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.
| 24(1) |
903316 |
| |
S. Leung |
| |
(613) 957-2116 |
19(1)
December 19, 1990
Dear Sirs:
Re: Paragraph 55(3)(a) of the Income Tax Act (the "Act")
We are writing further to our letter of March 19, 1990 (file # 5-9293) (the "Letter") which was issued in response to your letter of December 11, 1989 relating to the application of paragraph 55(3)(a) of the Act to a dividend arising in the course of a divorce settlement.
We wish to inform you that we have recently reconsidered our position with regards to the application of subsection 55(3)(a) of the Act to situations involving a divisive reorganization as part of a matrimonial settlement in which the divorce will occur as the final step in the series of transactions.
As a result of our review we are now of the opinion that the arm's length test, referred to in subparagraphs 55(3)(a)(i) and (ii) of the Act, is to be applied at the time such disposition or increase in interest occurs with the result that the provisions of subsection 55(3)(a) would normally apply to a series of transactions that ends with a divorce.
It should, however, be noted that in the event that a spouse who receives property as part of a matrimonial settlement, to which subsection 55(3)(a) might otherwise apply, subsequently disposes of property to a person who deals at arm's length with the dividend recipient or such an arm's length person acquires an increased interest in a corporation and that disposition or increase in interest forms part of the same series of transactions or events within the definition of subsection 248(10), then the provisions of subsection 55(3)(a) will not apply to the dividends received by the corporation.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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