| 19(1) | File No. 5-8991 |
| M. Vallée | |
| (613) 957-2093 |
November 23, 1989
Dear Sirs:
Re: Subsection 15(1) of the Income Tax Act (the Act)
This is in reply to your letter dated October 27, 1989, wherein you requested a technical interpretation regarding the application of subsection 15(1) of the Act to a situation where a single-purpose corporation holds real estate for the personal use of shareholders.
You are requesting our comments regarding the application of subsection 15(1) of the Act to a corporation that holds Canadian property, instead of U.S. property, or which acquires property pursuant to a subsection 85(1) election.
Subsection 15(1)(c) of the Act applies to any situation where a benefit is conferred by a corporation on a shareholder. Notwithstanding the clear intent of the Act, we have devised a position publicly stated at the 1980 Tax Foundation Conference, which is an administrative concession historically directed at facilitating Canadian residents who hold residential real property situated in the United States in implementing estate plans. Our answer to Question 20 of the 1980 Annual Tax Conference Round Table pertained solely to a situation where a condominium or other residential property located in the United States is held by a Canadian corporation in order to avoid the U.S. federal estate tax. Our administrative position applies only in this context and will not be extended to Canadian property. Moreover, since the position is an administrative concession, we find it inappropriate to expand it to situations where property is transferred on a tax-deferred basis.
Yours truly,
for Director Reorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch