CRA is providing additional particulars on s. 86.1 spin-off transactions and may consider the delay until the spinner received CRA approval re s. 220(3.5) penalties
CRA has a webpage listing “eligible distributions,” i.e., generally U.S. spin-offs that CRA has approved as satisfying the s. 86.1 rollover treatment (i.e., pro-rating the Canadian shareholders ACB) rather than the value of the distribution being an income inclusion. Previously, this table only showed the date of the CRA approval. Starting in 2020, CRA started also listing when the distribution occurred, which often could be in the preceding year.
This then raised the question as to whether CRA would waive the late-filing penalty under s. 220(3.5) when, due to a delay between the distribution date and the approval date, the Canadian taxpayer late-filed the election under s. 86.1(2)(f). CRA indicated that it will consider this passage of time “as an important factor in its decision to waive the penalty for a late-filed section 86.1 election,” but did not give a blanket assurance that it would do so.