CRA issues draft folio on price adjustment clauses

CRA’s draft folio on price adjustment clauses has dropped the (dead letter) requirement in IT-169 that the taxpayer notify CRA of the clause in its return.

CRA intimates that clauses adjusting the redemption value of shares avoid "technical difficulties" pertaining to clauses which instead purport to retroactively issue or cancel shares.  However, an adjusting payment on a share with the first type of clause which has already been redeemed will result in an income inclusion to the redeemed shareholder under s. 84(3).

Price adjustment clauses "might" not work for butterfly purposes.

Neal Armstrong.  Summary of 27 March 2013 S4-F3-C1 under General Concepts – Effective Date.