Provincial GAAR rulings are the new normal in loss transfer rulings

A lossco parent will not transfer losses to a profitco subsidiary under typical triangular loss-shifting techniques because profitco has public shareholders and does not wish to incur debt. Accordingly, lossco will engage in such techniques to transfer losses to a newco subsidiary (Aco), and then transfer Aco to profitco to be wound-up under s. 88(1.1) (2013-0511991R3 and 2013-0496351R3 are similar). More realistically than 2013-0496351R3, the usual borrowing capacity rep is given in relation to the lossco rather than Aco.

Similarly to 2013-0496351R3 and 2013-0504301R3, provincial GAAR rulings were given (the new normal). Also the unwinding of the loss transfer transactions will occur on a cashless basis (a somewhat older normal) – which may be safer than using payments by direction.  (There is recent anecdotal evidence of CRA challenging the latter.)

Neal Armstrong. Summary of 2014 Ruling 2014-0518451R3 under s. 111(1)(a).