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: Where a corporation is acquired and an amalgamation also takes place on the same day, but the amalgamation documents are silent as to the effective time, would the deemed year end resulting from the two transactions occur at the same time, being the commencement of the day on which the transactions occur?
Position: See below
Reasons: Legislation
2010 STEP Round Table
Q.3 It is possible for control of a corporation to be acquired and for an amalgamation of the acquired corporation with one or more corporations to occur on the same day. Both the acquisition of control and the amalgamation results in a year end being triggered and a new taxation year commencing. If no subsection 256(9) election is filed and the applicable amalgamation documents are silent as to the effective time of the amalgamation, would both the deemed year end resulting from the acquisition of control and the deemed year end resulting from the amalgamation occur at the same time being the commencement of the day on which these transactions occur.
This question is similar to one posed at the 2007 APFF Roundtable. At that time we were asked to consider a similar question in relation to the amalgamation of a Pubco with a Holdco to form Amalco, where the three persons who were shareholders of Holdco will control Amalco as the shareholders of Pubco will receive non-voting shares when the corporations amalgamate. We stated that:
This amalgamation would technically generate two deemed taxation year-ends for Pubco. On the one hand, for purposes of the ITA, the taxation year of Pubco would be deemed to have ended immediately before the amalgamation of Pubco and Holdco pursuant to paragraph 87(2)(a) of the ITA. On the other hand, the group of three persons originally shareholders of Holdco would be deemed to have acquired, immediately before the amalgamation, control of Pubco pursuant to subparagraph 256(7)(b)(ii) of the ITA. Consequently, and in accordance with paragraph 249(4)(a) of the ITA (subject to paragraph 249(4)(c) of the ITA), the taxation year of Pubco that would, but for paragraph 249(4)(a) of the ITA, have included the time of the deemed acquisition of control pursuant to subparagraph 256(7)(b)(ii) of the ITA, would be deemed to have ended immediately before that time. In other words, the deemed acquisition of control of Pubco resulting from the amalgamation would technically generate a deemed taxation year-end with respect to Pubco immediately before the time that is immediately before the amalgamation.
This opinion is set out in Rulings document F2007-0243341C6, issued on October 5, 2007.
Katharine Skulski
2010-036308
(613) 957-8976
June 8, 2010
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2010
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2010
Email this Content