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:
Does 95(2)(e.1) apply where there is a rollover for U.S. federal purposes but not U.S. state tax purposes?
Position:
Yes.
Reasons:
Wording of law. Elsewhere in Act, where tax of a political subdivision is to be considered, there is specific wording in the law eg. definition of business and non-business income tax in 126(7), Regulation 5907(4).
XXXXXXXXXX 970771
J. Stalker
Attention: XXXXXXXXXX
December 15, 1997
Dear Sirs:
Re: Paragraph 95(2)(e.1) of the Income Tax Act (the Act”)
We are writing in response to your letter of March 18, 1997 in respect of the application of paragraph 95(2)(e.1) of the Act to a dissolution of a U.S. foreign affiliate into another wholly-owned U.S. foreign affiliate.
You have asked if paragraph 95(2)(e.1) would apply in a situation where the dissolution of the affiliate results in no recognition of any gain or loss for U.S. federal tax purposes but is considered a taxable transaction for U.S. state tax purposes.
Paragraph 95(2)(e.1) would apply if the transactions does not result in a gain or loss for U.S. federal tax purposes even if a gain or loss is recognized for state tax purposes, assuming the other conditions of that provision are met.
The above comments represent our general view with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 22 of Information Circular 70-6R3, are not binding on the Department.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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