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:
COST OF INVENTORY UPON AMALGAMATION
Position TAKEN:
THE AMOUNT SET OUT IN 87(2)(B)
Reasons FOR POSITION TAKEN:
87(2)(B) DEEMS AMALCO TO HAVE ACQUIRED THE INVENTORY AT THE 10(1) AMOUNT OF THE PREDECESSORS FOR THEIR LAST TAXATION YEAR PRIOR TO THE AMALGAMATION
942377
XXXXXXXXXX A. Seidel
Attention: XXXXXXXXXX
January 31, 1995
Dear Sirs:
This is in reply to your letter dated September 8, 1994 with respect to the value of inventory after an amalgamation of two corporations pursuant to subsection 10(1) and paragraph 87(2)(b) of the Income Tax Act (the "Act").
In the situation where two corporations that carry on the business of buying and selling land have each written down their land inventory to fair market value for tax purposes pursuant to subsection 10(1) of the Act and the two corporations subsequently amalgamate to form a new corporation ("Amalco"), the provisions of paragraph 87(2)(b) of the Act will deem Amalco to have acquired the land inventory of the two predecessor corporations for an amount equal to the amount determined in accordance with section 10 of the Act as the value of the inventory for the purposes of computing the income of the predecessor corporation for its last taxation year. Since there is no provision which deems the cost of the inventory to be Amalco's cost thereof, it is our view that for the purposes of subsection 10(1) of the Act, Amalco's cost of the land inventory acquired would be equal to the amount set out in paragraph 87(2)(b) of the Act.
These comments are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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