Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is the reference to "all of the shares" in subclause 88(1)(c)(vi)(B)(II) a reference only to shares of a subsidiary that is subsequently wound-up into its parent?
Position: The reference to "all of the shares" in subclause 88(1)(c)(vi)(B)(II) is a reference to any shares owned by a person who acquires property distributed to the parent on the winding-up.
Reasons: See below.
2010 CTF November 28, 2011
Question 19 - 88(1)(c)(vi)(B)(II) Deemed ownership of shares
Subparagraph 88(1)(c)(vi) provides that property distributed on the winding-up of a 90% owned subsidiary taxable Canadian corporation into its parent does not qualify for an addition to its cost under paragraph 88(1)(c) if it is acquired by some persons. The persons described in subclause 88(1)(c)(vi)(B)(II) are persons which, if all their shares were owned by one hypothetical person, would make that hypothetical person a specified shareholder of the subsidiary before control of the subsidiary was last acquired by the parent. Is the reference to "all of the shares" in subclause 88(1)(c)(vi)(B)(II) a reference only to shares of a subsidiary that is subsequently wound-up into its parent?
Answer:
The reference to "all of the shares" in subclause 88(1)(c)(vi)(B)(II) is a reference to any shares owned by a person who acquires property distributed to the parent on the winding-up. The hypothetical person will be considered to be a specified shareholder of the subsidiary if it holds 10% or more of the issued shares of the subsidiary or of any other corporation that is related to the subsidiary and that has a significant interest in the issued shares of the subsidiary after applying the various presumptions in paragraphs (a) to (e) of that definition.
Trevor McGowen
2010-038604
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