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.
We are writing in reply to your memorandum of June 9, 1989, wherein you requested our comments on the appropriateness of the proposed changes to paragraph 1 of IT-188R.
Specifically, you requested our views as to whether the sentence, "Where 90% of the fair market value of the assets of the business that was carried on in Canada are sold, all or, substantially all of the assets of the business will be considered sold" can replace the previous sentence, "All or substantially all is considered to be at least 90% of the property used in carrying on the business", in IT-188R.
You have adopted the fair market value test because it is consistent with the test in the definition of "small business corporation" in subsection 248(1).
Our comments
From our research into this matter, we noted a reluctance to adopt "...a specific universal base or measuring stick, whether quantity, cost, fair market value or some other measure..." (See 1982 memo attached). In addition to the above, we noted that the words "fair market value" were added to the definition of "small business corporation" while no such wording subsists in section 22.
In view of the above, it is our opinion that the application of the fair market value test to situations where those words are not an integral part of the "all or substantially all" concept, would not be appropriate in the circumstances.
With respect to the amendments to paragraph 10, we have no comment. In view of the changes in 10, we suggest that the existing comments in paragraph 11 need not be changed.
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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