Will CRA follow recent decisions (e.g., MSH) that have not required the reduction of a corporation’s RDTOH balance where it was denied a dividend refund because it failed to file its applicable income tax return within the required three-year period; and will it require a dividend recipient to pay Part IV tax if it receives a dividend from a connected dividend payer that had RDTOH at the end of a particular taxation year even if the dividend payer is denied a dividend refund because its income tax return was not filed within that period? CRA responded:
The CRA will follow these recent… decisions with respect to the computation of a corporation’s RDTOH balance. In 1057513 Ontario Inc.... the Federal Court of Appeal has also recently stated, in obiter, that unclaimed dividend refunds did not reduce the corporation’s RDTOH balance. …
As well, the CRA will consider that a dividend recipient’s Part IV tax liability with respect to a dividend received from a connected dividend payer will be determined according to the dividend refund actually received by the dividend payer.