CRA amends its amalgamation Folio to discuss the EIFEL rules

CRA has published a revised version of its Folio on amalgamations that reflects the interaction of the amalgamation rules with the EIFEL rules. Observations include:

• S. 87(2.1)(a.1) provides that the amalgamated corporation is a continuation of its predecessors for purposes of computing its cumulative unused excess capacity (CUEC).
• However, pursuant to s. 111(5.01), the CUEC of a taxpayer for any taxation year ending after a loss restriction event is determined without regard to component elements in the CUEC computation that occurred in taxation years ending before that time.
• The rule in s. 87(2.1), permitting the amalgamated corporation to deduct various types of losses of predecessors, also applies to restricted interest and financing expenses (RIFE).
• However, the loss streaming and denial rules in ss. 111(4) to (5.4) are also applicable to RIFE on an acquisition of control, which is to be tested on an amalgamation under the s. 256(7)(b) rules.

Neal Armstrong. 49 summaries of Income Tax Folio S4-F7-C1, Amalgamations of Canadian Corporations, dated January 8, 2026 including under s. 87(2.1)(a.1), s. 111(5.01), s. 87(2.1) and s. 111(5).