C-4.1, applies to the investment fund of that predecessor corporation; and
(b)on the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.
Marginal note:Computation of paid-up capital
(3)Subject to subsection 87(3.1), where there is an amalgamation or a merger of 2 or more Canadian corporations, in computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,
(a)there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this subsection, in respect of all the shares of the capital stock of the new corporation immediately after the amalgamation or merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share (except a share held by any other predecessor corporation) of the capital stock of a predecessor corporation immediately before the amalgamation or merger, that
(i)the paid-up capital, determined without reference to this subsection, of the particular class of shares of the capital stock of the new corporation immediately after the amalgamation or merger
is of
(ii)the paid-up capital, determined without reference to this subsection, in respect of all of the issued and outstanding shares of the capital stock of the new corporation immediately after the amalgamation or merger; and
(b)there shall be added an amount equal to the lesser of
(i)the amount, if any, by which
(A)the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the new corporation before the particular time
exceeds
(B)the total that would be determined under clause 87(3)(b)(i)(A) if this Act were read without reference to paragraph 87(3)(a), and
(ii)the amount required by paragraph 87(3)(a) to be deducted in computing the paid-up capital of shares of the particular class.
Marginal note:Election for non-application of subsection (3)
(3.1)Where,
(a)there is an amalgamation of 2 or more corporations,
(b)all of the issued shares, immediately before the amalgamation, of each class of shares (other than a class of shares all of the issued shares of which were cancelled on the amalgamation) of the capital stock of each predecessor corporation (in this subsection referred to as the “exchanged class”) are converted into all of the issued shares, immediately after the amalgamation, of a separate class of shares of the capital stock of the new corporation (in this subsection referred to as the “substituted class”),
(c)immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, and
(d)the new corporation elects in its return of income filed in accordance with section 150 for its first taxation year to have the provisions of this subsection apply,
for the purpose of computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,
(e)subsection 87(3) does not apply in respect of the amalgamation, and
(f)each substituted class shall be deemed to be the same as, and a continuation of, the exchanged class from which it was converted.
Marginal note:Shares of predecessor corporation
(4)Where there has been an amalgamation of two or more corporations after May 6, 1974, each shareholder (except any predecessor corporation) who, immediately before the amalgamation, owned shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”) that were capital property to the shareholder and who received no consideration for the disposition of those shares on the amalgamation, other than shares of the capital stock of the new corporation (in this subsection referred to as the “new shares”), shall be deemed
(a)to have disposed of the old shares for proceeds equal to the total of the adjusted cost bases to the shareholder of those shares immediately before the amalgamation, and
(b)to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) that
(i)the fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder,
is of
(ii)the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply:
(c)the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of
(i)the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, and
(ii)the fair market value of the old shares immediately before the amalgamation,
(d)the shareholder’s capital loss from the disposition of the old shares shall be deemed to be nil, and
(e)the cost to the shareholder of any new shares of any class of the capital stock of the new corporation acquired by the shareholder on the amalgamation shall be deemed to be that proportion of the lesser of
(i)the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, and
(ii)the total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old shares
that
(iii)the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholder
is of
(iv)the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder.
Marginal note:Exchanged shares
(4.1)For the purposes of the definitionterm preferred sharein subsection 248(1), where there has been an amalgamation of two or more corporations after November 16, 1978 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued in consideration for the disposition of a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share,
(a)the new share shall be deemed to have been issued at the time the exchanged share was issued;
(b)if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; and
(c)the new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.
Marginal note:Idem
(4.2)Where there has been an amalgamation or merger of two or more corporations after November 27, 1986 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued to a shareholder in consideration for the disposition of a share by that shareholder of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share, for the purposes of applying the provisions of this subsection, subsections 112(2.2) and 112(2.4), Parts IV.1 and VI.1, section 258 and the definitionsgrandfathered share,short-term preferred share,taxable preferred shareandtaxable RFI sharein subsection 248(1) to the new share, the following rules apply:
(a)the new share shall be deemed to have been issued at the time the exchanged share was issued;
(b)where the exchanged share was a share described in paragraph (a), (b), (c) or (d) of the definitiongrandfathered sharein subsection 248(1), the new share shall be deemed to be the same share as the exchanged share for the purposes of that definition;
(c)the new share shall be deemed to have been acquired by the shareholder at the time the exchanged share was acquired by the shareholder;
(d)the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(e)an election made under subsection 191.2(1) by a predecessor corporation with respect to the class of shares of its capital stock to which the exchanged share belonged shall be deemed to be an election made by the new corporation with respect to the class of shares of its capital stock to which the new share belongs; and
(f)where the terms or conditions of the exchanged share or an agreement in respect of the exchanged share specify an amount in respect of the exchanged share for the purposes of subsection 191(4) and an amount equal to the amount so specified in respect of the exchanged share is specified in respect of the new share for the purposes of subsection 191(4),
(i)for the purposes of subparagraphs 191(4)(d)(i) and 191(4)(e)(i), the new share shall be deemed to have been issued for the same consideration as that for which the exchanged share was issued and to have been issued for the purpose for which the exchanged share was issued,
(ii)for the purposes of subparagraphs 191(4)(d)(ii) and 191(4)(e)(ii), the new share shall be deemed to be the same share as the exchanged share and to have been issued for the purpose for which the exchanged share was issued, and
(iii)where the shareholder received no consideration for the disposition of the exchanged share other than the new share, for the purposes of subsection 191(4),
(A)in the case of an exchanged share to which subsection 191(4) applies because of paragraph 191(4)(a), the new share shall be deemed to have been issued for consideration having a fair market value equal to the consideration for which the exchanged share was issued, and
(B)in the case of an exchanged share to which subsection 191(4) applies because of an event described in paragraph 191(4)(b) or 191(4)(c), the consideration for which the new share was issued shall be deemed to have a fair market value equal to the fair market value of the exchanged share immediately before the time that event occurred.
Marginal note:Exchanged rights
(4.3)Where there has been an amalgamation or merger of two or more corporations after June 18, 1987 and a right listed on a designated stock exchange to acquire a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new right”) was acquired by a shareholder in consideration for the disposition of a right described in paragraph (d) of the definitiongrandfathered sharein subsection 248(1) to acquire a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged right”), the new right shall be deemed to be the same right as the exchanged right for the purposes of paragraph (d) of the definitiongrandfathered sharein subsection 248(1) where the terms and conditions of the new right were the same as, or substantially the same as, the terms and conditions of the exchanged right and the terms and conditions of the share receivable on an exercise of the new right were the same as, or substantially the same as, the terms and conditions of the share that would have been received on an exercise of the exchanged right.
Marginal note:Flow-through shares
(4.4)Where
(a)there is an amalgamation of two or more corporations each of which is a principal-business corporation (within the meaning assigned by subsection 66(15)) or a corporation that at no time carried on business,
(b)a predecessor corporation entered into an agreement with a person at a particular time for consideration given by the person to the predecessor corporation,
(c)for the consideration under the agreement
(i)a share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or
(ii)a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and
(d)the new corporation
(i)issues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, or
(ii)is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,
for the purposes of subsection 66(12.66) and Part XII.6 and for the purposes of renouncing an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses that would, but for the renunciation, be incurred by the new corporation after the amalgamation,
(e)the person shall be deemed to have given the consideration under the agreement to the new corporation for the issue of the new share,
(f)the agreement shall be deemed to have been entered into between the new corporation and the person at the particular time,
(g)the new share shall be deemed to be a flow-through share of the new corporation, and
(h)the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation.
Marginal note:Options to acquire shares of predecessor corporation
(5)Where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who immediately before the amalgamation owned a capital property that was an option to acquire shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old option”) and who received no consideration for the disposition of that option on the amalgamation, other than an option to acquire shares of the capital stock of the new corporation (in this subsection referred to as the “new option”), shall be deemed
(a)to have disposed of the old option for proceeds equal to the adjusted cost base to the taxpayer of that option immediately before the amalgamation, and
(b)to have acquired the new option at a cost to the taxpayer equal to the proceeds described in paragraph 87(5)(a),
and where the old option was taxable Canadian property of the taxpayer, the new option is deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the taxpayer.
Marginal note:Adjusted cost base of option
(5.1)Where the cost to a taxpayer of a new option is determined at any time under subsection 87(5),
(a)there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the new option the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the old option; and
(b)the amount determined under paragraph 87(5.1)(a) shall be added after that time in computing the adjusted cost base to the taxpayer of the new option.
Marginal note:Obligations of predecessor corporation
(6)Notwithstanding subsection (7), where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who, immediately before the amalgamation, owned a capital property that was a bond, debenture, mortgage, hypothecary claim, note or other similar obligation of a predecessor corporation (in this subsection referred to as the “old property”) and who received no consideration for the disposition of the old property on the amalgamation other than a bond, debenture, mortgage, hypothecary claim, note or other similar obligation respectively, of the new corporation (in this subsection referred to as the “new property”) is, if the amount payable to the holder of the new property on its maturity is the same as the amount that would have been payable to the holder of the old property on its maturity, deemed
(a)to have disposed of the old property for proceeds equal to the adjusted cost base to the taxpayer of that property immediately before the amalgamation; and
(b)to have acquired the new property at a cost to the taxpayer equal to the proceeds described in paragraph 87(6)(a).
Marginal note:Adjusted cost base
(6.1)Where the cost to a taxpayer of a particular property that is a bond, debenture or note is determined at any time under subsection 87(6) and the terms of the bond, debenture or note conferred upon the holder the right to exchange that bond, debenture or note for shares,
(a)there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the bond, debenture or note the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the property for which the particular property was exchanged at that time; and
(b)the amount determined under paragraph 87(6.1)(a) in respect of the particular property shall be added after that time in computing the adjusted cost base to the taxpayer of the particular property.
Marginal note:Idem
(7)Where there has been an amalgamation of two or more corporations after May 6, 1974 and
(a)a debt or other obligation of a predecessor corporation that was outstanding immediately before the amalgamation became a debt or other obligation of the new corporation on the amalgamation, and
(b)the amount payable by the new corporation on the maturity of the debt or other obligation, as the case may be, is the same as the amount that would have been payable by the predecessor corporation on its maturity,
the provisions of this Act
(c)shall not apply in respect of the transfer of the debt or other obligation to the new corporation, and
(d)shall apply as if the new corporation had incurred or issued the debt or other obligation at the time it was incurred or issued by the predecessor corporation under the agreement made on the day on which the predecessor corporation made an agreement under which the debt or other obligation was issued,
except that, for the purposes of the definitionincome bondorincome debenturein subsection 248(1), paragraph 87(7)(d) shall not apply to any debt or other obligation of the new corporation unless the terms and conditions thereof immediately after the amalgamation are the same as, or substantially the same as, the terms and conditions of the debt or obligation that was an income bond or income debenture of the predecessor corporation immediately before the amalgamation.
Marginal note:Foreign merger
(8)Subject to subsection 95(2), where there has been a foreign merger in which a taxpayer’s shares or options to acquire shares of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares or options to acquire shares of the capital stock of the new foreign corporation or the foreign parent corporation, unless the taxpayer elects in the taxpayer’s return of income for the taxation year in which the foreign merger took place not to have this subsection apply, subsections (4) and (5) apply to the taxpayer as if the references in those subsections to
(a)“amalgamation” were read as “foreign merger”;
(b)“predecessor corporation” were read as “predecessor foreign corporation”; and
(c)“new corporation” were read as “new foreign corporation or the foreign parent corporation”.
Marginal note:Definition offoreign merger
(8.1)For the purposes of this section,foreign mergermeans a merger or combination of two or more corporations each of which was, immediately before the merger or combination, resident in a country other than Canada (each of which is in this section referred to as a “predecessor foreign corporation”) to form one corporate entity resident in a country other than Canada (in this section referred to as the “new foreign corporation”) in such a manner that, and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation,
(a)all or substantially all the property (except amounts receivable from any predecessor foreign corporation or shares of the capital stock of any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination becomes property of the new foreign corporation as a consequence of the merger or combination;
(b)all or substantially all the liabilities (except amounts payable to any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination become liabilities of the new foreign corporation as a consequence of the merger or combination; and
(c)all or substantially all of the shares of the capital stock of the predecessor foreign corporations (except any shares or options owned by any predecessor foreign corporation) are exchanged for or become, because of the merger or combination,
(i)shares of the capital stock of the new foreign corporation, or
(ii)if, immediately after the merger, the new foreign corporation was controlled by another corporation (in this section referred to as the “foreign parent corporation”) that was resident in a country other than Canada, shares of the capital stock of the foreign parent corporation.
Marginal note:Absorptive mergers
(8.2)For the purposes of the definitionforeign mergerin subsection (8.1), if there is a merger or combination, otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation, of two or more non-resident corporations (each of which is referred to in this subsection as a “predecessor foreign corporation”), as a result of which one or more predecessor foreign corporations ceases to exist and, immediately after the merger or combination, another predecessor foreign corporation (referred to in this subsection as the “survivor corporation”) owns properties (except amounts receivable from, or shares of the capital stock of, any predecessor foreign corporation) representing all or substantially all of the fair market value of all such properties owned by each predecessor foreign corporation immediately before the merger or combination, then
(a)the merger or combination is deemed to be a merger or combination of the predecessor foreign corporations to form one non-resident corporation;
(b)the survivor corporation is deemed to be the non-resident corporation so formed;
(c)all of the properties of the survivor corporation immediately before the merger or combination that are properties of the survivor corporation immediately after the merger or combination are deemed to become properties of the survivor corporation as a consequence of the merger or combination;
(d)all of the liabilities of the survivor corporation immediately before the merger or combination that are liabilities of the survivor corporation immediately after the merger or combination are deemed to become liabilities of the survivor corporation as a consequence of the merger or combination;
(e)all of the shares of the capital stock of the survivor corporation that were outstanding immediately before the merger or combination that are shares of the capital stock of the survivor corporation immediately after the merger or combination are deemed to become shares of the capital stock of the survivor corporation as a consequence of the merger or combination; and
(f)all of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.
Marginal note:Anti-avoidance
(8.3)Subsection (8) does not apply in respect of a taxpayer’s shares of the capital stock of a predecessor foreign corporation that are exchanged for or become, on a foreign merger, shares of the capital stock of the new foreign corporation or the foreign parent corporation, if
(a)the new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;
(b)shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; and
(c)the foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, to
(i)a person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length immediately after the transaction, event or series, or
(ii)a partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).
Marginal note:Taxable Canadian property — conditions for rollover
(8.4)Subsection (8.5) applies at any time if
(a)there is at that time a foreign merger of two or more predecessor foreign corporations (within the meaning assigned by subsection (8.1), if that subsection and subsection (8.2) were read without reference to the expression “otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation”) that were, immediately before that time,
(i)resident in the same country, and
(ii)related to each other (determined without reference to paragraph 251(5)(b));
(b)because of the foreign merger,
(i)a predecessor foreign corporation (referred to in this subsection and subsection (8.5) as the “disposing predecessor foreign corporation”) disposes of a property (referred to in this subsection and subsection (8.5) as the “subject property”) that is, at that time,
(A)a taxable Canadian property (other than treaty-protected property) of the disposing predecessor foreign corporation, and
(B)any of the following:
(I)a share of the capital stock of a corporation,
(II)an interest in a partnership, and
(III)an interest in a trust, and
(ii)the subject property becomes property of a corporation that is a new foreign corporation for the purposes of subsection (8.1);
(c)no shareholder (except any predecessor foreign corporation) that owned shares of the capital stock of a predecessor foreign corporation immediately before the foreign merger received consideration for the disposition of those shares on the foreign merger, other than shares of the capital stock of the new foreign corporation;
(d)if the subject property is a share of the capital stock of a corporation or an interest in a trust, the corporation or trust is not, at any time in the 24-month period beginning at that time, as part of a transaction or event, or series of transactions or events including the foreign merger, subject to a loss restriction event; and
(e)the new foreign corporation and the disposing predecessor foreign corporation jointly elect in writing under this paragraph in respect of the foreign merger and file the election with the Minister on or before the filing-due date of the disposing predecessor foreign corporation (or the date that would be its filing-due date, if subsection (8.5) did not apply in respect of the disposition of the subject property) for the taxation year that includes that time.
Marginal note:Foreign merger — taxable Canadian property rollover
(8.5)If this subsection applies at any time,
(a)if the subject property is an interest in a partnership,
(i)the disposing predecessor foreign corporation is deemed not to dispose of the subject property (other than for the purposes of subsection (8.4)), and
(ii)the new foreign corporation is deemed
(A)to have acquired the subject property at a cost equal to the cost of the subject property to the disposing predecessor foreign corporation, and
(B)to be the same corporation as, and a continuation of, the disposing predecessor foreign corporation in respect of the subject property; and
(b)if the subject property is a share of the capital stock of a corporation or an interest in a trust,
(i)the subject property is deemed to have been disposed of at that time by the disposing predecessor foreign corporation to the new foreign corporation (that is referred to in subparagraph (8.4)(b)(ii)) for proceeds of disposition equal to the adjusted cost base of the subject property to the disposing predecessor foreign corporation immediately before that time, and
(ii)the cost of the subject property to the new foreign corporation is deemed to be the amount that is deemed by subparagraph (i) to be the proceeds of disposition of the subject property.
Marginal note:Rules applicable in respect of certain mergers
(9)Where there has been a merger of two or more taxable Canadian corporations to form a new corporation that was controlled, immediately after the merger, by a taxable Canadian corporation (in this subsection referred to as the “parent”) and, on the merger, shares of the capital stock of the parent (in this subsection referred to as “parent shares”) were issued by the parent to persons who were, immediately before the merger, shareholders of a predecessor corporation, the following rules apply:
(a)for the purposes of paragraph 87(1)(c), subsection 87(4) and theIncome Tax Application Rules, any parent shares received by a shareholder of a predecessor corporation shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger;
(a.1)for the purposes of subsections 87(4.1) and 87(4.2), a parent share issued to a shareholder in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation shall be deemed to be a share of a class of the capital stock of the new corporation that was issued in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation by that shareholder;
(a.2)for the purposes of subsection 87(4.3), a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the parent shall be deemed to be a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the new corporation;
(a.21)for the purpose of paragraph (4.4)(d)
(i)each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and
(ii)any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;
(a.3)for the purpose of applying subsection 87(5) in respect of the merger, the reference in that subsection to “the new corporation” shall be read as a reference to “the parent”;
(a.4)for the purpose of paragraph 87(9)(c), any shares of the new corporation acquired by the parent on the merger shall be deemed to be new shares;
(a.5)for the purpose of applying subsection 87(10) in respect of the merger,
(i)the reference in paragraph 87(10)(b) to “the new corporation” shall be read as a reference to “the new corporation or the parent, within the meaning assigned by subsection 87(9)”, and
(ii)the references in paragraphs 87(10)(c) and 87(10)(f) to “the new corporation” shall be read as references to “the public corporation described in paragraph 87(9)(b)”.
(b)in computing, at any particular time, the paid-up capital in respect of any particular class of shares of the capital stock of the parent that included parent shares immediately after the merger
(i)there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this paragraph, in respect of all the shares of the capital stock of the parent immediately after the merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share of the capital stock of the parent or a predecessor corporation (other than any share of a predecessor corporation owned by the parent or by another predecessor corporation and any share of a predecessor corporation owned by a shareholder other than the parent or another predecessor corporation that was not exchanged on the merger for parent shares) immediately before the merger that
(A)the paid-up capital, determined without reference to this paragraph, in respect of that particular class of shares of the capital stock of the parent immediately after the merger
is of
(B)the paid-up capital, determined without reference to this paragraph, in respect of all the issued and outstanding shares of the classes of the capital stock of the parent that included parent shares immediately after the merger, and
(ii)there shall be added an amount equal to the lesser of
(A)the amount, if any, by which
(I)the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the parent before the particular time
exceeds
(II)the total that would be determined under subclause 87(9)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 87(9)(b)(i), and
(B)the amount required by subparagraph 87(9)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class; and
(c)notwithstanding paragraph 87(4)(b), the parent shall be deemed to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost equal to the total of
(i)the amount otherwise determined under paragraph 87(4)(b) to be the cost of those shares, and
(ii)in any case where the parent owned, immediately after the merger, all the issued shares of the capital stock of the new corporation, such portion of
(A)the amount, if any, by which
(I)the amount by which the total of the money on hand of the new corporation and all amounts each of which is the cost amount to the new corporation of a property owned by it, immediately after the merger, exceeds the total of all amounts each of which is the amount of any debt owing by the new corporation, or of any other obligation of the new corporation to pay any amount, that was outstanding immediately after the merger,
exceeds
(II)the total of the adjusted cost bases to the parent of all shares of the capital stock of each predecessor corporation beneficially owned by it immediately before the merger
as is designated by the parent in respect of the shares of that particular class in its return of income under this Part for its taxation year in which the merger occurred, except that
(B)in no case shall the amount so designated in respect of the shares of a particular class exceed the amount, if any, by which the total fair market value, immediately after the merger, of the shares of that particular class issued by virtue of the merger exceeds the cost of those shares to the parent determined without reference to this paragraph, and
(C)in no case shall the total of the amounts so designated in respect of the shares of each class of the capital stock of the new corporation exceed the amount determined under clause 87(9)(c)(ii)(A).
Marginal note:Share deemed listed
(10)Where
(a)a new corporation is formed as a result of an amalgamation,
(b)the new corporation is a public corporation,
(c)the new corporation issues a share (in this subsection referred to as the “new share”) of its capital stock,
(d)the new share is issued in exchange for a share (in this subsection referred to as the “old share”) of the capital stock of a predecessor corporation,
(e)immediately before the amalgamation, the old share was listed on a designated stock exchange, and
(f)the new share is redeemed, acquired or cancelled by the new corporation within 60 days after the amalgamation,
the new share is deemed, for the purposes of subsection 116(6), the definitionsqualified investmentin subsections 146(1), 146.1(1), 146.3(1) and 146.4(1), in section 204 and in subsection 207.01(1), and the definitiontaxable Canadian propertyin subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.
Marginal note:Vertical amalgamations
(11)Where at any time there is an amalgamation of a corporation (in this subsection referred to as the “parent”) and one or more other corporations (each of which in this subsection is referred to as the “subsidiary”) each of which is a subsidiary wholly-owned corporation of the parent,
(a)the shares of the subsidiary are deemed to have been disposed of by the parent immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and 88(1.7) applied, with any modifications that the circumstances require, to the amalgamation; and
(b)the cost to the new corporation of each capital property of the subsidiary acquired on the amalgamation is deemed to be the amount that would have been the cost to the parent of the property if the property had been distributed at that time to the parent on a winding-up of the subsidiary and subsections 88(1) and 88(1.7) had applied to the winding-up.
Marginal note:Winding-up
88(1)Where a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) has been wound up after May 6, 1974 and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another taxable Canadian corporation (in this subsection referred to as the “parent”) and all of the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by persons with whom the parent was dealing at arm’s length, notwithstanding any other provision of this Act other than subsection 69(11), the following rules apply:
(a)subject to paragraphs 88(1)(a.1) and 88(1)(a.3), each property (other than an interest in a partnership) of the subsidiary that was distributed to the parent on the winding-up shall be deemed to have been disposed of by the subsidiary for proceeds equal to
(i)in the case of a Canadian resource property, a foreign resource property or a right to receive production (as defined in subsection 18.1(1)) to which a matchable expenditure (as defined in subsection 18.1(1)) relates, nil, and
(ii)[Repealed, 1994, c. 7, Sch