On October 15, 2013, the Joint Committee made useful submissions to Finance on draft legislation released September 13, 2013 (seehttp://www.thor.ca/blog/2013/10/department-of-finance-tax-related-quick-update-report/ for a quick summary of the latter). Among the Joint Committee’s submissions were the following items.
- If a taxpayer is deemed to have disposed of property under the new “synthetic” disposition rules, the taxpayer should be able to claim a reserve to the same extent as if a “real” disposition had taken place (page 4).
- The proposed definition of “derivative forward arrangement” (in the new character conversion rules) could be interpreted to apply to almost any forward sale agreement that extends beyond 180 days, simply because all such agreements have an element of interest. A small interest element could therefore cause the entire amount by which the forward sale price exceeds the fair market value of the property to be treated as income. This result extends the rule beyond its intended scope (page 5).
- Under s. 256.1, a person or group of persons can be deemed to acquire control of a corporation if certain conditions exist. Based on the wording of the new rules, a further acquisition of control of the corporation could also arise if actual de jure control of the corporation is later acquired by this same person or group. This result is considered inappropriate (page 20). Further, if s. 256.1(3) applies, the corporation and each corporation controlled by it is deemed not to be related to or affiliated with any person to which it was related or affiliated immediately before the deemed acquisition of control. This deeming rule would preclude certain subsequent reorganizations if those reorganizations are dependent on related or affiliated status: under s. 55(3)(a) or s. 69(11) for example (see page 21).