,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

            ,9=m,n ,circul>
    
,subject3 ,g5]al ,anti-,avoid.e ,rule
,numb]3 #hh-b ,supple;t #a
,date3 ,july #ac1 #aiij

#a4 ,! purpose ( ? ,supple;t 6,9=m,n
  ,circul> #hh-b is 6provide fur!r
  guid.e ) respect 6! applic,n (! g5]al
  anti-avoid.e rule1 sec;n #bde (!
  ,9come ,tax ,act 7! ,act74
#b4 ,! transac;ns describ$ 9 ! examples
  >e assum$ 6-ply )! relevant provi.ns
  (! ,act & n 6be subject 6any o!r anti-
  avoid.e rule4 ,!y >e al assum$ =!
  purposes ( ? supple;t 6h be5 "utak5
  prim>ily 6obta9 a tax b5efit & !y >e1
  = t r1son1 avoid.e transac;ns4 ,"!=e1
  ! issue 6be det]m9$ is :e!r !y wd 2
  reg>d$ z a misuse (a provi.n (! ,act
  or an abuse hav+ reg>d 6! ,act r1d z a
  :ole4                               #a
               ,examples             a#a
    
#c4 ,cry/alliz+ ,capital ,ga9s ,deduc;n
,facts
  ,an 9dividual [ns %>es (a corpor,n t
  >e qualifi$ small busi;s corpor,n %>es
  z def9$ 9 subsec;n #aaj.f7#a7 (! ,act4
  ,! %>ehold] has />t$ ! proc$ures
  requir$ 6li/ ! %>es (! corpor,n on a
  prescrib$ /ock ex*ange 9 ,canada4 ,9
  ord] 6take advantage (! capital ga9s
  deduc;n "u subsec;n #aaj.f7#b.a7 (!
  ,act 2f ! %>es c1se 6be qualifi$ small
  busi;s corpor,n %>es1 ! 9dividual
  sells ! %>es 6a relat$ corpor,n 9
  3sid],n = %>es & elects an am.t "u
  subsec;n #he7#a7 (! ,act t w p]mit !
  9dividual 6take ! maximum capital ga9s
  deduc;n4
,9t]pret,n
  ,! capital ga9s deduc;n "u subsec;n
  #aaj.f7#b.a7 (! ,act is availa# 9
  respect (! 4posi;n (a %>e t at ! "t (
  4posi;n 0 a qualifi$ small busi;s
  corpor,n %>e4 ,x is n re/rict$      #b
               #hh-b;,s#a            b#a
  6ga9s result+ f >m's l5g? 4posi;ns (
  s* %>es4 ,acly1 ! sale ( %>es 6!
  relat$ corpor,n wd n 2 view$ z an
  abuse (! ,act r1d z a :ole4
--------------------------------------#b
  ,= ano!r example ( ,cry/alliz,n (!
  ,capital ,ga9s ,deduc;n see ! -;ts
  relat+ to 8,small ,busi;s ,corpor,n
  ,%>es0 9 ,rev5ue ,canada ,r.d ,ta# 9
  ,report ( ,proce$+s ( ,=tie? ,tax
  ,3f];e1 #aihh ,3f];e ,report #ec3g1
  8,,gaar & ,,qsbc ,%>es0 at #ec3i4
#d4 ,pur*ase 0,newco ( ,qualifi$ ,small
  ,busi;s ,corpor,n ,%>es
,facts
  ;,x & ;,y >e ,canadian resid5t
  9dividuals :o d1l at >m's l5g? & ea*
  [ns #ej p]c5t (! %>es ( ,opco4 ,^!
  %>es >e qualifi$ small busi;s corpor,n
  %>es z def9$ 9 subsec;n #aaj.f7#a7 (!
  ,act4 ;,x wants 6acquire ! %>es (
  ,opco [n$ 0;,y4 ;,x 9corporates ;,x
  ,co41 a taxa# ,canadian corpor,n1 :
  borr[s monies & pur*ases all (      #c
               #hh-b;,s#a            a#b
  ;,y's %>es ( ,opco = ca%4 ;,x ,co4 &
  ,opco m]ge4 ;,y claims a capital ga9s
  deduc;n "u subsec;n #aaj.f7#b.a7 (!
  ,act 9 respect (! ga9 r1liz$ on ! sale
  (! ,opco %>es4
,9t]pret,n
  ,sec;n #hd.a (! ,act describes !
  circum/.es 9 : 3sid],n rcvd 0a taxpay]
  on a sale ( %>es 6a corpor,n %d 2
  a3.t$ = z a divid5d4 ,x does n deem !
  pur*as+ corpor,n 6pay a divid5d 6!
  sell+ %>ehold] ": ! pur*as] &! sell]
  d1l at >m's l5g?4 ,s9ce ;,y & ;,x ,co4
  d1l at >m's l5g?1 ! sale ( %>es is n
  a6ect$ 0sec;n #hd.a (! ,act4 ,z
  9dicat$ 9 p>agraph #bj ( ,9=m,n
  ,circul> #hh-b1 ! borr[+ 0;,x ,co41 !
  pur*ase ( %>es 0;,x ,co4 &! m]g] ( ;,x
  ,co4 & ,opco >e n abusive4 ,9 ^!
  circum/.es1 ! sale 6;,x ,co4 w n 2 an
  abuse (! ,act r1d z a :ole4


                                      #d
               #hh-b;,s#a            b#b
#e4 ,3solid,n ( ,pr(its & ,losses 9 a
  ,corporate ,gr\p
,facts
  ,pr(itco & ,lossco >e taxa# ,canadian
  corpor,ns4 ,lossco is a :olly-[n$
  subsidi>y ( ,pr(itco4 ,lossco has non-
  capital losses t wd 2 deducti# if
  ,lossco _h 9come4 ,9 ord] 6g5]ate
  9come 9 ,lossco f : xs non-capital
  losses may 2 deduct$1 ,pr(itco borr[s
  f xs bank & uses ! monies 6subscribe =
  -mon %>es ( ,lossco4 ,lossco l5ds ^!
  monies 6,pr(itco at a -m]cial rate (
  9t]e/4 ,pr(itco repays ! bank4 ,! am.t
  ( %>e subscrip;n is n 9 excess (! am.t
  ( monies t ,lossco cd r1sonably 2
  expect$ 6be a# 6borr[ = use 9 xs
  busi;s on ! basis solely ( xs cr$it f
  an >m's l5g? l5d]4
--------------------------------------#c
,9t]pret,n
  ,! ,explanatory ,notes 6,draft
  ,legisl,n & ,regul,ns ,relat+ 6,9come
  ,tax ,re=m issu$ 0! ,m9i/] (        #e
               #hh-b;,s#a            a#c
  ,f9.e 9 ,june #aihh /ate t ! transf] (
  9come 2t relat$ corpor,ns t is
  a3ompli%$ us+ transac;ns t >e leg,y
  e6ective wd n usu,y result 9 a misuse
  (! provi.ns (! ,act or an abuse (!
  ,act r1d z a :ole4 ,! transac;ns 2t
  ,pr(itco & ,lossco1 : >e relat$
  corpor,ns1 wd n "!=e 2 3sid]$ an abuse
  (! ,act r1d z a :ole4 ,? 9t]pret,n
  does n a4ress ! deductibil;y ( 9t]e/
  paya# 0,pr(itco 6xs bank or 6,lossco4
  ,s* 9t]e/ w 2 deducti# pursuant
  6p>agraph #bj7#a77c7 (! ,act provid$ t
  ,pr(itco acquires ! %>es ( ,lossco =!
  purpose ( e>n+ 9come f ! %>es4
#f4 ,debtor's ,ga9 on ,settle;t ( ,debts
,facts
  ,pur*aseco 9t5ds 6pur*ase all ! %>es &
  debt ( ,lossco f _! pres5t [n]s & !n
  amalgamate ) ,lossco4 ,pur*aseco d1ls
  at >m's l5g? ) ea* (! pres5t [n]s4
  ,lossco's debt is [$ 6xs bank4 ,lossco
  has non-capital losses t w 2 deducti#
  0! corpor,n result+ f !             #f
               #hh-b;,s#a            b#c
  amalgam,n4 ,! fair m>ket value (! debt
  ( ,lossco1 : w 2 xs co/ am.t
  6,pur*aseco1 is less ?an xs pr9cipal
  am.t4 ,9 ord] 6avoid ! applic,n (
  subsec;n #hj7#b7 6! settle;t (! debt t
  wd o!rwise o3ur on ! amalgam,n (
  ,pur*aseco & ,lossco1 ,pur*aseco
  9corporates a subsidi>y1 ,subco1 t
  pur*ases ! ,lossco debt f ! bank at xs
  fair m>ket value4 ,pur*aseco buys !
  ,lossco %>es & amalgamates ) ,lossco :
  2comes ,amalco4 ,subco w 3t9ue 6hold !
  debt ( ,amalco & does n 9t5d 65=ce !
  debt4
,9t]pret,n
  ,subsec;n #hj7#b7 (! ,act 3templates t
  sec;n #hj %d apply ": a debt )a co/
  am.t t is less ?an xs pr9cipal am.t is
  ext+ui%$ on an amalgam,n4 ,! hold+ (!
  debt is equival5t 6an ext+ui%;t (!
  debt s9ce ! subsidi>y ( ,amalco does n
  9t5d 6seek repay;t (! debt4 ,"!=e1 !
  acquisi;n (! debt 0,subco wd 3/itute
  an abuse (! ,act r1d z a :ole4      #g
               #hh-b;,s#a            c#c
  ,= ano!r example ( ,debtors' ,ga9 on
  ,settle;t ( ,debts see p>agraph #bc (
  ,9=m,n ,circul> #hh-b dat$ ,octob]
  #ba1 #aihh4
#g4 ,avoid.e ( ,capital ,ga9 0,non-
  ,resid5t corpor,n on ,sale ( ,%>es (
  ,canadian ,subsidi>y
,facts
  ,u,sco1 a corpor,n resid5t 9 ! ,unit$
  ,/ates & n resid5t 9 ,canada1 [ns all
  ! %>es (a taxa# ,canadian corpor,n1
  ,opco1 ^u : "! is an a3ru$ ga94 ,!
  value (! ,opco %>es is deriv$ pr9cip,y
--------------------------------------#d
  f r1l prop]ty situat$ 9 ,canada4
  ,u,sco has agre$ 6sell ! ,opco %>es
  6an >m's l5g? pur*as]1 ,pur*aseco4
  ,6reduce ! ga9 t x wd o!rwise r1lize
  on ! sale (! ,opco %>es1 ,u,sco causes
  ,opco 6pay 6,u,sco a divid5d 9 an am.t
  equal 6! 9come e>n$ & reta9$ 0,opco
  s9ce ,u,sco acquir$ ! ,opco %>es &
  sells ! ,opco %>es 6,pur*aseco4
                                      #h
               #hh-b;,s#a            a#d
,9t]pret,n
  ,u,sco is 5titl$ 6reduce ! fair m>ket
  value (! ,opco %>es 0! am.t (! 9come
  e>n$ 0,opco s9ce ,u,sco acquir$ ! %>es
  ( ,opco4 ,z ! divid5d pd does n exce$
  ? am.t & ,u,sco is subject 69come tax
  ( #aj p]c5t (! divid5d pd pursuant
  6subsec;n #bab7#b7 (! ,act & p>agraph
  #b ( ,>ticle ;,x (! ,canada-,u4,s4
  ,tax ,3v5;n 7#aihj71 ! pay;t (!
  divid5d wd n 2 an abuse (! ,act r1d z
  a :ole4
#h4 ,9cr1se ( ,co/ ( ,prop]ty ,acquir$
  on a ,w9d+-,up (a ,corpor,n
,facts
  ,canco op]ates ?ree busi;ses1 ;,a1 ;,b
  & ;,c1 & [ns 9ve/;t prop]ty4
  ,pur*aseco 9t5ds 6pur*ase all ! %>es (
  ,canco1 w9d x up & 4pose ( busi;s ;,a
  & ;,b4 ,prior 6? pur*ase1 ,canco
  transf]s all (! prop]ty us$ 9 busi;s
  ;,a & ;,b 6:olly-[n$ subsidi>ies ;,x &
  ;,y1 respectively1 & elects pursuant
  6subsec;n #he7#a7 (! ,act 9         #i
               #hh-b;,s#a            b#d
  respect (! transf]s4 ,pur*aseco buys
  all ! %>es ( ,canco & w9ds up ,canco &
  designates an am.t1 pursuant 6p>agraph
  #hh7#a77d7 (! ,act1 69cr1se ! adju/$
  co/ base (! %>es (! subsidi>ies ;,x &
  ;,y4 ,pur*aseco sells ! %>es ( ;,x &
  ;,y 6di6]5t >m's l5g? "pies4
,9t]pret,n
  ,! %>es (! subsidi>ies issu$ 9 3sid],n
  =! prop]ty -pris+ busi;ses ;,a & ;,b
  >e deem$ 0sec;n #ed.b (! ,act 6be
  capital prop]ty ( ,canco4 ,p>agraph
  #hh7#a77d7 (! ,act provides t ! co/ 6a
  p>5t (a capital prop]ty [n$ 0a
  subsidi>y may 2 9cr1s$ 9 c]ta9
  circum/.es4 ,! rules ( ? p>agraph
  apply 6a prop]ty (a subsidi>y t is
  deem$ 6be a capital prop]ty z well z
  "o t is 9 fact a capital prop]ty4
  ,s9ce ! transac;ns describ$ >e 3si/5t
  )! 9t5;n ( sec;n #ed.b & p>agraph
  #hh7#a77d7 (! ,act1 ! transf]s 0,canco

                                     #aj
               #hh-b;,s#a            c#d
  ( busi;s ;,a 6;,x & busi;s ;,b 6;,y wd
  n 2 an abuse (! ,act r1d z a :ole4
--------------------------------------#e
#i4 ,%ift ( ,pd-,up ,capital 6,pref]r$
  ,%>es ,cr1t$ on an ,amalgam,n 6give
  ,capital ,ga9s 6,pref]r$ ,%>ehold] on
  ,redemp;n
,facts
  ,n9ety p]c5t (! -mon %>es ( ,opco >e
  [n$ 0,holdco & t5 p]c5t >e widely held
  09dividuals4 ,holdco & ,opco w m]ge 9
  a mann] describ$ 9 subsec;n #hg7#a7 (!
  ,act4 ,on ! m]g]1 ea* 9dividual
  %>ehold] ( ,opco w rcv1 9 ex*ange =
  ea* -mon %>e [n$1 a redeema# pref]r$
  %>e ( ,amalco hav+ pd-up capital &
  redemp;n am.t equal 6! fair m>ket
  value (! -mon %>e immly 2f !
  amalgam,n4 ,! pd-up capital (! ,amalco
  %>es issu$ on ! amalgam,n w n exce$ !
  pd-up capital1 immly 2f ! amalgam,n1
  (! %>es ( ,opco [n$ 0! 9dividuals &!
  %>es ( ,holdco4 ,! pref]r$ %>es (
  ,amalco >e redeem$ &! %>ehold]s    #aa
               #hh-b;,s#a            a#e
  9clude ! redemp;n proce$s z proce$s (
  4posi;n ( _! pref]r$ %>es4
,9t]pret,n
  ,sec;n #hd.a (! ,act 9dicates !
  circum/.es 9 : a taxpay] :o 4poses (
  %>es 6a corpor,n %d a3.t =! proce$s (
  4posi;n z a divid5d4 ,9dividuals :o
  d1l at >m's l5g? )! acquir+ corpor,n
  >e n requir$ 6a3.t = _! proce$s (
  4posi;n z a divid5d4 ,if ! 9dividuals
  _h sold _! ,opco %>es 6,holdco1 sec;n
  #hd.a wd n h deem$ ,holdco 6pay a
  divid5d4 ,! 4posi;n (! redeema#
  pref]r$ %>es 6,amalco is simil> 6a
  4posi;n 6,holdco4 ,s9ce ! hold]s (!
  redeema# pref]r$ %>es w 4pose ( s*
  %>es 6an >m's l5g? p]son1 ,amalco1 !
  issue ( hi< pd-up capital redeema#
  pref]r$ %>es wd n 2 an abuse (! ,act
  r1d z a :ole4



                                     #ab