7 February 1991 Income Tax Severed Letter - Amalgamation

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.

Dear Sirs:

Re: Subsection 87(9) of theIncome Tax Act(Canada) (the “Act”)

We are writing in response to your letter of December 14, 1990 wherein you requested our comments on whether subsection 87(9) of the Act applied in the following situation.

• 1. Corporation A owns all of the issued and outstanding common shares of corporation B.
• 2. Corporation B and the public own sixty-six and thirty-four percent of the issued and outstanding common shares of corporation C, respectively.
• 3. Corporations B and C wish to amalgamate but are unable to do so because of various financial, legal and other considerations.
• 4. As a result, corporation B incorporates a subsidiary corporation, D.
• 5. Corporation B transfers all of its common shares of corporation C to corporation D utilizing the provisions of subsection 85(1) of the Act.
• 6. Corporations C and D amalgamate under the relevant corporate law to form Amalco. Upon the amalgamation, corporation B receives all the common shares of Amalco and the public receive common shares of corporation A.
• 7. As consideration for corporation A issuing its common shares to the public on the above amalgamation, corporation B issues additional common shares to corporation A.
• 8. Corporations A, B, C, D and Amalco are each a taxable Canadian corporation within the meaning of paragraph 89(1)(i) of the Act.

Comments

It is our view that the provisions of subsection 87(9) of the Act will apply in respect of the above amalgamation, except paragraph (c) thereof will not apply to the shares of corporation B issued to corporation A.

The comments expressed are not advance income tax rulings and are not considered binding on the Department, in respect of any taxpayer, in accordance with paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.