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On a liquidation and dissolution (“L&D”) of FA1, it distributed to its parent (ACo) its shares of (wholly-owned) FA2 and FA3 and other property. Ss. 88(3) to (3.5) applied to the L&D. As it was not a “qualifying liquidation and dissolution,” the FA1 properties were disposed of at their fair market value. Prior to the L&D, FA2 and FA1 had paid exempt dividends to FA1 and ACo, respectively. But for s. 93(4), Canco realized a capital loss of $1 million (after the application of s.

What is the CRA position on Descarries? After noting that the case was not appealed because in the result it was favourable and it was only an informal procedure case, CRA then summarized the facts, stating that the Oka shareholders engaged in "three avoidance transactions" (TaxInterpretations translation) for appropriating the surplus of Oka which, in December 2004, had already " ... and was in the course of liquidating the remainder of its assets:"