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.
The proposed transactions do not meet the conditions of subsection 85.1(3). Should we still rule favorably?
Problem:
UK1 and UK2 are foreign affiliates of a Canadian company. UK1 indirectly owns 100% of the shares of UK2. A reorganization will take place in the United Kingdom whereby all the shares of UK1 will be cancelled; as consideration for the cancellation UK2 will issue its own shares to the previous shareholders of UK1; and UK1 will issue shares to UK2 equal to the shares cancelled. Technically subsection 8511(3) doesn't apply because the Canadian company does not sell its shares to UK2.
Position:
Subsection 85.1(3) does not apply.
Rationale:
The proposed transactions do not meet the conditions of subsection 85.1(3).
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