Income Tax Act — I-3.3 212.3
t loan or indebtedness. Preferred shares (19) Subparagraph (1)(b)(ii) applies, and subsection (16) and paragraphs (18)(b) and (d) do not apply, to an acquisition of shares of the capital stock of a subject corporation by a CRIC if, having regard to all the terms and conditions of the shares and any agreement in respect of the shares, the shares cannot reasonably be considered to fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation, unless the subject corporation would be a subsidiary wholly-owned corporation of the CRIC throughout the period during which the series of transactions or events that includes the acquisition occurs if the CRIC owned all of the shares of the capital stock of the subject corporation that are owned by any of (a) the CRIC; (b) a corporation resident in Canada that is a subsidiary wholly-owned corporation of the CRIC; and (c) a corporation resident in Canada of which the CRIC is a subsidiary wholly-owned corporation. Assumption of debt on liquidation or distribution (20) Subsection (2) applies to an investment in a subject corporation made by a CRIC that is an acquisition of shares of the capital stock of the subject corporation described in any of subparagraphs (18)(b)(v) to (vii) to the extent of the lesser of (a) the total of all amounts each of which is the amount of a debt obligation assumed by the CRIC in respect of the liquidation and dissolution, redemption, dividend or qualifying return of capital, as the case may be, and (b) the fair market value of the shares at the investment time. Persons deemed not to be related (21) If it can reasonably be considered that one of the main purposes of one or more transactions or events is to cause two or more persons to be related to each other, or a person or group of persons to control another person, so that, in the absence of this subsection, subsection (2) would not apply because of subsection (18) to an investment in a subject corporation made by a CRIC, those persons are deemed not to be related to each other, or that person or group of persons is deemed not to control that other person, as the case may be, for the purposes of subsection (18). Mergers (22) For the purposes of this section and subsections 219.1(3) and (4), (a) if there has been an amalgamation to which subsection 87(11) applies, (i) the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, the parent and each subsidiary referred to in that subsection, (ii) the new corporation is deemed not to acquire any property of the parent, or of any subsidiary, as a result of the amalgamation, and (iii) each shareholder of the new corporation is deemed not to acquire indirectly any shares as a result of the amalgamation; and (b) if there has been a winding-up to which subsection 88(1) applies, (i) the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection, and (ii) the parent is deemed not to acquire any property of the subsidiary as a result of the winding-up. Indirect investment (23) Subsection (2) applies to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would not apply because of subsection (16) or (24), to the extent that one or more properties received by the subject corporation from the CRIC as a result of the investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a series of transactions or events that includes the making of the investment, in a transaction or event to which subsection (2) would have applied if the CRIC had entered into the transaction, or participated in the event, as the case may be, instead of the subject corporation. Indirect funding (24) Subsection (2) does not apply to an inv