Here is an example of the rule’s operation:

An individual (X) wholly-owns Holdco, (with a December 31 year end), which wholly-owns Investco (with a November 30 year-end). In its November 30, 2026 taxation year, Investco earns $100,000 of rental income, resulting in $30,667 being added to its non-eligible refundable dividend tax on hand (NERDTOH) balance. On November 30, 2026, it pays an $80,000 non-eligible taxable dividend to Holdco. On March 31, 2027, Holdco pays an $80,000 taxable dividend to X and utilizes its GRIP balance to designate $30,000 of that amount as an eligible dividend. Both Investco and Holdco have balance-due dates (BDDs) two months after their year-ends.

S. 129(1.3) denies Investco’s November 30, 2026, RDTOH refund because the payee, Holdco, is an affiliated private corporation with a BDD after Investco's BDD. However, the $80,000 taxable dividend paid by Holdco on March 31, 2027, will allow Investco to recover its “suspended” $30,667 NERDTOH in that subsequent year.

S. 129(1.32) does not distinguish between an eligible and non-eligible taxable dividend paid by the payee, so that this NERDTOH refund occurs even though Holdco's dividend is partly an eligible dividend – so that there is a more favourable result than if no “suspension” had occurred.

Untoward consequences include:

• A suspended dividend appears to be permanently forfeited if any taxpayer other than the payer relies on a dividend paid by the payee to obtain an RDTOH refund. For example, if Holdco received a $100 ERDTOH refund for its December 31, 2027, taxation year because it paid the $80,000 taxable dividend to X on March 31, 2027, this seemingly would permanently disqualify Investco's entire $80,000 “suspended” dividend from generating a future refund.
• If the dividend payer corporation experiences a loss restriction event after its dividend has been suspended, s. 129(1.32)(a)(i) prevents any subsequent de-suspension.
• In light of Vefghi, where the payer corporation and the beneficiary corporation have aligned but non-calendar year-ends, dividend suspension may still apply by virtue of the dividend being recognized in the beneficiary's subsequent taxation year.

Neal Armstrong. Summary of Kenneth Keung and Taylor Greening, “Suspended dividend and denied RDTOH refund under new subsection 129(1.3),” Tax for the Owner-Manager, Vol. 26, No. 1, January 2026, p. 2 under s. 129(1.3).

We have translated a further 6 CRA interpretations released in December of 1999. Their descriptors and links appear below.

These are additions to our set of 3,448 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5^th of each month).

While auditing the 2013 and 2014 taxation years of the taxpayer, CRA repeatedly asked for supporting accounting documentation, to no avail. It then issued a requirement to RBC for the taxpayer’s bank statements, and used them to perform a bank deposit analysis. It then reassessed the taxpayer pursuant to s. 152(7), based on the results of that analysis by inter alia adding unreported revenue of $1.8 million and $4.6 million for the 2013 and 2014 taxation years, respectively.

Before finding that the bank deposit analysis as performed was reliable and not fundamentally flawed, and largely affirming the reassessments insofar as they related to understated revenue, Derksen J stated (at para. 28):

[S.] 152(7) does not require that the taxpayer’s records be inadequate before the Minister can rely on an alternative assessment technique. Thus, the Court does not have to be satisfied that it was necessary for the Minister to use an alternative assessment technique. The Minister can use an alternative assessment technique at any time regardless of the state of the taxpayer’s records … .

Gross negligence penalties were also sustained, given that it should have been evident that the bookkeeper was not able to handle the workload.

Neal Armstrong. Summaries of Premier Fasteners Inc. v. The King, 2026 TCC 2 under s. 152(7), s. 163(2) and s. 261(1) – relevant spot rate.

Ms. Hsia, a Canadian citizen, and her fiancé, Mr. Chuang, a foreign national, bought a residential property in a “specified area” (i.e., subject to the foreign buyer’s tax) of B.C. Mr. Chuang contributed 40% of the purchase price but registered a 5% interest on title, while Ms. Hsia registered the remaining 95% interest and her mother contributed 60% of the purchase price.

The additional transfer tax (“ATT”) imposed pursuant to the Property Transfer Tax Act (B.C.) (the “PTTA”) was paid based on 5% of the declared fair market value of the property. The Chambers Judge concluded that, by operation of law (i.e., resulting trust), Ms. Hsia held a substantial portion of her registered 95% interest in trust for Mr. Chuang.

On this basis, Fleming, J.A. concluded that ATT had been correctly assessed on the FMV of the property. In particular:

• Ms. Hsia was a “taxable trustee” under the s. 2.01 definition, i.e., although she was not a foreign entity herself, she was the trustee of a resulting trust for a “foreign entity” (Mr. Chuang), who held a beneficial interest in the residential property to which the transaction related; and
• accordingly, s. 2.02(5)(a) applied, which provided that the ATT was to be calculated on the (total) transaction FMV where each transferee was a foreign entity or a taxable trustee.

Fleming, J.A., indicated that thus the “legislature expressly contemplates a Canadian transferee being liable for the additional transfer tax as a taxable trustee”, i.e., “the definition of a ‘taxable trustee’ captures both a foreign entity and a Canadian entity holding some interest in property in trust for a foreign entity”.

Neal Armstrong. Summary of Chuang v. British Columbia, 2026 BCCA 10 under Property Transfer Tax Act (B.C.), s. 2.02(5)(a).