CRA rules on a pipeline with different promissory-note mechanics

In 2018, CRA issued rulings under ss. 84(2), 84.1 and 245(2) on a straightforward but mildly unusual pipeline transaction. The estate transferred its stepped-up preferred shares of an investments holding company (Holdco) to a Newco in consideration for shares of Newco – then one year after this, Newco will effect a reduction in the paid-up capital of such shares through the issuance of 8 promissory notes payable to the estate. They will each be payable in the 1st, 2nd, 3rd (etc. through to the 8th) quarter thereafter. Such notes will thereafter be paid in accordance with their terms and (after the passing of at least XX months) Holdco and Newco also will amalgamate.

Neal Armstrong. Summary of 2018 Ruling 2018-0777441R3 F under s. 84(2).