Mr. A holds all the shares of Corporation A, whose only property which is capital property with an ACB of $100,000. Corporation B, which is an unrelated corporation carrying on a land development business, acquires all the shares of Corporation A for $500,000 in order to subdivide the property for resale. If Corporation A is wound up immediately, can the cost of land be increased under s. 88(1)(d) to $500,000? What if the winding-up of Corporation A was effected a several years later? CRA responded (TI translation):
[T]o the extent that the land held by Corporation A was capital property, other than an ineligible property, to it at the time that Corporation B last acquired control of it, and the land was owned by Corporation A until it was distributed to Corporation B on the winding-up, the land of Corporation A would be a property whose cost could be increased by the amount determined by paragraph 88(1)(d), notwithstanding that the property in question would not be a capital property to Corporation B, and assuming that subparagraphs 88(1)(c) (iv) to (vi) did not apply in this case.
Whether the winding-up of Corporation B takes place immediately after the acquisition of control or several years after the acquisition of control, the land will represent an eligible property for bump purposes but subject to the limitations in [ss. 88(1)(d)(i), (i.1) and (iii), and (ii)]. The amounts determined by virtue of these limitations will thus vary depending on when the winding-up occurs.