Mortgage Broker

CMB MAGAZINE cmba-achc.ca spring 2016 | 11 letters to the editor l e total of all arm's-length individuals hold at least 90 per cent of the votes that can be cast at an annual meeting of the issuer. l e terms and conditions of each share or unit held by the registered plan are the same as, or similar to, the terms and conditions of the equity held by arm's-length individuals (arm's-length equity). l e fair market value of the arm's-length equity with the same (or similar) terms and conditions is equal to at least 10 per cent of the total fair market value of all equity of the issuer with the same (or similar) terms and conditions. l e holder or annuitant deals at arm's length with the issuer. l None of the main purposes of the structure of the issuer, or the terms or conditions of the equity, is to accommodate transactions or events that could affect the fair market value of the investment held by the registered plan in a manner that would not occur in a normal commercial or investment context in which parties deal with each other at arm's length and act prudently, knowledgeably and willingly. e thrust of the exception is to determine whether the relationship between the holder or annuitant of the registered plan and the issuer of the investment is such that the holder or an- nuitant is in a position to manipulate the value of the investment or the distribution of income. Applying the seven-part test Different parts of the Income Tax Act (ITA) have different requirements as to proof. e general rule is that the taxpayer must show some evidence to prove the position claimed and then the burden shis to the government to rebut the evidence on the balance of probabilities. We are not at all comfortable confirming that to be the position in your case and strongly recommend that you obtain legal advice from a tax lawyer. As well, different parts of the ITA require different levels of care the taxpayer must have taken to have met requirements. In some matters, it is an absolute matter of the taxpayer qualifying or not qualifying for exemption; for example, the question is possibly as to whether or not the taxpayer meets the 10 per cent threshold, regardless of any efforts made. In other matters, the taxpayer is expected to have taken reasonable care (based on the taxpayer's knowledge of parties being related and having taken care to discover the same, perhaps by obtaining a declaration from each investor as to their knowledge of being related to another investor). We believe it would not be responsible to disclose investors' names to other investors without their consent, as doing so could raise breach of privacy allegations. Before solving one problem and perhaps creating a significant other problem, you should obtain legal advice. Requirements of a trust company What happens when a third party, such as a trust company, will not do business with you unless you provide an auditor's certification that you qualify under the 10 per cent rule? is can be a problem as an auditor may be reluctant to provide such an absolute certification without having absolute proof. Without such absolute proof, the most he or she may be willing to provide is a professional opinion. e result may very well be that you are unable to obtain a certificate to the satisfaction of the trust company and are unable to do business with it. Presumably, if a trust company's requirements for doing business are unrealistic, it will have difficulty attracting business and will need to change the requirements. Closing Your questions do not lend themselves to black and white answers. e answers involve the application of factors, as described. is is very much a circumstance in which obtaining advice from a tax lawyer is appropriate. He or she can advise you how to best structure your business to give yourself the best chance to succeed on the points you raise. Please send letters to the editor to: info@cmba-achc.ca alex raths/getty images

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