Buyco acquired all the shares of Opco on 15 January 2010 from Sellco. A CRA audit resulted in a 2011 reassessment to increase Opco's income for its 2008 and 2009 years. CRA stated (TaxInterpretations translation):
[no price adjustment]
[W]here nothing in particular is provided in the agreement of purchase and sale for the shares of the capital stock of Opco respecting the amount of additional income tax payable by Opco, the amount of additional tax paid by Opco, in general, would reduce the safe income on hand attributable to the shares held by Sellco for the purposes of subsection 55(2). In such a situation, it appears to us that the payment of the additional tax by Opco would have the effect of reducing the safe income on hand that can reasonably be considered to contribute to the gain on the shares of the capital stock of Opco held by Buyco [per the summary, "the gain inherent in the Opco's shares"].
[price adjustment to Buyco]
In the situation where the agreement of purchase and sale contains an adjustment clause to the price for the shares payable by Buyco by reason of a reassessment sustained by Opco, the amount received by Buyco by reason of the price adjustment clause, in general, would reduce the acquisition cost of the shares of Opco.
Furthermore, the amount of the additional tax payable by Opco by reason of the reassessment for a taxation year ending prior to the acquisition of control would, in general, have the same effect on Opco’s safe income on hand as ... above.
[price adjustment to Opco]
In the situation where the agreement of purchase and sale for the shares of the capital stock of Opco provides that Sellco is responsible for the amount of any reassessment for a taxation year prior to the acquisition of the shares and to the extent that Opco received or is considered to have received from Sellco an amount equivalent to the amount of additional tax arising under the reassessment, the calculation of the safe income on hand attributable to the Opco shares held by Buyco would need to take into account the application of paragraph 12(1)(x) or subsection 12(2.2) to the compensation received from Sellco.