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 Opco repurchase the shares. If Mr A doesn’t make a 55(5)(f) designation, the entire amount of the deemed dividend will be re-characterized as a capital gain (although, according to a statement made by the CRA last year, such a designation is unnecessary, which is unhelpful if the goal is to ensure that the entire deemed dividend is treated as a gain instead).
The CRA says that it has notified Finance. (Editorial comments from Loukidelis: Perhaps Finance should get its act together and reduce the glaring differences in tax rates between dividends and capital gains.)
Neal Armstrong, summary of Q. 15 of 9 October APFF Roundtable under 2015 APFF Conference.
