Canada Revenue Agency · Income splitting
A non-voting dividend-sprinkling class that cannot meet the TOSI excluded-shares test
What the rule requires
A dividend-sprinkling class only works if an exclusion from the tax on split income applies. The "excluded shares" exclusion is closed to a PREC on two independent grounds: it requires shares carrying at least 10% of the votes AND value, which a non-voting class can never meet, and it is available only where LESS than 90% of the business income comes from providing services. A PREC exists to provide one individual's services, so it fails that test whatever the shares carry.
Authority: ITA s. 120.4 (tax on split income)
What good looks like
No non-voting discretionary-dividend class was found, so the articles do not build in the sprinkling structure that TOSI attacks.
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