CRA considers that a promissory note issued in satisfaction of a capital dividend has full cost
1 September 2021 - 11:13pm
S. 52(1) does not deem a promissory note issued to a shareholder in payment of a capital dividend to have a cost equaling the dividend amount (as the dividend was not included in the recipient’s income). Does that matter?
CRA responded:
Our Directorate is generally of the view that the cost of a promissory note, received as full and absolute payment of a dividend for which the election under subsection 83(2) has been made, equals the principal amount of the promissory note, thereby achieving a result more consistent with the role of subsection 83(2) under the integration scheme embodied in the Act.
Neal Armstrong. Summary of 21 June 2021 External T.I. 2019-0815871E5 F under s. 54 – ACB.