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.
XXXX A.A. Cameron (613) 995-1787
XXXX
December 19, 1985
Dear Sirs:
Re: Clause 111(5) (a)(i)(A) of the Income Tax Act (the "Act")
We are writing in response to your letter of October 7, 1985 in which you request our opinion as to whether a corporation would be entitled, under the above-mentioned provision of the Act, to deduct non-capital losses of previous years in the year control changes in the hypothetical situation involving the sale of the loss business by the corporation which is completed as of the close of business on the last day of the taxation year during which there was a change in control of the corporation.
The amendment made to subparagraph 111(5)(a)(i) of the Act by Bill C-72, which received Royal Assent October 29, 1985, clarifies that where there has been a change in control of a corporation its non-capital losses of prior taxation years will be deductible in the taxation year control changes provided the business to which these losses relate is carried on by the corporation for profit or a reasonable expectation of profit throughout the part of the taxation year that is after the change in control rather than throughout the entire taxation year of the corporation..
Since the corporation must carry on the loss business "throughout" the portion of its taxation year remaining after the change of control, we are of the opinion that a sale of this business by the corporation on the last day of this taxation year, as detailed above, would not satisfy this requirement. The corporation in this situation would therefore not be entitled to a deduction for the non-capital losses sustained by this business in prior taxation years.
We hope this information will be of assistance to you.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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