P. Mason (613) 957-2109
Attention: XXXX
March 19, 1987
Dear Sirs:
Re: Paragraph 251(5)(b) of the Income Tax Act
This is in reply to your letter of February 2, 1987 in which you asked us to comment on the application of paragraph 251(5)(b) of the income Tax Act, where a marital agreement provides one spouse with the right to acquire shares owned by the other spouse in the event of a divorce.
Since the confirmation which you requested is in respect of a proposed agreement your request should be the subject of an advance income tax ruling. An advance income tax ruling is a statement given by Revenue Canada Taxation (RCT), to a taxpayer which states how RCT will interpret the law in respect of specific transactions or on questions of facts where it is possible to predetermine all the material facts and where all the facts can reasonably be expected to prevail or be made to prevail. Advance income tax rulings are explained and distinguished from opinions in Information Circular 70-6R (IC 7C)-6R. As noted in paragraph 24 of IC 70-6R, any written or verbal opinions provided by RCT are not rulings and are not binding upon RCT in respect of any taxpayer.
The right you describe does appear to be a right described in 251(5)(b). Paragraph 31 of interpretation Bulletin 64R2 describes two types of rights which RCT would not normally view as being rights which in and by themselves would cause the provisions of paragraph 251(5)(b) of the Act to be applicable Other factors of a particular situation, particularly other provisions contained in the marital agreement, may cause that provision of the Act to be applicable in respect of the particular situation, even if the right is one described in IT-64R2 .
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch