New s. 55(3)(a) requires that there be an outside basis reduction for a spinning-off corporation

The exemption under the proposed version of s. 55(3)(a) requires that the exempted dividends arise under s. 84(3) (or (2).) Accordingly, where an intermediate holding company (Holdco) wishes to have its subsidiary (Opco) spin off a business to another Holdco subsidiary (Newco), so that Opco starts off by selling that business to Newco for preferred shares and retracting those prefs for a note, it no longer is possible (even ignoring CRA’s traditional unfavourable policy) to complete the spin-off through Opco dividending the note to Holdco (so that there is no reduction in the ACB of the Opco shareholding) and Holdco contributing the note back to Newco in consideration for shares. Instead, in order to generate a s. 84(3) dividend, Opco can distribute the note to Holdco as redemption proceeds for a portion of the Opco shareholding, before that note is contributed to Newco. This will result in a pro rata reduction in the ACB of that shareholding in Opco. However, Holdco will have full basis for its shareholding in Newco (i.e., a cost equal to the net fair market value of the business transferred to Newco).

On the other hand, if butterfly-style mechanics instead were used to spin-off the business to Newco, the resulting ACB of Holdco’s Newco shareholding would be equal to a pro-rata portion of its previous ACB in the Opco shareholding. Accordingly, the first (note distribution and contribution) mechanics generally produce a better result.

Neal Armstrong. Summary of Carla Hanneman, "Reorganization Strategies for Proposed Paragraph 55(3)(a)", Canadian Tax Focus, Vol. 5, No. 3, August 2015, p.8 under s. 55(3)(a).