Ms. A, who owned all the shares of Lossco, which had disposed of all the assets of its (unspecified) business for cash, disposed of those shares for FMV cash consideration to Profitco, which was owned equally by her and her three siblings. Lossco was then wound up into or amalgamated with Profitco so that the latter could use the Lossco non-capital losses as a deduction from its income from operating a transport services business. Regarding the potential application of s. 69(11), CRA stated:
In a situation as described above, involving the amalgamation of a profitable corporation with another corporation that has realized non-capital losses, subsection 69(11) could apply if one of the main purposes of the series of transactions or events was to apply the non-capital losses against net income from the disposition of property after the amalgamation (for example, the property disposed of could be inventory, vehicles or real property) that was owned by the profitable corporation immediately before the amalgamation (provided that the disposition of such property is made, or arrangements for such disposition are made, before the day that is three years after the time that is immediately before the amalgamation). On the other hand, it appears to us that subsection 69(11) would not apply if the sole purpose of the series of transactions or events was to apply non-capital losses against the net income of the new corporation arising solely from services rendered by the new corporation and, in particular, did not involve any disposition of property acquired by the new corporation on the amalgamation.