,canada ,rev5ue ,ag5cy                #a

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#aae;,r#b
,subject3 ,9come ,tax ,act--,frac;nal
  ,9t]e/ 9 ,%>es
,date3 ,febru>y #bj1 #aiie
,ref];e3 ,subsec;n #ea7#a7 7al sec;n #dg
  & subsec;ns #ea7#b7 & 7#d7 (! ,9come
  ,tax ,act & subsec;n #bf7#h7 (! ,9come
  ,tax ,applic,n ,rules 7,,itar77

  ,at ! ,canada ,cu/oms & ,rev5ue ,ag5cy
7,,ccra71 we issue 9come tax 9t]pret,n
bullet9s 7,,it's7 9 ord] 6provide
te*nical 9t]pret,ns & posi;ns reg>d+
c]ta9 provi.ns 3ta9$ 9 9come tax law4
,due 6_! te*nical nature1 ,,it's >e us$
prim>ily 0\r /aff1 tax speciali/s1 & o!r
9dividuals :o h an 9t]e/ 9 tax matt]s4
,= ^? r1d]s :o pref] a less te*nical
explan,n (! law1 we (f] o!r public,ns1
s* z tax guides & pamphlets4
                                      #a
             ,,it-#aae;,r#b          a#a
  ,:ile ! -;ts 9 a "picul> p>agraph 9 an
,,it may relate 6provi.ns (! law 9 =ce
at ! "t !y 7 made1 s* -;ts >e n a
sub/itute =! law4 ,! r1d] %d1 "!=e1
3sid] s* -;ts 9 li<t (! relevant
provi.ns (! law 9 =ce =! "picul> tax,n
ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any
relevant am5d;ts 6^? provi.ns or
relevant c\rt deci.ns o3urr+ af ! date
on : ! -;ts 7 made4
  ,subject 6! abv1 an 9t]pret,n or
posi;n 3ta9$ 9 an ,,it g5],y applies z
(! date on : x 0 publi%$1 un.s o!rwise
specifi$4 ,if "! is a subsequ5t *ange 9
t 9t]pret,n or posi;n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= future assess;ts & reassess;ts4 ,if1
on ! o!r h&1 ! *ange is n fav\ra#
6taxpay]s1 x w norm,y 2 e6ective =!
curr5t & subsequ5t tax,n ye>s or =
transac;ns 5t]$ 96af ! date on : ! *ange
is publi%$4
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 an ,,it1 pl1se s5d !m to3           #b
             ,,it-#aae;,r#b          b#a
  ,manag]1 ,te*nical ,public,ns &
    ,projects ,sec;n
  ,9come ,tax ,rul+s ,directorate
  ,policy & ,legisl,n ,bran*
  ,canada ,cu/oms & ,rev5ue ,ag5cy
  ,ottawa ,,on ,k#a;,a #j;,l#e

                 ,3t5ts
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,3v]ti# ,prop]ties 7p>agraphs #a-d7
  ,id5tical ,prop]ties 7p>agraph #e7
  ,o!r ,bullet9s 7p>agraph #f7
,explan,n ( ,*anges

               ,applic,n
    
  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#aae;,r dat$ ,septemb]
#ae1 #aige4

                                      #c
                ,summ>y              c#a
    
  ,sec;n #ea sets \ ! rules 3c]n+ 3v]ti#
prop]ty4 ,subsec;n #ea7#a7 p]mits a
taxpay] 6ex*ange a 3v]ti# prop]ty issu$
0a corpor,n = %>es (! corpor,n on !
basis (a tax-free rollov]4 ,a 3v]ti#
prop]ty is capital prop]ty t is a %>e (!
corpor,n1 or a bond1 deb5ture1 or note
(! corpor,n t 3ta9s a 3v].n privilege4
,9 ! c\rse ( an ex*ange ( 3v]ti#
prop]ty1 a taxpay] may 2 5titl$ 6rcv a
frac;nal 9t]e/ 9 a %>e4 ,? bullet9
4cusses h[ a taxpay] may a3.t = ca% or
o!r non-%>e 3sid],n rcvd 9 lieu (a
frac;nal 9t]e/ 9 a %>e4
  ,sec;n #dg d1ls ) id5tical prop]ties
acquir$ af #aiga :ile subsec;n #bf7#h7 (
,,itar 4cusses s* prop]ties acquir$
g5],y 2f #aigb4 8,id5tical prop]ties0 >e
prop]ties t >e ! same 9 all mat]ial
respects4 ,v>i\s transac;ns may result 9
a taxpay] hav+ a frac;nal %>e t is an
9t]e/ 9 id5tical prop]ties4 ,? bullet9
4cusses ! 4posi;n ( s* a frac;nal     #d
             ,,it-#aae;,r#b          d#a
%>e ": "s (! id5tical prop]ties 7
acquir$ 2f #aigb & o!rs af #aiga4

          ,4cus.n & ,9t]pret,n
    
           ,3v]ti# ,prop]ties
            7p>agraphs #a-d7
    
#a4 ,subject 6p>agraph #b 2l1 = ex*anges
  o3urr+1 & reorganiz,ns -m5c+1 af
  ,decemb] #ba1 #aiib1 subsec;n #ea7#a7
  p]mits a taxpay] 6ex*ange 3v]ti#
--------------------------------------#b
  prop]ty issu$ 0a corpor,n = %>es ( "o
  or m classes ( capital /ock (! same
  corpor,n on ! basis (a tax-free
  rollov]1 t is1 ! adju/$ co/ base (!
  3v]ti# prop]ty 2comes ! adju/$ co/
  base (! %>es rcvd4 ,no 3sid],n o!r ?an
  %>es (! corpor,n may 2 rcvd =! 3v]ti#
  prop]ty4 8,3v]ti# prop]ty0 is capital
  prop]ty (a taxpay] t is a %>e (a
  corpor,n1 or a bond1 deb5ture1 or note
  (a corpor,n t 3ta9s a 3v].n         #e
             ,,it-#aae;,r#b          a#b
  privilege4 ,2f ,decemb] #bb1 #aiib1 a
  %>e1 6be a 3v]ti# prop]ty1 _h 63ta9 a
  3v].n privilege4 ,subsec;n #bdh7#a7
  def9es 8%>e0 9 "p1 6m1n 8a %>e or
  frac;n (a %>e (! capital /ock (a
  corpor,n04 ,not)/&+ ! 9clusive;s ( t
  def9i;n1 ? bullet9 4cusses 8%>es0 &
  8frac;ns ( %>es0 z if !y 7 di6]5t4
#b4 ,subsec;n #ea7#b7 d5ies ! tax-free
  rollov] "u subsec;n #ea7#a7 & re/ricts
  any capital loss ":1 z a result (!
  ex*ange ( 3v]ti# prop]ty (a taxpay] =
  %>es t h a fair m>ket value t is less
  ?an t (! 3v]ti# prop]ty1 a b5efit has
  be5 3f]r$ on a p]son relat$ 6!
  taxpay]4 ,subsec;n #ea7#d71 : applies
  6ex*anges o3urr+ & reorganiz,ns -m5c+
  af ,decemb] #ba1 #aiib1 provides t
  subsec;ns #ea7#a7 & 7#b7 d n apply ":
  sec;n #hf or subsec;n #he7#a7 or 7#b7
  apply4
#c4 ,! situ,n (t5 >ises 9 an ex*ange (
  3v]ti# prop]ty t a taxpay] 2comes
  5titl$ 6a frac;n (a %>e 2c (!       #f
             ,,it-#aae;,r#b          b#b
  "picul> 3v].n agree;t4 ,h["e1 mo/
  corpor,ns w n issue ^! frac;nal %>es4
  ,9 lieu (! frac;nal %>es1 ! agree;t w
  usu,y provide =! taxpay] 6rcv ca% or
  o!r non-%>e 3sid],n4 ,! applic,n (
  subsec;n #ea7#a7 g5],y w n 2 d5i$ 9 ^!
  circum/.es1 not)/&+ t ! subsec;n
  requires t no 3sid],n o!r ?an %>es 2
  rcvd =! 3v]ti# prop]ty4 ,9 a4i;n1 if !
  value (! ca% or o!r non-%>e 3sid],n
  rcvd 0a taxpay] 9 ? mann] does n exce$
  4#bjj1 ! taxpay] may ei calculate &
  report ! ga9 or loss on ! am.t rcvd 9
  lieu (! frac;n (a %>e1 or ignore t
  calcul,n & reduce1 0! am.t rcvd1 !
  adju/$ co/ base (! %>es rcvd4 ,": !
  value (! non-%>e 3sid],n rcvd 0a
  taxpay] exce$s 4#bjj1 ! taxpay] m/
  report ! ga9 or loss4 ,9 ei case1
  subsec;n #ea7#a7 may 2 utiliz$ =!
  3v]ti# prop]ty ex*ang$ = %>es4


                                      #g
             ,,it-#aae;,r#b          c#b
#d4 ,"o me?od ( calculat+ ! ga9 or loss
  on ! am.t rcvd 9 lieu (! frac;n (a %>e
  foll[s1 b any r1sona# me?od is
  a3epta#3

  ,assump;ns3
  7a7 ,a taxpay] holds #hj pref]r$ %>es1
    t h a total adju/$ co/ base ( 4#gbj4
    ,! %>es >e trad+ at 4#aa p] %>e at !
    date (! 3v].n4
  7b7 ,! pref]r$ %>es >e 3v]ti# 96-mon
    %>es on ! basis ( #.cb -mon %>es =
    "o pref]r$ %>e4
  7c7 ,9 lieu ( issu+ frac;nal %>es1 !
    corpor,n pays ca% bas$ on ! clos+
    m>ket price (a -mon %>e 7: is 4#ce47
    on ! "d 2f ! 3v].n4 ,?us ! taxpay]1
    :o is 5titl$ 6#be.f -mon %>es 7#.cb
    multipli$ 0#hj71 rcvs #be -mon %>es
    & 4#ba 9 ca% 7#.f multipli$ 04#ce74
  


                                      #h
             ,,it-#aae;,r#b          d#b
  ,calculat+ ! ga9 or loss on ! frac;n
  (! %>e3
,proce$s 4#ba.jj
,less3
  ,por;n (! ,adju/$ ,co/ ,base appli$
  frac;n ( -mon %>e = : ca% rcvd divid$
  0total numb] ( -mon %>es receiva# on
  3v].n 79clud+ any frac;n7 multipli$
  0adju/$ co/ base or

  #.f divid$ 0#be.f multipli$ 04#gbj
  equals #af.hh
,ga9 4#d.ab

          ,id5tical ,prop]ties
             7p>agraph #e7
    
#e4 ,= calculat+ a ga9 or loss ": a
  taxpay] 4poses ( "s id5tical prop]ty
  [n$ on ,decemb] #ca1 #aiga & "s
  prop]ty acquir$ subsequ5tly1 ! adju/$
  co/ base (! pre-#aigb prop]ty m/ 2
  calculat$ "u subsec;n #bf7#h7 (!
  ,,itar &! adju/$ co/ base (! po/-   #i
             ,,it-#aae;,r#b          e#b
  #aiga prop]ty is calculat$ "u sec;n
  #dg4 ,? cr1tes two sep>ate pools (
  id5tical prop]ty4 ,4posi;ns >e deem$
  6be f ! pre-#aigb pool until ! pool is
  exhau/$4 ,h["e1 = simplic;y1 ": a
  taxpay] has a pre-#aigb &a po/-#aiga
  pool ( id5tical %>es &! po/-#aiga pool
  3ta9s a frac;n (a %>e 7e4g41 a frac;n
  rcvd z a /ock divid5d71 ! 4posi;n (!
  frac;n may 2 3sid]$ 6be a 4posi;n f !
  po/-#aiga pool1 ev5 ?\< ! pre-#aigb
  pool 0 n exhau/$ at t "t4

      ,o!r ,bullet9s 7p>agraph #f7
    
#f4 ,de"p;tal practice appli$ 9 situ,ns
  9volv+ frac;nal 9t]e/s 9 %>es is
  4cuss$ 9 ! curr5t v].n ( ,,it-#dej1
  ,%>e = ,%>e ,ex*ange & 9 ! curr5t v].n
  ( ,,it-#dgd1 ,amalgam,ns ( ,canadian
  ,corpor,ns4


                                     #aj
          ,explan,n ( ,*anges         #c
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns t we h made z
a result ( *anges 6! law1 z well z
*anges reflect+ new or revis$ de"p;tal
9t]pret,ns4

                ,ov]view
    
  ,? bullet9 describes h[ a %>ehold] may
tr1t a frac;nal 9t]e/ 9 %>es ": !
%>ehold] is 5titl$ 6rcv a frac;n (a %>e
z a result ( an ex*ange ( 3v]ti#
prop]ty1 or ": ! %>ehold] has two pools
( id5tical prop]ty & 4poses (a frac;n (a
%>e f "o ( ^? pools4
  ,? bullet9 reflects am5d;ts 6! ,9come
,tax ,act result+ f ,s4,c4
#aihj-ha-hb-hc1 c4#dh 7=m]ly ,bill ;,c-
#ed71 & ,s4,c4 #aihe1 c4#de 7=m]ly ,bill
;,c-#gb7 & ,s4,c4 #aiid1 c4#ba       #aa
             ,,it-#aae;,r#b          a#c
7=m]ly ,bill ;,c-#bg7 & makes 9cid5tal
*anges 6improve cl>;y4 ,bill ;,c-#ei1
giv5 f/ r1d+ 9 ! ,h\se ( ,-mons on
,novemb] #bd1 #aiid1 does n a6ect any?+
t is sd 9 ? bullet94

      ,legislative & ,o!r ,*anges
    
  ,p>agraph #a4 ,af ,may #f1 #aigd1
sec;n #ea p]mitt$ a taxpay] 6ex*ange
3v]ti# prop]ty (a corpor,n 96%>es (!
same corpor,n1 provid$ t ! =m] prop]ty
3ta9$ a 3v].n privilege &! taxpay] rcvd
no 3sid],n except = %>es or frac;ns (
%>es4 ,! p>agraph reflects ! foll[+
*anges 6sec;n #ea3
    --,bill ;,c-#gb p]mits ! taxpay]
      6rcv %>es ( "o or m classes (!
      capital /ock (! corpor,n 9 ex*ange
      =! 3v]ti# prop]ty2 &
    --,bill ;,c-#bg1 applica# af
      ,decemb] #ba1 #aiib1 p]mits a %>e
      6be tr1t$ z a 3v]ti# prop]ty ev5
                                     #ab
             ,,it-#aae;,r#b          b#c
      ?\< "! is no 3v].n privilege
      atta*$ 6! %>e4
  ,new p>agraph #b describes two
provi.ns : d5y ! op],n ( subsec;n
#ea7#a73
    --,bill ;,c-#ed a4$ subsec;n #ea7#b7
      6d5y ! tax-free rollov] "u
      subsec;n #ea7#a7 ": a b5efit wd 2
      3f]r$ on a p]son relat$ 6! taxpay]
      ^: %>es >e 2+ ex*ang$2 &
    --,bill ;,c-#bg1 applica# 6ex*anges
      o3urr+ & reorganiz,ns -m5c+ af
      ,decemb] #ba1 #aiib1 a4$ subsec;n
      #ea7#d7 : provides t subsec;n
      #ea7#a7 or 7#b7 wd n apply ":
      sec;n #hf or subsec;ns #he7#a7 or
      7#b7 appli$4
  ,p>agraph #c 7=m] p>agraph #b7 has be5
exp&$ 6describe :y ! ,de"p;t has tak5 !
posi;n t x has 9 t p>agraph4
  ,p>agraph #f id5tifies o!r bullet9s t
4cuss frac;nal 9t]e/s 9 %>es4

                                     #ac