2016 Ruling 2016-0635101R3 - 55(3)(a) Spin-Off to Use Parent Losses -- summary under Subsection 86(1)

As a preliminary step in a s. 55(3)(a) spin-off transaction, a preliminary s. 86 reorg was effected through an exchange of the “old” common shares of Subco for newly created common shares (having more votes per shares) and preferred shares also newly created by articles of amendment (having a distinguishing dividend feature which, in fact, was not utilized before the shares were redeemed) pursuant to a share exchange agreement - rather than by virtue of articles of amendment changing the old shares into the new shares. CRA ruled that s. 86(1) would apply.