Subsection 51(1) - Convertible property
Administrative Policy
2 November 2023 APFF Roundtable Q. 4, 2023-0982781C6 F - Section 51 Share Exchange
2004-0092561E5 indicated that an exchange of 100 common shares for 500,000 preferred shares and 100 common shares of the same corporation (with...
1 May 2023 External T.I. 2021-0921101E5 - XXXXXXXXXX
A corporation (the DLCC), which had been operating a club for the purposes of pleasure and recreation of the members and of the community was, as...
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| Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(l) | s. 149(1)(l) NPO can have share capital, but may not so qualify even if it satisfies the CNFPCA | 313 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | conversion of share corp to non-share corp would not cause a share disposition if no share cancellation and the rights of the shareholders were not substantively altered | 195 |
| Tax Topics - Income Tax Act - Section 149 - Subsection 149(12) | “rentals” not reduced by expenses | 21 |
2017 Ruling 2017-0696791R3 F - Reduction of PUC/capital
Bco will transfer to a newly-incorporated subsidiary (Newco) all its shares of a wholly-owned subsidiary (Cco) on a s. 85(1) rollover basis in...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | interest on money borrowed by Subco for distribution of share-capital account to its parent is deductible if the Subco property continues generating business income | 532 |
2020 Ruling 2019-0824211R3 F - Post-mortem Hybrid Pipeline
The described preliminary transactions (on which CRA did not rule) included the estate exchanging its Class A shares of Opco under s. 51(1) for...
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| Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) | pipeline rulings where the underlying operating business was sold for cash after the death and before the pipeline transactions | 450 |
6 May 2014 Internal T.I. 2014-0524651I7 - Loss on conversion
Canco indirectly controlled ULC which was the sole member (holding common membership units) of LLC. ULC also held non-interest-bearing Notes...
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| Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | non-interest-bearing loan to wholly-owned ULC | 171 |
| Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) | s. 51 applies where issuer had a cash redemption override | 208 |
6 May 2014 Internal T.I. 2014-0524651I7 - Loss on conversion
After being asked whether "the right of exchange must be absolute for purposes of subsection 51(1)," a specific example was described. Preferred...
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| Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) | non-interest-bearing loan to wholly-owned ULC | 171 |
| Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) | conversion not under Note terms | 185 |
7 October 2011 Roundtable, 2011-0412191C6 F - Sec. 86 - Reorganisation of the Capital of a Corp.
Q.B.C.A. s. 91 of the new Q.B.C.A. permits a corporation to convert the shares of a particular class into shares of a new class, through a simple...
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| Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) | reorganization of capital generally requires articles of amendment | 216 |
8 October 2010 Roundtable, 2010-0373231C6 F - Application of subsections 51(1) and 85(1)
CRA's position in IT-291R3, that an election under s. 85(1) potentially is available even if the shares to be issued are not yet part of the...
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| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | share consideration need not be immediately issuable | 123 |
11 January 2010 External T.I. 2009-0340591E5 F - Specified class - 256(1.1) of the Act
Where a shareholder exchanged all its Class A shares for Class B shares of the same corporation pursuant to what CRA accepted as being a s. 51...
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| Tax Topics - Income Tax Act - Section 256 - Subsection 256(1.1) - Paragraph 256(1.1)(d) | s. 256(1.1)(d) must be met throughout the period the shares were outstanding – but can cleanse with s. 51 exchange | 442 |
2006 Ruling 2006-0177541R3 - Amendments to Debt, Conversion
CCo and GCo will agree to amend the terms of the "Tier 2 Debt" owing to CCo to accord it with the right to convert the Tier 2 Debt into common...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition | 63 |
6 July 2004 External T.I. 2004-0081631E5 F - Price Adjustment Clauses
After indicating that ticking the box on any prescribed rollover election form is sufficient notification to it of the existence of a price...
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| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | ticking "yes" box on election form is sufficient notice of price adjustment clause | 70 |
| Tax Topics - General Concepts - Effective Date | no requirement to notify CRA of price-adjustment clause otherwise than by ticking box on any prescribed form | 136 |
29 March 2001 External T.I. 2000-0050265 - Mutual fund corporation - "switch" shares
A shareholder of a mutual fund corporation redeems his shares in accordance with their terms in exchange for shares of another class of the same...
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| Tax Topics - Income Tax Act - Section 131 - Subsection 131(6) - Capital Gains Redemption | 80 |
9 September 1997 External T.I. 9721405 - CONVERSION OF DEBT OBLIGATION
Where a debt obligation provides that it is convertible at the option of the holder into another debt obligation of the same issuer provided that...
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| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | notice by issuer before convertible | 95 |
| Tax Topics - Income Tax Act - Section 51.1 | conversion subject to issuer notice | 173 |
12 February 1997 External T.I. 9631575 - INTERACTION OF SECTIONS 51 AND 116
A non-resident exchanged pursuant to s. 51(1) his common shares (which were taxable Canadian property) of a Canadian private corporation for...
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| Tax Topics - Income Tax Act - Section 116 - Subsection 116(5) | s. 116(5) is applicable to issuer if s. 51(1) exchange of TCP | 201 |
| Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base | cost of shares acquired by issuer on s. 51(1) exchange is stated capital of new shares | 141 |
1 November 1994 External T.I. 9416305 - EXCHANGE SHARES OF SAME CORP
An employee, who holds 100 common shares of an employer corporation (the "Old Shares") with an adjusted cost base and paid-up capital of $500 ($5...
Handbook on Securities Transactions, 94-110 (e), p. 12
No reporting is required if, in the course of a conversion, the security owner receives cash or some other consideration totalling $200 or less,...
92 C.R. - Q.4
Where on the conversion of a debenture into shares, the holder foregoes any accrued but unpaid interest, such interest will not be added to the...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(3) | 33 |
87 C.R. - Q.67
The rollover is not available on an automatic conversion.
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| Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) | 24 |
IT-115R "Fractional Interests in Shares"
Articles
Didier Fréchette, Ryan Rabinovitch, "Current Issues Involving Foreign Exchange", 2015 CTF Annual Conference paper
Dealing with FX gain on U.S. dollar loan by Can LP to Cansub to fund on-loan to US Opco: asymmetrical application where s. 51 applies (pp....
Gabrielle M.R. Richards, "Capital Financing by Non-Residents: Section 116 Obligations", Corporate Structures and Groups, Vol. VII, No. 3, 2002, p. 375
CCRA is of the view that the cost for purposes of s. 116(5)(c) of shares acquired pursuant to a convertible share is the amount credited to the...
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| Tax Topics - Income Tax Act - Section 116 - Subsection 116(5) | 36 |
Hugh Chasmar, "Mutual Fund 'Switch Funds'", Taxation of Corporate Reorganizations, Canadian Tax Journal, Vol. 46, No. 1, 1998, p. 172.
Discussion as to whether an exchange by an investor of shares of one class for shares of another could be treated as a redemption enabling...
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| Tax Topics - Income Tax Act - Section 131 - Subsection 131(1) | 35 | |
| Tax Topics - Income Tax Act - Section 132 - Subsection 132(1) | 0 |
Ewens, "Convertible Property: Section 51 - Part 1", 1994 Canadian Tax Journal, Vol. 42, No. 5,.
Ross, "Equity Preferred Shares", 1992 Canadian Tax Journal, No. 3, p. 793.
Ruby, "Recent Financing Techniques", 1989 Conference Report, C.27 under "Adjustable Rate Convertible Debentures"
Subsection 51(2) - Idem [Convertible property]
Administrative Policy
11 April 2005 External T.I. 2005-0112321E5 F - Price adjustment clause
An estate freeze entailed the exchange by Mr. A of his common shares of Opco by way of purchase for cancellation for Class A preferred shares with...
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| Tax Topics - General Concepts - Effective Date | CRA may also accept a price adjustment clause for improving the attributes of the shares received on an exchange so as to equal the exchange price | 332 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | where FMV of pre shares received on estate-freeze s. 51 exchange was less than that of the exchanged common shares, CRA would apply s. 51(2), not s. 15(1) | 142 |
S4-F3-C1 - Price Adjustment Clauses
CRA will consider a price adjustment clause to represent pricing at fair market value if:
- the agreement reflects a bona fide intention of the...
1996 Corporate Management Tax Conference Round Table, Q. 13 (C.T.O. "Benefit of Conversion")
Although s. 51(2) does not contain an exclusion for wholly-owned corporations, ordinarily RC would not consider that it is reasonable to regard...
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| Tax Topics - Income Tax Act - Section 86 - Subsection 86(2) | 64 |