Benco is a beneficiary of a trust that owns all of the issued shares of each of Opco1 and Opco2. On November 30, Opco1 pays a dividend to the trust, which allocates it to Benco. Opco1 does not receive a refund as a result of paying the dividend, and so Benco should not be subject to Part IV tax in respect of the dividend.
However, on December 1, Opco1 and Opco2 amalgamate. The CRA says that Benco does not receive the Opco1 dividend until December 31. As a result, Part IV might be payable. Benco was connected with Opco1 on November 30, but the latter corporation no longer exists on December 31, and so Benco can’t be considered to control Opco1.
If the amalgamation had been vertical, then perhaps subsection 87(2.11) would apply so that Benco could be considered to be connected with the Opco1. The wording of the provisions is not entirely clear, however.
S Shadrin, M Kakkar and D Carolin “Application of Part IV Tax to Amalgamations of Companies Owned by Trusts with Corporate Beneficiaries” 22:1 Tax for the Owner-Manager (Jan 2022)
