Our firm is transitioning to TaxCycle from Profile currently, and we’re experiencing some difficulties with the CDA Current Year continuity schedule/T2054 election mechanics, and the linking of this worksheet to Schedule 3.
Under the T2054 “required information” section, the field for “Capital dividend account [balance] immediately before this dividend becomes payable” populates without a reduction for the current year capital dividends that were paid (which are reflected on S3). In other words, it calculates as if you’re drafting an election for a late filing by default. Because of the penalties associated with paying out a capital dividend prior to filing the election, this seems to be odd treatment (it should be the exception rather than the norm)?
We’ve tried indicating “Yes” in response to “Calculate amount A from Schedule 3?” under the “Required information” section on the T2054 election to see if this would help, but this doesn’t effect the “Capital dividend account [balance] immediately before this dividend becomes payable” field on the T2054. Instead, it links the S3 value to both “The full amount of the dividend for which this election is made” field on the T2054, and the “Capital dividend paid or payable in the year” field in the CDA Current Year Worksheet continuity above it. This linking to the continuity also seems strange to me - I think the S3 value should always populate in the “Capital dividends paid or payable in the current year” of the continuity worksheet, regardless of what you’re filing on an election, because if the dividends are on S3 you’re indicating they have already been paid.
These calculation mechanics differ from what we’re used to in Profile, which automatically reduces the T2054 field for the “Capital dividend account [balance] immediately before this dividend becomes payable” for the value listed on S3 (i.e. it assumes you’ll be filing the election on time). The T2054 election field for “The full amount of the dividend for which this election is made” is then a manual input field, not linked to the dividends already paid in the year per the continuity, or S3. This treatment is much better suited to the processes at our firm, as we rarely file a late election, and also like to get the T2054 for dividends that will be paid out in the upcoming year executed at our year end meeting with the client.
I’ve talked to support about this and they’ve indicated they are considering changing the way TaxCycle handles these calculations. We thought it would be good to post in the forum as well to see if other users are having similar issues, and if our preference to adopt Profile’s approach as the default (i.e. handling the T2054 calculations with an underlying assumption that the election will be filed on time) would work for others.