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 subsection 87(11) allow the same bump on a vertical amalgamation as paragraph 88(1)c) does for wind-ups?
Position:
Yes, provided that it is an amalgamation of a parent and one or more of its wholly-owned subsidiaries.
Reasons:
Wording of the law
FARM TAX SEMINARS
QUESTION 2
Paragraph 88(1)(d) determines, for the purpose of paragraph 88(1)(c), the amount by which a parent corporation may increase (“bump”) the cost of certain capital property e.g. land, acquired by it on the winding-up of its subsidiary provided that both corporations are taxable Canadian corporations and the parent owns not less than 90% of the issued shares of each class of the subsidiary’s capital stock. Does subsection 87(11) allow the same “bump” on an amalgamation?
Department’s Position
Subsection 87(11) is a new provision effective in respect of a vertical amalgamation occurring after 1994 to which subsection 87(1) applies. These provisions provide a new corporation formed on the amalgamation of a parent and one or more of its subsidiary wholly-owned corporations with the option of increasing its cost of certain capital property acquired by it on the amalgamation. This increase is the same as the “bump” that would have been available to the parent if the subsidiary had been wound-up into the parent and subsection 88(1) had applied to the winding-up.
Speaking Notes: We are not commenting on the liability for land transfer tax to be paid to the Province of Ontario.
Fiona Francis
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