CPA Compilation Report · Holding & Investment Companies · Ontario
CPA Compilation Report for Holding & Investment Companies
CPA compilation reports built specifically for Ontario holding companies and investment companies. Inter-company dividends, shareholder loan compliance, RDTOH and CDA tracking, passive income impact on SBD, investment portfolio schedules, estate freeze documentation, family trust reporting. From $600. 900+ five-star reviews.
Why Holding and Investment Companies Need a CPA Compilation Report
Holding companies and investment companies are often treated as afterthoughts: a shell that receives dividends from the operating company and holds investments. In reality, the holdco's financial statements are the foundation of your corporate tax planning, estate planning and creditor protection strategy. A holdco with incorrect shareholder loan balances triggers CRA inclusion under section 15(2). A holdco without RDTOH tracking overpays or underpays dividend refunds. A holdco without a CDA schedule misses tax-free capital dividend elections. A holdco without a proper investment portfolio schedule cannot support adjusted cost base (ACB) claims on dispositions.
Lenders, estate lawyers, family trust administrators, associated corporation calculations and CRA all require CPA-prepared financial statements for holding and investment companies. The compilation report under CSRS 4200 is the minimum standard that satisfies every one of these requirements. For a general overview of our compilation report services, see our CPA compilation report page.
Who Requires a CPA Compilation Report from Holding and Investment Companies?
| Who Requires It | Why | What They Review |
|---|---|---|
| CRA | CRA requires the holdco to file a T2 return every year. The T2 must be supported by CPA-prepared financial statements. CRA audits inter-company transactions (dividends, management fees, shareholder loans), passive income reporting (RDTOH, GRIP, LRIP), associated corporation status and CDA elections. | Shareholder loan balances (section 15(2) inclusion). Inter-company dividend deductions. RDTOH balance. CDA election documentation. Associated corporation calculations. Investment income classification. |
| Lender (personal mortgage or commercial loan) | Lenders reviewing the shareholder's net worth for personal mortgage qualification or commercial loan applications require CPA-prepared holdco financial statements. The holdco's assets (investments, real estate, retained earnings) form a significant portion of the shareholder's net worth. | Total assets (investments at FMV or cost), total liabilities, shareholder equity (retained earnings), inter-company receivables, investment portfolio value. |
| Estate lawyer / estate planning | Estate plans involving holdcos require current CPA-prepared financial statements. Estate freezes, family trust distributions, intergenerational transfers and probate planning all depend on accurate holdco valuations. The estate lawyer relies on the compilation report for the holdco's book value and the CPA's notes on shareholder equity composition. | Shareholder equity breakdown (paid-up capital, retained earnings, contributed surplus), share structure (common, preferred, freeze shares), CDA balance, investment portfolio ACB and FMV. |
| Family trust administrator | If the holdco's shares are held by a family trust, the trust's annual T3 filing requires CPA-prepared financial statements from the holdco. Dividend income received by the trust from the holdco must reconcile to the holdco's dividend declarations. The 21-year trust disposition rule requires accurate share valuations. | Dividend declarations from holdco to trust. Share value for the 21-year deemed disposition. Income allocations to beneficiaries. ACB of shares held by the trust. |
| Associated corporation calculation | If the holdco is associated with one or more operating companies, the $500,000 SBD limit must be shared. CPA-prepared financial statements for each associated corporation are required to determine the allocation. Missing holdco financial statements mean the associated corporation rules cannot be applied correctly. | CCPC status verification. Share ownership structure. Cross-ownership percentages. SBD allocation agreement between associated corporations. |
| Accountant for the operating company | The operating company's CPA needs the holdco's financial statements to reconcile inter-company dividends, management fees, shareholder loans and associated corporation rules. Without holdco financials, the opco's tax return cannot be completed accurately. | Inter-company dividend amounts. Management fee payments. Shareholder loan balances. Associated corporation status. SBD allocation. |
Critical Tax Accounts We Track in Every Holdco Compilation
| Tax Account | What It Is | Why It Matters |
|---|---|---|
| RDTOH (Refundable Dividend Tax on Hand) | A notional account that accumulates when the corporation pays tax on investment income (interest, taxable capital gains, foreign income) or receives taxable dividends from non-connected corporations. The RDTOH is refunded to the corporation when taxable dividends are paid to shareholders at a rate of $38.33 for every $100 in taxable dividends paid (Eligible RDTOH) or non-eligible dividends paid (Non-Eligible RDTOH). | If the RDTOH balance is not tracked, the corporation misses dividend refunds. On a holdco with $200,000 in RDTOH, paying $521,908 in taxable dividends triggers a $200,000 refund. If RDTOH is not claimed on the T2, the refund is lost. We track Eligible RDTOH and Non-Eligible RDTOH separately on every compilation. |
| CDA (Capital Dividend Account) | A notional account that accumulates from the non-taxable portion of capital gains (50%), capital dividends received from other corporations, and life insurance proceeds. Dividends paid from the CDA are received tax-free by the shareholder. | If the CDA balance is not tracked, the corporation cannot elect to pay tax-free capital dividends under subsection 83(2). On a holdco that sold investments with $400,000 in capital gains, the CDA balance increases by $200,000. A capital dividend election allows $200,000 to be distributed tax-free. Missing this election means the $200,000 is distributed as a taxable dividend instead. |
| GRIP (General Rate Income Pool) | Tracks income taxed at the general corporate rate (above the SBD limit). Eligible dividends can be paid from GRIP to shareholders at the lower eligible dividend tax rate. | If GRIP is not tracked, the corporation may pay non-eligible dividends when eligible dividends are available, resulting in higher personal tax for the shareholder. We track GRIP on every compilation where applicable. |
| PUC (Paid-Up Capital) | The tax-paid cost of the shares issued by the corporation. Returns of PUC to shareholders are tax-free (up to the PUC amount). Amounts exceeding PUC are deemed dividends. | Incorrect PUC tracking results in tax-free returns being classified as taxable dividends or taxable returns being classified as tax-free. PUC is especially critical after estate freezes, section 85 rollovers and share reorganizations. We verify PUC on every holdco compilation. |
| ACB (Adjusted Cost Base) of investments | The tax cost of each investment held by the corporation. Includes original purchase price plus reinvested distributions (mutual funds), return of capital adjustments and averaging on identical securities. | Incorrect ACB results in overstated or understated capital gains on disposition. On a $500,000 investment portfolio, an ACB error of $30,000 changes the capital gain by $30,000 and the tax by $7,500 to $15,000. We maintain per-investment ACB schedules for every holdco. Compilation Report Services → |
Passive Income and the SBD Grind
| Passive Income in Holdco | Impact on SBD in Associated Opco |
|---|---|
| $0 to $50,000 | No impact. The operating company retains the full $500,000 SBD limit (12.2% on the first $500,000 of active business income). |
| $50,001 to $149,999 | SBD is reduced by $5 for every $1 of passive income above $50,000. At $100,000 in passive income, the SBD is reduced by $250,000 (from $500,000 to $250,000). The opco pays the higher general rate (26.5%) on the lost SBD room. |
| $150,000+ | SBD is fully eliminated. The operating company pays 26.5% on all active business income (no SBD rate). $150,000 in holdco passive income costs the opco an additional $71,500/year in tax on $500,000 of active income (26.5% vs. 12.2%). |
The SBD Grind Is the Most Expensive Holdco Mistake: Passive investment income earned inside the holdco (interest, foreign dividends, taxable capital gains) above $50,000 grinds down the associated operating company's SBD limit. At $150,000 in holdco passive income, the opco loses the entire SBD ($500,000 x (26.5% - 12.2%) = $71,500/year in additional tax). We track passive income on every holdco compilation and advise on strategies to manage it: timing of capital gain realizations, use of corporate class funds, capital dividend elections to reduce retained investment balances and portfolio rebalancing.
Holdco Compilation Report from $600. Every Tax Account Tracked.
RDTOH, CDA, GRIP, PUC, ACB, passive income, shareholder loans. Built for Ontario holding and investment companies.
Shareholder Loan Compliance
| CRA Rule | What It Means | Financial Statement Impact |
|---|---|---|
| Section 15(2): Shareholder loan inclusion | If the corporation loans money to a shareholder (or a person connected to the shareholder) and the loan is not repaid by the end of the fiscal year following the year the loan was made, the entire loan balance is included in the shareholder's personal income as a deemed dividend. A $200,000 shareholder loan not repaid on time results in $200,000 of personal income. | Shareholder loans receivable must be shown on the holdco balance sheet with the date of origination, repayment terms and interest rate. Notes to the financial statements must disclose whether the loan meets the section 15(2) exceptions (bona fide repayment terms, one-year repayment rule). |
| Section 80.4: Imputed interest | If the corporation loans money to a shareholder at below the CRA prescribed rate, the difference between the prescribed rate and the rate charged is a taxable benefit to the shareholder. The prescribed rate is set quarterly by CRA. | Interest income on shareholder loans must be recorded at the prescribed rate (or higher). If the loan is interest-free, the imputed interest is disclosed in the notes and reported as a shareholder benefit on the T4 or T5. |
| Section 15(2.6): Bona fide repayment exception | A shareholder loan is excluded from income inclusion if it was repaid within one year after the end of the corporation's fiscal year in which the loan was made, and the repayment was not part of a series of loans and repayments. | We track every shareholder loan transaction during the year: advances, repayments, interest charges. The compilation report confirms whether the one-year repayment test is met. If not met, the inclusion amount is disclosed. |
| Inter-company loans (holdco to opco) | Loans between associated corporations (holdco lending to opco, or opco lending to holdco) must be recorded at arm's length terms. Interest rates, repayment terms and security must be documented. Transfer pricing rules may apply if the terms are not arm's length. | Inter-company receivable/payable balances shown on both the holdco and opco balance sheets. Interest income/expense recorded. Balances must reconcile between the two entities. We prepare both compilations to ensure consistency. |
What Our Holdco Compilation Service Includes
| Service | What We Do |
|---|---|
| Year-end bookkeeping review | We reconcile all inter-company transactions (dividends, management fees, loans), verify investment portfolio transactions (purchases, sales, distributions, return of capital adjustments), confirm shareholder loan balances and verify bank and brokerage account statements. |
| Financial statement preparation | Balance sheet with investments at cost (FMV disclosed in notes if materially different), inter-company receivables/payables, shareholder loans, share capital (by class) and retained earnings. Income statement with investment income by type (interest, dividends, capital gains, rental). Notes with accounting policies, share structure description and contingencies. |
| CPA compilation report (CSRS 4200) | The formal compilation report letter signed by a licensed CPA. Accepted by CRA, lenders, estate lawyers, family trust administrators and associated corporation filings. |
| RDTOH schedule (Eligible and Non-Eligible) | Opening balance, additions from investment income, refunds from dividends paid and closing balance. Eligible RDTOH and Non-Eligible RDTOH tracked separately per the 2019 rules. Reconciled to the T2 Schedule 3. |
| CDA schedule | Opening balance, additions from capital gains (50% non-taxable portion), capital dividends received, life insurance proceeds. Capital dividend elections (subsection 83(2)) documented. Closing CDA balance available for tax-free distribution. |
| GRIP / LRIP schedule | GRIP opening balance, additions from general-rate income, reductions from eligible dividends paid. LRIP tracked if applicable. Ensures the correct dividend designation (eligible vs. non-eligible) on every dividend paid to shareholders. |
| Investment portfolio schedule | Every investment holding listed with: security name, quantity, purchase date, original cost, ACB (adjusted for distributions, return of capital, reinvestments), FMV at year-end, unrealized gain/loss. Dispositions during the year: proceeds, ACB, capital gain/loss. This schedule supports every capital gain claim and CDA calculation. |
| Shareholder loan reconciliation | Every shareholder loan transaction tracked: advances, repayments, interest charges, year-end balance. Section 15(2) compliance verified. Imputed interest under section 80.4 calculated. One-year repayment test documented. |
| T2 corporate tax return | Corporate tax return reconciled to the compilation financial statements. RDTOH refund claimed. CDA election filed. Associated corporation SBD allocation filed (Schedule 23). Passive income calculated for SBD grind impact. T2 included FREE for bookkeeping clients. |
| CRA audit support (FREE) | If CRA audits the holdco's inter-company transactions, shareholder loans, RDTOH claims, CDA elections or passive income calculations, we represent you at no additional charge. FREE for every client. Compilation Report Services → |
Ontario Holding Company Compilation Report: Real Client Results
Holdco with $1.2M Investment Portfolio, Toronto
A Toronto business owner's holdco had accumulated $1.2 million in investments over 8 years. The previous accountant had not maintained an ACB schedule. When the owner sold $340,000 in investments, the capital gain was calculated using the original purchase price (ignoring $62,000 in return of capital adjustments and $18,000 in reinvested distributions that reduced ACB). We reconstructed the ACB schedule from brokerage statements going back 8 years, corrected the capital gain, filed an amended T2 and recovered $9,800 in overpaid tax. Going forward, we maintain the per-investment ACB schedule on every compilation.
$9,800 tax recovery + ACB schedule reconstructed for entire portfolio
Holdco with $180,000 CDA Balance, Mississauga
A Mississauga business owner sold the operating company's shares for a $720,000 capital gain. The non-taxable portion ($360,000) plus an existing $180,000 CDA balance from prior years meant $540,000 was available for tax-free distribution via capital dividend election. The previous accountant had not tracked the CDA. We reconstructed the CDA schedule from 6 years of T2 returns, confirmed the $180,000 balance, filed the capital dividend election (subsection 83(2)) and distributed $540,000 tax-free. Without the CDA election, the shareholder would have paid $108,000 in personal tax on the $540,000.
$108,000 in personal tax saved through CDA election
Holdco Triggering SBD Grind, Brampton
A Brampton holdco earned $124,000 in passive investment income (interest and foreign dividends). The associated operating company was paying 26.5% on $500,000 of active business income because the SBD had been ground down to $130,000. We restructured: timed capital gain realizations to stay below $50,000 per year, switched interest-bearing investments to Canadian dividend-paying equities (eligible dividends from connected Canadian corporations do not count toward the passive income threshold), filed capital dividend elections to reduce retained investment balances and rebalanced the portfolio. Passive income dropped to $38,000. SBD restored to $500,000. Annual tax savings for the opco: $52,780. Compilation Report Services →
$52,780/year opco tax savings + SBD fully restored
Estate Freeze Holdco, Oakville
An Oakville business owner completed an estate freeze: exchanged common shares of the holdco for preferred shares at FMV ($2.4 million) and issued new common shares to a family trust for nominal value. The previous accountant did not update the share structure in the holdco's financial statements. When the estate lawyer requested current financials, the compilation report still showed the pre-freeze share structure. We prepared a corrected compilation report: updated PUC for the new preferred and common shares, documented the section 85 rollover, prepared the family trust T3 filing, tracked the 21-year deemed disposition date and verified that CCPC status was preserved. The estate plan is now properly documented in the financial statements.
Estate freeze properly documented + PUC corrected + CCPC status verified
10 Common Compilation Report Mistakes for Holding and Investment Companies
| # | Mistake | Consequence |
|---|---|---|
| 1 | Not tracking RDTOH (Eligible and Non-Eligible) | Missed dividend refunds. A holdco with $150,000 in RDTOH that pays taxable dividends without claiming the refund loses up to $150,000. The refund must be claimed on the T2 in the year dividends are paid. If not claimed, it is lost for that year. |
| 2 | Not tracking the CDA balance | Missed tax-free capital dividend elections. Every capital gain creates a CDA addition (50% non-taxable portion). Without CDA tracking, the corporation distributes as taxable dividends what could have been distributed tax-free. On $400,000 in cumulative gains, the missed CDA election costs $40,000 to $80,000 in personal tax. |
| 3 | Shareholder loan not repaid within the section 15(2) deadline | The entire loan balance is included in the shareholder's personal income as a deemed dividend. A $200,000 loan = $200,000 of personal income = approximately $86,000 to $107,000 in personal tax. The inclusion applies even if the shareholder repays the loan later. |
| 4 | No investment portfolio ACB schedule | Capital gains on dispositions are calculated incorrectly. ACB must reflect return of capital adjustments, reinvested distributions, superficial loss adjustments and averaging on identical securities. An ACB error of $50,000 changes capital gain by $50,000 and tax by $12,500 to $25,000. |
| 5 | Holdco passive income grinding the opco's SBD | Passive income above $50,000 reduces the associated opco's SBD by $5 for every $1. At $150,000 passive income, SBD is eliminated entirely. The opco pays an additional $71,500/year in tax. This is the most expensive holdco mistake and is completely avoidable with proper planning. |
| 6 | Not filing the holdco T2 because "it has no activity" | Every corporation must file a T2 every year, even if there is no revenue or activity. Late filing: $25/day penalty minimum. CRA may also revoke the corporation's status. The holdco's T2 is required for RDTOH, CDA, GRIP, associated corporation calculations and shareholder loan compliance even in "inactive" years. |
| 7 | Incorrect PUC after estate freeze or share reorganization | PUC determines the tax-free return of capital. After an estate freeze, PUC of the new preferred shares must equal the agreed value. PUC of the new common shares is typically nominal. Incorrect PUC results in tax-free distributions being assessed as taxable dividends or vice versa. |
| 8 | Not reconciling inter-company balances between holdco and opco | Dividends declared by the opco must appear as dividend income in the holdco. Management fees paid by the opco must appear as management fee income in the holdco. Loan balances must match on both balance sheets. Discrepancies trigger CRA queries and delay both T2 filings. |
| 9 | Not verifying CCPC status annually | If the corporation loses CCPC status (e.g., a non-resident shareholder acquires control, or the shares become listed), the corporation loses the SBD, RDTOH, CDA and other CCPC-specific benefits. CCPC status must be verified on every compilation. We confirm share ownership and control each year. |
| 10 | Using a CPA who does not understand holdco tax accounts | Generic CPAs who do not track RDTOH, CDA, GRIP, PUC and passive income grind produce financial statements that result in missed refunds, missed tax-free elections, shareholder loan inclusions and SBD losses. Holdco accounting requires specialized tax knowledge. Compilation Report Services → |
Frequently Asked Questions: Compilation Reports for Holding and Investment Companies
How much does a compilation report cost for a holding company?
From $600 for a standard holdco with inter-company dividends, shareholder loans and a basic investment portfolio. Holdcos with complex portfolios, multiple associated corporations, estate freeze documentation or family trust coordination: $1,000 to $2,500. T2 included FREE for bookkeeping clients. Know Your Exact Fee →
Does my holdco need a compilation report even if it has no revenue?
Yes. Every corporation must file a T2 every year, and the T2 must be supported by financial statements. The holdco's compilation report tracks RDTOH, CDA, GRIP, PUC, shareholder loans, investment portfolio ACB and associated corporation status. These accounts change even in years with no "activity." Failure to file: $25/day penalty minimum. Compilation Report Services →
What is RDTOH and why does it matter?
RDTOH (Refundable Dividend Tax on Hand) is a notional account that accumulates when the corporation pays tax on investment income. When the corporation pays taxable dividends to shareholders, a portion of the RDTOH is refunded ($38.33 per $100 in dividends). If RDTOH is not claimed on the T2, the refund is lost. We track Eligible and Non-Eligible RDTOH separately on every holdco compilation.
What is the CDA and how do I use it?
The Capital Dividend Account accumulates from the non-taxable portion of capital gains (50%), capital dividends received from other corporations and life insurance proceeds. Dividends paid from the CDA are received tax-free by the shareholder. A capital dividend election under subsection 83(2) must be filed with CRA before or at the time of the dividend payment. We track the CDA on every compilation and prepare the election.
How does holdco passive income affect my operating company?
Passive investment income in the holdco above $50,000 reduces the associated opco's SBD by $5 for every $1. At $150,000, the SBD is eliminated. The opco pays 26.5% instead of 12.2% on the first $500,000 of active business income. Annual cost: up to $71,500. We monitor passive income and advise on strategies to stay below the $50,000 threshold. Book Free Consultation →
What happens if a shareholder loan is not repaid on time?
Under section 15(2), if the loan is not repaid by the end of the fiscal year following the year the loan was made, the entire balance is included in the shareholder's personal income. A $200,000 loan = $200,000 income = approximately $86,000 to $107,000 in personal tax. The inclusion applies even if repaid later. We track every shareholder loan transaction and alert you before the deadline.
Do you maintain an investment portfolio ACB schedule?
Yes. Every investment listed with purchase date, original cost, return of capital adjustments, reinvested distributions, superficial loss adjustments and current ACB. Dispositions tracked with proceeds, ACB and capital gain/loss. The schedule supports every capital gain claim on the T2 and every CDA addition. Maintained cumulatively year over year.
Can you prepare the compilation for both my holdco and opco?
Yes. We recommend one CPA prepare both to ensure inter-company balances reconcile, dividends are recorded consistently, associated corporation calculations are correct and shareholder loan compliance is verified across entities. Multi-entity pricing available. Book Free Consultation →
Do you support estate freeze documentation?
Yes. We document the estate freeze in the holdco's compilation report: updated share structure (preferred freeze shares, new common shares), PUC for each class, section 85 rollover elected amounts, family trust share ownership and the 21-year deemed disposition date. The compilation report provides the financial documentation the estate lawyer requires.
Is the T2 corporate tax return included?
T2 is filed FREE for all bookkeeping clients. For compilation-only clients, the T2 is available from $400 (standalone) or bundled with the compilation report. Every T2 includes RDTOH refund claim, CDA election, GRIP calculation, associated corporation SBD allocation and CRA audit support FREE. Know Your Exact Fee →
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Holdco Compilation Report. From $600. Every Tax Account Tracked.
RDTOH, CDA, GRIP, PUC, ACB, passive income grind, shareholder loans, estate freeze. Built for Ontario holding and investment companies. 900+ five-star reviews.
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