Principales Questions: Substantially all of the assets of a corporation ("Holdco") would consist in an interest of 40% in the common shares of the capital stock of an operating corporation ("Opco"). A non resident person ("Non-Resident") would own all of the issued and outstanding shares of the capital stock of Holdco. Non-Resident would also own 60% of the common shares of the capital stock of Opco. In order to simplify the corporate structure, Non-Resident would like to hold directly the shares of the capital stock of Opco owned by Holdco. For administrative reasons, Non-Resident does not want to amalgamate Opco with Holdco. Instead, Non-Resident would transfer his shares of the capital stock of Holdco to Opco, in consideration for the issuance by Opco of preferred shares of its capital stock. Holdco would then be wound-up into Opco.
Position Adoptée: General comments provided. The Tremblay decision contains a strong dissent based on the Smythe decision rendered by the Supreme Court of Canada. Furthermore, the general anti-avoidance rule was not invoked in the Tremblay case. Consequently and despite the Tremblay decision, the CRA will continue to challenge abusive surplus stripping arrangements, including those taking the form of "tuck under" transactions. However, it is possible that, in appropriate circumstances, subsection 84(2) or 245(2) would not apply to a "tuck under" transaction. For example, the CRA maintains its long standing position that subsections 84(2) and 245(2) should not apply to "tuck under" transactions carried out in the context of "safe income extraction" scenarios.
Raisons: Wording of the Act and case law.
