CRA states that a statutory amalgamation satisfied s. 87(1)(a) notwithstanding a distribution of cash on the amalgamation

2017-0696821E5 F described two individuals who wholly-owned two corporations of equal value and who, on the corporations’ amalgamation, received equal numbers of shares of Amalco, but also received an equal amount of cash from Amalco. CRA indicated that the payout of the cash (pursuant to the Amalgamation Agreement) would comply with s. 87(1)(c) (i.e., the predecessor shareholders received shares of Amalco), but went on to indicate that the cash payout prevented there from being a rollover at the shareholder level that otherwise would have been available under s. 87(4).

CRA has now indicated that, in light of Envision, such an amalgamation would satisfy the condition in s. 87(1)(a) (that all the property of the predecessors, other than intercompany holdings, have become property of the Amalco by virtue of the amalgamation) notwithstanding the cash leakage on the amalgamation. This interpretation effectively confirms that the immediate payout of cash on an amalgamation squeeze-out transaction does not jeopardize the application of s. 87(1).

Neal Armstrong. Summary of 14 April 2021 External T.I. 2018-0785921E5 F under s. 87(1)(a).