| 19(1) | File No. 5-8504 |
| J.D. Jones | |
| (613) 957-2104 |
November 30, 1989
Dear Sirs:
Re: Subsection 153(4) of the Income Tax Act (the "Act")
This is in reply to your letter of August 4, 1989, wherein you requested our opinion on the application of subsection 153(4) of the Act where all of the shares of a trust company are in registered form such that the trust company knows the name of every registered shareholder.
You state in your letter that it is a basic principle of corporate law that the only person entitled to receive dividends or other distributions on a share from the issuer corporation or its agent is the registered shareholder. Thus, it is your view that where a trust company will by paying dividends on its shares, provided that trust company knows all the names of its registered shareholders, the trust company should not be required to make inquiries as to whether a particular registered shareholder may be holding shares in trust for some other person who may benefit from dividends paid thereon and, accordingly, subsection 153(4) of the Act should not apply.
We agree that, in the normal situation where a dividend is paid to the registered owner of the underlying share and the dividend is accepted by that person, the trust company need not enquire further as to the rights of other persons with respect to the shares. If for some reason however, payment of the dividend cannot be effected because it is subsequently established that the registered owner of the share is no longer entitled to receive such payment, subsection 153(4) of the Act may be applicable if the person beneficially entitled to the dividend is unknown. If you have a factual situation in mind, you may wish to provide full details to the local district taxation office for their consideration.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch