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 5 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 Capital dividend account (CDA) immediately before this dividend becomes payable (line 110) section of 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.

Schedule 89 is transmitted separately from the T2 return.

Consult the Electronic transmission to the CRA topic for more information on how to transmit this form.

The program defines the status of the checkboxes Were all diagnostics related to Schedule 89 corrected in the T2 EFILE diagnostic tab? and Were all diagnostics with the "Schedule 89" mention and relating to electronic filing corrected in the General diagnostic tab? based on whether the corporation’s information complies with EFILE requirements (e.g., the Business Number (BN), the contact person’s name and telephone number, the date entered on line 003 and the answers on lines 004 and 005) and the data entered in Schedule 89, as applicable.

If Schedule 89 is selected for electronic filing and one of the above-mentioned checkboxes is not selected, it is important to verify the diagnostics so that the necessary adjustments can be made.

When you are ready to transmit or retransmit Schedule 89, answer Yes to the question Is Schedule 89 ready to be transmitted or retransmitted? at the top of the schedule.

In summary, the EFILE status of Schedule 89 will be at Eligible if:

• Schedule 89 is applicable;

• The answer at one of lines 004 or 005 is Yes;

• You answered Yes to the question Select this schedule for electronic filing at the top of the schedule;

• You selected Yes to the question Schedule 89 ready to be transmitted or retransmitted? at the top of the schedule;

• The answer to the question At the request of the CRA, please confirm that the business number on line 001 of Part 1 is that of the corporation entered on line 002. is I confirm;

• All Schedule 89 diagnostics are corrected; and

• The answer to the question Is the form completed and ready to be transmitted? in the Instructions when the form is electronically transmitted to the CRA section of Form T2054 is set to No.

Note: According to CRA requirements, when the answer on lines 004 and 005 is equal to No, Schedule 89 must not be transmitted electronically. Therefore, you must answer No to the question Is Schedule 89 ready to be transmitted or retransmitted?. Note that Schedule 89 is still applicable in this situation but will only be printed for your records and those of your client.

The information on the transmission status of Schedule 89 is also accessible via the File/Properties (F11) command.

If you have selected Schedule 89 for electronic filing and have made a CDA balance verification request, and upon transmitting Schedule 89, the transmission status is at Accepted:

• The answer on line 004 will reset to No; and

• The date in the field If yes, enter the date on which the corporation makes the request for a CDA balance verification will be transferred to the field Enter the date of the last request for a CDA balance verification.

If you need to attach relevant files to Schedule 89 when it is produced, you must use the transmission service Schedule 89 – Docs within 24 hours of electronically transmitting the form or the CRA's secure portal once this 24-hour period has elapsed and within seven days after efiling.