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.
Background
Paragraph 55(3)(b) requires that a shareholder transferee receive its pro rata share of each type of assets distributed in the course of a butterfly reorganization. Elections pursuant to subsection 85(1) are normally filed in respect of the property transfers, so that there is no fair market value realization by the transferor. Where the property to be transferred is real property inventory no election under subsection 85(1) can be made, due to a specific exclusion in subsection 85(1). We recently considered a case in which an Opco will transfer real property inventory pursuant to a subsection 97(2) election to a partnership as fair market value. The partnership will carry on business for at least 6 months and will then be wound up, distributing the property to the two remaining partners under subsection 98(3) of the Act. These partners are shareholders of LPL.
Issue
A partnership is being used to circumvent the prohibition against rolling real property to a corporation which is found in subsection 85(1). XXX for their opinions on two questions XXX
Significance
XXX
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