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:
Whether an amalgamated corporation formed by the amalgamation of a parent and a wholly-owned subsidiary can carry back its losses to offset taxable income of the subsidiary corporation.
Position:
No.
Reasons:
Subsection 87(2.11) clearly permits the losses to be carried back to the parent corporation only.
XXXXXXXXXX 982570
F. Francis
Attention: XXXXXXXXXX
October 20, 1998
Dear Sirs:
This is in reply to your letter of September 28, 1998, wherein you requested our comments with respect to the application of paragraph 87(2.1)(e) of the Income Tax Act (the “Act”) to a particular fact situation involving an amalgamation of a parent corporation with its wholly-owned subsidiary corporation.
As noted in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996, we do not provide opinions with respect to completed factual transactions. However we will provide the following general comments.
Paragraph 87(2.1)(e) of the Act does not allow the losses incurred by a new corporation formed by an amalgamation to be carried back for deduction to any predecessor corporations. However, subsection 87(2.11) of the Act treats the corporation formed on an amalgamation of a corporation with one or more of its subsidiary wholly-owned corporations as the same corporation and a continuation of, the former parent corporation, for the purposes of section 111 and Part IV of the Act. Consequently, the amalgamated corporation is allowed to carry back losses incurred by it to offset taxable income of the parent corporation, but not of the subsidiary wholly-owned corporation. We note that the Act does not permit any discretion in this regard.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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