| 19(1) | File No. 5-8164 |
| J.D. Jones | |
| (613) 957-2104 |
June 27, 1989
Dear Sirs:
Re: Subsection 153(4) of the Income Tax Act (the "Act")
This is in reply to your letter of May 29, 1989 wherein you requested a technical interpretation with respect to subsection 153(4) of the Act as it applies to the following situation.
A Co. is a public corporation with 10% of its shares held by minority d shareholders and 90% held by B. Co. A Co. and B. Co. undergo an amalgamation to form Amalco. The minority public shareholders are issued redeemable preference shares of Amalco which are redeemed on the day after amalgamation and results in a deemed dividend. Amalco deposits into an account with a trust company moneys representing the redemption price, a portion of which represents the paid-capital of the shares redeemed and the balance represents the deemed dividend. The account is in the name of Amalco and the trust company is authorized to issue cheques thereon to the minority public shareholders presenting their certificates the trust company. As the trust company does not know at the time of the redemption the names of the shareholders to whom the redemption proceeds are payable, it will ascertain this upon then presenting their share certificates and claiming their redemption proceeds.
You have asked for our opinion on whether, in these circumstances, the trust company would be required to comply with subsection 153(4) of the Act in respect of shareholders who do not claim their redemption proceeds before the end of the trust company's taxation year.
It is our view that the provisions of subsection 153(4) of the Act would be applicable in the above situation such that the trust company would be required to withhold and remit 33 1/3% of the aggregate amount of such dividends on or before the day that is 60 days after the end of the trust company's taxation year.
We trust that our comments will be of assistance.
Yours truly,
for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch
c.c. Source Deductions Division