Question
The CRA previously stated that where property is transferred to a corporation by a shareholder for no consideration, the corporation will not have any cost base in the property. In a 2007 ruling,[Footnote 29] the CRA ruled that the corporation obtained tax basis in cash transferred by a shareholder to the corporation for no consideration. Can you provide assurance that the position expressed in the ruling would apply regardless of the type of property transferred?
Response
In the absence of a specific provision in the Act to the contrary, it is the position of the CRA that a corporation that receives property from its shareholder for no consideration has a cost basis for that property equal to its FMV. Should the CRA not agree with the taxpayers’ valuation, the conditions set out in Interpretation Bulletin IT‑169[Footnote 30] apply with such modifications as the circumstances require.