Income Tax Act
Marginal note:Amalgamations
87 (1) In this section, an amalgamation means a merger of two or more corporations each of which was, immediately before the merger, a taxable Canadian corporation (each of which corporations is referred to in this section as a “predecessor corporation”) to form one corporate entity (in this section referred to as the “new corporation”) in such a manner that
(a) all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger becomes property of the new corporation by virtue of the merger,
(b) all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger become liabilities of the new corporation by virtue of the merger, and
(c) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,
otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of that property by the other corporation or as a result of the distribution of that property to the other corporation on the winding-up of the corporation.
Marginal note:Shares deemed to have been received by virtue of merger
(1.1) For the purposes of paragraph 87(1)(c) and the Income Tax Application Rules, where there is a merger of
(a) a corporation and one or more of its subsidiary wholly-owned corporations, or
(b) two or more corporations each of which is a subsidiary wholly-owned corporation of the same corporation
any shares of the capital stock of a predecessor corporation owned by a shareholder (except any predecessor corporation) immediately before the merger that were not cancelled on the merger shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger as consideration for the disposition of the shares of the capital stock of the predecessor corporations.
Marginal note:New corporation continuation of a predecessor
(1.2) Where there has been an amalgamation of corporations described in paragraph (1.1)(a) or of two or more corporations each of which is a subsidiary wholly-owned corporation of the same person, the new corporation is, for the purposes of section 29 of the Income Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection does not affect the determination of any predecessor corporation’s fiscal period, taxable income or tax payable.
Marginal note:Definition of subsidiary wholly-owned corporation
(1.4) Notwithstanding subsection 248(1), for the purposes of this subsection and subsections 87(1.1), 87(1.2) and 87(2.11), subsidiary wholly-owned corporation of a person (in this subsection referred to as the “parent”) means a corporation all the issued and outstanding shares of the capital stock of which belong to
(a) the parent;
(b) a corporation that is a subsidiary wholly-owned corporation of the parent; or
(c) any combination of persons each of which is a person described in paragraph 87(1.4)(a) or 87(1.4)(b).
Marginal note:Definitions
(1.5) For the purpose of this section, financial institution, mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1).
Marginal note:Rules applicable
(2) Where there has been an amalgamation of two or more corporations after 1971 the following rules apply
Marginal note:Taxation year
(a) for the purposes of this Act, the corporate entity formed as a result of the amalgamation shall be deemed to be a new corporation the first taxation year of which shall be deemed to have commenced at the time of the amalgamation, and a taxation year of a predecessor corporation that would otherwise have ended after the amalgamation shall be deemed to have ended immediately before the amalgamation;
Marginal note:Inventory
(b) for the purpose of computing the income of the new corporation, where the property described in the inventory, if any, of the new corporation at the beginning of its first taxation year includes property that was described in the inventory of a predecessor corporation at the end of the taxation year of the predecessor corporation that ended immediately before the amalgamation (which taxation year of a predecessor corporation is referred to in this section as its “last taxation year”), the property so included shall be deemed to have been acquired by the new corporation at the beginning of its first taxation year for an amount determined in accordance with section 10 as the value thereof for the purpose of computing the income of the predecessor corporation for its last taxation year, except that where the income of the predecessor corporation for its last taxation year from a farming business was computed in accordance with the cash method, the amount so determined in respect of inventory owned in connection with that business shall be deemed to be the total of all amounts each of which is an amount included because of paragraph 28(1)(b) or 28(1)(c) in computing that income for that year and, where the income of the new corporation from a farming business is computed in accordance with the cash method, for the purpose of section 28,
(i) an amount equal to that total shall be deemed to have been paid by the new corporation, and
(ii) the new corporation shall be deemed to have purchased the property for an amount equal to that total,
in its first taxation year and in the course of carrying on that business;
Marginal note:Method adopted for computing income
(c) in computing the income of the new corporation for a taxation year from a business or property
(i) there shall be included any amount received or receivable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been received or receivable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been included in computing the income of the predecessor corporation for that year, and
(ii) there may be deducted any amount paid or payable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been paid or payable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been deductible in computing the income of the predecessor corporation for that year;
Marginal note:Depreciable property
(d) for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),
(i) where depreciable property of a prescribed class has been acquired by the new corporation from a predecessor corporation, the capital cost of the property to the new corporation shall be deemed to be the amount that was the capital cost of the property to the predecessor corporation, and
(ii) in determining the undepreciated capital cost to the new corporation of depreciable property of a prescribed class at any time,
(A) there shall be added to the capital cost to the new corporation of depreciable property of the class acquired before that time the cost amount, immediately before the amalgamation, to a predecessor corporation of each property included in that class by the new corporation,
(B) there shall be subtracted from the capital cost to the new corporation of depreciable property of that class acquired before that time the capital cost to the new corporation of property of that class acquired by virtue of the amalgamation,
(C) a reference in subparagraph 13(5)(b)(ii) to amounts that would have been deducted in respect of property in computing a taxpayer’s income shall be construed as including a reference to amounts that would have been deducted in respect of that property in computing a predecessor corporation’s income, and
(D) where depreciable property that is deemed by subsection 37(6) to be a separate prescribed class has been acquired by the new corporation from a predecessor corporation, the property shall continue to be deemed to be of that same separate prescribed class;
Marginal note:Depreciable property acquired from predecessor corporation
(d.1) for the purposes of this Act, where depreciable property (other than property of a prescribed class) has been acquired by the new corporation from a predecessor corporation, the new corporation shall be deemed to have acquired the property before 1972 at an actual cost equal to the actual cost of the property to the predecessor corporation, and the new corporation shall be deemed to have been allowed the total of all amounts allowed to the predecessor corporation in respect of the property, under regulations made under paragraph 20(1)(a), in computing the income of the predecessor corporation;
Marginal note:Capital property
(e) subject to paragraph 87(2)(e.4) and subsection 142.6(5), where a capital property (other than depreciable property or an interest in a partnership) has been acquired by the new corporation from a predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the adjusted cost base of the property to the predecessor corporation immediately before the amalgamation;
Marginal note:Partnership interest
(e.1) where a partnership interest that is capital property has been acquired from a predecessor corporation to which the new corporation was related, for the purposes of this Act, the cost of that partnership interest to the new corporation shall be deemed to be the amount that was the cost of that interest to the predecessor corporation and, in respect of that partnership interest, the new corporation shall be deemed to be the same corporation as and a continuation of the predecessor corporation;
Marginal note:Security or debt obligation
(e.2) subject to paragraphs 87(2)(e.3) and 87(2)(e.4) and subsection 142.6(5), where a property that is a security or debt obligation (other than a capital property or an inventory) of a predecessor corporation used by it in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money in the taxation year ending immediately before the amalgamation has been acquired by the new corporation from the predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the cost amount of the property to the predecessor corporation immediately before the amalgamation;
Marginal note:Financial institutions — specified debt obligation
(e.3) where the new corporation is a financial institution in its first taxation year, it shall be deemed, in respect of a specified debt obligation (other than a mark-to-market property) acquired from a predecessor corporation that was a financial institution in its last taxation year, to be the same corporation as, and a continuation of, the predecessor corporation;
Marginal note:Financial institutions — mark-to-market property
(e.4) where
(i) the new corporation is a financial institution in its first taxation year and a property acquired by the new corporation from a predecessor corporation is a mark-to-market property of the new corporation for the year, or
(ii) a predecessor corporation was a financial institution in its last taxation year and a property acquired by the new corporation from the predecessor corporation was a mark-to-market property of the predecessor corporation for the year,
the cost of the property to the new corporation shall be deemed to be the amount that was the fair market value of the property immediately before the amalgamation;
(e.41) if subsection 10.1(6) applied to a predecessor corporation in its last taxation year, each eligible derivative (as defined in subsection 10.1(5)) of the predecessor corporation immediately before the end of its last taxation year is deemed to have been reacquired, or reissued or renewed, as the case may be, by the new corporation at its fair market value immediately before the amalgamation;
(e.42) for the purposes of subsection 10.1(7), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Financial institutions — mark-to-market property
(e.5) for the purposes of subsections 112(5) to 112(5.2) and 112(5.4) and the definition mark-to-market property in subsection 142.2(1), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(f) [Repealed, 2016, c. 12, s. 27]
(f.1) [Repealed, 1994, c. 7, Sch. VIII, s. 37]
Marginal note:Reserves
(g) for the purpose of computing the income of the new corporation for a taxation year,
(i) any amount that has been deducted as a reserve in computing the income of a predecessor corporation for its last taxation year shall be deemed to have been deducted as a reserve in computing the income of the new corporation for a taxation year immediately preceding its first taxation year, and
(ii) any amount deducted under paragraph 20(1)(p) in computing the income of a predecessor corporation for its last taxation year or a previous taxation year shall be deemed to have been deducted under that paragraph in computing the income of the new corporation for a taxation year immediately preceding its first taxation year;
Marginal note:Continuation
(g.1) for the purposes of sections 12.4 and 26, subsection 97(3) and section 256.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Financial institution rules
(g.2) for the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(g.3) for the purposes of applying subsections 13(21.2), 18(15) and 40(3.4) to any property that was disposed of by a predecessor corporation before the amalgamation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Superficial losses — capital property
(g.4) for the purpose of applying paragraph 40(3.5)(c) in respect of any share that was acquired by a predecessor corporation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Patronage dividends
(g.5) for the purposes of section 135, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:COVID-19 – emergency subsidies
(g.6) for the purposes of section 125.7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation unless it is reasonable to consider that one of the main purposes of the amalgamation is to cause the new corporation to qualify for the deemed overpayment under any of subsections 125.7(2) to (2.2) or to increase the amount of that deemed overpayment;
Marginal note:COVID-19 — automobile benefits
(g.7) for the purposes of subsections 6(2.2) and (2.3), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:COVID-19 — air quality improvement tax credit
(g.8) for the purposes of section 127.43, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Debts
(h) for the purpose of computing a deduction from the income of the new corporation for a taxation year under paragraph 20(1)(l), 20(1)(l.1) or 20(1)(p)
(i) any debt owing to a predecessor corporation that was included in computing the income of the predecessor corporation for its last taxation year or a preceding taxation year,
(ii) where a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any loan or lending asset made or acquired by the predecessor corporation in the ordinary course of its business of insurance or the lending of money, or
(iii) where a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any instrument or commitment described in paragraph 20(1)(l.1) that was issued, made or assumed by the predecessor corporation in the ordinary course of its business of insurance or the lending of money,
and that by reason of the amalgamation, has been acquired by the new corporation, shall be deemed to be a debt owing to the new corporation that was included in computing its income for a preceding taxation year, a loan or lending asset made or acquired or an instrument or commitment that was issued, made or assumed by the new corporation in a preceding taxation year in the ordinary course of its business of insurance or the lending of money, as the case may be;
Marginal note:Debts
(h.1) for the purposes of section 61.4, the description of F in subsection 79(3), the definition forgiven amount in subsection 80(1), subsection 80.03(7) and section 80.04, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Special reserve
(i) for the purpose of computing a deduction from the income of the new corporation for a taxation year under paragraph 20(1)(n), any amount included in computing the income of a predecessor corporation from a business for its last taxation year or a previous taxation year in respect of property sold in the course of the business shall be deemed to have been included in computing the income of the new corporation from the business for a previous year in respect of that property;
Marginal note:Special reserves
(j) for the purposes of paragraphs 20(1)(m), 20(1)(m.1) and 20(1)(m.2), subsection 20(24) and section 34.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Inventory adjustment
(j.1) for the purposes of paragraph 20(1)(ii), an amount required by paragraph 12(1)(r) to be included in computing the income of a predecessor corporation for its last taxation year shall be deemed to be an amount required by paragraph 12(1)(r) to be included in computing the income of the new corporation for a taxation year immediately preceding its first taxation year;
Marginal note:Prepaid expenses and matchable expenditures
(j.2) for the purposes of subsections 18(9) and 18(9.01), section 18.1 and paragraph 20(1)(mm), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Employee benefit plans, etc.
(j.3) for the purposes of paragraphs 12(1)(n.1) to (n.3) and 20(1)(r), (s), (oo) and (pp), section 32.1, paragraph 104(13)(b), subsections 144.1(4) to (7) and Part X1.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Accrual rules
(j.4) for the purposes of subsections 12(3) and 12(9), section 12.2, subsection 20(19) and the definition adjusted cost basis in subsection 148(9) of this Act, and subsections 12(5) and (6) and paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Cancellation of lease
(j.5) for the purposes of paragraphs 20(1)(z) and 20(1)(z.1), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Continuing corporation
(j.6) for the purposes of paragraphs 12(1)(t) and (x), subsections 12(2.2) and 13(7.1), (7.4) and (24), paragraphs 13(27)(b) and (28)(c), subsections 13(29) and 18(9.1), paragraphs 20(1)(e), (e.1) and (hh), sections 20.1 and 32, paragraph 37(1)(c), subsection 39(13), subparagraphs 53(2)(c)(vi) and (h)(ii), paragraph 53(2)(s), subsections 53(2.1), 66(11.4), 66.7(11) and 127(10.2), section 139.1, subsection 152(4.3), the determination of D in the definition undepreciated capital cost in subsection 13(21) and the determination of L in the definition cumulative Canadian exploration expense in subsection 66.1(6), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Certain transfers and loans
(j.7) for the purposes of sections 74.4 and 74.5, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(j.8) [Repealed, 2013, c. 33, s. 6]
Marginal note:Part I.3 tax
(j.9) for the purpose of determining the amount deductible by the new corporation for any taxation year under section 125.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Part I.3 and Part VI tax
(j.91) for the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any corporation for any taxation year that ends before the amalgamation;
Marginal note:Subsection 125(5.1) and 157.1(1)
(j.92) for the purposes of subsection 125(5.1) and the definition eligible corporation in subsection 157.1(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Mining reclamation trusts
(j.93) for the purposes of paragraphs 12(1)(z.1) and 12(1)(z.2) and 20(1)(ss) and 20(1)(tt) and sections 107.3 and 127.41, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Film or video productions
(j.94) for the purposes of sections 125.4 and 125.5, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Non-resident entities
(j.95) for the purposes of sections 94 to 94.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Journalism organizations
(j.96) for the purposes of section 125.6, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Continuing corporation
(j.97) for the purposes of subsection 110(0.1), paragraph 110(1)(e) and subsection 110(1.31), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Certain payments to employees
(k) for the purpose of subsection 6(3), any amount received by a person from the new corporation that would, if received by the person from a predecessor corporation, be deemed for the purpose of section 5 to be remuneration for that person’s services rendered as an officer or during a period of employment, shall be deemed for the purposes of section 5 to be remuneration for services so rendered by the person;
Marginal note:Scientific research and experimental development
(l) for the purposes of section 37 and Part VIII, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Idem
(l.1) for the purposes of this paragraph, paragraph 87(2)(l.2) and section 37.1,
(i) the base period for a particular taxation year of a new corporation that has fewer than 3 preceding taxation years shall be deemed to be the period
(A) commencing on the day that
(I) is the earliest of all days each of which is a day immediately before the commencement of a taxation year of a predecessor corporation in respect of the new corporation that ended after 1976, and
(II) is in the 3 year period ending on the day immediately before the commencement of the particular year, and
(B) ending immediately before the first day of the particular taxation year,
(ii) where subparagraph 87(2)(l.1)(i) applies,
(A) in determining the qualified expenditures made by the new corporation in its base period, there shall be included the total of all amounts each of which is the qualified expenditure made by a predecessor corporation in a taxation year that commenced in the base period of the new corporation, and
(B) in determining the total of the amounts paid to the new corporation by persons referred to in subparagraphs (b)(i) to (iii) of the definition expenditure base in subsection 37.1(5) in its base period, there shall be included the total of all such amounts paid to a predecessor corporation by a person referred to in those subparagraphs in a taxation year that commenced in the base period of the new corporation,
(iii) the capital cost to the new corporation of any property that was a research property of a predecessor corporation acquired by it from the predecessor corporation shall be deemed to be the capital cost thereof to the predecessor corporation and the property shall be deemed to be a research property of the new corporation, and
(iv) each amount determined in respect of the new corporation under subparagraph 37.1(3)(b)(i) or 37.1(3)(b)(iii), as the case may be, shall be deemed to be the total of the amount otherwise determined and the total of amounts each of which is the amount determined under subparagraph 37.1(3)(b)(i) or 37.1(3)(b)(iii), as the case may be, in respect of a predecessor corporation;
Marginal note:Definition of predecessor corporation
(l.2) for the purposes of this paragraph and paragraph 87(2)(l.1), predecessor corporation includes any corporation in respect of which a predecessor corporation was a new corporation;
Marginal note:Forgiven amount
(l.21) for the purposes of section 61.3, the definition unrecognized loss in subsection 80(1) and subsection 80.01(10), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Replacement property
(l.3) where before the amalgamation property of a predecessor corporation was unlawfully taken, lost, destroyed or taken under statutory authority, or was a former business property of the predecessor corporation, for the purposes of applying sections 13 and 44 and the definition former business property in subsection 248(1) to the new corporation in respect of the property and any replacement property acquired therefor, the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation;
Marginal note:Subsection 13(4.2) election
(l.4) for the purposes of subsection 13(4.3) and paragraph 20(16.1)(b), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Contingent amount — section 143.4
(l.5) for the purposes of section 143.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Reserves
(m) for the purpose of computing the income of the new corporation for a taxation year, any amount claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing a predecessor corporation’s gain for its last taxation year from the disposition of any property shall be deemed
(i) to have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in computing the new corporation’s gain for a taxation year immediately preceding its first taxation year from the disposition of that property by it before its first taxation year, and
(ii) to be the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of that property;
Marginal note:Gift of non-qualifying security
(m.1) for the purpose of computing the new corporation’s gain under subsection 40(1.01) for any taxation year from the disposition of a property, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Gift of predecessor’s property
(m.2) for the purpose of computing the fair market value of property under subsection 248(35), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Outlays made pursuant to warranty
(n) for the purpose of section 42, any outlay or expense made or incurred by the new corporation in a taxation year, pursuant to or by virtue of an obligation described in that section incurred by a predecessor corporation, that would, if the outlay or expense had been made or incurred by the predecessor corporation in that year, have been deemed to be a loss of the predecessor corporation for that year from the disposition of a capital property shall be deemed to be a loss of the new corporation for that year from the disposition of a capital property;
Marginal note:Expiration of options previously granted
(o) for the purpose of subsection 49(2),
(i) any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,
(ii) any person to whom the option was granted who was not dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm’s length at the time that the option was granted, and
(iii) any person to whom the option was granted who was dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm’s length at the time that the option was granted;
Marginal note:Consideration for resource property disposition
(p) for the purpose of computing a deduction from the income of the new corporation for a taxation year under section 64 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, any amount that has been included in computing the income of a predecessor corporation for its last taxation year or a previous taxation year by reason of subsection 59(1) or paragraph 59(3.2)(c) of this Act, of subsection 59(3) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or of subsection 83A(5ba) or (5c) of that Act as it read in its application to a taxation year before the 1972 taxation year, shall be deemed to have been included in computing the income of the new corporation for a previous year by virtue thereof;
Marginal note:Registered plans
(q) for the purposes of sections 147, 147.1 and 147.2 and any regulations made under subsection 147.1(18), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Employees profit sharing plan
(r) an election made under subsection 144(10) by a predecessor corporation is deemed to be an election made by the new corporation;
Marginal note:Tax deferred cooperative shares
(s) for the purpose of section 135.1, if the new corporation is, at the beginning of its first taxation year, an agricultural cooperative corporation (within the meaning assigned by subsection 135.1(1)),
(i) the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation that was an agricultural cooperative corporation at the end of the predecessor corporation’s last taxation year, and
(ii) if, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition tax deferred cooperative share in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the “old share”) that was, at the end of the predecessor corporation’s last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange;
Marginal note:Deemed SIFT wind-up corporation
(s.1) if a predecessor corporation was a SIFT wind-up corporation immediately before the amalgamation, the new corporation is deemed to be a SIFT wind-up corporation;
Marginal note:Pre-1972 capital surplus on hand
(t) for the purpose of subsection 88(2.1), any capital property owned by a predecessor corporation on December 31, 1971 that was acquired by the new corporation by virtue of the amalgamation shall be deemed to have been acquired by the new corporation before 1972 at an actual cost to it equal to the actual cost of the property to the predecessor corporation;
Marginal note:Shares of foreign affiliate
(u) where one or more shares of the capital stock of a foreign affiliate of a predecessor corporation have, by virtue of the amalgamation, been acquired by the new corporation and as a result of the acquisition the affiliate has become a foreign affiliate of the new corporation,
(i) for the purposes of subsection 91(5) and paragraph 92(1)(b), any amount required by section 92 to be added or deducted, as the case may be, in computing the adjusted cost base of any such share to the predecessor corporation before the amalgamation shall be deemed to have been so required to be added or deducted, as the case may be, in computing the adjusted cost base of the share to the new corporation, and
(ii) for the purposes of subsections 93(2.01), (2.11), (2.21) and (2.31), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;
Marginal note:Gifts
(v) for the purposes of section 110.1, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation with respect to gifts;
Marginal note:Taxable dividends
(x) for the purposes of subsections 112(3) to 112(4.22),
(i) any taxable dividend received on a share that was deductible from the predecessor corporation’s income for a taxation year under section 112 or subsection 138(6) is deemed to be a taxable dividend received on the share by the new corporation that was deductible from the new corporation’s income under section 112 or subsection 138(6), as the case may be,
(ii) any dividend (other than a taxable dividend) received on a share by the predecessor corporation is deemed to have been received on the share by the new corporation, and
(iii) a share acquired by the new corporation from a predecessor corporation is deemed to have been owned by the new corporation throughout any period of time throughout which it was owned by a predecessor corporation;
Marginal note:Contributed surplus
(y) for the purposes of subsections 84(1) and 84(10), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(y.1) [Repealed, 1998, c. 19, s. 117]
Marginal note:Foreign tax carryover
(z) for the purposes of determining the new corporation’s unused foreign tax credit (within the meaning of subsection 126(7)) in respect of a country for any taxation year and determining the extent to which subsection 126(2.3) applies to reduce the amount that may be claimed by the new corporation under paragraph 126(2)(a) in respect of an unused foreign tax credit in respect of a country for a taxation year, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph shall in no respect affect the determination of
(i) the fiscal period of the new corporation or any of its predecessor corporations, or
(ii) the tax payable under this Act by any predecessor corporation;
Marginal note:Capital dividend account
(z.1) for the purposes of computing the capital dividend account of the new corporation, it shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, other than a predecessor corporation to which subsection 83(2.1) would, if a dividend were paid immediately before the amalgamation and an election were made under subsection 83(2) in respect of the full amount of that dividend, apply to deem any portion of the dividend to be paid by the predecessor corporation as a taxable dividend;
Marginal note:Application of Parts III and III.1
(z.2) for the purposes of Parts III and III.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Refundable dividend tax on hand
(aa) if the new corporation was a private corporation immediately after the amalgamation, the following rules apply:
(i) for the purpose of computing the eligible refundable dividend tax on hand and non-eligible refundable dividend tax on hand (as defined in subsection 129(4)) of the new corporation at the end of its first taxation year there shall be added to the total determined under those definitions in respect of the new corporation for the year
(A) in respect of the new corporation’s eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the total of all amounts each of which is the portion, if any, of its dividend refund for its last taxation year from its eligible refundable dividend tax on hand determined under subparagraph 129(1)(a)(i) or clause 129(1)(a)(ii)(B), and
(B) in respect of the new corporation’s non-eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the non-eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the portion, if any, of its dividend refund for its last taxation year from its non-eligible refundable dividend tax on hand determined under clause 129(1)(a)(ii)(A), and
(ii) no amount shall be added under this paragraph in respect of a predecessor corporation
(A) that was not a private corporation at the end of its last taxation year, or
(B) where subsection 129(1.2) would have applied to deem a dividend paid by the predecessor corporation immediately before the amalgamation not to be a taxable dividend for the purpose of subsection 129(1);
Marginal note:Mutual fund and investment corporations
(bb) where the new corporation is a mutual fund corporation or an investment corporation, there shall be added to
(i) the amount determined under each of paragraphs (a) and (b) of the definition capital gains dividend account in subsection 131(6), and
(ii) the values of A and B in the definition refundable capital gains tax on hand in that subsection
in respect of the new corporation at any time the amounts so determined and the values of those factors immediately before the amalgamation in respect of each predecessor corporation that was, immediately before the amalgamation, a mutual fund corporation or an investment corporation;
Marginal note:Flow-through entities
(bb.1) where a predecessor corporation was, immediately before the amalgamation, an investment corporation, a mortgage investment corporation or a mutual fund corporation and the new corporation is an investment corporation, a mortgage investment corporation or a mutual fund corporation, as the case may be, for the purpose of section 39.1, the new corporation is deemed to be the same corporation as, and a continuation of, the predecessor corporation;
Marginal note:Non-resident-owned investment corporation
(cc) in the case of a new corporation that is a non-resident-owned investment corporation,
(i) for the purpose of computing its allowable refundable tax on hand (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had allowable refundable tax on hand immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition allowable refundable tax on hand in subsection 133(9),
(ii) for the purpose of computing its capital gains dividend account (within the meaning assigned by subsection 133(8)) at any time, where a predecessor corporation had an amount in its capital gains dividend account immediately before the amalgamation, that amount shall be added to the amount determined under paragraph (a) of the description of A in the definition capital gains dividend account in subsection 133(8), and
(iii) for the purpose of computing its cumulative taxable income (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had cumulative taxable income immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition cumulative taxable income in subsection 133(9);
Marginal note:Public corporation
(ii) where a predecessor corporation was a public corporation immediately before the amalgamation, the new corporation shall be deemed to have been a public corporation at the commencement of its first taxation year;
Marginal note:Interest on certain obligations
(jj) for the purposes of paragraph 81(1)(m), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Disposition of shares of controlled corporation
(kk) for the purposes of paragraph 40(2)(h),
(i) where a corporation was controlled, directly or indirectly in any manner whatever, by a predecessor corporation immediately before the amalgamation and has, by reason of the amalgamation, become controlled, directly or indirectly in any manner whatever, by the new corporation, the new corporation shall be deemed to have acquired control of the corporation so controlled at the time control thereof was acquired by the predecessor corporation, and
(ii) where a predecessor corporation was immediately before the amalgamation controlled, directly or indirectly in any manner whatever, by a corporation that, immediately after the amalgamation, controlled, directly or indirectly in any manner whatever, the new corporation, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Para. 20(1)(n) and subpara. 40(1)(a)(iii) amounts
(ll) notwithstanding any other provision of this Act, where any property was disposed of by a predecessor corporation, the new corporation shall, in computing
(i) the amount of any deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business, and
(ii) the amount of its claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property,
be deemed to be the same corporation as, and a continuation of, the predecessor corporation;
(mm) [Repealed, 2013, c. 34, s. 223]
Marginal note:Refundable Part VII tax on hand
(nn) for the purpose of computing the refundable Part VII tax on hand of the new corporation at the end of any taxation year, there shall be added to the total determined under paragraph 192(3)(a) the total of all amounts each of which is the amount, if any, by which
(i) a predecessor corporation’s refundable Part VII tax on hand at the end of its last taxation year
exceeds
(ii) the predecessor corporation’s Part VII refund for its last taxation year;
(oo) [Repealed, 2019, c. 29, s. 11]
Marginal note:Refundable investment tax credit and balance-due day
(oo.1) for the purpose of applying the definition qualifying corporation in subsection 127.1(2), and subparagraph (d)(i) of the definition balance-due day in subsection 248(1), to any corporation, the new corporation is deemed to have had
(i) a particular taxation year that
(A) where it was associated with another corporation in the new corporation’s first taxation year, ended in the calendar year that precedes the calendar year in which that first year ends, and
(B) where clause 87(2)(oo.1)(i)(A) does not apply, immediately precedes that first year,
(ii) taxable income for the particular year (determined before taking into consideration the specified future tax consequences for the particular year) equal to the total of all amounts each of which is a predecessor corporation’s taxable income for its taxation year that ended immediately before the amalgamation (determined before taking into consideration the specified future tax consequences for that year),
(iii) a business limit for the particular year equal to the total of all amounts each of which is a predecessor corporation’s business limit for its taxation year that ended immediately before the amalgamation, and
(iv) a qualifying income limit for the particular year equal to the total of all amounts each of which is a predecessor corporation’s qualifying income limit for its taxation year that ended immediately before the amalgamation;
Marginal note:Cumulative offset account computation
(pp) for the purpose of computing the cumulative offset account (within the meaning assigned by subsection 66.5(2)) of the new corporation at any time, there shall be added to the total otherwise determined under paragraph 66.5(2)(a) the total of all amounts each of which is the amount, if any, by which
(i) a predecessor corporation’s cumulative offset account at the end of its last taxation year
exceeds
(ii) the amount deducted under subsection 66.5(1) in computing the predecessor corporation’s income for its last taxation year;
Marginal note:Continuation of corporation
(qq) for the purpose of computing the new corporation’s investment tax credit at the end of any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any predecessor corporation;
Marginal note:Tax on taxable preferred shares
(rr) for the purposes of subsections 112(2.9), 191(4), and 191.1(2) and 191.1(4), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Transferred liability for Part VI.1 tax
(ss) for the purposes of section 191.3, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Livestock — inclusion of deferred amount
(tt) for the purposes of subsections 80.3(3) and 80.3(5), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Fuel tax rebates
(uu) for the purposes of paragraph 12(1)(x.1), the description of D.1 in the definition non-capital loss in subsection 111(8), and subsections 111(10) and 111(11), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:General rate income pool
(vv) if the new corporation is a Canadian-controlled private corporation or a deposit insurance corporation in its first taxation year, in computing its general rate income pool at the end of that first taxation year there shall be added the total of all amounts determined under subsection 89(5) in respect of the corporation for that first taxation year;
Marginal note:Low rate income pool
(ww) if the new corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation in its first taxation year, there shall be added in computing its low rate income pool at any time in that first taxation year the total of all amounts determined under subsection 89(9) in respect of the corporation for that first taxation year; and
(xx) for the purposes of Part VI.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation.
Marginal note:Application of s. 37.1(5)
(2.01) The definitions in subsection 37.1(5) apply to subsection 87(2).
Marginal note:Non-capital losses, etc., of predecessor corporations
(2.1) Where there has been an amalgamation of two or more corporations, for the purposes only of
(a) determining the new corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss, as the case may be, for any taxation year, and
(b) determining the extent to which subsections 111(3) to 111(5.4) and paragraph 149(10)(c) apply to restrict the deductibility by the new corporation of any non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss, as the case may be,
the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection shall in no respect affect the determination of
(c) the fiscal period of the new corporation or any of its predecessors,
(d) the income of the new corporation or any of its predecessors, or
(e) the taxable income of, or the tax payable under this Act by, any predecessor corporation.
Marginal note:Vertical amalgamations
(2.11) Where a new corporation is formed by the amalgamation of a particular corporation and one or more of its subsidiary wholly-owned corporations, the new corporation is deemed to be the same corporation as, and a continuation of, the particular corporation for the purposes of applying sections 111 and 126, subsections 127(5) to 127(26) and 181.1(4) to 181.1(7), Part IV and subsections 190.1(3) to 190.1(6) in respect of the particular corporation.
Marginal note:Amalgamation of insurers
(2.2) Where there has been an amalgamation and one or more of the predecessor corporations was an insurer, the new corporation is, notwithstanding subsection (2), deemed, for the purposes of paragraphs 12(1)(d), (e), (e.1), (i) and (s), subsection 12.5(8), paragraphs 20(1)(l), (l.1), (p) and (jj) and 20(7)(c), subsections 20(22) and 20.4(4), sections 138, 138.1, 140, 142 and 148 and Part XII.3, to be the same corporation as, and a continuation of, each of those predecessor corporations.
Marginal note:Quebec credit unions
(2.3) For the purpose of applying this section to an amalgamation governed by section 689 of An Act respecting financial services cooperatives, R.S.Q., c. C-67.3, an investment deposit of a credit union is deemed to be a share of a separate class of the capital stock of a predecessor corporation in respect of the amalgamation the adjusted cost base and paid up capital of which to the credit union is equal to the adjusted cost base to the credit union of the investment deposit immediately before the amalgamation if
(a) immediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act, R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; and
(b) on the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.
Marginal note:Computation of paid-up capital
(3) Subject to subsection 87(3.1), where there is an amalgamation or a merger of 2 or more Canadian corporations, in computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,
(a) there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this subsection, in respect of all the shares of the capital stock of the new corporation immediately after the amalgamation or merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share (except a share held by any other predecessor corporation) of the capital stock of a predecessor corporation immediately before the amalgamation or merger, that
(i) the paid-up capital, determined without reference to this subsection, of the particular class of shares of the capital stock of the new corporation immediately after the amalgamation or merger
is of
(ii) the paid-up capital, determined without reference to this subsection, in respect of all of the issued and outstanding shares of the capital stock of the new corporation immediately after the amalgamation or merger; and
(b) there shall be added an amount equal to the lesser of
(i) the amount, if any, by which
(A) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the new corporation before the particular time
exceeds
(B) the total that would be determined under clause 87(3)(b)(i)(A) if this Act were read without reference to paragraph 87(3)(a), and
(ii) the amount required by paragraph 87(3)(a) to be deducted in computing the paid-up capital of shares of the particular class.
Marginal note:Election for non-application of subsection (3)
(3.1) Where,
(a) there is an amalgamation of 2 or more corporations,
(b) all of the issued shares, immediately before the amalgamation, of each class of shares (other than a class of shares all of the issued shares of which were cancelled on the amalgamation) of the capital stock of each predecessor corporation (in this subsection referred to as the “exchanged class”) are converted into all of the issued shares, immediately after the amalgamation, of a separate class of shares of the capital stock of the new corporation (in this subsection referred to as the “substituted class”),
(c) immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, and
(d) the new corporation elects in its return of income filed in accordance with section 150 for its first taxation year to have the provisions of this subsection apply,
for the purpose of computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,
(e) subsection 87(3) does not apply in respect of the amalgamation, and
(f) each substituted class shall be deemed to be the same as, and a continuation of, the exchanged class from which it was converted.
Marginal note:Shares of predecessor corporation
(4) Where there has been an amalgamation of two or more corporations after May 6, 1974, each shareholder (except any predecessor corporation) who, immediately before the amalgamation, owned shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”) that were capital property to the shareholder and who received no consideration for the disposition of those shares on the amalgamation, other than shares of the capital stock of the new corporation (in this subsection referred to as the “new shares”), shall be deemed
(a) to have disposed of the old shares for proceeds equal to the total of the adjusted cost bases to the shareholder of those shares immediately before the amalgamation, and
(b) to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) that
(i) the fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder,
is of
(ii) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply:
(c) the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of
(i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, and
(ii) the fair market value of the old shares immediately before the amalgamation,
(d) the shareholder’s capital loss from the disposition of the old shares shall be deemed to be nil, and
(e) the cost to the shareholder of any new shares of any class of the capital stock of the new corporation acquired by the shareholder on the amalgamation shall be deemed to be that proportion of the lesser of
(i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, and
(ii) the total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old shares
that
(iii) the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholder
is of
(iv) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder.
Marginal note:Exchanged shares
(4.1) For the purposes of the definition term preferred share in subsection 248(1), where there has been an amalgamation of two or more corporations after November 16, 1978 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued in consideration for the disposition of a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share,
(a) the new share shall be deemed to have been issued at the time the exchanged share was issued;
(b) if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; and
(c) the new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.
Marginal note:Idem
(4.2) Where there has been an amalgamation or merger of two or more corporations after November 27, 1986 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued to a shareholder in consideration for the disposition of a share by that shareholder of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share, for the purposes of applying the provisions of this subsection, subsections 112(2.2) and 112(2.4), Parts IV.1 and VI.1, section 258 and the definitions grandfathered share, short-term preferred share, taxable preferred share and taxable RFI share in subsection 248(1) to the new share, the following rules apply:
(a) the new share shall be deemed to have been issued at the time the exchanged share was issued;
(b) where the exchanged share was a share described in paragraph (a), (b), (c) or (d) of the definition grandfathered share in subsection 248(1), the new share shall be deemed to be the same share as the exchanged share for the purposes of that definition;
(c) the new share shall be deemed to have been acquired by the shareholder at the time the exchanged share was acquired by the shareholder;
(d) the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(e) an election made under subsection 191.2(1) by a predecessor corporation with respect to the class of shares of its capital stock to which the exchanged share belonged shall be deemed to be an election made by the new corporation with respect to the class of shares of its capital stock to which the new share belongs; and
(f) where the terms or conditions of the exchanged share or an agreement in respect of the exchanged share specify an amount in respect of the exchanged share for the purposes of subsection 191(4) and an amount equal to the amount so specified in respect of the exchanged share is specified in respect of the new share for the purposes of subsection 191(4),
(i) for the purposes of subparagraphs 191(4)(d)(i) and 191(4)(e)(i), the new share shall be deemed to have been issued for the same consideration as that for which the exchanged share was issued and to have been issued for the purpose for which the exchanged share was issued,
(ii) for the purposes of subparagraphs 191(4)(d)(ii) and 191(4)(e)(ii), the new share shall be deemed to be the same share as the exchanged share and to have been issued for the purpose for which the exchanged share was issued, and
(iii) where the shareholder received no consideration for the disposition of the exchanged share other than the new share, for the purposes of subsection 191(4),
(A) in the case of an exchanged share to which subsection 191(4) applies because of paragraph 191(4)(a), the new share shall be deemed to have been issued for consideration having a fair market value equal to the consideration for which the exchanged share was issued, and
(B) in the case of an exchanged share to which subsection 191(4) applies because of an event described in paragraph 191(4)(b) or 191(4)(c), the consideration for which the new share was issued shall be deemed to have a fair market value equal to the fair market value of the exchanged share immediately before the time that event occurred.
Marginal note:Exchanged rights
(4.3) Where there has been an amalgamation or merger of two or more corporations after June 18, 1987 and a right listed on a designated stock exchange to acquire a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new right”) was acquired by a shareholder in consideration for the disposition of a right described in paragraph (d) of the definition grandfathered share in subsection 248(1) to acquire a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged right”), the new right shall be deemed to be the same right as the exchanged right for the purposes of paragraph (d) of the definition grandfathered share in subsection 248(1) where the terms and conditions of the new right were the same as, or substantially the same as, the terms and conditions of the exchanged right and the terms and conditions of the share receivable on an exercise of the new right were the same as, or substantially the same as, the terms and conditions of the share that would have been received on an exercise of the exchanged right.
Marginal note:Flow-through shares
(4.4) Where
(a) there is an amalgamation of two or more corporations each of which is a principal-business corporation (within the meaning assigned by subsection 66(15)) or a corporation that at no time carried on business,
(b) a predecessor corporation entered into an agreement with a person at a particular time for consideration given by the person to the predecessor corporation,
(c) for the consideration under the agreement
(i) a share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or
(ii) a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and
(d) the new corporation
(i) issues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, or
(ii) is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,
for the purposes of subsection 66(12.66) and Part XII.6 and for the purposes of renouncing an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses that would, but for the renunciation, be incurred by the new corporation after the amalgamation,
(e) the person shall be deemed to have given the consideration under the agreement to the new corporation for the issue of the new share,
(f) the agreement shall be deemed to have been entered into between the new corporation and the person at the particular time,
(g) the new share shall be deemed to be a flow-through share of the new corporation, and
(h) the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation.
Marginal note:Options to acquire shares of predecessor corporation
(5) Where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who immediately before the amalgamation owned a capital property that was an option to acquire shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old option”) and who received no consideration for the disposition of that option on the amalgamation, other than an option to acquire shares of the capital stock of the new corporation (in this subsection referred to as the “new option”), shall be deemed
(a) to have disposed of the old option for proceeds equal to the adjusted cost base to the taxpayer of that option immediately before the amalgamation, and
(b) to have acquired the new option at a cost to the taxpayer equal to the proceeds described in paragraph 87(5)(a),
and where the old option was taxable Canadian property of the taxpayer, the new option is deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the taxpayer.
Marginal note:Adjusted cost base of option
(5.1) Where the cost to a taxpayer of a new option is determined at any time under subsection 87(5),
(a) there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the new option the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the old option; and
(b) the amount determined under paragraph 87(5.1)(a) shall be added after that time in computing the adjusted cost base to the taxpayer of the new option.
Marginal note:Obligations of predecessor corporation
(6) Notwithstanding subsection (7), where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who, immediately before the amalgamation, owned a capital property that was a bond, debenture, mortgage, hypothecary claim, note or other similar obligation of a predecessor corporation (in this subsection referred to as the “old property”) and who received no consideration for the disposition of the old property on the amalgamation other than a bond, debenture, mortgage, hypothecary claim, note or other similar obligation respectively, of the new corporation (in this subsection referred to as the “new property”) is, if the amount payable to the holder of the new property on its maturity is the same as the amount that would have been payable to the holder of the old property on its maturity, deemed
(a) to have disposed of the old property for proceeds equal to the adjusted cost base to the taxpayer of that property immediately before the amalgamation; and
(b) to have acquired the new property at a cost to the taxpayer equal to the proceeds described in paragraph 87(6)(a).
Marginal note:Adjusted cost base
(6.1) Where the cost to a taxpayer of a particular property that is a bond, debenture or note is determined at any time under subsection 87(6) and the terms of the bond, debenture or note conferred upon the holder the right to exchange that bond, debenture or note for shares,
(a) there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the bond, debenture or note the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the property for which the particular property was exchanged at that time; and
(b) the amount determined under paragraph 87(6.1)(a) in respect of the particular property shall be added after that time in computing the adjusted cost base to the taxpayer of the particular property.
Marginal note:Idem
(7) Where there has been an amalgamation of two or more corporations after May 6, 1974 and
(a) a debt or other obligation of a predecessor corporation that was outstanding immediately before the amalgamation became a debt or other obligation of the new corporation on the amalgamation, and
(b) the amount payable by the new corporation on the maturity of the debt or other obligation, as the case may be, is the same as the amount that would have been payable by the predecessor corporation on its maturity,
the provisions of this Act
(c) shall not apply in respect of the transfer of the debt or other obligation to the new corporation, and
(d) shall apply as if the new corporation had incurred or issued the debt or other obligation at the time it was incurred or issued by the predecessor corporation under the agreement made on the day on which the predecessor corporation made an agreement under which the debt or other obligation was issued,
except that, for the purposes of the definition income bond or income debenture in subsection 248(1), paragraph 87(7)(d) shall not apply to any debt or other obligation of the new corporation unless the terms and conditions thereof immediately after the amalgamation are the same as, or substantially the same as, the terms and conditions of the debt or obligation that was an income bond or income debenture of the predecessor corporation immediately before the amalgamation.
Marginal note:Foreign merger
(8) Subject to subsection 95(2), where there has been a foreign merger in which a taxpayer’s shares or options to acquire shares of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares or options to acquire shares of the capital stock of the new foreign corporation or the foreign parent corporation, unless the taxpayer elects in the taxpayer’s return of income for the taxation year in which the foreign merger took place not to have this subsection apply, subsections (4) and (5) apply to the taxpayer as if the references in those subsections to
(a) “amalgamation” were read as “foreign merger”;
(b) “predecessor corporation” were read as “predecessor foreign corporation”; and
(c) “new corporation” were read as “new foreign corporation or the foreign parent corporation”.
Marginal note:Definition of foreign merger
(8.1) For the purposes of this section, foreign merger means a merger or combination of two or more corporations each of which was, immediately before the merger or combination, resident in a country other than Canada (each of which is in this section referred to as a “predecessor foreign corporation”) to form one corporate entity resident in a country other than Canada (in this section referred to as the “new foreign corporation”) in such a manner that, and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation,
(a) all or substantially all the property (except amounts receivable from any predecessor foreign corporation or shares of the capital stock of any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination becomes property of the new foreign corporation as a consequence of the merger or combination;
(b) all or substantially all the liabilities (except amounts payable to any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination become liabilities of the new foreign corporation as a consequence of the merger or combination; and
(c) all or substantially all of the shares of the capital stock of the predecessor foreign corporations (except any shares or options owned by any predecessor foreign corporation) are exchanged for or become, because of the merger or combination,
(i) shares of the capital stock of the new foreign corporation, or
(ii) if, immediately after the merger, the new foreign corporation was controlled by another corporation (in this section referred to as the “foreign parent corporation”) that was resident in a country other than Canada, shares of the capital stock of the foreign parent corporation.
Marginal note:Absorptive mergers
(8.2) For the purposes of the definition foreign merger in subsection (8.1), if there is a merger or combination, otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation, of two or more non-resident corporations (each of which is referred to in this subsection as a “predecessor foreign corporation”), as a result of which one or more predecessor foreign corporations ceases to exist and, immediately after the merger or combination, another predecessor foreign corporation (referred to in this subsection as the “survivor corporation”) owns properties (except amounts receivable from, or shares of the capital stock of, any predecessor foreign corporation) representing all or substantially all of the fair market value of all such properties owned by each predecessor foreign corporation immediately before the merger or combination, then
(a) the merger or combination is deemed to be a merger or combination of the predecessor foreign corporations to form one non-resident corporation;
(b) the survivor corporation is deemed to be the non-resident corporation so formed;
(c) all of the properties of the survivor corporation immediately before the merger or combination that are properties of the survivor corporation immediately after the merger or combination are deemed to become properties of the survivor corporation as a consequence of the merger or combination;
(d) all of the liabilities of the survivor corporation immediately before the merger or combination that are liabilities of the survivor corporation immediately after the merger or combination are deemed to become liabilities of the survivor corporation as a consequence of the merger or combination;
(e) all of the shares of the capital stock of the survivor corporation that were outstanding immediately before the merger or combination that are shares of the capital stock of the survivor corporation immediately after the merger or combination are deemed to become shares of the capital stock of the survivor corporation as a consequence of the merger or combination; and
(f) all of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.
Marginal note:Anti-avoidance
(8.3) Subsection (8) does not apply in respect of a taxpayer’s shares of the capital stock of a predecessor foreign corporation that are exchanged for or become, on a foreign merger, shares of the capital stock of the new foreign corporation or the foreign parent corporation, if
(a) the new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;
(b) shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; and
(c) the foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, to
(i) a person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length immediately after the transaction, event or series, or
(ii) a partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).
Marginal note:Taxable Canadian property — conditions for rollover
(8.4) Subsection (8.5) applies at any time if
(a) there is at that time a foreign merger of two or more predecessor foreign corporations (within the meaning assigned by subsection (8.1), if that subsection and subsection (8.2) were read without reference to the expression “otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation”) that were, immediately before that time,
(i) resident in the same country, and
(ii) related to each other (determined without reference to paragraph 251(5)(b));
(b) because of the foreign merger,
(i) a predecessor foreign corporation (referred to in this subsection and subsection (8.5) as the “disposing predecessor foreign corporation”) disposes of a property (referred to in this subsection and subsection (8.5) as the “subject property”) that is, at that time,
(A) a taxable Canadian property (other than treaty-protected property) of the disposing predecessor foreign corporation, and
(B) any of the following:
(I) a share of the capital stock of a corporation,
(II) an interest in a partnership, and
(III) an interest in a trust, and
(ii) the subject property becomes property of a corporation that is a new foreign corporation for the purposes of subsection (8.1);
(c) no shareholder (except any predecessor foreign corporation) that owned shares of the capital stock of a predecessor foreign corporation immediately before the foreign merger received consideration for the disposition of those shares on the foreign merger, other than shares of the capital stock of the new foreign corporation;
(d) if the subject property is a share of the capital stock of a corporation or an interest in a trust, the corporation or trust is not, at any time in the 24-month period beginning at that time, as part of a transaction or event, or series of transactions or events including the foreign merger, subject to a loss restriction event; and
(e) the new foreign corporation and the disposing predecessor foreign corporation jointly elect in writing under this paragraph in respect of the foreign merger and file the election with the Minister on or before the filing-due date of the disposing predecessor foreign corporation (or the date that would be its filing-due date, if subsection (8.5) did not apply in respect of the disposition of the subject property) for the taxation year that includes that time.
Marginal note:Foreign merger — taxable Canadian property rollover
(8.5) If this subsection applies at any time,
(a) if the subject property is an interest in a partnership,
(i) the disposing predecessor foreign corporation is deemed not to dispose of the subject property (other than for the purposes of subsection (8.4)), and
(ii) the new foreign corporation is deemed
(A) to have acquired the subject property at a cost equal to the cost of the subject property to the disposing predecessor foreign corporation, and
(B) to be the same corporation as, and a continuation of, the disposing predecessor foreign corporation in respect of the subject property; and
(b) if the subject property is a share of the capital stock of a corporation or an interest in a trust,
(i) the subject property is deemed to have been disposed of at that time by the disposing predecessor foreign corporation to the new foreign corporation (that is referred to in subparagraph (8.4)(b)(ii)) for proceeds of disposition equal to the adjusted cost base of the subject property to the disposing predecessor foreign corporation immediately before that time, and
(ii) the cost of the subject property to the new foreign corporation is deemed to be the amount that is deemed by subparagraph (i) to be the proceeds of disposition of the subject property.
Marginal note:Rules applicable in respect of certain mergers
(9) Where there has been a merger of two or more taxable Canadian corporations to form a new corporation that was controlled, immediately after the merger, by a taxable Canadian corporation (in this subsection referred to as the “parent”) and, on the merger, shares of the capital stock of the parent (in this subsection referred to as “parent shares”) were issued by the parent to persons who were, immediately before the merger, shareholders of a predecessor corporation, the following rules apply:
(a) for the purposes of paragraph 87(1)(c), subsection 87(4) and the Income Tax Application Rules, any parent shares received by a shareholder of a predecessor corporation shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger;
(a.1) for the purposes of subsections 87(4.1) and 87(4.2), a parent share issued to a shareholder in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation shall be deemed to be a share of a class of the capital stock of the new corporation that was issued in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation by that shareholder;
(a.2) for the purposes of subsection 87(4.3), a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the parent shall be deemed to be a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the new corporation;
(a.21) for the purpose of paragraph (4.4)(d)
(i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and
(ii) any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;
(a.3) for the purpose of applying subsection 87(5) in respect of the merger, the reference in that subsection to “the new corporation” shall be read as a reference to “the parent”;
(a.4) for the purpose of paragraph 87(9)(c), any shares of the new corporation acquired by the parent on the merger shall be deemed to be new shares;
(a.5) for the purpose of applying subsection 87(10) in respect of the merger,
(i) the reference in paragraph 87(10)(b) to “the new corporation” shall be read as a reference to “the new corporation or the parent, within the meaning assigned by subsection 87(9)”, and
(ii) the references in paragraphs 87(10)(c) and 87(10)(f) to “the new corporation” shall be read as references to “the public corporation described in paragraph 87(9)(b)”.
(b) in computing, at any particular time, the paid-up capital in respect of any particular class of shares of the capital stock of the parent that included parent shares immediately after the merger
(i) there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this paragraph, in respect of all the shares of the capital stock of the parent immediately after the merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share of the capital stock of the parent or a predecessor corporation (other than any share of a predecessor corporation owned by the parent or by another predecessor corporation and any share of a predecessor corporation owned by a shareholder other than the parent or another predecessor corporation that was not exchanged on the merger for parent shares) immediately before the merger that
(A) the paid-up capital, determined without reference to this paragraph, in respect of that particular class of shares of the capital stock of the parent immediately after the merger
is of
(B) the paid-up capital, determined without reference to this paragraph, in respect of all the issued and outstanding shares of the classes of the capital stock of the parent that included parent shares immediately after the merger, and
(ii) there shall be added an amount equal to the lesser of
(A) the amount, if any, by which
(I) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the parent before the particular time
exceeds
(II) the total that would be determined under subclause 87(9)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 87(9)(b)(i), and
(B) the amount required by subparagraph 87(9)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class; and
(c) notwithstanding paragraph 87(4)(b), the parent shall be deemed to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost equal to the total of
(i) the amount otherwise determined under paragraph 87(4)(b) to be the cost of those shares, and
(ii) in any case where the parent owned, immediately after the merger, all the issued shares of the capital stock of the new corporation, such portion of
(A) the amount, if any, by which
(I) the amount by which the total of the money on hand of the new corporation and all amounts each of which is the cost amount to the new corporation of a property owned by it, immediately after the merger, exceeds the total of all amounts each of which is the amount of any debt owing by the new corporation, or of any other obligation of the new corporation to pay any amount, that was outstanding immediately after the merger,
exceeds
(II) the total of the adjusted cost bases to the parent of all shares of the capital stock of each predecessor corporation beneficially owned by it immediately before the merger
as is designated by the parent in respect of the shares of that particular class in its return of income under this Part for its taxation year in which the merger occurred, except that
(B) in no case shall the amount so designated in respect of the shares of a particular class exceed the amount, if any, by which the total fair market value, immediately after the merger, of the shares of that particular class issued by virtue of the merger exceeds the cost of those shares to the parent determined without reference to this paragraph, and
(C) in no case shall the total of the amounts so designated in respect of the shares of each class of the capital stock of the new corporation exceed the amount determined under clause 87(9)(c)(ii)(A).
Marginal note:Share deemed listed
(10) Where
(a) a new corporation is formed as a result of an amalgamation,
(b) the new corporation is a public corporation,
(c) the new corporation issues a share (in this subsection referred to as the “new share”) of its capital stock,
(d) the new share is issued in exchange for a share (in this subsection referred to as the “old share”) of the capital stock of a predecessor corporation,
(e) immediately before the amalgamation, the old share was listed on a designated stock exchange, and
(f) the new share is redeemed, acquired or cancelled by the new corporation within 60 days after the amalgamation,
the new share is deemed, for the purposes of subsection 116(6), the definitions qualified investment in subsections 146(1), 146.1(1), 146.3(1) and 146.4(1), in section 204 and in subsection 207.01(1), and the definition taxable Canadian property in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.
Marginal note:Vertical amalgamations
(11) Where at any time there is an amalgamation of a corporation (in this subsection referred to as the “parent”) and one or more other corporations (each of which in this subsection is referred to as the “subsidiary”) each of which is a subsidiary wholly-owned corporation of the parent,
(a) the shares of the subsidiary are deemed to have been disposed of by the parent immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and 88(1.7) applied, with any modifications that the circumstances require, to the amalgamation; and
(b) the cost to the new corporation of each capital property of the subsidiary acquired on the amalgamation is deemed to be the amount that would have been the cost to the parent of the property if the property had been distributed at that time to the parent on a winding-up of the subsidiary and subsections 88(1) and 88(1.7) had applied to the winding-up.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 87
- 1994, c. 7, Sch. II, s. 65, Sch. VI, s. 3, Sch. VIII, s. 37, c. 8, s. 9, c. 21, s. 39
- 1995, c. 3, s. 23, c. 21, ss. 30, 54
- 1996, c. 21, s. 15
- 1997, c. 25, s. 18, c. 26, s. 83
- 1998, c. 19, s. 15, 117
- 1999, c. 22, s. 24
- 2000, c. 19, s. 13
- 2001, c. 17, ss. 65, 211
- 2002, c. 9, s. 30
- 2006, c. 4, s. 55
- 2007, c. 2, s. 45, c. 35, ss. 68, 108
- 2008, c. 28, s. 9
- 2009, c. 2, s. 19
- 2010, c. 12, s. 8, c. 25, s. 15
- 2012, c. 31, s. 17
- 2013, c. 33, s. 6, c. 34, ss. 6, 64, 223, c. 40, s. 39
- 2014, c. 39, s. 19
- 2016, c. 12, s. 27
- 2017, c. 33, s. 24
- 2018, c. 12, s. 7
- 2019, c. 29, s. 11
- 2020, c. 11, s. 1
- 2020, c. 13, s. 1
- 2021, c. 23, s. 13
- 2022, c. 5, s. 2
- 2022, c. 19, s. 11
- Date modified: