Income Tax Application Rules — I-3.31 26
ltered, in form only, because of the amalgamation. Convertible properties (24) Where there has been an exchange to which subsection 51(1) of the amended Act applies on which a taxpayer has acquired shares of one class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for a share, bond, debenture or note of the corporation (in this subsection referred to as the “old property”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the time of the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and, where the exchange occurred after May 6, 1974, for the purposes of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, (a) the property that was the old property shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and (b) the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old property that was altered, in form only, because of the exchange. Bond conversion (25) Where, after May 6, 1974, there has been an exchange to which section 51.1 of the amended Act applies on which a taxpayer has acquired a bond of a debtor (in this subsection referred to as the “new bond”) in exchange for another bond of the same debtor (in this subsection referred to as the “old bond”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new bond, (a) the property that was the old bond shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new bond; and (b) the property that is the new bond shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old bond that was altered, in form only, because of the exchange. Share for share exchange (26) Where, after May 6, 1974, there has been an exchange to which subsection 85.1(1) of the amended Act applies on which a taxpayer has acquired shares of any particular class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for shares of any particular class of the capital stock of another corporation (in this subsection referred to as the “old shares”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, (a) the property that was the old shares shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and (b) the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the exchange. Reorganization of capital (27) Where, after May 6, 1974, there has been a reorganization of the capital of a corporation to which sectio