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.
Principal Issues: -Would the corporation be considered wound-up for purposes of the Act in a situation where the corporation is not dissolved?
Position TAKEN: - In very restricted circumstances (i.e. the existence of outstanding litigation) where certain conditions have been met, the Department will consider a corporation to be wound-up for purposes of the Act.
Reasons FOR POSITION TAKEN: - Consistent with rulings previously provided.
XXXXXXXXXX 940841
Attention: XXXXXXXXXX
April 8, 1994
Dear Sirs:
This is in reply to your letter of March 29, 1994 wherein you requested confirmation that the provisions of subsection 88(1) of the Income Tax Act S.C. 1970-71-72, c.63, as amended, consolidated to June 10, 1993 would apply to the factual situation described in your letter.
It appears that the interpretation you seek relates to actual proposed transactions to be undertaken by specific taxpayers and, therefore, we refer you to Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Customs, Excise and Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments.
Generally the dissolution of a corporation is authorized by the relevant federal or provincial legislation only where it can be established that
(i) all liabilities of the corporation have been extinguished or provided for, or the creditors have given consent to the dissolution, and
(ii) after the interests of all creditors have been satisfied, all remaining property of the corporation has been distributed among its shareholders.
Where the formal dissolution of a corporation is not complete but there is substantial evidence that the corporation will be dissolved within a short period of time, the Department considers that the corporation has been wound up for the purposes of subsections 88(1) and 88(2). Such evidence would generally include evidence that the requirements for dissolution described in the preceding paragraph have been satisfied. Where, however, a corporation has not been dissolved because it is involved in outstanding litigation, the Department will accept that it has been wound up for the purposes of subsections 88(1) and 88(2) provided that all of the following conditions have been satisfied:
(a) all of the corporation's assets and liabilities (other than its rights and obligations under the outstanding litigation which cannot be transferred without prejudice to the corporation) have been distributed to or assumed by the corporation's shareholders;
(b) the sole reason for the delay in formally dissolving the corporation is the existence of the outstanding litigation;
(c) the corporation does not own or acquire any property or carry on any activity or undertaking (other than those required to pursue the litigation) after the distribution of its assets and prior to its formal dissolution; and
(d) the corporation is formally dissolved within a reasonable time following the resolution of the outstanding litigation.
These comments are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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