Schedule 89, Request for Capital Dividend Account Balance Verification

If you indicate that the corporation is a private corporation at the end of the year, but you also indicate that the corporation type has changed status during the year, Schedule 89 will still be applicable. You may need to use an override in such a case so that it reflects only the transactions made during the time the corporation was a private corporation.

The charts in Parts 2A and 2B contain the components required to calculate the capital dividend account balance. The data items entered in this chart must be listed in chronological order, from the oldest taxation year or the relevant date to the most recent. Note that if the data items in the chart are not listed in chronological order according to the taxation years or relevant dates, you may sort them by clicking the button. When you click this button, the list of capital dividend account components will be listed in chronological order according to the taxation years or relevant dates, on screen and when printing. When adding an item, you only have to repeat the operation in order for the taxation years or relevant dates to be sorted in chronological order.

The sort will be retained during roll forward of the client file.

For taxation years ending after March 20, 2013, column 5 in Part 2A and column 4 in Part 2B cannot contain the proceeds of a LIA policy. In addition, in the case of a 10/8 policy, if death occurs after 2013, the outstanding borrowing amount or policy loan must be subtracted from the proceeds of the policy entered in column 5 in Part 2A and in column 4 in Part 2B. For more details about the LIA policy and 10/8 policy, review the definitions of subsection 248(1) the Income Tax Act.

Column 4 in the first chart as well as the second chart in Part 2 list the non-taxable portion of each eligible capital property sale. This information is required to calculate the capital dividend account balance. The data items entered in those charts must be listed in chronological order, from the oldest taxation year to the most recent. Note that if the data items in those charts are not listed in chronological order according to the taxation years, you may sort them by clicking the button. When you click this button, the list of non-taxable portions of eligible capital property components will be listed in chronological order according to the taxation years, on screen and when printing. When adding a disposition, you only have to repeat the operation in order for the data items to be sorted in chronological order according to the taxation years.

The sort will be retained during roll forward of the client file.

In column 4 of the first chart in Part 3, you can indicate the non-taxable portion of eligible capital property sales in accordance with paragraphs c), c.1) and c.2) of the definition of “capital dividend account” in subsection 89(1) of the Income Tax Act for taxation years ending before February 28, 2000. In addition, in column 4 of second chart in Part 3, you can indicate the non taxable portion of eligible capital property sales (under paragraphs c), c.1) and c.2) of the definition of “capital dividend account” in subsection 89(1) of the Income Tax Act) for taxation years ending after February 27, 2000 and before January 1, 2017.

Part 4 chart contains the list of additional information on each capital dividend received. The data items entered in this chart must be listed in chronological order, from the first dividend that became payable to the last. Note that if the data items in the chart are not listed in chronological order according to the date the dividend became payable, you may sort them by clicking the button. When you click this button, the list of additional information on each capital dividend received components will be listed in chronological order according to the date the dividend became payable, on screen and when printing. When adding extra information lines, you only have to repeat the operation in order for the data items to be sorted in chronological order according to the date on which the dividends became payable.

The sort will be retained during roll forward of the client file.

When line 200 and/or line 210 of Schedule 3, Dividends Received, Taxable Dividends Paid, and Part IV Tax Calculation (Jump Code: 3), are completed and line 230 of this schedule is also completed, an entry is automatically created on column 1 and/or column 2 in Part 4 of Schedule 89 based on the value on these lines. However, the date the dividend became payable (column 3) must be entered manually.

In Part 7, on line CDA balance, the program calculates the capital dividend account (CDA) balance up to which a capital dividend can be paid immediately before the end of the taxation year.

Since Part 3 – CDA components – Eligible capital property (ECP) must only display amounts related to the reporting corporation, and for the amounts reported therein to be considered in the calculation, custom lines Eligible capital property for tax years ending before January 1, 2018 (predecessor corporations) and Eligible capital property for tax years ending before January 1, 2018 (filing corporation – Part 3) have been added to Part 7 – CDA balance.

For each election for a capital dividend under subsection 83(2) of the ITA that you make, you will have to proceed as described in the help topic relating to Form T2054 (Jump Code: 2054) to correctly calculate the CDA immediately before this dividend becomes payable (line 110) in Form T2054.