Search - consideration

23 March 2011 Internal T.I. 2010-0389081I7 F- Disposition of a resource property-- summary under Paragraph (a) Summary Under Tax Topics- Income Tax Act- Section 54- Proceeds of Disposition- Paragraph (a) proceeds included full (undiscounted) deferred cash proceeds, but might exclude share consideration (with volatile market price) until issued The Vendor sold a percentage interest in mineral claims (the “Mining Properties”) for consideration including deferred cash payments and shares to be issued by the public-company Purchaser, in each case, to be paid or issued over a four-year period. ... Turning to the deferred share issuance consideration, the Directorate noted that the shares’ market price could “fluctuate greatly,” and indicated that the TSO accordingly might: conclude that such portion of the proceeds of disposition for the Mining Properties by the Vendor is not determinable prior to the date of issuance of the shares by the Purchaser and that such portion of the proceeds of disposition would be recognized for tax purposes at the times of their issuance …. ...

23 March 2011 Internal T.I. 2010-0389081I7 F- Disposition of a resource property-- summary under Paragraph 12(1)(b) Summary Under Tax Topics- Income Tax Act- Section 12- Subsection 12(1)- Paragraph 12(1)(b) full undiscounted amount of future cash consideration to be included as an amount receivable The Vendor sold a percentage interest in mineral claims for consideration including deferred cash payments to be paid over a four-year period. ... Thus, for the purposes of paragraph 12(1)(b), we are of the view that to be able to say that the proceeds of disposition have become receivable, the vendor must have an absolute right, though not necessarily immediate, to the consideration and, secondly, that the proceeds of disposition are determined or determinable. ...

24 January 2011 Internal T.I. 2010-0389251I7 F- Farm-out agreement and warrants-- summary under Paragraph (f) Summary Under Tax Topics- Income Tax Act- Section 66.1- Subsection 66.1(6)- Canadian exploration expense- Paragraph (f) application of farmout policy to situation where free warrants issued along with incurring of CEE A mining exploration corporation (the "Purchaser") agreed with another mining exploration corporation (the "Vendor") to acquire an interest in the Vendor's unproven resource properties (the "Properties") in consideration for incurring specified exploration expenses. As part of this agreement, the Vendor also agreed to issue, for no significant consideration, warrants to the Purchaser to acquire treasury common shares. After noting that a portion of the consideration otherwise payable as Canadian exploration expense should be allocated to the warrants based on their value, the Directorate stated: [T]he CRA's current position with respect to simple farm-out transactions is that there would be no cost to the farmee to acquire a property and that the farmee may consider the expenses incurred by the farmee to be Canadian exploration expenses if the expenses meet the definition of Canadian exploration expense in subsection 66.1(6). ...

30 April 2009 External T.I. 2008-0296721E5 F- Late filed election 85(7)- Amending transactions-- summary under Rectification & Rescission Summary Under Tax Topics- General Concepts- Rectification & Rescission CRA will not anticipate a judicial rectification An individual transferred an immovable to his corporation for non-share consideration, and after being reassessed by CRA for the resulting gain, filed a late s. 85(7) election showing preferred share consideration and proposed to validate such late election by entering into a "deed of correction" with the corporation providing for the shares’ issuance. ... Consequently, CRA would not be able to accept a late election filed by the taxpayer and the Corporation under subsection 85(7) since, based on the Contract initially entered into … one of the conditions set out in subsection 85(1) (i.e., the issuance by the Corporation of share consideration) would not have been satisfied. ...

12 September 2007 External T.I. 2006-0211121E5 F- Fiducie non-résidente-- summary under Specified Foreign Property Summary Under Tax Topics- Income Tax Act- Section 233.3- Subsection 233.3(1)- Specified Foreign Property generally no reporting obligations on T1135 where interest in non-resident trust acquired for not consideration Regarding the reporting obligations of a Canadian resident beneficiary of a non-resident trust that was not itself deemed resident in Canada, CRA stated: [W]e have assumed that the only property held by the Canadian beneficiary is an interest in a non-resident trust that would not be deemed to be resident in Canada for tax purposes. ... The exceptions are as follows: an interest in a non-resident trust that was not acquired for consideration by either the person or partnership or a person related to the person or partnership; and an interest in a trust described in paragraphs (a) and (b) of the definition "exempt trust" in subsection 233.2(1). As you can see, a number of situations will be exempt from filing prescribed Form T1135 because the Canadian resident will not have specified foreign property due to the fact that neither the Canadian resident nor a person related to the Canadian resident acquired the interest for consideration. ...

11 July 2006 External T.I. 2005-0152031E5 F- Actions admissibles de petite entreprise-- summary under Paragraph 110.6(7)(b) Summary Under Tax Topics- Income Tax Act- 101-110- Section 110.6- Subsection 110.6(7)- Paragraph 110.6(7)(b) transfer of property to corporation for a s. 85 agreed amount less than FMV of the property and the shares issued therefor does not engage s. 110.6(7)(b) A couple will transfer a co-owned immovable – that is used 75% in the operation of an active business of a corporation owned by one of them and 25% for rental to third parties – to the corporation on a rollover basis in consideration for shares with a FMV equaling that of the immovable. After indicating that it would regard the building as being “an asset used principally in an active business carried on by the corporation” following the rollover transaction, CRA went on to state: Paragraph 110.6(7)(b) states that the capital gains exemption in subsections 110.6(2) and (2.1) is not available to an individual on the disposition of a property where a corporation or partnership acquires a property for consideration that is significantly less than its fair market value; the disposition of the property by the individual is part of the same series of events or transactions as the acquisition of the property by the corporation or partnership. In this case, the taxpayer's corporation and his spouse acquire the immovable in consideration for preferred shares. ...

16 August 2017 Internal T.I. 2017-0701291I7- Exclusive Distributorship Rights-- summary under Article 12 Summary Under Tax Topics- Treaties- Income Tax Conventions- Article 12 lump sum paid for distributorship rights was not a royalty In consideration for a lump sum, a non-resident in a Treaty country (NRco) granted an arm’s length Canadian company (Canco) the exclusive right to distribute its product in Canada, with Canco agreeing not to acquire or sell competitive products. ... Paragraph 10.1 of the OECD commentary (the “OECD Commentary”) on Article 12 of the Model Tax Convention states that payments made in consideration for obtaining the exclusive distribution rights of a product in a given territory do not constitute royalties within the meaning of the Model Tax Convention as they are not made in consideration for the use of, or the right to use, an element of property included in the definition. ...

5 October 2018 APFF Financial Strategies and Instruments Roundtable Q. 1, 2018-0761521C6 F- Life insurance policy as share redempt. proceeds-- summary under Subsection 148(7) Summary Under Tax Topics- Income Tax Act- Section 148- Subsection 148(7) more gain will be realized if an appreciated life insurance policy is distributed as redemption proceeds rather than a dividend-in-kind 2017-0690331C6 found that a dividend-in-kind by a subsidiary to its parent of a life insurance policy would result in proceeds of disposition to it equal to the greater of the policy’s cash surrender value (CSV) and its adjusted cost basis (ACB), rather than equaling the policy’s higher fair market value (FMV), given that the dividend would not result in consideration being given for the policy. ... In effectively answering “$100,000,” CRA stated: [T]he word "consideration" must, for the purposes of subsection 148(7), receive the broad meaning generally accorded to it in the jurisprudence … [so that where] on a share redemption, the redemption price paid by a corporation is an interest in a life insurance policy that the corporation transfers to the shareholder, the CRA is of the view that the shareholder gave consideration (the redeemed shares) to the corporation for the interest thus transferred. ...

30 June 2003 External T.I. 2003-0182875 F- TRANSFERT DE POLICE D'ASSURANCE-- summary under Subsection 15(1) Summary Under Tax Topics- Income Tax Act- Section 15- Subsection 15(1) benefit where permanent life or critical illness policy transferred gratuitously to shareholder as new policyholder In Scenario 1, a private corporation acquires (and becomes the policyholder of) a permanent life insurance policy on the life of one of its shareholders, pays the premiums on the policy for 12 years, then transfers the policy without consideration to the shareholder who, two years later, after having taken over the premium payments, cancels the policy. ... In the 10 th year, it transfers the policy to the shareholder without consideration who, after paying the premiums for one year, receives a full refund of all premiums paid during the policy term. CCRA indicated that in both scenarios the amount of the benefit to be included in computing the shareholder's income pursuant to s. 15 (1) equaled the excess of the policy’s FMV over any consideration paid. ...

29 October 2003 External T.I. 2003-0026355 F- ECHANGE D'ACTIONS-- summary under Subparagraph 110.6(14)(f)(i) Summary Under Tax Topics- Income Tax Act- 101-110- Section 110.6- Subsection 110.6(14)- Paragraph 110.6(14)(f)- Subparagraph 110.6(14)(f)(i) s. 110.6(14)(f)(i) applies to shares issued as part consideration for shares of a different class transferred to the corporation on a dirty s. 85 exchange Mr. ... CCRA responded: [W]here a note is part of the consideration issued … subparagraph 110.6(14)(f)(i) could apply because of the wording of the Act. Indeed … the shares are issued as consideration for other shares even if a note is issued as part of the same transfer. ...