Section 186

Subsection 186(1) - Tax on assessable dividends

See Also

Les Entreprises Michèle L'Heureux Inc. v. The Queen, 94 DTC 1693, [1995] 1 CTC 2850 (TCC)

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Administrative Policy

2014 Ruling 2014-0533601R3 - Spin-off butterfly - subsection 55(2)

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution spin-off by CCPC under Plan of Arrangement of two businesses/matching of PUC of cross-shareholdings to match Part IV tax/leased property as business property 978
Tax Topics - Income Tax Act - Section 84 - Subsection 84(1) stated capital distribution effected by set-off 77
Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) new common shares distinct on basis of right to interim financials 97

2014 Ruling 2013-0513211R3 - Butterfly Transaction

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution transfer to TC subco to avoid Part IV circularity/88(2) wind-up of DC/83(2.1) rep 470

30 June 2014 Internal T.I. 2013-0508411I7 F - Part IV Tax and the Dividend Refund

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Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) failure to circularly calculate Part IV tax and dividend refund is neglect given published TIs 268

2013 Ruling 2013-0502921R3 - Split-Up Butterfly - Farm

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution split-up b/f of CCPC with discontinued farm and unresolved circularity issue 609

2013 Ruling 2012-0443081R3 - Distribution of pre-72 Capital Surplus on Hand

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2013 Ruling 2012-0449611R3 - single-wing butterfly reorganization

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution single-wing b/f with acquisition of control of DC by its remaining shareholder (helpful re circularity issue) 566

93 C.R. - Q. 44

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4 March 1991 T.I. (Tax Window, No. 2, p. 15, ¶1183)

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Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) 22

IT-474R "Amalgamations of Canadian Corporations" under "Rules Respecting Shareholders, Option Holders and Creditors" under "Non-Resident Shareholders"

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Articles

Michael N. Kandev, Alan Shragie, "RDTOH on Butterfly", Canadian Tax Highlights, Volume 16, Number 11, November 2008, p. 2.

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Potter, "Part IV Tax Complications in Butterfly Transactions", 1992 Canadian Tax Journal, No. 4, p. 992.

Paragraph 186(1)(a)

Administrative Policy

26 November 2020 STEP Roundtable Q. 11, 2020-0839891C6 - Subsection 104(19)

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Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) dividend subject to Pt IV tax because payer and corporate beneficiary no longer connected at December 31 effective date of all s. 104(19) designations 85
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13) designated dividend included in individual’s terminal return which has a December 31 year end 129
Tax Topics - Income Tax Act - Section 249 - Subsection 249(1) - Paragraph 249(1)(c) individual has a calendar year, even in terminal year 149

30 April 2019 Internal T.I. 2018-0757591I7 F - Part IV tax and trust

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Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) s. 104(19)-designated dividend not received as dividend until trust year end 223

3 June 2016 External T.I. 2016-0647621E5 F - Dividend designation from a trust - timing

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Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) designation not effective until end of year 230

Paragraph 186(1)(b)

Administrative Policy

2020 Ruling 2018-0772291R3 F - Multi-wings split-up net asset butterfly 55(3)(b)

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution split-up butterfly of investment co (DC) between three siblings' transferees (TCs) with extinguishment of TC notes on DC wind-up 399
Tax Topics - Income Tax Act - Section 80 - Subsection 80(1) - Forgiven Amount no application of s. 80 where notes owing by corporation to its shareholders are distributed to them on its winding-up 173

2019 Ruling 2018-0758411R3 - Multi-wing split-up net asset butterfly

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution butterfly split-up of rental property into co-ownership arrangement, completed by wind-up of DC into TCs and subsequent dividend refund distribution 571

2018 Ruling 2018-0749491R3 - 55(3)(a) Reorganization

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii) spin-off of investment portfolio (but not rental property) by DC to 4 children’s respective TCs which father controls with special voting shares 574
Tax Topics - Income Tax Act - Section 55 - Subsection 55(4) Parent reps that he will control the TCs for commercial reasons 273

11 October 2018 External T.I. 2018-0771831E5 - Part IV Circular Calculation on cross redemption

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2018 Ruling 2017-0683941R3 - Split-up transactions

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii) split-up to resolve business differences between daughter and mother, with relevant significant investment of arm's length investor in further transferee company 758
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) arm's length investment in proposed purchaser of spinco assets not part of spin-off series 229

2017 Ruling 2016-0646891R3 - Pipeline and subsequent Split-up butterfly

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Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) pipeline coupled with split up butterfly in favour of TCs for grandchild residuary trusts 543
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution combined pipeline and split-up butterfly 144

18 December 2017 External T.I. 2017-0714971E5 F - Application of subsection 55(2)

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) relationship between Part IV tax and s. 55(2) and related amended return filings 477

21 November 2017 CTF Roundtable Q. 6, 2017-0724071C6 - Circular calculations Part IV tax

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) where Holdco receives a dividend subject to refundable Pt IV tax and to s. 55(2), two different dividends should be reported for Pt IV and s. 55(2) purposes 396

2017 Ruling 2016-0675881R3 - Paragraph 55(3)(a) Internal Reorganization

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) division of rental real estate company between holdcos for 2 children but with parents' holdco retaining voting control 579
Tax Topics - Income Tax Act - Section 55 - Subsection 55(4) s. 55(3)(a) split-up between Newcos for two siblings which were related due to multiple-voting shares held by the father’s and mother’s Holdco 170
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) - Paragraph 85(1)(e) UCC on s. 55(3)(a) spin-off prorated based on relative capital cost rather than FMV 174

2015 Ruling 2015-0605901R3 F - Présomption de gain en capital

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) separation of real estate assets beneath new holdco formed by unrelated shareholders 567
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii) spin-off of real estate beneath new common holdoc of unrelated shareholders 107
Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) taxation year end changed to immediately before building spin-off 95

24 November 2015 CTF Roundtable Q. 1, 2015-0610691C6 - T2 Late-Filing: Impact on Div. Refund and RDTOH

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Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) unclaimed dividend refunds did not reduce the corporation’s RDTOH 200

27 June 2014 External T.I. 2013-0498191E5 F - Interaction entre 55(2) et l'impôt de partie IV

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) s. 55(2) tax on cross-redemption deemed dividends between connected CCPCs gave rise to circular Part IV tax 355

11 October 2013 Roundtable, 2013-0495801C6 F - Dividend Paid to Trust and Schedule 3 of T2

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Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) s. 104(19) designation is not effective until year end of trust 167

21 January 2009 External T.I. 2008-0266191E5 F - Part IV & Capital Gain Strip

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) portion of the dividend received by the recipient corporation that is subject to Pt. IV also includes any safe income attributable to the shares of the payer held by the recipient 219

Articles

David Carolin, Manu Kakkar, "Estate Plans, Trusts, and Dividends: Is There a Gap Here?", Tax for the Owner-Manager, Vol. 21, No. 1, January 2021, p. 1

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Subsection 186(2) - When corporation controlled

See Also

Special Risks Holdings Inc. v. The Queen, 84 DTC 6505, [1984] CTC 553 (FCTD), aff'd 86 DTC 6036, [1986] 1 CTC (FCA)

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Administrative Policy

7 October 2020 APFF Roundtable Q. 17, 2020-0845821C6 F - Part IV tax and trust

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Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) various applications of proposition that an s. 104(19) designation is not effective until the trust’s year end 812
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(24) under the ordinary meaning of payable, an amount is payable at a time if it is paid then 450

11 October 2019 APFF Roundtable Q. 12, 2019-0812711C6 - Part IV

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Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) two 50% shareholders of two corporations likely acting in concert to produce connectedness 174

10 October 2014 October APFF Roundtable Q. 18, 2014-0538081C6 F - 2014 APFF Roundtable, Q. 18 - Connected corporations

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12 January 2011 External T.I. 2010-0388821E5 F - Discretionary dividend

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) SIOH where two discretionary-dividend classes potentially allocable fully to class with 100% winding-up participation 259

16 November 2006 External T.I. 2006-0204901E5 F - Meaning of Full Voting Rights

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29 July 1992 T.I. (Tax Window, No. 21, p. 7, ¶2054)

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15 May 1991 T.I. (Tax Window, No. 6, p. 2, ¶1357)

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31 July 1989 T.I. (Dec. 89 Access Letter, ¶1053)

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Subsection 186(4) - Corporations connected with particular corporation

Administrative Policy

22 July 1993 External T.I. 9313855 - CONNECTED CORPORATIONS

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16 December 1992 T.I. 920178 (November 1993 Access Letter, p. 511, ¶C245-050)

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) 30

26 August 1992 T.I. (Tax Window, No. 23, p. 12, ¶2155)

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25 and 28 March 1991 T.I. (Tax Window, No. 1, p. 5, ¶1178)

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90 C.R. - Q26

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IT-269R3 "Part IV Tax on Taxable Dividends Received by a Private Corporation or a Subject Corporation"

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Tax Topics - General Concepts - Fair Market Value - Shares 57

Subsection 186(5) - Deemed private corporation

Administrative Policy

18 December 2001 External T.I. 2001-0073925 - Paragraph 88(1)(e.2) & Subsection 186(5)186(5)

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Subsection 186(6) - Partnerships

Administrative Policy

6 November 2013 External T.I. 2013-0485691E5 - Connected Corporation and Part IV Tax

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Subsection 186(7) - Interpretation

Administrative Policy

8 January 2003 External T.I. 2002-0173665 - SMALL BUSINESS CORP

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