Income Tax Regulations — 6203
(B) the holder of the share will derive earnings by virtue of the holding, ownership or disposition of the share; (b) the corporation or a specified person in relation to the corporation cannot reasonably be expected to, within two years after the time the share is issued, (i) acquire or cancel the share in whole or in part, (ii) reduce the paid-up capital of the corporation in respect of the share, or (iii) make a payment, transfer or other provision, directly or indirectly, by way of a dividend, loan, purchase of shares, financial assistance to any purchaser of the share or in any other manner whatever, that may reasonably be considered to be a repayment or return of all or part of the consideration for which the share was issued otherwise than as a consequence of the payment of a dividend paid by a subsidiary wholly-owned corporation to its parent, of an amalgamation of a subsidiary wholly-owned corporation or of a winding-up to which subsection 88(1) of the Act applies; (c) no person or partnership can reasonably be expected to provide, within two years after the time the share is issued, any form of undertaking with respect to the share (including any guarantee, security, indemnity, covenant or agreement and including the lending of funds to, or the placing of amounts on deposit with, or on behalf of, the holder of the share or any specified person in relation to the holder); and (d) it cannot reasonably be expected that any of the terms or conditions of the share or any existing agreement in respect of the share or its issue will thereafter be modified or amended, or that any new agreement in respect of the share or its issue will be entered into, within two years after the time the share is issued, in such a manner that the share would not be a prescribed share if it had been issued at the time of such modification or amendment or at the time the new agreement is entered into. (2) For the purposes of subsection (1), (a) the dividend entitlement of a share of the capital stock of a corporation shall be deemed not to be limited to a maximum amount or fixed at a minimum amount where it may reasonably be considered that all or substantially all of the dividend entitlement is determinable by reference to the dividend entitlement of another share of the capital stock of the corporation that meets the requirements of subparagraph (1)(a)(i); (b) the liquidation entitlement of a share of the capital stock of a corporation shall be deemed not to be limited to a maximum amount or fixed at a minimum amount where it may reasonably be considered that all or substantially all of the liquidation entitlement is determinable by reference to the liquidation entitlement of another share of the capital stock of the corporation that meets the requirements of subparagraph (1)(a)(ii); (c) where a corporation has merged or amalgamated with one or more other corporations, the corporation formed as a result of the merger or amalgamation shall be deemed to be the same corporation as, and a continuation of, each of its predecessor corporations and a share issued on the merger or amalgamation as consideration for another share shall be deemed to be the same share as the share for which it was issued but this paragraph does not apply if the share issued on the merger or amalgamation is not a prescribed share at the time of its issue; and (d) an agreement entered into between the first purchaser of a share and another person or partnership, other than a specified person in relation to the corporation issuing the share, for the sale of the share to that other person or partnership shall be deemed not to be an undertaking with respect to the share. (3) For the purposes of subsections (1) and (2), specified person , in relation to a corporation or a holder of a share, as the case may be (in this subsection referred to as the “taxpayer”), means any person or partnership with whom the taxpayer does not deal at arm’s length or any partnership or trust of wh