CRA largely repeated a statement made at the 2016 APFF Roundtable, Q.20 (also in response to the Poulin decision) respecting employee buyco arrangements, that the employee buyco could be established to be an accommodation party and, thus, not dealing at arm’s length with the employee-shareholder vendor, where, for example:
- the employee-buyco assumes no economic risks;
- the employee-buyco does not benefit from acquiring the Opco shares;
- the employee-buyco has no interest other than to enable the employee-shareholder to realize a capital gain and benefit from the capital gains deduction; or
- the employee-buyco has no role independent of the employee-shareholder or the operating corporation.
CRA went on to state that this position is consistent with its discussion at the 2012 Annual Conference.