The terms of an alter ego trust (the “Trust”) established by Mr. X, and to which he had transferred all the common shares of XCO (which, in turn, wholly-owned subsidiaries), provided that, following his death, the Trust was to transfer such common shares of XCO to a newly-formed subsidiary of the Trust (Newco), with the agreed amount designated under the s. 85(1) election being the transferred shares’ FMV.. Thereafter, XCO will be wound up and the shares of the subsidiaries distributed by XCO to Newco, with Newco making a bump designation pursuant to s. 88(1)(d) in respect of the distributed shares.
Rulings regarding inter alia the s. 88(1)(d) bump. Regarding the application of s. 88(1)(d.3) to the shares of XCO, CRA stated in its summary:
Shares of subsidiary [XCO] are acquired as a consequence of death pursuant to the directions of the settlor [Mr. X] in the terms governing the alter ego trust, trustees of the alter ego trust under equitable obligation to transfer shares of subsidiary to parent [Newco] on the death of the settlor.