,canada ,cu/oms #a & ,rev5ue ,ag5cy ,9t]pret,n ,bullet9 ,subject3 ,9come ,tax ,act ,w9d+-up ,divid5d ,numb]3 ,,it-#adi;,r#d ,date3 ,june #bh1 #aiia ,ref];e3 ,subsec;n #hh7#b7 7al subsec;ns #hc7#b71 #hd7#b71 #acc7#g.a71 p>agraph #adh7#i77a7 & subp>agraphs #ed7h77;ix71 #hi7#a77b77;iv7 & 7;v77 ,applic,n ,? bullet9 replaces & c.els ,9t]pret,n ,bullet9 ,,it-#adi;,r#c dat$ ,july #bb1 #aihe4 ,curr5t revi.ns >e designat$ 0v]tical l9es4 ,summ>y ,? bullet9 4cusses ! 8w9d+-up divid5d0 t results :5 c]ta9 ,canadian #a ,,it-#adi;,r#d a#a corpor,ns >e w.d up4 ,x al 4cusses h[ ! ,act e/abli%es ! por;n (! am.t1 rcvd 0! %>ehold]s 9 a w9d+-up1 t is taxa# 9 _! h&s4 ,ess5ti,y1 ! law provides t any am.t rcvd 9 excess ( pd-up capital is deem$ 6be a divid5d4 ,h["e1 dep5d+ on ! type ( corpor,n1 ? w9d+-up divid5d c 2 brok5 96sep>ate am.ts >is+ f 7a7 ! capital divid5d a3.t1 7b7 ! capital ga9s divid5d a3.t1 7c7 ! pre-#aigb capital surplus on h&1 & 7d7 af ,june #bh1 #aihb & 2f ,may #bd1 #aihe1 ! life 9sur.e capital divid5d a3.t4 ,any excess1 af 4tribut+ ! abv am.ts1 is a taxa# divid5d4 ,4cus.n & ,9t]pret,n ,4tribu;ns on ,w9d+-up #a4 ,subsec;n #hh7#b7 provides special rules 6facilitate ! 4tribu;n ( #b ,,it-#adi;,r#d b#a prop]ty on ! w9d+-up 7see #c 2l7 (a ,canadian corpor,n 6: subsec;n #hh7#a7 does n apply4 ,= subsec;n #hh7#b7 6apply 9 ! c\rse (! w9d+-up ( s* a corpor,n1 all or sub/anti,y all (! prop]ty [n$ 0! corpor,n m/ 2 4tribut$ 6xs %>ehold]s4 ,x does n require t "! 2 a s+le 4tribu;n ( prop]ty on w9d+- up4 ,h["e1 ": "! is a s]ies ( 4tribu;ns 9 ! c\rse ( w9d+-up1 subsec;n #hh7#b7 usu,y applies 6! la/ s* 4tribu;n1 :5 x c 2 sd t all or sub/anti,y all (! prop]ty [n$ immly 2fh& has be5 4tribut$ 6! %>ehold]s4 ,g5],y1 ! only prop]ty [n$ 0! corpor,n af ? f9al 4tribu;n w 2 ca% or --------------------------------------#b o!r liquid assets 6be us$ =! pay;t ( taxes & any rema9+ co/s ( liquid,n4 ,if a relatively small am.t ( prop]ty rema9s 9 ! corpor,n = 4tribu;n 6! %>ehold]s af ! pay;t ( ^! taxes & liquid,n co/s1 bo? ? 4tribu;n &! #c ,,it-#adi;,r#d a#b previ\s 4tribu;n w qualify "u subsec;n #hh7#b74 ,tim+ ( ,4tribu;ns #b4 ,6a*ieve ! purpose ( subsec;n #hh7#b71 tim+ is ( "picul> import.e4 ,! po9ts 9 "t specifi$ & _! signific.e >e z foll[s3 7a7 8,a "picul> "t 9 ! c\rse ( w9d+- up0 is t po9t 7;i7 :5 ! f9al 4tribu;n ( prop]ty is made1 7;ii7 :51 0virtue ( subsec;n #hd7#b71 ! corpor,n is deem$ 6h pd &! %>ehold]s >e deem$ 6h rcvd a divid5d ref]r$ 6in p>agraph #hh7#b77b7 z ! 8w9d+-up divid5d01 & 7;iii7 :5 an elec;n is requir$ "u subsec;n #hc7#b71 #acc7#g.a71 or #hc7#b.a7 z x r1d ) respect 6divid5ds pd af ,june #bh1 #aihb & #d ,,it-#adi;,r#d b#b 2f ,may #bd1 #aihe1 6pay tax-free divid5ds4 7b7 ,! 8"t ( -put,n0 (! corpor,n's capital divid5d a3.t1 capital ga9s divid5d a3.t & pre-#aigb capital surplus on h& is immly 2f ! "t m5;n$ 9 7a7 abv4 7c7 8,immly 2f ! "t ( -put,n0 is :5 ! tax,n ye> (! corpor,n is deem$ 6h 5d$ &a new tax,n ye> 6h -m;ed4 ,9 3junc;n ) subp>agraph #hh7#b77a77;iv71 ? 8"t ( -put,n0 5sures t ! capital divid5d a3.t1 ! capital ga9s divid5d a3.t &! pre- #aigb capital surplus on h& 9clude any am.t >is+ on or prior 6! f9al w9d+-up 4tribu;n4 7d7 8,immly 2f ! 5d (! tax,n ye>0 7! ye> deem$ 6h 5d$ 9 7c7 abv7 is :5 ! prop]ty 4tribut$ at ! "picul> "t not$ 9 7a7 abv is deem$ 6h be5 4pos$ ( 0! corpor,n4 ,? p]mits ! capital ga9s & o!r am.ts >is+ on ! 4tribu;n #e ,,it-#adi;,r#d c#b 6be reflect$ 9 ! a3.ts prior 6! 5d ( t tax,n ye>4 ,calcul,n ( ,sep>ate ,divid5ds #c4 ,p>agraph #hh7#b77b7 provides t =! purpose ( an elec;n 6pay 7a7 a capital divid5d "u subsec;n #hc7#b71 7b7 a capital ga9s divid5d (a non- resid5t-[n$ 9ve/;t corpor,n "u subsec;n #acc7#g.a71 or --------------------------------------#c 7c7 af ,june #bh1 #aihb & 2f ,may #bd1 #aihe1 a life 9sur.e capital divid5d "u subsec;n #hc7#b.a71 z x r1d = t p]iod1 por;ns (! w9d+-up divid5d >e 3sid]$ 6be sep>ate divid5ds4 ,^! sep>ate divid5ds >e calculat$ z foll[s3 7d7 ,= an elec;n "u subsec;n #hc7#b7 7or subsec;n #acc7#g.a771 a sep>ate divid5d is deem$ 6be pd equal 6! por;n (! w9d+-up divid5d t does #f ,,it-#adi;,r#d a#c n exce$ ! bal.e (! capital divid5d a3.t 7or capital ga9s divid5d a3.t7 immly 2f s* divid5d is deem$ 6h be5 pd4 ,": ! w9d+-up divid5d exce$s ! bal.e (! capital divid5d a3.t 7or capital ga9s divid5d a3.t71 ! sep>ate divid5d is alw equal 6t bal.e & "!=e an elec;n 7if any7 "u subsec;n #hc7#b7 7or #acc7#g.a77 m/ 2 9 respect ( t bal.e4 7e7 ,) respect 6a w9d+-up 5d+ af ,june #bh1 #aihb & 2f ,may #bd1 #aihe1 ! por;n (! w9d+-up divid5d t exce$s ! am.t elect$ "u subsec;n #hc7#b7 or #acc7#g.a7 z det]m9$ 9 7d7 abv1 up 6! am.t (! corpor,n's life 9sur.e capital divid5d a3.t1 is al deem$ 6be a sep>ate divid5d4 ,provid$ an elec;n 9 respect (! full am.t 0 made "u subsec;n #hc7#b.a7 z x r1d = t p]iod1 s* sep>ate divid5d is a non- taxa# divid5d4 7f7 ,! por;n (! w9d+-up divid5d t exce$s ! am.t (! divid5ds #g ,,it-#adi;,r#d b#c elect$ "u subsec;n #hc7#b71 #acc7#g.a7 or1 af ,june #bh1 #aihb & 2f ,may #bd1 #aihe1 subsec;n #hc7#b.a7 z det]m9$ 9 7d7 & 7e7 abv1 up 6! corpor,n's pre-#aigb capital surplus on h& is deem$ n 6be a divid5d4 ,? por;n is 9clud$ "u subp>agraph #ed7h77;ix7 9 ! proce$s (! 4posi;n (! %>es4 7g7 ,! por;n (! w9d+-up divid5d t exce$s ! a7regate ( 7;i7 ! sep>ate divid5d 9 7d7 abv 7": an elec;n is made71 7;ii7 ! sep>ate divid5d 9 7e7 abv1 & 7;iii7 ! por;n 9 7f7 abv is deem$ 6be a sep>ate divid5d t is a taxa# divid5d4 ,ea* %>ehold] is deem$ 6h rcvd sep>ate divid5ds1 det]m9$ z 9 7d71 7e71 & 7g7 abv 9 propor;n 6! numb] ( %>es held4 --------------------------------------#d ,! sep>ate -pon5ts (! w9d+-up divid5d1 z 4cuss$ 9 7d7 to 7g7 abv1 c 2 illu/rat$ 9 ! foll[+ ta#3 #h ,w9d+ up ,divid5d a#d ,transcrib]'s note3 7,! foll[+ is set-up 9 ?ree columns ,column #a3 ,private ,corpor,n ,column #b3 ,non-,resid5t ,[n$ ,9ve/;t ,corp4 ,column #c3 ,public ,corpor,n47 ,private corpor,n3 7d71 7e7 #hh7#b77b77;i7 ,capital ,divid5d or ,life ,9sur.e ,capital ,divid5d ,non-resid5t 7d7 #acc7#g.a7 ,capital ,ga9 divid5d ,private corpor,n3 7f7 #hh7#b77b77;ii7 ,,pre-#aigb ,,csoh #i ,,it-#adi;,r#d b#d ,non-resid5t3 7f7 #hh7#b77b77;ii7 ,,pre-#aigb ,,csoh ,public corpor,n 7f7 #hh7#b77b77;ii7 ,,pre-#aigb ,,csoh ,private corpor,n3 7g7 #hh7#b77b77;iii7 ,taxa# ,divid5d ,non-resid5t3 7g7 #hh7#b77b77;iii7 ,taxa# ,divid5d ,public corpor,n3 7g7 #hh7#b77b77;iii7 ,taxa# ,divid5d #aj ,,it-#adi;,r#d c#d ,! example 2l illu/rates ! abv alloc,n & ord]+ (! w9d+-up divid5d =a private corpor,n4 --------------------------------------#e ,! foll[+ facts >e assum$ reg>d+ ! w9d-up (a private corpor,n3 ,proce$s availa# on w9d+-up 4#e1jjj1jjj ,pd-up capital ( %>es """""" 4#a1jjj1jjj ,bal.e 9 capital divid5d a3.t """"""""""""""""""""" 4#a1cjj1jjj ,bal.e 9 pre-#aigb capital surplus on h& """""""""""""" 4#fjj1jjj ,! applic,n ( p>agraph #hh7#b77b7 is z foll[s3 ,proce$s on w9d+-up """""""" 4#e1jjj1jjj less3 pd-up capital-- p>agraph #hi7#a77c7 """""" 4#a1jjj1jjj ,w9d+-up divid5d--p>agraph #hd7#b77b7 """"""""""""""" 4#d1jjj1jjj #aa ,,it-#adi;,r#d a#e less3 capital divid5d a3.t 7elec;n made7 subp>agraph #hh7#b77b77;i7 """"""""""" 4#a1cjj1jjj """"""""""""""""""""""""""" 4#b1gjj1jjj less3 pre-#aigb capital surplus on h& subp>agraph #hh7#b77b77;ii7 """""""""""" 4#fjj1jjj ,taxa# divid5d--subp>agraph #hh7#b77b77;iii7 """"""""" 4#b1ajj1jjj ,assess;t ( ,am.ts #d4 ,! am.ts t >e deem$ 6be sep>ate divid5ds &! am.t deem$ n 6be a divid5d dep5d on ! bal.e1 z f9,y assess$ 0! ,de"p;t1 ( 7a7 ! capital divid5d a3.t 7or capital ga9s divid5d a3.t71 7b7 ! pre-#aigb capital surplus on h&1 & 7c7 af ,june #bh1 #aihb & 2f ,may #bd1 #aihe1 ! life 9sur.e capital divid5d a3.t1 #ab ,,it-#adi;,r#d b#e immly 2f ! w9d+-up divid5d is deem$ 6h be5 pd4 ,": bal.es ( ^! a3.ts z assess$ di6] f ! am.ts -put$ 0! corpor,n at ! "t (! elec;ns "u subsec;n #hc7#b71 #hc7#b.a7 7z x r1d at t "t71 or subsec;n #acc7#g.a7 9 respect ( ^? sep>ate divid5ds1 ! am.t ( ea* sep>ate divid5d &! relat$ elec;n w 2 adju/$ 6reflect ! bal.es assess$4 ,h["e1 ! corpor,n rema9s responsi# = -put+ ^! a3.ts z a3urately z possi# 9 liy #ah1 #aiia is 5act$ 96law z propos$1 ! provi.ns ( subsec;n #hh7#b7 w apply 6! capital ga9s divid5d a3.t ( 9ve/;t corpor,ns z describ$ 9 p>agraph #aca7#f77b74 ,x is propos$ t = w9d+s-up -m5c+ af #aihh1 subsec;n #hh7#b7 w apply 6! capital ga9s divid5d a3.t ( 9ve/;t #ac ,,it-#adi;,r#d c#e corpor,ns 9 ! same mann] z x curr5tly applies 6! capital divid5d a3.t ( private corpor,ns &! capital ga9s divid5d a3.t ( non-resid5t-[n$ 9ve/;t corpor,ns4 #ad