Following Descarries, CRA will no longer issue rulings in which an individual can in effect use shares (e.g., preferred shares) whose ACB was stepped up using the capital gains deduction ("CGD") (by redeeming those shares to create a deemed dividend and a capital loss) to offset or reduce a capital gain on a disposition of his or her common shares. CRA stated (TaxInterpretations translation):
[T]he CRA recommended to the Committee on the General Anti-Avoidance Rule that it confirm that the provisions of subsection 245(2) apply respecting a series of transactions similar to those proposed in the advance ruling carrying the number 2005-0134731R3 F.
Such transactions effectively accomplish a distribution of surplus of a corporation in the form of a capital gain even while such capital gain is reduced by a capital loss sustained from the disposition of shares whose ACB arose from the CGD or from the FMV of such shares on V-Day.