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.
942448
XXXXXXXXXX David R. Senécal
Attention: XXXXXXXXXX
February 10, 1995
Dear Sirs:
Re: Paragraphs 111(4)(c) and 111(4)(e) of the Income Tax Act
This is in reply to your letter of September 16, 1994, wherein you request our views on the applicability of the afore-mentioned paragraphs to capital property owned by a foreign affiliate which has been the subject of an acquisition of control. We apologize for the delay in responding.
In our view, subsection 111(4) of the Income Tax Act (the "Act") does not generally apply to the capital property of a foreign affiliate upon the acquisition of control of the affiliate or the Canadian parent of the affiliate.
Although a foreign affiliate is not specifically excluded from the application of subsection 111(4), the reference in paragraphs 111(4)(d), (e), and (f) to "the taxation year that ended immediately before that time" is a reference to the taxation year deemed by paragraph 249(4)(a) to have ended immediately before the acquisition of control. Subsection 249(4) does not apply to the acquisition of control of a foreign affiliate unless the foreign affiliate carried on business in Canada at any time in its last taxation year commencing before the acquisition of control. The various rules in subsection 111(4) are all interdependent. Paragraph 111(4)(c) does not operate in isolation notwithstanding that the paragraph does not refer to "the taxation year that ended immediately before that time".
We trust that the above comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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