CRA declines to provide guidance on a Pt. IV tax circularity issue

2022-0957491R3 F, discussed in yesterday’s post, contemplated initial distributions by an estate and trust, followed by a split-up butterfly reorganization. The Rulings Directorate granted an extension for the implementation of the proposed transactions given that clearance certificates had not yet been received from CRA and the ARQ respecting the various distributions.

As ruled on, after the redemption of preferred shares issued by the two transferee corporations (TCs), and before the winding-up of the distributing corporation (DC) into the TCs, the TCs would establish their first taxation year ends, thereby avoiding circularity issues under s. 186(1)(b). Due to the implementation delay, this was no longer possible.

The Directorate noted this circularity issue, but declined to provide any guidance on it.

Neal Armstrong. Summary of 2023 Ruling 2023-0998411R3 F under s. 186(1)(b).