12 January 2005 External T.I. 2004-0106161E5 - Application of par. 84.1(1)(b) on a sale of shares -- summary under Subsection 84.1(1)

Under transactions in which Mr. A sells a portion of his shares of a family farm corporation ("Farmco") to a newly incorporated subsidiary ("Xco") of an unrelated individual (Mr. X) for a cash consideration of $500,000 which Mr. A then lends to Farmco, with Farmco using the loan proceeds to redeem the Farmco shares held by Xco, would be considered to be non-arm's length transactions that were subject to s. 84.1(1)(b). Such transactions also could be subject to s. 245(2).