CRA requires filing of articles of dissolution before applying s. 88 to a wind-up

A lossco parent could not transfer losses to a profitco subsidiary under typical triangular loss-shifting techniques because profitco (which likely is a financial institution) is precluded from receiving a loan from lossco. Accordingly, lossco will engage in such techniques to transfer losses to a newco subsidiary (Aco), and then transfer Aco to profitco to be wound-up under s. 88(1.1) (see also 2013-0496351R3). Bizarrely, a representation was given that the interest-bearing loan by lossco to Aco (which has no assets) "will not exceed the amount that ACo could reasonably be expected to borrow from an arm’s-length financial institution."

Notwithstanding the favourable comments in IT-126R2, para. 5 on when a corporation is considered to have been wound-up, CRA ruled that s. 88(1.1) would not apply to the winding-up of Aco until articles of dissolution were filed.  2013-0496351R3 is similar.

Similarly to 2013-0504301R3, a provincial GAAR ruling was given.

Neal Armstrong. Summary of 2014 Ruling 2013-0511991R3 under s. 111(1)(a).