Section 187.2

After finding that s. 55(2) would apply to the deemed dividend arising on the redemption of preferred shares of a CCPC held by an unrelated public corporation, CRA stated:

[A] corporation is liable to pay Part IV.1 tax in respect of dividends, other than "excluded dividends", received by it in the year on a taxable preferred share, to the extent that an amount in respect of those dividends is deductible in computing its taxable income for the year under, inter alia, section 112. Section 187.2 would therefore not apply to a dividend amount that would be deemed not to be a dividend received by the corporation by virtue of subsection 55(2).