Principal Issues: Whether a corporation has more than one taxation year end as a result of an acquisition of control and amalgamation on the same day.
Position: Question of fact that can only be determined on a case by case basis. However, based on the stated facts there would be only one taxation year end.
Reasons: Wording of the Act and our prior positions.
XXXXXXXXXX 2004-010548 Michael Cooke January 27, 2005
Dear XXXXXXXXXX:
Re: Acquisition of Target and Amalgamation
This is in reply to your letter dated December 16, 2004 wherein you requested our opinion on the application of subsection 256(2) of the Income Tax Act (the "Act") in the following fact situation.
The facts in your letter are briefly summarized as follows:
Xco acquires all the shares of Target from an arm's-length vendor.
Xco transfers all the shares of Target to its subsidiary wholly-owned corporation ("Pco").
Target and Pco are amalgamated under subsection 87(1). No time is specified in the articles of amalgamation.
All of the above described transactions take place on the same day.
No election is filed under subsection 256(9) in respect of any acquisition of control.
The issue is whether Target would have one or more deemed taxation year ends as a result of the above take-over and amalgamation transactions.
Your request appears to relate to either a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling.
To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R5 dated May 17, 2002 ("IC 70-6R5"). However, if the situation relates to a completed transaction a request for the Canada Revenue Agency's ("CRA") views must be made to your local Tax Services Office. We can, however, provide the following comments.
As noted in your letter, our position on the interaction of subsection 256(9) and our administrative position described in paragraph 9 of IT-474 has recently been confirmed in our response to Question 4 of the 2002 APFF Convention. Essentially, Question 4 of the 2002 APFF Convention confirmed our response to Question 39 of the 1990 CTF Roundtable that involved a somewhat similar fact situation to the one you have described.
Based on the above, provided no particular time was indicated on the certificate of amalgamation of Target and Pco and no election was made under subsection 256(9) not to have that subsection apply on the acquisition of control of Target by Xco, Target would only be considered to have one taxation year that would end immediately before the commencement of the day in which the above described transactions took place.
We trust that our comments will be of assistance to you. However, as stated in paragraph 22 of Information Circular 70-6R5, the opinion expressed in this letter is not a ruling and consequently is not binding on the CRA.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch