Revenue Canada Taxation
G.D. Tapp 613-593-6201
July 16, 1981
Dear Sirs:
Re : Transfer of Property to a Corporation by a Shareholder -----------------------------
This is in reply to your letter of March 27, 1981 with respect to the transfer of property to a corporation by a shareholder.
Where a taxpayer has disposed of property to a taxable Canadian corpora- tion for consideration that includes shares of the capital stock of the corporation, we are of the view that a prior issuance of shares by the corporation for cash, in and by itself, would not constitute a business for the purposes of subsection 85(l.1) of the Income Tax Act (the Act). Accordingly, the provisions of subsection 85(1.1) of the Act would not apply in respect of such disposition to render the provisions of subsec- tion 85(1) of the Act inoperative.
We trust that these comments are of assistance to you.
Yours truly,
for Director Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch