CRA expansively interprets “on” in the s. 93(4) stop-loss rule

But for s. 93(4), a Canadian corporation (ACo) would have realized a capital loss on the liquidation and dissolution of a wholly-owned non-resident subsidiary (FA1) which, in turn, held FA2 and FA3. CRA found that s. 93(4) applied to deny the loss and add it to the ACB to ACo of the shares of FA2 and FA3 on the basis that ACo had acquired those shares “on” its disposition of the shares of FA1 – even though such acquisition in fact occurred before the dissolution of FA1. Its reasoning suggested that it considered the “on” test to be satisfied by virtue of the fact that “ACo acquired the shares of FA2 and FA3 as part of the process of liquidating and dissolving FA1, which included ACo disposing of its shares of FA1.”

Neal Armstrong. Summaries of 5 September 2018 Internal T.I. 2017-0698241I7 under s. 93(4), s. 93(2.01) and s. 93(1).