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A short term preferred share of a corporation under paragraph 248(1)(b) of the definition of short term preferred share (subject to certain exceptions): b) is a share that is convertible or exchangeable at any time within 5 years after the date of its issue, unless (i) it is convertible into or exchangeable for (A) another share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share, (B) a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share, or (C) both a share described in clause (A) and a right or warrant described in clause (B), and (ii) all the consideration receivable for the share on the conversion or exchange is the share described in clause (i)(A) or the right or warrant described in clause (i)(B) or both, as the case may be, and for the purposes of this subparagraph, where a taxpayer may become entitled on the conversion or exchange of a share to receive any particular consideration (other than consideration described in any of clauses (i)(A) to (C)) in lieu of a fraction of a share, the particular consideration shall be deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1, (our emphasis added) Subsection 27(5) of the Interpretation Act (Canada) R.S., c. ...

In consideration for the issuance of Parentco shares to the Former Targetco Shareholders, Targetco issues its shares to Parentco having a FMV equal to the FMV of the Parentco shares issued to Former Targetco Shareholders. ... As such, the cost of the shares of Amalco held by Parentco will not be derived from the value of the consideration given, i.e., shares issued by Parentco, to acquire the shares of Amalco. ... In consideration for Midco issuing shares to Parentco, Amalco issues compensatory shares to Midco having a FMV equal to the FMV of the shares of Midco issued to Parentco. ...

Reasons: (1) The services performed under a contract generally give rise to an inflow of cash, receivables or other consideration in the qualifying period. (2) Unrealized gains/losses arising from mark-to-market valuation adjustment to investments do not give rise to an inflow of cash, receivables or other consideration. ... Moreover, the services performed under the contract by an entity typically give rise to an inflow of cash, receivables or other consideration over the term of the service contract. ... However, in our view, the mark-to-market valuation adjustment to the carrying value of the investment does not give rise to an “inflow of cash, receivables or other consideration”. ...

Should you wish an in-depth consideration of the proposed transactions referred to in your letter, your request should follow the format set out in Information Circular 70-6R2 for requesting advance income tax rulings.  ... For example, a tax deferred basis may involve a situation in which A Co. transfers an asset to B Co. with which it does not deal at arm's length, receiving as consideration preferred shares, and both file elections under subsection 85(1).  ... The comments set out in this letter are of a general nature and do not take into account the numerous additional considerations that might arise in the context of specific fact situations.  ...

Your first question is whether the requirement in subsection 85(1) that the consideration for property transferred to a taxable Canadian corporation include shares of the capital stock of the corporation would be satisfied if such consideration consists of shares to be issued by the corporation after legal authorization to do so is obtained. ... It is our opinion that, technically speaking, the above-mentioned requirement in subsection 85(1) of the Act would not be satisfied where the transferee corporation cannot immediately issue shares as partial or full consideration for the property transferred to it. ... With regard to your second question, it is our opinion that co-ownership in a single share of a corporation received as consideration for the transfer of property to the corporation would qualify as share consideration for purposes of a subsection 85(1) rollover. ...

Is the paid-up capital of the special shares of XXX and their fair market value equal to the difference between the fair market value of the rental property and the non-share consideration? ... If the fair market value of the special shares is found to be less than the difference between the fair market value of the rental property and the non-share consideration could any excess be a benefit conferred on the common shareholder for the purpose of paragraph 85(1)(e.2) of the Act? ... " It is our view that at the time of issue of the special shares, an amount equal to the net consideration received by Ontario should have been added to the paid-up capital of the class of shares to which the special shares belong. ...

Accordingly, it will likely be necessary to determine the appropriate allocation of the amounts to be paid as between that part is paid as consideration for the right to use computer software and that part that is paid as consideration for services. ... No deductions are permitted in determining the amount of income that is subject to this tax, e.g. it is the gross amount paid to the non-resident as consideration for the right to use computer software that is subjected to tax at the applicable rate without regard to expenses of any kind incurred by the non-resident. ... Where an amount is paid to a non-resident in part as consideration for services rendered in Canada and in part as consideration for services rendered outside Canada it is necessary to make an allocation of the amount as between in the two in order to determine the amount required to be withheld under Income Tax Regulation 105. ...

Should you wish an in-depth consideration of the proposed transactions referred to in your letter, your request should follow the formal set out in Information Circular 70-6R2 for requesting advance income tax rulings. ... For example, a tax-deferred basis may involve a situation in which A Co. transfers an asset to B Co. with which it does not deal at arm's length, receiving as consideration preferred shares, and both file elections under subsection 85(1). ... The comments set out in this letter are of a general nature and do not take into account the numerous additional considerations that might arise in the context of specific fact situations. ...

Accordingly, it will likely be necessary to determine the appropriate allocation of the amounts to be paid as between that part that is paid as consideration for the right to use computer software and that part that is paid as consideration for services. ... No deductions are permitted in determining the amount of income that is subject to this tax, e.g. it is the gross amount paid to the non-resident as consideration for the right to use computer software that is subjected to tax at the applicable rate without regard to expenses of any kind incurred by the non-re5ident. ... Where an amount is paid to a non-resident in part as consideration for services rendered in Canada and in part as consideration for services rendered outside Canada it is necessary to make an allocation of the amount as between the two in order to determine the amount required to be withheld under Income Tax Regulation 105. ...

Your first question is whether the requirement in subsection 85(1) that the consideration for property transferred to a taxable Canadian corporation include shares of the capital stock of the corporation would be satisfied if such consideration consists of shares to be issued by the corporation after legal authorization to do so is obtained. ... It is our opinion that, technically speaking, the above-mentioned requirement in subsection 85(1) of the Act would not be satisfied where the transferee corporation cannot immediately issue shares as partial or full consideration for the property transferred to it. ... With regard to your second question, it is our opinion that co- ownership in a single share of a corporation received as consideration for the transfer of property to the corporation would qualify as share consideration for purposes of a subsection 85(1) rollover. ...