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: Will a former employer be related to the current employer under subparagraph 60(j.1)(iv) of the Act?
Position: Yes.
Reasons: The former employer's business was continued by the current employer.
XXXXXXXXXX
XXXXXXXXXX 2000-001249
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Company") XXXXXXXXXX
This is in reply to your letter dated XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the information provided during our various telephone conversations (XXXXXXXXXX).
We understand that, to the best of your knowledge and that of the Company, none of the issues involved in the ruling request
(i) is in an earlier return of the Company or a related person,
(ii) is being considered by a tax services office or tax centre in connection with a previously filed tax return of the Company or a related person,
(iii) is under objection by the Company or a related person,
(iv) is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired, and
(v) is the subject of a ruling previously issued by the Directorate.
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:
Facts
1. The Company was incorporated under the laws of Canada and its head office is located in XXXXXXXXXX. The Company is a taxable Canadian corporation. The expression "taxable Canadian corporation" has the meaning assigned by subsection 89(1) of the Act.
The Company files its tax returns with the XXXXXXXXXX Tax Centre and is located within the area served by the XXXXXXXXXX Tax Services Office.
2. The Company is a holding corporation and, through its subsidiary wholly-owned corporations (the "Subsidiaries"), it is in the business of XXXXXXXXXX (hereinafter referred to as the "Client"). All employees of the corporate group are employees of the Company and the Company charges each of its Subsidiaries for its cost of the services provided to the particular Subsidiary. The Company has offices throughout Canada. The Company's fiscal year ends on XXXXXXXXXX. The expression "subsidiary wholly-owned corporation" has the meaning assigned by subsection 248(1) of the Act.
3. XXXXXXXXXX (the "Previous Employer") is a corporation that, as part of its XXXXXXXXXX business, also provides XXXXXXXXXX to the Client.
4. The Company and the Previous Employer are not related to each other under section 251 of the Act.
5. Effective XXXXXXXXXX, the Company and the Previous Employer entered into an agreement (the "Agreement") with respect to the provision of XXXXXXXXXX to the Client. Under the Agreement, the Company became XXXXXXXXXX. As part of the transfer of the Previous Employer's XXXXXXXXXX business provided to the Client, all of the Previous Employer's employees who were working on the administration or marketing (including XXXXXXXXXX, customer service, accounting and sales) related to the business with the Client were transferred to the Company on XXXXXXXXXX (the "Transferred Employees").
6. The Transferred Employees did not receive a severance package from the Previous Employer. The Transferred Employees are only entitled to benefits under the Previous Employer's pension plan for their years of service with the Previous Employer prior to XXXXXXXXXX and are only entitled to benefits under the Company's pension plan for their years of service with the Company after XXXXXXXXXX.
Proposed Transactions
7. The Company will close its offices XXXXXXXXXX. The Company is in the process of providing severance packages to the administrative staff in the XXXXXXXXXX offices and is negotiating a severance settlement with an employee from the XXXXXXXXXX sales office. The severance packages relating to Transferred Employees will recognize the years of service with the Company and the Previous Employer.
8. There are XXXXXXXXXX Transferred Employees that will receive a severance package from the Company as a result of the office closures described in 7 above.
Purpose of the Proposed Transactions
9. The purpose of the proposed transactions is to provide severance payments to employees who will lose their jobs with the Company as a result of the closure of the XXXXXXXXXX offices.
Ruling Given
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed as described above, we rule as follows:
A. With respect to the Transferred Employees, the Former Employer will be related to the Company for purposes of paragraph 60(j.1) of the Act pursuant to subparagraph 60(j.1)(iv) of the Act.
The above ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996, and is binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed on or before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
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