CRA confirms application of draft s. 87(8.2) to downstream merger

CRA found that draft s. 87(8.2) applied to a "downstream merger" of an immediate foreign subsidiary (FA1) of Canco into FA1's subsidiary (FA2), with FA2 as the survivor.  CRA characterized the FA2 shares received by Canco on the merger as consideration for Canco's cancelled shares of FA1, so that s. 87(4)(a) deemed Canco to have disposed of its shares of FA1 for their adjusted cost base, rather than draft para. (n) of the definition of "disposition" applying to deem there to have been no disposition of those FA1 shares.

Neal Armstrong.  Summary of 4 March 2013 Memorandum 2012-0449371I7 under s. 87(8.2).