Section 256

Table of Contents

Subsection 256(1) - Associated corporations

Paragraph 256(1)(a)

Cases

The Queen v. W. Ralston & Co., 96 DTC 6488, [1996] 3 CTC 346 (FCTD)

100 voting common shares of the taxpayer were held by members of the Cohen family, and the 100 voting preferred shares of the taxpayer were held...

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Harvard International Resources Ltd. v. Provincial Treasurer of Alberta, 93 DTC 5254, [1993] 1 CTC 329 (Alta. Q.B.)

The taxpayer held an undivided 99.328% interest in the 100 outstanding common shares of a corporation ("Holdings") and another corporation...

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The Queen v. Imperial General Properties Ltd., 85 DTC 5500, [1985] 2 CTC 299, [1985] 2 S.C.R. 288

The Wingold group held 90 common shares of the taxpayer and the Gasner group held 10 common shares and 80 voting cumulative preference shares with...

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Allied Farm Equipment Ltd. v. MNR, 73 DTC 5036, [1972] CTC 619 (FCA)

Given that s. 39(4) of the pre-1972 Act applied only for the purposes of s. 39, which provided a reduced rate of tax for certain Canadian...

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Donald Applicators Ltd. v. MNR, 69 DTC 5122, [1969] CTC 98 (Ex Ct), briefly aff'd 71 DTC 5202, [1971] CTC 402 (SCC)

498 Class B shares in the capital of each of ten companies was held by a corporation ("Saje") and 2 Class A shares were held in each corporation...

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Minister of National Revenue v. Dworkin Furs (Pembroke) Ltd. et al., 67 DTC 5035, [1967] CTC 50, [1967] S.C.R. 223

Dworkin Furs Ltd. owned 48% of the issued shares of Dworkin Furs (Pembroke) Limited in its own name and 2% in the names of Roy Saipe and Helen...

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See Also

Kruger Wayagamack Inc. v. The Queen, 2015 DTC 1112 [at 667], 2015 TCC 90, aff'd 2016 FCA 192

The taxpayer was capitalized, and its common shares then were held, on a 51-49 basis, by a business corporation ("Kruger") and a Government of...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares non-assignable put right ignored 98
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i) de jure control requires strategic control, not merely operational control 93
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(c) effect of s. 256(1.2)(g) is as if company were run by 3rd party 254
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) de facto control requires strategic control, not merely operational control 216

Administrative Policy

1 February 1999 External T.I. 9823715 - PERSONAL SERVICES BUSINESS

It is generally the Department's view that a foreign corporation is a 'person' for purposes of the Act unless the context clearly indicates...

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23 June 1995 External T.I. 9510475 - ASSOCIATED CORPORATIONS

Where a corporation ("Supplyco") owns 50% of the shares of another corporation ("Distributorco") which is a franchisee of Supplyco, Supplyco will...

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1993 APFF Roundtable, Q.1

Where a wholly-owned subsidiary ("Holdco II") of Holdco I is the sole general partner of three limited partnerships which, in turn, each hold 1/3...

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Paragraph 256(1)(b)

Cases

Southside Car Market Ltd. v. The Queen, 82 DTC 6179, [1982] CTC 214 (FCTD)

"[S]ince the language of paragraph 256(1)(b) sets forth two distinct circumstances when two corporations are associated, namely, when controlled...

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The Queen v. Mars Finance Inc., 80 DTC 6207, [1980] CTC 216, 80 DTC 6069 (FCTD)

It was stated, obiter, that where the Court has to decide whether two corporations are associated by reason of being controlled by the same...

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H.A. Fawcett & Son, Ltd. v. The Queen, 80 DTC 6195, [1980] CTC 293 (FCA)

A legatee of a control bloc of shares who was also the sole executor of the estate obtained control of the company immediately upon the death of...

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International Iron & Metal Co. Ltd. v. Minister of National Revenue, 72 DTC 6205, [1972] CTC 242, [1974] S.C.R. 898, aff'g 69 DTC 5445, [1969] CTC 668 (Ex Ct)

A corporation ("Burland") was owned by nine children of four fathers. The taxpayer ("International Iron") would have been indirectly controlled by...

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Words and Phrases
control

Minister of National Revenue v. Consolidated Holding Co., 72 DTC 6007, [1972] CTC 18, [1974] S.C.R. 419

Two individuals (Harold Gavin and Robert Gavin) each owned 50% of the shares of one corporation ("Consolidated") which in turn owned 43.7% of the...

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Vina-Rug (Canada) Limited v. Minister of National Revenue, 68 DTC 5021, [1968] CTC 1, [1968] S.C.R. 193

Because John Stradwick, Jr., his brother W.L. Stradwick and H.D. McGilvery, who collectively owned more than 50% of the shares of Stradwick's and...

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Words and Phrases
group of persons group

Vineland Quarries and Crushed Stone Ltd. v. MNR, 66 DTC 5092, [1966] CTC 69 (Ex Ct), briefly aff'd 67 DTC 5283 (SCC)

In finding that under the above arrangement, Vineland and S. & T. "were controlled by the same ... group of persons" (i.e., Saunder and...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership 52

Yardley Plastics of Canada Ltd. v. MNR, 66 DTC 5183, [1966] CTC 215 (Ex Ct)

Two corporations whose voting shares were held as follows

Shareholder Canadian Moldings Yardley Plastics
Hill 4.6% 28%
Hill...

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Words and Phrases
group of persons

See Also

Ferronnex Inc. and Quincaillerie Brassard Inc. v. Minister of National Revenue, 91 DTC 559, [1991] 1 CTC 2330 (TCC)

A corporation ("Fercomat") was found to be controlled by the same group of persons as each of two other corporations ("Quincaillerie" and...

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Express Cable Television Ltd. v. MNR, 82 DTC 1431, [1982] CTC 2447 (TRB)

A partnership of corporations (variously referred to as "Welsh Antenna" and "Antenna Systems") held a majority of the shares of one corporation...

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King George Hotels Ltd. v. MNR, 68 DTC 635 (TAB)

The taxpayer, which was indirectly controlled by children of the Leier family, was found to be associated with the corporation ("J.P.") that was...

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Buckerfield's Ltd. v. MNR, 64 D.T.C 5301 (Ex Ct)

Two companies that were vigorous competitors (Pioneer and Federal) each owned one-half of the shares of two other companies (Buckerfield's and...

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Words and Phrases
control

Administrative Policy

5 April 1995 External T.I. 9414745 - STOP LOSS

S.256(7)(b) will apply where the same group of unrelated individuals controls an amalgamated corporation as controlled both the predecessors.

80 C.R. - Q.25

A person who is the registered and beneficial owner of the shares of one company is the "same person" for purposes of s. 256(1)(b) where he also...

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IT-64R3 "Corporations

Association and Control - after 1988".

Paragraph 256(1)(c)

Cases

1056 Enterprises Ltd. v. The Queen, 89 DTC 5287, [1989] 2 CTC 1 (FCTD)

The Minister assessed the taxpayer, whose shares were owned 99% by an individual ("John"), on the basis that John's brother ("William"), who was...

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See Also

Disher-Winslow Products Ltd. v. MNR, 52 DTC 27 (TAB)

An individual (Edward) was the holder and beneficial owner of substantially all the shares of the taxpayer and his father (Clarence) was the...

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Words and Phrases
owner
Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership 174

Paragraph 256(1)(d)

Cases

Allied Farm Equipment Ltd. v. MNR, 73 DTC 5036, [1972] CTC 619 (FCA)

Each of three brothers owned and controlled one Canadian corporation and, among the three of them, owned and controlled a U.S. corporation. In...

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1056 Enterprises Ltd. v. The Queen, 89 DTC 5287, [1989] 2 CTC 1 (FCTD)

An individual ("John") was issued 99% of the shares of the appellant ("Cantex") on its incorporation, even though John's brother had provided...

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Holiday Luggage Mfg. Co. Inc. v. The Queen, 86 DTC 6601, [1987] 1 CTC 23 (FCTD)

Father and son each owned substantially all the shares of a CCPC, and 30% of the shares of a U.S. corporation. Joyal, J. held that the two CCPC's...

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Words and Phrases
corporation

Administrative Policy

31 March 2009 External T.I. 2009-0310821E5 F - Associated Corporations - 256

A held 50% of the voting common shares of AB Inc. and his brother (B) held 37.5% of such shares directly and another 12.5% were held by B’s...

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4 April 1990 T.I. (September 1990 Access Letter, ¶1439)

Where A is the sole shareholder of A Ltd., and A along with his three brothers are the four trustees, having equal powers, of a testamentary trust...

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Paragraph 256(1)(e)

Cases

The Queen v. B.B. Fast & Sons Distributors, 86 DTC 6106, [1986] 1 CTC 299 (FCA)

William Fast and his wife each owned 50% of the shares of one corporation ("Willmar"), and William Fast and his 4 siblings each owned 20% of the...

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Atomic Truck Cartage Ltd. v. The Queen, [1985] 2 CTC 21, 86 DTC 6032 (FCTD)

The common shares of three corporations were held by individuals, all of whom were related to each other, as follows:

Entreprises: X -...

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The Queen v. Mars Finance Inc., 80 DTC 6207, [1980] CTC 216, 80 DTC 6069 (FCTD)

Where the conditions of S.256(1)(e) are met, then it is irrelevant that de facto control of one of the corporations is exercised contrary to the...

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Administrative Policy

Subsection 256(1.1)

Administrative Policy

20 February 1996 External T.I. 9605085 - STOCK DIVIDEND SHARES THOSE OF A SPECIFIED CLASS?

Where a share has been issued as a stock dividend, the consideration for which the share was issued would be considered to be nil.

31 October 1991 T.I. (Tax Window, No. 12, p. 13, ¶1560)

The "amount of unpaid dividends" referred to in s. 256(1.1)(e) may include accumulated but unpaid dividends.

3 September 1991 T.I. (Tax Window, No. 8, p. 3, ¶1437)

A share with no entitlement to dividends generally will comply with s. 256(1.1)(c).

If the share terms provide that the shares will become voting...

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Paragraph 256(1.1)(d)

Administrative Policy

11 January 2010 External T.I. 2009-0340591E5 F - Specified class - 256(1.1) of the Act

Class A shares of the corporation were issued in three different years (Years 1, 4 and 13). The annual rate of dividend on such shares (expressed...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) s. 51(1) exchange regarded as the new shares having been issued for consideration equalling the FMV of the old shares 58

Subsection 256(1.2) - Control, etc.

Cases

9044 2807 Québec Inc. v. Canada, 2004 DTC 6636, 2004 FCA 23

Noël J.A. indicated (at p. 6639) that in order to avoid any conflict between applying the results of the de jure control and de facto...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) situs of decision-making power 268

Administrative Policy

89 C.R. - Q.14

Where a minor child owns 10% of the common shares of Holdco which owns 100% of the common shares of Opco, s. 256(1.2)(e) will not be applied more...

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88 C.R. - Q.39

RC will identify any group of persons, related or unrelated, without considering whether any group acts in concert.

Paragraph 256(1.2)(a)

Paragraph 256(1.2)(b)

Administrative Policy

18 October 89 Meeting with Quebec Accountants, Q.3 (April 90 Access Letter, ¶1166)

Where A owns 95% of the shares of Corporation A and the other 5% are owned by B, and B owns all the shares of Corporation B, and to fund a...

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Paragraph 256(1.2)(c)

See Also

Kruger Wayagamack Inc. v. The Queen, 2015 DTC 1112 [at 667], 2015 TCC 90, aff'd 2016 FCA 192

51% and 49% of the taxpayer's shares (being common shares) were held by a business corporation ("Kruger") and a Government of Quebec corporation...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares non-assignable put right ignored 98
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i) de jure control requires strategic control, not merely operational control 93
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1) - Paragraph 256(1)(a) de jure or de facto control requires strategic control, not merely operational control 340
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) de facto control requires strategic control, not merely operational control 216

Administrative Policy

30 May 2007 External T.I. 2006-0218101E5 F - Interaction entre 125.4(1) et 256(1.2)c)

CRA noted that the expanded definition of control in s. 256(1.2)(c) applies only for the purposes of the enumerated provision in its preamble and,...

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Locations of other summaries Wordcount
Tax Topics 44
Tax Topics - Income Tax Regulations - Regulation 1106 - Subsection 1106(2) s. 256(1.2)(c) does not inform the definition of prescribed taxable Canadian corporation

29 June 1995 External T.I. 9510645 - COTRUSTEES OF DIFFERENT TRUSTS SAME PERSONS

"Where the co-trustees of two trusts are the same persons and one of the trusts owns shares representing more than 50% of the fair market value...

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Paragraph 256(1.2)(d)

Paragraph 256(1.2)(f)

Cases

Canada v. Propep Inc., 2010 DTC 5088 [at 6882], 2009 FCA 274

The taxpayer was owned by another corporation (9059) which, in turn, was owned by a Quebec trust whose first-ranking beneficiary was 9059, and...

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Words and Phrases
beneficiary

Administrative Policy

Articles

Jeffrey T. Love, Kenneth R. Hauser, "How Various Aggregation Rules Apply to Trusts", 2018 Conference Report (Canadian Tax Foundation), 28: 1-79

Uncertainties re scope of ss. 256(1.2)(f)(ii), (iii) and (iv) (pp. 28:62-63)

Subparagraph 256(1.2)(f)(iii) applies when a beneficiary's share of...

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Subparagraph 256(1.2)(f)(ii)

See Also

Moules Industriels (C.H.F.G.) Inc. v. The Queen, 2018 TCC 85

Whether corporations in which two discretionary trusts whose beneficiaries included the children (and their spouses) of Mr. Houle were associated...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) Quebec trusts are considered to be owners of their property for ITA purposes 224

Administrative Policy

14 September 2017 External T.I. 2017-0685121E5 F - Associated corporations

Three children each of whom wholly-owns a Childco are also, along with their parent, the discretionary beneficiaries of a family trust owning all...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2) - Paragraph 256(2)(b) - Subparagraph 256(2)(b)(ii) election under s. 256(2)(b)(ii) busts s. 256(2)(a) transitivity but not association with 3rd corporation 310
Tax Topics - Income Tax Act - Section 125 - Subsection 125(5.1) making s. 256(2)(b)(ii) election, by eliminating s. 256(2)(a) transitivity, reduces the reduction for taxable capital employed in Canada 262

8 December 2015 External T.I. 2015-0608781E5 F - Associated corporations - discretionary trust

1st Situation: X, who holds all the shares of Newco, and is a beneficiary of a discretionary trust holding all the shares of Opco (so that X is...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.3) no double-counting of shares in applying s. 256(1.3) to shares deemed to be owned by minor trust beneficiaries 139

16 August 2006 External T.I. 2006-0176801E5 F - Subparagraph 256(1.2)(f)(ii)

Mr. X is the beneficiary of a discretionary inter vivos trust. The trust deed provides that when Mr. X dies, his adult son, Mr. Y, will become...

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6 January 2004 External T.I. 2003-0052261E5 - Subparagraph 256(1.2)(f)(ii)

A discretionary inter vivos personal resident trust (the "Trust") owns all the shares of Opco. Mr. A (a resident), who is not a trustee but is a...

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Subsection 256(1.3) - Parent deemed to own shares

Administrative Policy

8 December 2015 External T.I. 2015-0608781E5 F - Associated corporations - discretionary trust

Father and Mother each hold 80 shares of Newco and Opco, respectively, and two discretionary trusts, with their three minor children as...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(f) - Subparagraph 256(1.2)(f)(ii) beneficiary includes beneficially entitled/combined application of 256(1.2)(f)(ii) and 256(1.3), but shares attributed only once] 595

8 December 2015 External T.I. 2015-0610921E5 F - Associated corporations - child under 18

On January 1 of a particular year, “Child”, who is 17 years, becomes the shareholder of Opco (a CCPC with a calendar year which is not managed...

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13 October 2000 External T.I. 2000-0038915 - Double-Counting - Associated Corporations

With respect to a situation where father held, as the sole trustee of a discretionary trust for minor children, 24% of the shares of a...

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4 March 1994 External T.I. 9328745 F - Associated Corporations

Where 16% of the shares of a corporation are held by a discretionary family trust and three beneficiaries of the trust (being siblings) are under...

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21 August 1992 T.I. 921988 (April 1993 Access Letter, p. 155, ¶C248-133)

Where Mr. A. owns all the shares of X Ltd. and Mrs. A, who owned all the shares of Y Ltd., freezes her interest in Y Ltd. in favour of a...

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Subsection 256(1.4) - Options and rights

Administrative Policy

24 July 1998 External T.I. 9807875 - ASSOCIATED CORPORATIONS

Where a corporation and its two 50% shareholders have agreed that the shares held by the shareholder shall be purchased by the corporation in the...

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18 June 1998 External T.I. 9805705 - ASSOCIATED CORPORATIONS

In indicating that s. 256(1.4)(b) could apply where pursuant to a unanimous shareholders agreement a corporation would automatically acquire the...

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5 February 1993 T.I. (Tax Window, No. 28, p. 3, ¶2411)

S.256(1.4)(a) applies in a situation where the articles of incorporation or a shareholders' agreement for a corporation having three equal common...

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91 C.R. - Q.11

Where parties to a shareholders' agreement have made a bona fide attempt to define "permanent disability", their definition will be given weight...

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20 April 1990 T.I. (September 1990 Access Letter, ¶1440)

Permanent disability refers to impairments that are expected to last for continuous periods that will exceed the period provided in s....

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Paragraph 256(1.4)(a)

Administrative Policy

7 October 2016 APFF Roundtable Q. 7, 2016-0652971C6 F - Paragraph 251(5)(b) and subsection 256(1.4)

Franchisor and Manager each hold 50% of the shares (being common shares) of Franchisee. The shareholders’ agreement for Franchisee provides, in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(ii) may include right arising after triggering of event over which no control 274
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(i) right to find 3rd party purchaser 72

28 September 2006 External T.I. 2006-0197841E5 F - Shareholders agreement & 256(1.4)

Four unrelated individuals (A, B, C and D) each hold 25% of the shares (being common shares) of Opco through their respective wholly-owned holding...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(i) technically a contingent right to acquire control where each 25% shareholder has an obligation to acquire shares of another shareholder offering its shares 127

20 April 2005 External T.I. 2005-0119901E5 F - Associated Corporations - Shareholders' Agreement

Two individuals (X and Y) each held all of the shares of Gesco and Holdco, respectively, and each of Gesco and Holdco held ½ of all the shares...

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Paragraph 256(1.4)(b)

Administrative Policy

16 March 2011 External T.I. 2010-0380571E5 F - Application de 251(5)b)(ii) et 256(1.4)b)

The wording of ss. 251(5)(b)(ii) and 256(1.4)(b) is sufficiently broad to cover a situation where a person does not have control over the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(ii) s. 251(5)(b)(ii) does not apply where corporation is required to redeem shares of declared fraudster 148

Subsection 256(2) - Corporations associated through a third corporation

Administrative Policy

17 June 2011 Internal T.I. 2011-0394471I7 F - Associated Corporations - 256

In rejecting a taxpayer view that s. 256(2) permits the multiplication of the small business deduction (“SBD”) in the same corporate group in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2.1) list of 5 “useful” factors in determining s. 256(2.1) application 167
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) Transport M.L. Couture cited as an example 22

26 February 2007 External T.I. 2005-0163391E5 F - Choix en vertu du paragraphe 256(2) de la LIR

A real estate rental company (ABco), which otherwise would be associated with its two 50% shareholders (Aco and Bco, which are wholly-owned by two...

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17 January 2007 Internal T.I. 2006-0216331I7 F - Association

After describing an intricate and redacted factual situation regarding the eligibility to the small business deduction (SBD) of numerous...

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10 December 1993 External T.I. 9335545 - SUBSECTION 256(2) AND T2144

Re RC's requirements for acceptance of a late-filed Form T2144.

16 June 1993 T.I. (Tax Window, No. 32, p. 12, ¶2607)

An election by a corporation under s. 256(2) will not affect the status of the other two corporations in question for purposes of ss.129(6) and...

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6 September 1991 T.I. (Tax Window, No. 9, p. 6, ¶1447)

Example of the application of s. 256(2).

30 March 1990 Memorandum (August 1990 Access Letter, ¶1395)

The phrase "either of the other two corporations" refers to both corporations. In the situation where corporations B, C, D and E are each...

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2 November 89 T.I. (April 90 Access Letter, ¶1181)

An election made by a corporation under s. 256(2) not to be associated is valid only for the purposes of section 125 and not for purposes of the...

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88 C.R. - F.Q.40

The election by the third corporation should be filed with its return of income for the relevant taxation year.

Paragraph 256(2)(a)

See Also

Agence du revenu du Québec v. 9181-4517 Québec Inc., 2021 QCCA 11

The taxpayer corporation (“9181-4517”) was associated under s. 21.20(b) of the Taxation Act (similar to ITA s. 256(1)(b)) with a second...

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Paragraph 256(2)(b)

Subparagraph 256(2)(b)(ii)

Administrative Policy

14 September 2017 External T.I. 2017-0685121E5 F - Associated corporations

Each of Aco, Bco and Cco is wholly-owned by siblings (A, B and C), and their parent (D) holds all the voting non-participating shares of Dco. A,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(f) - Subparagraph 256(1.2)(f)(ii) Childco associated with Parent-controlled corp whose non-voting equity is held by family trust 85
Tax Topics - Income Tax Act - Section 125 - Subsection 125(5.1) making s. 256(2)(b)(ii) election, by eliminating s. 256(2)(a) transitivity, reduces the reduction for taxable capital employed in Canada 262

24 November 2011 External T.I. 2011-0424631E5 F - Subsection 256(2)

CRA confirmed 2003-0051701I7, that a s. 256(2) election causes Aco and Bco not be associated with Cco for s. 125(5.1) purposes, but does not apply...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 181.1 - Subsection 181.1(4) s. 256(2) election causes Aco and Bco not be associated with Cco for s. 125(5.1), but not ss. 181.1(2) and (4), purposes 116

Subsection 256(2.1) - Anti-avoidance

Cases

Nicole L. Tiessen Interior Design LTD. v. Canada, 2022 FCA 53

An incorporated firm of architects and interior designers restructured, so that their practice was now carried on by a partnership between...

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Locations of other summaries Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 27 - Subsection 27(1.3) new issue could not now be raised because it might have generated additional evidence at the TCC 345

Les installations de l'Est Inc. v. The Queen, 91 DTC 5185, [1990] 2 CTC 503, [1990] 1 CTC 324 (FCTD)

It was found that a second corporation was incorporated in order to deal with difficulties the first corporation had been having with its...

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Maritime Forwarding Ltd v. The Queen, 88 DTC 6114, [1988] 1 CTC 186 (FCTD)

The taxpayer was unsuccessful in his assertions that the main reasons for the separate existence of a company (controlled by a family trust) whose...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Purpose/Intention 49

Kencar Enterprises Ltd. v. The Queen, 87 DTC 5450, [1987] 2 CTC 246 (FCTD)

The taxpayer was formed for income tax estate planning reasons, and the taxpayer's appeal accordingly failed.

Alpha Forming Corp. Ltd. v. The Queen, 83 DTC 5021, [1982] CTC 425 (FCTD)

A direction was made under old S.247(2) respecting 2 corporations the first one of which ("Alpha") was owned primarily by 2 individuals, and the...

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The Queen v. Covertite Ltd., 81 DTC 5363, [1981] CTC 464, 81 DTC 5353 (FCTD)

The onus under the section was not met by an unsubstantiated explanation by the wife of the chief shareholder of the first company that the second...

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Honeywood Ltd. v. The Queen, 81 DTC 5066, [1981] CTC 38 (FCTD)

Since no "positive evidence" was adduced by the Crown to prove that one of the main reasons for the companies' separate existence was the...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence 90

Lenco Fibre Canada Corp. v. The Queen, 79 DTC 5292, [1979] CTC 374 (FCTD)

The wife of the owner of two companies incorporated the plaintiff company, which hired her as its sole employee, in order for the plaintiff...

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Decker Contracting Ltd. v. The Queen, 79 DTC 5001, [1979] CTC 838 (FCA)

It was argued that the separate existence of a company ("Garyray") owned by the wives of the individual owners of the appellant, did not result in...

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Debruth Investments Ltd. v. M.N.R., 75 DTC 5012, [1975] CTC 55 (FCA)

A successful businessman who carried on a real estate business through a company ("Don River") owned by him and his wife set up four separate...

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First Pioneer Petroleums Ltd. v. MNR, 74 DTC 6109, [1974] CTC 108 (FCTD)

"[T]he question of fact to be determined is not whether the tax advantage is the main reason but rather whether it is a main reason for the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose income taxes not incurred to generate profit 50

See Also

Nicole L. Tiessen Interior Design Ltd. v. The Queen, 2021 TCC 29, aff'd 2022 FCA 53

An incorporated firm of architects (the “Corporation”), which received administrative services from a partnership owned principally by trusts...

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Prairielane Holdings Ltd. v. The Queen, 2019 TCC 157

The two taxpayers (“PLH” and “SCL”), which were each controlled by two unrelated individuals, would have been associated with each other...

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Words and Phrases
one of the main reasons

Jencal Holdings Ltd. v. The Queen, 2019 TCC 16

Until 2007, a partnership carrying on a global tire business through subsidiaries, was held indirectly by a family holding company (“KT...

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Maintenance Euréka Ltée v. The Queen, 2011 DTC 1319 [at 1812], 2011 TCC 307

Hogen J. found that the taxpayers' reassessment under s. 256(2.1) was justified, given that (para. 15):

The evidence shows that the two corporate...

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Taber Solids Control (1998) Ltd. v. The Queen, 2009 DTC 1899, 2009 TCC 527

Before going on to find that the taxpayer and a corporation owned by the wife of the majority shareholder of the taxpayer, were associated because...

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LJP Sales Agency Inc. v. The Queen, 2004 DTC 2007, 2003 TCC 851

The reason for the separate existence of two corporations, one of them owned by the husband, and the other one substantially owned by his wife,...

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Saratoga Building Corp. v. MNR, 93 DTC 564, [1993] 2 CTC 2074 (TCC)

A finding was made that none of the main reasons for the separate incorporation of the taxpayers involved tax savings given that they had been...

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Administrative Policy

2013 Ruling 2013-0498961R3 - Partner creating a professional corporation

CRA accepted a representation that the professional corporations (ProCorps) whose respective employees and controlling shareholder was a partner...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Specified partnership income professional partner services corp 321

17 June 2011 Internal T.I. 2011-0394471I7 F - Associated Corporations - 256

In the course of a general discussion, the Directorate described the following factors (taken from Maureen Donnelly and Allister Young, "Deemed...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2) s. 256(2) does not multiply the SBD but protects it where particular corporations otherwise are eligible 182
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) Transport M.L. Couture cited as an example 22

6 November 2008 Internal T.I. 2008-0292561I7 F - DAPE multiple

Four brothers and an unrelated individual, who were actively involved in a succession of construction projects, through their respective...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Personal Services Business PSBs where 4 brothers and an executive provided all the management services to a jointly owned construction company through their respective managementcos 164

84 C.R. - Q.87

Listing of RC criteria re the "most effective manner" phrase appearing in old s. 247(2)(a).

Subsection 256(3) - Saving provision

Subsection 256(5.1) - Control in fact

Cases

Bresse Syndics Inc. v. Canada, 2021 FCA 115

A public company (CO2 Public) operating a high-tech business in the field of carbon dioxide capture and management carried on its SR&ED through a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation - Paragraph (a) no need to address whether terms of trust deed gave Pubco de jure control over the mooted CCPC as those terms gave Pubco de facto control 312

North American et al. v. The Deputy Minister of Finance, 2019 MBQB 29

At issue was whether a corporation (“533”) whose shares were considered by the applicants to be beneficially owned by Mrs. Carson was...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.11) s. 256(5.11) permits departure from McGillivray 252

Aeronautic Development Corporation v. Canada, 2018 FCA 67

The taxpayer (“ADC”) was denied refundable SR&ED investment tax credits on the basis that a U.S. resident (Mr. Silva) and a U.S. corporation...

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Words and Phrases
supply contract
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) sole customer under single contract dominated the company 317

McGillivray Restaurant Ltd. v. Canada, 2016 FCA 99

The taxpayer was controlled de jure by the holder of 760 of its 1000 voting shares (Mrs. Howard). Her husband, as officer and director, made all...

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Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Certainty subjective interpretive tests to be avoided 78

Plomberie J.C. Langlois inc. v. Canada, 2007 DTC 5662, 2006 FCA 113

In rejecting a submission on behalf of the taxpayer that the Tax Court judge had ignored the terms of a unanimous shareholder agreement in finding...

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9044 2807 Québec Inc. v. Canada, 2004 DTC 6636, 2004 FCA 23

The trial judge had correctly found that a corporation ("ML1") whose shares were owned by an individual ("father"), and a corporation ("ML2") 90%...

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Lanester Sales Ltd. v. The Queen, 2003 DTC 997 (TCC), aff'd 2004 DTC 6461, 2004 FCA 217

Arrangements pursuant to a shareholders agreement under which the franchisor of the taxpayer (which owned 49.9% of the taxpayer's shares) was...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) franchise arrangement was arm's length 82

Silicon Graphics Ltd. v. Canada, 2002 DTC 7113, 2002 FCA 260

The taxpayer was found to be a Canadian-controlled private corporation, as neither de jure nor de facto control was held by...

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See Also

BHP Billiton Limited v Commissioner of Taxation, [2020] HCA 5

The appellant, BHP Billiton Limited ("Ltd"), an Australian resident taxpayer, was part of a dual-listed company arrangement (the “DLC...

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CO2 Solution Technologies Inc. v. The Queen, 2019 TCC 286, aff'd sub nom. Bresse Syndics Inc. acting for the bankruptcy of CO2 Solution Technologies Inc. v. The Queen, 2021 FCA 115

A high-tech public company (CO2 Public) carried on its SR&ED through a private company (CO2 Technologies) that was held by a discretionary trust...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation - Paragraph (a) a declaration of trust’s requiring the trustees to be the Pubco directors gave Pubco de jure and de facto control of a trust investment 677
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(i) a declaration of trust’s requiring the trustees to be the Pubco directors likely represented a s. 251(5)(b)(i) right of Pubco over trust investment 291

Aeronautic Development Corporation v. The Queen, 2017 TCC 39

The taxpayer was denied refundable SR&ED investment tax credits on the basis that a U.S. resident (Mr. Silva) and a U.S. corporation controlled by...

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Kruger Wayagamack Inc. v. The Queen, 2015 DTC 1112 [at 667], 2015 TCC 90, aff'd 2016 FCA 192

Kruger Inc. was the 51% shareholder of the taxpayer and was entitled under the unanimous shareholders agreement between it and the other...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares non-assignable put right ignored 98
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i) de jure control requires strategic control, not merely operational control 93
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1) - Paragraph 256(1)(a) de jure or de facto control requires strategic control, not merely operational control 340
Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.2) - Paragraph 256(1.2)(c) effect of s. 256(1.2)(g) is as if company were run by 3rd party 254

Solutions MindReady R&D Inc. v. The Queen, 2015 TCC 17

All of the shares of the taxpayer were held by a trust whose two trustees were also directors of a public company and the sole directors of the...

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McGillivray Restaurant Ltd. v. The Queen, 2015 DTC 1030 [at 134], 2014 TCC 357, aff'd supra

The taxpayer's business was a franchised restaurant. Boyle J found that it was required to share the small business deduction with corporations...

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Lyrtech RD Inc. v. The Queen, 2013 DTC 1147 [at 820], 2013 TCC 12, aff'd 2014 FCA 267

In order to generate refundable investment tax credits for research and development expenditures, a Canadian public corporation ("Lyrtech")...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) s. 248(25) does not apply for s. 251(5)(b) purposes 337

Taber Solids Control (1998) Ltd. v. The Queen, 2009 DTC 1899, 2009 TCC 527

The taxpayer ("Taber 1998") and its majority shareholder ("Ken") were found to have de facto control over a corporation that was owned by Ken's...

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Brownco Inc. v. The Queen, 2008 DTC 2591, 2008 TCC 58

The taxpayer was subject to the de facto control of the holder of ½ of its shares ("Bost") given that under the unanimous shareholder agreement...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) "free" terms indicative of non-arm's length 45

Corpor-Air Inc. v. The Queen, 2007 DTC 841, 2006 TCC 75

The taxpayer was found to be subject to the de facto control of the husband of the individual who was its sole director, shareholder and officer...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence 57

Avotus Corporation v. The Queen, 2007 DTC 215, 2006 TCC 505

A non-resident shareholder of the taxpayer, who owned one-half of the taxpayer's shares and, by virtue of being chairman, was entitled pursuant to...

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Plomberie J.C. Langlois Inc. c. La Reine, 2006 DTC 2997, 2004 TCC 734, aff'd supra.

The taxpayer and its 50% corporate shareholder were found to be subject to the de facto control of the same person (an individual who was the sole...

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L.d.g. 2000 Inc. v. The Queen, 2003 DTC 827 (TCC)

50% of the shares of the taxpayer were acquired by another corporation ("Gestion") following which the two individual shareholders of the taxpayer...

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Transport M.l. Couture v. The Queen, 2003 DTC 817 (TCC), aff'd sub. nom. 9044-2807 supra.

The taxpayer was found to be controlled within the meaning of s. 256(5.1) by another corporation ("Transport Couture") given the economic...

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Miller, The Estate of Carl Edward v. The Queen, 2002 DTC 1228 (TCC)

An order of the District Court of Ontario that there be no administration or distribution of an estate pending a decision of the widow of the...

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Mimetix Pharmaceuticals Inc. v. The Queen, 2001 DTC 1026 (TCC), briefly aff'd 2003 DTC, 2003 FCA 106

Fifty percent of the voting shares of the taxpayer together with most of its capital (in the form of preferred shares and an interest-free loan)...

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Multiview Inc. v. The Queen, 97 DTC 1489 (TCC)

Brulé TCJ. applied the criteria in Interpretation Bulletin IT-64R3, para. 17, 19 to find that the taxpayer was not subject to the de facto...

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Rolka v. MNR, 62 DTC 1394, [1962] CTC 637 (Ex Ct)

An individual was found to indirectly control a corporation ("Nelmar") whose "shareholders were merely his nominees, prepared at all times to...

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Administrative Policy

5 January 2016 External T.I. 2015-0568911E5 F - MRC - Revenu d’entreprise

In the context of noting that a corporation whose capital was held by a municipality nonetheless would not qualify for s. 149(1)(d.5) exemption if...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(d.5) Quebec regional county municipality is municipality 150

11 October 2013 APFF Roundtable, 2013-0495811C6 F - De Facto Control

S. 188 of the Quebec Business Corporations Act provided that "Unless otherwise provided in the by-laws, in the case of a tie, the chair of the...

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11 October 2013 APFF Roundtable, 2013-0493651C6 F - Affiliated persons and de facto control

All the voting common shares of Opco (carrying on an active business) are held by a discretionary inter vivos trust which was settled by the uncle...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.61) exception unavailable for inter vivos trust 177

17 June 2011 Internal T.I. 2011-0394471I7 F - Associated Corporations - 256

Transport M.L. Couture was discussed as an example of the application of s. 256(5.1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2) s. 256(2) does not multiply the SBD but protects it where particular corporations otherwise are eligible 182
Tax Topics - Income Tax Act - Section 256 - Subsection 256(2.1) list of 5 “useful” factors in determining s. 256(2.1) application 167

14 June 2010 Internal T.I. 2010-0366611I7 F - Determination of CCPC Status

At issue was whether a start-up Canadian private corporation engaged in SR&ED was a Canadian-controlled private corporation (“CCPC”)....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) sole beneficiary of a trust did not have a s. 251(5)(b) right to trust shares 44
Tax Topics - General Concepts - Agency application of Kinguk Trawl test of agency 165
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation - Paragraph (b) agreement was not a USA since it did not contain an outright transfer of the powers of the directors to the shareholders 549

22 December 2009 Internal T.I. 2009-0343331I7 F - Determination of CCPC Status

A Quebec corporation (the “Corporation”) whose only outstanding shares were common shares, agreed in the Contract with a non-resident...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 220 - Subsection 220(2.2) s. 220(2.2) precluded accepting a late amendment 81
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation shareholder agreement affecting how the majority of directors exercised their rights was not a USA 362

20 December 2004 External T.I. 2004-0092871E5 F - Arm's Length: de facto control

In 1999-0008405 F, CRA applied IT-64R4 in generally commenting that s. 84.1 could apply where an individual who sold the individual’s shares of...

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23 June 1995 External T.I. 9510475 - ASSOCIATED CORPORATIONS

With respect to a situation where one corporation ("Supplyco") owned 50% of the shares of another corporation ("Distributorco") and the majority...

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20 March 1995 External T.I. 9424295 - 256(5.1) CONTROL AND GOVERNING BODIES

With respect to whether an incorporated professional business would be subject to de facto control by a professional body where an order has been...

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1 September 1995 External T.I. 9503925 - C.C.P.C.

A submission that a 60% non-resident shareholder did not control what was alleged to be a CCPC by virtue of terms of the shareholders' agreement...

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28 July 1994 External T.I. 9417455 - CCPC STATUS

"In addition to the factors expressed in paragraph 19 of IT-64R3, the Department would also consider the composition of the board of directors,...

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91 C.R. - Q.9

Provided that Canadian-resident trustees, in fact, control a private corporation, it would be a CCPC even if it has non-resident beneficiaries.

A.P.F.F. 1990 Round Table, Question 36, No. 9317770

In order for the exception to apply, the arrangement must have been entered into for commercial and not for the purpose of controlling the other...

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20 March 1995 External T.I. 9424295 - 256(5.1) CONTROL AND GOVERNING BODIES

With respect to the situation where an incorporated professional is required to carry on business under the supervision and control of an...

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12 August 1992 T.I. 921604 (April 1993 Access Letter, p. 155, ¶C248-134; Tax Window, No. 23, p. 12, ¶2130)

Where a shareholder's agreement between two 50% shareholders provides that each shareholder will elect two members of the board of the directors...

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29 July 1992 Memorandum (Tax Window, No. 21, p. 4, ¶2037)

Where the chair of a shareholder's meeting has the deciding vote and is one of two 50% shareholders, she generally will have de facto control of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) 89

29 July 1992 Memorandum (Tax Window, No. 21, p. 1, ¶2038)

An estate that does not own voting shares of a corporation nonetheless may be in a position to exercise some influence over the corporation that...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 85 - Subsection 85(4) 79

29 June 1992 Internal T.I. 7-920444

Discussion of whether persons have effective control with respect to a substantial block of shares in a widely-held corporation where there is...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) 10

91 C.R. - Q.12

Where a 50% shareholder has a casting vote by virtue of being chairperson, the corporation generally will be controlled directly or indirectly in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) 21

20 September 1990 Internal T.I. 7-902376

"The introduction of subsection 256(5.1) expands the judicially based de jure control concept to include de facto control situations where the...

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3 January 1990 T.I. 5-9256 (Tax Window Files "'Meaning of Canadian-Controlled Private Corporation' - Control Test"

Where a Canadian-resident private corporation owns all the shares of a resident Canadian corporation ("N") which, in turn, owns all the shares of...

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22 September 89 T.I. (February 1990 Access Letter, ¶1130)

Father has his corporation invest $150,000 in a corporation owned by his daughter and her husband, by acquiring shares that were retractable at...

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89 C.R. - Q.15

"While the ability to elect a majority of the directors, or to control the day to day management and operation of the business, may be...

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3 Aug. 89 T.I. (Jan. 90 Access Letter, ¶1086)

RC rejected a submission that "control in fact" means control by a person who does not otherwise control the corporation where that person has any...

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88 C.R. - Q.41

The enactment of ss.256(5.1) and 256(1.4) did not alter RC's policy described in IT-64R2, paragraph 31 respecting rights of first refusal and...

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Gouin-Toussaint, September 1989 Revenue Canada Round Table (Dec. 89 Access Letter, ¶1040)

A public corporation and a private corporation plan to each acquire ½ of the common shares of a third corporation ("Opco"). The public...

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Gouin-Toussaint, September 1989 Revenue Canada Round Table (Dec. 89 Access Letter, ¶1040)

A daughter who had de jure control of a corporation operating three boutiques was unlikely in the circumstances to run her business independently...

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Gouin-Toussaint, September 1989 Revenue Canada Round Table (Dec. 89 Access Letter, ¶1040)

A non-resident individual involved in the battery-making business in the United States controlled a Canadian corporation of which the non-resident...

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IT-64R4 "Corporations: Association and Control (Archived) 1 November 2004

23. Whether a person or group of persons can be said to have de facto control of a corporation, notwithstanding that they do not legally control...

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IT-458R "Canadian-Controlled Private Corporation"

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(6) 0

Articles

Boriana Christov, "De Facto Control", Tax Topics, No. 1978, 4 February 2010, p. 1.

Kroft, "Meaning of de facto Control - Emerging Income Tax Issues", 1991 Conference Report, p. 8:42.

Subsection 256(5.11)

Cases

North American et al. v. The Deputy Minister of Finance, 2019 MBQB 29

Dewar J reversed a finding of the Manitoba Tax Appeals Commission that a corporation (“533”) was subject to de facto control (as described in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) spouse made her own decisions re restaurant 376

Subsection 256(6) - Idem [Control in fact]

Cases

Silicon Graphics Ltd. v. Canada, 2002 DTC 7113, 2002 FCA 260

In rejecting a submission of the Crown that a U.S. corporation ("Silicon U.S.") had de facto control of the taxpayer and finding that the taxpayer...

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Administrative Policy

4 February 2015 External T.I. 2015-0565741E5 - Canadian-controlled private corporation

As a condition to distributing shares of Aco to the beneficiaries of a testamentary trust of which it was sole trustee, the trustee ("Pubco"),...

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Words and Phrases
debt
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract indemnity agreement was not "indebtedness" 47
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) s. 256(5)(b) applied to acquisition right upon default under indemnity 167

8 October 2010 Roundtable, 2010-0373161C6 F - Paragraphs 256(3) and 256(6) ITA

Given the application of s. 256(6) to the entire Act, if the conditions set out in that subsection are otherwise satisfied, can CRA confirm...

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IT-458R "Canadian-Controlled Private Corporation"

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) 0

Subsection 256(6.1) - Simultaneous control

Administrative Policy

8 October 2010 Roundtable, 2010-0373241C6 F - Acquisition of Control

In the course of a non-committal response as to whether there is an acquisition of control of a public company when its shareholders exchange most...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(d) question of fact whether somersault transaction results in acquisition of control of a public company 164

5 October 2000 External T.I. 2000-0037965 - Application of Parthenon Case - Control

With respect to cases prior to December 1999, it was the Agency's view "that Parthenon does not apply to restrict control of a corporation to only...

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Subsection 256(7) - Acquiring control

Paragraph 256(7)(a)

Administrative Policy

22 August 2014 External T.I. 2014-0540751E5 F - Acquisition of control

Two brothers (A and B) own 100% of the shares of Holdco A and Holdco B, respectively, which, each in turn, owns 50% of the shares of Opco. A...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(iii) cousins part of related control group while fathers alive 244

12 December 2013 External T.I. 2013-0484031E5 - Application of clause 256(7)(a)(i)(B)

A limited partnership which owns less than 50% of the voting shares of a corporation will, as a result of a reorganization of capital, own more...

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2011 Ruling 2010-0360921R3 - Change of trustee - control

Opco, which has net capital and non-capital losses, is controlled by a Trust whose trustees are three resident individuals (Trustees 1, 2 and 3)...

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22 March 2005 External T.I. 2005-0111811E5 - Acquisition of Control

The transfer of shares from the deceased to trusts the executors of which were his surviving spouse and two children would not result in an...

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12 August 1994 External T.I. 9412385 - CHANGE OF CONTROL

If at 10:00 a.m. a corporation ("Bco") issues one common share to an unrelated corporation ("Dco"), and at 10:30 on the same day, Bco acquires the...

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22 January 1993 T.I. (Tax Window, No. 28, p. 10, ¶2379)

Where the articles of a corporation provide that the voting rights associated with a particular block of voting shares (representing more than 50%...

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23 March 1992 T.I. 913478 (April 1993 Access Letter, p. 156, ¶C248-135)

Where an individual owned all the shares of A Co and controlled B Co by reason of being the sole trustee of a family trust which owned its shares,...

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90 C.R. - Q44

Where an individual acquires from a related person the shares of a corporation which has a wholly-owned subsidiary, RC considers that there has...

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90 C.R. - Q41

Where there has been an acquisition of shares by more than one person, those persons will be deemed not to have acquired control if each of them...

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26 February 1990 T.I. (July 1990 Access Letter, ¶1350)

Where prior to a section 86 reorganization of Opco, 50% of its voting shares were held by Mr. A (through his holding company), 20% by Mrs. A and...

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89 C.R. - Q.16

Where two brothers (A and B) each own 50% of the voting shares of Opco and the shares of Opco owned by B are converted into non-voting shares, A...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) 155

October 1989 Revenue Canada Round Table - Q.25 (Jan. 90 Access Letter, ¶1075)

Where father and son hold respectively 51% and 49% of Opco through their respective wholly-owned holding corporations, and on the retirement of...

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87 C.R. - Q.66

Where there is an acquisition of shares of a corporation by more than one person, those persons will be deemed not to have acquired control if...

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81 C.R. - Q.47

Provided that on the death of a controlling shareholder there is no change in control of the parent pursuant to s. 256(7)(a)(ii) or (iii), then...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(5.1) 36

Subparagraph 256(7)(a)(i)

Administrative Policy

2 February 2006 External T.I. 2005-0152431E5 F - Utilization of non-capital losses

Ms. A, who owned all the shares of Lossco, which had disposed of all the assets of its (unspecified) business for cash, disposed of those shares...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(11) s. 69(11) would not apply where losses are applied against services income of Amalco 262

Clause 256(7)(a)(i)(A)

Administrative Policy

4 May 2005 External T.I. 2005-0120271E5 F - Change of Control - CDA & RDTOH

Ms. A, the sole shareholder of Zco (A CCPC), sold her shares to her brother (Mr. B, also a resident). Was there an acquisition of control of Zco...

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Paragraph 256(7)(b)

Administrative Policy

2014 Ruling 2014-0523221R3 - Amalgamation of mutual funds

Proposed transactions. C1, which is a smaller mutual fund corporation than C2, will amalgamate with C2 to form Amalco. C1, C2 and Amalco have...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(5.5) amalgamation of two mutual fund corporations each with capital losses 134
Tax Topics - Income Tax Act - Section 69 - Subsection 69(11) amalgamation of two mutual fund corporations each with capital losses 134

S4-F7-C1 - Amalgamations of Canadian Corporations

1.49 Pursuant to subparagraph 256(7)(b)(i), control of a corporation will be deemed not to have been acquired solely because of an amalgamation...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 100 - Subsection 100(2.1) s. 100(2.1) applies to non-qualifying amalgamation 64
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) application following amalgamation 113
Tax Topics - Income Tax Act - Section 116 - Subsection 116(1) deemed tcp following amalgamation 167
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.1) continuity of s. 13(5.1) on amalgamation 132
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) Amalco can continue objection and receive refunds 157
Tax Topics - Income Tax Act - Section 169 Amalco can continue objection 103
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) reserve after amalgamation 62
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder shareholder need not hold shares 88
Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) deemed non-arm's length relationship on amalgamation 172
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(iii) reserve after amalgamation 62
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(7) successoring where non-wholly owned amalgamation 109
Tax Topics - Income Tax Act - Section 69 - Subsection 69(13) no disposition of predecessor property on general principles 113
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.4) s. 87(5) not applicable 112
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) non-87 amalgamation/no FX gain 165
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) no deemed dividend to dissenter on amalgamation 87
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) election filing by Amalco 109
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.1) s. 87(1.1) qualifies for all s. 87 purposes 66
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.2) successoring where non-wholly owned amalgamation 109
Tax Topics - Income Tax Act - Section 87 - Subsection 87(10) deemed listing of temporary Amalco shares 120
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11) gain if high PUC is sub shares 55
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) presumptive satisfaction of s. 87(1)(a)/dissent and squeeze-outs onside 297
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) new corp/deemed year end coinciding or not with acquisition of control 758
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(b) Amalco must follow predecessor's valuation method subject to truer picture doctrine 64
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(c) reserve after amalgamation 113
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(d) cost amount carryover 149
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(e.1) s. 100(2.1) applies to non-qualifying amalgamation 64
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(o) no continuity rule for non-security options 139
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(q) pre-amalgamation services 106
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) loss-carry back to parent 169
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) dovetailing with s. 88(1.1) 44
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3.1) 346
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3) PUC shifts 189
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 281
Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) dovetailing with s. 78 and 112(12) 191
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) allocation of s. 87(9)(c)(ii) excess as parent chooses 230
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) late designation 122
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) dovetailing with s. 87(2.1) 62
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) partnership dissolution on amalgamation 137
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) deemed non-arm's length relationship on amalgamation 467
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) deemed non-arm's length relationship on amalgamation 371
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) class continuity on non-arm's length amalgamation 327
Tax Topics - Income Tax Regulations - Regulation 8503 - Subsection 8503(3) - Paragraph 8503(3)(b) pre-amalgamation services 106
Tax Topics - Income Tax Act - Section 249 - Subsection 249(3) 136
Tax Topics - Income Tax Act - Section 22 - Subsection 22(1) 179

Example 2

Consider the situation where the shareholders of a public corporation (Pubco) acquire shares of a loss company (Lossco) on a triangular...

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2012 Ruling 2011-0402571R3 - De Jure Control - Debt Settlement

Parent owns the Class B common shares of Lossco and Mr. A, who deals at arm's length with Parent (and with Profitco, a subsidiary of Parent) holds...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i) no immediate right to elect directors 259

17 February 2011 External T.I. 2010-0388081E5 - Clarification STEP Roundtable Q3 - Deemed Year End

On the amalgamation of public corporation ("Pubco") and a private corporation ("Holdco") to form Amalco, the three shareholders of Holdco acquire...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) 2010 STEP Roundtable Q. 3 clarification - no double acquisition 74
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) double year ends where acquisition of control under s. 256(7)(b)(ii) 165

7 January 2002 External T.I. 2001-0064945 - Acquisition of control

Where shareholders of a public company ("Pubco") receive more than 50% of the shares of a loss company ("Lossco") on a triangular amalgamation of...

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9 February 1999 External T.I. 9831755 - AMALGAMATION - ACQUISITION OF CONTROL

Where two unrelated persons (X and Y) hold 60% and 40% of the shares of a corporation which then amalgamates, with X and Y each holding 50% of the...

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5 April 1995 External T.I. 9414745 - STOP LOSS

Where four unrelated individuals (A, B, C and D) own 40%, 20%, 20% and 20% of the common shares of Xco, and own 15%, 24%, 24% and 24% of the...

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22 August 1991 T.I. (Tax Window, No. 8, p. 4, ¶1408)

Where a partnership "owns" more than 50% of the voting shares of a corporation and a particular partner has the entitlement to exercise more than...

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ATR-7 (31 March 86)

The amalgamation of Lossco and Opco following the transfer of the Opco shares held by Holdco and the brother-in-law to Newco in exchange for...

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Articles

Richler, "Triangular Amalgamations", March/April 1985 Canadian Tax Journal, p. 374

RC accepts that where on a triangular amalgamation, those who controlled the target corporation control the parent following the amalgamation,...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) 68

Subparagraph 256(7)(b)(iii)

Clause 256(7)(b)(iii)(B)

Cases

Birchcliff Energy Ltd. v. Canada, 2019 FCA 151

A newly-launched public corporation ("Predecessor Birchcliff") accessed the losses of a lossco ("Veracel") in order to shelter the profits from...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) analysis looked beyond the immediate but transitory effect of transactions for avoiding the loss-streaming rules 399

Paragraph 256(7)(d)

See Also

Promutuel Réassurance v. The Queen, 2020 TCC 13

The taxpayer (“ProRé”) was a corporation without share capital engaged in the reinsurance of casualty risk whose capital had been contributed...

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Words and Phrases
group of persons
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(8.1) s. 256(8.1) deemed non-share insurance corporation to have issued shares to its insurance-company members 154

Administrative Policy

8 October 2010 Roundtable, 2010-0373241C6 F - Acquisition of Control

Opco, whose only class of shares is listed on a stock exchange, distributes shares of a newly-incorporated corporation ("Newco") to its...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(6.1) purpose is to take into account simultaneous control at the various levels 85

Paragraph 256(7)(e)

Administrative Policy

30 July 2001 External T.I. 2001-0091465 - Shares Exchange Arrangement

Common shares of a CBCA corporation ("Canco") held by dissenting shareholders will no longer be considered to be outstanding shares of Canco....

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Paragraph 256(7)(i)

Articles

Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Taxation of Trusts Resident in Canada", Chapter 3 of Canadian Taxation of Trusts, (Canadian Tax Foundation), 2016.

Trustees not necessarily a group (pp. 158-9)

[T]he CRA has relied on Consolidated Holding as establishing a presumption that trustees act in...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(3) 374
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(4) - Paragraph 251.1(4)(d) 437
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(g) - Subparagraph 251.1(1)(g)(ii) 115
Tax Topics - Income Tax Act - Section 164 - Subsection 164(6) 141
Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2) 331
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(1) 144
Tax Topics - Income Tax Act - Section 251.2 - Subsection 251.2(3) - Paragraph 251.2(3)(b) 112
Tax Topics - Income Tax Act - Section 252.2 - Subsection 252.2(2) 115
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) - Paragraph 70(6)(d.1) 161
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) 1201
Tax Topics - Treaties - Income Tax Conventions - Article 29B 239
Tax Topics - Income Tax Act - Section 248 - (2)-(41) 157
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8) 199
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.2) 59
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.3) 38
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(6) 174
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(6) 164
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(24) 163
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) 91
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(18) 49
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(7.01) 66
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) 311
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13) 125
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) 144
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(2) 379

Subparagraph 256(7)(i)(ii)

Administrative Policy

11 October 2019 APFF Roundtable Q. 9, 2019-0812781C6 F - Acquisition of control and trusts

Do trustees of a spousal trust under s. 70(6)(b) have a discretionary power respecting the distribution of income (or capital) of the trust...

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Subsection 256(8) - Deemed exercise of right

See Also

Deans Knight Income Corporation v. The Queen, 2019 TCC 76, rev'd 2021 FCA 160

After finding that a third-party did not have a call right to acquire a further block of shares sufficient to give it a s. 251(5)(b) right to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) - Subparagraph 251(5)(b)(i) 3rd party was expected to, but could not require, an acquisition of voting control 589
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) the absence of an acquisition of effective control of a Lossco also demonstrated an absence of s. 245(4) abuse 522

Administrative Policy

92 C.R. - Q.23

Where an option to which s. 256(8) applies subsequently expires, there will be no acquisition of control by the grantor of the option.

Subsection 256(8.1)

See Also

Promutuel Réassurance v. The Queen, 2020 TCC 13

The taxpayer (“ProRé”) was a corporation without share capital which acquired voting control of a taxable Canadian trust company...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(d) 27 insurance companies who acted in a cooperative manner were a “group of persons” for s. 256(7)(d) purposes 676

Subsection 256(9) - Date of acquisition of control

Cases

Survivance v. Canada, 2007 DTC 5096, 2006 FCA 129

The taxpayer, a public corporation, which disposed of its shares of a subsidiary to a private corporation, was eligible to claim a business...

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Administrative Policy

11 October 2013 APFF Roundtable, 2013-0495751C6 F - Time of an Acquisition of Control

The questioner asserted:

It is generally accepted that the "particuar time on a day" when "control of a corporation is acquired" is the time at...

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4 July 1989 T.I. (Dec. 89 Access Letter, ¶1067)

At 2 p.m. on June 1, 1989, all of the shares held by Company A in Company B (which prior to that time was controlled by it) are redeemed, with the...

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Articles

Peter Lee, Paul Stepak, "PE Investments in Canadian Companies", draft 2017 CTF Annual Conference paper

Use of s. 256(9) election for seller of Target to get benefit of debt repayment by Target immediately before the closing (pp. 22-23)

The payoff of...

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