J.F. Oulton (613) 995-1787
October 29, 1982
Attention:
Dear Sirs:
This is in reply to your letter of October 28, 1982 requesting our opinion concerning an hypothetical situation where a shareholder assumes a debt owing to a third party by a foreign affiliate whollyowned by him in exchange for shares of the capital stock of the affiliate having a fair market value less than the amount of the debt.
In these circumstances it is our view that paragraph 69(l)(a) of the Act would be applicable to reduce the cost of the shares and that therefore subsection 245(2) of the Act would not be applied to the affiliate.
Yours truly,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR D.B. MORPHY
for Director Corporate Rulings Division Legislation Branch