Chapter History S4-F5-C1, Share for Share Exchange


The purpose of this Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Update November 24, 2015

Minor changes have been made to improve the usability of the income tax folios:

  • the Summary section has been moved to the top of each folio chapter to be more immediately visible and helpful to readers;
  • the Application and Reference sections have been moved to the end of the Chapter which is more appropriate for administrative content of this nature.  However, these sections now appear in the Table of contents for easy access;
  • the statement that folios are only available in electronic format has been moved to the end of the Application section; and
  • the words “as promulgated under the Act” in connection with the Income Tax Regulations have been removed from the Application section, in the interest of using plain language.

The following specific changes have been made to this Chapter:

¶1.6(f) has been revised to include a reference to paragraph 85.1(2)(c).

¶1.11 has been revised to remove the word “reporting” in connection with the section 116 requirements to better reflect the legislation.

¶1.4, 1.11, 1.14 and 1.15 of the French Chapter only have been revised to improve readability.

Update June 12, 2015


Income Tax Folio S4-F5-C1, Share for Share Exchange, replaces and cancels Interpretation Bulletin IT-450R, Share for Share Exchange

In addition to consolidating the content of the former interpretation bulletin, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin are described below. Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended.

Legislative and other changes

¶1.2(a) (formerly included in ¶1 of IT-450R) has been revised to amend the Act reference from paragraph 89(1)(a) to subsection 89(1) to improve the accuracy of the reference. 

¶1.2(c) (formerly included in ¶1 of IT-450R) has been revised to reflect a legislative amendment to subsection 85.1(1) made by S.C. 1994, c.7, Sch. VIII, s.36(1), applicable to exchanges of shares occurring after December 20, 1991. The effect of this amendment is to require that an acquired corporation be a taxable Canadian corporation. As a result, the note included in ¶1 of IT-450R that described the proposed legislation to this effect, has been deleted. Additionally, the paragraph discussing share exchanges occurring before June 6, 1987 (formerly appearing at the end of ¶1 of IT-450R) has been deleted because it is outdated.

¶1.2(d) (formerly included in ¶1 of IT-450R) has been modified to be more comprehensive. 

¶1.3 has been added to clarify that subsection 85.1(1) applies to partnerships as reflected in previously published CRA guidance.

¶1.4 – 1.5 have been added to reflect new subsection 85.1(2.2) enacted in S.C. 2013, c. 34, s.221 (1).

¶1.6(c) (formerly included in ¶2(a) of IT-450R) reflects a legislative amendment to paragraph 85.1(2)(a) made by S.C. 1994, c. 21, s. 37(1), applicable to exchanges occurring after December 21, 1992. The amendment specifies that a right referred to in paragraph 251(5)(b) that is the right of the purchaser to acquire the exchanged shares is not applicable in determining whether persons are not dealing at arm’s length. Consequently, ¶3 of IT-450R and the note following ¶3 of IT-450R have been deleted. 

¶1.6(e) has been added to reflect the addition of paragraph 85.1(2)(e) by S.C. 2001, c. 21, s. 63(1) applicable to foreign share for share exchanges after 1995. This amendment provides that a tax-deferred rollover is not available in respect of a share for share exchange where the vendor is a foreign affiliate and includes any portion of the gain or loss realized from the exchange in computing its foreign accrual property income for the year. ¶1.6(g) and (h) have been added to reflect previously published CRA guidance on this form of non-qualifying consideration.

¶1.7 (formerly included in ¶6, ¶7 and ¶8 of IT-450R) has been revised to provide clarity. It has also been revised to remove the reference to a deemed dividend because subsection 84(3) would not apply in the context of a subsection 85.1(1) exchange.

¶1.10 (formerly included in ¶5 of IT-450R) has been revised to reflect a legislative amendment to paragraph 85.1(1)(a) made by S.C. 2010, c.12, s. 7(1), applicable after March 4, 2010. The amendment adds a 60 month sunset clause in respect of the deemed taxable Canadian property status of the particular shares.

¶1.11 has been added to highlight the compliance obligations associated with the disposition of taxable Canadian property by non-resident vendors and provide a link to more information.

¶1.12 – 1.13 (formerly included in ¶9 of IT-450R) have been revised slightly to add the words “on the exchange” after the words “gain or loss” to provide clarity and to be more consistent with the wording in the legislation. In addition, the portion of ¶9 of IT-450R dealing with share exchanges occurring before February 18, 1987 has been deleted because it is outdated.

¶1.14 (formerly included in ¶10 of IT-450R) has been revised by adding a sentence to summarize the impact of paragraph 85.1(2.1)(a). 

¶1.16 has been added to reflect previously published CRA guidance on determining paid-up capital.

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