Participating shares of Opco were issued to a discretionary trust ("Trust") as part of an estate freeze, and Opco then paid a dividend to the Trust. Prior to December 31 of the same year, the Trust incorporated a corporation Newco, which became a beneficiary of the Trust, with the Trust then allocating and paying the dividend in that year to Newco. After stating that “[s]ince a corporation does not own its own shares prior to their issuance, it follows that the issuance of shares by a corporation to a trust for consideration equal to their FMV generally does not constitute a transfer of property to which subsection 75(2) could apply,” CRA went on to state:
[T]o the extent that such a scenario does not contravene applicable corporate and trust law and that the Trust subscribed for shares of Opco and Newco for consideration equal to their FMV, it appears to us that the issuance of shares by Opco and Newco would not constitute a transfer of property to which subsection 75(2) would likely apply.