Two individuals, Mr. A and Mr. B wholly-own two corporations of equal value (A Inc. and B Inc.), which amalgamate. On the amalgamation, the two individuals, in addition to receiving equal numbers of shares of Amalco, also received an equal amount of cash from Amalco.
After appearing to accept that the cash did not preclude qualification of the amalgamation under s. 87(1), CRA went on to explain that the cash precluded a rollover at the shareholder level, stating:
Mr. A and Mr. B could not … benefit from the rollover … because as consideration for the disposition of the shares they held in the predecessor corporations, they received, in addition to the shares of the capital stock of Amalco, consideration other than shares due to the amalgamation. … Subparagraph (b)(iii) of the definition of "disposition" in subsection 248(1) provides that a disposition of any property includes any transaction or event by which a share is converted because of an amalgamation or merger. Mr. A and Mr. B would therefore be deemed to have disposed of their shares in the capital stock of the predecessor corporations at the fair market value of such shares … .