VIII, s. 36, c. 21, s. 372001, c. 17, s. 632009, c. 2, s. 182010, c. 12, s. 72013, c. 34, ss. 63, 221
86(1)Where, at a particular time after May 6, 1974, in the course of a reorganization of the capital of a corporation, a taxpayer has disposed of capital property that was all the shares of any particular class of the capital stock of the corporation that were owned by the taxpayer at the particular time (in this section referred to as the “old shares”), and property is receivable from the corporation therefor that includes other shares of the capital stock of the corporation (in this section referred to as the “new shares”), the following rules apply:(a)the cost to the taxpayer of any property (other than new shares) receivable by the taxpayer for the old shares shall be deemed to be its fair market value at the time of the disposition;(b)the cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the fair market value at that time of the consideration receivable for the old shares (other than new shares) that(i)the fair market value, immediately after the disposition, of those new shares of that class,is of(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares; and(c)the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the cost to the taxpayer of all new shares and other property receivable by the taxpayer for the old shares.Marginal note:Idem(2)Notwithstanding paragraphs 86(1)(b) and 86(1)(c), where a taxpayer has disposed of old shares in circumstances described in subsection 86(1) and the fair market value of the old shares immediately before the disposition exceeds the total of(a)the cost to the taxpayer of the property (other than new shares) receivable by the taxpayer for the old shares as determined under paragraph 86(1)(a), and(b)the fair market value of the new shares, immediately after the disposition,and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer, the following rules apply:(c)the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of(i)the total of the cost to the taxpayer of the property as determined under paragraph 86(1)(a) and the gift portionand(ii)the fair market value of the old shares immediately before the disposition,(d)the taxpayer’s capital loss from the disposition of the old shares shall be deemed to be nil, and(e)the cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the total determined under subparagraph 86(2)(c)(i) that(i)the fair market value, immediately after the disposition, of the new shares of that class,is of(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares.Marginal note:Computation of paid-up capital(2.1)Where subsection 86(1) applies to a disposition of shares of the capital stock of a corporation (in this subsection referred to as the “exchange”), in computing the paid-up capital in respect of a particular class of shares of the capital stock of the corporation at any particular time that is the time of, or any time after, the exchange,(a)there shall be deducted the amount determined by the formula(A - B) × C/AwhereAis the total of all amounts each of which is the increase, if any, as a result of the exchange, in the paid-up capital in respect of a class of shares of the capital stock of the corporation, computed without reference to this subsection as it applies to the exchange,Bis the amount, if any, by which the paid-up capital in respect of the old shares exceeds the fair market value of the consideration (other than shares of the capital stock of the corporation) given by the corporation for the old shares on the exchange, andCis the increase, if any, as a result of the exchange, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the exchange; and(b)there shall be added an amount equal to the lesser of(i)the amount, if any, by which(A)the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular timeexceeds(B)the total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), and(ii)the total of all amounts required by paragraph 86(2.1)(a) to be deducted in respect of that particular class of shares before the particular time.Marginal note:Application(3)Subsections 86(1) and 86(2) do not apply in any case where subsection 85(1) or 85(2) applies.Marginal note:Computation of adjusted cost base(4)Where a taxpayer has disposed of old shares in circumstances described in subsection 86(1),(a)there shall be deducted after the disposition in computing the adjusted cost base to the taxpayer of each new share the amount determined by the formulaA × B/CwhereAis the amount, if any, by which(i)the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the taxpayer of the old shares immediately before the dispositionexceeds(ii)the amount that would be the taxpayer’s capital gain for the taxation year that includes the time of the disposition from the disposition of the old shares if paragraph 40(1)(a) were read without reference to subparagraph (iii) of that paragraph,Bis the fair market value of the new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares, andCis the total of all amounts each of which is the fair market value of a new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares; and(b)the amount determined under paragraph 86(4)(a) in respect of the acquisition shall be added in computing the adjusted cost base to the taxpayer of the new share after the disposition.
(a)the cost to the taxpayer of any property (other than new shares) receivable by the taxpayer for the old shares shall be deemed to be its fair market value at the time of the disposition;(b)the cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the fair market value at that time of the consideration receivable for the old shares (other than new shares) that(i)the fair market value, immediately after the disposition, of those new shares of that class,is of(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares; and(c)the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the cost to the taxpayer of all new shares and other property receivable by the taxpayer for the old shares.
(i)the fair market value, immediately after the disposition, of those new shares of that class,
(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares; and
(a)the cost to the taxpayer of the property (other than new shares) receivable by the taxpayer for the old shares as determined under paragraph 86(1)(a), and(b)the fair market value of the new shares, immediately after the disposition,
(c)the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of(i)the total of the cost to the taxpayer of the property as determined under paragraph 86(1)(a) and the gift portionand(ii)the fair market value of the old shares immediately before the disposition,(d)the taxpayer’s capital loss from the disposition of the old shares shall be deemed to be nil, and(e)the cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the total determined under subparagraph 86(2)(c)(i) that(i)the fair market value, immediately after the disposition, of the new shares of that class,is of(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares.
(i)the total of the cost to the taxpayer of the property as determined under paragraph 86(1)(a) and the gift portion
(ii)the fair market value of the old shares immediately before the disposition,
(i)the fair market value, immediately after the disposition, of the new shares of that class,
(ii)the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares.
(a)there shall be deducted the amount determined by the formula(A - B) × C/AwhereAis the total of all amounts each of which is the increase, if any, as a result of the exchange, in the paid-up capital in respect of a class of shares of the capital stock of the corporation, computed without reference to this subsection as it applies to the exchange,Bis the amount, if any, by which the paid-up capital in respect of the old shares exceeds the fair market value of the consideration (other than shares of the capital stock of the corporation) given by the corporation for the old shares on the exchange, andCis the increase, if any, as a result of the exchange, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the exchange; and(b)there shall be added an amount equal to the lesser of(i)the amount, if any, by which(A)the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular timeexceeds(B)the total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), and(ii)the total of all amounts required by paragraph 86(2.1)(a) to be deducted in respect of that particular class of shares before the particular time.
(i)the amount, if any, by which(A)the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular timeexceeds(B)the total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), and(ii)the total of all amounts required by paragraph 86(2.1)(a) to be deducted in respect of that particular class of shares before the particular time.
(A)the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular time
(B)the total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), and
(a)there shall be deducted after the disposition in computing the adjusted cost base to the taxpayer of each new share the amount determined by the formulaA × B/CwhereAis the amount, if any, by which(i)the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the taxpayer of the old shares immediately before the dispositionexceeds(ii)the amount that would be the taxpayer’s capital gain for the taxation year that includes the time of the disposition from the disposition of the old shares if paragraph 40(1)(a) were read without reference to subparagraph (iii) of that paragraph,Bis the fair market value of the new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares, andCis the total of all amounts each of which is the fair market value of a new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares; and(b)the amount determined under paragraph 86(4)(a) in respect of the acquisition shall be added in computing the adjusted cost base to the taxpayer of the new share after the disposition.
(i)the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the taxpayer of the old shares immediately before the disposition
(ii)the amount that would be the taxpayer’s capital gain for the taxation year that includes the time of the disposition from the disposition of the old shares if paragraph 40(1)(a) were read without reference to subparagraph (iii) of that paragraph,
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]R.S., 1985, c. 1 (5th Supp.), s. 861994, c. 21, s. 381995, c. 21, s. 29
86.1(1)Notwithstanding any other provision of this Part,(a)the amount of an eligible distribution received by a taxpayer shall not be included in computing the income of the taxpayer; and(b)subsection 52(2) does not apply to the eligible distribution received by the taxpayer.Marginal note:Eligible distribution(2)For the purpose of this section, a distribution by a particular corporation that is received by a taxpayer is an eligible distribution if(a)the distribution is with respect to all of the taxpayer’s common shares of the capital stock of the particular corporation (in this section referred to as the “original shares”);(b)the distribution consists solely of common shares of the capital stock of another corporation that were owned by the particular corporation immediately before their distribution to the taxpayer (in this section referred to as the “spin-off shares”);(c)in the case of a distribution that is not prescribed,(i)at the time of the distribution, both corporations are resident in the United States and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and(A)are actively traded on a designated stock exchange in the United States, or(B)are required, under theSecurities Exchange Act of 1934of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and(iii)under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;(d)in the case of a distribution that is prescribed,(i)at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange,(iii)under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, and(iv)the distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances;(e)before the end of the sixth month following the day on which the particular corporation first distributes a spin-off share in respect of the distribution, the particular corporation provides to the Minister information satisfactory to the Minister establishing(i)that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),(ii)that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada,(iii)the date of the distribution,(iv)the type and fair market value of each property distributed to residents of Canada,(v)the name and address of each resident of Canada that received property with respect to the distribution,(vi)in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution,(vii)in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, and(viii)such other matters that are required, in prescribed form; and(f)the taxpayer elects in writing filed with the taxpayer’s return of income for the taxation year in which the distribution occurs that this section apply to the distribution and provides information satisfactory to the Minister(i)of the number, cost amount (determined without reference to this section) and fair market value of the taxpayer’s original shares immediately before the distribution,(ii)of the number, and fair market value, of the taxpayer’s original shares and the spin-off shares immediately after the distribution of the spin-off shares to the taxpayer,(iii)except where the election is filed with the taxpayer’s return of income for the year in which the distribution occurs, concerning the amount of the distribution, the manner in which the distribution was reported by the taxpayer and the details of any subsequent disposition of original shares or spin-off shares for the purpose of determining any gains or losses from those dispositions, and(iv)of such other matters that are required, in prescribed form.Marginal note:Cost adjustments(3)Where a spin-off share is distributed by a corporation to a taxpayer pursuant to an eligible distribution with respect to an original share of the taxpayer,(a)there shall be deducted for the purpose of computing the cost amount to the taxpayer of the original share at any time the amount determined by the formulaA × (B/C)whereAis the cost amount, determined without reference to this section, to the taxpayer of the original share at the time that is immediately before the distribution or, if the original share is disposed of by the taxpayer, before the distribution, at the time that is immediately before its disposition,Bis the fair market value of the spin-off share immediately after its distribution to the taxpayer, andCis the total of(i)the fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, and(ii)the fair market value of the spin-off share immediately after its distribution to the taxpayer; and(b)the cost to the taxpayer of the spin-off share is the amount by which the cost amount of the taxpayer’s original share was reduced as a result of paragraph (a).Marginal note:Inventory(4)For the purpose of calculating the value of the property described in an inventory of a taxpayer’s business,(a)an eligible distribution to the taxpayer of a spin-off share that is included in the inventory is deemed not to be an acquisition of property in the fiscal period of the business in which the distribution occurs; and(b)for greater certainty, the value of the spin-off share is to be included in computing the value of the inventory at the end of that fiscal period.Marginal note:Reassessments(5)Notwithstanding subsections 152(4) to (5), the Minister may make at any time such assessments, reassessments, determinations and redeterminations that are necessary where information is obtained that the conditions in subparagraph (2)(c)(iii) or (d)(iii) are not, or are no longer, satisfied.
(a)the amount of an eligible distribution received by a taxpayer shall not be included in computing the income of the taxpayer; and(b)subsection 52(2) does not apply to the eligible distribution received by the taxpayer.
(a)the distribution is with respect to all of the taxpayer’s common shares of the capital stock of the particular corporation (in this section referred to as the “original shares”);(b)the distribution consists solely of common shares of the capital stock of another corporation that were owned by the particular corporation immediately before their distribution to the taxpayer (in this section referred to as the “spin-off shares”);(c)in the case of a distribution that is not prescribed,(i)at the time of the distribution, both corporations are resident in the United States and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and(A)are actively traded on a designated stock exchange in the United States, or(B)are required, under theSecurities Exchange Act of 1934of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and(iii)under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;(d)in the case of a distribution that is prescribed,(i)at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange,(iii)under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, and(iv)the distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances;(e)before the end of the sixth month following the day on which the particular corporation first distributes a spin-off share in respect of the distribution, the particular corporation provides to the Minister information satisfactory to the Minister establishing(i)that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),(ii)that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada,(iii)the date of the distribution,(iv)the type and fair market value of each property distributed to residents of Canada,(v)the name and address of each resident of Canada that received property with respect to the distribution,(vi)in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution,(vii)in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, and(viii)such other matters that are required, in prescribed form; and(f)the taxpayer elects in writing filed with the taxpayer’s return of income for the taxation year in which the distribution occurs that this section apply to the distribution and provides information satisfactory to the Minister(i)of the number, cost amount (determined without reference to this section) and fair market value of the taxpayer’s original shares immediately before the distribution,(ii)of the number, and fair market value, of the taxpayer’s original shares and the spin-off shares immediately after the distribution of the spin-off shares to the taxpayer,(iii)except where the election is filed with the taxpayer’s return of income for the year in which the distribution occurs, concerning the amount of the distribution, the manner in which the distribution was reported by the taxpayer and the details of any subsequent disposition of original shares or spin-off shares for the purpose of determining any gains or losses from those dispositions, and(iv)of such other matters that are required, in prescribed form.
(i)at the time of the distribution, both corporations are resident in the United States and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and(A)are actively traded on a designated stock exchange in the United States, or(B)are required, under theSecurities Exchange Act of 1934of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and(iii)under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;
(A)are actively traded on a designated stock exchange in the United States, or(B)are required, under theSecurities Exchange Act of 1934of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and
(i)at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada,(ii)at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange,(iii)under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, and(iv)the distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances;
(i)that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),(ii)that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada,(iii)the date of the distribution,(iv)the type and fair market value of each property distributed to residents of Canada,(v)the name and address of each resident of Canada that received property with respect to the distribution,(vi)in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of theInternal Revenue Code of 1986of the United States, as amended from time to time, that apply to the distribution,(vii)in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, and(viii)such other matters that are required, in prescribed form; and
(i)of the number, cost amount (determined without reference to this section) and fair market value of the taxpayer’s original shares immediately before the distribution,(ii)of the number, and fair market value, of the taxpayer’s original shares and the spin-off shares immediately after the distribution of the spin-off shares to the taxpayer,(iii)except where the election is filed with the taxpayer’s return of income for the year in which the distribution occurs, concerning the amount of the distribution, the manner in which the distribution was reported by the taxpayer and the details of any subsequent disposition of original shares or spin-off shares for the purpose of determining any gains or losses from those dispositions, and(iv)of such other matters that are required, in prescribed form.
(a)there shall be deducted for the purpose of computing the cost amount to the taxpayer of the original share at any time the amount determined by the formulaA × (B/C)whereAis the cost amount, determined without reference to this section, to the taxpayer of the original share at the time that is immediately before the distribution or, if the original share is disposed of by the taxpayer, before the distribution, at the time that is immediately before its disposition,Bis the fair market value of the spin-off share immediately after its distribution to the taxpayer, andCis the total of(i)the fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, and(ii)the fair market value of the spin-off share immediately after its distribution to the taxpayer; and(b)the cost to the taxpayer of the spin-off share is the amount by which the cost amount of the taxpayer’s original share was reduced as a result of paragraph (a).
(i)the fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, and(ii)the fair market value of the spin-off share immediately after its distribution to the taxpayer; and
(a)an eligible distribution to the taxpayer of a spin-off share that is included in the inventory is deemed not to be an acquisition of property in the fiscal period of the business in which the distribution occurs; and(b)for greater certainty, the value of the spin-off share is to be included in computing the value of the inventory at the end of that fiscal period.
[NOTE: Application provisions are not included in the consolidated textsee relevant amending Acts and regulations.]2001, c. 17, s. 642005, c. 30, s. 32007, c. 35, s. 682013, c. 34, s. 222
87(1)In this section, an amalgamation means a merger of two or more corporations each of which was, immediately before the merger, a taxable Canadian corporation (each of which corporations is referred to in this section as a “predecessor corporation”) to form one corporate entity (in this section referred to as the “new corporation”) in such a manner that(a)all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger becomes property of the new corporation by virtue of the merger,(b)all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger become liabilities of the new corporation by virtue of the merger, and(c)all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of that property by the other corporation or as a result of the distribution of that property to the other corporation on the winding-up of the corporation.Marginal note:Shares deemed to have been received by virtue of merger(1.1)For the purposes of paragraph 87(1)(c) and theIncome Tax Application Rules, where there is a merger of(a)a corporation and one or more of its subsidiary wholly-owned corporations, or(b)two or more corporations each of which is a subsidiary wholly-owned corporation of the same corporationany shares of the capital stock of a predecessor corporation owned by a shareholder (except any predecessor corporation) immediately before the merger that were not cancelled on the merger shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger as consideration for the disposition of the shares of the capital stock of the predecessor corporations.Marginal note:New corporation continuation of a predecessor(1.2)Where there has been an amalgamation of corporations described in paragraph (1.1)(a) or of two or more corporations each of which is a subsidiary wholly-owned corporation of the same person, the new corporation is, for the purposes of section 29 of theIncome Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection does not affect the determination of any predecessor corporation’s fiscal period, taxable income or tax payable.Marginal note:Definition ofsubsidiary wholly-owned corporation(1.4)Notwithstanding subsection 248(1), for the purposes of this subsection and subsections 87(1.1), 87(1.2) and 87(2.11),subsidiary wholly-owned corporationof a person (in this subsection referred to as the “parent”) means a corporation all the issued and outstanding shares of the capital stock of which belong to(a)the parent;(b)a corporation that is a subsidiary wholly-owned corporation of the parent; or(c)any combination of persons each of which is a person described in paragraph 87(1.4)(a) or 87(1.4)(b).Marginal note:Definitions(1.5)For the purpose of this section,financial institution,mark-to-market propertyandspecified debt obligationhave the meanings assigned by subsection 142.2(1).Marginal note:Rules applicable(2)Where there has been an amalgamation of two or more corporations after 1971 the following rules applyMarginal note:Taxation year(a)for the purposes of this Act, the corporate entity formed as a result of the amalgamation shall be deemed to be a new corporation the first taxation year of which shall be deemed to have commenced at the time of the amalgamation, and a taxation year of a predecessor corporation that would otherwise have ended after the amalgamation shall be deemed to have ended immediately before the amalgamation;Marginal note:Inventory(b)for the purpose of computing the income of the new corporation, where the property described in the inventory, if any, of the new corporation at the beginning of its first taxation year includes property that was described in the inventory of a predecessor corporation at the end of the taxation year of the predecessor corporation that ended immediately before the amalgamation (which taxation year of a predecessor corporation is referred to in this section as its “last taxation year”), the property so included shall be deemed to have been acquired by the new corporation at the beginning of its first taxation year for an amount determined in accordance with section 10 as the value thereof for the purpose of computing the income of the predecessor corporation for its last taxation year, except that where the income of the predecessor corporation for its last taxation year from a farming business was computed in accordance with the cash method, the amount so determined in respect of inventory owned in connection with that business shall be deemed to be the total of all amounts each of which is an amount included because of paragraph 28(1)(b) or 28(1)(c) in computing that income for that year and, where the income of the new corporation from a farming business is computed in accordance with the cash method, for the purpose of section 28,(i)an amount equal to that total shall be deemed to have been paid by the new corporation, and(ii)the new corporation shall be deemed to have purchased the property for an amount equal to that total,in its first taxation year and in the course of carrying on that business;Marginal note:Method adopted for computing income(c)in computing the income of the new corporation for a taxation year from a business or property(i)there shall be included any amount received or receivable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been received or receivable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been included in computing the income of the predecessor corporation for that year, and(ii)there may be deducted any amount paid or payable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been paid or payable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been deductible in computing the income of the predecessor corporation for that year;Marginal note:Depreciable property(d)for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),(i)where depreciable property of a prescribed class has been acquired by the new corporation from a predecessor corporation, the capital cost of the property to the new corporation shall be deemed to be the amount that was the capital cost of the property to the predecessor corporation, and(ii)in determining the undepreciated capital cost to the new corporation of depreciable property of a prescribed class at any time,(A)there shall be added to the capital cost to the new corporation of depreciable property of the class acquired before that time the cost amount, immediately before the amalgamation, to a predecessor corporation of each property included in that class by the new corporation,(B)there shall be subtracted from the capital cost to the new corporation of depreciable property of that class acquired before that time the capital cost to the new corporation of property of that class acquired by virtue of the amalgamation,(C)a reference in subparagraph 13(5)(b)(ii) to amounts that would have been deducted in respect of property in computing a taxpayer’s income shall be construed as including a reference to amounts that would have been deducted in respect of that property in computing a predecessor corporation’s income, and(D)where depreciable property that is deemed by subsection 37(6) to be a separate prescribed class has been acquired by the new corporation from a predecessor corporation, the property shall continue to be deemed to be of that same separate prescribed class;Marginal note:Depreciable property acquired from predecessor corporation(d.1)for the purposes of this Act, where depreciable property (other than property of a prescribed class) has been acquired by the new corporation from a predecessor corporation, the new corporation shall be deemed to have acquired the property before 1972 at an actual cost equal to the actual cost of the property to the predecessor corporation, and the new corporation shall be deemed to have been allowed the total of all amounts allowed to the predecessor corporation in respect of the property, under regulations made under paragraph 20(1)(a), in computing the income of the predecessor corporation;Marginal note:Capital property(e)subject to paragraph 87(2)(e.4) and subsection 142.6(5), where a capital property (other than depreciable property or an interest in a partnership) has been acquired by the new corporation from a predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the adjusted cost base of the property to the predecessor corporation immediately before the amalgamation;Marginal note:Partnership interest(e.1)where a partnership interest that is capital property has been acquired from a predecessor corporation to which the new corporation was related, for the purposes of this Act, the cost of that partnership interest to the new corporation shall be deemed to be the amount that was the cost of that interest to the predecessor corporation and, in respect of that partnership interest, the new corporation shall be deemed to be the same corporation as and a continuation of the predecessor corporation;Marginal note:Security or debt obligation(e.2)subject to paragraphs 87(2)(e.3) and 87(2)(e.4) and subsection 142.6(5), where a property that is a security or debt obligation (other than a capital property or an inventory) of a predecessor corporation used by it in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money in the taxation year ending immediately before the amalgamation has been acquired by the new corporation from the predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the cost amount of the property to the predecessor corporation immediately before the amalgamation;Marginal note:Financial institutions — specified debt obligation(e.3)where the new corporation is a financial institution in its first taxation year, it shall be deemed, in respect of a specified debt obligation (other than a mark-to-market property) acquired from a predecessor corporation that was a financial institution in its last taxation year, to be the same corporation as, and a continuation of, the predecessor corporation;Marginal note:Financial institutions — mark-to-market property(e.4)where(i)the new corporation is a financial institution in its first taxation year and a property acquired by the new corporation from a predecessor corporation is a mark-to-market property of the new corporation for the year, or(ii)a predecessor corporation was a financial institution in its last taxation year and a property acquired by the new corporation from the predecessor corporation was a mark-to-market property of the predecessor corporation for the year,the cost of the property to the new corporation shall be deemed to be the amount that was the fair market value of the property immediately before the amalgamation;(e.41)if subsection 10.1(6) applied to a predecessor corporation in its last taxation year, eacheligible derivative(as defined in subsection 10.1(5)) of the predecessor corporation immediately before the end of its last taxation year is deemed to have been reacquired, or reissued or renewed, as the case may be, by the new corporation at its fair market value immediately before the amalgamation;(e.42)for the purposes of subsection 10.1(7), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Marginal note:Financial institutions — mark-to-market property(e.5)for the purposes of subsections 112(5) to 112(5.2) and 112(5.4) and the definitionmark-to-market propertyin subsection 142.2(1), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;(f)[Repealed, 2016, c. 12, s. 27](f.1)[Repealed, 1994, c. 7, Sch