A non-resident holds 40% of the common shares of Opco and all of the shares of Holdco (also a Canadian private corporation) which, in turn, holds the other 60% of the common shares of Opco. The non-resident transfers the Holdco shares to Opco in consideration for redeemable preferred shares of Opco, thereby realizing a capital gain that is treaty-exempt. Holdco is eventually wound up into Opco. Would s. 84(2) or 245(2) apply? After noting in its summary that “Tremblay ... contains a strong dissent based on ... Smythe,” CRA responded:
Furthermore ... section 245 was not raised in the Tremblay case.
Consequently, and despite the Tremblay decision, the CRA intends to continue to challenge surplus stripping situations that are considered abusive, including those in the form of "tuck under" transactions, in particular by reviewing the potential application of subsections 84(2) and 245(2) in particular situations.
That said, it is possible that, under appropriate circumstances, "tuck under" transactions may be performed without triggering the application of subsections 84(2) and 245(2). For example, the CRA maintains its long-standing position that subsections 84(2) and 245(2) should not apply to a "tuck under" transaction to extract the safe income on hand relating to the interest of a corporate taxpayer in a target corporation.