Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
CORPORATE MANAGEMENT TAX CONFERENCE ROUND TABLE
June 1996
Question 9
Plan of Arrangement - What is it for Tax Purposes?
Many of today's more complex corporate takeovers and other reorganizations are given legal effect by virtue of an "arrangement" which essentially appears to collapse what might otherwise be several reorganization steps into one set of transactions that are stated to occur in a very short time frame. An arrangement can involve any combination of amalgamation, wind-up, division of a business into two corporate entities, reorganization of the share capital of a company, etc. (see section 192 of the CBCA, section 182 of the OBCA and similar sections of other governing statutes).
The tax consequences of a series of corporate manoeuvres often depend on the sequence of steps. This sequence is not always required to be spelled out for corporate law purposes but spelling out the sequence may be critical for tax purposes.
How does Revenue Canada determine the tax consequences of an arrangement?
Department's Position
Ordinarily, the Department will respect the ordering of a series of transactions where the order is specified in an arrangement. Where the order of a series of transactions is not set out in the arrangement, and the order is relevant for tax purposes, the Department will look to all of the relevant legal documentation in order to ascertain the tax consequences of the series. Of course, the tax consequences of a series of transactions effected by way of an arrangement can be recharacterized under section 245.
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