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:
The effect of bankruptcy on deductibility of non-capital losses.
Position TAKEN:
No change in control on an assignment in or discharge from bankruptcy.
Reasons FOR POSITION TAKEN:
Trustee is agent of the bankrupt per 128(2)(a).
Revenue Canada Round Table
Canadian Petroleum Tax Society
June 2, 1994
Question 23
Acquisition of Control - Implications in a Bankruptcy
An individual makes an assignment in bankruptcy. One of the assets which the individual owns and which is transferred to his Trustee in Bankruptcy is shares of a corporation which has non-capital losses carried forward and an active business operation. In the course of the individual's bankruptcy, the assets of the corporation are liquidated resulting in further non-capital losses being accumulated. After the individual's discharge from bankruptcy, the shares of the corporation are registered in the individual's name so that a new business can be carried on through the corporation, the income of which would be sheltered by the non-capital losses carried forward.
Are the non-capital losses carried forward from pre-bankruptcy years subject to the acquisition of control limitations contained in subsection 111(5) and are the non-capital losses generated during the period between the assignment in bankruptcy and the discharge from bankruptcy subject to the acquisition of control limitations in subsection 111(5) ?
Department's Position
The following, which was stated in our reply to question 57 of the Revenue Canada Round Table at the 1993 Canadian Tax Foundation Annual Conference, continues to be our position:
"Paragraph 128(2)(a) provides that a trustee in bankruptcy is deemed to be the agent of the bankrupt for all purposes of the Act. Therefore, there will be no change in control of the particular corporation in the above situation when the individual makes an assignment or is discharged from bankruptcy. As a result subsection 111(5) will not apply."
Author: D. Yuen
File: 941086
Date: June 6, 1994
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1994
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1994
Email this Content