Killam Apartment REIT will be using the s. 132.2 merger rule together with a renunciation to eliminate its corporate subsidiary

At the beginning of 2016, Killam Properties Inc. (KPI) effectively converted to a REIT under a Plan of Arrangement pursuant to which most of its shareholders exchanged their KPI shares for units of the REIT on a taxable basis, but with some electing to receive rollover treatment by transferring their shares on a s. 97(2) rollover basis for exchangeable units of a subsidiary LP (Killam MLP) - into which the REIT then also contributed the KPI shares acquired by it on a taxable basis.

Starting with 2003-0053981R3, CRA issued various rulings permitting an income fund or REIT to eliminate a corporate subsidiary by creating a mutual fund corporation (MFC) through a distribution of shares of the MFC, having a nominal value, to its unitholders, then amalgamating the corporate subsidiary with the MFC to form Amalgamated MFC, and then effecting a s. 132.2 merger of Amalgamated MFC into the income fund or REIT.

On October 11, 2024, CRA issued a ruling letter confirming the tax consequences of transactions of this general character for the elimination of KPI, including the application of the s. 132.2 rules, and the REIT is now proposing to implement. A complicating factor is that KPI is held by the REIT through Killam MLP rather than directly. Accordingly, the proposed transactions include a renunciation by Killam MLP of the receipt of redemption proceeds for its 99.999%+ shareholding in Amalco MFC, somewhat similar to that ruled on in 2016-0660321R3.

Neal Armstrong. Summary of Circular of Killam Apartment Real Estate Investment Trust dated October 18, 2024 under Public Transactions - Other - Internal S. 132.2/107.4 Mergers - Corporate Sub s. 132.2 Merger.