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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: whether position on receipt of cash for fractional shares established for section 87 applies to a foreign merger under 87(8)
Position: yes
Reasons: consistent with intent of provision and reasoning in file 983060A
XXXXXXXXXX D. Yuen
2003-001331
June 2, 2003
Dear XXXXXXXXXX:
Re: Foreign Mergers
We are writing in response to your facsimile dated April 11, 2003, wherein you requested our comments on a foreign merger. Unless otherwise stated, all references to a statute herein are to the Income Tax Act (Canada), R.S.C. 1985 (5th supp.) c. 1, as amended.
Your Question
You have indicated that the Canada Customs and Revenue Agency (the "CCRA") has taken the view (paragraphs 38(b) and 39 of Interpretation Bulletin IT-474R) that where a taxpayer receives cash in lieu of fractional shares as a result of an amalgamation under subsection 87(1), the taxpayer will not be disqualified from the rollover treatment provided under subsection 87(4) and where the amount of cash received is less than $200, the taxpayer may either reduce the adjusted cost base, as defined in section 54, of the share consideration received or compute a gain or loss in respect of the appropriate fraction. You have asked whether the above positions are applicable in respect of a foreign merger, as defined in subsection 87(8.1), where a shareholder will receive cash instead of a fraction of a share.
It is our view that the positions described above will be applicable in respect of a foreign merger defined in subsection 87(8.1) and which is subject to subsection 87(8), where a shareholder will receive cash instead of a fraction of a share.
The comment is provided in accordance with the guidelines set out in paragraph 22 of Information Circular IC 70-6R5 dated May 17, 2002, issued by the CCRA and is not considered binding on the CCRA.
Yours truly,
Olli Laurikainen
Section Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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