Revenue Canada Taxation
Dennis Bresee (613) 995-1178
November 25, 1982
Dear XXXX,
This is in reply to your letter of October 19, 1982 concerning the dollar value of consideration to be taken back by a taxpayer on a rollover of capital property to a related corporation pursuant to the provisions of subsection 85(1) of the Act.
In order to avoid the application of paragraph 85(1)(e.2) of the Act to the above sale the fair market value of the consi- deration taken back by the taxpayer must be equal to the fair market value of the capital property purchased by the corpora- tion. The fair market value of the property must be established, using acceptable principles of valuation. In our view, the potential tax liability inherent in capital property being trans- ferred on a rollover basis should not be reflected in the valua- tion of the property transferred unless the transferred property is to be disposed of by the transferee corporation shortly after the rollover and thus the tax liability is imminent and can be calculated with certainty.
Yours truly,
for Director Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch