CRA rules on a double post-mortem pipeline

Two spouses (the parents) owning a portion of the shares of a family company (Opco) earning interest and dividends from a portfolio of loans and private company shares, died in relatively quick succession. Accordingly, a double pipeline transaction was proposed under which each estate transferred its shares to a Newco in consideration for mostly a note in one case and mostly high-PUC preferred shares in the second.

Following the amalgamation of Opco and the two Newcos a year later, the note and these high-PUC preferred shares would be repaid or redeemed at a rate per quarter not exceeding 25% of their initial principal or redemption amount. In addition, on the amalgamation, it appeared to be contemplated that discretionary non-voting shares would be issued by Amalco and that the PUC of these shares would also be distributed in cash at a rate per quarter, following the amalgamation, not exceeding 25% of their initial PUC.

Neal Armstrong. Summary of 2024 Ruling 2023-0998721R3 under s. 84(2).