Income Tax Regulations — 6205
hare 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, 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 subsections 110.6(8) and (9) of the Act and subject to subsection (3), a prescribed share is a share of the capital stock of a particular corporation where (a) it is a particular share that is owned by a person and that was issued by the particular corporation as part of an arrangement to that person, to a spouse, common-law partner or parent of that person or, if the person is a trust described in paragraph 104(4)(a) of the Act, to the person who created the trust or by whose will the trust was created or, if the person is a corporation, to another person owning all of the issued and outstanding shares of the capital stock of the corporation or to a spouse, common-law partner or parent of that other person, and (i) the main purpose of the arrangement was to permit any increase in the value of the property of the particular corporation to accrue to other shares that would, at the time of their issue, be prescribed shares if this section were read without reference to this subsection, and (ii) at the time of the issue of the particular share or at the end of the arrangement, (A) the other shares were owned by (I) the person to whom the particular share was issued (in this paragraph referred to as the “original holder”), (II) a person who did not deal at arm’s length with the original holder, (III) a trust none of the beneficiaries of which were persons other than the original holder or a person who did not deal at arm’s length with the original holder, or (IV) any combination of persons described in subclause (I), (II) or (III), (B) the other shares were owned by employees of the particular corporation or of a corporation controlled by the particular corporation, or (C) the other shares were owned by any combination of persons each of whom is described in clause (A) or (B); or (b) it is a share that was issued by a mutual fund corporation. (c) [Repealed, SOR/90-607, s. 1] (3) For the purposes of subsections 110.6(8) and (9) of the Act, a prescribed share does not include a share of the capital stock issued by a mutual fund corporation (other than an investment corporation) the value of which can reasonably be considered to be, directly or indirectly, derived primarily from investments made by the mutual fund corporation in one or more corporations (in this subsection referred to as an “investee corporation”) connected with it (within the meaning of subsection 186(4) of the Act on the assumption that the references in that subsection to “payer corporation” and “particular corporation” were read as references to “investee corporation” and “mutual fund corporation”, respectively). (4) For the purposes of this section, (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 (i) 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 clause (1)(a)(i)(A), or (ii) the dividend entitlement cannot be such as to impair the ability of the corporation to redeem another share of the capital stock of the corporation that meets the requirements of paragraph (2)(a); (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 liquidati