25 February 1991 External T.I. 910165 F - Winding-up

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.

Dear Sirs:

Re:  Winding-up Section 88 of the Income Tax Act (Canada) (the "Act")

We are writing in response to your letter of January 17, 1991 wherein you requested our comments on whether a subsidiary corporation is considered to be wound up in the hypothetical situation.

1.     A subsidiary corporation is wound up into its parent-corporation pursuant to the provisions of the British Columbia Company Act.

2.     In the course of the winding-up, the assets of the subsidiary  corporation are transferred to its parent corporation.

3.     In order to avoid British Columbia sales tax on the transfer of assets, the parent corporation must hold its shares of the subsidiary corporation for at least eight months after the asset transfer (the "holding period").

4.     Paragraph 5 of Interpretation Bulletin IT-126R dated February 3, 1975 issued by Revenue Canada, Taxation ("IT-126R") indicates that where "there is substantial evidence that the corporation will be dissolved within a short period of time, for the purposes of section 88 the corporation is considered to be wound up."

You have asked whether the holding period would be considered "a short period of time" as referred to in paragraph 5 of IT-126R.

Comments

Generally we would consider the corporation to have been wound up where the assets of the corporation have been distributed to the shareholders, provided the corporation has not subsequently taken any action which would indicate that it will not be wound up.

The comments expressed are not advance income tax rulings and are not considered binding on the Department, in respect of any taxpayer, in accordance with paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch