When implementing an estate freeze for a private corporation
using one of the rollover provisions of the Act, there can be
concern that the corporate attribution rule will apply. One way to
avoid this problem is to use a stock dividend freeze, but care must
be taken to deal with potential problem areas.
The corporate attribution rule in section 74.4 may apply when
one of the rollover provisions (section 51, 85, or 86) is used to
implement the exchange of common shares for fixed-value preferred
shares on a tax-deferred basis. When a shareholder transfers
property (for example, a share) to the corporation, and one of the
main purposes of the transfer is to reduce the shareholder's
income and to benefit "designated persons" (which for
purposes of section 74.4 includes spouses and minor children), the
attribution rule may apply to deem the shareholder to have received
the income. The rule does not apply in certain circumstances, the
most important of which is that the
