In an ITA 86 exchange of shares in a reorganization, if the transferor receives shares with a fair market value that is greater than the fair market value of the shares given up, it may be considered a gift to a related party.

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In an ITA 86 exchange, the focus is on the tax-deferred rollover of shares in a corporate reorganization, not on the characterization of the transaction as a gift. The difference in fair market value does not automatically imply a gift; it's about the continuity of investment and deferral of capital gains.

In an ITA 86 Exchange of Shares in a Reorganization