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: Shares of a private corporation are held in a self-directed RRSP trust. The annuitant wishes to sell the shares. Do we require that the RRSP issuer obtain a valuation from the corporation before the sale can be executed?
Position: Not necessarily
Reasons: The sale must be at fair market value, which may be established by another means.
XXXXXXXXXX 2001-008744
S. E. Thomson
July 11, 2001
Dear XXXXXXXXXX:
Re: Valuation of private corporation shares in an RRSP
We are writing in response to your fax of June 7, 2001 in which you ask about private corporation shares held in a self-directed RRSP trust. Specifically, you ask if we will require you to obtain a valuation of the shares from the corporation before you can execute a sale of the shares.
Subsection 146(9) of the Income Tax Act provides that if property is sold by an RRSP trust for consideration that is less than the fair market value of the property at the time of the sale, the difference between the consideration and the fair market value shall be included in the income of the annuitant in the year.
The Canada Customs and Revenue Agency (the "CCRA") does not sanction any one particular method of determining fair market value of a property that must be used in all cases. Rather, fair market value of a particular property is a question to be determined by an examination of all of the relevant facts surrounding each situation.
The CCRA's general policy on the valuation of closely held corporations is outlined in Information Circular 89-3, Policy Statement on Business Equity Valuations, available on our website at www.ccra-adrc.gc.ca/formspubs/menu-e.html. The circular generally defines fair market value to be the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length, neither party being under any compulsion to transact. However, when no established market for the shares of the private corporation exists, other factors will be considered as outlined in the circular.
We trust that we have been of assistance.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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