Raj Juneja, "Taxation of equity derivatives", 2015 CTF Annual Conference paper
Exemption of foreign exchanges from requirement to be recognized (pp. 17:9-10)
[T]he explanatory notes to the July 31, 2015 legislative proposals indicate that an exchange will be a recognized derivatives exchange if a provincial securities commission has published a statement or notice to this effect and that both Canadian and foreign exchanges potentially meet the requirements of the definition. However, it is understood that securities commission notices usually exempt foreign exchanges from the requirement to be recognized or registered
Ambiguity of purpose test (p.17:11)
It is unclear what the "main reason" anti-avoidance test in point 1(b) above is targeting. It appears to apply where one of main reasons for entering into the agreement is to obtain the benefit of a deduction in respect of a dividend equivalent payment or a reduction of an income inclusion on account of an adjustment for dividends on the underlying shares.
No allowance for profit on qualifying offset (p.17:11)
Subparagraph (b)(ii) of the "synthetic equity arrangement" definition excludes an agreement that would otherwise be a synthetic equity arrangement where it was entered into for the purpose of offsetting all amounts included or deducted in computing the taxpayer's income with respect to another agreement of the taxpayer under which the taxpayer receives substantially all of the economics in respect of the share (an agreement under which the taxpayer has the long position). This provision is intended to apply to exempt an equity derivative from being a synthetic equity arrangement when the taxpayer entered into the derivative to hedge the taxpayer's long position under another derivative. An issue with the wording of this exception is that the purpose test requires that the derivative have been entered into to offset all amounts under the long position, which is unlikely to be the case because it does not allow for any profit to be earned between the two transactions.
Exclusion for acquisition of control (p. 17:11-12)
Subparagraph (b)(iii)…was introduced in the legislative proposals released on July 31, 2015 in response to a submission by the Joint Committee on Taxation…[which] noted that the version of the rules in the 2015 federal budget could apply in many typical commercial share-purchase transactions whereby pre-sale dividends (including safe income dividends) are paid.