I-3 - Taxation Act

Section 308.2.0.2 Disposition versions

2019-06-19

308.2.0.2. Where the conditions of the second paragraph are met, in respect of a stock dividend, the following rules apply:

(a)  the amount of the stock dividend is deemed for the purposes of section 308.1 to be a separate taxable dividend to the extent of the portion of the amount that does not exceed the amount of the income earned or realized by any corporation after 31 December 1971 and before the safe-income determination time, in relation to the transaction or event or series of transactions or events, that can reasonably be considered to contribute to the capital gain that would have been realized on a disposition at fair market value of the share on which the dividend was received, if the disposition had occurred immediately before the dividend was paid; and

(b)  the amount of the separate taxable dividend referred to in subparagraph a is deemed to reduce the amount of the income earned or realized by any corporation after 31 December 1971 and before the safe-income determination time, in relation to the transaction or event or series of transactions or events, that can reasonably be considered to contribute to the capital gain that would have been realized on a disposition at fair market value of the share on which the dividend was received, if the disposition had occurred immediately before the dividend was paid.

The conditions to which the first paragraph refers, in respect of a stock dividend, are as follows:

(a)  a dividend recipient holds a share in respect of which it receives the stock dividend;

(b)  the fair market value of the share or shares issued as a stock dividend exceeds the amount by which the paid-up capital of the corporation that paid the stock dividend is increased because of the payment of the dividend; and

(c)  section 308.1 would apply to the stock dividend if section 308.2 were read without reference to its paragraph b.

2019, c. 14, s. 109.