Eastern Standard Time, November 27, 1986 the terms or conditions of a share of the capital stock of a corporation have been changed or any agreement in respect of the share has been changed or entered into by the corporation, the share shall be deemed to have been issued at that time.
Marginal note:Loss sustained by investor
(2.8)For the purposes of paragraph 112(2.4)(a), any loss that an investor may sustain by virtue of the ownership, holding or disposition of the subject share referred to in that paragraph shall be deemed to include any loss with respect to an obligation or share that was issued or acquired as part of a transaction or event or a series of transactions or events that included the issuance or acquisition of the subject share, or a share for which the subject share was substituted.
Marginal note:Related corporations
(2.9)For the purposes of subparagraph 112(2.4)(b)(i), where it may reasonably be considered having regard to all the circumstances that a corporation has become related to any other corporation for the purpose of avoiding any limitation on the deduction of a dividend under subsection 112(1), 112(2) or 138(6), the corporation shall be deemed not to be related to the other corporation.
Marginal note:Loss on share that is capital property
(3)Subject to subsections 112(5.5) and 112(5.6), the amount of any loss of a taxpayer (other than a trust) from the disposition of a share that is capital property of the taxpayer (other than a share that is property of a partnership) is deemed to be the amount of the loss determined without reference to this subsection minus,
(a)where the taxpayer is an individual, the lesser of
(i)the total of all amounts each of which is a dividend received by the taxpayer on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and
(ii)the loss determined without reference to this subsection minus all taxable dividends received by the taxpayer on the share; and
(b)where the taxpayer is a corporation, the total of all amounts received by the taxpayer on the share each of which is
(i)a taxable dividend, to the extent of the amount of the dividend that was deductible under this section or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year,
(ii)a dividend in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, or
(iii)a life insurance capital dividend.
Marginal note:Loss on share that is capital property — excluded dividends
(3.01)A qualified dividend shall not be included in the total determined under subparagraph (3)(a)(i) or paragraph (3)(b) if the taxpayer establishes that
(a)it was received when the taxpayer and persons with whom the taxpayer was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the taxpayer owned throughout the 365-day period that ended immediately before the disposition.
Marginal note:Loss on share held by partnership
(3.1)Subject to subsections 112(5.5) and 112(5.6), where a taxpayer (other than a partnership or a mutual fund trust) is a member of a partnership, the taxpayer’s share of any loss of the partnership from the disposition of a share that is held by a particular partnership as capital property is deemed to be that share of the loss determined without reference to this subsection minus,
(a)where the taxpayer is an individual, the lesser of
(i)the total of all amounts each of which is a dividend received by the taxpayer on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and
(ii)that share of the loss determined without reference to this subsection minus all taxable dividends received by the taxpayer on the share;
(b)where the taxpayer is a corporation, the total of all amounts received by the taxpayer on the share each of which is
(i)a taxable dividend, to the extent of the amount of the dividend that was deductible under this section or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year,
(ii)a dividend in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, or
(iii)a life insurance capital dividend; and
(c)where the taxpayer is a trust, the total of all amounts each of which is
(i)a taxable dividend, or
(ii)a life insurance capital dividend
received on the share and designated under subsection 104(19) or 104(20) by the trust in respect of a beneficiary that was a corporation, partnership or trust.
Marginal note:Loss on share held by partnership — excluded dividends
(3.11)A qualified dividend shall not be included in the total determined under subparagraph (3.1)(a)(i) or paragraph (3.1)(b) or (c) if the taxpayer establishes that
(a)it was received when the particular partnership, the taxpayer and persons with whom the taxpayer was not dealing at arm’s length did not hold in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the particular partnership held throughout the 365-day period that ended immediately before the disposition.
Marginal note:Loss on share held by partnership — excluded dividends
(3.12)A taxable dividend received on a share and designated under subsection 104(19) by a particular trust in respect of a beneficiary that was a partnership or trust shall not be included in the total determined under paragraph 112(3.1)(c) where the particular trust establishes that the dividend was received by an individual (other than a trust).
Marginal note:Loss on share held by trust
(3.2)Subject to subsections 112(5.5) and 112(5.6), the amount of any loss of a trust (other than a mutual fund trust) from the disposition of a share of the capital stock of a corporation that is capital property of the trust is deemed to be the amount of the loss determined without reference to this subsection minus the total of
(a)the amount, if any, by which the lesser of
(i)the total of all amounts each of which is a dividend received by the trust on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and
(ii)the loss determined without reference to this subsection minus the total of all amounts each of which is the amount of a taxable dividend
(A)received by the trust on the share,
(B)received on the share and designated under subsection 104(19) by the trust in respect of a beneficiary who is an individual (other than a trust), or
(C)that is a qualified dividend received on the share and designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or another trust where the trust establishes that
(I)it owned the share throughout the 365-day period that ended immediately before the disposition, and
(II)the dividend was received while the trust, the beneficiary and persons not dealing at arm’s length with the beneficiary owned in total less than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received
exceeds
(iii)if the trust is an individual’s graduated rate estate, the share was acquired as a consequence of the individual’s death and the disposition occurs during the trust’s first taxation year, 1/2 of the lesser of
(A)the loss determined without reference to this subsection, and
(B)the individual’s capital gain from the disposition of the share immediately before the individual’s death, and
(b)the total of all amounts each of which is
(i)a taxable dividend, or
(ii)a life insurance capital dividend
received on the share and designated under subsection 104(19) or 104(20) by the trust in respect of a beneficiary that was a corporation, partnership or trust.
Marginal note:Loss on share held by trust — special cases
(3.3)Notwithstanding subsection 112(3.2), where a trust has at any time acquired a share of the capital stock of a corporation because of subsection 104(4), the amount of any loss of the trust from a disposition after that time is deemed to be the amount of the loss determined without reference to subsection 112(3.2) and this subsection minus the total of
(a)the amount, if any, by which the lesser of
(i)the total of all amounts each of which is a dividend received after that time by the trust on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and
(ii)the loss determined without reference to subsection 112(3.2) and this subsection minus the total of all amounts each of which is the amount of a taxable dividend
(A)received by the trust on the share after that time,
(B)received on the share after that time and designated under subsection 104(19) by the trust in respect of a beneficiary who is an individual (other than a trust), or
(C)that is a qualified dividend received on the share after that time and designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or another trust where the trust establishes that
(I)it owned the share throughout the 365-day period that ended immediately before the disposition, and
(II)the dividend was received when the trust, the beneficiary and persons not dealing at arm’s length with the beneficiary owned in total less than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received
exceeds
(iii)1/2 of the lesser of
(A)the loss from the disposition, determined without reference to subsection 112(3.2) and this subsection, and
(B)the trust’s capital gain from the disposition immediately before that time of the share because of subsection 104(4), and
(b)the total of all amounts each of which is a taxable dividend received on the share after that time and designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or trust.
Marginal note:Loss on share held by trust — excluded dividends
(3.31)A qualified dividend received by a trust shall not be included under subparagraph (3.2)(a)(i) or (b)(ii) or (3.3)(a)(i) if the trust establishes that the dividend
(a)was received,
(i)in any case where the dividend was designated under subsection 104(19) or 104(20) by the trust, when the trust, the beneficiary and persons with whom the beneficiary was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received, or
(ii)in any other case, when the trust and persons with whom the trust was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received, and
(b)was received on a share that the trust owned throughout the 365-day period that ended immediately before the disposition.
Marginal note:Loss on share held by trust — excluded dividends
(3.32)A qualified dividend that is a taxable dividend received on the share and that is designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or trust, shall not be included under paragraph (3.2)(b) or (3.3)(b) if the trust establishes that the dividend was received by an individual (other than a trust), or
(a)was received when the trust, the beneficiary and persons with whom the beneficiary was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)was received on a share that the trust owned throughout the 365-day period that ended immediately before the disposition.
Marginal note:Loss on share that is not capital property
(4)Subject to subsections 112(5.5) and 112(5.6), the amount of any loss of a taxpayer (other than a trust) from the disposition of a share of the capital stock of a corporation that is property (other than capital property) of the taxpayer is deemed to be the amount of the loss determined without reference to this subsection minus,
(a)where the taxpayer is an individual and the corporation is resident in Canada, the total of all dividends received by the individual on the share;
(b)where the taxpayer is a partnership, the total of all dividends received by the partnership on the share; and
(c)where the taxpayer is a corporation, the total of all amounts received by the taxpayer on the share each of which is
(i)a taxable dividend, to the extent of the amount of the dividend that was deductible under this section, section 113 or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year, or
(ii)a dividend (other than a taxable dividend).
Marginal note:Loss on share that is not capital property — excluded dividends
(4.01)A qualified dividend shall not be included in the total determined under paragraph (4)(a), (b) or (c) if the taxpayer establishes that
(a)it was received when the taxpayer and persons with whom the taxpayer was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the taxpayer owned throughout the 365-day period that ended immediately before the disposition.
Marginal note:Fair market value of shares held as inventory
(4.1)For the purpose of section 10, the fair market value at any time of a share of the capital stock of a corporation is deemed to be equal to the fair market value of the share at that time, plus
(a)where the shareholder is a corporation, the total of all amounts received by the shareholder on the share before that time each of which is
(i)a taxable dividend, to the extent of the amount of the dividend that was deductible under this section, section 113 or subsection 115(1) or 138(6) in computing the shareholder’s taxable income or taxable income earned in Canada for any taxation year, or
(ii)a dividend (other than a taxable dividend);
(b)where the shareholder is a partnership, the total of all amounts each of which is a dividend received by the shareholder on the share before that time; and
(c)where the shareholder is an individual and the corporation is resident in Canada, the total of all amounts each of which is a dividend received by the shareholder on the share before that time (or, where the shareholder is a trust, that would have been so received if this Act were read without reference to subsection 104(19)).
Marginal note:Fair market value of shares held as inventory — excluded dividends
(4.11)A qualified dividend shall not be included in the total determined under paragraph (4.1)(a), (b) or (c) if the shareholder establishes that
(a)it was received while the shareholder and persons with whom the shareholder was not dealing at arm’s length did not hold in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the shareholder held throughout the 365-day period that ended at the time referred to in subsection 112(4.1).
Marginal note:Loss on share held by trust
(4.2)Subject to subsections 112(5.5) and 112(5.6), the amount of any loss of a trust from the disposition of a share that is property (other than capital property) of the trust is deemed to be the amount of the loss determined without reference to this subsection minus
(a)the total of all amounts each of which is a dividend received by the trust on the share, to the extent that the amount was not designated under subsection 104(20) in respect of a beneficiary of the trust; and
(b)the total of all amounts each of which is a dividend received on the share that was designated under subsection 104(19) or 104(20) by the trust in respect of a beneficiary of the trust.
Marginal note:Loss on share held by trust — excluded dividends
(4.21)A qualified dividend shall not be included in the total determined under paragraph (4.2)(a) if the taxpayer establishes that
(a)it was received when the trust and persons with whom the trust was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the trust owned throughout the 365-day period that ended immediately before the disposition.
Marginal note:Loss on share held by trust — excluded dividends
(4.22)A qualified dividend shall not be included in the total determined under paragraph (4.2)(b) if the taxpayer establishes that
(a)it was received when the trust, the beneficiary and persons with whom the beneficiary was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and
(b)it was received on a share that the trust owned throughout the 365-day period that ended immediately before the disposition.
(4.3)[Repealed, 1998, c. 19, s. 131]
Marginal note:Disposition of share by financial institution
(5)Subsection 112(5.2) applies to the disposition of a share by a taxpayer in a taxation year where
(a)the taxpayer is a financial institution in the year;
(b)the share is a mark-to-market property for the year; and
(c)the taxpayer received
(i)a dividend on the share at a time when the taxpayer and persons with whom the taxpayer was not dealing at arm’s length held in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received, or
(ii)a dividend on the share under subsection 84(3).
Marginal note:Share held for less than one year
(5.1)Subsection 112(5.2) applies to the disposition of a share by a taxpayer in a taxation year where
(a)the disposition is an actual disposition;
(b)the taxpayer did not hold the share throughout the 365-day period that ended immediately before the disposition; and
(c)the share was a mark-to-market property of the taxpayer for a taxation year that begins after October 1994 and in which the taxpayer was a financial institution.
Marginal note:Adjustment re dividends
(5.2)Subject to subsection 112(5.3), where subsection 112(5) or 112(5.1) provides that this subsection applies to the disposition of a share by a taxpayer at any time, the taxpayer’s proceeds of disposition shall be deemed to be the amount determined by the formula
A + B - (C - D)
where
(a)if the taxpayer received a dividend under subsection 84(3) in respect of the share, the total determined under subparagraph (b)(ii), and
(b)in any other case, the lesser of
(i)the loss, if any, from the disposition of the share that would be determined before the application of this subsection if the cost of the share to any taxpayer were determined without reference to
(A)paragraphs 87(2)(e.2) and (e.4), 88(1)(c), 138(11.5)(e) and 142.5(2)(b),
(B)subsection 85(1), where the provisions of that subsection are required by paragraph 138(11.5)(e) to be applied, and
(C)paragraph 142.6(1)(d), and
(ii)the total of all amounts each of which is
(A)where the taxpayer is a corporation, a taxable dividend received by the taxpayer on the share, to the extent of the amount that was deductible under this section or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year,
(B)where the taxpayer is a partnership, a taxable dividend received by the taxpayer on the share, to the extent of the amount that was deductible under this section or subsection 115(1) or 138(6) in computing the taxable income or taxable income earned in Canada for any taxation year of members of the partnership,
(C)where the taxpayer is a trust, an amount designated under subsection 104(19) in respect of a taxable dividend on the share, or
(D)a dividend (other than a taxable dividend) received by the taxpayer on the share,
(a)the taxpayer’s proceeds of disposition on a deemed disposition of the share before that time were increased because of this subsection,
(b)where the taxpayer is a corporation or trust, a loss of the taxpayer on a deemed disposition of the share before that time was reduced because of subsection 112(3), 112(3.2), 112(4) or 112(4.2), or
(c)where the taxpayer is a partnership, a loss of a member of the partnership on a deemed disposition of the share before that time was reduced because of subsection (3.1) or (4), and
Marginal note:Subsection (5.2) — excluded dividends
(5.21)A dividend, other than a dividend received under subsection 84(3), shall not be included in the total determined under subparagraph (b)(ii) of the description of B in subsection (5.2) unless
(a)the dividend was received when the taxpayer and persons with whom the taxpayer did not deal at arm’s length held in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; or
(b)the share was not held by the taxpayer throughout the 365-day period that ended immediately before the disposition.
Marginal note:Adjustment not applicable
(5.3)For the purpose of determining the cost of a share to a taxpayer on a deemed reacquisition of the share after a deemed disposition of the share, the taxpayer’s proceeds of disposition shall be determined without regard to subsection 112(5.2).
Marginal note:Deemed dispositions
(5.4)Where a taxpayer disposes of a share at any time,
(a)for the purpose of determining whether subsection 112(5.2) applies to the disposition, the conditions in subsections 112(5) and 112(5.1) shall be applied without regard to a deemed disposition and reacquisition of the share before that time; and
(b)total amounts under subsection 112(5.2) in respect of the disposition shall be determined from the time when the taxpayer actually acquired the share.
Marginal note:Stop-loss rules not applicable
(5.5)Subsections 112(3) to 112(4) and 112(4.2) do not apply to the disposition of a share by a taxpayer in a taxation year that begins after October 1994 where
(a)the share is a mark-to-market property for the year and the taxpayer is a financial institution in the year; or
(b)subsection 112(5.2) applies to the disposition.
Marginal note:Stop-loss rules restricted
(5.6)In determining whether any of subsections 112(3) to 112(4) and 112(4.2) apply to reduce a loss of a taxpayer from the disposition of a share, this Act shall be read without reference to paragraphs 112(3.01)(b) and 112(3.11)(b), subclauses 112(3.2)(a)(ii)(C)(I) and 112(3.3)(a)(ii)(C)(I) and paragraphs 112(3.31)(b), 112(3.32)(b), 112(4.01)(b), 112(4.21)(b) and 112(4.22)(b) where
(a)the disposition occurs
(i)because of subsection 142.5(2) in a taxation year that includes October 31, 1994, or
(ii)because of paragraph 142.6(1)(b) after October 30, 1994; or
(b)the share was a mark-to-market property of the taxpayer for a taxation year that begins after October 1994 in which the taxpayer was a financial institution.
Marginal note:Meaning of certain expressions
(6)For the purposes of this section,
(a)“dividend” and “taxable dividend” do not include a capital gains dividend (within the meaning assigned by subsection 131(1)) or any dividend received by a taxpayer on which the taxpayer was required to pay tax under Part VII of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on March 31, 1977;
(b)one corporation is controlled by another corporation if more than 50% of its issued share capital (having full voting rights under all circumstances) belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length; and
(c)financial institutionandmark-to-market propertyhave the meanings assigned by subsection 142.2(1).
Marginal note:Interpretation — qualified dividend
(6.1)For the purposes of this section, a dividend on a share is a qualified dividend to the extent that
(a)it is a dividend other than a dividend received under subsection 84(3); or
(b)it is received under subsection 84(3) and,
(i)if the share is held by an individual other than a trust, the dividend is received by the individual,
(ii)if the share is held by a corporation, the dividend is received by the corporation while it is a private corporation, and is paid by another private corporation,
(iii)if the share is held by a trust,
(A)the dividend is received by the trust,
(B)the dividend is designated under subsection 104(19) by the trust in respect of a beneficiary and
(I)the beneficiary is an individual other than a trust,
(II)the beneficiary is a private corporation when the dividend is received by it and the dividend is paid by another private corporation,
(III)the beneficiary is another trust that does not designate the dividend under subsection 104(19), or
(IV)the beneficiary is a partnership all of the members of which are, when the dividend is received, a person described by any of subclauses (I) to (III), or
(C)the dividend is designated by the trust under subsection 104(19) in respect of a beneficiary that is another trust or a partnership and the trust establishes that the dividend is received by a person described by any of subclauses (B)(I) to (III), and
(iv)if the share is held by a partnership,
(A)the dividend is included in the income of a member of a partnership and
(I)the member is an individual, or
(II)the member is a private corporation when the dividend is received by it and the dividend is paid by another private corporation, or
(B)the dividend is designated under subsection 104(19) by a member of a partnership that is a trust in respect of a beneficiary described by any of subclauses (iii)(B)(I) to (IV) or is described by clause (iii)(C).
Marginal note:Rules where shares exchanged
(7)Where a share (in this subsection referred to as the “new share”) has been acquired in exchange for another share (in this subsection referred to as the “old share”) in a transaction to which section 51, 85.1, 86 or 87 applies, for the purposes of the application of any of subsections 112(3) to 112(3.32) in respect of a disposition of the new share, the new share is deemed to be the same share as the old share, except that
(a)any dividend received on the old share is deemed for those purposes to have been received on the new share only to the extent of the proportion of the dividend that
(i)the shareholder’s adjusted cost base of the new share immediately after the exchange
is of
(ii)the shareholder’s adjusted cost base of all new shares immediately after the exchange acquired in exchange for the old share; and
(b)the amount, if any, by which a loss from the disposition of the new share is reduced because of the application of this subsection shall not exceed the proportion of the shareholder’s adjusted cost base of the old share immediately before the exchange that
(i)the shareholder’s adjusted cost base of the new share immediately after the exchange
is of
(ii)the shareholder’s adjusted cost base of all new shares, immediately after the exchange, acquired in exchange for the old share.
Marginal note:Synthetic disposition  — holding period
(8)If a synthetic disposition arrangement is entered into in respect of a property owned by a taxpayer and the synthetic disposition period of the arrangement is 30 days or more, for the purposes of paragraphs (3.01)(b) and (3.11)(b), subclauses (3.2)(a)(ii)(C)(I) and (3.3)(a)(ii)(C)(I) and paragraphs (3.31)(b), (3.32)(b), (4.01)(b), (4.11)(b), (4.21)(b), (4.22)(b), (5.1)(b) and (5.21)(b) and subsection (9), the taxpayer is deemed not to own the property during the synthetic disposition period.
Marginal note:Exception
(9)Subsection (8) does not apply in respect of a property owned by a taxpayer in respect of a synthetic disposition arrangement if the taxpayer owned the property throughout the 365-day period (determined without reference to this subsection) that ended immediately before the synthetic disposition period of the arrangement.
Marginal note:Exception
(9.1)Subsection (8) does not apply for the purpose of paragraph (5.21)(b) in respect of a dividend received on a share, referred to in paragraph (a) of the description of B in subsection (5.2), during a synthetic disposition period of a synthetic disposition arrangement in respect of that share.
Marginal note:Synthetic equity arrangements — ordering
(10)For the purposes of subsections (3), (3.1), (4), (4.1) and (5.2), if a synthetic equity arrangement is in respect of a number of shares that are identical properties (referred to in this subsection asidentical shares) that is less than the total number of such identical shares owned by a person or partnership at that time and in respect of which there is no other synthetic equity arrangement, the synthetic equity arrangement is deemed to be in respect of those identical shares in the order in which the person or partnership acquired them.
Marginal note:Interest in a partnership — cost reduction
(11)In computing the cost to a taxpayer, at any time, of an interest in a partnership that is property (other than capital property) of the taxpayer, there is to be deducted an amount equal to the total of all amounts each of which is the taxpayer’s share of any loss of the partnership from the disposition by the partnership, or another partnership of which the partnership is directly or indirectly a member, of a share of the capital stock of a corporation (referred to in this subsection and subsection (12) as the “partnership loss”) in a fiscal period of the partnership that includes that time or a prior fiscal period, computed without reference to subsections (3.1), (4) and (5.2), to the extent that the taxpayer’s share of the partnership loss has not previously reduced the taxpayer’s cost of the interest in the partnership because of the application of this subsection.
Marginal note:Application
(12)For the purposes of subsection (11), if a taxpayer disposes of an interest in a partnership at any particular time, the taxpayer’s share of a partnership loss is to be computed as if
(a)the fiscal period of each partnership of which the taxpayer is directly or indirectly a member had ended immediately before the time that is immediately before the particular time;
(b)any share of the capital stock of a corporation that was property of a partnership referred to in paragraph (a) at the particular time had been disposed of by the relevant partnership immediately before the end of that fiscal period for proceeds equal to its fair market value at the particular time; and
(c)each member of a partnership referred to in paragraph (a) were allocated a share of any loss (computed without reference to subsections (3.1), (4) and (5.2)) in respect of dispositions described in paragraph (b) determined by reference to the member’s specified proportion for the fiscal period referred to in paragraph (a).
Marginal note:Application
(13)For the purposes of subsection (11), if a taxpayer (referred to as the “transferee” in this subsection) acquires an interest in a partnership at any time from another taxpayer (referred to as the “transferor” in this subsection), in computing the cost of the partnership interest to the transferee there is to be added an amount equal to the total of all amounts each of which is an amount deducted from the transferor’s cost of the partnership interest because of subsection (11), other than an amount to which subsection (3.1) would apply.
Marginal note:Deduction in respect of dividend received from foreign affiliate
113(1)Where in a taxation year a corporation resident in Canada has received a dividend on a share owned by it of the capital stock of a foreign affiliate of the corporation, there may be deducted from the income for the year of the corporation for the purpose of computing its taxable income for the year, an amount equal to the total of
(a)an amount equal to such portion of the dividend as is prescribed to have been paid out of the exempt surplus, as defined by regulation (in this Part referred to as “exempt surplus”) of the affiliate,
(a.1)an amount equal to the total of
(i)one-half of the portion of the dividend that is prescribed to have been paid out of the hybrid surplus, as defined by regulation (in this Part referred to as “hybrid surplus”), of the affiliate, and
(ii)the lesser of
(A)the total of
(I)the product obtained when the foreign tax prescribed to be applicable to the portion of the dividend referred to in subparagraph (i) is multiplied by the amount by which
1the corporation’s relevant tax factor for the year
exceeds
2one-half, and
(II)the product obtained when
1the non-business-income tax paid by the corporation applicable to the portion of the dividend referred to in subparagraph (i)
is multiplied by
2the corporation’s relevant tax factor for the year, and
(B)the amount determined under subparagraph (i),
(b)an amount equal to the lesser of
(i)the product obtained when the foreign tax prescribed to be applicable to such portion of the dividend as is prescribed to have been paid out of the taxable surplus, as defined by regulation (in this Part referred to as “taxable surplus”) of the affiliate is multiplied by the amount by which
(A)the corporation’s relevant tax factor for the year
exceeds
(B)one, and
(ii)that portion of the dividend,
(c)an amount equal to the lesser of
(i)the product obtained when
(A)the non-business-income tax paid by the corporation applicable to such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate
is multiplied by
(B)the corporation’s relevant tax factor for the year, and
(ii)the amount by which such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate exceeds the deduction in respect thereof referred to in paragraph 113(1)(b), and
(d)an amount equal to such portion of the dividend as is prescribed to have been paid out of the pre-acquisition surplus of the affiliate,
and for the purposes of this subsection and Subdivision I of Division B, the corporation may make such elections as may be prescribed.
Marginal note:Additional deduction
(2)Where, at any particular time in a taxation year ending after 1975, a corporation resident in Canada has received a dividend on a share owned by it at the end of its 1975 taxation year of the capital stock of a foreign affiliate of the corporation, there may be deducted from the income for the year of the corporation for the purpose of computing its taxable income for the year, an amount in respect of the dividend equal to the lesser of
(a)the amount, if any, by which the amount of the dividend so received exceeds the total of
(i)the deduction in respect of the dividend permitted by subsection 91(5) in computing the corporation’s income for the year, and
(ii)the deduction in respect of the dividend permitted by subsection 113(1) from the income for the year of the corporation for the purpose of computing its taxable income, and
(b)the amount, if any, by which
(i)the adjusted cost base to the corporation of the share at the end of its 1975 taxation year
exceeds the total of
(iii)such amounts in respect of dividends received by the corporation on the share after the end of its 1975 taxation year and before the particular time as are deductible under paragraph 113(1)(d) in computing the taxable income of the corporation for taxation years ending after 1975,
(iii.1)the total of all amounts received by the corporation on the share after the end of its 1975 taxation year and before the particular time
(A)on a reduction, before August 20, 2011, of the paid-up capital of the foreign affiliate in respect of the share, or
(B)on a reduction, after August 19, 2011, of the paid-up capital of the foreign affiliate in respect of the share that is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, and
(iv)the total of all amounts deducted under this subsection in respect of dividends received by the corporation on the share before the particular time.
Marginal note:Definitions
(3)In this section,
non-business-income taxpaid by a taxpayer has the meaning assigned by subsection 126(7); (impôt sur le revenu ne provenant pas d’une entreprise)
relevant tax factorhas the meaning assigned by subsection 95(1). (facteur fiscal approprié)
Marginal note:Portion of dividend deemed paid out of exempt surplus
(4)Such portion of any dividend received at any time in a taxation year by a corporation resident in Canada on a share owned by it of the capital stock of a foreign affiliate of the corporation, that was received after the 1971 taxation year of the affiliate and before the affiliate’s 1976 taxation year, as exceeds the amount deductible in respect of the dividend under paragraph 113(1)(d) in computing the corporation’s taxable income for the year shall, for the purposes of paragraph 113(1)(a), be deemed to be the portion of the dividend prescribed to have been paid out of the exempt surplus of the affiliate.
Marginal note:Individual resident in Canada for only part of year
114Notwithstanding subsection 2(2), the taxable income for a taxation year of an individual who is resident in Canada throughout part of the year and non-resident throughout another part of the year is the amount, if any, by which
(a)the amount that would be the individual’s income for the year if the individual had no income or losses, for the part of the year throughout which the individual was non-resident, other than
(i)income or losses described in paragraphs 115(1)(a) to (c), and
(ii)income that would have been included in the individual’s taxable income earned in Canada for the year under subparagraph 115(1)(a)(v) if the part of the year throughout which the individual was non-resident were the whole taxation year,
exceeds the total of
(b)the deductions permitted by subsection 111(1) and, to the extent that they relate to amounts included in computing the amount determined under paragraph (a), the deductions permitted by any of paragraphs 110(1)(d) to (d.2) and (f), and
(c)any other deduction permitted for the purpose of computing taxable income to the extent that
(i)it can reasonably be considered to be applicable to the part of the year throughout which the individual was resident in Canada, or
(ii)if all or substantially all of the individual’s income for the part of the year throughout which the individual was non-resident is included in the amount determined under paragraph (a), it can reasonably be considered to be applicable to that part of the year.
114.1[Repealed, 2001, c. 17, s. 89]
Marginal note:Deductions in separate returns
114.2Where a separate return of income with respect to a taxpayer is filed under subsection 70(2), 104(23) or 150(4) for a particular period and another return of income under this Part with respect to the taxpayer is filed for a period ending in the calendar year in which the particular period ends, for the purpose of computing the taxable income under this Part of the taxpayer in those returns, the total of all deductions claimed in all those returns under section 110 shall not exceed the total that could be deducted under that section for the year with respect to the taxpayer if no separate returns were filed under subsections 70(2), 104(23) and 150(4).
Marginal note:Non-resident’s taxable income in Canada
115(1)For the purposes of this Act, the taxable income earned in Canada for a taxation year of a person who at no time in the year is resident in Canada is the amount, if any, by which the amount that would be the non-resident person’s income for the year under section 3 if
(a)the non-resident person had no income other than
(i)incomes from the duties of offices and employments performed by the non-resident person in Canada and, if the person was resident in Canada at the time the person performed the duties, outside Canada,
(ii)incomes from businesses carried on by the non-resident person in Canada which, in the case of the Canadian banking business of an authorized foreign bank, is, subject to this Part, the profit from that business computed using the bank’s branch financial statements (within the meaning assigned by subsection 20.2(1),
(iii)taxable capital gains from dispositions described in paragraph 115(1)(b),
(iii.1)the amount by which the amount required by paragraph 59(3.2)(c) to be included in computing the non-resident person’s income for the year exceeds any portion of that amount that was included in computing the non-resident person’s income from a business carried on by the non-resident person in Canada,
(iii.2)amounts required by section 13 to be included in computing the non-resident person’s income for the year in respect of dispositions of properties to the extent that those amounts were not included in computing the non-resident person’s income from a business carried on by the non-resident person in Canada,
(iii.21)the total of all amounts, each of which is an amount included under subparagraph 56(1)(r)(v) or section 56.3 in computing the non-resident person’s income for the year,
(iii.22)the total of all amounts, each of which is an amount included under subparagraph 56(1)(r)(iv.1) in computing the non-resident person’s income for the year,
(iii.3)in any case where, in the year, the non-resident person carried on a business in Canada described in any of paragraphs (a) to (g) of the definitionprincipal-business corporationin subsection 66(15), all amounts in respect of a Canadian resource property that would be required to be included in computing the non-resident person’s income for the year under this Part if the non-resident person were resident in Canada at any time in the year, to the extent that those amounts are not included in computing the non-resident person’s income by virtue of subparagraph 115(1)(a)(ii) or 115(1)(a)(iii.1),
(iv)the amount, if any, by which any amount required by subsection 106(2) to be included in computing the non-resident person’s income for the year as proceeds of the disposition of an income interest in a trust resident in Canada exceeds the amount in respect of that income interest that would, if the non-resident person had been resident in Canada throughout the year, be deductible under subsection 106(1) in computing the non-resident person’s income for the year,
(iv.1)the amount, if any, by which any amount required by subsection 96(1.2) to be included in computing the non-resident person’s income for the year as proceeds of the disposition of a right to a share of the income or loss under an agreement referred to in paragraph 96(1.1)(a) exceeds the amount in respect of that right that would, if the non-resident person had been resident in Canada throughout the year, be deductible under subsection 96(1.3) in computing the non-resident person’s income for the year,
(v)in the case of a non-resident person described in subsection 115(2), the total determined under paragraph 115(2)(e) in respect of the non-resident person,
(vi)the amount that would have been required to be included in computing the non-resident person’s income in respect of a life insurance policy in Canada by virtue of subsection 148(1) or 148(1.1) if the non-resident person had been resident in Canada throughout the year, and
(vii)in the case of an authorized foreign bank, the amount claimed by the bank to the extent that the inclusion of the amount in income
(A)increases any amount deductible by the bank under subsection 126(1) for the year, and
(B)does not increase an amount deductible by the bank under section 127 for the year,
(b)the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were taxable capital gains and allowable capital losses from dispositions, other than dispositions deemed under subsection 218.3(2), of taxable Canadian properties (other than treaty-protected properties), and
(b.1)[Repealed, 2001, c. 17, s. 90(4)]
(c)the only losses for the year referred to in paragraph 3(d) were losses from duties of an office or employment performed by the person in Canada and businesses (other than treaty-protected businesses) carried on by the person in Canada and allowable business investment losses in respect of property any gain from the disposition of which would, because of this subsection, be included in computing the person’s taxable income earned in Canada,
exceeds the total of
(d)the deductions permitted by subsection 111(1) and, to the extent that they relate to amounts included in computing the amount determined under any of paragraphs (a) to (c), the deductions permitted by any of paragraphs 110(1)(d) to (d.2), (e) and (f) and subsection 110.1(1),
(e)the deductions permitted by any of subsections 112(1) and (2) and 138(6) in respect of a dividend received by the non-resident person, to the extent that the dividend is included in computing the non-resident person’s taxable income earned in Canada for the year,
(e.1)the deduction permitted by subsection (4.1), and
(f)where all or substantially all of the non-resident person’s income for the year is included in computing the non-resident person’s taxable income earned in Canada for the year, such of the other deductions permitted for the purpose of computing taxable income as may reasonably be considered wholly applicable.
Marginal note:Idem
(2)Where, in a taxation year, a non-resident person was
(a)a student in full-time attendance at an educational institution in Canada that is a university, college or other educational institution providing courses at a post-secondary school level in Canada,
(b)a student attending, or a teacher teaching at, an educational institution outside Canada that is a university, college or other educational institution providing courses at a post-secondary school level, who in any preceding taxation year ceased to be resident in Canada in the course of or subsequent to moving to attend or to teach at the institution,
(b.1)an individual who in any preceding taxation year ceased to be resident in Canada in the course of or subsequent to moving to carry on research or any similar work under a grant received by the individual to enable the individual to carry on the research or work,
(c)an individual
(i)who had, in any previous year, ceased to be resident in Canada,
(ii)who received, in the taxation year, salary or wages or other remuneration in respect of an office or employment that was paid to the individual directly or indirectly by a person resident in Canada, and
(iii)who was, under an agreement or a convention with one or more countries that has the force of law in Canada, entitled to an exemption from an income tax otherwise payable in any of those countries in respect of the salary or wages or other remuneration, or
(c.1)a person who received in the year an amount, under a contract, that was or will be deductible in computing the income of a taxpayer subject to tax under this Part and the amount can, irrespective of when the contract was entered into or the form or legal effect of the contract, reasonably be regarded as having been received, in whole or in part,
(i)as consideration or partial consideration for entering into a contract of service or an agreement to perform a service where any such service is to be performed in Canada, or for undertaking not to enter into such a contract or agreement with another party, or
(ii)as remuneration or partial remuneration from the duties of an office or employment or as compensation or partial compensation for services to be performed in Canada,
the following rules apply:
(d)for the purposes of subsection 2(3) the non-resident person shall be deemed to have been employed in Canada in the year,
(e)for the purposes of subparagraph 115(1)(a)(v), the total determined under this paragraph in respect of the non-resident person is the total of
(i)any remuneration in respect of an office or employment that was paid to the non-resident person directly or indirectly by a person resident in Canada and was received by the non-resident person in the year, except to the extent that the remuneration is attributable to the duties of an office or employment performed by the non-resident person anywhere outside Canada and
(A)is subject to an income or profits tax imposed by the government of a country other than Canada, or
(B)is paid in connection with the selling of property, the negotiating of contracts or the rendering of services for the non-resident person’s employer, or a foreign affiliate of the employer, or any other person with whom the employer does not deal at arm’s length, in the ordinary course of a business carried on by the employer, that foreign affiliate or that person,
(ii)amounts that would be required by paragraph 56(1)(n) or 56(1)(o) to be included in computing the non-resident person’s income for the year if the non-resident person were resident in Canada throughout the year and the reference in the applicable paragraph to “received by the taxpayer in the year” were read as a reference to “received by the taxpayer in the year from a source in Canada”,
(iii)[Repealed, 1994, c. 7, Sch