Japanese absorptive merger triggered a taxable disposition of shares of Canadian subsidiary

CRA has found that a Japanese absorptive merger - in which only one of the merging  corporations survived and the others were considered under the Japanese Commercial Code to have been dissolved - resulted in gain being triggered on the taxable Canadian property held by the dissolved Japanese corporations, in this case, shares of Canadian subsidiaries.  This is consistent with previous CRA positions (see, for example, 2000-002395, a ruling respecting a US absorptive merger.)

Foreign mergers of this type can be problematic.  The foreign advisors, who know that there is a rollover under the foreign tax law, may not realize that they give rise to a disposition under the Act.

Neal Armstrong.  See summary of 8 March 2012 Memorandum 2010-0387961I7 under ITA s. 248(1) - "Disposition".