CRA rules on classic pipeline transactions with one year delay before amalgamation of Newco, and phased repayment of note thereafter

CRA has issued a s. 84(2) ruling on a classic pipeline transaction in which a spousal trust, following the death of the surviving spouse, will transfer its shares of a Holdco (which carries on business through a grandchild corporation) to a Newco for a note, with Holdco and its subsidiary being wound-up into or amalgamated with Newco after a year. The note will be distributed to the beneficiaries if not retained in the trust but, during the first year following the wind-ups or amalgamation, will not be repaid at a greater rate than XX% of the initial note principal per quarter. Based on 2014-0559481R3 F, XX% might be 25%.

Neal Armstrong. Summary of 2015 Ruling 2014-0563081R3 under s. 84(2).