RE:RE:Tax Accountant by trade - here is your responseSection 85 of ITA only works when you receive preferred shares on the exchange.
I will show you as an example:
If I have land that I bought for $ 100,000 and it is worth $ 500,00 I may wish to transfer it to my company tax free.
If I receive common shares from the company for my land, then the common shares (which is identical to currency) is done at $ 500,000 (no choice) and, I am stuck with a a capital gain.
However I ask that the company to give me preferred shares that are issued at a $ 100,000 value (its market value) but that it contains a redemption clause of $ 500,000. In this case I can rollover land at $ 100,000 and, received preferred shares with market value of $ 100,000.
BUT........my land is worth $ 500,000 so I still want my money bacj eventually. With preferred shares I have this choice as it contains this clause. So I demand that in 2 years that the company pay me back $ 500,000 by redeeming my preferred shares. The company pays me $ 500,000 of which $ 400,000 (my gain) would be considered a taxable dividend. The other $ 100,000 is my cost.
This play with the shares can only be done with PREFERRED SHARES, it cannot be done with common shares as common shares do not contain a redemption clause, it is like a cash transaction. You cannot dilute or reduce the cash component of the common shares.
Stocks trade on the market at its value, we never hear of common shares trading at a price but redeemable at a higher price.
The link below explains the intrinsics of a butterfly operation and that is not the case with RECO ROE buyout.
https://bergerlaw.ca/the-butterfly-transaction/
mpo