920275
24(1) M.P. Sarazin
(613) 957-2118
Attention:19(1)
April 21, 1992
Dear Sirs:
Re: Subsection 111(5) of the Income Tax Act (the "Act")
This is in reply to your letter dated January 23, 1992 wherein you requested our comments with respect to the application of subsection 111(5) of the Act to the following situation.
24(1)
24(1)
You have requested our comments with regards to each of the following questions:
A. Does the response to Question 42 in the 1984 Revenue Canada Round Table wherein the department stated "persons will be considered as having collectively acquired control where there is evidence that they have a common link or interest or they act together to control the corporation" continue to reflect the Department's current position?
B. Would the Department consider Mr. A and Mr. B to be a group which has acquired control of M Ltd. immediately after X Co.'s shares of M Ltd. were cancelled in 1989? In addition, would our position differ if M Ltd. and D Ltd. subsequently amalgamated?
C. What factors would the Department consider in determining whether a common link or interest exists between a group of shareholders?
In your letter you have outlined what appears to be an actual fact situation related to past transactions. The review of such transactions falls within the responsibility of District Taxation Offices and it is the practice of this Department not to comment on such transactions when the identities of the taxpayers are not known. However, we can provide you with the following general comments which we hope will be of assistance to you.
The Department's position regarding the determination of whether a group of persons has acquired control of a particular corporation remains as expressed in its response to Question 42 of the 1984 Revenue Canada Round Table. This position has been subsequently confirmed in the Department's responses to Question 40 and 43 at the 1988 Revenue Canada Round Table.
We regret that without a review of all of the facts it would not be possible for us to provide any comments on whether Mr. A and Mr. B constitute a group which has acquired control of M Ltd.
Paragraph 12 of Interpretation Bulletin IT-419 provides the Department's general views regarding the concept of "acting in concert". Since each series of transactions would have to be examined on its own merits, it is not possible to provide any all encompassing guidelines which would apply to all situations.
We hope the above comments will be of assistance to you.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch