Search - consideration

A sold shares of Opco to a son and daughter in consideration for promissory notes that were non-interest bearing and repayable in annual instalments, the cost of the Opco shares acquired by the son and daughter were equal to the fair market value of the promissory notes, which was lower than the fair market value of the Opco shares. CCRA stated that: "In various 'butterfly' rulings... we generally accept, as a statement of fact from the particular taxpayer, that a non-interest bearing note that is payable on demand and issued as consideration for certain property acquired by the taxpayer may have a fair market value equal to its stated principal amount. ...

The Directorate indicated that: CRA generally does not assess a s. 105 benefit arising from the use of the personal-use property by a beneficiary or person related to the beneficiary – but this administrative position would not extend to use of the property by an unrelated person, who would be required to include a benefit under s. 105(1) based on rent for comparable property, less any consideration paid for the use of the property (subject to the comments in IT-432R2, para. 11 as to computation of the benefit). ... X’s spouse, and that property is made available to the corporation’s shareholder, CRA indicated that the benefit question turned on whether (i) the trust specifically granted a right to use the property to the corporation, with such newly-created property then being distributed for not consideration by the corporation its shareholder without consideration, or (ii) the trust allowed the shareholder to use the property held by the trust. ...

In finding that dividends on the Class A shares paid to the Trust could not be attributed to Mother under s. 75(2), CRA stated: Since a corporation does not own its own shares prior to their issuance, it follows that the issuance of shares by a corporation to a trust for consideration equal to their FMV generally does not constitute a transfer of property to which subsection 75(2) could apply. According to … Kieboom …, subsection 75(2) could, however, apply where the shares are not subscribed for consideration equal to their fair market value. ...

Consideration to USCo includes a fixed monthly fee, a percentage of gross receipts, and a "Procurement License Fee" ("PLF"). ... CRA indicated that the PLF is not consideration for a set of "procurement rights" distinct from the other franchise rights. ...

A has actually disposed of them-- was part of the series of transactions or events in which Opco acquired the Class "AA" shares of its capital stock for consideration less than their fair market value. In addition, paragraph 110.6(7)(b) will only apply if it is determined that Opco acquired Class "AA" shares of its capital stock for consideration that is "significantly less" than the FMV of those shares at the time of acquisition. ...

5 July 2012 Internal T.I. 2010-0388551I7 F- Fiducie- retour de sommes-- summary under Subsection 75(2) Summary Under Tax Topics- Income Tax Act- Section 75- Subsection 75(2) s. 75(2) does not apply to an estate freeze as the corp does not own its treasury shares issued to the trust In finding that s. 75(2) did not apply to an estate freeze effected by Father in relation to shares of Holdco in favour of a family trust (the Trust), the Directorate stated: As a corporation is not the owner of its own shares before their issuance, it follows that such issuance by the corporation to a trust for consideration equal to their FMV does not generally constitute a transfer of property to which subsection 75(2) can apply. ... Kieboom, 92 DTC 6382 (FCA), subsection 75(2) nonetheless could apply when the subscription for the shares is not for consideration equal to their FMV. ...

23 April 2013 Internal T.I. 2012-0466081I7 F- Usufruct created under French legislation-- summary under Section 43.1 Summary Under Tax Topics- Income Tax Act- Section 43.1 gift of immovable subject to reservation of a usufruct gave rise to a disposition under s. 43.1 A Canadian-resident taxpayer who lived outside Canada made a transfer without consideration (the "Gift") to her adult children of a building and subjacent land situated in France (the "Building"), which had appreciated subsequent to its acquisition by the taxpayer. ... After noting that the creation of a usufruct governed by the C.c.f. did not give rise to a deemed trust under s. 248(3), CRA stated (TaxInterpretations translation): … the Taxpayer is deemed to have disposed of the Immovable for consideration equal to its FMV and that her children were deemed to have acquired the property for the same amount, all in accordance with the provisions of paragraphs 69(1)(b) and (c). ...

23 April 2013 Internal T.I. 2012-0466081I7 F- Usufruct created under French legislation-- summary under Paragraph 69(1)(b) Summary Under Tax Topics- Income Tax Act- Section 69- Subsection 69(1)- Paragraph 69(1)(b) disposition of all building under shared gift A Canadian-resident taxpayer who lived outside Canada made a transfer without consideration (the "Gift") to her adult children of a building and subjacent land situated in France (the "Building"), which had appreciated subsequent to its acquisition by the taxpayer. ... After noting that the creation of a usufruct governed by the C.c.f. did not give rise to a deemed trust under s. 248(3), CRA stated (TaxInterpretations translation): … the Taxpayer is deemed to have disposed of the Immovable for consideration equal to its FMV and that her children were deemed to have acquired the property for the same amount, all in accordance with the provisions of paragraphs 69(1)(b) and (c). ...

CRA indicated that this turned on whether (i) the trust specifically granted a right to use the property to the corporation, with such newly-created property then being distributed for not consideration by the corporation its shareholder without consideration, or (ii) the trust allowed the shareholder to use the property held by the trust. ...

Before finding that the debentures were repaid on conversion for the issued shares’ stated capital, so that no premium could be deducted under s. 20(1)(f)(ii), the Directorate stated: [T]he jurisprudence has established that the treatment of the issuer and the holder of the shares may be different, that is, it is the stated capital of the shares issued that generally constitutes the cost of the property received in consideration for their issue and it is the FMV of such shares that is used to determine the tax consequences to the holder of the shares when the holder has transferred property in consideration for the acquisition of such shares. ...