Paul Hickey, in Canadian Tax Highlights (22:3, March 2014), notes that the CRA recently confirmed that it will defer processing an election to treat an excess capital dividend as a separate taxable dividend until any related objection under Part III has been resolved. Previously, the CRA would process the election, which vitiated any objection under Part III (an objection that was meant to dispute the CRA’s position on the relevant CDA balance). The taxpayer, then, was forced to choose between filing the election, even if it disagreed with the CRA position on the CDA balance, and filing an objection, which, if the taxpayer lost, meant that Part III tax would be payable because it would be too late to file an election.
