Principal Issues: (1) Is technical interpretation F9906255 still valid? (2) The situation in technical interpretation F9906255 was one where: Gesco received from Canco (its subsidiary) a taxable dividend of $2 M to which subsection 55(2) applied, Gesco had safe income on hand of $300,000 in respect of its shares of Canco and Canco received a dividend refund of $25,000 on total dividends paid of $2.1M. The second issue raised is what would be Gesco's Part IV tax if in this situation Canco's dividend refund instead of $25,000 was $400,000, and, what would be the part of the dividend to which subsection 55(2)(a) would apply?
Position: (1) No. (2) Part IV tax would be approximately $380,950 and subsection 55(2)(a) would apply to $857,143.
Reasons: (1) and (2) Because of the approach adopted by the Tax Court of Canada in 943963 Ontario inc. v. HMQ (99 DTC 802).