2 February 2012 External T.I. 2011-0416871E5 - Paragraph 249(4)(c) election

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.

Principal Issues: Whether an election under paragraph 249(4)(c) to extend a taxation year as a result of an acquisition of control at the end of the first taxation year of a newly amalgamated entity can result in a taxation year in excess of 53 weeks.

Position: Yes, provided that the amalgamated entity can establish when its first taxation year would have ended.

XXXXXXXXXX
									2011-041687
									Katie Campbell
									(613) 957-2126
February 2, 2012

Dear XXXXXXXXXX :

We are writing in response to your email of July 27, 2011 wherein you requested a technical interpretation confirming that a taxation year in excess of 53 weeks would be allowed under the Act (footnote 1) . The relevant facts, as provided in your email, are as follows:

Two corporations amalgamate to form Amalco. By virtue of paragraph 87(2)(a), Amalco will have a new taxation year commence at the time of the amalgamation. Amalco will select a taxation year-end (the "first taxation year-end") within 53 weeks of the amalgamation in accordance with the definition of taxation year in subsection 249(1). Within 7 days of the first taxation year-end, control of Amalco will be acquired. Therefore, by virtue of paragraph 249(4)(a), Amalco will be deemed to have a year-end immediately before the acquisition of control. However, Amalco intends to file a paragraph 249(4)(c) election to extend its taxation year from the first taxation year-end until immediately before the acquisition of control. This election will result in the first taxation year of Amalco exceeding 53 weeks.

Your view

As defined in subsection 249(1), the taxation year of a corporation is a fiscal period. The definition of fiscal period is outlined in subsection 249.1(1) as, inter alia, a period that does not exceed 53 weeks. As the first taxation year-end will be within 53 weeks of the amalgamation, the first taxation year of Amalco would meet the definition of taxation year.

Paragraph 249(4)(c) applies notwithstanding subsection 249(1) and allows a corporation to extend its taxation year where control of the corporation is acquired within 7 days of when the corporation's taxation year would have ended. Therefore, paragraph 249(4)(c) would allow Amalco to extend the first taxation year-end to immediately before the acquisition of control. It is your view that since paragraph 249(4)(c) applies notwithstanding subsection 249(1), the resulting taxation year, which exceeds 53 weeks, would be allowed under the Act.

Our view

Your request appears to relate to a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R5 ("IC-70-6R5") dated May 17, 2002. Where the particular transactions are completed, they are the responsibility of the relevant tax services office. We can, however, provide the following general comments.

It is our view that, provided Amalco can establish that its taxation year would have ended on the first taxation year-end, the election in paragraph 249(4)(c) would be available to extend the first taxation year-end to the time immediately before the acquisition of control. Accordingly, Amalco's first taxation year would exceed 53 weeks.

Our comments are provided in accordance with the practice outlined in paragraph 22 of IC 70-6R5, dated May 17, 2002.

Yours truly,

David Palamar
Manager
Reorganizations Section I
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 The Act means the Income Tax Act R.S.C. 1985 (5th Supp.) c.1 as amended from time to time and consolidated to the date of this letter and, unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.