An ECP gain potentially could have been paid out immediately as a winding-up distribution

An increase to the capital dividend account (CDA) arising out of a gain of a CCPC from the disposition of eligible capital property (ECP) did not arise until the end of the year in question, so that immediate declaration and payment of a purported capital dividend generated Part III tax. However, it is suggested that if the distribution in question was described in ss. 88(2)(a) and (b) (i.e., it occurred in the course of a winding-up of the CCPC and was of substantially all the CCPC’s property), then the bump to the CDA occurred immediately before the time of the distribution, so that no Part III tax was exigible.

It is implicitly considered that a winding-up of a corporation for s. 88(2) purposes need not commence with an authorizing resolution, and it is suggested that:

The sale of a business that included cumulative ECP gain should be viewed as a step in the course of a winding-up of the business that was sold.

Neal Armstrong. Summary of Derek T. Dalsin, “ECP-Related CDA Dividend “In the Course of a Winding Up” Pre-2017,” Canadian Tax Highlights, Vol. 27, No. 8, August 2019, p. 1 under s. 88(2)(a).