Subsection 89(1) - Definitions
Adjusted Taxable Income
Administrative Policy
20 June 2016 External T.I. 2016-0648481E5 F - Small business deduction and GRIP
Can a corporation choose not to take the small business deduction to enable it to add an amount to its general rate income pool account ("GRIP "),...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(1) | SBD discretionary | 37 |
Canadian corporation
Administrative Policy
88 C.R. - Q.9
A corporation incorporated in a foreign jurisdiction that is continued in Canada is not a Canadian corporation as it was not incorporated in Canada.
Capital Dividend Account
Cases
Canada v. Innovative Installation Inc., 2010 DTC 5175 [at 7317], 2010 FCA 285
In order to ensure payment of a loan owing by the taxpayer ("Innovative") to a bank (RBC) on the death of Innovative's principal (Mr Peacock),...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Payment & Receipt | indirect receipt through debt repayment | 156 |
See Also
CSI Development Corp. v. The Queen, 99 DTC 1139 (TCC)
McArthur TCJ. found that the amount added to the taxpayer's capital dividend account as the result of the realization by a partnership of an...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc. | 79 |
Administrative Policy
3 December 2015 External T.I. 2015-0613761E5 F - Capital Dividend Account
Where a corporation donates ecologically sensitive lands so as to be eligible for the s. 110.1(1)(d) deduction, what amount will be added to its...
9 October 2015 APFF Roundtable Q. 6, 2015-0595551C6 F - Capital Dividend Account
If Holdco (a CCPC) has realized $1M in allowable capital losses on its public company portfolio, its subsidiary (Opco) has realized a $1M taxable...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(z.1) | amalgamation can cause a combined positive CDA balance to be zeroed | 161 |
18 August 2014 External T.I. 2014-0540361E5 F - CDA and the deeming rules of 40(3.6) or 112(3)
A corporation's capital dividend accounts will not be reduced by a loss on the redemption of shares held by it where such loss is deemed to be nil...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(b) | ss. 112(3) and 40(3.6) stop-loss rules modify operation of s. 40(1)(b) | 128 |
19 December 2013 Internal T.I. 2013-0490751I7 - Adjustment to a taxpayer`s CDA
The taxpayer, which was a private corporation, disposed of eligible capital property to a non-arm's-length non-resident sister company...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(8) | s. 247(2) trumps s. 69(1) | 80 |
25 March 2013 External T.I. 2012-0447171E5 - Creditor's Group Life Insurance and CDA
Creditor's group life insurance products generally have no cash surrender value, premiums payable with respect to a particular debtor for this...
5 October 2012 APFF Roundtable Q. 8, 2012-0454161C6 F - Computation of CDA and Acquisition of Control
Where Mr. A, who owns 50% of the shares of a CCPC ("Gesco") having net capital losses of $200,000, purchases the other 50% shareholding of Mr. B,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 81 |
24 May 2012 External T.I. 2012-0441151E5 - Donation of flow-through shares - 40(12) and CDA
Where a private corporation holding flow-through shares as capital property gifts the shares to a qualified donee, it will include the capital...
8 May 2012 CALU Roundtable Q. 6, 2012-043564
Shareholders of a corporation use a buy-sell agreement to requires the corporation to acquire insurance on the shareholders' lives (and pay the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) | holder of insurance proceeds as agent | 194 |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 115 | |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 124 |
8 May 2012 CALU Roundtable Q. 6, 2012-043564
On the same facts as for Q. 6.1 above except that the buy-sell agreement gives an irrevocable direction to the insurer to pay the proceeds over to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) | holder of insurance proceeds as agent | 194 |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 115 | |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 194 |
8 May 2012 CALU Roundtable Q. 6, 2012-043564
On the same facts as for Q. 6.1 above except that the insurance policy names the Insurance Trustee as the beneficiary of the policy, for example,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(1) | holder of insurance proceeds as agent | 194 |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 124 | |
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account | 194 |
28 March 2012 External T.I. 2011-0412541E5 F - Compte de dividendes en capital
A deemed capital gain arising under s. 80(12) will result in an addition to the corporation's capital dividend account.
7 October 2011 APFF Roundtable Q. 29, 2011-0412131C6 F - Subsection 55(2) and Capital Dividend Account
if in the year prior to the sale of Opco by Holdco, Opco pays a dividend to Holdco which is subject to s. 55(2), s. 55(2)(b) generally would apply...
18 June 2007 External T.I. 2006-0215001E5
Each of the partners of a partnership with a fiscal period end of April 30, 200X and which disposed of eligible capital property in that year is a...
28 September 2006 Internal T.I. 2006-0202901I7 F - Subsection 80(4) - Impact on the CDA
A reduction of net capital losses pursuant to s. 80(4) would not be taken into consideration in computing a private corporation's capital dividend...
16 August 2004 External T.I. 2004-009046
A capital gains reserve taken in a taxation year will be included in the calculation of the capital dividend account balance on the first day of...
4 December 2003 External T.I. 2003-003859
"We would normally expect the partnership agreement to determine a particular partner's share of a capital dividend received by the partnership...
21 March 2002 External T.I. 2001-0115265 F
An addition to the CDA as a result of a disposition of goodwill can only be accessed through a capital dividend following the taxation year in...
22 November 2000 External T.I. 2000-004941
"Where, for example, a particular corporation is a member of a partnership which realized a capital gain in its fiscal period ending April 30,...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(b) | stock index link | 139 |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(3) - Participating debt interest | stock index link | 139 |
26 June 1998 External T.I. 5-972999
Because the amount in paragraph (a) cannot be less than zero, a company had a positive capital dividend account as a result of disposing of...
Income Tax Technical News, No. 10, 11 July 1997, "Life Insurance Policy Used as Security for Indebtedness"
26 July 1994 T.I. 941567 (C.T.O. "Capital Dividend Account")
Where a corporation is the beneficiary of a life insurance policy but is not the policyholder and has, therefore, not paid the premiums in respect...
15 February 1994 T.I. 940235 (HAA 7313-3) (C.T.O. "Life Insurance - Capital Dividend Account")
There is no requirement that the shareholders to whom a capital dividend is to be paid must have been shareholders at the time the corporation...
28 October 1993 External T.I. 5-932377
In order for life insurance proceeds to be included in the capital dividend account of a corporation, the proceeds must be considered to be...
20 September 1993 T.I. 932127 (C.T.O. "Life Annuities")
S.245 potentially could apply to a back-to-back insurance strategy which provided for the purchase of a term life insurance policy providing a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 70 - Subsection 70(5.3) | 50 |
24 July 1992 T.I. 921605 (C.T.O. "Living Benefits and Capital Dividend Account")
An advance payment of part of the sum assured under a policy where the life expectancy of the insured is less than two years due to a medically...
23 March 1992 T.I. (Tax Window, No. 18, p. 22, ¶1824)
Where two personal holding companies each own 50% of the shares of Opco and each holding company is the owner of an insurance policy on the life...
3 January 1992 Memorandum (Tax Window, No. 15, p. 8, ¶1682)
The capital dividend account with respect to a dividend paid part-way through the year was not reduced by the bankruptcy prior to that time of a...
12 November 1991 T.I. (Tax Window, No. 13, p. 4, ¶1592)
Where an individual owns a life insurance policy and pays all the premiums, but a corporation is the beneficiary, the corporation will add the...
31 May 1990 T.I. (October 1990 Access Letter, ¶1468)
The amount of 1% of a price paid to the vendor of a winning lottery ticket under Lotto-Québec would not be included in the vendor corporation's...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business | 24 | |
| Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement | 24 |
31 January 1990 T.I. (June 1990 Access Letter, ¶1266)
In computing the capital dividend account of a corporation following the winding-up of the wholly-owned subsidiary, separate calculations must be...
9 November 89 T.I. (April 90 Access Letter, ¶1176)
A business investment loss is a capital loss, and therefore will reduce a taxpayer's capital dividend account.
89 C.R. - Q.49
A prior year's capital gains reserve is considered to come into the capital dividend account calculation at the beginning of the year.
IT-66R6 "Capital Dividends"
Articles
Strain, "Estate Planning: Life-Insured Share Redemption Provides Advantages over Outright Buy Back", Taxation of Executive Compensation and Retirement, September 1993, p. 811.
Paragraph (a)
Administrative Policy
17 August 2016 Internal T.I. 2016-0639251I7 - Capital Dividend Account and 149(1)(n)
Can an entity exempt under s. 149(1)(n) have and use a capital dividend account (“CDA”)? The Directorate responded:
[A] s. 149(1)(n) entity...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1.2) | deemed 149(10) gain does not add to CDA before it disapppears under 89(1.2) | 163 |
| Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(n) | can have a CDA while exempt | 89 |
29 November 2016 CTF Roundtable Q. 4, 2016-0671491C6 - 55(2) and Part IV Tax
Taking its RDTOH of $383,333 into account, Opco pays a taxable dividend of $1,000,000 to Holdco (its wholly-owning parent also with a calendar...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) | repeal of the s. 55(2) exemption, for dividends for which the Part IV tax is refunded on on-payment to an individual shareholder, busts integration | 93 |
Paragraph (b)
Paragraph (c.1)
See Also
Non Corp Holdings Corp. v. Canada (Attorney General), 2016 ONSC 2737
Following the sale of a business giving rise to a “capital gain” (likely, goodwill proceeds), the dividend of the targeted capital dividend...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Rectification & Rescission | date of capital dividend declaration rectified to eliminate Part III tax | 174 |
Paragraph (d)
Excessive Eligible Dividend Designation
Administrative Policy
11 October 2013 APFF Roundtable, 2013-0495781C6 F - GRIP Exceeds Safe Income
Targetco is a CCPC owned by Sellco (also a CCPC) and has a GRIP account of $2.6M. However, the safe income on hand of Sellco in respect of the...
General Rate Income Pool
Administrative Policy
20 February 2014 External T.I. 2013-0480051E5 F - Eligible dividend and safe income
Holdco, which is unrelated to Opco or any other shareholder, holds 30% of both the Class A common and Class B preferred shares of Opco. Its Class...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(14) | eligible dividend allocation solely to safe income portion of dividend | 191 |
16 April 2013 External T.I. 2013-0477771E5 F - Calculation of the general rate income pool
A Canadian-resident corporation (Corporation A), which presents performances of an artist (A) who is its sole shareholder, became a...
28 November 2010 CTF Annual Conference Roundtable Q. 5, 2010-0385991C6 - 2010 CTF - Q. 5 - 55(2) and GRIP
Where a CCPC pays an eligible dividend across a single class of shares owned 50/50 by a Canadian resident individual and a Canadian resident CCPC,...
Income Tax Technical News, No. 41, 23 December 2009
Where the full amount of the dividend paid by a CCPC is designated as an eligible dividend but a portion of the dividend is received by a...
Articles
John Granelli, "Getting a Handle on GRIP", Tax Topics (Wolters Kluwer), No. 2252, May 7, 2015, p. 1
Addition to general rate income pool differs from actual after-tax income subject to full rates (p.1)
[T]he following table compares the GRIP...
Jennifer Smith, Trent Henry, "De-tax the Dividends", CA Magazine, December 2006, p. 40.
Paid-Up Capital
See Also
Insight Venture Associates III, LLC v. SLM Soft Inc. (2003), 67 O.R. (3d) 115 (S.C.J.)
With respect to s. 23 of the Ontario Business Corporations Act … the effect of the conversion [of] a debt security into shares releases the...
Administrative Policy
2015 Ruling 2015-0584151R3 - Conversion of Contributed Surplus to PUC
A non-resident corporation governed by a non-resident jurisdiction’s corporate law had issued share capital based only on the “nominal...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84 - Subsection 84(1) | cross-border inbound continuance of corporation with different labels for capital and surplus followed by conversion of capital surplus to stated capital | 245 |
20 March 2015 External T.I. 2014-0535971E5 - Meaning of "paid-up capital" in subsection 90(3)
CRA stated that "to the extent [the applicable State corporate] laws and constating documents do not provide for stated capital akin to that which...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(3) | LLC with partner capital-account style LLC Agreement does not have PUC | 251 |
8 October 2010 APFF Roundtable, 2010-0373301C6 F - Classes of shares with identical characteristics
If classes of shares with identical characteristics are created under the Quebec Business Corporations Act, they will be considered to be separate...
October 1992 Central Region Rulings Directorate Tax Seminar, Q. 2 (C.T.O. Doc. No. 142 "Paid-Up Capital Foreign Currency Shares"; May 1993 Access Letter, p. 230)
Because where a transaction is on capital account, the Canadian dollar value of the transaction is calculated at the exchange rate prevailing at...
88 C.R. - Q.7
Where the stated capital in respect of a class of shares is maintained in a foreign currency, the paid-up capital in respect of shares of the...
88 C.R. - Q.35
Where subsequent to a transaction to which s. 85(2.1) applied, a corporation reduced its stated capital for corporate purposes, then the paid-up...
IT-463R2 "Paid-up Capital" 8 September 1995
2
Since subparagraph (b)(iii) of the definition of "paid-up capital" provides that the amount of the paid-up capital of a class of shares is...
Articles
Marshall Haughey, "Issuing Shares for a Promissory Note", 24 Can. Current Tax, May 2014, p. 85.
Prohibition by jurisdiction (pp. 85-6)
[I]n Saskatchewan, Manitoba, New Brunswick, and Newfoundland…a promissory note cannot be given as...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Illegality | 664 |
Vern Krishna, "Equity Financing: Corporate Aspects", 19 Canadian Current Tax, December 2008, p. 21.
Stephen Fyfe, Craig Webster, "Current Mutual Fund Developments and Products", 2000 Conference Report, c. 21: Discussion (at pp. 21:40-42) of paid-up capital of mutual fund corporation including:
A number of years ago, advance income tax rulings were sought from the CCRA with respect to whether a mutual fund corporation has paid-up capital...
Christopher J. Steeves, "Shares Issued for Foreign Currency and the Potential for Deemed Dividends", Corporate Structures and Groups, Vol. V, No. 4, 1999, p. 280: Discussion of the time at which the paid-up capital of a share issued in a foreign currency is translated into Canadian dollars.
Private Corporation
Administrative Policy
80 C.R. - Q.25
The status of a private corporation does not change on the acquisition of its control by a public corporation acting as executor or trustee as a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 256 - Subsection 256(1) - Paragraph 256(1)(b) | 37 |
Public Corporation
Administrative Policy
2015 Ruling 2015-0577141R3 - Election to cease to be a public corporation
Proposed transactions
Bidco, which is a wholly-owned Canadian-resident subsidiary of Holdco2, which is a non-resident wholly-owned subsidiary of a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(ii) | closely-held Amalco can elect following the delisting of shares of a public predecessor | 81 |
27 June 2014 External T.I. 2014-0527341E5 F - Sociétés publiques aux fins de SPCC
Are federal Crown corporations not prescribed in Regs. 6700 and 7100 considered public corporations for purposes of the definition of...
21 September 2012 External T.I. 2012-0455231E5 - Section 89(1) - defn of a "public corporation"
A wholly-owned subsidiary (Subco) of a public corporation (Pubco) that has never elected to be a public corporation itself, will not itself be a...
26 September 1996 External T.I. 5-962766
"The Department takes the view that shares that are conditionally listed will not be listed for purposes of the Act until the time at which all of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 48.1 - Subsection 48.1(1) | 53 |
Forms
T2067 "Election not to be a Public Corporation"
At the time of this election, for each class of shares referred to in 2 above:
a) insiders of the...
Subsection 89(1.2)
Administrative Policy
17 August 2016 Internal T.I. 2016-0639251I7 - Capital Dividend Account and 149(1)(n)
CRA indicated that one-half of the capital gains generated by a private corporation that is exempt as a low-rental housing corporation under s....
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (a) | exempt low-rental housing corp can use a CDA | 118 |
| Tax Topics - Income Tax Act - Section 149 - Subsection 149(1) - Paragraph 149(1)(n) | can have a CDA while exempt | 89 |
Subsection 89(7) - GRIP addition for 2006
Administrative Policy
21 March 2013 External T.I. 2013-0476901E5 F - GRIP addition under 89(7)
Situation 1
Corporation A received a taxable dividend of $1M from its wholly-owned subsidiary (Corporation P) on January 1, 2001, then sold all...
Subsection 89(8) - LRIP addition — ceasing to be CCPC
Administrative Policy
19 January 2011 External T.I. 2010-0390831E5 - Compute LRIP - corporation becomes non-CCPC
A future income tax asset is not "property" within the meaning of variable A of s. 89(8) as it does not represent a "right" - unless the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property | 39 |
Subsection 89(11) - Election: non-CCPC
Administrative Policy
May 2013 ICAA Roundtable, Q. 24 (reported in April 2014 Member Advisory)
[A] subsection 89(11) election does not prevent an otherwise qualifying CCPC from receiving the enhanced federal SR&ED rate of 35%. The election...
Subsection 89(14) - Dividend designation
Administrative Policy
20 November 2015 External T.I. 2014-0539951E5 - Foreign Currency Denominated Dividends
Citing Banner Pharmacaps, CRA considered that a dividend does not “arise” for s. 261(2) purposes until it is paid (rather than declared) so...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) | U.S.-dollar dividends are translated on a cash rather than accrual basis | 279 |
20 February 2014 External T.I. 2013-0480051E5 F - Eligible dividend and safe income
Holdco, which is unrelated to Opco or any other shareholder, holds 30% of both the Class A common and Class B preferred shares of Opco. Its Class...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - General Rate Income Pool | eligible dividend allocation solely to safe income portion of dividend | 168 |
6 January 2014 External T.I. 2013-0512041E5 F - Dividend Designation under subsection 89(14)
After noting that an alleviatory amendment was made to s. 89(14) effective for dividends paid after March 28, 2012 to address the problem that...
5 October 2012 APFF Roundtable, 2012-0454091C6 F - GRIP and deemed dividend pursuant to 84.1(1)(b)
Mr and Mrs X hold all the shares of A and B, respectively (both private corporations). Mr X sells all his shares of A to B in consideration for a...
8 October 2010 APFF Roundtable Q. 11, 2010-0373281C6 F - Redemption of shares and eligible dividend
CRA's position that, in order to be valid, an eligible dividend designation must stipulate the amount of the dividend, only applies to regular...
Income Tax Technical News, No. 41, 23 December 2009
"Eligible Dividend Designation - Subsection 89(14)".
Designation of Eligible Dividends 20 December 2006
Public Corporations
For ... public corporations, ... notification has been made if, before or at the time the dividends are paid, a designation is made stating that...
All Other Corporations
For 2007 and subsequent taxation years, for all corporations other than public corporations, the notification requirements of proposed subsection...
2 May 2008 External T.I. 2007-0249941E5 - Dividend designation
An eligible dividend designation by a CCPC must specify an amount.
Subsection 89(14.1) - Late designation
Administrative Policy
12 March 2015 External T.I. 2014-0541991E5 - Objection Eligible Dividend Designation
A Canadian-controlled private corporation ("Canco") declared and paid out a dividend at a time it had an insufficient GRIP balance to make an...
11 October 2013 APFF Roundtable, 2013-0495771C6 F - Late eligible dividend designation
underline;">: Q. 14(a)(1). [Essentially the same question and response as immediately below for 2013-0475261E5 respecting an excessive capital...
2 August 2013 External T.I. 2013-0475261E5 - Eligible Dividend - Late Filing 89(14.1) & 184(3)
A Canadian-controlled private corporation makes a s. 184(3) election to deem the excess portion of a capital dividend to be a separate taxable...
29 May 2012 CTF Prairie Tax Conference 2012 Roundtable, 2012-0445661C6 - Late Eligible Dividend Designation
The Minister will generally accept a late designation where, for example:
- there have been tax consequences not intended by the taxpayers and...