2015 Ruling 2015-0604051R3 - Internal Reorganization -- summary under Subsection 15(1.1)

The U.S. parent (XXXco1) of a Canadian corporation (Canco1) transferred a portion of its Class A common shares of Canco1 to a U.S. subsidiary (USco3) of XXXco1, and then had Canco1 pay a stock dividend on its Class A common shares (now held on a pro rata basis by XXXco1 and USco3) consisting of a new class of Class B common shares, so that the existing Class A common shares were diluted down to a nominal value, and the value of the newly issued Class B common shares (now embedding most of the value in the stack) being subject to 5% withholding tax. CRA ruled that s. 15(1.1) would not apply to this stock dividend.