Subsection 186(1) - Tax on assessable dividends
See Also
Les Entreprises Michèle L'Heureux Inc. v. The Queen, 94 DTC 1693 (TCC)
Dussault TCJ. accepted the Minister's "successive calculation method" in solving the circularity issues arising where in the course of a butterfly...
Administrative Policy
2014 Ruling 2014-0533601R3 - Spin-off butterfly - subsection 55(2)
A spin-off butterfly reorganization by DC entail a cross-redemption of shareholdings (being the "DC Butterfly Shares" and the "Spinco Redemption...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | spin-off by CCPC under Plan of Arrangement of two businesses/matching of PUC of cross-shareholdings to match Part IV tax/leased property as business property | 978 |
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(1) | stated capital distribution effected by set-off | 77 |
| Tax Topics - Income Tax Act - Section 86 - Subsection 86(1) | new common shares distinct on basis of right to interim financials | 97 |
2014 Ruling 2013-0513211R3 - Butterfly Transaction
In a butterfly reorganization for the split-up of DC into three TCs, the Part Iv tax circularity problem is addressed by having DC transfer its...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | transfer to TC subco to avoid Part IV circularity/88(2) wind-up of DC/83(2.1) rep | 470 |
30 June 2014 Internal T.I. 2013-0508411I7 F - Part IV Tax and the Dividend Refund
As a result of a tuck under transaction, Investments and XX each held shares in the other. Investments, which had an RDTOH balance at year end,...
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| Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) | failure to circularly calculate Part IV tax and dividend refund is carelessness | 236 |
27 June 2014 External T.I. 2013-0498191E5 F - Interaction entre 55(2) et l'impôt de partie IV
On a cross-share redemption between two connected Canadian-controlled private corporations, neither of which has a refundable dividend tax on hand...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) | s. 55(2) tax on cross-redemption deemed dividends between connected CCPCs gave rise to circular Part IV tax | 355 |
2013 Ruling 2013-0502921R3 - Split-Up Butterfly - Farm
Butterfly
A standard split-up butterfly of D commences with DC paying a dividend (through issuing demand notes) to each of Son1, Son2 and Mother...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | split-up b/f of CCPC with discontinued farm and unresolved circularity issue | 609 |
2013 Ruling 2012-0443081R3 - Distribution of pre-72 Capital Surplus on Hand
(Amended only re one ruling in 2013-0512531R3)
Current situation
ACo, which is a Canadian-controlled private corporation (with an RDTOH...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 54 - Personal-Use Property | 118 | |
| Tax Topics - Income Tax Act - Section 88 - Subsection 88(2) | 737 |
2013 Ruling 2012-0449611R3 - single-wing butterfly reorganization
Existing situation
DC, which is a CCPC beneficially owning rental real estate encumbered with mortgages (the "Buildings") and which carries on a...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(1) - Distribution | single-wing b/f with acquisition of control of DC by its remaining shareholder (helpful re circularity issue) | 566 |
93 C.R. - Q. 44
RC is prepared to consider requests for refunds of Part IV tax paid by a parent for a year in which it received a dividend from a subsidiary (that...
4 March 1991 T.I. (Tax Window, No. 2, p. 15, ¶1183)
A private corporation is required to pay Part IV tax under s. 186(1)(b) irrespective whether the payor corporation actually applies for the...
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| Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) | 22 |
IT-474R "Amalgamations of Canadian Corporations" under "Rules Respecting Shareholders, Option Holders and Creditors" under "Non-Resident Shareholders"
"A non-resident holder of shares of a predecessor corporation which constitute taxable Canadian property need not comply with the procedures set...
Articles
Michael N. Kandev, Alan Shragie, "RDTOH on Butterfly", Canadian Tax Highlights, Volume 16, Number 11, November 2008, p. 2.
Use of sub of TC to avoid circularity (p.2)
CRA document 2007-0237361R3 suggests an approach that may permit an allocation of a share of the RDTOH...
Potter, "Part IV Tax Complications in Butterfly Transactions", 1992 Canadian Tax Journal, No. 4, p. 992.
Paragraph 186(1)(a)
Administrative Policy
3 June 2016 External T.I. 2016-0647621E5 F - Dividend designation from a trust - timing
A dividend is received by a family trust from a Canadian-controlled private corporation with only operating assets (Opco) and immediately...
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| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(19) | designation not effective until end of year | 230 |
Paragraph 186(1)(b)
Administrative Policy
2015 Ruling 2015-0605901R3 F - Présomption de gain en capital
The proposed transactions contemplate (in para. 24) respecting a spin-off of real estate by Opco to newly-incorporated Realtyco that Opco (with...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3.01) - Paragraph 55(3.01)(g) | separation of real estate assets beneath new holdco formed by unrelated shareholders | 567 |
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(3) - Paragraph 55(3)(a) - Subparagraph 55(3)(a)(ii) | spin-off of real estate beneath new common holdoc of unrelated shareholders | 107 |
| Tax Topics - Income Tax Act - Section 249.1 - Subsection 249.1(7) | taxation year end changed to immediately before building spin-off | 95 |
24 November 2015 CTF Roundtable Q. 1, 2015-0610691C6 - T2 Late-Filing: Impact on Div. Refund and RDTOH
Will CRA require a dividend recipient to pay Part IV tax if it receives a dividend from a connected dividend payer that had RDTOH at the end of a...
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| Tax Topics - Income Tax Act - Section 129 - Subsection 129(1) | unclaimed dividend refunds did not reduce the corporation’s RDTOH | 200 |
Subsection 186(2) - When corporation controlled
See Also
Special Risks Holdings Inc. v. The Queen, 84 DTC 6505, [1984] CTC 553 (FCTD), aff'd 86 DTC 6036, [1986] 1 CTC (FCA)
Exactly 1/2 of the common shares of a corporation ("Melling, Hogg") were purchased by the plaintiff, and the other 1/2 were purchased by a United...
Administrative Policy
10 October 2014 October APFF Roundtable Q. 18, 2014-0538081C6 F - 2014 APFF Roundtable, Q. 18 - Connected corporations
Aco holds one share of Cco bearing 1000 votes and Cco holds 100 share of Bco carrying one vote per share. Aco and Cco deal at arm's length. The...
29 July 1992 T.I. (Tax Window, No. 21, p. 7, ¶2054)
Where an individual owns all the shares of Holdco which, in turn, owns all the shares of Opco, a loan receivable owing by Holdco to Opco will...
15 May 1991 T.I. (Tax Window, No. 6, p. 2, ¶1357)
Where the shares of Parentco are owned by related persons, its subsidiary will be deemed for purposes of Part IV and the definition of a qualified...
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|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share | 35 |
31 July 1989 T.I. (Dec. 89 Access Letter, ¶1053)
A corporation ("Opco") all of whose voting shares are held by an individual is connected with a second corporation which holds the non-voting...
Subsection 186(4) - Corporations connected with particular corporation
Administrative Policy
22 July 1993 T.I. 931385 (C.T.O. "Connected Corporations")
"The existence of a shareholders' agreement or a voting trust which dictates the manner in which the shares are to be voted will not disqualify...
16 December 1992 T.I. 920178 (November 1993 Access Letter, p. 511, ¶C245-050)
Discussion of whether s. 245 will apply where additional shares are required, or shareholdings are pooled, in order that Part IV tax will not...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 30 |
26 August 1992 T.I. (Tax Window, No. 23, p. 12, ¶2155)
The definition of control in s. 186(2) should be used in applying the tests in s. 186(4) even where those tests relate to provisions outside Part...
25 and 28 March 1991 T.I. (Tax Window, No. 1, p. 5, ¶1178)
A corporation is not "connected" with its wholly-owned subsidiary.
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | 68 |
90 C.R. - Q26
A corporate beneficiary of a trust will not be considered for purposes of s. 186(4)(b) to own shares held by the trust notwithstanding that the...
IT-269R3 "Part IV Tax on Taxable Dividends Received by a Private Corporation or a Subject Corporation"
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| Tax Topics - General Concepts - Fair Market Value - Shares | 57 |
Subsection 186(5) - Deemed private corporation
Administrative Policy
18 December 2001 External T.I. 2001-007392
"While subsection 186(5) does not specifically refer to paragraph 88(1)(e.2) it is our view that such reference is not necessary. Therefore, where...
Subsection 186(6) - Partnerships
Administrative Policy
6 November 2013 External T.I. 2013-0485691E5 - Connected Corporation and Part IV Tax
The recipient corporation owns 20% of the shares of a payer corporation (and is thus connected under s. 186(4)(b), and also owns 12.5% of the...
Subsection 186(7) - Interpretation
Administrative Policy
8 January 2003 External T.I. 2002-017366
Two corporations which have no direct ownership in each other but which are controlled by the same person would be considered to be connected...