10 December 1993 External T.I. 9335245 F - Capital Dividend Election

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.

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Attention:  XXXXXXXXXX

Dear Sir:

RE:  Capital Dividend Election

We are writing in response to your letter of November 16, 1993 in which you have requested the Department's interpretation of subsection 83(2) of the Income Tax Act and section 2101 of the Income Tax Regulations.

Under subsection 83(2) of the Act, a private corporation can pay a capital dividend to its shareholders by electing in prescribed manner and prescribed form as set out in section 2101 of the Regulations. Paragraph 2101(b) of the Regulations provides that, where the directors of the corporation are legally entitled to administer the affairs of the corporation, a certified copy of their resolution authorizing the direction to be made shall be filed with the Minister. You have enclosed a form of Directors' Resolution (included here as Appendix I) and have asked us to confirm that it meets the requirements of paragraph 2101(b) of the Regulations and that no further documents are required with respect to that paragraph.

Our Comments:

We confirm that the Directors' Resolution in Appendix I would fully meet the requirements of paragraph 2101(b) of the Regulations and that no further documents would be required with respect to that paragraph.

The foregoing comments are given in accordance with the practice of providing non-binding opinions referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.

Yours truly,

for DirectorReorganizations and Foreign Division Rulings DirectorateLegislative and Intergovernmental Affairs Branch

APPENDIX I     RESOLUTION IN WRITING OF THE DIRECTORS OF (the "Corporation") XXXXXXXXXX

Issue Sheet

A corporation would like to pay a dividend to its shareholders and intends on electing under subsection 83(2) of the Act to deem the dividend to be a capital dividend. In order to be effective, the election must be accompanied by a Directors' Resolution authorizing the election to be made, pursuant to paragraph 2101(b) of the Regulations. The taxpayer's representative has attached a form of Directors' Resolution and has asked if it satisfies the relevant requirements. He also wants assurance that nothing else is required under paragraph 2101(b) of the Regulations such as minutes of the Directors' meeting.

Comments

A copy of the Resolution was faxed to John Pardy of Assessing. His group reviews these elections and he informed us that the Resolution did indeed meet the requirements of paragraph 2101(b) of the Regulations. We assured the representative that the Resolution was okay and that no other documents, such as the minutes of the Directors meeting, were necessary.