A discretionary trust (the "Trust"), whose beneficiaries were A, A's spouse, their children and a corporation ("Holdco") all of whose participating and voting shares were held by A, received a dividend on its shareholding (being all the non-voting common shares) in Opco, and distributed that dividend to Holdco, making a s. 104(19) designation, and with Holdco claiming a s. 112(1) deduction for its income inclusion under s. 104(13). The Opco dividend amount equalled the safe income on hand respecting the Trust's shares, and no Part IV tax was payable (by virtue inter alia of A being the sole voting shareholder of Opco).
Should the dividend be recognized in the calculation of Holdco's safe income? After noting the availability and making of the s. 104(19) designation in respect of the dividend which was included in Holdco's income under s. 104(13), CRA stated (TaxInterpretations translation):
[I]t would be reasonable to consider that the amount of the dividend allocated to Holdco by virtue of subsection 104(19) which was included in the computation of its income, would increase its safe income by an equivalent amount.