The Taxation of Corporate Reorganizations; Foreign Share Exchanges and Foreign Spinoffs

The Department of Finance continues to expand the provisions of the Income Tax Act (Canada) to permit certain tax-deferred transactions. The new rules governing foreign share exchanges expand on existing rollover provisions that apply where shares of one taxable Canadian corporation are exchanged for shares of another. Similarly, the new foreign spinoff rules expand on existing rules applicable to domestic spinoffs but may have more limited practical application because of the significant compliance requirements imposed. This article discusses the tax implications of the application of these new rules.