Profitco is wholly-owned by Lossco, which is wholly owned by Parent. Profitco borrows from Profitco (at an interest rate reflecting the loan’s subordinated status) and subscribes for non-voting cumulative redeemable retractable preferred shares of Lossco. Parent will agree, in a support agreement with Lossco, to make capital contributions to fund Lossco’s payment of the dividends, which will occur on the unwinding of the transactions.
CRA provided an opinion that, after giving effect the July 31, 2015 draft amendments, s. 55(2) will not apply to this dividend.