How to record dividends received from a connected corporation in the T2 and what will be the journal entry to record the dividend amount received in the books? Any one please help, really appreciated
I would expect that field 8096 on Schedule 125 might be a suitable place to record the dividend income on the T2 return.
Moving on to Schedule 3; Part 1 fields 200, 205, 210, 220 230, 240 242, the classification question between fields 240 & 242, as well as fields 250 and 260 should all be completed to properly account for the dividends received. If you complete part 1 of Schedule 3 accurately then Part 2 (Part IV Tax) should automatically calculate.
If you flowed any of the dividend out to shareholders then Part 3 of Schedule 3 would also need to be completed.
As for the journal entry in the corporation’s books; Could it not be a simple as debit Bank (Asset) and credit Dividends Received (Income Account)?
Thank you so much for your reply. But the problem is both corporations owned 100% same person (shareholder). What would be the treatment in this case?
I don’t think that makes any difference to how it is treated. I think @snoplowguy response is still valid.
Then it is not a connected corporation, and the payee could not possibly pay dividends to the subject corporation…
Strongly suggest you engage an acccountant…
OK thank you so much
I’d check articles of incorporation of the corporation paying out the dividends. If it says that corporation x is the shareholder then the entries and income tax treatments outlined by @snoplowguy and @snoplowguy remain the same. If both corporations are owned by the same person without involving the other one then the dividends would be issued directly to the owner and therefore T1.
“How to record dividends received from a connected corporation”
“But the problem is both corporations owned 100% same person (shareholder).”
I’m sorry, but I just don’t see how it would be at all possible for either of these two corporations or the sole shareholder to comply with the law without each hiring a professional Accountant. And also a Lawyer.
Essential documentation appears to be already incorrect.