Précis: The corporate taxpayer claimed that when its subsidiary sold a piece of real estate, the full taxable capital gain and recaptured CCA totaling $3,079,184 entered into its “safe income” computation for the purposes of subsection 55(2) of the Act. That safe income was calculated when it increased its paid-up capital giving rise to a deemed dividend to the corporate taxpayer (December 13, 2006). CRA reassessed on the basis that the safe income was only $1,998,098 since it was reduced by the subsidiary’s tax liability of $1,081,586 on the sale of the real estate (computed as at December 13, 2006). The taxpayer argued that the tax should be computed at the end of the 2006 taxation year, i.e., December 31, 2006, and that it had no tax to pay on that date since it had acquired software giving rise to sufficient CCA to shelter the income in question. (The software deduction was under objection at the time of this trial.) The Tax Court agreed with CRA and dismissed the appeal with costs.
626468 New Brunswick Inc. v. R. – TCC: “Safe Income” calculated after, not before, tax and computed at the date the dividends in question were paidREAD MORE »