Holdco, received shares of the foreign merged corporation in replacement of its shares of a public American company. After filing a return in which it did not report the transaction, it filed an amended return reporting a capital loss on its shares of the American company (whose FMV had been lower than their ACB). The Directorate noted that if Holdco had elected in its return to not have s. 87(8) apply, it would have realized a capital loss, given that s. 87(4) would thereby not apply, the s. 93(2) rule would not apply as the American company was not a foreign affiliate and the superficial and suspended loss rules in ss. 40(2)(g)(i) and 40(3.4) would not apply given that the replacement shares were not identical property.
The Directorate indicated that, since in its initial return, Holdco had not calculated a gain or loss on the shares, it should be considered to not have made such election in that return. However, the claiming of a capital loss in the amended return represented either an election for s. 87(8) to not apply, or reflected a view that the merger did not qualify as a foreign merger. CRA would accept such an election in the amended return since it was filed before the time of the initial assessment or the time for objecting to such assessment.