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.
Canadian Tax Foundation November, 1992
Question # 41: Non-Qualifying Amalgamations
What is Revenue Canada's view of the tax implications of an amalgamation which does not qualify under section 87 of the Act? Is such an amalgamation treated as causing a disposition of the shares of each predecessor corporation by its shareholders but not as a disposition of the assets and liabilities of each predecessor corporation?
Department's Position
At the predecessor corporation level, the Canadian income tax treatment of an amalgamation which does not qualify under section 87 of the Act will be determined substantially by the legal consequences flowing from the corporate law under which the predecessor corporations are amalgamated. Where the applicable corporate law provides that the predecessor corporations involved in the amalgamation cease to exist and that a new corporation is formed on the amalgamation, the predecessor corporations generally will be considered to have disposed of any property held immediately before the amalgamation. Where, however, the applicable corporate law is of a "continuation type" as described in the Supreme Court of Canada decision in The Queen v. Black & Decker Manufacturing Co., Ltd. (1975) 1 SCR 411; (1974) 43 DLR (3d) 393, then the predecessor corporations generally would not be considered to have disposed of any assets held immediately before the amalgamation.
At the shareholder level, the shareholders of each predecessor corporation, including other predecessor corporations, generally will be considered to have disposed of their shares in each predecessor corporation for capital gains purposes. Specifically, the position outlined in paragraph 42 of Interpretation Bulletin IT - 474R is restricted, as described in paragraph 1 of that Bulletin, to amalgamations which satisfy the requirements of subsection 87(1).
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