Reversing position, CRA recognizes that an MRPS redemption premium was proceeds rather than dividend

Luxembourg accommodates the issuance of mandatory redeemable preferred shares ("MRPS"), which are treated as debt for Luxembourg interest-deduction purposes but are shares under Luxembourg corporate law. In 2012-0439741I7, CRA indicated that the premium received on a MRPS redemption was a dividend to the Canadian holder on ordinary principles (i.e., even before applying s. 90(2)).

CRA has now reversed this position (and removed this internal interpretation from its database), stating: "In the absence of an election under subsection 93(1)… redemption proceeds are treated as proceeds of disposition."

Neal Armstrong. Summary of 25 August 2014 T.I. 2014-0528361E5 under s. 90(1).