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.
Principal Issues:
An individual owns all the issued shares of a Canadian-controlled private corporation as defined in subsection 125(7) of the Act. Within a month following the end of its fiscal period, the corporation declares a dividend which is payable fourteen months after the end of that fiscal period. The dividend will be equal to three times the corporation's refundable dividend tax on hand, as defined in subsection 129(3) of the Act, at the end of the fiscal period in which the dividend was declared. Within three months following the declaration of the dividend, the individual dies. The issue is whether the dividend can be considered to be a right or thing for the purposes of subsection 70(2) of the Act.
Position:
The dividend would not constitute a right or thing.
Reasons:
The determination of the dividend involves income realization (or losses) during a period of time that is subsequent to the death of the individual.
952603
XXXXXXXXXX M. Eisner
Attention: XXXXXXXXXX
December 21, 1995
Dear Sirs:
Re: Rights and Things
This is in reply to your letter of September 25, 1995 concerning dividends and "rights or things" for the purposes of subsection 70(2) of the Income Tax Act (the Act).
The situation which has been set out in your letter appears to relate to an actual set of circumstances. Confirmation of the tax consequences of proposed transactions will only be provided by this Directorate in response to a request for an advance income tax ruling following a review of the relevant facts and documentation. The procedures for requesting an advance income tax ruling are set out in Information Circular 70-6R2 and the related Special Release dated September 30, 1992. On the other hand, if the transactions have already occurred, you may wish to submit the relevant information to your local Tax Services office. We are, however, prepared to provide you with the following general comments.
You are concerned with the type of situation where an individual owns all the issued shares of a Canadian-controlled private corporation as defined in subsection 125(7) of the Act. Within a month following the end of its fiscal period, the corporation declares a dividend which is payable fourteen months after the end of that fiscal period. The dividend will be equal to three times the corporation's refundable dividend tax on hand, as defined in subsection 129(3) of the Act, at the end of the fiscal period in which the dividend was declared. Within three months following the declaration of the dividend, the individual dies. The concern is whether the dividend can be considered to be a right or thing for the purposes of subsection 70(2) of the Act.
In the above situation, the determination of the refundable dividend tax on hand would involve income realization (or losses) during a period of time that is subsequent to the death of the individual. As a consequence, it is our view that the dividend declared would not constitute a right or thing in respect of the individual pursuant to subsection 70(2) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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