A non-standard loss shift includes a payment for the losses
A loss shift from Opco to its sister (Profitco) normally would entail Opco lending at interest to Profitco and Profitco subscribing for Opco prefs. However, Profitco is a regulated financial institution which does not want additional debt on its balance sheet, and Opco is to be paid for its losses. Accordingly, Opco will effect a loss shift to a newco subsidiary (Lossco) and sell Lossco to Profitco for prefs whose redemption amount will reflect some value for the losses and which Profitco will redeem; and Lossco will be wound up into Profitco under s. 88(1.1). The goosed value of the prefs does not give rise to a s. 56(2) benefit to the parent of Profitco and Opco.
Neal Armstrong. Summaries of 2013 Ruling 2013-0496351R3 under s. 111(1)(a) and s. 88(1.1).