Principal Issues: 1. Will provisions of subsection 85.1(3) of the Act apply to the transfer of shares held by Opco to non-resident corporations?
2. Immediately after the issuance of shares of the capital stock of XXXXXXXXXX Holdco #1, XXXXXXXXXX Holdco #2 and XXXXXXXXXX Holdco #3 to XXXXXXXXXX Family Holdcos, will XXXXXXXXXX Holdco #1, XXXXXXXXXX Holdco #2 and XXXXXXXXXX Holdco #3 be foreign affiliates of each of the Family Trusts?
Position: 1. Provided the shares transferred are capital properties of Opco, 85.1(3) will apply.
2. Yes
Reasons: 1. The corporations the shares of which will be transferred are foreign affiliates of Opco, the purchaser will be a foreign affiliate of Opco immediately after the transfer, the consideration paid will include shares of the capital stock of the acquiring affiliate. Subsection 85.1(4) will not apply.
2. The equity percentage of each Family Trust 1 will be XXXXXXXXXX % because it will hold XXXXXXXXXX % of a specific class of a XXXXXXXXXX Family Holdco which will hold XXXXXXXXXX % of a specific class of shares of each of those corporations. The equity percentage of each Family Trust 2 will be XXXXXXXXXX % because it will hold XXXXXXXXXX % of a specific class of a XXXXXXXXXX Family Holdco which hold XXXXXXXXXX % of a specific class of shares of each of those corporations.