US-dollar denominated preferred shares of a Canadian corporation held by its non-resident parent are amended to add a conversion right, so that they are convertible into common shares having an equivalent fair market value at the time of conversion to that of the preferred shares. What was the stated capital for the preferred shares is added to the stated capital for the common shares.
On such a conversion, no gain or loss results under s. 39(2) since (per the CRA summary) there is no change in the patrimony of the Canadian corporation as a result.