Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
whether subsection 129(1.2) applies when shares moved within related corporate group
Position:
yes; if purpose test is met
Reasons:
no exemption provided for such transactions
XXXXXXXXXX 962932
Attention: XXXXXXXXXX
January 17, 1997
Dear Sirs:
This is in reply to your letter dated August 9, 1996 in which you requested our views on the application of subsection 129(1.2) of the Income Tax Act (the "Act") to an inter-corporate dividend in the situation where the purpose test in subsection 129(1.2) of the Act has been met but you believe that the series of transactions does not offend the intent of the provision as outlined in the Explanatory Notes to Draft Legislation and Regulations Relating to Income Tax Reform issued in April of 1988.
In our view the provisions of subsection 129(1.2) of the Act will apply to a dividend in any situation where "one of the main purposes" of acquiring a share and paying a dividend on that share is to enable a corporation to obtain a dividend refund. The Department has not adopted any administrative position with respect to transactions undertaken to shift refundable dividend tax on hand within a related corporate group.
These comments are provided in accordance with the guidelines set out in paragraph 22 of Information Circular 70-6R3.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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.../cont'd
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