Subsection 82(1) - Taxable dividends received
Paragraph 82(1)(a)
Cases
De Groote v. The Queen, 85 DTC 5008, [1985] 1 CTC 687 (FCTD)
The taxpayer sold the beneficial ownership of shares to, and executed a declaration of trust in favour of, a company controlled by him and then, while still the registered owner of the shares, received dividends thereon and paid them to the controlled company. Although the dividends had been "received" by him, they were not included in his income by virtue of s. 56(4) because he had assigned his shares prior to the dividend declaration date.
Robson v. MNR, 52 DTC 1088, [1952] CTC 85, [1952] 2 S.C.R. 223
A corporation, which admittedly was seeking to effect a tax-free distribution of profits to its shareholders, sold shares of another corporation to its shareholders (including the taxpayer) at a substantial undervalue, and the shareholders then sold the shares at a gain. The difference between the fair value of the shares and the amount paid therefor by the shareholders constituted, at the time of the shares' distribution, "dividends or profits directly or indirectly received ... from stocks" for purposes of s. 3(1) of the Income War Tax Act.
See Also
Cooper v. The Queen, 2010 TCC 403, 2010 DTC 1277 [at 3934]
Webb J. noted that the gross-up amount will increase a taxpayer's income for the purposes of assessing a 163(1) penalty, because 163(1) calculates the 10% penalty on the income amount, not the tax owing.
Horkoff v. The Queen, 97 DTC 621 (TCC)
Dividends that were purportedly paid to the taxpayers "as of" December 30, 1990 were dividend income to the taxpayers in their 1991 taxation years given that the dividends were not declared until February 13, 1991, the amount of the dividends was not known until that date, and the dividends would not have been declared or paid if a sale of shares of the corporation had not closed on that date.
C.I.R. v. Trustees of Joseph Reid (1949), 30 TC 431 (HL)
In finding that a dividend paid by a South African company out of a capital gain realized by it was "income arising from possessions out of the United Kingdom" for purposes of Case V of Schedule D, Lord Morton stated (p. 446):
"Prima facie a dividend paid on shares is income. It has been held that, even if a distribution by way of dividend has been made out of profits arising from some dealing with the company's capital assets, the distribution is income, as between the persons beneficially interested in capital and income respectively (see In re Bates, [1928] Ch. 682; Hill v. Permanent Trustee Company of New South Wales, Ltd., [1930] A.C. 720; In re Doughty, [1947] Ch. 263).
Gresham Life Society Co., Ltd. v. Bishop (1902), 4 TC 464 (HL)
The taxpayer, a UK life insurance company which was managed in London and had foreign branch businesses, was assessed for interest and dividends which it received on foreign securities held in the hands of agents abroad, and which were reinvested abroad, on the basis that it received such income in the U.K. In finding that the taxpayer was not taxable on such amounts, Lord Brampton stated (at p. 475):
[I]t is conceded that no part of the money in question was ever received in the United Kingdom in specie… . But it was argued that… it was "constructively" so received in the accounts of the Society. …If it means something differing from or short of an actual receipt, then it seems to me that a constructive receipt is not recognised by the Statute, which in using the word "received" alone, must be taken to have used it having regard to its ordinary acceptation. … I am not myself prepared to say that what amongst business men is equivalent to a receipt of a sum of money is not a receipt within the meaning of the Statute… . But…[a] mere entry in an account which does not represent such a transaction does not prove any receipt… .
Administrative Policy
30 January 2014 T.I. 2013-0515761E5 F - Dividend received
A dividend of a taxable Canadian corporation owned by an individual is not paid in money but is recorded in its books as an increase in a loan owing to the shareholder or as a decrease in a loan made to the shareholder. CRA quoted Hickman Motors that "the law is well established that accounting documents or accounting entries serve only to reflect transactions and that it is the reality of the facts that determines the true nature and substance of transactions," and further stated (TaxInterpretations translation):
The necessary documentation must be provided in a particular instance to corroborate that factually and legally a dividend has been paid by the corporation and received by the shareholder. In this regard, book entries are ancillary and serve only to report transactions.
11 December 2013 T.I. 2013-0474161E5 - T-slips and dividend and interest
Respecting a question as to when dividends are paid and received for T5 purposes, CRA stated:
In Innovative Installation Inc. v The Queen, 2009 TCC 580, the Tax Court of Canada explained that "received" does not require "proceeds to pass directly to the taxpayer. The taxpayer can notionally or constructively receive it."
Therefore, it is our view that, generally, the date on which the dividend is paid, whether by cheque, electronic payment, offset or credit to the shareholder's account, would also be the date on which the amount is received.
25 September 2013 T.I. 2013-0488571E5 F - Repayment of a dividend
A taxpayer refunded part of the dividends received from a corporation in 2006.
After citing Sussex Square Apartments v. The Queen. [1999] 2 CTC 2143 (TCC), [2000] 4 CTC 203 (FCA), Dale v. The Queen, 97 DTC 5252 (CFA) and Waddington v. O'Callaghan (1931) 16 T.C. 187, CRA stated (TaxInterpretations translation):
…CRA does not accept retroactive changes to a contract or a corporate act…at least where no court order is rendered to that effect. When a dividend is declared by the board of directors…it cannot be reduced or nullified by the board and the shareholders have no power to request its nullification.