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.
MEMO TO FILE:
CTF November, 1992
Question #47
Conversion of Preference Shares into Common Shares
Where a shareholder holds fixed redemption amount preference shares that are convertible into common shares of the same corporation and at the time of conversion the common shares have a fair market value greater than the fixed redemption amount of the preference shares, will the excess be treated as a subsection 15(1) benefit to the shareholder at the time of the conversion?
Department's Position
Our position remains as stated in response to Question #25 of the 1991 CTF round table.
"It is a question of fact whether a benefit has been conferred on a shareholder. Based on the facts stated in the question, and provided that the preference shares were acquired at fair market value, the subsequent conversion of the preference shares into common shares, at a time when the common shares had a fair market value greater than the fixed redemption amount of the preference shares, would not, in and of itself result in the excess being treated as a subsection 15(1) benefit to the shareholder at the time of the conversion."
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