CRA synthesizes expanded positions on amalgamations

There are various additions in the new Folio on amalgamations as compared to IT-474R2 (many of them, reflective of intervening technical interpretations and rulings) including:

• CRA accepts Envision for the proposition that under the applicable corporate law, the property of predecessors necessarily becomes property of Amalco (thereby satisfying s. 87(1)(a));
• an acquisition of control of the target corporation and its subsequent amalgamation on the same day will give rise to two years ends rather than one if there are transactions described in the closing agenda which must logically occur in between;
• there also will be two year ends if the acquisition of control occurs by means of a horizontal amalgamation;
• CRA generally will accept a late s. 88(1)(d) bump designation by Amalco provided that the bump is applied on a proportional basis;
• the s. 87(7)(d) debt continuity rule assures that the recognition of an FX gain on debt under s. 111(12) and s. 111(4)(e) will be remembered when Amalco later settles the debt;
• CRA likes Copthorne; and
• a deemed debt settlement occurring under s. 80.01(3) will not result in FX gain.

Some of the dubious assertions in IT-474R2 (e.g., Amalco is generally stuck with the inventory valuation methods followed by its predecessor, and CRA will only "accept" that there is a good s. 87 amalgamation if Amalco pretends that there is a s. 13(5.1) continuity rule) or accommodations (e.g., the $200 fractional share cash policy, or the continuity of ACB on pref-for-pref exchanges) have been retained.

Neal Armstrong.  Summaries of S4-F7-C1: Amalgamations of Canadian Corporations under s. 87(1), 87(2)(a), s. 88(1)(d), s. 87(3) and s. 80.01(3).