CRA ruled on a combined pipeline and split-up butterfly transaction respecting DC, which invested in marketable securities, and the shares in which passed to the estate with their adjusted cost based having been stepped-up under s. 70(5). DC then transferred its marketable securities to three transferee corporations (TCs) for the three beneficiaries in consideration for “butterfly shares” – but with DC holding onto the notes that it received on the immediate redemption of the butterfly shares for a redacted period of time, after which DC was wound-up into the TCs, thereby resulting in deemed winding-up dividends and in the notes being extinguished on their being assigned to the TCs.
DC had refundable dividend tax on hand. This sequencing of the two deemed dividends (coupled with the appropriate choice by the TCs of their first year end) avoided Part IV tax circularity issues.