# Capital Dividend Account distributions



## sbakar (Jan 24, 2014)

Hi,

I had a question regarding the handling of capital gains within a CCPC and the distribution of a capital dividend account balance to shareholders. I understand that the tax treatment of capital gains within a CCPC is split 50-50, with 50% of the capital gains entering the notional capital dividend account balance tax-free, and the other 50% being taxed at the highest tax rate of 48.67% in the year of disposition. My question is regarding distribution to shareholders from the capital dividend account. A number of resources mention that the capital dividend account can be distributed tax-free to resident shareholders, but does that mean that the distribution of the CDA balance is tax free at the corporate level only, or tax free at the corporate AND personal level? In other words, the corporation pays no tax upon distribution of the CDA from the corporation to the shareholder, but does the shareholder then pay tax on the capital dividend at the personal level on a T1? 

Is there a space on the T1 for mentioning the amount of capital dividend received or is the capital dividend not declared on the T1? Is this included on Line 120 as 'Other than eligible dividend received from Canadian corporation'? Finally, does the CCPC issue a T-slip to the shareholder for a capital dividend payment or does the CCPC only file the T2054 along with certain other requirements directly to CRA?

Thanks.

SNB


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## OurBigFatWallet (Jan 20, 2014)

Capital dividends arent taxable to (resident) shareholders and they require a t-slip


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## sbakar (Jan 24, 2014)

OurBigFatWallet,

I was under the impression that although T2054 is filed with CRA, there is no T slip issued to the shareholder? Can you please post a CRA resource that shows this requirement?

Thanks.

SNB


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## Yasehtor (Oct 12, 2018)

sbakar said:


> OurBigFatWallet,
> 
> I was under the impression that although T2054 is filed with CRA, there is no T slip issued to the shareholder? Can you please post a CRA resource that shows this requirement?
> 
> ...


That is correct. No T slip is issued.Capital Dividend Account Info


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