An individual transfers his 100 common shares of a corporation to the corporation in consideration for 500,000 preferred shares and 100 common shares of the corporation, with the 100 common shares previously held by him being cancelled. Because such transaction would not involve any change to the bundle of rights represented by the common shares held by the individual both before and after the transaction, this transaction would not entail a disposition of his 100 common shares. The transaction instead would be regarded as involving nothing more than the issuance by the corporation of 500,000 preferred shares. S.84(1) could apply to such an issuance. CRA stated:
The CRA's longstanding position on the concept of disposition in situations similar to the Particular Situations is to focus on the nature of the changes made to the shares of the capital stock of a particular corporation rather than the method by which the changes are accomplished. Our approach is based on the fact that we consider a shareholder's interest in a corporation to be an intangible asset, consisting of a bundle of rights and privileges attached to the shares granted by the articles of incorporation and the relevant corporate laws. Thus, a particular transaction in a particular share of the capital stock of a particular corporation held by a taxpayer may not constitute a disposition where, after the transaction, the taxpayer is left with another share of the capital stock of the particular corporation that has identical rights, privileges, restrictions and conditions as the rights, privileges, restrictions and conditions attached to the particular share.