CRA indicates that a corporation can seek a dividend refund for a deemed dividend arising in a year from an s. 184(3) election if no dividend refund claim had previously been made for that year

Did CRA have the authority to reassess a taxation year of a corporation that had paid an excessive capital dividend in order to reflect the resulting dividend refund to the corporation from the deemed payment of a taxable dividend pursuant to an s. 184)3) election?

CRA indicated that the normal reassessment period for Part I tax purposes is separate from the normal redetermination period for a dividend refund. Thus, if the corporation had previously filed a T2 return for the year that did not report a dividend refund within the required s. 129(1) limitation period, then for a dividend refund, would not yet have commenced. Accordingly, a request for a determination of a dividend refund could be made by the corporation in an amended return.

If a dividend refund had been declared in the previously filed T2 return of the corporation, then the normal redetermination period for a dividend refund would have commenced on the date that an original notice of determination (or original notification that no dividend refund was payable) was sent to the corporation. If this normal redetermination period had expired before the corporation's s. 184(3) election had been processed, then the corrected balances of the ERDTOH, and NERDTOH accounts could be used in subsequent taxation years, keeping in mind that the dividend refund computed in the year of the deemed dividend under the s. 184(3) election would not in fact reduce those balances until the refund in fact had been made.

Neal Armstrong. Summary of 23 July 2025 Internal T.I. 2025-1056911I7 under s. 152(1.2).