5-903686
Dear Sirs:
Re: Dividend Rental Arrangement
We are writing in response to your letter of December 18, 1990 in which you requested rulings in respect of a dividend rental arrangement. We regret that other workload prevented us from replying earlier.
We are unable to provide the rulings requested because a complete submission requesting an advance income tax ruling was not supplied. As noted in paragraphs 3, 6 and 15 of Information Circular 70-6R2, an advance income tax ruling can only be provided in respect of definite proposed transactions involving specifically identified taxpayers. In addition, we are unable to provide rulings on proposed legislation.
Although we are unable to respond to your request in the form of an advance income tax ruling, we can provide our general comments with respect to dividend rental arrangements.
Provided that an arrangement is a dividend rental arrangement, as defined in subsection 248(1), subsection 112(2.3) would deny a deduction under subsections 112(1), 112(2) or 138(6) in respect of a dividend received as part of such an arrangement. It is a question of fact whether an arrangement is a dividend rental arrangement.
The proposed amendment to subsection 112(4) as contained in Bill C-18, which received first reading on May 30, 1991, would reduce any loss on shares held as inventory by a corporation by any taxable dividends on the shares received by that corporation to the extent that the dividends are deductible in computing the corporation's taxable income or its taxable income earned in Canada, and by any dividends other than taxable dividends, unless the corporation meets the requirements of paragraphs 112(4)(a) and (b).
Our comments in this letter are provided pursuant to the practice referred to in paragraph 21 of Information Circular 70-6R2 and are not binding on Revenue Canada, Taxation in respect of any transaction or taxpayer.
Yours truly,
for DirectorFinancial Industries DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch