Search - consideration

Confirming the first point, CRA indicated that if an estate freeze is subject to s. 74.4(2), the deemed interest benefit is computed based on the outstanding amount determined under s. 74.4(3), and the shares received on the refreeze constitute excluded consideration as defined in s. 74.4(1) – so that such consideration does not reduce the outstanding amount under 74.4(3). Confirming the second point, CRA agreed that the redemption of refrozen shares for cash consideration would reduce the outstanding amount, but only to the extent of the FMV of those shares. ...

23 January 2022 TEI Roundtable, 2021-0913421C6- CEWS- Foreign exchange as qualifying revenue-- summary under Qualifying Revenue Summary Under Tax Topics- Income Tax Act- Section 125.7- Subsection 125.7(1)- Qualifying Revenue annual balance sheet translation adjustments to FX-denominated balances are not included in qualifying revenue for CEWS purposes An eligible entity whose normal accounting practice is to convert the inflow of cash, receivables, and other consideration into Canadian currency from a foreign currency, also adjusts various FX-denominated balances on its balance sheet date to reflect their value in Canadian currency on that date. ... In responding “no” to the first question, CRA stated: [Q]ualifying revenue requires, among other things, an inflow of cash, receivables or other consideration. Where an entity re-evaluates or translates certain balance sheet accounts to reflect their value in Canadian currency at a certain time, no inflow of cash, receivables or other consideration has occurred. ...

CRA responded: [P]aragraph 148(7)(a) would apply to deem the proceeds of the disposition to Opco to equal $50,000 (the greatest of CSV ($500), consideration (nil) and ACB ($50,000)), resulting in a policy gain of nil. ... In cases where the FMV of the interest in the life insurance policy is greater than the ACB of that interest, subsection 148(7) provides for a transfer of the interest on a rollover basis (assuming that the consideration given for that interest and the CSV are equal to or less than the ACB). ... We have brought this situation to the attention of the Department of Finance for their consideration. ...

Upon its renewal, the policy is transferred to the employee for no consideration under s. 148(7), whereupon the employee starts paying the annual premiums. Given that the key employee has been including the annual premium amount in income as a s. 6(1)(a) benefit, does a further benefit arise on the transfer of the policy to the key employee for no consideration? After noting that in 2019-0799051C6 it addressed a similar situation regarding a permanent policy, CRA stated: In circumstances in which the person to which the interest in the policy was transferred to is an individual who is an employee or shareholder of the corporation which effected the transfer, either of subsections 6(1) or 15(1) of the Act may apply to include in the income of the individual the amount by which the fair market value of the policy exceeds any actual consideration paid by the individual for the policy. ...

In the year immediately preceding that sale on January 1 of all the shares of Aco, Aco paid a dividend in kind of the policy to Trust X, so that the policy was deemed to be disposed of for the greatest of its ACB, CSV and the (nil) consideration received, or $150. ... CRA considers that where a trust transfers the policy to its beneficiary, the beneficiary is regarded as giving consideration for the transfer that is all or any part of the beneficiary's income or capital interest, as applicable. Here, it would be reasonable to consider that such consideration had an FMV of $250. ...

8 October 2010 Roundtable, 2010-0373231C6 F- Application of subsections 51(1) and 85(1)-- summary under Subsection 85(1) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1) share consideration need not be immediately issuable In confirming its position in IT-291R3, para. 35, CRA stated: The Dale case concerned a transferee corporation that had issued shares that were not authorized in its articles of incorporation. ... Bowman J. ruled that the term "consideration that includes shares", which appears in section 85, does not mean that the shares must be issued at the same time as the property transfer or in the same taxation year.... ...

(j) of the definition in s. 128.1(10) of "excluded right or interest", that phrase includes an interest in a personal trust resident in Canada that was never acquired for consideration and did not arise as a result of a transfer of property to the trust by that individual that would be a qualifying disposition (if subsection 107.4(1) were read without ss. (h) and (i)); and further noted that s. 108(7) provides, inter alia, that for these purposes a person can contribute to the trust without failing the acquisition for consideration prohibition. ...

9 October 2015 APFF Roundtable Q. 1, 2015-0595751C6 F- Deductibility of financing fees and 20(1)(e)(v)-- summary under Paragraph 20(1)(e) Summary Under Tax Topics- Income Tax Act- Section 20- Subsection 20(1)- Paragraph 20(1)(e) discharge of a debt through its assumption or cash proceeds from sub transferee denies a s. 20(1)(e)(v) deduction The exclusion in s. 20(1)(v)(v) for settlement occurring "as part of a series of borrowings or other transactions and repayments" applies where (i) the debt of the taxpayer is settled by the taxpayer transferring assets to a subsidiary in consideration inter alia for an assumption of the debt (with the taxpayer being released) – or (ii) where the debt is not assumed on the asset transfer and the taxpayer instead uses cash consideration received from the subsidiary (funded out of a borrowing by it) to discharge the debt. ...

-- summary under Paragraph 28(1)(a) Summary Under Tax Topics- Income Tax Act- Section 28- Subsection 28(1)- Paragraph 28(1)(a) promissory note accepted as absolute payment for the transfer of inventory given that no remedy provided for non-payment Respecting the transfer of inventory by a cattle farmer for a promissory note, CRA stated: [B]oth the Bill of Sale and the Purchase and Sale Agreement refer to the promissory note as the consideration given for the transfer of the inventory. Since the promissory note was accepted as consideration for the transfer of the inventory, and given that none of the documents provide any remedy for non-payment, it appears that payment could only be enforced under the terms of the promissory note. ...

In some of these arrangements, the facts have led to a conclusion that the trust acquired the shares for fair market value consideration (perhaps by transferring cash to Corp B on the acquisition of the Corp A shares from it).... CRA agrees with the general proposition that where property is transferred to a trust by a beneficiary for fair market value consideration, subsection 75(2) will not apply to attribute income in respect of that property to the beneficiary. In the alternative, if the facts are such that it may be concluded that the trust did not acquire the shares for fair market value consideration, CRA will typically challenge the arrangement on other grounds. ...