,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#cce;,r#b
,date3 ,july #ab1 #bjjd
,subject3 ,9come tax act--,9direct
  ,pay;ts
,ref];e3 ,subsec;n #ef7#b7 7al subsec;n
  #ae7#a72 p>agraphs #fi7#a77b7 &
  #bad7#c77a7 (! ,9come ,tax ,act 7!
  8,act077

  ,at ! ,canada ,rev5ue ,ag5cy 7,,cra71
we issue 9come tax 9t]pret,n bullet9s
7,,it's7 9 ord] 6provide te*nical
9t]pret,ns & posi;ns reg>d+ c]ta9
provi.ns 3ta9$ 9 9come tax law4 ,due 6_!
te*nical nature1 ,,it's >e us$ prim>ily
0\r /aff1 tax speciali/s1 & o!r
9dividuals :o h an 9t]e/ 9 tax matt]s4
,= ^? r1d]s :o pref] a less te*nical
explan,n (! law1 we (f] o!r public,ns1
s* z tax guides & pamphlets4          #a
             ,,it-#cce;,r#b          a#a
  ,:ile ! -;ts 9 a "picul> p>agraph 9 an
,,it may relate 6provi.ns (! law 9 =ce
at ! "t !y 7 made1 s* -;ts >e n a
sub/itute =! law4 ,! r1d] %d1 "!=e1
3sid] s* -;ts 9 li<t (! relevant
provi.ns (! law 9 =ce =! "picul> tax,n
ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any
relevant am5d;ts 6^? provi.ns or
relevant c\rt deci.ns o3urr+ af ! date
on : ! -;ts 7 made4
  ,subject 6! abv1 an 9t]pret,n or
posi;n 3ta9$ 9 an ,,it g5],y applies z
(! date on : x 0 publi%$1 un.s o!rwise
specifi$4 ,if "! is a subsequ5t *ange 9
t 9t]pret,n or posi;n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= future assess;ts & reassess;ts4 ,if1
on ! o!r h&1 ! *ange is n fav\ra#
6taxpay]s1 x w norm,y 2 e6ective =!
curr5t & subsequ5t tax,n ye>s or =
transac;ns 5t]$ 96af ! date on : ! *ange
is publi%$4
  ,mo/ ( \r public,ns >e availa# on \r
,web site at3 _+www.cra.gc.ca_:4      #b
             ,,it-#cce;,r#b          b#a
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 an ,,it1 pl1se s5d !m to3

  ,9come ,tax ,rul+s ,directorate
  ,policy & ,plann+ ,bran*
  ,canada ,rev5ue ,ag5cy
  ,ottawa ,,on ,k#a;,a #j;,l#e

or 0email at ! foll[+ a4ress3
_+bulletins@cra.gc.ca_:
  ,? v].n is only availa# electronic,y4

                 ,3t5ts
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,3di;ns =! applic,n ( subsec;n #ef7#b7
    7p>agraphs #a-d7
  ,exemp;n--,p5.n ,b5efits 7p>agraph #e7
  ,excep;n--,split ,9come 7p>agraph #f7
  ,examples (! applic,n ( subsec;n
    #ef7#b7
                                      #c
             ,,it-#cce;,r#b          c#a
    ,gifts 6,%>ehold]s' ,relatives
      7p>agraph #g7
    ,prop]ty ,sold 6,%>ehold]'s ,* 2l
      ,fair ,m>ket ,value 7p>agraph #h7
  ,divid5ds 7p>agraph #i7
  ,o!r -;ts
    ,9come or capital tr1t;t
      7p>agraph #aj7
    ,applic,n 6>m's l5g? or non->m's
      l5g? transac;ns 7p>agraph #aa7
    ,deem$ pay;t =! purposes ( ,"p
      ,,xiii (! ,act 7p>agraph #ab7
    ,9clu.n ( an am.t 9 ! 9come (a
      taxpay] & 9 ! 9come (! recipi5t (!
      prop]ty 7p>agraph #ac7
,explan,n ( ,*anges

               ,applic,n
    
  ,? bullet9 c.els & replaces ,,it-
#cce;,r dat$ ,septemb] #aa1 #aihi4 ,un.s
o!rwise /at$1 all /atutory ref];es "?\t
! bullet9 >e 6! ,act4
                                      #d
                ,summ>y              d#a
    
  ,? bullet9 4cusses a rule direct$ ag/
tax avoid.e : mi<t result :5 am.ts : wd
3/itute 9come :5 rcvd 0a "picul> taxpay]
>e pd 6ano!r p]son4

          ,4cus.n & ,9t]pret,n
    
     ,3di;ns =! applic,n ( subsec;n
        #ef7#b7 7p>agraphs #a-d7
    
#a4 ,subsec;n #ef7#b7 w cause an am.t n
  rcvd 0a taxpay] 6be a4$ 6! taxpay]'s
  9come if !
--------------------------------------#b
  foll[+ 3di;ns >e met3
  7a7 "! is a pay;t or transf] ( prop]ty
    6a p]son o!r ?an ! taxpay]2
  7b7 ! pay;t or transf] is pursuant 6!
    direc;n (1 or )! 3curr;e (1 !
    taxpay] 7? may 2 implicit--see
    p>agraph #c72
  
                                      #e
             ,,it-#cce;,r#b          a#b
  7c7 "! is a b5efit 6! taxpay] or a
    b5efit ! taxpay] wi%es 63f] on ! o!r
    p]son2
  7d7 ! taxpay] wd h be5 taxa# on ! am.t
    "u "s o!r sec;n (! ,act if ! pay;t
    or transf] _h be5 made directly 6!
    taxpay]4
#b4 ,subsec;n #ef7#b7 w n g5],y 2
  applica# 9 a situ,n 9volv+ a bona fide
  loan 2t p]sons 2c s* a loan does n
  3/itute a 8pay;t or transf] ( prop]ty0
  )9 ! m1n+ ( t subsec;n4 ,:e!r a bona
  fide loan has be5 made 9 a "picul>
  situ,n is a mix$ "q ( law & fact t w
  norm,y require1 am;g o!r ?+s1 a review
  (! t]ms & 3di;ns (! loan agree;t4
  ,factors 6be 3sid]$ wd 9clude :e!r !
  loan be>s 9t]e/1 ! repay;t t]ms1 :e!r
  secur;y is provid$ 6! cr$itor1 etc4
  ,h["e1 if a loan is =giv5 9 a "picul>
  situ,n1 ! adv.e ( funds may 2come a
  8pay;t or transf]0 ( prop]ty subject
  6subsec;n #ef7#b7 at ! "t (! =give;s
  (! sd loan4                         #f
             ,,it-#cce;,r#b          b#b
#c4 ,! 3curr;e or "picip,n (! taxpay] 9
  ! 3f]r+ (! b5efit ne$ n 2 active4 ,x
  may 2 passive or implicit & c 2 9f]r$
  f all ! circum/.es (a "picul> situ,n
  7= example1 ! degree ( 3trol : !
  taxpay] is 5titl$ 6ex]cise ov] !
  corpor,n 3f]r+ ! b5efit74
#d4 ,except z 9dicat$ 9 p>agraph #i )
  respect 6divid5d 9come1 a taxpay] 6:om
  subsec;n #ef7#b7 applies ne$ n 2 leg,y
  5titl$ 6! prop]ty pd or transf]r$ b m/
  h "s degree ( 3trol ov] xs pay;t or
  transf]4 ,?us a %>ehold] :o does n
  specific,y direct a pay;t t falls "u
  subsec;n #ef7#b7 6be made b acquiesces
  9 xs pay;t w 2 taxa# on ! por;n (!
  pay;t equal 6! propor;n (! numb] (
  %>es [n$ 0! %>ehold] 6! total numb] (
  %>es4 ,:e!r or n a %>ehold] w 2 view$
  z hav+ acquiesc$ 9 ! pay;t w dep5d on
  ! facts (! "picul> case4


                                      #g
        ,exemp;n--,p5.n ,b5efits     c#b
             7p>agraph #e7
    
#e4 ,subsec;n #ef7#b7 does n apply 6any
  por;n (a retire;t p5.n t ! taxpay]
  assigns "u sec;n #fe.a (! ,canada
  ,p5.n ,plan or "u a -p>a# provi.n (a
  prov9cial p5.n plan z def9$ 9 sec;n #c
  (! ,canada ,p5.n ,plan or (a prescrib$
  prov9cial p5.n plan4 ,! ,quebec ,p5.n
  ,plan is a prov9cial p5.n plan t has a
  -p>a# provi.n4 ,! ,saskat*ewan ,p5.n
  ,plan is ! only prov9cial p5.n plan
  prescrib$ 6date4

        ,excep;n--,split ,9come
             7p>agraph #f7
    
#f4 ,pursuant 6subsec;n #ef7#e71
  subsec;n #ef7#b7 does n apply 6any
  am.t t is 9clud$ 9 -put+ a specifi$
  9dividual's split 9come =a tax,n ye>
  "u sec;n #abj.d4 ,subsec;n #ef7#e7
  5sures t am.ts tax$ z split 9come 9 !
                                      #h
             ,,it-#cce;,r#b          d#b
  h&s (a m9or * >e n al attribut$ 6ano!r
  p]son4

        ,examples (! applic,n (
            subsec;n #ef7#b7
    
     ,gifts 6,%>ehold]s' ,relatives
             7p>agraph #g7
    
#g4 ,pursuant 6! direc;n (1 or )!
  3curr;e (1 xs %>ehold]s1 a "picul>
  corpor,n makes gifts 6relatives (!
  %>ehold]s4 ,^! relatives >e n
  %>ehold]s or employees (! "picul>
  corpor,n4 ,9 s* a situ,n1 subsec;n
  #ef7#b7 wd apply 69clude 9 !
  %>ehold]s' 9come ! fair m>ket value (!
  gifts made 0! "picul> corpor,n4 ,^!
  gifts wd 3/itute pay;ts or transf]s (
  prop]ty pursuant 6! direc;n (1 or )!
  3curr;e (1 ! %>ehold]s 6"s o!r p]sons
  7i4e4 _! relatives7 z a b5efit t !
  %>ehold]s desir$ 6h 3f]r$ on _!
  relatives4 ,fur!rmore1 an am.t      #i
             ,,it-#cce;,r#b          e#b
  correspond+ 6! fair m>ket value (!
  gifts wd h be5 9clud$ 9 ! %>ehold]s'
  9come "u subsec;n #ae7#a7 if ! pay;ts
  or transf]s _h be5 made 0! "picul>
  corpor,n 6! sd %>ehold]s4 ,9 ? situ,n1
  ea* %>ehold] t direct$ or acquiesc$ 9
  ! pay;ts or transf]s wd 2 taxa# "u
  subsec;n #ef7#b7 on a por;n (! pay;ts
  or transf]s made 0! "picul> corpor,n t
  is equal 6! propor;n (! numb] ( issu$
  & \t/&+ %>es (! corpor,n [n$ 0!
  %>ehold] 6! total numb] ( %>es t >e 9
  fact issu$ & \t/&+4

     ,prop]ty ,sold 6,%>ehold]'s ,*
         2l ,fair ,m>ket ,value
             7p>agraph #h7
    
#h4 ;,x [ns all (! issu$ & \t/&+ %>es (
  ,xco4 ,at ! direc;n ( ;,x1 ,xco sells
  a piece ( l& = 3sid],n t is less ?an
  fair m>ket value 9 fav\r ( ;,y1 ! * (
  ;,x4 ,^! transac;ns wd h ! foll[+ tax
  3sequ;es4 ,f/1 subsec;n #ef7#b7    #aj
             ,,it-#cce;,r#b          f#b
  wd apply 69clude 9 ;,x's 9come an am.t
  correspond+ 6! di6];e 2t ! fair m>ket
  value (! prop]ty transf]r$ &! 3sid],n
  pd 0;,y4 ,! transf] (! piece ( l&
  0,xco 6"s o!r p]son 7i4e4 ;,y7 is made
  pursuant 6! direc;n ( ;,x z a b5efit t
  ;,x desir$ 6h 3f]r$ on ;,y & an am.t
  correspond+ 6! di6];e 2t ! fair m>ket
  value (! prop]ty transf]r$ &! 3sid],n
  pd 0;,x wd h be5 9clud$ 9 ;,x's 9come
  "u subsec;n #ae7#a7 if ! transf] _h
  be5 made 0,xco 6;,x4 ,fur!rmore1 "u
  p>agraph #fi7#a77b71 ,xco wd 2 deem$
  6h rcvd proce$s ( 4posi;n equal 6!
  fair m>ket value (! piece ( l& at ! "t
  (! transf]4 ,f9,y1 ! adju/$ co/ base
  (! piece ( l& 6;,y wd1 te*nic,y1 2
  equal 6! 3sid],n he or %e pd 6,xco4
  ,see !
--------------------------------------#c
  curr5t v].n ( ,,it-#dje1 ,9adequate
  ,3sid],ns--,acquisi;ns & ,4posi;ns1 =
  a4i;nal 4cus.ns on ! applic,n (
  subsec;n #fi7#a74                  #aa
        ,divid5ds 7p>agraph #i7      a#c
    
#i4 ,abs5t a %am1 subt]fuge or an
  >tificial transac;n & provid$ t prop]
  3sid],n 0 giv5 =! %>es :5 issu$1
  subsec;n #ef7#b7 does n g5],y apply
  6divid5d 9come s9ce1 until a divid5d
  is dcld1 ! pr(its 2l;g 6! corpor,n z
  reta9$ e>n+s4 ,h["e1 subsec;n #ef7#b7
  may 2 applica# ": divid5ds >e pd
  6%>ehold]s (a corpor,n :o1 hav+ reg>d
  6! divid5d 5title;ts ( _! %>es z set \
  9 ! >ticles ( 9corpor,n1 rcv divid5ds
  6: !y >e n 5titl$ &/or ": ano!r
  taxpay] has a pre-exi/+ 5title;t 6!
  divid5d 9come pd 6%>ehold]s (a
  corpor,n4

               ,o!r -;ts
    
        ,9come or capital tr1t;t
             7p>agraph #aj7
    
#aj4 ,! am.t 6be 9clud$ 9 ! taxpay]'s
  9come is ! am.t t wd h be5         #ab
             ,,it-#cce;,r#b          b#c
  9clud$ 9 ! taxpay]'s 9come if ! pay;t
  or transf] _h be5 made directly 6!
  taxpay]4 ,! am.t is 3sid]$ 6be 9come
  or capital 6! taxpay] 9 ! same way x
  wd h be5 if ! taxpay] _h rcvd ! am.t
  directly4

      ,applic,n 6>m's l5g? or non-
          >m's l5g? transac;ns
             7p>agraph #aa7
    
#aa4 ,subsec;n #ef7#b7 applies 6bo?
  >m's-l5g? & non->m's l5g? transac;ns
  if ! 3di;ns li/$ 9 p>agraph #a >e met4

     ,deem$ pay;t =! purposes ( ,"p
     ,,xiii (! ,act 7p>agraph #ab7
    
#ab4 ,"u p>agraph #bad7#c77a71 ": a
  taxpay] is n a resid5t ( ,canada1 any
  am.t t wd h be5 9clud$ 9 ! taxpay]'s
  9come "u subsec;n #ef7#b71 if ,"p ,i
  (! ,act appli$1 is 6be tr1t$ z a
  divid5d =! purposes ( ,"p ,,xiii   #ac
             ,,it-#cce;,r#b          c#c
  (! ,act4 ,non-resid5t )hold+ tax wd
  "!=e 2 exigi# on t am.t4

     ,9clu.n ( an am.t 9 ! 9come (a
         taxpay] & 9 ! 9come (!
          recipi5t (! prop]ty
             7p>agraph #ac7
    
#ac4 ,an am.t 6: subsec;n #ef7#b7
  applies cd 2 9clud$ 9 ! 9come ( bo? !
  taxpay] &! p]son :o rcvs ! pay;t or !
  prop]ty4 ,h["e1 x is norm,y ! ,canada
  ,rev5ue ,ag5cy's 7,,cra7 practice n
  6assess ! same 9come twice4 ,acly1 ":
  ! taxpay] agrees 6! realloc,n1 !
  recipi5t's 9come w 2 reduc$4 ,": !
  taxpay] does n agree1 ! ,,cra w al
  reduce ! recipi5t's 9come1 )\t requir+
  a waiv]1 provid$ t at ! "t (! assess+
  ac;n1 ! recipi5t's return 0 n ab
  62come /atute-b>r$2 9 ^? cases1 !
  ,,cra w seek a waiv]4

                                     #ad
          ,explan,n ( ,*anges         #d
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns t we h made z
a result ( *anges 6! law1 z well z
*anges reflect+ new or revis$ 9t]pret,ns
(! ,,cra4

           ,r1sons =! ,revi.n
    
  ,? bullet9 updates ! =m] ,,it-#cce;,r1
: 4cuss$ ! provi.ns ( subsec;n #ef7#b74
,subsec;n #ef7#b7 is a rule direct$ ag/
tax avoid.e : mi<t result :5 am.ts : wd
3/itute 9come :5 rcvd 0a "picul> p]son
>e pd 6ano!r p]son4 ,? bullet9 has be5
revis$ ma9ly 6add 9t]pretative -;ts4




                                     #ae
      ,legislative & ,o!r ,*anges    a#d
    
  ,new p>agraph #b has be5 a4$ 6provide
-;ts ) respect 6! f/ 3di;n =! applic,n (
subsec;n #ef7#b74
  ,new p>agraph #c has be5 a4$ 6provide
-;ts ) respect 6! second 3di;n =!
applic,n ( subsec;n #ef7#b74
  ,p>agraph #d is ! same z =m] p>agraph
#c4 ,x provides -;ts ) respect 6! ?ird &
f\r? 3di;ns =! applic,n ( subsec;n
#ef7#b7 & is bas$ on ! deci.n (!
,ex*equ] ,c\rt ( ,canada 9 ,m4,n4,r4 v4
,allan ,bronfman1 ,7#aife7' ,,ctc #cgh1
#fe ,,dtc #ebce4
  ,p>agraph #e 3ta9s1 9 ess;e1 ! delet$
-;ts f ! la/ s5t;e ( =m] p>agraph #a4 ,x
has be5 revis$ 6ref] 6sec;n #fe.a (!
,canada ,p5.n ,plan 79/1d ( sec;n
#fd.a71 69dicate t ! ,quebec ,p5.n ,plan
has n[ a -p>a# provi.n & 69dicate t !
,saskat*ewan ,p5.n ,plan is ! only
prov9cial p5.n plan prescrib$ 6date4
  ,! a4i;n ( new p>agraph #f is
3sequ5tial on ! 9troduc;n (! tax     #af
             ,,it-#cce;,r#b          b#d
on split 9come 7see sec;n #abj.d (!
,act74
  ,new p>agraphs #g & #h provide
examples (! applic,n ( subsec;n #ef7#b74
  ,new p>agraph #i has be5 a4$ 6reflect
! deci.ns (! ,supreme ,c\rt ( ,canada 9
,neuman v4 ,m4,n4,r41 ,7#aiih7' #c ,,ctc
#agg1 #ih ,,dtc #fbig1 & 9 ,! ,que5 v4
,mc,clurg1 ,7#aiia7' #a ,,ctc #afi1 #ia
,,dtc #ejja4
  ,p>agraph #aj is ! same z =m] p>agraph
#b4
  ,p>agraph #aa is ! same z =m] p>agraph
#d4
  ,new p>agraph #ab has be5 a4$ 6ref] 6!
deem+ provi.n 3ta9$ 9 subsec;n #bad7#c74
  ,new p>agraph #ac has be5 a4$ 69clude
an adm9i/rative posi;n ) respect 6!
applic,n ( subsec;n #ef7#b74




                                     #ag