3 December 2015 External T.I. 2015-0613761E5 F - Capital Dividend Account -- translation
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3 December 2015 T.I. 2015-0613761E5 F - Capital Dividend Account-translation
Principal Issues: Whether the full amount of the capital gain realized by a corporation as a result of an ecological gift is added to the corporation’s capital dividend account?
Position: Yes.
Reasons: Wording of the Act.
XXXXXXXXXX 2015-061376
M. Séguin
December 3, 2015
Dear Madam,
Subject: Donation of ecologically sensitive land and capital dividend account
This is in response to your email of October 16, 2015 in which you requested our views regarding the application of the definition of capital dividend account under subsection 89(1) to a corporation making a donation of ecologically sensitive land for which it can obtain a deduction under paragraph 110.1(1)(d).
Unless otherwise specified, all statutory references herein are to provisions or subprovisions of the Income Tax Act (hereinafter, the “Act”).
This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation but is intended to assist you in making that determination. The income tax treatment of transactions will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, “Advance Income Tax Rulings”.
Your question
You requested confrimation by the Canada Revenue Agency that where a corporation makes a gift of property described in paragraph 110.1(1)(d), the full amount of the capital gain realized on the disposition of such property would be added to the capital dividend account of that corporation.
Our Comments
A corporation disposing of a property described in paragraph 110.1(1)(d) which is a capital property of the corporation, will realize a capital gain under subsection 39(1). Furthermore, subparagraph 38(a.2)(i) provides that the taxable capital gain resulting from the disposition of such property to a qualified donee described in subsection 149.1(1) (other than a private foundation) is equal to zero. Furthermore, by virtue of the definition of capital dividend account provided in subsection 89(1), the capital gain resulting from such a disposition would be included by virtue of clause (a)(i)(A) of the definition as there would be no amount of taxable capital gain as described by clause (a)(i)(B) taking subparagraph 38(a.2)(i) into account. Accordingly, the full amount of the capital gain resulting from the disposition would be included in the capital dividend account of the corporation.
We trust that these comments will be of assistance.
Stéphane Charette, CPA, CMA, MBA
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch
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