CRA no longer considers that s. 116(5) could apply to a s. 51(1) exchange

IC72-17R6, para. 40 states that although ss. 116(1) and (3) do not apply to a s. 51(1) exchange of shares of a corporation because there is no “disposition” of the shares, there nonetheless is an “acquisition” of shares by the corporation, so that s. 116(5) may apply if the shares are taxable Canadian property (“TCP”).

After agreeing that ss. 116(1) to (4) do not apply because there is no disposition, CRA went on to indicate that the purchaser referred to in s. 116(5) is someone to whom property is disposed of. Therefore, where s. 51(1) applies, there is no purchaser because there is no disposition.

On this basis, CRA has changed its position and concluded that no remittance is required pursuant to s. 116(5) on a s. 51(1) exchange. The previous position in IC72-17R6, para. 40, will be amended accordingly.

Neal Armstrong. Summary of 13 May 2026 IFA Roundtable, Q.3 under s. 116(5).