ACO (a CCPC) has three corporate shareholders, each holding 10 Class A common shares in its capital: BCO (exempt under s. 149(1)); CCO (a non-resident); and DCO (a taxable CCPC).
After ACO realizes a capital gain on a disposition to a third party that generates a capital dividend account of $100, DCO exchanges its 10 Class A common shares under s. 51 for 10 Class B common shares. ACO then pays a capital dividend of $100 on the Class B common shares.
Before intimating that s. 83(2.1) likely would not apply to the streaming of the CDA to DCO because it was one of the original shareholders, CRA stated:
For the purposes of applying subsection 83(2.1), the CRA has traditionally considered that it is the main purpose of the original acquisition of the shares that must be taken into account when they are exchanged for shares of another class upon reclassification of the capital stock of the corporation. In addition, the CRA is generally of the view that subsection 83(2.1) does not apply to transactions that result in the payment of a capital dividend to certain original shareholders of the corporation. Such positions are largely based on the legislative intent of subsection 83(2.1), which is to prevent a corporation from transferring the balance of its CDA to another corporation or person by selling shares of its capital stock.