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18 November 1991 Ruling 912981 F- Deductibility of Consideration Paid for Player Rights Unedited CRA Tags 9 Dear Sirs: Re:  Deductibility of Consideration Paid for Player Rights This is in reply to your letter of  24(1) concerning the deductibility, for purposes of the Income Tax Act, of consideration paid for player rights in the following hypothetical situation: "A partnership (the "Partnership") will pay a fee to obtain membership in a professional sports league with all the privileges of membership, including a franchise for a team in a particular city, and the rights to select players with league experience from the present teams in the league and to priority drafting position in 1992 player drafts (such rights collectively referred to as the "Player Rights").  ...

29 May 1991 Ruling 910341 F- Dispositions- Absence of Consideration Unedited CRA Tags 50(1)(b)(iii), 54 disposition 24(1) This is in reply to your letter dated February 1, 1991 regarding the tax treatment 24(1) The Facts you have presented follow. Facts 24(1) Issues 24(1) Our Comments Interpretation Bulletin IT-460, Dispositions- Absence of Consideration states in Paragraph 4 that "The following occurrences do not constitute a disposition (within the meaning of paragraph 54(c)) of a share of a corporation... ...

Payment of Merger Consideration and Financing of the Acquisition 23. The former holders of Target shares received the Merger Consideration as soon as practicable after the Closing Date. As required by the Merger Agreement, prior to the First Effective Time, XXXXXXXXXX, on behalf of Merger Sub1, caused to be deposited, XXXXXXXXXX, in trust for the benefit of holders of Target shares, the Merger Consideration, XXXXXXXXXX sufficient to pay the aggregate Cash Consideration and evidence of XXXXXXXXXX Common Shares in book-entry form representing the number of XXXXXXXXXX Common Shares sufficient to deliver the aggregate Share Consideration. 24. ... Upon the issuance of the XXXXXXXXXX Common Shares as the aggregate Share Consideration as described in Paragraph 33.ii, XXXXXXXXXX, added to the stated capital account maintained for such common shares an amount equal to the aggregate FMV of the Share Consideration. ...

On XXXXXXXXXX, A subscribed for XXXXXXXXXX Class A voting preferred shares in PC1 for a $XXXXXXXXXX cash consideration. ... The consideration issued by each Holding Company 82. The consideration to be received by DC on the Distribution to each Holding Company will be a combination of assumed liabilities and XXXXXXXXXX Class A preferred shares. 83. ... The Corporate Group was primarily restructured prior to A's death for estate planning considerations. 101. ...

A will transfer the XXXXXXXXXX Class A PS, XXXXXXXXXX Class C PS and XXXXXXXXXX Class E PS it held in DC to Aco in consideration for the Aco Debt 1, which has a Principal Amount equal to the aggregate FMV (and PUC) of the Class A PS, Class C PS and Class E PS in DC transferred to ACo. 21. ... B will transfer the XXXXXXXXXX Class A PS, XXXXXXXXXX Class C PS and XXXXXXXXXX Class E PS it held in DC to Bco in consideration for the Bco Debt 1, which has a Principal Amount equal to the aggregate FMV of the Class A PS, Class C PS and Class E PS in DC transferred to ACo. 25. ... BCo will redeem the XXXXXXXXXX Class C Special Shares of its capital stock owned by DC for an amount equal to their Issue Price, and will issue to DC the BCo Note as a consideration for the redemption of the XXXXXXXXXX Class C Special Shares so issued by ACo and BCo. 39. ...

(b) Each of B, C, D and E will transfer their respective XXXXXXXXXX Class B common shares of DC to ACo and, as consideration therefor, ACo will issue to each of them XXXXXXXXXX Class B common shares of its capital stock having an aggregate FMV equal to the aggregate FMV of the XXXXXXXXXX Class B common Shares of DC transferred to ACo by each of them. ... (c) F will transfer his XXXXXXXXXX Class A common shares of DC to BCo and, as consideration therefor, BCo will issue XXXXXXXXXX Class A common shares of its capital stock having an aggregate FMV equal to the aggregate FMV, at that time, of the XXXXXXXXXX Class A common shares of DC transferred to BCo by F. ... The consideration to be issued by ACo and BCo 23. As consideration for the property so transferred by DC as described in paragraph 20 above, each of ACo and BCo will: (a) Assume their pro-rata share of DC's liabilities. ...

Additional Considerations 1.     Document #E72960 written in response to a memorandum dated June 20, 1988, contained an opinion that, in the facts of the situation under consideration, a woodchipper was being used primarily in a logging activity. ... In the situation presently under consideration, although the trailers are said to be "designed specifically" to haul wood chips there is no indication that modifications of the trucks has been undertaken or that the primary use of the Assets will be other than to transport the wood chips by highway to a mill, i.e., the taxpayer is not undertaking any processing operation as was the situation in the cases referred to above. ...

OTHER CONSIDERATIONS In the case of a "one man company", the Department generally considers that coverage under insurance plans, such as a private health services plan, a group term life insurance plan and a group sickness and accident insurance plan, would be received by virtue of the individual's shareholdings rather than by virtue of employment.  ...

Consequently, the non-share consideration received in respect of the land will not exceed the tax cost of the land and the non-share consideration received in respect of the building will not exceed the tax cost of the building. ... The promissory note issued as consideration for the land will not exceed the ACB of the land and the promissory note issued as consideration for the building will not exceed the UCC of the building. ... Consequently, the non-share consideration in respect of the XXXXXXXXXX land will not exceed the tax cost of the land and the non-share consideration in respect of the XXXXXXXXXX building will not exceed the tax cost of the building. ...

A share issued under an agreement which provided for (1) the possible termination of the agreement prior to the company actually incurring and renouncing the promised amounts, (2) a cancellation of the issued share, and (3) a return of the shareholder's consideration in respect of the issued share would appear to fall within the ambit of paragraph 6202.I(1)(c) because these provisions impose a contingent obligation to effect an undertaking, i.e. the return of the shareholder's consideration, in order to limit a loss that the shareholder may sustain.  In the absence of information that indicates otherwise, our view is that the return of the shareholder's consideration could reasonably be considered to have been given to limit the shareholder's "loss" of the amount of consideration paid for the issued share. ... An economic loss would be sustained in an amount of the consideration paid for the issued share to which is attached an entitlement to certain income tax deductions that would not otherwise exist but for the payment of consideration.  ...