Partway through its calendar taxation year, a family trust received a dividend from a family corporation, paid that dividend to a corporate beneficiary (also with a calendar year end) and in its return for that taxation year, made a s. 104(19) designation. CRA applied its published position (e.g., in 2020-0845821C6 F) that since (due to a sale of the dividend payor to a third party) the two corporations had ceased to be connected between the time of the dividend and the effective time of the s. 104(19) designation (the December 31 trust year end), the dividend was subject to Part IV tax.

A second situation was similar, except that a new taxation year of the corporate beneficiary started after the date of the payment of the dividend (on June 30, shortly preceding the dividend payer and beneficiary ceasing to be connected) and before the (December 31) effective date of the s. 104(19) designation by the trust, so that on no day in that taxation year of the corporate beneficiary was the dividend payer connected to it.

Webb JA confirmed that the determination of whether the corporate payor was connected with the corporate beneficiary was to be made at the end of the particular taxation year of the trust in which it received the dividend. Thus, since such connected status did not exist at the trust year-end, Part IV tax was payable in both cases.

In reaching this conclusion, Webb JA noted:

• Since the s. 104(19) designation “cannot be made before the end of the trust's taxation year, the last day of the trust's taxation year is the earliest date on which this designation could be made” and, indeed, “[i]t is only once the designation is made, and the corporate beneficiary is deemed to receive a dividend, that the determination of whether the beneficiary corporation is connected to the corporation that paid the dividend to the trust can be made”.
• Conversely, finding that the date the trust made the designation was the relevant date could lead to a conflict with the wording of s. 104(19), for example, if a trust with a December 31 year-end made a designation when it filed its tax return after December 31, that “would be after the taxation year of the corporate beneficiary in which the trust's taxation year ends”.

Thus, in light of these and other considerations, the only date for applying the connected test that seemed to “work” was the December 31 trust year end.

Neal Armstrong. Summary of Canada v. Vefghi Holding Corp, 2025 FCA 143 under s. 104(19).

Regarding a non-profit corporation operating a youth baseball league in Ontario which was paying fees to independent contractors for their services of officiating at the games, CRA noted that its administrative exception from the T4A slip requirement for services fees of less than $500 per year, and for services rendered to individuals by professionals or for repairs or maintenance of an individual’s principal residence, did not apply, so that T4As were required.

CRA indicated that the late-filing penalties under ss. 162(7.01) and (7.02) could apply cumulatively for failure to file the T4As; and also seemed to imply that the $2500 penalty under s. 162(7)(a) could apply (which seems incorrect – it does not apply if s. 162(7.01) or (7.02) applies).

Since the officials were residents, there would be no payor liability to pay their taxes.

Regarding the s. 238 offence, CRA stated:

While the broad wording of subsection 238(1) applies to a failure to file or make a return as and when required, the provincial courts require the CRA to have served the taxpayer with a Notice of Requirement under section 231.2, in respect of which the taxpayer failed to comply.

Neal Armstrong. Summaries of 17 November 2022 External T.I. 2022-0930451E5 under Reg. 200(1), s. 162(7.01) and s. 238(1).

We have translated a CRA interpretation released last week, a ruling released the previous week and a further 6 CRA interpretations released in April of 2000. Their descriptors and links appear below.

These are additions to our set of 3,284 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 25 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5^th of each month).

Mr. A wholly owned Opco, whose shares qualified as qualified small business corporation shares (QSBCS), and Holdco, which leased commercial property to Opco for use in its Canadian active business, so that the rents were deemed under s. 129(6) to be active business income. Mr. A disposed of the Opco shares to a holding company of his adult child (the purchaser). If this disposition satisfied the other requirements of s. 84.1(2.31), it nonetheless would not satisfy those rules if Holdco constituted a relevant group entity.

In finding that it was not, CRA indicated that Opco's assets could not be considered to be used in a business of Holdco nor, on the facts, did Opco hold shares or debt of Holdco or a debt payable by Holdco. Therefore, it could not be concluded that the business carried on by Holdco could be relevant in determining whether shares of Opco constituted QSBCS at the disposition time.

The same conclusion was reached more briefly in 2024-1036641E5 F.

Neal Armstrong. Summary of 6 May 2025 External T.I. 2024-1010641E5 F under s. 84.1(2.31)(c)(iii).