CRA rules on conventional pipeline transactions

CRA ruled on pipeline transactions respecting the preferred shares that the deceased had held in Opco (holding a rental property, portfolio investments and private company shares):

1. Some of the preferred shares of Opco held by the estate are redeemed for notes (Notes 1, 2 and 3), giving rise to an eligible dividend and an s. 164(6) carryback.
2. The estate transfers the balance of its preferred shares to a Newco held by a trust for the surviving children (which also holds the common shares of Opco) in consideration for a promissory note (Note 4) and some preferred shares of Newco.
3. Opco repays Note 1 (to pay the taxes on the deemed dividend arising in 1 above).
4. After the requisite waiting period, Newco amalgamates with Opco.
5. Amalco then gradually repays Notes 2 and 3, and then Note 4.

Neal Armstrong. Summary of 2024 Ruling 2024-1029151R3 F under s. 84(2).