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:
- 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.
- For any inter-corporate dividend, section 55 and the safe income on hand of the payer must be considered.
- 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.
- 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.