Section 86, The Income Tax Act, 2000

(1) Where—a) a company cancels or redeems a share or acquires a share from a shareholder other than in the course of a complete liquidation by the company; and b) the shareholder retains other shares in the company following the redemption, cancellation or acquisition, the shareholder shall be treated as not having disposed of the share that was redeemed, cancelled or acquired by the company and the shareholder’s adjusted cost base in the share shall be added to the adjusted cost base of shares in the company retained by the shareholder on a pro rate basis; and the shareholder shall be treated as having received a dividend in the amount transferred in redemption, cancellation or acquisition of the share. (2) Where— a) a company cancels or redeems a share or acquires a share from a shareholder including in the course of a complete liquidation by the company; and b) the shareholder retains no other shares in the company following the redemption or cancellation, the proceeds derived by the shareholder shall be deemed not to be dividends. (3) If a company in the course of a complete liquidation distributes assets in specie to a shareholder that is a resident company— a) no gain or loss shall, for the purposes of this Act be recognised by the distributing company as a result of the disposal, and b) the shareholder's cost base in the distributed property shall be the shareholder’s cost base in the cancelled shares. (4) Where a shareholder to which. subsection (3) applies receives more than one asset in the course of a liquidation of a company in which it has shares, the proportion of the adjusted cost base of its shares that is attributed to an asset shall be the proportion of the market value of all assets received in respect of the liquidation that is attributable to the market value of the asset.