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: Does deemed gain under 55(2)(c) occur at time of payment of dividend? Does addition to CDA of such gain occur at time of payment of dividend?
Position: Yes. Yes.
Reasons: The law.
2017 CTF Annual Conference
Question 4: Timing of deemed gain under 55(2)
Where subsection 55(2) applies to a dividend that is not received on a redemption, acquisition or cancellation of a share to which subsection 84(2) or (3) applies, the dividend recipient is deemed to have a gain under paragraph 55(2)(c), for the year in which the dividend was received from the disposition of a capital property.
Does the deemed gain occur at the time of the payment of the dividend?
Does the addition to the capital dividend account (“CDA”) occur at the time of the payment of the dividend?
In document 2011-0412131C6, the CRA indicated that the CDA addition that is caused by the application of former paragraph 55(2)(c) can only be available for distribution as a capital dividend in the taxation year following the year in which the gain was included in income by virtue of subsection 55(2).
In light of the amended wording in current paragraph 55(2)(c) and our understanding of the tax policy of current subsection 55(2), the CRA is of the view that the amount deemed to be a gain under paragraph 55(2)(c) is deemed to be realized on a disposition of a capital property at the time of the payment of the dividend for purposes of inclusion in income and the definition of “capital dividend account” in subsection 89(1).
November 21, 2017
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2017
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2017