CRA generally will accept advance concurrences by share vendors to elect to convert excessive capital dividend or eligible dividends to ordinary dividends

Vendors may proceed with a preliminary reorganization before a share sale and agree in advance that elections will be made in the event that CRA later identifies that there have been excessive eligible dividend or capital dividend designations. CRA stated:

… In [this] context … the CRA generally accepts that shareholders may give their concurrence in advance, through undertakings under the various sale agreements, to the making of elections under subsections 184(3) and 185.1(3).

It went on to indicate that “since in such circumstances the number of shareholders is generally small and their respective returns have generally been assessed at the time the 184(3) election is filed, the CRA will not request the preparation of T5 slips in respect of that election unless the circumstances make that procedure practical."

Neal Armstrong. Summaries of 8 October 2021 APFF Roundtable, Q.10 under s. 184(3) and s. 185.1(3).