| 24(1) | 5-920814 |
| D.J. Powrie | |
| (613) 957-2109 |
Attention: 19(1)
March 24, 1992
Dear Sirs:
Re: Cost Amount of Inventory for the Purposes of Subsection 69(13)
This is in reply to your letter of March 13, 1992 in which you requested a clarification of our opinion of March 5, 1992 (our file number 5-913271) as to the meaning of the phrase "cost amount" in paragraph 69(13)(c)[FN: All statutory references in this letter are to provisions of the Income Tax Act as it reads at the date of this letter.] as it applies to property described in the inventory of predecessor corporations which amalgamate. For the sake of clarity, much of that earlier opinion is repeated here.
Subsection 69(13) deems property described in the inventory of a predecessor corporation which becomes property of the amalgamated corporation as a result of the amalgamation to have been disposed of immediately before the amalgamation for proceeds of disposition equal to the cost amount of the property immediately before the amalgamation. This disposition is deemed to take place for the purpose of determining whether subsection 69(11) is applicable to a subsequent disposition of the inventory.
Under the definition of cost amount in section 248, the cost amount of property described in a taxpayer's inventory at any time is its value at that time as determined for the purpose of computing the taxpayer's income. In our opinion, in the case of an amalgamation described in subsection 87(1), the cost amount of inventory of a predecessor corporation for the purposes of subsection 69(13) will be its cost amount as determined at the end of the predecessor's taxation year that (under paragraph 87(2)(a)) ends immediately before the amalgamation.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
Yours truly,
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch