8 May 1992 Administrative Letter 9209536 F - Short Form Vertical 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.

May 8, 1992

W.S. HumeT2 and T3 Programs DivisionRulings DirectorateT2 Programs Division

Attention:     C. Ritchie

Amalgamation vs. Wind-up

This is in response to your memorandum of March 26, 1992 in which you requested our opinion on whether a short-form vertical amalgamation, as allowed by the corporate statutes of several provinces of Canada, is an amalgamation or a wind-up for purposes of the Income Tax Act (the "Act").  Our conclusions are based on a review of the Canada Business Corporations Act because it is the model for most of the provincial statutes.  In particular, we refer to subsection 184(1) of the Canada Business Corporations Act.

A wind-up for purposes of section 88 of the Act is described in Interpretation Bulletin IT-126.  Generally, a corporation is wound-up when it distributes its assets to its shareholders, the shares are cancelled and the company is dissolved.  Although a short-form vertical amalgamation is similar to a wind-up in many respects, the significant difference is that the company is not dissolved within the provisions of the corporate law.  Rather, the parent and its subsidiary are, for purposes of the corporate statute, "continued" in an amalgamated corporation.

Aside from the fact that the short-form vertical amalgamation is clearly an amalgamation and not a wind-up or dissolution in terms of corporate law, it is a form of reorganization which is specifically described in subsection 87(1.1) of the Act.  One must conclude that the legislators intended the short-form amalgamation to be treated as an amalgamation for purposes of the Act.

In our opinion, the short-form amalgamation should be subject to the provisions of section 87 of the Act.

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