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:
Clarification and correction of our opinion 960911 dated May 1, 1996 concerning the carry back of Unused Part I.3 Tax Credits flowed through from a subsidiary on a winding-up to a tax year of the parent that ended prior to the winding-up.
Position:
Yes.
Reasons:
The wording of paragraph 87(2)(j.9) as modified for a wind-up situation by paragraph 88(1)(e.2) and subsection 125.3(1) and the definition of Unused Part I.3 Tax Credits in subsection 125.3(4).
961684
XXXXXXXXXX Michael Cooke
Attention: XXXXXXXXXX
May 13, 1996
Dear Sirs:
Re: Carry back of Pre-1992 Unused Part I.3 Tax Credits
("unused LCT credits") Following a Winding-Up
This is in response to your facsimile dated May 7, 1996, in which you requested that we clarify our views as expressed in our letter to you dated May 1, 1996 (file #960911) as to whether a subsidiary's unused LCT credits that flow through to its parent on the winding-up of the subsidiary can be used by the parent to reduce its pre-1992 Part I surtax otherwise payable.
The current version of subsection 125.3(1) of the Income Tax Act (the Act) no longer permits unused LCT credits to be carried back to the three taxation years immediately following the year commencing with its first taxation year which ends after 1991. However, the definition of "unused LCT credits" found in subsection 125.3(4) of the Act, specifically paragraph 125.3(4)(b), does in fact ensure that any "unused LCT credits" of the corporation, as defined in that paragraph, of its first three taxation years ending after 1991 (post-1991 unused LCT credits) can be carried back up to three years to reduce its pre-1992 Part I surtax otherwise payable. To obtain this result, one must apply the pre-1992 version of 125.3(1) of the Act to the unused LCT credits as defined in paragraph 125.3(4)(b) of the Act.
Therefore, we confirm that on the winding-up of a subsidiary the parent may be able to carry back unused LCT credits that it received from its subsidiary to reduce the parent's pre-1992 Part I surtax otherwise payable.
While we trust the foregoing comments are useful they are given in accordance with the practice referred to in paragraph 21 of IC 70-6R2 and are not binding on the Department.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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