Immediately prior to closing a sale of a private corporation, its shareholder wishes to have all of the capital dividend account distributed to it, but the precise CDA balance cannot be known until year end when the accounts are finalized. Would CRA accept a resolution of the directors and a T2054 form where the amount of the capital dividend was shown only by a mathematical formula, i.e., it would be, at the time of signing, a determinable, but not a determined, amount?
CRA responded:
Subsection 83(2) allows a private corporation to make an election (the "Election") to deem a dividend to have been paid out of its CDA. [Reg.] 2101 … requires the corporation to file with the Minister, inter alia, the prescribed form and a certified copy of the resolution … .
The CRA expects that such a resolution will refer to the amount of the dividend covered by the election, which should be the amount reported on Form T2054.
The CRA does not intend to adopt an administrative policy with respect to the situation described in the statement of this question.
In closing, it should be noted that the maximum amount of the penalty assessed under subsection 83(4) is $41.67 for each month or part of a month between the due date for filing the Election and the day the Election is filed.