Income Tax Act — I-3.3 55
 a winding-up of a corporation to which subsection 88(1) applies, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary; ( société déterminée ) specified wholly-owned corporation of a public corporation means a corporation all of the outstanding shares of the capital stock of which (other than directors’ qualifying shares and shares of a specified class) are held by (a) the public corporation, (b) a specified wholly-owned corporation of the public corporation, or (c) any combination of corporations described in paragraph (a) or (b). ( filiale à cent pour cent déterminée ) Deemed proceeds or gain (2) If this subsection applies to a taxable dividend received by a dividend recipient, notwithstanding any other provision of this Act, the amount of the dividend (other than the portion of it, if any, subject to tax under Part IV that is not refunded as a consequence of the payment of a dividend by a corporation where the payment is part of the series referred to in subsection (2.1)) is deemed (a) not to be a dividend received by the dividend recipient; (b) if the dividend is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies, to be proceeds of disposition of the share that is redeemed, acquired or cancelled except to the extent that the dividend is otherwise included in computing those proceeds; and (c) if paragraph (b) does not apply to the dividend, to be a gain of the dividend recipient, for the year in which the dividend was received, from the disposition of a capital property. Application of subsection (2) (2.1) Subsection (2) applies to a taxable dividend received by a corporation resident in Canada (in subsections (2) to (2.2) and (2.4) referred to as the dividend recipient ) as part of a transaction or event or a series of transactions or events if (a) the dividend recipient is entitled to a deduction in respect of the dividend under subsection 112(1) or (2) or 138(6); (b) it is the case that (i) one of the purposes of the payment or receipt of the dividend (or, in the case of a dividend under subsection 84(3), one of the results of which) is to effect a significant reduction in the portion of the capital gain that, but for the dividend, would have been realized on a disposition at fair market value of any share of capital stock immediately before the dividend, or (ii) the dividend (other than a dividend that is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies) is received on a share that is held as capital property by the dividend recipient and one of the purposes of the payment or receipt of the dividend is to effect (A) a significant reduction in the fair market value of any share, or (B) a significant increase in the cost of property, such that the amount that is the total of the cost amounts of all properties of the dividend recipient immediately after the dividend is significantly greater than the amount that is the total of the cost amounts of all properties of the dividend recipient immediately before the dividend; and (c) the amount of the dividend exceeds the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received. Special rule — amount of the stock dividend (2.2) For the purpose of applying subsections (2), (2.1), (2.3) and (2.4), the amount of a stock dividend and the dividend recipient’s entitlement to a deduction under subsection 112(1) or (2) or 138(6) in respect of the amount of that dividend are to be determined as if paragraph (b) of the definition amount in subsection 24