CRA provides an unredacted schedule for repayment of a pipeline note

CRA ruled on a pipeline transaction for a testamentary spousal trust, following the death of the spouse, under which it distributed its common shares of the portfolio company to its two individual residuary beneficiaries under s. 107(2) and sold its preferred shares of the company to a Newco set up by those beneficiaries in consideration mostly for a note, and they transferred their common shares of the portfolio company to Newco on a s. 85 rollover basis. After at least one year, the portfolio company was to be wound up into Newco and then the note was to be “gradually repaid over a period of at least two years after the wind-up”. The ruling letter then stated:

For greater certainty, Newco will pay down no more than 25% of the principal amount of the Note by 3 months following the winding-up, no more than 50% of the principal amount of the Note by 6 months following the winding-up, and no more than 75% of the principal amount of the Note by 9 months following the winding-up.

Neal Armstrong. Summary of 2023 Ruling 2023-0980101R3 under s. 84(2).