Example 1
Son claims an ABIL under s. 50(1) with respect to his share investment in a wholly-owned corporation (Lossco), which had ceased active business operations in the year, and then transfers his shares of Lossco at the beginning of the following year to a corporation wholly-owned by his Father (Profitco) for consideration of $1, with Lossco then being wound-up into Profitco under s. 88(1).
Example 2
Brothers A and B each hold 50% of the common shares of Lossco, which had ceased active business operations in the year, with Brother B claiming an ABIL under s. 50(1). Brother B then transfers his shares of Lossco at the beginning of the following year to a corporation wholly-owned by Brother A (Profitco) for $1, Brother A sells his shares of Lossco to Profitco for their fair market value, and Lossco is liquidated into Profitco under s. 88(1).
CRA indicated that both examples represented transactions of a different type than loss consolidation transactions described in 2009-0332571R3. However, as in these two examples, there was not an acquisition of control of the Losscos by virtue of s. 256(7)(a)(i), "it appears that the restrictions provided for in paragraphs 88(1.1)(e) and 88(1.2)(c) respecting the utilization of losses other than capital losses and net capital losses would not be applicable." (TaxInterpretations translation)