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.
APFF - 1995
Question 10
Computation of paid-up capital and adjusted cost base of shares following an amalgamation
Mr. X owns shares in two corporations (A and B); he invested $100,000 in the form of common shares in each of the corporations. The paid-up capital and the adjusted cost base of the common shares of A and B is therefore $100,000. The market value of company A is nil, whereas the market value of company B largely exceeds the original investment. If Mr. X merges A and B, would he be able to receive shares in the corporation resulting from the merger of the shares with a paid-up capital and an adjusted cost base equal to $200,000?
Answer by the Department of Revenue
To the extent that applicable corporate law allows the registration of legal capital of this amount, the paid-up capital for new shares could be $200,000, as no reduction is required under subsection 87(3); we assume that this involves an amalgamation within the meaning of subsection 87(1). With respect to the adjusted cost base, the provisions of subsection 87(4) of the Act would allow the adjusted cost base of the old shares to convert into the new class of shares of the company resulting from the amalgamation.
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