Canadian merger and acquisition activity has been very strong in recent years. In 2006, the value of Canadian merger and acquisition transactions was US$230 billion, nearly a 50% increasernfrom the previous year. Continued strength in the Canadian economy (particularly in the mining and resource sectors), the prevailing low-interest rate environment and greater private equity investment in Canada should continue to drive Canadian merger and acquisition activity in 2007. This increased activity means Canadian companies will continue to incur significant expenses in planning, structuring and implementing transactions. As a result, the treatment of these transaction costs under the Income Tax Act will become more important, both for taxpayers and the Canada Revenue Agency (CRA).
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