CRA confirms that contributed surplus will cease to be recognized for thin cap purposes if the contributor ceases to be a specified non-resident shareholder
We have published our summaries (provided in more abbreviated form than prior years) of the oral responses given by CRA at the May 15, 2019 IFA Roundtable together with the written questions posed. Next up, we will summarize the oral responses of Ted Cook and Stephanie Smith to some of the questions posed to them at the IFA Finance Roundtable.
Q.1 of the CRA Roundtable confirmed the 1995 CRA position that, in order for contributed surplus to be recognized for thin cap purposes, the contributor must still be a specified non-resident shareholder at the time the equity amount computation is made for the year, i.e., at the end of that year. CRA further indicated that, in order to be included in the determination of the monthly average under s. (a)(ii) of the “equity amount” definition, the contributed surplus must also have been contributed by a specified non-resident shareholder by the beginning of the month for which that contributed surplus amount is taken into account in that computation.