CRA states that it cannot cancel Part III tax payable as a result of the CGIR being maintained at ½

A corporation realized a capital gain of $100,000 on May 1, 2024, thereby increasing its CDA from nil to $50,000, then on September 30, 2024 realized a capital loss of $30,000. Based on the proposed reduction in the capital gains inclusion fraction to 1/3, it computed its CDA as having been reduced to $40,000 and immediately paid a $40,000 capital dividend - which resulted in a $5,000 excess for Part III penalty tax purposes because the inclusion rate instead stayed at ½.

Regarding whether CRA would relieve the Part III tax, it noted that its power to waive interest or penalties under s. 220(3.1) does not extend to the waiver of tax imposed under s. 184(2), and that “the only possible relief … would be the election provided for in subsection 184(3) to treat the Excess as a taxable dividend to the recipient or recipients.” Not a word about the FAA s. 23(2) procedure (see, e.g., 2015-0578071E5 F), so perhaps the implication is that CRA does not think it is a big deal for shareholders to be taxable on a dividend under the s. 184(3) procedure.

Neal Armstrong. Summary of 9 October 2025 APFF Roundtable, Q.1 under s. 184(3).