A corporation governed by the CBCA which nonetheless was intended to qualify as an NPO under s. 149(1)(l) owned an apartment building which it leased to tenants who also held all its common shares in proportion to the relative size of their apartments. The leases were rent-free except for an obligation to pick up a proportionate share of property costs (described as being economically analogous to condo fees), and presumably were very long-term leases.
It was proposed that the corporation transfer undivided interests in the property to its shareholders in proportion to their relative shareholdings so that each would acquire a co-ownership interest proportionate to the relative size of that transferee’s apartment. Such transfer would result in an extinguishing of the leases. The consideration paid by the shareholders would be a proportionate fraction of the property’s nominal appraised value.
CRA ruled inter alia that there would be no s. 15(1) benefit to the extent that the FMV of the share of the real property so transferred to each shareholder was equal to or less than the FMV of the consideration paid therefor, but did not rule on whether the corporation qualified as an NPO.
Neal Armstrong. Summary of 2021 Ruling 2020-0847671R3 F under s. 15(1).