A DC which holds a rental property and an investment portfolio and is owned by Parent and his four children will spin off its investment portfolio in reliance on the s. 55(3)(a) exception to four TCs mostly owned by each of the four children.
Each TC will redeem the preferred shares issued by it to DC in connection with the spin-off, the first taxation year end of each TC will end on the following day so as to prevent circularity in the calculation of the refund of RDTOH and Part IV tax of the TCs and DC. Thereafter, DC will redeem its preferred shares held by the four TCs.