Principal Issues: Acquisition of control
Position: General comments
XXXXXXXXXX 2007-022967 Michael Cooke April 13, 2007
Dear XXXXXXXXXX:
Re: Acquisition of Control
This is in reply to your facsimile of April 3, 2007, wherein you requested our views on whether there is an acquisition of control of a corporation for the purposes of subsection 249(4) of the Income Tax Act (Canada) (the "Act").
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.
Consider the following simple example:
Opco is a taxable Canadian corporation that is controlled by Xco. Xco is also a taxable Canadian corporation. On July 1, 2006, all the shares of Xco are acquired by an arm's-length person ("Purchaser") for their fair market value. Purchaser pays cash for the shares of Xco.
For the purposes of the Act, including subsection 249(4), Purchaser will be considered to have acquired control of Xco and Opco on July 1, 2006.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
Yours truly,
David Palamar
Manager
Corporate Reorganizations Section II
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch