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 paragraph 95(2)(e.1) "applies" where preamble is satisfied but none of the operative provisions could possibly have application.
Position: No
Reasons: Existing view (see E2004-010543
XXXXXXXXXX 2006-017271
Attention: XXXXXXXXXX
February 27, 2006
Dear Sirs:
Re: Subsection 5907(9) of the Regulations to the Income Tax Act (Canada) (the "Act")
This is in response to your letter in respect of the application of subsection 5907(9) of the Regulations in a situation involving a liquidation and dissolution of a foreign affiliate into its Canadian parent.
You have presented a situation where a wholly-owned foreign affiliate ("FA") of a corporation resident in Canada ("Canco") liquidates and dissolves into Canco. Such transaction might be viewed as one described in the preamble to paragraph 95(2)(e.1) of the Act notwithstanding that none of the rules provided in subparagraphs 95(2)(e.1)(i) to (iii) could have any application. You request our view whether for the purposes of subsection 5907(9) of the Regulations such dissolution is a transaction to which "paragraph 95(2)(e.1) of the Act does not apply".
In the above case, it is our view that paragraph 95(2)(e.1) of the Act does not apply to the liquidation and dissolution, and accordingly, the provisions of subsection 5907(9) of the Regulations may apply.
The above comments represent our general views with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 22 of Information Circular 70-6R5, are not binding on the Canada Revenue Agency. In addition, these comments do not account for proposed changes to the Act and Regulations thereto set out in draft legislation to the Act included in the Technical Bill issued by the Department of Finance on February 27, 2004.
Yours truly,
Olli Laurikainen CA
for Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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