In an intergenerational business transfer (IBT), the purchaser does not generally acquire control of the targetco for the purposes of the rule in ITA paragraph 88(1)(d.2). As a result, the tax cost of the eligible assets of targetco likely cannot…
Relevant group entities
A relevant group entity (RGE) of a corporation (per subaparagraphs 84.1(2.31)(c)(iii) and 84.1(2.32)(c)(iii) in the intergenerational transfer (IGT) rules) is any entity carrying on an active business that is relevant to whether the corporation’s shares are qualified small business corporation…
IGT, de facto control and notes
The immediate transfer regime under the intergenerational transfer (IGT) rules found in subsection 84.1(2.31) will not provide a safe harbour from section 84.1, if the taxpayer-vendor at any time after the sale, either alone or with a spouse, has de…
De facto control and IGT rules
If Son’s Buyco issues a note to his parents for the purchase of all of the shares of Opco, would the parents have de facto control of Buyco and Opco because of the note? The CRA said they would, if…
84(2.31) and De Facto Control
The CRA and the courts will need to adopt a narrower definition of de facto control for the purposes of subsection 84.1(2.31), if its policies objectives are to be met. The subsection, among other things, requires parents to give up…
2024 STEP Roundtable
The following is based on the text published in Tax Topics 2713 (September 10, 2024). Question 1 – Spousal Trusts A spousal trust that receives a contribution of capital after the death of the spouse-beneficiary remains a spousal trust, but…
C-208 caution
Allan Lanthier has written about how C-208 provides opportunities for abusive surplus stripping that tax professionals have only dreamed about. He has updated his post, however, to point out that the Federal Court of Appeal’s recent decision in R v…
C-208
Bill C-208, the version that received Royal Assent, is short and sweet and obviously not drafted by the persons at Justice who normally draft tax bills. See, eg, new subparagraph 84.1(2.3)(a)(iii). “Operation”? That’s an odd word choice. I’m not aware…
Planning like it’s the 1990s again
The CRA has reversed a long-standing (and questionable) position on whether a deemed dividend arising under paragraph 84.1(1)(b) of the Income Tax Act (Canada) gives rise to a dividend refund in the purchaser corporation. The CRA apparently now accepts that…
Avoiding 84.1(2.1)
Jin Wen and Michelle Dickinson, “Are Shares Tainted Forever Under Subsection 84.1(2.1)?”, 8:4 Cdn Tax Focus (Nov 2018), discusses the rule in subsection 84(2.1), which grinds PUC as if a vendor had claimed the capital gain exemption but never does,…