Income Tax Act — I-3.3 88
Winding-up 88 (1) Where a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) has been wound up after May 6, 1974 and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another taxable Canadian corporation (in this subsection referred to as the “parent”) and all of the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by persons with whom the parent was dealing at arm’s length, notwithstanding any other provision of this Act other than subsection 69(11), the following rules apply: (a) subject to paragraphs 88(1)(a.1) and 88(1)(a.3), each property (other than an interest in a partnership) of the subsidiary that was distributed to the parent on the winding-up shall be deemed to have been disposed of by the subsidiary for proceeds equal to (i) in the case of a Canadian resource property, a foreign resource property or a right to receive production (as defined in subsection 18.1(1)) to which a matchable expenditure (as defined in subsection 18.1(1)) relates, nil, and (ii) [Repealed, 1994, c. 7, Sch. VIII, s. 38] (iii) in the case of any other property, the cost amount to the subsidiary of the property immediately before the winding-up; (a.1) each property of the subsidiary that was distributed to the parent on the winding-up shall, for the purpose of paragraph 88(2.1)(b) or 88(2.1)(e), be deemed not to have been disposed of; (a.2) each interest of the subsidiary in a partnership that was distributed to the parent on the winding-up shall, except for the purpose of paragraph 98(5)(g), be deemed not to have been disposed of by the subsidiary; (a.3) where (i) the subsidiary was a financial institution in its taxation year in which its assets were distributed to the parent on the winding up, and (ii) the parent was a financial institution in its taxation year in which it received the assets of the subsidiary on the winding up, each specified debt obligation (other than a mark-to-market property) of the subsidiary that was distributed to the parent on the winding-up shall, except for the purpose of subsection 69(11), be deemed not to have been disposed of, and for the purpose of this paragraph, financial institution , mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1); (b) the shares of the capital stock of the subsidiary owned by the parent immediately before the winding-up shall be deemed to have been disposed of by the parent on the winding-up for proceeds equal to the greater of (i) the lesser of the paid-up capital in respect of those shares immediately before the winding-up and the amount determined under subparagraph 88(1)(d)(i), and (ii) the total of all amounts each of which is an amount in respect of any share of the capital stock of the subsidiary so disposed of by the parent on the winding-up, equal to the adjusted cost base to the parent of the share immediately before the winding-up; (c) subject to paragraph 87(2)(e.3) (as modified by paragraph 88(1)(e.2)), and notwithstanding paragraph 87(2)(e.1) (as modified by paragraph 88(1)(e.2)), the cost to the parent of each property of the subsidiary distributed to the parent on the winding-up shall be deemed to be (i) in the case of a property that is an interest in a partnership, the amount that but for this paragraph would be the cost to the parent of the property, and (ii) in any other case, the amount, if any, by which (A) the amount that would, but for subsection 69(11), be deemed by paragraph 88(1)(a) to be the proceeds of disposition of the property exceeds (B) any reduction of the cost amount to the subsidiary of the property made because of section 80 on the winding-up, plus where the property was a capital property (other than an ineligible property) of the subsidiary at the time that the parent last acquired control of the subsidiar