2 March 1990 Ministerial Letter 59608 F - Acquisition of Control

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.

March 2, 1990

Dear Sirs:

Re: Subsections 249(4) and 256(9) of the Income Tax Act (Canada) (the "Act")

This is in response to your letter of February 14, 1990 in which you requested our interpretation of subsections 249(4) and 256(9) of the Act in the situation described herein.

The taxation year, within the meaning of subsection 249(1), of X Co ends on December 31, 1990. All of the issued and outstanding shares of X Co are owned by Mr. X. On May 1, 1990, Mr. X will sell all of the shares of X Co to an unrelated person, Mr. Y. On the same day Mr. Y will sell the shares of X Co to Mr. Z, an unrelated person.  No election under subsection 256(9) will be filed by X Co in respect of either acquisition of shares of X Co.

You have concluded that both of Mr. Y and Mr. Z will acquire control of X Co and that by virtue of subsection 256(9) of the Act, both such acquisitions of control will be deemed to have occurred at the commencement of May 1, 1990. Paragraph 249(4)(a) provides that where at any time control of a corporation has been acquired the taxation year of the corporation that would, but for paragraph 249(4)(a), have included that time shall be deemed to have ended immediately before that time. Your specific enquiry is whether, in the situation described above, X Co will be considered to have two taxation years both ending on April 30, 1990 or just one such year-end.

Opinions

In our view, X Co will only have one taxation year which will be deemed by paragraph 249(4)(a) to end on April 30, 1990.

The above comments represent an expression of opinion and not an advance income tax ruling. As such, they are not binding on Revenue Canada, Taxation as explained in paragraph 24 of Information Circular 70-6R.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch