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.
Capital Gains Exemption - Prescribed Share Status on Amalgamation
Assume that preferred shares are issued by Amalco on an amalgamation in exchange for preferred shares of a predecessor corporation. The preferred shares of the predecessor would have been prescribed shares as they were issued in an estate freeze arrangement as contemplated by Regulation 6205(2). The new preferred shares of Amalco would not otherwise be prescribed shares.
Will the Department confirm that the new preferred shares will be prescribed shares pursuant to Regulation 6205(4)(c) (i.e., they will not lose their prescribed share status due to the fact that Regulation 6205(4)(c) does not apply if the shares issued on amalgamation are not prescribed shares at the time of issue?
Department's Position
The new preferred shares will not be prescribed shares pursuant to paragraph 6205(4)(c) of the Regulations if the shares issued on the merger or amalgamation are not prescribed shares at the time of their issue. This result cannot be avoided as section 6205 of the Income Tax Regulations, makes no reference to substituted shares. This has been referred to the Department of Finance (their reply is attached).
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