Income Tax Act — I-3.3 212.1
onduit disposes of shares — other than a disposal of shares by a non-resident trust or by a trust resident in Canada that is, at that time, a graduated rate estate of an individual (if the trust acquired the shares on and as a consequence of the individual’s death and the individual was, immediately before their death, resident in Canada) — of the capital stock of a corporation resident in Canada to a purchaser, then (i) each holder of an interest in the conduit is deemed, on a class-by-class basis, to have disposed, at that time, of the shares to the purchaser in the proportion expressed by the formula A/B where A is the fair market value, at that time, of the holder’s interest in the conduit, and B is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and (ii) each holder of an interest in the conduit is deemed to have received from the purchaser and the purchaser is deemed to have paid to each such holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula A × B/C where A is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the conduit from the purchaser for the shares, B is the amount determined for A in subparagraph (i), and C is the amount determined for B in subparagraph (i); (c) for the purposes of subsections (1) and (1.1), if at any time a conduit acquires shares of the capital stock of a corporation resident in Canada from a vendor, then (i) each holder of an interest in the conduit is deemed to have acquired, at that time, the shares from the vendor, on a class-by-class basis, in the proportion expressed by the formula A/B where A is the fair market value, at that time, of the holder’s interest in the conduit, and B is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and (ii) each holder of an interest in the conduit is deemed to have paid to the vendor and the vendor is deemed to have received from each such holder, as consideration for the shares deemed to have been acquired in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula A × B/C where A is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is paid by the conduit to the vendor for the shares, B is the amount determined for A in subparagraph (i), and C is the amount determined for B in subparagraph (i); and (d) for the purpose of determining whether the subject corporation is connected with the purchaser corporation for the purposes of subsection (1) at any time, if at that time a conduit owns shares of the capital stock of the subject corporation, each holder of an interest in the conduit is deemed to own, at that time, the shares of each class of the capital stock of the subject corporation that are owned by the conduit the number of which is determined by the formula A × B/C where A is the total number of shares of the class of the capital stock of the subject corporation that are owned by the conduit at that time, B is the fair market value, at that time, of the holder’s interest in the conduit, and C is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit. Avoidance of subsections (5) and (6) (7) The amounts determined for A and B in paragraph (5)(b), for A and B in subparagraph (6)(c)(i) and for B and C in paragraph (6)(d) are, in respect of an interest as a beneficiary under a trust held by a person or partnership, deemed to be equal to one if (a) the person or partnership’s share of the accumulating income or ca