Acquisition of Control
Acquisition of control triggers a deemed year-end, restricts loss carryforwards to the same or similar business, and can apply where no one planned for it. Custom written for CPAs who need to catch it before it happens.
Acquisition of control is a loss restriction event that triggers one of the most consequential deemed year-ends in the Act. Capital losses become carry-back only. Non-capital losses are capped to the same or similar business. RDTOH and CDA pools are neutralized. An asset-by-asset write-down decision must be made before the new year begins. This course covers when the rules apply, when the related persons exception protects you, the trust and trustee scenarios where it triggers without warning, the full tax attribute consequences, the write-down and write-up election, and the anti-stuffing rollover denial rule.
ABOUT THE COURSE
Acquisition of control is one of those rules that practitioners think they know until a client does something that triggers it unexpectedly. A trust distributes shares to family members. Trustees change. Shares structured to keep voting control in the seller's hands still cross the 75% value threshold. The rules apply in ways the transaction parties never anticipated, and by the time anyone reviews the consequences, the deemed year-end has already come and gone.
The course opens with the definition and the three-step framework that should govern every analysis: is there an acquisition of control, is the result good or bad, and what can be done? Not every acquisition of control is adverse. Triggered deliberately, it can allow a corporation to write down assets to fair market value, carry capital losses back three years, and recover tax already paid. Triggered accidentally, it can permanently restrict non-capital losses to the same or similar business and neutralize refundable tax pools that took years to accumulate.
On the consequences side, the course works through every major tax attribute and what happens to it: capital losses become carryback-only; non-capital losses survive but are restricted to income from the same or similar business in future years; ITC and R&D pools face the same restriction; RDTOH pools are neutralized by a special rule that deems the triggering dividend not to be a taxable dividend, denying the refund; and the CDA is similarly cut off. Business foreign tax credits and GRIP are not restricted.
The write-down rules are mechanical but the write-up election is where planning happens. The automatic rule requires write-downs only. An election allows a corporation to also write up capital property to any value up to FMV, triggering capital gains and recapture that can absorb existing loss pools before they expire. The K Corp example works through the full interplay: an elected write-up on a building with accrued gain, applied against a net capital loss and then against a non-capital loss carryforward, reducing what would otherwise be stranded losses. The course concludes with the anti-stuffing rule: rollovers into a loss corporation are denied if the corporation is sold to a non-affiliated person within 36 months, extending even to sales to siblings and children.
Know when acquisition of control triggers, what it costs, and how to use it — whether the result is a tax liability or a three-year loss carryback. Learn at your own pace.
Acquisition of Control
Seminar Snapshot
Acquisition of Control
Special Topics · Course Syllabus
- Loss restriction event: acquisition of voting control OR change of ownership of 75%+ of value
- 75% value test catches non-voting share transfers that retain technical voting control
- Related persons exception: does not apply between related persons
- ABC Corp examples: A sells to D (no AOC, B and C still control); A and B gift to spouses (no AOC, related exception)
- D Co: seller keeps 100 voting preferred, sells all common (almost all value) to E — loss restriction event on value even though voting control retained
- Two-step transactions: B sells to E one year after A sold to D; anti-avoidance rules can collapse the two steps
- Trusts cannot be related to individuals — the related exception never applies to trust distributions
- F Trust: distribution of shares to F1, F2, F3 is an acquisition of control; fix is to issue voting shares to F1 before the distribution so F1 controls going in
- Trustee changes: table of scenarios — A replaced by A's spouse (no AOC); A replaced by B (unrelated, yes AOC); unanimous board where one trustee changes to unrelated person (yes AOC); majority board where one trustee changes (no AOC)
- Death: special rule, no AOC when shares pass from deceased to estate; distribution from estate to children of deceased — no AOC (related); distribution to unrelated beneficiaries — AOC
- Fixed-percentage trust: trustee change with no discretionary income or capital — no AOC
- Deemed year-end immediately before acquisition of control
- Assets written down property by property (class by class for depreciable): non-depreciable capital property produces capital loss; depreciable property produces terminal loss
- Inventory write-down: adventure in nature of trade only, not ordinary inventory
- Bad debts and receivables: written down to FMV debt by debt
- Resource pools written down
- Following deemed year-end: corporation can select any new year-end up to 12 months out, no CRA permission required
- Capital losses (including ABIL): carry back only, no carry forward
- Property losses: carry back only
- Non-capital losses (excluding ABIL): carry back unrestricted; carry forward limited to income from same or similar business
- ITC and R&D pools: same or similar business restriction
- RDTOH pools: special rule deems triggering dividend not to be a taxable dividend — dividend refund denied
- CDA: special rule deems dividend not to be a capital dividend
- Business FTC: not restricted
- GRIP: not restricted
- Automatic rule: write down only
- Election: write up capital property to any value up to FMV; taxpayer specifies the elected amount
- I Corp: $400K capital gain in 2018; $600K capital loss on AOC write-down; carry $400K back to 2018, recover tax paid — beneficial result
- J Corp: write-down of equipment produces $800K business loss; carry back to 2017, 2018, 2019 income — beneficial
- K Corp example: $600K non-capital loss carryforward, $400K net capital loss; elects building write-up at $800K; $800K capital gain absorbs $400K capital loss; $60K recapture reduces non-capital loss to $540K; could elect full FMV for $1M capital gain and eliminate another $100K of non-capital loss
- Plan: roll appreciated assets into loss corporation under s.85 to create capital gains that absorb losses, then sell the corporation
- Special rule: rollover into a corporation is denied if the corporation is sold to a non-affiliated person within 36 months of the transfer
- "Non-affiliated" is more restrictive than "non-related" — sale to siblings, children, and other related persons (other than spouse) will also deny the rollover
- Mr. K rolls stock portfolio into K Corp, sells K Corp to his brother — rollover denied, Mr. K has gain on the transfer
- Conclusions: AOC can apply where not anticipated; sometimes the result is beneficial; property and capital losses require the most care; requires proactive planning at every stage
Meet Your Presenter
Michael Cadesky
Michael Cadesky is the managing partner at Cadesky Tax and a committed contributor to the tax and accounting professions since 1980, earning the title of Fellow from CPA Ontario. He is a past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Michael is also the co-author of 11 books on tax subjects and the author or co-author of numerous papers and articles on Canadian and international taxation.
FAQ
When can I access the course?
Immediately upon purchase. All course materials are available on-demand, allowing you to start learning right away.
How long do I have access?
You have 1-year all-access to the course materials. Watch and review the content as many times as you need, at your own pace.
Does the course provide CPD?
Yes. Upon completion, you will receive a verifiable CPD certificate indicating all instructional learning hours and required details.
What's included in the course?
Full video recording of the seminar, plus slides with detailed notes for your reference. Additional resources may be included.
Can I watch on any device?
Yes. Access the course from your computer, tablet, or phone — any device with internet access.