| File 902635 |
QUESTION I60
Winding-up - Cost amount of Inventory
In a winding-up to which subsection 88(1) applies, the inventory of the subsidiary is deemed by subparagraph 80(1)(a)(iii) to be disposed of by the subsidiary for proceeds equal to the cost amount thereof to the subsidiary immediately before the winding-up. The "cost amount" of inventory to a taxpayer at any time is defined in subsection 248(1) to mean its value at that time as determined for the purpose of computing the income of the taxpayer. Where the distribution of inventory to the parent on the winding-up does not coincide with the year-end of the subsidiary, is the cost amount of the inventory for the purposes of subparagraph 88(1)(a)(iii):
(a) its value immediately before the winding-up determined in accordance with the method previously adopted by the subsidiary; or
(b) its value as determined for purposes of computing the income of the subsidiary at the end of its immediately preceding taxation year?
DEPARTMENT'S POSITION
The cost amount of each property described in an inventory of the subsidiary, for purposes of subparagraph 88(1)(a)(iii), is the value of each property immediately before the winding-up determined in accordance with the valuation method previously adopted by the subsidiary.
Prepared by: Lois A. McCarron-McGuire