A CCPC (Aco) received (as its only income during the years 2001 to 2005) taxable dividends of $1,200,000 and $300,000 in 2003 and 2005 from its wholly-owned subsidiary (Bco). Bco's "full rate taxable income" ("FRTI") for each of 2003 and 2005 was $634,920, and nil for 2001, 2002 and 2003. 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"), $400,000 was added for 2003 and 2004, and nil for the prior years. On the other hand, the amount of Element B in the GRIP Addition for Bco for the years 2001 to 2005 was $1,500,000. Did the $300,000 taxable dividend received by Aco in 2005 increases its GRIP addition? CRA responded:
[T]he amount of Aco's GRIP Addition would be $400,000 since it seems reasonable to us to consider, in this situation, that $400,000 of the dividends Aco received from Bco in its 2003 and 2005 taxation years would be attributable to an amount described in Element A of the GRIP Addition in respect of Bco.