CAPITAL DIVIDEND ACCOUNT

If you operate a business in Canada, then you should be aware of the Capital Dividend Account (CDA).

Yet, very few business owners know about it.

This short video gives an overview of this secret notional account tracked by the Canada Revenue Agency (CRA).

If you claim a capital gain in your corporation, 50% of the gain is taxable and the other tax-free 50% can be pulled out through the CDA.

I discovered a shocking fact that not all accountants are aware of this notional account. Does yours?

The scary part is that if you do not claim the CDA amount up to a year after dissolving your business, the government takes it.

A tax-free capital dividend is not to be confused with a taxable regular dividend. 

Your accounting professional should know about the CRA Form T2054 Election for a Capital Dividend under Subsection 83(2).

A word of caution: if the calculation is incorrect, stiff penalties will apply.