Final answer:
A CCPC can pay an eligible dividend to the extent it has a sufficient general rate income pool. The GRIP represents the corporation's non-taxable income from active business activities that have not been paid out as dividends.
Step-by-step explanation:
In the context of Canadian tax law, a CCPC (Canadian-controlled private corporation) can pay an eligible dividend only to the extent that it has a sufficient general rate income pool (GRIP). The GRIP represents the corporation's non-taxable income from active business activities that have not been paid out as dividends. It is used to determine the amount of taxable dividends that can be paid at a lower tax rate.
For example, if a CCPC has $100,000 in its GRIP, it can pay eligible dividends of up to $100,000 to its shareholders at the lower tax rate, subject to other requirements. If the corporation pays dividends beyond the available GRIP, those additional dividends would be subject to a higher tax rate.