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.
December 9, 1993
Vancouver District Office Head Office
K.F. Slawson Rulings DirectorateChief of Audit (613) 957-8953
Attention:Ted Fitz-Clarke
933030
Meeting with XXXXXXXXXX
We are writing in response to your request of October 20, 1993 in which you asked us to respond to a question submitted by the XXXXXXXXXX The issue required additional consideration with the result that we could not meet your deadline. Nevertheless, as we have finalized our response we are sending the letter for your files. The question and answer are as follows:
Question: Where a trust receives a taxable dividend and intends to designate a portion of it to a preferred beneficiary pursuant to subsection 104(19) with respect to an amount thereof that will be the subject of a preferred beneficiary election under subsection 104(14), is the full amount of the dividend, grossed up in accordance with paragraph 82(1)(b), included in the accumulating income of the trust?
Answer: Yes. In computing the income of a trust, the full amount of a taxable dividend received would be grossed up in accordance with paragraph 82(1)(b). Similarly, the computation of accumulating income, within the meaning of paragraph 108(1)(a), would include the full amount of the dividend grossed up in accordance with paragraph 82(1)(b).
Accordingly, the deduction permitted to the trust under paragraph 104(12) and the inclusion in the beneficiary's income under paragraph 104(14) could include a portion of the grossed up amount of the taxable dividend. However, in establishing the character of the income to the preferred beneficiary and type of income not to be included in the income of the trust, paragraph 104(19) must deal with the taxable dividend not the grossed up amount.
For practical purposes, the effect of subsection 104(19) is to divide the taxable dividend amongst the appropriate tax returns such that on each the gross up of the taxable dividend would be applied as appropriate.
Acting Section Chief
Trusts Section
Manufacturing Industries, Partnerships
and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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