Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: When is a capital gains reserve that is claimed pursuant to subparagraph 40(1)(a)(iii) included in the calculation of the capital dividend account balance for the subsequent taxation year.
Position: On the first day of the subsequent taxation year.
Reasons: Subject to any capital gains reserve that may ultimately be claimed in the subsequent taxation year, a capital gains reserve taken in a taxation year is included in the calculation of the capital dividend account balance on the first day of the subsequent taxation year.
2004-009046
XXXXXXXXXX T. Lanzer
(613) 957-2129
August 16, 2004
Dear XXXXXXXXXX:
Re: Computation of Balance in Capital Dividend Account
We are writing in response to your letter of August 5, 2004 wherein you requested our comments on the time when a capital gains reserve taken in a prior year is included in the calculation of the capital dividend account balance in a subsequent year.
A capital gains reserve claimed pursuant to subparagraph 40(1)(a)(iii) of the Income Tax Act in a taxation year is included in the taxpayer's gain from the disposition of property for the subsequent taxation year pursuant to subparagraph 40(1)(a)(ii). Subject to the comments regarding the calculation of the capital dividend account balance in paragraph 11 of Interpretation Bulletin IT 66R6, a capital gains reserve taken in a taxation year is included in the calculation of the capital dividend account balance on the first day of the subsequent taxation year.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch
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