Section 82

Subsection 82(1) - Taxable dividends received

See Also

Kufsky v. The Queen, 2019 TCC 254, aff'd 2022 FCA 66

payment was dividend even though no declaration

In finding that a corporation should be treated as having paid dividends to its shareholder, so that CRA validly assessed the shareholder under s. 160 for a tax debt of the corporation, even though no dividend had been declared, and the only evidence of the payment of a dividend was the cash movements and the corporation’s subsequently-fired accountant issuing T5 slips to the taxpayer, MacPhee J stated (at para. 23):

[A] reported dividend, even if not in compliance with the provincial statute, remains valid for tax purposes … .

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) a dividend that had not been declared nonetheless was a dividend for tax purposes 418

Paragraph 82(1)(a)


De Groote v. The Queen, 85 DTC 5008, [1984] CTC 687 (FCTD)

no longer beneficial shareholder

The taxpayer sold the beneficial ownership of shares to, and executed a declaration of trust in favour of, a company controlled by him and then, while still the registered owner of the shares, received dividends thereon and paid them to the controlled company. Although the dividends had been "received" by him, they were not included in his income by virtue of s. 56(4) because he had assigned his shares prior to the dividend declaration date.

Robson v. Minister of National Revenue, 52 DTC 1088, [1952] CTC 85, [1952] 2 S.C.R. 223

indirect payment

A corporation, which admittedly was seeking to effect a tax-free distribution of profits to its shareholders, sold shares of another corporation to its shareholders (including the taxpayer) at a substantial undervalue, and the shareholders then sold the shares at a gain. The difference between the fair value of the shares and the amount paid therefor by the shareholders constituted, at the time of the shares' distribution, "dividends or profits directly or indirectly received ... from stocks" for purposes of s. 3(1) of the Income War Tax Act.

See Also

Trower v. The Queen, 2019 TCC 77 (Informal Procedure)

purported retroactive dividend would not have been agreed to by both directors at the time

The taxpayer, Ms. Trower, separated from her husband in 2015 and ceased to be a shareholder and director of their company (“Cove” – previously owned on a 49/51 basis) on or shortly before October 2, 2016. Cove transferred $78,457 to their joint bank account in 2016 and under $3,000 to her personal account. Although Ms. Trower had agreed to income splitting for the 2015 year, she had not agreed to do so for 2016. Nonetheless, a resolution was prepared and signed in 2017 by Mr. Trower, at that time the sole director and shareholder of Cove, showing that it paid dividends of $50,342 to Ms. Trower in 2016. She had not agreed to this treatment.

In reversing the resulting assessment by CRA of Ms Trower to include a taxable dividend in her income for 2016, Monaghan J stated (at paras 37-38, 46):

No dividend is payable until such time as it is declared. In this case the dividend was not declared (or approved) until February 2017 and so no dividend was payable in 2016.

… I accept that practice in the “real world” does not always conform with best practice. … [and] that directors and/or shareholders may make a decision and act upon it, even though they may not record that decision in writing until a later date. But that cannot be said to have happened here. All of the evidence is that the only two relevant people, Mr. and Ms. Trower, never agreed that the transfers would be dividends. The decision was a unilateral one by Mr. Trower. He did not have that power before he became the sole shareholder and director.

… While I am not able to determine the nature of the transfers in 2016, in my view, absent her agreement, they could not be and are not dividends paid to Ms. Trower in 2016. Ms. Trower has demolished the Minister’s key assumption of fact underlying the assessment of her 2016 taxation year regarding dividends.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date a dividend by a sole director could not be backdated to when there was another director 220

Cooper v. The Queen, 2010 TCC 403, 2010 DTC 1277 [at 3934] (Informal Procedure)

gross-up effect on penalty

Webb J. noted that the gross-up amount will increase a taxpayer's income for the purposes of assessing a 163(1) penalty, because 163(1) calculates the 10% penalty on the income amount, not the tax owing.

Horkoff v. The Queen, 97 DTC 621, [1996] 3 CTC 2737 (TCC)

back-dated dividend

Dividends that were purportedly paid to the taxpayers "as of" December 30, 1990 were dividend income to the taxpayers in their 1991 taxation years given that the dividends were not declared until February 13, 1991, the amount of the dividends was not known until that date, and the dividends would not have been declared or paid if a sale of shares of the corporation had not closed on that date.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date "as of" dividends not effective until quantified and declared 67

C.I.R. v. Trustees of Joseph Reid (1949), 30 TC 431 (HL)

dividend also income on general principles

In finding that a dividend paid by a South African company out of a capital gain realized by it was "income arising from possessions out of the United Kingdom" for purposes of Case V of Schedule D, Lord Morton stated (p. 446):

"Prima facie a dividend paid on shares is income. It has been held that, even if a distribution by way of dividend has been made out of profits arising from some dealing with the company's capital assets, the distribution is income, as between the persons beneficially interested in capital and income respectively (see In re Bates, [1928] Ch. 682; Hill v. Permanent Trustee Company of New South Wales, Ltd., [1930] A.C. 720; In re Doughty, [1947] Ch. 263).

Gresham Life Society Co., Ltd. v. Bishop (1902), 4 TC 464 (HL)

no constructive receipt

The taxpayer, a UK life insurance company which was managed in London and had foreign branch businesses, was assessed for interest and dividends which it received on foreign securities held in the hands of agents abroad, and which were reinvested abroad, on the basis that it received such income in the U.K. In finding that the taxpayer was not taxable on such amounts, Lord Brampton stated (at p. 475):

[I]t is conceded that no part of the money in question was ever received in the United Kingdom in specie… . But it was argued that… it was "constructively" so received in the accounts of the Society. …If it means something differing from or short of an actual receipt, then it seems to me that a constructive receipt is not recognised by the Statute, which in using the word "received" alone, must be taken to have used it having regard to its ordinary acceptation. … I am not myself prepared to say that what amongst business men is equivalent to a receipt of a sum of money is not a receipt within the meaning of the Statute… . But…[a] mere entry in an account which does not represent such a transaction does not prove any receipt… .

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt no constructive receipt 210

Administrative Policy

30 January 2014 External T.I. 2013-0515761E5 F - Dividend received

book entries are ancillary and do not establish receipt

A dividend of a taxable Canadian corporation owned by an individual is not paid in money but is recorded in its books as an increase in a loan owing to the shareholder or as a decrease in a loan made to the shareholder. CRA quoted Hickman Motors that "the law is well established that accounting documents or accounting entries serve only to reflect transactions and that it is the reality of the facts that determines the true nature and substance of transactions," and further stated (TaxInterpretations translation):

[T]he necessary documentation must be provided in a particular instance to corroborate that factually and legally a dividend has been paid by the corporation and received by the shareholder. In this regard, book entries are ancillary and serve only to report transactions.

To the extent that it is established that a dividend has actually been paid by the corporation and received by the shareholder, that dividend would be taxed on a received basis ... .

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt book entries merely record and do not establish that a dividend was paid 175

11 December 2013 External T.I. 2013-0474161E5 - T-slips and dividend and interest

constructive receipt

Respecting a question as to when dividends are paid and received for T5 purposes, CRA stated:

In Innovative Installation Inc. v The Queen, 2009 TCC 580, the Tax Court of Canada explained that "received" does not require "proceeds to pass directly to the taxpayer. The taxpayer can notionally or constructively receive it."

Therefore, it is our view that, generally, the date on which the dividend is paid, whether by cheque, electronic payment, offset or credit to the shareholder's account, would also be the date on which the amount is received.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Payment & Receipt constructive receipt 102

25 September 2013 External T.I. 2013-0488571E5 F - Repayment of a dividend

dividend declared cannot be nullified by subsequent board or shareholder resolution

Where a taxpayer and his wife repay a portion of the dividends received by them in their 2006 taxation year, can the taxes on those dividends be reduced? After citing Sussex Square Apartments v. The Queen, [1999] 2 CTC 2143 (TCC), [2000] 4 CTC 203 (FCA), Dale v. The Queen, 97 DTC 5252 (CFA) and Waddington v. O'Callaghan (1931) 16 T.C. 187, CRA stated (TaxInterpretations translation):

When a dividend is declared by the board of directors of a corporation, we are of the view that it cannot be reduced or nullified by the board and the shareholders have no power to request its nullification.

Consequently, in your particular situation, it does not seem possible to us to modify the tax consequences of the dividends that you and your wife received … .

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date taxpayer generally cannot change his legal position through a subsequent board or shareholder resolution 154

6 October 2005 External T.I. 2005-0146061E5 F - Coop de travailleurs actionnaire - montants versés

interest on a preferred share was a dividend

CRA indicated that interest received by a worker on preferred share shares held in a workers shareholder cooperative was a taxable dividend pursuant to s. 82(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 136 - Subsection 136(2) workers shareholder cooperative qualified 108
Tax Topics - Income Tax Act - Section 135 - Subsection 135(4) - Allocation in Proportion to Patronage patronage dividend based on volume of work performed 108


Kevyn Nightingale, John Sorensen, "Backdating of Dividends", Tax Topics (Wolters Kluwer), No. 2392, January 11, 2018, p. 1

CRA distinction between evidencing and recharacterizing a transaction (p. 3)

[T]he CRA recognizes that a transaction may be "papered" after the fact, but backdating is improper where it is tantamount to a retroactive characterization or alteration of reality. The courts take the same view: "although not ideal, a share certificate may be prepared and signed after the investment and its acceptance, with no effect on the quality or value of the title represented by the share certificate" [fn 10: Beaulieu…2011 DTC 1160…] However, another court stated "I find unacceptable the notion that a company and its shareholder are entitled, for purposes affecting the rights of third parties, to rewrite history, that is to say, to treat imaginary events as having happened. A legislature has the power to enact deeming provisions. Others do not." [fn 11: … Wood …88 DTC 1180…]

Need to codify CRA practice on finalizing salary/dividend mix (p. 3)

We would recommend an express CRA policy permitting the crystallization of compensation and dividends in an owner-managed business to occur, for example, up to 60 days after fiscal year end (to match the due date for T5 slip filing). This administrative concession would codify the CRA's existing practice.

Efficacy of formulaic resolution

[I]s it feasible to draft resolutions before year-end without full knowledge of the financial situation? A formulaic approach may be legally effective. For instance: of the amounts disbursed, some proportion is a shareholder loan repayment, some proportion is salary or bonus, and the balance is a dividend (the amount of which is to be established following the calculation of shareholder loan balances and salary/bonus).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date 362

Subsection 82(2)


Fiducie financière Satoma v. Canada, 2018 FCA 74

s. 82(2) supports the primacy of s. 75(2) over the actual dividend recipient

In support of his conclusion that where a dividend attributed to a trust was attributed under s. 75(2) to another person, the trust was not subject to tax on that dividend, Noel C.J. noted that s. 82(2) further provides that where a dividend is attributed to another person pursuant to s. 75(2), that person is also deemed to receive it.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(1) - Tax Benefit tax benefit to trust from tax-free dividend even though not distributed to a beneficiary 277
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) using ss. 75(2) and 112(1) for tax-free dividends to trust thwarted s. 112(1) object to tax earnings when ultimately distributed 319
Tax Topics - Income Tax Act - Section 3 pervasive rule that the same income is not to be taxed in 2 persons’ hands 148
Tax Topics - Statutory Interpretation - Double Taxation/Deduction (Presumption Against) inclusion of income in more than one taxpayer’s hands is contrary to s. 3 173
Tax Topics - Income Tax Act - Section 112 - Subsection 112(1) abusive to use s. 112(1) so as to avoid ultimate taxation of individuals 180
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) use of s. 75(2) to access s. 112(1) deduction for dividend in fact received by family trust, was abusive 286

Administrative Policy

15 June 2021 STEP Roundtable Q. 5, 2021-0883001C6 - Income Attribution from AET

application of s. 82(2) where s. 75(2) applies to dividend income allocated by a partnership

The settlor of an alter ego trust contributes to the trust an interest in a limited partnership that generates business income. CRA indicated that although the partnership business income or loss allocated to the trust would not be attributed to the settlor (s. 75(2) does not attribute business income), the settlor of an alter ego trust must be entitled to receive all of the income of the trust that arises before the settlor’s death, so that the settlor would still end up having property income in his or her hands under ss. 104(13) and 108(5).

However, CRA noted that where the partnership allocates dividend income to the trust and s. 75(2) applies, the dividend will retain its character as a dividend pursuant to s. 82(2).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) "second generation income" is not subject to s. 75(2) attribution 453
Tax Topics - Income Tax Act - Section 248 - Subsection 248(5) substituted property rule does not apply to "second generation income" 128

Subsection 82(3)

Administrative Policy

23 August 2021 Internal T.I. 2020-0856081I7 - Interaction of subsection 82(3) and section 120.4

s. 82(3) election can convert a TOSI dividend to a dividend on an excluded share

CRA noted that “[g]enerally, there is an incentive for the higher income spouse to elect under subsection 82(3) as the increase in the spousal tax credit from the election should exceed the tax payable on the dividend in the higher income spouse’s hands taking into account the dividend tax credit and the higher spousal tax credit [under s. 118(1)(a)] which can now also be claimed by that spouse after the election.”

In addressing the interaction between the s. 82(3) election and the tax on split income (“TOSI”) under s. 120.4, CRA stated:

Because subsection 82(3) deems all subject dividends to be “received” by the electing spouse while the TOSI applies to dividends received by a specified individual, based on the text, subsection 82(3) applies before the TOSI rules. When a taxpayer makes an election under subsection 82(3), all of the dividends received by his or her spouse or common-law partner from taxable Canadian corporations, are deemed to be received by the taxpayer for that year, and not by their spouse or common law partners. Thus, the electing spouse becomes the specified individual from the perspective of applying the TOSI rules. Where, because of their personal circumstances, the electing spouse is an Acceptable Recipient [benefiting from a TOSI exclusion] of the subject dividends, then such dividends will not be subject to the TOSI.

The Directorate provided three examples, including Example 3, under which the electing spouse is the higher earner in the couple, but not at the highest personal rate and holds 20% of the shares of Aco in which the other spouse (the “Recipient Spouse”) receiving the subject dividends holds 5% of the shares and “Brother” (who is the only one actively involved in Aco’s manufacturing business) holds the balance of 75%.

The Directorate indicated that although the dividends that the Electing Spouse is deemed by the s. 82(3) election to have received are not further deemed to be paid on the Aco shares actually held by the Electing Spouse, it nonetheless will consider the deemed dividend to have been received on the excluded shares of the Electing Spouse rather than on the 5% shareholding of the Recipient Spouse, so that the deemed dividends would not be subject to TOSI.

The Directorate also indicated:

[I]f shares held by an Electing Spouse were not excluded shares before the election, they will not become excluded shares after (i.e. an Electing Spouse who owns 6% of the votes and value of Opco, will not be deemed by the subsection 82(3) election to own the 5% of shares of Opco that are held by their lower income spouse). …

[T]he filing of the subsection 82(3) election is not inconsistent with the TOSI policy, and this view is not impacted by the ability to late file or amend a subsection 82(3) election.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Excluded Shares - Paragraph (b) s. 82)3) deeming applies before application of TOSI rules 259