My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Monday, March 9, 2015

Capital Dividends - A Tax-Free Withdrawal from your Company

If you are a private corporate business owner, you may be sitting on a treasure trove of tax-free money. Yes, I said tax-free money. The source of these “free” funds is the Capital Dividend Account (“CDA”), which I discuss in greater detail below. Although a CDA account is most often found in holding/investment companies, the largest accounts are often generated in active companies who have sold all or part of their business.


Private business owners often discuss with their professional advisors whether they should take salary and/or dividends, which are both taxable to the owner when paid. However, surprisingly, the possibility of paying a tax-free dividend is often overlooked, which is possible if the dividend is paid from the Capital Dividend Account (“CDA”) of a private corporation to a Canadian resident individual.

The Capital Dividend Account


The CDA tracks certain amounts that are not taxable to the Company and may be distributed to shareholders with no personal tax. For example:

(i) if the company earns a capital gain which is 50% taxable, the half that is not taxable is added to the CDA.

(ii) if the company was paid a capital dividend from another company it invested in, that amount is not taxable and is added to the CDA.

(iii) if the company sells a particular eligible capital property (“ECP”) in the year, the portion of the gain that is not taxable is added to the CDA. Please note that the addition to the CDA occurs at the end of the year in which the sale of the ECP took place. As a result, the CDA cannot be paid out tax-free until the first moment of the following taxation year.

(iv) if the company receives proceeds from a life insurance policy which are considered to be non-taxable, this is added to the CDA.

(v) if the company incurs a capital loss, 50% of such amount that will not be deductible in the current or future years against capital gains and will reduce the CDA.

Filing and Declaring a Capital Dividend


The following are the filing procedures and considerations as to the timing of declaring a capital dividend:

i) For the dividend to be tax-free, the company needs to make an election on Form T2054 - Election for a Capital Dividend Under Subsection 83(2), which is due to be filed with the Canada Revenue Agency on or before the earlier of the day that the dividend is paid or becomes payable.

A certified copy of the Director(s) resolution authorizing the capital dividend and a detailed calculation of the CDA at the earlier of the date the capital dividend is paid or becomes payable must accompany the Form T2054.

If the Form T2054 and attachments are filed late, a penalty will arise.

ii) If the Canada Revenue Agency reviews the election and determines that the capital dividend paid (or declared) was too high, then a penalty, equal to 3/5 of the excess of dividend over the CDA balance available, will arise.

It is possible to avoid such penalty if an election is made to treat the excess portion as a taxable dividend at the time it is paid, and such election is filed within 90 days after the date of the notice of assessment in respect of the tax on the excess, noted above.

To avoid these negative consequences, it is important to properly calculate the CDA.

iii) The CDA is a cumulative account from the date of incorporation (assuming it has always been a private corporation). If the company has not previously filed a Form T2054, it will be necessary to review the historical capital gains and losses and corporate activities from the date of incorporation to the date of the dividend in order to determine the correct CDA balance.

iiii) The CDA is paid at a moment in time. If you have a CDA balance but incur a loss the next day, your CDA balance is reduced. Thus, in general, it is prudent to pay a CDA dividend when the account reaches a material amount (this amount is different to each person) so that you do not take the risk of a capital loss reducing the balance in the account. If you pay a capital dividend and then incur a capital loss, the account can go negative.

Further analysis may be required for any non-resident shareholders, since a payment from the CDA to a non-resident of Canada is subject to non-resident withholding tax and the dividend may be taxable in their country of residence.

Journal Entries


Some companies reflect capital dividends by adjusting journal entry (“AJE”), rather than paying the actual dividend. Where the dividend is paid by AJE, the shareholder loan is credited. This creates a tax-free loan owing from the company to the shareholder. The CRA has stated that an AJE on its own does not constitute payment of the funds and that a demand promissory note accepted by the recipient as absolute payment together with an indication of such an intention in the resolutions is at a minimum required to have the dividend considered paid and received.

Balance Determination


Where a company has had more than one accountant and/or has amalgamated with other corporations in the past, the determination of the CDA can be problematic. The CRA recently announced that as of April, 2015, a CDA balance request form will be available to hopefully alleviate this tracking issue.

Speak with your accountant to see if your private company has a CDA balance. If so, paying out a capital dividend should be considered as part of your Company’s overall remuneration strategy.

 
This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.

87 comments:

  1. Hi, great blog post! Quick question, will a CDA dividend paid out to an individual (shareholder) be reflected in the personal return (t1) of that shareholder? Thanks

    ReplyDelete
  2. Mark, when you say material amount, is that just a dollar amount for the capital dividend balance or a cost amount of preparation?

    ReplyDelete
    Replies
    1. Hi Anon

      Good question, it is both. You have to pay an accountant to prepare the form and calculate the CDA balance and a lawyer for the resolutions (doing yourself will typically be foolhardy). Depending upon how complicated, it could cost $1500-$2,500. So you need to factor in the cost; thus if you have a $7,000 CDA, it would probably be cost prohibitive, but if u have a $25k CDA, it is probably worthwhile, depending upon your financial situation.

      Delete
  3. Great post, Mark! Do you think most companies know about using their CDA as tax-free or aren't aware of this? I have always been surprised that more companies don't take advantage of it.

    ReplyDelete
    Replies
    1. Hi Valerie

      The reason I see most often for non use is the company has switched accountants and the new accountant was not aware or cannot find info regarding the CDA.

      Delete
  4. HI Mark -
    My corporation has a sizeable CDA credit, but no cash currently. I am looking for info on whether my corporation can issue a promissory note as payment for the capital dividend, and came across your blog. You mention what CRA has said is required as a minimum to do this. Where can I find more CRA comments on this step? Your articles are quite readable. Thanks!

    ReplyDelete
    Replies
    1. Hi Anon

      If you intend to pay out a CDA and don't have the cash I would speak to your lawyer first to see what they suggest from a legal perspective.

      Here is an article-see the capital dividend discussion and the links to the footnotes http://www.cch.ca/newsletters/FinancialPlanning/may2011/index.htm

      Delete
  5. Hi Mark,

    You mentioned some companies create an adjusting entry that credits the shareholder account versus paying out the capital dividend by cheque. If that is the case, does T2054 form still need to be filed with CRA? Do resolutions need to be filed with CRA along with CDA calculations?

    ReplyDelete
    Replies
    1. For any capital dividend the T2054 and resolutions must be prepared

      Delete
    2. Hi Mark,

      After a T2054 form has been filed with CRA can a journal entry be posted which credits the shareholder loan a/c and debits retained earnings to clear out the capital a/c?

      Thanks for your time, you provide a lot of valuable information@!

      Delete
    3. Hi Anon

      I do not provide any answers in relation to adjusting entries, that is a question for your accountant. I provided the CRA's comments on AJE in the blog.

      thx

      Delete
  6. If you have capital loss carryforwards against capital gains and the CDA is zero, are dividends from the gain then considered "regular ineligible dividends" when paid to the shareholder?

    ReplyDelete
    Replies
    1. Hi Anon

      You are mixing up concepts. Your GRIP account (eligible dividend account) is a separate calculation from capital gains that takes into account eligible dividends received and active business income in excess of $500k to name a couple components.

      Delete
  7. Hi Mark,
    I have a client who has a CDA balance and a debit balance in the shareholder account that is larger then the CDA balance. I want to declare a capital dividend to clear this up. Will CRA not like that? About 1/2 of the balance in the S/H account came from the currect year but the remaining is from prior years. So the actual amount of the CDA did not all go to the S/H in the current year. Would this be a problem?
    Thank you,
    Theresa

    ReplyDelete
    Replies
    1. Hi Theresa,

      I have had varying levels of concern from various tax lawyers on this from none to some. thus, I will not even attempt to provide an answer. You should speak to a tax person or tax lawyer you use for their opinion

      Delete
  8. Hi Mark:

    Is there a tax benefit from CDA, if it's meant to be tax neutral?
    From what I can see, there is a benefit. There is more money left in corp, so it will grow more and lead to a bigger tax free gain at time of disposition?
    Wonder if this simple understanding is correct. If so, there periodic disposition should be made as it is cheaper this way than taking out funds at the high bracket?

    thanks,

    Brian

    ReplyDelete
    Replies
    1. Hi Brian

      The CDA is meant to be tax neutral and since the payment is tax free it is definitely cheaper than taking funds if you are already at a higher tax rate and require more funds.

      Delete
  9. Hi, very informative. If the CDA has been "off the books" so to speak, how do I reconcile the journal when paying the actual cash out? That CDA amount never actually exists in the books so how do I balance at year-end?
    Thanks, Geoff

    ReplyDelete
    Replies
    1. Hi Geoff

      You must prepare a capital dividend schedule as part of the election. The schedule would show all capital gains and losses for each year. So you or your accountant would have to prepare such. We typically keep a running schedule for our clients, especially those that have investment income

      Delete
  10. Hi Avon,

    How can we show this CDA in T2?

    ReplyDelete
    Replies
    1. Hi Roya, who the heck is Avon?

      anyways, the CDA election is a separate election form separate from the T2. The running total of the CDA is not typically provided to the CRA until you actually file a CDA election.

      Delete
  11. Hi Mark, Good article. I have a question regarding ETFs, ACB, and the CDA. Some ETFs reinvest a portion of the yearly distribution and if I understand correctly, this amount is added to the ACB for the ETF. My question is: if a portion of the distribution is reported as a Capital Gain, does this impact the CDA? Thanks in advance. Tom

    ReplyDelete
    Replies
    1. Hi Anon

      If you report the yearly distribution as a capital gain on your tax return, it would be included.

      Delete
  12. Hi Mark,
    Great article - thank you! Do non-capital loss carryforwards reduce the CDA? Should I expect CRA to confirm they received the T2054 and that the dividend is permissable to be paid tax-free to the shareholders? Thanks again. Jen

    ReplyDelete
    Replies
    1. Hi Jen

      Non cap losses do not reduce the CDA

      You may get a letter from the CRA asking for back up for the CDA but they will not send a letter saying it is permissible.

      Delete
  13. Hi Mark,

    You say:
    Thus, in general, it is prudent to pay a CDA dividend when the account reaches a material amount (this amount is different to each person) so that you do not take the risk of a capital loss reducing the balance in the account. If you pay a capital dividend and then incur a capital loss, the account can go negative."
    Are you talking about before you file the election? or after? So if we do an election and take out the entire CDA tax free, and then later sell something for a loss, the account will go negative, is there a risk in that? And what is the risk? Thanks, Jan

    ReplyDelete
    Replies
    1. Hi Jan

      Once u file the CDA election future capital losses do not impact that election only your future CDA account

      Delete
  14. Thanks for a great, clear and comprehensive article.

    Question: In my company, I have been doing some trading on the side, which resulted in significant profits (about $100K over 20 years). My accountant never declared a capital dividend account in the company books. Is it too late to declare it now, and will I be subject to a penalty?

    Thanks again.

    Ramy Taraboulsi

    ReplyDelete
    Replies
    1. Hi Ramy

      There is no requirement to issue a capital dividend (since it is tax-free)so you cannot have a penalty for not declaring such.

      You can declare the capital dividend at any time, so u can still do it.

      Delete
  15. Thank you for this article. Who can receive the capital dividend? is it just the shareholders? What about deceased shareholders estate, or the children of the deceased shareholder? can it be paid tax free to anyone?

    ReplyDelete
    Replies
    1. Hi Anon

      A Cap div can be paid depending on the circumstances to a deceased persons estate or spouse etc. This is complicated and you need to speak to an accountant.

      Delete
  16. Thank you for the information, I am a student in Ontario trying to wrap my head around this concept. What if Company A internally generated an asset and sold it. For simplicity, lets assume there was never a CEC balance nor any activity within that schedule. Would "Company A" book a business income of 1/2 - that can be taxable at the SBD rate ? Then the remaining 1/2 is allocated to the S/H as a capital dividend with no tax consequences?

    Would selling an internally generated asset also allow the corp to realize (for tax purposes) 100% of there CEC expenditures vs the 75% through annual deductions?

    Thank you!

    ReplyDelete
    Replies
    1. See this article re the old taxation of CEC and the new rules. https://www.dwpv.com/en/Resources/Publications/2016/Repeal-of-the-Eligible-Capital-Property-Regime

      Delete
  17. My brother had a life insurance policy..term..for 500K. Payable to his Corp. When he passed away his policy paid out. His estate. .beneficiaries hold a certain class of shares equally. Can a CD election be made if the retained earnings of the corp. are negative. I realize regular dividends are not allowable but is a capital dividend on life insurance proceeds allowable even though the corporation has a negstive net worth..keeping in mind there are some unearned revenues to be realized

    ReplyDelete
    Replies
    1. see this article for an answer to your question
      http://thetaxissue.com/whats-your-tax-issue-negative-retained-earnings/

      Delete
  18. Hi,

    I have two questions.

    (1) After filling form T2054, can I withdraw the money directly from the CDA account in the company, or should wait for a confirmation/acceptance of CRA on election process?

    (2) Should we show the CDA on the financial statements (e.g. on the retained earnings statement or the balance sheet), or should we lump them with the retained earnings without any segregation? Is showing the CDA on the financials dependent on whether money was withdrawn from this account?

    Thanks a lot.

    Ramy.

    ReplyDelete
    Replies
    1. Hi Ramy

      The capital dividend is filed upon the earlier of a dividend becoming payable or paid, thus, if it was not paid, it is payable (hopefully you issued a promissory note -speak to your accountant or lawyer) and thus, typically you would not wait since the CRA may not provide anything other than acknowledgement of the filing.

      The CDA dividend is shown on the income statement as a dividend paid that reduces retained earnings similar to a regular dividend.

      Delete
    2. Thanks a lot Mark;

      Following up with my second question: Before making the CDA withdrawal, is there a problem in showing on the Financial Statements the CDA amount? I was thinking of breaking down the RE account into two subaccounts: subject to CDA withdrawal and not subject to CDA withdrawal? Alternatively, should I just disclose the CDA amounts on the notes?

      Thanks again.

      Ramy.

      Delete
    3. Hi Ramy

      I would not break the account down into two subaccounts. The CDA dividend is one dividend payment. You should ask your accountant or get some accounting advice as you seem to require some direction here with payment and accounting.

      Delete
  19. Goodmonring, can you tell me when declaring a capital dividend, do we have to respect the rights of that class of shares i.e 7% dividend per annum on consideration

    ReplyDelete
    Replies
    1. Hi Anon

      Maybe.You need to check with your lawyer

      Delete
  20. Will applying non capital losses against prior year capital gains reduce the CDA amount I currently have?

    ReplyDelete
    Replies
    1. Hi Anon

      No. It will however affect your RDTOH balance in that year and future years and could result in a reassessment of taxes where there was a dividend refund in that or a subsequent year.

      Delete
  21. If you have incurred a capital gain in the current year and have not yet filed a tax return, are you able to pay out a dividend including the non-taxable portion of that gain you have not yet reported to the CRA?

    ReplyDelete
    Replies
    1. Hi Anon

      Yes in most cases, speak to your accountant to ensure facts allow for it.

      Delete
  22. Hi Mark, how do you determine when a CDA is payable?
    I am in the process of dissolving (voluntary) a CCPC with a $8K CDA balance.

    ReplyDelete
  23. Hi Anon

    You can pay a CDA dividend at any point in time you wish. There are often timing strategies, but given you are dissolving, you must pay the CDA before dissolving.

    ReplyDelete
    Replies
    1. Hi Mark,

      When you said "you must pay the CDA before dissolving". Is that because of the late filing penalties or is there another reason(s) preventing the CDA from being paid as part of the dissolution process?

      Delete
    2. If a company is dissolved your company does not legally exist. Thus, you must pay the CDA before it is dissolved.

      Delete
  24. Hi Mark,
    Thank you for a great article. Do the corporation has to issue T5 for capital dividend?

    Thank you, Zara

    ReplyDelete
    Replies
    1. Hi Zara

      No T5 is required. The cap div is designated on the T2 corporate return filing for that year on schedule 3 and the T2054 capital dividend election

      Delete
  25. Hi Mark,

    I have a question about a potential timing issue.

    Company A sold a good will to Company B (associated each other) without any capital gain and loss. B sold it to the 3rd party within 1 year and got $500k of capital gain.
    Was there any issue that B sold it too early and elected $250k of capital dividend? Hard to find any timing limitation.

    Thanks in advance,

    Jay

    ReplyDelete
    Replies
    1. Hi Jay

      Your situation is a bit complex and I would require more info if I did provide specific tax advice on this blog, which I do not. You should speak to your accountant.

      My concern without knowing all the facts is the concern I note in the post above, that being " if the company sells a particular eligible capital property (“ECP”) in the year, the portion of the gain that is not taxable is added to the CDA. Please note that the addition to the CDA occurs at the end of the year in which the sale of the ECP took place. As a result, the CDA cannot be paid out tax-free until the first moment of the following taxation year."

      I dont follow your example exactly, but this may be a concern.

      Delete
  26. Say the company realizes its one and only capital gain in the prior year (without any realized capital losses up to this point-in-time). The company then pays out the entire CDA balance on the first day of the following taxation year and during this same year, the company realizes a capital loss. Questions: (1) Should you \ are you allowed to carry back the capital loss to the prior year? (2) If you do carry back the loss, does that then reduce the previous CDA balance and does that mean the that previous 'capital dividend' was overpaid (based on the previous CDA less the capital loss carry-back)? (3) If, instead, you carry forward the capital loss is the CDA account in a negative balance and is this allowed? P.S. Fantastic website!

    ReplyDelete
    Replies
    1. Hi Anon

      The capital dividend is calculated at a point in time, thus future capital losses do not affect filed capital dividends. They just give you a negative current CDA balance.

      In general you should be able to carryback the capital loss. Speak to your accountant about your specific fact situation.

      Delete
  27. Hi Mark:
    Thanks for the article. You have cleared up a niggle in the back of my mind that's been bugging me for some time. I've been selling Life Insurance for 16 years, and the majority of the training I've seen insists that the CDA can ONLY be created using life insurance proceeds. (kind of self-serving for the industry maybe?) There have only been two presentations I can remember that said there are other ways to use the CDA. Now with your article, it all comes way more clear for me. Thanks again...Ralph P

    ReplyDelete
  28. Hi Mark;
    When the Life Insurance Policy is paid by the Corp. and the Corp is the beneficiary. What would the accounting entries be to set up the premiums and how does the capital dividend account come into play so that upon death of the shareholder his estate can receive the funds tax free.

    ReplyDelete
    Replies
    1. Hi Anon

      I do not provide specific accounting entry advice on this blog.

      As per the discussion above, if the company receives proceeds from a life insurance policy on the death of a shareholder which are considered to be non-taxable, this is added to the CDA. Then depending upon other components of the calculation, those proceeds typically can be paid out via the corps CDA account. This is typically done via a share redemption of the deceased shareholders shares.

      Delete
  29. Hi Mark,

    Thanks very much. Your article is very informative. I have a question as follows.

    You mentioned that the balance to the CDA related to ECP gets added at the end of the year.

    Is that also the case for a CDA balance arising from a gain on the sale of securities or property or does such a balance get added to the CDA immediately upon realization of the gain?

    ReplyDelete
    Replies
    1. Hi Attaul,

      In general, the sale of securities are added upon realization. You should always have your accountant review any calculation as the rules can be tricky.

      Delete
  30. Hi Mark, Good article. I am a little confusing on the Capital Gain amount that to be deposid into the Capital Dividend Account.
    Assume a corporation purchased a property for $600,000 (ABC) four years ago, currently the corporation has sold the property for $1,050,000, and the cost of sale was $50,000, property accumulated amortization was $100,000 over the four years. Therefore, the General Journal Entries shows:
    1,050,000 as debit, 100,000 as debit, 600,000 as credit, 50,000 as credit, AND 500,000 (also credit) AS CAPITAL GAIN and 50% = $250,000 is taxable income and the other $250,000 should go to CDA?
    Or, using the Capital Gain amount that coming from the Federal Schedule 6 which is:
    1050,000 – 50,000 – 600,000 = $400,000 AS CAPITAL GAIN and 50% = $200,000 is taxable income and the other $200,000 should go to CDA?
    $200,000 or $250 to be deposited into the CDA?
    Thanks for your time; you provide a lot of valuable information

    ReplyDelete
    Replies
    1. Hi Anon:

      If you bought a property for $600k, sold for $1050,000 and had $50k of costs, your capital gain=$400k. $200k would go to the CDA assuming the property was capital in nature.
      The recapture of depreciation has nothing to do with the CDA.

      Delete
    2. Thank you Mark for the clarifications,and also the taxable gain to be $200K.
      Pardon me, but why all the online accountants (in corporation Book Keeping) calculate the Capital Gain with General Journal Entries as I described above considering the accumulated depreciations part of the Journal entries and calculate the CG as $500K?
      Best regards,

      Delete
    3. I dont know ask them or your accountant

      Delete
  31. Thankyou for a very informative blog.
    I am aware of a non active company that has a clean balance sheet ( no cash) but a sizable CDA. I wonder about purchasing the company, loaning money to it and then taking out CDA -- are there any risks in this idea.

    ReplyDelete
    Replies
    1. Hi Anon

      Speak to your accountant there are acquisition of control rules and I dont understand the benefit here anyways unless you are trying to loan corporate funds, which again you should speak to your accountant about.

      Delete
  32. Thank you Mark for being so generous with sharing your advice. I am "in the same boat" as previous posting, even numbers are close! So, 200K goes to CDA and we can declare free dividends? What about taxable 200K? Company pays 50% ie. 100K on that? Can we declare more free dividends with rest of 100K?

    ReplyDelete
    Replies
    1. Hi Anon

      I am assuming you have a $400k capital gain if you say you have $200k CDA. The remaining $200k that is not eligible as a capital dividend would need to be paid as a taxable dividend, the max tax free is $200k of the $400k gain. In the end you should pay around 25% on the corp capital gain if it is flowed out to you personally, the same you would have paid if you had the gain personally

      Delete
  33. Great topic. Went through this last year received as a shareholder through the proper CDA. Does the individual have to report anything on their 2016 tax return this year, even though it is considered "tax Free" portion. Thanks

    ReplyDelete
    Replies
    1. Hi Anon

      You do not have to report a capital dividend on your personal return, however, it is noted on the corporate return

      Delete
  34. Hi Mark, thanks for this great article.

    Question re: CDA. Corporation has a year end of December 31 but sold the assets and triggered a capital gain on May 10th. Does the addition to CDA occur on May 10 or December 31? What I'm wondering is whether a CDA election can be made in the same year as the addition to the CDA. I believe it can, but I'm not sure.

    Thanks for your time and your great articles

    ReplyDelete
    Replies
    1. Hi Anon

      It depends upon the type of assets as noted in the blog post. Speak to your accountant about the exact assets you sold, they may or may not be eligible for immediate inclusion in the CDA account

      Delete
  35. Hi Mark - I have a pretty simple question. Do we have to file a T2054 and have a Special Resolution of the Directors every time we issue a Capital Dividend?
    Thanks,
    Merilyn.

    ReplyDelete
  36. Hello Mark:
    You wrote:

    "The CRA has stated that an AJE on its own does not constitute payment of the funds and that a demand promissory note accepted by the recipient as absolute payment together with an indication of such an intention in the resolutions is at a minimum required to have the dividend considered paid and received."

    Are you able to direct me to a specific CRA policy or directive please.

    Thank you, Mark.

    Your great work here is appreciated!

    ReplyDelete
    Replies
    1. Hi Anon

      I wrote this two years ago, I dont recall quickly where I got that from. However, here is a link that talks about the same thing

      http://www.cch.ca/newsletters/FinancialPlanning/may2011/index.htm

      Delete
    2. Thank you for the lead, where there was a reference made to the decisions in Banner Pharmacaps NRO Ltd. v. Canada, 2003 FCA 367, 2003 DTC 5642 (FCA)

      Further research revealed a case comment on Banner, which mentioned Hickman Motors Limited v. The Queen [97 DTC 5363 (SCC)]and a CRA technical interpretation (2007-0229311I7) that is on point.

      www.crawfordss.com/pdf/Dividends%20Paid%20by%20Journal%20Entry.pdf

      Delete
  37. If a corporation dissolves, can a capital dividend election for "date dividend becomes payable" be after the date of dissolution? Or does it need to be prior to the date of dissolution?

    ReplyDelete
  38. Great information. If a coporation receives insurance proceeds and the net after ACB is added to the capital dividend account on September 28, 2017; can they pay the capital dividend out the next day - September 29, 2017?

    ReplyDelete
    Replies
    1. Hi anon -there r some issues relating to capital dividends based on the proposed liberal legislation. So unfortunately I am not commenting on this topic until clarified

      Delete
  39. Hi, can you tell me if I sell an asset class (building of the business), at a capital gain, does 50% of the gain go into CDA (Capital Dividend Acct) or just eligible for the refundable dividend tax credit (RDOTH). If it does, would capital loss (sale of all of business equipment) reduce capital gains. I assume the gains would be recorded in part 4 of page 1 of schedule 6. Why would it say do not include loss on depreciable property, where should they be recorded.Second questions, are gains from eligible capital now treated as depreciable property (class 14.1) as proposed last year. If so, would the 50% non taxable gains go into CDA account.
    Thanks for your time.

    ReplyDelete
    Replies
    1. Hi Ron

      Yes 50% of the gain would go into the CDA, you cannot have a capital loss on the disposition of depreciable property. See this blog re ECP http://www.thebluntbeancounter.com/search?q=ecp

      Delete