Exceptions from Subsection 55(2) - CCH Canadian

Purpose of Subsection 55(2) —Example 2Shareholder• Vendorco transfers sellproperty to Purchaseco ontax-deferred rolloverVendorcoPrefsFMV 100ACB 0PUC 0UnrelatedPurchaseco• Purchaseco issuespreferred shares toVendorco• Purchaseco redeemspreferred shares• Deemed dividend onredemption rather thancapital gainKeep propertyS85 tax-deferredSell property• RESULT of deemeddividend was reduction ofcapital gain on preferredshares• No gain / income realized ontransfer of Sell Property© 2010 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is aSwiss entity with which the independent member firms of the KPMG network are affiliated 8