CRA confirms that goodwill and IP that were not on target’s tax books could be written up under s. 111(4)(e)
In connection with an acquisition of its control, Canco used a s. 111(4)(c) and(d) write-down of debt owing by a controlled foreign affiliate to designate the s. 111(4)(e) write-up of the capital cost of goodwill (Class 14.1), customer relationships (Class 14.1) and intellectual property (Class 12 – e.g., software or video copyright?). CRA indicated that this could be done even though, prior to the acquisition of control, these assets had no cost, i.e., these assets were internally generated. CRA also indicated that “the goodwill and the customer relationship … constitute a single property, being the goodwill in respect of the Taxpayer’s business.”
Neal Armstrong Summary of 19 May 2020 Internal T.I. 2020-0841791I7 under s. 111(4)(e).