24 August 1989 Internal T.I. 58287 F - Winding-up - When a Dividend is Deemed Paid and a Shareholder Considered to Have Disposed of Shares

By services, 18 January, 2022
Official title
Winding-up - When a Dividend is Deemed Paid and a Shareholder Considered to Have Disposed of Shares
Language
French
CRA tags
164(6), 84(2)
Document number
Citation name
58287
Severed letter type
Technical Interpretation - Internal
d7 import status
Drupal 7 entity type
Node
Drupal 7 entity ID
632349
Extra import data
{
"field_external_guid": [],
"field_proprietary_citation": [],
"field_release_date_new": "1989-08-24 08:00:00",
"field_tags": []
}
Main text
19(1) File No. 5-8287
  D. Watson
  (613) 957-2121

August 24, 1989

Dear Sirs:

Re:  Subsection 164(6) and 84(2)

This is in response to your letter of June 14, 1989 in which you requested our opinion regarding the application of subsections 164(6) and 84(2) of the Income Tax Act (the "Act") where a capital loss arises on the winding-up of a corporation by the executor of an estate.  Specifically, you requested an opinion as to when subsection 84(2) of the Act deems a dividend to have been paid and when, during the course of a wind-up, a shareholder is considered to have disposed of shares for the purposes of subsection 164(6) of the Act.

Where subsection 84(2) is applicable, that is, where property is distributed on a winding-up, a dividend is deemed to have been paid when the property is distributed.  Interpretation Bulletin IT-126R explains the words "on the winding-up" in general terms.  However, in a specific situation the facts would have to be evaluated to determine that a wind-up is in progress and that a distribution of corporate property is part of the process.

With respect to your second question, it is the Department's view that there is no disposition of the shares of the corporation being dissolved until the certificate of dissolution has been issued and the corporation has been dissolved and there are no reasons to believe that the corporation may thereafter be revived. However, as set out in paragraph 5 of IT-126R, the Department is prepared to accept that there has been a wind up, and consequently a disposition of the shares of the corporation by a shareholder, where the formal dissolution of the corporation is not complete but there is substantial evidence that the corporation will be dissolved within a short period of time.

These comments do not constitute an advance income tax ruling and are not binding on the Department with respect to a specific taxpayer.

Your truly,

for DirectionReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch