5-910544
Dear Sirs:
We are writing in reply to your letter of February 15, 1991, in which you ask for a technical interpretation of subsections 85(4) and 164(6) as they apply to a particular fact situation.
It appears that the interpretation you seek relates to specific taxpayers and, therefore, we refer you to Information Circular 70-6R2, dated September 28, 1990. As discussed therein, confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. We can offer, however, the following general comments:
Referring to your last query first, paragraph 164(6)(a) requires that a disposition resulting in a capital loss occur before the rules specified in paragraph (c) thereof apply. The phrase "notwithstanding any other provision of this Act" occur after paragraph (a) and, therefore, subsection 85(4) can prevent the operation of subsection 164(6) in situations where it deems a capital loss to be nil.
With respect to the application of subsection 85(4), it is our view that the executor and the estate may be considered to be the same person for certain purposes of the Income Tax Act, one of which would be the rule contained in subsection 85(4). Where the executor controls a corporation immediately after the redemption of the estate's shares by the corporation, then any capital loss arising from the redemption of the shares will be deemed to be nil in accordance with that subsection.
We hope the foregoing is of assistance although the opinions expressed herein are not binding on the Department.
Yours truly,
for DirectorFinancial Industries DivisionLegislative and Intergovernmental Affairs Branch