Revenue Canada Taxation Head Office
B.G. Dodd (613) 957-9769
October 25, 1988
Dear Sirs:
We are writing in reply to your letter dated August 18, 1988 concerning subsection 153(4) of the Income Tax Act (the "Act").
You enquired as to whether subsection 153(4) of the Act, by virtue of its postamble, offers the taxpayer the option of either:
a) including the unclaimed dividends, interest or proceeds of disposition referred to therein in taxable income for the year, or
b) paying the special taxes referred to therein.
It is our opinion that subsection 153(4) of the Act does not provide a taxpayer with an option to include the unclaimed amount in income but merely provides that this provision will not apply in circumstances where the unclaimed amount is, or has been otherwise included in his income. Generally as the person beneficially entitled to the amount would retain his right to the amount and the amount would remain a liability of the taxpayer, there is no basis for including such amounts in the taxpayer's income. Indeed this is the very reason for the existence of the provision.
On the question of deductibility by the taxpayer where, in the event of having earlier been required to include the unclaimed amount in income, he subsequently must pay the amount over to the beneficial owner, we do not appear to have encountered such a situation and are uncertain how it might arise. Accordingly we are not prepared to comment definitively except in the context of a specific case where all the facts are known.
We hope the foregoing will be of assistance.
Yours truly,
for Director Financial Industries Division Rulings Directorate