Part of s. 55(3)(a) spin-off and immediate sale
It is proposed that the Property be spun-off by Subco to a newly-incorporated subsidiary of Parent (“Newco”), so that Parent can then receive the Property under a s. 88(1) wind-up of Newco, and then close on the sale to Purchaser, thereby utilizing its net capital or non-capital losses.
Use of terminal loss to bump elected amount
As part of the spin-off transactions, Subco will transfer the Property to Newco in consideration for the assumption of liabilities and the issuance of redeemable Newco Preferred shares. An s. 85(1) election will be made only respecting the Land parcels, with the agreed amount for each parcel equalling its ACB plus the terminal loss that, but for ss. 13(21.1) and (21.2), would be recognized on the disposition of the Building thereon (except that the elected amount will not exceed the parcel’s FMV).
Ruling
Subject to s. 13(21.2), the provisions of s. 13(21.1)(a) will apply to Subco’s transfer of the parcels so that its proceeds of disposition otherwise determined under s. 85(1) will be redetermined under s. 13(21.1)(a).