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.
XXXXXXXXXX 991759
C. Tremblay
October 4, 1999
Dear Sir\Madam:
This is in reply to your letter of April 29, 1999, wherein you indicated that you received a distribution of capital gains from a U.S. based mutual fund. XXXXXXXXXX has reported this amount on your T-5 as foreign income. You question why this capital gains distribution cannot be reported as a capital gain instead of a dividend.
Where a U.S. mutual fund is treated as a corporation for Canadian tax purposes, any distribution by that corporation to its shareholders on a pro-rata basis would constitute a dividend for Canadian tax purposes. A U.S. corporation cannot qualify as a mutual fund corporation" within the meaning assigned by subsection 131(8) of the Income Tax Act (the "Act"). Accordingly, the capital gain distribution received by a Canadian taxpayer cannot be elected by the corporation under subsection 131(1) of the Act to be a capital gains dividend to a Canadian shareholder. Therefore, the full amount of the distribution, regardless that such distribution may be comprised solely of capital gains realized by the corporation, will be included in a Canadian shareholder's income as a dividend in accordance with section 90 and paragraph 12(1)(k) of the Act.
If, however, the U. S. mutual fund is treated as a trust for Canadian tax purposes, it is our opinion that a capital gains distribution would generally be included in computing the income of a Canadian taxpayer as income from property that is an interest in the trust, and not as a capital gain, pursuant to paragraphs 104(13)(c) and 108(5)(a) of the Act. Where the trust is not resident in Canada there is no exception that would permit a flow through of the capital gains to a Canadian taxpayer.
We trust our comments are of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications 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, 1999
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, 1999
Email this Content