Background
At the time of the death of A, he held the shares (being Class A voting participating shares) of the Corporation (a portfolio investments company).
Completed transactions
The Corporation, which received life insurance proceeds on the life of A, paid a capital dividend to the estate, thereby reducing the FMV of its shares.
The estate exchanged its (Class A) shares under s. 51 for non-voting Class F preferred shares, and subscribed for one Class A share.
Reviewed transactions
The estate exchanged its Class F shares under s. 51 for Class A shares.
The estate transferred its Class F shares of the Corporation to Newco in consideration for four notes maturing 3, 6, 9 and 12 months after the amalgamation below, and in consideration for voting participating Class A shares of Newco, electing under s. 85(1), and realizing a capital loss (which, by virtue of s. 40(3.61), was not denied under s. 40(3.6)) that was carried back pursuant to an election under s. 164(6).
Proposed transactions
Newco will be amalgamated with the Corporation after a specified period.
The notes will thereafter commence to be repaid consistently with their maturity dates.
Rulings
Re ss. 84.1, 84(2) and 245(2).