1993 External T.I. 9324515 F - Paid-Up Capital

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.

932451 XXXXXXXXXX  T. Harris (613) 957-2114

August 31, 1993

Dear Sir:

RE:  Deemed Dividend from XXXXXXXXXX

This is in response to your letter of April 13, 1993, regarding the above-noted subject, which was addressed to the Sudbury Taxation Centre. A copy of this letter was faxed to us on August 27, 1993 by your representative, XXXXXXXXXX

You have requested that we determine whether the paid-up capital used by XXXXXXXXXX to compute the amount of the deemed dividend arising from the redemption of certain Class A common shares of the company owned by you is accurate.

We regret that we are unable to make the determination requested. Information relating to the paid-up capital of its issued and outstanding shares is not included in the information which a corporate taxpayer is required to report to Revenue Canada, Customs, Excise and Taxation. Under Canada's self-assessment system of taxation, it is the responsibility of each corporation to maintain records relating to the paid-up capital of its various classes of issued shares and to report the amount of any deemed dividend arising from the redemption of any its shares on an information return which is provided to both the shareholder and to the Department. We, therefore, generally rely on the amount reported by the issuing corporation on the T5 slips which it prepares.

In those jurisdictions which do not allow par value shares, the paid-up capital of shares of a given class will generally reflect the average of the consideration paid to the corporation for all of the issued and outstanding shares of that class. Consequently, it is not unusual that the paid-up capital of shares owned by one shareholder is not equal to the purchase price paid by that shareholder to acquire those shares.

Should you have any concerns as to the accuracy of the paid-up capital used by XXXXXXXXXX to compute the amount of the deemed dividend resulting from the redemption of your shares, we would suggest that you contact the company to request a review of its calculations.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch