15 May 1990 Ministerial Correspondence 900624 F - Acquisition of Control on an Amalgamation

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.

19(1)

May 15, 1990

Dear Sirs:

Re:  Acquisition of Control on an Amalgamation

This is in response to your letter of April 30, 1990 wherein you requested our opinion on whether there has been an acquisition of control in the following hypothetical situation:

1.     Corporation A owns a majority of the voting shares of Corporation B.

2.     Corporation B owns all of the voting shares of Corporation C.

3.     Corporation C owns all of the voting shares of Corporation D and E.

4.     Corporation C, D, and E amalgamate to form "Amalco".

5.     Corporation B owns all of the voting shares of Amalco immediately after the amalgamation.

For the purposes of the sections listed in the preamble of subsection 256(7) of the Act, subparagraph (a)(i) states:

     "where shares of a particular corporation have been acquired by a person after March 31, 1977, that person shall be deemed not to have acquired control of the particular corporation by virtue of such share acquisition if that person was, immediately before such share acquisition, related (other than by virtue of a right referred to in paragraph 251(5)(b) to the particular corporation."

In the hypothetical situation mentioned above subsection 251(3.1) of the Act will deem that Corporations B, C, D, E and Amalco were related persons.  Therefore, it is our opinion that Corporation B is deemed not to have acquired control of Amalco by virtue of subparagraph 256(7)(a)(i) of the Act.

As explained in paragraph 24 of Information Circular 70-6R any written or verbal opinions are not rulings and are not binding upon Revenue Canada, Taxation in respect of any taxpayers.

Yours truly,

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