I-3 - Taxation Act

Section 502.0.2 Disposition versions

2006-03-01

502.0.2. Section 502.0.1 does not apply in respect of a particular dividend, in respect of which an election is made under section 502, paid on a share of the capital stock of a particular corporation to an individual where it is reasonable to consider that all or substantially all of the capital dividend account of the particular corporation, as determined under section 89 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) and without reference to paragraph b of section 570, immediately before the particular dividend became payable consisted of amounts other than

(a)  any amount added to the account by reason of paragraph b of the definition of “capital dividend account” in subsection 1 of section 89 of the said Act in respect of a dividend received on a share of the capital stock of another corporation which share, or another share for which the share was substituted, was acquired by the particular corporation in a transaction or as part of a series of transactions one of the main purposes of which was that the particular corporation receive the dividend, but not in respect of a dividend where it is reasonable to consider that the purpose of paying the dividend was to distribute an amount that was received by the other corporation and included in computing the other corporation’s capital dividend account, as determined under section 89 of the said Act and without reference to paragraph b of section 570, by reason of paragraph d of the definition of “capital dividend account” in subsection 1 of section 89 of the said Act;

(b)  any amount added to the account by reason of paragraph z.1 of subsection 2 of section 87 of the said Act as a result of an amalgamation or winding-up or a series of transactions including the amalgamation or winding-up that would not have been so added had the amalgamation or winding-up occurred or the series of transactions including the amalgamation or winding-up been commenced after 4:00 p.m. Eastern Daylight Saving Time, 25 September 1987;

(c)  any amount added to the account at the time when the particular corporation was controlled, directly or indirectly in any manner whatever, by one or more persons not resident in Canada; or

(d)  any amount in respect of a capital gain from a disposition of a property by the particular corporation or another corporation that may reasonably be considered as having accrued while the property, or another property for which it was substituted, was a property of a corporation that was controlled, directly or indirectly in any manner whatever, by one or more persons not resident in Canada.

1990, c. 59, s. 181; 1995, c. 49, s. 134; 1996, c. 39, s. 273; 1997, c. 3, s. 71.