Subsection 110.6(8) denies the capital gain exemption for a gain on a share if insufficient dividends are paid on it and the share is not a “prescribed share”. An ordinary common share is a prescribed shares under Reg 6205(1). A “freeze share” is prescribed if it meets the requirements of Reg 6205(2).
The authors note that “freeze shares” would not be prescribed under Reg 6502(2) if a trust undertakes a freeze and then transfers the freeze shares to Mr X, a beneficiary of the trust, under subsection 107(2). The shares were not issued to Mr X as the freezor.
Stan Shadrin and Simon Cheung “Adverse Implications of a Freeze Transaction Because of Subsection 110.6(8)” Tax for the Owner-Manager 23:2 (April 2023)
