Subsection 55(3)

Paragraph 55(3)(a)

Administrative Policy

2016 Ruling 2016-0648991R3 - Internal spinoff reorganization of XXXXXXXXXX

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Tax Topics - Income Tax Act - Section 85.1 - Subsection 85.1(3) a double transfer of shares under s. 85(1) and 85.1(3) would not affect the shares’ capital property status 171
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares shares did not lose capital property character on internal spin-off transfer with a view to their further dorp-down 104

2016 Ruling 2016-0635101R3 - 55(3)(a) Spin-Off to Use Parent Losses

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Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) where land transferred under s. 85(1) along with terminal loss building, elect high with a view to s. 13(21.1)(a) applying to reduce the land proceeds to ACB 177
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) s. 86(1) applied where “dirty” s. 85 exchange mechanic used, but no s. 85 election made 91
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(a) elected amount deterines proceeds before s. 13(21.1)(a) grind 197

2016 Ruling 2015-0623731R3 - Subsections 55(2) and (2.1)

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Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount policy on set-off of unequal redemption notes does not extend beyond a butterfly reorg 389
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) stated capital of old shares required to be prorated amongst new classes based on relative FMV 130

2017 Ruling 2016-0675881R3 - Paragraph 55(3)(a) Internal Reorganization

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(4) s. 55(3)(a) split-up between Newcos for two siblings which were related due to multiple-voting shares held by the father’s and mother’s Holdco 164
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(e) UCC on s. 55(3)(a) spin-off prorated based on relative capital cost rather than FMV 160
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b) where circular RDTOH calculation arises on spin-off transaction, it is for the TSOs to sort out which corporations should bear Part IV tax 241

12 May 2017 External T.I. 2017-0683511E5 F - Purpose tests of a dividend or repurchase of share

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) - Subparagraph 55(2.1)(b)(ii) redeeming common shares otherwise than out of safe income may be GAARable 324
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of s. 55(3)(a) redemption exception to circumvent safe income limitation could be offensive 52

13 January 2016 External T.I. 2015-0604521E5 - ACB increase in paragraph 55(3)(a) reorganization

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) objectionable for a s. 55(3)(a) spin-off to result in an increase in the aggregate outside basis 169
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount contribution of note by creditor to debtor 34

2015 Ruling 2014-0559181R3 - Internal Reorganization

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Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) internal spinoff by "profitco" for previous loss transfer rulings will not prejudice those rulings 163

14 April 2015 External T.I. 2015-0570021E5 F - Présomption de gain en capital

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) application of safe harbour where holdco interposed before spin-off transaction 346

11 February 2015 External T.I. 2014-0557251E5 F - paragraph 110.1(1)(c) and clause 55(3)(a)(i)(B)

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10 October 2014 APFF Roundtable Q. 16, 2014-0538031C6 - APFF 2014 Q. 16 - Capital gain

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Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(b) - Subparagraph 251(2)(b)(i) incorporator related to corporation 61
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) interposition of holdco to permit related-person spin-off compliant with s. 55(3)(a)(ii) and (v) 844

2014 Ruling 2013-0505431R3 - XXXXXXXXXX

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Tax Topics - Income Tax Act - Section 66.2 - Subsection 66.2(5) - Canadian development expense - Paragraph (e) transfer of roylaty from partly-owned partnership 429
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) delay in filing articles of dissolution 47
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) s. 97(2) applicable to contribution (no equity consideration) 55

25 April 2014 External T.I. 2014-0528011E5 F - Subsection 55(2) - redemption of shares

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3 January 2014 External T.I. 2013-0514021E5 F - Subsection 55(2) - redemption of shares

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2013 Ruling 2013-0501811R3 - Internal Reorganization - 55(3)(a)

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16 February 2011 External T.I. 2012-0435381E5 - Subsection 55(2) - redemption of shares

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27 January 2000 External T.I. 1999-000937 -

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1999 APFF Round Table, Q. 15

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3 February 1999 Ruling 971084

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1 December 1998 TEI Conference, Q. XXIII

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7 July 1998 TI 964116

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3 November 1997 T.I. 9725615 [meaning of "significant"]

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1997 Ruling 3-970402 -

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29 April 1997 External T.I. 5-971115 -

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1996 Ontario Tax Conference Round Table, "Creditor Protection and Butterfly Transactions", 1997 Canadian Tax Journal, Vol. 45, No. 1, pp. 214-215

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1996 Corporate Management Tax Conference Report, Q. 15

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27 June 1995 External T.I. 5-942536 -

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16 September 1992 T.I. (Tax Window, No. 24, p. 16, ¶2196)

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10 January 1992 CGA Roundtable, Q. 19, 7-912224

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10 January 1992 Memorandum (Tax Window, No. 17, p. 15, ¶1773)

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10 January 1992 Memorandum (Tax Window, No. 17, p. 14, ¶1773)

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10 January 1992 Memorandum (Tax Window, No. 17, p. 12, ¶1773)

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24 February 1992 Memorandum (Tax Window, No. 13, p. 13, ¶1627)

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19 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 6, ¶1054)

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19 March 1990 T.I. (August 1990 Access Letter, ¶1371)

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29 January 1990 T.I. (June 1990 Access Letter, ¶1268)

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3 November 89 T.I. (April 90 Access Letter, ¶1172)

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) 107

1 November 89 T.I. (April 90 Access Letter, ¶1172)

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Articles

Doron Barkai, Alexander Demner, "Dealing with New Subsection 55(2): Issues and Strategies", 2016 Conference Report (Canadian Tax Foundation), 6:1–56

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Carla Hanneman, "Reorganization Strategies for Proposed Paragraph 55(3)(a)", Canadian Tax Focus, Volume 5, Number 3, August 2015, p.8.

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Benjamin Alarie, Julia Lockhart, "The Importance of Family Resemblance: Series of Transactions After Copthorne", Canadian Tax Journal (2014) 62:1, 273-99.

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) 1136

Michael N. Kandev, Abraham Leitner, "Through the Looking Glass: Dividing up a Family Business in a Canada-US Cross-Border Context", 2011 Canadian Tax Journal, Vol 59, No. 4, p. 899: Canada-US cross-border divisions of family operations that are structured under s. 55(3)(a) are generally constrained by the stricter rules of Code section 355.

Firoz Ahmed, "Subsection 55(3) Update", Canadian Current Tax, Vol. 15, No. 8, May 2005, p. 1: CRA's "new position is that the acquisition of shares of a corporation representing less than three percent of the fair market value of the shares of the capital stock of the corporation will not generally result in a significant increase in interest even if the shares have a very high value".

K.A. Siobhan Monaghan, "Doomed (or 'Deemed') to Fail", Corporate Structures and Groups, Vol. V, No. 1, p. 253.

Subparagraph 55(3)(a)(ii)

Administrative Policy

2018 Ruling 2017-0683941R3 - Split-up transactions

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) arm's length investment in proposed purchaser of spinco assets not part of spin-off series 219
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b) year-end established in middle of cross-redemptions to avoid circularity 212

2015 Ruling 2015-0605901R3 F - Présomption de gain en capital

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) separation of real estate assets beneath new holdco formed by unrelated shareholders 512
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) taxation year end changed to immediately before building spin-off 93
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b) year end selection to avoid Pt. IV circularity 91

Subparagraph 55(3)(a)(iii)

Administrative Policy

2015 Ruling 2015-0604051R3 - Internal Reorganization

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Tax Topics - Income Tax Act - Section 152 - Subsection 152(1.11) s. 55(3)(a) rulings conditional on U.S. parents accepting GAAR assessments to reduce their outside basis 224
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) pro-rata highly dilutive stock dividend 115
Tax Topics - Income Tax Act - Section 212.3 - Subsection 212.3(2) extensive reps required re series of transactions 45

Subparagraph 55(3)(a)(v)

Administrative Policy

29 October 2013 External T.I. 2013-0489771E5 F - Internal Reorganization - 55(3)(a)

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) estate distribution of corporation followed by transfer of assets from related corporation could be part of same series 160
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.2) - Paragraph 55(3.2)(d) s. 55(3.2)(d) application to estate distribution of corporation to 3 sibling beneficiaries does not deem them to be related to each other 237

Paragraph 55(3)(b)

See Also

Deuce Holdings Ltd. v. The Queen, 97 DTC 921 (TCC)

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) safe income on hand reduced by taxes, but not by inchoate retiring allowance 52

Administrative Policy

1997 Ruling 971037

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1996 Corporate Management Tax Conference Round Table, Q. 16

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1996 Corporate Management Tax Conference Round Table, Q. 19 (C.T.O. "Butterflies - Tolerance Levels")

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1996 Tax Ruling 963488

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93 C.R. - Q. 13

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11 November 1993 Memorandum (Tax Window, No. 30, p. 3, ¶2482)

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Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) 74

8 April 1993 T.I. (Tax Window, No. 30, p. 19, ¶2502)

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13 January 1993 T.I. 922909 (November 1993 Access Letter, p. 496, ¶C38-180)

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25 August 1992 T.I. (Tax Window, No. 23, p. 6, ¶2133)

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Tax Professionals Mini Round Table - Vancouver - Q. 3 (March 1993 Access Letter, p. 101)

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26 November 1992 Memorandum (Tax Window, No. 27, p. 13, ¶2351)

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31 August 1992 Memorandum (Tax Window, No. 24, p. 3, ¶2191)

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) 37

92 CR - Q.30

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Tax Topics - General Concepts - Effective Date 19

92 C.R. - Q25

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17 July 1992 External T.I. 5-913100 -

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5 July 1991 Memorandum (Tax Window, No. 5, p. 18, ¶1338)

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11 April 1991 T.I. (Tax Window, No. 2, p. 19, ¶1199)

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27 December 1990 T.I. (Tax Window, Prelim. No. 2, p. 6, ¶1058)

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19 April 1990 T.I. (September 1990 Access Letter, ¶1416)

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Hiltz, "The Butterfly Reorganization

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Read, "Section 55

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89 C.M.TC - Q.16

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89 C.M.TC - Q.17

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87 C.R. - Q.57

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87 C.R. - Q.56

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ATR-47, February 24, 1992

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Hiltz, "Section 55: An Update" 1984 Corporate Management Tax Conference Report, p. 40.

Articles

Firoz Ahmed, "Return of the Somersault", Canadian Current Tax, Vol. 11, No. 1, October 2000, p. 1.

Sider, "Corporate Reorganizations: A Review of a Divestiture", 1993 Conference Report, c. 14

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Robertson, "Capital Gains Strips: A Revenue Canada Perspective on the Provisions of Section 55", 1981 Conference Report, p. 81.

Hausman, "U.S.-Canada Cross-Border Reorganizations", 1990 Canadian Tax Journal, p. 678.

Lemons, Matsuba, Olson, "How U.S. Shareholders Can Avoid the Sting of the Canadian Butterfly", 1991 Canadian Petroleum Tax Journal, Spring 1991, p. 67.