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Proposed transactions: The Estate will transfer its Class A and C shares to a newly-incorporated corporation (Newco), whose common shares are owned equally by X, Y and the Trust, in consideration for two Notes Y and Z will transfer their common and Class B shares, and the Trust will transfer its common share, of Amalco to Newco in consideration for non-voting preferred shares of Newco Amalco will be amalgamated with Newco no sooner than one year after the above transfers The Notes "will be gradually repaid over a period of at least one year after the amalgamation date, but the amount of the repayments in any given quarter of that year will not exceed X% of the principal amount of Note 1 and Note 2 when they were issued" Rulings: S. 84.1 will not apply to the transfer of shares by the Estate to Newco for the Notes, except that it will so apply to the extent of the V-Day value of the Class A shares so transferred by it S. 84(2) will not apply to deem the Estate to have received a dividend on the Class A and C shares ...

29 October 2013 External T.I. 2013-0507881E5- Price adjustment clause-- summary under Effective Date Summary Under Tax Topics- General Concepts- Effective Date A price adjustent clause in the share provisions for preferred shares issued by Opco to the taxpayer in Year 1 in consideration for the transfer of property to Opco provide that the redemption value of the shares issued will be changed if the FMV of the consideration for the shares is determined by CRA to be different than the determination at the time of the transaction (or an additional amount will be paid if the change is upward and the preferred shares issued are redeemed before the determination by CRA). ...

29 October 2013 External T.I. 2013-0507881E5- Price adjustment clause-- summary under Subsection 84(3) Summary Under Tax Topics- Income Tax Act- Section 84- Subsection 84(3) price adjustment payment recognized as s. 84(3) dividend when received A price adjustent clause in the share provisions for preferred shares issued by Opco to the taxpayer in Year 1 in consideration for the transfer of property to Opco provide that the redemption value of the shares issued will be changed if the FMV of the consideration for the shares is determined by CRA to be different than the determination at the time of the transaction (or an additional amount will be paid if the change is upward and the preferred shares issued are redeemed before the determination by CRA). ...

Proposed transactions Each of the Charity and Aco will transfer assets (including goodwill) to Newco (a CBCA corporation) in consideration for Class A or Class B redeemable preferred shares (bearing a dividend on their redemption amount equal to the prevailing interest rate prescribed under Reg. 4301(c)) and cash in consideration for Class C preferred shares. ...

X transfers all his common shares of Opco to Opco in consideration for preferred shares of Opco and, at the same time, Holdco subscribes for common shares of Opco. ... X transfers all his common shares of Opco 1 to Opco 1, and of Opco 2 to Opco 2, in consideration for preferred share of Opco 1 or Opco 2, as the case may be and, at the same time, an inter vivos trust for the minor children of X ("Trust") subscribes for common shares of Opco 1 and Opco 2. ...

The proposed transactions will be implemented before a potential acquisition of control of the foreign parent (which would "grind" the adjusted cost base of Loans under s. 111(4)): GP and Holdco will transfer Loan 1 and 2 to a newly-incorporated subsidiary (Subco) of Opco in consideration for Subco Preferred Shares Opco will transfer its partnership interest in GP to Canco 2, so that GP will cease to exist and Canco 2 will receive Subco Preferred Shares Canco 2 (which does not have significant tax attributes) will distribute such Subco Preferred Shares to Holdco in settlement of Loan 3 (thereby giving rise to a forgiven amount to it) Holdco will transfer its Subco Preferred Shares to Opco in consideration for Opco Preferred Shares Subco will be wound up into Opco under s. 88(1) (following a reduction of the stated capital of the Subco Preferred Shares)so that Loans 1 and 2 (previously owing to Subco by Opco) will be extinguished Rulings (following ATR-66): Ss. 40(2)(e.1) and 53(1)(f.11) will apply to the dispositions of Loans 1 and 2 to Subco The settlement of Loans 1 and 2 on the Subco winding-up will not give rise to a forgiven amount per s. 80.01(4) Neither s. 40(2)(e.1) nor s. 40(3.4) will apply to deny the capital loss to Holdco on the settlement of Loan 3 S. 61.3(3) will not apply to deny the application of s. 61.3(1) to Canco 2 (re inter alia the forgiven amount arising to it on the settlement of Loan 3) S. 245(2) will not be applicable ...

The proposed transactions will be implemented before a potential acquisition of control of the foreign parent (which would "grind" the adjusted cost base of Loans under s. 111(4)): GP and Holdco will transfer Loan 1 and 2 to a newly-incorporated subsidiary (Subco) of Opco in consideration for Subco Preferred Shares Opco will transfer its partnership interest in GP to Canco 2, so that GP will cease to exist and Canco 2 will receive Subco Preferred Shares Canco 2 (which does not have significant tax attributes) will distribute such Subco Preferred Shares to Holdco in settlement of Loan 3 (thereby giving rise to a forgiven amount to it) Holdco will transfer its Subco Preferred Shares to Opco in consideration for Opco Preferred Shares Subco will be wound up into Opco under s. 88(1) (following a reduction of the stated capital of the Subco Preferred Shares)so that Loans 1 and 2 (previously owing to Subco by Opco) will be extinguished Rulings (following ATR-66): Ss. 40(2)(e.1) and 53(1)(f.11) will apply to the dispositions of Loans 1 and 2 to Subco The settlement of Loans 1 and 2 on the Subco winding-up will not give rise to a forgiven amount per s. 80.01(4) Neither s. 40(2)(e.1) nor s. 40(3.4) will apply to deny the capital loss to Holdco on the settlement of Loan 3 S. 61.3(3) will not apply to deny the application of s. 61.3(1) to Canco 2 (re inter alia the forgiven amount arising to it on the settlement of Loan 3) S. 245(2) will not be applicable ...

However…the taxpayer should be prepared to establish that the brief delay could not practically have been avoided and was not attributable to financial considerations like a desire to earn a return from a non-qualifying investment, to avoid temporary cash flow issues or because of exchange rate considerations. ...

A, for nominal consideration, 1 non-voting Class B preferred share, which is redeemable and retractable “for the fair market value for which it is issued” and entitled to discretionary dividends as and when declared. ... A as consideration for the share does not represent the fair market value of such share at the time of subscription.” ...

Its issued share capital consists of 1,000 Class A common shares and 1,000 Class B common shares held by two unrelated holdcos (Holdco1 and Holdco 2), who had subscribed for their shares on incorporation for nominal consideration. Opco repurchases all the Class B shares for $1M (Alternative 1) or Opco pays a discretionary dividend of $1M to Holdco 2 and the repurchases the Class B shares for nominal consideration, with the FMV of the Class A shares remaining at $1M, and the FMV of the Class B shares reduced by the dividend amount (Alternative 2). ...