A split-up butterfly of a CCPC distributing corporation (DC) entailed its division between the respective newly-incorporated transferee corporations (the TCs) for three siblings and their respective family trusts. DC has ERDTOH and NERDTOH balances.
After the creation of cross-shareholdings between DC and the three TCs using the usual plumbing, and the redemption for notes of the prefs held by DC in each TC, the shares held by the TCs in DC are not redeemed, as this would result in Part IV tax circularity issues. Instead, the TCs close off their first taxation years and then, on the following day or so, the TC notes are distributed by DC to the respective TCs on a s. 88(2) winding up of DC.
DC is not to be dissolved until it has received and distributed, on a pro rata basis, the dividend refund.
The standard rulings included that the extinguishing of the notes by operation of law on their distribution to the debtors (the TCs) does not engage s. 80.