The CRA might apply the GAAR to a 55(3)(a) butterfly if A + B > C where A is the ACB of the remaining shares in the capital of DC after the butterfly B is the ACB of the DC…
CRA and relationship breakdowns
My very first butterfly was undertaken pursuant to 55(3)(a) for a couple who were divorcing after many years of marriage. I recall looking carefully at whether their divorce would be treated as part of the series of transactions that included…
Safe income and trust allocations
In technical interpretation 2019-0833061E5 (January 27, 2020), the CRA stated that, where a trust receives a dividend of $2,500, $1,000 of which is ‘safe’, it cannot designate the safe portion to a corporate beneficiary and the rest to an individual…
55(3)(a) purpose test?
The CRA believes that a dividend otherwise exempt under paragraph 55(3)(a) of the Income Tax Act (Canada) will be subject to GAAR if one of the purposes of the dividend was to increase the cost of property contrary to the…
Safe income accrual
From Henry Shew, “Safe Income May Vary Within Shares of the Same Class” 8:3 Cdn Tax Focus (August 2018): Assume that Holdco purchases 100 shares of Opco for $10 (“the old shares”). These shares earn $1 per share of safe…
55(2) ‘double taxation’
In 101139810 Saskatchewan Ltd. v R, 2017 TCC 3, an individual owned all of the shares of DC, which held some shares of Targetco. The individual undertook a series of transactions that ended with the sale of Targetco shares to…
More s 55 nonsense
Tax Interpretations has translated a technical interpretation (2017-0683511E5) in which the CRA states that using a redemption of shares to avoid s. 55(2.1)(b) is potentially GAAR-able. I have another translation: the government needs to invoke GAAR to cooper up its…
55(2) Gone Bad
Michael Welters “Results Test in Subsection 55(2)” Canadian Tax Highlights 25:3 (March 2017) discusses 101139810 Saskatchewan Ltd. v R, 2017 TCC 3. The court applied 55(2) to intercorporate dividends paid to two holdcos even though the individual who owned them…
S 55(2.1)(b)(ii)(B) and cash
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…