Regulation 5301

Subsection 5301(1)

Administrative Policy

15 February 2013 Internal T.I. 2012-0455351I7 - Composition of a Corporation's Instalment Base

A transferor corporation transferred its Part VI.1 tax liability for 2011 in the amount of $8,000, to a related transferee, which was assessed for that amount pursuant to s. 191.3(3) in respect of that transfer, and so that the Part VI.1 tax liability of the transferor for 2011 was nil. No such transfer was made for 2010 or 2009. CRA stated:

[O]nly the amount assessed under subsection 191.3(3) would form part of the instalment base of the transferee corporation. Since the corporation was not assessed under subsection 191.3(3) in 2010 and 2009 for Part VI.1 tax, no such tax would be included in its instalment base in those years.

Subsection 5301(4)

Paragraph 5301(4)(a)

Administrative Policy

16 October 2012 External T.I. 2011-0425271E5 F - Small CCPC

Amalco’s instalments based on tax payable of predecessors

For the purpose of establishing the frequency of the instalment payments of the corporation formed on the amalgamation of a CCPC, is it necessary to adjust the taxable income or taxable capital, as the case may be, of the new corporation? CRA stated:

Paragraph 5301(4)(a) of the Regulations provides that for the purposes of section 157, the "first instalment base" of a new corporation that was formed as a result of an amalgamation for its first taxation year is calculated by taking into account the tax payable under Part I of the Act by the predecessor corporations for their last taxation year. In addition, a new corporation created as a result of an amalgamation can qualify as SCCPC if all the conditions set out in subsection 157(1.2) are satisfied. The taxable income and taxable capital employed in Canada of the predecessor corporations for the taxation year that ended immediately before the amalgamation shall not be taken into account for the purposes of paragraphs 157(1.3)(b) and 157(1.4)(b) to determine whether the new corporation qualifies as a SCCPC since that corporation is deemed to be a new corporation and the predecessor corporations are deemed to have ceased to exist.

[T]he amount of the instalments in the first year of taxation of a new corporation that has been created as a result of an amalgamation is calculated on the basis of the tax payable by the predecessor corporations for their last taxation yearn and the new corporation created as a result of the amalgamation may make its instalment payments on a quarterly rather than monthly basis for its first taxation year if all the conditions in subsection 157(1.2) of the Act are satisfied.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 157 - Subsection 157(1.2) - Paragraph 157(1.2)(a) carryback of losses can produce small CCPC ("SCCPC") status (quarterly instalments) but not reduce instalment base 266
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(6) - Paragraph 5301(6)(a) flow-through of attributes of wound-up sub 180
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(8) - Paragraph 5301(8)(a) 1st instalment base of transferor taken into account by transferee 194

Subsection 5301(6)

Paragraph 5301(6)(a)

Administrative Policy

16 October 2012 External T.I. 2011-0425271E5 F - Small CCPC

flow-through of attributes of wound-up sub

For the purpose of establishing the frequency of the instalment payments for parent corporation following the winding-up of a CCPC, is it necessary to adjust the taxable income or taxable capital, as the case may be, of the parent? CRA responded:

Where a subsidiary within the meaning of subsection 88(1) has been wound-up and all or substantially all of the property of the subsidiary has been distributed to its parent corporation, paragraph 5301(6)(a) of the Regulations provides that the "first instalment base" of the parent company for the taxation year in which the property of the subsidiary was distributed to it is calculated in particular by taking into account the "first instalment base" of the subsidiary. Furthermore, the taxable income and taxable capital employed in Canada of a subsidiary for the taxation year of its winding-up must be taken into consideration for the purposes of paragraphs 157(1.3)(b) and 157(1.4)(b) to determine whether the parent qualifies as a SCCPC [small CCPC] since the parent and the subsidiary are associated in the course of the particular taxation year by virtue of paragraph 256(1)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 157 - Subsection 157(1.2) - Paragraph 157(1.2)(a) carryback of losses can produce small CCPC ("SCCPC") status (quarterly instalments) but not reduce instalment base 266
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(4) - Paragraph 5301(4)(a) Amalco’s instalments based on tax payable of predecessors 278
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(8) - Paragraph 5301(8)(a) 1st instalment base of transferor taken into account by transferee 194

Subsection 5301(8)

Administrative Policy

15 April 1991 T.I. (Tax Window, No. 2, p. 16, ¶1204)

Where in an attempt to circumvent Regulation 5301(8) a corporation transfers all or substantially all of its assets to more than one corporation with which it does not deal at arm's length, s. 245(2) may be applied.

Paragraph 5301(8)(a)

Administrative Policy

16 October 2012 External T.I. 2011-0425271E5 F - Small CCPC

1st instalment base of transferor taken into account by transferee

For the purpose of establishing the frequency of the instalment payments for a particular corporation following the transfer to it of property of a CCPC, is it necessary to adjust the taxable income or taxable capital, as the case may be, of the transferee corporation? CRA responded:

Paragraph 5301(8)(a) of the Regulations provides for the calculation of the "first instalment base" of a transferee corporation where another corporation (the transferor) with which it was not dealing at arm’s length disposed of all or substantially all of its property to it and where section 85 applied to the disposition. Thus, the transferee corporation must consider the "first instalment base" of the transferor when calculating its "first instalment base" for its taxation year in which the disposition falls. However, the taxable income and taxable capital employed in Canada of the transferor for the taxation year in which the disposition falls will be taken into account for the purposes of paragraphs 157(1.3)(b) and 157(1.4)(b) to determine whether the corporation qualifies as a SCCPC [small CCPC] for the taxation year in which the disposition occurs only if the corporation and the corporation are associated during that taxation year.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 157 - Subsection 157(1.2) - Paragraph 157(1.2)(a) carryback of losses can produce small CCPC ("SCCPC") status (quarterly instalments) but not reduce instalment base 266
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(4) - Paragraph 5301(4)(a) Amalco’s instalments based on tax payable of predecessors 278
Tax Topics - Income Tax Regulations - Regulation 5301 - Subsection 5301(6) - Paragraph 5301(6)(a) flow-through of attributes of wound-up sub 180

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