Subsection 84.1(1) - Non-arm’s length sale of shares
Cases
Fiducie famille Gauthier v. Canada, 2012 FCA 76, aff'g 2011 DTC 1343 [at 1917], 2011 TCC 318
The taxpayer, a family trust, made a non-arm's-length sale of shares to a numbered corporation ("4041763 or "404") for a promissory note of...
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| Tax Topics - General Concepts - Fair Market Value - Shares | 258 |
Canada v. Olsen, 2002 DTC 6770, 2002 FCA 3
The taxpayer transferred shares of a corporation ("Leader") to corporations controlled by the taxpayer's children and spouses in consideration for...
See Also
Poulin v. The Queen, 2016 TCC 154
CRA successfully applied s. 84.1 to a transaction in which one of the two major shareholders of a Quebec CCPC (Mr. Turgeon) agreed to sell some...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | sale to the special-purpose Holdco of an independent employee was essentially a surplus-stripping transaction rather than an arm’s length sale | 604 |
Fiducie Famille Gauthier v. The Queen, 2011 DTC 1343 [at 1917], 2011 TCC 318, aff'd 2012 FCA 76
The taxpayer, a family trust, made a non-arm's-length sale of shares to a numbered corporation for a promissory note of approximately $2.6...
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| Tax Topics - General Concepts - Substance | 233 |
Estate of the late Donald Mills v. The Queen, 2010 DTC 1301 [at 4078], 2010 TCC 443, aff'd 2011 DTC 5124, 2011 FCA 219
The taxpayer exchanged shares for a promissory note. Under s. 84.1(1)(b), the receipt of the promissory note resulted in a deemed dividend. The...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(i) | no bad debt if deemed dividend | 77 |
McMullen v. The Queen, 2007 DTC 286, 2007 TCC 16
The taxpayer and an unrelated individual ("DeBruyn") accomplished a split-up of the business of a corporation ("DEL") of which they were equal...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | 270 | |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 198 | |
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | mutual benefit and same advisors insufficient to establish non-arm's length in structured sale transaction | 258 |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | 229 |
Lloyd v. The Queen, 2002 DTC 1493 (TCC)
Although the taxpayer signed an agreement with a holding company for the sale of shares in a company ("READ") to the holding company, Bowman...
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| Tax Topics - General Concepts - Effective Date | taxpayer can attack own transaction as legally ineffective | 130 |
| Tax Topics - General Concepts - Tax Avoidance | taxapyer can argue legally ineffective transactions | 131 |
| Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 3 | 64 |
Administrative Policy
7 October 2016 APFF Roundtable Q. 6, 2016-0652821C6 F - Graduated Rate Estate - Total Charitable Gifts
CRA largely repeated a statement made at the 2016 APFF Roundtable, Q.20 (also in response to the Poulin decision) respecting employee buyco...
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| Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(ii) | right of GREs to carry forward donations for five years | 109 |
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | touchstones for accommodation party | 184 |
7 October 2016 APFF Roundtable Q. 20, 2016-0655831C6 F - Employee Buycos and the Poulin Case
CRA accepts the finding in Poulin that the structuring of a sale transaction so that the vendor secured a tax advantage (the capital gains...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | Poulin distinction between accommodation parties and tax advantaged arm’s length dealings accepted | 188 |
2 May 2016 External T.I. 2016-0633351E5 F - Descarries Case and Document no. 2015-0610711C6
In rejecting a submission that 2015-0610711C6 had improperly reversed 2005-0134731R3 F on the basis that the purpose of section 84.1 is only “to...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | Descarries not to be construed narrowly | 176 |
24 November 2015 CTF Roundtable Q. 11, 2015-0610711C6 - Impact of the Descarries decision
In 2005-0134731R3 F, Mr. X realized a capital gain of selling all of the common shares of HOLDCO to his children in consideration for promissory...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | contrary to GAAR to use basis stepped up under CGD to create a capital loss permitting surplus extraction | 494 |
2014 Ruling 2014-0526361R3 F - Post Mortem Pipeline
An estate of B, and a spousal trust for which B had been the spouse, which on death acquired (Class F) preference shares of a portfolio...
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| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | step up of PUC of freeze pref shares for purposes of pipeline transaction | 315 |
25 November 2012 CTF Roundtable, 2013-0479402C6 - Employee Buycos - comments from CRA Panel
Employees of Opco received Opco shares as incentives under an Opco employee share ownership plan ("ESOP"). Under the terms of the ESOP, on...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | stock option share Buyco not at arm's length | 202 |
3 July 2012 External T.I. 2012-0443421E5 F - 84.1 and partnership
A and B are Canadian-resident spouses who have not utilized their capital gains exemption and who each hold 50 Class A shares (the only issued...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 552 |
7 October 2011 Roundtable, 2011-0412121C6 F - Interaction between S. 84.1 and S. 85(2.1)
As s. 84.1(1) takes precedence over s. s. 85(2.1), a "grind" of paid-up capital will not occur under s. 85(2.1) if all the conditions for the...
12 January 2005 External T.I. 2004-010616
Under transactions in which Mr. A sells a portion of his shares of a family farm corporation ("Farmco") to a newly incorporated subsidiary ("Xco")...
9 January 2004 External T.I. 2003-0037425
A farming partnership between a husband and wife transfers its business to a newly-incorporated corporation ("Opco") whose common shares are held...
28 March 2003 External T.I. 2002-016665
Two shareholders collectively holding 24% of the shares of Opco transfer their shares of Opco to a newly-incorporated holding company ("Xyco") and...
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| Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) | 145 |
4 November 1998 T.I. 980169
A partnership that transfers shares will be considered to be a person and a taxpayer for purposes of s. 84.1.
23 December 1993 External T.I. 5-932688
RC's practice is to apply s. 84.1 where the conditions for its application are present given that its provisions do not give RC any administrative...
1993 A.P.F.F. Round Table Q. 4
It is not relevant to the application of s. 84.1 whether the subject corporation and the purchaser corporation were connected before the...
29 January 1990 T.I. (June 1990 Access Letter, ¶1264)
The sale by Mr. and Mrs. A of all the shares of Holdco to a corporation owned by their daughter and son-in-law in consideration for a promissory...
18 December 1989 T.I. (May 1990 Access Letter, ¶1220)
An estate which acquires shares of a deceased person under a testamentary trust acquires the shares from a person with whom it was not dealing at...
October 1989 Revenue Canada Round Table - Q.11 (Jan. 90 Access Letter, ¶1075)
s. 84.1 will not apply where an individual taxpayer exchanges common shares of a corporation for preferred shares of the same corporation -...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 48 | |
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | 73 |
18 Aug. 89 T.I. (Jan. 90 Access Letter, ¶1082)
s. 84.1 does not apply to the disposition by an individual of 1/2 of his common shares of Opco to Opco in exchange for preference shares of Opco...
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| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(2.1) | 67 | |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(5) | 87 |
Articles
David Wilkenfeld, "Section 84.2 Update", Tax for The Owner-Manager, Vol. 2, No. 1, January 2002.
Subsection 84.1(2) - Idem [Non-arm’s length sale of shares]
See Also
Emory v. The Queen, 2010 DTC 1074 [at 2901], 2010 TCC 71
The taxpayer and another individual ("Chen") owned 27% and 73%, respectively of the shares (being common shares) of a corporation ("Sona"). S....
Administrative Policy
25 July 1994 T.I. 940786
Where a transferor has acquired a subject share from a non-arm's length individual, the amount of any capital gain realized by the non-arm's...
13 April 1994 External T.I. 5-940501
An individual owns all the voting shares of a corporation ("Opco") and shares (including non-voting special shares) of Opco representing...
30 November 1991 Round Table (4M0462), Q. 10.1 - Non-Arm's Length Relationship and Death (C.T.O. September 1994)
Shares acquired by a taxpayer from his deceased spouse are acquired from a person with whom the taxpayer is not dealing at arm's length and are,...
Paragraph 84.1(2)(a.1)
See Also
Pomerlau v. The Queen, 2016 CCI 228
The family Opco was held by a holding company (Groupe Pomerlau Inc.), whose Class A (common) shares, having a fair market value (“FMV”) of...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | abusive avoidance of s. 84.1 by converting soft into hard ACB | 245 |
Côté-Létourneau v. The Queen, 2010 DTC 1116 [at 3092], 2007 TCC 91
The Court rejected a submission of the taxpayers that shares issued to them by a corporation were not acquired by them: an Order for them to...
Administrative Policy
9 October 2015 APFF Roundtable Q. 14, 2015-0595631C6 F - Indirect Monetization of CGD
Following Descarries, CRA will no longer issue rulings in which an individual can in effect use shares (e.g., preferred shares) whose ACB was...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | Descarries not consistent with use of ACB on a previous capital gains crystallizatin to create a capital loss for use on a sale | 169 |
9 October 2015 APFF Roundtable Q. 7, 2015-0595561C6 F - Computation of adjusted cost base and section 84.1
The capital gains deduction was claimed in the terminal return of an individual (X) for shares which were bequeathed to his son, and the son then...
10 August 2015 External T.I. 2015-0602751E5 - Capital gains deduction and section 84.1
The taxpayer and his wife acquire all the shares, qualifying as qualified small business corporation shares, of a corporation (the "Corporation")...
Subsection 84(2.1)
Administrative Policy
28 April 2016 External T.I. 2015-0594461E5 - Subsection 84.1(2.1)
Does the phrase “the amount in respect of which a deduction under section 110.6 was claimed in respect of the transferor’s gain from the...