The s. 184(3)(b) excess dividend election is made respecting the amount of the original dividend that was payable. S. 184(3)(d) deems the shareholder to have received the excess dividend. Does the excess portion of a dividend, that was declared but not paid and that was elected upon under s. 184(3), remain non-taxable to the shareholder for so long as it remains unpaid? CRA responded:
[U]nder the current wording of subparagraph 184(3)(d)(ii), as the separate taxable dividend is deemed, for the purposes of paragraph 12(1)(j) and subsection 82(1), to have been received at the time the initial dividend was payable, such dividend may be taxed in a taxation year preceding the year in which the dividend was actually paid.
The CRA has already brought this matter to the attention of the Department of Finance.
Where an excessive capital dividend is made outside the reassessment period, will s. 184(3) apply? After referring to the 90-day period in the preamble to s. 184(3), CRA stated:
Thus, it would be possible to make an election under subsection 184(3) if a notice of reassessment were issued provided that the prescribed terms and conditions were followed and provided that the corporation elected not later than the 90th day on which the notice of reassessment was sent.
On the other hand, if the Minister could no longer assess under Part III, the condition for making an election under subsection 184(3) would not be satisfied given that the corporation would not have tax payable under Part III.