| July 17, 1989 | |
| To: Charlottetown District Office | From: Specialty Rulings |
| Directorate | |
| Mr. Herb Terris | D. Holtz |
| Chief of Audit | (613) 957-2114 |
| File No. 7-4125 |
Subject: 24(1)
This is in response to your memorandum of July 7, 1989 which was forwarded to us by Mr. J.R. Robertson, Director General, Compliance Research and Investigations Directorate.
We agree with your conclusion to disallow the application of subsection 85(1) of the Act to the sale of the building to 24(1) in 1985 on the basis that the relevant shares to be given as consideration were never authorized or issued. In addition, we note that a capital dividend was paid on these preference shares (your exhibit 8). As the shares were never issued, the amount paid was not a dividend and the amount should be assessed pursuant to subsection 15(1) of the Act.
As for the amounts that you propose to assess pursuant to subsection 15(1) of the Act, we agree that such an assessment is warranted provided there is no documentary evidence that these were legitimate disbursements by the corporation.
Please contact the writer if you have any further questions.
R.J.L. ReadActing Assistant Deputy MinisterLegislative and IntergovernmentalAffairs Branch