Sections 85, 86, 51

Question 1

Techniques to transition shares

Answer 1

1. Taxable succession planning
   - Taxable sale of shares to successor
   - Gift of shares S.69

2 . Estate freeze transactions (tax-deferred)

• Exchange of common shares for pref shares S.51
• Exchange of common shares for pref shares S.86
• Exchange of common shares for pref shares S.85
• High-low stock dividends

3. Use of new companies (tax-deferred)
   - Transfer of shares to Holdco S.85
   - Transfer of shares to Holdco S.85

Notes
- Partnership freezes are not recommended based on CRA commentary that 103(1) and 103(1.1) would likely apply if a partnership was used for a freeze (see 2004-0070001C6).