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ARTICLE · 21 APRIL 2008

The Unintended Consequences Of Subsection 256(9)

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The lncome Tax Act (Canada) (the "Act"), contains all manner of "shoals and traps", which may result in unintended tax consequences to the unaware, and in some cases to the aware.

CanadaTax
John McClure
John McClure
Brian Kearl
Brian Kearl
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The lncome Tax Act (Canada) (the "Act"), contains all manner of "shoals and traps"1, which may result in unintended tax consequences to the unaware, and in some cases to the aware. A reminder of this fact is illustrated in a recent court decision, and subsequent Canada Revenue Agency ("CRA") technical opinion, pertaining to the application of subsection 256(9) of the Act.

Subsection 256(9) of the Act is a seemingly straight forward provision. It provides that where control of a corporation is acquired at any time during a given day, for purposes of the Act, control of the corporation will be deemed to have been acquired at the beginning of that day, unless the corporation elects this not to be the case. This corporate election is to be made with the corporation's tax return for its taxation year immediately preceding the change of control.

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