14 March 2003 Internal T.I. 2003-0182977 F - 40(3.5)(c) -- summary under Subsection 40(3.5)

Where a public corporation ("Parentco") holding shares of a public corporation ("Subco") with an accrued loss, sells the shares to a newly-incorporated subsidiary ("Newco") and Subco and Newco then merge within 30 days on a triangular amalgamation, the capital loss otherwise realized by Parentco on the transfer of the shares will be denied by s. 40(3.4). The position of the taxpayer "that in order that 40(3.5)(c) applies, a share disposed of must first meet the three conditions under s. 40(3.3) applicable to capital property disposed of and for a period of 30 days after the disposition, before the deeming rule provided under s. 40(3.5)(c) can be taken into consideration" did not make sense.