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.
5-960062
XXXXXXXXXXJ. Teixeira
(613) 957-8953
Attention: XXXXXXXXXX
January 19, 1996
Dear Sirs:
Re: Capital Dividend Account
This is in reply to your letter of December 18, 1995 wherein you requested an interpretation of the Income Tax Act (the "Act") in the situation described in your letter.
The situation outlined in your letter appears to involve completed transactions and identifiable taxpayers. As mentioned in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, it is a district Tax Service Office that will assist in determining the tax treatment of such transactions. However, we are prepared to provide you with the following general comments.
The rules for determining the balance in the capital dividend account are provided in subsection 89(1) of the Act. The amount is computed on a cumulative basis for a particular period. This period commences on the first day of the first taxation year commencing after the time the corporation last became a private corporation and ending after 1971, and ends immediately before the balance in the capital dividend account is to be determined. The reassessment of the capital dividend account will not be subject to the normal reassessment period of 3 or 4 years under section 152 of the Act until an election pursuant to subsection 83(2) of the Act to pay a capital dividend has been made. Therefore, the Department may adjust the amount of a capital gain, which arose in a year outside the normal reassessment period, for the purposes of computing the capital dividend account in respect of a dividend paid within the normal reassessment period.
The foregoing comments are not rulings and, in accordance with the practice referred to in Information Circular 70-6R2, are not binding on Revenue Canada.
Yours truly,
for Director
Reorganization and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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