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CRA stated: Where an agent remunerates a principal's employee, the amount of money the principal pays the agent as a reimbursement for the employee's wages is not consideration for a supply and therefore is not subject to tax. Therefore, since Company A acts as an agent of Company B and Company C in remunerating the Employees, the amount of money Company B and Company C pay Company A as the reimbursement for the Employees' wages is not consideration for a supply and would not be subject to tax. ...

2024 Ruling 2023-0998291R3 F- Multi-wings split-up net asset butterfly 55(3)(b)-- summary under Paragraph 85(1)(b) Summary Under Tax Topics- Income Tax Act- Section 85- Subsection 85(1)- Paragraph 85(1)(b) excess debt allocated on s. 85(1) transfer of land and building to the land so as to produce capital gains rather than recapture In order to accomplish a multi-wing split-up net asset butterfly of a private corporation (DC) owned by a divorced couple, they will transfer their common shares of DC to two new transferee corporations (TC1 and TC2), then DC will distribute each of the two rental properties, along with cash assets, to the respective TC in consideration for the assumption of liabilities (including shareholder advances and mortgage debt) and the issuance of TC preferred shares. ... The sole consideration for the cash transfers will be debt assumptions, the buildings will be transferred on a full s. 85(1) rollover basis (i.e., debt assumed only up to their cost amounts, so that there is no recapture) and the balance of the assumed debt will be allocated to the transferred land so that the agreed amount therefor will produce (consistently with s. 85(1)(e.3)) the recognition of capital gains by DC (and resulting Part IV tax under s. 186(1)(b) to the TCs on the DC winding-up.) ...

On the death of the individual, the Opco shares had an aggregate FMV less than the aggregate redemption value of the outstanding preferred shares (so that the Opco common shares were considered to have a nominal FMV) Proposed Transactions The estate will transfer all its shares of Opco on an s. 85(1) rollover basis to a corporation newly incorporated by it (“Newco”) in consideration for a demand note (Note 1) of Newco and Class B non-voting, non-cumulative preferred shares of Newco. Each of the children will transfer their Class E preferred shares and common shares of Opco on an s. 85(1) rollover basis to Newco in consideration for Class C non-voting, non-cumulative preferred shares of Newco. ...

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. ... In addition, in order to determine whether there is an abuse having regard to section 84.1, the CRA could consider, among other things, the source of the funds used to repay the consideration for the disposition of the partnership interests, and the value to be attributed to the shares of the capital stock of the corporation held by the partnership in relation to the total value of the interests in the partnership. ... In response to a question as to whether the answer would change if Managementco instead was owned by the child of A and B, CRA indicated that although it was aware of the intergenerational rollover in s. 70(9.21), s. 84.1 did not take this consideration into account, so that the answer would not change. ...

Acquisition of Mergeco by Shareholder 1 and 2 group Under the second plan of arrangement: Bidco will transfer the convertible senior notes to Mergeco for cancellation The shareholder rights plan for Megeco will be cancelled The outstanding Mergeco options will be cash-surrendered to Mergeco Mergeco shares of dissenters will be transferred to Bidco for their fair value At the same time, all other Mergeco shares will be transferred to Bidco for cash consideration – except that Mergeco shares held by affiliates of Shareholder 2 will be transferred to Buyco 1 (a joint newly-formed 50/50 subsidiary of Shareholder 1 and 2) in consideration for shares of Buyco 1 All the shares of Bidco held by the Shareholder 1 and 2 groups will be transferred to Buyco 1 in consideration for shares of Buyco 1, so that Buyco 1 is owned equally by the two groups The Mergeco shares held by Buyco 1 will be transferred to Buyco 2 (an affiliate of Shareholder 1) for shares of Buyco 2 Mergeco will elect to cease to be a public corporation (and also elect under s. 256(9) in its tax return) Buyco 2 will transfer the shares of Mergeco to Bidco for shares of Bidco. ...

DC will transfer a proportionate share of its two types of property (cash and near cash; and investment property, namely, the Buildings and related assets) on a net asset butterfly basis under s. 85(1) to a newly-incorporated subsidiary of Holdco B (Holdco B Sub) in consideration for the assumption of liabilities and for Holdco B Sub Special Shares (which will carry more than 10% and less than 50% of the votes for all Holdco B Sub shares), with Holdco B Sub thereby being connected with DC; the shareholder loans will be considered current liabilities for this purpose; DC will purchase for cancellation all of the DC common shares held by Holdco B in consideration for issuing a Note, which will be accepted as absolute payment; no s. 256(9) election will be made respecting the resulting acquisition of control of DC by Holdco A. Holdco B Sub will redeem all of the Holdco B Sub Special Shares held by DC in consideration for issuing a Note, which will be accepted as absolute payment. ...

DC will transfer a proportionate share of its two types of property (cash and near cash; and investment property, namely, the Buildings and related assets) on a net asset butterfly basis under s. 85(1) to a newly-incorporated subsidiary of Holdco B (Holdco B Sub) in consideration for the assumption of liabilities and for Holdco B Sub Special Shares (which will carry more than 10% and less than 50% of the votes for all Holdco B Sub shares), with Holdco B Sub thereby being connected with DC; the shareholder loans will be considered current liabilities for this purpose; DC will purchase for cancellation all of the DC common shares held by Holdco B in consideration for issuing a Note, which will be accepted as absolute payment; no s. 256(9) election will be made respecting the resulting acquisition of control of DC by Holdco A. Holdco B Sub will redeem all of the Holdco B Sub Special Shares held by DC in consideration for issuing a Note, which will be accepted as absolute payment. ...

Proposed transactions Parent will transfer to Can Holdco (which currently has nominal assets) all its FA 2 shares in consideration for common shares of Can Holdco having an equal FMV, and elect at the lesser of under s. 85(1)(c.1)(i) and (ii). Subco 3 will transfer all its FA 2 shares to Can Holdco for a purchase price equal to the shares' adjusted cost base (and with a price adjustment clause based only on any adjustment to such ACB), and Can Holdco will issue in consideration therefor redeemable retractable Class B shares having a redemption amount, apid-up capital and FMV equal to such purchase price. ... Can Holdco will transfer all its FA 1 shares to FA 2 in consideration for additional FA 2 shares with an equivalent FMV. ...

Proposed transactions Parent will transfer to Can Holdco (which currently has nominal assets) all its FA 2 shares in consideration for common shares of Can Holdco having an equal FMV, and elect at the lesser of under s. 85(1)(c.1)(i) and (ii). Subco 3 will transfer all its FA 2 shares to Can Holdco for a purchase price equal to the shares' adjusted cost base (and with a price adjustment clause based only on any adjustment to such ACB), and Can Holdco will issue in consideration therefor redeemable retractable Class B shares having a redemption amount, paid-up capital and FMV equal to such purchase price. ... Can Holdco will transfer all its FA 1 shares to FA 2 in consideration for additional FA 2 shares with an equivalent FMV. ...

2012 Ruling 2012-0460811R3- Public Company Spin-Off Butterfly-- summary under Distribution Summary Under Tax Topics- Income Tax Act- Section 55- Subsection 55(1)- Distribution standard spin-off by public resource co Under the proposed transactions for a spin-off butterfly of Spinco by DC (a public corporation and principal business corporation as defined in s. 66(15)): no dissent rights were exercised Spinco, which is a taxable Canadian corporation and whose common shares have been conditionally accepted for listing but which will not issue any shares until the time of transfer to it below of the DC Butterfly Shares, will elect to be a public corporation by filing the T2073 prescribed form each DC shareholder will exchange each of its DC common shares for one DC New Common Share (having the same rights as the old common shares except that the DC New Common Shares will give the holders thereof the right to vote, to the exclusion of any other class of shares of DC, for the election of directors at any meeting of shareholders called for that purpose) and one DC Butterfly Share (which will be non-voting and redeemable and retractable for the "Butterfly Proportion" of the fair market value of an old DC common share immediately before such reorganization) each DC stock option holder will exchange its options for new DC stock options and Spinco stock options ("The issuance by Spinco of the Spinco Stock Options will be in anticipation of the [butterfly] distribution... and will form part of the non-share consideration relating to such transfer." – para. 29) each DC Butterfly Shares will be transferred to Spinco in consideration for one Spinco common share, with the Spinco common shares being listed on a designated stock exchange the net FMV of each of the three types of property of DC will be determined on a consolidated basis (and where the property of DC is a share of a corporation over which DC has a significant influence, the net FMV of the share of the particular corporation will be multiplied by the proportion that the net FMV of that type of property of the particular corporation is of the net FMV of all the property of the particular corporation- and following the allocation of current liabilities to each cash or near cash property, any remaining net FMV of any accounts receivable, inventories and prepaid expenses of a particular corporation will be reclassified as business property and excluded from cash or near cash property, to the extent that such property will be collected, sold or used by the particular corporation in the ordinary course of the business to which such property relates) DC will transfer to Spinco each transferred asset such that following the transfer the net FMV of each type of transferred property will approximate the Butterfly Proportion; and in consideration therefor Spinco will issue the Spinco Stock Options and Spinco Redemption Shares; DC and Spinco will make a joint s. 85(1) election Spinco and DC will redeem the Spinco Redemption Shares and DC Butterfly Shares for redemption notes (making a s. 89(14) designation respecting the resulting deemed dividend), and will each satisfy its note by transferring the other note to its debtor Rulings: s. 86 rulings re exchange of DC common shares for new common shares and DC Butterfly Shares s. 85.1(1) rulings re transfer of DC Butterfly Shares to Spinco cross-cancellation of notes will not give rise to gain or forgiven amounts ...