CTF - 1990 Conference Report
QUESTION I 62
Capital Gains Deduction
Two individuals, A and B, own 75% and 25%, respectively, of the shares of a particular corporation. Prior to A's selling his shares of the particular corporation to an arm's length purchaser, a company incorporated by B receives its pro-rata share of the assets of the particular corporation pursuant to paragraph 55(3)(b) of the Act.
As a result of the transfer to B's corporation, will A be precluded from claiming a capital gains deduction on the disposition of shares to the purchaser by virtue of subsection 110.6(7)?
DEPARTMENT'S POSITION
The provisions of paragraph 110.6(7)(a) of the Act will apply in respect of any capital gain that any taxpayer may realize in a taxation year on a disposition of property which is part of a series of transactions or events which includes transactions to which subsection 55(2) of the Act would apply but for paragraph 55(3)(b) of the Act.
Prepared by: D. Watson