XXXX
D.A. Bresee (613) 995-1178
March 16, 1983
Dear XXXX
This is in reply to your letter of January 25, 1983 concerning section 86 of the Act and subsection 26(27) of the Income Tax Application Rules, 1971 (the "ITAR").
In your particular situation a corporation ("Opco") carries out a reorganization of its capital and converts its 5,000 issued common shares of no par value but having an aggregate paid-up capital of $5,000 into 500 common shares having a par value of $10 each.
In order for section 86 of the Act to apply to a reorganization of capital there must be a disposition by the taxpayer of all his shares of a particular class. In the situation herein described it would appear that no disposition has occurred. In this regard you may wish to refer to IT-65 Stock Splits and Consolidations and IT-448 Dispositions - Changes in Terms of Securities (in particular paragraphs 15(f) and 15(g). Accordingly, since no disposition has apparently occurred the provisions of subsection 86(1) of the Act and subsection 26(27) of the ITAR would not apply.
We trust our reply is sufficient for your purpose.
Yours truly,
for Director Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch