Principal Issues: 1. Does paragraph 55(3)(a) apply in the context of this internal reorganization? 2. Does subsection 245(2) apply with respect to this internal reorganization? 3. Do the back-to-back transfers of shares of XXXXXXXXXX subsidiaries (i.e., the property) cause the characterization of the property to change from capital property, for purposes of subsection 85.1(3)?
Position: 1. Yes; 2. No 3. No.
Reasons: 1. There is no transaction described in subparagraphs 55(3)(a)(i) to (v) that forms a part of the same series of transactions or events that include the deemed dividends; 2. The Proposed Transactions do not include an avoidance transaction; furthermore, there is no creation or streaming of cost base and the preferred shares in the Proposed Transactions are cross-redeemed for notes that are set-off and cancelled; 3. XXXXXXXXXX.