CRA's position that, in order to be valid, an eligible dividend designation must stipulate the amount of the dividend, only applies to regular dividends, and not to deemed dividends arising under s. 84(3), whose amount is determined under a formula. The designation should refer to the number and class of shares being redeemed. In particular, CRA stated:
[I]n the case of a share redemption, it would be sufficient, in order for the designation under subsection 89(14) to be valid, to identify the number and class of shares redeemed and to indicate that the designation is in respect of the dividend deemed to have been paid on that specific share redemption, as calculated under subsection 84(3), as long as the other conditions set out in subsection 89(14) are satisfied. In such a case, the CRA would not require that a fixed amount be indicated in order to designate the dividend as an eligible dividend.
If the designation had been made in that manner, correcting the elements in the calculation of the deemed dividend paid under subsection 84(3) would not result in there being a change in there being a designation. That would not constitute a designation of a partial dividend or a late-filed designation. If the amount of the dividend, as recalculated, did not exceed the GRIP, there would not be an excessive eligible dividend designation. However, in the reverse case, there would be an excessive eligible dividend designation.
If the designation had been made by reference to a precise figure as an eligible dividend without any reference to a redemption of shares or a deemed dividend paid under subsection 84(3), the designation could be considered invalid because it was for a partial dividend. However, if the CRA were to find that the designation could only have been in respect of the deemed dividend paid on that share redemption, the CRA would generally take the position that the designation would be valid in respect of the full amount of the deemed dividend paid.