VIII, s. 18, c. 21, s. 1341997, c. 25, s. 91998, c. 19, s. 98(F), s. 3072000, c. 12, s. 1422005, c. 33, s. 102013, c. 34, s. 108
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]1995, c. 21, s. 19
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]1995, c. 21, s. 19
56.4(1)The following definitions apply in this section.eligible corporationeligible corporation, of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock. (société admissible)eligible individualeligible individual, in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time. (particulier admissible)eligible interesteligible interest, of a taxpayer, means capital property of the taxpayer that is(a)a partnership interest in a partnership that carries on a business;(b)a share of the capital stock of a corporation that carries on a business; or(c)a share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation. (participation admissible)goodwill amountgoodwill amount, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to theIncome Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of a business carried on by the taxpayer through a permanent establishment located in Canada. (montant pour achalandage)permanent establishmentpermanent establishmentmeans a permanent establishment as defined for the purpose of subsection 16.1(1). (établissement stable)restrictive covenantrestrictive covenant, of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm’s length with the taxpayer, other than an agreement or undertaking(a)that disposes of the taxpayer’s property; or(b)that is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value. (clause restrictive)taxpayertaxpayerincludes a partnership. (contribuable)Marginal note:Income — restrictive covenants(2)There is to be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm’s length (other than an amount that has been included in computing the taxpayer’s income because of this subsection for a preceding taxation year or in the taxpayer’s eligible corporation’s income because of this subsection for the taxation year or a preceding taxation year).Marginal note:Non-application of subsection (2)(3)Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the “purchaser”) with whom the particular taxpayer deals at arm’s length (determined without reference to paragraph 251(5)(b)), if(a)section 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year;(b)the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to theIncome Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or(c)subject to subsection (9), the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definitioneligible interestin subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and(i)the disposition is to the purchaser (or to a person related to the purchaser),(ii)the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),(iii)the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;(iv)if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,(v)the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and(vi)the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.Marginal note:Treatment of purchaser(4)An amount paid or payable by a purchaser for a restrictive covenant is(a)if the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;(b)if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of determining the cost of the property or for the purposes of subsection 13(35), as the case may be, and not to be an amount paid or payable for all other purposes of the Act; and(c)if an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser’s acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.Marginal note:Non-application of section 68(5)If this subsection applies to a restrictive covenant granted by a taxpayer, section 68 does not apply to deem consideration to be received or receivable by the taxpayer for the restrictive covenant.Marginal note:Application of subsection (5) — if employee provides covenant(6)Subsection (5) applies to a restrictive covenant if(a)the restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm’s length (referred to in this subsection as the “purchaser”);(b)the restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the “vendors”) by the purchaser of an interest, or for civil law purposes a right, in the individual’s employer, in a corporation related to that employer or in a business carried on by that employer;(c)the individual deals at arm’s length with the employer and with the vendors;(d)the restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;(e)no proceeds are received or receivable by the individual for granting the restrictive covenant; and(f)the amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.Marginal note:Application of subsection (5) — realization of goodwill amount and disposition of property(7)Subject to subsection (10), subsection (5) applies to a restrictive covenant granted by a taxpayer if(a)the restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the “vendor”) to(i)another taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or(ii)another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;(b)where subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, and(i)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(A)included by the vendor in computing a goodwill amount of the vendor, or(B)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(ii)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,(A)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(B)under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),(c)where subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, and(i)either(A)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(I)included by the vendor in computing a goodwill amount of the vendor, or(II)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(B)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing(I)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(II)under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,(ii)the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and(iii)the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;(d)no proceeds are received or receivable by the vendor for granting the restrictive covenant;(e)subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;(f)the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of(i)the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,(ii)the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or(iii)the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and(g)a joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by(i)in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or(ii)in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.Marginal note:Application of subsection (7) and section 69 — special rules(8)For the purpose(a)of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if(i)the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and(ii)if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and(b)of determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.Marginal note:Anti-avoidance rule — non-application of paragraph (3)(c)(9)Paragraph (3)(c) does not apply to an amount that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property under paragraph 3(a).Marginal note:Anti-avoidance — non-application of subsection (7)(10)Subsection (7) does not apply in respect of a taxpayer’s grant of a restrictive covenant if one of the results of not applying section 68 to the consideration received or receivable in respect of the taxpayer’s grant of the restrictive covenant would be that paragraph 3(a) would not apply to consideration that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property.Marginal note:Clarification if subsection (2) applies — where another person receives the amount(11)For greater certainty, if subsection (2) applies to include in computing a taxpayer’s income an amount received or receivable by another taxpayer, that amount is not to be included in computing the income of that other taxpayer.Marginal note:Clarification if subsection (5) applies(12)For greater certainty, if subsection (5) applies in respect of a restrictive covenant,(a)the amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); and(b)the amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.Marginal note:Filing of prescribed form(13)For the purpose of paragraphs (3)(b) and (c) and subsection (7), an election in prescribed form filed under any of those provisions is to include a copy of the restrictive covenant and be filed(a)if the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person’s filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; and(b)in any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.Marginal note:Non-application of section 42(14)Section 42 does not apply to an amount received or receivable as consideration for a restrictive covenant.
(a)a partnership interest in a partnership that carries on a business;(b)a share of the capital stock of a corporation that carries on a business; or(c)a share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation. (participation admissible)
(a)that disposes of the taxpayer’s property; or(b)that is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value. (clause restrictive)
(a)section 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year;(b)the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to theIncome Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or(c)subject to subsection (9), the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definitioneligible interestin subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and(i)the disposition is to the purchaser (or to a person related to the purchaser),(ii)the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),(iii)the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;(iv)if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,(v)the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and(vi)the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.
(i)the disposition is to the purchaser (or to a person related to the purchaser),(ii)the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),(iii)the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;(iv)if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,(v)the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and(vi)the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.
(a)if the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;(b)if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of determining the cost of the property or for the purposes of subsection 13(35), as the case may be, and not to be an amount paid or payable for all other purposes of the Act; and(c)if an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser’s acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.
(a)the restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm’s length (referred to in this subsection as the “purchaser”);(b)the restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the “vendors”) by the purchaser of an interest, or for civil law purposes a right, in the individual’s employer, in a corporation related to that employer or in a business carried on by that employer;(c)the individual deals at arm’s length with the employer and with the vendors;(d)the restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;(e)no proceeds are received or receivable by the individual for granting the restrictive covenant; and(f)the amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.
(a)the restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the “vendor”) to(i)another taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or(ii)another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;(b)where subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, and(i)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(A)included by the vendor in computing a goodwill amount of the vendor, or(B)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(ii)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,(A)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(B)under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),(c)where subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, and(i)either(A)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(I)included by the vendor in computing a goodwill amount of the vendor, or(II)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(B)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing(I)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(II)under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,(ii)the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and(iii)the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;(d)no proceeds are received or receivable by the vendor for granting the restrictive covenant;(e)subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;(f)the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of(i)the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,(ii)the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or(iii)the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and(g)a joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by(i)in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or(ii)in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.
(i)another taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or(ii)another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;
(i)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(A)included by the vendor in computing a goodwill amount of the vendor, or(B)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(ii)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,(A)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(B)under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),
(A)included by the vendor in computing a goodwill amount of the vendor, or(B)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or
(A)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(B)under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),
(i)either(A)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(I)included by the vendor in computing a goodwill amount of the vendor, or(II)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(B)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing(I)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(II)under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,(ii)the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and(iii)the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;
(A)the amount that can reasonably be regarded as being consideration for the restrictive covenant is(I)included by the vendor in computing a goodwill amount of the vendor, or(II)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or(B)it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing(I)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(II)under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,
(I)included by the vendor in computing a goodwill amount of the vendor, or(II)received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or
(I)under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or(II)under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,
(i)the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,(ii)the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or(iii)the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and
(i)in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or(ii)in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.
(a)of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if(i)the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and(ii)if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and(b)of determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.
(i)the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and(ii)if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and
(a)the amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); and(b)the amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.
(a)if the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person’s filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; and(b)in any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]2013, c. 34, s. 1952016, c. 12, s. 182017, c. 33, s. 15
57(1)Notwithstanding subparagraph 56(1)(a)(i), there shall be included in computing the income of a taxpayer in respect of a payment received by the taxpayer out of or under a superannuation or pension fund or plan the investment income of which has at some time been exempt from taxation under theIncome War Tax Actby reason of an election for that exemption by the trustees or corporation administering the fund or plan, only that part of the payment that remains after deducting the proportion thereof(a)that the total of the paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election is of the total of all amounts paid by the taxpayer into or under the fund or plan, or(b)that the total of the amounts paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election together with simple interest on each amount so paid from the end of the year of payment thereof to the commencement of the superannuation allowance or pension at 3% per annum is of the total of all amounts paid by the taxpayer into or under the fund or plan together with simple interest, computed in the same manner, on each amount so paid,whichever is the greater.Marginal note:Exception(2)This section does not apply in respect of a payment received by a taxpayer out of or under a superannuation or pension fund or plan if the taxpayer made no payment into or under the fund or plan.Marginal note:Limitation(3)Where a payment, to which subsection 57(1) would otherwise be applicable, is received by a taxpayer out of or under a superannuation or pension fund or plan in respect of a period of service for part only of which the taxpayer made payments into or under the fund or plan, subsection 57(1) is applicable only to that part of the payment which may reasonably be regarded as having been received in respect of the period for which the taxpayer made payments into or under the fund or plan and any part of the payment which may reasonably be regarded as having been received in respect of a period for which the taxpayer made no payments into or under the fund or plan shall be included in computing the taxpayer’s income for the year without any deduction whatever.Marginal note:Certain payments from pension plan(4)Where a taxpayer, during the period from August 15, 1944 to December 31, 1945, made a contribution in excess of $300 to or under a registered pension plan in respect of services rendered by the taxpayer before the taxpayer became a contributor, there shall be included in computing the taxpayer’s income in respect of a payment received by the taxpayer out of or under the plan only that part of the payment that remains after deducting the proportion thereof that the contribution so made minus $300 is of the total of the amounts paid by the taxpayer to or under the plan.Marginal note:Payments to widow, etc., of contributor(5)Where, in respect of the death of a taxpayer who was a contributor to or under a superannuation or pension fund or plan described in subsection 57(1) or 57(4), a payment is received by a person in a taxation year out of or under the fund or plan, there shall be included in computing the income of that person for the year in respect thereof only that part of the payment that would, if the payment had been received by the taxpayer in the year out of or under the fund or plan, have been included by virtue of this section in computing the income of the taxpayer for the year.
(a)that the total of the paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election is of the total of all amounts paid by the taxpayer into or under the fund or plan, or(b)that the total of the amounts paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election together with simple interest on each amount so paid from the end of the year of payment thereof to the commencement of the superannuation allowance or pension at 3% per annum is of the total of all amounts paid by the taxpayer into or under the fund or plan together with simple interest, computed in the same manner, on each amount so paid,
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]1970-71-72, c. 63, s. 1 “57”1977-78, c. 1, s. 101(F)1990, c. 35, s. 29
58(1)In determining the amount that shall be included in computing the income of a taxpayer in respect of payments received by the taxpayer in a taxation year under contracts entered into before May 26, 1932 with the Government of Canada or annuity contracts like those issued under theGovernment Annuities Actentered into before that day with the government of a province or a corporation incorporated or licensed to carry on an annuities business in Canada, there may be deducted from the total of the payments received the lesser of(a)the total of the amounts that would have been so received if the contracts had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless those additional sums or premiums had been paid before that day, and(b)$5,000.Marginal note:Annuities before 1940(2)In determining the amount that shall be included in computing the income of a taxpayer in respect of payments received by the taxpayer in a taxation year under annuity contracts entered into after May 25, 1932, and before June 25, 1940, with the Government of Canada or annuity contracts like those issued under theGovernment Annuities Actentered into during that period with the government of a province or a corporation incorporated or licensed to carry on an annuities business in Canada, there may be deducted from the total of the payments received the lesser of(a)the total of the amounts that would have been received under the contracts if they had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless such additional sums or premiums had been paid before that day, and(b)$1,200.Marginal note:Limitation(3)Where a taxpayer has received annuity payments in respect of which the taxpayer would otherwise be entitled to make deductions under both subsection 58(1) and subsection 58(2),(a)if the amount deductible under subsection 58(1) is $1,200 or more, he may not make a deduction under subsection 58(2); and(b)if the amount deductible under subsection 58(1) is less than $1,200, the taxpayer may make one deduction computed as though subsection 58(2) applied to all contracts entered into before June 25, 1940.Marginal note:Capital element(4)The amount remaining after deducting from the total of the annuity payments to which this section applies received in a taxation year the deductions permitted by subsection 58(1), 58(2) or 58(3) shall be deemed to be the annuity payment in respect of which the capital element is deductible under paragraph 60(a.Marginal note:Spouses or common-law partners(5)Where a taxpayer and the taxpayer’s spouse or common-law partner each received annuity payments in respect of which they may deduct amounts under this section, the amount deductible shall be computed as if their annuities belonged to one person and may be deducted by either of them or be apportioned between them in such manner as is agreed to by them or, in case of disagreement, as the Minister determines.Marginal note:Pension benefits(6)This section does not apply to superannuation or pension benefits received out of or under a registered pension plan.Marginal note:Enlargement of annuity(7)For the purpose of this section, an annuity shall be deemed to have been enlarged on or after June 25, 1940, if what is payable under the contract has, at any such time, been increased whether by increasing the amount of each periodic payment, by increasing the number of payments or otherwise.
(a)the total of the amounts that would have been so received if the contracts had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless those additional sums or premiums had been paid before that day, and(b)$5,000.
(a)the total of the amounts that would have been received under the contracts if they had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless such additional sums or premiums had been paid before that day, and(b)$1,200.
(a)if the amount deductible under subsection 58(1) is $1,200 or more, he may not make a deduction under subsection 58(2); and(b)if the amount deductible under subsection 58(1) is less than $1,200, the taxpayer may make one deduction computed as though subsection 58(2) applied to all contracts entered into before June 25, 1940.
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]R.S., 1985, c. 1 (5th Supp.), s. 581994, c. 7, Sch