The refreeze of a non-SBC may result in imputed income on a fictional amount

Mr. X effects an estate freeze on a non-small business corporation as a result of which he is subject to imputed income under s. 74.4(2) on the “outstanding amount,” being essentially under s. 74.4(3) the redemption amount of the preferred shares that he received on the freeze of, say, $15 million. If the corporation declines in value and he does a “refreeze” so that he now holds preferred shares with a redemption value of $3 million, the outstanding amount will remain at $15 million – or only be reduced to $12 million if those preferred shares are redeemed in full for cash.

Neal Armstrong. Summary of Manu Kakkar, Alex Ghani and Boris Volvofsky, “Corporate Attribution: Refreeze May Cause Unsolvable Corporate Attribution Problem,” Tax for the Owner-Manager, Vol. 18, No. 3, July 2018, p.6 under s. 74.4(3).