5-910981
Dear Sirs:
This is in reply to your letter of April 8, 1991, concerning the deposit in trust by corporations for the purchase of Canada Savings Bonds or other types of provincial bonds.
As indicated in Information Circular 70-6R2, we do not express opinions on specific proposed transactions other than as a reply to an advance income tax ruling. As a consequence, therefore, we may only offer the following general comments.
Whether Canada Savings bonds can be treated in the way described in your letter is a matter to be determined according to the Regulations governing Canada Savings Bonds and we make no comment thereon.
It is our opinion that there would be a strong presumption that a benefit is being conferred on the shareholder pursuant to subsection 15(1) of the Income Tax Act (the "Act") unless it can be clearly established that no such benefit exists.
It is also our opinion that subsection 75(2) of the Act would apply so that any income derived from the Canada Savings Bonds would be deemed to be income of the corporation. It should be noted that the application of subsection 75(2) of the Act does not preclude the application of subsection 15(1) of the Act.
For subsection 246(1) of the Act to apply, there must be a benefit conferred to the shareholder as a result of the transaction. Since there is a strong presumption that a benefit has been conferred on the shareholder, it is our view that subsection 246(1) of the Act would apply unless, as stated above, it can be clearly established that no benefit has been conferred.
The above comments, as mentioned above, are an expression of opinion only and are not binding on the Department. We trust however that they are of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate legislative and Intergovernmental Affairs Branch