Issuing Shares for a Promissory Note

During the course of tax-driven reorganizations, it may be convenient or advantageous to issue corporate shares in exchange for a promissory note. It is particularly useful where a taxpayer desires to create paid-up capital (PUC) or cost basis (ACB) in shares without having to transfer cash. Although this practice is generally limited by corporate statutes, there are ways of making it work. This article examines the pit-falls and solutions to issuing shares for a promissory note. Reproduced with permission of the publisher LexisNexis Canada Inc. from Canadian Current Tax, Vol. 24, No. 8, May 2014.