CRA gives s. 84(2) ruling on distribution of share consideration received for sale of a business

CRA ruled that where a Canadian public corporation transfers a Canadian business to a Newco, and sells Newco to a public company purchaser in consideration for equity of the purchaser, it can then distribute that equity to its shareholders, without there being a deemed dividend by virtue of the exemption in s. 84(2) (PUC distribution on the discontinuance or reorganization of a business).

This transaction would also appear to be exempted from deemed dividend treatment under the proposed amendments to s. 84(4.1) (one-time distribution of proceeds of disposition) if it were not already exempted by s. 84(2).

Neal Armstrong.  Summary of 2012 Ruling 2012-0435291R3 under s. 84(2).