5-920100
A. Simard
24(1) (613) 957-2098
Attention: 19(1)
May 11, 1992
Dear Sirs:
Re: Subsections 74.1(2) and 74.4(2) of the Income Tax Act (the "Act")
This is in reply to your letter dated January 6, 1992, wherein you requested our opinion regarding the application of the income attribution rules and in particular how subsection 74.1(2) of the Act interacts with subsection 74.4(2) of the Act in the following situation. We apologize for the delay in replying to your request.
24(1)
The facts in your letter appear to relate to a specific proposed transaction. Accordingly, your query should take the form of a request for an advance income tax ruling. Although we cannot provide confirmation with respect to the tax consequences of specific proposed transactions in response to a request for an opinion, we have set out below our general comments on the matters you have raised.
OUR COMMENTS
1. In order to apply subsection 74.4(2) of the Act, the "designated person" in respect of whom the individual has loaned property to a corporation, must be a "specified shareholder" of the corporation. For this purpose, the definition of "specified shareholder" in subsection 248(1) of the Act must be read without reference to paragraphs (a) and (d) thereof.
Therefore, in the particular situation submitted, given the fact that each granchild is not a "specified shareholder" of the corporation, we agree with you that subsection 74.4(2) of the Act would not apply.
2. Furthermore, we agree with your opinion that no income would be attributed to the individual under subsection 74.1(2) of the Act.
As stated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, the above opinion does not constitute a ruling and accordingly, is not binding on Revenue Canada, Taxation.
We trust our comments are of assistance.
Yours truly,
Maurice Bissonfor the DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch