On April 30, 2023, Canco (resident in Canada) transferred all the shares of USco (resident in the US and which, in turn, wholly-owned a US LLC) to a wholly-owned newly-incorporated Canadian holding company (“Holdco”) on a s. 85 rollover basis; and then USco was wound up into Holdco on May 1, 2023. The taxation year ends of Canco and Holdco were June 30, and that of the LLC was December 31.
(a)
Who must file the T1134 for 2023: Canco, Holdco, or both?
CRA indicated that since Canco and Holdco each held the USco shares directly for a portion of their 2023 taxation year, each would be a reporting entity that was required to file a T1134 for their 2023 taxation year – however, as a related group with the same year end, and using the same functional currency, they could designate one of them as their representative to file a single T1134 information return with the required information for both.
(b)
What are the equity percentages and the direct equity percentages of USco in the LLC to be reported in (ii) of Subsection C of Section 3 of Part I of the T1134 if USco held 50% of the shares of the LLC on June 30, 2022, 100% of those shares on December 31, 2022 and none on May 1, 2023?
After noting that “the organizational structure must be reported as it exists at the reporting taxpayer's year-end,” CRA stated:
For its fiscal period ended June 30, 2022, if Canco completes Subsection C of Part I of the T1134 information return, it will be required to indicate in item ii) that USco had a 50% equity interest in LLC, and a 50% direct equity interest in LLC.
For their fiscal period ended June 30, 2023, Canco and Holdco will have to indicate that USco had a 0% equity interest in LLC, and a 0% direct equity interest in LLC. This is the case regardless of whether Canco and Holdco each file a T1134 information return or whether a single return is filed pursuant to administrative relief for groups of related filers.
Transactions relating to the winding-up of USco must be reported in Subsection B of section 3 of Part II of the supplement filed in respect of USco.