Search - consideration

6 October 2003 External T.I. 2003-0040145 F- TRANSFERT D'UNE POLICE D'ASSURANCE-VIE-- summary under Element A Summary Under Tax Topics- Income Tax Act- Section 148- Subsection 148(9)- Adjusted Cost Basis- Element A no taxable benefit when life insurance policy transferred to wholly-owned corporation at less than its FMV A shareholder transferred a universal life insurance policy, that was an exempt policy, on the individual’s life to a wholly-owned corporation for consideration equal to the cash surrender value, which was less than the adjusted cost basis (ACB) of the policy. ... If, in this case, it appears that the fair market value of the policy is greater than the cash surrender value, there will be a benefit conferred by the shareholder to the corporation since the transfer of the policy will be for consideration equal to the cash surrender value. ...

6 October 2003 External T.I. 2003-0040145 F- TRANSFERT D'UNE POLICE D'ASSURANCE-VIE-- summary under Subsection 246(1) Summary Under Tax Topics- Income Tax Act- Section 246- Subsection 246(1) no taxable benefit when life insurance policy transferred to wholly-owned corporation at less than its FMV A shareholder transferred a universal life insurance policy, that was an exempt policy, on the individual’s life to a wholly-owned corporation for consideration equal to the cash surrender value, which was less than the adjusted cost basis (ACB) of the policy. ... If, in this case, it appears that the fair market value of the policy is greater than the cash surrender value, there will be a benefit conferred by the shareholder to the corporation since the transfer of the policy will be for consideration equal to the cash surrender value. ...

10 March 2004 External T.I. 2003-0047905- Debt Assumption by Partnership-- summary under Paragraph 85(1)(b) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(b) subsequent assumption by partnership of excess mortgage debt treated as boot Three individuals, who are co-owners and actively involved in managing several commercial rental properties and whose tax basis (ACB of land and UCC of buildings) in the properties is less than the mortgages thereon, transfer their respective interests to a new general partnership among them in consideration for the assumption by the partnership of that portion of the mortgages which does not exceed the ACB and UCC of the transferred assets and for general partnership interests, and elect under s. 97(2) with agreed amounts equal to such tax basis. ... In finding that such second stage assumption was included in the boot, CCRA stated: [T]he assumption by the Partnership of the Excess Mortgages represents consideration for the Properties for the purposes of paragraph 85(1)(b) and subsection 97(2). ...

Such a mechanism exists, for example, in the case of relief for shares issued as consideration for other shares or as consideration for the payment of a stock dividend. ...

Such a mechanism exists, for example, in the case of relief for shares issued as consideration for other shares or as consideration for the payment of a stock dividend. ...

21 January 2002 External T.I. 2001-0078735 F- Droit de recevoir une somme-- summary under Proceeds of Disposition Summary Under Tax Topics- Income Tax Act- Section 54- Proceeds of Disposition FMV of contingent right to deferred cash sales proceeds was included in proceeds, with subsequent gain or loss when the contingency was resolved The shareholders of a Canadian-controlled private corporation (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 in one year’s 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). ...

B could not … benefit from the rollover … because as consideration for the disposition of the shares they held in the predecessor corporations, they received, in addition to the shares of the capital stock of Amalco, consideration other than shares due to the amalgamation. … Subparagraph (b)(iii) of the definition of "disposition" in subsection 248(1) provides that a disposition of any property includes any transaction or event by which a share is converted because of an amalgamation or merger. ...

For the purposes of the Act, the CRA nevertheless considers that the consideration paid by the lessee may be considered in part or in whole as rent to the extent that the leasing contract makes the leased property available to the lessee for its use without transferring ownership of the property. … Although a leasing agreement is often referred to as a financing agreement, the CRA believes that the leasing agreement cannot be considered a true loan. The consideration paid by Aco is an expense incurred to have the use of tangible property for the term of the agreement and to acquire a purchase option on that property at the end of that term. ...

Five years later, after the FMV of the interests in Grainco have appreciated to $1.5 million and such interests continue to qualify as interests in a family farm partnership, A (and then B several days later) transfers his or her partnership interest in Grainco to a newly-incorporated corporation (“Holdco,” or "Managementco")- in which each of A and B holds common shares with an ACB of $50) in consideration for a note receivable of $750,000 and claims the capital gains exemption. ... In addition, in order to determine whether there is an abuse having regard to section 84.1, the CRA could consider, among other things, the source of the funds used to repay the consideration for the disposition of the partnership interests, and the value to be attributed to the shares of the capital stock of the corporation held by the partnership in relation to the total value of the interests in the partnership. ... In response to a question as to whether the answer would change if Managementco instead was owned by the child of A and B, CRA indicated that although it was aware of the intergenerational rollover in s. 70(9.21), s. 84.1 did not take this consideration into account, so that the answer would not change. ...

X proposes to transfer the immovable to a taxable Canadian corporation in a non-arm’s length transaction, with an s. 85(1) election being made on the following basis: Land Building Total FMV $250,000 $350,000 $600,000 Cost amount $150,000 $50,000 $200,000 Agreed amount $150,000 $50,000 $200,000 Share consideration $400,000 Note consideration $200,000 The corporation subsequently sold the immovable in an arm’s length sale for $600,000 ($250,000 for the land). ... X to the corporation, passes on his death to his son (at which time the FMV of the land and building are $250,000 and $350,000), and the son then disposes of it for its FMV of $600,000 to a corporation in consideration for a $600,000 note. ...