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Mr. Jones owns all 5,000 shares of L&L Ltd. The shares have a PUC
of $75,000 and his ACB is $40,000. One-half of the shares are
redeemed for $55,000.
Redemption Price $55,000
PUC [(1/2)($75,000)] ( 37,500)
ITA 84(3) Deemed Dividend $17,500
• If Public Company
• Entire distribution is treated as deemed dividend
• Exception if there is a redemption, acquisition, or
cancellation of shares
$100,000 Of Individual
Investment
Shareholder
Income
When Corporation
Distributes Its After
Tax Income As
Dividends, Part Of
Tax Is Refunded
Refund Equal To $1
For Each $3 Of
Dividends Paid
$26,667 = [(1/3)($80,000)]
$100,000
Investment
Income
Assessed At A Rate
Of 33-1/3%
Refunded At A Rate
Of $1 For Each $3
Of Dividends Paid
Connected Corporations
Control (> 50%), or
Greater Than:
10% Of Voting, And
10% FMV Of All
Dividends can be
designated as eligible.
Should be non-eligible.
If designated – will be
subject to tax on excess
designation.