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7 October 2022 APFF Roundtable Q. 8, 2022-0942151C6 F- Surplus stripping Unedited CRA Tags 40(1)(a)(iii); 40(2)(a)(ii); 84.1(1), 84.1(2)(a.1)(i) and (ii); 245(2) and (4); 256(5.1) and (5.11) Principales Questions: (1) Whether the GAAR would apply to a series of transactions (“Series”) pursuant to which an individual (“Brother”) would transfer his shares in a Canadian-controlled private corporation (“Opco”) to a newly incorporated corporation (“Brother Holdco”) on rollover basis prior to Brother Holdco’s disposition of the Opco shares at their FMV (“Sale”) to a corporation newly incorporated by his sister (“Sister Holdco”) for a cash consideration of $200,000 and the balance of the sale price payable within a period of four years after the date of the Sale? ... Tel que le prévoit le paragraphe 256(5.11) L.I.R. ainsi que la jurisprudence applicable, tout facteur, tant contractuel, commercial, économique, moral que familial, peut être pris en considération afin de déterminer si une personne ou un groupe de personnes a une influence, directe ou indirecte, dont l’exercice entraînerait le contrôle de fait d’une société (« Influence »). ...

This publication also highlights factors that should be given consideration for particular types of businesses. ... There are other Canadian income tax considerations which should be addressed by USco. ...

Accordingly, any determination of whether section 9, paragraph 12(1)(x), subsection 56(2) or 246(1) of the Act apply to a particular Parentco/Subco arrangement involving life insurance policies can only be ascertained, on a case-by-case basis, after a comprehensive review and analysis of the relevant facts and agreements amongst the parties (including any valuation considerations, as applicable). ... Consequently, we remain of the view that any determination of whether section 9, paragraph 12(1)(x), or subsections 15(1), 56(2) or 246(1) of the Act apply to a particular shared-ownership arrangement involving life insurance policies and their respective premium payments can only be ascertained, on a case-by-case basis, after a comprehensive review and analysis of the relevant facts and agreements amongst the parties (including any valuation considerations, as applicable). ...

In the process, X disposes of his OPCO common shares in consideration for preferred shares of OPCO. ... X disposes of 35% of the common shares of OPCO in favour of EMPLOYEECO in consideration for a balance of the purchase price. ... X disposes of all of its common shares of OPCO in favour of EMPLOYEECO in consideration for a balance of the purchase price. ...

We are also of the view that the nature of the specific life insurance policies presently used in split dollar arrangements, which we understand can include universal life insurance policies, need to be taken into consideration in this matter. ... Will such a condition, in and of itself, be viewed as "consideration" and, hence, disqualify the transfer as a gift? Department's Position The Department would not, generally, consider that such a condition would constitute "valuable consideration" received by the donor so as to disqualify the transfer as a "gift". ...

Part B – Transfer of a Policy to a Corporation and Subsequent Gift to a Charity On March 1, 2021, Individual A transferred the recently acquired Policy to a wholly owned corporation (Opco) for no consideration. ... Spouse A transfers the Policy to Spouse B for no consideration. At the time of the transfer of the Policy, the Policy's ACB was $20,000, CSV was $60,000 and FMV was $70,000. ... Spouse A transfers the Policy to Spouse B for no consideration. At the time of the transfer of the Policy, the Policy’s ACB is $10,000, CSV is $20,000 and FMV is $22,000. ...

De nouvelles actions participantes seraient souscrites pour une considération nominale par la fiducie familiale discrétionnaire. ... In addition and although rendered in the course of the application of subsection 160(1) of the ITA, it is appropriate to refer to the conclusion in the Algoa Trust 3 case that a dividend constitutes a gift, being a payment without consideration. ... The shares subscribed for by the trust are property contributed to the trust in consideration for the subscription price paid for with amounts received as bequests. ...

En réponse à la question 45 de la table ronde de Revenu Canada qui a eu lieu lors du congrès de 1981 de l'ACÉF, Revenu Canada a apporté quelques précisions lorsque les actions privilégiées sont émises à titre de considération dans le cadre d'une vente visée par l'article 85 L.I.R., notamment en ce qui concerne un droit de rachat, qu'il est suffisant que le droit de rachat soit applicable au gré du détenteur. ... In response to question 45 of the Revenue Canada Round Table at the 1981 CTF Conference, Revenue Canada provided some details when preferred shares are issued as consideration in the context of a sale subject to section 85 of the ITA, notably concerning a right of redemption, and stated that it is sufficient that the right of redemption is at the option of the holder. ... The impact of the attributes of estate freeze preferred shares on their FMV is important because one of the concerns of the CRA with respect to estate freeze, is to ensure that the total FMV of the consideration received in freeze preferred shares and property other than shares, is equal to the FMV of the common shares exchanged, so that there is no benefit conferred by the author of the freeze in favour of a related person. ...

Based on the facts of the situation described in the ruling request, taking into consideration the foreign law under which the Partnership was formed, the provisions of the partnership agreement and the terms and conditions of the loan agreement between the Partnership and the U.S. lender, the CRA came to the conclusion that the partners of the Partnership were considered to be the payers of the interest on the Loan. ...

The Court took into consideration, among other things, that the notional value of the swaps closely approximated the investments in the US Operations, the taxpayer's formal derivative policy and its credit facilities prohibited it from speculating in derivatives, and in arriving at its finding, that there was no evidence that the swaps were related to an underlying item that was on income account and that there was no evidence of a profit or speculation motive on the part of the taxpayer. ...