Subsection 55(2.5)

Administrative Policy

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

significant reduction in value of nominal value share

After noting that "even if there is no accrued gain on the share that is reduced by a dividend, the significant reduction in fair market value test might still apply" under s. 55(2.1)(b), CRA stated:

The new rule in s. 55(2.5) is clear that even if a share has nominal fair market value and potentially no accrued gain, a dividend might significantly reduce its fair market value since the value of the share must be adjusted to take into account the value of the dividend.

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(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