Election to treat excessive eligible dividend designations as ordinary dividends

If you have been assessed Part III.1 tax, you can elect to treat your excessive eligible dividend designations as an ordinary dividend (deemed to be a separate taxable dividend under paragraph 185.1(2)(b) of the Act) in order to reduce or eliminate the Part III.1 tax otherwise payable. You may not make this election on excessive eligible dividend designations that are subject to the 30% Part III.1 tax.

To make an election, send a letter to your tax centre stating that the corporation elects under subsection 185.1(2) of the Act in respect of the said dividend. File your election on or before the day that is 90 days after the day the notice of assessment for Part III.1 tax was mailed.

When making this election, include the following documents:

1. if the directors of the corporation are legally entitled to administer the affairs of the corporation, a certified copy of:

(a) the directors' resolution authorizing the election to be made, and

(b) the directors' declaration that the election is made with the concurrence of all shareholders (other than those shareholders to which subsection 185.1(4) applies) who received or were entitled to receive all or any portion of the said dividend and whose addresses were known to the corporation;

2. if the directors of the corporation are not legally entitled to administer the affairs of the corporation, a certified copy of:

(a) the authorization of the person or persons legally entitled to administer the affairs of the corporation to make the election, and

(b) the declaration of the person or persons legally entitled to administer the affairs of the corporation that the election is made with the concurrence of all shareholders (other than those shareholders to which subsection 185.1(4) applies) who received or were entitled to receive all or any portion of the said dividend and whose addresses were known to the corporation; and

3. a schedule showing the following information:

(a) the date of the notice of assessment of the tax that would, but for the election, have been payable under Part III.1 of the Act,

(b) the full amount of the said dividend,

(c) the date the said dividend became payable, or the first day on which any part of the said dividend was paid if that day is earlier,

(d) the portion, if any, of the said dividend described in paragraph 185.1(2)(a) of the Act, and

(e) the portion, if any, of the said dividend that is deemed by paragraph 185.1(2)(b) of the Act to be a separate dividend that is a taxable dividend.

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