Principal Issues: (1) Whether subsection 40(3.6) will apply to deem the capital loss resulting from the disposition of the shares that each of Succession and Fiducie will hold in FusionCo to be nil? (2) For the purposes of paragraphs 88(1)(c), (d) and (d.2), whether the time control of A Ltée was last acquired will be deemed to have occurred immediately after the death of Mère?
Position: (1) No; (2) Yes.
Reasons: (1) Although each of Fiducie and Succession will hold a debt payable by FusionCo, they will not be affiliated to FusionCo immediately after the shares that they held in the capital stock of FusionCo were redeemed pursuant to subparagraph 251.1(1)(b)(i) because they will not have de facto control over that corporation at that time; (2) The acquisition of control of A Ltée will be deemed to have occured immediately after the death of Mère pursuant to paragraph 88(1)d.3) because Nouco can be viewed as having acquired all the shares of the capital stock of A Ltée that were previously held by Fiducie and Sucession as a consequence of the death of Mère.
