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.
Principal Issues: When will a taxable dividend designated in respect of a beneficiary of a trust pursuant to subsection 104(19) be considered to have been received by the beneficiary?
Position: At the time that is the end of the taxation year of the trust in which the dividend was received by the trust.
Reasons: The conditions of subsection 104(19).
XXXXXXXXXX
File No. 2012-046513
Marc Edelson, LL.B.
Attention: XXXXXXXXXX
January 14, 2013
Dear Sir:
Re: Connected Corporations
This is in reply to your email inquiry of October 9, 2012. Unless otherwise stated, all statutory references herein are to the Income Tax Act (Canada) and the regulations promulgated thereunder.
You have inquired as to when a taxable dividend will be considered to have been received by a beneficiary of a trust where the dividend is initially received by the trust and, for the purposes of subsection 104(19), is designated by the trust in favor of the beneficiary in the trust's return of income for the taxation year in which the trust received the dividend.
In general terms, subsection 104(19) provides that the portion of any taxable dividend of a taxable Canadian corporation
(a) received by a trust in a particular taxation year of the trust, and
(b) that may reasonably be considered, by reason of subsection 104(13) or (14) or section 105, to have been included in a beneficiary's income from the trust for a particular taxation year of the beneficiary,
may, if the trust was resident in Canada throughout the particular taxation year of the trust, be designated by the trust in favor of that beneficiary in the trust's return of income for its particular taxation year. In that case the dividend will be deemed, for certain purposes, not to have been received by the trust and, for the purposes of the Act (other than Part XIII) to be a taxable dividend received by the beneficiary in the particular taxation year of the beneficiary referred to in paragraph (b) above.
It is our opinion that the amount of a taxable dividend designated in favor of a particular beneficiary pursuant to subsection 104(19) will be deemed to have been received by the beneficiary at the time that is the end of the particular taxation year of the trust in which the trust received the dividend.
Our comments are provided in accordance with the practice outlined in paragraph 22 of IC-70-6R5.
Yours truly,
David Palamar
Reorganizations Section I
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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