5-903189
Dear Sirs:
Re: Request for Technical Interpretation Paragraph 55(3)(a) of the Income Tax Act (the "Act")
We are responding to your letter, dated November 5, 1990 concerning the applicability of paragraph 55(3)(a) to two scenarios that you outlined in your letter.
As was discussed in our telephone conversation 19(1) McCarron-McGuire) on November 27, 1990, we will be providing only general comments in this letter because the scenarios outlined in your letter appear to contain actual or proposed transactions. Revenue Canada, Taxation (the "Department") will only provide assurance as to the outcome of a proposed transaction in the context of an advance income tax ruling, as stated in Information Circular 70-6R2, dated September 28, 1990.
Our comments
24(1)
In the view of the Department, yes. The series of transactions does not result in a disposition of property to, or an increase in interest in any corporation of, any person who at the time of the disposition or increase in interest deals at arm's length with Newco, the dividend recipient. In other words, the arm's length determination is to be made at the time of disposition of property or increase in interest, (at which time Mr. X and Mrs. X are married), not at the end of the series of transactions (when they are divorced).
These comments assume that there is no other disposition of property to, or significant increase in the interest in any corporation of, any person with whom Newco deals at arm's length occurring as part of the same series of transactions determined with reference to subsection 248(10) of the Act; if such a disposition or increase in interest occurred, the exception in paragraph 55(3)(a) would not apply.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
Yours truly,
for DirectorReorganizations and Non-resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch