A Canadian corporation contributed its shares of a subsidiary (Merger Sub1) to a Canadian subsidiary as a contribution of capital. It had acquired such shares as the agreed consideration for issuing shares to the shareholders of a non-resident target under a Delaware merger, and was ruled to have a cost for those shares of Merger Sub1 equal to the FMV of the shares that were so issued by it (together with any related costs incurred by it).
CRA ruled that Opco also was able to increase the PUC of its shares in reliance on s. 84(1)(b) in an amount equal to the FMV of those contributed shares.