{"id":982,"date":"2013-12-02T16:38:24","date_gmt":"2013-12-02T16:38:24","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=982"},"modified":"2025-02-12T13:31:02","modified_gmt":"2025-02-12T21:31:02","slug":"cra-confirms-its-position-on-price-adjustment-clauses","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2013\/12\/cra-confirms-its-position-on-price-adjustment-clauses\/","title":{"rendered":"CRA confirms its position on price adjustment clauses"},"content":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/12\/2013-050788.pdf\">2013-0507881E5<\/a>, the CRA usefully confirmed its view that a payment made pursuant to a valid price adjustment clause \u2013 in respect of preferred shares that were redeemed before the payment \u2013 is taxed as a dividend in the year of the payment.  In the course of asset transfers within a corporate group, it is common that preferred shares of the acquiring company be issued as consideration in order to access a rollover under s. 85(1).  Such preferred shares have a redemption amount that is typically set at a <em>bona fide<\/em> best estimate of the value of the property transferred, which is subject to adjustment if this value is later determined to be wrong (see Income Tax Folio S4F3\u00acC1, Price Adjustment Clauses). If the preferred shares are later redeemed, the subsequent adjustment may come as an additional payment to the former holder.  In 2013-0507881E5, the CRA considered a case where the preferred shares were issued in year 1 and redeemed in year 5.  A payment was made to the former holder (of the preferred shares) in year 7 pursuant to a valid price adjustment clause.  The CRA confirmed its position that such a payment would be taxed as a <em>dividend<\/em> to the former holder in the year of the payment (i.e., year 7), such that no penalties or interest would apply.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In <a href=\"http:\/\/thor.ca\/blog\/wp-content\/uploads\/2013\/12\/2013-050788.pdf\">2013-0507881E5<\/a>, the CRA usefully confirmed its view that a payment made pursuant to a valid price adjustment clause \u2013 in respect of preferred shares that were redeemed before the payment \u2013 is taxed as a dividend in the&hellip;<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[52],"tags":[],"class_list":["post-982","post","type-post","status-publish","format-standard","hentry","category-tax-blog-general"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/982","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=982"}],"version-history":[{"count":1,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/982\/revisions"}],"predecessor-version":[{"id":2736,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/982\/revisions\/2736"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=982"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=982"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=982"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}