Vendors may proceed with a preliminary reorganization before a share sale and agree in advance that an s. 184(3) election will be made in the event of it being identified that there has been an excessive capital dividend designation.
- Will CRA accept an advance concurrence to the making of the election, where the shareholder concerned has no involvement when the election is made?
- Are T5 slips required where the election is made?
CRA responded:
(a)
… In a context similar to that described in the statement of this question, the CRA generally accepts that shareholders may give their concurrence in advance, through undertakings under the various sale agreements, to the making of [the] election … .
(b)
…When a subsection 184(3) election is filed, additional T5 slips must usually be filed. However, since in such circumstances the number of shareholders is generally small and their respective returns have generally been assessed at the time the 184(3) election is filed, the CRA will not request the preparation of T5 slips in respect of that election unless the circumstances make that procedure practical.
However, if an excessive capital dividend is identified in the year it is paid or payable, the corporation will have to file additional T5 slips by the last day of February of the following year … .