CRA rules on a PUC-reduction (to access CDA) similar to ATR-54

The taxpayer held high-PUC preferred shares of a family corporation. To increase the deemed dividends that would arise on the redemption of preferred shares following the taxpayer's death so as to better access the corporation’s capital dividend account (CDA), it was proposed that the PUC of two classes of preferred shares be reduced and that those preferred shares be converted by the taxpayer under s. 51(1) into redeemable retractable preferred shares of a third class.

CRA ruled that this PUC reduction would not give rise to a disposition, or an ACB grind under s. 53(2)(a)(ii), and that s. 245(2) would not be applied as a result of these transactions. It indicated in its summary that these transactions were similar to ATR-54. ATR-54 noted that there was no avoidance of s. 83(2.1) since the CDA arose a number of years subsequent to the issuance of the high-PUC shares in question and that the reduction of their PUC did not give rise to an acquisition of shares for purposes of s. 83(2.1).

Neal Armstrong. Summary of 2026 Ruling 2025-1076711R3 under s. 248(1) - disposition.