Acquisition of Lossco business
Subsequently to a CCAA filing by Lossco and members of its group, Taxpayer (a wholly-owned subsidiary of a Luxembourg company held by a group of (perhaps U.S.) investors), as limited partner, and its wholly-owned subsidiary, as GP, formed Lossco Business LP, which then acquired the business (the "Lossco Business”) of Lossco pursuant to the “Asset Sale Agreement”. Lossco Business LP thereafter carried on the Lossco Business with a reasonable expectation of profit (the “Continued Lossco Business”). Lossco, which had accumulated non-capital losses and investment tax credits (“ITCs”), was inactive. Taxpayer also earned income through its interests in X LP and Y LP.
Acquisition and wind-up of Lossco
A number of years later, Taxpayer will purchase all of the Lossco shares for nominal consideration and wind-up and dissolve Lossco (which is not expected to have any assets). These transactions will “permit the Taxpayer to utilize Lossco NOLs and ITCs against future income generated by the Continued Lossco Business, the XXXXXXXXXX and income generated from other similar businesses” and will “put the Taxpayer in the same position as if it had purchased all of the issued shares of Lossco, which in the circumstances of the CCAA process, was not possible at the time the Asset Sale Agreement was entered into.”
Rulings
Including that:
[T]he acquisition of the Lossco Business from Lossco by the Lossco Business LP in a separate transaction completed years prior to the Proposed Transactions as more particularly described herein; the fact that Lossco has since been inactive with no assets; and the fact that the Taxpayer carries on the Continued Lossco Business through Lossco Business LP, shall not, in and by themselves, cause: (i) the Taxpayer to fail to satisfy the requirement of paragraph 88(1.1)(b); or (ii) the Continued Loss Business to not be treated as the same as the Lossco Business for purposes of paragraph 88(1.1)(e) and subclause 88(1)(e.3)(i)(C)(I).