DATE: July 2, 1987
TO: AUDIT APPLICATIONS DIVISION K. Warren, Director
ATTENTION P. Jolie
FROM: Specialty Rulings Directorate S. Shinerock 957-2110 RE: Letter from XXXX on subsections 184(3.1) and (3.2) of the Act
We attach the original copy of a letter from XXXX which our Mr. Shinerock discussed with you recently. The letter requests our views on the application of subsections 184(3.1) and (3.2) of the Act to a situation where excessive elections made under former subsection 83(1) or existing subsection 83(2) of the Act by a predecessor to an amalgamation would subject an amalgamated corporation (Amalco)to Part III tax under either of former subsection 184(1) or existing subsection 184(2) of the Act, unless the relieving provisions of subsections 184(3.1) and (3.2) of the Act applied.
It is our view that the correct legal answer is that Amalco would be precluded from electing under either of subsections 184(3.1) of (3.2) of the Act because section 87 of the Act contains no provisions to enable Amalco to make such elections in respect of excessive elections made by a predecessor. It is also clear that the predecessor could not elect following the amalgamation because Amalco is deemed by paragraph 87(2)(a) of the Act to be a new corporation. Since we understand that you are administering this deficiency in the law in a manner that is favourable to taxpayers, we believe that it would be appropriate that you respond to XXXX letter.
We shall be drawing this matter to the attention of Current Amendments and Regulations Division.
A.G. Cockell Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch