Dividend Designation From A Trust – Timing (T.I. 2016-0647621E5)

The CRA was asked a question regarding the application of Part IV tax and the determination of the timing when a corporate beneficiary of a trust receives a dividend designated under subsection 104(19) of the Income Tax Act (Canada) (the "Act").

The facts presented were as follows:

1. Opco and Gesco are both SPCCs;
2. Opco is wholly-owned by Trust;
3. Opco has a May 31^st year-end;
4. Gesco and Trust have December 31 year-end;
5. On May 31^st, Opco pays a $10,000 dividend to Trust;
6. On May 31^st, Trust distributes said amount to Gesco pursuant to subsection 104(19) of the Act;
7. Opco does not receive any refund of RDTOH for the year;
8. On May 31^st, Opco and Gesco are "connected" pursuant to paragraph 186(4)(a) of the Act; and