Joint Committee, "Legislative Proposals to Address Income Sprinkling Released December 13, 2017", 8 March 2018 Joint Committee Submission

Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (b)

No exclusions for indirect s. 55(3)(a) transfers or extraordinary discretionary dividends on existing shares ((p. 10)

  • Where, following a...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (a)

No exclusion for transfers from grandparents or perhaps adoptive parents (p. 11)

  • S. (a)(i) of “excluded amount” does not include transfers of...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Arm's Length Capital

Exclusion for arm’s length borrowing even where no source-individual guarantee (p. 11)

The definition of “arm’s length capital” for adults...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(d) - Subparagraph 120.4(1.1)(d)(ii)

Broad scope including potential iterative derivation (pp. 11-12)

Would the following amounts be considered as derived directly or indirectly from...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Shares

Para. (c) exclusion for income form a related business taints a holding company receiving dividends from a wholly-owned Opco with an active...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Related Business - Paragraph (c)

Valuation difficulties where shares of Opco are held through a trust (p. 13)

  • Para. (c) of “related business” looks at whether a specified...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Business

5 taxation years of the specified individual may be what is referenced (p. 13)

  • It is unclear whether “any five prior taxation years” refers...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount

Failure of attribution rules to dovetail with excluded amount definition (p. 15)

  • Where s. 75(2) or 56(4.1) deems an amount of taxable capital...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(3)

Failure of attribution rules to generate FTCs (p. 15)

Attributed income will not be entitled to foreign tax credits under subsection 120.4(3)...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Amount - Paragraph (d)

Insufficient flow through of attributes under QSBC provisions to beneficiary of trust (p. 16)

  • As the qualified small business corporation...

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Summary Under
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1.1) - Paragraph 120.4(1.1)(b)

Flow-through of attributes on 3rd generation transfers, inheritance from active and inactive parents or as a result of single property...

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