2017 Advance Income Tax Ruling (2016-0675881R3), CRA ruled that the related party exemption (Paragraph 55(3)(a)) would apply to a proposed internal reorganization, such that Subsection 55(2) would not reclassify a deemed dividend into a capital gain.
In a 2017 Advance Income Tax Ruling (2016-0675881R3), CRA ruled that the related party exemption (Paragraph 55(3)(a)) would apply to a proposed internal reorganization, such that Subsection 55(2) would not reclassify a deemed dividend into a capital gain. The series of transactions effectively split up a real estate corporation into two new corporations, each respectively owned by a sibling. However, the parents retained voting control of the two new corporations, rendering them related for the purposes of Paragraph 55(3)(a).
In a supplemental Advance Income Tax Ruling (2017-0704351R3), CRA opined that, provided the beneficial owners of the property remain unchanged, a change in legal title of the property would not alter their opinion that the related party exception would apply.
