Background
Mr. A, who has never been a resident of Canada and is a resident of a redacted country for purposes of Art. 4 of the Treaty with that country, has held vacant land (the “Property”) in Canada for some time through a wholly-owned non-resident corporation (“Holdco”). Holdco acquired the property for investment rather than for development purposes, and the property (which was its sole asset other than some cash) has never generated income.
Proposed transactions
Mr. A will gift the shares of Holdco (which are taxable Canadian property and capital property) equally to his three non-resident children.
Rulings
A. Provided that … Mr. A is regarded as a tax resident of XXXXXXXXXX by virtue of Article 4(1) of the Treaty, the capital gain realized by Mr. A on the disposition of the Holdco shares will not be subject to tax under Part I of the Act pursuant to Article 13(6) of the Treaty and subsection 115(1).
B. Provided that the Children file the notifications required by subsection 116(5.02) in respect of the acquisition of the Holdco shares, such shares will constitute treaty-exempt property, and therefore excluded property, such that Mr. A will not be required to comply with the requirements of subsection 116(3) in respect of the disposition of such shares.