Cases
Canada v. Kruco Inc., 2003 DTC 5506, 2003 FCA 284
The taxpayer, which held approximately 32.5% of the common shares of another corporation ("Kruger"), took the position that it received a deemed...
Paragraph 55(5)(b)
See Also
626468 New Brunswick Inc. v. The Queen, 2018 TCC 100, aff'd 2019 FCA 306
An individual rolled his apartment building into a Newco in consideration for a mortgage assumption and shares with nominal paid-up capital, and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) | safe income was reduced by corporate income taxes that would be computed on that income | 364 |
Paragraph 55(5)(c)
Administrative Policy
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 with a fiscal period end of XX. ABC has an income inclusion under s....
| 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(2.1) - Paragraph 55(2.1)(c) | not claiming s. 34.2(11) transitional reserve to increase SIOH | 379 |
Paragraph 55(5)(d)
Articles
Jim Samuel, "Interaction of the Foreign Affiliate Surplus and Safe-Income Regimes: Selected Anomalies, Issues, and Planning Considerations", Canadian Tax Journal, (2018) 66:2, 269-307
Increasing the tax-free surplus balance for s. 55(5)(d)(i) purposes through Reg. 5907(2.1) election (p. 294)
[G]enerally, if a regulation...
Paul Dhesi, Korinna Fehrmann, "Integration Across Borders", Canadian Tax Journal, (2015) 63:4, 1049-72
Safe income of foreign affiliate (pp. 1069-1071)
Conceptually, the modified "tax-free surplus balance" definition in paragraph 55(5)(d) is the...
SuParagraph 55(5)(d)(i)
Administrative Policy
3 December 2019 CTF Roundtable Q. 3, 2019-0824391C6 - Safe Income Determination Time
Can Holdco wholly-owns Can Opco, which wholly-owns US FA (its only asset). These shareholdings have a nominal ACB. The time (“Time 1”)...
Paragraph 55(5)(e)
Cases
Gestion B. Dufresne Ltée v. Canada, 99 DTC 5614 (FCA)
Because of s. 55(5)(e), two corporations each of which was controlled by an individual who was the brother-in-law of the other controlling...
Administrative Policy
21 July 1992 External T.I. 5-921027
s. 55(5)(e) would not preclude a finding that two brothers who each owned 50% of the shares of two companies, acted in concert in respect of the...
Subparagraph 55(5)(e)(i)
Administrative Policy
23 March 2022 External T.I. 2021-0921261E5 - Bill C-208 - 55(5)(e)(i)
Regarding the meaning of “or” in the phrase “the dividend was received or paid” included in the exclusion added to s. 55(5)(e)(i) by Bill...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) | s. 55(5)(e)(i) exception (which cannot be used to multiply ACB) now permits a s. 55(3)(a) split-up between siblings where either the dividend recipient or payer is a QSBC | 223 |
Articles
David Carolin, Manu Kakkar, "Imperfect Timing: Subparagraph 55(5)(e)(i) Cannot Be Used in Purification Transactions", Tax for the Owner-Manager, Vol. 24, No. 2, April 2024. p. 7
- Although s. 55(5)(e)(i) deems siblings to deal with each other at arm’s length for the purposes of the butterfly rules, on June 29, 2021 it was...
| Other locations for this summary | |
|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(5) - Paragraph 55(5)(e) - Subparagraph 55(5)(e)(i) |
Subparagraph 55(5)(e)(ii)
Administrative Policy
10 October 2014 APFF Roundtable, 2014-0538021C6 F - Meaning of beneficiary
In Fiducie Famille Salammbô c. Ville de Montréal (2011 QCCQ 11322), a mutations tax case, the Court found that potential non-designated...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) | Propep applied: beneficiary under s. 55(5)(e)(ii) included beneficially interested per s. 248(25)(a) | 231 |
2 November 2009 External T.I. 2009-0317541E5 F - Transfer to Corporations Owned by Brothers
A holds preferred shares of Corporation A directly (Class B shares with a redemption amount and ACB (reflecting a previous crystallization...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(4) | use of special voting shares by father questioned where most of the economic interest in the split-up business goes to the children | 747 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) | interest on debt assumed by Holdco to acquire non-dividend-bearing prefs of Opco was non-deductible even though commons also acquired – but amalgamation cured | 264 |
8 October 2004 APFF Roundtable Q. 28, 2004-0086961C6 - Interaction of 55(5)(e)(ii) and 248(25)(a)
Can CRA indicate whether s. 55(5)(e)(ii) should be interpreted in light of s. 248(25)(a)?
CRA indicated that "the concept of 'person beneficially...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) | 0 |
Articles
Michael Goldberg, "Not Quite Chicken Soup – Part II: Are Powers to Add and Remove Beneficiaries Safe for Canadian Family Trust Precedents", Tax Topics, Number 2175, November 14, 2013, p.1.
Effect of power to add and remove beneficiaries (PARB) (p. 2)
However, if the beneficially interested concept is applicable for purposes of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) | 422 |
Subparagraph 55(5)(e)(iii)
Administrative Policy
20 December 2000 External T.I. 2000-0043725 - Unrelated Persons
S, and S’s two parents, are the three trustees of a personal trust ("J Trust"), whose beneficiaries are the children and grandchildren of his...
Paragraph 55(5)(f)
Cases
Her Majesty the Queen, Appellant v. Nassau Walnut Investments Inc., Respondent, 97 DTC 5051, [1998] 1 CTC 33 (FCA)
Although it had been planned that the portion of deemed dividends received by the taxpayer (arising on the redemption of shares held by it) that...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) | late s. 55(5)(f) designation available | 194 |
| Tax Topics - Statutory Interpretation - Expressio Unius est Exclusio Alterius | express limited relief does not imply no other relief | 74 |
| Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) | taxpayer can amend return on objection in respects relevant to issues surrounding the reassessment | 112 |
See Also
101139810 Saskatchewan Ltd. v. The Queen, 2017 TCC 3
An individual (Case) held his 1/3 shareholding in a small business corporation through a personal holding company (8231) which also held 1/3 of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) | s. 55(2) assessment of corporate tax on bad butterfly confirmed notwithstanding same accrued gain reported at individual shareholder level | 489 |
| 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 |
Gestion Jean-Paul Champagne Inc. v. MNR, 97 DTC 155, [1996] 2 CTC 2537 (TCC)
The taxpayer, which failed to report the receipt of a deemed dividend in its tax return for the relevant taxation year, was found to be entitled...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) | 92 |
Administrative Policy
21 November 2017 CTF Roundtable Q. 5, 2017-0726381C6 - 55(5)(f) and 55(2.3) with 55(2.1)
CRA rejected the suggestion that safe income of Opco effectively can be duplicated on the basis that where a dividend in excess of safe income is...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(b) | notwithstanding dividend bifurcation under s. 55(5)(f) (or 55(2.3)), the s. 55(2.1)(b) purpose test is to be applied to the whole dividend | 238 |
| 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 |
9 March 2016 External T.I. 2016-0630281E5 F - Redemption of shares and changes to 55(2)
Where the dividend resulting under s. 84(3) from a redemption of shares exceeds the safe income stipulated in ss. 55(5)(b) to 55(5)(d), will it be...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) | exemption of s. 84(3) deemed dividend not exceeding safe income | 152 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) - Paragraph 55(2)(b) | demarcation between ss. 55(2)(b) and (c) | 286 |
24 November 2015 CTF Roundtable Q. 4, 2015-0610701C6 - Surplus Stripping and GAAR
Approximately 25% of the fair market value of the OPCO shares owned by Mr. A, who is one of its shareholders and who wants to extract its surplus,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | deliberate triggering of s. 55(2) gain does not violate GAAR | 226 |
16 June 2014 STEP Roundtable, 2014-0522991C6 - Safe Income
CRA stated that its long-standing practice "is to apply subsection 55(2) only to the excess of the taxable dividend paid on a share over the safe...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2.1) - Paragraph 55(2.1)(c) | s. 55(5)(f) designation unnecessary | 186 |
7 October 2011 Roundtable, 2011-0412091C6 F - Late Filed Paragraph 55(5)(f) Designation
Would CRA accept a late filed designation under s. 55(5)(f)? CRA responded:
Given the FCA’s judgment in Nassau Walnut, the CRA's long-standing...
1992 A.P.P.F. Annual Conference, Q. 2 (January - February 1993 Access Letter, p. 50)
RC will accept a designation that is filed with a late-filed income tax return, or a designation that is filed after the filing of the income tax...
June 1990 Meeting of Alberta Institute of Chartered Accountants (November 1990 Access Letter, ¶1499, Q. 5)
Rulings have been granted wherein a corporation is permitted to make more than one s. 55(5)(f) designation provided that there is an explanation...
June 1990 Meeting of Alberta Institute of Chartered Accountants (November 1990 Access Letter, ¶1499, Q. 6)
There is no provision for a taxpayer to make late or amended designations under s. 55(5)(f).
90 C.P.T.J. - Q.21
It is the practice of RC to accept a designation under s. 55(5)(f) which is filed before the time has expired for filing a notice of objection in...
90 C.P.T.J. - Q.19
s. 55(5)(f) does not allow for the use of a formula, rather than an amount, in the designation of a separate taxable dividend.
Articles
Rick McLean, Jeff Oldewening, Jonas Lau, "Capital Gains Stripping and Surplus Stripping", 2017 Annual CTF Conference draft paper
Introduction of the bifurcation rules (p. 10)
Any other taxable dividend is no longer protected from recharacterization by the internal...