Search - consideration

14 March 2016 External T.I. 2016-0626781E5- Neuman Type Situation-- summary under Subsection 15(1) Summary Under Tax Topics- Income Tax Act- Section 15- Subsection 15(1) s. 15(1) might apply where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend The only issued and outstanding share of Opco (which has retained earnings of $500,000) is 1 Class A common share, with a fair market value of $1,000,000 owned by Mr. ... A, for nominal consideration, 1 non-voting Class B preferred share, which is redeemable and retractable “for the fair market value for which it is issued” and entitled to discretionary dividends as and when declared. ... A as consideration for the share does not represent the fair market value of such share at the time of subscription. ...

Must the retained amount be included in the value of the consideration for the disposition of the stock options pursuant to s. 7(1)(b)? ... CRA responded (TI translation): [T]he term "value of the consideration for the disposition" under paragraph 7(1)(b) includes a receivable from the employer. Therefore…if the agreed price for the options includes the amount retained at the moment of the disposition of the stock options subject to a possible future reduction, the retained amount would be a part of the value of the consideration for the disposition under paragraph 7(1)(b). ...

30 April 2009 External T.I. 2008-0296721E5 F- Late filed election 85(7)- Amending transactions-- summary under Rectification & Rescission Summary Under Tax Topics- General Concepts- Rectification & Rescission CRA will not anticipate a judicial rectification An individual transferred an immovable to his corporation for non-share consideration, and after being reassessed by CRA for the resulting gain, filed a late s. 85(7) election showing preferred share consideration and proposed to validate such late election by entering into a "deed of correction" with the corporation providing for the shares’ issuance. ... Consequently, CRA would not be able to accept a late election filed by the taxpayer and the Corporation under subsection 85(7) since, based on the Contract initially entered into … one of the conditions set out in subsection 85(1) (i.e., the issuance by the Corporation of share consideration) would not have been satisfied. ...

12 September 2007 External T.I. 2006-0211121E5 F- Fiducie non-résidente-- summary under Specified Foreign Property Summary Under Tax Topics- Income Tax Act- Section 233.3- Subsection 233.3(1)- Specified Foreign Property generally no reporting obligations on T1135 where interest in non-resident trust acquired for not consideration Regarding the reporting obligations of a Canadian resident beneficiary of a non-resident trust that was not itself deemed resident in Canada, CRA stated: [W]e have assumed that the only property held by the Canadian beneficiary is an interest in a non-resident trust that would not be deemed to be resident in Canada for tax purposes. ... The exceptions are as follows: an interest in a non-resident trust that was not acquired for consideration by either the person or partnership or a person related to the person or partnership; and an interest in a trust described in paragraphs (a) and (b) of the definition "exempt trust" in subsection 233.2(1). As you can see, a number of situations will be exempt from filing prescribed Form T1135 because the Canadian resident will not have specified foreign property due to the fact that neither the Canadian resident nor a person related to the Canadian resident acquired the interest for consideration. ...

11 July 2006 External T.I. 2005-0152031E5 F- Actions admissibles de petite entreprise-- summary under Paragraph 110.6(7)(b) Summary Under Tax Topics- Income Tax Act- 101-110- Section 110.6- Subsection 110.6(7)- Paragraph 110.6(7)(b) transfer of property to corporation for a s. 85 agreed amount less than FMV of the property and the shares issued therefor does not engage s. 110.6(7)(b) A couple will transfer a co-owned immovable – that is used 75% in the operation of an active business of a corporation owned by one of them and 25% for rental to third parties – to the corporation on a rollover basis in consideration for shares with a FMV equaling that of the immovable. After indicating that it would regard the building as being “an asset used principally in an active business carried on by the corporation” following the rollover transaction, CRA went on to state: Paragraph 110.6(7)(b) states that the capital gains exemption in subsections 110.6(2) and (2.1) is not available to an individual on the disposition of a property where a corporation or partnership acquires a property for consideration that is significantly less than its fair market value; the disposition of the property by the individual is part of the same series of events or transactions as the acquisition of the property by the corporation or partnership. In this case, the taxpayer's corporation and his spouse acquire the immovable in consideration for preferred shares. ...

30 June 2003 External T.I. 2003-0182875 F- TRANSFERT DE POLICE D'ASSURANCE-- summary under Subsection 15(1) Summary Under Tax Topics- Income Tax Act- Section 15- Subsection 15(1) benefit where permanent life or critical illness policy transferred gratuitously to shareholder as new policyholder In Scenario 1, a private corporation acquires (and becomes the policyholder of) a permanent life insurance policy on the life of one of its shareholders, pays the premiums on the policy for 12 years, then transfers the policy without consideration to the shareholder who, two years later, after having taken over the premium payments, cancels the policy. ... In the 10 th year, it transfers the policy to the shareholder without consideration who, after paying the premiums for one year, receives a full refund of all premiums paid during the policy term. CCRA indicated that in both scenarios the amount of the benefit to be included in computing the shareholder's income pursuant to s. 15 (1) equaled the excess of the policy’s FMV over any consideration paid. ...

29 October 2003 External T.I. 2003-0026355 F- ECHANGE D'ACTIONS-- summary under Subparagraph 110.6(14)(f)(i) Summary Under Tax Topics- Income Tax Act- 101-110- Section 110.6- Subsection 110.6(14)- Paragraph 110.6(14)(f)- Subparagraph 110.6(14)(f)(i) s. 110.6(14)(f)(i) applies to shares issued as part consideration for shares of a different class transferred to the corporation on a dirty s. 85 exchange Mr. ... CCRA responded: [W]here a note is part of the consideration issued … subparagraph 110.6(14)(f)(i) could apply because of the wording of the Act. Indeed … the shares are issued as consideration for other shares even if a note is issued as part of the same transfer. ...

The consideration paid by the borrower is in the form of a right provided to the lender to reacquire an equal number of identical securities for no consideration other than the extinguishment of the right. ... When the right to acquire securities given by the borrower to the lender is settled, the borrower will purchase from a third party the number of securities it originally borrowed and dispose of these new securities to the lender in consideration for the settlement of that right; accordingly, the borrower will realize a gain or loss at that time equal to the change in the value of the borrowed securities during the term of the arrangement. ...

21 January 2002 External T.I. 2001-0078735 F- Droit de recevoir une somme-- summary under Paragraph 12(1)(g) Summary Under Tax Topics- Income Tax Act- Section 12- Subsection 12(1)- Paragraph 12(1)(g) s. 12(1)(g) inapplicable to contingent right to receive deferred cash sales proceeds to the extent the share consideration declined in value The shareholders of a CCPC (Xco) agreed to sell their Xco shares to a public corporation (Yco) in consideration for an upfront cash payment, and for shares of Yco received on an s. 85(1) rollover basis – but with a clause (the “Clause”) in the sale agreement providing that in one year’s time they would receive a further cash payment for each of their Yco shares equal to the deficiency in its trading price at that time as compared to the portion of the sale price allocated to such shares. ... Instead, the right to receive an amount pursuant to the Clause was a capital property, forming part of the non-share consideration that the vendors received on the disposition of their shares in Xco, the cost of which was determined pursuant to paragraph 85(1)(f). ...

21 January 2002 External T.I. 2001-0078735 F- Droit de recevoir une somme-- summary under Paragraph 85(1)(f) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(f) s. 85(1)(f) applicable to contingent right to receive deferred cash sales proceeds to the extent the share consideration received under s. 85(1) declined in value The shareholders of a CCPC (Xco) agreed to sell their Xco shares to a public corporation (Yco) in consideration for an upfront cash payment, and for shares of Yco received on an s. 85(1) rollover basis – but with a clause (the “Clause”) in the sale agreement providing that in one year’s time they would receive a further cash payment for each of their Yco shares equal to the deficiency in its trading price at that time as compared to the portion of the sale price allocated to such shares. CCRA indicated that the right to receive an amount pursuant to the Clause was a capital property, forming part of the non-share consideration that the vendors received on the disposition of their shares in Xco, the cost of which was determined pursuant to paragraph 85(1)(f). ...