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Permitted exchanges/Three-Party Share Exchange Foreign Sub 1 will concurrently make the following transfers of its shares of DC (which will not be taxable Canadian property): (i) transfer all the DC Special Shares to TC, a newly-incorporated private corporation subsidiary of Foreign Sub 1 (para. 126(a)) in consideration for the issue of common shares of TC; and (ii) transfer all the DC New Common Shares to Foreign Sub 15, a newly-incorporated LLC subsidiary of Foreign Spinco 1 which, in turn will be a non-Canadian subsidiary of Foreign Sub 1 (para. 126(b)). ... DC transfers assets to TC including A Co and E Co (the Foreign Subsidiaries of CFAs) in consideration for the assumption of liabilities and the issuance by TC of preferred shares, so that the proportion of the net business assets received by TC approximates the ratio of the FMV of the DC Special Shares to the FMV of all the issued and outstanding DC shares. ...

Five years later, after the FMV of the interests in Grainco have appreciated to $1.5 million and such interests continue to qualify as interests in a family farm partnership, A (and then B several days later) transfers his or her partnership interest in Grainco to a newly-incorporated corporation (“Holdco,” or "Managementco")- in which each of A and B holds common shares with an ACB of $50) in consideration for a note receivable of $750,000 and claims the capital gains exemption. ...

16 November 2011 External T.I. 2011-0423861E5 F- paragraph 53(1)b)-- summary under Clause (a)(i)A) Summary Under Tax Topics- Income Tax Act- Section 89- Subsection 89(1)- Capital Dividend Account- Paragraph (a)- Subparagraph (a)(i)- Clause (a)(i)A) example of capital gain for CDA purposes being less than the s. 40 capital gain Holdco, whose common shares of Opco have a nominal adjusted cost base ("ACB") and paid-up capital ("PUC"), a fair market value ("FMV") of $2 million and safe income on hand ("SIOH") attributable to those shares of $900,000, increases the PUC of those shares by $1 million, and transfers those common shares (or to be more precise, new common shares issued in replacement therefor on the PUC increase) to Opco for cancellation in consideration for the issuance by Opco of (i) preference shares of Opco having an FMV, PUC and ACB (determined under s. 85(1)(g)) of $1 million; and (ii) common shares having a FMV of $1 million and nominal PUC and ACB. ...

Proposed transactions: Spousal Trust will transfer its Class A and B preferred shares of Holdco to Newco in consideration for the Newco Note (in the case of the A's) and voting redeemable retractable non-cumulative Class B preferred shares (in the case of the B's). ...

Q. b CRA noted that although s. 161(7) ensures interest and penalties are computed without regard to reductions in taxes payable resulting from application of subsequent years' losses, "no similar provision exists that would exclude such a deduction from the determination or redetermination of a taxpayer's actual instalment obligations, nor from the determination of the remainder of taxes payable in respect of a taxation year under paragraphs 157(1)(a) and (b)," and concluded: [T]here is no provision…that would, in re-determining a functional currency reporter's CAD Taxes Payable for a taxation year as the result of a loss carried back to that year, prevent consideration of each prior amount of a loss that was previously applied in that year. ...

Permitted exchanges/Three-Party Share Exchange Foreign Sub 1 will concurrently make the following transfers of its shares of DC: (i) transfer all the DC Special Shares to TC, a newly-incorporated private corporation subsidiary of Foreign Sub 1 (para. 126(a)) in consideration for the issue of common shares of TC; and (ii) transfer all the DC New Common Shares to Foreign Sub 15, a newly-incorporated LLC subsidiary of Foreign Spinco 1 which, in turn will be a non-Canadian subsidiary of Foreign Sub 1 (para. 126(b)). ...

ACo will transfer its shares of BCo to Newco for Class 4 preferred shares (in order "to transfer ACo's entitlement to pre-72 CSOH to Newco"), and will elect under s. 85(1) "to ensure that paragraph 88(2.2)(b) applies on the transfer"; PUC will allocated to the Class 4 preferred shares equal to the PUC of the ACo shares held by Newco "to ensure that the deemed dividends on the redemptions [in 4 below] will be equal;" There will be a cross-redemption of shares between ACo and Newco in consideration for promissory note issuances, giving rise to equal dividends (as a result of the PUC of the Class 4 preferred shares of Newco being established with this end in view), with the promissory notes then being set-off. ...

ACo will transfer its shares of BCo to Newco for Class 4 preferred shares (in order "to transfer ACo's entitlement to pre-72 CSOH to Newco"), and will elect under s. 85(1) "to ensure that paragraph 88(2.2)(b) applies on the transfer"; PUC will allocated to the Class 4 preferred shares equal to the PUC of the ACo shares held by Newco "to ensure that the deemed dividends on the redemptions [in 4 below] will be equal;" There will be a cross-redemption of shares between ACo and Newco in consideration for promissory note issuances, giving rise to equal dividends (as a result of the PUC of the Class 4 preferred shares of Newco being established with this end in view), with the promissory notes then being set-off. ...

Amalco will transfer all of the Business 1 assets to BCo in consideration for the assumption of ACo’s obligations and a portion of the Amalco Certificates of Indebtedness and the issuance to Amalco of BCo Membership Shares. ...

CRA responded (before adding cautions): [W]e assume that the redemption value of the preferred shares of Divco is equal to the fair market value of the consideration received by Divco upon the issuance of the shares. ...