The Summary portion of 2018-0759521E5 indicated that if a s. 104(19) designation is made respecting a preferred beneficiary income amount resulting from an election under s. 104(14), the amount would be includable in split income under para. (a) of that definition. Can CRA (i) elaborate on its reasoning in this regard, (ii) confirm its position respecting minor preferred beneficiaries for years prior to 2018, and (iii) indicate how a T3 return should be prepared to avoid a s. 104(19) designation when allocating a taxable dividend to a preferred beneficiary?
CRA indicated that, as noted in Q.13, the exception in s. (a)(i) from the para. (c) exclusion for taxable dividends designated under s. 104(19) reflects the absence of a legislative exclusion from the tax on split income for such dividends, is consistent with 2000-0056385 F, and has been noted in the T3 guide every year since 2000 (page 44 of the 2018 guide). This issue has been discussed with the Department of Finance, and CRA’s interpretation on this matter is consistent with tax policy, so that CRA will not be granting relief for any historical preferred beneficiary elections made.
In order to avoid making the s. 104(19) designation when preparing a T3 slip, the amount should simply be included in Box 26 (“other income”).