At the end of our article on 729658 Alberta Ltd. v. The Queen, 2004 TCC 474, we speculated that the case might create new opportunities for taxpayers. A CRA technical interpretation dated February 5, 2005, suggests that the Agency disagrees.
Safe Income and Partial Rollovers
For many years, the CRA has maintained that the partial realization of a gain on shares in the capital of a corporation would reduce the “safe income” attributable to those shares pro rata. As a result, a vendor of shares was often required to choose between claiming the $500,000 capital exemption and using safe income to reduce taxes on the sale of shares. 729658 Alberta Ltd. v. The Queen, 2004 TCC 474, suggests that the CRA position might be wrong and that a vendor might be able to have his exemption cake and eat it too.