In order to implement pipeline planning, the estate of an individual ("Estate") generally incorporates a new corporation ("Newco") to which it sells shares of a private corporation ("Target"), with or without a tax rollover, in consideration for shares of Newco (the "Shares") or a note issued by Newco ("Note").Newco will remain in existence for at least one year before being merged with Target to form Amalco, whose assets are gradually used to redeem the Shares or Note.
Does CRA have concerns with these transactions being varied by the Estate selling the Target shares to an existing corporation in which it does not hold any shares (the "Existing Corporation") and whose shares may be held by heirs of the deceased? CRA responded:
[T]he transfer of the shares held by the Estate in the capital stock of Target to the Existing Corporation rather than to Newco does not appear to raise any immediate concerns with respect to the application of subsection 84(2). However, it is still necessary to consider the application of section 84.1, subsection 245(2), as well as other relevant provisions … .