Background
At the time of the death of X, he held shares of Newco (whose only undertaking was to hold shares of Investments) and a portion of the shares of Investments (a portfolio investment company).
Completed transactions
- Investments redeemed various shares held by the estate for Note1, giving rise to deemed dividends and capital losses which were carried back under s. 164(6).
- The estate then disposed of all its shares of Investments to Newco in consideration for Note2.
- Investments then paid a dividend to Newco through issuing Note3 and Newco paid a dividend to the estate through the issuance of Note4.
- Investments then transferred its stock market investments to four testamentary trusts created under X’s will (Trust1, Trust2, Trust3 and Trust4) in consideration for Trust-Note1, Trust-Note2, Trust-Note3 and Trust-Note4.
Proposed transactions
- Investments will be wound-up into Newco pursuant to s. 88(1).
- Newco will pay a dividend (designated to be an eligible dividend) thorough the issuance of a note to the estate.
- The estate will make a substantial distribution to Trust1, Trust2, Trust3 and Trust4 through a distribution of inter alia Notes1 to 4 now owing by Newco – with such Trusts agreeing with Newco to pay the accrued but unpaid interest owing by then on Trust-Note1 to 4 to Newco, by way of set-off against part of Notes1 to 4 owing to them by Newco.
- Newco will then by wound-up into the Estate pursuant to s. 88(2).
- The executors will distribute the remaining estate property to the heirs in accordance with X’s will in due course.
Rulings
Re ss. 84(2) and 245(2).