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C is the fair market value, immediately
before the exchange, of all the
shares (other than shares of a
specified class none or all of the
shares of which were acquired by
the acquiror on the exchange and
shares to be redeemed, acquired or
cancelled by the distributing
corporation pursuant to the exercise
of a statutory right of dissent by the
holder of the share) of the capital
stock of the distributing corporation
outstanding immediately before the
exchange, and
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D is the fair market value, immediately
before the distribution, of all the
shares issued to the participant by
the acquiror in consideration for
shares of a specified class all of the
shares of which were acquired by
the acquiror on the exchange;
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``permitted
redemption''
« rachat
autorisé »
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``permitted redemption'', in relation to a
distribution by a distributing corporation,
means
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(a) a redemption or purchase for
cancellation by the distributing
corporation, as part of the reorganization
in which the distribution was made, of all
the shares of its capital stock owned by a
transferee corporation in relation to the
distributing corporation,
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(b) a redemption or purchase for
cancellation by a transferee corporation
in relation to the distributing corporation,
as part of the reorganization in which the
distribution was made, of all of the shares
of its capital stock owned by the
distributing corporation, and
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(c) a redemption or purchase for
cancellation by the distributing
corporation, in contemplation of the
distribution, of all the shares of its capital
stock each of which is
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(i) a share of a specified class the cost
of which, at the time of its issuance, to
its original owner was equal to the fair
market value at that time of the
consideration for which it was issued,
or
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(ii) a share that was issued, in
contemplation of the distribution, by
the distributing corporation in
exchange for a share described in
subparagraph (i);
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``specified
class''
« catégorie
exclue »
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``specified class'' means a class of shares of
the capital stock of a distributing
corporation where
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(a) the paid-up capital in respect of the
class immediately before the beginning
of the series of transactions or events that
includes a distribution by the distributing
corporation was not less than the fair
market value of the consideration for
which the shares of that class then
outstanding were issued,
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(b) under neither the terms and
conditions of the shares nor any
agreement in respect of the shares are the
shares convertible into or exchangeable
for shares other than shares of a specified
class or shares of the capital stock of a
transferee corporation in relation to the
distributing corporation, and
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(c) under neither the terms and conditions
of the shares nor any agreement in
respect of the shares is any holder of the
shares entitled to receive on the
redemption, cancellation or acquisition
of the shares by the corporation or by any
person with whom the corporation does
not deal at arm's length (excluding any
premium for early redemption) an
amount greater than the total of the fair
market value of the consideration for
which the shares were issued and the
amount of any unpaid dividends thereon.
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(2) Subparagraphs 55(3)(a)(i) and (ii) of
the Act are replaced by the following:
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(i) a disposition of property to a person
(other than the corporation) to whom that
corporation was not related, or
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(ii) a significant increase in the interest in
any corporation of any person (other than
the corporation that received the
dividend) to whom the corporation that
received the dividend was not related; or
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(3) Paragraph 55(3)(b) of the Act is
replaced by the following:
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(b) if the dividend was received
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(i) in the course of a reorganization in
which
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(A) a distributing corporation made a
distribution to one or more transferee
corporations, and
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(B) the distributing corporation was
wound up or all of the shares of its
capital stock owned by each transferee
corporation immediately before the
distribution were redeemed or
cancelled otherwise than on an
exchange to which subsection 51(1),
85(1) or 86(1) applies, and
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(ii) on a permitted redemption in relation
to the distribution or on the winding-up of
the distributing corporation.
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(4) Subsection 55(3.1) of the Act is
replaced by the following:
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| Where
paragraph
(3)(b) not
applicable
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(3.1) Notwithstanding subsection (3), a
dividend to which subsection (2) would, but
for paragraph (3)(b), apply is not excluded
from the application of subsection (2) where
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(a) in contemplation of and before a
distribution made in the course of the
reorganization in which the dividend was
received, property became property of the
distributing corporation, a corporation
controlled by it or a predecessor
corporation of any such corporation
otherwise than as a result of
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(i) an amalgamation of corporations each
of which was related to the distributing
corporation,
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(ii) an amalgamation of a predecessor
corporation of the distributing
corporation and one or more corporations
controlled by that predecessor
corporation,
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(iii) a reorganization in which a dividend
was received to which subsection (2)
would, but for paragraph (3)(b), apply, or
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(iv) a disposition of property by
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(A) the distributing corporation, a
corporation controlled by it or a
predecessor corporation of any such
corporation to a corporation controlled
by the distributing corporation or a
predecessor corporation of the
distributing corporation,
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(B) a corporation controlled by the
distributing corporation or by a
predecessor corporation of the
distributing corporation to the
distributing corporation or
predecessor corporation, as the case
may be, or
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(C) the distributing corporation, a
corporation controlled by it or a
predecessor corporation of any such
corporation for consideration that
consists only of money or
indebtedness that is not convertible
into other property, or of any
combination thereof,
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(b) the dividend was received as part of a
series of transactions or events in which
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(i) a person or partnership (referred to in
this subparagraph as the ``vendor'')
disposed of property and
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(I) a share of the capital stock of a
distributing corporation that made a
distribution as part of the series or of
a transferee corporation in relation
to the distributing corporation, or
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(II) property 10% or more of the fair
market value of which was, at any
time during the course of the series,
derived from one or more shares
described in subclause (I),
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(B) the vendor was, at any time during
the course of the series, a specified
shareholder of the distributing
corporation or of the transferee
corporation, and
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(C) the property or any other property
(other than property received by the
transferee corporation on the
distribution) acquired by any person or
partnership in substitution therefor
was acquired (otherwise than on a
permitted acquisition, permitted
exchange or permitted redemption in
relation to the distribution) by a person
(other than the vendor) who was not
related to the vendor or, as part of the
series, ceased to be related to the
vendor or by a partnership,
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(ii) control of a distributing corporation
that made a distribution as part of the
series or of a transferee corporation in
relation to the distributing corporation
was acquired (otherwise than as a result
of a permitted acquisition, permitted
exchange or permitted redemption in
relation to the distribution) by any person
or group of persons, or
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(iii) in contemplation of a distribution by
a distributing corporation, a share of the
capital stock of the distributing
corporation was acquired (otherwise than
on a permitted acquisition or permitted
exchange in relation to the distribution or
on an amalgamation of 2 or more
predecessor corporations of the
distributing corporation) by
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(A) a transferee corporation in relation
to the distributing corporation or by a
person or partnership with whom the
transferee corporation did not deal at
arm's length from a person to whom
the acquiror was not related or from a
partnership,
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(B) a person or any member of a group
of persons who acquired control of the
distributing corporation as part of the
series,
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(C) a particular partnership any
interest in which is held, directly or
indirectly through one or more
partnerships, by a person referred to in
clause (B), or
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(D) a person or partnership with whom
a person referred to in clause (B) or a
particular partnership referred to in
clause (C) did not deal at arm's length,
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(c) the dividend was received by a
transferee corporation from a distributing
corporation that, immediately after the
reorganization in the course of which a
distribution was made and the dividend was
received, was not related to the transferee
corporation and the total of all amounts
each of which is the fair market value, at the
time of acquisition, of a property that
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(i) was acquired, as part of the series of
transactions or events that includes the
receipt of the dividend, by a person (other
than the transferee corporation) who was
not related to the transferee corporation
or, as part of the series, ceased to be
related to the transferee corporation or by
a partnership, otherwise than
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(A) as a result of a disposition in the
ordinary course of business,
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(B) on a permitted acquisition in
relation to a distribution, or
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(C) as a result of an amalgamation of
2 or more corporations that were
related to each other immediately
before the amalgamation, and
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(ii) is a property (other than money,
indebtedness that is not convertible into
other property, a share of the capital stock
of the transferee corporation and
property more than 10% of the fair
market value of which is attributable to
one or more such shares)
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(A) that was received by the transferee
corporation on the distribution,
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(B) more than 10% of the fair market
value of which was, at any time after
the distribution and before the end of
the series, attributable to property
received by the transferee corporation
on the distribution, or
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(C) to which, at any time during the
course of the series, more than 10% of
the fair market value of a property
referred to clause (A) was attributable
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is greater than 10% of the fair market value,
at the time of the distribution, of all the
property (other than money and
indebtedness that is not convertible into
other property) received by the transferee
corporation on the distribution, or
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(d) the dividend was received by a
distributing corporation that, immediately
after the reorganization in the course of
which a distribution was made and the
dividend was received, was not related to
the transferee corporation that paid the
dividend and the total of all amounts each
of which is the fair market value, at the time
of acquisition, of a property that
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(i) was acquired, as part of the series of
transactions or events that includes the
receipt of the dividend, by a person (other
than the distributing corporation) who
was not related to the distributing
corporation or, as part of the series,
ceased to be related to the distributing
corporation or by a partnership,
otherwise than
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(A) as a result of a disposition in the
ordinary course of business,
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(B) on a permitted acquisition in
relation to a distribution, or
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(C) as a result of an amalgamation of
2 or more corporations that were
related to each other immediately
before the amalgamation, and
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(ii) is a property (other than money,
indebtedness that is not convertible into
other property, a share of the capital stock
of the distributing corporation and
property more than 10% of the fair
market value of which is attributable to
one or more such shares)
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(A) that was owned by the distributing
corporation immediately before the
distribution and not disposed of by it
on the distribution,
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(B) more than 10% of the fair market
value of which was, at any time after
the distribution, attributable to
property described in clause (A), or
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(C) to which, at any time during the
course of the series, more than 10% of
the fair market value of a property
referred to in clause (A) was
attributable
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is greater than 10% of the fair market value
at the time of the distribution, of all the
property (other than money and
indebtedness that is not convertible into
other property) owned immediately before
that time by the distributing corporation and
not disposed of by it on the distribution.
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| Interpretation
of paragraph
(3.1)(b)
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(3.2) For the purpose of paragraph (3.1)(b),
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(a) in determining whether the vendor
referred to in subparagraph (3.1)(b)(i) is at
any time a specified shareholder of a
transferee corporation or of a distributing
corporation, the references in the definition
``specified shareholder'' in subsection
248(1) to ``taxpayer'' shall be read as
``person or partnership'';
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(b) a corporation that is formed by the
amalgamation of 2 or more corporations
(each of which is referred to in this
paragraph as a ``predecessor corporation'')
shall be deemed to be the same corporation
as, and a continuation of, each of the
predecessor corporations;
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(c) subject to paragraph (d), each particular
person who acquired a share of the capital
stock of a distributing corporation in
contemplation of a distribution by the
distributing corporation shall be deemed, in
respect of that acquisition, not to be related
to the person from whom the particular
person acquired the share unless
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(i) the particular person acquired all the
shares of the capital stock of the
distributing corporation that were
owned, at any time during the course of
the series of transactions or events that
included the distribution and before the
acquisition, by the other person, or
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(ii) immediately after the reorganization
in the course of which the distribution
was made, the particular person was
related to the distributing corporation;
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(d) where a share is acquired by an
individual from a personal trust in
satisfaction of all or a part of the
individual's capital interest in the trust, the
individual shall be deemed, in respect of
that acquisition, to be related to the trust;
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(e) subject to paragraph (f), where at any
time a share of the capital stock of a
corporation is redeemed or cancelled
(otherwise than on an amalgamation where
the only consideration received or
receivable for the share by the shareholder
on the amalgamation is a share of the capital
stock of the corporation formed by the
amalgamation), the corporation shall be
deemed to have acquired the share at that
time;
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(f) where a share of the capital stock of a
corporation is redeemed, acquired or
cancelled by the corporation pursuant to the
exercise of a statutory right of dissent by the
holder of the share, the corporation shall be
deemed not to have acquired the share; and
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(g) control of a corporation shall be deemed
not to have been acquired by a person or
group of persons where it is so acquired
solely because of
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(i) the incorporation of the corporation,
or
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(ii) the acquisition by an individual of
one or more shares for the sole purpose of
qualifying as a director of the
corporation.
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(5) Subsection 55(4) of the Act is replaced
by the following:
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| Avoidance of
subsection (2
)
|
(4) For the purposes of this section, where
it can reasonably be considered that one of the
main purposes of one or more transactions or
events was to cause 2 or more persons to be
related to each other or to cause a corporation
to control another corporation, so that
subsection (2) would, but for this subsection,
not apply to a dividend, those persons shall be
deemed not to be related to each other or the
corporation shall be deemed not to control the
other corporation, as the case may be.
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(6) Paragraph 55(5)(e) of the Act is
replaced by the following:
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(e) in determining whether 2 or more
persons are related to each other, in
determining whether a person is at any time
a specified shareholder of a corporation and
in determining whether control of a
corporation has been acquired by a person
or group of persons,
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(i) a person shall be deemed to be dealing
with another person at arm's length and
not to be related to the other person if the
person is the brother or sister of the other
person,
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(ii) where at any time a person is related
to each beneficiary (other than a
registered charity) under a trust who is or
may (otherwise than by reason of the
death of another beneficiary under the
trust) be entitled to share in the income or
capital of the trust, the person and the
trust shall be deemed to be related at that
time to each other and, for this purpose,
a person shall be deemed to be related to
himself, herself or itself,
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(iii) a trust and a person shall be deemed
not to be related to each other unless they
are deemed by paragraph (3.2)(d) or
subparagraph (ii) to be related to each
other or the person is a corporation that is
controlled by the trust, and
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(iv) persons who are related to each other
solely because of a right referred to in
paragraph 251(5)(b) shall be deemed not
to be related to each other; and
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(7) Subsections (1), (3) and (4) apply to
dividends received after February 21, 1994
other than dividends received before 1995
in the course of a reorganization that was
required on February 22, 1994 to be carried
out pursuant to a written agreement
entered into before February 22, 1994,
except that, in applying the Act to dividends
received before June 23, 1994 to which
subsections (1), (3) and (4) apply,
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