5 October 1992 Income Tax Severed Letter 9228650 - Loss Deemed to be Nil on Transfer to Corporation

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Canadian Tax Foundation - November 1992 Revenue Canada Round Table

Question 19 - Loss Deemed to be Nil on Transfer to Corporation

As a follow-up to Question 42 of the Revenue Canada Round Table at the 1991 Canadian Tax Foundation Conference, consider a situation where an Estate owns all of the shares of Opco. The deceased taxpayer's legal representative would like to make an election pursuant to subsection 164(6) of the Act. However, for certain reasons, Opco cannot be fully liquidated in the first taxation year of the Estate.

If 90% of the Opco shares are redeemed within the first taxation year of the Estate, would subsection 85(4) of the Act apply to deem the capital loss, if any, to be nil, with the result that subsection 164(6) of the Act would not apply?

               Department's Position

It remains our view that paragraph 85(4)(a) of the Act would apply to deem a capital loss to be nil in the situation described above. We would also point out that subsequent to the holding of the 1991 Canadian Tax Foundation Conference, paragraph 85(4)(a) of the Act was amended by 1991, Chapter 49, S. 64(5) (Bill C-18) to provide that the paragraph would apply notwithstanding any other provision of the Act.

Author: Simon Leung                                                                                      File # 922865
September 15, 1993