3rd Situation
ABCco and DEFco are connected CCPCs with calendar year ends. During each of 2001 to 2005, ABCco had full rate taxable income ("FRTI") of $160,000. The total of the amounts referred to in paras. (a) and (b) of A in the GTIP addition formula for 2001 to 2005 for ABCco was $504,000.
In 2002, each of ABCco and DEFco received a taxable dividend of $800,000 from the other on a cross share redemption. Such receipt of DEFco was its only income for its 2001 to 2005 years, and no other dividends were paid them during this period.
In finding that the GRIP addition for 2006 for ABCco and DEFco would be $504,000 and $0, respectively, CRA noted that “the amount referred to in paragraph (c) of Element A of the formula for calculating the GRIP addition for 2006 of each of the connected corporations can be determined by successive calculations,” and then stated:.
Thus, in the third situation, the amount of $504,000 of the GRIP addition for 2006 for ABCco would ultimately correspond, at the end of the successive calculations, to the excess of the total of the amounts referred to in element A of the formula for calculating the GRIP addition for 2006 for the period 2001 to 2005, being $1,034,000 (that is, the total of the amounts referred to in paragraphs (a) and (b) of the description of A of that formula, i.e., $504,000, and the total of the amounts referred to in paragraph (c) of the description of A of that formula, being $800,000) out of the total of the amounts referred to in the description of B of the formula for calculating the GRIP, being $800,000. Furthermore, in the third situation, the GRIP addition for 2006 for DEFco would be nil at the end of the successive calculations.
The result is the same whether the circular calculations begins with the $800,000 dividend paid by one of the corporations, or the other … .
4th Situation
This is identical to the 3rd, except that, in 2004, ABCco paid a taxable dividend of $100,000 to its parent. In finding that, here, the 2006 GRIP addition for 2006 for ABCco and DEFco would be $404,000 and $0, respectively, and that, the parent could add $100,000 in computing para. (c) of variable A of the formula, for its 2004 taxation year, CRA stated:
[S]ince DEFco received from ABCco, during the period 2001 to 2005, a portion ($800,000) of the total taxable dividends paid by ABCco ($900,000), the portion of the dividend received by DEFco that can reasonably be considered to be attributable to an amount described in paragraph (a), (b) or (c) of the description of A in respect of ABCco should be prorated based on the taxable dividends received by DEFco out of the total taxable dividends paid by ABCco.