Duck Lake, 1975.
In order to make the exercise of trying a new fishing spot more certain, my brother left little to chance this time.
He dawned his full-body black neoprene wet suit and scuba gear, including an oxygen tank, then hobbled over to the muddy shoreline, and waded in like a big rubber zombie.
After he flippered off, we ventured out on to the lake in our row boat, exploring as much as fishing, checking out the intake creek at the other end.
My brother was long gone, having swam up the connecting creek and on to the adjacent lake about an hour earlier: Captain Nemo.
If the lake was small, the creek feeding it was little more than a thriving ditch, about four feet wide and three feet deep, banked on either side by grassy sidelines.
"There can't be much for fish in this place," my dad mused out loud.
We sat at a few metres from the lake, chewing on one of our favourite snacks, Fig Newtons.
My dad fiddled with an old elk rib which had moldered in the grass on a nearby knoll, having been taken down by a predator years before. I daydreamed of what that battle for life and death might have looked like...
Just then a terrifying creature birthed itself out of the creek beside us, cresting on the shore with a loud splash!
Nearly figging my newtons, I jumped up, wide-eyed, then quickly recognized the black zombie from about 90 minutes before.
My brother took off his mouthpiece and lifted his spear gun with a triumphant Irish grin.
A chubby three-pound trout glistened beautifully in the mid-day sun.
Who does this? In scuba gear!
"There's billions of them!" he exclaimed.
"Hurry up! Come 'ere!"
I shoved another cookie in my mouth and scurried over to the little creek, and witnessed for myself their dark green backs, teaming in the cool waters, synchronized in eagerness.
Dad suggested they looked hungry enough to challenge a bare hook.
I felt ridiculous, dropping an empty, shiny hook in to the creek, toward a dozen or so beautiful trout who seemed unaffected by us standing on the steam's bank so close to them.
The moment the steel hit the water, the largest of them darted toward it with all the manners of an anxious alpha male, seizing the hook in its mouth. My rod bent in half, and I wrangled the seventeen inch beauty out of the water and on to the grass, seizing it in my hands before it could flip itself back in.
We caught our limits in that lake system every day, each summer for years to come, but I have never since experienced anything quite like that warm July afternoon in the Chilcotin.
We later learned that the treasure in those lakes was the result of years of hard work to stock the larger of the three lakes with trophy trout, thus supporting the nearby wilderness resort.
So it is with the proceeds of years of work developing a lump sum accumulated in a family business.
Taking it out in the most efficient way can make a big difference to the annual catch and its longevity.
Paying a capital dividend - a tax advantage
A capital dividend is a tax-free dividend.
As with all dividends, there is no deduction for the corporation paying the dividend; however, this type of dividend is not taxable in the hands of the recipient.
Now that is a desirable catch!
Your corporation can pay a capital dividend if there's a positive balance in its capital dividend account (CDA).
The CDA does not appear on your company's financial statements, nor does it have to be disclosed anywhere. However, it should be closely monitored to allow you to take advantage of any tax-free capital dividends. Some corporate tax software packages allow you to calculate and track the CDA balance annually.
The capital dividend account is affected by the following:
It is increased by the non-taxable portion of capital gains realized by the corporation.
It is reduced by non-deductible capital losses realized by the corporation.
It is increased by any capital dividends received by the corporation and decreased by any capital dividends that the corporation pays.
It is increased by life insurance proceeds in excess of the policy's adjusted cost base.
It is possible for the CDA to be negative.
A capital dividend is declared by a directors' resolution and by filing a prescribed election (Form T2054) with the CRA on or before the earlier of the date the dividend becomes payable or is paid.
Once a capital dividend is distributed to shareholders, the CDA is reduced by the amount of the capital dividend paid.
Generally, it is beneficial to immediately pay a capital dividend whenever the CDA is positive so that the opportunity is not lost in cases where the corporation realizes a capital loss in the future.
As mentioned above, you can only pay a capital dividend up to the positive balance in the CDA.
This article is not a substitute for individualized tax or legal advice. Readers must consult their own tax professionals before implementing a strategy. Mark Ryan is an advisor in Prince George with RBC wealth Management, Dominion Securities
(member CIPF) and can be reached at: [email protected].
