Subsection 111(1) - Losses deductible
Paragraph 111(1)(a) - Non-capital losses
Cases
1455257 Ontario Inc. v. Canada, 2021 FCA 142
The validity of a s. 160 assessment of the taxpayer turned in part on whether the affiliate from which the taxpayer had received a transfer of...
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| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(b) - Subparagraph 152(4)(b)(i) | CRA has no arbitrary discretion to reject an s. 152(4)(b)(i) extension request | 315 |
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) - Paragraph 160(1)(e) | s. 160 applied to post-transfer interest | 316 |
The Queen v. Merali, 88 DTC 6173, [1988] 1 CTC 320 (FCA)
"There is nothing in the Act to prevent a resident from carrying over non-capital losses incurred when he was a non-resident taxpayer having...
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| Tax Topics - Income Tax Act - Section 216 - Subsection 216(1) | 108 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxpayer | nexus to Ccn source | 28 |
| Tax Topics - Statutory Interpretation - Ordinary Meaning | 64 |
Oceanspan Carriers Ltd. v. The Queen, 87 DTC 5102, [1987] 1 CTC 210 (FCA)
"A corporation which incurs losses from business activities outside Canada when it is neither a resident nor had income from a source in Canada,...
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| Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) | 77 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Taxpayer | "taxpayer" refers to a person who may become liable to tax | 77 |
See Also
Brookfield Renewable Power Inc. v. Agence du revenu du Québec, 2023 QCCQ 10239
In connection with a September 2009 loss consolidation transaction between a “Lossco” in the Brookfield group (“BRPI”) and its...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | deductible interest on loss consolidation loans reduced from 14% to 8.75% | 325 |
J.D. Irving Limited v. Agence du revenu du Québec, 2020 QCCQ 2423, aff'd 2022 QCCA 241
A loss consolidation transaction involved a company (“IPPL”) in the Irving group of companies transferring, in December, its pollution control...
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| Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(17) | property serviced by the user was not a leasing property | 416 |
| Tax Topics - General Concepts - Agency | Stubart recognized that business operations can be carried on by an affiliated agent | 231 |
Hatt v. The Queen, 2015 TCC 207 (Informal Procedure)
The taxpayer, who became a non-resident when she went on unpaid leave from her Canadian job in 2003, retired in 2007 and thereupon received...
Administrative Policy
2023 Ruling 2023-0973911R3 - Loss Consolidation Ruling
Background
Aco, a non-resident corporation which is an indirect-wholly owned subsidiary of a public non-resident corporation, and Bco, a Canadian...
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| Tax Topics - General Concepts - Payment & Receipt | daylight loan circled 4 times | 71 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | loan in loss-shifting transaction was limited recourse to the Numberco preferred shares, which had a yield 1 b.p. higher | 89 |
2022 Ruling 2021-0910431R3 - Loss consolidation arrangement
Background
Parent indirectly wholly-owns Profitcos 1, 2 and 3 and itself has non-capital loss carryforwards. The loss consolidation transactions...
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| Tax Topics - Income Tax Act - Section 112 - Subsection 112(1) | s. 112(1) deduction to partners on dividend income component of income allocation to them by limited partnership | 114 |
2024 Ruling 2023-0994301R3 F - Loss consolidation arrangement
Background
LP, a Canadian limited partnership, holds common shares of Profitco through two Holdcos and holds preference shares of Profitco...
2023 Ruling 2023-0964601R3 - Loss consolidation arrangement
Background
Parentco (along with the other named corporations, a taxable Canadian corporation) wholly-owned two Losscos and a Profitco.
Proposed...
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| Tax Topics - General Concepts - Payment & Receipt | in-house re-circulating daylight loan used to fund a loss-shifting transaction | 115 |
2023 Ruling 2022-0949841R3 - Loss Consolidation Ruling
Background
Parentco (listed on an exchange) holds Lossco directly and through Subco, and also holds Profitco. Lossco holds recently-incorporated...
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| Tax Topics - Income Tax Act - Section 261 - Subsection 261(16) - Paragraph 261(16)(a) | transfer of losses to a Profitco with a different functional currency | 124 |
2020 Ruling 2019-0834901R3 - Loss Utilization - Depreciable Property
CRA ruled on transactions for Profitco, which is an indirect wholly-owned Canadian subsidiary of a non-resident parent, to utilize the non-capital...
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| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Machinery and Equipment | depreciable property retained its character in superficial gain transaction | 216 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) | s. 55(3)(a) application to deemed dividend arising on superficial gain transaction to utilize losses of Lossco | 203 |
2020 Ruling 2019-0835141R3 - Loss consolidation arrangement
Background
Parent wholly-owns Lossco (a holding company) which, in turn, owns all the issued and outstanding voting common shares of Opco (a...
2020 Ruling 2019-0819971R3 - Loss Consolidation Ruling
Background
Lossco, a publicly-traded resident corporation, has non-capital loss carryforward balances all allocable to its only permanent...
2017 Ruling 2017-0711911R3 - loss consolidation ruling
Background
Aco, a holding company which generally does not have taxable income, otherwise than foreign accrual property income (FAPI) from a...
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| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) | requirement for dissolution of subsidiary before the end of the first taxation year of parent commencing after the commencement of the winding-up | 164 |
2017 Ruling 2017-0706211R3 - Standard Loss Consolidation
Current structure
Three corporations within a group wholly-owned by Parentco (Cco, Dco and Eco) have generated non-capital losses. CCo wholly...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | interest-deductibility on limited-recourse loans | 89 |
2018 Ruling 2018-0742641R3 - Loss consolidation arrangement
Background
Lossco is the corporate parent of a group of Canadian and non-Canadian corporations. It has non-capital loss carryforwards. Lossco...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | intercompany subordinated loan to bear interest at the rate for a senior secured financing | 82 |
2016 Ruling 2016-0652041R3 - Loss consolidation arrangement
Proposed transactions
In order to effectively shift taxable income from Parentco to its wholly-owned subsidiary, Profitco:
- Parentco will use the...
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| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) | s. 55(2) ruling re dividends on preferred shares used in loss shift | 159 |
9 August 2016 Internal T.I. 2014-0526171I7 - Resettlement of a Trust
A non-resident common-law commercial trust had been settled with cash and Canadian real estate by two (apparently non-resident) corporations. A...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | sale of the two interests in a commercial trust to a 3rd party gave rise to a new trust given that this not contemplated when trust settled | 395 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | sale of trust with losses to 3rd party was abusive | 162 |
2015 Ruling 2015-0582101R3 - loss utilization
Completed transactions
- Lossco (which incurred non-capital losses in a number of taxation years) borrowed (not in excess of its borrowing...
2015 Ruling 2015-0604071R3 - Loss Consolidation Arrangement
Background
Profitco is wholly-owned by Lossco, which is wholly owned by Parent. Based on Profitco's audited financial information, it would be in...
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| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) | loss shifting transaction not affected | 89 |
19 August 2015 External T.I. 2015-0589611E5 - loss consolidation arrangements
In loss consolidation transactions: are they permitted to occur amongst related parties that are not affiliated? Does it matters whether or not...
2015 Ruling 2014-0559181R3 - Internal Reorganization
CRA provided s. 55(3)(a) and other rulings for spinning off various business divisions of an indirect subsidiary (Bco) of a public corporation to...
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| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) | business division spin-offs by indirect public corp sub to new sisters | 365 |
2014 Ruling 2013-0516071R3 - Reorganization
Background
Profitco is wholly-owned by Foreign Parent 2 which, in turn, is indirectly wholly-owned by Foreign Parent 1. Profitco is the limited...
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| Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(14) | transfer by Profitco of profitable LP to Lossco which is affiliated by virtue of common NR indirect parent | 100 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | transfer of profitable LP to Lossco followed by allocation of previously-earned profits of LP to Lossco | 95 |
2014 Ruling 2014-0543911R3 - loss consolidation
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Proposed Transactions
Lossco, which is an indirect subsidiary of Parent and has permanent establishments in various provinces, will make a...
2015 Ruling 2014-0563151R3 - Loss consolidation
This is essentially identical to 2014-0518451R3 from a year earlier. Briefly, a lossco parent (Lossco) will not transfer losses to a profitco...
2013 Ruling 2013-0498551R3 - Loss Consolidation
Lossco, an indirect subsidiary of Parent, will make interest-bearing loans to Parent, and Parent will subscribe for redeemable retractable...
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| Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount - Element B - Paragraph B(a) | no forgiven amount on loan transfer to debtor | 72 |
2014 Ruling 2014-0525441R3 - loss consolidation arrangement
Existing structure
Parent holds Subsidiary, which is profitable, directly, and holds Lossco A (which, in turn, holds Lossco B and Lossco C)...
2 December 2014 CTF Roundtable, Q2(a)
In a loss consolidation arrangement, "Lossco," which has non-capital losses, lends money to Profitco at a reasonable stated rate of interest and...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | positive spread/independent servicing source in loss consolidations | 165 |
2 December 2014 CTF Roundtable, Q2(b)
Must corporations be affiliated or related or both in a loss consolidation arrangement? CRA responded:
The CRA will consider ruling requests where...
2 December 2014 CTF Roundtable, Q2(c)
Does the decision in the 2013 Federal Budget not to proceed with a corporate group taxation system impact rulings for loss consolidation...
2014 Ruling 2014-0518451R3 - Loss consolidation
Overview
Loan 2 (in step 3 below) is being made by Lossco (the wholly-owned loss subsidiary of Parent) to Aco (so as to generate losses in Aco...
2014 Ruling 2013-0511991R3 - Loss consolidation
Structure
Lossco, which is a specified financial institution with non-capital losses, is a subsidiary of non-resident parent, and serves as the...
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| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) | s. 88(1.1) loss transfer not effective until articles of dissolution | 134 |
13 June 2014 External T.I. 2014-0522251E5 - Independent source of income for loss utilization
Lossco, which is developing a commercial use building, lends money to Profitco (a related corporation) at interest and Profitco uses the proceeds...
2013 Ruling 2013-0512321R3 - Loss Consolidation
Conventional loss shift between two sister corporations (Lossco and Profitco) utilizing preferred shares and interest-bearing loan.
2013 Ruling 2013-0504301R3 - Loss Consolidation
Background
Lossco, which is a Canadian public corporation with a portion of its shares held by Parentco, wishes to transfer losses to Profitco,...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | provincial GAAR ruling re loss shift | 126 |
2014 Ruling 2013-0483491R3 - Loss Consolidation Arrangement
Existing structure/debt indenture
Parentoco, a widely-held non-resident corporation, holds Forco, a non-resident holding company, which holds...
2013 Ruling 2012-0458091R3 - XXXXXXXXXX - loss consolidation
Proposed transactions
- Parent borrows on a daylight basis from the Financial Institution.
- Parent makes a daylight loan to a partnership (New LP)...
2013 Ruling 2013-0496351R3 - Loss Consolidation
Background
Opco, which has non-capital losses and is a great-grandchild RFI subsidiary of Parentco (also an RFI) and an immediate subsidiary of...
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| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) | Subco "has been wound up" when it is dissolved | 115 |
2013 Ruling 2012-0472291R3 - Loss consolidation
Background
Lossco, which has non-capital losses and is a holding company subsidiary of Parent, holds all the common shares of Opco, which is a...
18 December 2012 Internal T.I. 2012-0461651I7 - Foreign Tax Credits - s. 126 vs. s. 110.5
Canco realized deductible losses on FX hedging instruments due to the strengthening of the U.S. dollar. Accordingly, it engaged in the...
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| Tax Topics - Income Tax Act - 101-110 - Section 110.5 | policy of s. 110.5 | 300 |
2012 Ruling 2012-0451431R3 - Loss Consolidation
LossCo, which is insolvent, and ProfitCo, both are indirect subsidiaries of a foreign parent. LossCo is indebted to ProfitCo under the LossCo...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | addition of conversion right | 125 |
| Tax Topics - Income Tax Act - Section 51.1 | intercompany debt conversion to senior and junior note and elimination of junior note | 27 |
| Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(4) | intercompany debt conversion to senior and junior note and elimination of junior note | 326 |
2012 Ruling 2012-0439191R3 - Loss Consolidation
Lossco, which is a wholly-owned indirect subsidiary of a non-resident parent ("Parent"), borrows money under a daylight loan and uses the...
5 October 2012 APFF Roundtable, 2012-0454061C6 F - Transfer of a Lossco to a related corporation
Example 1
Son claims an ABIL under s. 50(1) with respect to his share investment in a wholly-owned corporation (Lossco), which had ceased active...
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| Tax Topics - General Concepts - Fair Market Value - Shares | non-capital losses of corporation taken into account in valuing its shares | 162 |
| Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) | lossco with no assets or liabilities cannot be insolvent | 417 |
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) | lossco losses maintained on father-son or sibling transfers and s. 88(1.1) wind-up | 266 |
2012 Ruling 2012-0437881R3 - Loss Utilization
Set-up
Aco, which is a direct Canadian-resident holding-company subsidiary of Parentco (which, in turn, is a wholly-owned subsidiary of Ultimate...
2012 Ruling 2011-0427951R3 - Loss Consolidation
1st Proposed transactions
Subsidiary1, which is a non-resident subsidiary of Parent (a non-resident publicly listed corporation) makes an...
2012 Ruling 2011-0426581R3 - Loss and XXXXXXXXXX tax consolidation
Creditco is an indirect subsidiary of Parentco, which is a Canadian corporation. Creditco carries on business in one province, has non-capital...
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| Tax Topics - Income Tax Act - Section 125.4 - Subsection 125.4(1) - Qualified Corporation | 167 |
Income Tax Technical News No. 44 13 April 2011 [archived]
If a typical loss-consolidation transaction results in an incidental shifting of income or losses between provinces, simply because the...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) | exchangeable debenture appreciation not recognized | 102 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | exchangeable debenture appreciation not recognized | 120 |
| Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) | exchangeable debenture exercise | 90 |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c) | FMV basis in contributed property | 72 |
| Tax Topics - Treaties - Income Tax Conventions - Article 10 | use of s.à r.l. | 131 |
2010 Ruling 2009-0332571R3 - Loss consolidation - related or affiliated
Mr A and Mrs B are siblings. Mr A holds all the voting shares of HA which, in turn, holds Lossco. HA also is the common shareholder of HASub....
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | loss shift between related but unaffiliated corporations | 163 |
2009 Ruling 2008-0289771R3 - Loss Consolidation
Favourable ruling was given with respect to transactions in which the following three transactions are repeated until the right amount of...
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| Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(b) | 50 |
17 December 2008 External T.I. 2007-0253031E5 - Loss Consolidation Arrangement
Ruling request denied because the Lossco did not have the borrowing capacity to effect the loss consolidation arrangement: "It is the borrowing...
Income Tax Technical News, No. 30, 21 May 2004
As noted earlier, loss consolidation transactions must be legally effective. ...However, we would not feel comfortable providing a ruling on a...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) | 38 | |
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) - Paragraph 111(5)(a) | 27 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | no reserve if substantial peformance | 107 |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 112 | |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 96 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | general partner cannot contract on its own account with partnership | 232 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 38 |
25 May 2001 External T.I. 2001-0067415 F - CONSOLIDATION DE PERTES
Regarding loss consolidation transactions, CCRA stated:
For a transaction to be commercially reasonable, the amount of borrowings and investments...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | related-person loss transfer transactions must be commercially reasonable to satisfy s. 20(1)(c) | 131 |
27 May 1998, Chartered Accountants of Ontario Roundtable, 9811750
"Transfers of income or deductions between corporations that are affiliated using transactions that are legally effective and complying with all...
12 April 1995 External T.I. 9508595 - GAAR AND UTILIZATION OF LOSSES
Would GAAR apply where inventory is transferred by a corporation to a wholly owned corporation for the purpose of utilizing the accumulated non-...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 32 |
1994 A.P.F.F. Round Table, Q. 3
Where Mr. X has been employed by Opco Inc. for a number of years and is also the sole shareholder of a corporation ("Investco") with accumulated...
1 December 1992 T.I. (Tax Window, No. 27, p. 9, ¶2319)
If one of the purposes of a series of transfers of a capital property within a related corporate group is to utilize non-capital losses of one of...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 49 | |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares | 82 |
2 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 21, ¶1024)
Where a non-resident person incurs a non-capital loss in a business carried on in Canada, the loss may be applied against income earned by the...
Articles
Vukets, "Structural Issues and Utilization of Domestic Loss Carryforward Pools", 1993 Conference Report, C. 23
Discussion (at pp. 28-29) of Revenue Canada's position on similar businesses.
Paragraph 111(1)(a.1)
Articles
EY, "Proposed EIFEL rules", Tax Alert 2022 No. 13, 9 March 2022
Effect of carrying forward cumulative unused excess capacity for 3 years is similar to a 3-year carryback (p. 6)
IFE that is denied under new...
Paragraph 111(1)(b) - Net capital losses
Administrative Policy
2019 Ruling 2018-0772921R3 - Loss utilization
Aco, and its subsidiary Bco, have available capital losses that they wish to use in stepping up the undepreciated capital cost of trademarks...
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| Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) - Subparagraph 13(7)(e)(ii) | net capital losses used to step up UCC of trademarks | 354 |
| Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) | Class 14.1 property character maintained in circular-transfer transactions | 265 |
21 March 2018 External T.I. 2017-0736291E5 - Interest calculation - loss substitutions
Aco first applied a $1,000 non-capital loss from Year 1 to offset a $1,000 taxable capital gain realized in Year 2. However, it then realized a...
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| Tax Topics - Income Tax Act - Section 161 - Subsection 161(7) - Paragraph 161(7)(b) | interest not assessed on loss substitutions | 232 |
24 July 2017 Internal T.I. 2017-0705801I7 - non-TCP net capital loss
The Directorate confirmed that a non-resident may offset a taxable capital gain on the disposition of taxable Canadian property with a net capital...
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| Tax Topics - Income Tax Act - Section 111 - Subsection 111(9) | capital loss realized on emigration on non-TCP available for carryforward against TCP gain | 188 |
14 August 2014 Internal T.I. 2013-0506691I7 - Capital Losses - Health & Welfare Trusts
Are health and welfare trusts ("HWTs") permitted to incur capital losses and deduct net capital losses when computing taxable income under...
5 July 2013 External T.I. 2013-0479161E5 - Capital Loss Adjustment - 152(4)
The correspondent asked whether a capital loss for a statute-barred year can be amended to increase the amount of the capital loss, and whether...
Paragraph 111(1)(e) - Limited partnership losses
Cases
Canada v. Green, 2017 FCA 107
CRA considered that business losses incurred by lower tier partnerships (the PSLPs) were deemed to be limited partnership losses of an upper-tier...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.1) | business losses of lower-tier LPs flowed through upper-tier partnership | 542 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) | partnerships not taxpayers for ss. 3 and 111 purposes | 41 |
| Tax Topics - Income Tax Act - 101-110 - Section 102 - Subsection 102(2) | ITA recognizes 2-tier partnerships | 74 |
See Also
Green v. The Queen, 2016 DTC 1018 [at 2629], 2016 TCC 10
Paris J found that the business losses of a limited partnership allocated to an upper-tier partnership in excess of its at-risk amount continue to...
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| Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.1) | limited partnership losses flow through a 2-tier LP structure | 511 |
Administrative Policy
31 May 2012 External T.I. 2012-0436521E5 - Ltd ptnp losses in stacked ptnsp
In Year 1, C and D form a limited partnership (CD), which incurs a loss of $500 in that year, which is $300 in excess of their contributed...
25 February 2005 External T.I. 2004-0107981E5 - Limited Partnership Losses-Tiered Partnership
In response to an inquiry as to the deductibility of limited partnership losses ("LPL") in a multi-tier partnership arrangement, the Directorate...
14 May 2004 External T.I. 2004-0062801E5 - limited partnership losses- tiered partnership
Suppose that Mr A and B form a partnership (AB Partnership), with AB taking the $100 contributed by each of them to, in turn, contribute $200 to a...
2 May 1994 External T.I. 9407775 - PARTNERSHIP - LIMITED PARTNERSHIP LOSSES
A general partnership, that is a limited partner of a limited partnership, cannot carry forward its limited partnership losses arising from the...
C. Brian Darling, "Revenue Canada Perspectives," 1992 Corporate Management Tax Conference Report (CTF), Q.11
Deductions under s. 111(1)(e) are not available to a general partner who was formerly a limited partner.
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | may be no disposition on conversion of limited to general partnership | 36 |
Articles
Joint Committee, "Response to Green case", 19 January 2018 Joint Committee Submission to Finance respecting the Green case
Suggested response to Green
Whether Finance chooses to respond to Green by providing that all portions of s. 96 apply to partnerships where they...
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| Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.12) | 49 |
Forster, "Limited Partnership Losses", Canadian Current Tax, June 1992, p. P57
A limited partner who becomes a general partner thereafter will have no at-risk amount and, accordingly, will be unable to deduct any unutilized...
Subsection 111(1.1)
Paragraph 111(1.1)(a)
Subparagraph 111(1.1)(a)(ii)
Administrative Policy
21 September 2021 Internal T.I. 2021-0907861I7 - Application of ss. 100(1)(b) and 111(1.1)(a)(ii)
The correspondent provided two loss carryover examples in which there were carryovers of allowable capital losses for application against taxable...
Subsection 111(2) - Year of death
Administrative Policy
21 November 2017 External T.I. 2017-0690651E5 - Net Capital Losses - Year of Death
Does the definition of “non-capital loss” found in s. 111(8), read with s. 111(2), allow a taxpayer to deduct the full amount of unused net...
11 September 2003 Internal T.I. 2003-0026217 F - Report de Pertes du de Cujus
The taxpayer died in 2002 and when the CRA computer system processed his file, his net capital loss for 2001was deducted from his income from all...
Articles
Sandra Bussey, Jim Barnett, "Capital Gains and Losses in the Year of Death", Tax for the Owner-Manager, Vol. I, No. 2, April 2001, p. 10.
Subsection 111(3) - Limitation on deductibility
Cases
CCLI (1994) INC v. Canada, 2007 DTC 5372, 2007 FCA 185
In its 1989 taxation year, the taxpayer deducted non-capital losses of $29.4 million which it treated as comprising a non-capital loss carried...
Paragraph 111(3)(a)
Cases
Bakorp Management Ltd. v. Canada, 2019 FCA 195
Following the resolution of a tax dispute for taxation year 1, the taxpayer (Bakorp) requested that the Minister reduce the amount of a...
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| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.3) | the only remedy for the failure of CRA to make a s. 152(4.3) adjustment was judicial review of that decision | 329 |
Administrative Policy
6 September 2001 Internal T.I. 2001-0094327 F - DEMANDE DE CONTRIBUABLE
After 65302 was decided, the Corporation revised its taxable income computation for a taxation year (Year 1) that was before the normal...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(8) - Non-Capital Loss | non-capital loss could be recomputed for a prior year which had not been assessed | 373 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | CCRA should not exercise its discretion to reassess a taxation year to allow the carryforward of a non-capital loss arising as a result of a favourable court decision | 279 |
| Tax Topics - Income Tax Act - 101-110 - Section 110.1 - Subsection 110.1(1.1) | donation previously claimed in a prior year but no longer needed in that year could not be re-claimed in a subsequent year | 60 |
| Tax Topics - Income Tax Act - Section 164 - Subsection 164(6.1) | s. 164(6.1) inapplicable to amendment to non-capital loss for a prior year consequent on a favourable court decision | 60 |
Paragraph 111(3)(b)
Administrative Policy
17 May 1993 Memorandum (Tax Window, No. 31, p. 11, ¶2522)
Except as provided in s. 111(3)(b), s. 111 does not impose an ordering on the application of losses and, therefore, a taxpayer can claim losses in...
Subsection 111(4) - Acquisition of control
Cases
Madison Pacific Properties Inc. v. The King, 2023 TCC 180
The appellant (“MPP”) was an insolvent, publicly traded, mining company with accumulated non-capital and net capital losses of $9.7 million...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | acquisition of close to legal control of a Lossco by two arm’s length companies in a different business to access its losses was an abuse | 452 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(1) - Tax Benefit | in the alternative transaction, two acquirers of the shares of a Lossco would have been acting in concert so as to be a group that acquired control of the Lossco | 291 |
Administrative Policy
10 July 1997 External T.I. 9715885 - IT302R3
"The policy stated in paragraph 18 of IT-302R3 would apply to a corporation receiving a notice of reassessment in the same manner as is described...
Paragraph 111(4)(c)
Administrative Policy
7 October 2005 APFF Roundtable Q. 1, 2005-0140881C6 F - Acquisition of Control - Foreign Corp. - Losses
As s. 249(4) does not apply to a non-resident corporation that does not have a permanent establishment in Canada and whose control is acquired by...
Paragraph 111(4)(d)
Administrative Policy
94 C.P.T.J. - Q.25
S.111(4) does not generally apply to the capital property of a foreign affiliate upon the acquisition of control of the affiliate or the Canadian...
Tax Professionals Mini Round Table - Vancouver - Q. 11 (March 1993 Access Letter, p. 104)
Where s. 111(4)(d) applies to create a loss, then s. 40(2)(g) will deem that loss to be nil where the criteria therein are met.
Paragraph 111(4)(e)
Administrative Policy
19 May 2020 Internal T.I. 2020-0841791I7 - Application of paragraph 111(4)(e)
The Taxpayer recognized a capital loss under s. 111(4)(d) for the excess of the ACB of a loan receivable from one of its controlled foreign...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(34) - Paragraph 13(34)(a) | goodwill and customer relationship constituted single goodwill property | 124 |
6 October 2017 APFF Roundtable Q. 15, 2017-0709141C6 F - Designation pursuant to paragraph 111(4)(e)
The sole asset of a corporation sold to a 3rd party is goodwill with a fair market value of $200,000. Can the corporation make a s. 111(4)(e)...
7 October 2016 APFF Roundtable Q. 17, 2016-0652781C6 F - Functional currency and acquisition of control
Can a s. 111(4)(e) election be made respecting a pre-transition debt held immediately before an acquisition of control so as to realize a gain the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 261 - Subsection 261(9) - Paragraph 261(9)(a) | exclusion of pre-transition debts from s. 111(4) | 98 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(10) | exclusion of pre-transition debts | 153 |
10 February 1995 External T.I. 9500695 - PARAGRAPH 111(4) AMENDED DESIGNATION
"In view of the fact that, in subsection 248(1) of the Act, the term 'assessment' is defined as including a 'reassessment', it is our position...
10 February 1995 External T.I. 9424485 - PARAGRAPHS 111(4)(C)&(E)
S.111(4) does not generally apply to the capital property of a foreign affiliate upon the acquisition of control of the affiliate or the Canadian...
93 CR - Q. 22
Depreciable property designated under s. 111(4)(e) is deemed to have been disposed of by the corporation and reacquired by it for the purposes of...
8 July 1992 External T.I. 5-922051
Because an "assessment" includes a "reassessment", a corporation is allowed to amend a previously-made election under s. 111(4)(e) for a taxation...
13 February 1992 T.I. (Tax Window, No. 16, p. 19, ¶1747)
RC will accept an election under s. 111(4)(e), or any written amendment thereto, made within 90 days from the date of assessment or reassessment...
90 C.R. - Q42
Because s. 111(4)(e) is only applicable with respect to capital properties rather than foreign currency obligations, the designation will not be...
90 C.R. - Q45
RC will not accept designations under s. 111(4)(e) beyond the time limits specified therein.
88 C.R. - Q8
Ss.111(4)(c), (d) and (e) do not apply to foreign exchange gains and losses on indebtedness of the corporation.
Articles
Kim Maguire, Jeffrey Shafer, "Trends in Buy/Sell Transactions", draft 2021 Conference Report
Planning to engage s. 111(4)(e) before closing of CCPC acquisition (pp. 14-18)
- Includes a discussion of s. 111(4)(e) planning in a...
Subsection 111(5) - Idem [Acquisition of control]
Cases
The King v. MMV Capital Partners Inc., 2023 FCA 234
A venture capital corporation (MMV) acquired 49% of the voting common shares of the respondent while in interim bankruptcy proceedings and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | Deans Knight applied regarding acquiring an approximate 100% interest in a Lossco with no change of de jure control | 361 |
Deans Knight Income Corp. v. Canada, 2023 SCC 16
The non-capital losses of $90M, and other tax attributes (the “Tax Attributes”) of the taxpayer, were effectively sold to arm’s length...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | a transaction where a Lossco became subject to control rights similar to de jure control abused the rationale of s. 111(5) | 526 |
| Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) | lender to distressed corporation may have de facto control | 118 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | series includes transactions undertaken before or after the series in relation to the series | 75 |
Yarmouth Industrial Leasing Ltd. v. The Queen, 85 DTC 5401, [1985] 2 CTC 67 (FCTD)
For the purposes of s. 111(5), control of a corporation may be acquired by virtue of control being acquired of its parent. [C.R.: 125(1)]
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) - Paragraph 111(5)(b) - Subparagraph 111(5)(b)(ii) | 70 |
Malka v. The Queen, 78 DTC 6144, [1978] CTC 219, [1978] CTC 219 (FCTD)
The taxpayers, who acquired 400 voting common shares in a company were held to have thereby acquired control of it notwithstanding that 500 voting...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 159 - Subsection 159(2) | de facto liquidator | 69 |
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares | 141 |
See Also
Total Energy Services Inc., 2024 TCC 12
In September, 2007, most of the equity of an insolvent public corporation (“Biomerge”) was acquired by the company (“Nexia”) of two...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | an acquisition of an insolvent public company with losses by a SIFT trust was an abuse of s. 111(5) | 367 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) | acquisition of loss company and its merger with a loss user 1 ½ years later were part of the same series | 230 |
A.G. of Canada v. Fallbridge Holdings Ltd. (1985), 31 BLR 57 (FCA)
It was stated, obiter, that the fact that two companies acted in concert to effect an acquisition did not necessarily constitute them as a group...
Administrative Policy
25 February 1999 External T.I. 9900025 - ACQUISITION OF CONTROL - 50:50 GROUP OF SH
Various illustrations of the RC position that there generally will be an acquisition of control whenever one of two shareholders, each holding 50%...
Income Tax Technical News, No. 16
"The Department will apply the Supreme Court's findings [in Duha] that, outside of the constating documents of a corporation and its share...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Reasonable Expectation of Profit | 42 | |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(4) | 42 |
93 C.R. - Q. 57
Where an individual makes an assignment in bankruptcy, there will be no acquisition of control of a corporation owned by the individual for...
88 C.R. - Q.43
Where 4 unrelated individuals each own 1/4 of the shares of a corporation and one of the individual's shares are redeemed, then control of the...
Articles
Joel A. Nitikman, "Who Has De Jure Control of a Corporation When Its Shares Are Held by a Limited Partnership?", 2011 Canadian Tax Journal, Vol 59, p. 765
Argues that (at least where the shares of a subsidiary corporation held as partnership property are registered in the name of the limited...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 249 - Subsection 249(4) | 63 |
Paragraph 111(5)(a)
Cases
Canada v. Deans Knight Income Corporation, 2021 FCA 160, aff'd 2023 SCC 16
The non-capital losses of $90M, and other tax attributes of the taxpayer, were effectively sold to arm’s length investors pursuant to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | avoidance of a de jure acquisition of a Lossco through acquiring “actual control” was abusive | 591 |
Garage Montplaisir Inc. v. Canada, 2001 DTC 5366 (FCA)
The taxpayer’s predecessor acquired control of and then amalgamated with a corporation ("Pinard") carrying on a used car dealership, but which...
Wigmar Holdings Ltd. v. R., 97 DTC 5203, [1997] 2 CTC 263 (FCA)
The taxpayer, which at the relevant times operated a ranch and was a real estate developer, acquired, in an arm's length transaction, another BC...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(2) - Paragraph 80(2)(a) | legally binding settlement required for forgiveness, so that debt parking transaction and mortgage discharge did not discharge debt | 129 |
The Queen v. Dorchester Drummond Corp. Ltd., 79 DTC 5163, [1979] CTC 219 (FCTD)
A company which acquired vacant land with the intention of eventually erecting a highrise office tower thereon, and which during the period...
Orlando v. The Minister of National Revenue, 62 DTC 1064, [1962] CTC 108, [1962] S.C.R. 261
With the exception of minimal revenues from the sale of hay, the only revenues derived by the taxpayer from her farm lands were sums which she...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives | course of conduct of selling topsoil | 114 |
See Also
Birchcliff Energy Ltd. v. The Queen, 2015 TCC 232, nullified on procedural grounds 2017 FCA 89
A predecessor ("Birchcliff") of the taxpayer negotiated a plan to merge with a corporation ("Veracel"), which had discontinued its medical...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Sham | transitory share issuance under plan of arrangement was not a sham | 177 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(3) | share subscription was avoidance transaction notwithstanding its "overarching purpose" was financing | 148 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | abusive reverse takeover by Lossco through diverted private placement | 261 |
NRT Technology Corp. v. The Queen, 2013 DTC 1021 [at 110], 2012 TCC 420, briefly aff'd 2013 DTC 5153 [at 6360], 2013 FCA 221
The taxpayer, which sold ATMs to the gaming industry, and specialized keyboards and price scanners to retail stores, in January 2006 acquired a...
Crystal Beach Park Limited v. The Queen, 2006 DTC 2845, 2006 TCC 183
Two business associates ("Tiburzi" and "Gelder") acquired 15,000 of the 30,000 common shares of the taxpayer (with the other 15,000 common shares...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Onus | 49 | |
| Tax Topics - Income Tax Act - Section 251.2 - Subsection 251.2(2) - Paragraph 251.2(2)(a) | 2 business associates were not acting in concert and were not a group | 84 |
Gaz Métropolitain Inc. v. R., [1999] 2 CTC 2116, 98 DTC 1751, 1998 CanLII 227
The taxpayer (GMI), which carried on a business of selling natural gas to residential, commercial and industrial customers, had a minority...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) - Paragraph 88(1.1)(e) | same business as that of wound-up subsidiary was carried on in light of its primary purpose | 274 |
No. 678 v. MNR, 60 DTC 45 (TAB)
The taxpayer, which had been a dealer in trucks and cars, ceased operations and, following a change of control, started operating service...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 14 | 134 |
Maidment v. Kibby & Anor., [1993] BTC 291 (D)
Vice-Chancellor Nicholls affirmed the finding of the Commissioner that the purchase as a going concern by the taxpayers of an existing fish and...
Montplaisir Ltée v. MNR, 92 DTC 2317, [1992] 2 CTC 2700 (TCC), aff'd 96 DTC 6557 (FCTD). aff'd 2001 DTC 5366 (FCA)
The taxpayer, which acquired control of a corporation ("Pinard") carrying on a used car dealership, was found not to be carrying on the business...
Queen & Metcalfe Carpark Ltd. v. MNR, 74 DTC 6007, [1973] CTC 810 (FCTD), aff'd [1976] CTC xvi (FCA)
The proposed renting out of hotel premises or a cinema structure was implicitly treated as part of the taxpayer's business of acquiring various...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(dd) | engaged in a business/zoning, traffic flows and markets would be included | 142 |
Jeffrey v. Rolls - Royce, Ltd. (1961), 40 TC 443 (HL)
In finding that sums received by the taxpayer for providing technical know-how to foreign organizations were receipts of its trade of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Patents and Know-How | 147 |
Utah Co. of Americas v. MNR, 59 DTC 1275, [1959] CTC 496 (Ex Ct)
A Nevada company which was engaged in Canada in the construction of housing (and of a large building in Vancouver), and which carried on a mining...
Frankel Corporation Ltd. v. Minister of National Revenue, 59 DTC 1161, [1959] CTC 244, [1959] S.C.R. 713
An operation of recovering non-ferrous metals from scrap material, alloying them with other non-ferrous metals to specifications required by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives | inventory included in business sale | 105 |
Keir & Cawder, Ltd. v. C.I.R. (1958), 38 TC 23 (C.S. (1st Div.))
The taxpayer, which sold materials for use in construction projects, made a foray into the field of construction contracting which was terminated...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Compensation Payments | 73 |
Canadian Fruit Distributors Ltd. v. MNR, 54 DTC 1145, [1954] CTC 284 (Ex. Ct.)
The respective activities of the taxpayer in acting as a broker for the sale of the fruit and vegetable products of its parent and of third...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | 76 | |
| Tax Topics - Income Tax Act - Section 9 - Nature of Income | income reduced to nil by obligation to pay | 151 |
Hoffman v. MNR, 50 DTC 284
The taxpayer and his brother in partnership sustained a loss in 1945 from a hardware store as a result of its destruction by fire. The next year,...
Bell v National Provincial Bank of England, Limited, [1904] 1 KB 149 (CA)
The taxpayer, a bank with numerous branches in England and Wales, purchased the business and premises and other assets of the County of Stafford...
Administrative Policy
10 October 2024 APFF Roundtable, Q.14
Holdco, a CCPC, had accumulated non-capital losses (NCLs) arising from the management services it had rendered over the years (i.e., the services...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) | separate admin services business within Amalco likely would not be respected as the continuation of a predecessor's management business | 269 |
1 March 2012 Internal T.I. 2012-0437901I7 F - Timing of the adjustments pursuant to 111(5)
A corporation acquired all of the shares of a target corporation, resulting in an acquisition of control, and a day later, they amalgamated to...
16 August 2011 Internal T.I. 2011-0401721I7 F - Loss Utilization
In finding that the non-capital losses of an acquired corporation were from property rather than a business, so that they could not be utilized by...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) - Paragraph 88(1.1)(e) | factors in determining whether investments are held as a business | 131 |
2011 Ruling 2011-0392171R3 - XXXXXXXXXX
A deposit-taking financial institution with significant non-capital losses (LossCo") was directed by the provincial regulator to quickly merge...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 272 |
2007 Ruling 2006-0198421R3 - Utilization of Losses - Acquisition Control
Ruling that following the transfer by Lossco of a business to a partnership of which it was part owner and an indirect acquisition of control of...
Income Tax Technical News, No. 34, 27 April 2006 under "Sale of Tax Losses"
Where Profitco avails itself of the benefit of tax losses of Lossco, a publicly traded corporation that is insolvent and has ceased to carry on...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 58 |
7 October 2005 APFF Roundtable Q. 6, 2005-0140981C6 F - Loss Carryforward under subsection 111(5)
Where there is an acquisition of control of two Canadian furniture manufacturers (A and B), and B then leases all its assets to A and transfers...
Income Tax Technical News, No. 30, 21 May 2004
The Agency "would not feel comfortable providing a ruling on a loss consolidation transaction that contemplates dollar amounts and time frames...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) | 38 | |
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) | dollar amounts not artificial; parent lossco must have independent income source | 143 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | no reserve if substantial peformance | 107 |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 112 | |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 96 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | general partner cannot contract on its own account with partnership | 232 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 38 |
17 February 2003 External T.I. 2003-0000725 - Meaning of Similar Properties
It is unlikely that the similar property test would be satisfied where a profitable corporation that is in the business of producing a type of...
24 March 1997 Internal T.I. 9705947 - LOSSES, MEANING OF "SIMILAR", MINING PROPERTIES
Tin and uranium are similar properties for purposes of s. 111(5)(a)(ii). Similarly, "the Department has previously opined that income derived by a...
17 October 1996 External T.I. 9627815 - SIMILAR BUSINESS, LOSS UTILIZATION
RC referred to a passage from Barnwell Consolidated School District No. 15 v. Canadian Western and Natural Gas, Light, Heat & Power Co. in...
5 January 1996 External T.I. 9514915 - business carried on by partnership
Where a business carried on by a corporation subsequent to an acquisition of control of the corporation, is transferred to a partnership in which...
Revenue Canada Round Table TEI, 16 May 1994, Q. 10 (C.T.O. 94 TEI Round Table Reasonable Expectation of Profit")
RC referred to the general principles laid down in Moldowan v. The Queen, 77 DTC 5213 as to what constitutes a reasonable expectation of...
19 May 1993 T.I. (Tax Window, No. 31, p. 12, ¶2524)
Although an operation of oil and gas wells in Alberta following an acquisition of control would not be the same business as the operation of oil...
17 May 1993 Memorandum (Tax Window, No. 31, p. 12, ¶2523)
Losses from a rental property incurred by a corporation prior to an acquisition will continue to be available after the acquisition of control if...
17 May 1993 Memorandum (Tax Window, No. 31, p. 2, ¶2508)
Where three shareholders (A, B and C) each owning 1/3 of the shares of LossCo transfer their shares of LossCo to ACo, BCo and CCo, then assuming...
September 1991 Memorandum (Tax Window, No. 9, p. 4, ¶1443)
Discussion of when a number of shareholders comprise a "group". The existence of a shareholders' agreement will not always be prima facie evidence...
18 October 1990 Administrative Letter 59586 F - Impact of Partnership on Pre-acquisition Losses
Company A, whose losses from Div 1 are streamed due to a previous acquisition of control, transfers Div 1 to a partnership, whose other partner...
11 June 1990 External T.I. 59750 F - Acquisition of Control - Amalgamation of Loss Corporation with Profitable Corporation
A business involving software is not similar to a business involving computer hardware and peripheral equipment, although a business involving...
13 February 1990 T.I. (July 1990 Access Letter, ¶1331)
The construction of single-family houses and the construction of rental properties cannot be considered as similar services. Where an acquiring...
11 January 1990 T.I. 5-9152
Where Company A, a wholesaler of a product, acquires all the shares of a retailer of the same product in order to ensure continued distribution of...
89 C.R. – Q.37
Where a loss corporation transfers its entire business to a partnership of which it is a member, would it for the purposes of s. 111(5), as...
12 September 1989 Income Tax Severed Letter 5-8250 - Acquisition of a loss company
A corporation which is in the business of retailing clothing, which it has manufactured or which has been manufactured by others, through its...
IT-206R "Separate Businesses"
Whether a successive business operation is a continuation of the same business
4. Where one business operation succeeds another the following...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 22 - Subsection 22(1) | 10 | |
| Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) | 344 |
Articles
Anu Nijhawan, "When is 'Loss Trading' Permissible: A Purposive Analysis of Subsection 111(5)", 2015 CTF Annual Conference paper
Absence of purpose test for loss-streaming rules (p. 9:6)
[S]ubsection 111(5) does not incorporate a purpose test. Such inclusion was explicitly...
Ian Gamble, "Income from a Business or Property: General Principles and Current Issues", 2014 Conference Report, Canadian Tax Foundation, 5:1-32
Share investments potentially a business (pp. 5:10-15)
[C]onsolidated Mogul's chief task in the relevant years was the development and management...
Anthony Schiefer, "Buyer Beware - Structuring to Minimize to Minimize Capital Tax Consequences of a Share Purchase", Corporate Structures in Groups, Vol. IV. No. 1, p. 300
Discussion of techniques to use interest expense of purchaser to shelter taxable income of target.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 181.2 - Subsection 181.2(3) | 15 |
Cadesky, "Corporate Losses", 1990 Conference Report, c. 19.
Subparagraph 111(5)(a)(i)
Administrative Policy
10 October 2007 External T.I. 2007-0249251E5 F - Utilization of Losses - Acquisition of control
Before noting that non-capital losses of inactive corporations likely could not be carried forward following an acquisition of their control...
Subparagraph 111(5)(a)(ii)
Cases
Manac Inc. Corp. v. Canada, 98 DTC 6605, [1998] 4 CTC 60 (FCA)
All the voting shares of a corporation ("Nortex") which manufactured resin-coated wood panels, were acquired by a subsidiary of a predecessor of...
See Also
Leekes Ltd v HM Revenue & Customs, [2018] EWCA Civ 1185
The taxpayer (Leekes) carried on a trade of running department stores (three in Wales and one in Wiltshire) and acquired for nominal consideration...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) | acquired business was segregated from its expanded component | 244 |
Paragraph 111(5)(b)
Subparagraph 111(5)(b)(ii)
See Also
Yarmouth Industrial Leasing Ltd. v. The Queen, 85 DTC 5401, [1985] 2 CTC 67 (FCTD)
For the purposes of the pre-1983 version of s. 111(5)(a), it was found that a corporation - whose business had consisted in the leasing of a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) | 25 |
Subsection 111(5.1) - Computation of undepreciated capital cost
Administrative Policy
7 February 2005 External T.I. 2004-0101421E5 F - Subsection 111(5.1)
Aco acquired all of the shares of Bco for a price of $1000, resulting in an acquisition of control. Bco’s only assets were Class 43 and 8...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Fair Market Value - Other | depreciable assets’ value inferred from the share purchase price | 103 |
25 April 1990 T.I. (September 1990 Access Letter, ¶1429)
Where the amount designated by a corporation under s. 111(4)(e) in respect of a depreciable property exceeds its fair market value at the time of...
88 CPTJ - Q.24
S.111(5.1) applies whether or not the purchaser's intention is to acquire losses.
84 C.R. - Q.42
Where the controlling shareholder of a public corporation disposes of sufficient of its shares to the public to lose control, or where a 49% block...
84 C.R. - Q.43
Guidelines on what constitutes the same or similar business have not yet been developed.
81 C.R. - Q.47
There is a control change where a corporation owned equally by X and Y becomes fully owned by X, or where a corporation fully owned by X becomes...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(a) | 38 |
Subsection 111(5.2)
Cases
Devon Canada Corporation v. The Queen, 2018 TCC 170
Two public companies made cash payments for the surrender by employees of their options previously granted to them under employee stock option...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure | payments made to target’s employees for surrendering their options on target’s acquisition were mostly deductible by it | 309 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) - Subparagraph 20(1)(e)(i) | quaere whether “sale” includes a sale to a 3rd party | 177 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | disposition of surrendered stock options occurred under doctrine of merger | 318 |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | "cost" implies the acquisition of an asset | 172 |
Subsection 111(5.5) - Restriction
Administrative Policy
2014 Ruling 2014-0523221R3 - Amalgamation of mutual funds
underline;">: Proposed transactions. C1, which is a smaller mutual fund corporation than C2, will amalgamate with C2 to form Amalco. C1, C2 and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) | amalgamation of two mutual fund corporations each with capital losses | 132 |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(11) | amalgamation of two mutual fund corporations each with capital losses | 134 |
Subsection 111(8) - Definitions
Non-Capital Loss
Cases
Taylor v. The Queen, 88 DTC 6422, [1988] 2 CTC 226 (F.CTC)
A submission that a (foreign non-business income) tax can never be an expense so as to create a loss within the meaning of s. 111(8)(b) was...
Administrative Policy
11 October 2013 Roundtable, 2013-0495901C6 F - Limited partnership loss and non-capital loss
A limited partner has both losses from other sources and losses and limited partnership losses from the limited partnership. Based on the...
4 November 2010 Internal T.I. 2010-0358441I7 F - Indien, avance de salaire
After noting that a salary advance was includible in employment income under s. 6(3), CRA indicated that repayment giving rise to a deduction...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87 | salary advance cannot be exempt | 151 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(3) - Paragraph 6(3)(a) | salary advance is taxable under s. 6(3) | 75 |
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n) | salary repayment could generate non-capital loss | 147 |
6 September 2001 Internal T.I. 2001-0094327 F - DEMANDE DE CONTRIBUABLE
After 65302 was decided, the Corporation revised its income and taxable income computation for a taxation year (Year 1) that was before the normal...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) | CCRA should not exercise its discretion to reassess a taxation year to allow the carryforward of a non-capital loss arising as a result of a favourable court decision | 279 |
| Tax Topics - Income Tax Act - 101-110 - Section 110.1 - Subsection 110.1(1.1) | donation previously claimed in a prior year but no longer needed in that year could not be re-claimed in a subsequent year | 60 |
| Tax Topics - Income Tax Act - Section 164 - Subsection 164(6.1) | s. 164(6.1) inapplicable to amendment to non-capital loss for a prior year consequent on a favourable court decision | 60 |
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(3) - Paragraph 111(3)(a) | s. 111(3)(a) precluded the application of a non-capital loss that had previously been claimed for a prior year even though there no longer was taxable income in that prior year | 159 |
22 May 1997 External T.I. 9700195 - SUBSECTION 111(8) AND PARAGRAPH 3(F) OF THE ACT
"A taxpayer may claim a net capital loss carried over from a previous year ... pursuant to variable E in the formula, notwithstanding the fact...
3 July 1997 External T.I. 9639225 - SECTION 114
Although s. 114 specifies that each partial period is treated as a whole taxation year, for purposes of s. 111, the loss from one period and the...
5 September 1996 External T.I. 9626965 - MORTGAGE INVESTMENT CORPORATION LOSSES
A loss to a mortgage investment corporation resulting from it paying taxable dividends in an amount greater than its income for the year will give...
6 April 1993 T.I. (Tax Window), No. 30, p. 7, ¶2489)
Where a non-capital loss in a preceding year has been reinstated as the result of the carryback to that year of a net capital loss, the taxpayer...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(6) | 39 |
24 June 1992 External T.I. 5-920948
Respecting an inquiry as to the treatment of CEE renounced to a non-resident shareholder, the Rulings Directorate stated:
For the purpose of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 3 | flow-through shares a source | 86 |
30 August 1991 T.I. (Tax Window, No. 8, p. 7, ¶1427)
S.111(8)(b) required a taxable capital gain for a year to be reduced by deductions available for the year (in this case, deductions for dividends...
24 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 23, ¶1104)
An individual who has realized a capital gain but has no net income for the year may claim the capital gains exemption on the full amount of the...
20 April 1990 TI 5-9269
A taxpayer (which is not a principal business corporation) may deduct CEE or CDE without restriction to its income so as to create a non-capital...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 3 | 55 |
90 C.R. - Q52
An ABIL is included in non-capital losses and may be carried back three years and forward seven years without adjustment for the different...
Articles
Forster, "Administrative and Regulatory", Canadian Current Tax, March 1992, p. A7
A
Administrative Policy
3 May 2022 CALU Roundtable Q. 5, 2022-0928831C6 - Policy Loan Repayment
Where a taxpayer repays a policy loan and is thereby entitled to a deduction under s. 60(s) that exceeds the taxpayer’s income for the year, is...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 60 - Paragraph 60(s) | excess s. 60(s) amount cannot be recognized in other years | 279 |
2 September 2009 Internal T.I. 2009-0329251I7 F - Application du paragraphe 80(16)
In the particular taxation year, a commercial debt obligation that ACO issued in the course of carrying on its business was forgiven. In addition,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(16) | s. 80(16) designation under s. 80(11) increased s. 80(13) income inclusion | 215 |
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(13) | s. 80(13) income was from the debtor's business | 30 |
D.2
Administrative Policy
23 May 2012 Internal T.I. 2011-0418071I7 F - Remise de dettes, PAC
After the taxpayer had settled a commercial debt obligation so as to give rise to a forgiven amount, it was assessed by CRA to increase its...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80 - Subsection 80(3) - Paragraph 80(3)(a) | debt settlement results in immediate application of forgiven amount to reduce NCL at that time | 266 |
Subsection 111(9) - Exception
Administrative Policy
24 July 2017 Internal T.I. 2017-0705801I7 - non-TCP net capital loss
A corporation, upon emigration from Canada incurred a capital loss pursuant to s. 128.1(4) on the deemed disposition of property which was not...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(b) | emigration loss from non-TCP offsettable against post-emigration TCP gain | 129 |
18 April 1990 T.I. (September 1990 Access Letter, ¶1428)
Where the rental activities of a non-resident did not constitute the carrying on of a business in Canada, the net losses generated would not be...
IT-262R2 "Losses of Non-Residents and Part-Year Residents"
Subsection 111(12) - Foreign currency debt on acquisition of control
Administrative Policy
2 August 2016 External T.I. 2014-0544941E5 F - Interaction between ss. 111(12) and 80.01(3)
Aco is indebted to Bco (its wholly-owned subsidiary and also a Canadian-controlled private corporation) for US$1,000,000 under a “commercial...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) | deemed settlement under 80.01(3) before operation of 111(12) | 153 |
S4-F7-C1 - Amalgamations of Canadian Corporations
1.59 Where control of a corporation is acquired and that corporation makes a designation under paragraph 111(4)(e) to realize an accrued foreign...
Articles
Carrie Aiken, Johnson Tai, "Debt Restructuring Transactions – Issues, Strategies and Trends", 2016 CTF Annual Conference draft paper
A Canadian public company (Canco) will be recapitalized so that the provider of debtor-in-possession financing will end up holding 2/3 of the...
Carrie Smit, "Foreign Currency Debts and Acquisitions of Control: Beware the Unexpected Gain", International Tax (Wolters Kluwer CCH), February 2017, No. 9, p. 6
Avoidance of s. 111(12) where simultaneous acquisition of control (AoC) and amalgamation (p. 3)
[2014-05544941E5] found that both the AoC and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(11) | 117 |