Dear Sirs:
Re: Single-Purpose Corporations
This is in response to your letter of April 3, 1991 in which you requested that the Department treat the shareholder of a single-purpose corporation as the actual owner of the U.S. property that it holds so that the transfer of legal title from the corporation to the shareholder will not be regarded as a taxable disposition of corporate property. You suggest that ignoring the corporation is consistent with the substance of the transaction and with the Department's policy published in the 1980 Canadian Tax Foundation report.
The Department has always assumed that the corporation would have legal and beneficial ownership of the U.S. property. Thus, absent a trust agreement between the shareholder and the corporation with respect to the property, any transfer of title to a shareholder would result in a taxable disposition of corporate property. However, where it can be established on the facts of a particular case that a shareholder, at all times, had beneficial ownership of the U.S. property, on the transfer of legal title to a shareholder there will not be a taxable disposition of corporate property. Such a determination can only be made on a case by case basis and may ultimately have to be decided by the courts.
We trust that our comments will be of assistance to you.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch