I-3 - Taxation Act

Section 502.0.4 Disposition versions

2006-03-01

502.0.4. 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 a corporation related, otherwise than by reason of a right referred to in paragraph b of section 20, to the particular corporation, and in this section referred to as the “related corporation”, 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 if it is reasonable to consider that any portion of the capital dividend account of that other corporation, as determined under the said section 89 and without reference to paragraph b of section 570, immediately before that dividend became payable consisted of an amount added thereto by reason of paragraph z.1 of subsection 2 of section 87 of the said Act or of paragraph b of the definition of “capital dividend account” in subsection 1 of the said section 89 as a result of a transaction or a series of transactions that would not have been so added had the transaction occurred or the series of transactions been commenced after 4:00 p.m. Eastern Daylight Saving Time, 25 September 1987;

(b)  any amount that represented the capital dividend account of a corporation, as determined under the said section 89 and without reference to paragraph b of section 570, before it became related to the related corporation;

(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;

(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; or

(e)  any amount in respect of a capital gain from a disposition of a property, or another property for which it was substituted, that may reasonably be considered as having accrued while the property or the other property was a property of a person that was not related to the related corporation.

1990, c. 59, s. 181; 1995, c. 49, s. 136; 1996, c. 39, s. 273; 1997, c. 3, s. 71.