Q.B.C.A. s. 91 of the new Q.B.C.A. permits a corporation to convert the shares of a particular class into shares of a new class, through a simple resolution of the board of directors, and with no filing of articles of amendment being required unless this is necessary to change the authorized share capital.
After finding that s 86 would not apply given its general view “that capital will be reorganized for the purposes of section 86 in the situation where the provisions of the corporation's incorporating act require an amendment of its articles,” whereas here there was none, CRA went on to state:
[W]here, for tax purposes, there is a disposition of a share held by a taxpayer resulting from a conversion permitted by Q.B.C.A. section 91, we believe that such a transaction would normally come within subsection 51(1) … .
...[B]y virtue of subsection 51(4), section 86 takes precedence over subsection 51(1). Thus, an interpretation that would enable the application of section 86 to transactions permitted by Q.B.C.A. section 91would significantly restricts the scope of subsection 51(1). That does not seem appropriate or desirable.