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.
Q.15 Subsection 69(11)
If subsection 69(11) applies to deem property to be disposed of by the transferor for proceeds of disposition equal to fair market value of the property, what is the transferee's cost of the property in the context of:
(a) a winding-up to which subsection 88(1) applies;
(b) an amalgamation to which section 87 applies; or
(c) a transfer to which subsection 85(1) applies?
Department's Position
Section 69 does not provide for any adjustment to the cost to the transferee of property acquired on a transfer to which subsection 69(11) applies.
Thus, in the case of a winding-up to which subsection 88(1) applies, the cost to the parent of the property distributed on the winding-up will be determined in accordance with paragraph 88(1)(c). For this purpose it will be necessary to determine the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition, notwithstanding the fact that the proceeds of disposition to the subsidiary will be determined under subsection 69(11). Subsection 69(11) overrides paragraph 88(1)(a) for the purposes of determining the proceeds of disposition to the subsidiary, but it does not affect the determination of an amount under paragraph 88(1)(a) for the purposes of determining the cost to the parent of the property under paragraph 88(1)(c). Paragraph 69(5)(b) does not apply in determining the cost of the property to the parent because the rules in subsection 88(1) apply "notwithstanding any other provision of this Act other than subsection 69(11)".
In the case of an amalgamation to which the section 87 applies, the cost to the amalgamated corporation of the property acquired from a predecessor corporation on the amalgamation will be determined in accordance with subsection 87(2).
In the case of a transfer to which subsection 85(1) applies, the cost to the transferee of the property will be determined in accordance with paragraph 85(1)(a).
Prepared by: Jake E. Harms
November 9, 1990
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