Income Tax Act — I-3.3 87
st bases to the shareholder of those shares immediately before the amalgamation, and (b) to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) that (i) the fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder, is of (ii) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder, except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply: (c) the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, and (ii) the fair market value of the old shares immediately before the amalgamation, (d) the shareholder’s capital loss from the disposition of the old shares shall be deemed to be nil, and (e) the cost to the shareholder of any new shares of any class of the capital stock of the new corporation acquired by the shareholder on the amalgamation shall be deemed to be that proportion of the lesser of (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, and (ii) the total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old shares that (iii) the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholder is of (iv) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder, and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder. Exchanged shares (4.1) For the purposes of the definition term preferred share in subsection 248(1), where there has been an amalgamation of two or more corporations after November 16, 1978 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued in consideration for the disposition of a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share, (a) the new share shall be deemed to have been issued at the time the exchanged share was issued; (b) if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; and (c) the new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation. Idem (4.2) Where there has been an amalgamation or merger of two or more corporations after November 27, 1986 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued to a shareholder in consideration for the disposition of a share by that shareholder of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as,