October 1989 Revenue Canada Round Table - Q.11 (Jan. 90 Access Letter, ¶1075)

It is acceptable for an individual taxpayer to stepped-up the basis of his qualified small business corporation shares by exchanging those shares for other shares of the same corporation having the same paid-up capital, but with an elected amounts sufficient to trigger the requisite amount of capital gain.

s. 84.1 will not apply where an individual taxpayer exchanges common shares of a corporation for preferred shares of the same corporation - because the shares will not be disposed of to another corporation.

Where a taxpayer receives an undivided part of a block of flow-through shares following the liquidation of a limited partnership under s. 98(3), and then exchanges this undivided part for shares of the same category of the same corporation, having the same paid-up capital, RC will accept an election under s. 85(1), and will accept that the shares issued to the taxpayer have a paid-up capital equal to that of the undivided block of shares.