The authors describe a scenario where Aco and Bco own 85% and 15% respectively of Opco. Opco cannot spin-off its real property to Realco where Aco and Bco become direct 85/15 shareholders of Realco. 55(3)(a) will not apply because Bco…
Part IV and 55(2) confusion
Consider the situation where subsection 55(2) applies to a dividend because it is paid as part of a series that includes the refund of the Part IV tax that was payable on the dividend. Ottawa Air Cargo Centre Ltd. v…
Safe income again
A corporation must reduce the safe income of its shares by contingent liabilities and reserves, if they reduce the “inherent gain” of the shares. “The safe income is reduced by actual and potential cash outflows”. APFF 2022 Conference question 1,…
Safe income determination time
If Aco is incorporated to purchase the assets of Bco and then purchases the assets, Bco’s safe income is not increased by any gain realized on the sale if the incorporation of Aco triggers the safe income determination time. The…
RDTOH and safe income
The CRA accepts that, if refundable tax contributes to the gain on a share immediately before its disposition, it can also contribute to the safe income of the share. In the example, a corporation with a December 31 year-end, sells…
GAAR and 55(2)
3295940 Canada Inc. v R, 2022 TCC 68 considered a taxpayer who had wanted to sell shares of 329, which had a high tax cost, to an arm’s length purchaser. The purchaser would not buy the shares for commercial reasons.…
Dividend ordering
Holdco owns all of the shares of Opco, which are worth $5 million. The Opco shares have safe income of $1 million. Opco has GRIP of $1 million and NERDTOH of $70,000. Opco can pay a $1 million eligible dividend…
55(2) and T5s
Opco pays a dividend to Holdco, and part of the dividend is re-characterized as a capital gain under subsection 55(2). Does that affect the amount of the dividend reported on the T5 for the dividend? I have not been able…
Part IV and 55(2) protection
Under the new refundable tax rules, carefully paying dividends can maximize the use of both safe income and Part IV to protect dividends from 55(2). “This tax-planning opportunity requires very specific tax attributes for the payer: a GRIP corresponding to…
Post-butterfly dispositions gone wrong
The authors note a number of significant issues with 55(3.1)(c): What is a series of transactions? (55(3.1)(c)(i)) What is considered the ordinary course of business? (subclause 55(3.1)(c)(i)(A)(I)) How is the 10% allowable threshhold determined? (pre- and postamble to 55(3.1)(c) and…