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- Title
PAID-UP CAPITAL PLANNING.
- Authors
Burpee, T. R.; Schusheim, P. E.; Smith, Jennifer; Devon, Shiyamala S.
- Abstract
Paid-up capital (PUC) is a concept of fundamental importance to the tax system. Its primary role is in determining the tax consequences of corporate distributions and reorganizations. Of foremost significance is the fact that PUC generally can be distributed to shareholders on a tax-free basis. The manner in which PUC is calculated in particular circumstances is critical to the availability of tax-free treatment. In some circumstances, certain provisions of the Income Tax Act may apply to result in dividend income to the shareholder, which may be subject to tax. This article discusses some of the planning and pitfalls relating to the calculation of PUC. Particular issues addressed include recent developments in the application of the section 84.1 surplus-stripping rule, private versus public company share redemptions and returns of capital, exceptions to the deemed dividend rule, capitalization of contributed surplus, and PUC shifts.
- Subjects
TAX laws; CORPORATE reorganizations; INVESTORS; CAPITAL; STOCKS (Finance)
- Publication
Canadian Tax Journal / Revue Fiscale Canadienne, 2003, Vol 51, Issue 6, p2296
- ISSN
0008-5111
- Publication type
Article