Principal Issues: Whether an OTC quotation service is a prescribed stock exchange for the purposes of section 3201 of the Income Tax Regulations
Position: Generally, no.
Reasons: Consistent with previous positions taken concerning section 4900 of the Regulations.
XXXXXXXXXX 2005-011349 Fiona Harrison March 6, 2007
Dear XXXXXXXXXX:
This is in reply to your facsimile of January 28, 2005, wherein you requested a technical interpretation with respect to the definition of "small business corporation" under subsection 248(1) of the Income Tax Act (the "Act"). We apologise for the delay in responding to your enquiry. In particular, you enquire as to whether a corporation, the shares of which are quoted on an OTC quotation service, such as those operated by Pink Sheets, LLC, or the OTC Bulletin Board operated by NASDAQ Stock Market Inc., is a "Canadian-controlled private corporation" as defined under subsections 125(7) and 248(1) of the Act.
Generally, an OTC quotation service, such as those described above, is not a prescribed stock exchange for the purposes of section 3201 of the Income Tax Regulations. Consequently, a corporation the shares of which are quoted on such an OTC quotation service may be a Canadian-controlled private corporation provided that it otherwise meets the requirements of that definition in subsection 125(7) of the Act, and provided that it is not a corporation described in either paragraph (b) or (c) of the definition of "public corporation" in subsection 89(1) of the Act.
As noted in Information Circular 70-6R5, the above comments are an expression of opinion and are not binding on the Canada Revenue Agency.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch