T2054: Election for a Capital Dividend Under Subsection 83(2)
Reviewed by EverStone CPA · August 2026
Quick answer: Form T2054 is how a private corporation elects to pay a dividend out of its capital dividend account, tax-free to the shareholder. The deadline is not a filing season date — it runs from the day the dividend becomes payable.
What the form is
T2054 is the prescribed form for an election under subsection 83(2). The CRA describes it as “for use by a private corporation to elect to have the provisions of subsection 83(2) apply to a dividend”.
The capital dividend account is a notional balance. It collects the untaxed half of capital gains, the proceeds of certain life insurance policies and some other amounts. A dividend elected out of that balance is received by the shareholder tax-free, which is why the account is worth tracking carefully.
The election is what makes the dividend a capital dividend. Without a valid, timely T2054 it is an ordinary taxable dividend, whatever the directors intended.
Who files it
Private corporations with a positive capital dividend account balance — most often after selling an asset at a gain, or after receiving life insurance proceeds on a shareholder or key person.
It is a planning tool rather than a routine filing. Many small corporations never file one; those that do usually file it around a sale or a death.
The form at a glance
| Item | Detail |
|---|---|
| Legislation | Subsection 83(2) |
| Who files | The private corporation paying the dividend |
| Due | The earlier of the day the dividend becomes payable and the first day any part of it is paid |
| Must include | A certified copy of the directors’ resolution, and a schedule computing the CDA immediately before the election |
| Late penalty | Lesser of $8,000 and $100 per complete month |
What catches people out
The deadline is the trap. It is not tied to the corporate return. The election is due by the earlier of the day the dividend becomes payable and the first day any part of it is paid — and a dividend becomes payable on the day stipulated in the directors’ resolution declaring it. Declare a dividend payable immediately and the election is due immediately.
Regulation 2101 sets out what must accompany the election: a certified copy of the resolution of the directors authorising it, and a schedule showing the computation of the capital dividend account immediately before the election. An election filed without them is incomplete.
Get the balance wrong and elect more than the account holds, and the excess attracts a separate penalty tax under Part III. Computing the CDA before declaring, not after, is the whole discipline here.
A late, amended or revoked election carries a penalty of the lesser of $8,000 and $100 for each complete month from the election’s original due date to the date the request reaches the CRA in a form it finds satisfactory. The CRA will generally not process the election until it is paid.
Common questions
When is the T2054 due?+
What has to be filed with it?+
What if the CDA balance was wrong?+
Can a late T2054 be accepted?+
Where this comes from
- CRA — T2054 form page
- CRA — Income Tax Folio S3-F2-C1, Capital Dividends
- CRA — Penalty for accepting a late, amended or revoked election
General information current as of August 2026, not advice for your situation. Elections are unforgiving about dates — confirm yours before you file. Please speak with a CPA about your circumstances.
Related reading
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