XXXX V.A. Sider (613) 995-1178
February 14, 1985
Dear Sirs:
We are writing in response to your letter of December 3, 1984 concerning our interpretation of subsections 111(5), 87(2.1) and 88(1.1).
That part of paragraph 111(5)(a) preceding subparagraph (i) refers to "a business" that incurred losses. In our opinion each reference in the remaining part of paragraph 111(5)(a) to "that business" is a reference to the same business that incurred the losses. Prior to November 12, 1951 the corresponding references were to "any particular business" and "that business". Subsequent to November 12, 1981 and prior to the recent amendments, the corresponding references were to "a particular business" and "the particular business".
In our opinion these changes in wording have not resulted in any change in meaning, and our interpretation has not been affected as a result of these changes. Similarly the corresponding references in paragraph 88(1.1)(e) to "a particular business" and the subsequent references in that paragraph to "that business" do not, in our opinion, convey a different meaning than the references in subsection 111(5) just discussed.
It is a question of fact whether a business carried on at one point in time is the same business that is carried on at another point in time. IT-206R , to which you referred, expresses the Department's views on separate businesses. The Department also considers the cases to which you referred to be helpful in making this determi- nation. In addition, paragraph 7 of IT-376 describes certain factors to be considered in determining whether a particular business is being carried on.
No criteria have been developed to determine what constitutes "similar properties" or "similar services" as those phrases are used in subsection 111(5). We will develop guidelines once a sufficient number of cases have been examined.
Generally, the Department considers that the term "substantially all" means at least 90 percent.
When subsection 87(2.1) applies, for the purposes of subsection 111(3) to (5.4), a new corporation formed on an amalgamation is deemed to be the same corporation as, and a continuation of, each predecessor corporation. In such a situation it may be necessary to determine whether a loss business that was carried on by a predecessor corporation continues to be carried on by the amalgamated corporation. Although we have not developed specific guidelines for this situation, our previous comments and references concerning whether business activities carried on at different points in time constitute the same business apply to this situation as well. In the case of an amalgamation of corporations carrying on different business into one corporation that combines the different businesses into one operation, we will not necessarily consider that a loss business that was carried on by a predecessor corporation is not carried on by the amalgamated corporation solely because of a change in name or the integration of the loss business with another business previously carried on by another predecessor.
We hope these comments will he of assistance to you.
Yours truly,
for Director Corporate Rulings Division Corporate Rulings Directorate Legislation Branch