According to the CRA, cash is property for the purposes of the application of s 55(2.1)(b)(ii)(B). 2016 CTF Roundtable Q8. S 55(2.1)(b) reads as follows: (b) it is the case that (i) one of the purposes of the payment or…
More s 55 hocus pocus
Holdco owns all of Opco’s issued shares. Both corporations have calendar year-ends. Opco doesn’t have any safe income, but it has $383,333 of RDTOH. Opco pays a $1 million dividend to Holdco, which pays a $1 million dividend to its…
You’d better calculate safe income
The CRA appeared unsympathetic to the idea that detailed calculations of safe income might not be necessary where Opco is wholly-owned by Holdco, and Opco accounting income does not differ greatly from its taxable income. The CRA representative spoke darkly…
Discretionary dividend shares
Suppose shareholders of Opco hold different classes of common shares on which dividends can be paid at the discretion of the board so that one class can receives dividends to the exclusion of other classes. All common shares participate pro…
55(2) and creditor-proofing
The new purpose tests in section 55 make creditor proofing problematic. The 55(3)(a) exception remains, however, for deemed dividends. Perhaps it’s possible, then, to achieve creditor proofing by engaging in a 55(3)(a) butterfly. Not so fast. The CRA’s comments at…
55(2) This Week
Manu Kakkar and Marissa Halil, in “Subsection 55(2): The CRA’s Recent Positions” Tax for the Owner-Manager 16:1 (January 2016), provide a useful summary of the CRA’s pronouncements on 55(2) at the Tax Foundation conference. The CRA is concerned that deliberately…
55(2) as a tax reduction tool
The CRA accepts that the GAAR will not apply where a taxpayer deliberately triggers 55(2) to reduce tax. Rather than having Opco pay a dividend to Mr A, Mr A could roll his shares of Opco to Holdco and have…
Safe income and trusts
The CRA accepts that a safe income dividend paid from Opco to a trust-shareholder, which then allocates the dividend to Holdco, one of the trust’s beneficiaries, will be added to Holdco’s safe income. Technical interpretation 2014-0538061C6 dated October 10, 2014,…
55(3)(a) and GAAR
The CRA has said that GAAR might apply to a deemed dividend otherwise exempt under 55(3)(a) where the purpose is to increase the cost of property (55(2.1)(b)(ii)(B)). Is that right? 55(3)(a) was amended to be applicable only in respect of…