VIII, s. 157]
Marginal note:Repayments of inducements, etc.
(hh)an amount repaid by the taxpayer in the year pursuant to a legal obligation to repay all or part of a particular amount
(i)included under paragraph 12(1)(x) in computing the taxpayer’s income for the year or a preceding taxation year, or
(ii)that is, by reason of subparagraph 12(1)(x)(vi) or subsection 12(2.2), not included under paragraph 12(1)(x) in computing the taxpayer’s income for the year or a preceding taxation year, where the particular amount relates to an outlay or expense (other than an outlay or expense that is in respect of the cost of property of the taxpayer or that is or would be, if amounts deductible by the taxpayer were not limited by reason of paragraph 66(4)(b), subsection 66.1(2), subparagraph 66.2(2)(a)(ii), the words “30% of” in clause 66.21(4)(a)(ii)(B), clause 66.21(4)(a)(ii)(C) or (D) or subparagraph 66.4(2)(a)(ii), deductible under section 66, 66.1, 66.2, 66.21 or 66.4) that would, if the particular amount had not been received, have been deductible in computing the taxpayer’s income for the year or a preceding taxation year;
Marginal note:Repayment of obligation
(hh.1)3/4 of any amount repaid by the taxpayer in the year (on or after the time the taxpayer ceases to carry on a business) under a legal obligation to repay all or part of an amount the taxpayer received or was entitled to receive that was assistance from a government, municipality or other public authority (whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance) in respect of, or for the acquisition of, property the cost of which was an eligible capital expenditure of the taxpayer in respect of the business if the amount of the eligible capital expenditure of the taxpayer in respect of the business was reduced by paragraph 14(10)(c) because of the amount of the assistance the taxpayer received or was entitled to receive;
Marginal note:Inventory adjustment
(ii)the amount required by paragraph 12(1)(r) to be included in computing the taxpayer’s income for the immediately preceding taxation year;
(jj)[Repealed, 2013, c. 34, s. 180]
Marginal note:Exploration and development grants
(kk)the amount of any assistance or benefit received by the taxpayer in the year as a deduction from or reimbursement of an expense that is a tax (other than the goods and services tax) or royalty to the extent that
(i)the tax or royalty is, by reason of the receipt of the amount by the taxpayer, not deductible in computing the taxpayer’s income for a taxation year, and
(ii)the deduction or reimbursement was included by the taxpayer in the amount determined for J in the definitioncumulative Canadian exploration expensein subsection 66.1(6), for M in the definitioncumulative Canadian development expensein subsection 66.2(5) or for I in the definitioncumulative Canadian oil and gas property expensein subsection 66.4(5);
Marginal note:Repayment of interest
(ll)such part of any amount payable by the taxpayer because of a provision of this Act, or of an Act of a province that imposes a tax similar to the tax imposed under this Act, as was paid in the year and as can reasonably be considered to be a repayment of interest that was included in computing the taxpayer’s income for the year or a preceding taxation year;
Marginal note:Cost of substances injected in reservoir
(mm)the portion claimed by the taxpayer of an amount that is an outlay or expense made or incurred by the taxpayer before the end of the year that is a cost to the taxpayer of any substance injected before that time into a natural reservoir to assist in the recovery of petroleum, natural gas or related hydrocarbons to the extent that that portion was not
(i)otherwise deducted in computing the taxpayer’s income for the year, or
(ii)deducted in computing the taxpayer’s income for any preceding taxation year,
except that where the year is less than 51 weeks, the amount that may be claimed under this paragraph by the taxpayer for the year shall not exceed the greater of
(iii)that proportion of the maximum amount that may otherwise be claimed under this paragraph by the taxpayer for the year that the number of days in the year is of 365, and
(iv)the amount of such outlay or expense that was made or incurred by the taxpayer in the year and not otherwise deducted in computing the taxpayer’s income for the year;
Marginal note:Part XII.6 tax
(nn)the tax, if any, under Part XII.6 paid in the year or payable in respect of the year by the taxpayer (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income);
(nn.1)[Repealed, 2017, c. 20, s. 4]
Marginal note:Salary deferral arrangement
(oo)any deferred amount under a salary deferral arrangement in respect of another person to the extent that it was
(i)included under paragraph 6(1)(a) as a benefit in computing the income of the other person for the taxation year of the other person that ends in the taxpayer’s taxation year, and
(ii)in respect of services rendered to the taxpayer;
Marginal note:Idem
(pp)any amount under a salary deferral arrangement in respect of another person (other than an arrangement established primarily for the benefit of one or more non-resident employees in respect of services to be rendered outside Canada) to the extent that it was
(i)included under paragraph 6(1)(i) in computing the income of the other person for the taxation year of the other person that ends in the taxpayer’s taxation year, and
(ii)in respect of services rendered to the taxpayer;
Marginal note:Disability-related modifications to buildings
(qq)an amount paid by the taxpayer in the year for prescribed renovations or alterations to a building used by the taxpayer primarily for the purpose of gaining or producing income from the building or from a business that are made to enable individuals who have a mobility impairment to gain access to the building or to be mobile within it;
Marginal note:Disability-related equipment
(rr)an amount paid by the taxpayer in the year for any prescribed disability-specific device or equipment;
Marginal note:Qualifying environmental trusts
(ss)a contribution made in the year by the taxpayer to a qualifying environmental trust under which the taxpayer is a beneficiary;
Marginal note:Acquisition of interests in qualifying environmental trusts
(tt)the consideration paid by the taxpayer in the year for the acquisition from another person or partnership of all or part of the taxpayer’s interest as a beneficiary under a qualifying environmental trust, other than consideration that is the assumption of a reclamation obligation in respect of the trust;
Marginal note:Debt forgiveness
(uu)any amount deducted in computing the taxpayer’s income for the year because of paragraph 80(15)(a) or subsection 80.01(10);
Marginal note:Countervailing or anti-dumping duty
(vv)an amount paid in the year by the taxpayer as or on account of an existing or proposed countervailing or anti-dumping duty in respect of property (other than depreciable property);
Marginal note:Split income
(ww)where the taxpayer is a specified individual in relation to the year, the individual’s split income for the year; and
Marginal note:Derivative forward agreement
(xx)in respect of a derivative forward agreement of a taxpayer, the amount determined by the formula
A – B
where
(i)the total of all amounts each of which is
(A)if the taxpayer acquires a property under the agreement in the year or a preceding taxation year, the portion of the amount by which the cost to the taxpayer of the property exceeds the fair market value of the property at the time it is acquired by the taxpayer that is attributable to an underlying interest other than an underlying interest referred to in subparagraphs (b)(i) to (iii) of the definitionderivative forward agreementin subsection 248(1), or
(B)if the taxpayer disposes of a property under the agreement in the year or a preceding taxation year, the portion of the amount by which the fair market value of the property at the time the agreement is entered into by the taxpayer exceeds theproceeds of disposition(within the meaning assigned by Subdivision C) of the property that is attributable to an underlying interest other than an underlying interest referred to in clauses (c)(i)(A) to (C) of the definitionderivative forward agreementin subsection 248(1), and
(ii)the amount that is,
(A)if final settlement of the agreement occurs in the year and it cannot reasonably be considered that one of the main reasons for entering into the agreement is to obtain a deduction under this paragraph, the amount determined under subparagraph (i), or
(B)in any other case, the total of all amounts included under paragraph 12(1)(z.7) in computing the taxpayer’s income in respect of the agreement for the year or a preceding taxation year, and
Marginal note:Application of s. 13(21)
(1.1)The definitions in subsection 13(21) apply to any regulations made under paragraph 20(1)(a).
Marginal note:Application of s. 12.2(11)
(1.2)The definitions in subsection 12.2(11) apply to paragraph 20(1)(c).
Marginal note:Borrowed money
(2)For the purposes of paragraph 20(1)(c), where a person has borrowed money in consideration of a promise by the person to pay a larger amount and to pay interest on the larger amount,
(a)the larger amount shall be deemed to be the amount borrowed; and
(b)where the amount actually borrowed has been used in whole or in part for the purpose of earning income from a business or property, the proportion of the larger amount that the amount actually so used is of the amount actually borrowed shall be deemed to be the amount so used.
Marginal note:Limitation of expression “interest” — 10/8 policy
(2.01)For the purposes of paragraphs (1)(c) and (d), interest does not include an amount if
(a)the amount
(i)is paid, after March 20, 2013 in respect of a period after 2013, in respect of a life insurance policy that is, at the time of the payment, a 10/8 policy, and
(ii)is described in paragraph (a) of the definition10/8 policyin subsection 248(1); or
(b)the amount
(i)is payable, in respect of a life insurance policy, after March 20, 2013 in respect of a period after 2013 during which the policy is a 10/8 policy, and
(ii)is described in paragraph (a) of the definition10/8 policyin subsection 248(1).
Marginal note:Limitation of expression “interest”
(2.1)For the purposes of paragraphs 20(1)(c) and 20(1)(d), “interest” does not include an amount that is paid after the taxpayer’s 1977 taxation year or payable in respect of a period after the taxpayer’s 1977 taxation year, depending on the method regularly followed by the taxpayer in computing the taxpayer’s income, in respect of interest on a policy loan made by an insurer except to the extent that the amount of that interest is verified by the insurer in prescribed form and within the prescribed time to be
(a)interest paid in the year on that loan; and
(b)interest (other than interest that would, but for paragraph 20(2.2)(b), be interest on money borrowed before 1978 to acquire a life insurance policy or on an amount payable for property acquired before 1978 that is an interest in a life insurance policy) that is not added to the adjusted cost basis (within the meaning given that expression in subsection 148(9)) to the taxpayer of the taxpayer’s interest in the policy.
Marginal note:Limitation of expression “life insurance policy”
(2.2)For the purposes of paragraphs 20(1)(c) and 20(1)(d), a “life insurance policy” does not include a policy
(a)that is or is issued pursuant to a pooled registered pension plan, a registered pension plan, a registered retirement savings plan, an income-averaging annuity contract or a deferred profit sharing plan;
(b)that was an annuity contract issued before 1978 that provided for annuity payments to commence not later than the day on which the policyholder attains 75 years of age; or
(c)that is an annuity contract all of the insurer’s reserves for which vary in amount depending on the fair market value of a specified group of properties.
Marginal note:Sectoral reserve
(2.3)For the purpose of clause 20(1)(l)(ii)(D), a sectoral reserve is a reserve or an allowance for impairment for a loan that is determined on a sector-by-sector basis (including a geographic sector, an industrial sector or a sector of any other nature) and not on a property-by-property basis.
Marginal note:Specified Percentage
(2.4)For the purpose of clause 20(1)(l)(ii)(D), a taxpayer’s specified percentage for a taxation year is
(a)where the taxpayer has a prescribed reserve amount for the year, the percentage that is the percentage of the prescribed reserve amount of the taxpayer for the year claimed by the taxpayer under clause 20(1)(l)(ii)(C) for the year, and
(b)in any other case, 100%.
Marginal note:Borrowed money
(3)For greater certainty, if a taxpayer uses borrowed money to repay money previously borrowed, or to pay an amount payable for property described in subparagraph (1)(c)(ii) previously acquired (which previously borrowed money or amount payable in respect of previously acquired property is, in this subsection, referred to as the “previous indebtedness”), subject to subsection 20.1(6), for the purposes of paragraphs (1)(c), (e) and (e.1), subsections 20.1(1) and (2), section 21 and subparagraph 95(2)(a)(ii), and for the purpose of paragraph 20(1)(k) of theIncome Tax Act, Chapter 148 of the Revised Statutes of Canada, 1952, the borrowed money is deemed to be used for the purpose for which the previous indebtedness was used or incurred, or was deemed by this subsection to have been used or incurred.
Marginal note:Bad debts — dispositions of depreciable property
(4)If an amount that is owing to a taxpayer as or on account of the proceeds of disposition of depreciable property (other than a timber resource property, a passenger vehicle to which paragraph 13(7)(g) applies or a zero-emission passenger vehicle to which paragraph 13(7)(i) applies) of the taxpayer of a prescribed class is established by the taxpayer to have become a bad debt in a taxation year, there may be deducted in computing the taxpayer’s income for the year the lesser of
(a)the amount so owing to the taxpayer, and
(b)the amount, if any, by which the capital cost to the taxpayer of that property exceeds the total of the amounts, if any, realized by the taxpayer on account of the proceeds of disposition.
Marginal note:Idem
(4.1)Where an amount that is owing to a taxpayer as or on account of the proceeds of disposition of a timber resource property of the taxpayer is established by the taxpayer to have become a bad debt in a taxation year, the amount so owing to the taxpayer may be deducted in computing the taxpayer’s income for the year.
Marginal note:Bad debts — zero-emission passenger vehicles
(4.11)If an amount that is owing to a taxpayer as or on account of the proceeds of disposition of a zero-emission passenger vehicle of the taxpayer to which paragraph 13(7)(i) applies is established by the taxpayer to have become a bad debt in a taxation year, there may be deducted in computing the taxpayer’s income for the year the lesser of
(a)the amount that would be determined by the formula in subparagraph 13(7)(i)(ii) in respect of the disposition if the amount determined for A in the formula were the amount owing to the taxpayer, and
(b)the amount determined by the formula
A – B
where
Marginal note:Former eligible capital property
(4.2)If an amount is deductible under subsection (4) in respect of the disposition of a depreciable property and subsection 13(39) applied to the disposition of the depreciable property, the amount deductible under subsection (4) is equal to 3/4 of the amount that would be deductible without reference to this subsection.
(4.3)[Repealed, 2016, c. 12, s. 7]
Marginal note:Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition
(5)Where depreciable property, other than a timber resource property, of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for the sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year an amount equal to the lesser of
(a)the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim, and
(b)the amount determined under paragraph 20(5)(a) less the amount, if any, by which the proceeds of disposition of the depreciable property exceed the capital cost to the taxpayer of that property.
Marginal note:Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition
(5.1)Where a timber resource property of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim.
Marginal note:Special reserves
(6)Where an amount is deductible in computing income for a taxation year under paragraph 20(1)(m) as a reserve in respect of
(a)articles of food or drink that it is reasonably anticipated will have to be delivered after the end of the year, or
(b)transportation that it is reasonably anticipated will have to be provided after the end of the year,
there shall be substituted for the amount determined under that paragraph an amount not exceeding the total of amounts included in computing the taxpayer’s income from the business for the year that were received or receivable (depending on the method regularly followed by the taxpayer in computing the taxpayer’s profit) in the year in respect of
(c)articles of food or drink not delivered before the end of the year, or
(d)transportation not provided before the end of the year, as the case may be.
Marginal note:Where para. (1)(m) does not apply
(7)Paragraph 20(1)(m) does not apply to allow a deduction
(a)as a reserve in respect of guarantees, indemnities or warranties;
(b)in computing the income of a taxpayer for a taxation year from a business in any case where the taxpayer’s income for the year from that business is computed in accordance with the method authorized by subsection 28(1);
(c)as a reserve in respect of insurance, except that in computing an insurer’s income for a taxation year from an insurance business, other than a life insurance business, carried on by it, there may be deducted as a policy reserve any amount that the insurer claims not exceeding the amount prescribed in respect of the insurer for the year; or
(d)as a reserve in respect of a reclamation obligation.
Marginal note:No deduction in respect of property in certain circumstances
(8)Paragraph 20(1)(n) does not apply to allow a deduction in computing the income of a taxpayer for a taxation year from a business in respect of a property sold in the course of the business if
(a)the taxpayer, at the end of the year or at any time in the immediately following taxation year,
(i)was exempt from tax under any provision of this Part, or
(ii)was not resident in Canada and did not carry on the business in Canada;
(b)the sale occurred more than 36 months before the end of the year;
(c)the purchaser of the property sold was a corporation that, immediately after the sale,
(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 that controlled the taxpayer, directly or indirectly, in any manner whatever, or
(iii)controlled the taxpayer, directly or indirectly, in any manner whatever; or
(d)the purchaser of the property sold was a partnership in which the taxpayer was, immediately after the sale, a majority-interest partner.
Marginal note:Application of para. (1)(cc)
(9)In lieu of making any deduction of an amount permitted by paragraph 20(1)(cc) in computing a taxpayer’s income for a taxation year from a business, the taxpayer may, if the taxpayer so elects in prescribed manner, make a deduction of 1/10 of that amount in computing the taxpayer’s income for that taxation year and a like deduction in computing the taxpayer’s income for each of the 9 immediately following taxation years.
Marginal note:Convention expenses
(10)Notwithstanding paragraph 18(1)(b), there may be deducted in computing a taxpayer’s income for a taxation year from a business an amount paid by the taxpayer in the year as or on account of expenses incurred by the taxpayer in attending, in connection with the business, not more than two conventions held during the year by a business or professional organization at a location that may reasonably be regarded as consistent with the territorial scope of that organization.
Marginal note:Foreign taxes on income from property exceeding 15%
(11)In computing the income of an individual from a property other than real or immovable property for a taxation year after 1975 that is income from a source outside Canada, there may be deducted the amount, if any, by which,
(a)such part of any income or profits tax paid by the taxpayer to the government of a country other than Canada for the year as may reasonably be regarded as having been paid in respect of an amount that has been included in computing the taxpayer’s income for the year from the property,
exceeds
(b)15% of the amount referred to in paragraph 20(11)(a).
Marginal note:Foreign non-business-income tax
(12)In computing the income of a taxpayer who is resident in Canada at any time in a taxation year from a business or property for the year, there may be deducted any amount that the taxpayer claims that does not exceed the non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada (within the meaning assigned by subsection 126(7) read without reference to paragraphs (c) and (e) of the definitionnon-business-income taxin that subsection) in respect of that income, other than any of those taxes paid that can, in whole or in part, reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.
Marginal note:Foreign tax where no economic profit
(12.1)In computing a taxpayer’s income for a taxation year from a business, there may be deducted the amount that the taxpayer claims not exceeding the lesser of
(a)the amount of foreign tax (within the meaning assigned by subsection 126(4.1)) that
(i)is in respect of a property used in the business for a period of ownership by the taxpayer or in respect of a related transaction (as defined in subsection 126(7)),
(ii)is paid by the taxpayer for the year,
(iii)is, because of subsection 126(4.1), not included in computing the taxpayer’s business-income tax or non-business-income tax, and
(iv)where the taxpayer is a corporation, is not an amount that can reasonably be regarded as having been paid in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer, and
(b)the portion of the taxpayer’s income for the year from the business that is attributable to the property for the period or to a related transaction (as defined in subsection 126(7)).
Marginal note:Deductions under Subdivision I
(13)In computing the income for a taxation year of a taxpayer resident in Canada, there may be deducted such amounts as are provided by Subdivision I.
Marginal note:Accrued bond interest
(14)Where, by virtue of an assignment or other transfer of a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, the transferee has become entitled to an amount of interest that accrued on the debt obligation for a period commencing before the time of transfer and ending at that time that is not payable until after that time, that amount
(a)shall be included as interest in computing the transferor’s income for the transferor’s taxation year in which the transfer occurred, except to the extent that it was otherwise included in computing the transferor’s income for the year or a preceding taxation year; and
(b)may be deducted in computing the transferee’s income for a taxation year to the extent that the amount was included as interest in computing the transferee’s income for the year.
Marginal note:Interest on debt obligation
(14.1)Where a person who has issued a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, is obligated to pay an amount that is stipulated to be interest on that debt obligation in respect of a period before its issue (in this subsection referred to as the “unearned interest amount”) and it is reasonable to consider that the person to whom the debt obligation was issued paid to the issuer consideration for the debt obligation that included an amount in respect of the unearned interest amount,
(a)for the purposes of subsection 20(14) and section 12, the issue of the debt obligation shall be deemed to be an assignment of the debt obligation from the issuer, as transferor, to the person to whom the obligation was issued, as transferee, and an amount equal to the unearned interest amount shall be deemed to be interest that accrued on the obligation for a period commencing before the issue and ending at the time of issue; and
(b)notwithstanding paragraph 20(14.1)(a) or any other provision of this Act, no amount that can reasonably be considered to be an amount in respect of the unearned interest amount shall be deducted or included in computing the income of the issuer.
Marginal note:Sales of linked notes
(14.2)For the purposes of subsection (14), the amount determined by the following formula is deemed to be interest that accrued on an assigned or otherwise transferred debt obligation — that is, at any time, described in paragraph 7000(1)(d) of theIncome Tax Regulations— to which the transferee has become entitled to for a period commencing before the time of the transfer and ending at that particular time that is not payable until after that particular time:
A − B
where
(15)[Repealed, 2003, c. 28, s. 3]
Marginal note:Terminal loss
(16)Notwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), where at the end of a taxation year,
(a)the total of all amounts used to determine A to D.1 in the definitionundepreciated capital costin subsection 13(21) in respect of a taxpayer’s depreciable property of a particular class exceeds the total of all amounts used to determine E to K in that definition in respect of that property, and
(b)the taxpayer no longer owns any property of that class,
in computing the taxpayer’s income for the year
(c)there shall be deducted the amount of the excess determined under paragraph 20(16)(a), and
(d)no amount shall be deducted for the year under paragraph 20(1)(a) in respect of property of that class.
Marginal note:Non-application of subsection (16)
(16.1)Subsection (16) does not apply
(a)in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or any other amount that is prescribed;
(b)in respect of a taxation year in respect of a property that was a former property deemed by paragraph 13(4.3)(a) or (b) to be owned by the taxpayer, if
(i)within 24 months after the taxpayer last owned the former property, the taxpayer or a person not dealing at arm’s length with the taxpayer acquires a similar property in respect of the same fixed place to which the former property applied, and
(ii)at the end of the taxation year, the taxpayer or the person owns the similar property or another similar property in respect of the same fixed place to which the former property applied; and
(c)in respect of a taxation year in respect of property included in Class 14.1 of Schedule II to theIncome Tax Regulationsunless the taxpayer has ceased to carry on the business to which the class relates.
Marginal note:Reference to “taxation year” and “year” of individual
(16.2)Where a taxpayer is an individual and the taxpayer’s income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, if depreciable property acquired for the purpose of gaining or producing income from the business has been disposed of, each reference in subsections 20(16) and 20(16.1) to a “taxation year” and “year” shall, for greater certainty, be read as a reference to a “fiscal period”.
Marginal note:Disposition after ceasing business
(16.3)Where a taxpayer, after ceasing to carry on a business, has disposed of depreciable property of the taxpayer of a prescribed class that was acquired by the taxpayer for the purpose of gaining or producing income from the business and that was not subsequently used by the taxpayer for some other purpose, in applying subsection 20(16) or 20(16.1), each reference in that subsection to a “taxation year” and “year” shall, notwithstanding anything in subsection 20(16.2), not be read as a reference to a “fiscal period”.
(17) and (18)[Repealed, 2013, c. 34, s. 180]
Marginal note:Annuity contract
(19)Where a taxpayer has in a particular taxation year received a payment under an annuity contract in respect of which an amount was by virtue of subsection 12(3) included in computing the taxpayer’s income for a taxation year commencing before 1983, there may be deducted in computing the taxpayer’s income for the particular year such amount, if any, as is allowed by regulation.
Marginal note:Life insurance policy
(20)Where in a taxation year a taxpayer disposes of an interest in a life insurance policy that is not an annuity contract (otherwise than as a consequence of a death) or of an interest in an annuity contract (other than a prescribed annuity contract), there may be deducted in computing the taxpayer’s income for the year an amount equal to the lesser of
(a)the total of all amounts in respect of the interest in the policy that were included under section 12.2 of this Act or paragraph 56(1)(d.1) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in computing the taxpayer’s income for the year or a preceding taxation year, and
(b)the amount, if any, by which the adjusted cost basis (within the meaning assigned by section 148) to the taxpayer of that interest immediately before the disposition exceeds the proceeds of the disposition (within the meaning assigned by section 148) of the interest that the policyholder, a beneficiary or an assignee became entitled to receive.
Marginal note:Debt obligation
(21)If a taxpayer has in a particular taxation year disposed of a property that is an interest in, or for civil law a right in, a debt obligation for consideration equal to its fair market value at the time of disposition, there may be deducted in computing the taxpayer’s income for the particular year the amount, if any, by which
(a)the total of all amounts each of which is an amount that was included in computing the taxpayer’s income for the particular year or a preceding taxation year as interest in respect of that property
exceeds the total of all amounts each of which is
(b)the portion of an amount that was received or became receivable by the taxpayer in the particular year or a preceding taxation year that can reasonably be considered to be in respect of an amount described in paragraph 20(21)(a) and that was not repaid by the taxpayer to the issuer of the debt obligation because of an adjustment in respect of interest received before the time of disposition by the taxpayer, or
(c)an amount in respect of that property that was deductible by the taxpayer by virtue of paragraph 20(14)(b) in computing the taxpayer’s income for the particular year or a preceding taxation year.
Marginal note:Deduction for negative reserves
(22)In computing an insurer’s income for a taxation year, there may be deducted the amount included under paragraph 12(1)(e.1) in computing the insurer’s income for the preceding taxation year.
Marginal note:Amounts paid for undertaking future obligations
(24)Where an amount is included under paragraph 12(1)(a) in computing a taxpayer’s income for a taxation year in respect of an undertaking to which that paragraph applies and the taxpayer paid a reasonable amount in a particular taxation year to another person as consideration for the assumption by that other person of the taxpayer’s obligations in respect of the undertaking, if the taxpayer and the other person jointly so elect,
(a)the payment may be deducted in computing the taxpayer’s income for the particular year and no amount is deductible under paragraph 20(1)(m) or 20(1)(m.1) in computing the taxpayer’s income for that or any subsequent taxation year in respect of the undertaking; and
(b)where the amount was received by the other person in the course of business, it shall be deemed to be an amount described in paragraph 12(1)(a).
Marginal note:Manner of election
(25)An election under subsection 20(24) shall be made by notifying the Minister in writing on or before the earlier of the days on or before which either the payer or the recipient is required to file a return of income pursuant to section 150 for the taxation year in which the payment to which the election relates was made.
(26)[Repealed, 2013, c. 34, s. 180]
Marginal note:Loans, etc., acquired in ordinary course of business
(27)For the purposes of computing a deduction under paragraph 20(1)(l), 20(1)(l.1) or 20(1)(p) from the income for a taxation year of a taxpayer who was an insurer or whose ordinary business included the lending of money, a loan or lending asset or an instrument or commitment described in paragraph 20(1)(l.1) acquired from a person with whom the taxpayer did not deal at arm’s length for an amount equal to its fair market value shall be deemed to have been acquired by the taxpayer in the ordinary course of the taxpayer’s business of insurance or the lending of money where
(a)the person from whom the loan or lending asset or instrument or commitment was acquired carried on the business of insurance or the lending of money; and
(b)the loan or lending asset was made or acquired or the instrument or commitment was issued, made or assumed by the person in the ordinary course of the person’s business of insurance or the lending of money.
Marginal note:Application of ss. 13(21) and 138(12)
(27.1)The definitions in subsections 13(21) and 138(12) apply to this section.
Marginal note:Deduction before available for use
(28)In computing a taxpayer’s income from a business or property for a taxation year ending before the time a building or a part thereof acquired after 1989 by the taxpayer becomes available for use by the taxpayer, there may be deducted an amount not exceeding the amount by which the lesser of
(a)the amount that would be deductible under paragraph 20(1)(a) for the year in respect of the building if subsection 13(26) did not apply, and
(b)the taxpayer’s income for the year from renting the building, computed without reference to this subsection and before deducting any amount in respect of the building under paragraph 20(1)(a)
exceeds
(c)the amount deductible under paragraph 20(1)(a) for the year in respect of the building, computed without reference to this subsection,
and any amount so deducted shall be deemed to be an amount deducted by the taxpayer under paragraph 20(1)(a) in computing the taxpayer’s income for the year.
Marginal note:Idem
(29)Where, because of subsection 18(3.1), a deduction would, but for this subsection, not be allowed to a taxpayer in respect of an outlay or expense in respect of a building, or part thereof, and the outlay or expense would, but for that subsection and without reference to this subsection, be deductible in computing the taxpayer’s income for a taxation year, there may be deducted in respect of such outlays and expenses in computing the taxpayer’s income for the year an amount equal to the lesser of
(a)the total of all such outlays or expenses, and
(b)the taxpayer’s income for the year from renting the building or the part thereof computed without reference to subsection 20(28) and this subsection.
Marginal note:Specified reserve adjustment
(30)For the purpose of the description of N in subclause 20(1)(l)(ii)(D)(II), the specified reserve adjustment for a loan of a taxpayer for a taxation year is the amount determined by the formula
0.1(A × B × C/365)
where
Marginal note:PHSP premiums
20.01(1)Notwithstanding paragraphs 18(1)(a) and (h) and subject to subsection (2), there may be deducted in computing an individual’s income for a taxation year from a business carried on by the individual and in which the individual is actively engaged on a regular and continuous basis, directly or as a member of a partnership, an amount payable by the individual or partnership in respect of the year as a premium, contribution or other consideration under a private health services plan in respect of the individual, the individual’s spouse or common-law partner or any person who is a member of the individual’s household if
(a)in the year or in the preceding taxation year
(i)the total of all amounts each of which is the individual’s income from such a business for a fiscal period that ends in the year exceeds 50% of the individual’s income for the year, or
(ii)the individual’s income for the year does not exceed the total of $10,000 and the total referred to in subparagraph (i) in respect of the individual for the year,
on the assumption that the individual’s income from each business is computed without reference to this subsection and the individual’s income is computed without reference to this subsection and Subdivision E; and
(b)the amount is payable under a contract between the individual or partnership and
(i)a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or the business of offering to the public its services as trustee,
(ii)a person or partnership engaged in the business of offering to the public its services as an administrator of private health services plans, or
(iii)a person the taxable income of which is exempt under section 149 and that is a business or professional organization of which the individual is a member or a trade union of which the individual or a majority of the individual’s employees are members.
Marginal note:Limit
(2)For the purpose of calculating the amount deductible under subsection (1) in computing an individual’s income for a taxation year from a particular business,
(a)no amount may be deducted to the extent that
(i)it is deducted under this section in computing another individual’s income for any taxation year, or
(ii)it is included in calculating a deduction under section 118.2 in computing an individual’s tax payable under this Part for any taxation year;
(b)where an amount payable under a private health services plan relates to a period in the year throughout which
(i)each of one or more persons
(A)is employed on a full-time basis (other than on a temporary or seasonal basis) in the particular business or in another business carried on by
(I)the individual (otherwise than as a member of a partnership),
(II)a partnership of which the individual is a majority-interest partner, or
(III)a corporation affiliated with the individual, and
(B)has accumulated not less than three months of service in that employment since the person last became so employed, and
(ii)the total number of persons employed in a business described in clause (i)(A), with whom the individual deals at arm’s length and to whom coverage is extended under the plan, is not less than 50% of the total number of persons each of whom is a person
(A)who carries on the particular business or is employed in a business described in clause (i)(A), and
(B)to whom coverage is extended under the plan,
the amount so deductible in relation to the period shall not exceed the individual’s cost of equivalent coverage under the plan in respect of each employed person who deals at arm’s length with the individual and who is described in subparagraph (i) in relation to the period;
(c)subject to paragraph (d), where an amount payable under a private health services plan relates to a particular period in the year, other than a period described in paragraph (b), the amount so deductible in relation to the particular period shall not exceed the amount determined by the formula
(A/365) × (B + C)
where
(i)is the individual or the individual’s spouse or common-law partner, or
(ii)is a member of the individual’s household and has attained the age of 18 years before the beginning of the particular period, and
(d)where an amount payable under a private health services plan relates to a particular period in the year (other than a period described in paragraph (b)) and one or more persons with whom the individual deals at arm’s length are described in subparagraph (b)(i) in relation to the particular period, the amount so deductible in relation to the particular period shall not exceed the lesser of the amount determined under the formula set out in paragraph (c) and the individual’s cost of equivalent coverage in respect of any such person in relation to the particular period.
Marginal note:Equivalent coverage
(3)For the purpose of subsection (2), an amount payable in respect of an individual under a private health services plan in relation to a period does not exceed the individual’s cost of equivalent coverage under the plan in respect of another person in relation to the period to the extent that, in relation to the period, the amount does not exceed the product obtained when
(a)the amount that would be the individual’s cost of coverage under the plan if the benefits and coverage in respect of the individual, the individual’s spouse or common-law partner and the members of the individual’s household were identical to the benefits and coverage made available in respect of the other person, the other person’s spouse or common-law partner and the members of the other person’s household
is multiplied by
(b)the percentage of the cost of coverage under the plan in respect of the other person that is payable by the individual or a partnership of which the individual is a member.
Marginal note:Borrowed money used to earn income from property
20.1(1)Where
(a)at any time after 1993 borrowed money ceases to be used by a taxpayer for the purpose of earning income from a capital property (other than real or immovable property or depreciable property), and
(b)the amount of the borrowed money that was so used by the taxpayer immediately before that time exceeds the total of
(i)where the taxpayer disposed of the property at that time for an amount of consideration that is not less than the fair market value of the property at that time, the amount of the borrowed money used to acquire the consideration,
(ii)where the taxpayer disposed of the property at that time and subparagraph 20.1(1)(b)(i) does not apply, the amount of the borrowed money that, if the taxpayer had received as consideration an amount of money equal to the amount by which the fair market value of the property at that time exceeds the amount included in the total by reason of subparagraph 20.1(1)(b)(iii), would be considered to be used to acquire the consideration,
(iii)where the taxpayer disposed of the property at that time for consideration that includes a reduction in the amount of the borrowed money, the amount of the reduction, and
(iv)where the taxpayer did not dispose of the property at that time, the amount of the borrowed money that, if the taxpayer had disposed of the property at that time and received as consideration an amount of money equal to the fair market value of the property at that time, would be considered to be used to acquire the consideration,
an amount of the borrowed money equal to the excess shall, to the extent that the amount is outstanding after that time, be deemed to be used by the taxpayer for the purpose of earning income from the property.
Marginal note:Borrowed money used to earn income from business
(2)Where at any particular time after 1993 a taxpayer ceases to carry on a business and, as a consequence, borrowed money ceases to be used by the taxpayer for the purpose of earning income from the business, the following rules apply:
(a)where, at any time (in this paragraph referred to as the “time of disposition”) at or after the particular time, the taxpayer disposes of property that was last used by the taxpayer in the business, an amount of the borrowed money equal to the lesser of
(i)the fair market value of the property at the time of disposition, and
(ii)the amount of the borrowed money outstanding at the time of disposition that is not deemed by this paragraph to have been used before the time of disposition to acquire any other property
shall be deemed to have been used by the taxpayer immediately before the time of disposition to acquire the property;
(b)subject to paragraph 20.1(2)(a), the borrowed money shall, after the particular time, be deemed not to have been used to acquire property that was used by the taxpayer in the business;
(c)the portion of the borrowed money outstanding at any time after the particular time that is not deemed by paragraph 20.1(2)(a) to have been used before that subsequent time to acquire property shall be deemed to be used by the taxpayer at that subsequent time for the purpose of earning income from the business; and
(d)the business shall be deemed to have fiscal periods after the particular time that coincide with the taxation years of the taxpayer, except that the first such fiscal period shall be deemed to begin at the end of the business’s last fiscal period that began before the particular time.
Marginal note:Deemed dispositions
(3)For the purpose of paragraph 20.1(2)(a),
(a)where a property was used by a taxpayer in a business that the taxpayer has ceased to carry on, the taxpayer shall be deemed to dispose of the property at the time at which the taxpayer begins to use the property in another business or for any other purpose;
(b)where a taxpayer, who has at any time ceased to carry on a business, regularly used a property in part in the business and in part for some other purpose,
(i)the taxpayer shall be deemed to have disposed of the property at that time, and
(ii)the fair market value of the property at that time shall be deemed to equal the proportion of the fair market value of the property at that time that the use regularly made of the property in the business was of the whole use regularly made of the property; and
(c)where the taxpayer is a trust, subsections 104(4) to 104(5.2) do not apply.
Marginal note:Amount payable for property
(4)Where an amount is payable by a taxpayer for property, the amount shall be deemed, for the purposes of this section and, where subsection 20.1(2) applies with respect to the amount, for the purposes of this Act, to be payable in respect of borrowed money used by the taxpayer to acquire the property.
Marginal note:Interest in partnership
(5)For the purposes of this section, where borrowed money that has been used to acquire an interest in a partnership is, as a consequence, considered to be used at any time for the purpose of earning income from a business or property of the partnership, the borrowed money shall be deemed to be used at that time for the purpose of earning income from property that is the interest in the partnership and not to be used for the purpose of earning income from the business or property of the partnership.
Marginal note:Refinancings
(6)Where at any time a taxpayer uses borrowed money to repay money previously borrowed that was deemed by paragraph 20.1(2)(c) immediately before that time to be used for the purpose of earning income from a business,
(a)paragraphs 20.1(2)(a) to 20.1(2)(c) apply with respect to the borrowed money; and
(b)subsection 20(3) does not apply with respect to the borrowed money.
Marginal note:Interest — authorized foreign bank — interpretation
20.2(1)The following definitions apply in this section.
branch advanceof an authorized foreign bank means an amount allocated or provided by, or on behalf of, the bank to, or for the benefit of, its Canadian banking business under terms that were documented, before the amount was so allocated or provided, to the same extent as, and in a form similar to the form in which, the bank would ordinarily document a loan by it to a person with whom it deals at arm’s length. (avance de succursale)
branch financial statementsof an authorized foreign bank for a taxation year means the unconsolidated statements of assets and liabilities and of income and expenses for the year, in respect of its Canadian banking business,
(a)that form part of the bank’s annual report for the year filed with the Superintendent of Financial Institutions as required under section 601 of theBank Act, and accepted by the Superintendent, and
(b)if no filing is so required for the taxation year, that are prepared in a manner consistent with the statements in the annual report or reports so filed and accepted for the period or periods in which the taxation year falls,
except if the Minister demonstrates that the statements are not prepared in accordance with generally-accepted accounting principles in Canada as modified by any specifications applicable to the bank made by the Superintendent of Financial Institutions under subsection 308(4) of theBank Act(in this definition referred to as “modified GAAP”), in which case it means the statements subject to such modifications as are required to make them comply with modified GAAP. (états financiers de succursale)
calculation periodof an authorized foreign bank for a taxation year means any one of a series of regular periods into which the year is divided in a designation by the bank in its return of income for the year or, in the absence of such a designation, by the Minister,
(a)none of which is longer than 31 days;
(b)the first of which commences at the beginning of the year and the last of which ends at the end of the year; and
(c)that are, unless the Minister otherwise agrees in writing, consistent with the calculation periods designated for the bank’s preceding taxation year. (période de calcul)
Marginal note:Formula elements
(2)The following descriptions apply for the purposes of the formulae in subsection (3) for any calculation period in a taxation year of an authorized foreign bank:
Marginal note:Interest deduction
(3)In computing the income of an authorized foreign bank from its Canadian banking business for a taxation year, there may be deducted on account of interest for each calculation period of the bank for the year,
(a)where the total amount at the end of the period of its liabilities to other persons and partnerships and branch advances is 95% or more of the amount of its assets at that time, an amount not exceeding
(i)if the amount of liabilities to other persons and partnerships at that time is less than 95% of the amount of its assets at that time, the amount determined by the formula
IL + IBA × (0.95 × A - L)/BA
and
(ii)if the amount of those liabilities at that time is greater than or equal to 95% of the amount of its assets at that time, the amount determined by the formula
IL × (0.95 × A)/L
and
(b)in any other case, the total of
(i)the amount determined by the formula
IL + IBA
and
(ii)the product of
(A)the amount claimed by the bank, in its return of income for the year, not exceeding the amount determined by the formula
(0.95 × A) - (L + BA)
and
(B)the average, based on daily observations, of the Bank of Canada bank rate for the period.
Marginal note:Branch amounts
(4)Only amounts that are in respect of an authorized foreign bank’s Canadian banking business, and that are recorded in the books of account of the business in a manner consistent with the manner in which they are required to be treated for the purposes of the branch financial statements, shall be used to determine
(a)the amounts in subsection (2); and
(b)the amounts in subsection (3) of an authorized foreign bank’s assets, liabilities to other persons and partnerships, and branch advances.
Marginal note:Notional interest
(5)For the purposes of the description of IBA in subsection (2), a reasonable amount on account of notional interest for a calculation period in respect of a branch advance is the amount that would be payable on account of interest for the period by a notional borrower, having regard to the duration of the advance, the currency in which repayment is required and all other terms, as adjusted by paragraph (c), of the advance, if
(a)the borrower were a person that dealt at arm’s length with the bank, that carried on the bank’s Canadian banking business and that had the same credit-worthiness and borrowing capacity as the bank;
(b)the advance were a loan by the bank to the borrower; and
(c)any of the terms of the advance (excluding the rate of interest, but including the structure of the interest calculation, such as whether the rate is fixed or floating and the choice of any reference rate referred to) that are not terms that would be made between the bank as lender and the borrower, having regard to all the circumstances, including the nature of the Canadian banking business, the use of the advanced funds in the business and normal risk management practices for banks, were instead terms that would be agreed to by the bank and the borrower.
Marginal note:Weak currency debt — interpretation
20.3(1)The definitions in this subsection apply in this section.
exchange datein respect of a debt of a taxpayer that is at any time a weak currency debt means, if the debt is incurred or assumed by the taxpayer
(a)in respect of borrowed money that is denominated in the final currency, the day that the debt is incurred or assumed by the taxpayer; and
(b)in respect of borrowed money that is not denominated in the final currency, or in respect of the acquisition of property, the day on which the taxpayer uses the borrowed money or the acquired property, directly or indirectly, to acquire funds that are, or to settle an obligation that is, denominated in the final currency. (date de l’échange)
hedgein respect of a debt of a taxpayer that is at any time a weak currency debt means any agreement made by the taxpayer
(a)that can reasonably be regarded as having been made by the taxpayer primarily to reduce the taxpayer’s risk, with respect to payments of principal or interest in respect of the debt, of fluctuations in the value of the weak currency; and
(b)that is identified by the taxpayer as a hedge in respect of the debt in a designation in prescribed form filed with the Minister on or before the 30th day after the day the taxpayer enters into the agreement. (opération de couverture)
weak currency debtof a taxpayer at a particular time means a particular debt in a foreign currency (in this section referred to as the “weak currency”), incurred or assumed by the taxpayer at a time (in this section referred to as the “commitment time”) after February 27, 2000, in respect of a borrowing of money or an acquisition of property, where
(a)any of the following applies, namely,
(i)the borrowed money is denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, is used for the purpose of earning income from a business or property and is not used to acquire funds in a currency other than the final currency,
(ii)the borrowed money or the acquired property is used, directly or indirectly, to acquire funds that are denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, that are used for the purpose of earning income from a business or property and that are not used to acquire funds in a currency other than the final currency,
(iii)the borrowed money or the acquired property is used, directly or indirectly, to settle an obligation that is denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, that is incurred or assumed for the purpose of earning income from a business or property and that is not incurred or assumed to acquire funds in a currency other than the final currency, or
(iv)the borrowed money or the acquired property is used, directly or indirectly, to settle another debt of the taxpayer that is at any time a weak currency debt in respect of which the final currency (which is deemed to be the final currency in respect of the particular debt) is a currency other than the currency of the particular debt;
(b)the amount of the particular debt (together with any other debt that would, but for this paragraph, be at any time a weak currency debt, and that can reasonably be regarded as having been incurred or assumed by the taxpayer as part of a series of transactions that includes the incurring or assumption of the particular debt) exceeds $500,000; and
(c)either of the following applies, namely,
(i)if the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt is determined under a formula based on the value from time to time of a reference rate (other than a reference rate the value of which is established or materially influenced by the taxpayer), the interest rate at the commitment time, as determined under the formula as though interest were then payable, exceeds by more than two percentage points the rate at which interest would have been payable at the commitment time in the final currency if
(A)the taxpayer had, at the commitment time, instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating) with those modifications that the difference in currency requires, and
(B)interest on the equivalent amount of debt referred to in clause (A) was payable at the commitment time, or
(ii)in any other case, the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt exceeds by more than two percentage points the rate at which interest would have been payable at the particular time in the final currency if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating), with those modifications that the difference in currency requires. (dette en devise faible)
Marginal note:Interest and gain
(2)Notwithstanding any other provision of this Act, the following rules apply in respect of a particular debt of a taxpayer (other than a corporation described in one or more of paragraphs (a), (b), (c) and (e) of the definitionspecified financial institutionin subsection 248(1)) that is at any time a weak currency debt:
(a)no deduction on account of interest that accrues on the debt for any period that begins after the day that is the later of June 30, 2000 and the exchange date during which it is a weak currency debt shall exceed the amount of interest that would, if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt, the principal and interest in respect of which were denominated in the final currency, on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating) have accrued on the equivalent debt during that period, with those modifications that the difference in currency requires;
(b)the amount, if any, of the taxpayer’s gain or loss (in this section referred to as a “foreign exchange gain or loss”) for a taxation year on the settlement or extinguishment of the debt that arises because of the fluctuation in the value of any currency shall be included or deducted, as the case may be, in computing the taxpayer’s income for the year from the business or the property to which the debt relates; and
(c)the amount of any interest on the debt that was, because of this subsection, not deductible is deemed, for the purpose of computing the taxpayer’s foreign exchange gain or loss on the settlement or extinguishment of the debt, to be an amount paid by the taxpayer to settle or extinguish the debt.
Marginal note:Hedges
(3)In applying subsection (2) in circumstances where a taxpayer has entered into a hedge in respect of a debt of the taxpayer that is at any time a weak currency debt, the amount paid or payable in the weak currency for a taxation year on account of interest on the debt, or paid in the weak currency in the year on account of the debt’s principal, shall be decreased by the amount of any foreign exchange gain, or increased by the amount of any foreign exchange loss, on the hedge in respect of the amount so paid or payable.
Marginal note:Repayment of principal
(4)If the amount (expressed in the weak currency) outstanding on account of principal in respect of a debt of the taxpayer that is at any time a weak currency debt is reduced before maturity (whether by repayment or otherwise), the amount (expressed in the weak currency) of the reduction is deemed, except for the purposes of determining the rate of interest that would have been charged on an equivalent loan in the final currency and applying paragraph (b) of the definitionweak currency debtin subsection (1), to have been a separate debt from the commitment time.
Marginal note:Definitions
20.4(1)The definitions in section 12.5 apply for the purposes of this section.
Marginal note:Transition year income deduction
(2)There shall be deducted in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year the absolute value of the negative amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.
Marginal note:Transition year income inclusion reversal
(3)If an amount has been included under subsection 12.5(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be deducted in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula
A × B/1825
where
Marginal note:Ceasing to carry on business
(4)If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections 12.5(4) to (6) apply, there shall be deducted in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula
A – B
where
Marginal note:Cost of borrowed money
21(1)Where in a taxation year a taxpayer has acquired depreciable property, if the taxpayer elects under this subsection in the taxpayer’s return of income under this Part for the year,
(a)in computing the taxpayer’s income for the year and for such of the 3 immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for any such year in respect of borrowed money used to acquire the depreciable property or the amount payable for the depreciable property; and
(b)the amount or the part of the amount, as the case may be, described in paragraph 21(1)(a) shall be added to the capital cost to the taxpayer of the depreciable property so acquired by the taxpayer.
Marginal note:Borrowed money used for exploration or development
(2)Where in a taxation year a taxpayer has used borrowed money for the purpose of exploration, development or the acquisition of property and the expenses incurred by the taxpayer in respect of those activities are Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year,
(a)in computing the taxpayer’s income for the year and for such of the three immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for that election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for any such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be; and
(b)the amount or the part of the amount, as the case may be, described in paragraph (a) is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the year.
Marginal note:Borrowing for depreciable property
(3)In computing the income of a taxpayer for a particular taxation year, where the taxpayer
(a)in any preceding taxation year
(i)made an election under subsection 21(1) in respect of borrowed money used to acquire depreciable property or an amount payable for depreciable property acquired by the taxpayer, or
(ii)was, by virtue of subsection 18(3.1), required to include an amount in respect of the construction of a depreciable property in computing the capital cost to the taxpayer of the depreciable property, and
(b)in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for an election under this subsection in respect thereof, would have been deductible in computing the taxpayer’s income (other than exempt income) for each such year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer,
if an election under this subsection is made in the taxpayer’s return of income under this Part for the particular year, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for the particular year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer, and the amount or part of the amount, as the case may be, shall be added to the capital cost to the taxpayer of the depreciable property.
Marginal note:Borrowing for exploration, etc.
(4)In computing the income of a taxpayer for a particular taxation year, where the taxpayer
(a)in any preceding taxation year made an election under subsection 21(2) in respect of borrowed money used for the purpose of exploration, development or acquisition of property,
(b)in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for that election, would have been deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for each such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be, and
(c)so elects in the taxpayer’s return of income for the particular year,
the following rules apply:
(d)paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the election that, but for the election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for the particular year in respect of the borrowed money used for the exploration, development or acquisition of property, and
(e)the amount or part of the amount, as the case may be, is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the particular year.
Marginal note:Reassessments
(5)Notwithstanding any other provision of this Act, where a taxpayer has made an election in accordance with the provisions of subsection 21(1) or 21(2), such reassessments of tax, interest or penalties shall be made as are necessary to give effect thereto.
Marginal note:Sale of accounts receivable
22(1)Where a person who has been carrying on a business has, in a taxation year, sold all or substantially all the property used in carrying on the business, including the debts that have been or will be included in computing the person’s income for that year or a previous year and that are still outstanding, and including the debts arising from loans made in the ordinary course of the person’s business if part of the person’s ordinary business was the lending of money and that are still outstanding, to a purchaser who proposes to continue the business which the vendor has been carrying on, if the vendor and the purchaser have executed jointly an election in prescribed form to have this section apply, the following rules are applicable:
(a)there may be deducted in computing the vendor’s income for the taxation year an amount equal to the difference between the face value of the debts so sold (other than debts in respect of which the vendor has made deductions under paragraph 20(1)(p)), and the consideration paid by the purchaser to the vendor for the debts so sold;
(b)an amount equal to the difference described in paragraph 22(1)(a) shall be included in computing the purchaser’s income for the taxation year;
(c)the debts so sold shall be deemed, for the purposes of paragraphs 20(1)(l) and 20(1)(p), to have been included in computing the purchaser’s income for the taxation year or a previous year but no deduction may be made by the purchaser under paragraph 20(1)(p) in respect of a debt in respect of which the vendor has previously made a deduction; and
(d)each amount deducted by the vendor in computing income for a previous year under paragraph 20(1)(p) in respect of any of the debts so sold shall be deemed, for the purpose of paragraph 12(1)(i), to have been so deducted by the purchaser.
Marginal note:Statement by vendor and purchaser
(2)An election executed for the purposes of subsection 22(1) shall contain a statement by the vendor and the purchaser jointly as to the consideration paid for the debts sold by the vendor to the purchaser and that statement shall, subject to subsection 69(1), as against the Minister, be binding on the vendor and the purchaser in so far as it may be relevant in respect of any matter arising under this Act.
Marginal note:Sale of inventory
23(1)Where, on or after disposing of or ceasing to carry on a business or a part of a business, a taxpayer has sold all or any part of the property that was included in the inventory of the business, the property so sold shall, for the purposes of this Part, be deemed to have been sold by the taxpayer in the course of carrying on the business.
Marginal note:Reference to property in inventory
(3)A reference in this section to property that was included in the inventory of a business shall be deemed to include a reference to property that would have been so included if the income from the business had not been computed in accordance with the method authorized by subsection 28(1) or paragraph 34(a).
24(1)[Repealed, 2016, c. 12, s. 8]
Marginal note:Business carried on by spouse or common-law partner or controlled corporation
(2)If, at any time, an individual ceases to carry on a business and the individual’s spouse or common-law partner, or a corporation controlled directly or indirectly in any manner whatever by the individual, carries on the business and acquires all of the property included in Class 14.1 of Schedule II to theIncome Tax Regulationsin respect of the business owned by the individual immediately before that time and that had value at that time, the following rules apply:
(a)the individual is deemed to have, immediately before that time, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the individual of the property immediately before the disposition;
(b)the spouse, common-law partner or corporation, as the case may be, is deemed to have acquired the property at a cost equal to those proceeds; and
(c)if the amount that was the capital cost to the individual of the property exceeds the amount determined under paragraph 70(5)(b) to be the cost to the person that acquired the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(i)the capital cost to the person of the property is deemed to be the amount that was the capital cost to the individual of the property, and
(ii)the excess is deemed to have been allowed to the person in respect of the property under regulations made for the purposes of paragraph 20(1)(a) in computing income for taxation years that ended before the person acquired the property.
(3)[Repealed, 2016, c. 12, s. 8]
24.1[Repealed, 1996, c. 21, s. 6(1)]
Marginal note:Fiscal period of business disposed of by individual
25(1)Where an individual was the proprietor of a business and disposed of it during a fiscal period of the business, the fiscal period may, if the individual so elects and subsection 249.1(4) does not apply in respect of the business, be deemed to have ended at the time it would have ended if the individual had not disposed of the business during the fiscal period.
Marginal note:Election
(2)An election under subsection 25(1) is not valid unless the individual, at the time when the fiscal period of the business would, if the election were valid, be deemed to have ended, is resident in Canada.
Marginal note:Dispositions in extended fiscal period
(3)If subsection (1) applies in respect of a fiscal period of a business of an individual, for the purpose of computing the individual’s income for the fiscal period, section 13 is to be read without reference to its subsection (8).
Marginal note:Banks — inclusions in income
26(1)There shall be included in computing the income of a bank for its first taxation year that commences after June 17, 1987 and ends after 1987 the total of
(a)the total of the specific provisions of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, as at the end of its immediately preceding taxation year,
(b)the total of the general provisions of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, as at the end of its immediately preceding taxation year,
(c)the amount, if any, by which
(i)the amount of the special provision for losses on trans-border claims of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, that was deductible by the bank under subsection 26(2) in computing its income for its immediately preceding taxation year
exceeds
(ii)that part of the amount determined under subparagraph 26(1)(c)(i) that was a realized loss of the bank for that immediately preceding taxation year, and
(d)the amount, if any, of the tax allowable appropriations account of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, at the end of its immediately preceding taxation year.
Marginal note:Banks — deductions from income
(2)In computing the income for a taxation year of a bank, there may be deducted an amount not exceeding the total of
(a)that part of the total of the amounts of the five-year average loan loss experiences of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(b)that part of the total of the amounts transferred by the bank to its tax allowable appropriations account, as permitted under the Minister’s rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(c)that part of the amount, if any, by which
(i)the amount of the special provision for losses on trans-border claims, as determined, or as would be determined if such a determination were required, under the Minister’s rules, that was deductible by the bank under this subsection in computing its income for its last taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987
exceeds
(ii)that part of the amount determined under subparagraph 26(2)(c)(i) that was a realized loss of the bank for that last taxation year
that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(d)where the tax allowable appropriations account of the bank at the end of its last taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987, as determined, or as would be determined if such a determination were required, under the Minister’s rules, is a negative amount, that part of such amount expressed as a positive number that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, and
(e)that part of the total of the amounts calculated in respect of the bank for the purposes of the Minister’s rules, or that would be calculated for the purposes of those rules if such a calculation were required, under Procedure 8 of the Procedures for the Determination of the Provision for Loan Losses as set out in Appendix 1 of those rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year.
Marginal note:Write-offs and recoveries
(3)In computing the income of a bank, the following rules apply:
(a)any amount that was recorded by the bank as a realized loss or a write-off of an asset that was included by the bank in the calculation of an amount deductible under the Minister’s rules, or would have been included in the calculation of such an amount if such a calculation had been required, for any taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987, shall, for the purposes of paragraph 12(1)(i) and section 12.4, be deemed to have been deducted by the bank under paragraph 20(1)(p) in computing its income for the year for which it was so recorded; and
(b)any amount that was recorded by the bank as a recovery of a realized loss or a write-off of an asset that was included by the bank in the calculation of an amount deductible under the Minister’s rules, or would have been included in the calculation of such an amount if such a calculation had been required, for any taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987 shall, for the purposes of section 12.4, be deemed to have been included by the bank under paragraph 12(1)(i) in computing its income for the year for which it was so recorded.
Definition ofMinister’s rules
(4)For the purposes of this section,Minister’s rulesmeans the Rules for the Determination of the Appropriations for Contingencies of a Bank issued under the authority of the Minister of Finance pursuant to section 308 of theBank Actfor the purposes of subsections (1) and (2) of this section.
Marginal note:Application of Part I to Crown corporation
27(1)This Part applies to a federal Crown corporation as if
(a)any income or loss from a business carried on by the corporation as agent of Her Majesty, or from a property of Her Majesty administered by the corporation, were an income or loss of the corporation from the business or the property, as the case may be; and
(b)any property, obligation or debt of any kind whatever held, administered, entered into or incurred by the corporation as agent of Her Majesty were a property, obligation or debt, as the case may be, of the corporation.
Marginal note:Presumption
(2)Notwithstanding any other provision of this Act, a prescribed federal Crown corporation and any corporation controlled by such a corporation are each deemed not to be a private corporation and paragraphs 149(1)(d) to (d.4) do not apply to those corporations.
Marginal note:Transfers of land for disposition
(3)Where land of Her Majesty has been transferred to a prescribed federal Crown corporation for purposes of disposition, the acquisition of the property by the corporation and any disposition thereof shall be deemed not to have been in the course of the business carried on by the corporation.
Marginal note:Emissions allowances
27.1(1)Notwithstanding section 10, for the purpose of computing a taxpayer’s income from a business, an emissions allowance shall be valued at the cost at which the taxpayer acquired it.
Marginal note:Determination of cost of emissions allowances
(2)If at any particular time a taxpayer that owns one emissions allowance, or two or more identical emissions allowances (for the purposes of this subsection two or more emissions allowances will be considered identical if they could be used to settle the same emissions obligations), acquires one or more other emissions allowances (in this subsection referred to asnewly acquired emissions allowances), each of which is identical to each of the previously-acquired emissions allowances, for the purposes of computing, at any subsequent time, the cost of the taxpayer of each of the identical emissions allowances,
(a)the taxpayer is deemed to have disposed of each of the previously-acquired emissions allowances immediately before the particular time for proceeds equal to its cost to the taxpayer immediately before the particular time; and
(b)the taxpayer is deemed to have acquired each of the identical emissions allowances at the particular time at a cost equal to the amount determined by the formula
(A + B)/C
where
Marginal note:Expense restriction
(3)Notwithstanding any other provision of this Act, in computing a taxpayer’s income from a business for a taxation year, the total amount deductible in respect of a particular emissions obligation for a taxation year shall not exceed the amount determined by the formula
A + B x C
where
(a)used by the taxpayer to settle the particular emissions obligation in the year, or
(b)held by the taxpayer at the end of the taxation year that can be used to satisfy the particular emissions obligation in respect of the year;
D − (E + F)
where
Marginal note:Income inclusion in following year
(4)There shall be included in computing the income of a taxpayer for a taxation year as income from a business the amount deducted in respect of an emissions obligation referred to in subsection (3) for the immediately preceding taxation year to the extent that the emissions obligation was not settled in the immediately preceding taxation year.
Marginal note:Proceeds of disposition
(5)If a taxpayer surrenders an emissions allowance to settle an emissions obligation, the taxpayer’s proceeds from the disposition of the emissions allowance are deemed to be equal to the taxpayer’s cost of the emissions allowance.
Marginal note:Loss restriction event
(6)Notwithstanding subsection (1), each emissions allowance held at the end of the taxpayer’s taxation year that ends immediately before the time at which the taxpayer is subject to a loss restriction event is to be valued at the cost at which the taxpayer acquired the property, or its fair market value at the end of the year, whichever is lower, and after that time the cost at which the taxpayer acquired the property is, subject to a subsequent application of this subsection and subsection (2), deemed to be that lower amount.
Marginal note:Farming or fishing business
28(1)For the purpose of computing the income of a taxpayer for a taxation year from a farming or fishing business, the income from the business for that year may, if the taxpayer so elects, be computed in accordance with a method (in this section referred to as the “cash method”) whereby the income therefrom for that year shall be deemed to be an amount equal to the total of
(a)all amounts that
(i)were received in the year, or are deemed by this Act to have been received in the year, in the course of carrying on the business, and
(ii)were in payment of or on account of an amount that would, if the income from the business were not computed in accordance with the cash method, be included in computing income from the business for that or any other year,
(b)with respect to a farming business, such amount, if any, as is specified by the taxpayer in respect of the business in the taxpayer’s return of income under this Part for the year, not exceeding the amount, if any, by which
(i)the fair market value at the end of the year of inventory owned by the taxpayer in connection with the business at that time
exceeds
(ii)the amount determined under paragraph 28(1)(c) for the year,
(c)with respect to a farming business, the amount, if any, that is the lesser of
(i)the taxpayer’s loss from the business for the year computed without reference to this paragraph and to paragraph 28(1)(b), and
(ii)the value of inventory purchased by the taxpayer that was owned by the taxpayer in connection with the business at the end of the year, and
(d)the total of all amounts each of which is an amount included in computing the taxpayer’s income for the year from the business because of subsection 13(1), 80(13) or 80.3(3) or (5),
minus the total of
(e)all amounts, other than amounts described in section 30, that
(i)were paid in the year, or are deemed by this Act to have been paid in the year, in the course of carrying on the business,
(ii)in the case of amounts paid, or deemed by this Act to have been paid, for inventory, were in payment of or on account of an amount that would be deductible in computing the income from the business for the year or any other taxation year if that income were not computed in accordance with the cash method, and
(iii)in any other case, were in payment of or on account of an amount that would be deductible in computing the income from the business for a preceding taxation year, the year or the following taxation year if that income were not computed in accordance with the cash method,
(e.1)all amounts, other than amounts described in section 30, that
(i)would be deductible in computing the income from the business for the year if that income were not computed in accordance with the cash method,
(ii)are not deductible in computing the income from the business for any other taxation year, and
(iii)were paid in a preceding taxation year in the course of carrying on the business,
(f)the total of all amounts each of which is the amount, if any, included under paragraph 28(1)(b) or 28(1)(c) in computing the taxpayer’s income from the business for the immediately preceding taxation year, and
(g)the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)(a) or (uu), subsection 20(16), section 30 or subsection 80.3(2) or (4) in respect of the business,
except that paragraphs 28(1)(b) and 28(1)(c) do not apply in computing the income of the taxpayer for the taxation year in which the taxpayer dies.
Marginal note:Acquisition of inventory
(1.1)Where at any time, and in circumstances where paragraph 69(1)(a) or 69(1)(c) applies, a taxpayer acquires inventory that is owned by the taxpayer in connection with a farming business the income from which is computed in accordance with the cash method, for the purposes of this section an amount equal to the cost to the taxpayer of the inventory shall be deemed
(a)to have been paid by the taxpayer at that time and in the course of carrying on that business, and
(b)to be the only amount so paid for the inventory by the taxpayer,
and the taxpayer shall be deemed to have purchased the inventory at the time it was so acquired.
Marginal note:Valuation of inventory
(1.2)For the purpose of paragraph 28(1)(c) and notwithstanding section 10, inventory of a taxpayer shall be valued at any time at the lesser of the total amount paid by the taxpayer at or before that time to acquire it (in this section referred to as its “cash cost”) and its fair market value, except that an animal (in this section referred to as a “specified animal”) that is a horse or, where the taxpayer has so elected in respect thereof for the taxation year that includes that time or for any preceding taxation year, is a bovine animal registered under theAnimal Pedigree Act, shall be valued
(a)at any time in the taxation year in which it is acquired, at such amount as is designated by the taxpayer not exceeding its cash cost to the taxpayer and not less than 70% of its cash cost to the taxpayer; and
(b)at any time in a subsequent taxation year, at such amount as is designated by the taxpayer not exceeding its cash cost to the taxpayer and not less than 70% of the total of
(i)its value determined under this subsection at the end of the preceding taxation year, and
(ii)the total amount paid on account of the purchase price of the animal during the year.
Marginal note:Short fiscal period
(1.3)For each taxation year that is less than 51 weeks, the reference in subsection 28(1.2) to “70” shall be read as a reference to the number determined by the formula
100 - (30 × A/365)
where
Marginal note:Where joint farming or fishing business
(2)Subsection 28(1) does not apply for the purpose of computing the income of a taxpayer for a taxation year from a farming or fishing business carried on by the taxpayer jointly with one or more other persons, unless each of the other persons by whom the business is jointly carried on has elected to have his or her income from the business for that year computed in accordance with the cash method.
Marginal note:Concurrence of Minister
(3)Where a taxpayer has filed a return of income under this Part for a taxation year wherein the taxpayer’s income for that year from a farming or fishing business has been computed in accordance with the cash method, income from the business for each subsequent taxation year shall, subject to the other provisions of this Part, be computed in accordance with that method unless the taxpayer, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, adopts some other method.
Marginal note:Non-resident
(4)Notwithstanding subsections 28(1) and 28(5), where at the end of a taxation year a taxpayer who carried on a business the income from which was computed in accordance with the cash method is non-resident and does not carry on that business in Canada, an amount equal to the total of all amounts each of which is the fair market value of an amount outstanding during the year as or on account of a debt owing to the taxpayer that arose in the course of carrying on the business and that would have been included in computing the taxpayer’s income for the year if the amount had been received by the taxpayer in the year, shall (to the extent that the amount was not otherwise included in computing the taxpayer’s income for the year or a preceding taxation year) be included in computing the taxpayer’s income from the business
(a)for the year, if the taxpayer was non-resident throughout the year; and
(b)for the part of the year throughout which the taxpayer was resident in Canada, if the taxpayer was resident in Canada at any time in the year.
(4.1)[Repealed, 2001, c. 17, s. 18]
Marginal note:Accounts receivable
(5)There shall be included in computing the income of a taxpayer for a taxation year such part of an amount received by the taxpayer in the year, on or after disposing of or ceasing to carry on a business or a part of a business, for, on account or in lieu of payment of, or in satisfaction of debts owing to the taxpayer that arose in the course of carrying on the business as would have been included in computing the income of the taxpayer for the year had the amount so received been received by the taxpayer in the course of carrying on the business.
Marginal note:Disposition of animal of basic herd class
29(1)Where a taxpayer has a basic herd of a class of animals and disposes of an animal of that class in the course of carrying on a farming business in a taxation year, if the taxpayer so elects in the taxpayer’s return of income under this Part for the year the following rules apply:
(a)there shall be deducted in computing the taxpayer’s basic herd of that class at the end of the year such number as is designated by the taxpayer in the taxpayer’s election, not exceeding the least of
(i)the number of animals of that class so disposed of by the taxpayer in that year,
(ii)1/10 of the taxpayer’s basic herd of that class on December 31, 1971, and
(iii)the taxpayer’s basic herd of that class of animal at the end of the immediately preceding taxation year; and
(b)there shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained when
(i)the number determined under paragraph 29(1)(a) in respect of the taxpayer’s basic herd of that class for the year
is multiplied by
(ii)the quotient obtained when the fair market value on December 31, 1971 of the taxpayer’s animals of that class on that day is divided by the number of the taxpayer’s animals of that class on that day.
Marginal note:Reduction in basic herd
(2)Where a taxpayer carries on a farming business in a taxation year and the taxpayer’s basic herd of any class at the end of the immediately preceding year, minus the deduction, if any, required by paragraph 29(1)(a) to be made in computing the taxpayer’s basic herd of that class at the end of the year, exceeds the number of animals of that class owned by the taxpayer at the end of the year,
(a)there shall be deducted in computing the taxpayer’s basic herd of that class at the end of the year the number of animals comprising the excess; and
(b)there shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained when
(i)the number of animals comprising the excess
is multiplied by
(ii)the quotient obtained when the fair market value on December 31, 1971 of the taxpayer’s animals of that class on that day is divided by the number of the taxpayer’s animals of that class on that day.
Marginal note:Interpretation
(3)For the purposes of this section,
(a)a taxpayer’sbasic herdof any class of animals at a particular time means such number of the animals of that class that the taxpayer had on hand at the end of his 1971 taxation year as were, for the purpose of assessing the taxpayer’s tax under this Part for that year, accepted by the Minister, as a consequence of an application made by the taxpayer, to be capital properties and not to be stock-in-trade, minus the numbers, if any, required by virtue of this section to be deducted in computing the taxpayer’s basic herd of that class at the end of taxation years of the taxpayer ending before the particular time;
(b)class of animalsmeans animals of a particular species, namely, cattle, horses, sheep or swine, that are
(i)purebred animals of that species for which a certificate of registration has been issued by a person recognized by breeders in Canada of purebred animals of that species to be the registrar of the breed to which such animals belong, or issued by the Canadian Livestock Records Corporation, or
(ii)animals of that species other than purebred animals described in subparagraph 29(3)(b)(i),
each of which descriptions in subparagraphs 29(3)(b)(i) and 29(3)(b)(ii) shall be deemed to be of separate classes, except that where the number of the taxpayer’s animals described in subparagraph 29(3)(b)(i) or 29(3)(b)(ii), as the case may be, of a particular species is not greater than 10% of the total number of the taxpayer’s animals of that species that would otherwise be of two separate classes by virtue of this paragraph, the taxpayer’s animals described in subparagraphs 29(3)(b)(i) and 29(3)(b)(ii) of that species shall be deemed to be of a single class; and
(c)in determining the number of animals of any class on hand at any time, an animal shall not be included if it was acquired for a feeder operation, and an animal shall be included only if its actual age is not less than,
(i)in the case of cattle, 2 years,
(ii)in the case of horses, 3 years, and
(iii)in the case of sheep or swine, one year,
except that 2 animals of a class under the age specified in subparagraph 29(3)(c)(i), 29(3)(c)(ii) or 29(3)(c)(iii), as the case may be, shall be counted as one animal of the age so specified.
Marginal note:Improving land for farming
30Notwithstanding paragraphs 18(1)(a) and 18(1)(b), there may be deducted in computing a taxpayer’s income for a taxation year from a farming business any amount paid by the taxpayer before the end of the year for clearing land, levelling land or installing a land drainage system for the purposes of the business, to the extent that the amount has not been deducted in a preceding taxation year.
Marginal note:Restricted farm loss
31(1)If a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income that is a subordinate source of income for the taxpayer, then for the purposes of sections 3 and 111 the taxpayer’s loss, if any, for the year from all farming businesses carried on by the taxpayer is deemed to be the total of
(a)the lesser of
(i)the amount by which the total of the taxpayer’s losses for the year, determined without reference to this section and before making any deduction under section 37, from all farming businesses carried on by the taxpayer exceeds the total of the taxpayer’s incomes for the year, so determined from all such businesses, and
(ii)$2,500 plus the lesser of
(A)1/2 of the amount by which the amount determined under subparagraph 31(1)(a)(i) exceeds $2,500, and
(B)$15,000, and
(b)the amount, if any, by which
(i)the amount that would be determined under subparagraph (a)(i) if it were read without reference to “and before making any deduction under section 37”,
exceeds
(ii)the amount determined under subparagraph 31(1)(a)(i).
Marginal note:Restricted farm loss
(1.1)For the purposes of this Act, a taxpayer’s “restricted farm loss” for a taxation year is the amount, if any, by which
(a)the amount determined under subparagraph 31(1)(a)(i) in respect of the taxpayer for the year
exceeds
(b)the total of the amount determined under subparagraph 31(1)(a)(ii) in respect of the taxpayer for the year and all amounts each of which is an amount by which the taxpayer’s restricted farm loss for the year is required to be reduced because of section 80.
Marginal note:Farming and manufacturing or processing
(2)Subsection (1) does not apply to a taxpayer for a taxation year if the taxpayer’s chief source of income for the year is a combination of farming and manufacturing or processing in Canada of goods for sale and all or substantially all output from all farming businesses carried on by the taxpayer is used in the manufacturing or processing.
Marginal note:Insurance agents and brokers
32(1)In computing a taxpayer’s income for a taxation year from the taxpayer’s business as an insurance agent or broker, no amount may be deducted under paragraph 20(1)(m) for the year in respect of unearned commissions from the business, but in computing the taxpayer’s income for the year from the business there may be deducted, as a reserve in respect of such commissions, an amount equal to the lesser of
(a)the total of all amounts each of which is that proportion of an amount that has been included in computing the taxpayer’s income for the year or a preceding taxation year as a commission in respect of an insurance contract (other than a life insurance contract) that
(i)the number of days in the period provided for in the insurance contract that are after the end of the taxation year
is of
(ii)the number of days in that period, and
(b)the total of all amounts each of which is the amount that would, but for this subsection, be deductible under paragraph 20(1)(m) for the year in respect of a commission referred to in paragraph 32(1)(a).
Marginal note:Reserve to be included
(2)There shall be included as income of a taxpayer for a taxation year from a business as an insurance agent or broker, the amount deducted under subsection 32(1) in computing the taxpayer’s income therefrom for the immediately preceding year.
Marginal note:Additional reserve
(3)In computing a taxpayer’s income for a taxation year ending after 1990 from a business carried on by the taxpayer throughout the year as an insurance agent or broker, there may be deducted as an additional reserve an amount not exceeding
(a)where the year ends in 1991, 90%,
(b)where the year ends in 1992, 80%,
(c)where the year ends in 1993, 70%,
(d)where the year ends in 1994, 60%,
(e)where the year ends in 1995, 50%,
(f)where the year ends in 1996, 40%,
(g)where the year ends in 1997, 30%,
(h)where the year ends in 1998, 20%,
(i)where the year ends in 1999, 10%, and
(j)where the year ends after 1999, 0%
of the amount, if any, by which
(k)the reserve that was deducted by the taxpayer under subsection 32(1) for the taxpayer’s last taxation year ending before 1991
exceeds
(l)the amount deductible by the taxpayer under subsection 32(1) for the taxpayer’s first taxation year ending after 1990,
and any amount so deducted by the taxpayer for a taxation year shall be deemed for the purposes of subsection 32(2) to have been deducted for that year under subsection 32(1).
Marginal note:Employee benefit plan deductions
32.1(1)Where a taxpayer has made contributions to an employee benefit plan in respect of the taxpayer’s employees or former employees, the taxpayer may deduct in computing the taxpayer’s income for a taxation year
(a)such portion of an amount allocated to the taxpayer for the year under subsection 32.1(2) by the custodian of the plan as does not exceed the amount, if any, by which
(i)the total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding year
exceeds the total of all amounts each of which is
(ii)an amount in respect of the plan deducted by the taxpayer in computing the taxpayer’s income for a preceding year, or
(iii)an amount received by the taxpayer in the year or a preceding year that was a return of amounts contributed by the taxpayer to the plan; and
(b)where at the end of the year all of the obligations of the plan to the taxpayer’s employees and former employees have been satisfied and no property of the plan will thereafter be paid to or otherwise be available for the benefit of the taxpayer, the amount, if any, by which
(i)the total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding year
exceeds the total of all amounts each of which is
(ii)an amount in respect of the plan deducted by the taxpayer in computing the taxpayer’s income for a preceding year, or, by virtue of paragraph 32.1(1)(a), for the year, or
(iii)an amount received by the taxpayer in the year or a preceding year that was a return of amounts contributed by the taxpayer to the plan.
Marginal note:Allocation
(2)Every custodian of an employee benefit plan shall each year allocate to persons who have made contributions to the plan in respect of their employees or former employees the amount, if any, by which the total of
(a)all payments made in the year out of or under the plan to or for the benefit of their employees or former employees (other than the portion thereof that, by virtue of subparagraph 6(1)(g)(ii), is not required to be included in computing the income of a taxpayer), and
(b)all payments made in the year out of or under the plan to the heirs or the legal representatives of their employees or former employees
exceeds the income of the plan for the year.
Marginal note:Income of employee benefit plan
(3)For the purposes of subsection 32.1(2), the income of an employee benefit plan for a year
(a)in the case of a plan that is a trust, is the amount that would be its income for the year if section 104 were read without reference to subsections 104(4) to 104(24); and
(b)in any other case, is the total of all amounts each of which is the amount, if any, by which a payment under the plan by the custodian thereof in the year exceeds
(i)in the case of an annuity, that part of the payment determined in prescribed manner to have been a return of capital, and
(ii)in any other case, that part of the payment that could, but for paragraph 6(1)(g), reasonably be regarded as being a payment of a capital nature.
33.1[Repealed, 2013, c. 33, s. 4]
Marginal note:Professional business
34In computing the income of a taxpayer for a taxation year from a business that is the professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, the following rules apply:
(a)if the taxpayer so elects in the taxpayer’s return of income under this Part for the year and the year begins before March 22, 2017, there shall not be included any amount in respect of work in progress at the end of the year; and
(b)where the taxpayer has made an election under this section, paragraph 34(a) shall apply in computing the taxpayer’s income from the business for all subsequent taxation years unless the taxpayer, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, revokes the election to have that paragraph apply.
Marginal note:Additional Business Income
34.1(1)Where
(a)an individual (other than a graduated rate estate) carries on a business in a taxation year,
(b)a fiscal period of the business begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and
(c)the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,
there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula
(A - B) × C/D
where
(i)the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii)the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,
Marginal note:Additional income election
(2)Where
(a)an individual (other than a graduated rate estate) begins carrying on a business in a taxation year and not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and
(b)the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,
there shall be included in computing the individual’s income for the year from the business the lesser of
(c)the amount designated in the individual’s return of income for the year, and
(d)the amount determined by the formula
(A - B) × C/D
where
(i)the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii)the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,
Marginal note:Deduction
(3)There shall be deducted in computing an individual’s income for a taxation year from a business the amount, if any, included under subsection 34.1(1) or 34.1(2) in computing the individual’s income for the preceding taxation year from the business.
(4) to (7)[Repealed, 2013, c. 40, s. 15]
Marginal note:No additional income inclusion
(8)Subsections 34.1(1) and 34.1(2) do not apply in computing an individual’s income for a taxation year from a business where
(a)the individual dies or otherwise ceases to carry on the business in the year; or
(b)the individual becomes a bankrupt in the calendar year in which the taxation year ends.
Marginal note:Death of partner or proprietor
(9)Where
(a)an individual carries on a business in a taxation year,
(b)the individual dies in the year and after the end of a fiscal period of the business that ends in the year,
(c)another fiscal period of the business ends because of the individual’s death (in this subsection referred to as the “short period”), and
(d)the individual’s legal representative
(i)elects that this subsection apply in computing the individual’s income for the year, or
(ii)files a separate return of income under subsection 150(4) in respect of the individual’s business,
notwithstanding subsection 34.1(8), there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula
(A - B) × C/D
where
(i)the total of all amounts, each of which is an amount included in the value of A in respect of the business that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii)the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,
Marginal note:Definitions
34.2(1)The definitions in this subsection apply in this section.
adjusted stub period accrualof a corporation in respect of a partnership — in which the corporation has a significant interest at the end of the last fiscal period of the partnership that ends in the corporation’s taxation year in circumstances where another fiscal period (in this definition referred to as the “particular period”) of the partnership begins in the year and ends after the year — means
(a)if paragraph (b) does not apply, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
(b)if a fiscal period of the partnership ends in the corporation’s taxation year and the year is the first taxation year in which the fiscal period of the partnership is aligned with the fiscal period of one or more other partnerships under a multi-tier alignment (in this paragraph referred to as the “eligible fiscal period”),
(i)where a fiscal period of the partnership ends in the year and before the eligible fiscal period, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
(ii)where the eligible fiscal period of the partnership is the first fiscal period of the partnership that ends in the corporation’s taxation year, the amount determined by the formula
(A – B – C) × D/E – (F + G)
where
eligible alignment income, of a corporation, means
(a)if a partnership is subject to a single-tier alignment, the first aligned fiscal period of the partnership ends in the first taxation year of the corporation ending after March 22, 2011 (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period,
(i)where the eligible fiscal period is preceded by another fiscal period of the partnership that ends in the corporation’s first taxation year that ends after March 22, 2011 and the corporation is a member of the partnership at the end of that preceding fiscal period, the amount determined by the formula
A – B – C
where
(ii)where the eligible fiscal period is the first fiscal period of the partnership that ends in the corporation’s first taxation year ending after March 22, 2011, nil; and
(b)if a partnership is subject to a multi-tier alignment, the first aligned fiscal period of the partnership ends in the taxation year of the corporation (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period, the amount determined by the formula
A – B – C
where
(i)for which a deduction is available under section 112 or 113, or
(ii)that would be included in computing the income of the corporation for the year if there were no multi-tier alignment,
multi-tier alignment, in respect of a partnership, means the alignment under subsection 249.1(9) or (11) of the fiscal period of the partnership and the fiscal period of one or more other partnerships.  (alignement pour paliers multiples)
qualified resource expense, of a corporation for a taxation year in respect of a fiscal period of a partnership that begins in the year and ends after the year, means an expense incurred by the partnership in the portion of the fiscal period that is in the year and that is described in any of the following definitions:
(a)Canadian exploration expensein subsection 66.1(6);
(b)Canadian development expensein subsection 66.2(5);
(c)foreign resource expensein subsection 66.21(1); and
(d)Canadian oil and gas property expensein subsection 66.4(5). (dépense admissible relative à des ressources)
qualifying transitional income, of a corporation that is a member of a partnership on March 22, 2011, means the amount that is the total of the following amounts, computed in accordance with subsection (15),
(a)the corporation’s eligible alignment income in respect of the partnership, and
(b)the corporation’s adjusted stub period accrual in respect of the partnership for
(i)if there is a multi-tier alignment in respect of the partnership, the corporation’s taxation year during which ends the fiscal period of the partnership that is aligned with the fiscal period of one or more other partnerships under the multi-tier alignment, or
(ii)in any other case, the corporation’s first taxation year that ends after March 22, 2011. (revenu admissible à l’allègement)
significant interest, of a corporation in a partnership at any time, means a membership interest of the corporation in the partnership if the corporation, or the corporation together with one or more persons or partnerships related to or affiliated with the corporation, is entitled at that time to more than 10% of
(a)the income or loss of the partnership; or
(b)the assets (net of liabilities) of the partnership if it were to cease to exist. (participation importante)
single-tier alignment, in respect of a partnership, means the ending of a fiscal period of the partnership under subsection 249.1(8). (alignement pour palier unique)
specified percentage, of a corporation for a particular taxation year in respect of a partnership, means
(a)if the first taxation year for which the corporation has qualifying transitional income ends in 2011 and the particular year ends in
(i)2011, 100%,
(ii)2012, 85%,
(iii)2013, 65%,
(iv)2014, 45%,
(v)2015, 25%, and
(vi)2016, 0%;
(b)if the first taxation year for which the corporation has qualifying transitional income ends in 2012 and the particular year ends in
(i)2012, 100%,
(ii)2013, 85%,
(iii)2014, 65%,
(iv)2015, 45%,
(v)2016, 25%, and
(vi)2017, 0%; and
(c)if the first taxation year for which the corporation has qualifying transitional income ends in 2013 and the particular year ends in
(i)2013, 85%,
(ii)2014, 65%,
(iii)2015, 45%,
(iv)2016, 25%, and
(v)2017, 0%. (pourcentage déterminé)
Marginal note:Income inclusion — adjusted stub period accrual
(2)Subject to subsections (5) and (9), a corporation (other than a professional corporation) shall include in computing its income for a taxation year its adjusted stub period accrual in respect of a partnership if
(a)the corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the year;
(b)another fiscal period of the partnership begins in the year and ends after the year; and
(c)at the end of the year, the corporation is entitled to a share of an income, loss, taxable capital gain or allowable capital loss of the partnership for the fiscal period referred to in paragraph (b).
Marginal note:Income inclusion — new partner designation
(3)Subject to subsection (5), if a corporation (other than a professional corporation) becomes a member of a partnership during a fiscal period of the partnership (in this subsection referred to as the “particular period”) that begins in the corporation’s taxation year and ends after the taxation year but on or before the filing-due date for the taxation year and the corporation has a significant interest in the partnership at the end of the particular period, the corporation may include in computing its income for the taxation year the lesser of
(a)the amount, if any, designated by the corporation in its return of income for the taxation year, and
(b)the amount determined by the formula
A × B/C
where
Marginal note:Treatment in following year
(4)If an amount was included in computing the income of a corporation in respect of a partnership for the immediately preceding taxation year under subsection (2) or (3),
(a)the portion of the amount that, because of subparagraph (5)(a)(i) or (ii), was income for that preceding year is deductible in computing the income of the corporation for the current taxation year; and
(b)the portion of the amount that, because of subparagraph (5)(a)(i) or (ii), was taxable capital gains for that preceding year is deemed to be an allowable capital loss of the corporation for the current taxation year from the disposition of property.
Marginal note:Character of amounts
(5)For the purposes of this Act, the following rules apply:
(a)in computing the income of a corporation for a taxation year,
(i)an adjusted stub period accrual included under subsection (2) in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for all fiscal periods of the partnership ending in the year,
(ii)an amount included under subsection (3) in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for the particular period referred to in that subsection,
(iii)an amount, a portion of which is deductible or is an allowable capital loss under subsection (4) in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the income and taxable capital gains included in the corporation’s income for the immediately preceding taxation year under subsection (2) or (3) in respect of the partnership,
(iv)an amount claimed as a reserve under subsection (11) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the qualifying transitional income in respect of the partnership for the year, and
(v)an amount, a portion of which is included in income under paragraph (12)(a), or is deemed to be a taxable capital gain under paragraph (12)(b), in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the amount claimed as a reserve under subsection (11) in respect of the partnership for the immediately preceding taxation year;
(b)a corporation’s capital dividend account, as defined in subsection 89(1), is to be determined without reference to this section; and
(c)the reference in subparagraph 53(2)(c)(i.4) to an amount deducted under subsection (11) by a taxpayer includes an amount deemed to be an allowable capital loss under subparagraph (11)(b)(ii).
Marginal note:Designation — qualified resource expense
(6)A corporation may designate an amount for a taxation year in respect of a qualified resource expense under the definitionadjusted stub period accrualin subsection (1) subject to the following rules:
(a)the corporation cannot designate an amount for the year in respect of a qualified resource expense in respect of a partnership except to the extent the corporation obtains from the partnership, before the corporation’s filing-due date for the year, information in writing identifying the corporation’s qualified resource expenses described
(i)in paragraph (h) of the definitionCanadian exploration expensein subsection 66.1(6), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year,
(ii)in paragraph (f) of the definitionCanadian development expensein subsection 66.2(5), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year,
(iii)in paragraph (e) of the definitionforeign resource expensein subsection 66.21(1), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year, and
(iv)in paragraph (b) of the definitionCanadian oil and gas property expensein subsection 66.4(5), determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year; and
(b)the amount designated for the year by the corporation is not to exceed the maximum amount that would be deductible by the corporation under any of sections 66.1, 66.2, 66.21 and 66.4 in computing its income for the year if
(i)the amounts referred to in paragraph (a) in respect of the partnership were the only amounts relevant in determining the maximum amount, and
(ii)the fiscal period of the partnership that begins in the year and ends after the year had ended at the end of the year and each qualified resource expense were deemed under subsection 66(18) to be incurred by the corporation at the end of the year.
Marginal note:No additional income — bankrupt
(7)Subsections (2) and (3) do not apply in computing a corporation’s income for a taxation year in respect of a partnership if the corporation becomes a bankrupt in the year.
Marginal note:Foreign affiliates
(8)This section does not apply for the purposes of computing, for a taxation year of a foreign affiliate of a corporation resident in Canada,
(a)the foreign accrual property income of the affiliate in respect of the corporation; and
(b)except to the extent that the context otherwise requires, the exempt surplus or exempt deficit, the hybrid surplus or hybrid deficit, and the taxable surplus or taxable deficit (as those terms are defined in subsection 5907(1) of theIncome Tax Regulations) of the affiliate in respect of the corporation.
Marginal note:Special case — multi-tier alignment
(9)If a corporation is a member of a partnership subject to a multi-tier alignment, subsection (2) does not apply to the corporation in respect of the partnership for taxation years preceding the taxation year that includes the end of the first aligned fiscal period of the partnership under the multi-tier alignment.
Marginal note:Designations
(10)Once a corporation makes a designation in calculating its adjusted stub period accrual in respect of a partnership for a taxation year under any of the description of E or F of paragraph (a), the description of E or F of subparagraph (b)(i) and the description of F or G of subparagraph (b)(ii) of the definitionadjusted stub period accrualin subsection (1), the designation cannot be amended or revoked.
Marginal note:Transitional reserve
(11)If a corporation has qualifying transitional income in respect of a partnership for a particular taxation year,
(a)the corporation may, in computing its income for the particular year, claim an amount, as a reserve, not exceeding the least of
(i)the specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership,
(ii)if, for the immediately preceding taxation year, an amount was claimed under this subsection in computing the corporation’s income in respect of the partnership, the amount that is the total of
(A)the amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, and
(B)the amount by which the corporation’s qualifying transitional income in respect of the partnership is increased in the particular year because of the application of subsections (16) and (17), and
(iii)the amount determined by the formula
A – B
where
(b)the portion of the amount claimed under paragraph (a) for the particular year that, because of subparagraph (5)(a)(iv), has
(i)a character other than capital is deductible in computing the income of the corporation for the particular year, and
(ii)the character of capital is deemed to be an allowable capital loss of the corporation for the particular year from the disposition of property.
Marginal note:Inclusion of prior year reserve
(12)Subject to subsection (5), if a reserve was claimed by a corporation under subsection (11) in respect of a partnership for the immediately preceding taxation year,
(a)the portion of the reserve that was deducted under subparagraph (11)(b)(i) for that preceding year is to be included in computing the income of the corporation for the current taxation year; and
(b)the portion of the reserve that was deemed by subparagraph (11)(b)(ii) to be an allowable capital loss of the corporation for that preceding year is deemed to be a taxable capital gain of the corporation for the current taxation year from the disposition of property.
Marginal note:No reserve
(13)No claim shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnership
(a)unless,
(i)in the case of a corporation that is a member of a partnership in respect of which there is a multi-tier alignment, the corporation has been a member of the partnership continuously since before March 22, 2011 to the end of the year,
(ii)in the case of a corporation that is a member of a partnership in respect of which there is no multi-tier alignment, the corporation is a member of the partnership
(A)at the end of the partnership’s fiscal period that begins before March 22, 2011 and ends in the year of the corporation that includes March 22, 2011,
(B)at the end of the partnership’s fiscal period commencing immediately after the fiscal period referred to in clause (A) and continues to be a member until after the end of the year of the corporation that includes March 22, 2011, and
(C)continuously since before March 22, 2011 until the end of the year;
(b)if at the end of the year or at any time in the following taxation year,
(i)the corporation’s income is exempt from tax under this Part, or
(ii)the corporation is non-resident and the partnership does not carry on business through a permanent establishment (as defined for the purpose of subsection 16.1(1)) in Canada; or
(c)if the year ends immediately before another taxation year
(i)at the beginning of which the partnership no longer principally carries on the activities to which the reserve relates,
(ii)in which the corporation becomes a bankrupt, or
(iii)in which the corporation is dissolved or wound up (other than in circumstances to which subsection 88(1) applies).
Marginal note:Deemed partner
(14)A corporation that cannot claim an amount under subsection (11) for a taxation year in respect of a partnership solely because it has disposed of its interest in the partnership is deemed for the purposes of paragraph (13)(a) to be a member of a partnership continuously until the end of the taxation year if
(a)the corporation disposed of its interest to another corporation related to, or affiliated with, the corporation at the time of the disposition; and
(b)a corporation related to, or affiliated with, the corporation has the partnership interest referred to in paragraph (a) at the end of the taxation year.
Marginal note:Computing qualifying transitional income — special rules
(15)For the purposes of determining a corporation’s qualifying transitional income, the income or loss, as the case may be, of a partnership for a fiscal period shall be computed as if
(a)the partnership had deducted for the period the maximum amount deductible in respect of any expense, reserve, allowance or other amount;
(b)this Act were read without reference to paragraph 28(1)(b); and
(c)the partnership had made an election under paragraph 34(a).
Marginal note:Qualifying transition income adjustment  — conditions for application
(16)Subsection (17) applies for a particular taxation year of a corporation and for each subsequent taxation year for which the corporation may claim an amount under subsection (11) in respect of a partnership if the particular year is the first taxation year
(a)that is after the taxation year in which the corporation has, or would have if the partnership had income, an adjusted stub period accrual that is included in the corporation’s qualifying transitional income in respect of the partnership by reason of paragraph (b) of the definitionqualifying transitional incomein subsection (1); and
(b)in which ends the fiscal period of the partnership that began in the taxation year referred to in paragraph (a).
Marginal note:Adjustment of qualifying transitional income
(17)If this subsection applies in respect of a partnership for a taxation year of a corporation, the adjusted stub period accrual included in the corporation’s qualifying transitional income in respect of the partnership for the year is computed as if
(a)the descriptions in paragraph (a) and subparagraph (b)(i) of the definitionadjusted stub period accrualin subsection (1) read as follows:
(b)the descriptions in subparagraph (b)(ii) of the definitionadjusted stub period accrualin subsection (1) read as follows:
Marginal note:Anti-avoidance
(18)If it is reasonable to conclude that one of the main reasons a corporation is a member of a partnership in a taxation year is to avoid the application of subsection (13), the corporation is deemed not to be a member of the partnership for the purposes of that subsection.
Marginal note:Definitions
34.3(1)The definitions in this subsection and in subsection 34.2(1) apply in this section.
actual stub period accrual, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C/D – E
where
base year, of a corporation in respect of a qualifying partnership for a taxation year, means the preceding taxation year of the corporation in which began a fiscal period of the partnership that ends in the corporation’s taxation year. (année de base)
income shortfall adjustment, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C × D
where
(a)the actual stub period accrual in respect of the qualifying partnership, and
(b)the amount that would be the corporation’s adjusted stub period accrual for the base year in respect of the qualifying partnership if the value of F in paragraph (a) of the definitionadjusted stub period accrualin subsection 34.2(1) were nil;
(a)begins on the day after the day on which the base year ends, and
(b)ends on the day on which the taxation year ends; and
qualifying partnership, in respect of a corporation for a particular taxation year, means a partnership
(a)a fiscal period of which began in a preceding taxation year and ends in the particular taxation year; and
(b)in respect of which the corporation was required to calculate an adjusted stub period accrual for the preceding taxation year. (société de personnes admissible)
Marginal note:Application of subsection (3)
(2)Subsection (3) applies to a corporation for a taxation year if
(a)the corporation has designated an amount for the purpose of the description of F in paragraph (a) of the definitionadjusted stub period accrualin subsection 34.2(1) in calculating its adjusted stub period accrual for the base year in respect of a qualifying partnership for the taxation year; and
(b)where the corporation has qualifying transitional income, the taxation year is after the first taxation year of the corporation to which subsection 34.2(17) applies.
Marginal note:Income shortfall adjustment — inclusion
(3)If this subsection applies to a corporation for a taxation year, the corporation shall include in computing its income for the taxation year the amount determined by the formula
A + 0.50 × (A – B)
where
Marginal note:Prospectors and grubstakers
35(1)Where a share of the capital stock of a corporation
(a)is received in a taxation year by an individual as consideration for the disposition by the individual to the corporation of a mining property or an interest, or for civil law a right, therein acquired by the individual as a result of the individual’s efforts as a prospector, either alone or with others, or
(b)is received in a taxation year
(i)by a person who has, either under an arrangement with a prospector made before the prospecting, exploration or development work or as an employer of a prospector, advanced money for, or paid part or all of, the expenses of prospecting or exploring for minerals or of developing a property for minerals, and
(ii)as consideration for the disposition by the person referred to in subparagraph (i) to the corporation of a mining property or an interest, or for civil law a right, therein acquired under the arrangement under which that person made the advance or paid the expenses, or if the prospector’s employee, acquired by the person through the employee’s efforts,
the following rules apply:
(c)notwithstanding any other provision of this Act, no amount in respect of the receipt of the share shall be included
(i)in computing the income for the year of the individual or person, as the case may be, except as provided in paragraph 35(1)(d), or
(ii)in computing at any time the amount to be determined for F in the definitioncumulative Canadian development expensein subsection 66.2(5) in respect of the individual or person, as the case may be,
(d)in the case of an individual or partnership (other than a partnership each member of which is a taxable Canadian corporation), an amount in respect of the receipt of the share equal to the lesser of its fair market value at the time of acquisition and its fair market value at the time of disposition or exchange of the share shall be included in computing the income of the individual or partnership, as the case may be, for the year in which the share is disposed of or exchanged,
(e)notwithstanding Subdivision C, in computing the cost to the individual, person or partnership, as the case may be, of the share, no amount shall be included in respect of the disposition of the mining property or the interest, or for civil law the right, therein, as the case may be,
(f)notwithstanding sections 66 and 66.2, in computing the cost to the corporation of the mining property or the interest, or for civil law the right, therein, as the case may be, no amount shall be included in respect of the share, and
(g)for the purpose of paragraph 35(1)(d), an individual or partnership shall be deemed to have disposed of or exchanged shares that are identical properties in the order in which they were acquired.
Marginal note:Definitions
(2)In this section,
mining propertymeans
(a)a right, licence or privilege to prospect, explore, drill or mine for minerals in a mineral resource in Canada, or
(b)real property or an immovable in Canada (other than depreciable property) the principal value of which depends on its mineral resource content; (bien minier)
prospectormeans an individual who prospects or explores for minerals or develops a property for minerals on behalf of the individual, on behalf of the individual and others or as an employee. (prospecteur)
36[Repealed, 2013, c. 40, s. 17]
Marginal note:Scientific research and experimental development
37(1)Where a taxpayer carried on a business in Canada in a taxation year, there may be deducted in computing the taxpayer’s income from the business for the year such amount as the taxpayer claims not exceeding the amount, if any, by which the total of
(a)the total of all amounts each of which is an expenditure of a current nature made by the taxpayer in the year or in a preceding taxation year ending after 1973
(i)on scientific research and experimental development related to a business of the taxpayer, carried on in Canada and directly undertaken by the taxpayer,
(i.01)on scientific research and experimental development related to a business of the taxpayer, carried on in Canada and directly undertaken on behalf of the taxpayer,
(i.1)by payments to a corporation resident in Canada to be used for scientific research and experimental development carried on in Canada that is related to a business of the taxpayer, but only where the taxpayer is entitled to exploit the results of that scientific research and experimental development,
(ii)by payments to
(A)an approved association that undertakes scientific research and experimental development,
(B)an approved university, college, research institute or other similar institution,
(C)a corporation resident in Canada and exempt from tax under paragraph 149(1)(j), or
(D)[Repealed, 1996, c. 21, s. 9(4)]
(E)an approved organization that makes payments to an association, institution or corporation described in any of clauses A to (C)
to be used for scientific research and experimental development carried on in Canada that is related to a business of the taxpayer, but only where the taxpayer is entitled to exploit the results of that scientific research and experimental development, or
(iii)where the taxpayer is a corporation, by payments to a corporation resident in Canada and exempt from tax because of paragraph 149(1)(j), for scientific research and experimental development that is basic research or applied research carried on in Canada
(A)the primary purpose of which is the use of results therefrom by the taxpayer in conjunction with other scientific research and experimental development activities undertaken or to be undertaken by or on behalf of the taxpayer that relate to a business of the taxpayer, and
(B)that has the technological potential for application to other businesses of a type unrelated to that carried on by the taxpayer, and
(b)[Repealed, 2012, c. 31, s. 9]
(c)the total of all amounts each of which is an expenditure made by the taxpayer in the year or in a preceding taxation year ending after 1973 by way of repayment of amounts described in paragraph 37(1)(d),
(c.1)all amounts included by virtue of paragraph 12(1)(v), in computing the taxpayer’s income for any previous taxation year,
(c.2)all amounts added because of subsection 127(27), (29) or (34) to the taxpayer’s tax otherwise payable under this Part for any preceding taxation year, and
(c.3)in the case of a partnership, all amounts each of which is an excess referred to in subsection 127(30) in respect of the partnership for any preceding fiscal period,
exceeds the total of
(d)the total of all amounts each of which is the amount of any government assistance or non-government assistance (as defined in subsection 127(9)) in respect of an expenditure described in paragraph (a) or (b), as paragraph (a) or (b), as the case may be, read in its application in respect of the expenditure, that at the taxpayer’s filing-due date for the year the taxpayer has received, is entitled to receive or can reasonably be expected to receive,
(d.1)the total of all amounts each of which is the super-allowance benefit amount (within the meaning assigned by subsection 127(9)) for the year or for a preceding taxation year in respect of the taxpayer in respect of a province,
(e)that part of the total of all amounts each of which is an amount deducted under subsection 127(5) in computing the tax payable under this Part by the taxpayer for a preceding taxation year where the amount can reasonably be attributed to
(i)a prescribed proxy amount for a preceding taxation year,
(ii)an expenditure of a current nature incurred in a preceding taxation year that was a qualified expenditure incurred in that preceding year in respect of scientific research and experimental development for the purposes of section 127, or
(iii)an amount included because of paragraph 127(13)(e) in the taxpayer’s SR&ED qualified expenditure pool at the end of a preceding taxation year within the meaning assigned by subsection 127(9),
(f)the total of all amounts each of which is an amount deducted under this subsection in computing the taxpayer’s income for a preceding taxation year, except amounts described in subsection 37(6),
(f.1)the total of all amounts each of which is the lesser of
(i)the amount deducted under section 61.3 in computing the taxpayer’s income for a preceding taxation year, and
(ii)the amount, if any, by which the amount that was deductible under this subsection in computing the taxpayer’s income for that preceding year exceeds the amount claimed under this subsection in computing the taxpayer’s income for that preceding year,
(g)the total of all amounts each of which is an amount equal to twice the amount claimed under subparagraph 194(2)(a)(ii) by the taxpayer for the year or any preceding taxation year, and
(h)if the taxpayer was subject to a loss restriction event before the end of the year, the amount determined for the year under subsection (6.1) with respect to the taxpayer.
Marginal note:Business of related corporations
(1.1)Notwithstanding paragraph 37(8)(c), for the purposes of subsection 37(1), where a taxpayer is a corporation, scientific research and experimental development, related to a business carried on by another corporation to which the taxpayer is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)) and in which that other corporation is actively engaged, at the time at which an expenditure or payment in respect of the scientific research and experimental development is made by the taxpayer, shall be considered to be related to a business of the taxpayer at that time.
Marginal note:Deemed time of capital expenditure
(1.2)For the purposes of paragraph 37(1)(b), an expenditure made by a taxpayer in respect of property shall be deemed not to have been made before the property is considered to have become available for use by the taxpayer.
Marginal note:SR&ED in the exclusive economic zone
(1.3)For the purposes of this section and section 127 of this Act and Part XXIX of theIncome Tax Regulations, an expenditure is deemed to have been made by a taxpayer in Canada if the expenditure is
(a)made by the taxpayer in the course of a business carried on by the taxpayer in Canada; and
(b)made for the prosecution of scientific research and experimental development in the exclusive economic zone of Canada, within the meaning of theOceans Act, or in the airspace above that zone or the seabed or subsoil below that zone.
Marginal note:Salary or wages for SR&ED outside Canada
(1.4)For the purposes of this section, section 127 and Part XXIX of theIncome Tax Regulations, the amount of a taxpayer’s expenditure for a taxation year determined under subsection (1.5) is deemed to be made in the taxation year in respect of scientific research and experimental development carried on in Canada by the taxpayer.
Marginal note:Salary or wages outside Canada — limit determined
(1.5)The amount of a taxpayer’s expenditure for a taxation year determined under this subsection is the lesser of
(a)the amount that is the total of all expenditures each of which is an expenditure made by the taxpayer, in the taxation year and after February 25, 2008, in respect of an expense incurred in the taxation year for salary or wages paid to the taxpayer’s employee who was resident in Canada at the time the expense was incurred in respect of scientific research and experimental development,
(i)that was carried on outside Canada,
(ii)that was directly undertaken by the taxpayer,
(iii)that related to a business of the taxpayer, and
(iv)that was solely in support of scientific research and experimental development carried on in Canada by the taxpayer, and
(b)the amount that is 10 per cent of the total of all expenditures, made by the taxpayer in the year, each of which would, if this Act were read without reference to subsection (1.4), be an expenditure made in respect of an expense incurred in the year for salary or wages paid to an employee in respect of scientific research and experimental development that was carried on in Canada, that was directly undertaken by the taxpayer and that related to a business of the taxpayer.
Marginal note:Research outside Canada
(2)In computing the income of a taxpayer for a taxation year from a business of the taxpayer, there may be deducted expenditures of a current nature made by the taxpayer in the year
(a)on scientific research and experimental development carried on outside Canada, directly undertaken by or on behalf of the taxpayer, and related to the business (except to the extent that subsection (1.4) deems the expenditures to have been made in Canada); or
(b)by payments to an approved association, university, college, research institute or other similar institution to be used for scientific research and experimental development carried on outside Canada related to the business provided that the taxpayer is entitled to exploit the results of that scientific research and experimental development.
Marginal note:Minister may obtain advice
(3)The Minister may obtain the advice of the Department of Industry, the National Research Council of Canada, the Defence Research Board or any other agency or department of the Government of Canada carrying on activities in the field of scientific research as to whether any particular activity constitutes scientific research and experimental development.
Marginal note:Where no deduction allowed under section
(4)No deduction may be made under this section in respect of an expenditure made to acquire rights in, or arising out of, scientific research and experimental development.
Marginal note:Where no deduction allowed under ss. 110.1 and 118.1
(5)Where, in respect of an expenditure on scientific research and experimental development made by a taxpayer in a taxation year, an amount is otherwise deductible under this section and under section 110.1 or 118.1, no deduction may be made in respect of the expenditure under section 110.1 or 118.1 in computing the taxable income of, or the tax payable by, the taxpayer for any taxation year.
Marginal note:Expenditures of a capital nature
(6)For the purposes of section 13, an amount claimed under subsection (1) that may reasonably be considered to be in respect of a property described in paragraph (1)(b), as that paragraph read in its application in respect of the property, is deemed to be an amount allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a), and for that purpose the property is deemed to be of a separate prescribed class.
Marginal note:Loss restriction event
(6.1)If a taxpayer was, at any time (in this subsection referred to as “that time”) before the end of a taxation year of the taxpayer, last subject to a loss restriction event, the amount determined for the purposes of paragraph (1)(h) for the year with respect to the taxpayer in respect of a business is the amount, if any, by which
(a)the amount, if any, by which
(i)the total of all amounts each of which is
(A)an expenditure described in paragraph (1)(a) or (c) that was made by the taxpayer before that time,
(B)the lesser of the amounts determined immediately before that time in respect of the taxpayer under subparagraphs (1)(b)(i) and (ii), as those paragraphs read on March 29, 2012, in respect of expenditures made, and property acquired, by the taxpayer before 2014, or
(C)an amount determined in respect of the taxpayer under paragraph (1)(c.1) for its taxation year that ended immediately before that time
exceeds the total of all amounts each of which is
(ii)the total of all amounts determined in respect of the taxpayer under paragraphs (1)(d) to (g) for its taxation year that ended immediately before that time, or
(iii)the amount deducted under subsection (1) in computing the taxpayer’s income for its taxation year that ended immediately before that time
exceeds
(b)the total of
(i)if the business to which the amounts described in any of clauses (a)(i)(A) to (C) can reasonably be considered to have been related was carried on by the taxpayer for profit or with a reasonable expectation of profit throughout the year, the total of
(A)the taxpayer’s income for the year from the business before making any deduction under subsection (1), and
(B)if properties were sold, leased, rented or developed, or services were rendered, in the course of carrying on the business before that time, the taxpayer’s income for the year, before making any deduction under subsection (1), from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services, and
(ii)the total of all amounts each of which is an amount determined in respect of a preceding taxation year of the taxpayer that ended after that time equal to the lesser of
(A)the amount determined under subparagraph (i) with respect to the taxpayer in respect of the business for that preceding year, and
(B)the amount in respect of the business deducted under subsection (1) in computing the taxpayer’s income for that preceding year.
Marginal note:Definitions
(7)In this section,
approvedmeans approved by the Minister after the Minister has, if the Minister considers it necessary, obtained the advice of the Department of Industry or the National Research Council of Canada. (agréé)
scientific research and experimental development[Repealed, 1996, c. 21, s. 9(8)]
Marginal note:Interpretation
(8)In this section,
(a)references to expenditures on or in respect of scientific research and experimental development
(i)where the references occur in subsection 37(2), include only
(A)expenditures each of which was an expenditure incurred for and all or substantially all of which was attributable to the prosecution of scientific research and experimental development, and
(B)expenditures of a current nature that were directly attributable, as determined by regulation, to the prosecution of scientific research and experimental development, and
(ii)where the references occur other than in subsection 37(2), include only
(A)expenditures incurred by a taxpayer in a taxation year (other than a taxation year for which the taxpayer has elected under clause (B)), each of which is
(I)an expenditure of a current nature all or substantially all of which was attributable to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development in Canada, or
(II)an expenditure of a current nature directly attributable, as determined by regulation, to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development in Canada, and
(III)[Repealed, 2012, c. 31, s. 9]
(B)where a taxpayer has elected in prescribed form and in accordance with subsection 37(10) for a taxation year, expenditures incurred by the taxpayer in the year each of which is
(I)[Repealed, 2012, c. 31, s. 9]
(II)an expenditure of a current nature for the prosecution of scientific research and experimental development in Canada directly undertaken on behalf of the taxpayer,
(III)[Repealed, 2012, c. 31, s. 9]
(IV)that portion of an expenditure made in respect of an expense incurred in the year for salary or wages of an employee who is directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employee thereon, and, for this purpose, where that portion is all or substantially all of the expenditure, that portion shall be deemed to be the amount of the expenditure, or
(V)the cost of materials consumed or transformed in the prosecution of scientific research and experimental development in Canada, or
(VI)[Repealed, 2012, c. 31, s. 9]
(b)for greater certainty, references to scientific research and experimental development related to a business include any scientific research and experimental development that may lead to or facilitate an extension of that business;
(c)except in the case of a taxpayer who derives all or substantially all of the taxpayer’s revenue from the prosecution of scientific research and experimental development (including the sale of rights arising out of scientific research and experimental development carried on by the taxpayer), the prosecution of scientific research and experimental development shall not be considered to be a business of the taxpayer to which scientific research and experimental development is related; and
(d)references to expenditures of a current nature include any expenditure made by a taxpayer other than an expenditure made by the taxpayer for
(i)the acquisition from a person or partnership of a property that is a capital property of the taxpayer, or
(ii)the use of, or the right to use, property that would be capital property of the taxpayer if it were owned by the taxpayer.
Marginal note:Salary or wages
(9)An expenditure of a taxpayer
(a)does not include, for the purposes of clauses (8)(a)(ii)(A) and (B), remuneration based on profits or a bonus, where the remuneration or bonus, as the case may be, is in respect of a specified employee of the taxpayer, and
(b)includes, for the purpose of paragraph (1.5)(a), an amount paid in respect of an expense incurred for salary or wages paid to an employee only if the taxpayer reasonably believes that the salary or wages is not subject to an income or profits tax imposed, because of the employee’s presence or activity in a country other than Canada, by a government of that other country.
Marginal note:Limitation re specified employees
(9.1)For the purposes of clauses (8)(a)(ii)(A) and (B), expenditures incurred by a taxpayer in a taxation year do not include expenses incurred in the year in respect of salary or wages of a specified employee of the taxpayer to the extent that those expenses exceed the amount determined by the formula
A × B/365
where
Marginal note:Associated corporations
(9.2)Where
(a)in a taxation year of a corporation that ends in a calendar year, the corporation employs an individual who is a specified employee of the corporation,
(b)the corporation is associated with another corporation (in this subsection and subsection 37(9.3) referred to as the “associated corporation”) in a taxation year of the associated corporation that ends in the calendar year, and
(c)the individual is a specified employee of the associated corporation in the taxation year of the associated corporation that ends in the calendar year,
for the purposes of clauses (8)(a)(ii)(A) and (B), the expenditures incurred by the corporation in its taxation year or years that end in the calendar year and by each associated corporation in its taxation year or years that end in the calendar year do not include expenses incurred in those taxation years in respect of salary or wages of the specified employee unless the corporation and all of the associated corporations have filed with the Minister an agreement referred to in subsection 37(9.3) in respect of those years.
Marginal note:Agreement among associated corporations
(9.3)Where all of the members of a group of associated corporations of which an individual is a specified employee file, in respect of their taxation years that end in a particular calendar year, an agreement with the Minister in which they allocate an amount in respect of the individual to one or more of them for those years and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed the amount determined by the formula
A × B/365
where
the maximum amount that may be claimed in respect of salary or wages of the individual for the purposes of clauses (8)(a)(ii)(A) and (B) by each of the corporations for each of those years is the amount so allocated to it for each of those years.
Marginal note:Filing
(9.4)An agreement referred to in subsection 37(9.3) is deemed not to have been filed by a taxpayer unless
(a)it is in prescribed form; and
(b)where the taxpayer is a corporation, it is accompanied by
(i)where its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(ii)where its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made.
Marginal note:Deemed corporation
(9.5)For the purposes of subsections 37(9.2) and 37(9.3) and this subsection, each
(a)individual related to a particular corporation,
(b)partnership of which a majority-interest partner is
(i)an individual related to a particular corporation, or
(ii)a corporation associated with a particular corporation, and
(c)limited partnership of which a member whose liability as a member is not limited is
(i)an individual related to a particular corporation, or
(ii)a corporation associated with a particular corporation,
is deemed to be a corporation associated with the particularcorporation.
Marginal note:Time for election
(10)Any election made under clause (8)(a)(ii)(B) for a taxation year by a taxpayer shall be filed by the taxpayer on the day on which the taxpayer first files a prescribed form referred to in subsection 37(11) for the year.
Marginal note:Filing requirement
(11)A prescribed form must be filed by a taxpayer with the Minister in respect of any expenditure, that would be incurred by the taxpayer in a taxation year that begins after 1995 if this Act were read without reference to subsection 78(4), that is claimed by the taxpayer for the year as a deduction under this section, on or before the day that is 12 months after the taxpayer’s filing-due date for the taxation year, containing
(a)prescribed information in respect of the expenditure; and
(b)claim preparer information, as defined in subsection 162(5.3).
Marginal note:Failure to file
(11.1)Subject to subsection (12), if the prescribed information in respect of an expenditure referred to in paragraph (11)(a) is not contained in the form referred to in subsection (11), no amount in respect of the expenditure may be deducted under subsection (1).
Marginal note:Misclassified expenditures
(12)If a taxpayer has not filed a prescribed form in respect of an expenditure in accordance with subsection 37(11), for the purposes of this Act, the expenditure is deemed not to be an expenditure on or in respect of scientific research and experimental development.
Marginal note:Non-arm’s length contract — linked work
(13)For the purposes of this section and sections 127 and 127.1, where
(a)work is performed by a taxpayer for a person or partnership at a time when the person or partnership does not deal at arm’s length with the taxpayer, and
(b)the work would be scientific research and experimental development if it were performed by the person or partnership,
the work is deemed to be scientific research and experimental development.
Marginal note:Look-through rule
(14)For the purposes of subparagraphs (1)(a)(i.01) to (iii), the amount of a particular expenditure made by a taxpayer shall be reduced by the amount of any related expenditure of the person or partnership to whom the particular expenditure is made that is not an expenditure of a current nature of the person or partnership.
Marginal note:Reporting of certain payments
(15)If an expenditure is required to be reduced because of subsection (14), the person or the partnership referred to in that subsection is required to inform the taxpayer in writing of the amount of the reduction without delay if requested by the taxpayer and in any other case no later than 90 days after the end of the calendar year in which the expenditure was made.
37.1[Repealed, 1998, c. 19, s. 87(1)]
37.2[Repealed, 1998, c. 19, s. 87(1)]
37.3[Repealed, 1998, c. 19, s. 87(1)]
Marginal note:Taxable capital gain and allowable capital loss
38For the purposes of this Act,
(a)subject to paragraphs (a.1) to (a.3), a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is ½ of the taxpayer’s capital gain for the year from the disposition of the property;
(a.1)a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if
(i)the disposition is the making of a gift to a qualified donee of a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)) or a prescribed debt obligation,
(ii)the disposition is deemed by section 70 to have occurred and the property is
(A)a security described in subparagraph (i), and
(B)the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to a qualified donee, or
(iii)the disposition is the exchange, for a security described in subparagraph (i), of a share of the capital stock of a corporation, which share included, at the time it was issued and at the time of the disposition, a condition allowing the holder to exchange it for the security, and the taxpayer
(A)receives no consideration on the exchange other than the security, and
(B)makes a gift of the security to a qualified donee not more than 30 days after the exchange;
(a.2)a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if
(i)the disposition is the making of a gift to a qualified donee (other than a private foundation) of a property described, in respect of the taxpayer, in paragraph 110.1(1)(d) or in the definitiontotal ecological giftsin subsection 118.1(1), or
(ii)the disposition is deemed by section 70 to have occurred and the property is
(A)described in subparagraph (i), and
(B)the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to a qualified donee (other than a private foundation);
(a.3)a taxpayer’s taxable capital gain for a taxation year, from the disposition of an interest in a partnership (other than a prescribed interest in a partnership) that would be an exchange described in subparagraph (a.1)(iii) if the interest were a share in the capital stock of a corporation, is equal to the lesser of
(i)that taxable capital gain determined without reference to this paragraph, and
(ii)½ of the amount, if any, by which
(A)the total of
(I)the cost to the taxpayer of the partnership interest, and
(II)each amount required by subparagraph 53(1)(e)(iv) or (x) to be added in determining the taxpayer’s adjusted cost base of the partnership interest,
exceeds
(B)the adjusted cost base to the taxpayer of the partnership interest (determined without reference to subparagraphs 53(2)(c)(iv) and (v));
(b)a taxpayer’s allowable capital loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s capital loss for the year from the disposition of that property; and
(c)a taxpayer’s allowable business investment loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s business investment loss for the year from the disposition of that property.
Marginal note:Tax-deferred transaction — flow-through shares
38.1If a taxpayer acquires a property (in this section referred to as the “acquired property”) that is included in a flow-through share class of property in the course of a transaction or series of transactions to which any of section 51, subsections 73(1), 85(1) and (2) and 85.1(1), sections 86 and 87 and subsections 88(1) and 98(3) apply
(a)if the transfer of the acquired property is part of a gifting arrangement (within the meaning assigned by section 237.1) or of a transaction or series of transactions to which subsection 98(3) applies, or the transferor is a person with whom the taxpayer was, at the time of the acquisition, not dealing at arm’s length, there shall be added, at the time of the transfer, to the taxpayer’s exemption threshold in respect of the flow-through share class of property, and deducted from the transferor’s exemption threshold in respect of the flow-through share class of property, the amount determined by the formula
A × B
where
(b)if the transferor receives particular shares of the capital stock of the taxpayer as consideration for the acquired property and those particular shares are listed on a designated stock exchange or are shares of a mutual fund corporation, then for the purposes of this section and subsection 40(12)
(i)the particular shares are deemed to be flow-through shares of the transferor, and
(ii)there shall be added to the transferor’s exemption threshold in respect of the flow-through share class of property that includes the particular shares the amount that is determined under paragraph (a) or that would be so determined if paragraph (a) applied to the taxpayer.
Marginal note:Allocation of gain re certain gifts
38.2If a taxpayer is entitled to an amount of an advantage in respect of a gift of property described in paragraph 38(a.1) or (a.2),
(a)those paragraphs apply only to that proportion of the taxpayer’s capital gain in respect of the gift that the eligible amount of the gift is of the taxpayer’s proceeds of disposition in respect of the gift; and
(b)paragraph 38(a) applies to the extent that the taxpayer’s capital gain in respect of the gift exceeds the amount of the capital gain to which paragraph 38(a.1) or (a.2) applies.
Marginal note:Meaning of capital gain and capital loss
39(1)For the purposes of this Act,
(a)a taxpayer’s capital gain for a taxation year from the disposition of any property is the taxpayer’s gain for the year determined under this Subdivision (to the extent of the amount thereof that would not, if section 3 were read without reference to the expression “other than a taxable capital gain from the disposition of a property” in paragraph 3(a) and without reference to paragraph 3(b), be included in computing the taxpayer’s income for the year or any other taxation year) from the disposition of any property of the taxpayer other than
(i)[Repealed, 2016, c. 12, s. 13]
(i.1)an object that the Canadian Cultural Property Export Review Board has determined meets the criterion set out in paragraph 29(3)(b) of theCultural Property Export and Import Actif
(A)the disposition is to an institution or a public authority in Canada that was, at the time of the disposition, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object, or
(B)the disposition is deemed by section 70 to have occurred and the object is the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to an institution that would be described in clause (A) if the disposition were made at the time the estate makes the gift,
(ii)a Canadian resource property,
(ii.1)a foreign resource property,
(ii.2)a property if the disposition is a disposition to which subsection 142.4(4) or (5) or 142.5(1) applies,
(iii)an insurance policy, including a life insurance policy, except for that part of a life insurance policy in respect of which a policyholder is deemed by paragraph 138.1(1)(e) to have an interest in a related segregated fund trust,
(iv)a timber resource property; or
(v)an interest of a beneficiary under a qualifying environmental trust;
(b)a taxpayer’s capital loss for a taxation year from the disposition of any property is the taxpayer’s loss for the year determined under this Subdivision (to the extent of the amount thereof that would not, if section 3 were read in the manner described in paragraph (a) of this subsection and without reference to the expression “or the taxpayer’s allowable business investment loss for the year” in paragraph 3(d), be deductible in computing the taxpayer’s income for the year or any other taxation year) from the disposition of any property of the taxpayer other than
(i)depreciable property, or
(ii)property described in any of subparagraphs 39(1)(a)(ii) to (iii) and (v); and
(c)a taxpayer’s business investment loss for a taxation year from the disposition of any property is the amount, if any, by which the taxpayer’s capital loss for the year from a disposition after 1977
(i)to which subsection 50(1) applies, or
(ii)to a person with whom the taxpayer was dealing at arm’s length
of any property that is
(iii)a share of the capital stock of a small business corporation, or
(iv)a debt owing to the taxpayer by a Canadian-controlled private corporation (other than, where the taxpayer is a corporation, a debt owing to it by a corporation with which it does not deal at arm’s length) that is
(A)a small business corporation,
(B)a bankrupt that was a small business corporation at the time it last became a bankrupt, or
(C)a corporation referred to in section 6 of the Winding-up Act that was insolvent (within the meaning of that Act) and was a small business corporation at the time a winding-up order under that Act was made in respect of the corporation,
exceeds the total of
(v)in the case of a share referred to in subparagraph 39(1)(c)(iii), the amount, if any, of the increase after 1977 by virtue of the application of subsection 85(4) in the adjusted cost base to the taxpayer of the share or of any share (in this subparagraph referred to as a “replaced share”) for which the share or a replaced share was substituted or exchanged,
(vi)in the case of a share referred to in subparagraph 39(1)(c)(iii) that was issued before 1972 or a share (in this subparagraph and subparagraph 39(1)(c)(vii) referred to as a “substituted share”) that was substituted or exchanged for such a share or for a substituted share, the total of all amounts each of which is an amount received after 1971 and before or on the disposition of the share or an amount receivable at the time of such a disposition by
(A)the taxpayer,
(B)where the taxpayer is an individual, the taxpayer’s spouse or common-law partner, or
(C)a trust of which the taxpayer or the taxpayer’s spouse or common-law partner was a beneficiary
as a taxable dividend on the share or on any other share in respect of which it is a substituted share, except that this subparagraph shall not apply in respect of a share or substituted share that was acquired after 1971 from a person with whom the taxpayer was dealing at arm’s length,
(vii)in the case of a share to which subparagraph (vi) applies and where the taxpayer is a trust for which a day is to be, or has been, determined under paragraph 104(4)(a), or (a.4) by reference to a death or later death, as the case may be, the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition, as a taxable dividend on the share or on any other share in respect of which it is a substituted share, by an individual whose death is that death or later death, as the case may be, or a spouse or common-law partner of the individual, and
(viii)the amount determined in respect of the taxpayer under subsection 39(9) or 39(10), as the case may be.
Marginal note:Foreign currency dispositions by an individual
(1.1)If, because of any fluctuation after 1971 in the value of one or more currencies other than Canadian currency relative to Canadian currency, an individual (other than a trust) has made one or more particular gains or sustained one or more particular losses in a taxation year from dispositions of currency other than Canadian currency and the particular gains or losses would, in the absence of this subsection, be capital gains or losses described under subsection (1)
(a)subsection (1) does not apply to any of the particular gains or losses;
(b)the amount determined by the following formula is deemed to be a capital gain of the individual for the year from the disposition of currency other than Canadian currency:
A – (B + C)
where
(c)the amount determined by the following formula is deemed to be a capital loss of the individual for the year from the disposition of currency other than Canadian currency:
D – (E + F)
where
Marginal note:Foreign exchange capital gains and losses
(2)If, because of any fluctuation after 1971 in the value of a currency other than Canadian currency relative to Canadian currency, a taxpayer has made a gain or sustained a loss in a taxation year (other than a gain or loss that would, in the absence of this subsection, be a capital gain or capital loss to which subsection (1) or (1.1) applies, or a gain or loss in respect of a transaction or event in respect of shares of the capital stock of the taxpayer)
(a)the amount of the gain (to the extent of the amount of that gain that would not, if section 3 were read in the manner described in paragraph (1)(a), be included in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital gain of the taxpayer for the year from the disposition of currency other than Canadian currency; and
(b)the amount of the loss (to the extent of the amount of that loss that would not, if section 3 were read in the manner described in paragraph (1)(a), be deductible in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital loss of the taxpayer for the year from the disposition of currency other than Canadian currency.
Marginal note:Deemed gain — parked obligation
(2.01)For the purposes of subsection (2), if a debt obligation owing by a taxpayer (referred to in this subsection and subsections (2.02) and (2.03) as thedebtor) is denominated in a foreign currency and the debt obligation has become a parked obligation at a particular time, the debtor is deemed at that time to have made the gain, if any, that the debtor otherwise would have made if it had paid an amount at the particular time in satisfaction of the debt obligation equal to
(a)if the debt obligation has become a parked obligation at the particular time as a result of its acquisition by the holder of the debt obligation, the amount paid by the holder to acquire the debt obligation; and
(b)in any other case, the fair market value of the debt obligation at the particular time.
Marginal note:Parked obligation
(2.02)For the purposes of subsection (2.01), a debt obligation owing by a debtor is a parked obligation at a particular time if
(a)both
(i)at that time, the holder of the debt obligation does not deal at arm’s length with the debtor or, if the debtor is a corporation, has a significant interest in the debtor, and
(ii)at any previous time, a person who held the debt obligation dealt at arm’s length with the debtor and, where the debtor is a corporation, did not have a significant interest in the debtor; and
(b)it can reasonably be considered that one of the main purposes of the transaction or event or series of transactions or events that resulted in the debt obligation meeting the condition in subparagraph (a)(i) is to avoid the application of subsection (2).
Marginal note:Interpretation
(2.03)For the purposes of subsections (2.01) and (2.02),
(a)paragraph 80(2)(j) applies for the purpose of determining whether two persons are related to each other or whether any person is controlled by any other person; and
(b)paragraph 80.01(2)(b) applies for the purpose of determining whether a person has a significant interest in a corporation.
Marginal note:Upstream loan — transitional set-off
(2.1)If at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this subsection and subsections (2.2) and (2.3) as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this subsection and subsections (2.2) and (2.3) as a “creditor affiliate”) of a qualifying entity, or that is a partnership (referred to in this subsection and subsection (2.3) as a “creditor partnership”) of which such an affiliate is a member, and the loan or indebtedness is at a later time repaid, in whole or in part, then the amount of the borrowing party’s capital gain or capital loss determined, in the absence of this subsection, under subsection (2) in respect of the repayment, is to be reduced
(a)in the case of a capital gain
(i)if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain, that is equal to twice the amount that would — in the absence of subparagraph 40(2)(g)(ii) and paragraph 95(2)(g.04) and on the assumption that the creditor affiliate’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or
(ii)if the creditor is a creditor partnership, by an amount, not exceeding that capital gain, that is equal to twice the amount that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of a qualifying entity, that would — in the absence of subparagraph 40(2)(g)(ii) and paragraph 95(2)(g.04) and on the assumption that the creditor partnership’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes that later time; and
(b)in the case of a capital loss
(i)if the creditor is a creditor affiliate, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor affiliate’s capital gain in respect of the repayment of the loan or indebtedness, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or
(ii)if the creditor is a creditor partnership, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor partnership’s capital gain in respect of the repayment of the loan or indebtedness, that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of a qualifying entity, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes the later time.
Marginal note:Definition ofqualifying entity
(2.2)For purposes of subsections (2.1) and (2.3),qualifying entitymeans
(a)in the case of a borrowing party that is a corporation,
(i)the borrowing party,
(ii)a corporation resident in Canada of which
(A)the borrowing party is a subsidiary wholly-owned corporation, or
(B)a corporation described in this paragraph is a subsidiary wholly-owned corporation,
(iii)a corporation resident in Canada
(A)each share of the capital stock of which is owned by
(I)the borrowing party, or
(II)a corporation that is described in this subparagraph or subparagraph (ii), or
(B)all or substantially all of the capital stock of which is owned by one or more corporations resident in Canada that are borrowing parties in respect of the creditor affiliate because of subsection 90(7), or
(iv)a partnership each member of which is
(A)a corporation described in any of subparagraphs (i) to (iii), or
(B)another partnership described in this subparagraph; and
(b)in the case of a borrowing party that is a partnership,
(i)the borrowing party,
(ii)if each member — determined as if each member of a partnership that is a member of another partnership is a member of that other partnership — of the borrowing party is either a particular corporation resident in Canada (in this paragraph referred to as the “parent”) or a corporation resident in Canada that is asubsidiary wholly-owned corporation, as defined in subsection 87(1.4), of the parent,
(A)the parent, or
(B)a corporation resident in Canada that is asubsidiary wholly-owned corporation, as defined in subsection 87(1.4), of the parent, or
(iii)a partnership each member of which is any of
(A)the borrowing party,
(B)a corporation described in subparagraph (ii), and
(C)another partnership described in this subparagraph.
Marginal note:Upstream loan — transitional set-off election
(2.3)Subsection (2.1) and paragraph 95(2)(g.04) do not apply in respect of a repayment, in whole or in part, of a loan or indebtedness if an election has been filed with the Minister before 2019 jointly by
(a)the borrowing party;
(b)if the creditor is a creditor affiliate, each qualifying entity of which the creditor affiliate is a foreign affiliate; and
(c)if the creditor is a creditor partnership, each qualifying entity of which a member of the creditor partnership is a foreign affiliate.
Marginal note:Gain in respect of purchase of bonds, etc., by issuer
(3)Where a taxpayer has issued any bond, debenture or similar obligation and has at any subsequent time in a taxation year and after 1971 purchased the obligation in the open market, in the manner in which any such obligation would normally be purchased in the open market by any member of the public,
(a)the amount, if any, by which the amount for which the obligation was issued by the taxpayer exceeds the purchase price paid or agreed to be paid by the taxpayer for the obligation shall be deemed to be a capital gain of the taxpayer for the taxation year from the disposition of a capital property, and
(b)the amount, if any, by which the purchase price paid or agreed to be paid by the taxpayer for the obligation exceeds the greater of the principal amount of the obligation and the amount for which it was issued by the taxpayer shall be deemed to be a capital loss of the taxpayer for the taxation year from the disposition of a capital property,
to the extent that the amount determined under paragraph 39(3)(a) or 39(3)(b) would not, if section 3 were read in the manner described in paragraph 39(1)(a) and this Act were read without reference to subsections 80(12) and 80(13), be included or be deductible, as the case may be, in computing the taxpayer’s income for the year or any other taxation year.
Marginal note:Election concerning disposition of Canadian securities
(4)Except as provided in subsection 39(5), where a Canadian security has been disposed of by a taxpayer in a taxation year and the taxpayer so elects in prescribed form in the taxpayer’s return of income under this Part for that year,
(a)every Canadian security owned by the taxpayer in that year or any subsequent taxation year shall be deemed to have been a capital property owned by the taxpayer in those years; and
(b)every disposition by the taxpayer of any such Canadian security shall be deemed to be a disposition by the taxpayer of a capital property.
Marginal note:Members of partnerships
(4.1)For the purpose of determining the income of a taxpayer who is a member of a partnership, subsections 39(4) and 39(5) apply as if
(a)every Canadian security owned by the partnership were owned by the taxpayer; and
(b)every Canadian security disposed of by the partnership in a fiscal period of the partnership were disposed of by the taxpayer at the end of that fiscal period.
Marginal note:Exception
(5)An election under subsection 39(4) does not apply to a disposition of a Canadian security by a taxpayer (other than a mutual fund corporation or a mutual fund trust) who at the time of the disposition is
(a)a trader or dealer in securities,
(b)a financial institution (as defined in subsection 142.2(1)),
(c) to (e)[Repealed, 1995, c. 21, s. 49]
(f)a corporation whose principal business is the lending of money or the purchasing of debt obligations or a combination thereof, or
(g)a non-resident,
or any combination thereof.
Definition ofCanadian security
(6)For the purposes of this section,Canadian securitymeans a security (other than a prescribed security) that is a share of the capital stock of a corporation resident in Canada, a unit of a mutual fund trust or a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by a person resident in Canada.
Marginal note:Unused share-purchase tax credit
(7)The amount of any unused share-purchase tax credit of a taxpayer for a particular taxation year, to the extent that it was not deducted from the taxpayer’s tax otherwise payable under this Part for the immediately preceding taxation year, shall be deemed to be a capital loss of the taxpayer from a disposition of property for the year immediately following the particular taxation year.
Marginal note:Unused scientific research and experimental development tax credit
(8)The amount of any unused scientific research and experimental development tax credit of a taxpayer for a particular taxation year, to the extent that it was not deducted from the taxpayer’s tax otherwise payable under this Part for the immediately preceding taxation year, shall be deemed to be a capital loss of the taxpayer from a disposition of property for the year immediately following the particular taxation year, except that where the taxpayer is an individual the capital loss shall be deemed to be 147% of that amount.
Marginal note:Deduction from business investment loss
(9)In computing the business investment loss of a taxpayer who is an individual (other than a trust) for a taxation year from the disposition of a particular property, there shall be deducted an amount equal to the lesser of
(a)the amount that would be the taxpayer’s business investment loss for the year from the disposition of that particular property if paragraph 39(1)(c) were read without reference to subparagraph 39(1)(c)(viii), and
(b)the amount, if any, by which the total of
(i)the total of all amounts each of which is twice the amount deducted by the taxpayer under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that
(A)ended before 1988, or
(B)begins after October 17, 2000,
(i.1)the total of all amounts each of which is
(A)3/2 of the amount deducted under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that
(I)ended after 1987 and before 1990, or
(II)began after February 27, 2000 and ended before October 18, 2000, or
(B)the amount determined by multiplying the reciprocal of the fraction in paragraph 38(a) that applies to the taxpayer for each of the taxpayer’s taxation years that includes February 28, 2000 or October 18, 2000 by the amount deducted under section 110.6 in computing the taxpayer’s taxable income for that year, and
(i.2)the total of all amounts each of which is 4/3 of the amount deducted under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that ended after 1989 and before February 28, 2000
exceeds
(ii)the total of all amounts each of which is an amount deducted by the taxpayer under paragraph 39(1)(c) by virtue of subparagraph 39(1)(c)(viii) in computing the taxpayer’s business investment loss
(A)from the disposition of property in taxation years preceding the year, or
(B)from the disposition of property other than the particular property in the year,
except that, where a particular amount was included under subparagraph 14(1)(a)(v) in the taxpayer’s income for a taxation year that ended after 1987 and before 1990, the reference in subparagraph 39(9)(b)(i.1) to “3/2” shall, in respect of that portion of any amount deducted under section 110.6 in respect of the particular amount, be read as “4/3”.
Marginal note:Idem, of a trust
(10)In computing the business investment loss of a trust for a taxation year from the disposition of a particular property, there shall be deducted an amount equal to the lesser of
(a)the amount that would be the trust’s business investment loss for the year from the disposition of that particular property if paragraph 39(1)(c) were read without reference to subparagraph 39(1)(c)(viii), and
(b)the amount, if any, by which the total of
(i)the total of all amounts each of which is twice the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that
(A)ended before 1988, or
(B)begins after October 17, 2000,
(i.1)the total of all amounts each of which is
(A)3/2 of the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that
(I)ended after 1987 and before 1990, or
(II)began after February 27, 2000 and ended before October 18, 2000, or
(B)the amount determined by multiplying the reciprocal of the fraction in paragraph 38(a) that applies to the trust for each of the trust’s taxation years that includes February 28, 2000 or October 18, 2000 by the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for that year, and
(i.2)the total of all amounts each of which is 4/3 of the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that ended after 1989 and before February 28, 2000
exceeds
(ii)the total of all amounts each of which is an amount deducted by the trust under paragraph 39(1)(c) by virtue of subparagraph 39(1)(c)(viii) in computing its business investment loss
(A)from the disposition of property in taxation years preceding the year, or
(B)from the disposition of property other than the particular property in the year,
except that, where a particular amount was included under subparagraph 14(1)(a)(v) in the trust’s income for a taxation year that ended after 1987 and before 1990, the reference in subparagraph 39(10)(b)(i.1) to “3/2” shall, in respect of that portion of any amount deducted under section 110.6 in respect of the particular amount, be read as “4/3”.
Marginal note:Recovery of bad debt
(11)Where an amount is received in a taxation year on account of a debt (in this subsection referred to as the “recovered amount”) in respect of which a deduction for bad debts had been made under subsection 20(4.2) in computing a taxpayer’s income for a preceding taxation year, the amount, if any, by which 1/2 of the recovered amount exceeds the amount determined under paragraph 12(1)(i.1) in respect of the recovered amount is deemed to be a taxable capital gain of the taxpayer from a disposition of capital property in the year.
Marginal note:Guarantees
(12)For the purpose of paragraph 39(1)(c), where
(a)an amount was paid by a taxpayer in respect of a debt of a corporation under an arrangement under which the taxpayer guaranteed the debt,
(b)the amount was paid to a person with whom the taxpayer was dealing at arm’s length, and
(c)the corporation was a small business corporation
(i)at the time the debt was incurred, and
(ii)at any time in the 12 months before the time an amount first became payable by the taxpayer under the arrangement in respect of a debt of the corporation,
that part of the amount that is owing to the taxpayer by the corporation shall be deemed to be a debt owing to the taxpayer by a small business corporation.
Marginal note:Repayment of assistance
(13)The total of all amounts paid by a taxpayer in a taxation year each of which is
(a)such part of any assistance described in subparagraph 53(2)(k)(i) in respect of, or for the acquisition of, a capital property (other than depreciable property) by the taxpayer that was repaid by the taxpayer in the year where the repayment is made after the disposition of the property by the taxpayer and under an obligation to repay all or any part of that assistance, or
(b)an amount repaid by the taxpayer in the year in respect of a capital property (other than depreciable property) acquired by the taxpayer that is repaid after the disposition thereof by the taxpayer and that would have been an amount described in subparagraph 53(2)(s)(ii) had the repayment been made before the disposition of the property,
shall be deemed to be a capital loss of the taxpayer for the year from the disposition of property by the taxpayer in the year and, for the purpose of section 110.6, that property shall be deemed to have been disposed of by the taxpayer in the year.
Marginal note:Definitions
39.1(1)In this section,
exempt capital gains balanceof an individual for a taxation year that ends before 2005 in respect of a flow-through entity means the amount determined by the formula
A - B - C - F
where
(a)if the entity is a trust referred to in any of paragraphs (f) to (j) of the definitionflow-through entityin this subsection, the amount determined under paragraph 110.6(19)(c) in respect of the individual’s interest or interests therein, and
(b)in any other case, the lesser of
(i)4/3 of the total of the taxable capital gains that resulted from elections made under subsection 110.6(19) in respect of the individual’s interests in or shares of the capital stock of the entity, and
(ii)the amount that would be determined under subparagraph (i) if
(A)the amount designated in the election in respect of each interest or share were equal to the amount determined by the formula
D - E
where
(B)this Act were read without reference to subsection 110.6(20),
(a)if the entity is a trust described in any of paragraphs (d) and (h) to (j) of the definitionflow-through entityin this subsection, the total of
(i)3/2 of the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section), for a preceding taxation year that began after February 27, 2000 and ended before October 18, 2000 that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(ii)4/3 of the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section), for a preceding taxation year that ended before February 28, 2000 and that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(iii)the amount claimed by the individual under subparagraph 104(21.4)(a)(ii) or (21.7)(b)(ii) for a preceding taxation year, and
(iv)twice the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section) for a preceding taxation year that began after October 17, 2000 and that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(b)if the entity is a partnership, the total of
(i)3/2 of the total of
(A)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that began after February 27, 2000 and ended before October 18, 2000, was reduced under subsection (4), and
(B)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that began after February 27, 2000 and ended before October 18, 2000, was reduced under subsection (5),
(ii)4/3 of the total of
(A)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that ended before February 28, 2000 and in a preceding taxation year was reduced under subsection (4), and
(B)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that ended before February 28, 2000 and in a preceding taxation year, was reduced under subsection (5),
(iii)the product obtained when the reciprocal of the fraction in paragraph 38(a) that applies to the partnership for its fiscal period that includes February 28, 2000 or October 17, 2000 is multiplied by the total of
(A)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that includes February 28, 2000 or October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (4), and
(B)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that includes February 28, 2000 or October 17, 2000 and ended in a preceding taxation year was reduced under subsection (5), and
(iv)twice the total of
(A)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that began after October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (4), and
(B)the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that began after October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (5), and
(c)in any other case, the total of all amounts each of which is the amount by which the total of the individual’s capital gains otherwise determined under subsection 130.1(4) or 131(1), subsections 138.1(3) and 138.1(4) or subsection 144(4), as the case may be, for a preceding taxation year in respect of the entity was reduced under subsection 39.1(6); and
(a)if the entity is a trust described in any of paragraphs (g) to (j) of the definitionflow-through entityin this subsection, the total of all amounts each of which is an amount included before the year in the cost to the individual of a property under subsection 107(2.2) or paragraph 144(7.1)(c) because of the individual’s exempt capital gains balance in respect of the entity, and
(b)in any other case, nil; (solde des gains en capital exonérés)
flow-through entitymeans
(a)an investment corporation,
(b)a mortgage investment corporation,
(c)a mutual fund corporation,
(d)a mutual fund trust,
(e)a partnership,
(f)a related segregated fund trust for the purpose of section 138.1,
(g)a trust governed by an employees profit sharing plan,
(h)a trust maintained primarily for the benefit of employees of a corporation or two or more corporations that do not deal at arm’s length with each other, where one of the main purposes of the trust is to hold interests in, or for civil law rights in, shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm’s length therewith,
(i)a trust established exclusively for the benefit of one or more persons each of whom was, at the time the trust was created, either a person from whom the trust received property or a creditor of that person, where one of the main purposes of the trust is to secure the payments required to be made by or on behalf of that person to such creditor, and
(j)a trust all or substantially all of the properties of which consist of shares of the capital stock of a corporation, where the trust was established pursuant to an agreement between 2 or more shareholders of the corporation and one of the main purposes of the trust is to provide for the exercise of voting rights in respect of those shares pursuant to that agreement. (entité intermédiaire)
Marginal note:Reduction of capital gain
(2)Where at any time after February 22, 1994 an individual disposes of an interest in or a share of the capital stock of a flow-through entity, the individual’s capital gain, if any, otherwise determined for a taxation year from the disposition shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula
A - B - C
where
(a)if the entity made a designation under subsection 104(21) in respect of the individual for the year, twice the amount, if any, claimed under subsection 39.1(3) by the individual for the year in respect of the entity,
(b)if the entity is a partnership, twice the amount, if any, claimed under subsection (4) by the individual for the year in respect of the entity, and
(c)in any other case, the amount, if any, claimed under subsection 39.1(6) by the individual for the year in respect of the entity, and
Marginal note:Reduction of taxable capital gain
(3)The taxable capital gain otherwise determined under subsection 104(21) of an individual for a taxation year as a result of a designation made under that subsection by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding 1/2 of the individual’s exempt capital gains balance for the year in respect of the entity.
Marginal note:Reduction in share of partnership’s taxable capital gains
(4)An individual’s share otherwise determined for a taxation year of a taxable capital gain of a partnership from the disposition of a property (other than property acquired by the partnership after February 22, 1994 in a transfer to which subsection 97(2) applied) for its fiscal period that ends after February 22, 1994 and in the year shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula
A - B
where
(5)[Repealed, 2016, c. 12, s. 14]
Marginal note:Reduction of capital gains
(6)The total capital gains otherwise determined under subsection 130.1(4) or 131(1), subsections 138.1(3) and 138.1(4) or subsection 144(4), as the case may be, of an individual for a taxation year as a result of one or more elections, allocations or designations made after February 22, 1994 by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding the individual’s exempt capital gains balance for the year in respect of the entity.
Marginal note:Nil exempt capital gains balance
(7)Notwithstanding subsection 39.1(1), where at any time an individual ceases to be a member or shareholder of, or a beneficiary under, a flow-through entity, the exempt capital gains balance of the individual in respect of the entity for each taxation year that begins after that time is deemed to be nil.
Marginal note:General rules
40(1)Except as otherwise expressly provided in this Part
(a)a taxpayer’s gain for a taxation year from the disposition of any property is the amount, if any, by which
(i)if the property was disposed of in the year, the amount, if any, by which the taxpayer’s proceeds of disposition exceed the total of the adjusted cost base to the taxpayer of the property 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, or
(ii)if the property was disposed of before the year, the amount, if any, claimed by the taxpayer under subparagraph 40(1)(a)(iii) in computing the taxpayer’s gain for the immediately preceding year from the disposition of the property,
exceeds
(iii)subject to subsection 40(1.1), such amount as the taxpayer may claim
(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 year, and
(B)in any other case, in the taxpayer’s return of income under this Part for the 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 property that are payable to the taxpayer after the end of the year as can reasonably be regarded as a portion of the amount determined under subparagraph 40(1)(a)(i) in respect of the property, and
(D)an amount equal to the product obtained when 1/5 of the amount determined under subparagraph 40(1)(a)(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
(b)a taxpayer’s loss for a taxation year from the disposition of any property is,
(i)if the property was disposed of in the year, the amount, if any, by which the total of the adjusted cost base to the taxpayer of the property 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, exceeds the taxpayer’s proceeds of disposition of the property, and
(ii)in any other case, nil.
Marginal note:Gift of non-qualifying security
(1.01)A taxpayer’s gain for a particular taxation year from a disposition of a non-qualifying security of the taxpayer (as defined in subsection 118.1(18)) that is the making of a gift (other than an excepted gift, within the meaning assigned by subsection 118.1(19)) to a qualified donee (as defined in subsection 149.1(1)) is the amount, if any, by which
(a)where the disposition occurred in the particular year, the amount, if any, by which the taxpayer’s proceeds of disposition exceed the total of the adjusted cost base to the taxpayer of the security immediately before the disposition and any outlays and expenses to the extent they were made or incurred by the taxpayer for the purpose of making the disposition, and
(b)where the disposition occurred in the 60-month period that ends at the beginning of the particular year, the amount, if any, deducted under paragraph 40(1.01)(c) in computing the taxpayer’s gain for the preceding taxation year from the disposition of the security
exceeds
(c)the amount that the taxpayer claims in prescribed form filed with the taxpayer’s return of income for the particular year, not exceeding the eligible amount of the gift, where the taxpayer is not deemed by subsection 118.1(13) to have made a gift of property before the end of the particular year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of the particular year.
Marginal note:Reserve — property disposed of to a child
(1.1)In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a property, 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,
(a)the property was disposed of by the taxpayer to the taxpayer’s child,
(b)that child was resident in Canada immediately before the disposition, and
(c)the property was immediately before the disposition,
(i)any land in Canada or depreciable property in Canada of a prescribed class that was used by the taxpayer, the spouse or common-law partner of the taxpayer, a child or a parent of the taxpayer in a farming or fishing business carried on in Canada,
(ii)a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)), or
(iii)a qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)).
(iv)[Repealed, 2014, c. 39, s. 11]
Marginal note:Limitations
(2)Notwithstanding subsection 40(1),
(a)subparagraph 40(1)(a)(iii) does not apply to permit a taxpayer to claim any amount under that subparagraph in computing a gain for a taxation year if
(i)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,
(ii)the purchaser of the property sold is a corporation that, immediately after the sale,
(A)was controlled, directly or indirectly, in any manner whatever, by the taxpayer,
(B)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
(C)controlled the taxpayer, directly or indirectly, in any manner whatever, where the taxpayer is a corporation, or
(iii)the purchaser of the property sold is a partnership in which the taxpayer was, immediately after the sale, a majority-interest partner;
(b)where the taxpayer is an individual, the taxpayer’s gain for a taxation year from the disposition of a property that was the taxpayer’s principal residence at any time after the date (in this section referred to as the “acquisition date”) that is the later of December 31, 1971 and the day on which the taxpayer last acquired or reacquired it, as the case may be, is the amount determined by the formula
A - (A × B/C) - D
where
(i)if the taxpayer was resident in Canada during the year that includes the acquisition date, one plus the number of taxation years that end after the acquisition date for which the property is the taxpayer’s principal residence and during which the taxpayer was resident in Canada, or
(ii)if it is not the case that the taxpayer was resident in Canada during the year that includes the acquisition date, the number of taxation years that end after the acquisition date for which the property was the taxpayer’s principal residence and during which the taxpayer was resident in Canada,
(i)if the acquisition date is before February 23, 1994 and the taxpayer or the taxpayer’s spouse or common-law partner elected under subsection 110.6(19) in respect of the property or an interest, or for civil law a right, therein that was owned, immediately before the disposition, by the taxpayer, 4/3 of the lesser of
(A)the total of all amounts each of which is the taxable capital gain of the taxpayer or of their spouse or common-law partner that would have resulted from an election by the taxpayer or spouse or common-law partner under subsection 110.6(19) in respect of the property or the interest or right if
(I)this Act were read without reference to subsection 110.6(20), and
(II)the amount designated in the election were equal to the amount, if any, by which the fair market value of the property or the interest or right at the end of February 22, 1994 exceeds the amount determined by the formula
E – 1.1F
where
(B)the total of all amounts each of which is the taxable capital gain of the taxpayer or of their spouse or common-law partner that would have resulted from an election that was made under subsection 110.6(19) in respect of the property or the interest or right if the property were the principal residence of neither the taxpayer nor the spouse or common-law partner for each particular taxation year unless the property was designated, in a return of income for the taxation year that includes February 22, 1994 or for a preceding taxation year, to be the principal residence of either of them for the particular taxation year, and
(ii)in any other case, zero;
(c)where the taxpayer is an individual, the taxpayer’s gain for a taxation year from the disposition of land used in a farming business carried on by the taxpayer that includes property that was at any time the taxpayer’s principal residence is
(i)the taxpayer’s gain for the year, otherwise determined, from the disposition of the portion of the land that does not include the property that was the taxpayer’s principal residence, plus the taxpayer’s gain for the year, if any, determined under paragraph 40(2)(b) from the disposition of the property that was the taxpayer’s principal residence, or
(ii)if the taxpayer so elects in prescribed manner in respect of the land, the taxpayer’s gain for the year from the disposition of the land including the property that was the taxpayer’s principal residence, determined without regard to paragraph 40(2)(b) or subparagraph (i) of this paragraph, less the total of
(A)$1,000, and
(B)$1,000 for each taxation year ending after the acquisition date for which the property was the taxpayer’s principal residence and during which the taxpayer was resident in Canada;
(d)where the taxpayer is a corporation, its loss for a taxation year from the disposition of a bond or debenture is its loss therefrom for the year otherwise determined, less the total of such amounts received by it as, on account or in lieu of payment of, or in satisfaction of interest thereon as were, by virtue of paragraph 81(1)(m), not included in computing its income;
(e)[Repealed, 1998, c. 19, s. 89]
(e.1)a particular taxpayer’s loss, if any, from the disposition at any time to a particular person or partnership of an obligation — other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the particular taxpayer in respect of another taxpayer, where the particular taxpayer or, if the particular taxpayer is a partnership, a member of the particular taxpayer is a foreign affiliate of the other taxpayer, an obligation that is, or would be, if the particular taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the particular taxpayer — that was, immediately after that time, payable by another person or partnership to the particular person or partnership is nil if the particular taxpayer, the particular person or partnership and the other person or partnership are related to each other at that time or would be related to each other at that time if paragraph 80(2)(j) applied for the purpose of this paragraph;
(e.2)subject to paragraph (e.3), a taxpayer’s loss on the settlement or extinguishment of a particular commercial obligation (in this paragraph having the meaning assigned by subsection 80(1)) issued by a person or partnership and payable to the taxpayer is deemed to be the amount determined by the following formula if any part of the consideration given by the person or partnership for the settlement or extinguishment of the particular obligation consists of one or more other commercial obligations issued by the person or partnership to the taxpayer:
A - (B - C)/B
where
(e.3)paragraph (e.2) does not apply, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, to the particular commercial obligation if the particular commercial obligation is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer;
(f)a taxpayer’s gain or loss from the disposition of
(i)a chance to win a prize or bet, or
(ii)a right to receive an amount as a prize or as winnings on a bet,
in connection with a lottery scheme or a pool system of betting referred to in section 205 of theCriminal Codeis nil;
(g)a taxpayer’s loss, if any, from the disposition of a property (other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer), to the extent that it is
(i)a superficial loss,
(ii)a loss from the disposition of a debt or other right to receive an amount, unless the debt or right, as the case may be, was acquired by the taxpayer for the purpose of gaining or producing income from a business or property (other than exempt income) or as consideration for the disposition of capital property to a person with whom the taxpayer was dealing at arm’s length,
(iii)a loss from the disposition of any personal-use property of the taxpayer (other than listed personal property or a debt referred to in subsection 50(2)), or
(iv)a loss from the disposition of property to
(A)a trust governed by a deferred profit sharing plan, an employees profit sharing plan, a FHSA, a registered disability savings plan, a registered retirement income fund or a TFSA, under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary, or
(B)a trust governed by a registered retirement savings plan under which the taxpayer or the taxpayer’s spouse or common-law partner is an annuitant or becomes, within 60 days after the end of the taxation year, an annuitant,
is nil;
(h)where the taxpayer is a corporation, its loss otherwise determined from the disposition at any time in a taxation year of shares of the capital stock of a corporation (in this paragraph referred to as the “controlled corporation”) that was controlled, directly or indirectly in any manner whatever, by it at any time in the year, is its loss therefrom otherwise determined less the amount, if any, by which
(i)all amounts added under paragraph 53(1)(f.1) to the cost to a corporation, other than the controlled corporation, of property disposed of to that corporation by the controlled corporation that were added to the cost of the property during the period while the controlled corporation was controlled by the taxpayer and that can reasonably be attributed to losses on the property that accrued during the period while the controlled corporation was controlled by the taxpayer,
exceeds
(ii)all amounts by which losses have been reduced by virtue of this paragraph in respect of dispositions before that time of shares of the capital stock of the controlled corporation; and
(i)where at a particular time a taxpayer has disposed of a share of the capital stock of a corporation that was at any time a prescribed venture capital corporation or a prescribed labour-sponsored venture capital corporation or a share of the capital stock of a taxable Canadian corporation that was held in a prescribed stock savings plan or of a property substituted for such a share, the taxpayer’s loss from the disposition thereof shall be deemed to be the amount, if any, by which
(i)the loss otherwise determined
exceeds
(ii)the amount, if any, by which
(A)the amount of prescribed assistance that the taxpayer (or a person with whom the taxpayer was not dealing at arm’s length) received or is entitled to receive in respect of the share
exceeds
(B)the total of all amounts determined under subparagraph 40(2)(i)(i) in respect of any disposition of the share or of the property substituted for the share before the particular time by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length.
Marginal note:Deemed gain where amounts to be deducted from adjusted cost base exceed cost plus amounts to be added to adjusted cost base
(3)Where
(a)the total of all amounts required by subsection 53(2) (except paragraph 53(2)(c)) to be deducted in computing the adjusted cost base to a taxpayer of any property at any time in a taxation year
exceeds
(b)the total of
(i)the cost to the taxpayer of the property determined for the purpose of computing the adjusted cost base to the taxpayer of that property at that time, and
(ii)all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the property in computing the adjusted cost base to the taxpayer of that property at that time,
the following rules apply:
(c)subject to paragraph 93(1)(b), the amount of the excess is deemed to be a gain of the taxpayer for the year from a disposition at that time of the property,
(d)for the purposes of section 93 and subsections 116(6) and (6.1), the property is deemed to have been disposed of by the taxpayer at that time, and
(e)for the purposes of subsection 2(3) and sections 110.6 and 150, the property is deemed to have been disposed of by the taxpayer in the year.
Marginal note:Deemed gain for certain partners
(3.1)Where, at the end of a fiscal period of a partnership, a member of the partnership is a limited partner of the partnership, or is a member of the partnership who was a specified member of the partnership at all times since becoming a member, except where the member’s partnership interest was held by the member on February 22, 1994 and is an excluded interest at the end of the fiscal period,
(a)the amount determined under subsection 40(3.11) is deemed to be a gain from the disposition, at the end of the fiscal period, of the member’s interest in the partnership; and
(b)for the purposes of subsection 2(3), section 110.6, subsections 116(6) and (6.1) and section 150, the interest is deemed to have been disposed of by the member at that time.
Marginal note:Amount of gain
(3.11)For the purpose of subsection 40(3.1), the amount determined at any time under this subsection in respect of a member’s interest in a partnership is the amount determined by the formula
A - B
where
(a)all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the member of the interest in the partnership at that time, and
(b)if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(2)(c)(i) in respect of the taxpayer for that fiscal period; and
(a)the cost to the member of the interest determined for the purpose of computing the adjusted cost base to the member of the interest at that time,
(b)all amounts required by subsection 53(1) to be added to the cost to the member of the interest in computing the adjusted cost base to the member of the interest at that time, and
(c)if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(1)(e)(i) in respect of the taxpayer for that fiscal period.
Meaning ofprofessional partnership
(3.111)In this section,professional partnershipmeans a partnership through which one or more persons carry on the practice of a profession that is governed or regulated under a law of Canada or a province.
Marginal note:Deemed loss for certain partners
(3.12)If a corporation, an individual (other than a trust) or a graduated rate estate (each of which is referred to in this subsection as the “taxpayer”) is a member of a partnership at the end of a fiscal period of the partnership, the taxpayer is deemed to have a loss from the disposition at that time of the member’s interest in the partnership equal to the amount that the taxpayer elects in the taxpayer’s return of income under this Part for the taxation year that includes that time, not exceeding the lesser of
(a)the amount, if any, by which
(i)the total of all amounts each of which was an amount deemed by subsection 40(3.1) to be a gain of the taxpayer from a disposition of the interest before that time
exceeds
(ii)the total of all amounts each of which was an amount deemed by this subsection to be a loss of the taxpayer from a disposition of the interest before that time, and
(b)the adjusted cost base to the taxpayer of the interest at that time.
Marginal note:Artificial transactions
(3.13)For the purpose of applying section 53 at any time to a member of a partnership who would be a member described in subsection (3.1) of the partnership if the fiscal period of the partnership that includes that time ended at that time, where at any time after February 21, 1994 the member of the partnership makes a contribution of capital to the partnership and
(a)the partnership or a person or partnership with whom the partnership does not deal at arm’s length
(i)makes a loan to the member or to a person with whom the member does not deal at arm’s length, or
(ii)pays an amount as, on account of, in lieu of payment of or in satisfaction of, a distribution of the member’s share of the partnership profits or partnership capital, or
(b)the member or a person with whom the member does not deal at arm’s length becomes indebted to the partnership or a person or partnership with whom the partnership does not deal at arm’s length,
and it is established, by subsequent events or otherwise, that the loan, payment or indebtedness, as the case may be, was made or arose as part of a series of contributions and such loans, payments or other transactions, the contribution of capital shall be deemed not to have been made.
Marginal note:Specified member of a partnership
(3.131)Where it can reasonably be considered that one of the main reasons that a member of a partnership was not a specified member of the partnership at all times since becoming a member of the partnership is to avoid the application of subsection 40(3.1) to the member’s interest in the partnership, the member is deemed for the purpose of that subsection to have been a specified member of the partnership at all times since becoming a member of the partnership.
Marginal note:Limited partner
(3.14)For the purpose of subsection 40(3.1), a member of a partnership at a particular time is a limited partner of the partnership at that time if, at that time or within 3 years after that time,
(a)by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);
(b)the member or a person not dealing at arm’s length with the member is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount or to obtain a benefit that would be described in paragraph 96(2.2)(d) if that paragraph were read without reference to subparagraphs 40(3.14)(b)(ii) and 40(3.14)(b)(vi);
(c)one of the reasons for the existence of the member who owns the interest
(i)can reasonably be considered to be to limit the liability of any person with respect to that interest, and
(ii)cannot reasonably be considered to be to permit any person who has an interest in the member to carry on the person’s business (other than an investment business) in the most effective manner; or
(d)there is an agreement or other arrangement for the disposition of an interest in the partnership and one of the main reasons for the agreement or arrangement can reasonably be considered to be to attempt to avoid the application of this subsection to the member.
Marginal note:Excluded interest
(3.15)For the purpose of subsection 40(3.1), an excluded interest in a partnership at any time means an interest in a partnership that actively carries on a business that was carried on by it throughout the period beginning February 22, 1994 and ending at that time, or that earns income from a property that was owned by it throughout that period, unless in that period there was a substantial contribution of capital to the partnership or a substantial increase in the indebtedness of the partnership.
Marginal note:Amounts considered not to be substantial
(3.16)For the purpose of subsection 40(3.15), an amount will be considered not to be substantial where
(a)the amount
(i)was raised pursuant to the terms of a written agreement entered into by a partnership before February 22, 1994 to issue an interest in the partnership and was expended on expenditures contemplated by the agreement before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production),
(ii)was raised pursuant to the terms of a written agreement (other than an agreement referred to in subparagraph 40(3.16)(a)(i)) entered into by a partnership before February 22, 1994 and was expended on expenditures contemplated by the agreement before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production),
(iii)was used by the partnership before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production) to make an expenditure required to be made pursuant to the terms of a written agreement entered into by the partnership before February 22, 1994, or
(iv)was used to repay a loan, debt or contribution of capital that had been received or incurred in respect of any such expenditure;
(b)the amount was raised before 1995 pursuant to the terms of a prospectus, preliminary prospectus, offering memorandum or registration statement filed before February 22, 1994 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of a province and, where required by law, accepted for filing by the public authority, and expended before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii), or an interest in one or more partnerships all or substantially all of the property of which is such a film production) on expenditures contemplated by the document that was filed before February 22, 1994;
(c)the amount was raised before 1995 pursuant to the terms of an offering memorandum distributed as part of an offering of securities where
(i)the memorandum contained a complete or substantially complete description of the securities contemplated in the offering as well as the terms and conditions of the offering,
(ii)the memorandum was distributed before February 22, 1994,
(iii)solicitations in respect of the sale of the securities contemplated by the memorandum were made before February 22, 1994,
(iv)the sale of the securities was substantially in accordance with the memorandum, and
(v)the funds are expended in accordance with the memorandum before 1995 (except that the funds may be expended before March 2, 1995 in the case of a partnership all or substantially all of the property of which is a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production); or
(d)the amount was used for an activity that was carried on by the partnership on February 22, 1994 but not for a significant expansion of the activity nor for the acquisition or production of a film production.
Marginal note:Whether carrying on business before February 22, 1994
(3.17)For the purpose of subsection 40(3.15), a partnership in respect of which paragraph 40(3.16)(a), 40(3.16)(b) or 40(3.16)(c) applies shall be considered to have actively carried on the business, or earned income from the property, contemplated in the document referred to in that paragraph throughout the period beginning February 22, 1994 and ending on the earlier of the closing date, if any, stipulated in the document and January 1, 1995.
Marginal note:Deemed partner
(3.18)For the purpose of subsection 40(3.1), a member of a partnership who acquired an interest in the partnership after February 22, 1994 shall be deemed to have held the interest on February 22, 1994 where the member acquired the interest
(a)in circumstances in which
(i)paragraph 70(6)(d.1) applied,
(ii)where the member is an individual, the member’s spouse or common-law partner held the partnership interest on February 22, 1994,
(iii)where the member is a trust, the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
(iv)the partnership interest was, immediately before the death of the spouse or common-law partner or the taxpayer, as the case may be, an excluded interest;
(b)in circumstances in which
(i)paragraph 70(9.2)(c) applied,
(ii)the member’s parent held the partnership interest on February 22, 1994, and
(iii)the partnership interest was, immediately before the parent’s death, an excluded interest;
(c)in circumstances in which
(i)paragraph 70(9.3)(e) applied,
(ii)the trust referred to in subsection 70(9.3) or the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
(iii)the partnership interest was, immediately before the death of the spouse or common-law partner referred to in subsection 70(9.3), an excluded interest; or
(d)before 1995 pursuant to a document referred to in subparagraph 40(3.16)(a)(i) or paragraph 40(3.16)(b) or 40(3.16)(c).
Marginal note:Non-application of subsection (3)
(3.19)Subsection 40(3) does not apply in any case where subsection 40(3.1) applies.
Marginal note:Non-application of subsection (3.1)
(3.2)Subsection 40(3.1) does not apply in any case where paragraph 98(1)(c) or 98.1(1)(c) applies.
Marginal note:Deemed capital gain under section 180.01
(3.21)If, in respect of a taxation year, a taxpayer has made an election under subsection 180.01(1), the amount deemed to be a capital gain under paragraph 180.01(2)(b) is deemed to be a gain from the disposition of property for the taxation year.
Marginal note:When subsection (3.4) applies
(3.3)Subsection 40(3.4) applies when
(a)a corporation, trust or partnership (in this subsection and subsection (3.4) referred to as the “transferor”) disposes of a particular capital property — other than depreciable property of a prescribed class and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — otherwise than in a disposition described in any of paragraphs (c) to (g) of the definitionsuperficial lossin section 54;
(b)during the period that begins 30 days before and ends 30 days after the disposition, the transferor or a person affiliated with the transferor acquires a property (in this subsection and subsection 40(3.4) referred to as the “substituted property”) that is, or is identical to, the particular property; and
(c)at the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.
Marginal note:Loss on certain properties
(3.4)If this subsection applies because of subsection 40(3.3) to a disposition of a particular property,
(a)the transferor’s loss, if any, from the disposition is deemed to be nil, and
(b)the amount of the transferor’s loss, if any, from the disposition (determined without reference to paragraph 40(2)(g) and this subsection) is deemed to be a loss of the transferor from a disposition of the particular property at the time that is immediately before the first time, after the disposition,
(i)at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns
(A)the substituted property, or
(B)a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,
(ii)at which the property would, if it were owned by the transferor, be deemed by section 128.1 or subsection 149(10) to have been disposed of by the transferor,
(iii)that is immediately before the transferor is subject to a loss restriction event,
(iv)at which the transferor or a person affiliated with the transferor is deemed by section 50 to have disposed of the property, where the substituted property is a debt or a share of the capital stock of a corporation, or
(v)if the transferor is a corporation,
(A)for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is
(I)a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or
(II)a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and
(B)for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins,
and for the purpose of paragraph 40(3.4)(b), where a partnership otherwise ceases to exist at any time after the disposition, the partnership is deemed not to have ceased to exist, and each person who was a member of the partnership immediately before the partnership would, but for this subsection, have ceased to exist is deemed to remain a member of the partnership, until the time that is immediately after the first time described in subparagraphs 40(3.4)(b)(i) to 40(3.4)(b)(v).
Marginal note:Deemed identical property
(3.5)For the purposes of subsections 40(3.3) and 40(3.4),
(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;
(b)a share of the capital stock of a corporation that is acquired in exchange for another share in a transaction is deemed to be a property that is identical to the other share if
(i)section 51, 86 or 87 applies to the transaction, or
(ii)the following conditions are met, namely,
(A)section 85.1 applies to the transaction,
(B)subsection (3.4) applied to a prior disposition of the other share, and
(C)none of the times described in any of subparagraphs (3.4)(b)(i) to (v) has occurred in respect of the prior disposition;
(b.1)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;
(c)if subsections (3.3) and (3.4) apply to the disposition by a transferor of a share of the capital stock of a particular corporation and after the disposition
(i)the particular corporation is merged or combined with one or more other corporations, otherwise than in a transaction in respect of which paragraph (b) applies to the share, then the corporation formed on the merger or combination is deemed to own the share while the corporation so formed is affiliated with the transferor,
(ii)the particular corporation is wound up in a winding-up to which subsection 88(1) applies, then the parent (within the meaning assigned by subsection 88(1)) is deemed to own the share while the parent is affiliated with the transferor, or
(iii)the particular corporation is liquidated and dissolved, the liquidation and dissolution is a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the corporation or a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the corporation, and the transferor is a foreign affiliate of a taxpayer, then for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of the taxpayer for a taxation year of the transferor, the taxpayer referred to in subsection 88(3.1) or the particular shareholder referred to in the definitiondesignated liquidation and dissolutionin subsection 95(1), as the case may be, is deemed to own the share while the taxpayer or particular shareholder is affiliated with the transferor; and
(d)where subsections 40(3.3) and 40(3.4) apply to the disposition by a transferor of a share of the capital stock of a corporation, and after the disposition the share is redeemed, acquired or cancelled by the corporation, otherwise than in a transaction in respect of which paragraph 40(3.5)(b) or 40(3.5)(c) applies to the share, the transferor is deemed to own the share while the corporation is affiliated with the transferor.
Marginal note:Loss on shares
(3.6)If at any time a taxpayer disposes, to a corporation that is affiliated with the taxpayer immediately after the disposition, of a share of a class of the capital stock of the corporation (other than a share that is a distress preferred share (within the meaning assigned by subsection 80(1)) and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer),
(a)the taxpayer’s loss, if any, from the disposition is deemed to be nil; and
(b)in computing the adjusted cost base to the taxpayer after that time of a share of a class of the capital stock of the corporation owned by the taxpayer immediately after the disposition, there shall be added the proportion of the amount of the taxpayer’s loss from the disposition (determined without reference to paragraph 40(2)(g) and this subsection) that
(i)the fair market value, immediately after the disposition, of the share
is of
(ii)the fair market value, immediately after the disposition, of all shares of the capital stock of the corporation owned by the taxpayer.
Marginal note:Exception — estate loss carried back
(3.61)If, in the course of administering the estate of a deceased taxpayer, the taxpayer’s legal representative elects in accordance with subsection 164(6) to treat all or any portion of the estate’s capital loss (determined without reference to subsections (3.4) and (3.6)) from the disposition of a share of the capital stock of a corporation as a capital loss of the deceased taxpayer from the disposition of the share, subsections (3.4) and (3.6) apply to the estate in respect of the loss only to the extent that the amount of the loss exceeds the portion of the loss to which the election applies.
Marginal note:Losses of non-resident
(3.7)If an individual disposes of a property at any time after having ceased to be resident in Canada, for the purposes of applying subsections 100(4), 107(1) and 112(3) to (3.32) and (7) in computing the individual’s loss from the disposition,
(a)the individual is deemed to be a corporation in respect of dividends received by the individual, or deemed under Part XIII to have been paid to the individual, at a particular time that is after the time at which the individual last acquired the property and at which the individual was non-resident; and
(b)an amount on account of
(i)each taxable dividend received by the individual at a particular time described in paragraph (a), and
(ii)each amount deemed under Part XIII to have been paid to the individual at a particular time described in paragraph (a), as a dividend from a corporation resident in Canada, to the extent that the amount can reasonably be considered to relate to the property,
is deemed to be a taxable dividend that was received by the individual and that was deductible under section 112 in computing the individual’s taxable income or taxable income earned in Canada for the taxation year that includes that particular time.
Marginal note:Disposal of principal residence to spouse or trust for spouse
(4)Where a taxpayer has, after 1971, disposed of property to an individual in circumstances to which subsection 70(6) or 73(1) applied, for the purposes of computing the individual’s gain from the disposition of the property under paragraph 40(2)(b) or 40(2)(c), as the case may be,
(a)the individual shall be deemed to have owned the property throughout the period during which the taxpayer owned it;
(b)the property shall be deemed to have been the individual’s principal residence
(i)in any case where subsection 70(6) is applicable, for any taxation year for which it would, if the taxpayer had designated it in prescribed manner to have been the taxpayer’s principal residence for that year, have been the taxpayer’s principal residence, and
(ii)in any case where subsection 73(1) is applicable, for any taxation year for which it was the taxpayer’s principal residence; and
(c)where the individual is a trust, the trust shall be deemed to have been resident in Canada during each taxation year during which the taxpayer was resident in Canada.
(5)[Repealed, 1994, Sch