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.
Principal Issues: The requester asks our views regarding whether the CRA's administrative position in paragraph 45 of IT-474R2 will continue to apply in light of the March 4, 2010 amendments to subsection 87(4) of the Act.
Position: It is our position that the CRA's administrative position in paragraph 45 of IT-474R2 will continue to apply in light of the amendments to subsection 87(4) of the Act.
Reasons: As outlined in previous rulings position #2011-0391741I7.
October 11, 2012
Re: Administrative Position for Subsection 87(4) and Section 116
We are writing in response to your email concerning the Canada Revenue Agency (CRA)’s administrative position in paragraph 45 of Interpretation Bulletin (IT)-474R2, “Amalgamations of Canadian Corporations”. Specifically, you have requested whether the CRA’s administrative position will continue to apply in light of the legislative amendments to subsection 87(4) of the Act.
Paragraph 45 of Interpretation Bulletin (IT)-474R2 expresses the CRA’s administrative position regarding the applicability of section 116 of the Income Tax Act (“the Act”) in respect of an amalgamation to which subsection 87(4) of the Act applies. Pursuant to subsection 87(4) of the Act, where a non-resident shareholder is deemed to have disposed of shares of a predecessor corporation (“old shares”), which constituted taxable Canadian property (“TCP”) of the shareholder, it is not necessary to obtain a Certificate of Compliance under section 116 of the Act in respect of that deemed disposition. By virtue of the post-amble of former subsection 87(4) of the Act, where the old shares were TCP of the shareholder, the new shares are also deemed to be TCP of the shareholder.
Effective for taxation years ending after March 4, 2010, subsection 87(4) of the Act was amended to deem the new shares to be TCP of the shareholder at any time that is within 60 months after the amalgamation.
The Income Tax Rulings Directorate previously provided guidance on this issue in rulings document #2011-0391741I7(E), “Section 116 and Excluded Property”, dated July 18, 2011.
Since subsection 87(4) of the Act continues to deem the new share to be taxable Canadian property of the shareholder, the CRA’s administrative position in paragraph 45 of IT-474R2 continues to apply in respect of the deemed disposition of the old shares on an amalgamation to which subsection 87(4) of the Act applies.
We trust these comments are helpful.
Lita Krantz, CA
International Division/ Division des opérations internationales
International Section III
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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