Subsection 55(2.1)

Paragraph 55(2.1)(b)

See Also

101139810 Saskatchewan Ltd. v. The Queen, 2017 TCC 3

Mr. Case (“Case”), held 34 of the 102 common shares of an operating corporation (“CSM”) through a personal holding company (“8231”),...

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(f) 55(5)(f) designation may be made after assessment under s. 55(2) 278
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) taxation of same appreciation at individual shareholder level and corporate level under s. 55(2) was not double taxation 295

Administrative Policy

2020 Ruling 2020-0840631R3 F - Purpose Test in Subsection 55(2)

Background

After the death of Father, his estate (whose equal beneficiaries are his surviving children, A, B and C) holds Class E and J preferred...

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Tax Topics - Income Tax Act - Section 88 - Subsection 88(2) - Paragraph 88(2)(b) deemed ss. 88(2)(b) and 84(2) dividends on winding-up into three Holdcos 116

27 October 2020 CTF Roundtable Q. 1, 2020-0860991C6 - ACB increase due to misalignment of ACB

Parentco holds shares of a wholly-owned subsidiary (Subco1) with a fair market value (“FMV”) and adjusted cost base (“ACB”) of $200,000...

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) duplication of ACB is abusive 217

9 May 2018 CPA Roundtable Q. 11, 2018-0765271C6 - Application of 55(2)

What guidance can be provided on the purpose test? Is there a CRA audit manual that could be made available? CRA responded:

A favourable ruling...

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5 October 2018 APFF Financial Strategies and Instruments Roundtable Q. 5, 2018-0761561C6 F - Rachat de parts en cas d’invalidité

Opco is held equally by two unrelated individuals directly and through their respective Holdcos and, on the disability of one, Opco receives...

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5 October 2018 APFF Roundtable Q. 5, 2018-0768761C6 F - Partage de la déduction accordée aux petites entreprises

Messrs. A and B wholly-own Holdco A and B, respectively, each of which, in turn, holds half of the Class B shares of Opco having an FMV of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 125 - Subsection 125(8) use of personal holding companies precluded assignment 318
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Designated Member - Paragraph (b) - Subparagraph (b)(i) Serviceco met the 3 conditions for being a designated member 217

2016 Ruling 2016-0652041R3 - Loss consolidation arrangement

Respecting a triangular loss-shifting arrangement for the shift of non-capital losses by Parentco to its wholly-owned Profitco (with Profitco...

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Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) standard triangular loss shift with annual funding of dividends and interest, cashless unwind with set-off and provincial GAAR and s. 55(2) rulings 250

21 November 2017 CTF Roundtable Q. 5, 2017-0726381C6 - 55(5)(f) and 55(2.3) with 55(2.1)

Opco pays a dividend of $1,000 to Holdco. Its shares had a pre-dividend fair market value of $1,500. As the safe income that can reasonably be...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.3) dividend bifurcation under s. 55(2.3) does not detract from s. 55(2.1) purpose tests being applied to whole dividend 160
Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(f) bifurcated dividends are one dividend for s. 55(2.1)(b) purpose test but not under s. 55(2.1)(c) 102

21 November 2017 CTF Roundtable Q. 3, 2017-0724021C6 - Meaning of purpose

2016-0658841E5 indicates that paying a dividend of surplus assets with the goal of purifying the corporation for “qualified small business...

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6 April 2017 External T.I. 2016-0658841E5 F - Purpose tests and Allocation of safe income

The participating and non-voting Class AA shares of Opco, which were held equally by two unrelated individuals (A and B), were worth $500,000 and...

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) safe income was allocated between 2 classes of participating shares pro rata to their dividend entitlements 812

13 June 2017 STEP Roundtable Q. 6, 2017-0693411C6 - GAAR on share redemption-55(3)(a)

In 2015-0604521E5, a promissory note issued to Holdco on a share redemption was subsequently transferred to Newco as a capital contribution. Since...

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13 June 2017 STEP Roundtable Q. 7, 2017-0693421C6 - 55(2) and pipeline planning

On death, an estate receives shares of an investment holding company (H1), and then immediately structures a pipeline under which the H1 shares...

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29 November 2016 CTF Roundtable Q. 8, 2016-0671501C6 - 55(2) clause 55(2.1)(b)(ii)(B)

Is cash considered to be property for purposes of the application of s. 55(2.1)(b)(ii)(B)?

CRA indicated that it is contrary to the scheme of the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property cash is property in s. 55(2) 11

7 October 2016 APFF Roundtable Q. 14, 2016-0655921C6 F - Safe income on hand - Preferred shares

Respecting the payment of a non-participating dividend to a holding company on preferred shares whose paid-up capital and ACB equals their...

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) fixed dividends on full-ACB prefs did not come out of SIOH 140

23 June 2016 External T.I. 2016-0627571E5 - Application of proposed amendments to section 55

Divco, a Canadian-resident corporation with Canadian corporate shareholders, pays cash dividends from its excess cash-flow to its shareholders...

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2015 Ruling 2014-0552871R3 - Split-Up Butterfly

In connection with the butterfly split-up of DC equally between the family holding companies (Shareholder1 and Shareholder2) for two unrelated...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution post-butterfly sale of distributed shares by TC1 to TC2/disproportionate split of CDA/assumption of prepaid rent (for which a 20(24) election) treated as boot 773
Tax Topics - Income Tax Act - Section 20 - Subsection 20(24) deferred revenue treated as boot 53

8 June 2016 CTF Technical Seminar: Update on s. 55(2)

Comments of Yves Moreno and Annie Mailhot-Gamelin (both with the Income Tax Rulings Directorate) on the proposed s. 55(2) rules included:

  • The...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) safe income appropriately reduced by incentive reductions 29
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution butterfly rulings may require amending discretionary shares 50
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.5) significant reduction in value of nominal value share 84

21 December 2015 External T.I. 2015-0617731E5 F - 55(2) and creditor proofing

Holdco holds all the shares of Opco, which have a fair market value (“FMV”) of $1M and an adjusted cost base (“ACB”) of $100. Opco (which...

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3 December 2015 External T.I. 2015-0593941E5 F - Allocation of the safe income on hand

CRA declined to express a view as to whether an $8,000 reduction in an accrued capital gain of $120,000 was significant.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) flexible allocation of SIOH where discretionary common shares 1317
Tax Topics - General Concepts - Fair Market Value - Shares FMV of discretionary share increased at moment of dividend declaration to exclusion of other discretionary shares 94

17 November 2015 Roundtable, 2015-0613821C6 - TEI question on section 55

TEI members remain concerned that, because all dividends result in a reduction of the fair-market value of shares held by the dividend payor and...

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24 November 2015 CTF Annual Roundtable, Q.10

Points respecting proposed s. 55(2.1)(b)(ii) included:

  • The purpose test in s. 55(2.1)(b)(ii) could apply even if the dividend does not satisfy...

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(5) - Outstanding Debts to Specified Non-Residents foreign-currency debt to Canco translated at historical rate 34

2015 Ruling 2015-0604071R3 - Loss Consolidation Arrangement

Profitco is wholly-owned by Lossco, which is wholly owned by Parent. Profitco borrows from Profitco (at an interest rate reflecting the loan’s...

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Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) loss shift entailing Profitco subscribing for prefs of its Lossco parent, with dividends paid pursuant to support agreement/prefs redeemed wih note 254

9 October 2015 APFF Roundtable Q. 12, 2015-0595601C6 F - Proposed legislation - subsection 55(2)

Holdco holds shares of Opco with a nominal ACB and no safe income. In a corporate reorganization "aimed at protecting the assets of Opco, whose...

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) no relief under new rules where Part IV tax is refunded on payment of dividend to individual shareholder 183

18 October 2011 External T.I. 2011-0422021E5 F - Purpose test - Subsection 55(2) of the Act

Aco held all the shares (having a minimal adjusted cost base) of Holdco (a small business corporation), which held all the shares (being common...

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Articles

Doron Barkai, Alexander Demner, "Dealing with New Subsection 55(2): Issues and Strategies", 2016 Conference Report (Canadian Tax Foundation), 6:1–56

Possible need for a specific anti-avoidance purpose (p. 6-5)

[C]ertain practitioners have suggested that in the absence of a specific...

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Rick McLean, "Subsection 55(2): What Is the New Reality?", 2015 CTF Annual Conference paper

Example of planning engaging the introduction of the expanded s. 55(2.1)(b) test respecting increases in cost amount (pp. 22:9-12)

Holdco owns...

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Subparagraph 55(2.1)(b)(i)

Administrative Policy

10 October 2014 APFF Roundtable Q. 20, 2014-0534671C6 F - D&D Livestock

What is the CRA position on D & D Livestock? CRA stated (TaxInterpretations translation):

[S]ubsection 245(2) was not applied in this case....

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) unjustified duplication of fiscal attributes is abusive 178

Subparagraph 55(2.1)(b)(ii)

Administrative Policy

12 May 2017 External T.I. 2017-0683511E5 F - Purpose tests of a dividend or repurchase of share

Holdco holds 100% of Opco’s participating shares, which have a value of $100,000, paid-up capital and adjusted cost base of $1 and safe income...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) using s. 55(3)(a) to distribute cash otherwise than from safe income likely abusive 193
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) use of s. 55(3)(a) redemption exception to circumvent safe income limitation could be offensive 58

Paragraph 55(2.1)(c)

Cases

626468 New Brunswick Inc. v. Canada, 2019 FCA 306

Before agreeing to sell an apartment building (the property) owned by him to a third party, Mr. Gillis transferred the property on a s. 85(1)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) s. 55(2) operated through denying a s. 53(1)(b) ACB bump 304
Tax Topics - General Concepts - Fair Market Value - Shares FMV of shares reduced by accrued, but not yet payable, corporate income tax on gains 263

See Also

626468 New Brunswick Inc. v. The Queen, 2018 TCC 100, aff'd 2019 FCA 306

Before agreeing to sell an apartment building (the property) owned by him to a third party, Mr. Gillis transferred the property on a s. 85(1)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(b) safe income reduced by corporate income taxes 201

Administrative Policy

5 May 2021 IFA Roundtable Q. 5, 2021-0887671C6 - 2021 IFA Q5 - Applicability of 247(7)

9711005 indicated, before the bifurcation of RDTOH into the eligible refundable dividend tax on hand (“ERDTOH”) and non-eligible refundable...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) Pt. IV and safe income exclusions under s. 55(2) can be doubled up 289

28 May 2021 External T.I. 2021-0889611E5 - ACB and Safe income allocation on corporate reorg.

Assume that Parentco owns 100% of the shares of Holdco 1 which owns 100% of Holdco 2 which owns 100% of Opco. The group intends to transfer one...

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2020 Ruling 2020-0854091R3 - Safe Income and Section 47

Background

Holdco, a wholly-owned subsidiary of Parent (also resident) holds a controlling position (the “Historical Portion”) in Subsidiary....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) new common shares (on dirty s. 85 exchange to isolate cost base in new prefs) are distinguished from old common shares by different shareholder meeting notice period 100

15 June 2021 STEP Roundtable Q. 9, 2021-0883161C6 - Safe Income

Income Tax Technical News No. 37 (2008) indicates that non-deductible expenses must be deducted in computing safe income on hand. What are...

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7 October 2020 APFF Roundtable Q. 3, 2020-0852151C6 F - Safe income

In 2015, Opco, which had safe income of nil, paid a dividend on its 100 common shares to its sole shareholder (Mr. X) equaling the fair market...

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27 October 2020 CTF Roundtable Q. 2, 2020-0861001C6 - Consolidation of safe income in a corporate group

Could CRA reiterate its views on the consolidation of safe income in a corporate group?

After noting that its longstanding position had been...

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27 October 2020 CTF Roundtable Q. 3, 2020-0861031C6 - Safe income on reorganization

CRA provided various examples to illustrate the impact of reorganizations on safe income. CRA indicated that this determination essentially turned...

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27 January 2020 External T.I. 2019-0833061E5 - Discretionary Trust and Safe Income

A holding corporation (Holdco) and an individual are the beneficiaries of a discretionary trust (the Trust) that holds shares of Opco having safe...

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11 October 2019 APFF Roundtable Q. 10, 2019-0812691C6 - Consolidated safe income

When Holdco was incorporated and capitalized with $500,000 of share capital, it incorporated Opco 1 and 2 and subscribed $100 and $499,900 for...

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15 August 2011 External T.I. 2011-0415071E5 F - 110.5 and safe income

Must a corporation add a s. 110.5 addition to its taxable income in computing its safe income? After stating that

...income "earned or realized,"...

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27 November 2018 CTF Roundtable Q. 1, 2018-0780061C6 - Allocation of safe income

At the 2016 CTF Annual Conference, the CRA indicated that it was conducting a study in connection with the proper allocation of safe income in...

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29 May 2018 STEP Roundtable Q. 4, 2018-0743951C6 - Safe income and estate

In 2017 STEP Roundtable Q.7, 2017-0693421C6, CRA stated that safe income of a corporation owned by the deceased did not flow through to his...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) safe income flow through on a spousal rollover of shares on death 65

2015 Ruling 2015-0589471R3 - Earnout

In connection with the implementation of an earnout transaction for the purchase of Holdco common shares by a key employee, the (corporate)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) 5-year earnings based earnout for sale of Holdco common shares by Opco to key employee 841
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Safe Income Determination Time safe income determination time for a subsequent contemplated dividend was immediately before that dividend 534
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) s. 85(1) rollover available on dirty s. 85 exchange 92
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1) - Paragraph 7(1)(a) transactions for using s. 7 rules on sale of non-treasury shares 212

6 June 2017 External T.I. 2016-0658351E5 - Stock dividends and safe income

CRA provided an example illustrating the operation of s. 55(2.3), which streams safe income to stock dividend shares and away from the shares upon...

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.3) illustration of safe income streamed to preferred share stock dividend 382

6 April 2017 External T.I. 2016-0658841E5 F - Purpose tests and Allocation of safe income

The participating and non-voting Class AA shares of Opco, which were held equally by two unrelated individuals (A and B), were worth $500,000 and...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) s. 55(2) did not apply to dividends paid only for asset protection and QSBC-status purposes 294

13 June 2017 STEP Roundtable, Q.5

At the 2016 CTF Annual Conference, CRA indicated that it was conducting a study of how safe income on hand should be allocated for corporations...

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15 November 2016 Roundtable, 2016-0672321C6 - Guidance on determination of safe income

a. Given the historical records required to prepare safe income calculations, what type of practical approaches and assumptions are accepted by...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Safe Income Determination Time safe income determination time does not commence at beginning of series of regular annual dividends 141

7 October 2016 APFF Roundtable Q. 13, 2016-0652981C6 F - Allocation of the safe income on hand

On the incorporation of Opco in Year 1, two unrelated Holdcos (HC and HB) each subscribed $100 for 100 Class C or Class B voting common shares. In...

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7 October 2016 APFF Roundtable Q. 14, 2016-0655921C6 F - Safe income on hand - Preferred shares

Holdco holds 100 common shares of Opco and 100 non-participating preferred shares which are redeemable for, and have a PUC and ACB of, $100. Opco...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) whether dividends paid on non-participating prefs engage s. 55(2) is a question of fact 85

7 October 2016 APFF Roundtable Q. 15, 2016-0652991C6 F - Application of subsection 55(2) - holding period

X (an individual) holds 799,000 Class A common shares of Opco having a safe income on hand (“SIOH”) of $1M and a FMV of $1.8M. Opco pays a...

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7 October 2016 APFF Roundtable Q. 16, 2016-0653001C6 F - Safe income and freeze preferred shares

Holdco A holds 100 voting common shares of Opco with a paid-up capital and adjusted cost base of $100, as well as 100 estate freeze...

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8 June 2016 CTF Technical Seminar: Update on s. 55(2)

CRA considers it to be appropriate from a policy perspective for safe income to be correspondingly lower where incentive deductions have lowered a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) integration principle/expanded scope/no contemplated sale required/no blanket exemptons/policy similar to boot rules 348
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution butterfly rulings may require amending discretionary shares 50
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.5) significant reduction in value of nominal value share 84

20 April 2016 External T.I. 2016-0633961E5 F - Computation of safe income - stub period

Following the sale of depreciable properties and eligible capital properties and before the end of its taxation year, a corporation pays a...

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27 April 2016 External T.I. 2016-0633101E5 F - Attribution of safe income

Opco has a fair market value of $2M and its safe income is $1M. Its issued share capital consists of 1,000 Class A common shares and 1,000 Class...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution discretionary dividend shares may not satisfy the distribution definition 78

9 March 2016 External T.I. 2016-0630281E5 F - Redemption of shares and changes to 55(2)

Were ss 55(2) and 55(2.1) as set out in the July 31, 2015 Legislative Proposals intended to exempt, from capital gains treatment, a s. 84(3)...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(f) s. 55(2) application to separate dividend 113
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) - Paragraph 55(2)(b) demarcation between ss. 55(2)(b) and (c) 286

3 December 2015 External T.I. 2015-0593941E5 F - Allocation of the safe income on hand

1st situation. Three unrelated Holdcos (A, B and C) each hold all the 100 voting participating shares of a separate class of discretionary...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares FMV of discretionary share increased at moment of dividend declaration to exclusion of other discretionary shares 94
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) quaere whether 8% reduction is significant 21

10 October 2014 APFF Roundtable Q. 19, 2014-0538041C6 F - 2014 APFF Roundtable, Q. 19 - Stock dividend

Mr. X holds all 100 of Opco's Class A shares with a fair market value of $1,000,000 and nominal ACB and PUC. Opco pays a stock dividend comprising...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.1) not engaged if stock dividend is proportional 211
Tax Topics - Income Tax Act - Section 74.4 - Subsection 74.4(2) non-application to stock dividend, cf. s. 86 reorg 255
Tax Topics - Income Tax Regulations - Regulation 6205 - Subsection 6205(2) purpose test in Reg. 6205(2)(a) is not necessarily accomplished by all estate freezes/"arrangement" broad 413

14 February 2014 External T.I. 2012-0454481E5 F - Safe Income

The only source of income of ABC, a CCPC, is its interest in a partnership (P) with a fiscal period end of XX. ABC has an income inclusion under...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(11) transitional reserve deduction is in taxpayer's discretion 57
Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(c) no departures permitted from s. 34.2 adjustments 194

11 October 2013 APFF Roundtable Q. 18, 2013-0495851C6 F - Safe income adjustments

Buyco acquired all the shares of Opco on 15 January 2010 from Sellco. A CRA audit resulted in a 2011 reassessment to increase Opco's income for...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base downward adjustment under price adjustment clause reduces shares' ACB 91

3 July 2012 External T.I. 2012-0448651E5 F - Allocation of Safe Income

The three corporate shareholders of Opco each held 1/3 of the shares, being 100 Class A, B or C common shares but which, in the case of the Class...

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12 December 2011 External T.I. 2011-0416801E5 F - Safe Income on Hand - Stub Period

Respecting queries on how to calculate the safe income on hand ("SIOH") of a CCPC (Corporation A) that recognized income on a lumpy basis when it...

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6 December 2011 External T.I. 2011-0423181E5 F - Safe Income

200 Class A shares of Opco held by a shareholder had a safe income on hand ("SIOH") and FMV of $200 and $1,000 per share, respectively, and 100...

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9 May 2011 Internal T.I. 2011-0399531I7 F - Computation of safe income

The safe income on hand of Holdco, which redeemed shares of Holdco held in a year by “Portco”, was based on the safe income on hand of Opco,...

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

On January 1 of Year 1, Mr. A (the sole shareholder of Holdco) and Holdco subscribed, respectively, $100 and $900 for 100 Class A voting...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 186 - Subsection 186(2) Opco with voting shares held by individual and prefs held by his Holdco was connected to Holdco 137

8 October 2010 Roundtable, 2010-0373291C6 F - Tuck-Under Transactions - Safe Income Extractions

In the course of indicating that, in some instances, it would consider applying ss. 84(2) and 245(2) to tuck-under transactions, CRA stated:

T]he...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) Vaillancourt-Tremblay did not validate all tuck-under transactions 107
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) CRA accepts use of tuck-under transactions to extract safe income 196

8 October 2010 Roundtable, 2010-0373191C6 F - Computation of safe income

The partnership interest (in “SENC,” which holds all the shares of Subco, to which safe income is attributable) of an individual (X) was...

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25 August 2010 External T.I. 2010-0374231E5 F - Safe income allocation

Opco has safe income of $2M, which equals the value of its net tangible assets. X does a s. 51 exchange of its Opco common shares (being the only...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Shares Compliance Programs Branch now providing advance guidance on valuation methodology 146

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

CRA indicated that 943963 Ontario had essentially confirmed its position in 9711005, which stated:

[W]hen a corporation receives a dividend, part...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 186 - Subsection 186(1) - Paragraph 186(1)(b) 943963 Ontario followed 79

23 March 2005 Internal T.I. 2005-0113931I7 F - Safe income on hand calculation: Life Insurance

Opco, whose shares had always been held by Holdco, acquired an interest in a life insurance policy (the Policy) to insure the life of a...

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3 February 2005 External T.I. 2005-0112141E5 F - Safe income

Mr. A, who held ½ of the common shares of Opco having a PUC and ACB of $100, a safe income on hand of $699,900 and a fair market value of...

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Articles

Joan E. Jung, "Changing the Analysis for a Typical Spinout", Tax for the Owner-Manager, Vol. 22, No. 1, January 2022, p. 2

CRA position regarding misalignment (p.3)

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Henry Shew, "Safe Income May Vary Within Shares of the Same Class", Canadian Tax Focus, Vol. 8, No. 3, August 2018, p. 3

Illustration of the implications of safe income differing where shares of the same class held for different periods (p. 3)

Assume that Holdco...

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Doron Barkai, Alexander Demner, "Dealing with New Subsection 55(2): Issues and Strategies", 2016 Conference Report (Canadian Tax Foundation), 6:1–56

Risk of CRA calculating safe income where taxpayer has applied s. 55(2) (pp. 6:13-14)

If a taxpayer has not calculated its safe income on hand and...

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