Tax Interpretations Judicial and CRA interpretations of Canadian tax law and transactional implications

Posts for Tag: 249(3.1)

2014-0550191I7 E – Subsections 89(11) and 249(3.1)
22 October 2014

Principal Issues: (1) Whether subsection 249(3.1) applies at the time a corporation files an election under subsection 89(11), thereby triggering a deemed year-end. (2) Whether the revocation of the election provided for under subsection 89(12) triggers a deemed year-end under subsection 249(3.1).

Position: (1) No. (2) No.

Reasons: Wording of the Act.

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2014-0523171E5 E – Deemed year-end pursuant to 249(3.1)
27 March 2014

Principal Issues: Whether subsection 249(3.1) would apply when two public corporations become the owners of more than 50% of the voting common shares of the capital stock of a taxpayer. The taxpayer had made an election under subsection 89(11) before that time.

Position: No, subsection 249(3.1) would not apply.

Reasons: For the purposes of subsection 249(3.1), there is no change of status of the taxpayer. The taxpayer was already deemed not to be a CCPC for the purposes of subsection 249(3.1) because it made an election under subsection 89(11). See paragraph (d) of the definition of CCPC in subsection 125(7).

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2014-0524851E5 F – Deemed year-end and CPCC status

Principales Questions: Where a public corporation controls a corporate taxpayer, whether subsection 249(3.1) applies with respect to the taxpayer and whether the taxpayer becomes a CCPC at the time another corporation (which is a CCPC) acquires the rights to acquire all the shares of the capital stock of the taxpayer (such a time being before the acquisition of control of the taxpayer)?

Position Adoptée: Subsection 249(3.1) does not apply and the taxpayer does not become a CCPC at the time of the acquisition of the rights to acquire the shares of the capital stock of the taxpayer.

Raisons: The taxpayer does not meet the conditions provided for in subsection 249(3.1) because it does not become a CCPC at that time. Even if the deeming provision in paragraph 251(5)(b) applies for the purposes of the definition of CCPC in subsection 125(7), the public corporation remains a person which controls the taxpayer.

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2013-0504221E5 F – Fin d’années réputées
28 November 2013

Principales Questions: Une société issue d’une fusion qui perd son statut de SPCC peut-elle faire le choix prévu à l’alinéa 249(3.1)c)? Can a corporate entity, formed as a result of an amalgamation, that loses its status as a CCPC make the election provided for at paragraph 249(3.1)c)?

Position Adoptée: Non. No.

Raisons: Puisque la société issue de la fusion est une nouvelle société en vertu de l’alinéa 87(2)a) et qu’aucune disposition ne prévoit la continuité des sociétés remplacées pour cette fin, le choix visé au paragraphe 249(3.1) ne peut être fait. En particulier, l’exigence prévue au sous-alinéa 249(3.1)c)(i) n’est pas respectée. Since the corporate entity formed as a result of the amalgamation is deemed to be a new corporation under paragraph 87(2)a) and no provision indicates a continuation of the predecessor corporations in this situation, the section 249(3.1) can be elected. In particular, the condition provided for at subparagraph 249(3.1)(c)(i) is not met.

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2012-0455231E5 E – Section 89(1) – defn of a “public corporation”
21 September 2012

Principal Issues: Whether the definition in subsection 89(1) for a “public corporation” includes “corporations controlled by public corporations”?

Position: No

Reasons: A corporation will not be a “public corporation”, within the meaning of the definition of that term in 89(1), merely because it is controlled by a corporation that, itself, qualifies as a “public corporation”.

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