Principal Issues: (1) In a given situation, where two corporate shareholders (ABCco and DEFco) own equally a third corporation (SRco), the total amount of SRco's variable A of the 2006 GRIP Addition, per subsection 89(7) , is $504,000; in 2002, SRco paid a $400,000 taxable dividend to ABCco, and in 2004, a $400,000 taxable dividend to DEFco, whether the amount under paragraph c) of variable A for each of ABCco and DEFco should be $252,000. (2) In another given situation, where two sister corporations (ABCco and DEFco) are connected to each other, the total amount of ABCco's variable A of the 2006 GRIP Addition is $504,000; in 2002, shares of ABCco owned by DEFco and shares of DEFco owned by ABCco are cross redeemed resulting in two $800,000 taxable dividends, whether the amount of the 2006 GRIP Addition for ABCco and DEFco should be $208,000 and $0, respectively.
Position: (1) Yes. (2)
Reasons: (1) The amount of $504,000 should be apportioned between ABCco and DEFco proportionately to the dividends they received from SRco between 2001 and 2005. (2) ABCco's and DEFco's 2006 GRIP Addition should be $504,000 and $0, respectively as demonstrated in Tables 1 and 2 in this document.