Dividend Rental Agreement

Administrative Policy

18 October 1995 T.I. 951115 (Tax Window Files "Dividend Rental")

Where a taxable Canadian corporation (the "Borrower") borrows shares of a non-resident public corporation from an arm's length lender and simultaneously acquires an equivalent number of shares of a Canadian public corporation that are exchangeable into shares of the non-resident corporation and that pay an equivalent dividend, paragraph (b) would seem to be applicable.

23 April 1992 Memorandum 921211 (September 1992 Access Letter, p. 39)

A situation in which a securities dealer would borrow a share on which either a cash dividend, or a stock dividend valued at a 5% discount from the market price, was payable, elect to receive the stock dividend, sell the stock dividend upon receipt and pay a dividend compensation amount and a portion of the profit on the transaction to the lender of the share, would be considered a securities lending arrangement, and might also be considered a dividend rental arrangement.

IT-67R3 "Taxable Dividends from Corporations Resident in Canada"

"A dividend rental arrangement ... may generally be described as any arrangement the main reason for which is to enable a person to receive a dividend on a share ... in circumstances where any increase or decrease in the value of the share accrues to someone other than that person."

Articles

Sugg, "Preferred Share Review: Anomalies and Traps for the Unwary", 1992 Conference Report, c.22.

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