CRA will accommodate a s. 88(2)(b)(i) capital dividend election based on an estimated CDA balance

We have prepared brief summaries of the questions posed at the 6 October 2017 APFF Roundtable, and are providing translations of the CRA preliminary written answers on a piecemeal basis, starting with Q.4 to Q.9, and expect to be finished translating the answers by Sunday. We will also provide complete translations of the questions posed when they are officially released by CRA, towards or about year end.

Turning to Q.4, where the assets of a corporation, that is wound-up under s. 88(2) are portfolio investments or other assets with a fluctuating value, it may not be possible to know in advance of the moment of the winding-up what will be the capital dividend account (based on the gains realized on the winding-up) at the time of the winding-up, so that it will be impossible to file a completely accurate capital dividend election in advance of the winding-up time.

In these circumstances, CRA will expect the election to be filed based on the corporation’s best estimate. If CRA then comes to a different determination of the CDA, it will without further ado adjust the amount of the dividend deemed to come out of the CDA accordingly, as well as the amount shown on the election for (T2054). CRA also stated:

While the CRA usually expects a resolution to refer to the total amount of a dividend subject to an Election, which should correspond to that indicated in the Form T2054, the CRA will accept, in these particular circumstances, such amount not being specifically stated in the resolution.

Neal Armstrong. Summary of 6 October 2017 APFF Roundtable, Q.4 under s. 88(2)(b)(i).