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30 October 2003 External T.I. 2003-0037465 F- Subsections 40(3.3) & 40(3.4)-- summary under Subsection 40(3.4) Summary Under Tax Topics- Income Tax Act- Section 40- Subsection 40(3.4) non-application of s. 40(3.4) where taxpayer acquires then immediately disposes of an additional block/ application of formula where it partially dips into existing block A taxpayer described in s. 40(3.3)(a), which on January 1, 200X had held 100 common shares of Pubco for at least three months, acquired an additional 50 shares on June 1, 200X, and on June 2, 200X, disposed of those additional shares to an unaffiliated person, sustaining a capital loss.. ... CCRA indicated that although s. 40(3.4) would apply, under its administrative position, only 1/2 of the taxpayer's loss would be considered to be nil under s. 40(3.4)(a) under the formula: Deemed nil loss = (the lesser of S, P and B) / S x L where S = the number of shares disposed of at that time 100 P = the number of shares acquired during the period described in paragraph 40(3.3)(b) 50 B = the number of shares remaining at the end of that period 50 L = the loss on the disposition otherwise determined And therefore: Deemed nil loss = 50 / 100 x L CCRA indicated that s. 40(3.4) would apply to the entire loss arising under a second variation, under which, on June 1, 200X, the taxpayer disposed of 50 of the 100 Pubco common shares and on June 2, 200X, acquired an additional 50 Pubco common shares of Pubco. ...