CRA finds that the s. 87(2)(j.6) continuity rule does not remediate the adverse consequences under the old intergenerational transfer rules of vertically amalgamating the subject corp

S. 84.1(2.3)(a)(i), as part of the former (private-member bill) intergenerational business transfer rules, provided that if, otherwise than by reason of death, the children’s purchaser corporation disposed of the subject corporation shares within 60 months of their purchase, the exception in s. 84.1(2)(e) from the application of s. 84.1 was nullified.

2022-0953991E5 indicated that, consequently, if the purchaser corporation amalgamated, within the 60-month period, with the subject corporation, then the resulting disposition pursuant to s. 87(11)(a) of the subject shares engaged the s. 84.1(2.3)(a)(i) exclusion.

CRA now confirmed that s. 87(2)(j.6), which provides for continuity on an amalgamation for the purposes of ss. 84.1(2.31) and (2.32), does not deem there to be no disposition on an s. 87(11) amalgamation for purposes of access to the former s. 84.1(2)(e) rule, so that the adverse amalgamation result continues to apply in the above situation.

Neal Armstrong. Summary of 11 December 2024 External T.I. 2024-1039101E5 F under s. 84.1(2)(e).