31 January 1990 T.I. (June 1990 Access Letter, ¶1269)

Where 90% of the common shares of Opco owned by Father were exchanged for redeemable preference shares under an s. 86 reorganization, insufficient dividends paid on the preference shares could maintain the value of the preferred shares which might not have been the case if a reasonable rate of return had been paid thereon. Accordingly, insufficient dividends paid on the preference shares could result in the realization of a significant capital gain.

RC has not established any guidelines on what is a significant part for purposes of s. 110.6(8).

Where the share capital of Opco is reorganized under s. 86 by Father exchanging all his common shares for redeemable preference shares, the preference shares issued to him will not be prescribed shares because no prescribed shares are issued to Son who held 10% of the common shares of Opco prior to the s. 86 reorganization.