For the payor corporation, if a tax-free inter-corporate dividend was paid, does it have to report anything on S3?
Thanks a lot guys.
I’m sorry to answer this way, but…if you don’t know…perhaps you shouldn’t be doing T2s? This is a pretty basic item.
(I get that everyone needs to learn, but most go to school and intern to do that.)
Yes. Just went through a huge mess this morning, because I inadvertently forgot to record the payment on the payor’s schedule 3. The assessor then put part IV tax related to some other dividends of the payor on the payee schedule 3. Now I have to object to the notice because we both screwed up :).
And here I thought I didn’t make any mistakes…
Payor Schedule 3 - fill out Part 3. Both Box 430 & 450. Box 460 should be updated automatically.
Payee Schedule 3 - fill out Part 1. Box 205 is a “1”. Fill out Box 240 and line “1A” and box 250.
I assumed they are non-eligible dividends. If not, adjust.
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I really appreciate it.
Related issue - trying to get my head around ITA 138(6). My client - a professional dental corporation - earned dividend income on the investment portion of a Canada Life policy. Canada Life issued a 2022 T3 to report this and other investment income. My associate who is working on the file is arguing that these dividends are deductible under 138(6). But, the way I read it, 138(6) applies only if our client WAS a life insurance company. For instance, if Canada Life received dividends from a taxable Canadian corporation, it could deduct that dividend income on S3.
In my experience, portfolio dividends like these are not deductible under 112, 113, or 138(6). Correct?
I am reading 138(6) as applying to insurance companies.
138(6) In computing the taxable income of a life insurer …
Even the heading of the ITA says “Insurance corporations”
Your client is not an insurance company. It is a dental corporation that received just dividends. This section doesn’t apply to them.
I would report the dividend like any other dividend.