The Tax Effects of Corporate ReorganizationsShare Post
Corporate restructuring always trigger a domino effect that can be felt in every aspect and every division of your company.
The tax consequences can seem daunting, but they can also be deferred or possibly avoided with an appropriate planning strategy.
H2: Here are the most common types of corporate reorganizations and their consequences/ requirements:
Type of Reorganization
Attributes
Convertible Property and Debt Obligations
Transfer of Property to a corporation
Share-for-share exchange
Reorganization of Capital s
Amalgamation
Windups
Filing of Election is Required No
Yes
No
No
No
No
Deemed Year End n/a
n/a
n/a
n/a
Yes
No
Loss Utilization and Rollover of Tax Attributes n/a
n/a
n/a
n/a
Yes (1)
Yes (1)
Transferee/ Predecessor to be a Canadian Corporation No
Yes
No
No
Yes
Yes
Adjusted Cost Base Bump n/a
n/a
n/a
n/a
Yes (2)
Yes
Application of Anti-gifting or Anti- avoidance Provisions Yes
Yes (3)
No
Yes
Yes
Yes
May Establish Proceeds of Disposition No
Yes
Yes
No
n/a
n/a
Exchanged Shares Must be Capital Property Yes
No
Yes
Yes
n/a
n/a
Disposition of all Shares of a Class Requirement No
No
No
Yes
n/a
n/a
Possibility of Receipt of a Non-share Consideration No
Yes
No
Yes
n/a
n/a
Part of Reorganization of Capital No
No
No
Yes
n/a
n/a
Ordering Rules for Share Consideration Allocations Pro Rata Basis
Yes
n/a
Pro Rata Basis
n/a
n/a
Arm’s Length Requirement No
No
Yes
No
n/a
n/a
Vendor Not to Control Purchaser Requirement No
No
Yes
No
n/a
n/a
Notes:
(1) Only in certain situations and (or) to a certain entity
(2) Only in a wholly owned subsidiary situation
(3) Exceptions may apply for wholly owned corporations
This summary provides general information only and does not constitute professional advice. Please contact our firm for any specific advice with respect to a particular situation.
Share Post
Corporate restructuring always trigger a domino effect that can be felt in every aspect and every division of your company.
The tax consequences can seem daunting, but they can also be deferred or possibly avoided with an appropriate planning strategy.
H2: Here are the most common types of corporate reorganizations and their consequences/ requirements:
Type of Reorganization
Attributes | Convertible Property and Debt Obligations | Transfer of Property to a corporation | Share-for-share exchange | Reorganization of Capital s | Amalgamation | Windups |
| Filing of Election is Required | No | Yes | No | No | No | No |
| Deemed Year End | n/a | n/a | n/a | n/a | Yes | No |
| Loss Utilization and Rollover of Tax Attributes | n/a | n/a | n/a | n/a | Yes (1) | Yes (1) |
| Transferee/ Predecessor to be a Canadian Corporation | No | Yes | No | No | Yes | Yes |
| Adjusted Cost Base Bump | n/a | n/a | n/a | n/a | Yes (2) | Yes |
| Application of Anti-gifting or Anti- avoidance Provisions | Yes | Yes (3) | No | Yes | Yes | Yes |
| May Establish Proceeds of Disposition | No | Yes | Yes | No | n/a | n/a |
| Exchanged Shares Must be Capital Property | Yes | No | Yes | Yes | n/a | n/a |
| Disposition of all Shares of a Class Requirement | No | No | No | Yes | n/a | n/a |
| Possibility of Receipt of a Non-share Consideration | No | Yes | No | Yes | n/a | n/a |
| Part of Reorganization of Capital | No | No | No | Yes | n/a | n/a |
| Ordering Rules for Share Consideration Allocations | Pro Rata Basis | Yes | n/a | Pro Rata Basis | n/a | n/a |
| Arm’s Length Requirement | No | No | Yes | No | n/a | n/a |
| Vendor Not to Control Purchaser Requirement | No | No | Yes | No | n/a | n/a |
Notes:
(1) Only in certain situations and (or) to a certain entity
(2) Only in a wholly owned subsidiary situation
(3) Exceptions may apply for wholly owned corporations
This summary provides general information only and does not constitute professional advice. Please contact our firm for any specific advice with respect to a particular situation.