CRA characterized hypothetical transactions involving the use of discretionary dividend shares as entailing a transfer of value from two related corporations to two unrelated persons, and noted that they thus departed from normal business standards and were not explicable without more facts.
Rather than commenting on the contrived presented facts, CRA commented more generally on discretionary shares, and indicated that it will no longer be commenting on safe income allocation questions until it has studied the area further, whose potential for value shifting and valuation difficulties it finds troubling. This moratorium respecting interpretive issues relating to the use of discretionary dividend shares does not detract from the Rulings Directorate being “open for business” with respect to other s. 55 issues relating to 55.
CRA was not receptive to a suggestion that safe income computations could be skipped in the simple case of a holdco/opco structure and no or limited differences in accounting versus taxable income, stating that it is the duty of taxpayers and their representatives to be careful making claims that a dividend is not subject to the application of s. 55(2).