CRA appears to indicate that QSBC purification dividends may not engage s. 55(2.1)(b)
26 November 2017 - 3:53pm
CRA confirmed its position that:
- Where dividends were paid to purify a corporation for qualified small business corporation share purposes, it would be necessary under s. 55(2.1)(b) for the taxpayer to establish as a factual matter that the dividends had no purpose of reducing the gain on the shares or increasing the cost of property to the dividend recipient. The way in which the answer was articulated seemed to imply that regular annual dividends to distribute excess cash would be OK..
- Purpose for s. 55(2.1)(b) purposes is to be determined objectively (as articulated in Ludco) - rather than on the basis primarily of the taxpayer’s testimony as to its subjective intent.
Neal Armstrong. Summary of November 2017 CTF Annual Conference Roundtable, Q.3 under s. 55(2.1)(b).