A CCPC (Holdco) received (as its only income during the years 2001 to 2005) a taxable dividend of $400,000 in 2001 from its wholly-owned subsidiary (Opco). Opco's "full rate taxable income" ("FRTI") for each of the years 2001 and 2005 was $198,412 and $952,380, respectively; and nil doe 2002, 2003 and 2004. As a result, per s. 89(7), for the purpose of calculating the amount of Element A in the formula for computing Opco's general rate income pool addition for 2006 ("GRIP"), $125,000 was added for 2001 and $600,000 for 2005. In addition, the amount of Element B of Opco's GRIP formula was $400,000.and Subco's Element A of the formula for computing the GRIP Addition for 2006 pursuant to s.89(7) for 2002 to 2004 was nil and for the years 2001 and 2005 was $125,000 and $600,000, respectively. What was Holdco’s and Opco’s GRIP Addition for 2006? CRA responded:
[T]he amount of the GRIP for Opco is $325,000, that is, the amount of Element A (i.e., $725,000) minus the amount of Element B (i.e., $400,000) of the formula in subsection 89(7).
Furthermore … the amount of Holdco's GRIP is $400,000, since it seems reasonable to us to consider, in this situation, that the $400,000 dividend that Holdco received from Opco during 2001 is attributable to an amount described in Element A of the GRIP formula in respect of Opco.