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 dividends paid under a dividend reinvestment plan are dividends received in the form of shares or other securities for purposes of subparagraph 130(3)(a)(viii).
Position: No, unless terms of plan provide for payment of dividends in kind.
Reasons: 130(3)(a)(viii) only provides for a deduction of dividends in-kind and not shares acquired with the proceeds of the dividend.
XXXXXXXXXX 982246
Attention: XXXXXXXXXX
December 10, 1998
Dear Sirs:
Re: Investment Corporations
This is in reply to your letter of August 25, 1998 concerning whether for purposes of subparagraph 130(3)(a)(viii) of the Income Tax Act ("Act") the words "less any dividends or interest received by it in the form of shares, bonds or other securities that had not been sold before the end of the year" would include dividends received under a dividend or stock dividend reinvestment plan.
While this determination can only be made with reference to the terms of the particular dividend reinvestment plan unless the corporation that has declared the dividend actually pays the dividend in kind it is our view that the dividends paid, which under the plan are used to acquire additional shares of the paying corporation, would not be dividends received in the form of shares, bonds or other securities for purposes of subparagraph 130(3)(a)(viii) of the Act.
While we hope the foregoing comments are useful they are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996 and are not binding on the Department in respect of any particular situation.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Income Tax Rulings and
Interpretations Directorate
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