CRA accommodates the s. 21 capitalization of losses that otherwise would disappear on a s. 107.4 trust merger

A ruling released on Wednesday morning respecting the conversion of a mutual fund corporation (which at one point had been an ordinary taxable Canadian corporation) into a mutual fund trust through the utilization of an in-house s. 132.2 merger, essentially represents an amendment of a previously issued ruling, discussed in a previous post.  The amended ruling letter accommodates the elimination (through a further s. 107.4(3) transfer and s. 132.2 in-house merger) of a further subsidiary trust (Target) which had been acquired in the interim – as well as the elimination through the same techniques of a subtrust, in turn, of Target.

One point not mentioned in the previous post: a subsidiary LP of one of the subtrusts was to generate a loss which otherwise would have been extinguished, following its allocation to the subtrust, as a result of that subtrust being eliminated.  The ruling letter accommodates the capitalization of that loss through a s. 21 election, so that there is a stepped-up cost amount in the buildings received by the new public mutual fund trust.

Neal Armstrong.  Summaries of 2013 Ruling 2013-0488351R3 under s. 132.2 – qualifying merger and s. 21.