,canada ,rev5ue ,ag5cy #a ,9come ,tax ,te*nical ,news ,numb] #cg ,febru>y #ae1 #bjjh ,9 ,? ,issue ,safe ,9come ,calcul,n--,tr1t;t ( ,non- ,deducti# ,exp5ses ,! ,9come ,tax ,te*nical ,news is produc$ 0! ,legislative ,policy & ,regulatory ,a6airs ,bran*4 ,x is provid$ = 9=m,n purposes only & does n replace ! law4 ,if y h any -;ts or su7es;ns ab ! matt]s 4cuss$ 9 ? public,n1 pl1se s5d !m to3 #a  ,te*nical news a#a ,9come ,tax ,rul+s ,directorate ,legislative ,policy & ,regulatory ,a6airs ,bran* ,canada ,rev5ue ,ag5cy ,ottawa ,,on ,k#a;,a #j;,l#e ,! ,9come ,tax ,te*nical ,news c 2 f.d on ! ,canada ,rev5ue ,ag5cy ,9t]net site at _+www.cra.gc.ca_:4 ,safe ,9come ,calcul,n-- ,tr1t;t ( ,non-,deducti# ,exp5ses ,z 9dicat$ 9 ! 4cus.n "u ! h1d+ 8,safe ,9come ,calcul,n--! ,kruco ,case0 9 ,9come ,tax ,te*nical ,news #cd1 ! deci.n (! ,f$]al ,c\rt ( ,app1l 7,,fca7 9 ,! ,que5 v4 ,kruco ,9c4 99#a caus$ a grt d1l ( unc]ta9ty 3c]n+ ! 3t9u$ valid;y ( _m (! ,,cra's guidel9es = det]m9+ ! am.t (a corpor,n's safe 9come on h&1 z describ$ 9 v>i\s pap]s 99#b pres5t$ 0s5ior ,,cra (ficials & #b  ,safe 9come calcul,n b#a supple;t$ 0subsequ5t te*nical 9t]pret,ns issu$ 0! ,,cra4 99#a ,canada v4 ,kruco ,9c41 #bjjc ,,dtc #eejf1 ,7#bjjc7' #d ,,ctc #ahe4 99#b ,capital ,ga9s ,/rips3 ,a ,rev5ue ,canada ,p]spective ,on ! ,provi.ns ( ,sec;n #ee1 pres5t$ 0,j4,r4 ,rob]tson at ! #aiha annual 3f];e (! ,canadian ,tax ,f.d,n2 ,sec;n #ee3 ,a ,review ( ,curr5t ,issues1 pres5t$ 0,rob]t ,j4,l4 ,r1d at ! #aihh annual 3f];e (! ,canadian ,tax ,f.d,n2 & ,9come ,e>n$ or ,r1liz$3 ,"s ,reflec;ns1 pres5t$ 0,mi*ael ,hiltz at ! #aiia annual 3f];e (! ,canadian ,tax ,f.d,n4 ,z a result ( 3c]ns t taxpay]s miticle 9 ,9come ,tax ,te*nical ,news #cc1 expla9+ xs 9t]pret,n (! ,kruco deci.n & imple;t+ an adm9i/rative practice t wd a4ress xs 3c]ns4 ,9 v>i\s publi%$ docu;ts & /ate;ts made at annual 3f];es1 ! ,,cra has /at$ t xs 9t]pret,n ( ,kruco 0 t an am.t wd g5],y only 2 9clud$ 9 a corpor,n's safe 9come 6! ext5t t x is 9clud$ 9 ! det]m9,n ( xs net 9come = tax purposes or is an adju/;t specific,y set \ 9 p>agraph #ee7#e77b7 or 7c74 ,simil>ly1 an am.t t is deduct$ 9 -put+ a corpor,n's net 9come = tax purposes wd reduce ! corpor,n's safe 9come4 ,o!rwise1 safe 9come wd g5],y only 2 reduc$ 0^? ca% \tfl[s t o3ur af ! det]m9,n ( net 9come1 b 2f ! divid5d is pd 7s* z taxes & divid5ds7 6! ext5t t s* 4burse;ts reduce ! 9come 6: ! capital ga9 may 2 attributa#4 ,! ,,cra fur!r ann\nc$ t x wd foll[ ? approa*4 ,/ate;ts 7 al made 6! e6ect t "u ? approa*1 non- #d  ,safe 9come calcul,n d#a deducti# exp5ses wd n g5],y reduce a corpor,n's safe 9come on h&4 ,s9ce public,n ( xs 9t]pret,n (! ,kruco deci.n1 ! ,,cra has rcvd num]\s 5quiries seek+ cl>ific,n ( xs posi;n relat+ 6! tr1t;t ( non-deducti# exp5ditures 9 ! -put,n ( safe 9come on h&4 ,9 _m ( ^! sc5>ios1 ! safe 9come on h& z det]m9$ "u ! approa* describ$ abv wd l1d 6anomal\s results 9 t ! am.t det]m9$ wd exce$ ! fair m>ket value (! corpor,n's %>es4 ,moreov]1 ? approa* may e6ectively "um9e ! tax policy "uly+ subsec;n #ee7#b7 6! ext5t t ": ! safe 9come on h& z det]m9$ is n support$ 0! net fair m>ket value ( assets reta9$ 0! corpor,n1 x may p]mit ! pay;t (a safe divid5d t reduces ! por;n (! ga9 on a %>e t is attributa# 6unr1liz$ ga9s on ! "uly+ assets (! corpor,n4 ,3sequ5tly1 ! ,,cra has decid$ 6reconsid] xs 9t]pret,n (! ,kruco deci.n1 z describ$ 9 ,,ittn's #cc & #cd1 9 "picul> ) ref];e 6! tr1t;t ( non- #e  ,safe 9come calcul,n e#a deducti# exp5ditures 9 ! -put,n ( safe 9come on h&4 --------------------------------------#b ,9 ? reg>d1 ! only case t specific,y a4resses ! tr1t;t ( non-deducti# exp5ditures is t ( ,gestion ,jean-,paul ,champagne 99#c1 : 0 cit$ ) approval 0bo? ! ,tax ,c\rt ( ,canada 7,,tcc7 &! ,,fca 9 ,kruco4 ,9 ,gestion ,jean-,paul ,champagne1 ! ,c\rt held t ! safe 9come (a corpor,n _h 6be reduc$ 6reflect previ\sly 4tribut$ pr(its1 notably 9 ! =m ( divid5ds & non-deducti# exp5ditures4 99#c ,gestion ,jean-,paul ,champagne v4 ,m4,n4,r41 ,7#aiif7' #b ,,ctc #becg1 #ig ,,dtc #aee4 ,) respect 6! ,kruco case1 x %d 2 not$ t at ! ,,tcc level1 ,dussault ,j4 _h 6exam9e ! valid;y ( ?ree negative adju/;ts made 0! ,,cra 6! taxpay]'s safe 9come4 ,! f/ two adju/;ts 7 ) #f  ,safe 9come calcul,n a#b respect 69ve/;t tax cr$its claim$ 0! corpor,n4 ,! purpose ( ^! two negative adju/;ts 0 6reduce ! safe 9come (! taxpay] 0! am.t ( 8phantom 9come0 g5]at$ 0^! 9ve/;t tax cr$its4 ,) respect 6bo? adju/;ts1 ! ,tax ,c\rt ,judge f.d 9 fav\r (! taxpay]4 ,! ?ird adju/;t exam9$ 0,dussault ,j4 relat$ 6a transac;n t gave rise 6a ca% \tlay t 0 f.d 6be equival5t 6a non-deducti# exp5se4 ,9 p>agraph #hd ( 8 deci.n 9 ,kruco1 ,dussault ,j4 9dicat$ t ele;ts s* z non- deducti# exp5ses 8reflect ca% fl[ %[n on ! bal.e %eet : 9 no way a6ects ! calcul,n ( 9come =! purposes (! ,act40 ,fur!rmore1 9 p>agraph #ic ( 8 deci.n1 ,dussault ,j4 held t ! ca% \tlay made 0! corpor,n ) respect 6! ?ird adju/;t 0 n reflect$ 9 ! -put,n (! corpor,n's 9come = tax purposes1 al? x reduc$ ! am.t ( 4posa# af-tax 9come 0an equival5t am.t4 ,9 8 view1 ! r1son+ applica# 9 ! case (! ?ird adju/;t _h 6be ! "o adopt$ 9 ,gestion ,jean-,paul ,champagne4 #g  ,safe 9come calcul,n b#b ,?us1 ! safe 9come (! corpor,n _h 6be reduc$ 6reflect ! ca% \tlay made 0! corpor,n4 ,dussault ,j4 f9,y f.d t ! me?od adopt$ 0! ,m9i/] ) respect 6! ?ird adju/;t 0 r1sona#4 ,x %d 2 not$ t ! taxpay] did n app1l ! issue (! ?ird adju/;t d1l+ )! impact (! ca% \tlay4 ,9 p>agraphs #ce 6#ch (! r1sons = judge;t 9 ,kruco1 ! ,,fca sets \ ! g5]al pr9ciples t %d gov]n ! calcul,n ( safe 9come4 ,! ,,fca recognizes t ! calcul,n ( safe 9come is only ! f/ /ep & t a second /ep1 ! det]m9,n (! 8safe 9come on h&01 is requir$ 0! ,act4 ,on ? po9t1 ,noel1 ,j4 /ates ! foll[+ 9 p>agraph #ch (! deci.n & relies on ,gestion ,jean- ,paul ,champagne 9 support ( 8 /ate;t3 ,"! c 2 no d\bt t ? ex]cise 7i4e4 ! second /ep--! calcul,n ( 8safe 9come on h&07 calls = an 9quiry z 6:e!r 8! 9come e>n$ or r1liz$0 0 kept on h& or rema9$ 4posa# 6fund ! pay;t (! divid5d4 ,x foll[s1 = 9/.e1 t #h  ,safe 9come calcul,n c#b taxes or divid5ds pd \ ( ? 9come m/ 2 extract$ f safe 9come 7see ,deuce ,hold+s ,ltd41 supra & ,gestion ,jean- ,paul ,champagne ,9c41 supra74 7emphasis a4$74 ,al1 9 p>agraph #da ( 8 r1sons = judge;t 9 ,kruco1 ,noel1 ,j4 /at$3 ,reduc+ ? 9come 0ref];e 6ca% \tfl[s1 : take place af x has be5 -put$ 9 3=m;y ) p>agraph #ee7#e77c71 b 2f ! divid5d is pd1 does no viol;e 6! deem+ provi.n s9ce ! deem$ am.t is a3ept$ z ! />t+ po9t & modifi$ only 0ref];e 6subsequ5t ev5ts : >e relevant 6! subsec;n #ee7#b7 -put,n1 i4e41 ca% \tfl[s : take place af ! 9come has be5 det]m9$ --in 3=m;y )! deem+ provi.n--& : reduce ! 9come 6: ! capital ga9 c 2 8r1sonably ''' attributa#04 ,9 \r view1 9 9t]pret+ p>agraph #da (! ,,fca's deci.n1 prop] emphasis m/ 2 #i  ,safe 9come calcul,n d#b giv5 6! g5]al pr9ciples set \ 9 p>agraphs #ce 6#ch4 ,we 2lieve t safe 9come on h& reduc;ns made 6reflect ! impact ( ca% \tfl[s 7s* z non-deducti# exp5ses71 : >e n deduct$ 9 ! -put,n (! corpor,n's net 9come = tax purposes b / h ! e6ect ( reduc+ ! am.t ( 4posa# af- tax 9come 0an equival5t am.t1 >e 9 l9e )! g5]al pr9ciples set \ 0! ,,fca4 ,acly1 we >e n[ (! view t ! am.ts t m/ reduce a corpor,n's 8safe 9come on h&0 >e n limit$ only 6taxes & divid5ds4 ,! use (! t]ms 8= 9/.e0 9 p>agraph #ch (! ,,fca's deci.n supports ? view4 ,fur!rmore1 "o wd ?9k t ! /ate;t 0! ,,fca t ! second /ep 9 ! process ( det]m9+ a corpor,n's safe 9come requires an 89quiry0 z 6:e!r ! 9come e>n$ or r1liz$ 0 kept on h&1 is evid;e t s* second /ep implies m ?an ! m]e reduc;n (a corpor,n's net 9come 0taxes & divid5ds pd only4 #aj  ,safe 9come calcul,n #c ,we >e al (! view t an 9t]pret,n (! ,kruco deci.n t all[s ! reduc;n ( safe 9come 0! am.t ( non-deducti# exp5ses 9curr$ 0a corpor,n is 9 a3ord.e )! 9t5t ( subsec;n #ee7#b71 : is 6p]mit a tax- free 9t]corporate divid5d 6be pd 6reduce a pot5tial capital ga91 6! ext5t h["e t s* ga9 is attributa# 6! ret5;n ( 8po/- #aiga0 9come4 ,3sequ5tly1 = any divid5d pd af ! date ( rel1se ( ? ,,ittn 7o!r ?an a divid5d pd 9 a transac;n1 or z "p (a s]ies ( transac;ns1 ! >range;ts = :1 evid;ed 9 writ+1 7 sub/anti,y adv.ed at ! date ( rel1se ( ? ,,ittn71 x is ! ,,cra's posi;n t non-deducti# exp5ses m/ 2 deduct$ 9 -put+ ! safe 9come on h& attributa# 6! %>es on : ! divid5d is pd1 z -put$ 2f ! safe-9come det]m9,n "t =a "picul> transac;n4 ,) respect 6any divid5d pd on or 2f ! date ( ? ,,ittn 7& any divid5d pd af ! date ( rel1se ( ? ,,ittn t is eligi# =! transi;nal relief describ$ abv71 due 6! unc]ta9ty #aa  ,safe 9come calcul,n a#c associat$ )! impact ( non-deducti# exp5ses on safe 9come dur+ s* p]iod1 ! ,,cra's g5]al posi;n w 2 n 6make any new d[nw>d adju/;ts 6a corpor,n's safe 9come on h& 9 respect ( non-deducti# exp5ses4 #ab