Cases
Delage v. Canada, 2002 DTC 7061, 2002 FCA 212
The taxpayers were unable to establish that an amount paid to them as a dividend was, in fact, salary for services.
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| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | 23 | |
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | 51 |
Dale v. R., 97 DTC 5252, [1997] 2 CTC 286 (FCA)
At the time of a purported capital dividend on preference shares, the authorized capital of the corporation had not yet been amended to include...
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| Tax Topics - General Concepts - Effective Date | retroactive superior court order has retroactive effect for tax purposes | 174 |
| Tax Topics - General Concepts - Rectification & Rescission | retroactive effect of nunc pro tunc rectification order | 177 |
| Tax Topics - Income Tax Act - Section 83 - Subsection 83(2) | 78 | |
| Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) | retroactive validation by Superior Court of preference share issuance was effective for s. 85 purposes | 171 |
| Tax Topics - Statutory Interpretation - Provincial Law | 140 |
M.S.S. Inc. v. The Queen, 87 DTC 5088, [1987] 1 CTC 130, [1986] 2 CTC 99 (FCTD), aff'd 89 DTC 5502 (FCA)
Alleged management fees paid by the taxpayer to its parent corporation were found in reality to be dividends, as no management services had been...
The Queen v. Cranswick, 82 DTC 6073, [1982] CTC 69 (FCA)
The income which is typically earned by shares is dividends. A payment on shares that was of an unusual and unexpected kind, i.e., a voluntary...
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| Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) | unexpected damages payment was not income from a source | 236 |
| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | damages received by shareholders as a windfall were not income | 98 |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | 103 |
Bernstein v. MNR, 74 DTC 6041, [1974] CTC 4 (FCTD), aff'd 77 DTC 5187, [1977] CTC 328 (FCA)
The sale by a corporation to its shareholders (Bernstein and Kamichik) of shares of a subsidiary worth $100,000 for a sale price of $200, was not...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | no reorganization of corporation | 72 |
Guilder News Co. (1963) Ltd. v. MNR, 73 DTC 5048, [1973] CTC 1 (FCA)
At 5053:
"[M]any of the amounts that would fall under section [15(1)] would not fall within the concept of 'dividend' in its ordinary sense in...
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| Tax Topics - General Concepts - Effective Date | 229 | |
| Tax Topics - Income Tax Act - Section 121 | 13 | |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | restoration of previous year's detriment was benefit | 231 |
Gabco Ltd. v. MNR, 68 DTC 5210, [1968] CTC 313 (Ex Ct)
In finding remuneration paid to the younger brother of the principal of a corporation in proportion to a shareholding to be deductible, Cattanach...
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| Tax Topics - Income Tax Act - Section 67 | "unreasonable" if no reasonable business would have paid it | 196 |
See Also
Ahmad v. The Queen, 2013 DTC 1112 [at at 601], 2013 TCC 127 (Informal Procedure)
Before finding that a distribution in kind by a Bermudan corporation ("Tyco") was a taxable dividend to the taxpayer under s. 90, Rip CJ quoted...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | dividend in kind on US spin-off | 115 |
Marshall v. The Queen, 2011 DTC 1353 [at at 1976], 2011 TCC 497
The taxpayer was a shareholder of a Bermudian corporation ("Tyco"), and received shares as part of the same spin-off described in Capancini, where...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | 125 |
Capancini v. The Queen, 2010 DTC 1394 [at at 4569], 2010 TCC 581 (Informal Procedure)
Under a reorganization, the Canadian-resident taxpayer received, in exchange for shares he previously held of Tyco International Ltd. (a...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | 134 |
Mulligan v. R., 99 DTC 951, [1999] 3 CTC 2092 (TCC) (Informal Procedure)
Before going on to find that the taxpayer had received a dividend notwithstanding the absence of formal corporate action by the directors (i.e.,...
Memec plc v. IRC, [1998] BTC 251, [1998] EWCA Civ 941 (CA)
In order to minimize German corporate tax payable by its German subsidiary ("GmbH"), the taxpayer "Plc"), which was a UK company, formed a silent...
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| Tax Topics - Income Tax Act - Section 96 | German silent partnership not a partnership: purely contractual right with no participation in business | 352 |
Canadian Pacific Ltd. (1990), 72 OR (2d) 545 (Ont HCJ.)
A proposed distribution by a public company to its common shareholders of a subsidiary pursuant to a butterfly reorganization was found to...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend | 82 |
Anderson v. The Queen, 98 DTC 1027 (TCC)
Amounts paid to the taxpayer one day prior to the sale of their shares to the purchaser were found to be dividends rather than remuneration or...
Daggett v. MNR, 93 DTC 14, [1992] 2 CTC 2764 (TCC)
The purported payment of a dividend was ineffective because payment of a dividend would have impaired the capital of the corporation contrary to...
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| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) | 83 |
Re Telsten Services Ltd. (1981), 39 C.B.R. (N.S.) 68 (S.C.O.)
Payments made to a company's shareholder that were treated in the company's books as dividends, were not dividends for purposes of the Bankruptcy...
Canadian Pacific Ltd. (1990), 72 OR (2d) 545 (Ont HCJ.)
A proposed distribution by a public company to its common shareholders of a subsidiary pursuant to a butterfly reorganization was found to...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend | 82 |
Cangro Resources Ltd. v. MNR, 67 DTC 582 (TAB)
A payment received by the taxpayer that was stated to be made out of "paid-in capital and paid-in surplus" pursuant to the provisions of the...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 118 | |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | distributions out of share premium based on number of shares held were dividends | 231 |
Administrative Policy
11 April 2017 Internal T.I. 2016-0670541I7 - Foreign affiliate share redemption
Canco held the preferred, but not the common, shares of a Barbados International Business Company (“FA”), and its preferred shares were...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) | portion of proceeds paid on a redemption might be respected as a dividend (subject to s. 95(6)) if this is clearly indicated in accordance with Barbados law | 303 |
| Tax Topics - Income Tax Act - Section 95 - Subsection 95(6) - Paragraph 95(6)(b) | skewing exempt surplus to Canco could engage s. 95(6) | 137 |
25 August 2014 External T.I. 2014-0528361E5 - premium on redemption of foreign affiliate shares
After noting that in 2012-0439741I7 [immediately below] "we indicate that upon redemption of MRPS [mandatory redeemable preference shares], the...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | redemption premium is proceeds | 82 |
30 April 2013 Internal T.I. 2012-0439741I7
Mandatory Redeemable Preferred Shares ("MRPS"): are voting; have a mandatory redemption date approximately 10 years from the allotment date, with...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Share | treatment of MRPS as equity | 193 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | treatment of MRPS as equity | 211 |
16 April 2012 External T.I. 2011-041149
A Canadian-resident individual owns all the shares of an Alberta unlimited liability company which, in turn, owns a majority of the membership...
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| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | 246(1) application to payment of individual's US taxes by grandchild LLC | 114 |
22 January 1997 External T.I. 9701295 - Dividend in kind - U.S. divestiture
In indicating that a dividend in kind received by a Canadian shareholder from a U.S. corporation would be taxable, RC stated:
"It is our view that...
8 April 2004 Internal T.I. 2003-0037291I7 - US LLC and Regulation 5907(1.3)
A wholly-owned US C-corp subsidiary (US Holdco) of a taxable Canadian corporation wholly-owned two LLCs, which earned only foreign accrual...
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| Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Tax | no deduction for LLC sub income unless distributed | 243 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1.3) | 260 |
10 March 2003 Internal T.I. 2002-0172187 F - DEDUCTIBILITE DES INTERET
A debenture issued by a corporation provided for the payment of base interest plus the payment of an “additional interest” on maturity that...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) | interest on debenture issued in payment of interest, was non-deductible | 118 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(f) | premium (termed additional interest”) was payable even if no early repayment, and qualified under s. 20(1)(f) | 200 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | reiteration of position re deductibility of participating interest post-Sherway | 91 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees | legal fees re repaying debt were non-deductible | 21 |
9 May 2002 Internal T.I. 2002-0135307 F - Application du paragraphe 39(2)
Before going on to find that if a distribution made from a Delaware subsidiary’s surplus would be a dividend for ITA purposes if it was a...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(3) | distribution of contributed surplus by Delaware subsidiary likely was a dividend | 61 |
| Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) | distribution by Delaware subsidiary that did not result in s. 40 application thereby did not engage s. 39(2) | 100 |
8 January 1996 External T.I. 9428025 - RETURN OF CAPITAL FROM A DELAWARE CORPORATION
It is the Department's view that a dividend can include any distribution of property by a corporation to its shareholders that is not a return of...
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| Tax Topics - Income Tax Act - Section 90 - Subsection 90(1) | all distributions from Delaware corps are dividends | 92 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(3) | all distributions from Delaware corps are dividends | 92 |
| Tax Topics - Treaties - Income Tax Conventions - Article 10 | 108 |
16 May 1994 External T.I. 9404565 - COURT ORDERED CORPORATE DISTRIBUTION
A court order directing a corporation to pay a "dividend" to an inactive shareholder in order to compensate him for the undue depletion of the...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | 108 |
5 September 89 T.I. (February 1990 Access Letter, ¶1101)
Interest on the preferred share of a Quebec cooperative falls within the definition of a "dividend" as a sum to be divided among a group of...
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| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) | 27 |
IT-67R3 "Taxable Dividends from Corporations Resident in Canada"
"Any distribution by a corporation of its income or capital gains made pro rata among its shareholders may properly be described as a dividend...
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Amount | 10 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend Rental Agreement | 52 |
Articles
John R. Owen, "Foreign Entity Classification and the Character of Foreign Distributions", 2005 Conference Report, c. 20
Discussion of the nature of a dividend.
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| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Corporation | 10 |
Wertschek, "The Tax Advisor and Commercial Law: Some Issues", 1993 Conference Report, C. 24
Discussion (at pp. 9-12) of whether amounts paid as dividends in contravention of the governing corporate law will retain their character as...