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.
930224
XXXXXXXXXX A. Seidel
(613) 957-2120
Attention: XXXXXXXXXX
February 25, 1993
Dear Sirs:
This is in reply to your letter dated January 27, 1993 with respect to the deductibility of non-capital losses subsequent to an amalgamation of a parent ("Parentco") and its wholly-owned subsidiaries ("Subco").
Paragraph 87(2.1)(e) of the Income Tax Act (the "Act") currently prevents the carry-back of non-capital losses of the amalgamated corporation ("Newco") incurred subsequent to the amalgamation to any of the predecessor corporations.
The December, 1991 draft legislation proposes to add subsection 87(2.11) to the Act. The proposed amendment states that "where a new corporation is formed by the amalgamation of a particular corporation (Parentco) and one or more of its subsidiaries (Subco), the new corporation shall, for the purposes of applying section 111 and Part IV in respect of the particular corporation (Parentco), be deemed to be the same corporation as, and a continuation of, the particular corporation (Parentco)". Therefore, subject to the provisions of section 111, proposed subsection 87(2.11) of the Act will permit Newco to carry-back the non- capital losses of Newco to the predecessor Parentco. It will not permit the carry-back of the non-capital losses of Newco to the predecessor Subco. The proposed amendment will be applicable to amalgamations occurring after 1989.
We are unable to provide you with any information as to when Bill C-92, which includes proposed subsection 87(2.11) of the Act, will receive Royal Assent as this is determined by Parliament. However, we can advise you that Bill C-92 received second reading in the House of Commons on February 25, 1993 and has now been referred to Committee.
These comments are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2 and provided that subsection 87(2.11) of the Act is enacted as proposed in December, 1991. Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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