Schedule 16, Patronage Dividend Deduction
Schedule 16, Patronage Dividend Deduction
Complete Schedule 16 if you are claiming a patronage dividend deduction. This deduction is for payments made to customers for allocations in proportion to patronage. An allocation in proportion to patronage entitles a customer to receive payment calculated at a rate relating to the quantity, quality, or value of either goods or products sold or services rendered.
Corporations have to pay amounts that qualify for this deduction either during the tax year, or in the 12 months that follow the tax year.
An agricultural cooperative corporation for a particular tax year can deduct patronage dividends issued in the form of tax deferred cooperative shares, but deductions cannot be more than 85% of its income for that year that is attributable to business done with its members.
Corporations other than credit unions and cooperative corporations cannot deduct patronage dividends paid to non-arm's length persons.
Parts 1, 2, and 3 of Schedule 16 give details on how to calculate the allowable patronage dividend deduction. Enter this deduction on line 416 of Schedule 1.
If you are claiming a patronage dividend deduction, you also have to complete Part 5 of Schedule 16 entitled "Calculation of income from an active business carried on in Canada (ABI)." Enter the amount from line 124 at line 400 of the return.
File a completed copy of this schedule with your return.
Note
Eligible members of agricultural cooperative
corporations can defer including in income patronage
dividends in the form of tax deferred cooperative shares
issued before 2026 to the year of their disposal.
However, a member may elect to have an amount included in income before the disposition of the shares. To make this election, the member must send a letter specifying the amount to be included in income with their return for the particular tax year.
References
Sections 135 and 135.1
IT-362, Patronage Dividends
|
|
|