A dividend from a corporation to its shareholders is either a Corporate Dividend Payout you set, or a dividend the plan pays on its own to cover a shortfall or to clear a tax pool. The corporation must already be saved in the Evaluation. Corporate planning requires Pro.
Pay a dividend you choose
Open Financial Insights and confirm Current Scenario.
Open Planning Inputs. Select Add Toggle / Strategy, then New Toggle.
Choose Corporate, then Corporate Dividend Payout.
Select the corporation and Class of Shares.
Set Type of Dividend.
Enter Annual Amount and Rate Growth.
Set the dates and save.
The saved toggle is titled Pay [amount] from [corporation].
Type of Dividend | What it pays |
Ineligible Dividend | A non-eligible dividend |
Eligible Dividend | An eligible dividend |
CDA | A capital dividend. The menu says CDA, not "Capital Dividend" |
Dividend - Mix | CDA, then eligible (from ERDTOH), then NERDTOH, then ineligible. It can pay a partial amount when a pool runs out |
There is no field labelled "pay from pool in this order". Dividend - Mix uses that order on its own.
For what CDA, ERDTOH, and NERDTOH represent, see Understanding CDA, ERDTOH, and NERDTOH.
Dividends the plan pays on its own
The plan can pay a dividend without a Corporate Dividend Payout in four situations.
A cash-flow shortfall. Under Assumptions → Excess/Deficiency, the deficiency order can include Shareholder Loan, CDA, Eligible Dividend, NERDTOH, and Ineligible Dividend. When shown, Assume cash flow deficiency dividends are paid only to client and partner regardless of class of shares and ownership % limits who receives them.
Every year, when a pool has an excess. Under Assumptions → Corp / Trusts → Corporations:
Clear out CDA annually if excess
Clear out ERDTOH annually if excess
Clear out NERDTOH annually if excess
These pay the amount created in that plan year. They do not empty an opening CDA balance. The section notes that clear-out dividends are paid based on share ownership.
One year or a chosen period. Use the toggle Clear Out CDA/ERDTOH/NERDTOH, when shown. Check Clear Out CDA, Clear Out ERDTOH, or Clear Out NERDTOH. The assumptions note says to use this toggle when you do not want the clear-out on every year.
A transfer into a TFSA, RRSP, or RESP. When Auto-Create Dividend if Insufficient Salary/Dividend is checked, the plan can create a dividend to fund the transfer. See Corporate and Family Trust toggles reference.
An opening CDA balance can still be paid by a Corporate Dividend Payout of type CDA or Dividend - Mix, or when the deficiency order reaches CDA. Those paths use the full CDA balance, including the opening amount, subject to Minimum CDA Balance for Dividends and Maximum CDA Deficiency Dividends when those fields are shown.
Where to read the result
On personal Cash Flow details:
Total CDA (Corporations), Eligible Dividends (Corporations), Ineligible Dividends (Corporations)
Per person: Client CDA (Corporations), Partner CDA (Corporations), and the eligible and ineligible lines
A shortfall-driven dividend shows as Capital Dividends Paid, Eligible Dividends Paid (Pre-Tax), or Ineligible Dividends Paid (Pre-Tax).
On the corporation, look for CDA Dividends Paid, Eligible Dividends Paid (Pre-Refund), Ineligible Dividends Paid (Pre-Refund), and the start, addition, reduction, and end-of-year rows for CDA, ERDTOH, and NERDTOH.
A dividend that lands in a holding company
There is no intercorporate-dividend toggle. If the holding company owns shares of the operating company, the operating company's dividend is allocated to the holding company in proportion to those shares. That includes a Corporate Dividend Payout, a clear-out, and a shortfall dividend.
On the corporation, Connected Corporations sets which corporations are connected. An automatic option traces the shareholder connections for you.
On the receiving corporation, details show Intercorporate Dividend Connected, Intercorporate Dividend Non-Connected, and Dividend Eligible for Section 112 Deduction. A connected corporation receives the Section 112 deduction. A non-connected corporation is taxed on the non-connected path. The plan reports the two amounts separately. The Corporate Cash Flow chart shows both as inflows.
If the amount looks wrong
The opening CDA was not paid. Clear out CDA annually if excess pays CDA created that year, not the opening balance. Use Corporate Dividend Payout with type CDA, or Dividend - Mix.
The dividend went to the holding company. Check share ownership and Connected Corporations.
You cannot find "Capital Dividend". The type is labelled CDA.
Which dividend to pay, and how to read the tax result, stays with the advisor and, where needed, the client's tax professional.