| 24(1) | 902707 |
| C. Tremblay | |
| (613) 952-1361 |
19(1)
November 21, 1990
Dear Sirs:
Re: Paragraph 110.6(14)(c) and Subsection 186(2) of the Income Tax Act (the "Act")
This is in reply to your letter of September 25, 1990, requesting our confirmation that for the purposes of determining the corporations that would be connected to a particular small business corporation for the definition of "qualified small business corporation share", that the deemed relationship pursuant to paragraph 110.6(14)(c) of the, Act will be effective for determining non-arm's length control for the purposes of subsection 186(2) and 186(4) of the Act.
Our Comments
According to the preamble to subsection 110.6(14) of the Act, the deemed relationship pursuant to paragraph 110.6(14)(c) of the Act is applicable only for the purposes of the definition of "qualified small business corporation share" in subsection 110.6(1) of the Act.
As with any relationship which is not defined by the Act to be non-arm's length, it is a question of fact whether a trust and the beneficiary are dealing at arm's length. We note that pursuant to paragraph 17 of Interpretation bulletin IT-419, the Department will consider a relationship between a beneficiary and a trust to be a non-arm's length relationship.
However, in our view, paragraph 110.6(14)(c) of the Act is not intended to extend to the connected corporations rules in section 186 of the Act. Accordingly, we cannot confirm your understanding.
We trust our comments are of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch