Exceptions from Subsection 55(2) - CCH Canadian

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Rick McLeanTax Partner - TorontoKPMG LLPGregory BellTax Partner - OttawaKPMG LLP© 2010 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated withKPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Canada.
Overview of Subsection 55(2)• Anti-avoidance rule• Recharacterizes dividends received by a corporation asa capital gain or proceeds of disposition• Exceptions:• safe income dividends• dividends subject to Part IV tax• dividends arising in certain “related party” transactions –paragraph 55(3)(a)• dividends arising in butterfly reorganizations –paragraph 55(3)(b)© 2010 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is aSwiss entity with which the independent member firms of the KPMG network are affiliated 4
Page 1 and 2: Understanding Section55 and Butterf
Page 3: Agenda• Overview of Subsection 55
Page 7 and 8: Purpose of Subsection 55(2) —Exam
Page 9 and 10: Purpose of Subsection 55(2) —Exam
Page 11 and 12: Subsection 55(2) —Part of a Serie
Page 13 and 14: What Happens if Subsection 55(2) Ap
Page 15 and 16: First Exception: Income Earned or R
Page 17 and 18: Third Exception:Subsection 55(3)(a)
Page 19 and 20: Types of Butterflies© 2010 KPMG LL
Page 21 and 22: Types of Butterflies — Split-up v
Page 23 and 24: Spin-off Butterfly —AfterAB60%40%
Page 25 and 26: Spin-off Butterfly — Basics Steps
Page 27 and 28: Spin-off Butterfly — Basics Steps
Page 29 and 30: Full Split-up ("Double-wing") Butte
Page 31 and 32: Full Split-up Butterfly — Basic S
Page 33 and 34: Qualifying for the Exemption© 2010
Page 35 and 36: Distribution - Subsection 55(1) Def
Page 37 and 38: Pro Rata Test• Gross or Net Asset
Page 39 and 40: Look-Through Concept• Property de
Page 41 and 42: Butterfly Denial Rules© 2010 KPMG
Page 43 and 44: Application of Butterfly Denial Rul
Page 49 and 50: Public Company Spin-off Rules• Pu
Page 51 and 52: Related Issues• Part IV tax and R

Exceptions from Subsection 55(2) - CCH Canadian

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