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: shareholder withdraws cash each month from his company. Withdrawals are intended to be dividends. At y/e, directors declare a dividiend paid to the shareholder equal to the amount of the withdrawals throughout the years. Interest benefit under 80.4(2) assessed?
Position:yes
Reasons:see para 14 of IT-421R2
960016
XXXXXXXXXX Sandra Short
Attention: XXXXXXXXXX
February 23, 1996
Dear Sirs:
Re: 80.4(2) of the Income Tax Act
This is in reply to your query of December 21,1995 which asks that we consider the following:
A shareholder withdraws cash each month from his company. These withdrawals are intended to be dividends. At the end of the company's taxation year, the corporate directors declare a dividend paid to the shareholder in the amount of the cash withdrawals throughout the year. This dividend declaration is evidenced by a corporate resolution dated on the last day of the company's taxation year and the individual shareholder includes the dividend in his personal taxable income in the calendar year in which the cash was received. You have asked whether
(a)an interest benefit under 80.4(2) of the Act would be assessed from the time the cash was withdrawn from the company to the date of the corporate resolution or
(b)no interest benefit would be assessed as the dividends would be considered to have been paid on the day that the cash was withdrawn from the company and therefore no amount would be owing from the shareholder at any point in time.
It is our view that an interest benefit would be required to be included in the shareholder's income by virtue of subsection 80.4(2) of the Act for that period in the year during which the shareholder remains indebted to the corporation. Paragraph 80.4(2)(d) makes reference to "...each such loan and debt for the period in the year during which it was outstanding...". We refer you to the comments in paragraph 14 of Interpretation Bulletin IT-421R2.
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
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996