Background
On the death of X, X held all the shares of Holdco, which had investments in public company shares and bonds, and mutual fund and income trust units.
Preliminary transactions
The Estate of X exchanged Class A shares for Class D shares of Holdco under s. 51(1) and also subscribed for additional Class A shares of Holdco.
Holdco redeemed some of its Class D shares in order to recover its ERDTOH and NERDTOH account balances and the executors elected pursuant to s. 164(6) to carry back the resulting capital loss to X’s terminal year.
Proposed transactions
- The Estate will transfer its Class D shares to a corporation newly incorporated by it (Newco) in consideration for voting and participating shares of Newco, electing under s. 85(1).
- After the passage of a specified number of months, Newco will issue 8 promissory notes to the Estate as a reduction of the PUC of its shares, with such notes (apparently of equal amounts) maturing at successive quarterly intervals (the last one not being payable until the 7th quarter following such issuance).
- After a period of specified years, Holdco will be amalgamated with Newco, with Amalco continuing to carry on the investment business of Holdco.