VIII, c. 7, s. 12]
Marginal note:Principal residence — property owned at end of 1981
(6)Subject to subsection (6.1), if a property was owned by a taxpayer, whether jointly with another person or otherwise, at the end of 1981 and continuously from the beginning of 1982 until disposed of by the taxpayer, the amount of the gain determined under paragraph (2)(b) in respect of the disposition shall not exceed the amount, if any, by which the total of
(a)the taxpayer’s gain calculated in accordance with paragraph 40(2)(b) on the assumption that the taxpayer had disposed of the property on Dec ember 31, 1981 for proceeds of disposition equal to its fair market value on that date, and
(b)the taxpayer’s gain calculated in accordance with paragraph 40(2)(b) on the assumption that that paragraph applies and that
(i)the taxpayer acquired the property on January 1, 1982 at a cost equal to its proceeds of disposition as determined under paragraph 40(6)(a), and
(ii)the description of B in paragraph 40(2)(b) is read without reference to “one plus”
exceeds
(c)the amount, if any, by which the fair market value of the property on December 31, 1981 exceeds the proceeds of disposition of the property determined without reference to this subsection.
Marginal note:Principal residence — property owned at end of 2016
(6.1)If a trust owns property at the end of 2016, the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definitionprincipal residencein section 54, the trust disposes of the property after 2016, the disposition is the trust’s first disposition of the property after 2016 and the trust owns the property, whether jointly with another person or otherwise, continuously from the beginning of 2017 until the disposition,
(a)subsection (6) does not apply to the disposition; and
(b)the trust’s gain determined under paragraph (2)(b) in respect of the disposition is the amount, if any, determined by the formula
A + B − C
where
(i)the trust disposed of the property on December 31, 2016 for proceeds of disposition equal to its fair market value on that date, and
(ii)paragraph (a) did not apply in respect of the disposition described in subparagraph (i),
(i)the description of B in that paragraph is read without reference to “one plus”, and
(ii)the trust acquired the property on January 1, 2017 at a cost equal to its fair market value on December 31, 2016, and
Marginal note:Property in satisfaction of interest in trust
(7)Where property has been acquired by a taxpayer in satisfaction of all or any part of the taxpayer’s capital interest in a trust, in circumstances to which subsection 107(2) applies and subsection 107(4) does not apply, for the purposes of paragraph 40(2)(b) and the definitionprincipal residencein section 54 the taxpayer shall be deemed to have owned the property continuously since the trust last acquired it.
Marginal note:Effect of election under subsection 110.6(19)
(7.1)Where an election was made under subsection 110.6(19) in respect of a property of a taxpayer that was the taxpayer’s principal residence for the 1994 taxation year or that, in the taxpayer’s return of income for the taxation year in which the taxpayer disposes of the property or grants an option to acquire the property, is designated as the taxpayer’s principal residence, in determining, for the purposes of paragraph 40(2)(b) and subsections 40(4) to 40(7), the day on which the property was last acquired or reacquired by the taxpayer and the period throughout which the property was owned by the taxpayer this Act shall be read without reference to subsection 110.6(19).
Marginal note:Application of s. 70(10)
(8)The definitions in subsection 70(10) apply to this section.
Marginal note:Additions to taxable Canadian property
(9)If a non-resident person disposes of a taxable Canadian property
(a)that the person last acquired before April 27, 1995,
(b)that would not be a taxable Canadian property immediately before the disposition if section 115 were read as it applied to dispositions that occurred on April 26, 1995, and
(c)that would be a taxable Canadian property immediately before the disposition if section 115 were read as it applied to dispositions that occurred on January 1, 1996,
the person’s gain or loss from the disposition is deemed to be the amount determined by the formula
A × B/C
where
Marginal note:Application of subsection (11)
(10)Subsection (11) applies in computing at any particular time a taxpayer’s gain or loss (in this subsection and subsection (11) referred to as the “new gain” or “new loss”, as the case may be), in respect of any part (which in this subsection and subsection (11) is referred to as the “relevant part” and which may for greater certainty be the whole) of a foreign currency debt of the taxpayer, arising from a fluctuation in the value of the currency of the foreign currency debt (other than, for greater certainty, a gain or a capital loss that arises because of the application of subsection 111(12)), if at any time before the particular time the taxpayer realized a capital loss or gain in respect of the foreign currency debt because of subsection 111(12).
Marginal note:Gain or loss on foreign currency debt
(11)If this subsection applies, the new gain is the positive amount, or the new loss is the negative amount, as the case may be, determined by the formula
A + B – C
where
(a)if the taxpayer would, but for any application of subsection 111(12), recognize a new gain, the amount of the new gain, determined without reference to this subsection, or
(b)if the taxpayer would, but for any application of subsection 111(12), recognize a new loss, the amount of the new loss, determined without reference to this subsection, multiplied by (–1);
(a)the relevant part of the foreign currency debt at the particular time, or
(b)the forgiven amount, if any, (as defined in subsection 80(1)) in respect of the foreign currency debt at the particular time; and
(a)the relevant part of the foreign currency debt at the particular time, or
(b)the forgiven amount, if any, (as defined in subsection 80(1)) in respect of the foreign currency debt at the particular time.
Marginal note:Donated flow-through shares
(12)If at any time a taxpayer disposes of one or more capital properties that are included in a flow-through share class of property and subparagraph 38(a.1)(i) or (iii) applies to the disposition (in this subsection referred to as the “actual disposition”), then the taxpayer is deemed to have a capital gain from a disposition at that time of another capital property equal to the lesser of
(a)the taxpayer’s exemption threshold at that time in respect of the flow-through share class of property, and
(b)the total of all amounts each of which is a capital gain from the actual disposition (for greater certainty, calculated without reference to this subsection).
Marginal note:Class 14.1 — transitional rules
(13)Subsection (14) applies in respect of a disposition by a taxpayer of a property that is included in Class 14.1 of Schedule II to theIncome Tax Regulationsin respect of a business of the taxpayer if
(a)the property was an eligible capital property of the taxpayer immediately before January 1, 2017;
(b)the amount determined for Q in the definitioncumulative eligible capitalin subsection 14(5) in respect of the business immediately before January 1, 2017 is greater than nil;
(c)the amount determined for B in that definition in respect of the business immediately before January 1, 2017 is nil; and
(d)no amount is included in the taxpayer’s income for a taxation year because of paragraph 13(38)(d).
Marginal note:Class 14.1 — transitional rules
(14)If this subsection applies in respect of a disposition at any time by a taxpayer of a property, the taxpayer’s capital gain from the disposition is to be reduced by such amount as the taxpayer claims, not exceeding the amount by which
(a)2/3 of the amount determined for Q in the definitioncumulative eligible capitalin subsection 14(5) in respect of the business immediately before 2017
exceeds
(b)the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
Marginal note:Class 14.1 — transitional rules
(15)Subsection (16) applies in respect of a disposition by an individual of a property that is included in Class 14.1 of Schedule II to theIncome Tax Regulationsin respect of a business of the individual if
(a)the property was an eligible capital property of the individual immediately before January 1, 2017; and
(b)the individual’s exempt gains balance in respect of the business is greater than nil for the taxation year that includes January 1, 2017.
Marginal note:Class 14.1 — transitional rules
(16)If this subsection applies in respect of a disposition at any time by an individual of a property, the individual’s capital gain from the disposition is to be reduced by such amount as the individual claims, not exceeding the amount by which
(a)twice the amount of the individual’s exempt gains balance in respect of the business for the taxation year that includes January 1, 2017
exceeds
(b)the total of
(i)if paragraph 13(38)(d) applies in respect of the business for the individual’s taxation year that includes January 1, 2017, the amount determined for D in paragraph 14(1)(b) for the purposes of paragraph 13(38)(d), and
(ii)the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
Marginal note:Taxable net gain from disposition of listed personal property
41(1)For the purposes of this Part, a taxpayer’s taxable net gain for a taxation year from dispositions of listed personal property is 1/2 of the amount determined under subsection 41(2) to be the taxpayer’s net gain for the year from dispositions of such property.
Marginal note:Determination of net gain
(2)A taxpayer’s net gain for a taxation year from dispositions of listed personal property is an amount determined as follows:
(a)determine the amount, if any, by which the total of the taxpayer’s gains for the year from the disposition of listed personal property, other than property described in subparagraph 39(1)(a)(i.1), exceeds the total of the taxpayer’s losses for the year from dispositions of listed personal property, and
(b)deduct from the amount determined under paragraph 41(2)(a) such portion as the taxpayer may claim of the taxpayer’s listed-personal-property losses for the 7 taxation years immediately preceding and the 3 taxation years immediately following the taxation year, except that for the purposes of this paragraph
(i)an amount in respect of a listed-personal-property loss is deductible for a taxation year only to the extent that it exceeds the total of amounts deducted under this paragraph in respect of that loss for preceding taxation years,
(ii)no amount is deductible in respect of the listed-personal-property loss of any year until the deductible listed-personal-property losses for previous years have been deducted, and
(iii)no amount is deductible in respect of listed-personal-property losses from the amount determined under paragraph 41(2)(a) for a taxation year except to the extent of the amount so determined for the year,
and the remainder determined under paragraph 41(2)(b) is the taxpayer’s net gain for the year from dispositions of listed personal property.
Definition oflisted-personal-property loss
(3)In this section,listed-personal-property lossof a taxpayer for a taxation year means the amount, if any, by which the total of the taxpayer’s losses for the year from dispositions of listed personal property exceeds the total of the taxpayer’s gains for the year from dispositions of listed personal property, other than property described in subparagraph 39(1)(a)(i.1).
Marginal note:Dispositions subject to warranty
42(1)For the purposes of this Subdivision,
(a)an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,
(i)if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii)in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and
(b)an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,
(i)if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii)in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.
Meaning ofspecified date
(2)In subsection (1),specified datemeans,
(a)if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and
(b)in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.
Marginal note:General rule for part dispositions
43(1)For the purpose of computing a taxpayer’s gain or loss for a taxation year from the disposition of part of a property, the adjusted cost base to the taxpayer, immediately before the disposition, of that part is the portion of the adjusted cost base to the taxpayer at that time of the whole property that can reasonably be regarded as attributable to that part.
Marginal note:Ecological gifts
(2)For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real or personal servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,
(a)the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or servitude, as the case may be, is deemed to be equal to the amount determined by the formula
A × B/C
where
(b)for greater certainty, the cost to the taxpayer of the land shall be reduced at the time of the disposition by the amount determined under paragraph (a).
Marginal note:Payments out of trust income, etc.
(3)Notwithstanding subsection (1), where part of a capital interest of a taxpayer in a trust would, but for paragraph (h) or (i) of the definitiondispositionin subsection 248(1), be disposed of solely because of the satisfaction of a right to enforce payment of an amount by the trust, no part of the adjusted cost base to the taxpayer of the taxpayer’s capital interest in the trust shall be allocated to that part of the capital interest.
Marginal note:Life estates in real property
43.1(1)Notwithstanding any other provision of this Act, if at any time a taxpayer disposes of a remainder interest in real property (except as a result of a transaction to which subsection 73(3) would otherwise apply or by way of a gift to a qualified donee) to a person or partnership and retains a life estate or an estatepur autre vie(in this section referred to as the “life estate”) in the property, the taxpayer is deemed
(a)to have disposed at that time of the life estate in the property for proceeds of disposition equal to its fair market value at that time; and
(b)to have reacquired the life estate immediately after that time at a cost equal to the proceeds of disposition referred to in paragraph 43.1(1)(a).
Marginal note:Idem
(2)Where, as a result of an individual’s death, a life estate to which subsection 43.1(1) applied is terminated,
(a)the holder of the life estate immediately before the death shall be deemed to have disposed of the life estate immediately before the death for proceeds of disposition equal to the adjusted cost base to that person of the life estate immediately before the death; and
(b)where a person who is the holder of the remainder interest in the real property immediately before the death was not dealing at arm’s length with the holder of the life estate, there shall, after the death, be added in computing the adjusted cost base to that person of the real property an amount equal to the lesser of
(i)the adjusted cost base of the life estate in the property immediately before the death, and
(ii)the amount, if any, by which the fair market value of the real property immediately after the death exceeds the adjusted cost base to that person of the remainder interest immediately before the death.
Marginal note:Exchanges of property
44(1)Where at any time in a taxation year (in this subsection referred to as the “initial year”) an amount has become receivable by a taxpayer as proceeds of disposition of a capital property that is not a share of the capital stock of a corporation (which capital property is in this section referred to as the taxpayer’s “former property”) that is either
(a)property the proceeds of disposition of which are described in paragraph (b), (c) or (d) of the definitionproceeds of dispositionin subsection 13(21) or paragraph (b), (c) or (d) of the definitionproceeds of dispositionin section 54, or
(b)a property that was, immediately before the disposition, a former business property of the taxpayer,
and the taxpayer has
(c)if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, and
(d)in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,
acquired a capital property that is a replacement property for the taxpayer’s former property and the replacement property has not been disposed of by the taxpayer before the time the taxpayer disposed of the taxpayer’s former property, notwithstanding subsection 40(1), if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquired the replacement property,
(e)the gain for a particular taxation year from the disposition of the taxpayer’s former property shall be deemed to be the amount, if any, by which
(i)where the particular year is the initial year, the lesser of
(A)the amount, if any, by which the proceeds of disposition of the former property exceed
(I)in the case of depreciable property, the lesser of the proceeds of disposition of the former property computed without reference to subsection 44(6) and the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and
(II)in any other case, the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and
(B)the amount, if any, by which the proceeds of disposition of the former property exceed the total of the cost to the taxpayer, or in the case of depreciable property, the capital cost to the taxpayer, determined without reference to paragraph (f), of the taxpayer’s replacement property and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, or
(ii)where the particular year is subsequent to the initial year, the amount, if any, claimed by the taxpayer under subparagraph 44(1)(e)(iii) in computing the taxpayer’s gain for the immediately preceding year from the disposition of the former property,
exceeds
(iii)subject to subsection 44(1.1), such amount as the taxpayer claims,
(A)in the case of an individual (other than a trust), in prescribed form filed with the taxpayer’s return of income under this Part for the particular year, and
(B)in any other case, in the taxpayer’s return of income under this Part for the particular year,
as a deduction, not exceeding the lesser of
(C)a reasonable amount as a reserve in respect of such of the proceeds of disposition of the former property that are payable to the taxpayer after the end of the particular year as can reasonably be regarded as a portion of the amount determined under subparagraph 44(1)(e)(i) in respect of the property, and
(D)an amount equal to the product obtained when 1/5 of the amount determined under subparagraph 44(1)(e)(i) in respect of the property is multiplied by the amount, if any, by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property, and
(f)the cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer, of the taxpayer’s replacement property at any time after the time the taxpayer disposed of the taxpayer’s former property, shall be deemed to be
(i)the cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer of the taxpayer’s replacement property otherwise determined,
minus
(ii)the amount, if any, by which the amount determined under clause 44(1)(e)(i)(A) exceeds the amount determined under clause 44(1)(e)(i)(B).
Marginal note:Reserve — property disposed of to a child
(1.1)In computing the amount that a taxpayer may claim under subparagraph (1)(e)(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.
Marginal note:Time of disposition and of receipt of proceeds
(2)For the purposes of this Act, the time at which a taxpayer has disposed of a property for which there are proceeds of disposition as described in paragraph (b), (c) or (d) of the definitionproceeds of dispositionin subsection 13(21) or paragraph (b), (c) or (d) of the definitionproceeds of dispositionin section 54, and the time at which an amount, in respect of those proceeds of disposition has become receivable by the taxpayer shall be deemed to be the earliest of
(a)the day the taxpayer has agreed to an amount as full compensation to the taxpayer for the property lost, destroyed, taken or sold,
(b)where a claim, suit, appeal or other proceeding has been taken before one or more tribunals or courts of competent jurisdiction, the day on which the taxpayer’s compensation for the property is finally determined by those tribunals or courts,
(c)where a claim, suit, appeal or other proceeding referred to in paragraph 44(2)(b) has not been taken before a tribunal or court of competent jurisdiction within two years of the loss, destruction or taking of the property, the day that is two years following the day of the loss, destruction or taking,
(d)the time at which the taxpayer is deemed by section 70 or paragraph 128.1(4)(b) to have disposed of the property, and
(e)where the taxpayer is a corporation other than a subsidiary corporation referred to in subsection 88(1), the time immediately before the winding-up of the corporation,
and the taxpayer shall be deemed to have owned the property continuously until the time so determined.
Marginal note:Where s. 70(3) does not apply
(3)Subsection 70(3) does not apply to compensation referred to in paragraph (b), (c) or (d) of the definitionproceeds of dispositionin subsection 13(21) or paragraph (b), (c) or (d) of the definitionproceeds of dispositionin section 54 that has been transferred or distributed to beneficiaries or other persons beneficially interested in an estate or trust.
Marginal note:Deemed election
(4)Where a former property of a taxpayer was a depreciable property of the taxpayer
(a)if the taxpayer has elected in respect of that property under subsection 44(1), the taxpayer shall be deemed to have elected in respect thereof under subsection 13(4); and
(b)if the taxpayer has elected in respect of that property under subsection 13(4), the taxpayer shall be deemed to have elected in respect thereof under subsection 44(1).
Marginal note:Replacement property
(5)For the purposes of this section, a particular capital property of a taxpayer is a replacement property for a former property of the taxpayer, if
(a)it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
(a.1)it was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for a use that is the same as or similar to the use to which the taxpayer or a person related to the taxpayer put the former property;
(b)where the former property was used by the taxpayer or a person related to the taxpayer for the purpose of gaining or producing income from a business, the particular capital property was acquired for the purpose of gaining or producing income from that or a similar business or for use by a person related to the taxpayer for such a purpose;
(c)where the former property was a taxable Canadian property of the taxpayer, the particular capital property is a taxable Canadian property of the taxpayer; and
(d)where the former property was a taxable Canadian property (other than treaty-protected property) of the taxpayer, the particular capital property is a taxable Canadian property (other than treaty-protected property) of the taxpayer.
Marginal note:Deemed proceeds of disposition
(6)If a taxpayer has disposed of property that was a former business property and was in part a building and in part the land (or an interest, or for civil law a right, therein) subjacent to, or immediately contiguous to and necessary for the use of, the building, for the purposes of this Subdivision, the amount if any, by which
(a)the proceeds of disposition of one such part determined without regard to this subsection
exceed
(b)the adjusted cost base to the taxpayer of that part
shall, to the extent that the taxpayer so elects in the taxpayer’s return of income under this Part for the year in which the taxpayer acquired a replacement property for the former business property, be deemed not to be proceeds of disposition of that part and to be proceeds of disposition of the other part.
Marginal note:Where subpara. (1)(e)(iii) does not apply
(7)Subparagraph 44(1)(e)(iii) does not apply to permit a taxpayer to claim any amount under that subparagraph in computing a gain for a taxation year where
(a)the taxpayer, at the end of the year or at any time in the immediately following year, was not resident in Canada or was exempt from tax under any provision of this Part;
(b)the person to whom the former property of the taxpayer was disposed of was a corporation that, immediately after the disposition,
(i)was controlled, directly or indirectly in any manner whatever, by the taxpayer,
(ii)was controlled, directly or indirectly in any manner whatever, by a person or group of persons by whom the taxpayer was controlled, directly or indirectly in any manner whatever, or
(iii)controlled the taxpayer, directly or indirectly in any manner whatever, where the taxpayer is a corporation; or
(c)the former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority-interest partner.
Marginal note:Application of s. 70(10)
(8)The definitions in subsection 70(10) apply to this section.
Marginal note:Definitions
44.1(1)The definitions in this subsection apply in this section.
ACB reductionof an individual in respect of a replacement share of the individual in respect of a qualifying disposition of the individual means the amount determined by the formula
D × (E/F)
where
active business corporationat any time means, subject to subsection (10), a corporation that is, at that time, a taxable Canadian corporation all or substantially all of the fair market value of the assets of which at that time is attributable to assets of the corporation that are
(a)assets used principally in an active business carried on by the corporation or by an active business corporation that is related to the corporation;
(b)shares issued by or debt owing by other active business corporations that are related to the corporation; or
(c)a combination of assets described in paragraphs (a) and (b). (société exploitant activement une entreprise)
carrying valueof the assets of a corporation at any time means the amount at which the assets of the corporation would be valued for the purpose of the corporation’s balance sheet as of that time if that balance sheet were prepared in accordance with generally accepted accounting principles used in Canada at that time, except that an asset of a corporation that is a share or debt issued by a related corporation is deemed to have a carrying value of nil. (valeur comptable)
common sharemeans a share prescribed for the purpose of paragraph 110(1)(d). (action ordinaire)
eligible pooling arrangementin respect of an individual means an agreement in writing made between the individual and another person or partnership (which other person or partnership is referred to in this definition and subsection (3) as the “investment manager”) where the agreement provides for
(a)the transfer of funds or other property by the individual to the investment manager for the purpose of making investments on behalf of the individual;
(b)the purchase of eligible small business corporation shares with those funds, or the proceeds of a disposition of the other property, within 60 days after receipt of those funds or the other property by the investment manager; and
(c)the provision of a statement of account to the individual by the investment manager at the end of each month that ends after the transfer disclosing the details of the investment portfolio held by the investment manager on behalf of the individual at the end of that month and the details of the transactions made by the investment manager on behalf of the individual during the month. (arrangement admissible de mis en commun)
eligible small business corporationat any time means, subject to subsection (10), a corporation that, at that time, is a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which at that time is attributable to assets of the corporation that are
(a)assets used principally in an active business carried on primarily in Canada by the corporation or by an eligible small business corporation that is related to the corporation;
(b)shares issued by or debt owing by other eligible small business corporations that are related to the corporation; or
(c)a combination of assets described in paragraphs (a) and (b). (société admissible exploitant une petite entreprise)
eligible small business corporation shareof an individual means a common share issued by a corporation to the individual if
(a)at the time the share was issued, the corporation was an eligible small business corporation; and
(b)immediately before and after the share was issued, the total carrying value of the assets of the corporation and corporations related to it did not exceed $50,000,000. (action déterminée de petite entreprise)
permitted deferralof an individual in respect of a qualifying disposition of the individual means the amount determined by the formula
(G/H) × I
where
qualifying cost[Repealed, 2003, c. 15, s. 70(1)]
qualifying dispositionof an individual (other than a trust) means, subject to subsection (9), a disposition of shares of the capital stock of a corporation where each such share disposed of was
(a)an eligible small business corporation share of the individual;
(b)throughout the period during which the individual owned the share, a common share of an active business corporation; and
(c)throughout the 185-day period that ended immediately before the disposition of the share, owned by the individual. (disposition admissible)
qualifying portion of a capital gain[Repealed, 2003, c. 15, s. 70(1)]
qualifying portion of the proceeds of disposition[Repealed, 2003, c. 15, s. 70(1)]
replacement shareof an individual in respect of a qualifying disposition of the individual in a taxation year means an eligible small business corporation share of the individual that is
(a)acquired by the individual in the year or within 120 days after the end of the year; and
(b)designated by the individual in the individual’s return of income for the year to be a replacement share in respect of the qualifying disposition. (action remplacement)
Marginal note:Capital gain deferral
(2)Where an individual has made a qualifying disposition in a taxation year,
(a)the individual’s capital gain for the year from the qualifying disposition is deemed to be the amount by which the individual’s capital gain for the year from the qualifying disposition, determined without reference to this section, exceeds the individual’s permitted deferral in respect of the qualifying disposition;
(b)in computing the adjusted cost base to the individual of a replacement share of the individual in respect of the qualifying disposition at any time after its acquisition, there shall be deducted the amount of the ACB reduction of the individual in respect of the replacement share; and
(c)where the qualifying disposition was a disposition of a share that was taxable Canadian property of the individual, the replacement share of the individual in respect of the qualifying disposition is deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the individual.
Marginal note:Special rule — re eligible pooling arrangements
(3)Except for the purpose of the definitioneligible pooling arrangementin subsection (1), any transaction entered into by an investment manager under an eligible pooling arrangement on behalf of an individual is deemed to be a transaction of the individual and not a transaction of the investment manager.
Marginal note:Special rule — re acquisitions on death
(4)For the purpose of this section, a share of the capital stock of a corporation, acquired by an individual as a consequence of the death of a person who is the individual’s spouse, common-law partner or parent, is deemed to be a share that was acquired by the individual at the time it was acquired by that person and owned by the individual throughout the period that it was owned by that person, if
(a)where the person was the spouse or common-law partner of the individual, the share was an eligible small business share of the person and subsection 70(6) applied to the individual in respect of the share; or
(b)where the person was the individual’s parent, the share was an eligible small business share of the parent and subsection 70(9.2) applied to the individual in respect of the share.
Marginal note:Special rule — re breakdown of relationships
(5)For the purpose of this section, a share of the capital stock of a corporation, acquired by an individual from a person who was the individual’s former spouse or common-law partner as a consequence of the settlement of rights arising out of their marriage or common-law partnership, is deemed to be a share that was acquired by the individual at the time it was acquired by that person and owned by the individual throughout the period that it was owned by that person if the share was an eligible small business share of the person and subsection 73(1) applied to the individual in respect of the share.
Marginal note:Special rule — re eligible small business corporation share exchanges
(6)For the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the “exchanged shares”), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual if
(a)section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; and
(b)the individual’s total proceeds of disposition of the exchanged shares was equal to the total of all amounts each of which was the individual’s adjusted cost base of an exchanged share immediately before the disposition.
Marginal note:Special rule — re active business corporation share exchanges
(7)For the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the “exchanged shares”), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, if
(a)section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;
(b)the total of the individual’s proceeds of disposition in respect of the disposition of the exchanged shares was equal to the total of the individual’s adjusted cost bases immediately before the disposition of such shares; and
(c)the disposition of the exchanged shares was a qualifying disposition of the individual.
Marginal note:Special rule — re carrying on an active business
(8)For the purpose of the definitions in subsection (1), a property held at any particular time by a corporation that would, if this Act were read without reference to this subsection, be considered to carry on an active business at that time, is deemed to be used or held by the corporation in the course of carrying on that active business if the property (or other property for which the property is substituted property) was acquired by the corporation, at any time in the 36-month period ending at the particular time, because the corporation
(a)issued a debt or a share of a class of its capital stock in order to acquire money for the purpose of acquiring property to be used in or held in the course of, or making expenditures for the purpose of, earning income from an active business carried on by it;
(b)disposed of property used or held by it in the course of carrying on an active business in order to acquire money for the purpose of acquiring property to be used in or held in the course of, or making expenditures for the purpose of, earning income from an active business carried on by it; or
(c)accumulated income derived from an active business carried on by it in order to acquire property to be used in or held in the course of, or to make expenditures for the purpose of, earning income from an active business carried on by it.
Marginal note:Special rule — re qualifying disposition
(9)A disposition of a common share of an active business corporation (in this subsection referred to as the “subject share”) by an individual that, but for this subsection, would be a qualifying disposition of the individual is deemed not to be a qualifying disposition of the individual unless the active business of the corporation referred to in paragraph (a) of the definitionactive business corporationin subsection (1) was carried on primarily in Canada
(a)at all times in the period that began at the time the individual last acquired the subject share and ended at the time of disposition, if that period is less than 730 days; or
(b)in any other case, for at least 730 days in the period referred to in paragraph (a).
Marginal note:Special rule — re exceptions
(10)For the purpose of this section, an eligible small business corporation and an active business corporation at any time do not include a corporation that is, at that time,
(a)a professional corporation;
(b)a specified financial institution;
(c)a corporation the principal business of which is the leasing, rental, development or sale, or any combination of those activities, of real or immovable property owned by it; or
(d)a corporation more than 50% of the fair market value of the property of which (net of debts incurred to acquire the property) is attributable to real or immovable property.
Marginal note:Determination rule
(11)In determining whether a share owned by an individual is an eligible small business corporation share of the individual, this Act shall be read without reference to section 48.1.
Marginal note:Anti-avoidance rule
(12)The permitted deferral of an individual in respect of a qualifying disposition of shares issued by a corporation (in this subsection referred to as “new shares”) is deemed to be nil where
(a)the new shares (or shares for which the new shares are substituted property) were issued to the individual or a person related to the individual as part of a series of transactions or events in which
(i)shares of the capital stock of a corporation (in this subsection referred to as the “old shares”) were disposed of by the individual or a person related to the individual, or
(ii)the paid-up capital of old shares or the adjusted cost base to the individual or to a person related to the individual of the old shares was reduced;
(b)the new shares (or shares for which the new shares are substituted property) were
(i)issued by the corporation that issued the old shares,
(ii)issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm’s length with
(A)the corporation that issued the old shares, or
(B)the individual, or
(iii)issued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; and
(c)it is reasonable to conclude that one of the main reasons for the series of transactions or events or a transaction in the series was to permit the individual, persons related to the individual, or the individual and persons related to the individual to become eligible to deduct under subsection (2) permitted deferrals in respect of qualifying dispositions of new shares (or shares substituted for the new shares) the total of which would exceed the total that those persons would have been eligible to deduct under subsection (2) in respect of permitted deferrals in respect of qualifying dispositions of old shares.
Marginal note:Order of disposition of shares
(13)For the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.
Marginal note:Property with more than one use
45(1)For the purposes of this Subdivision the following rules apply:
(a)where a taxpayer,
(i)having acquired property for some other purpose, has commenced at a later time to use it for the purpose of gaining or producing income, or
(ii)having acquired property for the purpose of gaining or producing income, has commenced at a later time to use it for some other purpose,
the taxpayer shall be deemed to have
(iii)disposed of it at that later time for proceeds equal to its fair market value at that later time, and
(iv)immediately thereafter reacquired it at a cost equal to that fair market value;
(b)where property has, since it was acquired by a taxpayer, been regularly used in part for the purpose of gaining or producing income and in part for some other purpose, the taxpayer shall be deemed to have acquired, for that other purpose, the proportion of the property that the use regularly made of the property for that other purpose is of the whole use regularly made of the property at a cost to the taxpayer equal to the same proportion of the cost to the taxpayer of the whole property, and, if the property has, in such a case, been disposed of, the proceeds of disposition of the proportion of the property deemed to have been acquired for that other purpose shall be deemed to be the same proportion of the proceeds of disposition of the whole property;
(c)where, at any time after a taxpayer has acquired property, there has been a change in the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes,
(i)if the use regularly made of the property for those other purposes has increased, the taxpayer shall be deemed to have
(A)disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and
(B)immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(i)(A), and
(ii)if the use regularly made of the property for those other purposes has decreased, the taxpayer shall be deemed to have
(A)disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the decrease in use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and
(B)immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(ii)(A); and
(d)in applying this subsection in respect of a non-resident taxpayer, a reference to “gaining or producing income” shall be read as a reference to “gaining or producing income from a source in Canada”.
Marginal note:Election where change of use
(2)For the purposes of this Subdivision and section 13, if a taxpayer elects in respect of any property of the taxpayer in the taxpayer’s return of income for a taxation year under this Part,
(a)if subparagraph (1)(a)(i) or paragraph 13(7)(b) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have begun to use the property for the purpose of gaining or producing income;
(b)if subparagraph (1)(c)(ii) or 13(7)(d)(i) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have increased the use regularly made of the property for the purpose of gaining or producing income relative to the use regularly made of the property for other purposes; and
(c)if the taxpayer rescinds the election in respect of the property in the taxpayer’s return of income under this Part for a subsequent taxation year,
(i)if paragraph (a) applied to the taxpayer in the taxation year, the taxpayer is deemed to have begun to use the property for the purpose of gaining or producing income on the first day of the subsequent taxation year, and
(ii)if paragraph (b) applied to the taxpayer in the taxation year, the taxpayer is deemed to have increased the use regularly made of the property for the purpose of gaining or producing income on the first day of the subsequent taxation year by the amount that would have been the increase in the taxation year if the election had not been made.
Marginal note:Election concerning principal residence
(3)If at any time a property that was acquired by a taxpayer for the purpose of gaining or producing income, or that was acquired in part for that purpose, ceases in whole or in part to be used for that purpose and becomes, or becomes part of, the principal residence of the taxpayer, paragraphs (1)(a) and (c) shall not apply to deem the taxpayer to have disposed of the property at that time and to have reacquired it immediately thereafter if the taxpayer so elects by notifying the Minister in writing on or before the earlier of
(a)the day that is 90 days after a demand by the Minister for an election under this subsection is sent to the taxpayer, and
(b)the taxpayer’s filing-due date for the taxation year in which the property is actually disposed of by the taxpayer.
Marginal note:Where election cannot be made
(4)Notwithstanding subsection 45(3), an election described in that subsection shall be deemed not to have been made in respect of a change in use of property if any deduction in respect of the property has been allowed for any taxation year ending after 1984 and on or before the change in use under regulations made under paragraph 20(1)(a) to the taxpayer, the taxpayer’s spouse or common-law partner or a trust under which the taxpayer or the taxpayer’s spouse or common-law partner is a beneficiary.
Marginal note:Personal-use property
46(1)Where a taxpayer has disposed of a personal-use property (other than an excluded property disposed of in circumstances to which subsection 110.1(1), or the definitiontotal charitable gifts,total cultural giftsortotal ecological giftsin subsection 118.1(1), applies) of the taxpayer, for the purposes of this Subdivision
(a)the adjusted cost base to the taxpayer of the property immediately before the disposition shall be deemed to be the greater of $1,000 and the amount otherwise determined to be its adjusted cost base to the taxpayer at that time; and
(b)the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of $1,000 and the taxpayer’s proceeds of disposition of the property otherwise determined.
Marginal note:Where part only of property disposed of
(2)Where a taxpayer has disposed of part of a personal-use property (other than a part of an excluded property disposed of in circumstances to which subsection 110.1(1), or the definitiontotal charitable gifts,total cultural giftsortotal ecological giftsin subsection 118.1(1), applies) owned by the taxpayer and has retained another part of the property, for the purposes of this Subdivision
(a)the adjusted cost base to the taxpayer, immediately before the disposition, of the part so disposed of shall be deemed to be the greater of
(i)the adjusted cost base to the taxpayer at that time of that part otherwise determined, and
(ii)that proportion of $1,000 that the amount determined under subparagraph 46(2)(a)(i) is of the adjusted cost base to the taxpayer at that time of the whole property; and
(b)the proceeds of disposition of the part so disposed of shall be deemed to be the greater of
(i)the proceeds of disposition of that part otherwise determined, and
(ii)the amount determined under subparagraph 46(2)(a)(ii).
Marginal note:Properties ordinarily disposed of as a set
(3)For the purposes of this Subdivision, where a number of personal-use personal-use properties of a taxpayer that would, if the properties were disposed of, ordinarily be disposed of in one disposition as a set,
(a)have been disposed of by more than one disposition so that all of the properties have been acquired by one person or by a group of persons not dealing with each other at arm’s length, and
(b)had, immediately before the first disposition referred to in paragraph 46(3)(a), a total fair market value greater than $1,000,
the properties shall be deemed to be a single personal-use property and each such disposition shall be deemed to be a disposition of a part of that property.
Marginal note:Decrease in value of personal-use property of corporation, etc.
(4)Where it may reasonably be regarded that, by reason of a decrease in the fair market value of any personal-use property of a corporation, partnership or trust,
(a)a taxpayer’s gain, if any, from the disposition of a share of the capital stock of a corporation, an interest in a trust or an interest in a partnership has become a loss, or is less than it would have been if the decrease had not occurred, or
(b)a taxpayer’s loss, if any, from the disposition of a share or interest described in paragraph 46(4)(a) is greater than it would have been if the decrease had not occurred,
the amount of the gain or loss, as the case may be, shall be deemed to be the amount that it would have been but for the decrease.
Marginal note:Excluded property
(5)For the purpose of this section,excluded propertyof a taxpayer means property acquired by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, in circumstances in which it is reasonable to conclude that the acquisition of the property relates to an arrangement, plan or scheme that is promoted by another person or partnership and under which it is reasonable to conclude that the property will be the subject of a gift to which subsection 110.1(1), or the definitiontotal charitable gifts,total cultural giftsortotal ecological giftsin subsection 118.1(1), applies.
Marginal note:Identical properties
47(1)Where at any particular time after 1971 a taxpayer who owns one property that was or two or more identical properties each of which was, as the case may be, acquired by the taxpayer after 1971, acquires one or more other properties (in this subsection referred to as “newly-acquired properties”) each of which is identical to each such previously-acquired property, for the purposes of computing, at any subsequent time, the adjusted cost base of the taxpayer of each such identical property,
(a)the taxpayer shall be deemed to have disposed of each such previously-acquired property immediately before the particular time for proceeds equal to its adjusted cost base to the taxpayer immediately before the particular time;
(b)the taxpayer shall be deemed to have acquired the identical property at the particular time at a cost equal to the quotient obtained when
(i)the total of the adjusted cost bases to the taxpayer immediately before the particular time of the previously-acquired properties, and the cost to the taxpayer (determined without reference to this section) of the newly-acquired properties
is divided by
(ii)the number of the identical properties owned by the taxpayer immediately after the particular time;
(c)there shall be deducted, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property, the amount determined by the formula
A/B
where
(d)there shall be added, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property the amount determined under paragraph 47(1)(c) in respect of the identical property.
Marginal note:Where identical properties are bonds, etc.
(2)For the purposes of subsection 47(1), where a group of identical properties referred to in that subsection is a group of identical bonds, debentures, bills, notes or similar obligations issued by a debtor, subparagraph 47(1)(b)(ii) shall be read as follows:
“(ii)the quotient obtained when the total of the principal amounts of all such identical properties owned by the taxpayer immediately after the particular time is divided by the principal amount of the identical property.”
Marginal note:Securities acquired by employee
(3)For the purpose of subsection (1), a security (within the meaning assigned by subsection 7(7)) acquired by a taxpayer after February 27, 2000 is deemed not to be identical to any other security acquired by the taxpayer if
(a)the security is acquired in circumstances to which any of subsections 7(1.1), (1.5) or (8) or 147(10.1) applies; or
(b)the security is a security to which subsection 7(1.31) applies.
Marginal note:Application of s. 47.1 of R.S.C., 1952, c. 148
47.1(26.1)Words and expressions used in subsections 47.1(27) and 47.1(28) have the meanings assigned to them by subsections 47.1(1) to (26) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as the latter subsections read on July 1, 1986 and in so far as they are not inconsistent with subsections 47.1(27) and 47.1(28).
Marginal note:Capital losses in 1986
(27)Notwithstanding any other provision of this Act, where paragraph 47.1(10)(f) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that paragraph read on January 1, 1986, applied in respect of the termination before 1986 of an indexed security investment plan under which a taxpayer was a participant, any amount that would have been deemed under that paragraph to be a capital loss of the taxpayer from the Plan for the 1986 or a subsequent taxation year shall be deemed to be a capital loss of the taxpayer for the 1986 taxation year from the disposition of property in 1986.
Marginal note:Transition for 1986
(28)Where a taxpayer was a participant under a Plan on January 1, 1986, the following rules apply:
(a)each indexed security owned under the Plan by the taxpayer on that date shall be deemed to have been disposed of under the Plan on that date for proceeds of disposition determined by the formula
A × B/C
where
(b)each indexed security deemed under paragraph 47.1(28)(a) to have been disposed of under the Plan shall be deemed to have been reacquired outside the Plan by the taxpayer immediately after that date at a cost equal to the amount deemed under paragraph 47.1(28)(a) to be the proceeds of the disposition of that security;
(c)each put or call option referred to in clause 47.1(4)(a)(iv)(B) or (C) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that clause read on January 1, 1986, outstanding under the Plan on that date shall be deemed to have been closed out under the Plan on that date at a cost equal to the amount that the taxpayer would have had to pay on that date if the taxpayer had actually closed out the option on a prescribed stock exchange in Canada on that date;
(d)each put or call option deemed under paragraph 47.1(28)(c) to have been closed out shall be deemed to be written outside the Plan immediately after that date for proceeds equal to the amount deemed under paragraph 47.1(28)(c) to be the cost at which the option was closed out; and
(e)for greater certainty, the taxpayer’s indexed gain or loss, as the case may be, for the 1986 taxation year from the Plan and unindexed gain or loss, as the case may be, for that year from the Plan shall be nil.
48[Repealed, 1994, c. 21, s. 19(1)]
Marginal note:Gain when small business corporation becomes public
48.1(1)Where
(a)at any time in a taxation year an individual owns capital property that is a share of a class of the capital stock of a corporation that,
(i)at that time, is a small business corporation, and
(ii)immediately after that time, ceases to be a small business corporation because a class of its or another corporation’s shares is listed on a designated stock exchange, and
(b)the individual elects in prescribed form to have this section apply,
the individual is deemed, except for the purposes of sections 7 and 35, paragraph 110(1)(d.1) and subsections 120.4(4) and (5),
(c)to have disposed of the share at that time for proceeds of disposition equal to the greater of
(i)the adjusted cost base to the individual of the share at that time, and
(ii)the lesser of the fair market value of the share at that time and such amount as is designated in the prescribed form by the individual in respect of the share, and
(d)to have reacquired the share immediately after that time at a cost equal to those proceeds of disposition.
Marginal note:Time for election
(2)An election made under subsection 48.1(1) by an individual for a taxation year shall be made on or before the individual’s filing-due date for the year.
Marginal note:Late filed election
(3)Where the election referred to in subsection 48.1(2) was not made on or before the day referred to therein, the election shall be deemed for the purposes of subsections 48.1(1) and 48.1(2) to have been made on that day if, on or before the day that is 2 years after that day,
(a)the election is made in prescribed form; and
(b)an estimate of the penalty in respect of that election is paid by the individual when the election is made.
Marginal note:Penalty for late filed election
(4)For the purposes of this section, the penalty in respect of an election referred to in paragraph 48.1(3)(a) is an amount equal to the lesser of
(a)1/4 of 1% of the amount, if any, by which
(i)the proceeds of disposition determined under subsection 48.1(1)
exceed
(ii)the amount referred to in subparagraph 48.1(1)(c)(i)
for each month or part of a month during the period commencing on the day referred to in subsection 48.1(2) and ending on the day the election is made, and
(b)an amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 48.1(4)(a).
Marginal note:Unpaid balance of penalty
(5)The Minister shall, with all due dispatch, examine each election referred to in paragraph 48.1(3)(a), assess the penalty payable and send a notice of assessment to the individual, who shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.
Marginal note:Granting of options
49(1)Subject to subsections 49(3) and 49(3.1), for the purposes of this Subdivision, the granting of an option, other than
(a)an option to acquire or to dispose of a principal residence,
(b)an option granted by a corporation to acquire shares of its capital stock or bonds or debentures to be issued by it, or
(c)an option granted by a trust to acquire units of the trust to be issued by the trust,
is a disposition of a property the adjusted cost base of which to the grantor immediately before the grant is nil.
Marginal note:Expired option — shares
(2)If at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unless
(a)the option is held, at that time, by a person who deals at arm’s length with the corporation and the option was granted by the corporation to a person who was dealing at arm’s length with the corporation at the time that the option was granted, or
(b)the option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definitionCanadian exploration and development expensesin subsection 66(15), paragraph (i) of the definitionCanadian exploration expensein subsection 66.1(6), paragraph (g) of the definitionCanadian development expensein subsection 66.2(5) or paragraph (c) of the definitionCanadian oil and gas property expensein subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.
Marginal note:Expired option — trust units
(2.1)If, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm’s length with the trust or was granted to a person who did not deal at arm’s length with the trust at the time that the option was granted,
(a)the trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; and
(b)the adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.
Marginal note:Where option to acquire exercised
(3)Where an option to acquire property is exercised so that property is disposed of by a taxpayer (in this subsection referred to as the “vendor”) or so that property is acquired by another taxpayer (in this subsection referred to as the “purchaser”), for the purpose of computing the income of each such taxpayer the granting and the exercise of the option shall be deemed not to be dispositions of property and there shall be included
(a)in computing the vendor’s proceeds of disposition of the property, the consideration received by the vendor for the option; and
(b)in computing the cost to the purchaser of the property,
(i)where paragraph 53(1)(j) applied to the acquisition of the property by the purchaser because a person who did not deal at arm’s length with the purchaser was deemed because of the acquisition to have received a benefit under section 7, the adjusted cost base to that person of the option immediately before that person last disposed of the option, and
(ii)in any other case, the adjusted cost base to the purchaser of the option.
Marginal note:Option to acquire specified property exercised
(3.01)Where at any time a taxpayer exercises an option to acquire a specified property,
(a)there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the specified property the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the option; and
(b)the amount determined under paragraph 49(3.01)(a) in respect of that acquisition shall be added after that time in computing the adjusted cost base to the taxpayer of the specified property.
Marginal note:Where option to dispose exercised
(3.1)Where an option to dispose of property is exercised so that property is disposed of by a taxpayer (in this subsection referred to as the “vendor”) or so that property is acquired by another taxpayer (in this subsection referred to as the “purchaser”), for the purpose of computing the income of each such taxpayer the granting and the exercise of the option shall be deemed not to be dispositions of property and there shall be deducted
(a)in computing the vendor’s proceeds of disposition of the property, the adjusted cost base to the vendor of the option; and
(b)in computing the cost to the purchaser of the property, the consideration received by the purchaser for the option.
Marginal note:Option granted before February 23, 1994
(3.2)Where an individual (other than a trust) who disposes of property pursuant to the exercise of an option that was granted by the individual before February 23, 1994 so elects in the individual’s return of income for the taxation year in which the disposition occurs, subsection 49(3) does not apply in respect of the disposition in computing the income of the individual.
Marginal note:Reassessment where option exercised in subsequent year
(4)Where
(a)an option granted by a taxpayer in a taxation year (in this subsection referred to as the “initial year”) is exercised in a subsequent taxation year (in this subsection referred to as the “subsequent year”),
(b)the taxpayer has filed a return of the taxpayer’s income for the initial year as required by section 150, and
(c)on or before the day on or before which the taxpayer was required by section 150 to file a return of the taxpayer’s income for the subsequent year, the taxpayer has filed an amended return for the initial year excluding from the taxpayer’s income the proceeds received by the taxpayer for the granting of the option,
such reassessment of the taxpayer’s tax, interest or penalties for the year shall be made as is necessary to give effect to the exclusion.
Marginal note:Idem
(5)Where a taxpayer has granted an option (in this subsection referred to as the “original option”) to which subsection 49(1), 49(2) or 49(2.1) applies, and grants one or more extensions or renewals of that original option,
(a)for the purposes of subsections 49(1), 49(2) and 49(2.1), the granting of each extension or renewal shall be deemed to be the granting of an option at the time the extension or renewal is granted;
(b)for the purposes of subsections (2) to (4) and subparagraph (b)(iv) of the definitiondispositionin subsection 248(1), the original option and each extension or renewal of it is deemed to be the same option; and
(c)subsection 49(4) shall be read as if the year in which the original option was granted and each year in which any extension or renewal thereof was granted were all initial years.
Marginal note:No disposition where obligation satisfied
49.1For greater certainty, where a taxpayer acquires a particular property in satisfaction of an absolute or contingent obligation of a person or partnership to provide the particular property pursuant to a contract or other arrangement one of the main objectives of which was to establish a right, whether absolute or contingent, to the particular property and that right was not under the terms of a trust, partnership agreement, share or debt obligation, the satisfaction of the obligation is not a disposition of that right.
Marginal note:Debts established to be bad debts and shares of bankrupt corporation
50(1)For the purposes of this Subdivision, where
(a)a debt owing to a taxpayer at the end of a taxation year (other than a debt owing to the taxpayer in respect of the disposition of personal-use property) is established by the taxpayer to have become a bad debt in the year, or
(b)a share (other than a share received by a taxpayer as consideration in respect of the disposition of personal-use property) of the capital stock of a corporation is owned by the taxpayer at the end of a taxation year and
(i)the corporation has during the year become a bankrupt,
(ii)the corporation is a corporation referred to in section 6 of the Winding-up Act that is insolvent (within the meaning of that Act) and in respect of which a winding-up order under that Act has been made in the year, or
(iii)at the end of the year,
(A)the corporation is insolvent,
(B)neither the corporation nor a corporation controlled by it carries on business,
(C)the fair market value of the share is nil, and
(D)it is reasonable to expect that the corporation will be dissolved or wound up and will not commence to carry on business
and the taxpayer elects in the taxpayer’s return of income for the year to have this subsection apply in respect of the debt or the share, as the case may be, the taxpayer shall be deemed to have disposed of the debt or the share, as the case may be, at the end of the year for proceeds equal to nil and to have reacquired it immediately after the end of the year at a cost equal to nil.
Marginal note:Idem
(1.1)Where
(a)a taxpayer is deemed because of subparagraph 50(1)(b)(iii) to have disposed of a share of the capital stock of a corporation at the end of a taxation year, and
(b)the taxpayer or a person with whom the taxpayer is not dealing at arm’s length owns the share at the earliest time, during the 24-month period immediately following the disposition, that the corporation or a corporation controlled by it carries on business,
the taxpayer or the person, as the case may be, shall be deemed to have disposed of the share at that earliest time for proceeds of disposition equal to its adjusted cost base to the taxpayer determined immediately before the time of the disposition referred to in paragraph 50(1.1)(a) and to have reacquired it immediately after that earliest time at a cost equal to those proceeds.
Marginal note:Where debt a personal-use property
(2)Where at the end of a taxation year a debt that is a personal-use property of a taxpayer is owing to the taxpayer by a person with whom the taxpayer deals at arm’s length and is established by the taxpayer to have become a bad debt in the year,
(a)the taxpayer shall be deemed to have disposed of it at the end of the year for proceeds equal to the amount, if any, by which
(i)its adjusted cost base to the taxpayer immediately before the end of the year
exceeds
(ii)the amount of the taxpayer’s gain, if any, from the disposition of the personal-use property the proceeds of disposition of which included the debt; and
(b)the taxpayer shall be deemed to have reacquired the debt immediately after the end of the year at a cost equal to the amount of the proceeds determined under paragraph 50(2)(a).
Marginal note:Disposal of R.H.O.S.P. properties
(3)Each trust that was at the end of 1985 governed by a registered home ownership savings plan (within the meaning assigned by paragraph 146.2(1)(h) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1985 taxation year) shall be deemed to have disposed, immediately before 1986, of each property it holds at that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired it immediately after 1985 at a cost equal to that fair market value.
Marginal note:Convertible property
51(1)Where a share of the capital stock of a corporation is acquired by a taxpayer from the corporation in exchange for
(a)a capital property of the taxpayer that is another share of the corporation (in this section referred to as a “convertible property”), or
(b)a capital property of the taxpayer that is a bond, debenture or note of the corporation the terms of which confer on the holder the right to make the exchange (in this section referred to as a “convertible property”)
and no consideration other than the share is received by the taxpayer for the convertible property,
(c)except for the purposes of subsections 20(21) and 44.1(6) and (7) and paragraph 94(2)(m), the exchange is deemed not to be a disposition of the convertible property,
(d)the cost to the taxpayer of all the shares of a particular class acquired by the taxpayer on the exchange shall be deemed to be the amount determined by the formula
A × B/C
where
(d.1)there shall be deducted, after the exchange, in computing the adjusted cost base to the taxpayer of a share acquired by the taxpayer on the exchange, the amount determined by the formula
A × B/C
where
(d.2)the amount determined under paragraph 51(1)(d.1) in respect of a share shall be added, after the exchange, in computing the adjusted cost base to the taxpayer of the share,
(e)for the purposes of sections 74.4 and 74.5, the exchange shall be deemed to be a transfer of the convertible property by the taxpayer to the corporation, and
(f)where the convertible property is taxable Canadian property of the taxpayer, the share acquired by the taxpayer on the exchange is deemed to be, at any time that is within 60 months after the exchange, taxable Canadian property of the taxpayer.
Marginal note:Idem
(2)Notwithstanding subsection 51(1), where
(a)shares of the capital stock of a corporation have been acquired by a taxpayer in exchange for a convertible property in circumstances such that, but for this subsection, subsection 51(1) would have applied,
(b)the fair market value of the convertible property immediately before the exchange exceeds the fair market value of the shares immediately after the exchange, and
(c)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:
(d)the taxpayer shall be deemed to have disposed of the convertible property for proceeds of disposition equal to the lesser of
(i)the total of its adjusted cost base to the taxpayer immediately before the exchange and the gift portion, and
(ii)the fair market value of the convertible property immediately before the exchange,
(e)the taxpayer’s capital loss from the disposition of the convertible property shall be deemed to be nil, and
(f)the cost to the taxpayer of all the shares of a particular class acquired in exchange for the convertible property shall be deemed to be that proportion of the lesser of
(i)the adjusted cost base to the taxpayer of the convertible property immediately before the exchange, and
(ii)the total of the fair market value immediately after the exchange of all the shares acquired by the taxpayer in exchange for the convertible property and the amount that, but for paragraph 51(2)(e), would have been the taxpayer’s capital loss on the disposition of the convertible property,
that
(iii)the fair market value, immediately after the exchange, of all the shares of the particular class acquired by the taxpayer on the exchange
is of
(iv)the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange.
Marginal note:Computation of paid-up capital
(3)Where subsection 51(1) applies to the exchange of convertible property described in paragraph 51(1)(a) (referred to in this subsection as the “old shares”), 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/A
where
(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 time
exceeds
(B)the total that would be determined under clause 51(3)(b)(i)(A) if this Act were read without reference to paragraph 51(3)(a), and
(ii)the total of all amounts required by paragraph 51(3)(a) to be deducted in respect of that particular class of shares before the particular time.
Marginal note:Application
(4)Subsections 51(1) and 51(2) do not apply to any exchange to which subsection 85(1) or 85(2) or section 86 applies.
Marginal note:Conversion of debt obligation
51.1Where
(a)a taxpayer acquires a bond, debenture or note of a debtor (in this section referred to as the “new obligation”) in exchange for a capital property of the taxpayer that is another bond, debenture or note of the same debtor (in this section referred to as the “convertible obligation”),
(b)the terms of the convertible obligation conferred on the holder the right to make the exchange, and
(c)the principal amount of the new obligation is equal to the principal amount of the convertible obligation,
the cost to the taxpayer of the new obligation and the proceeds of disposition of the convertible obligation shall be deemed to be equal to the adjusted cost base to the taxpayer of the convertible obligation immediately before the exchange.
Marginal note:Cost of certain property the value of which included in income
52(1)In applying this Subdivision, an amount equal to the particular amount described by paragraph (d) shall be added in computing the cost at any time to a taxpayer of a property if
(a)the taxpayer acquired the property after 1971;
(b)the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;
(c)the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; and
(d)a particular amount in respect of the property’s value was
(i)included, otherwise than under section 7, in computing
(A)the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, or
(B)the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, or
(ii)for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.
(1.1)[Repealed, 2001, c. 17, s. 35(1)]
Marginal note:Cost of property received as dividend in kind
(2)Where any property has, after 1971, been received by a shareholder of a corporation at any time as, on account or in lieu of payment of, or in satisfaction of, a dividend payable in kind (other that a stock dividend) in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the property at a cost to the shareholder equal to its fair market value at that time, and the corporation shall be deemed to have disposed of the property at that time fore proceeds equal to that fair market value.
Marginal note:Cost of stock dividend
(3)Where a shareholder of a corporation has, after 1971, received a stock dividend in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the share or shares received by the shareholder as a stock dividend at a cost to the shareholder equal to the total of
(a)where the stock dividend is a dividend,
(i)in the case of a shareholder that is an individual, the amount of the stock dividend, and
(ii)in any other case, the total of all amounts each of which is
(A)the amount, if any, by which
(I)the amount that is the lesser of the amount of the stock dividend and its fair market value
exceeds
(II)the amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the amount of the separate dividend would not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series of transactions or events as part of which the dividend is received — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received, and
(B)the amount determined by the formula
A + B
where
(a.1)where the stock dividend is not a dividend, nil, and
(b)where an amount is included in the shareholder’s income in respect of the stock dividend under subsection 15(1.1), the amount so included.
Marginal note:Cost of property acquired as prize
(4)Where any property has been acquired by a taxpayer at any time after 1971 as a prize in connection with a lottery scheme, the taxpayer shall be deemed to have acquired the property at a cost to the taxpayer equal to its fair market value at that time.
(6)[Repealed, 2001, c. 17, s. 35(2)]
Marginal note:Cost of shares of subsidiary
(7)Notwithstanding any other provision of this Act, where a corporation disposes of property to another corporation in a transaction to which paragraph 219(1)(l) applies, the cost to it of any share of a particular class of the capital stock of the other corporation received by it as consideration for the property is deemed to be the lesser of the cost of the share to the corporation otherwise determined immediately after the disposition and the amount by which the paid-up capital in respect of that class increases because of the issuance of the share.
Marginal note:Cost of shares of immigrant corporation
(8)Notwithstanding any other provision of this Act, where at any time a corporation becomes resident in Canada, the cost to any shareholder who is not at that time resident in Canada of any share of the corporation’s capital stock, other than a share that was taxable Canadian property immediately before that time, is deemed to be equal to the fair market value of the share at that time.
Marginal note:Adjustments to cost base
53(1)In computing the adjusted cost base to a taxpayer of property at any time, there shall be added to the cost to the taxpayer of the property such of the following amounts in respect of the property as are applicable:
(a)any amount deemed by subsection 40(3) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property;
(b)where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which
(i)the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time
exceeds
(ii)the portion of the total determined under subparagraph (i) that relates to dividends in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the amount of the separate dividend would not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series of transactions or events as part of which the dividend is received — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received;
(b.1)where the property is a share of the capital stock of a corporation, the amount of any dividend deemed by paragraph 128.1(1)(c.2) to have been received in respect of the share by the taxpayer before that time and while the taxpayer was resident in Canada;
(c)where the property is a share of the capital stock of a corporation and the taxpayer has, after 1971, made a contribution of capital to the corporation otherwise than by way of a loan, by way of a disposition of shares of a foreign affiliate of the taxpayer to which subsection 85.1(3) or paragraph 95(2)(c) applies or, subject to subsection 53(1.1), a disposition of property in respect of which the taxpayer and the corporation have made an election under section 85, that proportion of such part of the amount of the contribution as cannot reasonably be regarded as a benefit conferred by the taxpayer on a person (other than the corporation) who was related to the taxpayer that
(i)the amount that may reasonably be regarded as the increase in the fair market value, as a result of the contribution, of the share
is of
(ii)the amount that may reasonably be regarded as the increase in the fair market value, as a result of the contribution, of all shares of the capital stock of the corporation owned by the taxpayer immediately after the contribution;
(d)if the property is a share of the capital stock of a foreign affiliate of the taxpayer, any amount required by section 92 to be added in computing the adjusted cost base to the taxpayer of the share;
(d.01)where the property is a share of the capital stock of a corporation, any amount required by paragraph 139.1(16)(l) to be added in computing the adjusted cost base to the taxpayer of the share;
(d.1)if the property is a capital interest in a trust, any amount included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been required to have been included under those subsections but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of theIncome Tax Act,chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;
(d.2)where the property is a unit in a mutual fund trust, any amount required by subsection 132.1(2) to be added in computing the adjusted cost base to the taxpayer of the unit;
(d.3)where the property is a share of the capital stock of a corporation of which the taxpayer was, at any time, a specified shareholder, any expense incurred by the taxpayer in respect of land or a building of the corporation that was by reason of subsection 18(2) or 18(3.1) not deductible by the taxpayer in computing the taxpayer’s income for any taxation year commencing before that time;
(e)where the property is an interest in a partnership,
(i)an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, equal to the total of all amounts each of which is the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of the income of the partnership from any source for that fiscal period, computed as if this Act were read without reference to
(A)paragraphs 38(a.1) to (a.3) and the fractions set out in the formula in paragraph 14(1)(b) and in subsection 14(5), paragraph 38(a) and subsection 41(1),
(A.1)subparagraph 39(1)(a)(i.1) in respect of an object referred to in that subparagraph that is not the subject of a gifting arrangement, as defined in subsection 237.1(1), nor a property that is a tax shelter,
(A.2)the description of C in the formula in paragraph 14(1)(b), and
(B)paragraph (i), paragraphs 12(1)(o) and (z.5), 18(1)(m), 20(1)(v.1) and 29(1)(b) and (2)(b), section 55, subsections 69(6) and (7) and paragraph 82(1)(b) of this Act and paragraphs 20(1)(gg) and 81(1)(r) and (s) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and the provisions of theIncome Tax Application Rulesrelating to income from the operation of new mines,
(ii)the taxpayer’s share of any capital dividends and any life insurance capital dividends received by the partnership before that time on shares of the capital stock of a corporation that were partnership property,
(iii)the taxpayer’s share of the amount, if any, by which
(A)any proceeds of a life insurance policy received by the partnership after 1971 and before that time in consequence of the death of any person whose life was insured under the policy,
exceeds the total of all amounts each of which is
(B)theadjusted cost basis(in this subparagraph as defined in subsection 148(9)), immediately before the death, of
(I)if the death occurs before March 22, 2016, the policy to the partnership, and
(II)if the death occurs after March 21, 2016, a policyholder’s interest in the policy,
(C)the amount by which the fair market value of consideration given in respect of a disposition of an interest in the policy exceeds the greater of the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, if
(I)the death occurs after March 21, 2016, and
(II)the disposition was by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016, or
(D)if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formula
A − B
where
(iv)where the taxpayer has, after 1971, made a contribution of capital to the partnership otherwise than by way of loan, such part of the amount of the contribution as cannot reasonably be regarded as a benefit conferred on any other member of the partnership who was related to the taxpayer,
(iv.1)each amount that is in respect of a specified amount described in subsection 80.2(1) and that is paid by the taxpayer to the partnership, to the extent that the amount paid is not deductible in computing the income of the taxpayer,
(v)where the time is immediately before the taxpayer’s death and the taxpayer was at that time a member of a partnership, the value, at the time of the taxpayer’s death, of the rights or things referred to in subsection 70(2) in respect of a partnership interest held by the taxpayer immediately before the taxpayer’s death, other than an interest referred to in subsection 96(1.5),
(vi)any amount deemed by subsection 40(3.1) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property,
(vii)any amount deemed by paragraph 98(1)(c) or 98.1(1)(c) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property,
(vii.1)a share of the taxpayer’s Canadian development expense or Canadian oil and gas property expense that was deducted at or before that time in computing the adjusted cost base to the taxpayer of the interest because of subparagraph 53(2)(c)(ii) and in respect of which the taxpayer elected under paragraph (f) of the definitionCanadian development expensein subsection 66.2(5) or paragraph (b) of the definitionCanadian oil and gas property expensein subsection 66.4(5), as the case may be,
(viii)an amount deemed, before that time, by subsection 66.1(7), 66.2(6) or 66.4(6) to be an amount referred to in the description of G in the definitioncumulative Canadian exploration expensein subsection 66.1(6), paragraph (a) of the description of F in the definitioncumulative Canadian development expensein subsection 66.2(5) or the description of G in that definition, or paragraph (a) of the description of F in the definitioncumulative Canadian oil and gas property expensein subsection 66.4(5) or the description of G in that definition in respect of the taxpayer,
(viii.1)an amount deemed, before that time, by subsection 59(1.1) to be proceeds of disposition receivable by the taxpayer in respect of the disposition of a foreign resource property,
(ix)the amount, if any, by which
(A)the taxpayer’s share of the amount of any assistance or benefit that the partnership received or became entitled to receive after 1971 and before that time from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from royalty or tax, investment allowance or any other form of assistance or benefit, in respect of or related to a Canadian resource property or an exploration or development expense incurred in Canada
exceeds
(B)the part, if any, of the amount included in clause 53(1)(e)(ix)(A) in respect of the interest that was repaid before that time by the taxpayer under a legal obligation to repay all or any part of the amount,
(x)any amount required by section 97 to be added before that time in computing the adjusted cost base to the taxpayer of the interest,
(xi)of which the taxpayer’s share of any income or loss of the partnership was, at any time, 10% or more, any expense incurred by the taxpayer in respect of land or a building of the partnership that was by reason of subsection 18(2) or 18(3.1) not deductible by the taxpayer in computing the taxpayer’s income for any taxation year commencing before that time,
(xii)any amount required by paragraph 110.6(23)(a) to be added at that time in computing the adjusted cost base to the taxpayer of the interest, and
(xiii)any amount required by subsection 127(30) to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time;
(xiv)[Repealed, 2009, c. 2, s. 11]
(f)where the property is substituted property (within the meaning assigned by paragraph (a) of the definitionsuperficial lossin section 54) of the taxpayer, the amount, if any, by which
(i)the amount of the loss that was, because of the acquisition by the taxpayer of the property, a superficial loss of any taxpayer from a disposition of a property
exceeds
(ii)where the property disposed of was a share of the capital stock of a corporation, the amount that would, but for paragraph 40(2)(g), be deducted under subsection 112(3), 112(3.1) or 112(3.2) in computing the loss of any taxpayer in respect of the disposition of the share;
(f.1)where the taxpayer is a taxable Canadian corporation and the property was disposed of by another taxable Canadian corporation to the taxpayer in circumstances such that
(i)paragraph 53(1)(f.2) does not apply to increase the adjusted cost base to the other corporation of shares of the capital stock of the taxpayer, and
(ii)the capital loss from the disposition was deemed by paragraph 40(2)(e.1) (or, where the property was acquired by the taxpayer before 1996, by paragraph 40(2)(e) or 85(4)(a) as those paragraphs read in their application to property acquired before April 26, 1995) to be nil,
the amount that would otherwise have been the capital loss from the disposition;
(f.11)where the property was disposed of by a person (other than a non-resident person or a person exempt from tax under this Part on the person’s taxable income) or by an eligible Canadian partnership (as defined in subsection 80(1)) to the taxpayer in circumstances such that
(i)paragraph 53(1)(f.1) does not apply to increase the adjusted cost base to the taxpayer of the property,
(ii)paragraph 53(1)(f.2) does not apply to increase the adjusted cost base to that person of shares of the capital stock of the taxpayer, and
(iii)the capital loss from the disposition was deemed by paragraph 40(2)(e.1) (or, where the property was acquired by the taxpayer before 1996, by paragraph 85(4)(a) as it read in its application to property acquired before April 26, 1995) to be nil,
the amount that would otherwise be the capital loss from the disposition;
(f.12)where the property is a particular commercial obligation (in this paragraph having the meaning assigned by subsection 80(1)) payable to the taxpayer as consideration for the settlement or extinguishment of another commercial obligation payable to the taxpayer and the taxpayer’s loss from the disposition of the other obligation was reduced because of paragraph 40(2)(e.2), the proportion of the reduction that the principal amount of the particular obligation is of the total of all amounts each of which is the principal amount of a commercial obligation payable to the taxpayer as consideration for the settlement or extinguishment of that other obligation;
(f.2)where the property is a share, any amount required by paragraph 40(3.6)(b) (or, where the property was acquired by the taxpayer before 1996, by paragraph 85(4)(b) as it read in its application to property disposed of before April 26, 1995) to be added in computing the adjusted cost base to the taxpayer of the share;
(g)where the property is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation, the amount, if any, by which the principal amount of the obligation exceeds the amount for which the obligation was issued, if the excess was required by subsection 16(2) or (3) to be included in computing the income of the taxpayer for a taxation year commencing before that time;
(g.1)where the property is an indexed debt obligation, any amount determined under subparagraph 16(6)(a)(i) in respect of the obligation and required to be included in computing the taxpayer’s income for a taxation year beginning before that time;
(h)where the property is land of the taxpayer, any amount paid by the taxpayer or by another taxpayer in respect of whom the taxpayer was a person, corporation or partnership described in subparagraph (b)(i), (ii) or (iii) of the definitioninterest on debt relating to the acquisition of landin subsection 18(3), after 1971 and before that time pursuant to a legal obligation to pay
(i)interest on debt relating to the acquisition of land (within the meaning assigned by subsection 18(3)), or
(ii)property taxes (not including income or profits taxes or taxes imposed by reference to the transfer of property) paid by the taxpayer in respect of the property to a province or to a Canadian municipality
to the extent that the amount was, because of subsection 18(2),
(iii)not deductible in computing the taxpayer’s income from the land or from a business for any taxation year beginning before that time, or
(iv)not deductible in computing the income of the other taxpayer and was not included in or added to the cost to the other taxpayer of any property otherwise than because of subparagraph (d.3) or subparagraph (e)(xi);
(i)where the property is land used in a farming business carried on by the taxpayer, an amount in respect of each taxation year ending after 1971 and commencing before that time, equal to the taxpayer’s loss, if any, for that year from the farming business, to the extent that the loss
(i)was not, by virtue of section 31, deductible in computing the taxpayer’s income for that year,
(ii)was not deducted in computing the taxpayer’s taxable income for the taxation year in which the taxpayer disposed of the property or any preceding taxation year,
(iii)did not exceed the total of
(A)taxes (other than income or profits taxes or taxes imposed by reference to the transfer of the property) paid by the taxpayer in that year or payable by the taxpayer in respect of that year to a province or a Canadian municipality in respect of the property, and
(B)interest, paid by the taxpayer in that year or payable by the taxpayer in respect of that year, pursuant to a legal obligation to pay interest on borrowed money used to acquire the property or on any amount as consideration payable for the property,
to the extent that those taxes and interest were included in computing the loss, and
(iv)did not exceed the remainder obtained when
(A)the total of each of the taxpayer’s losses from the farming business for taxation years preceding that year (to the extent that they are required by this paragraph to be added in computing the taxpayer’s adjusted cost base of the property),
is deducted from
(B)the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the adjusted cost base to the taxpayer of the property immediately before that time, determined without reference to this paragraph;
(j)if the property is a security (within the meaning assigned by subsection 7(7)) and, in respect of its acquisition by the taxpayer, a benefit was deemed by section 7 to have been received in any taxation year that ends after 1971 and begins before that time by the taxpayer or by a person that did not deal at arm’s length with the taxpayer or, if the security was acquired after February 27, 2000, would have been so deemed if section 7 were read without reference to subsections 7(1.1) and (8), the amount of the benefit that was, or would have been, so deemed to have been received;
(k)where the property is an expropriation asset of the taxpayer (within the meaning assigned by section 80.1) or an asset of the taxpayer assumed for the purposes of that section to be an expropriation asset thereof, any amount required by paragraph 80.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the asset;
(l)where the property is an interest in a related segregated fund trust referred to in section 138.1,
(i)each amount deemed by paragraph 138.1(1)(f) to be an amount payable to the taxpayer before that time in respect of that interest,
(ii)each amount required by subparagraph 138.1(1)(g)(ii) to be added before that time in respect of that interest,
(iii)each amount in respect of that interest that is a capital gain deemed to have been allocated under subsection 138.1(4) to the taxpayer before that time, and
(iv)each amount in respect of that interest that before that time was deemed by subsection 138.1(3) to be a capital gain of the taxpayer;
(m)where the property is an offshore investment fund property (within the meaning assigned by subsection 94.1(1)),
(i)any amount included in respect of the property by virtue of subsection 94.1(1) in computing the taxpayer’s income for a taxation year commencing before that time, or
(ii)where the taxpayer is a controlled foreign affiliate (within the meaning of subsection 95(1)), of a person resident in Canada, any amount included in respect of the property in computing the foreign accrual property income of the controlled foreign affiliate by reason of the description of C in the definitionforeign accrual property incomein subsection 95(1) for a taxation year commencing before that time;
(n)the reasonable costs incurred by the taxpayer, before that time, of surveying or valuing the property for the purpose of its acquisition or disposition (to the extent that those costs are not deducted by the taxpayer in computing the taxpayer’s income for any taxation year or attributable to any other property);
(o)where the property is real property of the taxpayer, any amount required by paragraph 43.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the property;
(p)where the time is after 2004 and the property is an interest in or a share of the capital stock of a flow-through entity (within the meaning assigned by subsection 39.1(1)), the amount determined by the formula
A × B/C
where
(q)any amount required under paragraph 53(4)(b), (5)(b), (6)(b), 47(1)(d), 49(3.01)(b), 51(1)(d.2), 86(4)(b) or 87(5.1)(b) or (6.1)(b) to be added in computing the adjusted cost base to the taxpayer of the property;
(r)if the time is before 2005, the property is an interest in, or a share of the capital stock of, a flow-through entity described in any of paragraphs (a) to (f) and (h) of the definitionflow-through entityin subsection 39.1(1) and immediately after that time the taxpayer disposed of all their interests in, and shares of the capital stock of, the entity, the amount determined by the formula
A × B/C
where
(i)the amount by which a capital gain is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity, or
(ii)twice an amount by which a taxable capital gain, or the income from a business, is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity,
(s)if the property was acquired under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(i) in computing the income of the taxpayer for a taxation year; and
(t)if the property is disposed of under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(ii) in computing the income of the taxpayer for the taxation year that includes that time.
Marginal note:Deemed contribution of capital
(1.1)For the purposes of paragraph 53(1)(c), where there has been a disposition of property before May 7, 1974 and
(a)the taxpayer and the corporation referred to in that paragraph have made an election under section 85 in respect of that property, and
(b)the consideration received by the taxpayer for the property did not include shares of the capital stock of the corporation,
the disposition of property shall be deemed to be a contribution of capital equal to the amount, if any, by which
(c)the amount that the taxpayer and the corporation have agreed on in the election
exceeds
(d)the fair market value at the time of the disposition of any consideration received by the taxpayer for the property so disposed of.
Marginal note:Flow-through entity before 2005
(1.2)For the purposes of paragraph (1)(r), if the fair market value of all of a taxpayer’s interests in, and shares of the capital stock of, a flow-through entity is nil when the taxpayer disposes of those interests and shares, the fair market value of each such interest or share at that time is deemed to be $1.
Marginal note:Amounts to be deducted
(2)In computing the adjusted cost base to a taxpayer of property at any time, there shall be deducted such of the following amounts in respect of the property as are applicable:
(a)where the property is a share of the capital stock of a corporation resident in Canada,
(i)any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a dividend on the share (other than a taxable dividend or a dividend in respect of which the corporation paying the dividend has elected in accordance with subsection 83(2) or 83(2.1) in respect of the full amount thereof),
(ii)any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share, except to the extent that the amount is deemed by subsection 84(4) or 84(4.1) to be a dividend received by the taxpayer,
(iii)any amount required to be deducted before that time under section 84.1 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applied before May 23, 1985 in computing the adjusted cost base to the taxpayer of the share,
(iv)any amount, to the extent that such amount is not proceeds of disposition of a share, received by the taxpayer before that time that would, but for subsection 84(8), be deemed by subsection 84(2) to be a dividend received by the taxpayer, and
(v)any amount required by paragraph 44.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share;
(b)where the property is a share of the capital stock of a non-resident corporation,
(i)if the corporation is a foreign affiliate of the taxpayer,
(A)any amount required under paragraph 80.1(4)(d) or section 92 to be deducted in computing the adjusted cost base to the taxpayer of the share, and
(B)any amount received by the taxpayer before that time, on a reduction of the paid-up capital of the corporation in respect of the share, that is so received
(I)after 1971 and on or before August 19, 2011, or
(II)after August 19, 2011, where the reduction is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, or
(ii)in any other case, any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share;
(b.1)if the property is a capital interest in a trust, any amount deducted by the taxpayer by reason of subsection 91(2) or (4) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been so deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of theIncome Tax Act,chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;
(b.2)if the property is property of a taxpayer that was subject to a loss restriction event at or before that time, any amount required by paragraph 111(4)(c) to be deducted in computing the adjusted cost base of the property;
(c)where the property is an interest in a partnership,
(i)an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, equal to the total of amounts each of which is the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of any loss of the partnership from any source for that fiscal period, computed as if this Act were read without reference to
(A)the fractions set out in subsection 14(5), paragraph 38(b) and in the formula in paragraph 14(1)(b),
(A.1)[Repealed, 2013, c. 34, s. 190]
(A.2)the description of C in the formula in paragraph 14(1)(b),
(B)paragraphs 12(1)(o) and 12(1)(z.5), 18(1)(m) and 20(1)(v.1), section 31, subsection 40(2), section 55 and subsections 69(6) and 69(7) of this Act and paragraphs 20(1)(gg) and 81(1)(r) and (s) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and
(C)subsections 100(4), 112(3.1), (4), (4.2) as it read in its application to dispositions of property that occurred before April 27, 1995 and (5.2),
except to the extent that all or a portion of such a loss may reasonably be considered to have been included in the taxpayer’s limited partnership loss in respect of the partnership for the taxpayer’s taxation year in which that fiscal period ended,
(i.1)an amount in respect of each fiscal period of the partnership ending before that time that is the taxpayer’s limited partnership loss in respect of the partnership for the taxation year in which that fiscal period ends to the extent that such loss was deducted by the taxpayer in computing the taxpayer’s taxable income for any taxation year that commenced before that time,
(i.2)any amount deemed by subsection 40(3.12) to be a loss of the taxpayer for a taxation year from a disposition before that time of the property,
(i.3)if at that time the property is not a tax shelter investment as defined by section 143.2 and the taxpayer would be a member, described in subsection 40(3.1), of the partnership if the fiscal period of the partnership that includes that time ended at that time, the unpaid principal amount of any indebtedness of the taxpayer for which recourse is limited, either immediately or in the future and either absolutely or contingently, and that can reasonably be considered to have been used to acquire the property,
(i.4)unless that time is immediately before a disposition of the interest, if the taxpayer is a member of the partnership and the taxpayer has been a specified member of the partnership at all times since becoming a member of the partnership, or the taxpayer is at that time a limited partner of the partnership for the purposes of subsection 40(3.1),
(A)where that time is in the taxpayer’s first taxation year for which the taxpayer is eligible to deduct an amount in respect of the partnership under subsection 34.2(11), the portion of the amount deducted in computing the taxpayer’s income for the taxation year under subsection 34.2(11) in respect of the partnership that would have been deductible if the definitionqualifying transitional incomein subsection 34.2(1) were read without reference to paragraph (b), and
(B)where that time is in any other taxation year, the portion of the amount deducted in computing the taxpayer’s income for the taxation year immediately preceding that other year under subsection 34.2(11) in respect of the partnership that would have been deductible if the definitionqualifying transitional incomein subsection 34.2(1) were read without reference to paragraph (b),
(ii)an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, other than a fiscal period after the fiscal period in which the taxpayer ceased to be a member of the partnership, equal to the taxpayer’s share of the total of
(A)amounts that, but for paragraph 96(1)(d), would be deductible in computing the income of the partnership for the fiscal period by virtue of the provisions of theIncome Tax Application Rulesrelating to the exploration and development expenses,
(B)the Canadian exploration and development expenses and foreign resource pool expenses, if any, incurred by the partnership in the fiscal period,
(C)the Canadian exploration expense, if any, incurred by the partnership in the fiscal period,
(D)the Canadian development expense, if any, incurred by the partnership in the fiscal period, and
(E)the Canadian oil and gas property expense, if any, incurred by the partnership in the fiscal period,
(iii)any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,
(iv)any amount required by section 97 to be deducted before that time in computing the adjusted cost base to the taxpayer of the interest,
(v)any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a distribution of the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of the partnership profits or partnership capital,
(vi)an amount equal to that portion of all amounts deducted under subsection 127(5) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the investment tax credit of the taxpayer by virtue of subsection 127(8),
(vii)any amount added pursuant to subsection 127.2(4) in computing the taxpayer’s share-purchase tax credit for a taxation year ending before or after that time,
(viii)an amount equal to 50% of the amount deemed to be designated pursuant to subsection 127.3(4) before that time in respect of each share, debt obligation or right acquired by the partnership and deemed to have been acquired by the taxpayer under that subsection,
(ix)the amount of all assistance received by the taxpayer before that time that has resulted in a reduction of the capital cost of a depreciable property to the partnership by virtue of subsection 13(7.2),
(x)any amount deductible by the taxpayer under subparagraph 20(1)(e)(vi) in respect of the partnership for a taxation year of the taxpayer ending at or after that time,
(xi)any amount required by paragraph 110.6(23)(b) to be deducted at that time in computing the adjusted cost base to the taxpayer of the interest,
(xii)any amount payable by the partnership, to the extent that the amount is deductible under subsection 20.01(1) in computing the taxpayer’s income for a taxation year that began before that time, and
(xiii)the amount of any reduction (within the meaning of paragraph 247(13)(a)) of the amount of a dividend deemed to have been received by the taxpayer in respect of a transaction (as defined in subsection 247(1)) or series of transactions in which the partnership was a participant;
(d)where the property is such that the taxpayer has, after 1971 and before that time, disposed of a part of it while retaining another part of it, the amount determined under section 43 to be the adjusted cost base to the taxpayer of the part so disposed of;
(e)if the property is a share, or an interest in or a right to — or, for civil law, a right in or to — a share, of the capital stock of a corporation acquired before August 1976, an amount equal to any expense incurred by the taxpayer in consideration therefor, to the extent that the expense was, by virtue of
(i)paragraph (e) of the definitionCanadian exploration and development expensesin subsection 66(15), a Canadian exploration and development expense,
(ii)paragraph (i) of the definitionCanadian exploration expensein subsection 66.1(6), a Canadian exploration expense,
(iii)paragraph (g) of the definitionCanadian development expensein subsection 66.2(5), a Canadian development expense, or
(iv)paragraph (c) of the definitionCanadian oil and gas property expensein subsection 66.4(5), a Canadian oil and gas property expense
incurred by the taxpayer;
(f)where the property was received by the taxpayer as consideration for any payment or loan
(i)made before April 20, 1983 by the taxpayer as a shareholder corporation (within the meaning assigned by subsection 66(15)) to a joint exploration corporation of the shareholder, and
(ii)described in paragraph (a) of the definitionagreed portionin subsection 66(15),
or the property was substituted for such a property, such portion of the payment or loan as may reasonably be considered to be related to an agreed portion (within the meaning assigned by subsection 66(15)) of the joint exploration corporation’s
(iii)Canadian exploration and development expenses,
(iv)Canadian exploration expense,
(v)Canadian development expense, or
(vi)Canadian oil and gas property expense,
as the case may be;
(f.1)where the property is a share of the capital stock of a joint exploration corporation resident in Canada and the taxpayer has, after 1971, made a contribution of capital to the corporation otherwise than by way of a loan, which contribution was included in computing the adjusted cost base of the property by virtue of paragraph 53(1)(c), such portion of the contribution as may reasonably be considered to be part of an agreed portion (within the meaning assigned by subsection 66(15)) of the corporation’s
(i)Canadian exploration and development expenses,
(ii)Canadian exploration expense,
(iii)Canadian development expense, or
(iv)Canadian oil and gas property expense,
as the case may be;
(f.2)any amount required by paragraph 66(10.4)(a) to be deducted before that time in computing the adjusted cost base to the taxpayer of the property;
(g)where section 80 is applicable in respect of the taxpayer, the amount, if any, by which the adjusted cost base to the taxpayer of the property is required in prescribed manner to be reduced before that time;
(g.1)any amount required under paragraph 53(4)(a), 53(5)(a), 53(6)(a), 47(1)(c), 49(3.01)(a), 51(1)(d.1), 86(4)(a) or 87(5.1)(a) or 87(6.1)(a) to be deducted in computing the adjusted cost base to the taxpayer of the property or any amount by which that adjusted cost base is required to be reduced because of subsection 80(9), 80(10) or 80(11);
(h)where the property is a capital interest of the taxpayer in a trust (other than an interest in a personal trust that has never been acquired for consideration or an interest of a taxpayer in a trust described in any of paragraphs (a) to (e.1) of the definitiontrustin subsection 108(1)),
(i)any amount paid to the taxpayer by the trust after 1971 and before that time as a distribution or payment of capital by the trust (otherwise than as proceeds of disposition of the interest or part thereof), to the extent that the amount became payable before 1988,
(i.1)any amount that has become payable to the taxpayer by the trust after 1987 and before that time in respect of the interest (otherwise than as proceeds of disposition of the interest or part thereof), except to the extent of the portion thereof
(A)that was included in the taxpayer’s income by reason of subsection 104(13) or from which an amount of tax was deducted under Part XIII by reason of paragraph 212(1)(c),
(A.1)that was deemed by subsection 104(16) to be a dividend received by the taxpayer, or
(B)where the trust was resident in Canada throughout its taxation year in which the amount became payable
(I)that is equal to the amount designated by the trust under subsection 104(21) in respect of the taxpayer,
(II)that was designated by the trust under subsection 104(20) in respect of the taxpayer, or
(III)that is an assessable distribution (as defined in subsection 218.3(1)) to the taxpayer,
(ii)an amount equal to that portion of all amounts deducted under subsection 127(5) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the investment tax credit of the taxpayer by virtue of subsection 127(7),
(iii)any amount added pursuant to subsection 127.2(3) in computing the taxpayer’s share-purchase tax credit for a taxation year ending before or after that time,
(iv)an amount equal to 50% of the amount deemed to be designated pursuant to subsection 127.3(3) before that time in respect of each share, debt obligation or right acquired by the trust and deemed to have been acquired by the taxpayer under that subsection, and
(v)an amount equal to the amount of all assistance received by the taxpayer before that time that has resulted in a reduction of the capital cost of a depreciable property to the trust by virtue of subsection 13(7.2);
(i)where the property is a capital interest in a trust (other than a unit trust) not resident in Canada that was purchased after 1971 and before that time by the taxpayer from a non-resident person at a time (in this paragraph referred to as the “purchase time”) when the property was not taxable Canadian property and the fair market value of such of the trust property as was
(i)a Canadian resource property,
(iii)an income interest in a trust resident in Canada,
(iv)taxable Canadian property, or
(v)a timber resource property
was not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by which
(vi)the fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)
exceeds
(vii)the total of the cost amounts to the trust at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v),
that the fair market value at the purchase time of the interest is of the fair market value at the purchase time of all capital interests in the trust;
(j)where the property is a unit of a unit trust not resident in Canada that was purchased after 1971 and before that time by the taxpayer from a non-resident person at a time (in this paragraph referred to as the “purchase time”) when the property was not taxable Canadian property and the fair market value of such of the trust property as was
(i)a Canadian resource property,
(iii)an income interest in a trust resident in Canada,
(iv)taxable Canadian property, or
(v)a timber resource property
was not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by which
(vi)the fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)
exceeds
(vii)the total of the cost amounts to the trust at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v),
that the fair market value at the purchase time of the unit is of the fair market value at the purchase time of all the issued units of the trust;
(k)where the property was acquired by the taxpayer after 1971, the amount, if any, by which the total of
(i)the amount of any assistance which the taxpayer has received or is entitled to receive before that time from a government, municipality or other public authority, in respect of, or for the acquisition of, the property, whether as a grant, subsidy, forgivable loan, deduction from tax not otherwise provided for under this paragraph, investment allowance or as any other form of assistance other than
(A)an amount described in paragraph 37(1)(d),
(B)an amount deducted as an allowance under section 65,
(C)the amount of prescribed assistance that the taxpayer has received or is entitled to receive in respect of, or for the acquisition of, shares of the capital stock of a prescribed venture capital corporation or a prescribed labour-sponsored venture capital corporation or shares of the capital stock of a taxable Canadian corporation that are held in a prescribed stock savings plan, or
(D)an amount included in income by virtue of paragraph 12(1)(u) or 56(1)(s), and
(ii)all amounts deducted under subsection 127(5) or 127(6) in respect of the property before that time,
exceeds such part, if any, of the assistance referred to in subparagraph 53(2)(k)(i) as has been repaid before that time by the taxpayer pursuant to an obligation to repay all or any part of that assistance;
(l)where the property is a debt obligation, any amount that was deductible by virtue of subsection 20(14) in computing the taxpayer’s income for any taxation year commencing before that time in respect of interest on that debt obligation;
(l.1)where the property is an indexed debt obligation,
(i)any amount determined under subparagraph 16(6)(a)(ii) in respect of the obligation and deductible in computing the income of the taxpayer for a taxation year beginning before that time, and
(ii)the amount of any payment that was received or that became receivable by the taxpayer at or before that time in respect of an amount that was added under paragraph 53(1)(g.1) to the cost to the taxpayer of the obligation;
(m)any part of the cost to the taxpayer of the property that was deductible (otherwise than because of this Subdivision or paragraph 8(1)(r)) in computing the taxpayer’s income for any taxation year commencing before that time and ending after 1971;
(n)where the property is an expropriation asset of the taxpayer (within the meaning assigned by section 80.1) or an asset of the taxpayer assumed for the purposes of that section to be an expropriation asset thereof, any amount required by paragraph 80.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the asset;
(o)where the property is a right to receive partnership property within the meaning assigned by paragraph 98.2(a) or 100(3)(a), any amount received by the taxpayer in full or partial satisfaction of that right;
(p)where the property is a debt owing to the taxpayer by a corporation, any amount required to be deducted before that time under section 84.1 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applied before May 23, 1985 or subsection 84.2(2) in computing the adjusted cost base to the taxpayer of the debt;
(q)where the property is an interest in a related segregated fund trust referred to in section 138.1,
(i)each amount in respect of that interest that is a capital loss deemed to have been allocated under subsection 138.1(4) to the taxpayer before that time, and
(ii)each amount in respect of that interest that before that time was deemed by subsection 138.1(3) to be a capital loss of the taxpayer;
(s)the amount, if any, by which
(i)the amount elected by the taxpayer before that time under subsection 53(2.1)
exceeds
(ii)any repayment before that time by the taxpayer of an amount received by the taxpayer as described in subsection 53(2.1) that may reasonably be considered to relate to the amount elected where the repayment is made pursuant to a legal obligation to repay all or any part of the amount so received;
(t)if the property is a right to acquire shares or units under an agreement, any amount required by paragraph 164(6.1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the right;
(u)where the property was at the end of February 22, 1994 a non-qualifying real property (within the meaning assigned by subsection 110.6(1) as that subsection applies to the 1994 taxation year) of a taxpayer, any amount required by paragraph 110.6(21)(b) to be deducted in computing the adjusted cost base to the taxpayer of the property;
(v)where the taxpayer elected under subsection 110.6(19) in respect of the property, any amount required by subsection 110.6(22) to be deducted in computing the adjusted cost base to the taxpayer of the property at that time;
(w)if the property was acquired under a derivative forward agreement, any amount deductible in respect of the property under paragraph 20(1)(xx) in computing the income of the taxpayer for a taxation year; and
(x)if the property is disposed of under a derivative forward agreement, any amount deductible in respect of the property under paragraph 20(1)(xx) in computing the income of the taxpayer for the taxation year that includes that time.
Marginal note:Election
(2.1)For the purpose of paragraph 53(2)(s), where in a taxation year a taxpayer receives an amount that would, but for this subsection, be included in the taxpayer’s income under paragraph 12(1)(x) in respect of the cost of a property (other than depreciable property) acquired by the taxpayer in the year, in the 3 taxation years preceding the year or in the taxation year following the year, the taxpayer may elect under this subsection on or before the date on or before which the taxpayer’s return of income under this Part for the year is required to be filed or, where the property is acquired in the following year, for that following year, to reduce the cost of the property by such amount as the taxpayer specifies, not exceeding the least of
(a)the adjusted cost base, determined without reference to paragraph 53(2)(s), at the time the property was acquired,
(b)the amount so received by the taxpayer, and
(c)where the taxpayer has disposed of the property before the year, nil.
(3)[Repealed, 2001, c. 17, s. 36(13)]
Marginal note:Recomputation of adjusted cost base on transfers and deemed dispositions
(4)If at any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property and the proceeds of disposition of the property are determined under paragraph 48.1(1)(c), section 70 or 73, subsection 85(1), paragraph 87(4)(a) or (c) or 88(1)(a), subsection 97(2) or 98(2), paragraph 98(3)(f) or (5)(f), subsection 104(4), paragraph 107(2)(a) or (2.1)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,
(a)there shall be deducted after that time in computing the adjusted cost base to the person or partnership (in this subsection referred to as the “transferee”) who acquires or reacquires the property at or immediately after that time the amount, if any, by which
(i)the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the vendor of the property,
exceeds
(ii)the amount that would be the vendor’s capital gain for the year from that disposition if this Act were read without reference to subparagraph 40(1)(a)(iii) and subsection 100(2); and
(b)the amount determined under paragraph 53(4)(a) in respect of that disposition shall be added after that time in computing the adjusted cost base to the transferee of the property.
Marginal note:Recomputation of adjusted cost base on other transfer
(5)Where
(a)at any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property to another person or partnership (in this subsection referred to as the “transferee”),
(b)immediately before that time, the vendor and the transferee do not deal with each other at arm’s length or would not deal with each other at arm’s length if paragraph 80(2)(j) applied for the purpose of this subsection,
(c)paragraph 53(5)(b) would apply in respect of the disposition if each right referred to in paragraph 251(5)(b) that is a right of the transferee to acquire the specified property from the vendor or a right of the transferee to acquire other property as part of a transaction or event or series of transactions or events that includes the disposition were not taken into account, and
(d)the proceeds of the disposition are not determined under any of the provisions referred to in subsection 53(4),
the following rules apply:
(e)there shall be deducted after that time in computing the adjusted cost base to the transferee of the property 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 vendor of the property immediately before that time
exceeds
(ii)the amount that would be the vendor’s capital gain for the year from that disposition if this Act were read without reference to subparagraph 40(1)(a)(iii) and subsection 100(2), and
(f)the amount determined under paragraph 53(5)(e) in respect of that disposition shall be added after that time in computing the adjusted cost base to the transferee of the property.
Marginal note:Recomputation of adjusted cost base on amalgamation
(6)Where a capital property that is a specified property is acquired by a new corporate entity at any time as a result of the amalgamation or merger of 2 or more predecessor corporations,
(a)there shall be deducted after that time in computing the adjusted cost base to the new entity of the property the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to a predecessor corporation of the property, unless those amounts are otherwise deducted under that paragraph in computing the adjusted cost base to the new entity of the property; and
(b)the amount deducted under paragraph 53(6)(a) in respect of the acquisition shall be added after that time in computing the adjusted cost base to the new entity of the property.
Marginal note:Definitions
54In this Subdivision,
adjusted cost baseto a taxpayer of any property at any time means, except as otherwise provided,
(a)where the property is depreciable property of the taxpayer, the capital cost to the taxpayer of the property as of that time, and
(b)in any other case, the cost to the taxpayer of the property adjusted, as of that time, in accordance with section 53,
except that
(c)for greater certainty, where any property (other than an interest in or a share of the capital stock of a flow-through entity within the meaning assigned by subsection 39.1(1) that was last reacquired by the taxpayer as a result of an election under subsection 110.6(19)) of the taxpayer is property that was reacquired by the taxpayer after having been previously disposed of by the taxpayer, no adjustment to the cost to the taxpayer of the property that was required to be made under section 53 before its reacquisition by the taxpayer shall be made under that section to the cost to the taxpayer of the property as reacquired property of the taxpayer, and
(d)in no case shall the adjusted cost base to a taxpayer of any property at any time be less than nil; (prix de base rajusté)
capital propertyof a taxpayer means
(a)any depreciable property of the taxpayer, and
(b)any property (other than depreciable property), any gain or loss from the disposition of which would, if the property were disposed of, be a capital gain or a capital loss, as the case may be, of the taxpayer; (immobilisations)
disposition[Repealed, 2001, c. 17, s. 37]
eligible capital property[Repealed, 2016, c. 12, s. 17]
exemption threshold, of a taxpayer at a particular time in respect of a flow-through share class of property, means the amount determined by the formula
A – B
where
(a)the total of all amounts, each of which is an amount that would be the cost to the taxpayer, computed without reference to subsection 66.3(3), of a flow-through share that was included at any time before the particular time in the flow-through share class of property and that was issued by a corporation to the taxpayer on or after the taxpayer’s fresh-start date in respect of the flow-through share class of property at that time, other than a flow-through share that the taxpayer was obligated, before March 22, 2011, to acquire pursuant to the terms of a flow-through share agreement entered into between the corporation and the taxpayer, and
(b)the total of all amounts, each of which is an amount that would be the adjusted cost base to the taxpayer of an interest in a partnership — computed as if subparagraph 53(1)(e)(vii.1) and clauses 53(2)(c)(ii)(C) and (D) did not apply to any amount incurred by the partnership in respect of a flow-through share held by the partnership, either directly or indirectly through another partnership — that was included at any time before the particular time in the flow-through share class of property, if
(i)the taxpayer
(A)acquired the interest on or after the taxpayer’s fresh-start date in respect of the flow-through share class of property at the particular time (other than an interest that the taxpayer was obligated, before August 16, 2011, to acquire pursuant to the terms of an agreement in writing entered into by the taxpayer), or
(B)made a contribution of capital to the partnership on or after August 16, 2011,
(ii)at any time after the taxpayer acquired the interest or made the contribution of capital, the taxpayer is deemed by subsection 66(18) to have made or incurred an outlay or expense in respect of a flow-through share held by the partnership, either directly or indirectly through another partnership, and
(iii)at any time between the time that the taxpayer acquired the interest or made the contribution of capital and the particular time, more than 50% of the fair market value of the assets of the partnership is attributable to property included in a flow-through share class of property, and
(a)the total of all amounts, each of which is a capital gain from a disposition of a property included in the flow-through share class of property, other than a capital gain referred to in paragraph 38.1(a), at an earlier time that is
(i)before the particular time, and
(ii)after the first time that the taxpayer acquired a flow-through share referred to in paragraph (a) of the description of A or acquired a partnership interest referred to in paragraph (b) of the description of A, and
(b)the exemption threshold of the taxpayer in respect of the flow-though share class of property immediately before that earlier time; (seuil d’exonération)
flow-through share class of propertymeans a group of properties,
(a)in respect of a class of shares of the capital stock of a corporation, each of which is
(i)a share of the class, if any share of the class or any right described in subparagraph (ii) is, at any time, a flow-through share to any person,
(ii)a right to acquire a share of the class, if any share of that class or any right described in this subparagraph is, at any time, a flow-through share to any person, or
(iii)a property that is an identical property of a property described in subparagraph (i) or (ii), or
(b)each of which is an interest in a partnership, if at any time more than 50% of the fair market value of the partnership’s assets is attributable to property included in a flow-through share class of property; (catégorie de biens constituée d’actions accréditives)
fresh-start date, of a taxpayer at a particular time in respect of a flow-through share class of property, means
(a)in the case of a partnership interest that is included in the flow-through share class of property, the day that is the later of
(i)August 16, 2011, and
(ii)the last day, if any, before the particular time, on which the taxpayer held an interest in the partnership, and
(b)in the case of any other property that is included in the flow-though share class of property, the day that is the later of
(i)March 22, 2011, and
(ii)the last day, if any, before the particular time, on which the taxpayer disposed of all property included in the flow-through share class of property; (date de nouveau départ)
listed personal propertyof a taxpayer means the taxpayer’s personal-use property that is all or any portion of, or any interest in or right to — or, for civil law, any right in or to — any
(a)print, etching, drawing, painting, sculpture, or other similar work of art,
(b)jewellery,
(c)rare folio, rare manuscript, or rare book,
(d)stamp, or
(e)coin; (biens meubles déterminés)
personal-use propertyof a taxpayer includes
(a)property owned by the taxpayer that is used primarily for the personal use or enjoyment of the taxpayer or for the personal use or enjoyment of one or more individuals each of whom is
(i)the taxpayer,
(ii)a person related to the taxpayer, or
(iii)where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary,
(b)any debt owing to the taxpayer in respect of the disposition of property that was the taxpayer’s personal-use property, and
(c)any property of the taxpayer that is an option to acquire property that would, if the taxpayer acquired it, be personal-use property of the taxpayer,
andpersonal-use propertyof a partnership includes any partnership property that is used primarily for the personal use or enjoyment of any member of the partnership or for the personal use or enjoyment of one or more individuals each of whom is a member of the partnership or a person related to such a member; (biens à usage personnel)
principal residenceof a taxpayer for a taxation year means a particular property that is a housing unit, a leasehold interest in a housing unit or a share of the capital stock of a co-operative housing corporation acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, if
(a)where the taxpayer is an individual other than a personal trust, the housing unit was ordinarily inhabited in the year by the taxpayer, by the taxpayer’s spouse or common-law partner or former spouse or common-law partner or by a child of the taxpayer,
(a.1)where the taxpayer is a personal trust, the housing unit was ordinarily inhabited in the calendar year ending in the year by a specified beneficiary of the trust for the year, by the spouse or common-law partner or former spouse or common-law partner of such a beneficiary or by a child of such a beneficiary, or
(b)where the taxpayer is a personal trust or an individual other than a trust, the taxpayer
(i)elected under subsection 45(2) that relates to the change in use of the particular property in the year or a preceding taxation year, other than an election rescinded under subsection 45(2) in the taxpayer’s return of income for the year or a preceding taxation year, or
(ii)elected under subsection 45(3) that relates to a change in use of the particular property in a subsequent taxation year,
except that, subject to section 54.1, a particular property shall be considered not to be a taxpayer’s principal residence for a taxation year
(c)where the taxpayer is an individual other than a personal trust, unless the particular property was designated by the taxpayer in prescribed form and manner to be the taxpayer’s principal residence for the year and no other property has been designated for the purposes of this definition for the year
(i)where the year is before 1982, by the taxpayer, or
(ii)where the year is after 1981,
(A)by the taxpayer,
(B)by a person who was throughout the year the taxpayer’s spouse or common-law partner (other than a spouse or common-law partner who was throughout the year living apart from, and was separated under a judicial separation or written separation agreement from, the taxpayer),
(C)by a person who was the taxpayer’s child (other than a child who was at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older), or
(D)where the taxpayer was not at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older, by a person who was the taxpayer’s
(I)mother or father, or
(II)brother or sister, where that brother or sister was not at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older,
(c.1)where the taxpayer is a personal trust, unless
(i)the particular property was designated by the trust in prescribed form and manner to be the taxpayer’s principal residence for the year,
(ii)the trust specifies in the designation each individual (in this definition referred to as a “specified beneficiary” of the trust for the year) who, in the calendar year ending in the year,
(A)is beneficially interested in the trust, and
(B)except where the trust is entitled to designate it for the year solely because of paragraph (b), ordinarily inhabited the housing unit or has a spouse or common-law partner, former spouse or common-law partner or child who ordinarily inhabited the housing unit,
(iii)no corporation (other than a registered charity) or partnership is beneficially interested in the trust at any time in the year,
(iii.1)if the year begins after 2016, the trust is, in the year,
(A)a trust
(I)for which a day is to be determined under paragraph 104(4)(a), (a.1) or (a.4) by reference to the death or later death, as the case may be, that has not occurred before the beginning of the year, of an individual who is resident in Canada during the year, and
(II)a specified beneficiary of which for the year is the individual referred to in subclause (I),
(B)a trust
(I)that is aqualified disability trust(as defined in subsection 122(3)) for the year, and
(II)anelecting beneficiary(in this clause, as defined in subsection 122(3)) of which for the year is
1resident in Canada during the year,
2a specified beneficiary of the trust for the year, and
3a spouse, common-law partner, former spouse or common-law partner or child of thesettlor(in this subparagraph, as defined in subsection 108(1)) of the trust, or
(C)a trust
(I)a specified beneficiary of which for the year is an individual
1who is resident in Canada during the year,
2who has not attained 18 years of age before the end of the year, and
3a mother or father of whom is a settlor of the trust, and
(II)in respect of which either of the following conditions is met:
1no mother or father of the individual referred to in subclause (I) is alive at the beginning of the year, or
2the trust arose before the beginning of the year on and as a consequence of the death of a mother or father of the individual referred to in subclause (I), and
(iv)no other property has been designated for the purpose of this definition for the calendar year ending in the year by any specified beneficiary of the trust for the year, by a person who was throughout that calendar year such a beneficiary’s spouse or common-law partner (other than a spouse or common-law partner who was throughout that calendar year living apart from, and was separated pursuant to a judicial separation or written separation agreement from, the beneficiary), by a person who was such a beneficiary’s child (other than a child who was during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over) or, where such a beneficiary was not during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over, by a person who was such a beneficiary’s
(A)mother or father, or
(B)brother or sister, where that brother or sister was not during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over, or
(d)because of paragraph (b), if solely because of that paragraph the property would, but for this paragraph, have been a principal residence of the taxpayer for 4 or more preceding taxation years,
and, for the purpose of this definition,
(e)the principal residence of a taxpayer for a taxation year shall be deemed to include, except where the particular property consists of a share of the capital stock of a co-operative housing corporation, the land subjacent to the housing unit and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the housing unit as a residence, except that where the total area of the subjacent land and of that portion exceeds 1/2 hectare, the excess shall be deemed not to have contributed to the use and enjoyment of the housing unit as a residence unless the taxpayer establishes that it was necessary to such use and enjoyment, and
(f)a particular property designated under paragraph (c.1) by a trust for a year shall be deemed to be property designated for the purposes of this definition by each specified beneficiary of the trust for the calendar year ending in the year; (résidence principale)
proceeds of dispositionof property includes,
(a)the sale price of property that has been sold,
(b)compensation for property unlawfully taken,
(c)compensation for property destroyed, and any amount payable under a policy of insurance in respect of loss or destruction of property,
(d)compensation for property taken under statutory authority or the sale price of property sold to a person by whom notice of an intention to take it under statutory authority was given,
(e)compensation for property injuriously affected, whether lawfully or unlawfully or under statutory authority or otherwise,
(f)compensation for property damaged and any amount payable under a policy of insurance in respect of damage to property, except to the extent that such compensation or amount, as the case may be, has within a reasonable time after the damage been expended on repairing the damage,
(g)an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec, plus any amount received by the taxpayer out of the proceeds of the sale,
(h)any amount included in computing a taxpayer’s proceeds of disposition of the property because of section 79, and
(i)in the case of a share, an amount deemed by subparagraph 88(2)(b)(ii) not to be a dividend on that share,
but notwithstanding any other provision of this Part, does not include
(j)any amount that would otherwise be proceeds of disposition of a share to the extent that the amount is deemed by subsection 84(2) or (3) to be a dividend received except to the extent the dividend is deemed
(i)by paragraph 55(2)(b) to be proceeds of disposition of the share, or
(ii)by subparagraph 88(2)(b)(ii) not to be a dividend, or
(k)any amount that would otherwise be proceeds of disposition of property of a taxpayer to the extent that the amount is deemed by subsection 84.1(1), 212.1(1.1) or 212.2(2) to be a dividend paid to the taxpayer or, if the taxpayer is a partnership, to a member of the taxpayer; (produit de disposition)
specified propertyof a taxpayer is capital property of the taxpayer that is
(a)a share,
(b)a capital interest in a trust,
(c)an interest in a partnership, or
(d)an option to acquire specified property of the taxpayer; (bien déterminé)
superficial lossof a taxpayer means the taxpayer’s loss from the disposition of a particular property where
(a)during the period that begins 30 days before and ends 30 days after the disposition, the taxpayer or a person affiliated with the taxpayer acquires a property (in this definition referred to as the “substituted property”) that is, or is identical to, the particular property, and
(b)at the end of that period, the taxpayer or a person affiliated with the taxpayer owns or had a right to acquire the substituted property,
except where the disposition was
(c)a disposition deemed to have been made by subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 138.2(4) or 142.5(2), section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),
(d)the expiry of an option,
(e)a disposition to which paragraph 40(2)(e.1) applies,
(f)a disposition by a taxpayer that was subject to a loss restriction event within 30 days after the disposition,
(g)a disposition by a person that, within 30 days after the disposition, became or ceased to be exempt from tax under this Part on its taxable income, or
(h)a disposition to which subsection 40(3.4) or 69(5) applies,
and, for the purpose of this definition,
(i)a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property, and
(j)a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 2013, deemed to be a property that is identical to equity in the SIFT wind-up entity. (perte apparente)
Marginal note:Exception to principal residence rules
54.1(1)A taxation year in which a taxpayer does not ordinarily inhabit the taxpayer’s property as a consequence of the relocation of the place of employment of the taxpayer or the taxpayer’s spouse or common-law partner while the taxpayer or the taxpayer’s spouse or common-law partner, as the case may be, is employed by an employer who is not a person to whom the taxpayer or the taxpayer’s spouse or common-law partner is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definitionprincipal residencein section 54 if
(a)the property subsequently becomes ordinarily inhabited by the taxpayer during the term of the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s employment by that employer or before the end of the taxation year immediately following the taxation year in which the taxpayer’s or the spouse’s or common-law partner’s employment by that employer terminates; or
(b)the taxpayer dies during the term of the taxpayer’s or the spouse’s or common-law partner’s employment by that employer.
Marginal note:Definition ofproperty
(2)In this section,property, in relation to a taxpayer, means a housing unit
(a)owned by the taxpayer,
(b)in respect of which the taxpayer has a leasehold interest, or
(c)in respect of which the taxpayer owned a share of the capital stock of a co-operative housing corporation if the share was acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporation
whether jointly with another person or otherwise in the year and that at all times was at least 40 kilometres farther from the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s new place of employment than was the taxpayer’s subsequent place or places of residence.
Marginal note:Certain shares deemed to be capital property
54.2Where any person has disposed of property that consisted of all or substantially all of the assets used in an active business carried on by that person to a corporation for consideration that included shares of the corporation, the shares shall be deemed to be capital property of the person.
Marginal note:Definitions
55(1)In this section,
distributionmeans a direct or indirect transfer of property of a corporation (referred to in this section as the “distributing corporation”) to one or more corporations (each of which is referred to in this section as a “transferee corporation”) where, in respect of each type of property owned by the distributing corporation immediately before the transfer, each transferee corporation receives property of that type the fair market value of which is equal to or approximates the amount determined by the formula
A × B/C
where
permitted acquisition, in relation to a distribution by a distributing corporation, means an acquisition of property by a person or partnership on, or as part of,
(a)a distribution, or
(b)a permitted exchange or permitted redemption in relation to a distribution by another distributing corporation; (acquisition autorisée)
permitted exchange, in relation to a distribution by a distributing corporation, means
(a)an exchange of shares for shares of the capital stock of the distributing corporation to which subsection 51(1) or 86(1) applies or would, if the shares were capital property to the holder thereof, apply, other than an exchange that resulted in an acquisition of control of the distributing corporation by any person or group of persons, and
(b)an exchange of shares of the capital stock of the distributing corporation by one or more shareholders of the distributing corporation (each of whom is referred to in this paragraph as a “participant”) for shares of the capital stock of another corporation (referred to in this paragraph as the “acquiror”) in contemplation of the distribution where
(i)no share of the capital stock of the acquiror outstanding immediately after the exchange (other than directors’ qualifying shares) is owned at that time by any person or partnership other than a participant,
and either
(ii)the acquiror owns, immediately before the distribution, all the shares each of which is a share of the capital stock of the distributing corporation that was owned immediately before the exchange by a participant, or
(iii)the fair market value, immediately before the distribution, of each participant’s shares of the capital stock of the acquiror is equal to or approximates the amount determined by the formula
(A × B/C) + D
where
permitted redemption, in relation to a distribution by a distributing corporation, means
(a)a redemption or purchase for cancellation by the distributing corporation, as part of the reorganization in which the distribution was made, of all the shares of its capital stock that were owned, immediately before the distribution, by a transferee corporation in relation to the distributing corporation,
(b)a redemption or purchase for cancellation by a transferee corporation in relation to the distributing corporation, or by a corporation that, immediately after the redemption or purchase, was a subsidiary wholly-owned corporation of the transferee corporation, as part of the reorganization in which the distribution was made, of all of the shares of the capital stock of the transferee corporation or the subsidiary wholly-owned corporation that were acquired by the distributing corporation in consideration for the transfer of property received by the transferee corporation on the distribution, and
(c)a redemption or purchase for cancellation by the distributing corporation, in contemplation of the distribution, of all the shares of its capital stock each of which is
(i)a share of a specified class the cost of which, at the time of its issuance, to its original owner was equal to the fair market value at that time of the consideration for which it was issued, or
(ii)a share that was issued, in contemplation of the distribution, by the distributing corporation in exchange for a share described in subparagraph 55(1) permitted redemption (c)(i); (rachat autorisé)
qualified person, in relation to a distribution, means a person or partnership with whom the distributing corporation deals at arm’s length at all times during the course of the series of transactions or events that includes the distribution if
(a)at any time before the distribution,
(i)all of the shares of each class of the capital stock of the distributing corporation that includes shares that cause that person or partnership to be a specified shareholder of the distributing corporation (in this definition all of those shares in all of those classes are referred to as the “exchanged shares”) are, in the circumstances described in paragraph (a) of the definitionpermitted exchange, exchanged for consideration that consists solely of shares of a specified class of the capital stock of the distributing corporation (in this definition referred to as the “new shares”), or
(ii)the terms or conditions of all of the exchanged shares are amended (which shares are in this definition referred to after the amendment as the “amended shares”) and the amended shares are shares of a specified class of the capital stock of the distributing corporation,
(b)immediately before the exchange or amendment, the exchanged shares are listed on a designated stock exchange,
(c)immediately after the exchange or amendment, the new shares or the amended shares, as the case may be, are listed on a designated stock exchange,
(d)the exchanged shares would be shares of a specified class if they were not convertible into, or exchangeable for, other shares,
(e)the new shares or the amended shares, as the case may be, and the exchanged shares are non-voting in respect of the election of the board of directors of the distributing corporation except in the event of a failure or default under the terms or conditions of the shares, and
(f)no holder of the new shares or the amended shares, as the case may be, is entitled to receive on the redemption, cancellation or acquisition of the new shares or the amended shares, as the case may be, by the distributing corporation or by any person with whom the distributing corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the exchanged shares were issued and the amount of any unpaid dividends on the new shares or on the amended shares, as the case may be; (personne admissible)
safe-income determination timefor a transaction or event or a series of transactions or events means the time that is the earlier of
(a)the time that is immediately after the earliest disposition or increase in interest described in any of subparagraphs 55(3)(a)(i) to 55(3)(a)(v) that resulted from the transaction, event or series, and
(b)the time that is immediately before the earliest time that a dividend is paid as part of the transaction, event or series; (moment de détermination du revenu protégé)
specified classmeans a class of shares of the capital stock of a distributing corporation where
(a)the paid-up capital in respect of the class immediately before the beginning of the series of transactions or events that includes a distribution by the distributing corporation was not less than the fair market value of the consideration for which the shares of that class then outstanding were issued,
(b)under neither the terms and conditions of the shares nor any agreement in respect of the shares are the shares convertible into or exchangeable for shares other than shares of a specified class or shares of the capital stock of a transferee corporation in relation to the distributing corporation,
(c)no holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares, and
(d)the shares are non-voting in respect of the election of the board of directors except in the event of a failure or default under the terms or conditions of the shares; (catégorie exclue)
specified corporationin relation to a distribution means a distributing corporation
(a)that is a public corporation or a specified wholly-owned corporation of a public corporation,
(b)shares of the capital stock of which are exchanged for shares of the capital stock of another corporation (referred to in this definition and subsection (3.02) as an “acquiror”) in an exchange to which the definitionpermitted exchangein this subsection would apply if that definition were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition,
(c)that does not make a distribution, to a corporation that is not an acquiror, after 1998 and before the day that is three years after the day on which the shares of the capital stock of the distributing corporation are exchanged in a transaction described in paragraph (b), and
(d)no acquiror in relation to which makes a distribution after 1998 and before the day that is three years after the day on which the shares of the capital stock of the distributing corporation are exchanged in a transaction described in paragraph (b),
and for the purposes of paragraphs (c) and (d)
(e)a corporation that is formed by an amalgamation of two or more other corporations is deemed to be the same corporation as, and a continuation of, each of the other corporations, and
(f)where there has been a winding-up of a corporation to which subsection 88(1) applies, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary; (société déterminée)
specified wholly-owned corporationof a public corporation means a corporation all of the outstanding shares of the capital stock of which (other than directors’ qualifying shares and shares of a specified class) are held by
(a)the public corporation,
(b)a specified wholly-owned corporation of the public corporation, or
(c)any combination of corporations described in paragraph (a) or (b). (filiale à cent pour cent déterminée)
Marginal note:Deemed proceeds or gain
(2)If this subsection applies to a taxable dividend received by a dividend recipient, notwithstanding any other provision of this Act, the amount of the dividend (other than the portion of it, if any, subject to tax under Part IV that is not refunded as a consequence of the payment of a dividend by a corporation where the payment is part of the series referred to in subsection (2.1)) is deemed
(a)not to be a dividend received by the dividend recipient;
(b)if the dividend is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies, to be proceeds of disposition of the share that is redeemed, acquired or cancelled except to the extent that the dividend is otherwise included in computing those proceeds; and
(c)if paragraph (b) does not apply to the dividend, to be a gain of the dividend recipient, for the year in which the dividend was received, from the disposition of a capital property.
Marginal note:Application of subsection (2)
(2.1)Subsection (2) applies to a taxable dividend received by a corporation resident in Canada (in subsections (2) to (2.2) and (2.4) referred to as thedividend recipient) as part of a transaction or event or a series of transactions or events if
(a)the dividend recipient is entitled to a deduction in respect of the dividend under subsection 112(1) or (2) or 138(6);
(b)it is the case that
(i)one of the purposes of the payment or receipt of the dividend (or, in the case of a dividend under subsection 84(3), one of the results of which) is to effect a significant reduction in the portion of the capital gain that, but for the dividend, would have been realized on a disposition at fair market value of any share of capital stock immediately before the dividend, or
(ii)the dividend (other than a dividend that is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies) is received on a share that is held as capital property by the dividend recipient and one of the purposes of the payment or receipt of the dividend is to effect
(A)a significant reduction in the fair market value of any share, or
(B)a significant increase in the cost of property, such that the amount that is the total of the cost amounts of all properties of the dividend recipient immediately after the dividend is significantly greater than the amount that is the total of the cost amounts of all properties of the dividend recipient immediately before the dividend; and
(c)the amount of the dividend exceeds the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received.
Marginal note:Special rule — amount of the stock dividend
(2.2)For the purpose of applying subsections (2), (2.1), (2.3) and (2.4), the amount of a stock dividend and the dividend recipient’s entitlement to a deduction under subsection 112(1) or (2) or 138(6) in respect of the amount of that dividend are to be determined as if paragraph (b) of the definitionamountin subsection 248(1) read as follows:
(b)in the case of a stock dividend paid by a corporation, the greater of
(i)the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend, and
(ii)the fair market value of the share or shares issued as a stock dividend at the time of payment,
Marginal note:Stock dividends and safe income
(2.3)If this subsection applies in respect of a stock dividend
(a)the amount of the stock dividend is deemed for the purpose of subsection (2) to be a separate taxable dividend to the extent of the portion of the amount that does not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received; and
(b)the amount of the separate taxable dividend referred to in paragraph (a) is deemed to reduce the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received.
Marginal note:Application of subsection (2.3)
(2.4)Subsection (2.3) applies in respect of a stock dividend if
(a)a dividend recipient holds a share upon which it receives the stock dividend;
(b)the fair market value of the share or shares issued as a stock dividend exceeds the amount by which the paid-up capital of the corporation that paid the stock dividend is increased because of the dividend; and
(c)subsection (2) would apply to the dividend if subsection (2.1) were read without reference to its paragraph (c).
Marginal note:Determination of reduction in fair market value
(2.5)For the purpose of applying clause (2.1)(b)(ii)(A), whether a dividend causes a significant reduction in the fair market value of any share is to be determined as if the fair market value of the share, immediately before the dividend, was increased by an amount equal to the amount, if any, by which the fair market value of the dividend received on the share exceeds the fair market value of the share.
Marginal note:Application
(3)Subsection 55(2) does not apply to any dividend received by a corporation (in this subsection and subsection 55(3.01) referred to as the “dividend recipient”)
(a)in the case of a dividend that is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies, if, as part of a transaction or event or a series of transactions or events as a part of which the dividend is received, there was not at any particular time
(i)a disposition of property, other than
(A)money disposed of on the payment of a dividend or on a reduction of the paid-up capital of a share, and
(B)property disposed of for proceeds that are not less than its fair market value,
to a person or partnership that was an unrelated person immediately before the particular time,
(ii)a significant increase (other than as a consequence of a disposition of shares of the capital stock of a corporation for proceeds of disposition that are not less than their fair market value) in the total direct interest in any corporation of one or more persons or partnerships that were unrelated persons immediately before the particular time,
(iii)a disposition, to a person or partnership who was an unrelated person immediately before the particular time, of
(A)shares of the capital stock of the corporation that paid the dividend (referred to in this paragraph and subsection 55(3.01) as the “dividend payer”), or
(B)property (other than shares of the capital stock of the dividend recipient) more than 10% of the fair market value of which was, at any time during the series, derived from any combination of shares of the capital stock and debt of the dividend payer,
(iv)after the time the dividend was received, a disposition, to a person or partnership that was an unrelated person immediately before the particular time, of
(A)shares of the capital stock of the dividend recipient, or
(B)property more than 10% of the fair market value of which was, at any time during the series, derived from any combination of shares of the capital stock and debt of the dividend recipient, and
(v)a significant increase in the total of all direct interests in the dividend payer of one or more persons or partnerships who were unrelated persons immediately before the particular time; or
(b)if the dividend was received
(i)in the course of a reorganization in which
(A)a distributing corporation made a distribution to one or more transferee corporations, and
(B)the distributing corporation was wound up or all of the shares of its capital stock owned by each transferee corporation immediately before the distribution were redeemed or cancelled otherwise than on an exchange to which subsection 51(1), 85(1) or 86(1) applies, and
(ii)on a permitted redemption in relation to the distribution or on the winding-up of the distributing corporation.
Marginal note:Interpretation for par. (3)(a)
(3.01)For the purposes of paragraph 55(3)(a),
(a)an unrelated person means a person (other than the dividend recipient) to whom the dividend recipient is not related or a partnership any member of which (other than the dividend recipient) is not related to the dividend recipient;
(b)a corporation that is formed by an amalgamation of 2 or more other corporations is deemed to be the same corporation as, and a continuation of, each of the other corporations;
(c)where there has been a winding-up of a corporation to which subsection 88(1) applies, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary;
(d)proceeds of disposition are to be determined without reference to
(i)subparagraph (j)(i) of the definitionproceeds of dispositionin section 54, and
(ii)section 93;
(e)notwithstanding any other provision of this Act, where a non-resident person disposes of a property in a taxation year and the gain or loss from the disposition is not included in computing the person’s taxable income earned in Canada for the year, the person is deemed to have disposed of the property for proceeds of disposition that are less than its fair market value unless, under the income tax laws of the country in which the person is resident, the gain or loss is computed as if the property were disposed of for proceeds of disposition that are not less than its fair market value and the gain or loss so computed is recognized for the purposes of those laws;
(f)a significant increase in the total direct interest in a corporation that would, but for this paragraph, be described in subparagraph (3)(a)(ii) is deemed not to be described in that subparagraph if the increase was the result of the issuance of shares of the capital stock of the corporation solely for money and the shares were redeemed, acquired or cancelled by the corporation before the dividend was received;
(g)a disposition of property that would, but for this paragraph, be described in subparagraph (3)(a)(i), or a significant increase in the total direct interest in a corporation that would, but for this paragraph, be described in subparagraph (3)(a)(ii), is deemed not to be described in those subparagraphs if
(i)the dividend payer was related to the dividend recipient immediately before the dividend was received,
(ii)the dividend payer did not, as part of the series of transactions or events that includes the receipt of the dividend, cease to be related to the dividend recipient,
(iii)the disposition or increase occurred before the dividend was received,
(iv)the disposition or increase was the result of the disposition of shares to, or the acquisition of shares of, a particular corporation, and
(v)at the time the dividend was received, all the shares of the capital stock of the dividend recipient and the dividend payer were owned by the particular corporation, a corporation that controlled the particular corporation, a corporation controlled by the particular corporation or any combination of those corporations; and
(h)a winding-up of a subsidiary wholly-owned corporation to which subsection 88(1) applies, or an amalgamation to which subsection 87(11) applies of a corporation with one or more subsidiary wholly-owned corporations, is deemed not to result in a significant increase in the total direct interest, or in the total of all direct interests, in the subsidiary or subsidiaries, as the case may be.
Marginal note:Distribution by a specified corporation
(3.02)For the purposes of the definitiondistributionin subsection (1), where the transfer referred to in that definition is by a specified corporation to an acquiror described in the definitionspecified corporationin subsection (1), the references in the definitiondistributionto
(a)“each type of property” shall be read as “property”; and
(b)“property of that type” shall be read as “property”.
Marginal note:Where paragraph (3)(b) not applicable
(3.1)Notwithstanding subsection 55(3), a dividend to which subsection 55(2) would, but for paragraph 55(3)(b), apply is not excluded from the application of subsection 55(2) where
(a)in contemplation of and before a distribution (other than a distribution by a specified corporation) made in the course of the reorganization in which the dividend was received, property became property of the distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation otherwise than as a result of
(i)an amalgamation of corporations each of which was related to the distributing corporation,
(ii)an amalgamation of a predecessor corporation of the distributing corporation and one or more corporations controlled by that predecessor corporation,
(iii)a reorganization in which a dividend was received to which subsection 55(2) would, but for paragraph 55(3)(b), apply, or
(iv)a disposition of property by
(A)the distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation to a corporation controlled by the distributing corporation or a predecessor corporation of the distributing corporation,
(B)a corporation controlled by the distributing corporation or by a predecessor corporation of the distributing corporation to the distributing corporation or predecessor corporation, as the case may be, or
(C)the distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation for consideration that consists only of money or indebtedness that is not convertible into other property, or of any combination thereof,
(b)the dividend was received as part of a series of transactions or events in which
(i)a person or partnership (referred to in this subparagraph as the “vendor”) disposed of property and
(A)the property is
(I)a share of the capital stock of a distributing corporation that made a distribution as part of the series or of a transferee corporation in relation to the distributing corporation, or
(II)property 10% or more of the fair market value of which was, at any time during the course of the series, derived from one or more shares described in subclause 55(3.1)(b)(i)(A)(I),
(B)the vendor (other than a qualified person in relation to the distribution) was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, and
(C)the property or any other property (other than property received by the transferee corporation on the (distribution) acquired by any person or partnership in substitution therefor was acquired (otherwise than on a permitted acquisition, permitted exchange or permitted redemption in relation to the (distribution) by a person (other than the vendor) who was not related to the vendor or, as part of the series, ceased to be related to the vendor or by a partnership,
(ii)control of a distributing corporation that made a distribution as part of the series or of a transferee corporation in relation to the distributing corporation was acquired (otherwise than as a result of a permitted acquisition, permitted exchange or permitted redemption in relation to the (distribution) by any person or group of persons, or
(iii)in contemplation of a distribution by a distributing corporation, a share of the capital stock of the distributing corporation was acquired (otherwise than on a permitted acquisition or permitted exchange in relation to the distribution or on an amalgamation of 2 or more predecessor corporations of the distributing corporation) by
(A)a transferee corporation in relation to the distributing corporation or by a person or partnership with whom the transferee corporation did not deal at arm’s length from a person to whom the acquiror was not related or from a partnership,
(B)a person or any member of a group of persons who acquired control of the distributing corporation as part of the series,
(C)a particular partnership any interest in which is held, directly or indirectly through one or more partnerships, by a person referred to in clause 55(3.1)(b)(iii)(B), or
(D)a person or partnership with whom a person referred to in clause 55(3.1)(b)(iii)(B) or a particular partnership referred to in clause 55(3.1)(b)(iii)(C) did not deal at arm’s length,
(c)the dividend was received by a transferee corporation from a distributing corporation that, immediately after the reorganization in the course of which a distribution was made and the dividend was received, was not related to the transferee corporation and the total of all amounts each of which is the fair market value, at the time of acquisition, of a property that
(i)was acquired, as part of the series of transactions or events that includes the receipt of the dividend, by a person (other than the transferee corporation) who was not related to the transferee corporation or, as part of the series, ceased to be related to the transferee corporation or by a partnership, otherwise than
(A)as a result of a disposition
(I)in the ordinary course of business, or
(II)before the distribution for consideration that consists solely of money or indebtedness that is not convertible into other property, or of any combination of the two,
(B)on a permitted acquisition in relation to a distribution, or
(C)as a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, and
(ii)is a property (other than money, indebtedness that is not convertible into other property, a share of the capital stock of the transferee corporation and property more than 10% of the fair market value of which is attributable to one or more such shares)
(A)that was received by the transferee corporation on the distribution,
(B)more than 10% of the fair market value of which was, at any time after the distribution and before the end of the series, attributable to property (other than money and indebtedness that is not convertible into other property) described in clause 55(3.1)(c)(ii)(A) or 55(3.1)(c)(ii)(C), or
(C)to which, at any time during the course of the series, the fair market value of property described in clause 55(3.1)(c)(ii)(A) was wholly or partly attributable
is greater than 10% of the fair market value, at the time of the distribution, of all the property (other than money and indebtedness that is not convertible into other property) received by the transferee corporation on the distribution, or
(d)the dividend was received by a distributing corporation that, immediately after the reorganization in the course of which a distribution was made and the dividend was received, was not related to the transferee corporation that paid the dividend and the total of all amounts each of which is the fair market value, at the time of acquisition, of a property that
(i)was acquired, as part of the series of transactions or events that includes the receipt of the dividend, by a person (other than the distributing corporation) who was not related to the distributing corporation or, as part of the series, ceased to be related to the distributing corporation or by a partnership, otherwise than
(A)as a result of a disposition
(I)in the ordinary course of business, or
(II)before the distribution for consideration that consists solely of money or indebtedness that is not convertible into other property, or of any combination of the two,
(B)on a permitted acquisition in relation to a distribution, or
(C)as a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, and
(ii)is a property (other than money, indebtedness that is not convertible into other property, a share of the capital stock of the distributing corporation and property more than 10% of the fair market value of which is attributable to one or more such shares)
(A)that was owned by the distributing corporation immediately before the distribution and not disposed of by it on the distribution,
(B)more than 10% of the fair market value of which was, at any time after the distribution and before the end of the series, attributable to property (other than money and indebtedness that is not convertible into other property) described in clause 55(3.1)(d)(ii)(A) or 55(3.1)(d)(ii)(C), or
(C)to which, at any time during the course of the series, the fair market value of property described in clause 55(3.1)(d)(ii)(A) was wholly or partly attributable
is greater than 10% of the fair market value at the time of the distribution, of all the property (other than money and indebtedness that is not convertible into other property) owned immediately before that time by the distributing corporation and not disposed of by it on the distribution.
Marginal note:Interpretation of paragraph (3.1)(b)
(3.2)For the purpose of paragraph 55(3.1)(b),
(a)in determining whether the vendor referred to in subparagraph 55(3.1)(b)(i) is at any time a specified shareholder of a transferee corporation or of a distributing corporation, the references in the definitionspecified shareholderin subsection 248(1) to “taxpayer” shall be read as “person or partnership”;
(b)a corporation that is formed by the amalgamation of 2 or more corporations (each of which is referred to in this paragraph as a “predecessor corporation”) shall be deemed to be the same corporation as, and a continuation of, each of the predecessor corporations;
(c)subject to paragraph 55(3.2)(d), each particular person who acquired a share of the capital stock of a distributing corporation in contemplation of a distribution by the distributing corporation shall be deemed, in respect of that acquisition, not to be related to the person from whom the particular person acquired the share unless
(i)the particular person acquired all the shares of the capital stock of the distributing corporation that were owned, at any time during the course of the series of transactions or events that included the distribution and before the acquisition, by the other person, or
(ii)immediately after the reorganization in the course of which the distribution was made, the particular person was related to the distributing corporation;
(d)where a share is acquired by an individual from a personal trust in satisfaction of all or a part of the individual’s capital interest in the trust, the individual shall be deemed, in respect of that acquisition, to be related to the trust;
(e)subject to paragraph 55(3.2)(f), where at any time a share of the capital stock of a corporation is redeemed or cancelled (otherwise than on an amalgamation where the only consideration received or receivable for the share by the shareholder on the amalgamation is a share of the capital stock of the corporation formed by the amalgamation), the corporation shall be deemed to have acquired the share at that time;
(f)where a share of the capital stock of a corporation is redeemed, acquired or cancelled by the corporation pursuant to the exercise of a statutory right of dissent by the holder of the share, the corporation shall be deemed not to have acquired the share;
(g)control of a corporation shall be deemed not to have been acquired by a person or group of persons where it is so acquired solely because of
(i)the incorporation of the corporation, or
(ii)the acquisition by an individual of one or more shares for the sole purpose of qualifying as a director of the corporation; and
(h)in relation to a distribution each corporation (other than a qualified person in relation to the distribution) that is a shareholder and a specified shareholder of the distributing corporation at any time during the course of a series of transactions or events, a part of which includes the distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.
Interpretation ofspecified shareholderchanged
(3.3)In determining whether a person is a specified shareholder of a corporation for the purposes of subparagraph 55(3.1)(b)(i) and paragraph 55(3.2)(h), the reference in the definitionspecified shareholderin subsection 248(1) to “or of any other corporation that is related to the corporation” shall be read as “or of any other corporation that is related to the corporation and that has a significant direct or indirect interest in any issued shares of the capital stock of the corporation”.
Marginal note:Specified shareholder exclusion
(3.4)In determining whether a person is a specified shareholder of a corporation for the purposes of the definitionqualified personin subsection (1), subparagraph (3.1)(b)(i) and paragraph (3.2)(h) as it applies for the purpose of subparagraph (3.1)(b)(iii), the reference to “not less than 10% of the issued shares of any class of the capital stock of the corporation” in the definitionspecified shareholderin subsection 248(1) is to be read as “not less than 10% of the issued shares of any class of the capital stock of the corporation, other than shares of a specified class (within the meaning of subsection 55(1))”.
Marginal note:Amalgamation of related corporations
(3.5)For the purposes of paragraphs (3.1)(c) and (d), a corporation formed by an amalgamation of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) that were related to each other immediately before the amalgamation, is deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.
Marginal note:Avoidance of subsection (2)
(4)For the purposes of this section, where it can reasonably be considered that one of the main purposes of one or more transactions or events was to cause 2 or more persons to be related to each other or to cause a corporation to control another corporation, so that subsection 55(2) would, but for this subsection, not apply to a dividend, those persons shall be deemed not to be related to each other or the corporation shall be deemed not to control the other corporation, as the case may be.
Marginal note:Applicable rules
(5)For the purposes of this section,
(a)where a dividend referred to in subsection 55(2) was received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series is deemed to be a portion of a capital gain attributable to anything other than income;
(b)the income earned or realized by a corporation for a period throughout which it was resident in Canada and not a private corporation shall be deemed to be the total of
(i)its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation by reason of section 37.1 of this Act or paragraph 20(1)(gg) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,
(ii)the amount, if any, by which
(A)the amount, if any, by which the total of the capital gains of the corporation for the period exceeds the total of the taxable capital gains of the corporation for the period
exceeds
(B)the amount, if any, by which the total of the capital losses of the corporation for the period exceeds the total of the allowable capital losses of the corporation for the period,
(iii)the total of all amounts each of which is an amount required to have been included under this subparagraph as it read in its application to a taxation year that ended before February 28, 2000,
(iv)the amount, if any, by which
(A)1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,
exceeds
(B)where the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formula
V + W
where
(C)in any other case, nil, and
(v)the amount, if any, by which
(A)the total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,
exceeds
(B)where the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after October 17, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formula
X + Y
where
(C)in any other case, nil;
(c)the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation under section 37.1 of this Act, as that section applies for taxation years that ended before 1995, or paragraph 20(1)(gg) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952;
(d)the income earned or realized by a corporation (referred to in this paragraph as the “affiliate”) for a period ending at a time when the affiliate was a foreign affiliate of another corporation is deemed to be the lesser of
(i)the amount that would, if theIncome Tax Regulationswere read without reference to their subsection 5905(5.6), be the tax-free surplus balance (within the meaning of their subsection 5905(5.5)) of the affiliate in respect of the other corporation at that time, and
(ii)the fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;
(e)in determining whether 2 or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,
(i)a person shall be deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person, except in the case where the dividend was received or paid, as part of a transaction or event or a series of transactions or events, by a corporation of which a share of the capital stock is a qualified small business corporation share or ashare of the capital stock of a family farm or fishing corporationwithin the meaning of subsection 110.6(1),
(ii)where at any time a person is related to each beneficiary (other than a registered charity) under a trust who is or may (otherwise than by reason of the death of another beneficiary under the trust) be entitled to share in the income or capital of the trust, the person and the trust shall be deemed to be related at that time to each other and, for this purpose, a person shall be deemed to be related to himself, herself or itself,
(iii)a trust and a person shall be deemed not to be related to each other unless they are deemed by paragraph 55(3.2)(d) or subparagraph 55(5)(e)(ii) to be related to each other or the person is a corporation that is controlled by the trust, and
(iv)this Act shall be read without reference to subsection 251(3) and paragraph 251(5)(b); and
(f)unless subsection (2.3) applies, if a corporation has received a dividend any portion of which is a taxable dividend (such a portion referred to as thetaxable partin this paragraph), as part of a transaction or event or series of transactions or events
(i)a portion of the dividend is deemed to be a separate taxable dividend equal to the lesser of
(A)the taxable part, and
(B)the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received, and
(ii)the amount, if any, by which the taxable part exceeds the portion referred to in subparagraph (i) is deemed to be a separate taxable dividend.
Marginal note:Unlisted shares deemed listed
(6)A share (in this subsection referred to as the “reorganization share”) is deemed, for the purposes of subsection 116(6) and the definitiontaxable Canadian propertyin subsection 248(1), to be listed on a designated stock exchange if
(a)a dividend, to which subsection (2) does not apply because of paragraph (3)(b), is received in the course of a reorganization;
(b)in contemplation of the reorganization
(i)the reorganization share is issued to a taxpayer by a public corporation in exchange for another share of that corporation (in this subsection referred to as the “old share”) owned by the taxpayer, and
(ii)the reorganization share is exchanged by the taxpayer for a share of another public corporation (in this subsection referred to as the “new share”) in an exchange that would be a permitted exchange if the definitionpermitted exchangewere read without reference to paragraph (a) and subparagraph (b)(ii) of that definition;
(c)immediately before the exchange, the old share
(i)is listed on a designated stock exchange, and
(ii)is not taxable Canadian property of the taxpayer; and
(d)the new share is listed on a designated stock exchange.
Marginal note:Amounts to be included in income for year
56(1)Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
Marginal note:Pension benefits, unemployment insurance benefits, etc.
(a)any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(i)a superannuation or pension benefit including, without limiting the generality of the foregoing,
(A)the amount of any pension, supplement or spouse’s or common-law partner’s allowance under theOld Age Security Actand the amount of any similar payment under a law of a province,
(B)the amount of any benefit under theCanada Pension Planor a provincial pension plan as defined in section 3 of that Act,
(C)the amount of any payment out of or under a specified pension plan, and
(C.1)the amount of any payment out of or under a foreign retirement arrangement established under the laws of a country, except to the extent that the amount would not, if the taxpayer were resident in the country, be subject to income taxation in the country,
but not including
(D)the portion of a benefit received out of or under an employee benefit plan that is required by paragraph 6(1)(g) to be included in computing the taxpayer’s income for the year, or would be required to be so included if that paragraph were read without reference to subparagraph 6(1)(g)(ii),
(E)the portion of an amount received out of or under a retirement compensation arrangement that is required by paragraph 56(1)(x) or 56(1)(z) to be included in computing the taxpayer’s income for the year,
(F)a benefit received under section 71 of theCanada Pension Planor under a similar provision of a provincial pension plan as defined in section 3 of that Act, and
(G)an amount received out of or under a registered pension plan as a return of all or a portion of a contribution to the plan to the extent that the amount
(I)is a payment made to the taxpayer under subsection 147.1(19) or subparagraph 8502(d)(iii) of theIncome Tax Regulations,and
(II)is not deducted in computing the taxpayer’s income for the year or a preceding taxation year,
(ii)a retiring allowance, other than an amount received out of or under an employee benefit plan, a retirement compensation arrangement or a salary deferral arrangement,
(iii)a death benefit,
(iv)a benefit under theUnemployment Insurance Act, other than a payment relating to a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act, or a benefit under Part I, VII.1, VIII or VIII.1 of theEmployment Insurance Act,
(v)a benefit under regulations made under an appropriation Act providing for a scheme of transitional assistance benefits to persons employed in the production of products to which the Canada-United States Agreement on Automotive Products, signed on January 16, 1965 applies,
(vi)except to the extent otherwise required to be included in computing the taxpayer’s income, a prescribed benefit under a government assistance program,
(vii)a benefit under theAct respecting parental insurance, R.S.Q., c