Post-butterfly dispositions gone wrong

The authors note a number of significant issues with 55(3.1)(c):

  1. What is a series of transactions? (55(3.1)(c)(i))
  2. What is considered the ordinary course of business? (subclause 55(3.1)(c)(i)(A)(I))
  3. How is the 10% allowable threshhold determined? (pre- and postamble to 55(3.1)(c) and clause 55(3.1)(c)(ii)(B)) The difficulty is that the 10% test applies to the fair market value of sold property as it changes throughout the series after the butterfly as a percentage of the fair market value of all property at the time of the butterfly.

David Carolin and Manu Kakkar “Problematic Post-Butterfly Transferee Corporation Dispositions Involving Paragraph 55(3.1)(c): Part I” 22:2 Tax for the Owner-Manager (April 2022)

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