Section 83

Subsection 83(2) - Capital dividend

Cases

2529-1915 Québec Inc. v. Canada, 2009 DTC 5023 [at 5585], 2008 FCA 398

Overview of facts. The two individual taxpayers devised a scheme to: generate artificial capital gains of $110 million in some home-grown...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Sham capital dividend elections for distributions of what should have been known to be income-account gains were shams 266
Tax Topics - General Concepts - Tax Avoidance capital dividend elections for distributions of what should have been known to be income-account gains were shams 266
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business shares premiums received for marketing tax scheme were business income 213
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares shares acquired for immediate resale as part of capital dividend account generation scheme were on income account 177
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business shares premiums received for marketing tax scheme were business income 223

Dale v. Canada, 97 DTC 5252, [1997] 2 CTC 286 (FCA)

At the time of a purported capital dividend on preference shares, the authorized capital of the corporation had not yet been amended to include...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date retroactive superior court order has retroactive effect for tax purposes 174
Tax Topics - General Concepts - Rectification & Rescission retroactive effect of nunc pro tunc rectification order 177
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Dividend 78
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) retroactive validation by Superior Court of preference share issuance was effective for s. 85 purposes 171
Tax Topics - Statutory Interpretation - Provincial Law 140

See Also

3295940 Canada Inc. v. The Queen, 2022 TCC 68, rev'd 2024 FCA 42

The taxpayer (3295940) was a holding company holding a shareholding in a Target with a low ACB (even after using safe income on hand to step up...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) circular use of capital dividends abused the purpose of the CDA 966
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d.2) indirect use of high outside basis in the taxpayer’s shares as compared to basis in shares sold by it was contrary to the policy of prohibiting a bump of the inside basis 195

Administrative Policy

7 October 2020 APFF Roundtable Q. 9, 2020-0852211C6 - Capital dividend

Immediately prior to closing a sale of a private corporation, its shareholder wishes to have all of the capital dividend account distributed to...

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7 October 2020 APFF Roundtable Q. 7, 2020-0852191C6 F - Capital dividend and series of shares

The questioner, after noting that the payment of capital dividends only to taxable shareholders of a private company and not to its- tax-exempt...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 83 - Subsection 83(2.1) s. 83(2.1) “should be considered” where one of the main purposes of a reorganization is to stream capital dividends 141

S3-F2-C1 - Capital Dividends

Full dividend

1.19 An election to pay a capital dividend should be filed on Form T2054 by the earlier of:

  • the day on which the dividend becomes...

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4 January 2012 External T.I. 2011-0414731E5 F - Interaction between 84.1 and 83(2) ITA

CRA does not plan to adopt an administrative position which would allow a private corporation to make a s. 83(2) election with respect to a...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84 - Subsection 84(7) s. 84(7) might contradict CRA position that no s. 83(2) election on s. 84.1 dividend to non-shareholder 105

30 May 2007 External T.I. 2006-0183851E5 F - Paragraphs 83(2) and 84.1(1)

Mr. X transfers high-low preferred shares of Opco 1 to Opco 2 (both held by him and related persons) in consideration for a note, such that he is...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(1) - Paragraph 84.1(1)(b) s. 84.1(1) dividend is payable per s. 84(7) so that s. 83(2) election available 62

26 September 2002 External T.I. 2002-0128955 F - 84.1(1)(b) Deem Dividend 83(2) CDA

An individual disposed of all of the shares of a private corporation to a corporation wholly owned by his wife (OP2) in consideration for a note...

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91 C.R. - Q.23

Where a corporation redeems shares owned by one shareholder, it may pay the balance of its capital dividend account to that one shareholder.

29 August 1991 T.I. (Tax Window, No. 8, p. 21, ¶1423)

No provision permits a late election.

25 June 1990 Memorandum (November 1990 Access Letter, ¶1523)

"There is no provision in sections 83 and 184 for amending an already filed election, for filing an amended election, for later substituting...

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Articles

Anthony Strawson, Timothy P. Kirby, "Vendor Planning for Private Corporations: Select Issues", 2017 Conference Report, (Canadian Tax Foundation), 11:1-28

Ability to use s. 84.1 deemed dividend as capital dividend (p. 11:22)

[l]n a 2002 technical interpretation, the CRA found that a purchaser...

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Subsection 83(2.1) - Idem [Capital dividend]

Cases

Groupe Honco Inc. v. Canada, 2014 DTC 5006, 2013 FCA 128, aff'g 2013 DTC 1032 [at 149], 2012 TCC 305, infra

Trudel JA stated (at para. 24) that:

[C]ounsel for the appellants is ignoring the purpose and spirit of subsection 83(2.1) of the Act in...

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Words and Phrases
one of the main purposes
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(10) sometimes elapsed time will be relevant to series determination 194

See Also

Travel Document Service & Ladbroke Group International v Revenue & Customs (Rev 1), [2018] EWCA Civ 549

A British taxpayer (TDS) used a total return swap to cause its share investment in a subsidiary (LGI) to be deemed to be a loan. However, its...

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Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions where an anti-avoidance provision’s application depended on the purpose of being a creditor, that purpose was the one for holding shares which were a deemed loan 379

Groupe Honco Inc v. The Queen, 2013 DTC 1032 [at 149], 2012 TCC 305, aff'd 2013 FCA 128, supra

On January 13, 1999, a newly-incorporated corporation ("New Supervac") was leased the assets of an unrelated corporation ("Old Supervac"), coupled...

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Barclays Mercantile Industrial Finance Ltd. v. Melluish, [1990] BTC 209 (Ch. D.)

The taxpayer ("BMI") acquired a film from a non-resident corporation ("WBI"), leased it to another corporation at a return that yielded 2.16% per...

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Words and Phrases
main object

Administrative Policy

7 October 2020 APFF Roundtable Q. 8, 2020-0852201C6 F - Acheminement du CDC / CDA Streaming

ACO (a CCPC) has three corporate shareholders, each holding 10 Class A common shares in its capital: BCO (exempt under s. 149(1)); CCO (a...

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7 October 2020 APFF Roundtable Q. 7, 2020-0852191C6 F - Capital dividend and series of shares

CRA confirmed that since s. 248(6) requires a series of shares to be treated as a separate class, a capital dividend could be paid by a private...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 83 - Subsection 83(2) capital dividends can be paid on one series and not the other 235

9 November 2017 External T.I. 2017-0704221E5 - Capital Dividend Account

Canco was the owner and beneficiary of a life insurance policy, with an adjusted cost basis of nil, on the life of its sole shareholder, Mr. X....

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2016 Ruling 2015-0624611R3 - Capital Dividend Account

An estate sold a private company (Canco 1) to a third party purchaser, which promptly amalgamated with Canco 1. To the surprise of the estate, the...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (d) proceeds of predecessor’s policy added to Amalco’s CDA when received 182

S3-F2-C1 - Capital Dividends

Main reason test

1.95 ... Groupe Honco...confirmed that a person can have more than one main reason for the acquisition of shares. If subsection...

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Words and Phrases
main reason

11 January 1994 External T.I. 9334235 F - CDA Anti Avoidance Rules

Where the shares of a corporation ("Opco") having a capital dividend account are transferred by a related individual to a newly-incorporated...

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29 June 2009 External T.I. 2008-0296371E5 F - Capital dividends

An estate owns all the shares of Corporation A, which has a capital dividend account (CDA) and refundable dividend tax on hand account (RDTOH) but...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1.2) s. 87(2)(aa) would apply to eliminate RDTOH of predecessor given the absence of an s. 83(2.4) equivalent to exempt the predecessor’s notional dividend 203
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(z.1) s. 87(2)(z.1) would apply to eliminate CDA of predecessor if the s. 83(2.4) exceptions did not prevent the application of s. 83(2.1) to the notional dividend paid by that predecessor 266

Articles

Michael McGowan, "HMRC v Lloyds Bank Leasing (No 1) Ltd: the troublesome increase in the scope of the "sole or main object" test", [2015] British Tax Review, No.5 2015 (Thomson Reuters (Professional) UK Limited), p. 649

Following the Lloyd Bank decisions ([2014] EWCA Civ 1062, remitted to [2015] UKFTT 401) dealing with an anti-avoidance provision which was engaged...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Purpose/Intention 644

Nathan Boidman, Canadian Tax Highlights, Vol. 22, No. 5, May 2014, p. 9.

Prevalence of "one of the main purposes" test (p. 9)

The phrase "one of the main purposes" (or "one of the main reasons," "one of the main...

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Subsection 83(2.2)

Administrative Policy

S3-F2-C1 - Capital Dividends

Overview

1.97 ...Subsection 83(2.2) provides that the anti-avoidance rule will not apply to a capital dividend paid to an individual if,...

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Subsection 83(2.3)

Administrative Policy

S3-F2-C1 - Capital Dividends

Overview

1.97 ...Subsection 83(2.3) provides that the anti-avoidance rule will not apply to capital dividends paid by a corporation where it is...

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Subsection 83(2.4) - Idem [Where s. (2.1) does not apply]

Administrative Policy

S3-F2-C1 - Capital Dividends

Overview

1.97 ... Subsection 83(2.4) provides that the anti-avoidance rule will not apply to a capital dividend paid to a related corporation...

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11 January 1994 External T.I. 9334235 F - CDA Anti Avoidance Rules

Where an individual transfers shares in a related corporation having a capital dividend account to a newly-incorporated holding corporation in...

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Subsection 83(3)

Administrative Policy

11 October 2019 APFF Roundtable Q. 13, 2019-0812721C6 F - Late-Filed CDA Election

Must the advance authorization (described in s. 83(3)(c)) by the directors be made before the declaration of the dividend or merely before the...

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30 August 2017 External T.I. 2017-0718311E5 F - Capital dividend account

On January 1, Corporation A paid a capital dividend of $40,000 to its sole shareholder, Corporation B, but did not make a late capital dividend...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (b) late capital dividend election retroactively affects CDA of dividend recipient 41

S3-F2-C1 - Capital Dividends

90-day limit

1.23 The late filing provisions described in ¶1.21 cease to be available for a particular dividend if a taxpayer does not comply...

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Subsection 83(3.1)

Administrative Policy

2 May 2005 Internal T.I. 2005-0119971I7 F - CDA - Excessive Election & Late Filed Election

CRA never received a s. 83(2) election in respect of a dividend payable in 1997 by Yco to its sole shareholder, an individual ("Y"). The normal...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 184 - Subsection 184(3) where the corporation failed to file s. 83(2) election, CRA should assess Pt. III tax first, then assess any s. 184(3) taxable dividends, without normal reassessment period limitation 106