Search - consideration

The possible "solutions" referred to by you were descriptions of 3 possibilities of what in fact may be the commercial substance of the transaction you apparently have under consideration, i.e. the commercial substance of the transaction you have under consideration may in fact be: (1) that the obligation to pay interest was contingent, (2) that the creditor agreed to forgive the accrued interest, (3) that the interest was in fact paid by the issue of the shares on the conversion. As we do not know the details of the transaction under consideration by you, we of course cannot comment upon whether or not there are other possibilities as to the commercial substance of the transaction. You are asking us to advise you of the tax consequences in a situation that you have under consideration without providing us with all of the pertinent facts (such as, the commercial substance of the transaction, whether there is a legal obligation to pay interest, the relationship of the creditor and the debtor, etc.). ...

The possible "solutions" referred to by you were descriptions of 3 possibilities of what in fact may be the commercial substance of the transaction you apparently have under consideration, i.e. the commercial substance of the transaction you have consideration may in fact be: (1) that the obligation to pay interest was contingent, (2) that the creditor agreed to forgive the accrued interest, (3) that the interest was in fact paid by the issue of the shares on the conversion. As we do not know the details of the transaction under consideration by you, we of course cannot comment upon whether or not there are other possibilities as to the commercial substance of the transaction. You are asking us to advise you of the tax consequences in a situation that you have under consideration without providing us with all of the pertinent facts (such as, the commercial substance of the transaction, whether there is a legal obligation to pay interest, the relationship of the creditor and the debtor, etc.). ...

Each year some of the employees of Corporation A are offered non- voting common shares of Corporation B for as consideration. ... Our Comments In the above situation, one must determine whether: 1. the benefit was conferred on the individuals in their capacity as employees (see subsection 7(5) of the Act), and 2. the transaction was a gift for no consideration or a transaction between the employer and employees for consideration (i.e.- for services rendered). Generally, transactions between an employer and arm's length employees occur by virtue of their employment and are for consideration (i.e.- they are not gifts). ...

S. residents in consideration of the sale of a capital asset are to be exempt from tax pursuant to Article VIII of the Canada-U. ... The consideration for the assignment was that the respondent was to be paid monthly "by way of royalty" a percentage of the gross sales of gas. ... It is doubtful that royalties paid in consideration of the sale of capital property are "from an interest" in any such property. ...

S. residents in consideration of the sale of a capital asset are to be exempt from tax pursuant to Article VIII of the Canada-U. ... The consideration for the assignment was that the respondent was to be paid monthly "by way of royalty" a percentage of the gross sales of gas. ... It is doubtful that royalties paid in consideration of the sale of capital property are "from an interest" in any such property. ...

1 November 1985 Income Tax Severed Letter RCT 5-8000 F Unedited CRA Tags 85(1)(e.2) Dear Sirs: RE:     Transfer of Property to a Sister Corporation This is in response to your letter of September 6, 1985 wherein you requested clarification of our position with respect to the application of paragraph 85(1)(e.2) of the Act where a property is transferred between corporations owned by the same shareholder for consideration less than the fair market value of the property transferred. Transfers for consideration less than fair value can, inadvertantly or intentionally, create opportunities for the inappropriate reduction of capital gains in the event of a future disposition of shares of the corporations involved. Despite the fact that the provisions of paragraph 85(1)(e.2) of the Act are applicable in such situations we have adopted an administrative position not to apply them to transfers between sister corporations where, in our view, the consideration taken back ensures that the accrued gain in the shares of the transferor is not reduced, as a result of the transfer, by more than the accrued gain in the property transferred. ...

Accordingly, does section 84 apply where non-share consideration is received by a shareholder of the amalgamated corporation as part of the exchange of his shares of the predecessor corporation for the new shares of the amalgamated corporation? ... As a result, an amalgamation can be an amalgamation to which section 87 applies even where a shareholder of a predecessor corporation receives both shares of the amalgamated corporation and non-share consideration in exchange for shares of the predecessor corporation. On this basis, the position in paragraph 52 of IT-474R would apply to a section 87 amalgamation where the shareholder of a predecessor corporation receives both shares in the amalgamated corporation and non-share consideration in exchange for shares in the predecessor corporation. ...

1 November 1990 Income Tax Severed Letter QUESTION I-78 Loan Guarantee from Non-resident for no Consideration A Canadian corporation ("Canco") borrows funds from an arm's length lender (the "lender"). Canco's non-resident parent corporation (the "parent") guarantees the loan for no consideration. ... Since the parent did not receive consideration for its guarantee of the loan, the parent will not be deemed by paragraph 214(15)(a) of the Act to have been paid interest on the loan. ...

Accordingly, does section 84 apply where non-share consideration is received by a shareholder of the amalgamated corporation as part of the exchange of his shares of the predecessor corporation for the new shares of the amalgamated corporation? ... As a result, an amalgamation can be an amalgamation to which section 87 applies even where a shareholder of a predecessor corporation receives both shares of the amalgamated corporation and non-share consideration in exchange for shares of the predecessor corporation. On this basis, the position in paragraph 52 of IT-474R would apply to a section 87 amalgamation where the shareholder of a predecessor corporation receives both shares in the amalgamated corporation and non-share consideration in exchange for shares in the predecessor corporation. ...

Subparagraph 40(2)(g)(ii) of the Act, however, deems the capital loss to be nil where the guarantee was given for no consideration. ... In the noted Bulletins guarantees were given for no consideration to corporations in which the guarantor had an interest. While it is admitted that Bowater and its co-venturer guaranteed for no consideration the debts of Bulkley Valley, they were never called upon to honour this guarantee. ...