7 October 2005 APFF Roundtable Q. 6, 2005-0140981C6 F - Loss Carryforward under subsection 111(5) -- summary under Paragraph 111(5)(a)

Where there is an acquisition of control of two Canadian furniture manufacturers (A and B), and B then leases all its assets to A and transfers all its employees to A, B would not be able to carry forward its pre-acquisition non-capital losses for deduction from post-acquisition profits because the loss business would now be carried on by A and not by B. However, if A and B were amalgamated, the amalgamated corporation would be able to deduct non-capital losses sustained originally by B in its first taxation year.