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.
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File: 7-912217 |
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Officer: P. Diguer |
ROUND TABLE - CGA - JANUARY 10, 1992
QUESTION #12
If shares, other than prescribed shares, are redeemed shortly before the sale of prescribed common shares, resulting in a significant capital gain, must the test in subsection 110.6(8) of the Act be considered with respect to these shares? If the shares had been redeemed before May 23, 1985, would it be necessary to take the test into account?
ANSWER
We assume that your question refers to the gain on the prescribed shares. We are of the opinion that subsection 110.6(8) of the Act does not become inapplicable solely because a significant capital gain resulted from a redemption of non-prescribed shares preceding the sale of common shares. It may still be reasonable to consider that a significant part of the capital gain on the prescribed (common) shares is attributable to the fact that dividends were not paid on a non-prescribed share of the corporation. This is a question of fact with respect to which it is not possible to give an opinion that has general application. Moreover, redemption of the non-prescribed shares before May 23, 1985 would not prevent the application of subsection 110.6(8) of the Act with respect to the gain on the prescribed shares if the other conditions for its application were present, and if the disposition of these prescribed shares took place after
November 21, 1985.
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