Moore
January 2021 Newsletter

When an agricultural cooperative corporation pays a patronage dividend, the recipient is normally required to include the dividend in the year of receipt. The cooperative is required to withhold tax on the dividend.

However, if the dividend is paid in the form additional shares of the cooperative, the inclusion of the dividend for the recipient is deferred to the year in which the shares are disposed of. Furthermore, the cooperative is not required to withhold tax when it pays the dividend in shares. Certain conditions apply (for example, normally the shares cannot be redeemable for at least five years).

This rule regarding dividends of shares was set to expire for shares issued after 2020. The federal government recently extended the rule to shares issued through the end of 2025.

Last modified on January 18, 2021 12:00 am