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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
SUBJECT: STOCK SPLIT AND TAXABLE PREFERRED SHARE SECTION:
248(l)(E) of taxable preferred share]
XXX 5-920337
G. Martineau
(613) 957-8953
Attention: XXX
April 1, 1992
Dear Sir/Madam:
Re: Interpretation of the definition of
"Taxable Preferred Share" in Subsection
248(1) of the Income Tax Act (the "Act"
This is in reply to your letter dated January 27, 1992, whereby you requested our views as to whether a stock split would not be considered a share issue at the time of the split for purposes of the definition of Taxable Preferred Shares in subsection 248(1) of the Act, and would be considered a modification of the outstanding shares for the purposes of paragraph 248(l)(e) of the said definition.
The situation outlined in your letter appears to involve completed transactions with identifiable taxpayers. As indicated in Information Circular 70-6R2, the district offives consider requests for written opinions on completed transactions. As a consequence, we may only offer you the following general comments that are not advance rulings and are not binding on the Department.
It is our view that a stock split as described in IT-65, Stock Splits and Consolidations, would not be considered to be an issuance of shares for purposes of paragraphs 248(l)(a) and (b) of the definition of Taxable Preferred Share. Furthermore, the status of a share would not generally change where there is a corresponding proportionate decrease in the dividend entitlement due to the stock split.
The above comments, as mentionned above, are an expression of opinion only and are not binding on the Department; nevertheless we hope this will be of assistance.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
ISSUE SHEET
File 5-920337
G. Martineau
Issues
The Department took the position that a stock split which does not result in any increase in the appropriate stated capital is not a share issue for the purposes of paragraph 110.6(14)(f) of the Act.
Mr. Bryan Bryson, from Current Amendments, opined that, from a policy point of view, a corresponding decrease in the dividend entitlement due to a stock split should not be considered a modification of the outstanding shares for the purposes of paragraph 248 (1) (e) of the definition of taxable preferred share.
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