A. INTRODUCTION
This is one of two papers covering subsection 55(2) presented at
the 2017 Canadian Tax Foundation (CTF) Prairies conference. The
other paper, written by Anthony Strawson, discusses planning
techniques practitioners could consider in order to manage
s.55(2).1
One of the most alarming legislative changes impacting tax
practitioners in recent years was the substantial overhaul of
subsection 55(2), which applies to inter-corporate dividends
received after April 20, 2015. The amendments greatly broadened the
reach of subsection 55(2) primarily due to the addition of two new
purpose tests and the restriction of the paragraph 55(3)(a) related
party exception to only subsection 84(2) or (3) deemed dividends.
Rather than attempt a comprehensive discussion of subsection
55(2),2 this paper will focus on certain aspects of the
safe income exception in paragraph 55(2.1)(c) which is the only
objective safe harbour in dealing with revised subsection
55(2).
