Mr. X transfers high-low preferred shares of Opco 1 to Opco 2 (both held by him and related persons) in consideration for a note, such that he is deemed by s. 84.1(1)(b) to receive a dividend. In finding that Opco 2 elected under s. 83(2) for the dividend to be a capital dividend CRA stated:
For the purposes of subsections 84.1(1) and 83(2), subsection 84(7) provides that a dividend deemed to have been paid pursuant to section 84.1 is deemed to have become payable at that time.
On the issue of whether a subsection 83(2) election is available to a corporation in respect of a dividend that it is deemed to have paid pursuant to paragraph 84.1(1)(b), we are of the view that such an election is available if such a dividend becomes payable by a private corporation to a shareholder who already holds shares of any class of the corporation's capital stock … .