On December 16, 2016, CRA released Folio S3-F2-C1, Capital Dividends. It included a number of updates to the previous guidance (IT-66R6, Capital Dividends) and additional information. Some of the key additions and information include:

• an individual receiving a capital dividend does not necessarily need to be a shareholder when the dividend is paid, provided that the individual is a shareholder when the capital dividend is declared (Paragraph 1.20);

 gifting publicly traded securities from a corporation rather than an individual

• the entire non-taxable portion of a capital gain (e.g. 100% when the inclusion rate is reduced to zero) that results from the making of certain gifts (such as the gifting of certain publicly traded securities to a qualified donee) is added to the capital dividend account (Paragraphs 1.33 and 1.34);
• when a capital dividend is received by a partnership, the timing on the inclusion of a corporate partner’s CDA will depend on the partnership agreement (Paragraph 1.49);
• a description of the treatment of proceeds of life insurance policies in relation to the capital dividend account (Paragraphs 1.59-1.72);
• a description of the election available to deem a dividend on the winding-up of a corporation to be a capital dividend pursuant to Subparagraph 88(2)(b)(i) (Paragraph 1.82);
• a dividend deemed to be paid pursuant to Subsection 84.1(1) may be elected to be a capital dividend (Paragraph 1.84) like other deemed dividends; and
• a description of the administrative policy which may allow a corporation to object to an assessment of Part III Tax in respect of an excessive capital dividend election while, at the same time, electing to treat the excess dividend as a separate taxable dividend (Subsection 184(3)). In these cases, CRA will hold the Subsection 184(3) election in abeyance until the resolution of the objection or subsequent appeal to a court (Paragraph 1.93). See VTN 390(8) for further details.