CRA rules on pipeline transaction that includes partial use of s. 164(6) and of the s. 88(1)(d) bump
CRA ruled on a hybrid pipeline transaction in which the two holding companies that were held by the deceased first purchase for cancellation a portion of their participating shares that are now held by the estate in order to generate a deemed dividend to clear out their RDTOH and CDA accounts - with the estate electing under s. 164(6) to treat the resulting capital loss as a capital loss of the deceased. The estate then proceeds with a conventional pipeline transaction in which it transfers its remaining shares of the holding companies to Newco and, after the requisite waiting period, the holding companies are amalgamated with Newco or are wound up into it (in either case, referred to as “Amalco”), and with the notes thereafter being gradually paid off by Amalco.
On the winding-up or amalgamation, preferred shares held by one of the holding corporations in a corporation (whose participating shares are held by a family trust) are to be bumped under s. 88(1)(d) (although there are no rulings on this aspect). The proposed transactions conclude with a s. 88(2) winding up of the Amalco.
Neal Armstrong. Summary of 2019 Ruling 2019-0793281R3 F under s. 84(2).