Robin MacKnight
Robert Martini
• November 9, 2006 Technical amendments
• October 16, 2006 Notice of Ways and
Means Motion – Eligible Dividends
• December 20, 2006 – CRA Guidelines on
Eligible Dividends
• Ontario Bill 74 – “Strengthening Business
Through a Simpler Tax System Act, 2006”
• Recent cases
Technical Amendments
November 9, 2006 technical amendments
(includes revised NRT and FIE rules)
 What to watch for

Technical Amendments: Stock
Dividends
Proposed non-recognition of cost base
 Dividends subject to s. 112 deduction not
included in ACB
 Impact on stock dividend planning?
 OBCA proposed amendments
 but proposals could thwart use of stock
dividends in reorganizations

Technical Amendments: Safe
Income Strips
Similar to stock dividend issue
 PUC increase/deemed dividend problem
 cost base not increased
 on deemed dividends
 where contributed surplus converted to
PUC
 Uncertainty?
 What alternatives should be considered?

Technical Amendments: Cost Base
Policy
Rationale for these proposals?
 Alternative method:
 daylight loan
 pay actual dividend
 recapitalize
 If same result, why introduce this rule?

Technical Amendments: Loss of
Status as Testamentary Trust
Anti-avoidance rule
 Watch for trust debt and liabilities
 Exceptions prevent loss of status

Technical Amendments: Other
Too numerous to mention
 Don’t assume they are inconsequential
 Could affect your situation

Eligible Dividends
October 16, 2006 revised NWMM
 Some changes to opening GRIP
 “full rate” taxable income and M&P
 intercompany dividends
 Uncertainty remains
 dividend streaming?

Eligible Dividends – CRA
Guidelines
CRA issued Guidelines on December 20,
2006
 Guidelines set out notification procedures
 CRA position on:
 non-residents
 partial dividends

Eligible Dividends: Issues and
Considerations
Consider share reorganization
 class for resident shareholders
 class for non-resident shareholders
 Investment income
 can you restructure?
 Goal – deferral plus eligible dividend
treatment
 possible?

Ontario Bill 74
“Strengthening Business Through a
Simper Tax System Act, 2006”
 Stated Benefits:
 single tax form
 single tax collector
 one set of income tax rules

Ontario Bill 74
One set of income tax rules?
 still differences
 transitional provisions
 Taxation Act – combines ITA and CTA

Recent Cases
Book-keeping error or retroactive tax
planning?
 Irmen
 9100-2402 Quebec Inc.
 Gambling winnings not taxable
 Leblanc 2006 TCC 680
 Waivers – Honeywell 2007 FCA 22
 De Facto directors – Hartrell

Recent Cases
RRSP strips – Nunn FCA
 Trusts – Rose v. Rose
 Piercing the corporate veil – Wildman v.
Wildman
