Income Tax Regulations — 6204
ation 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 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 subparagraph (1)(a)(i); (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 liquidation entitlement of another share of the capital stock of the corporation that meets the requirements of subparagraph (1)(a)(ii); and (c) the determination of whether a share of the capital stock of a particular corporation is a prescribed share shall be made without reference to a right or obligation to redeem, acquire or cancel the share, or to cause the share to be redeemed, acquired or cancelled, where (i) the person (in this paragraph referred to as the “holder”) to whom the share is sold or issued is, at the time the share is sold or issued, dealing at arm’s length with the particular corporation and with each corporation with which the particular corporation is not dealing at arm’s length, (ii) the right or obligation is provided for in the terms or conditions of the share or in an agreement in respect of the share or its issue and, having regard to all the circumstances, it can reasonably be considered that (A) the principal purpose of providing for the right or obligation is to protect the holder against any loss in respect of the share, and the amount payable on the redemption, acquisition or cancellation (in this subparagraph and in subparagraph (iii) referred to as the “acquisition”) of the share will not exceed the adjusted cost base of the share to the holder immediately before the acquisition, or (B) the principal purpose of providing for the right or obligation is to provide the holder with a market for the share, and the amount payable on the acquisition of the share will not exceed the fair market value of the share immediately before the acquisition, and (iii) having regard to all the circumstances, it can reasonably be considered that no portion of the amount payable on the acquisition of the share is directly determinable by reference to the profits of the particular corporation, or of another corporation with which the particular corporation does not deal at arm’s length, for all or any part of the period during which the holder owns the share or has a right to acquire the share, unless the reference to the profits of the particular corporation or the other corporation is only for the purpose of determining the fair market value of the share pursuant to a formula set out in the terms or conditions of the share or the agreement in respect of the share or its issue, as the case may be. (3) For the purposes of subsection (1), specified person , in relation to a corporation, means (a) any person or partnership with whom the corporation does not deal at arm’s length otherwise than because of a right referred to in paragraph 251(5)(b) of the Act that arises as a result of an offer by the person or partnership to acquire all or substantially all of the shares of the capital stock of the corporation, or (b) any partnership or trust of which the corporation (or a person or partnership with whom the corporation does not deal at arm’s length) is a member or beneficiary, respectively. (4) For the purposes of subsection (3), the Act shall be read without reference to subsection 256(9) of the Act. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] SOR/86-1136, s. 8; SOR/94-315, s. 2; SOR/94-686, ss. 78(F), 79(F); SOR/97-409, s. 1; SOR/2003-328, s. 4; SOR/2007-212, s. 4; SOR/2010-93, s. 22; 2017, c. 33, s.