| 19(1) | File No. 5-8971 |
| K. Astaphan | |
| (613) 957-2119 |
November 10, 1989
Dear Sirs:
Re: Subsection 88(4) and Paragraphs 88(1)(c) and (d) of the Income Tax Act (Canada) (the "Act")
This is in response to your letter of October 24, 1989 wherein you request that we confirm your understanding of our opinion of the application of the above provisions as expressed by Mr. Watson in a telephone conversation on October 16, 1989 19(1) Watson), in relation to a potential reorganization which you are considering.
Facts
24(1)
Issue
You ask whether the fair market value limit to the "bump" in subparagraph 88(1)(d)(ii) is that of the particular property at the time the parent last acquired control of the subsidiary.
It is your view 24(1)
You note that subsection 88(4) would apply for the purposes of determining whether control has been acquired for the purposes of paragraphs 88(1)(c) and (d) 24(1)
Our Comments
As what you have described is an actual fact situation, we are unable to confirm the application of the Act in the absence of a request by your clients, or by you on your client's behalf, for an advance income tax ruling.
We are, nevertheless, prepared to offer the following general comments on the interaction of subsection 88(4) and paragraphs 88(1)(c) and (d).
First, we would agree that in a hypothetical situation similar to the fact situation described by you, subsection 88(4) will apply such that the parent would not be considered to have acquired control of the subsidiary for the purposes of paragraphs 88(1)(c) and (d) by virtue of the amalgamation.
Secondly, subsection 88(4) will, in our view, also apply to deem the amalgamated corporation to be the same corporation as, and a continuation of, each predecessor for the purposes of paragraphs 88(1)(c) and (d).
In the result, in determining the limits of the "bump", subsection 88(4) would apply such that the amalgamation would effectively be ignored. Accordingly, the limit described in subparagraph 88(1)(d)(ii) would be the fair market value of the property at the time the parent last acquired control of the relevant predecessor.
The above comments are an expression of opinion and, as explained in paragraph 24 of Information Circular 70-6R, dated December 18, 1978, are not binding on Revenue Canada, Taxation.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch