CRA provides pipeline rulings where the underlying operating business was sold for cash after the death and before the pipeline transactions

A died holding the shares of an Opco and of a portfolio company (Holdco). Following A’s death, the operating business of Opco was sold to a third party for cash, at which point CRA accepted that Opco started carrying on a portfolio business. Opco then engaged in preliminary transactions to push out its capital dividend account and access refundable tax balances by redeeming shares, which generated capital losses that the estate could carry back under s. 164(6). Opco and Holdco then amalgamated to form Opco 2.

CRA ruled on the implementation by the estate of conventional pipeline transactions for Opco 2 (whereby it sells Opco 2 to a Newco formed by it in consideration for a note and, at a subsequent juncture, Opco 2 and Newco amalgamate to form Amalco, and Amalco starts progressively paying off the note).

Neal Armstrong. Summaries of 2020 Ruling 2019-0824211R3 F under s. 84(2) and s. 51(1).