Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Would we apply GAAR to a loss utilization scheme within a related group of coprorations.
Position TAKEN:
Not generally.
Reasons FOR POSITION TAKEN:
The Technical Notes to subsection 245(4) of the Act state that section 245 will not normally apply to transactions undertaken to transfer income or deductions within a related group of corporations.
950859
XXXXXXXXXX A. Seidel
Attention: XXXXXXXXXX
April 12, 1995
Dear Sirs:
This is in reply to your letter dated March 24, 1995 in which you requested our opinion with respect to the application of the general anti-avoidance rule ("GAAR") in the situation where inventory is transferred by a corporation to a wholly owned corporation, within the meaning of subsection 85(1.3) of the Income Tax Act (the "Act"), for the purpose of utilizing the accumulated non-capital losses of the wholly owned corporation.
It appears that the interpretation you seek relates to specific taxpayers and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Customs, Excise and Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for particular taxpayers with respect to specific transactions which are contemplated, a written request for an advance income tax ruling should be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments in response to your letter.
The Technical Notes to subsection 245(4) of the Act include the following comments with respect to transactions undertaken to transfer income or deductions within a related group of corporations. "In fact, the scheme of the Act as a whole, and the expressed object and spirit of the corporate loss limitation rules, clearly permit such transactions between related corporations where these transactions are otherwise legally effective and comply with the letter and spirit of these exceptions. Therefore, even if these transactions may appear to be primarily tax-motivated, they ordinarily do not fall within the scope of section 245 since they usually do not result in a misuse or abuse."
The above comments are not rulings and are provided in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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