CRA rules on pipeline transactions of an alter ego trust implemented over an extended period
30 August 2022 - 11:06pm
CRA provided the usual pipeline rulings respecting transactions, which contemplated that:
- shares of an investments company (ACo), whose ACB had been stepped up in the hands of an alter ego trust on the death of the settlor (“Father”) are transferred by the trust to a “Newco” in consideration mostly for notes of Newco
- the Newco common and preferred shares and the Newco notes are distributed pro rata to Father’s children on a s. 107(2) rollover basis
- at least one year after step 1, Newco and ACo amalgamate (under a long-form amalgamation, given that the children until then had been minority shareholders of ACo)
- Amalco repays no more than 10% of the initial aggregate principal amount of the notes during the first year following the amalgamation and, absent extraordinary events, repays no more than that sum in each of the subsequent years.
Neal Armstrong. Summary of 2021 Ruling 2021-0906111R3 under s. 84(2).