Section 69

Subsection 69(1) - Inadequate considerations

Paragraph 69(1)(a)

Cases

Tusk Exploration Ltd. v. Canada, 2018 FCA 121

double taxation can result from non-arm’s length transactions such as under s. 69(1)

The taxpayer, a Canadian exploration company, unsuccessfully argued that it was not subject to Part XII.6 tax on Canadian exploration expenses that it had purported to renounce under the look-back rule - but which were now admittedly not eligible for look back because the flow-through share investors were non-arm’s length. A secondary argument was that, as the Part XII.6 tax was a proxy for interest, and the non-arm’s length shareholders were assessed interest on their denied CEE claims for the look-back year, this resulted in a double interest imposition. Webb JA stated (at para. 37):

There are other provisions of the ITA dealing with non-arm’s length parties where the result would effectively be double taxation. For example, under paragraph 69(1)(a) of the ITA, if a taxpayer has acquired anything from a person with whom that taxpayer is not dealing at arm’s length for an amount in excess of the fair market value thereof, the adjustment under that paragraph is only made for the taxpayer who acquires the property. There is also a similar one-sided adjustment under paragraph 69(1)(b) of the ITA for dispositions of property for proceeds that are less than the fair market value of such property. As a result, double taxation could arise when the person who has acquired the property later sells it for an amount greater than the reduced cost (as determined under paragraph 69(1)(a) of the ITA) or the actual cost (since there is no adjustment for the purchaser who pays less than fair market value under paragraph 69(1)(b) of the ITA). Therefore, the potential for double taxation exists in the ITA when transactions are completed between parties who do not deal with each other at arm’s length.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 211.91 - Subsection 211.91(1) Part XII.6 tax was payable on CEE purportedly renounced on a look-back basis to NAL shareholders 497
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) potential for double taxation under the ITA of NAL transactions 295
Tax Topics - Income Tax Act - Section 66 - Subsection 66(12.6) only a PBC can renounce 53

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

Before going on to find that it followed from the deeming in subsection 256(9) of control of a corporation to be acquired as of the beginning of the day that control also was relinquished by the previous controller at the same, Noël J.A. stated (at p. 5104) that the trial judge had:

"Rightly noted that the presumption in paragraph 69(1)(a) of the Act applies when determining the tax consequences for one of the parties to a transaction (the purchaser), without altering the tax liability of the other (the vendor). However, this asymmetry results from the clear language of paragraph 69(1)(a), which reduces the sale price of the purchaser by deeming it equal to the fair market value of the property sold, and clearly intentionally, lets the vendor suffer the tax consequences resulting from the higher amount actually received ... ."

Deptuck v. Canada, 2003 DTC 5273, 2003 FCA 177

S.69(1)(a) applied to reduce the capital cost to a partnership of depreciable property purchased by it to the property's fair market value rather than the higher purchase price given that the same individual controlled both the vendor and the general partner of the partnership (as well as being the sole initial limited partner at the time of the purchase). Noël J.A. stated (at p. 5276) that:

"A partnership must be regarded as a separate person for the purpose of computing income with the result that the rules prescribed in Division B (Computation of Income), including paragraph 69(1)(a), apply to a partnership as if it were a person."

It was not relevant that some of the limited partners, who dealt at arm's length with the controlling individual, subscribed for units in the partnership in the year of the purchase, but subsequent to the time of the purchase.

Chutka v. Canada, 2001 DTC 5093 (FCA)

A sale of equipment by a corporation to a partnership whose general partner was wholly-owned by the same individual who owned the vendor corporation was found to be a non-arm's length transaction, with the result that s. 69(1)(a) applied to reduce the capital cost of the equipment to the purchasing partnership to the equipments fair market value. Linden J.A. found (at p. 5098) that "the fiction of a partnership as an entity separate from the partners is temporary and does not extend to colour the true legal nature of transactions at the time they are entered into by a partnership" and that both the vendor corporation and the general partner were persons and taxpayers within the meaning of the Act and were related persons, so that s. 251 deemed the transaction to occur not at arm's length. (followed in Deptck v. The Queen, 2002 DTC 1835 (TCC))

Ottawa Valley Power Co. v. MNR, 69 DTC 5166, [1969] CTC 242 (Ex Ct), aff'd 70 DTC 6223, [1970] CTC 305, [1970] S.C.R. 941

In finding that improvements which Ontario Hydro made free of charge to the plant of the taxpayer in order that the taxpayer could provide 60 cycle power rather than 25 cycle power did not result in the acquisition of property by the taxpayer "by gift" for purposes of s. 20(6) of the pre-1972 Act, Jackett P. stated (p. 5172) that he "would have grave doubts, however, about applying paragraph (c) to capital equipment supplied free of charge by one business man to another for business reasons, even if the particular transaction were legally a 'gift'". In any event, the transaction was not a gift because the expenditure by Ontario Hydro enabled it to receive 60 cycle power from the taxpayer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.1) 133

See Also

The Queen v. Yelle, 2010 DTC 5128 [at 7083], 2010 ABPC 94

The taxpayer, who was a member of a partnership, was accused tax evasion under s. 239(1)(a) in connection with capital cost allowance claims made by the partnership on software that it had purchased at an allegedly inflated price from a vendor who was alleged not to deal at arm's length with the partnership. In denying the taxpayer's motion for a directed verdict, Fradsham J. noted at para. 26 that the "taxpayer" referred to in s. 69(1)(a) can be a partnership, and at para. 35 that, in the phrase "where a taxpayer has acquired anything from a person whom the taxpayer was not dealing at arm's length," the "when" refers to the time of the "dealing" rather than the subsequent time that the acquired property is transferred.

Heron Bay Investments Ltd. v. The Queen, 2009 DTC 1606, 2009 DTC 1288

Hogan, J. indicated that if he accepted the taxpayer's evidence that a loan made by the taxpayer on a non-recourse basis to a related corporation was worth less than the amount advanced, this would not help the taxpayer in securing a doubtful debt deduction given that s. 69(1)(a) would have applied at the time the loan was made to reduce the cost of the loan to its fair market value.

Westward Explorations Ltd. v. The Queen, 2006 DTC 2443, 2006 TCC 105

An 11.12% interest in a gold mine that the taxpayer purchased was to be valued, for purposes of s. 69(1)(a) of the Act, on the basis that the whole mine, which was estimated by the Crown's expert to have a resource of 246,700 ounces (proven and probable - 29,600; possible - 25,100; and drill indicated - 192,000), and that that resource should be valued at $25 per ounce. The inferred ounces included in the valuation of the taxpayer's expert were too speculative.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Other 76

CIT Financial Ltd. v. The Queen, 2003 DTC 1138, 2003 TCC 544

The fair market value of custom software that a New Zealand company had developed to run its steel mill was found to have a fair market value equal to the amount shown in the New Zealand company's records as being the cost, plus a 70% adjustment factor to reflect the fact that most companies' tracking systems do not record between 30% and 70% of the real effort that goes into software. The capital cost to the taxpayer of the software was reduced from the purchase price to this amount.

Marcantonio v. MNR, 91 DTC 917 (TCC)

The taxpayer, an optometrist, sold lenses and frames which he, in turn, had purchased essentially at the same price from a related corporation ("Andrea"). Given that the relationship between the taxpayer and Andrea was that of retailer/wholesaler, the fair market value of the goods purchased from Andrea should be their wholesale price rather than their retail price. The taxpayer had failed to successfully challenge the basis of the Minister's reassessment, which was to allow the deduction by the taxpayer of an amount equal to the cost to Andrea of the lenses and frames plus 115% of its payroll costs. However, Mogan J. indicated that he assumed that the Minister would do what was possible to avoid the double taxation that would result from not reassessing Andrea to reduce its income accordingly.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) 77

Administrative Policy

28 July 2014 External T.I. 2014-0532651E5 - Loan to charitable foundation

non-interest bearing term loan could trigger PDO rules

Canco advances the Loan to a related charitable foundation. The Loan is not issued at a discount and matures in X years. Are there any tax consequence to Canco to the Loan not bearing interest? CRA stated:

Where the cost of the Loan is less than the amount payable at maturity, there will be a deemed accrual under paragraph 7000(2)(a) of the Regulations. However, because the Loan was made between two non-arm's length parties, paragraph 69(1)(a)… may apply to reduce the cost of the Loan to Canco. If the Loan is not repayable at the demand of Canco, it is possible that the fair market value of the Loan could be less than the amount advanced by Canco under the Loan. If that is the case, then paragraph 69(1)(a)… could deem Canco to have acquired the Loan at a cost equal to the fair market value of the Loan, triggering the deemed accrual under paragraph 7000(2)(a)… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(a) non-interest bearing and non-arm's length term loan could trigger PDO rules 156

S4-F3-C1 - Price Adjustment Clauses

CRA will consider a price adjustment clause to represent pricing at fair market value if:

  • the agreement reflects a bona fide intention of the parties to transfer property at FMV;
  • the purported FMV is determined by method that is fair and reasonable in the circumstances (which does not necessarily entail using CRA's preferred method, nor engaging a valuation expert);
  • the parties agree that a CRA or Court valuation, if any, will supersede the price otherwise determined; and
  • the excess or shortfall is actually refunded or paid, or legal liability therefor is adjusted (para. 1.5).

Price adjustment clauses involving shares may use a number of adjustment mechanisms. CRA non-exhaustively mentions changes in redemption value, the issuance of a note or change in the principle amount of a note, or a change in the number of shares issued - although CRA recommends against using the latter because of inherent legal and technical difficulties (para. 1.6).

8 January 2002 Internal T.I. 2001-009735 -

FMV of non-interest bearing note less than face

Where Mr. A sold shares of Opco to a son and daughter in consideration for promissory notes that were non-interest bearing and repayable in annual instalments, the cost of the Opco shares acquired by the son and daughter were equal to the fair market value of the promissory notes, which was lower than the fair market value of the Opco shares. CCRA stated that:

"In various 'butterfly' rulings ... we generally accept, as a statement of fact from the particular taxpayer, that a non-interest bearing note that is payable on demand and issued as consideration for certain property acquired by the taxpayer may have a fair market value equal to its stated principal amount."

10 January 1992 CGA Roundtable, Q. 19, 7-912224

FMV of debt rather than amount owing

Where shares are issued by a corporation on the conversion of debt owed by the corporation to a non-arm's length shareholder, the value of the debt rather than its principal amount must be considered as the amount paid to acquire the shares when determining whether the cost of the shares is limited by s. 69(1)(a).

8 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 10, ¶1046)

Ss.69(1)(a) and 80(1) both will be applied where a creditor accepts low fair market value shares in satisfaction of the debt previously owing to it.

87 C.R. - Q.68 (p. 47:38)

Where additional shares of an insolvent corporation are acquired by the taxpayer, any cost basis denied by s. 69(1)(a) may be treated as a contribution of capital for purposes of s. 53(1)(c).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(c) cost denied by 69(1)(a) treated as contribution of capital 134

81 C.R. - Q.3

When a shareholder advance is paid off with the proceeds of a day-light loan and the proceeds are then used by the shareholder to subscribe for shares, RC will not invoke the application of s. 69(1)(a) to the shares issued, if the corporation agrees to the application of s. 80, and vice versa.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) 20

IT-405 "Inadequate Considerations and Dispositions"

Paragraph 69(1)(b)

Cases

Bouchard v. The Queen, 83 DTC 5193, [1983] CTC 173 (FCTD)

S.69(1)(b)(i) did not apply to a transfer of land by the taxpayer to his son and daughter-in-law where they already had the beneficial ownership of the land under a parol trust. The Statute of Frauds had not been pleaded by the Minister, and even if it had, the invoking of the Statute "would deprive the plaintiff from establishing what he conceived to be the true nature of the transaction and that would be contrary to the public interest" (p. 5201).

See Also

DMWSHNZ Ltd. v. Commissioners for Her Majesty's Revenue and Customs, [2015] BTC 32, [2015] EWCA Civ 1036

repaid notes not disposed of to issuer

The taxpayer, which had been issued 10-year floating-rate notes on its sale of shares of a New Zealand subsidiary to a third party, subsequently demanded repayment of 43% of the Loan Notes. At issue was whether this qualified under s. 171A of the Taxation of Chargeable Gains Act (U.K.) as a transaction in which the taxpayer “disposes of an asset to a person who is not a member of the group.” In finding that this requirement was not satisfied, Lewison LJ stated (at paras. 50-1):

Ms Yang argued that… the relevant asset upon which to concentrate is the Loan Notes. Even after the debt was repaid the Loan Notes continued in existence, not least because the Issuer still had the obligation to cancel the Notes… . In addition the creditor's rights were transferred to the Issuer even if only for a scintilla temporis.

…I do not believe that the approach to interpretation of taxing statutes laid down by Barclays Mercantile Business Finance Ltd v Mawson [[2004] UKHL 51, [2005] 1 AC 684] with its insistence on a realistic view of the facts leaves any scope for angels, pinheads or scintillae temporis. …[I]n the real world when the debt was repaid the obligation to pay was discharged; and there were no remaining creditor's rights that could have been transferred to the Issuer. I cannot see that the world of [capital gains tax] compels any different conclusion.

…[T]he Issuer's obligation to cancel Notes which have been repaid (and to alter the relevant entries in the register) is of an administrative nature which only the Issuer can perform; the performance of which does not require or presuppose that the Issuer owns the Notes in any sense.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Purpose purposive approach entails checking whether overall effect of transaction answers the statutory description 130

Shepp v. The Queen, 99 DTC 510 (TCC)

In obiter dicta, Lamarre Proulx TCJ. doubted that s. 69(1)(b) could be applied on the basis that there was a disposition of an "economic interest" when Class B shares, which were (unsuccessfully) alleged by the Minister to have little value, were made convertible into Class A shares that did have significant value. Lamarre TCJ. stated (at p. 522):

"I do not see how a taxpayer who has not disposed of his shares could be said to have disposed of property for proceeds of disposition when the value of those shares may fluctuate while he holds them."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares 101

Gee-Gee Investments Ltd. v. MNR, 94 DTC 1419 (TCC)

The date at which a residence was to be valued for purposes of determining the capital gain realized by the taxpayer with respect to the transfer of the residence by the taxpayer to a shareholder with which it did not deal at arm's length was the date of sale and transfer of the residence to the shareholder rather than the prior date at which the shareholder had been granted an option to acquire the residence from the taxpayer.

Berry v. Warnett, [1980] T.R. 299 (C.A.), rev'd [1980] BTC 239 (HL)

rev'd on other grounds [1980] BTC 239 (HL)

"[T]he ordinary primary meaning of 'gift' is a voluntary transfer of property made without consideration."

Words and Phrases
gift

The Queen v. Littler, 78 DTC 6179, [1978] CTC 235 (FCA)

A sale by the taxpayer to his sons of shares for their market price at a time when the taxpayer had insider knowledge that an offer would be made for the shares at a price substantially higher than that market price was not a transaction whereby the taxpayer "dispose[d] of property directly or indirectly by way of gift" within the meaning of a former gift-tax provision of the Act. "A contract of sale, which is, by definition, a transfer of property for a consideration, cannot be a gift, which is, by definition, a disposition of property without consideration."

Words and Phrases
gift

Administrative Policy

7 October 2016 APFF Roundtable Q. 19, 2016-0655841C6 F - Reimbursement of attributed income

excess disposition proceeds not required to be repaid

CRA assesses corporation A under s. 56(2) and s. 69(1)(b) on a capital gain of $99,990 on the basis that it had exchanged preferred shares with a FMV of $100,000 for new common shares with a FMV of $10, thereby shifting value to the other shareholder (individual B) which was then realized by B on a sale to a third party. CRA indicated that these provisions

do not provide for a reimbursement obligation by a taxpayer where a benefit was allocated or when income was attributed to another taxpayer. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) no obligation to repay income reallocated to other partner 158
Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1) no domestic secondary adjustment doctrine 200

3 March 2015 External T.I. 2014-0519981E5 F - Donation avec charge / Gift with a charge

gift of encumbered property

An individual donates a real estate property with a fair market value of $200,000 that is charged with a hypothec of $100,000. After noting that under the applicable (Quebec) civil law "in order for there to be a donation, there must among other things be a donative intention," as to which CRA could not comment, and indicating that a real estate property is "a single" property, CRA stated (TaxInterpretations translation):

[I]f it is established that there was a donation agreement under the civil law, under subparagraph 69(1)(b)(ii) the proceeds of disposition of the property to the donor will be deemed to be equal to $200,000.

Under paragraph 69(1)(c), the cost of acquisition of the property to the donee of the gift with charge will be deemed to be equal to $200,000. …[T]he same interpretation would apply for 2016 and subsequent taxation years notwithstanding the amendment to that paragraph… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property real estate property is one property 63

25 October 2013 External T.I. 2013-0484321E5 F - Donation entre vifs / inter vivos gift 

meaning of "gift" inter vivos determined by private law

Does s. 69(1)(b)(ii) apply only to individuals? CRA indicated that the interpretation of the term "gift inter vivos" is not a tax issue but a matter of provincial private law, stating that in the absence of an express contrary provision or sham, "the legal relations created by the parties must be respected in tax matters."

6 August 2013 External T.I. 2012-0469481E5 F - Benefit under trust

taxable benefit added to acb

An estate sold personal-use real estate to one of its beneficiaries for a price less than the property's fair market value, so that s. 69(1)(b)(i) applied. The capital gain to the estate was payable to a beneficiary other than the purchaser.

CRA rejected a submission - that the exception in s. 105(1)(a) applied to exclude a taxable benefit to the purchaser because later in the same year the purchaser sold the property at a capital gain which was increased by the amount of the purchaser's reduced cost for the property. Accordingly, that difference represented a taxable benefit to the purchaser, but such amount was required to be added to the purchaser's adjusted cost base under s. 52(1) – with a resulting reduction in the capital gain on the subsequent sale.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1) taxable benefit on sale to beneficiary at undervalue was not eliminated under s. 105(1)(a) when beneficiary sold the property 128
Tax Topics - Income Tax Act - Section 52 - Subsection 52(1) benefit on estate sale to beneficiary at under-value added to property's ACB 129

23 April 2013 Internal T.I. 2012-0466081I7 F - Usufruct created under French legislation

disposition of all building under shared gift

A Canadian-resident taxpayer who lived outside Canada made a transfer without consideration (the "Gift") to her adult children of a building and subjacent land situated in France (the "Building"), which had appreciated subsequent to its acquisition by the taxpayer. The Gift was made as a shared gift (donation-partage) in accordance with s. 1075 of the French Civil Code ("C.c.f."), with the taxpayer reserving, as permitted by s. 949 of the C.c.f., a usufruct in her favour during her lifetime (the "Arrangement"), so that she was entitled to all the income from the Building.

After noting that the creation of a usufruct governed by the C.c.f. did not give rise to a deemed trust under s. 248(3), CRA stated (TaxInterpretations translation):

… the Taxpayer is deemed to have disposed of the Immovable for consideration equal to its FMV and that her children were deemed to have acquired the property for the same amount, all in accordance with the provisions of paragraphs 69(1)(b) and (c). We understand that the proceeds of disposition will be equal to the eventual excess of the FMV of the Immovable at the time of the Gift over the FMV of the Arrangement and any other rights and obligations relating to or encumbering the Immovable at that time.

CR alos found that s. 43.1(1) applied, indicating that the taxpayer is deemed to have disposed of her usufruct right respecting the Immvable for proceeds equal to its FMV at the time of its creation, and to have acquired it, immediately after that time, at a cost equal to such deemed proceeds of disposition.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 43.1 gift of immovable subject to reservation of a usufruct gave rise to a disposition under s. 43.1 266
Tax Topics - General Concepts - Foreign Law 2-step approach to characterizing a French civil law transaction 228

12 August 2010 External T.I. 2010-0370991E5 - Debt forgiveness

deemed FMV proceeds when debt of related corporation forgiven

Corporation A, an operating company, lent money to Corporation B, its holding company which Corporation B used to purchase a building. Corporation A then forgives the debt to Corporation B. CRA stated:

Even when a debt was acquired for the purpose of earning income from a business or property, subparagraph 69(1)(b)(i) presumes, except as expressly otherwise provided in the Act, that where a taxpayer disposes of anything to a person with whom the taxpayer was not dealing at arm's length for less than the fair market value thereof, the taxpayer shall be deemed to have received proceeds of disposition equal to that fair market value. ... As a result...the deemed proceeds of disposition would be the fair market value of the loan which could mean that no loss on the disposition of a debt would be allowed to the lender.

20 November 2008 Internal T.I. 2008-0281411I7 - Addition of Beneficiaries

The sole trustee (the Trustee) of a family trust who also was one of the "Existing Beneficiaries" exercised a power under the Trust Indenture to add beneficiaries to the Trust who were unrelated to the Existing Beneficiaries. The Trustee then resigned and a replacement trustee became trustee. The Trust protector then removed the replacement trustee and appointed a corporation resident in Canada as trustee.

After noting that the interest of the beneficiary of a discretionary trust "is essentially a right… to be considered by the trustee as to whether or not any trust property…should, in the trustee's discretion, be distributed…see Gartside v. I.R.C., [1968] A.C. 553 (HL)," CRA stated:

When additional beneficiaries are added to a trust, whether as a result of a variation of the trust or pursuant to the terms of the trust, the rights of the existing beneficiaries...are arguably diminished and as a result, each of the existing beneficiaries realizes a disposition of a part of the bundle of rights that forms his or her interest in the discretionary trust….[However,] the addition of the New Beneficiaries will not result in any actual or deemed proceeds of disposition in respect of that disposition other than to the Existing Beneficiary who is the trustee of the Trust.

However, as the trustee

is also a beneficiary of the Trust who has realized a disposition of a part of his interest in the Trust as a result of the addition of the New Beneficiaries, we believe that a reasonable argument can be made to apply subparagraph 69(1)(b)(ii) to the portion of his interest that has been disposed….[W]e suggest that you contact the Valuation Services Section….

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition addition of unrelated beneficiaries 282

31 May 2012 External T.I. 2011-0426091E5 - 98(5) - ptnsp's leasehold int if ptnr is lessor

A partnership was leasing property from a partner, and then is wound up as described in s. 98(5), with the former partner continuing to use the particular property in the business of the terminated partnership. If the leasehold interest is extinguished by merger, s. 98(5) would not apply to the leasehold interest. The terminated partnership would be considered to have disposed of its leasehold interest for nil proceeds of disposition (having regard to the BCN case, 79 DTC 5068), thereby resulting in a terminal loss.

31 December 2004 Internal T.I. 2004-0091781I7 -

Our position is that where, in a non-arm's-length situation, the fair market value of the shares exceeds the redemption amount, the difference will be taxed as a capital gain rather than as a deemed dividend. Paragraph 84(3)(a) speaks only of the "amount paid" where shares are redeemed. It does not stipulate fair market value payment or the lack of fair market value payment or even the necessity for one as opposed to the other; only that the amount paid in excess of the paid-up capital of the shares redeemed shall create a deemed dividend. Furthermore, although paragraph 69(1)(b) deems a taxpayer to have received proceeds of disposition equal to the fair market value of the property transferred in a non-arm's length situation, it does not apply to adjust the "amount paid".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) 92

2004 APFF Roundtable Q. 15, 2004-0086821C6 -

redemption by sub of parent shares

Respecting the situation where a subsidiary purchases for cancellation a portion of the common shares in its capital held by its wholly-owning parent, CRA noted that s. 69(1)(b) would apply only for capital gains purposes and not for purposes of determining the amount of a deemed dividend under s. 84(3), given that the presumption in s. 69(1)(b) applied only with respect to the person disposing of property.

14 September 2004 External T.I. 2004-008220 -

When asked whether the demolition of a rental property would trigger a disposition at fair market value, the Directorate indicated that the demolition would give rise to a disposition with nil proceeds, although in general s. 13(21.1)(b) would restrict the deduction of the resulting terminal loss to half of the amount otherwise calculated.

2001 Ruling 2001-007094 -

Although the issue is not referred to, the disposition of property by a corporation pursuant to the exercise of an option by a partnership of which the corporation was a general partner was considered to give rise to proceeds of disposition equal to the exercise price rather than the fair market value of the property.

2000 Ruling 2000-002395 -

A vertical merger between a US corporation with a Canadian branch business ("Absorbco") and its US parent ("Subco 3") under which Absorbco survives the merger, the US parent of Subco 3 exchanges its shares of Subco 3 for shares of Absorbco, and the shares of Subco 3 are cancelled, would qualify as a foreign merger. Subco 3, as the non-surviving corporation in this merger, will be considered to have disposed of all its assets and liabilities to Absorbco for their fair market value except that the shares of Absorbco instead will be disposed of by the non-resident parent of Subco 3 at fair market value. However, as the merger is described in Article XIII(8) of the US-Canada Convention, it is a transaction with reference to which the competent authority of Canada may enter into an agreement under s. 115.1.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 87 - Subsection 87(8.1) 69

17 April 2000 T.I. 1999 - 000928

S.69(1)(b) could apply to the granting of a non-exclusive licence of intellectual property to a related person.

14 January 1999 External T.I. 5-982855 -

Where shares bearing a non-cumulative dividend of 10% are exchanged on an s. 86 reorganization for shares bearing a non-cumulative dividend of 15%, the shareholder with the increased dividend rate will be considered to have received an s. 15 benefit, and other shareholders may be considered to have received fair market value proceeds under s. 69(1)(b).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 52

6 November 1997 External T.I. 5-972875 -

An individual shareholder ("A") owns 20 preferred shares of a CCPC ("Opco") having a fair market value of $20 and an unrelated individual ("B"), who is the only other shareholder of Opco, owns 80 common shares having a fair market value of $1,000. If A exchanges his 20 preferred shares in Opco for 20 common shares of Opco pursuant to s. 51 or 86, he will receive a benefit under s. 15(1) and B, if he does not deal at arm's length with A, would be deemed to have received proceeds of disposition equal to the fair market value of B's economic interest given up in Opco.

14 November 1996 T.I. 9635535

In a response to several questions concerning the tax consequences to both the employee and the non-arm's length transferee where the transferee 1) sells the option in an arm's length sale, 2) exercises the option, 3) receives dividends on the shares, and 4) disposes of the shares in an arm's length sale, CRA stated:

With respect to paragraph 69(1)(b) of the Act, it is our view that it does not apply to an employee/transferor who is subject to the provisions of paragraphs 7(1)(c) or (d) of the Act by virtue of paragraph 7(3)(a) of the Act.

12 April 1994 T.I. 940231 (C.T.O. "Intellectual Property")

S.69(1)(b) would apply where a parent corporation owns patents, trademarks and copyright used exclusively by one of its subsidiaries in the subsidiary's world wide business without a fair market value fee being charged for the use of such intellectual property. The word "anything" extends to intangible property.

93 C.R. - Q. 39

If a person enters into an agreement of purchase and sale (or an option) with a person with whom he does not deal at arm's length on fair market value terms and the fair market value of the property on closing is greater than the value in the agreement date, RC will apply s. 69(1)(b) to the person to increase the proceeds to fair market value at the time of disposition. Similarly, if the fair market value of the property at the time of disposition is less than the purchase price, RC will apply s. 69(1)(a) to the purchaser. However, the policy in IT-405, para. 5 applies.

Revenue Canada Round Table TEI Conference, 7 December 1993, Q. 9 (C.T.O. "Non-Arm's-Length Purchase and Sale Arrangement")

Where there is an extended delay between the date a non-arm's agreement is entered into and the closing of the agreement, RC generally would readjust the purchase price or proceeds of disposition of the property pursuant to s. 69(1)(a) or (b) where the property has depreciated or appreciated. A two-sided adjustment will be permitted where there is an "honest error".

7 December 1993 Revenue Canada Round Table TEI Roundtable Q. 10, 5-933368 -

Where a company acquires from a person with whom it does not deal at arm's length an option to acquire property at a fixed price, s. 69(1)(b) "could be applied when the option is granted, if not granted at fair market value. However, the application may be more appropriate when the option is exercised. In our view, the benefit arising at the time of granting an option is often difficult to quantify ... ." Reference was made to IT-403R, para. 5-6.

26 January 1993 T.I. 923284 (November 1993 Access Letter, p. 512, ¶C245-051; Tax Window, No. 28, p. 1, ¶2383)

S.69(1)(b) does not apply to the provision of services for less than their fair market value.

92 C.R. - Q.21

S.69(1)(b)(i) will apply to a transfer of ownership of equity in a corporation in circumstances such as those in The Queen v. Kieboom, 93 DTC 6382 to deem the transferor to have received fair market value proceeds.

17 February 1992 T.I. (Tax Window, No. 16, p. 21, ¶1752)

A conveyance will not be precluded from being considered a gift by the payment by the donee of $1 as a legal formality.

30 November 1991 Round Table (4M0462), Q. 3.3 - Issuing of Shares: Consideration Less than the F.M.V. (C.T.O. September 1994)

Where a corporation that has two unrelated shareholders (Mr. A and Mrs. B) each holding one share, issues a third common share for nominal consideration to Mrs. B, Mr. A will be considered for purposes of s. 69(1)(b)(ii) to have made a gift of part of his economic interest in the corporation to Mrs. B. Because Mr. A has disposed of part of his economic interest in the corporation and not of the shares in the corporation, the adjusted cost base of the property disposed of by him will be nil.

18 December 1989 T.I. (May 1990 Access Letter, ¶1219)

s. 69(1)(b) will apply to a purchase for cancellation of shares held by a non-arm's length shareholder for a purchase price less than fair market value. The proceeds for purposes of s. 40(1) will be reduced by the amount of the deemed dividend under s. 84(3), which is based on the actual amount paid by the corporation for the shares.

86 C.R. - Q.23

The existence of a fixed price in a buy-sell agreement is not conclusive that the shareholders were not dealing at arm's length.

85 C.R. - Q.9

"Anything" includes intangible property, such as the right to use property. For example, s. 69(1) will apply where an individual rents farmland to his family-owned corporation at less than fair market value and deducts expenses related to the farmland that are in excess of the rents.

Articles

Marie Emmanuelle Vaillancourt, Alan Shragie, "Non-Arm's Length Stock Options Transfers", CCH Tax Topics, No. 1985, 25 March 2010, p. 1.

Innes, "If the Tax Treatment of Accrued Gains on Inventory at Death", Estates and Trust Journal, Vol. 12, 1992, p. 122.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(2) 0

Subparagraph 69(1)(b)(i)

See Also

Mady v. The Queen, 2017 TCC 112

contemporaneous arm’s length sale price established that shares previously transferred at undervalue

On the same day as the taxpayer and (as described below) his family members closed the sale of the shares of his dental corporation (“MDPC”) to third-party purchaser (the Dental Corporation) and its affiliate, a complex reorganization was first implemented (not fully described below) which accomplished an estate freeze (which had been raised as a possibility a number of years previously), as well as a “purification” of MDPC for capital gains deduction purposes. Under the transactions directly at issue, the taxpayer exchanged his common shares of MDPC for preferred shares and for new common shares. The preferred shares had a redemption amount equal to the $2 million equity value of MDPC as estimated by a colleague at the same firm as the taxpayer’s tax advisor. She was not informed by the tax advisor that the Dental Corporation had agreed to purchase that equity for $4.5 million. The taxpayer then sold 85% of the new common shares to his wife and two children for nominal proceeds, subject to a price adjustment clause. Later that day, those three family members sold those common shares to the Dental Corporation for cash proceeds of $2.2 million (or $0.74 million each). The taxpayer also executed a Professional Services Agreement with the Dental Corporation in conjunction with the sale, under which there would be a claw back in his salary if EBITDA growth projections were not achieved.

The reassessment by CRA of the taxpayer under s. 86(2) was found by Hogan J to be unfounded, but an argument, made in the alternative on the appeal, that the taxpayer had realized a capital gain under s. 69(1)(b)(i) on his sale to his wife and children, was accepted by him. In particular, s. 69(1)(b)(i) applied on the basis that the common shares sold to the taxpayer’s wife and two children had a fair market value equalling 85% of the excess of $4.5 million over the preferred shares’ redemption amount of $2 million. Hogan J stated (at paras 136-7):

I accept the opinion of…the expert witness for the Crown… the market price approach should be used to value the shares because the shares were sold by the Appellant and his wife after the parties had agreed to sell those shares to Dental Corporation for $4.5 million. …

The [wife and children] acquired the shares from the Appellant for a purchase price of $0.01 per share and immediately thereafter sold them for a cash purchase price of $8,645 per share. The purchase price paid by Dental Corporation to the Appellant’s wife and daughters was final. Unlike the Appellant, they were not parties to the SPA and had no obligations thereunder towards Dental Corporation. If the minimum EBITDA Target set out in the SPA was not met, the Appellant’s wife and daughters were still entitled to retain the full cash purchase price that they received.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(11) transfer from wife to higher-income husband was infused with his income-splitting purpose (as well as regulatory breach if she didn’t transfer) 355
Tax Topics - General Concepts - Ownership wife and children did not acquire beneficial interest in shares the taxpayer was to transfer to them, under tax plan, until the share transfer occurred 253
Tax Topics - Income Tax Act - Section 86 - Subsection 86(2) family members did not acquire beneficial interest in new shares until after completion of s. 86 reorg 285
Tax Topics - General Concepts - Fair Market Value - Shares arm’s length sales price established FMV for closing-date internal transfer of same shares 470
Tax Topics - Income Tax Act - Section 163 - Subsection 163(2) was not responsible under s. 163(2) for the unbeknownst sharp practice of his tax advisor 658
Tax Topics - General Concepts - Price Adjustment Clause no jurisdiction to comment on application of price adjustment clause where the affected taxpayers are not appellants 223

Paragraph 69(1)(c)

Cases

Cassan v. The Queen, 2017 TCC 174

gratuitous transfer is gift irresepctive of absence of benevolent intent

In rejecting (at para. 296) a Crown submission (summarized at para. 249) that “gift” required “detached and disinterested generosity”) Owen J stated:

Donative intent does not require the transferor to have a particular motive for making the transfer. Rather, donative intent simply requires that the transferor intended to transfer the property gratuitously.

Words and Phrases
gift
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts common law gift was vitiated by loan to donor at unreasonably low rate 746
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(12) although borrowing by taxpayers had a term of 9.3 years, they had a reasonable expectation of refinancing with the promoter’s assistance 466
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(7) - Paragraph 143.2(7)(a) loans were not bona fide in that not handled with commerciality 655
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(d) no requirement to accrue interest on index-linked note in a year when the return thereon was not determinable 577
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) interest on loan to acquire LP units was deductible as there was a prospect of gross income being allocated by LP in 19 years’ time 583
Tax Topics - Statutory Interpretation - Realization Principle amount should not be recognized until ascertainable 67

Gervais v. The Queen, 85 DTC 5004, [1984] CTC 661 (FCTD)

A contract of sale cannot be a gift, which is a gratuitous transfer of property. The acquisition by the taxpayer of real property from his father for about 1/3 its fair market value pursuant to a deed of sale accordingly was not an acquisition of property by way of "gift" (there having been "no suggestion that the deed of sale was not what it was represented to be or was in any way simulated so as to disguise a gift").

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Provincial Law 52

Hutterian Brethren Church of Wilson v. The Queen, 79 DTC 5474, [1980] CTC 1 (FCA)

The donation of services, such as farming labour, by members of a Hutterite religious colony to their corporation did not constitute an acquisition of property by the corporation, nor did it constitute a gift since there was consideration for the provision of those services in the form of a covenant of the corporation (as set out in its memorandum of association) to support, maintain, instruct and educate the members of the colony.

Administrative Policy

22 March 2016 Internal T.I. 2013-0506561I7 - Property acquired on a return of capital

FMV cost of property acquired on contribution of capital

What is the cost (and amount incurred as an expense) for intellectual property with an unlimited life acquired by a corporation resident in Canada as a result of a return of capital from a wholly-owned foreign affiliate. Before concluding that for purposes of applying the eligible capital expenditure definition to the Canadian shareholder, the expenditure incurred by it would be considered to be equal to the FMV of the property at the time of its distribution, CRA stated:

[T]he cost of a property received by a corporation from its shareholder for no consideration, for example as a capital contribution, would…result in the corporation having a cost of the property equal to its FMV.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(4) FMV cost of property acquired on QROC distribution 115
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base FMV cost of contributed or distributed property 51
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure QROC distribution by a foreign affiliate to its Canadian shareholder of ECP results in ECE to the shareholder of the property’s FMV 210
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital - Element A.1 no gain to FA transferor of ECP 93

10 October 2014 APFF Roundtable, 2014-0538621C6 F - Disposition en contrepartie de 1$

treatment of transfer for nominal consideration as "gift" turns on Quebec law

Does CRA consider, similarly to Revenu Québec, that a transfer of an immovable for $1 can be a gift? After referring to s. 8.1 of the Interpretation Act, which indicated that the concept of gift in Quebec was governed by the Civil Code ("C.C.Q."), CRA stated (TaxInterpretations translation):

The C.C.Q. provides for several types of gifts, such as pure and simple gifts, indirect gifts, disguised gifts, remunerative gifts and gifts with a charge. All these gits may be gifts for the purposes of the ITA.

Thus, the determination of the nature of a particular transaction, as sale or gift, must be made on the basis of the genuine legal relations between the parties. In the absence of an express provision to the contrary in the ITA or a finding that the transaction is a sham, the genuine legal relations must be respected in tax matters.

26 June 2013 External T.I. 2013-0490711E5 F - Disposition en contrepartie de 1$

nature of Quebec gift

Could the acquisition of a property for consideration of one dollar qualify as an acquisition by gift for purposes of s. 69(1)(c)? The Directorate referred to the relevance of Quebec law per s. 8.1 of the Interpretation Act, and quoted the statement in s. 1806 of the Quebec Civil Code that:

Gift is a contract by which a person, the donor, transfers ownership of property by gratuitous title to another person, the donee.

After noting that the Civil Code contemplates different types of gifts (including "remunerative gifts and gifts with a charge [where only the net amount donated is considered a donation per s. 1810 CCQ]" and that all "such gifts can be gifts for purposes of paragraph 69(1)(c)," the Directorate stated (TaxInterpretations translation):

Thus, the determination of the nature of a particular transaction, to assess whether it is a true gift or sale, must be made on the basis of the legal relationships created by the contract of acquisition of the property. Indeed, in the absence of an express provision to the contrary in the Act or a finding of sham, the legal relationships created by the contract of acquisition must be respected for taxation purposes.

Editorial note: a donation contract in Québec is considered a unilateral contract by which property is transferred "by gratuitous title."

Words and Phrases
gift

21 December 2012 Internal T.I. 2009-0327221I7 - Paragraph 7(1)(e) - Death of a Taxpayer

FMV basis for stock options received by estate

After noting that a deceased employee would be deemed under s. 7(1)(e) to dispose of unexercised stock options at fair market value on death, CRA stated:

Where a deceased taxpayer's estate receives an employee stock option, we generally accept to apply paragraph 69(1)(c). Consequently, the option is deemed to have been acquired by the estate at a cost equal to its fair market value. ... In general, if an estate exercises an employee stock option, subparagraph 49(3)(b)(ii) will apply to add the adjusted cost base (ACB) of the option to the cost of the shares acquired under the option.

Income Tax Technical News No. 44 13 April 2011 [archived]

FMV basis in contributed property

In the absence of a specific provision in the Act to the contrary...a corporation that receives property from its shareholder for no consideration has a cost basis for that property equal to its FMV.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) inter-provincial loss shifting 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) exchangeable debenture appreciation not recognized 90
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) exchangeable debenture appreciation not recognized 106
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) exchangeable debenture exercise 84
Tax Topics - Treaties - Income Tax Conventions - Article 10 use of s.à r.l. 123

IT-464R, para. 8

"When a tenant makes improvements and alterations to leased property and subsequently abandons them, they are not considered to have been acquired by the landlord as a gift, bequest or inheritance under paragraph 69(1)(c)."

22 May 1997 External T.I. 5-964143 -

Where property is transferred to a trust for purposes of donating an equitable interest in the trust to a charity, the proceeds of disposition arising on the donation will be equal to the fair market value of the property at that time rather than the present discounted value of the equitable interest in the trust.

22 January 1996 T.I. 953006 (C.T.O. "Gift or Sale?")

"Should the properties have been bequeathed or gifted, the ACB to the recipient will, by virtue of paragraph 69(1)(c), be the FMV at the time of transfer, whereas, if it is decided that the properties were sold for $1,000 each, the ACB will be $1,000, notwithstanding that the FMV was far in excess of that amount."

May 1995 Executive Institute Round Table, Q. 24 (C.T.O. "Employee Stock Option")

Where an estate acquires employee stock options by way of bequest, it is deemed to acquire the property at fair market value. Provided that the shares acquired upon exercise of the option are capital property, s. 49(3)(b)(ii) will include the adjusted cost base of the option at the time of exercise.

October 1992 Central Region Rulings Directorate Seminar, Q. B. (May 1993 Access Letter, p. 229)

RC assumes, in the absence of clear evidence to the contrary, that an expropriation in a foreign jurisdiction has occurred in accordance with the laws of that jurisdiction. Accordingly, where property that previously was expropriated is returned to an individual that transaction will be governed by s. 69(1)(c).

September 1992 B.C. Revenue Canada Round Table, p. 21 (May 1993 Access Letter, p. 227)

Where personal property is transferred to a trust with the creation of a lifetime income interest payable only to the transferor and a residual capital interest payable to another person, then provided the remainder interest was acquired by the trust by way of gift, s. 69(1)(c) generally will deem the trust to have acquired the remainder interest at its fair market value.

Articles

Atlas, "Tax Planning for Foreign Inheritances", Tax Topics, No. 1247, 1 February 1996

Discussion of the determination of the cost of property held by a non-resident trust.

Subsection 69(2)

Cases

Indalex Ltd. v. The Queen, 86 DTC 6039, [1986] 1 CTC 219 (FCTD), aff'd 88 DTC 6053, [1988] 1 CTC 60 (FCA)

The taxpayer purchased its supplies of aluminium from a Burmudan affiliate ("Pillar International") which in turn purchased the aluminium from an arm's-length supplier ("Alcan"). Reed, J. accepted the Crown's contention that the closest arm's length comparable to the sales by Pillar International to the taxpayer were the sales by Alcan to Pillar International. In light of the relatively minor functions performed by Pillar International, the taxpayer was unable to justify the full 5% differential between the aluminium price paid by the taxpayer and the lower net price (after taking into account discounts paid by Alcan) paid by Pillar International.

In the Court of Appeal, it was further held that Reed, J. erred in concluding that a 1% differential was justified based on the fact that the global purchasing power of Pillar International permitted it to obtain from Alcan a price better than that which the taxpayer could have negotiated. "That greater bargaining power was exclusively due to the pooling of the purchasing power of a number of members of the Pillar group ... where non-arm's length parties combine to obtain an advantage from an outsider not available to them individually, any allocation of the advantage among them except on a pro rata basis has to be justified."

Administrative Policy

93 C.R. - Q. 33

Discussion of weaknesses of comparable profit method.

93 C.M.TC - Q. 17

The comparable profit method set out in the regulations to IRC s. 482 is very unlikely to produce a result that is compatible with the arm's length principle. The periodic adjustment rule also conflicts with the arm's length principle.

93 C.M.TC - Q. 13

RC will consider allowing a reasonable mark-up on charges for services (including computer services) provided by non-residents to related Canadian entities where the non-resident is in the business of providing such services to third parties and the rates charged to the Canadian entities are comparable with the charges to third parties.

89 C.R. - Calderwood Paper (C.42)

The operative words 'reasonable in the circumstances' may mean fair market value or another amount, depending on the facts of a particular case."

General discussion

IC 94-4 "International Transfer Pricing: Advance Pricing Agreements (APA)"

IC 87-2 "International Transfer Pricing and Other International Transactions"

IT-468R "Management or Administration Fees Paid to Non-Residents"

RC is prepared to accept an allocation of the costs, direct and indirect, reasonably attributable to providing the relevant services to the Canadian taxpayer. Mark-ups or profit elements are appropriate only in certain circumstances.

Articles

Purdy, Zanchelli, "Calculating and Supporting Management Fees (A Departure from the 'Back of the Envelope' Approach)", International Tax Planning, 1996 Canadian Tax Journal, Vol. 44, No. 1, 1996, p. 157.

Boidman, Lawlor, "Transfer Pricing in the Absence of Comparable Market Prices: Canada", Studies on International Fiscal Law, Volume LXXIIa, p. 323 (International Fiscal Association, Rotterdam, 1992).

Finance

1996 A.P.F.F. Round Table No. 7M12910: Discussion of position on transactional net margin and comparable margin of profit methods.

Subsection 69(3)

Cases

R. v. Kleysen, 96 DTC 6265 (Man QB)

After noting the submission for the accused that the relevant valuation test for sale of equipment by Canadian taxpayers to a related off-shore entity was the "reasonable amount" test in s. 69(3) rather than the "fair market value" test in s. 69(1), Schwartz J. found (at p. 6284) that he was not satisfied that the values used by the accused in their dealings with the off-shore corporation were unreasonable in all the circumstances.

Administrative Policy

18 March 1992 T.I. (Tax Window, No. 18, p. 4, ¶1816)

Where a Canadian subsidiary guarantees the U.S. bank debt of its U.S. parent, the amount of a reasonable guarantee fee will be included in its income as an amount for other services. The decision in Melford Developments Inc. v. The Queen, 80 DTC 6075 at 6076-77 (FCTD), affirmed 81 DTC 5020 (FCA), affirmed 82 DTC 6281, [1982] 2 S.C.R. 504 established that a loan guarantee constitutes other services.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 68

91 C.R. - Q.30

Where a Canadian subsidiary guarantees the loan obligations of a foreign parent, s. 69(3) will apply to deem the amount that would have been reasonable in the circumstances, if the corporations had been dealing at arm's length, to have been received or receivable by the Canadian subsidiary.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) 24

Articles

Yukich, "Taxation of Export Sales from Canada", 1993 Corporate Management Tax Conference Report, c. 9.

Subsection 69(4) - Shareholder appropriations

Cases

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

The word "appropriated" embraces an action of a third party - here, a court order directing that capital properties of the corporation be transferred to the divorced wife of the corporation's shareholder.

See Also

Husky Oil Limited v. Canada, 2010 DTC 5089 [at 6887], 2010 FCA 125

Sharlow, J.A. found that the "gift portion" exception to the rollover rule in s. 87(4) did not apply to a transaction in which the taxpayer received, on an amalgamation of its subsidiary with a subsidiary of another corporation, preferred shares that had a lower fair market value than the shares which it held of the subsidiary going into the amalgamation. In rejecting an alternative submission of the Minister that the amalgamation entailed an appropriation of property of the taxpayer (namely, its shares of its subsidiary) for the benefit of its shareholder (who wished this transaction to occur as part of a larger transaction), so that such shares of the subsidiary were deemed to be disposed of for their fair market value, Sharlow, J.A. stated (at para. 71-72):

"If subsection 69(4) can be applied to the disposition of shares to which para. 87(4)(a) also applies, the result in many cases (and certainly in this case) would be two statutory deeming rules creating two different statutory fictions. That cannot be ... In my view, the specific provisions of subsection 87(4) must trump the more general rule in subsection 69(4)."

Javalin Founderies & Machine Works Ltd. v. MNR, 67 DTC 392 (TAB)

In finding that a transaction under which the individual non-resident shareholder of a Canadian corporation took possession of all its assets after the corporation ceased to carry on business transactions subject to s. 17(5), the Board noted (at p. 398) that "if the purpose of section 17 ... is to prevent companies from understating their income by distributing stock-in-trade to shareholders either as gifts or upon winding-up without ascribing any value thereto in terms of payment by the shareholder", whereas here the shareholder had taken possession of capital assets.

Administrative Policy

31 May 2017 External T.I. 2016-0642621E5 - Donation to private foundation

implicit finding that s. 69(4) could apply to a gift

CRA confirmed that the s. 38(a.1) rule prevails over s. 69(4), as well as s. 69(1)(b)(ii), so that where a corporation transfers shares of a public corporation for no consideration to its sole shareholder, which is a private foundation, s. 38(a.1) will deem there to be no gain to the corporation if the transfer qualifies as a gift.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.1) s. 38(a.1) prevails over s. 69(4) 181

22 March 2016 Internal T.I. 2013-0506561I7 - Property acquired on a return of capital

FMV cost of property acquired on QROC distribution

What is the cost (and amount incurred as an expense) for intellectual property with an unlimited life acquired by a corporation resident in Canada as a result of a return of capital from a wholly-owned foreign affiliate. Before concluding that for purposes of applying the eligible capital expenditure definition to the Canadian shareholder, the expenditure incurred by it would be considered to be equal to the FMV of the property at the time of its distribution, CRA stated:

[T]he cost of a property received by a corporation from its shareholder for no consideration, for example as a capital contribution, would…result in the corporation having a cost of the property equal to its FMV.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c) FMV cost of property acquired on contribution of capital 115
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base FMV cost of contributed or distributed property 51
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure QROC distribution by a foreign affiliate to its Canadian shareholder of ECP results in ECE to the shareholder of the property’s FMV 210
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital - Element A.1 no gain to FA transferor of ECP 93

15 November 2013 Internal T.I. 2013-0478621I7 F - Transfer of intangibles - TP adjustments

s. 69(4) inapplicable where grandchild Canco undercharges for asset sale, enhancing sales proceeds received by ultimate U.S. parent

Pursuant to a sales agreement between Canco, its immediate non-resident parent (Parent) and the ultimate U.S. parent of Canco (Pubco), as vendors, and an arm's length purchaser (Acquireco1), for the sale of Division 1 for a sum of U.S.$XX, Canco disposed of assets of Division 1 to a subsidiary of Acquireco1 for their book value. The Montreal TSO took the view that the Division 1 assets included intangible assets whose value was not reflected in this selling price. Similar transactions occurred for the sale of Division 2 to Acquireco2.

Respecting a TSO proposal to apply s. 69(4) (and before finding that an adjustment should be made under s. 247(2)), CRA stated (TaxInterpretations translation):

[S]ubsection 69(4) requires, inter alia, that a property of a corporation be appropriated to or for the benefit of a shareholder of the corporation. It is generally accepted that the term shareholder, as defined in subsection 248(1), does not include an "indirect" shareholder. Thus, considering that Pubco was not a shareholder of Canco, subsection 69(4) cannot be applied.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) group sale with Canco not charging for intangibles should engage s. 247(2) 141
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) secondary adjustment re group sale with Canco not charging for intangibles 240

Subsection 69(5) - Idem [Shareholder appropriations]

Administrative Policy

14 May 2015 CLHIA Roundtable, 2015-0573841C6 - 2015 CLHIA Roundtable – Winding-up and ACB

s. 69(5) generally prevails over s. 1487

At the 2005 CALU Roundtable (2005-0116631C6), the CRA indicated that s. 69(5) would likely take precedence over s. 148(7) on the wind-up of a corporation under s. 88(2), so that a distributed interest in a life insurance policy would be disposed of at fair market value rather than cash surrender value. In confirming that this position "remains unchanged," CRA stated:

[T]he general rule is that where two provisions in the same statute conflict, the more specific provision should take precedence. … While we would generally expect subsection 69(5) to take precedence over subsection 148(7)… this approach is subject to a review of the particular facts and circumstances of an actual case… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7) s. 69(5) generally prevails over s. 148(7) 106

Subsection 69(11) - Deemed proceeds of disposition

Cases

Canada v. Oxford Properties Group Inc., 2018 FCA 30

3-year time limitation in s. 69(11) did not establish safe harbor for avoidance of recapture on sale after that period

When Oxford Properties was sold to an OMERS subsidiary, the purchaser first negotiated that Oxford would drop various properties down into LPs on a s. 97(2) rollover basis, with those partnership interests subsequently being bumped under s. 88(1)(d) (which, in 2001, did not prohibit bumping interests in partnerships holding appreciated buildings). After the acquisition, those bumped costs were then pushed down onto the cost of interests in property-specific LPs (which had been formed following the acquisition), by winding-up the upper-tier LPs under s. 98(3) and using the s. 98(3)(c) bump. After the three-year s. 69(11) period, some of the property-specific LPs were then sold to tax exempts.

Noël CJ reversed the findings of D’Arcy J that these transactions did not abuse ss. 97(2) and 100(1). Before so finding, Noël CJ stated (at paras 62, 65, 68 and 73):

The Tax Court judge … concluded that subsection 97(2) is not frustrated when deferred recapture goes untaxed, so long as [the] holding period [set out in s. 69(11)] is met.

…[S]ubsection 69(11) is found in subdivision f, “Rules Relating to Computation of Income” whereas 97(2) is found in subdivision j which deals with “Partnerships and Their Members”. … It therefore cannot be said that subsection 69(11) was introduced in order to target subsection 97(2) rollovers… . [S]ubsection 69(11) applies to any series where the initial disposition takes place below fair market value, whether a rollover under subsection 97(2) or any other provision is involved or not. As such, there is no “plausible and coherent plan” which could justify reading the three year time limitation set out in subsection 69(11) into subsection 97(2) (Copthorne at para. 91)

There is therefore no basis for the Tax Court judge’s conclusion that “certainty, predictability and fairness in tax law” require that the three year limitation found in subsection 69(11) be applied to subsection 97(2).

The question which the Tax Court judge had to address at this stage of the analysis is whether the fact that deferred gains and recapture will never be taxed frustrates the object, spirit and purpose of subsection 97(2). Given that the only reason why Parliament would preserve the tax attributes of property that is rolled into a partnership is to allow for the eventual taxation of the deferred gains and latent recapture, the answer must be in the affirmative.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) using the s. 88(1)(d) bump on newly-formed rental property LPs to avoid indirect recapture income under s. 100(1) was abusive 885
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) s. 88(1)(d) bump is intended to permit the transfer of ACB that otherwise would be lost to another property that is taxed in the same way 349
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3) - Paragraph 98(3)(c) s. 98(3)(c) bump is intended to avoid gain realization where there has been no economic gain 259
Tax Topics - Income Tax Act - Section 100 - Subsection 100(1) purpose is to ensure that latent recapture will be recognized on sale to tax exempt 244
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) object includes ultimate taxation of the deferred gain 224
Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) GAAR question as to determining a provision’s object was subject to correctness standard 155
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. statement that amendment was for “clarification” was self-serving 199
Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 45(2) determination of whether amendment merely clarified requires review of pre-amendment state of law 135

See Also

Oxford Properties Group Inc. v. The Queen, 2016 TCC 204, rev'd 2018 FCA 30

Parliament provided safe harbour for sales after 3 years

When Oxford Properties was sold to an a Canadian pension fund (OMERS) subsidiary, the purchaser first negotiated that Oxford would drop various properties down into LPs on a s. 97(2) rollover basis, with those partnership interests subsequently being bumped under s. 88(1)(d). After the acquisition, those bumped costs were then pushed down onto the cost of interests in property-specific LPs (which had been formed following the acquisition), by winding-up the upper-tier LPs under s. 98(3) and using the s. 98(3)(c) bump. After the three-year s. 69(11) period, some of the property-specific LPs were then sold to tax exempts.

In accepting that the 69(11) three-year limit was not abused, D'Arcy J stated (at para 193):

…Parliament is presumed to know the law and to take the law into account when making amendments. Parliament was aware of the three-year limitation at the time it extended the application of subsection 69(11) to tax-exempt entities. Thus, when it amended subsection 69(11) it made the positive decision to limit the application of subsection 69(11) to transfers to tax-exempt entities that occur within the three-year period. In my view, it is reasonable to conclude that Parliament was of the view that transfers after this three-year period did not abuse subsection 97(2). …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) no abuse in using 88(1)(d) bump to avoid s. 100 after 3-year s. 69(11) period 537
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) subsequent sale part of series as it utilized the benefit of previous LP packaging transactions 371
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) purpose not to tax underlying recapture on subsequent LP unit sale 415
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) purpose: to push down ACB of shares of sub to qualifying non-depreciable property 474
Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 45(2) subsequent amendment shed light on scope of previous version 99
Tax Topics - Income Tax Act - Section 100 - Subsection 100(1) S. 100 operates only on outside basis gain 278
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3) - Paragraph 98(3)(c) purpose: to preserve high outside basis through push down 285

Administrative Policy

2 December 2014 CTF Roundtable, Q2(c)

loss transfer where affiliated but not related

Must corporations be affiliated or related or both in a loss consolidation arrangement? CRA responded:

The CRA will consider ruling requests where the corporations are related and affiliated, as well as circumstances in which the corporations are related.

…[W]here the corporations are affiliated but not related…the meaning of affiliated will be determined on the same criteria as stipulated in subsection 69(11)… . In other words, where two corporations are not related, but are affiliated, the CRA would consider a loss consolidation arrangement only if the corporations are affiliated by reason of de jure control.

2014 Ruling 2014-0523221R3 - Amalgamation of mutual funds

amalgamation of two mutual fund corporations each with capital losses

underline;">: Proposed transactions. C1, which is a smaller mutual fund corporation than C2, will amalgamate with C2 to form Amalco. C1, C2 and Amalco have different series of mutual fund shares each tracking what for securities law purposes is regarded as a separate mutual fund as well as nominal value voting common shares. On the amalgamation, the former common shareholders of C1 will acquire a majority of the voting common shares of Amalco. Both C1 and C2 have capital loss carryforwards. C1 will make step-up designations under s. 111(4)(e).

Rulings

include: As a result of the amalgamation there will be an acquisition of control of C1 pursuant to s. 256(7)(b)(iii), and there will not be an acquisition of control of C2. Ss. 69(11) and 111(5.5) will not apply.

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 127
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) amalgamation of two mutual fund corporations each with capital losses 126

21 October 2013 Internal T.I. 2013-0505831I7 - Rollover and subsequent disposition of property

Forco not a targeted tax exempt

The taxpayer, a Canadian corporation, transferred all its voting and participating shares of Subco, a non-resident subsidiary wholly-owned corporation, to Forco (another controlled foreign affiliate) in consideration for shares of Forco. Forco also exercised an option to acquire IP from a group member. Forco sold its IP to an arm's length US purchaser ("Purchaseco") and another company in the Purchaseco group, and then sold all its shares of Subco to Purchaseco.

In finding that s. 69(11)(b) did not apply to deny a rollover under s. 85.1(3) for the drop-down of Subco to Forco, the Directorate stated:

The fact that there is no tax payable under the Act by Forco with respect to its gain on the disposition of the Subco shares is due to the fact that the disposition does not result in any income under the Act (Forco is simply not subject to tax under subsection 2(3) of the Act), not because an exemption from tax payable under the Act is available to Forco. Consequently, paragraph 69(11)(b) of the Act would not apply… .

The Directorate went on to state:

[A] court would probably be reluctant to apply subsection 69(11) of the Act to deny the benefit of the 85.1(3) rollover where the conditions to apply subsection 85.1(3) of the Act are met (considering paragraph 95(6)(b) of the Act) and where subsection 85.1(4) of the Act does not apply in a particular situation.

S. 85.1(4) was not considered here because there was to be a separate referral on that issue.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) s. 69(11)(b) not applied 243

2002 Ruling 2001-011607 -

non-application where s. 88(1)(d) bump

Where prior to the acquisition of Target, Target transfers assets on a rollover basis to a wholly-owned subsidiary of Target ("Xco"), and then following the amalgamation of Target with Newco, the cost to Amalco of the Xco shares is "bumped" under s. 88(1)(d) and those shares sold to an unrelated third party, s. 69(11) will not deem the disposition of the property acquired by Amalco on the amalgamation of Newco and Target to be for fair market value of proceeds.

1996 Tax Executives Round Table, Q. XIL (No. 9639150)

Where a taxpayer contributes property with an accrued gain to a loss corporation on a rollover basis and then, prior to the expiration of the three-year period, an unrelated third party acquires control of the loss company and elects under s. 111(4)(e) to step-up the cost base of the previously-transferred property, the deemed disposition under s. 111(4)(e) will be considered to be a disposition for purposes of s. 69(11).

18 August 1995 TI 9515455

non-application to s. 88(1)(d) bump

Where a corporation ("Newco") incorporated by an individual (B) acquires all the shares of Oldco from another individual (A) with whom B deals at arm's length, and Newco winds up Oldco and "bumps" land held by Newco under s. 88(1)(d), with the land being transferred by Newco to B immediately after the wind-up, then provided that Newco has no losses, tax credits or balance of undeducted outlays or expenses of any kind, s. 69(11) would not ordinarily apply to deem the disposition of land to be at a cost amount other than the amount determined by s. 88(1)(a)(iii).

93 CPTJ - Q.14

In one recent case, RC concluded that a series of transactions which technically avoided the application of s. 69(11) because the subsequent disposition occurred after three years, were subject to GAAR.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) 43

91 CPTJ - Q.1

Whether the vendor has knowledge and control of the series of transactions may be considered when determining whether s. 69(11) applies.

89 C.R. - Read Paper (C.18)

S.69(11) may apply upon a butterfly of property to a minority corporate shareholder as part of a series of transactions that includes a later sale of the property, if the taxable income attributable to the gain on the sale is reduced by non-capital losses of the shareholder.

Articles

Perry Truster, "Loss Trading and Subsection 69(11)", Tax for the Owner-Manager, Vol. 17, No. 2, April 2017

Example of sale of equipment to Lossco (p. 4)

1) Assume that X Co, a CCPC, has three shareholders, none of whom has used his or her capital gains exemption [totalling]….$2.472 million.
2) The ACB and the PUC of the shares…are nominal….
3) X Co is in the equipment leasing business….
5) X Co has received a $5 million offer from Buyco for the equipment.
6) The shareholders…would rather sell their shares to Buyco and are prepared to accept $4 million…
7) Buyco refuses to consider a share purchase.
8) [A]n arm's-length party, Lossco,…is prepared to enter into the following…transactions:

a) Lossco would acquire all of the shares of X Co for…$4.5 million….
b) The shareholders of X Co would each receive a $1.5 million promissory note from Lossco.
c) Lossco would acquire X Co's equipment by winding up X Co under subsection 88(1)….
d) Lossco would sell the equipment to Buyco for $5 million and would offset the resulting recapture and capital gains with its losses.
e) Lossco would pay off the $4.5 million promissory notes held by the former shareholders of X Co.

No application of s. 69(11) where sale of shares to lossco fro more than FMV (p. 4)

Subsection 69(11) penalizes a taxpayer (the transferor) that transfers property to another taxpayer (the transferee) that is not "affiliated" (in this example, Lossco) if the proceeds are less than FMV and the intention is to take advantage of the transferee's losses or other deductions.

[s]ubsection 69(11) will not generally be applicable in this type of example. As the example illustrates, the shareholders of X Co will have received proceeds that would be more, not less, than the proceeds they were prepared to accept from Buyco.

Potential application where purchaser can bump capital property underlying the purchased shares (pp. 4-5)

If Buyco was a real estate developer and the property owned by X Co was real estate that was capital property to it but inventory to Buyco, subsection 69(11) could be an issue. The shares of X Co would be worth the full $5 million to Buyco, because Buyco could step up the cost of X Co's underlying land to the $5 million purchase price of the shares of X Co….This being the case, the shareholders of X Co, in order to effect the share sale to Lossco, will have accepted less from Lossco ($4.5 million) than they could expect Buyco to pay ($5 million).

David M. Williamson, Michael H. Manly, "Subsection 69(11) - Unexpected Problems from Inappropriate Positions", Corporate Structures and Groups, Vol. V, No. 4, 1999, p. 285.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) 0

Marc N. Ton-That, "Unexpected Problems under Subsection 69(11)", Corporate Structures and Groups, Vol. V, No. 3, 1999, p. 268.

Subsection 69(13) - Amalgamation or merger

Administrative Policy

S4-F7-C1 - Amalgamations of Canadian Corporations

no disposition of predecessor property on general principles

1.98 In the case of an amalgamation or merger, there may not technically be a disposition of property from a predecessor corporation to the new corporation. Accordingly, subsection 69(13) deems the property of a predecessor corporation to have been disposed of immediately before the amalgamation or merger at its cost amount for the purposes of determining whether subsection 69(11) applies to the amalgamation or merger. The expression affiliated person is defined in subsection 251.1(1) except that, for the purposes of subsection 69(11), the affiliated person rules are to be read without the extended definition of control found in subsection 256(5.1). In other words, only de jure control is considered.

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 58
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) application following amalgamation 103
Tax Topics - Income Tax Act - Section 116 - Subsection 116(1) deemed tcp following amalgamation 155
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.1) continuity of s. 13(5.1) on amalgamation 126
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) Amalco can continue objection and receive refunds 145
Tax Topics - Income Tax Act - Section 169 Amalco can continue objection 97
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder shareholder need not hold shares 82
Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) deemed non-arm's length relationship on amalgamation 164
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) realted party, majority and 50% group exceptions 448
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(iii) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(7) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.4) s. 87(5) not applicable 104
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) non-87 amalgamation/no FX gain 159
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) no deemed dividend to dissenter on amalgamation 81
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) election filing by Amalco 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.1) s. 87(1.1) qualifies for all s. 87 purposes 60
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.2) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 87 - Subsection 87(10) deemed listing of temporary Amalco shares 114
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11) gain if high PUC is sub shares 47
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) presumptive satisfaction of s. 87(1)(a)/dissent and squeeze-outs onside 260
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 0
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 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(c) reserve after amalgamation 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(d) cost amount carryover 135
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(e.1) s. 100(2.1) applies to non-qualifying amalgamation 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(o) no continuity rule for non-security options 133
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(q) pre-amalgamation services 96
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) loss-carry back to parent 159
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) dovetailing with s. 88(1.1) 38
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3.1) 328
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3) PUC shifts 181
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 247
Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) dovetailing with s. 78 and 112(12) 171
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) allocation of s. 87(9)(c)(ii) excess as parent chooses 218
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) late designation 106
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) dovetailing with s. 87(2.1) 56
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) partnership dissolution on amalgamation 123
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) deemed non-arm's length relationship on amalgamation 415
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) deemed non-arm's length relationship on amalgamation 323
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) class continuity on non-arm's length amalgamation 311
Tax Topics - Income Tax Regulations - Regulation 8503 - Subsection 8503(3) - Paragraph 8503(3)(b) pre-amalgamation services 96

5 March 1992 External T.I. 5-913271 -

In the case of an amalgamation described in s. 87(1), the cost amount of inventory of a predecessor for purposes of s. 69(13) would be its value as determined for the purpose of computing the predecessor's income for the taxation year ending immediately before the amalgamation.

Subsection 69(14) - New taxpayer

Administrative Policy

20 February 2003 External T.I. 2002-015667 -

"The 'taxpayer' referred to in subsection 69(14) will include both the taxpayer that is the transferor in subsection 69(11), as well as each other person referred to in the wording contained in parentheses at the conclusion of paragraph 69(11)(a)".