22 July 1983 Income Tax Severed Letter 5-5251 - [New Capital Cost, Allowance Regulations]

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.

P.K. Tang 995-1787

July 22, 1983

Dear Sirs:

Re: New Capital Cost, Allowance Regulations

This is in reply to your letter of June 30, 1983 concerning the application of subsection 1100(2.2) of the Income Tax Regulations (the "Regulations") where the reorganization provisions of sections 85 and 87 of the Income Tax Act (the "Act") may be combined in connection with a particular transaction. You provided us with the following example.

Corporation X owns all of the outstanding shares of Corporations A and B. Corporation B in turn owns all of the outstanding shares of Corporation C. In order to combine the operations of these Companies A and B are amalgamated effective December 31. Immediately following the amalgamation, all of the assets and Business of the amalgamated company are transferred utilizing the provisions of section 85 of the Act to Corporation C.

It is our opinion that where a taxpayer acquires a property of a class in Schedule II to the Regulations by virtue of an amalgamation within the meaning assigned by subsection 87(1) of the Act and subsection 1100(2.2) of the Regulations applies, the provisions of subsection 1100(2.2) of the Regulations would continue to apply to that property by virtue of paragraph 1100(2.2) (g) when it is immediately transferred to another corporation in a transaction in respect of which an election was made under subsection 85(1) of the Act.

Therefore, in the example described we agree with you that the exemption provided under subsection 1100(2.2) would continue to apply on the property transferred to Corporation C under section 85 of the Act.

Yours truly,

ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR

D.B. MORPHY.

for Director Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch