Income Tax Severed Letters - 2020-02-12

Ruling

2019 Ruling 2018-0772921R3 - Loss utilization

Unedited CRA Tags
13(7)(e); 55(2); 85(1); 88(1); 245(2); Reg. 1102(1); Reg. 1102(14); Class 14.1
Summary Under
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) - Subparagraph 13(7)(e)(ii)
net capital losses used to step up UCC of trademarks
Summary Under
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14)
Class 14.1 property character maintained in circular-transfer transactions
Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(b)
self-cancelling circular transaction to convert net capital losses into stepped-up UCC

Principal Issues: 1. Whether Regulation 1102(14) will apply to deem the property transferred to be property of the same prescribed class. 2. Whether subparagraph 13(7)(e)(ii) will apply to each of the proposed transfers.

Position: 1. Yes. 2. Yes.

Reasons: Similar to ruling 2017-0693691R3.

2019 Ruling 2018-0782751R3 - Standard Loss Consolidation

Unedited CRA Tags
245; 20(1)(c); 112(1); 55(2); 88(1.1)

Principal Issues: Whether Lossco would be entitled to apply existing non-capital losses against the interest income that would be generated as part of particular loan that would be made under the loss consolidation transaction and whether the accompanying interest expense would be deductible by Profitco.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings. The proposed transactions would be legally effective and commercially realistic.

2017 Ruling 2017-0711911R3 - loss consolidation ruling

Unedited CRA Tags
20(1)(c) 55(2)
Summary Under
Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a)
transfer of losses from parent with losses after FAPI to successive new losscos, which then are wound-up into profitco
Summary Under
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1)
requirement for dissolution of subsidiary before the end of the first taxation year of parent commencing after the commencement of the winding-up

Principal Issues: Whether the loss consolidation arrangement is acceptable?

Position: Yes.

Reasons: The proposed transactions conform to our requirements for loss consolidation arrangements.