CRA rules on a s. 55(3)(a) split-up between Newcos for two siblings which were related due to multiple-voting shares held by the father’s and mother’s Holdco
S. 55(5)(e)(i) provides that siblings are unrelated for s. 55(3)(a) purposes, and s. 55(4) stipulates that a transaction which is inserted so as to make persons related for s. 55 purposes is to be ignored for such purposes.
CRA has ruled on a s. 55(3)(a) split-up of a real estate rental corporation (Canco) whose common shares were held by Son Holdco and Daughter Holdco and whose prefs were held by a Holdco for the father and mother of Son and Daughter (Holdco 1). Before the split up of the real estate between Newco 1 (whose common shares and prefs were acquired on the spin-off by Son Holdco and Holdco 1, respectively) and Newco 2 (whose common shares and prefs were acquired on the spin-off by Daughter Holdco and Holdco 1, respectively), Holdco 1 subscribed (presumably a nominal amount) for “super” voting shares of Canco and of Newco 1 and 2, so that at all relevant times, Canco, Newco 1 and Newco 2 were controlled by the two parents.
CRA also ruled that the undepreciated capital cost of depreciable property could be split based on the relative capital cost rather than relative fair market value of the depreciable properties that were spun-off. (Butterfly rulings typically have prorated UCC based on relative FMV – see e.g., 2014-0530961R3 and 2013-0498651R3).