CRA confirms that where a private corporation has immaculately-conceived shares of two series, capital dividends can be paid on only one series

CRA confirmed that since s. 248(6) requires a series of shares to be treated as a separate class, a capital dividend could be paid by a private corporation to the holders of only one of the series of shares of a class. Before asking about this, the questioner had commented that the payment of capital dividends only to taxable shareholders of a private company and not to its tax-exempt shareholders, can also be avoided by redemption transactions targeted to the taxable shareholders. CRA, in its response, added:

[I]f it were the case that certain reorganizations or conversions of shares carried out through a transaction, or as part of a series of transactions, one of the main purposes of which is to enable shareholders to receive capital dividends, then the application of subsection 83(2.1) should be considered.

Neal Armstrong. Summary of 7 October 2020 APFF Roundtable Q. 7, 2020-0852191C6 F under s. 83(2).