Inter-corporate dividends again

In A.G. Stedman “Intercorporate Dividend Planning: More Complexity” 20:1 Tax for the Owner-Manager (January 2020), the author outlines factors to consider when a private corporation proposes to pay a dividend to another private corporation as follows:

  1. When a subsidiary corporation has NERDTOH, ERDTOH, or GRIP balances, careful planning is necessary to ensure that dividends from the subsidiary result in additions to the same pools in the parent company.
  2. For any inter-corporate dividend, section 55 and the safe income on hand of the payer must be considered.
  3. Care must be taken to ensure that the corporate beneficiary of a trust that receives a dividend from another corpration is connected with the other corporation for Part IV tax purposes.
  4. Staggered year-ends are particularly problematic. The recipient might be required to file its tax return before the payer corporation can determine its ERDTOH and NERDTOH balances.
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