ATR-36 (4 Nov. 88)

RC gives a favourable s. 15(1) ruling with respect to an estate freeze transaction where father receives redeemable retractable non-cumulative Class A shares where it is stipulated that the corporation will not declare dividends on any other class which will result in it having insufficient net asset to settle in full the principal amount of the promissory note and the redemption amount of the Class A shares and it is stipulated that the corporation will not acquire any of its Class A shares for cancellation for an amount per share which is less than the lesser of the redemption amount per share and the net assets per outstanding Class A shares at the time of such acquisition. RC also requires that the corporation will not settle the principal amount of the promissory note for an amount which is less than the lesser of its principal amount and the net assets at the time of such settlement. Adult children subscribe for Class B non-participating shares in order to permit dividends to be paid by the corporation to the holders of its shares. Semble, that this funding was required by RC.

Favourable rulings (but with a refusal to give more than an opinion, in compliance with IT-169, as to the efficacy of a price-adjustment clause) are given for an estate freeze transaction in which:

1. X transfers his pre-1972 common shareholding in a public company to Holdco in consideration for a promissory note and redeemable retractable non-cumulative shares which cease to be voting on his death and with the usual asset-depletion protections;
2. a family trust for adult beneficiaries pays $5,000 in subscribing for common shares of Holdco; and
3. the adult children of Holdco subscribe for non-voting non-cumulative redeemable Class B shares of Holdco for an aggregate subscription price of $50,000 (in order to provide Holdco with the funds to pay dividends on its shares).

A favourable ruling is given with respect to an estate freeze involving a trust which will provide that "no amounts will be paid or payable to or for the benefit of, a particular beneficiary of the Trust until that beneficiary has attained the age of 18 years."