A U.S.-listed corporation, which has not filed a s. 261(3) election, periodically declares and pays dividends in U.S. dollars. Can it make eligible dividend designations under s. 89(14)? CRA responded:
[A] mere receivable arising as a result of a declaration of the dividend should not result in an “amount received” by a taxpayer such that there would be no income inclusion [citing Banner Pharmacaps]. Accordingly… the amount of a dividend does not arise until it is considered to be received, and is thus included in income. This typically occurs when the dividend is actually paid, which is also the time at which an eligible dividend designation is required to be made pursuant to subsection 89(14).
As such, the portion of the dividend that is designated as an eligible dividend under subsection 89(14) is a portion of the amount of such dividend converted in Canadian dollars using the relevant spot rate for the day the dividend is paid…[being] generally, the rate quoted by the Bank of Canada for noon on that day.
As such, the portion of the dividend that is designated as an eligible dividend under subsection 89(14) is a portion of the amount of such dividend converted in Canadian dollars using the relevant spot rate for the day the dividend is paid. The expression “relevant spot rate” is defined in subsection 261(1) and means, in respect of the conversion of an amount from a particular currency into another currency for a particular day when the other currency is Canadian currency, generally, the rate quoted by the Bank of Canada for noon on that day.