Section 88 Windup Agreement

12. April 2021    

In addition, Revenue Canada interpreted the ownership of 90 per cent of the subsidiary`s shares as an economic beneficiary. (18) This is an important element, as it means that individual shareholders will not be able to trigger subsection 88, paragraph 1, by pooling their holdings to reach the 90% threshold. In accordance with paragraph 88, paragraph 1.1, of the Income Tax Act, a subsidiary`s capital losses may be deferred and deducted when calculating the parent company`s taxable income, but only in a parent company`s tax year that is available after the subsidiary has been liquidated. Losses in the subsidiary cannot be attributed to a previous fiscal year of the parent company, which began before the start of liquidation (the creation of the subsidiary). In addition, losses incurred in the parent company cannot be attributed to a tax year by its subsidiary. Non-capital capital losses are deductible by the parent company only if they have not yet been deductible by the subsidiary for the calculation of its corporate tax income (point 88, paragraph 1.1, point b). (i) within the meaning of paragraph 1, paragraph 1, point d), (e.1), (i) and s), subsection 12.5(8), paragraph 20, paragraph 1, l), (l.1), (p) and (jj) and (jj) and 20 (7) (c), subsections 20 (22) and 20.4 (4), sections 138 1 8.1, 140, 142 and 148 and Part XII.3, the parent company is considered the same company as the subsidiary and (C) the amount of a reserve (with the other reservation covered in paragraph 20 paragraph 1) , paragraph 40, paragraph 1) (a) (a) (iii) or 44(1) (e) iii) of this law, or subsection 64(1) or (1.1) of the Income Tax Act, Chapter 148 of the Revised Statutes of Canada, 1952, as these two provisions are read just before November 3, 1981) in the calculation of the subsidiary`s income for its tax year in which its assets were divided between the parent company at the time of the liquidation , and overall, the success of Section 88 (1) in achieving these three objectives is a strong indicator of rollover corporate liquidity management in a way that integrates the interests and objectives of taxpayers as well as Revenue Canada. (ii) a share of the capital stock of another Canadian limited company which, immediately prior to the transfer, was controlled by the company within the meaning of paragraph 186, paragraph 2, and which was transferred by the company after 1978 to a person with whom the company did not act in the long term immediately after the order, with a provision other than a provision under paragraph 88 (2.2) under b) , or a new addition to sub paragraph 88(1) Rollover-Regelung is paragraph 88(1) (i) that applies to market real estate. Market-branded real estate is considered to have been sold by a financial institution at the end of each year for products corresponding to their fair value and acquired at a price equal to these products. The new paragraph 88, paragraph 1, point (i), added in 1995 essentially provides that the subsidiary`s fiscal year in which its assets were distributed as part of the liquidation procedure expired immediately before the transfer of these assets, immediately prior to the transfer of those assets. (67) As a result, ownership of the subsidiary is marked shortly before its distribution on the market and then distributed to the parent company for the same amount. Under Section 84, paragraph 2, distributions of companies to shareholders in the event of liquidation, termination or restructuring of the transaction that go beyond the share`s paid capital constitute a dividend considered a taxable dividend.

In order to avoid double taxation on the proceeds of liquidation, shareholders can reduce the amount that will be collected when calculating the taxable capital gain for the sale of shares under the dividend.