Ontario Barrister and Solicitor Practice Exam

Can a CCPC pay an eligible dividend if it has a sufficient general rate income pool?

1. Yes

2. No

3. Only with special approval

4. Only to certain shareholders

The correct answer is: Yes

A CCPC (Canadian Controlled Private Corporation) is able to pay an eligible dividend if it has a sufficient general rate income pool. A general rate income pool is a tax account that tracks the income eligible for a lower corporate income tax rate. This allows CCPCs to distribute eligible dividends to shareholders. Therefore, options B, C, and D are incorrect as they state limitations or special circumstances that would prevent a CCPC from paying an eligible dividend. However, option A is the correct answer as CCPCs can generally pay eligible dividends if they have a sufficient general rate income pool.