Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Application of paragraph 87(8.1)(c) to US merger where one predecessor ceases to exist.
Position: 87(8.1)(c) requirements met.
Reasons: Surviving corporation is considered a "new" corporation.
XXXXXXXXXX 1999-000980
D. A. Palamar
Attention: XXXXXXXXXX
December 7, 2000
Dear Sirs:
Re: Foreign Mergers
We are writing in response to your facsimile of October 8, 1999, concerning a foreign merger.
Hypothetical Situation
Corporation A (A) and Corporation B (B) are corporations incorporated, respectively, under the laws of California and Delaware. A taxable Canadian corporation (P) wholly owns both A and B. A will be merged into B pursuant to Delaware corporate law such that B will be the survivor corporation and the existence of A will cease. No new shares will be issued upon the merger and the shares of A will be cancelled. Under the laws of Delaware, all of the property of A and B (except amounts receivable from a predecessor) and all of the liabilities of A and B (except amounts payable to a predecessor) will become property and liabilities of the merged entity.
Issue
Assuming the conditions of paragraphs 87(8.1)(a) and (b) are satisfied, would the merger of A and B be considered to be a foreign merger within the meaning of subsection 87(8.1)? More specifically, would all of the shares of A and B held by P be considered to have been exchanged for or to have become shares of the capital stock of the merged corporation, within the meaning of paragraph 87(8.1)(c)?
Our Views
In our view, all of the shares of A and B held by P would be considered to have been exchanged for or to have become shares of the capital stock of the merged corporation, within the meaning of paragraph 87(8.1)(c).
The foregoing comments are provided in accordance with the guidelines set out in Paragraph 22 of Information Circular IC-70-6R3 dated December 30, 1996 and are not binding on the Agency.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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