Okanagan Limited has a November 30 year end, while its 95 percent owned subsidiary Valley Limited has a March 31 year end. Valley Limited is wound up using the rollover provisions of ITA 88(1)on September 15, 2020. At the time, Valley Limited has a non-capital loss of $150,000 for the period from April 1 to September 15, 2020. The earliest taxation year in which Okanagan Limited can make use of the $150,000 loss is the taxation year ending:

Question

Quizplus · Accepted Answer

According to ITA 88(1), when a subsidiary is wound up and the conditions are met, the losses incurred by the subsidiary can be transferred to the parent company. In this case, Valley Limited has a non-capital loss of $150,000 for the period from April 1 to September 15, 2020.

As Valley Limited has a March 31 year end, the loss must be carried back to the taxation year from April 1, 2020 to March 31, 2021. The loss will then be available for transfer to Okanagan Limited since it owns 95% of Valley Limited, and Okanagan Limited has a November 30 year end.

Therefore, the earliest taxation year in which Okanagan Limited can make use of the $150,000 loss is the taxation year ending November 30, 2021. Answer choice B is correct.

Okanagan Limited Has a November 30 Year End, While Its