Is the balance of the “future income tax liabilities” (being an accounting provision which was not deducted in computing income) presented in the financial statements of the subsidiary immediately before the winding-up required to be included in either of clause (B) or (C) in s. 88(1)(d)(i)? CRA responded (TaxInterpretations translation):
Respecting clause (C) of subparagraph 88(1)(d)(i), as it only applies to reserves deducted in computing the subsidiary’s income for its taxation year during which its assets were distributed to the parent on the winding-up, the balance of the “future income tax liabilities” would not be included in this clause.
Clause (B) of subparagraph 88(1)(d)(i) applies to amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the winding-up. The [CRA] position…is to consider an amount as a debt or other obligation of the subsidiary to pay an amount which is outstanding only to the extent that the amount represents a legal obligation to pay an amount. Given that this would not be the case for an amount of “future income tax liabilities” immediately before the winding-up, such an amount could not be included in such clause.