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|