BUSI 4005 Chapter Notes - Chapter 16: Capital Loss
19 May 2018
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Income deferral
1. Section 85
a. Exchange of share- allow tax free rollover for exchange share with other
corporation
b. Vendor
i. Do’t recogize CG/ CL
ii. Prior exchage there’s ar legth deal
iii. Transfer share = capital property
c. Purchaser
i. Canadian corporation
ii. After exchange, vendor and non arm length person no control purchaser
d. Consequence
i. Cost = lesser of FMV or PUC
ii. Proceed = ACB
iii. ACB new = ACB old
2. Section 86
a. Reorganization of capital – allow tax free rollover of share to new class of share
b. Condition
i. Shares are capital property
ii. Do’t iclude all shareholder
iii. Property receivable include other shares
iv. Total share of n class own by shareholder
c. Steps
i. Issuance of new share
ii. Redemption of old share
iii. Benefit rule on gift, proceed = lesser of FMV non share consideration gift
amount or FMV old share
3. Section 87
a. Amalgamation – tax free rollover in merger
b. Condition
i. Total property + liability belong to new corporation
ii. Exchange share get CG deferral
iii. Shareholder must get share of new corporation
c. Consequence
i. Tax value of asset = total predecessor corporation tax value of asset
ii. Deemed tax year end for predecessor
iii. Choke of new tax year end
iv. Bump in ACB
d. Major rollover provision
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