ASSOCIATED CORPORATIONS WITH REFERENCE TO THE INCOME TAX ACT

Abstract

Within the past twelve years there have been numerous amendments to the Income Tax Act. Many such amendments have been in response to new tax avoidance schemes, and have resulted in the development of sections 39 and 139 of the present Income Tax Act. In this article the author discusses the development of sections 39 and 139, and their effect on associated corporations. Next, the author focuses on section 39(4) of the Act and examines the meanings of certain terms in that section, specifically the word “person”, the concepts of share ownership and relatedness, the word “group”, and the concept of corporate control. In examining corporate control, the author then discusses the concept of group control, as well as the meaning of the word “control” itself. The author then provides practical examples dealing with the law of taxing associated corporations, and concludes his article through a series of suggestions for combating shortcomings illustrated by those examples.