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:
Will a dividend deemed under paragraph 84.1(1)(b) of the Act be considered a "taxable dividend" for purposes of subparagraph 129(1)(a)(i) of the Act?
Position: Yes.
Reasons:
Paragraph 84.1(1)(b) applies for the purposes of the Act and subsection 89(1) of the Act defines "taxable dividend" to include a "dividend".
972985
XXXXXXXXXX Jim Wilson
Attention: XXXXXXXXXX
January 19, 1998
Dear Sirs:
Re: Dividend Refunds Arising from Deemed Dividends
We are writing in response to your letter of November 5, 1997 wherein you requested our comments with respect to the application of paragraph 129(1)(a) of the Income Tax Act (the "Act"). More specifically, you have described a situation where, as a consequence of a non-arm's length sale of shares by an individual to a corporation resident in Canada ("Holdco"), the provisions of paragraph 84.1(1)(b) of the Act applied to deem a dividend to have been paid to the individual by Holdco. Since Holdco had refundable dividend tax on hand, as that term is defined in subsection 129(3) of the Act, at the end of the year in which the dividend was deemed to have been paid, you wish to know if Holdco would be entitled to a dividend refund.
Pursuant to subsection 89(1) of the Act, a "taxable dividend" is defined to include a “dividend”. Dividends deemed to have been paid "for the purposes of this Act", such as the case with paragraph 84.1(1)(b) of the Act, would constitute a "taxable dividend paid by the corporation on shares of its capital stock in the year" for purposes of subparagraph 129(1)(a)(i) of the Act.
The foregoing comments represent our general views with respect to the subject matter of your letter. As indicated in paragraph 22 of Information Circular 70-6R3, this is not an advance income tax ruling and is therefore not binding on Revenue Canada.
We trust that our comments will be of assistance.
Yours truly,
for Director
Reorganizations and International 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, 1998
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, 1998