ACB Adjustments for Foreign Affiliate Shares Held Through Partnerships

Author: Geoffrey S. Turner

Originally published in the CCH International Tax Newsletter, this article first briefly compares the treatment of dividends and capital distributions paid by foreign affiliates directly to a Canadian corporate shareholder and those indirectly paid through a partnership holding structure. Where a pre-acquisition surplus dividend is paid on foreign affiliate shares held through a partnership, there is no reduction in the relevant adjusted cost base (ACB), and consequently subsections 92(4) and (5) will apply to subsequent dispositions of the partnership interest or the underlying foreign affiliate shares. The article then considers several possible ways in which the Department of Finance might address the anomalies.

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Geoffrey S. Turner
Geoffrey S. Turner

Senior Counsel




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