Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether an individual can be considered a "dividend recipient" in applying the tests in subparagraph 55(3)(a) of the Act.
Position: No
Reasons: Dividend recipient means the corporation that is the recipient of the particular dividend in question. It does not include an individual.
2000-005153
XXXXXXXXXX Karen Power, CA
(613) 957-8953
Attention: XXXXXXXXXX
December 8, 2000
Dear XXXXXXXXXX:
Re: Definition of a Dividend Recipient for Purposes of
Paragraph 55(3)(a) of the Income Tax Act
We are writing in reply to your letter of October 13, 2000, wherein you requested our comments on whether an individual can be considered a "dividend recipient" in applying the tests in paragraph 55(3)(a) of the Income Tax Act (the "Act").
The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. The review of such situations is the responsibility of the Taxation Services Offices and it is the practice of the Canada Customs and Revenue Agency not to comment on such transactions when the identities of the taxpayers are not known. We can, however, provide you with the following general comments which we hope will be of assistance.
Subsection 55(2) is an anti-avoidance provision designed to prevent the use of the inter-corporate dividend exemption to unduly reduce a capital gain on a sale of shares. Paragraph 55(3)(a) provides an exemption from the application of subsection 55(2) for dividends received in certain related party transactions.
For purposes of paragraph 55(3)(a), an unrelated person is defined in paragraph 55(3.01)(a) of the Act to be a person to whom the dividend recipient is not related. In our view, based on the meaning of "dividend recipient" set out in paragraph 55(3)(a) of the Act, a dividend recipient means the corporation that is the recipient of the particular dividend in question. It does not include an individual.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice described in paragraph 22 of Information Circular 70-6R3.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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