As a preliminary to a gross-asset butterfly transaction in which DC (whose preferred shares and common shares each were owned equally by three siblings) will spin-off 1/3 of its assets to two transferee corporations (TC1 and TC2) formed by two of the siblings, DC’s articles will be amended to change all of the DC preferred shares into DC common shares.
Ruling that s. 86(1) (and not s. 86(2)) will apply provided that no s. 85(1) election is filed and the preferred shares are capital property.