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.
B. Fioravanti
September 21, 1979
This is in reply to your letter of August 28 concerning waived dividends in a basic estate freeze situation. That is, the father transfers assets to a newly incorporated corporation in consideration for a demand vote and preferred shares. The common shares are issued to the children. Three different situations are described, whereby the father valves his right to the preferred cbare dividend.
In a closely-held corporation, it is the Depart at practice to closely scrutinise transactions where the apparent result of the waiver of dividends is to split income or ultimately benefit other shareholders. The application of subsection 245(2) and 56(2) will, of course, depend on the facts of a particular case, bower, they will generally be applied.
We trust these camants will be of assistasee to you.
Yours sincerely,
ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR R.D. WEIL
for Director Non-Corporate Rulings Division
s. 56(2) s. 245(2
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© Her Majesty the Queen in Right of Canada, 1979
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© Sa Majesté la Reine du Chef du Canada, 1979
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