Section 246

Subsection 246(1) - Benefit conferred on a person

Cases

Gestion M.-A. Roy Inc. v. Canada, 2024 CAF 16

Various whole life policies on the life of a resident individual (Mr. Roy) were owned by (i) a holding company (“Gestion Roy”), controlled by...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) s. 15(1) benefit where subsidiary pays premiums on whole life policies owned by the taxpayer 291

Laliberté v. Canada, 2020 FCA 97

The founder and controlling shareholder of Cirque du Soleil, had been found by the Tax Court to have received a taxable benefit under s. 15(1) (or...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) any subjective intention of the controlling shareholder not to be enriched did not establish that no taxable benefit 427
Tax Topics - General Concepts - Onus Tax Court could determine a taxable benefit percentage (different from that assumed by the Minister) based on all the evidence 304

Consultants Pub Création Inc. v. Canada, 2008 DTC 6610, 2008 FCA 60, aff'g Massicotte v. The Queen, 2006 TCC 618

The taxpayer wholly owned a corporation ("Amadéus") which, in turn, wholly owned another corporation ("Pub Création"), and the taxpayer was also...

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The Queen v. Kieboom, 92 DTC 6382, [1992] 2 CTC 59 (FCA)

S.245(2)(c) applied where the taxpayer permitted his wife and, later, his children, to subscribe for non-voting common shares of his private...

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Sweeney v. The Queen, 90 DTC 6507, [1990] 2 CTC 342 (FCTD)

In 1950, a written agreement between the taxpayer's father and the taxpayer provided that the son could purchase his father's shares in a company...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other 170

Boardman v. The Queen, 85 DTC 5628, [1986] 1 CTC 103 (FCTD)

Since the taxpayer's legal obligations to his divorced wife were met by a court order which ordered the Registrar of Land Titles to transfer title...

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Mansfield v. The Queen, 83 DTC 5136, [1983] CTC 97 (FCTD), aff'd 84 DTC 6535, [1984] CTC 547 (FCA)

A company netted no cash from the sale of a $5,000 convertible debenture to its employee because it deposited with a bank an amount equal to the...

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The Queen v. Immobiliare Canada Ltd., 77 DTC 5332, [1977] CTC 481 (FCTD)

By purchasing debentures of a sister Canadian resident corporation from its non-resident parent the taxpayer eliminated withholding taxes that...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) sale of bond with accrued interest did not satisfy interest 178
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) sale proceeds allocable to expectancy of interest were not interest receipt 198
Tax Topics - Income Tax Act - Section 76 105

The Queen v. Esskay Farms Ltd., 76 DTC 6010, [1976] CTC 24 (FCTD)

The taxpayer, wished to sell land to the City of Calgary in consideration for two annual instalments in order to defer a portion of the gain to...

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Words and Phrases
disbursement

David v. The Queen, 75 DTC 5136, [1975] CTC 197 (FCTD)

As a result of transactions wherein the shares of a company held by the taxpayers were purchased on behalf of a pension plan which then caused the...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence 30
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) proceeds from the sale of cash-rich company to pension fund for wind-up 5 months later were "otherwise appropriated ... on the winding-up" 321

Indalex Ltd. v. The Queen, [1988] 1 CTC 60, 88 DTC 6053 (FCA)

It was found that the taxpayer, by purchasing aluminium from a Bermudan affiliate at a price that was 5% higher than what it would have paid if it...

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Laxton v. The Queen, 88 DTC 6008, [1988] 1 CTC 19 (FCTD), rev'd , in part, 89 DTC 5327 (FCA)

In a joint venture agreement it was agreed that an individual member of the joint venture ("Laxton") would be paid an annual management fee equal...

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MNR v. Enjay Chemical Co. Ltd., 71 DTC 5293, [1971] CTC 535 (FCTD)

In finding that a forgiveness of a portion of the trade indebtedness owing by the taxpayer to a U.S. affiliate would have given rise to a taxable...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base 30
Tax Topics - Income Tax Act - Section 9 - Forgiveness of Debt debt forgiveness related to inventory of operations 186

See Also

Gestion M.-A. Roy Inc. v. The King, 2022 CCI 144, aff'd 2024 CAF 16

Various whole life policies on the life of a resident individual (Mr. Roy) were owned by (i) a holding company (“Gestion Roy”), controlled by...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) a company’s payment of the premiums on whole life policies of which it was the beneficiary but not owner triggered ss. 15(1) and 246(1) benefits 468

Laliberté v. The Queen, 2018 TCC 186, aff'd 2020 FCA 97

The founder and controlling shareholder of Cirque du Soleil was found to have received a taxable benefit under s. 15(1) (or alternatively, under...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) business benefits from sending shareholder into space were secondary 491

Pelletier v. The Queen, 2004 DTC 3176 (TCC)

Although benefits were conferred on the taxpayers by virtue of their being able to acquire shares of a private company worth $300,000 for a...

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Husky Oil Ltd. v. The Queen, 95 DTC 316, [1995] 1 CTC 2184 (TCC), aff'd 95 DTC 5244 (FCA)

The taxpayer, which needed to "shelter" a capital gain previously realized by it, purchased from a vendor with which it dealt at arm's length the...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares 82
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) common interest of the parties did not evince that each was not acting in its own interests 133

Ovis Brooks v. Minister of National Revenue, 91 DTC 639, [1991] 1 CTC 2551 (TCC)

The taxpayer was deemed under former s. 245(2) to have disposed of an "economic interest" in a corporation wholly-owned by him when he caused it...

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Administrative Policy

7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 2, 2022-0936281C6 F - police d'assurance-vie & avantage

Suppose that two brothers resident in Canada each have a Holdco owning 50% of Opco and that, in order to fund the buy-sell agreement on the death...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement premiums paid by parent on a sub’s life insurance policies are non-deductible even if reimbursed on income account 192
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures premiums paid by Holdcos on policies of which their jointly-owned company (Opco) is the beneficiary are non-deductible capital expenditures even if reimbursed by the Opcos 138

2017 Ruling 2016-0660321R3 - Reorg of REIT to simplify multi-tier structure

A Canadian REIT (the “Fund”) holds the units and notes of a subsidiary unit trust (“Sub-Trust”), whose principal asset is most of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 132.2 - Subsection 132.2(1) - Qualifying Exchange use of the s.132.2 merger and a renunciation of most of the units otherwise issuable on the merger in order to eliminate a REIT corporate subsidiary held through an LP and a sub-trust 1006
Tax Topics - Income Tax Act - 101-110 - Section 107.4 - Subsection 107.4(2) - Paragraph 107.4(2)(a) s. 107.4 transfer of sub-trust’s assets to sister MFT trust 459
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3) drop down of LP 1 into LP 2 followed by immediate s. 98(3) wind-up of LP 1 into LP 2 and GP of LP1, followed by immediate taxable sale by GP to LP 2 146
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition no disposition on conversion of general to limited partnership or adding right of renunciation of a MFT unitholder 165
Tax Topics - Income Tax Act - Section 132.2 - Subsection 132.2(3) - Paragraph 132.2(3)(g) - Subaragraph 132.2(3)(g)(vi) - Clause 132.2(3)(g)(vi)(C) - Subclause 132.2(3)(g)(vi)(C)(I) renunciation by subsidiary partnership of transferee MFT of units that otherwise would be issuable on the redemption of its incestuous holding in transferor MFC 245

6 December 2016 External T.I. 2016-0666841E5 F - Sale of property for POD less than FMV

Opco is held somewhat equally by three holding companies, each wholly-owned by an individual (A, B or C) who is unrelated to the others. Opco...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c) application to Holdco shareholder of Opco where Opco conferrred a benefit on child of Holdco's shareholder 210
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) potential application to immediate shareholder re benefit on indirect shareholder 207

14 March 2016 External T.I. 2016-0626781E5 - Neuman Type Situation

The only issued and outstanding share of Opco (which has retained earnings of $500,000) is 1 Class A common share, with a fair market value of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) s. 15(1) might apply where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend 226
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) s. 56(2) likely non-applicable where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend 262
Tax Topics - Income Tax Act - Section 73 - Subsection 73(1) spousal rollover for Kieboom disposition of economic interest 82

16 April 2012 External T.I. 2011-0411491E5 - Taxation of distributions of a US LLC

In…2011-0411491E5, CRA commented on an interest in a United States Limited Liability Corporation (LLC) held by an Alberta Unlimited Liability...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) taxable benefit where US taxes on LLC income allocated to indirect Cdn member are paid by LLC or intermediate ULC 161

24 June 2015 External T.I. 2015-0575911E5 F - Benefit to shareholder or conferred on a person

Corporation A, is wholly owned by Holdco, which has equal unrelated Shareholders 1, 2, 3 and 4. Corporation A disposes of a capital property to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c) benefit only conferred on one shareholder (the husband) if wife of one of four sibling shareholders receives benefit 333
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) benefit conferred on spouse of individual shareholder of parent 253

3 March 2015 Internal T.I. 2014-0527841I7 F - Avantage imposable pour aéronef

In a wholly-owned stacked structure of three Corporations (C holding D, holding E), Corporation E acquired an aircraft for business use but with...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(c) apportionment of aircraft use between business and personal 74
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefits from personal use of corporate aircraft based on the cost of similar benefit from arm's length supplier 174
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c) s. 15(1.4)(c) applied to extend scope of Massicotte indirect benefit doctrine 170

12 December 2012 Internal T.I. 2012-0464411I7 - Indirect Benefit

A taxable Canadian corporation (Holdco) which is wholly-owned by a trust of which Mr. A is the sole trustee and is a discretionary beneficiary,...

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16 April 2012 External T.I. 2011-041149

A Canadian-resident individual owns all the shares of an Alberta unlimited liability company which, in turn, owns a majority of the membership...

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10 January 2011 Internal T.I. 2009-0344251I7 - Application of subsection 246(1)

In a situation where a second-tier subsidiary provides a benefit to the shareholder of a first-tier corporation, s. 246(1) can be applied on its...

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8 October 2010 Roundtable, 2010-0371901C6 F - avantage à l'actionnaire, assurance-vie

Question 2 at the May 4, 2010 CALU Roundtable concerned the situation where (A) Holdco holds an insurance policy on the life of its shareholder,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) reimbursement by sub of premiums potentially includible under s. s. 12(1)(x) where it is the beneficiary of life insurance policy held by parent 258

4 May 2010 CALU Roundtable, 2010-0359421C6 - Shareholder's benefit and life insurance

S. 246(1) could apply where a corporation (Parentco) holds a life insurance policy for which it pays the premiums and designates its subsidiary...

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4 December 2009 Internal T.I. 2009-0344991I7 F - Paragraphe 246(1) et le jugement Massicotte

Mr. X, who is the sole shareholder of Holdco, which in turn is the sole shareholder of Opco receives, along with four Opco employees receive...

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2 December 2008 Internal T.I. 2008-0270981I7 F - Entreprise de prestation de services personnels

Mr. A wholly-owned Holdco, which held a minority interest in Opco. The principal residence of Mr. A and Ms. A (spouses), held by Holdco, is...

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25 February 2008 Internal T.I. 2007-0243871I7 F - Avantages imposables

After finding that a corporation’s payment of the personal expenses of an unpaid director gave rise to s. 6(1)(a) inclusions to him, the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) unpaid director was a deemed employee, so that payment of his personal expenses was a s. 6(1)(a) benefit 131

14 June 2007 External T.I. 2006-0209341E5 F - Utilisation d'un bien d'une société de personnes

A partnership in whose farming business the partners are actively involved owns the residence of one of the partners, who does not pay rent, but...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) personal use of property is a factor going to the reasonableness of the profit-sharing arrangements 74
Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.2) - Paragraph 96(2.2)(d) personal use of property could engage s. 96(2.2)(d) 104
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose partner’s use of partnership property is addressed by denying partnership income deductions and under s. 103, rather than through benefit-conferral provisions 112

20 March 2007 External T.I. 2006-0173711E5 F - Paiement des impôts d'une fiducie

Mr. A is one of the two trustees for an inter vivos trust for his minor children that provides for the distribution of all income to the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) s. 105(1) does not apply where trustee pays trust taxes 109
Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(2) attribution may apply where father pays income tax liability of trust for his children 107

17 December 2003 Internal T.I. 2003-0047367 F - Benefit Conferred on Non-arm's Length Person

The four equal common shareholders of Opco were X (a director and vice president), his wife ("Y"), Y's sister and the sister's husband, and X and...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) s. 84(2) inapplicable on sale by defunct corporation of its assets at an undervalue to one of its shareholders 195
Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) application of s. 15(1) or 246(1) to property distributed by corporation to shareholder would be added to the property’s ACB 65

6 October 2003 External T.I. 2003-0040145 F - TRANSFERT D'UNE POLICE D'ASSURANCE-VIE

A shareholder transferred a universal life insurance policy, that was an exempt policy, on the individual’s life to a wholly-owned corporation...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7) loss on transfer of universal life policy to wholly-owned subsidiary not recognized 92
Tax Topics - Income Tax Act - Section 148 - Subsection 148(9) - Adjusted Cost Basis - Element A no taxable benefit when life insurance policy transferred to wholly-owned corporation at less than its FMV 209

25 March 1994 External T.I. 9335505 - INTEREST REDUCE 15(1) BENEFIT

"It our general position that the term 'shareholder' as used in subsection 15(1) of the Act would not include a person who indirectly controls a...

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93 A.P.F.F. Round Table, Q.17

Where a taxpayer transfers assets to an unrelated corporation applying the s. 85(1) rollover, it is not possible to rule out the application of...

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24 March 1993 T.I. (Tax Window, No. 38, p. 1, ¶2490)

Re potential application of s. 246(1) to a holder of common shares where his father exchanges preferred shares of the corporation for preferred...

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90 C.R. - Q.47

Where a Canadian corporation borrows funds from an arm's length lender and the Canadian corporation's non-resident parent guarantees the loan for...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 214 - Subsection 214(15) 100

80 C.R. - Q.55

The listing in IT-453 of conferral-of-benefit situations was not intended to be comprehensive.

IT-239R2 "Deductibility of Capital Losses from Guaranteeing Loans for Inadequate Consideration and from Loaning Funds at less than a Reasonable Rate of Interest in Non-arm's Length Circumstances"

Former s. 245(2) may have been applied in situations where there is a material benefit to other shareholders as a result of a minority shareholder...

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Paragraph 246(1)(a)

Administrative Policy

15 May 2019 IFA Roundtable Q. 7, 2019-0798821C6 - Subsection 246(1) and Non-Residents

An indirect benefit would be included in computing a non-resident’s income under s. 15(1) if the amount of the benefit were a payment made...

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5 November 2003 Internal T.I. 2003-0043277 F - Benefit-Use of Automobiles

The CEO ("X") of an automobile sales company ("Opco"), and X's spouse held 51% and 49% of the shares of a holding company ("HoldcoX"), which held...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(5) application of s. 15(5) to shareholder’s use of company automobile 72
Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) automobiles in car dealer inventory used for employee’s personal use remained in inventory, cf. if converted primarily to personal use of shareholder (which would not be a disposition) 314
Tax Topics - Income Tax Act - Section 9 - Computation of Profit conversion of automobile in car inventory to personal use of CEO would not entail its deemed disposition nor would the conversion of car inventory to personal use of shareholders 267

Subsection 246(2) - Arm’s length

Cases

Jobin v. The Queen, 78 DTC 6538, [1979] CTC 493 (FCTD)

What is now s. 245(3) did not apply to an arm's length sale of all the shares of a company, an operation which admittedly entailed the stripping...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(2) 22

See Also

Extendicare Health Services Inc. v. MNR, 87 DTC 5404, [1987] 2CTC 179 (FCTD)

"[T]he term 'bona fide', when used as an adjective, is generally taken to mean 'honestly', 'genuinely' or 'in good faith'."

Words and Phrases
bona fide