CRA rules on split-up reorganization of mutual fund trust

CRA has ruled that the rollover in s. 107.4(3) would apply where the unitholders for one class of units of a mutual fund trust (the "Exchanging Unitholders") become the sole unitholders of a new unit trust.  This is accomplished by a proportionate part of each of the investments of the old fund being transferred to the new fund (but with the adjustments contemplated in s. 107.4(2.1) for fractional shares), and the Exchanging Unitholders surrendering their units of the old fund and receiving units of the new fund.

The effect is approximately similar to a split-up butterfly of the old fund (but with a proportionate split-up of each investment rather than merely of the three types of property).

Neal Armstrong.  Summary of 2012 Ruling 2011-0428321R3 under s. 107.4(1).