Do you need to report tax-free Capital Dividends (Income Tax Folio S3-F2-C1) and if so, where/how?

[robertdhull]

I was advised that the Capital Dividend payment was tax-free to shareholders who are residents of Canada.

[TurboTaxLise]

You are correct these dividends are tax-free. 

Quoting directly from the CRA website link below: "This Chapter discusses capital dividends and the capital dividend account (CDA). The CDA keeps track of various tax-free surpluses accumulated by a private corporation. These surpluses may be distributed tax-free in the form of capital dividends to the corporation’s Canadian-resident shareholders.  A corporation paying a capital dividend must file an election in respect of the dividend when the dividend is paid or becomes payable (capital dividend election). In certain circumstances, a late-filed election is acceptable (late-filed capital dividend election).  If the corporation pays a capital dividend which exceeds the balance in its CDA, there will be additional tax consequences."

From my quote above - Income Tax Folio S3-F2-C1, Capital Dividends: https://bit.ly/2Aacdh3

Here is a link from TurboTax to guide you with your foreign sources:  How do I report foreign income, pension, and other foreign amounts? - https://bit.ly/2BuCFAf

Also from TaxTips - Capital Dividend: https://www.taxtips.ca/glossary/capital-dividend.htm

[TurboTaxLise]

@robertdhull - Is there anything else I can assist you with?

[robertdhull]

No, I was finally able to talk to Turbo Tax support and they answered the question. My question was not if it was tax-free ... I already knew that ... it was: "Did it need to be reported anywhere?" and the answer is "no". I don't know if I can deduce from this that ANYTHING that is tax free need not be reported. Thanks for taking the time to respond.

[TurboTaxLise]

I'm glad you got it all figured out. Thank you for replying! I will revise the above answer with the HOW as well.

[johancarnell]

Will Turbotax calculate Capital Dividends and maintain year to year balances?

[TurboTaxBrenda1]

Yes, TurboTax will calculate Capital Dividends and maintain year to year balances.