Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
XXXXXXXXXX
Dear Colleague:
Thank you for your letters on behalf of your constituents concerning the tax consequences for Canadian resident shareholders of XXXXXXXXXX when their XXXXXXXXXX shares were exchanged in 1998 for XXXXXXXXXX shares upon the merger of XXXXXXXXXX. I am also replying to your letter of March 8, 1999, with which you include a letter you received from XXXXXXXXXX, on the same subject.
Revenue Canada has not been involved with the XXXXXXXXXX merger; however, based on a review of public information, senior departmental officials understand that, on XXXXXXXXXX merged with
XXXXXXXXXX. On the merger, shareholders of XXXXXXXXXX, including Canadian residents, disposed of their, XXXXXXXXXX shares in exchange for XXXXXXXXXX shares. Under the Canadian Jncome Tax Act, such an exchange of shares by Canadian resident shareholders of XXXXXXXXXX ferral will apply automatically to qualifying share exchanges that occur after 1997. Accordingly, no special election needs to be filed in a shareholder's income tax return. Those shareholders who have already filed their 1998 tax returns and reported a capital gain for such a disposal of shares will be permitted to amend their returns to exclude the gain. However, should a shareholder wish to elect that the tax deferral not apply, he or she may choose instead to recognize the gain arising on the share exchange.
Should any of your constituents require additional information on this matter, I invite them to contact XXXXXXXXXX He is aware of our correspondence and will be pleased to help.
I trust my comments will assist you in replying to your constituents.
Yours sincerely,
Herb Dhaliwal, P.C., M.P.
D. Palamar/nm
957-2127
April 23, 1999