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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Canadian Tax Foundation
Corporate Management Tax Conference
June 14, 1996
Question 17 - Post-Butterfly Transfers of Property
Post-butterfly sales are governed by paragraphs 55(3.1)(c) and (d) of the Act. Prior to the 1994 amendments, Revenue Canada had indicated that certain taxable transfers between shareholders of properties received on a butterfly distribution would not affect the pro rata distribution test. If two shareholders are related, the transfer of butterflied properties between them would not constitute a problem under paragraph 55(3.1)(c).
Could these related shareholders be amalgamated or one be wound up into the other without the amalgamation or winding-up being considered to be done in the course of the reorganization in which the butterfly distribution is made?
Department's Response
Applying the approach described in our response to question 16, a winding-up or amalgamation of a transferee corporation would not ordinarily be considered to occur as part of the butterfly reorganization, even where the corporation with which the transferee corporation is being merged is also a shareholder of the distributing corporation. Thus, the amalgamation or winding-up would not affect the prior pro rata distibution. However, the amalgamation or winding-up might nevertheless occur as part of the series of transactions, in which case the rules in subsection 55(3.1) would have to be considered.
Author: Mark Symes
File: 5-962078
Date: June 12, 1996
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