Final T2+Dissolution

Tax Topics
1

I have a company who has sold its business, I need to file final T2 and dissolve the company.
They have cash on hand which is to be distriibuted to shareholders as return of paid-up capital.
I am very confused as to which order to file final T2 - file dissolution - distribute funds as I am getting very conflicting information. WOuld appreciate some guidance on which should I do first.

Balance Sheet:
Assets : Cash $100,000
Liabilities: $0
Equity:
Partners Contribution $350,000
Retained Earnings $-273,000
Net Income $23,000

They will have a total loss of 250K which may be elegible for an ABIL claim.

2

Did they file an application of dissolution yet?

You’d file a T2 up to the date of dissolution, which almost always ends up being a short-period filing. Wind-up the balance sheet to the shareholder loans on the final return and if they are offside, it’s a Section 84(3) deemed dividend.

A retained earnings deficit or cumulative non-capital losses are not the deciding factor as to whether an ABIL may be claimed. You need to look at the shareholder accounts .. among other factors.

Losses in the company are lost forever.

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