Income Tax Act — I-3.3 85.1
n of the amount, if any, by which (i) the increase, if any, as a result of the issue, in the paid-up capital in respect of all the shares of the capital stock of the purchaser, computed without reference to this subsection as it applies to the issue, exceeds (ii) the paid-up capital in respect of all the exchanged shares received as a result of the exchange that (iii) the increase, if any, as a result of the issue, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the issue, is of (iv) the amount, if any, determined in subparagraph 85.1(2.1)(a)(i) in respect of the issue; 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 that class paid by the purchaser before the particular time exceeds (B) the total that would be determined under clause 85.1(2.1)(b)(i)(A) if this Act were read without reference to paragraph 85.1(2.1)(a), and (ii) the total of all amounts required by paragraph 85.1(2.1)(a) to be deducted in respect of that particular class of shares before the particular time. Issuance deemed made to vendor (2.2) For the purposes of subsection (1), if a purchaser issues shares of a class of its capital stock (in this subsection referred to as “purchaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged shares that trade on a designated stock exchange to the purchaser solely for purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor. Disposition of shares of foreign affiliate (3) Where a taxpayer has disposed of capital property that was shares of the capital stock of a foreign affiliate of the taxpayer to any corporation that was, immediately following the disposition, a foreign affiliate of the taxpayer (in this subsection referred to as the “acquiring affiliate”) for consideration including shares of the capital stock of the acquiring affiliate, (a) the cost to the taxpayer of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the taxpayer as consideration for the disposition shall be deemed to be the fair market value of the property at the time of the disposition; (b) the cost to the taxpayer of any shares of any class of the capital stock of the acquiring affiliate receivable by the taxpayer as consideration for the disposition shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the shares disposed of exceeds the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate) that (i) the fair market value, immediately after the disposition, of those shares of the acquiring affiliate of that class is of (ii) the fair market value, immediately after the disposition, of all shares of the capital stock of the acquiring affiliate receivable by the taxpayer as consideration for the disposition; (c) the taxpayer’s proceeds of disposition of the shares shall be deemed to be an amount equal to the cost to the taxpayer of all shares and other property receivable by the taxpayer from the acquiring affiliate as consideration for the disposition; and (d) the cost to the acquiring affiliate of the shares acquired from the taxpayer shall be deemed to be an amount equal to the taxpayer’s proceeds of disposition referred to in paragraph 85.1(3)(c). Exception (4) Subsection (3) does not apply in respect of a disposition at any time by a taxpayer of a share of the capital stock of a particular foreign affi