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US Spin-offs and the CRA - what's taxable and what's not?

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  • Feb 26th, 2020 8:25 pm
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[OP]
Deal Guru
Jan 27, 2006
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Vancouver, BC

US Spin-offs and the CRA - what's taxable and what's not?

I own a large amount of McKesson Corporation (MCK on New York). Recently, they announced that they will be spinning off their holdings in Change Healthcare (CHNG on the NASDAQ) which they currently have a controlling interest to shareholders of MCK with a 7% premium (ie $100 of MCK is worth $107 of CHNG) for those MCK shareholders who want to tender their shares for the exchange offer. In the US, the transaction is considered tax-free according to MCK's regulatory filings - they have not made any mention of the tax consequences outside of the US.

Since this looks like a share for share exchange with a premium in terms of what I can find online for the CRA, my question is - am I right to say that it is? And if so, is the transaction taxable - ie deemed that I sold MCK and purchased CHNG, so that I will need to pay taxes on my sale of MCK stock? Or does this type of transaction falls into the exceptions as spelled out in section 85, so that the transaction is tax-free as they have ruled in the US?
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