If, when a corporation is wound up under the provisions of ITA 88(2), the distribution of assets to the shareholders exceeds the PUC of the shares being cancelled, the excess will be treated as a capital gain, one-half of which will be included in the taxpayer's Net Income For Tax Purposes.

Question

Quizplus · Accepted Answer

When a corporation is wound up and the distribution of assets to the shareholders exceeds the Paid-Up Capital (PUC) of the shares being cancelled, the excess is treated as a deemed dividend, not a capital gain. Therefore, it is taxed as dividend income, not as a capital gain where only half would be included in the taxpayer's Net Income For Tax Purposes.

If, When a Corporation Is Wound Up Under the Provisions