Cervus provides update on CRA review of 2009 corporate conversion
Symbol: CVL (TSX)
CALGARY, March 6, 2014 /CNW/ - As previously disclosed, the Canada Revenue Agency ("CRA") has previously requested information relating to the conversion transaction involving Cervus LP and Vasogen Inc. completed in October 2009 pursuant to which Cervus LP converted from a limited partnership structure to the current corporate structure of Cervus Equipment Corporation ("Cervus"). As expected, on March 4, 2014 Cervus received a proposal letter from the CRA indicating that it intends to challenge Cervus' tax filing position stemming from the conversion transaction. Cervus has until April 3, 2014 to provide a response to the proposal letter, or request an extension to the response period. Upon close of the initial or extended response period, Cervus expects that the CRA will formally reassess Cervus. Upon reassessment, Cervus is able to appeal.
Cervus remains confident in the appropriateness of its tax-filing position and the expected tax consequences of the conversion transaction and intends to defend such position vigorously if a notice of reassessment is received from the Canada Revenue Agency. Cervus strongly believes that the acquisition of control and general anti-avoidance rules do not apply to the conversion transaction and intends to file its future tax returns on a basis consistent with its view of the outcome of the conversion transaction. In order to appeal, 50% of any reassessed amount is due. Based on Cervus' taxation years since the conversion transaction and ending with the taxation year ended December 31, 2013, if Cervus is reassessed on the basis of the proposal letter, Cervus expects the 50% amount to equal $17.7 million excluding interest. Cervus would also be required to make a payment of 50% of the taxes the CRA claims are owed in any future tax year if the Canada Revenue Agency issues a similar notice of reassessment for such years and Cervus appeals it.
Certain other companies that converted from income trusts to corporations in a manner similar to the manner in which Cervus converted from a limited partnership to a corporation have publically disclosed that they have already received notices of reassessment from the CRA and that they either intend to, or have initiated, challenges of reassessment received from the CRA. These other companies have either been reassessed or expect to be reassessed by the CRA under the acquisition of control and general anti-avoidance rules, the same basis upon which the CRA has issued its proposal letter to the Company.
Graham Drake, President and Chief Executive Officer of Cervus, stated "We remain highly confident with our position based on the due diligence performed before the transaction was completed and changes to the Income Tax Act subsequent to Cervus completing its transaction. Cervus will continue to remain focused on building its business."
Cervus acquires and manages authorized agricultural, commercial, industrial and transportation equipment dealerships with interests in 55 dealership locations in Western Canada, New Zealand, and Australia. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Bobcat and JCB construction equipment; Clark, Sellick, and Doosan material handling equipment; and Peterbilt transportation equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".
Certain statements included in this news release, including statements or information that contain terminology such as "anticipate", "believe", "intend", "expect", "estimate", "may", "could", "will", and similar expressions, constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, that address activities, events, or developments that Cervus or a third party expects or anticipates will or may occur in the future are forward-looking statements. In particular, forward-looking statements included in this news release include, but are not limited to, statements relating to: the expected tax consequences of the conversion transaction; Cervus' intention to file its future tax returns on a basis consistent with its view of the outcome of the conversion transaction; and the potential affect of a successful challenge, if any, by the Canada Revenue Agency of the tax consequence of the conversion transaction on the availability or quantum of the tax losses or other tax accounts of Cervus. These forward-looking statements reflect Cervus' current beliefs and are based on information currently available to Cervus. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Assumptions underlying Cervus' expectations regarding forward-looking statements or information contained in this news release include, among others: that the results of the due diligence investigations completed by Cervus with respect to the conversion transaction were accurate; and that the conversion transaction was carried out in a manner that would not be affected by any review, reassessment of challenge by the Canada Revenue Agency; and Cervus' current understanding of the tax rates applicable to Cervus in the event the tax pools from the conversion transaction are not available to Cervus. Actual results and developments may differ materially from the results and developments discussed in the forward-looking statements as certain of these risks and uncertainties are beyond Cervus' control. Some of the risks and other factors, some of which are beyond Cervus' control which could cause results to differ materially from those expressed in the forward-looking statements contained in this news release include, but are not limited to: the risk that the Canada Revenue Agency could elect to challenge Cervus' tax filing and such challenge is successful which could potentially negatively affect the availability or quantum of the tax basis or other tax accounts of Cervus; and the risk that the tax impact to Cervus in the event the tax pools from the conversion transaction are not available to Cervus are materially different than those currently contemplated by Cervus. Consequently, all of the forward-looking statements included in this news release are qualified by these cautionary statements and other cautionary statements or risk factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Cervus. These forward-looking statements are made as of the date of this news release. Except as required by applicable securities legislation, Cervus assumes no obligation to update publicly or revise any forward-looking statements to reflect subsequent information, events, or circumstances.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
SOURCE Cervus Equipment CorporationFor further information:
Graham Drake - President and CEO
Telephone: (403) 567-2095
Fax: (403) 567-0392 Email: firstname.lastname@example.org
Randy Muth - Chief Financial Officer
Telephone: (403) 567-2097
Fax: (403) 567-0392 Email: email@example.com