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.
Principal Issues: Whether there is another way of calculating income by using the actual amount of dividends received, not the gross-up amount.
Position: No
Reasons: There is no discretion to calculate income without the gross-up factor.
September 13, 2012
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence of July 27, 2012, about the gross-up on eligible dividends from taxable Canadian corporations. Mrs. Linda Lizotte-MacPherson, Commissioner of the Canada Revenue Agency (CRA), also received a copy.
You mention that as a senior, you receive a pension under the Old Age Security Act and the Canada Pension Plan. You also receive eligible dividends and are concerned that the 41% gross-up factor has an adverse effect on the clawback of the old age security benefits and on certain credits and amounts. While you understand that the gross-up factor is a necessary part of determining the dividend tax credit, you want to know if there is another way of calculating income by using the actual amount of dividends received.
Please note that there is no discretion to calculate income without the gross-up factor. The Income Tax Act states that the gross-up factor on eligible dividends must be included when calculating income. The CRA is responsible for administering the tax system and applying the current tax legislation as enacted by Parliament, while the Department of Finance Canada is responsible for developing and evaluating federal income tax policy and amending the income tax legislation. I am therefore sending a copy of our correspondence to the Honourable James M. Flaherty, Minister of Finance, for his consideration.
I trust that the information I have provided clarifies the CRA’s position on this matter.
Yours sincerely,
Gail Shea, P.C., M.P.
c.c.: The Honourable James M. Flaherty‚ P.C.‚ M.P.
Minister of Finance
House of Commons
Ottawa ON K1A 0A6
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