CRA provided s. 55(3)(a) rulings respecting a spin-off by one Canadian subsidiary (CanSub1) of a public company (ParentCo) of CanSub1’s foreign subsidiary (ForSub1) to another wholly-owned Canadian subsidiary (CanSub2) of ParentCo. It was proposed that the acquisition by CanSub2 of the ForSub1 shares be followed by their s. 85.1(3) drop-down to a foreign subsidiary of CanSub2 in consideration for common shares of equivalent value. CRA ruled that this double transfer of the ForSub1 shares would not result in those shares not qualifying as capital property.
The reorganization also included a similar double-transfer of shares of another subsidiary (ForSub3), and CRA provided a similar ruling.