An Act respecting income taxesIncome Tax ActIncome Tax20262
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I-3.31 (5th Supp.)1985Application provisions are not included in the consolidated text; see relevant amending Acts.Short Title
Short TitleThis Act may be cited as the Income Tax Act.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S.C. 1952, c. 148, s. 1
Income TaxLiability for Tax
Tax payable by persons resident in CanadaAn income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year.Taxable incomeThe taxable income of a taxpayer for a taxation year is the taxpayer’s income for the year plus the additions and minus the deductions permitted by Division C.Tax payable by non-resident personsWhere a person who is not taxable under subsection 2(1) for a taxation yearwas employed in Canada,carried on a business in Canada, ordisposed of a taxable Canadian property,at any time in the year or a previous year, an income tax shall be paid, as required by this Act, on the person’s taxable income earned in Canada for the year determined in accordance with Division D.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1 “2”; 1984, c. 1, s.1; 1985, c. 45, s. 1
Computation of IncomeBasic Rules
Income for taxation yearThe income of a taxpayer for a taxation year for the purposes of this Part is the taxpayer’s income for the year determined by the following rules:determine the total of all amounts each of which is the taxpayer’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business and property,determine the amount, if any, by whichthe total ofall of the taxpayer’s taxable capital gains for the year from dispositions of property other than listed personal property, andthe taxpayer’s taxable net gain for the year from dispositions of listed personal property,exceedsthe amount, if any, by which the taxpayer’s allowable capital losses for the year from dispositions of property other than listed personal property exceed the taxpayer’s allowable business investment losses for the year,determine the amount, if any, by which the total determined under paragraph (a) plus the amount determined under paragraph (b) exceeds the total of the deductions permitted by Subdivision E in computing the taxpayer’s income for the year (except to the extent that those deductions, if any, have been taken into account in determining the total referred to in paragraph (a), anddetermine the amount, if any, by which the amount determined under paragraph (c) exceeds the total of all amounts each of which is the taxpayer’s loss for the year from an office, employment, business or property or the taxpayer’s allowable business investment loss for the year,and for the purposes of this Part,where an amount is determined under paragraph (d) for the year in respect of the taxpayer, the taxpayer’s income for the year is the amount so determined, andin any other case, the taxpayer shall be deemed to have income for the year in an amount equal to zero.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 3; 1994, c. 7, Sch. II, s. 1
Income or loss from a source or from sources in a placeFor the purposes of this Act,a taxpayer’s income or loss for a taxation year from an office, employment, business, property or other source, or from sources in a particular place, is the taxpayer’s income or loss, as the case may be, computed in accordance with this Act on the assumption that the taxpayer had during the taxation year no income or loss except from that source or no income or loss except from those sources, as the case may be, and was allowed no deductions in computing the taxpayer’s income for the taxation year except such deductions as may reasonably be regarded as wholly applicable to that source or to those sources, as the case may be, and except such part of any other deductions as may reasonably be regarded as applicable thereto; andwhere the business carried on by a taxpayer or the duties of the office or employment performed by a taxpayer was carried on or were performed, as the case may be, partly in one place and partly in another place, the taxpayer’s income or loss for the taxation year from the business carried on, or the duties performed, by the taxpayer in a particular place is the taxpayer’s income or loss, as the case may be, computed in accordance with this Act on the assumption that the taxpayer had during the taxation year no income or loss except from the part of the business that was carried on in that particular place or no income or loss except from the part of those duties that were performed in that particular place, as the case may be, and was allowed no deductions in computing the taxpayer’s income for the taxation year except such deductions as may reasonably be regarded as wholly applicable to that part of the business or to those duties, as the case may be, and except such part of any other deductions as may reasonably be regarded as applicable thereto.IdemSubject to subsection 4(3), in applying subsection 4(1) for the purposes of this Part, no deductions permitted by sections 60 to 64 apply either wholly or in part to a particular source or to sources in a particular place.Deductions applicableIn applying subsection 4(1) for the purposes of subsections 104(22) and 104(22.1) and sections 115 and 126,subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (z), apply either wholly or in part to a particular source or to sources in a particular place; andany deduction permitted by subsection 104(6) or 104(12) shall not apply either wholly or in part to a source in a country other than Canada.[Repealed, 1996, c. 21, s. 2(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 4; 1994, c. 7, Sch. II, s. 2, c. 21, s. 1; 1996, c. 21, s. 2; 2007, c. 35, s. 101; 2013, c. 34, s. 169
Income or Loss from an Office or EmploymentBasic Rules
Income from office or employmentSubject to this Part, a taxpayer’s income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year.Loss from office or employmentA taxpayer’s loss for a taxation year from an office or employment is the amount of the taxpayer’s loss, if any, for the taxation year from that source computed by applying, with such modifications as the circumstances require, the provisions of this Act respecting the computation of income from that source.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“5”
Inclusions
Amounts to be included as income from office or employmentThere shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicableValue of benefitsthe value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer’s office or employment, except any benefitderived from the contributions of the taxpayer’s employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a pooled registered pension plan, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,under a retirement compensation arrangement, an employee benefit plan or an employee trust,that was a benefit in respect of the use of an automobile,derived from counselling services in respect ofthe mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, orthe re-employment or retirement of the taxpayer,under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11), orthat is received or enjoyed by an individual other than the taxpayer under a program provided by the taxpayer’s employer that is designed to assist individuals to further their education, if the taxpayer deals with the employer at arm’s length and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer;Personal or living expensesall amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, excepttravel, personal or living expense allowancesexpressly fixed in an Act of Parliament, orpaid under the authority of the Treasury Board to a person who was appointed or whose services were engaged pursuant to the Inquiries Act, in respect of the discharge of the person’s duties relating to the appointment or engagement,travel and separation allowances received under service regulations as a member of the Canadian Forces,representation or other special allowances received in respect of a period of absence from Canada as a person described in paragraph 250(1)(b), (c), (d) or (d.1),representation or other special allowances received by a person who is an agent-general of a province in respect of a period while the person was in Ottawa as the agent-general of the province,reasonable allowances for travel expenses received by an employee from the employee’s employer in respect of a period when the employee was employed in connection with the selling of property or negotiating of contracts for the employee’s employer,allowances for board and lodging of the taxpayer, to a maximum total of $300 for each month of the year, ifthe taxpayer is, in that month, a registered participant with, or member of, a sports team or recreation program of the employer in respect of which membership or participation is restricted to persons under 21 years of age,the allowance is in respect of the taxpayer’s participation or membership and is not attributable to services of the taxpayer as a coach, instructor trainer, referee, administrator or other similar occupation,the employer is a registered charity or a non-profit organization described in paragraph 149(1)(l), andthe allowance is reasonably attributable to the cost to the taxpayer of living away from the place where the employee would, but for the employment, ordinarily reside,reasonable allowances received by a minister or clergyman in charge of or ministering to a diocese, parish or congregation for expenses for transportation incident to the discharge of the duties of that office or employment,reasonable allowances for travel expenses (other than allowances for the use of a motor vehicle) received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling away fromthe municipality where the employer’s establishment at which the employee ordinarily worked or to which the employee ordinarily reported was located, andthe metropolitan area, if there is one, where that establishment was located,in the performance of the duties of the employee’s office or employment,reasonable allowances for the use of a motor vehicle received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling in the performance of the duties of the office or employment,[Repealed, 1999, c. 22, s. 2]allowances (not in excess of reasonable amounts) received by an employee from the employee’s employer in respect of any child of the employee living away from the employee’s domestic establishment in the place where the employee is required by reason of the employee’s employment to live and in full-time attendance at a school in which the language primarily used for instruction is the official language of Canada primarily used by the employee ifa school suitable for that child primarily using that language of instruction is not available in the place where the employee is so required to live, andthe school the child attends primarily uses that language for instruction and is not farther from that place than the community nearest to that place in which there is such a school having suitable boarding facilities,and, for the purposes of subparagraphs (v), (vi) and (vii.1), an allowance received in a taxation year by a taxpayer for the use of a motor vehicle in connection with or in the course of the taxpayer’s office or employment shall be deemed not to be a reasonable allowancewhere the measurement of the use of the vehicle for the purpose of the allowance is not based solely on the number of kilometres for which the vehicle is used in connection with or in the course of the office or employment, orwhere the taxpayer both receives an allowance in respect of that use and is reimbursed in whole or in part for expenses in respect of that use (except where the reimbursement is in respect of supplementary business insurance or toll or ferry charges and the amount of the allowance was determined without reference to those reimbursed expenses);Director’s or other feesdirector’s or other fees received by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment;Allocations, etc., under profit sharing planamounts allocated to the taxpayer in the year by a trustee under an employees profit sharing plan as provided by section 144 except subsection 144(4), and amounts required by subsection 144(7) to be included in computing the taxpayer’s income for the year;Standby charge for automobileif at any time in the year an automobile is made available to the taxpayer, or to a particular person who does not deal at arm’s length with the taxpayer, by another person (referred to in this paragraph as “the employer”) because of or as a consequence of a previous, the current or an intended office or employment of the taxpayer, the amount, if any, by whichan amount that is a reasonable standby charge for the automobile for the total number of days in the year during which it was made so availableexceedsthe total of all amounts, each of which is an amount (other than an expense related to the operation of the automobile) paid in the year by the taxpayer, or the particular person who does not deal at arm’s length with the taxpayer, to the employer for the use of the automobile;Group sickness or accident insurance plansthe total of all amounts contributed in the year in respect of the taxpayer by the taxpayer’s employer to a group sickness or accident insurance plan, except to the extent that the contributions are attributable to benefits under the plan that, if received by the taxpayer, would be included in the taxpayer’s income under paragraph (f) in the year the benefits are received if that paragraph were read without regard to its subparagraph (v);Employment insurance benefitsthe total of all amounts received by the taxpayer in the year that were payable to the taxpayer on a periodic basis in respect of the loss of all or any part of the taxpayer’s income from an office or employment, pursuant toa sickness or accident insurance plan,a disability insurance plan,an income maintenance insurance plan, ora plan described in any of subparagraphs (i) to (iii) that is administered or provided by an employee life and health trust,to or under which the taxpayer’s employer has made a contribution, not exceeding the amount, if any, by whichthe total of all such amounts received by the taxpayer pursuant to the plan before the end of the year andwhere there was a preceding taxation year ending after 1971 in which any such amount was, by virtue of this paragraph, included in computing the taxpayer’s income, after the last such year, andin any other case, after 1971,exceedsthe total of the contributions made by the taxpayer under the plan before the end of the year andwhere there was a preceding taxation year described in clause (iv)(A), after the last such year, andin any other case, after 1967;Canadian Forces members and veterans amountsthe total of all amounts received by the taxpayer in the year on account ofan earnings loss benefit, an income replacement benefit (other than an amount determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of the Veterans Well-being Act, as modified, where applicable, under Part 5 of that Act), a supplementary retirement benefit or a career impact allowance payable to the taxpayer under Part 2 of the Veterans Well-being Act, oran amount payable under any of subsections 99(6), 109(1) and 115(5) and sections 124 to 126 of the Veterans Well-being Act;Employee benefit plan benefitsthe total of all amounts each of which is an amount received by the taxpayer in the year out of or under an employee benefit plan or from the disposition of any interest in any such plan, other than the portion thereof that isa death benefit or an amount that would, but for the deduction provided in the definition of that term in subsection 248(1), be a death benefit,a return of amounts contributed to the plan by the taxpayer or a deceased employee of whom the taxpayer is an heir or legal representative, to the extent that the amounts were not deducted in computing the taxable income of the taxpayer or the deceased employee for any taxation year,a superannuation or pension benefit attributable to services rendered by a person in a period throughout which the person was not resident in Canada, ora designated employee benefit (as defined in subsection 144.1(1));Employee trustamounts allocated to the taxpayer for the year by a trustee under an employee trust;Salary deferral arrangement paymentsthe amount, if any, by which the total of all amounts received by any person as benefits (other than amounts received by or from a trust governed by a salary deferral arrangement) in the year out of or under a salary deferral arrangement in respect of the taxpayer exceeds the amount, if any, by whichthe total of all deferred amounts under the arrangement that were included under paragraph 6(1)(a) as benefits in computing the taxpayer’s income for preceding taxation yearsexceedsthe total ofall deferred amounts received by any person in preceding taxation years out of or under the arrangement, andall deferred amounts under the arrangement that were deducted under paragraph 8(1)(o) in computing the taxpayer’s income for the year or preceding taxation years;Reimbursements and awardsamounts received by the taxpayer in the year as an award or reimbursement in respect of an amount that would, if the taxpayer were entitled to no reimbursements or awards, be deductible under subsection 8(1) in computing the income of the taxpayer, except to the extent that the amounts so receivedare otherwise included in computing the income of the taxpayer for the year, orare taken into account in computing the amount that is claimed under subsection 8(1) by the taxpayer for the year or a preceding taxation year;Automobile operating expense benefitwherean amount is determined under subparagraph 6(1)(e)(i) in respect of an automobile in computing the taxpayer’s income for the year,amounts related to the operation (otherwise than in connection with or in the course of the taxpayer’s office or employment) of the automobile for the period or periods in the year during which the automobile was made available to the taxpayer, or a person who does not deal at arm’s length with the taxpayer, are paid or payable by the employer within the meaning of paragraph (e) that made the automobile available (in this paragraph referred to as the “payor”), andthe total of the amounts so paid or payable is not paid in the year or within 45 days after the end of the year to the payor by the taxpayer or by the person related to the taxpayer,the amount in respect of the operation of the automobile determined by the formulaA - BwhereAiswhere the automobile is used primarily in the performance of the duties of the taxpayer’s office or employment during the period or periods referred to in subparagraph (ii) and the taxpayer notifies the employer in writing before the end of the year of the taxpayer’s intention to have this subparagraph apply, 1/2 of the amount determined under subparagraph 6(1)(e)(i) in respect of the automobile in computing the taxpayer’s income for the year, andin any other case, the amount equal to the product obtained when the amount prescribed for the year is multiplied by the total number of kilometres that the automobile is driven (otherwise than in connection with or in the course of the taxpayer’s office or employment) during the period or periods referred to in subparagraph 6(1)(k)(ii), andBis the total of all amounts in respect of the operation of the automobile in the year paid in the year or within 45 days after the end of the year to the payor by the taxpayer or by the person related to the taxpayer; andWhere standby charge does not applythe value of a benefit in respect of the operation of an automobile (other than a benefit to which paragraph (k) applies or would apply but for subparagraph (k)(iii)) received or enjoyed by the taxpayer, or by a person related to the taxpayer, in the year in respect of, in the course of or because of, the taxpayer’s office or employment.Parking costFor the purposes of this section, an amount or a benefit in respect of the use of a motor vehicle by a taxpayer does not include any amount or benefit related to the parking of the vehicle.Deeming rule — amount receivedFor the purposes of paragraph (1)(g), an amount received by an individual out of or under an employee benefit plan is deemed to have been received by a taxpayer and not by the individual ifthe individual does not deal at arm’s length with the taxpayer;the amount is received in respect of an office or employment of the taxpayer; andthe taxpayer is living at the time the amount is received by the individual.Reasonable standby chargeFor the purposes of paragraph (1)(e), a reasonable standby charge for an automobile for the total number of days (in this subsection referred to as the “total available days”) in a taxation year during which the automobile is made available to a taxpayer, or to a person who does not deal at arm’s length with the taxpayer, by a person (referred to in this subsection as the “employer”) shall be deemed to be the amount determined by the formulaA/B × [2% × (C × D) + 2/3 × (E - F)]whereAisthe lesser of the total kilometres that the automobile is driven (otherwise than in connection with or in the course of the taxpayer’s office or employment) during the total available days and the value determined for the description of B for the year in respect of the standby charge for the automobile during the total available days, ifthe taxpayer is required by the employer to use the automobile in connection with or in the course of the office or employment, andthe distance travelled by the automobile in the total available days is primarily in connection with or in the course of the office or employment, andthe value determined for the description of B for the year in respect of the standby charge for the automobile during the total available days, in any other case;Bis the product obtained when 1,667 is multiplied by the quotient obtained by dividing the total available days by 30 and, if the quotient so obtained is not a whole number and exceeds one, by rounding it to the nearest whole number or, where that quotient is equidistant from two consecutive whole numbers, by rounding it to the lower of those two numbers;Cis the cost of the automobile to the employer where the employer owns the vehicle at any time in the year;Dis the number obtained by dividing such of the total available days as are days when the employer owns the automobile by 30 and, if the quotient so obtained is not a whole number and exceeds one, by rounding it to the nearest whole number or, where that quotient is equidistant from two consecutive whole numbers, by rounding it to the lower of those two numbers;Eis the total of all amounts that may reasonably be regarded as having been payable by the employer to a lessor for the purpose of leasing the automobile during such of the total available days as are days when the automobile is leased to the employer; andFis the part of the amount determined for E that may reasonably be regarded as having been payable to the lessor in respect of all or part of the cost to the lessor of insuring againstloss of, or damage to, the automobile, orliability resulting from the use or operation of the automobile.Automobile salespersonWhere in a taxation yeara taxpayer was employed principally in selling or leasing automobiles,an automobile owned by the taxpayer’s employer was made available by the employer to the taxpayer or to a person related to the taxpayer, andthe employer has acquired one or more automobiles,the amount that would otherwise be determined under subsection 6(2) as a reasonable standby charge shall, at the option of the employer, be computed as ifthe reference in the formula in subsection 6(2) to “2%” were read as a reference to “1 1/2%”, andthe cost to the employer of the automobile were the greater ofthe quotient obtained by dividingthe cost to the employer of all new automobiles acquired by the employer in the year for sale or lease in the course of the employer’s businessbythe number of automobiles described in clause 6(2.1)(e)(i)(A), andthe quotient obtained by dividingthe cost to the employer of all automobiles acquired by the employer in the year for sale or lease in the course of the employer’s businessbythe number of automobiles described in clause 6(2.1)(e)(ii)(A).COVID-19 — automobile operating expense benefitIf a taxpayer met the condition in subparagraph (iv) of the description of A in paragraph (1)(k) for the 2019 taxation year in respect of the use of an automobile made available to the taxpayer, or to a person related to the taxpayer, by an employer (within the meaning assigned by subsection (2)), then for the purpose of applying paragraph (1)(k) in respect of an automobile provided by that employer in 2020 or 2021 (referred to in this subsection as the “relevant year”), the amount determined for A in paragraph (1)(k) in respect of the automobile for the relevant year is deemed to be the lesser of½ of the amount determined under subparagraph (1)(e)(i) in respect of the automobile for the relevant year, andthe amount determined under subparagraph (v) of the description of A in paragraph (1)(k) in respect of the automobile for the relevant year.COVID-19 — reasonable standby chargeA taxpayer is deemed to meet the condition in subparagraph (a)(ii) of the description of A in subsection (2) in respect of an employer (within the meaning assigned by subsection (2)) for the 2020 or 2021 taxation year if the taxpayer met the conditions in subparagraphs (a)(i) and (ii) of the description of A in subsection (2) for the 2019 taxation year in respect of an automobile made available to the taxpayer, or to a person related to the taxpayer, by that employer.Payments by employer to employeeAn amount received by one person from anotherduring a period while the payee was an officer of, or in the employment of, the payer, oron account, in lieu of payment or in satisfaction of an obligation arising out of an agreement made by the payer with the payee immediately prior to, during or immediately after a period that the payee was an officer of, or in the employment of, the payer,shall be deemed, for the purposes of section 5, to be remuneration for the payee’s services rendered as an officer or during the period of employment, unless it is established that, irrespective of when the agreement, if any, under which the amount was received was made or the form or legal effect thereof, it cannot reasonably be regarded as having been receivedas consideration or partial consideration for accepting the office or entering into the contract of employment,as remuneration or partial remuneration for services as an officer or under the contract of employment, orin consideration or partial consideration for a covenant with reference to what the officer or employee is, or is not, to do before or after the termination of the employment.Amount receivable for covenantIf an amount (other than an amount to which paragraph (1)(a) applies because of subsection (11)) is receivable at the end of a taxation year by a taxpayer in respect of a covenant, agreed to by the taxpayer more than 36 months before the end of that taxation year, with reference to what the taxpayer is, or is not, to do, and the amount would be included in the taxpayer’s income for the year under this Subdivision if it were received by the taxpayer in the year, the amountis deemed to be received by the taxpayer at the end of the taxation year for services rendered as an officer or during the period of employment; andis deemed not to be received at any other time.Group term life insuranceWhere at any time in a taxation year a taxpayer’s life is insured under a group term life insurance policy, there shall be included in computing the taxpayer’s income for the year from an office or employment the amount, if any, prescribed for the year in respect of the insurance.[Repealed, 1995, c. 3, s. 1]Employment at special work site or remote locationNotwithstanding subsection 6(1), in computing the income of a taxpayer for a taxation year from an office or employment, there shall not be included any amount received or enjoyed by the taxpayer in respect of, in the course or by virtue of the office or employment that is the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses the taxpayer has incurred for,the taxpayer’s board and lodging for a period ata special work site, being a location at which the duties performed by the taxpayer were of a temporary nature, if the taxpayer maintained at another location a self-contained domestic establishment as the taxpayer’s principal place of residencethat was, throughout the period, available for the taxpayer’s occupancy and not rented by the taxpayer to any other person, andto which, by reason of distance, the taxpayer could not reasonably be expected to have returned daily from the special work site, ora location at which, by virtue of its remoteness from any established community, the taxpayer could not reasonably be expected to establish and maintain a self-contained domestic establishment,if the period during which the taxpayer was required by the taxpayer’s duties to be away from the taxpayer’s principal place of residence, or to be at the special work site or location, was not less than 36 hours; ortransportation betweenthe principal place of residence and the special work site referred to in subparagraph 6(6)(a)(i), orthe location referred to in subparagraph 6(6)(a)(ii) and a location in Canada or a location in the country in which the taxpayer is employed,in respect of a period described in paragraph 6(6)(a) during which the taxpayer received board and lodging, or a reasonable allowance in respect of board and lodging, from the taxpayer’s employer.Cost of property or serviceTo the extent that the cost to a person of purchasing a property or service or an amount payable by a person for the purpose of leasing property is taken into account in determining an amount required under this section to be included in computing a taxpayer’s income for a taxation year, that cost or amount payable, as the case may be, shall include any tax that was payable by the person in respect of the property or service or that would have been so payable if the person were not exempt from the payment of that tax because of the nature of the person or the use to which the property or service is to be put.GST rebates re costs of property or serviceIfan amount in respect of an outlay or expense is deducted under section 8 in computing the income of a taxpayer for a taxation year from an office or employment, oran amount is included in the capital cost to a taxpayer of a property described in subparagraph 8(1)(j)(ii) or 8(1)(p)(ii),and a particular amount is paid to the taxpayer in a particular taxation year as a rebate under the Excise Tax Act in respect of any goods and services tax included in the amount of the outlay or expense, or the capital cost of the property, as the case may be, the particular amountto the extent that it relates to an outlay or expense referred to in paragraph (a), shall be included in computing the taxpayer’s income from an office or employment for the particular taxation year, andto the extent that it relates to the capital cost of property referred to in paragraph (b), is deemed, for the purposes of subsection 13(7.1), to have been received by the taxpayer in the particular taxation year as assistance from a government for the acquisition of the property.Amount in respect of interest on employee debtWhere an amount in respect of a loan or debt is deemed by subsection 80.4(1) to be a benefit received in a taxation year by an individual, the amount of the benefit shall be included in computing the income of the individual for the year as income from an office or employment.Contributions to an employee benefit planFor the purposes of subparagraph 6(1)(g)(ii),an amount included in the income of an individual in respect of an employee benefit plan for a taxation year preceding the year in which it was paid out of the plan shall be deemed to be an amount contributed to the plan by the individual; andwhere an amount is received in a taxation year by an individual from an employee benefit plan that was in a preceding year an employee trust, such portion of the amount so received by the individual as does not exceed the amount, if any, by which the lesser ofthe amount, if any, by whichthe total of all amounts allocated to the individual or a deceased person of whom the individual is an heir or legal representative by the trustee of the plan at a time when it was an employee trustexceedsthe total of all amounts previously paid out of the plan to or for the benefit of the individual or the deceased person at a time when the plan was an employee trust, andthe portion of the amount, if any, by which the cost amount to the plan of its property immediately before it ceased to be an employee trust exceeds its liabilities at that time thatthe amount determined under subparagraph 6(10)(b)(i) in respect of the individualis ofthe total of amounts determined under subparagraph 6(10)(b)(i) in respect of all individuals who were beneficiaries under the plan immediately before it ceased to be an employee trustexceedsthe total of all amounts previously received out of the plan by the individual or a deceased person of whom the individual is an heir or legal representative at a time when the plan was an employee benefit plan to the extent that the amounts were deemed by this paragraph to be a return of amounts contributed to the planshall be deemed to be the return of an amount contributed to the plan by the individual.Salary deferral arrangementWhere at the end of a taxation year any person has a right under a salary deferral arrangement in respect of a taxpayer to receive a deferred amount, an amount equal to the deferred amount shall be deemed, for the purposes only of paragraph 6(1)(a), to have been received by the taxpayer as a benefit in the year, to the extent that the amount was not otherwise included in computing the taxpayer’s income for the year or any preceding taxation year.IdemWhere at the end of a taxation year any person has a right under a salary deferral arrangement (other than a trust governed by a salary deferral arrangement) in respect of a taxpayer to receive a deferred amount, an amount equal to any interest or other additional amount that accrued to, or for the benefit of, that person to the end of the year in respect of the deferred amount shall be deemed at the end of the year, for the purposes only of subsection 6(11), to be a deferred amount that the person has a right to receive under the arrangement.ApplicationSubsection 6(11) does not apply in respect of a deferred amount under a salary deferral arrangement in respect of a taxpayer that was established primarily for the benefit of one or more non-resident employees in respect of services to be rendered in a country other than Canada, to the extent that the deferred amountwas in respect of services rendered by an employee whowas not resident in Canada at the time the services were rendered, orwas resident in Canada for a period (in this subsection referred to as an “excluded period”) of not more than 36 of the 72 months preceding the time the services were rendered and was an employee to whom the arrangement applied before the employee became resident in Canada; andcannot reasonably be regarded as being in respect of services rendered or to be rendered during a period (other than an excluded period) when the employee was resident in Canada.Part of plan or arrangementWhere deferred amounts under a salary deferral arrangement in respect of a taxpayer (in this subsection referred to as “that arrangement”) are required to be included as benefits under paragraph 6(1)(a) in computing the taxpayer’s income and that arrangement is part of a plan or arrangement (in this subsection referred to as the “plan”) under which amounts or benefits not related to the deferred amounts are payable or provided, for the purposes of this Act, other than this subsection,that arrangement shall be deemed to be a separate arrangement independent of other parts of the plan of which it is a part; andwhere any person has a right to a deferred amount under that arrangement, an amount received by the person as a benefit at any time out of or under the plan shall be deemed to have been received out of or under that arrangement except to the extent that it exceeds the amount, if any, by whichthe total of all deferred amounts under that arrangement that were included under paragraph 6(1)(a) as benefits in computing the taxpayer’s income for taxation years ending before that timeexceedsthe total ofall deferred amounts received by any person before that time out of or under the plan that were deemed by this paragraph to have been received out of or under that arrangement, andall deferred amounts under that arrangement that were deducted under paragraph 8(1)(o) in computing the taxpayer’s income for the year or preceding taxation years.Forgiveness of employee debtFor the purpose of paragraph 6(1)(a),a benefit shall be deemed to have been enjoyed by a taxpayer at any time an obligation issued by any debtor (including the taxpayer) is settled or extinguished; andthe value of that benefit shall be deemed to be the forgiven amount at that time in respect of the obligation.Forgiven amountFor the purpose of subsection 6(15), the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by subsection 80(1) ifthe obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor;no amount included in computing income because of the obligation being settled or extinguished at that time were taken into account;the definition forgiven amount in subsection 80(1) were read without reference to paragraphs (f) and (h) of the description of B in that definition; andsection 80 were read without reference to paragraphs (2)(b) and (q) of that section.Disability-related employment benefitsNotwithstanding subsection 6(1), in computing an individual’s income for a taxation year from an office or employment, there shall not be included any amount received or enjoyed by the individual in respect of, in the course of or because of the individual’s office or employment that is the value of a benefit relating to, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by the individual for,the transportation of the individual between the individual’s ordinary place of residence and the individual’s work location (including parking near that location) if the individual is blind or is a person in respect of whom an amount is deductible, or would but for paragraph 118.3(1)(c) be deductible, because of the individual’s mobility impairment, under section 118.3 in computing a taxpayer’s tax payable under this Part for the year; oran attendant to assist the individual in the performance of the individual’s duties if the individual is a person in respect of whom an amount is deductible, or would but for paragraph 118.3(1)(c) be deductible, under section 118.3 in computing a taxpayer’s tax payable under this Part for the year.DefinitionsThe definitions in this subsection apply in this subsection and subsection 6(18).disability policy means a group disability insurance policy that provides for periodic payments to individuals in respect of the loss of remuneration from an office or employment. (police d’assurance-invalidité)employer of an individual includes a former employer of the individual. (employeur)top-up disability payment in respect of an individual means a payment made by an employer of the individual as a consequence of the insolvency of an insurer that was obligated to make payments to the individual under a disability policy wherethe payment is made to an insurer so that periodic payments made to the individual under the policy will not be reduced because of the insolvency, or will be reduced by a lesser amount, orthe following conditions are satisfied:the payment is made to the individual to replace, in whole or in part, periodic payments that would have been made under the policy to the individual but for the insolvency, andthe payment is made under an arrangement by which the individual is required to reimburse the payment to the extent that the individual subsequently receives an amount from an insurer in respect of the portion of the periodic payments that the payment was intended to replace.For the purposes of paragraphs (a) and (b), an insurance policy that replaces a disability policy is deemed to be the same policy as, and a continuation of, the disability policy that was replaced. (paiement compensatoire pour invalidité)Group disability benefits — insolvent insurerWhere an employer of an individual makes a top-up disability payment in respect of the individual,the payment is, for the purpose of paragraph 6(1)(a), deemed not to be a benefit received or enjoyed by the individual;the payment is, for the purpose of paragraph 6(1)(f), deemed not to be a contribution made by the employer to or under the disability insurance plan of which the disability policy in respect of which the payment is made is or was a part; andif the payment is made to the individual, it is, for the purpose of paragraph 6(1)(f), deemed to be an amount payable to the individual pursuant to the plan.Benefit re housing lossFor the purpose of paragraph (1)(a), an amount paid at any time in respect of a housing loss (other than an eligible housing loss) to or on behalf of a taxpayer or a person who does not deal at arm’s length with the taxpayer in respect of, in the course of or because of, an office or employment is deemed to be a benefit received by the taxpayer at that time because of the office or employment.Benefit re eligible housing lossFor the purpose of paragraph (1)(a), an amount paid at any time in a taxation year in respect of an eligible housing loss to or on behalf of a taxpayer or a person who does not deal at arm’s length with the taxpayer in respect of, in the course of or because of, an office or employment is deemed to be a benefit received by the taxpayer at that time because of the office or employment to the extent of the amount, if any, by whichone half of the amount, if any, by which the total of all amounts each of which is so paid in the year or in a preceding taxation year exceeds $15,000exceedsthe total of all amounts each of which is an amount included in computing the taxpayer’s income because of this subsection for a preceding taxation year in respect of the loss.Housing lossIn this section, housing loss at any time in respect of a residence of a taxpayer means the amount, if any, by which the greater ofthe adjusted cost base of the residence at that time to the taxpayer or to another person who does not deal at arm’s length with the taxpayer, andthe highest fair market value of the residence within the six-month period that ends at that time exceedsif the residence is disposed of by the taxpayer or the other person before the end of the first taxation year that begins after that time, the lesser ofthe proceeds of disposition of the residence, andthe fair market value of the residence at that time, andin any other case, the fair market value of the residence at that time.Eligible housing lossIn this section, eligible housing loss in respect of a residence designated by a taxpayer means a housing loss in respect of an eligible relocation of the taxpayer or a person who does not deal at arm’s length with the taxpayer and, for these purposes, no more than one residence may be so designated in respect of an eligible relocation.Employer-provided housing subsidiesFor greater certainty, an amount paid or the value of assistance provided by any person in respect of, in the course of or because of, an individual’s office or employment in respect of the cost of, the financing of, the use of or the right to use, a residence is, for the purposes of this section, a benefit received by the individual because of the office or employment.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 6; 1994, c. 7, Sch. II, s. 3, Sch. VIII, s. 1, c. 21, s. 2; 1995, c. 3, s. 1, c. 21, s. 1; 1997, c. 10, s. 267; 1998, c. 19, s. 68; 1999, c. 22, s. 2; 2002, c. 9, s. 20; 2003, c. 15, s. 69; 2005, c. 21, s. 101; 2007, c. 16, s. 1; 2009, c. 2, s. 2; 2010, c. 25, s. 2; 2012, c. 31, s. 2; 2013, c. 34, ss. 170, 426; 2016, c. 7, s. 114; 2017, c. 20, s. 22018, c. 12, s. 22021, c. 23, s. 22023, c. 26, s. 22024, c. 17, s. 2(F)
Agreement to issue securities to employeesSubject to subsection (1.1), where a particular qualifying person has agreed to sell or issue securities of the particular qualifying person (or of a qualifying person with which the particular qualifying person does not deal at arm’s length) to an employee of the particular qualifying person (or of a qualifying person with which the particular qualifying person does not deal at arm’s length),if the employee has acquired securities under the agreement, a benefit equal to the amount, if any, by whichthe value of the securities at the time the employee acquired themexceeds the total ofthe amount paid or to be paid to the particular qualifying person by the employee for the securities, andthe amount, if any, paid by the employee to acquire the right to acquire the securitiesis deemed to have been received, in the taxation year in which the employee acquired the securities, by the employee because of the employee’s employment;if the employee has transferred or otherwise disposed of rights under the agreement in respect of some or all of the securities to a person with whom the employee was dealing at arm’s length, a benefit equal to the amount, if any, by whichthe value of the consideration for the dispositionexceedsthe amount, if any, paid by the employee to acquire those rightsshall be deemed to have been received, in the taxation year in which the employee made the disposition, by the employee because of the employee’s employment;if the employee has transferred or otherwise disposed of rights under the agreement in respect of some or all of the securities to the particular qualifying person (or a qualifying person with which the particular qualifying person does not deal at arm’s length) with whom the employee was not dealing at arm’s length, a benefit equal to the amount, if any, by whichthe value of the consideration for the dispositionexceedsthe amount, if any, paid by the employee to acquire those rightsis deemed to have been received, in the taxation year in which the employee made the disposition, by the employee because of the employee’s employment;if rights of the employee under the agreement have, by one or more transactions between persons not dealing at arm’s length, become vested in a person who has acquired securities under the agreement, a benefit equal to the amount, if any, by whichthe value of the securities at the time the person acquired themexceeds the total ofthe amount paid or to be paid to the particular qualifying person by the person for the securities, andthe amount, if any, paid by the employee to acquire the right to acquire the securities,is deemed to have been received, in the taxation year in which the person acquired the securities, by the employee because of the employee’s employment, unless at the time the person acquired the securities the employee was deceased, in which case such a benefit is deemed to have been received by the person in that year as income from the duties of an employment performed by the person in that year in the country in which the employee primarily performed the duties of the employee’s employment;if rights of the employee under the agreement have, by one or more transactions between persons not dealing at arm’s length, become vested in a particular person who has transferred or otherwise disposed of rights under the agreement to another person with whom the particular person was dealing at arm’s length, a benefit equal to the amount, if any, by whichthe value of the consideration for the dispositionexceedsthe amount, if any, paid by the employee to acquire those rightsshall be deemed to have been received, in the taxation year in which the particular person made the disposition, by the employee because of the employee’s employment, unless at the time the other person acquired the rights the employee was deceased, in which case such a benefit shall be deemed to have been received by the particular person in that year as income from the duties of an employment performed by the particular person in that year in the country in which the employee primarily performed the duties of the employee’s employment; andif rights of the employee under the agreement have, by one or more transactions between persons not dealing at arm’s length, become vested in a particular person who has transferred or otherwise disposed of rights under the agreement to a particular qualifying person (or a qualifying person with which the particular qualifying person does not deal at arm’s length) with whom the particular person was not dealing at arm’s length, a benefit equal to the amount, if any, by whichthe value of the consideration for the dispositionexceedsthe amount, if any, paid by the employee to acquire those rightsis deemed to have been received, in the taxation year in which the particular person made the disposition, by the employee because of the employee’s employment, unless at the time of the disposition the employee was deceased, in which case such a benefit is deemed to have been received by the particular person in that year as income from the duties of an employment performed by the particular person in that year in the country in which the employee primarily performed the duties of the employee’s employment; andif the employee has died and immediately before death owned a right to acquire securities under the agreement, a benefit equal to the amount, if any, by whichthe value of the right immediately after the deathexceedsthe amount, if any, paid by the employee to acquire the rightshall be deemed to have been received, in the taxation year in which the employee died, by the employee because of the employee’s employment, and paragraphs 7(1)(b), 7(1)(c) and 7(1)(d) do not apply.Employee stock optionsWhere after March 31, 1977 a Canadian-controlled private corporation (in this subsection referred to as “the corporation”) has agreed to sell or issue a share of the capital stock of the corporation or of a Canadian-controlled private corporation with which it does not deal at arm’s length to an employee of the corporation or of a Canadian-controlled private corporation with which it does not deal at arm’s length and at the time immediately after the agreement was made the employee was dealing at arm’s length withthe corporation,the Canadian-controlled private corporation, the share of the capital stock of which has been agreed to be sold by the corporation, andthe Canadian-controlled private corporation that is the employer of the employee,in applying paragraph (1)(a) in respect of the employee’s acquisition of the share, the reference in that paragraph to “the taxation year in which the employee acquired the securities” shall be read as a reference to “the taxation year in which the employee disposed of or exchanged the securities”.Non-arm’s length relationship with trustsFor the purposes of this section, a mutual fund trust is deemed not to deal at arm’s length with a corporation only ifthe trust controls the corporation; orthe corporation holds securities that give the corporation not less than 50% of the votes that could be cast at a meeting of the unitholders of the trust.Order of disposition of securitiesFor the purposes of this subsection, subsection (1.1), Subdivision C, paragraph 110(1)(d.01), subparagraph 110(1)(d.1)(ii) and subsections 110(2.1) and 147(10.4), and subject to subsection (1.31), a taxpayer is deemed to dispose of securities that are identical properties in the order in which the taxpayer acquired them and, for this purpose,if a taxpayer acquires a particular security (other than under circumstances to which subsection (1.1) or 147(10.1) applies) at a time when the taxpayer also acquires or holds one or more other securities that are identical to the particular security and are, or were, acquired under circumstances to which subsection (1.1) or 147(10.1) applied, the taxpayer is deemed to have acquired the particular security at the time immediately preceding the earliest of the times at which the taxpayer acquired those other securities; andif a taxpayer acquires, at the same time, two or more identical securities under circumstances to which subsection (1.1) applied, the taxpayer is deemed to have acquired the securities in the order in which the agreements under which the taxpayer acquired the rights to acquire the securities were made.Disposition of newly acquired securityWhere a taxpayer acquires at a particular time a particular security under an agreement referred to in subsection (1) — or acquires the particular security as consideration for the disposition of rights under the agreement — and, on a day that is no later than 30 days after the day that includes the particular time, the taxpayer disposes of a security that is identical to the particular security, the particular security is deemed to be the security that is so disposed of ifno other securities that are identical to the particular security are acquired, or disposed of, by the taxpayer after the particular time and before the disposition;the taxpayer identifies the particular security as the security so disposed of in the taxpayer’s return of income under this Part for the year in which the disposition occurs; andthe taxpayer has not so identified the particular security, in accordance with this subsection, in connection with the disposition of any other security.Exchange of optionsWherea taxpayer disposes of rights under an agreement referred to in subsection (1) to acquire securities of a particular qualifying person that made the agreement or of a qualifying person with which it does not deal at arm’s length (which rights and securities are referred to in this subsection as the “exchanged option” and the “old securities”, respectively),the taxpayer receives no consideration for the disposition of the exchanged option other than rights under an agreement with a person (in this subsection referred to as the “designated person”) that isthe particular person,a qualifying person with which the particular person does not deal at arm’s length immediately after the disposition,a corporation formed on the amalgamation or merger of the particular person and one or more other corporations,a mutual fund trust to which the particular person has transferred property in circumstances to which subsection 132.2(1) applied,a qualifying person with which the corporation referred to in subparagraph (iii) does not deal at arm’s length immediately after the disposition, orif the disposition is before 2013 and the old securities were equity in a SIFT wind-up entity that was at the time of the disposition a mutual fund trust, a SIFT wind-up corporation in respect of the SIFT wind-up entityto acquire securities of the designated person or a qualifying person with which the designated person does not deal at arm’s length (which rights and securities are referred to in this subsection as the “new option” and the “new securities”, respectively), andthe amount, if any, by whichthe total value of the new securities immediately after the dispositionexceedsthe total amount payable by the taxpayer to acquire the new securities under the new optiondoes not exceed the amount, if any, by whichthe total value of the old securities immediately before the dispositionexceedsthe amount payable by the taxpayer to acquire the old securities under the exchanged option,for the purposes of this section,the taxpayer is deemed (other than for the purposes of subparagraph (9)(d)(ii)) not to have disposed of the exchanged option and not to have acquired the new option,the new option is deemed to be the same option as, and a continuation of, the exchanged option, andif the designated person is not the particular person, the designated person is deemed to be the same person as, and a continuation of, the particular person.Rules where securities exchangedFor the purposes of this section and paragraphs 110(1)(d) to (d.1), wherea taxpayer disposes of or exchanges securities of a particular qualifying person that were acquired by the taxpayer under circumstances to which subsection (1.1) applied (in this subsection referred to as the “exchanged securities”),the taxpayer receives no consideration for the disposition or exchange of the exchanged securities other than securities (in this subsection referred to as the “new securities”) ofthe particular qualifying person,a qualifying person with which the particular qualifying person does not deal at arm’s length immediately after the disposition or exchange,a corporation formed on the amalgamation or merger of the particular qualifying person and one or more other corporations,a mutual fund trust to which the particular qualifying person has transferred property in circumstances to which subsection 132.2(1) applied, ora qualifying person with which the corporation referred to in subparagraph (iii) does not deal at arm’s length immediately after the disposition or exchange, andthe total value of the new securities immediately after the disposition or exchange does not exceed the total value of the old securities immediately before the disposition or exchange,the following rules apply:the taxpayer is deemed not to have disposed of or exchanged the exchanged securities and not to have acquired the new securities,the new securities are deemed to be the same securities as, and a continuation of, the exchanged securities, except for the purpose of determining if the new securities are identical to any other securities,the qualifying person that issued the new securities is deemed to be the same person as, and a continuation of, the qualifying person that issued the exchanged securities, andwhere the exchanged securities were issued under an agreement, the new securities are deemed to have been issued under that agreement.EmigrantFor the purposes of this section and paragraph 110(1)(d.1), a taxpayer is deemed not to have disposed of a share acquired under circumstances to which subsection (1.1) applied solely because of subsection 128.1(4).Rights ceasing to be exercisableFor the purposes of subsections (1) and 110(1), if a taxpayer receives at a particular time one or more particular amounts in respect of rights of the taxpayer to acquire securities under an agreement referred to in subsection (1) ceasing to be exercisable in accordance with the terms of the agreement, and the cessation would not, if this Act were read without reference to this subsection, constitute a transfer or disposition of those rights by the taxpayer,the taxpayer is deemed to have disposed of those rights at the particular time to a person with whom the taxpayer was dealing at arm’s length and to have received the particular amounts as consideration for the disposition; andfor the purpose of determining the amount, if any, of the benefit that is deemed to have been received as a consequence of the disposition referred to in paragraph (a), the taxpayer is deemed to have paid an amount to acquire those rights equal to the amount, if any, by whichthe amount paid by the taxpayer to acquire those rights (determined without reference to this subsection)exceedsthe total of all amounts each of which is an amount received by the taxpayer before the particular time in respect of the cessation.Securities held by trusteeIf a security is held by a trustee in trust or otherwise, whether absolutely, conditionally or contingently, for an employee, the employee is deemed, for the purposes of this section and paragraphs 110(1)(d) to (d.1),to have acquired the security at the time the trust began to so hold it; andto have exchanged or disposed of the security at the time the trust exchanged it or disposed of it to any person other than the employee.Special provisionIf a particular qualifying person has agreed to sell or issue securities of the particular person, or of a qualifying person with which it does not deal at arm’s length, to an employee of the particular person or of a qualifying person with which it does not deal at arm’s length,except as provided by this section, the employee is deemed to have neither received nor enjoyed any benefit under or because of the agreement; andthe income for a taxation year of any person is deemed to be not less than its income for the year would have been if a benefit had not been conferred on the employee by the sale or issue of the securities.Application of s. (1)For greater certainty it is hereby declared that, where a person to whom any provision of subsection 7(1) would otherwise apply has ceased to be an employee before all things have happened that would make that provision applicable, subsection 7(1) shall continue to apply as though the person were still an employee and as though the employment were still in existence.Non-application of this sectionThis section does not apply if the benefit conferred by the agreement was not received in respect of, in the course of, or by virtue of, the employment.Sale to trustee for employeesIf a particular qualifying person has entered into an arrangement under which securities of the particular person, or of a qualifying person with which it does not deal at arm’s length, are sold or issued by either person to a trustee to be held by the trustee in trust for sale to an employee of the particular person or of a qualifying person with which it does not deal at arm’s length,for the purposes of this section (other than subsection (2)) and paragraphs 110(1)(d) to (d.1),any particular rights of the employee under the arrangement in respect of those securities are deemed to be rights under a particular agreement with the particular person under which the particular person has agreed to sell or issue securities to the employee,any securities acquired under the arrangement by the employee or by a person in whom the particular rights have become vested are deemed to be securities acquired under the particular agreement, andany amounts paid or agreed to be paid to the trustee for any securities acquired under the arrangement by the employee or by a person in whom the particular rights have become vested are deemed to be amounts paid or agreed to be paid to the particular person for securities acquired under the particular agreement; andsubsection (2) does not apply in respect of securities held by the trustee under the arrangement.DefinitionsThe following definitions apply in this section and in subsection 47(3), paragraph 53(1)(j), subsection 110(0.1), paragraphs 110(1)(d), (d.01) and (e) and subsections 110(1.1) to (1.9) and (2.1).qualifying person means a corporation or a mutual fund trust. (personne admissible)security of a qualifying person means if the person is a corporation, a share of the capital stock of the corporation; andif the person is a mutual fund trust, a unit of the trust. (titre)[Repealed, 2010, c. 25, s. 3]Prescribed form for deferralWhere, at any time in a taxation year, a taxpayer holds a security that was acquired under circumstances to which subsection (8) applied, the taxpayer shall file with the Minister, with the taxpayer’s return of income for the year, a prescribed form containing prescribed information relating to the taxpayer’s acquisition and disposition of securities under agreements referred to in subsection (1).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 7; 1994, c. 7, Sch. II, s. 4, c. 21, s. 3; 1999, c. 22, s. 3; 2001, c. 17, s. 2; 2007, c. 35, s. 68; 2009, c. 2, s. 3; 2010, c. 25, s. 3; 2013, c. 34, s. 1712021, c. 23, s. 32024, c. 17, s. 3
Deductions
Deductions allowedIn computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto[Repealed, 2001, c. 17, s. 3(1)]Legal expenses of employeeamounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect, or to establish a right to, an amount owed to the taxpayer that, if received by the taxpayer, would be required by this Subdivision to be included in computing the taxpayer’s income;Clergy residencewhere, in the year, the taxpayeris a member of the clergy or of a religious order or a regular minister of a religious denomination, andisin charge of a diocese, parish or congregation,ministering to a diocese, parish or congregation, orengaged exclusively in full-time administrative service by appointment of a religious order or religious denomination,the amount, not exceeding the taxpayer’s remuneration for the year from the office or employment, equal tothe total of all amounts including amounts in respect of utilities, included in computing the taxpayer’s income for the year under section 6 in respect of the residence or other living accommodation occupied by the taxpayer in the course of, or because of, the taxpayer’s office or employment as such a member or minister so in charge of or ministering to a diocese, parish or congregation, or so engaged in such administrative service, orrent and utilities paid by the taxpayer for the taxpayer’s principal place of residence (or other principal living accommodation), ordinarily occupied during the year by the taxpayer, or the fair rental value of such a residence (or other living accommodation), including utilities, owned by the taxpayer or the taxpayer’s spouse or common-law partner, not exceeding the lesser ofthe greater of$1,000 multiplied by the number of months (to a maximum of ten) in the year, during which the taxpayer is a person described in subparagraphs (i) and (ii), andone-third of the taxpayer’s remuneration for the year from the office or employment, andthe amount, if any, by whichthe rent paid or the fair rental value of the residence or living accommodation, including utilitiesexceedsthe total of all amounts each of which is an amount deducted, in connection with the same accommodation or residence, in computing an individual’s income for the year from an office or employment or from a business (other than an amount deducted under this paragraph by the taxpayer), to the extent that the amount can reasonably be considered to relate to the period, or a portion of the period, in respect of which an amount is claimed by the taxpayer under this paragraph;Teachers’ exchange fund contributiona single amount, in respect of all employments of the taxpayer as a teacher, not exceeding $250 paid by the taxpayer in the year to a fund established by the Canadian Education Association for the benefit of teachers from Commonwealth countries present in Canada under a teachers’ exchange arrangement;Expenses of railway employeesamounts disbursed by the taxpayer in the year for meals and lodging while employed by a railway companyaway from the taxpayer’s ordinary place of residence as a relieving telegrapher or station agent or on maintenance and repair work, oraway from the municipality and the metropolitan area, if there is one, where the taxpayer’s home terminal was located, and at a location from which, by reason of distance from the place where the taxpayer maintained a self-contained domestic establishment in which the taxpayer resided and actually supported a spouse or common-law partner or a person dependent on the taxpayer for support and connected with the taxpayer by blood relationship, marriage or common-law partnership or adoption, the taxpayer could not reasonably be expected to return daily to that place,to the extent that the taxpayer has not been reimbursed and is not entitled to be reimbursed in respect thereof;Sales expenseswhere the taxpayer was employed in the year in connection with the selling of property or negotiating of contracts for the taxpayer’s employer, andunder the contract of employment was required to pay the taxpayer’s own expenses,was ordinarily required to carry on the duties of the employment away from the employer’s place of business,was remunerated in whole or part by commissions or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated, andwas not in receipt of an allowance for travel expenses in respect of the taxation year that was, by virtue of subparagraph 6(1)(b)(v), not included in computing the taxpayer’s income,amounts expended by the taxpayer in the year for the purpose of earning the income from the employment (not exceeding the commissions or other similar amounts referred to in subparagraph 8(1)(f)(iii) and received by the taxpayer in the year) to the extent that those amounts were notoutlays, losses or replacements of capital or payments on account of capital, except as described in paragraph 8(1)(j),outlays or expenses that would, by virtue of paragraph 18(1)(l), not be deductible in computing the taxpayer’s income for the year if the employment were a business carried on by the taxpayer, oramounts the payment of which reduced the amount that would otherwise be included in computing the taxpayer’s income for the year because of paragraph 6(1)(e);Transport employee’s expenseswhere the taxpayer was an employee of a person whose principal business was passenger, goods, or passenger and goods transport and the duties of the employment required the taxpayer, regularly,to travel, away from the municipality where the employer’s establishment to which the taxpayer reported for work was located and away from the metropolitan area, if there is one, where it was located, on vehicles used by the employer to transport the goods or passengers, andwhile so away from that municipality and metropolitan area, to make disbursements for meals and lodging,amounts so disbursed by the taxpayer in the year to the extent that the taxpayer has not been reimbursed and is not entitled to be reimbursed in respect thereof;Travel expenseswhere the taxpayer, in the year,was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, andwas required under the contract of employment to pay the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment,amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the office or employment, except where the taxpayerreceived an allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), 6(1)(b)(vi) or 6(1)(b)(vii), not included in computing the taxpayer’s income for the year, orclaims a deduction for the year under paragraph 8(1)(e), 8(1)(f) or 8(1)(g);Motor vehicle travel expenseswhere the taxpayer, in the year,was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, andwas required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment,amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayerreceived an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer’s income for the year, orclaims a deduction for the year under paragraph 8(1)(f);Dues and other expenses of performing dutiesan amount paid by the taxpayer in the year, or on behalf of the taxpayer in the year if the amount paid on behalf of the taxpayer is required to be included in the taxpayer’s income for the year, asannual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,office rent, or salary to an assistant or substitute, the payment of which by the officer or employee was required by the contract of employment,the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for,annual dues to maintain membership in a trade union as definedby section 3 of the Canada Labour Code, orin any provincial statute providing for the investigation, conciliation or settlement of industrial disputes,or to maintain membership in an association of public servants the primary object of which is to promote the improvement of the members’ conditions of employment or work,annual dues that were, pursuant to the provisions of a collective agreement, retained by the taxpayer’s employer from the taxpayer’s remuneration and paid to a trade union or association designated in subparagraph 8(1)(i)(iv) of which the taxpayer was not a member,dues to a parity or advisory committee or similar body, the payment of which was required under the laws of a province in respect of the employment for the year, anddues to a professions board, the payment of which was required under the laws of a province,to the extent that the taxpayer has not been reimbursed, and is not entitled to be reimbursed in respect thereof;Motor vehicle and aircraft costswhere a deduction may be made under paragraph 8(1)(f), 8(1)(h) or 8(1)(h.1) in computing the taxpayer’s income from an office or employment for a taxation year,any interest paid by the taxpayer in the year on borrowed money used for the purpose of acquiring, or on an amount payable for the acquisition of, property that isa motor vehicle that is used, oran aircraft that is required for usein the performance of the duties of the taxpayer’s office or employment, andsuch part, if any, of the capital cost to the taxpayer ofa motor vehicle that is used, oran aircraft that is required for usein the performance of the duties of the office or employment as is allowed by regulation;C.P.P. contributions and U.I.A. premiumsany amount payable by the taxpayer in the yearas an employer’s premium under the employment Insurance Act, oras an employer’s contribution under the Canada Pension Plan or under a provincial pension plan as defined in section 3 of the Canada Pension Plan,in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer’s office or employment if an amount is deductible by the taxpayer for the year under subparagraph 8(1)(i)(ii) in respect of that individual;Quebec parental insurance planan amount payable by the taxpayer in the year as an employer’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011 in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer’s office or employment if an amount is deductible by the taxpayer for the year under subparagraph (i)(ii) in respect of that individual;Employee’s registered pension plan contributionsthe amount in respect of contributions to registered pension plans that, by reason of subsection 147.2(4), is deductible in computing the taxpayer’s income for the year;Employee RCA contributionsan amount contributed by the taxpayer in the year to a pension plan in respect of services rendered by the taxpayer where the plan is a prescribed plan established by an enactment of Canada or a province or wherethe plan is a retirement compensation arrangement,the amount was paid to a custodian (within the meaning assigned by the definition retirement compensation arrangement in subsection 248(1)) of the arrangement who is resident in Canada, andeitherthe taxpayer was required, by the terms of the taxpayer’s office or employment, to contribute the amount, and the total of the amounts contributed to the plan in the year by the taxpayer does not exceed the total of the amount contributed to the plan in the year by any other person in respect of the taxpayer, orthe plan is a pension plan the registration of which under this Act was revoked (other than a plan the registration of which was revoked as of the effective date of its registration) and the amount was contributed in accordance with the terms of the plan as last registered;[Repealed, 1994, c. 21, s. 4(2)]Salary reimbursementan amount paid by or on behalf of the taxpayer in the year pursuant to an arrangement (other than an arrangement described in subparagraph (b)(ii) of the definition top-up disability payment in subsection 6(17)) under which the taxpayer is required to reimburse any amount paid to the taxpayer for a period throughout which the taxpayer did not perform the duties of the office or employment, to the extent thatthe amount so paid to the taxpayer for the period was included in computing the taxpayer’s income from an office or employment, andthe total of amounts so reimbursed does not exceed the total of amounts received by the taxpayer for the period throughout which the taxpayer did not perform the duties of the office or employment;Reimbursement of disability paymentswhere,as a consequence of the receipt of a payment (in this paragraph referred to as the “deferred payment”) from an insurer, a payment (in this paragraph referred to as the “reimbursement payment”) is made by or on behalf of an individual to an employer or former employer of the individual pursuant to an arrangement described in subparagraph (b)(ii) of the definition top-up disability payment in subsection 6(17), andthe reimbursement payment is madein the year, other than within the first 60 days of the year if the deferred payment was received in the immediately preceding taxation year, orwithin 60 days after the end of the year, if the deferred payment was received in the year,an amount equal to the lesser ofthe amount included under paragraph 6(1)(f) in respect of the deferred payment in computing the individual’s income for any taxation year, andthe amount of the reimbursement payment;Forfeited amountswhere at the end of the year the rights of any person to receive benefits under a salary deferral arrangement in respect of the taxpayer have been extinguished or no person has any further right to receive any amount under the arrangement, the amount, if any, by which the total of all deferred amounts under the arrangement included in computing the taxpayer’s income for the year and preceding taxation years as benefits under paragraph 6(1)(a) exceeds the total ofall such deferred amounts received by any person in that year or preceding taxation years out of or under the arrangement,all such deferred amounts receivable by any person in subsequent taxation years out of or under the arrangement, andall amounts deducted under this paragraph in computing the taxpayer’s income for preceding taxation years in respect of deferred amounts under the arrangement;Ideman amount that is deductible in computing the taxpayer’s income for the year because of subsection 144(9);Excess EPSP amountsan amount that is an excess EPSP amount (as defined in subsection 207.8(1)) of the taxpayer for the year, other than any portion of the excess EPSP amount for which the taxpayer’s tax for the year under subsection 207.8(2) is waived or cancelled;Musical instrument costswhere the taxpayer was employed in the year as a musician and as a term of the employment was required to provide a musical instrument for a period in the year, an amount (not exceeding the taxpayer’s income for the year from the employment, computed without reference to this paragraph) equal to the total ofamounts expended by the taxpayer before the end of the year for the maintenance, rental or insurance of the instrument for that period, except to the extent that the amounts are otherwise deducted in computing the taxpayer’s income for any taxation year, andsuch part, if any, of the capital cost to the taxpayer of the instrument as is allowed by regulation;Artists’ employment expenseswhere the taxpayer’s income for the year from the office or employment includes income from an artistic activitythat was the creation by the taxpayer of, but did not include the reproduction of, paintings, prints, etchings, drawings, sculptures or similar works of art,that was the composition by the taxpayer of a dramatic, musical or literary work,that was the performance by the taxpayer of a dramatic or musical work as an actor, dancer, singer or musician, orin respect of which the taxpayer was a member of a professional artists’ association that is certified by the Minister of Communications,amounts paid by the taxpayer before the end of the year in respect of expenses incurred for the purpose of earning the income from those activities to the extent that they were not deductible in computing the taxpayer’s income for a preceding taxation year, but not exceeding a single amount in respect of all such offices and employments of the taxpayer equal to the amount, if any, by whichthe lesser of $1,000 and 20% of the total of all amounts each of which is the taxpayer’s income from an office or employment for the year, before deducting any amount under this section, that was income from an artistic activity described in any of subparagraphs 8(1)(q)(i) to 8(1)(q)(iv),exceedsthe total of all amounts deducted by the taxpayer for the year under paragraph 8(1)(j) or 8(1)(p) in respect of costs or expenses incurred for the purpose of earning the income from such an activity for the year;Apprentice mechanics’ tool costsif the taxpayer was an eligible apprentice mechanic at any time after 2001 and before the end of the taxation year, the amount claimed by the taxpayer for the taxation year under this paragraph not exceeding the lesser ofthe taxpayer’s income for the taxation year computed without reference to this paragraph, andthe amount determined by the formula(A - B) + CwhereA is the total of all amounts each of which is the cost to the taxpayer of an eligible tool acquired in the taxation year by the taxpayer or, if the taxpayer first becomes employed as an eligible apprentice mechanic in the taxation year, the cost to the taxpayer of an eligible tool acquired by the taxpayer in the last three months of the preceding taxation year,Bis the lesser ofthe value of A for the taxation year in respect of the taxpayer, andthe greater ofthe amount that is the total of the first dollar amount referred to in paragraph (s) and the amount determined for the taxation year for B in subsection 118(10), and5% of the total ofthe total of all amounts each of which is the taxpayer’s income from employment for the taxation year as an eligible apprentice mechanic, computed without reference to this paragraph, andthe amount, if any, by which the amount required by paragraph 56(1)(n.1) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(p) to be deducted in computing that income, andCis the amount by which the amount determined under this subparagraph for the preceding taxation year in respect of the taxpayer exceeds the amount deducted under this paragraph for that preceding taxation year by the taxpayer;Deduction — tradesperson’s toolsif the taxpayer is employed as a tradesperson at any time in the taxation year, the lesser of $1,000 and the amount determined by the formulaA - $1,000whereA is the lesser ofthe total of all amounts each of which is the cost of an eligible tool acquired by the taxpayer in the year, andthe total ofthe amount that would, if this subsection were read without reference to this paragraph, be the taxpayer’s income for the taxation year from employment as a trades­person in the taxation year, andthe amount, if any, by which the amount required by paragraph 56(1)(n.1) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(p) to be deducted in computing that income; andLabour mobility deductionif the taxpayer is an eligible tradesperson for the year, an amount equal to the lesser of$4,000, andthe total of all amounts each of which is a temporary relocation deduction of the taxpayer for the year in respect of an eligible temporary relocation of the taxpayer.General limitationExcept as permitted by this section, no deductions shall be made in computing a taxpayer’s income for a taxation year from an office or employment.MealsAn amount expended in respect of a meal consumed by a taxpayer who is an officer or employee shall not be included in computing the amount of a deduction under paragraph 8(1)(f) or 8(1)(h) unless the meal was consumed during a period while the taxpayer was required by the taxpayer’s duties to be away, for a period of not less than twelve hours, from the municipality where the employer’s establishment to which the taxpayer ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located.Dues not deductibleNotwithstanding subparagraphs 8(1)(i)(i), 8(1)(i)(iv), 8(1)(i)(vi) and 8(1)(i)(vii), dues are not deductible under those subparagraphs in computing a taxpayer’s income from an office or employment to the extent that they are, in effect, leviedfor or under a superannuation fund or plan;for or under a fund or plan for annuities, insurance (other than professional or malpractice liability insurance that is necessary to maintain a professional status recognized by statute) or similar benefits; orfor any other purpose not directly related to the ordinary operating expenses of the committee or similar body, association, board or trade union, as the case may be.Apprentice mechanicsFor the purpose of paragraph (1)(r),a taxpayer is an eligible apprentice mechanic in a taxation year if, at any time in the taxation year, the taxpayeris registered in a program established in accordance with the laws of Canada or of a province that leads to designation under those laws as a mechanic licensed to repair self-propelled motorized vehicles, andis employed as an apprentice mechanic;an eligible tool is a tool (including ancillary equipment) thatis acquired by a taxpayer for use in connection with the taxpayer’s employment as an eligible apprentice mechanic,has not been used for any purpose before it is acquired by the taxpayer,is certified in prescribed form by the taxpayer’s employer to be required to be provided by the taxpayer as a condition of, and for use in, the taxpayer’s employment as an eligible apprentice mechanic, andis, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment; anda taxpayer who, for a taxation year, is not an eligible apprentice mechanic and has an excess amount determined under the description of C in subparagraph (1)(r)(ii) is, for the taxation year, entitled to claim a deduction under that paragraph as if that excess amount were wholly applicable to an employment of the taxpayer.Eligible tool of tradespersonFor the purposes of paragraph (1)(s), an eligible tool of a taxpayer is a tool (including ancillary equipment) thatis acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer’s employment as a tradesperson;has not been used for any purpose before it is acquired by the taxpayer;is certified in prescribed form by the taxpayer’s employer to be required to be provided by the taxpayer as a condition of, and for use in, the taxpayer’s employment as a tradesperson; andis, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment.Cost of toolExcept for the purposes of the description of A in subparagraph (1)(r)(ii) and the description of A in paragraph (1)(s), the cost to a taxpayer of an eligible tool the cost of which was included in determining the value of one or both of those descriptions in respect of the taxpayer for a taxation year is the amount determined by the formulaK - (K × L/M)whereKis the cost to the taxpayer of the tool determined without reference to this subsection;Lisif the tool is a tool to which only paragraph (1)(r) applies in the taxation year, the amount that would be determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil,if the tool is a tool to which only paragraph (1)(s) applies in the taxation year, the amount determined under that paragraph to be deductible by the taxpayer in the taxation year, orif the tool is a tool to which both paragraphs (1)(r) and (s) apply in the taxation year, the amount that is the total ofthe amount that would be determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil, andthe amount determined under paragraph (1)(s) to be deductible by the taxpayer in the taxation year; andMis the amount that isif the tool is a tool to which only paragraph (1)(r) applies in the taxation year, the value of A determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year,if the tool is a tool to which only paragraph (1)(s) applies in the taxation year, the amount determined under subparagraph (i) of the description of A in paragraph (1)(s) in respect of the taxpayer for the taxation year, andif the tool is a tool to which both paragraphs (1)(r) and (s) apply in the taxation year, the amount that is the greater of the value of A determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year and the amount determined under subparagraph (i) of the description of A in paragraph (1)(s) in respect of the taxpayer for the taxation year.PresumptionNotwithstanding any other provision of this Act, the total of all amounts that would otherwise be deductible by a taxpayer pursuant to paragraph 8(1)(f), 8(1)(h) or 8(1)(j) for travelling in the course of the taxpayer’s employment in an aircraft that is owned or rented by the taxpayer, may not exceed an amount that is reasonable in the circumstances having regard to the relative cost and availability of other modes of transportation.Certificate of employerAn amount otherwise deductible for a taxation year under paragraph (1)(c), (f), (h) or (h.1) or subparagraph (1)(i)(ii) or (iii) by a taxpayer shall not be deducted unless the taxpayer’s employer confirms in prescribed form that the conditions set out in the applicable provision were met in the year in respect of the taxpayer and the form is filed with the taxpayer’s return of income for the year.Goods and services taxFor the purposes of this section and section 6, the amount of any rebate paid or payable to a taxpayer under the Excise Tax Act in respect of the goods and services tax shall be deemed not to be an amount that is reimbursed to the taxpayer or to which the taxpayer is entitled.Forfeiture of securities by employeeIf, in a taxation year,an employee is deemed by subsection 7(2) to have disposed of a security (as defined in subsection 7(7)) held by a trust,the trust disposed of the security to the person that issued the security,the disposition occurred as a result of the employee not meeting the conditions necessary for title to the security to vest in the employee, andthe amount paid by the person to acquire the security from the trust or to redeem or cancel the security did not exceed the amount paid to the person for the security,the following rules apply:there may be deducted in computing the employee’s income for the year from employment the amount, if any, by whichthe amount of the benefit deemed by subsection 7(1) to have been received by the employee in the year or a preceding taxation year in respect of the securityexceedsany amount deducted under paragraph 110(1)(d) or (d.1) in computing the employee’s taxable income for the year or a preceding taxation year in respect of that benefit, andnotwithstanding any other provision of this Act, the employee’s gain or loss from the disposition of the security is deemed to be nil and section 84 does not apply to deem a dividend to have been received in respect of the disposition.Work space in homeNotwithstanding paragraphs 8(1)(f) and 8(1)(i),no amount is deductible in computing an individual’s income for a taxation year from an office or employment in respect of any part (in this subsection referred to as the “work space”) of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is eitherthe place where the individual principally performs the duties of the office or employment, orused exclusively during the period in respect of which the amount relates for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of the office or employment;where the conditions set out in subparagraph 8(13)(a)(i) or 8(13)(a)(ii) are met, the amount in respect of the work space that is deductible in computing the individual’s income for the year from the office or employment shall not exceed the individual’s income for the year from the office or employment, computed without reference to any deduction in respect of the work space; andany amount in respect of a work space that was, solely because of paragraph 8(13)(b), not deductible in computing the individual’s income for the immediately preceding taxation year from the office or employment shall be deemed to be an amount in respect of a work space that is otherwise deductible in computing the individual’s income for the year from that office or employment and that, subject to paragraph 8(13)(b), may be deducted in computing the individual’s income for the year from the office or employment.Labour mobility deduction — interpretationFor the purposes of this subsection and paragraph (1)(t),a taxpayer is an eligible tradesperson for a taxation year if, in the taxation year, the taxpayer has income from employment as a tradesperson or apprentice and performs their duties of employment in construction activities described in subsection 238(1) of the Income Tax Regulations;a temporary work location of a taxpayer is a location in Canadaat which the taxpayer performs their duties of employment under a temporary employment contract, andthat is not situated in the locality where the taxpayer is ordinarily employed or carrying on business;an eligible temporary relocation of a taxpayer is a temporary relocation that meets the following conditions:the relocation is undertaken by the taxpayer to enable the taxpayer to perform their duties of employment as an eligible tradesperson at one or more temporary work locations of the taxpayer within the same locality,prior to the relocation, the taxpayer ordinarily resided at a residence in Canada (in this subsection referred to as the “ordinary residence”),the taxpayer was required by their duties of employment referred to in subparagraph (i) to be away from the ordinary residence for a period of not less than 36 hours,during the temporary relocation, the taxpayer temporarily resided at one or more lodgings in Canada (in this subsection referred to as the “temporary lodging”), andthe distance between the ordinary residence and each temporary work location of the taxpayer referred to in subparagraph (i) is not less than 150 kilometres greater than the distance between each temporary lodging referred in subparagraph (iv) and each temporary work location of the taxpayer referred to in subparagraph (i);subject to paragraph (e), an eligible temporary relocation expense of a taxpayer for a taxation year is a reasonable expense incurred by the taxpayer during the taxation year, the previous taxation year or prior to February 1 of the following taxation year, in respect oftransportation for one round trip per eligible temporary relocation by the taxpayer between the ordinary residence and the temporary lodging,meals consumed by the taxpayer during the round trip described in subparagraph (i), andthe taxpayer’s temporary lodging if, throughout the period of the taxpayer’s temporary relocation,the taxpayer maintains their ordinary residence as their principal place of residence, andthe ordinary residence remains available for the taxpayer’s occupancy and is not rented to any other person;an eligible temporary relocation expense described in paragraph (d) does not include an expense incurred by the taxpayer to the extent thatthe expense is deducted (other than under paragraph (1)(t)) in computing the taxpayer’s income for any taxation year,the expense was deductible under paragraph (1)(t) by the taxpayer for the immediately preceding taxation year, orthe taxpayer is entitled to receive a reimbursement, allowance or any other form of assistance (other than an amount that is included in computing the income for any taxation year of the taxpayer and that is not deductible in computing the income of the taxpayer) in respect of the expense; anda taxpayer’s temporary relocation deduction for a taxation year in respect of an eligible temporary relocation of the taxpayer is the lesser ofthe total eligible temporary relocation expenses of the taxpayer for the taxation year incurred in respect of the eligible temporary relocation, andhalf of the taxpayer’s total income for the taxation year from employment as an eligible tradesperson at all temporary work locations referred to in subparagraph (c)(i) in respect of the eligible temporary relocation (computed without reference to this section).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 8; 1994, c. 7, Sch. II, s. 5, Sch. VIII, s. 2, c. 21, s. 4; 1996, c. 23, s. 171; 1998, c. 19, s. 69; 1999, c. 22, s. 4; 2000, c. 12, s. 142; 2001, c. 17, s. 3; 2002, c. 9, s. 21; 2007, c. 2, s. 2; 2012, c. 31, s. 3; 2013, c. 34, s. 1722022, c. 10, s. 22023, c. 26, s. 32024, c. 17, s. 4(F)
Income or Loss from a Business or PropertyBasic Rules
IncomeSubject to this Part, a taxpayer’s income for a taxation year from a business or property is the taxpayer’s profit from that business or property for the year.LossSubject to section 31, a taxpayer’s loss for a taxation year from a business or property is the amount of the taxpayer’s loss, if any, for the taxation year from that source computed by applying the provisions of this Act respecting computation of income from that source with such modifications as the circumstances require.Gains and losses not includedIn this Act, “income from a property” does not include any capital gain from the disposition of that property and “loss from a property” does not include any capital loss from the disposition of that property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“9”; 1984, c. 1, s. 4; 1986, c. 6, s. 4
Valuation of inventoryFor the purpose of computing a taxpayer’s income for a taxation year from a business that is not an adventure or concern in the nature of trade, property described in an inventory shall be valued at the end of the year at the cost at which the taxpayer acquired the property or its fair market value at the end of the year, whichever is lower, or in a prescribed manner.Adventures in the nature of tradeFor the purpose of computing a taxpayer’s income from a business that is an adventure or concern in the nature of trade, property described in an inventory shall be valued at the cost at which the taxpayer acquired the property.Certain expenses included in costFor the purposes of subsections 10(1), 10(1.01) and 10(10), where land is described in an inventory of a business of a taxpayer, the cost at which the taxpayer acquired the land shall include each amount that isdescribed in paragraph 18(2)(a) or (b) in respect of the land and for which no deduction is permitted to the taxpayer, or to another person or partnership that isa person or partnership with whom the taxpayer does not deal at arm’s length,if the taxpayer is a corporation, a person or partnership that is a specified shareholder of the taxpayer, orif the taxpayer is a partnership, a person or partnership whose share of any income or loss of the taxpayer is 10% or more; andnot included in or added to the cost to that other person or partnership of any property otherwise than because of paragraph 53(1)(d.3) or subparagraph 53(1)(e)(xi).Continuation of valuationNotwithstanding subsection 10(1), for the purpose of computing income for a taxation year from a business, the inventory at the commencement of the year shall be valued at the same amount as the amount at which it was valued at the end of the preceding taxation year for the purpose of computing income for that preceding year.Methods of valuation to be the sameWhere property described in an inventory of a taxpayer’s business that is not an adventure or concern in the nature of trade is valued at the end of a taxation year in accordance with a method permitted under this section, that method shall, subject to subsection 10(6), be used in the valuation of property described in the inventory at the end of the following taxation year for the purpose of computing the taxpayer’s income from the business unless the taxpayer, with the concurrence of the Minister and on any terms and conditions that are specified by the Minister, adopts another method permitted under this section.Incorrect valuationWhere the inventory of a business at the commencement of a taxation year has, according to the method adopted by the taxpayer for computing income from the business for that year, not been valued as required by subsection 10(1), the inventory at the commencement of that year shall, if the Minister so directs, be deemed to have been valued as required by that subsection.Fair market valueFor the purpose of subsection 10(1), the fair market value of property (other than property that is obsolete, damaged or defective or that is held for sale or lease or for the purpose of being processed, fabricated, manufactured, incorporated into, attached to, or otherwise converted into property for sale or lease) that iswork in progress at the end of a taxation year of a business that is a profession means the amount that can reasonably be expected to become receivable in respect thereof after the end of the year; andadvertising or packaging material, parts, supplies or other property (other than work in progress of a business that is a profession) that is included in inventory means the replacement cost of the property.InventoryWithout restricting the generality of this section,property (other than capital property) of a taxpayer that is advertising or packaging material, parts or supplies or work in progress of a business that is a profession is, for greater certainty, inventory of the taxpayer;anything used primarily for the purpose of advertising or packaging property that is included in the inventory of a taxpayer shall be deemed not to be property held for sale or lease or for any of the purposes referred to in subsection 10(4); andproperty of a taxpayer, the cost of which to the taxpayer was deductible by virtue of paragraph 20(1)(mm), is, for greater certainty, inventory of the taxpayer having a cost to the taxpayer, except for the purposes of that paragraph, of nil.Artistic endeavourNotwithstanding subsection 10(1), for the purpose of computing the income of an individual other than a trust for a taxation year from a business that is the individual’s artistic endeavour, the value of the inventory of the business for that year shall, if the individual so elects in the individual’s return of income under this Part for the year, be deemed to be nil.Value in later yearsWhere an individual has made an election pursuant to subsection 10(6) for a taxation year, the value of the inventory of a business that is the individual’s artistic endeavour shall, for each subsequent taxation year, be deemed to be nil unless the individual, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, revokes the election.Definition of business that is an individual’s artistic endeavourFor the purpose of this section, business that is an individual’s artistic endeavour means the business of creating paintings, prints, etchings, drawings, sculptures or similar works of art, where such works of art are created by the individual, but does not include a business of reproducing works of art.TransitionWhere, at the end of a taxpayer’s last taxation year at the end of which property described in an inventory of a business that is an adventure or concern in the nature of trade was valued under subsection 10(1), the property was valued at an amount that is less than the cost at which the taxpayer acquired the property, after that time the cost to the taxpayer at which the property was acquired is, subject to subsection 10(10), deemed to be that amount.Loss restriction eventNotwithstanding subsection (1.01), property described in an inventory of a taxpayer’s business that is an adventure or concern in the nature of trade 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, deemed to be that lower amount.Loss restriction eventFor the purposes of subsections 88(1.1) and 111(5), a taxpayer’s business that is at any time an adventure or concern in the nature of trade is deemed to be a business carried on at that time by the taxpayer.Removing property from inventoryIf at any time a non-resident taxpayer ceases to use, in connection with a business or part of a business carried on by the taxpayer in Canada immediately before that time, a property that was immediately before that time described in the inventory of the business or the part of the business, as the case may be, (other than a property that was disposed of by the taxpayer at that time), the taxpayer is deemedto have disposed of the property immediately before that time for proceeds of disposition equal to its fair market value at that time; andto have received those proceeds immediately before that time in the course of carrying on the business or the part of the business, as the case may be.Adding property to inventoryIf at any time a property becomes included in the inventory of a business or part of a business that a non-resident taxpayer carries on in Canada after that time (other than a property that was, otherwise than because of this subsection, acquired by the taxpayer at that time), the taxpayer is deemed to have acquired the property at that time at a cost equal to its fair market value at that time.[Repealed, 2017, c. 33, s. 2][Repealed, 2017, c. 33, s. 2]DerivativesFor the purposes of this section, property of a taxpayer that is a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement, or any similar agreement is deemed not to be inventory of the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 10; 1994, c. 7, Sch. II, s. 6; 1998, c. 19, s. 70; 2001, c. 17, s. 4; 2013, c. 40, s. 2; 2016, c. 12, s. 2; 2017, c. 33, s. 2
Mark-to-market electionSubsection (4) applies to a taxpayer in respect of a taxation year and subsequent taxation years if the taxpayer elects to have subsection (4) apply to the taxpayer and has filed that election in prescribed form on or before its filing-due date for the taxation year.RevocationThe Minister may, on application by the taxpayer in prescribed form, grant permission to the taxpayer to revoke its election under subsection (1). The revocation applies to each taxation year of the taxpayer that begins after the day on which the taxpayer is notified in writing that the Minister concurs with the revocation, on such terms and conditions as are specified by the Minister.Subsequent electionNotwithstanding subsection (1), if a taxpayer has, under subsection (2), revoked an election, any subsequent election under subsection (1) shall result in subsection (4) applying to the taxpayer in respect of each taxation year that begins after the day on which the prescribed form in respect of the subsequent election is filed by the taxpayer.ApplicationIf this subsection applies to a taxpayer in respect of a taxation year,if the taxpayer is a financial institution (as defined in subsection 142.2(1)) in the taxation year, each eligible derivative held by the taxpayer at any time in the taxation year is, for the purpose of applying the provisions of this Act and with such modifications as the context requires, deemed to be mark-to-market property (as defined in subsection 142.2(1)) of the taxpayer for the taxation year; andin any other case, subsection (6) applies to the taxpayer in respect of each eligible derivative held by the taxpayer at the end of the taxation year.Definition of eligible derivativeFor the purposes of this section, an eligible derivative, of a taxpayer for a taxation year, means a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement, held at any time in the taxation year by the taxpayer, ifthe agreement is not a capital property, a Canadian resource property, a foreign resource property or an obligation on account of capital of the taxpayer;eitherthe taxpayer has produced audited financial statements prepared in accordance with generally accepted accounting principles in respect of the taxation year, orif the taxpayer has not produced audited financial statements described in subparagraph (i), the agreement has a readily ascertainable fair market value; andwhere the agreement is held by a financial institution (as defined in subsection 142.2(1)), the agreement is not a tracking property (as defined in subsection 142.2(1)), other than an excluded property (as defined in subsection 142.2(1)), of the financial institution.Deemed dispositionIf this subsection applies to a taxpayer in respect of each eligible derivative held by the taxpayer at the end of a taxation year, for each eligible derivative held by the taxpayer at the end of the taxation year, the taxpayer is deemedto have disposed of the eligible derivative immediately before the end of the year and received proceeds or paid an amount, as the case may be, equal to its fair market value at the time of disposition; andto have reacquired, or reissued or renewed, the eligible derivative at the end of the year at an amount equal to the proceeds or the amount, as the case may be, determined under paragraph (a).Election year — gains and lossesIf a taxpayer holds, at the beginning of its first taxation year in respect of which an election referred to in subsection (1) applies (in this subsection referred to as the “election year”), an eligible derivative and, in the taxation year immediately preceding the election year, the taxpayer did not compute its profit or loss in respect of that eligible derivative in accordance with a method of profit computation that produces a substantially similar effect to subsection (6), thenthe taxpayer is deemedto have disposed of the eligible derivative immediately before the beginning of the election year and received proceeds or paid an amount, as the case may be, equal to its fair market value at that time, andto have reacquired, or reissued or renewed, the eligible derivative at the beginning of the election year at an amount equal to the proceeds or the amount, as the case may be, determined under subparagraph (i);the profit or loss that would arise (determined without reference to this paragraph) on the deemed disposition in subparagraph (a)(i)is deemed not to arise in the taxation year immediately preceding the election year, andis deemed to arise in the taxation year in which the taxpayer disposes of the eligible derivative (otherwise than because of paragraphs (6)(a) or 142.5(2)(a)); andfor the purpose of applying subsection 18(15) in respect of the disposition of the eligible derivative referred to in subparagraph (b)(ii), the profit or loss deemed to arise because of that subparagraph is included in determining the amount of the transferor’s loss, if any, from the disposition.Default realization methodIf subsection (4) does not apply to a taxpayer referred to in paragraph (4)(b) in respect of a taxation year, a method of profit computation that produces a substantially similar effect to subsection (6) shall not be used for the purpose of computing the taxpayer’s income from a business or property in respect of a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement for the taxation year.InterpretationFor the purposes of subsections (4) to (7), if an agreement that is an eligible derivative of a taxpayer is not a property of the taxpayer, the taxpayer is deemedto hold the eligible derivative at any time while the taxpayer is a party to the agreement; andto have disposed of the eligible derivative when it is settled or extinguished in respect of the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2017, c. 33, s. 3
Proprietor of businessSubject to section 34.1, if an individual is a proprietor of a business, the individual’s income from the business for a taxation year is deemed to be the individual’s income from the business for the fiscal periods of the business that end in the year.Reference to “taxation year”Where an individual’s income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, unless the context otherwise requires, a reference in this Subdivision or section 80.3 to a “taxation year” or “year” shall, in respect of the business, be read as a reference to a fiscal period of the business ending in the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 11; 1994, c. 21, s. 5; 1996, c. 21, s. 3; 2013, c. 40, s. 3
Inclusions
Income inclusionsThere shall be included in computing the income of a taxpayer for a taxation year as income from a business or property such of the following amounts as are applicableServices, etc., to be renderedany amount received by the taxpayer in the year in the course of a businessthat is on account of services not rendered or goods not delivered before the end of the year or that, for any other reason, may be regarded as not having been earned in the year or a previous year, orunder an arrangement or understanding that it is repayable in whole or in part on the return or resale to the taxpayer of articles in or by means of which goods were delivered to a customer;Amounts receivableany amount receivable by the taxpayer in respect of property sold or services rendered in the course of a business in the year, notwithstanding that the amount or any part thereof is not due until a subsequent year, unless the method adopted by the taxpayer for computing income from the business and accepted for the purpose of this Part does not require the taxpayer to include any amount receivable in computing the taxpayer’s income for a taxation year unless it has been received in the year, and for the purposes of this paragraph, an amount shall be deemed to have become receivable in respect of services rendered in the course of a business on the day that is the earlier ofthe day on which the account in respect of the services was rendered, andthe day on which the account in respect of those services would have been rendered had there been no undue delay in rendering the account in respect of the services;Interestsubject to subsections (3) and (4.1), any amount received or receivable by the taxpayer in the year (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income) as, on account of, in lieu of payment of or in satisfaction of, interest to the extent that the interest was not included in computing the taxpayer’s income for a preceding taxation year;Reserve for doubtful debtsany amount deducted under paragraph 20(1)(l) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;Reserve for guarantees, etc.any amount deducted under paragraph 20(1)(l.1) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;any amount deducted under paragraph 20(1)(m.3) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;Reserves for certain goods and services, etc.any amountdeducted under paragraph 20(1)(m) (including any amount substituted by virtue of subsection 20(6) for any amount deducted under that paragraph), paragraph 20(1)(m.1) or subsection 20(7), ordeducted under paragraph 20(1)(n),in computing the taxpayer’s income from a business for the immediately preceding year;Negative reserveswhere the taxpayer is an insurer, the amount prescribed in respect of the insurer for the year;Insurance proceeds expendedsuch part of any amount payable to the taxpayer as compensation for damage to, or under a policy of insurance in respect of damage to, property that is depreciable property of the taxpayer as has been expended by the taxpayerwithin the year, andwithin a reasonable time after the damage,on repairing the damage;Payments based on production or useany amount received by the taxpayer in the year that was dependent on the use of or production from property whether or not that amount was an instalment of the sale price of the property, except that an instalment of the sale price of agricultural land is not included by virtue of this paragraph;Proceeds of disposition of right to receive productionany proceeds of disposition to which subsection 18.1(6) applies;Previous reserve for quadrennial surveyany amount deducted as a reserve under paragraph 20(1)(o) in computing the taxpayer’s income for the immediately preceding year;Bad debts recoveredany amount, other than an amount referred to in paragraph 12(1)(i.1), received in the year on account of a debt or a loan or lending asset in respect of which a deduction for bad debts or uncollectable loans or lending assets was made in computing the taxpayer’s income for a preceding taxation year;Bad debts recoveredwhere an amount is received in the year on account of a debt in respect of which a deduction for bad debts was made under subsection 20(4.2) in computing the taxpayer’s income for a preceding taxation year, the amount determined by the formulaA × B/CwhereAis 1/2 of the amount so received,Bis the amount that was deducted under subsection 20(4.2) in respect of the debt, andCis the total of the amount that was so deducted under subsection 20(4.2) and the amount that was deemed by that subsection or subsection 20(4.3) to be an allowable capital loss in respect of the debt;Dividends from resident corporationsany amount of a dividend in respect of a share of the capital stock of a corporation resident in Canada that is required by Subdivision H to be included in computing the taxpayer’s income for the year;Foreign corporations, trusts and investment entitiesany amount required by Subdivision I to be included in computing the taxpayer’s income for the year;Partnership incomeany amount that is, by virtue of Subdivision J, income of the taxpayer for the year from a business or property;Partnership — interest deduction add backthe total of all amounts, each of which is the amount, if any, determined in respect of a partnership by the formulaA × B/C – DwhereAis the total of all amounts each of which is an amount of interest that isdeductible by the partnership, andpaid by the partnership in, or payable by the partnership in respect of, the taxation year of the taxpayer (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income) on a debt amount included in the taxpayer’s outstanding debts to specified non-residents (as defined in subsection 18(5)),Bis the amount determined under paragraph 18(4)(a) in respect of the taxpayer for the year,Cis the amount determined under paragraph 18(4)(b) in respect of the taxpayer for the year, andDis the total of all amounts each of which is an amount included under subsection 91(1) in computing the income of the taxpayer for the year or a subsequent taxation year, or of the partnership for a fiscal period, that may reasonably be considered to be in respect of interest described in A;Partnership — interest and financing expenses add backthe amount determined by the formulaA × Bwhere Ais the total of all amounts each of which is an amount determined under paragraph (h) of the description of A in the definition interest and financing expenses in subsection 18.2(1) in respect of the taxpayer for the taxation year, andBisif the taxpayer is an excluded entity for the year (as defined in subsection 18.2(1)), nil, andin any other case, the proportion determined under the first formula in subsection 18.2(2) in respect of the taxpayer for the year;Benefits from trustsany amount required by Subdivision K or subsection 132.1(1) to be included in computing the taxpayer’s income for the year, exceptany amount deemed by that subdivision to be a taxable capital gain of the taxpayer, andany amount paid or payable to the taxpayer out of or under an RCA trust (within the meaning assigned by subsection 207.5(1));Employees profit sharing planany amount received by the taxpayer in the year out of or underan employees profit sharing plan, oran employee trustestablished for the benefit of employees of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length;Employee benefit planthe amount, if any, by which the total of amounts received by the taxpayer in the year out of or under an employee benefit plan to which the taxpayer has contributed as an employer (other than amounts included in the income of the taxpayer by virtue of paragraph 12(1)(m)) exceeds the amount, if any, by which the total of all amountsso contributed by the taxpayer to the plan, orincluded in computing the taxpayer’s income for any preceding taxation year by virtue of this paragraphexceeds the total of all amountsdeducted by the taxpayer in respect of the taxpayer’s contributions to the plan in computing the taxpayer’s income for the year or any preceding taxation year, orreceived by the taxpayer out of or under the plan in any preceding taxation year (other than an amount included in the taxpayer’s income by virtue of paragraph 12(1)(m));Forfeited salary deferral amountswhere deferred amounts under a salary deferral arrangement in respect of another person have been deducted under paragraph 20(1)(oo) in computing the taxpayer’s income for preceding taxation years, any amount in respect of the deferred amounts that was deductible under paragraph 8(1)(o) in computing the income of the person for a taxation year ending in the year;Retirement compensation arrangementthe total of all amounts received by the taxpayer in the year in the course of a business out of or under a retirement compensation arrangement (including amounts received in respect of the arrangement under subsection 207.71(3)) to which the taxpayer, another person who carried on a business that was acquired by the taxpayer, or any person with whom the taxpayer or that other person does not deal at arm’s length, has contributed an amount that was deductible under paragraph 20(1)(r) in computing the contributor’s income for a taxation year;[Repealed, 2003, c. 28, s. 1(2)]Foreign oil and gas production taxesthe total of all amounts, each of which is the taxpayer’s production tax amount for a foreign oil and gas business of the taxpayer for the year, within the meaning assigned by subsection 126(7);Certain payments to farmersany amount received by the taxpayer in the year as a stabilization payment, or as a refund of a levy, under the Western Grain Stabilization Act or as a payment, or a refund of a premium, in respect of the gross revenue insurance program established under the Farm Income Protection Act;Employment tax deductionany amount deducted under subsection 127(13) or (14) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, by the taxpayer for the year;Inventory adjustmentthe total of all amounts each of which, in respect of a property described in the taxpayer’s inventory at the end of the year and valued at its cost amount to the taxpayer for the purposes of computing the taxpayer’s income for the year, is an allowance in respect of depreciation, obsolescence or depletion included in that cost amount;[Repealed, 2013, c. 34, s. 173]Investment tax creditthe amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6) in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e), subparagraph 53(2)(c)(vi) to (vi.4) or (h)(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);Home insulation or energy conversion grantsthe amount of any grant received by the taxpayer in the year under a prescribed program of the Government of Canada relating to home insulation or energy conversion in respect of a property used by the taxpayer principally for the purpose of gaining or producing income from a business or property;Research and development deductionsthe amount, if any, by which the total of amounts determined at the end of the year in respect of the taxpayer under paragraphs 37(1)(d) to 37(1)(h) exceeds the total of amounts determined at the end of the year in respect of the taxpayer under paragraphs 37(1)(a) to 37(1)(c.1);S. 80.4(1) benefitwhere the taxpayer is a corporation that carried on a personal services business at any time in the year or a preceding taxation year, the amount deemed by subsection 80.4(1) to be a benefit received by it in the year from carrying on a personal services business;Inducement, reimbursement, etc.any particular amount (other than a prescribed amount) received by the taxpayer in the year, in the course of earning income from a business or property, froma person or partnership (in this paragraph referred to as the “payer”) who pays the particular amountin the course of earning income from a business or property,in order to achieve a benefit or advantage for the payer or for persons with whom the payer does not deal at arm’s length, orin circumstances where it is reasonable to conclude that the payer would not have paid the amount but for the receipt by the payer of amounts from a payer, government, municipality or public authority described in this subparagraph or in subparagraph (ii), ora government, municipality or other public authority,where the particular amount can reasonably be considered to have been receivedas an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, oras a refund, reimbursement, contribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect ofan amount included in, or deducted as, the cost of property, oran outlay or expense,to the extent that the particular amountwas not otherwise included in computing the taxpayer’s income, or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, for the year or a preceding taxation year,is not an amount received by the taxpayer in respect of a restrictive covenant, as defined by subsection 56.4(1), that was included, under subsection 56.4(2), in computing the income of a person related to the taxpayer,except as provided by subsection 127(11.1), 127(11.5) or 127(11.6), does not reduce, for the purpose of an assessment made or that may be made under this Act, the cost or capital cost of the property or the amount of the outlay or expense, as the case may be,does not reduce, under subsection 12(2.2) or 13(7.4) or paragraph 53(2)(s), the cost or capital cost of the property or the amount of the outlay or expense, as the case may be,may not reasonably be considered to be a payment made in respect of the acquisition by the payer or the public authority of an interest in the taxpayer, an interest in, or for civil law a right in, the taxpayer’s business or an interest in, or for civil law a real right in, the taxpayer’s property, andwas not received by the taxpayer as an excluded loan;Fuel tax rebatesthe total of all amounts each of which isa fuel tax rebate received in the year by the taxpayer under subsection 68.4(3) of the Excise Tax Act, orthe amount determined by the formula10(A - B) - CwhereAis the total of all fuel tax rebates under subsections 68.4(2) and (3.1) of that Act received in the year by the taxpayer,Bis the total of all amounts, in respect of fuel tax rebates under section 68.4 of that Act received in the year by the taxpayer, repaid by the taxpayer under subsection 68.4(7) of that Act, andCis the total of all amounts, in respect of fuel tax rebates under section 68.4 of that Act received in the year, deducted under subsection 111(10) in computing the taxpayer’s non-capital losses for other taxation years;Crown charge rebatesthe total of all amounts each of which is an amount thatwas received by the taxpayer, including by way of a deduction from tax, in the year as a refund, reimbursement, contribution or allowance, in respect of an amount that was at any time receivable, directly or indirectly in any manner whatever, by Her Majesty in right of Canada or of a province in respect ofthe acquisition, development or ownership of a Canadian resource property, orthe production in Canada from a mineral resource, a natural accumulation of petroleum or natural gas, or an oil or a gas well, andwas not otherwise included in computing the taxpayer’s income for the year or a preceding taxation year;Automobile provided to partnerwhere the taxpayer is an individual who is a member of a partnership or an employee of a member of a partnership and the partnership makes an automobile available in the year to the taxpayer or to a person related to the taxpayer, the amounts that would be included by reason of paragraph 6(1)(e) in the income of the taxpayer for the year if the taxpayer were employed by the partnership;Amateur athlete trust paymentsany amount in respect of an amateur athlete trust required by section 143.1 to be included in computing the taxpayer’s income for the year;Qualifying environmental truststhe total of all amounts received by the taxpayer in the year as a beneficiary under a qualifying environmental trust, whether or not the amounts are included because of subsection 107.3(1) in computing the taxpayer’s income for any taxation year;Dispositions of interests in qualifying environmental truststhe total of all amounts each of which is the consideration received by the taxpayer in the year for the disposition to 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;Debt forgivenessany amount required because of subsection 80(13) or 80(17) to be included in computing the taxpayer’s income for the year;Eligible funeral arrangementsany amount required because of subsection 148.1(3) to be included in computing the taxpayer’s income for the year;TFSA amountsany amount required by subsection 146.2(9) or section 207.061 to be included in computing the taxpayer’s income for the year;Refundsany amount received by the taxpayer in the year in respect of a refund of an amount that was deducted under paragraph 20(1)(vv) in computing income for any taxation year; andDerivative forward agreementthe total of all amounts each of which isif the taxpayer acquires a property under a derivative forward agreement in the year, the portion of the amount by which the fair market value of the property at the time it is acquired by the taxpayer exceeds the cost to the taxpayer of the property that is attributable to an underlying interest other than an underlying interest referred to in subparagraphs (b)(i) to (iii) of the definition derivative forward agreement in subsection 248(1), orif the taxpayer disposes of a property under a derivative forward agreement in the year, the portion of the amount by which the proceeds of disposition (within the meaning assigned by Subdivision C) of the property exceeds the fair market value of the property at the time the agreement is entered into by the taxpayer that is attributable to an underlying interest other than an underlying interest referred to in clauses (c)(i)(A) to (C) of the definition derivative forward agreement in subsection 248(1).InterpretationParagraphs 12(1)(a) and 12(1)(b) are enacted for greater certainty and shall not be construed as implying that any amount not referred to in those paragraphs is not to be included in computing income from a business for a taxation year whether it is received or receivable in the year or not.No deferral of section 9 income under paragraph (1)(g)Paragraph (1)(g) does not defer the inclusion in income of any amount that would, if this section were read without reference to that paragraph, be included in computing the taxpayer’s income in accordance with section 9.Source of incomeFor the purposes of this Act, if a particular amount is included in computing the income of a taxpayer for a taxation year because of paragraph (1)(l.1) or (l.2) and the particular amount is in respect of another amount that is deductible by a partnership in computing its income from a particular source or from sources in a particular place, the particular amount is deemed to be from the particular source or from sources in the particular place, as the case may be.Receipt of inducement, reimbursement, etc.For the purposes of paragraph 12(1)(x), where at a particular time a taxpayer who is a beneficiary of a trust or a member of a partnership has received an amount as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, in respect of the activities of the trust or partnership, or as a reimbursement, contribution, allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of the cost of property or in respect of an expense of the trust or partnership, the amount shall be deemed to have been received at that time by the trust or partnership, as the case may be, as such an inducement, reimbursement, contribution, allowance or assistance.Deemed outlay or expenseWherein a taxation year a taxpayer receives an amount that would, but for this subsection, be included under paragraph 12(1)(x) in computing the taxpayer’s income for the year in respect of an outlay or expense (other than an outlay or expense in respect of the cost of property of the taxpayer) made or incurred by the taxpayer before the end of the following taxation year, andthe taxpayer elects under this subsection on or before the day on or before which the taxpayer’s return of income under this Part for the year is required to be filed, or would be required to be filed if tax under this Part were payable by the taxpayer for the year or, where the outlay or expense is made or incurred in the following taxation year, for that following year,the amount of the outlay or expense shall be deemed for the purpose of computing the taxpayer’s income, other than for the purposes of this subsection and paragraphs 12(1)(x) and 20(1)(hh), to have always been the amount, if any, by whichthe amount of the outlay or expenseexceedsthe lesser of the amount elected by the taxpayer under this subsection and the amount so received by the taxpayer,and, notwithstanding subsections 152(4) to 152(5), such assessment or reassessment of the taxpayer’s tax, interest and penalties under this Act for any taxation year shall be made as is necessary to give effect to the election.Interest incomeSubject to subsection (4.1), in computing the income for a taxation year of a corporation, partnership, unit trust or any trust of which a corporation or a partnership is a beneficiary, there shall be included any interest on a debt obligation (other than interest in respect of an income bond, an income debenture, a net income stabilization account or an indexed debt obligation) that accrues to it to the end of the year, or becomes receivable or is received by it before the end of the year, to the extent that the interest was not included in computing its income for a preceding taxation year.Interest from investment contractSubject to subsection (4.1), if in a taxation year a taxpayer (other than a taxpayer to whom subsection (3) applies) holds an interest in, or for civil law a right in, an investment contract on any anniversary day of the contract, there shall be included in computing the taxpayer’s income for the year the interest that accrued to the taxpayer to the end of that day with respect to the investment contract, to the extent that the interest was not otherwise included in computing the taxpayer’s income for the year or any preceding taxation year.Impaired debt obligationsParagraph 12(1)(c) and subsections 12(3) and 12(4) do not apply to a taxpayer in respect of a debt obligation for the part of a taxation year throughout which the obligation is impaired where an amount in respect of the obligation is deductible because of subparagraph 20(1)(l)(ii) in computing the taxpayer’s income for the year.Deemed accrualFor the purposes of subsections (3), (4) and (11) and 20(14) and (21), if a taxpayer acquires an interest in, or for civil law a right in, a prescribed debt obligation, an amount determined in prescribed manner is deemed to accrue to the taxpayer as interest on the obligation in each taxation year during which the taxpayer holds the interest or the right in the obligation.Exclusion of proceeds of dispositionIf a taxpayer disposes of an interest in, or for civil law a right in, a debt obligation that is a debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which the taxpayer is entitled, the portion of the proceeds of disposition received by the taxpayer that can reasonably be considered to represent a recovery of the cost to the taxpayer of the interest or the right in the debt obligation shall, notwithstanding any other provision of this Act, not be included in computing the taxpayer’s income, and for the purpose of this subsection, a debt obligation includes, for greater certainty, all of the issuer’s obligations to pay principal and interest under that obligation.Income from R.H.O.S.PNotwithstanding any other provision of this Act, where an individual was at the end of 1985 a beneficiary under a registered home ownership savings plan (within the meanings assigned by paragraphs 146.2(1)(a) and (h) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as they read in their application to the 1985 taxation year), that portion of the income that can reasonably be considered to have accrued under the plan before 1986 (other than the portion thereof that can reasonably be considered to be attributable to amounts contributed after May 22, 1985 to or under the plan) shall not be included in computing the income of the individual or of any other person.NISA receiptsThere shall be included in computing a taxpayer’s income for a taxation year from a property the total of all amounts each of which is the amount determined by the formulaA - BwhereAis an amount paid at a particular time in the year out of the taxpayer’s NISA Fund No. 2; andBis the amount, if any, by whichthe total of all amounts each of which isdeemed by subsection (10.4) or 104(5.1) or (14.1) (as it read for the taxpayer’s 2015 taxation year) to have been paid out of the taxpayer’s NISA Fund No. 2 before the particular time, ordeemed by subsection 70(5.4) or 73(5) to have been paid out of another person’s NISA Fund No. 2 on being transferred to the taxpayer’s NISA Fund No. 2 before the particular time,exceedsthe total of all amounts each of which is the amount by which an amount otherwise determined under this subsection in respect of a payment out of the taxpayer’s NISA Fund No. 2 before the particular time was reduced because of this description.Amount credited or added not included in incomeNotwithstanding any other provision of this Act, an amount credited or added to a taxpayer’s NISA Fund No. 2 shall not be included in computing the taxpayer’s income solely because of that crediting or adding.Acquisition of control — corporate NISA Fund No. 2For the purpose of subsection (10.2), if at any time there is an acquisition of control of a corporation, the balance of the corporation’s NISA Fund No. 2, if any, at that time is deemed to be paid out to the corporation immediately before that time.DefinitionsIn this section,anniversary day of an investment contract meansthe day that is one year after the day immediately preceding the date of issue of the contract,the day that occurs at every successive one year interval from the day determined under paragraph (a), andthe day on which the contract was disposed of; (jour anniversaire)excluded loan means a loan, other than a forgivable loan, evidenced in writingthat is from a payer that isa government, municipality or other public authority in Canada, ora person resident in Canada or Canadian partnership, if it is reasonable to conclude that the payer would not have made the loan but for the direct or indirect receipt by the payer of amounts from a government, municipality or other public authority in Canada;for which, at the time the loan was made, bona fide arrangements were made for repayment of the loan within a reasonable time; andthe funds from which were used for the purpose of earning income from a business or property. (prêt exclu)investment contract, in relation to a taxpayer, means any debt obligation other thana salary deferral arrangement or a plan or arrangement that, but for any of paragraphs (a), (b) and (d) to (l) of the definition salary deferral arrangement in subsection 248(1), would be a salary deferral arrangement,a retirement compensation arrangement or a plan or arrangement that, but for any of paragraphs (a), (b), (d) and (f) to (n) of the definition retirement compensation arrangement in subsection 248(1), would be a retirement compensation arrangement,an employee benefit plan or a plan or arrangement that, but for any of paragraphs (a) to (e) of the definition employee benefit plan in subsection 248(1), would be an employee benefit plan,a foreign retirement arrangement,a TFSA,a FHSA,an income bond,an income debenture,[Repealed, 2023, c. 26, s. 4][Repealed, 2023, c. 26, s. 4]an obligation in respect of which the taxpayer has (otherwise than because of subsection (4)) at periodic intervals of not more than one year, included, in computing the taxpayer’s income throughout the period in which the taxpayer held an interest in, or for civil law a right in, the obligation, the income accrued on it for those intervals,an obligation in respect of a net income stabilization account,an indexed debt obligation, anda prescribed contract. (contrat de placement)Flipped property — deemed businessFor the purposes of this Act, if, absent this subsection and paragraph 40(2)(b), a taxpayer would have had a gain from the disposition of a flipped property, then throughout the period that the taxpayer owned the flipped propertythe taxpayer is deemed to carry on a business that is an adventure or concern in the nature of trade with respect to the flipped property;the flipped property is deemed to be inventory of the taxpayer’s business; andthe flipped property is deemed not to be capital property of the taxpayer.Definition of flipped propertyFor the purposes of subsections (12) and (14), a flipped property of a taxpayer means a property (other than a property, or a right to acquire property, that would be inventory of the taxpayer if the definition inventory in subsection 248(1) were read without reference to subsection (12)) that isprior to its disposition by the taxpayer, eithera housing unit located in Canada, ora right to acquire a housing unit located in Canada; andowned or, in the case of a right to acquire, held, by the taxpayer for less than 365 consecutive days prior to its disposition, other than a disposition that can reasonably be considered to occur due to, or in anticipation of, one or more of the following events:the death of the taxpayer or a person related to the taxpayer,one or more persons related to the taxpayer becoming a member of the taxpayer’s household or the taxpayer becoming a member of the household of a related person,the breakdown of the marriage or common-law partnership of the taxpayer if the taxpayer has been living separate and apart from their spouse or common-law partner for at least 90 days prior to the disposition,a threat to the personal safety of the taxpayer or a related person,the taxpayer or a related person suffering from a serious illness or disability,an eligible relocation of the taxpayer or the taxpayer’s spouse or common-law partner, if the definition eligible relocation were read without reference to the requirements for the new work location and the new residence to be in Canada,an involuntary termination of the employment of the taxpayer or the taxpayer’s spouse or common-law partner,the insolvency of the taxpayer, orthe destruction or expropriation of the property.Flipped property — loss denialFor the purposes of this Part, a taxpayer’s loss from a business in respect of a flipped property is deemed to be nil.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 12; 1994, c. 7, Sch. II, s. 7, Sch. VI, s. 2, Sch. VIII, s. 3, c. 21, s. 6; 1995, c. 3, s. 2, c. 21, s. 76; 1996, c. 21, s. 4; 1997, c. 10, s. 268, c. 25, s. 2, c. 26, s. 82; 1998, c. 19, ss. 2 and 71; 1999, c. 22, s. 5; 2001, c. 17, s. 5; 2003, c. 28, s. 1; 2007, c. 35, s. 9; 2009, c. 2, s. 4; 2010, c. 25, s. 4; 2012, c. 31, s. 4; 2013, c. 34, ss. 2, 91, 173, c. 40, s. 4; 2014, c. 39, s. 2; 2017, c. 33, s. 42022, c. 19, s. 22023, c. 26, s. 42024, c. 15, s. 22024, c. 17, s. 52024, c. 17, s. 80
Cash bonus on Canada Savings BondsNotwithstanding any other provision of this Act, where in a taxation year a taxpayer receives an amount from the Government of Canada in respect of a Canada Savings Bond as a cash bonus that the Government of Canada has undertaken to pay (other than any amount of interest, bonus or principal agreed to be paid at the time of the issue of the bond under the terms of the bond), the taxpayer shall, in computing the taxpayer’s income for the year, include as interest in respect of the Canada Savings Bond 1/2 of the cash bonus so received.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1974-75-76, c. 26, s. 5; 1986, c. 6, s. 7
Amount to be includedWhere in a taxation year a taxpayer holds an interest, last acquired after 1989, in a life insurance policy that is notan exempt policy,a prescribed annuity contract, anda contract under which the policyholder has, under the terms and conditions of a life insurance policy that was not an annuity contract and that was last acquired before December 2, 1982, received the proceeds therefrom in the form of an annuity contract,on any anniversary day of the policy, there shall be included in computing the taxpayer’s income for the taxation year the amount, if any, by which the accumulating fund on that day in respect of the interest in the policy, as determined in prescribed manner, exceeds the adjusted cost basis to the taxpayer of the interest in the policy on that day.[Repealed, 1994, c. 7, Sch. II, s. 8(2)]IdemWhere in a taxation year subsection 12.2(1) applies with respect to a taxpayer’s interest in an annuity contract (or would apply if the contract had an anniversary day in the year at a time when the taxpayer held the interest), there shall be included in computing the taxpayer’s income for the year the amount, if any, by whichthe total of all amounts each of which is an amount determined at the end of the year, in respect of the interest, for any of H to L in the definition adjusted cost basis in subsection 148(9)exceedsthe total of all amounts each of which is an amount determined at the end of the year, in respect of the interest, for any of A to G in the definition referred to in paragraph 12.2(5)(a).Deemed acquisition of interest in annuityFor the purposes of this section, the first premium that was not fixed before 1990 and that was paid after 1989 by or on behalf of a taxpayer under an annuity contract, other than a contract described in paragraph (1)(d) of this section, or paragraph 12.2(3)(e) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or to which subsection (1) of this section or subsection 12.2(4) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, applies (as those paragraphs and subsections, the numbers of which are those in force immediately before December 17, 1991, read in their application to life insurance policies last acquired before 1990) or to which subsection 12(3) applies, last acquired by the taxpayer before 1990 (in this subsection referred to as the “original contract”) shall be deemed to have been paid to acquire, at the time the premium was paid, an interest in a separate annuity contract issued at that time, to the extent that the amount of the premium was not fixed before 1990, and each subsequent premium paid under the original contract shall be deemed to have been paid under that separate contract to the extent that the amount of that subsequent premium was not fixed before 1990.RidersFor the purposes of this Act, a rider added at any time after 1989 to a life insurance policy last acquired before 1990 that provides additional life insurance is deemed to be a separate life insurance policy issued at that time unlessthe policy is an exempt policy last acquired after December 1, 1982 or an annuity contract; orthe only additional life insurance provided by the rider is an accidental death benefit.DefinitionsIn this section and paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,anniversary day of a life insurance policy meansthe day that is one year after the day immediately preceding the day on which the policy was issued, andeach day that occurs at each successive one-year interval after the day determined under paragraph (a). (jour anniversaire)exempt policy has the meaning prescribed by regulation. (police exonérée)Application of ss. 138(12) and 148(9)The definitions in subsections 138(12) and 148(9) apply to this section.Application of s. 148(10)Subsection 148(10) applies to this section.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 12.2; 1994, c. 7, Sch. II, s. 8; 1998, c. 19, s. 72
[Repealed, 2013, c. 34, s. 174][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 12.3; 1995, c. 3, s. 3; 2013, c. 34, s. 174
Bad debt inclusionWhere, in a taxation year, a taxpayer disposes of a property that was a property described in an inventory of the taxpayer and in the year or a preceding taxation year an amount has been deducted under paragraph 20(1)(p) in computing the taxpayer’s income in respect of the property, there shall be included in computing the taxpayer’s income for the year from the business in which the property was used or held, the amount, if any, by whichthe total of all amounts deducted under paragraph 20(1)(p) by the taxpayer in respect of the property in computing the taxpayer’s income for the year or a preceding taxation yearexceedsthe total of all amounts included under paragraph 12(1)(i) by the taxpayer in respect of the property in computing the taxpayer’s income for the year or a preceding taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1988, c. 55, s. 5
DefinitionsThe definitions in this section apply for the purposes of this section and section 20.4.base year of an insurer means the insurer’s taxation year that immediately precedes its transition year. (année de base)insurance business of an insurer, is an insurance business carried on by the insurer, other than a life insurance business. (entreprise d’assurance)reserve transition amount of an insurer, in respect of an insurance business carried on by it in Canada in its transition year, is the positive or negative amount determined by the formulaA – BwhereAis the maximum amount that the insurer would be permitted to claim under paragraph 20(7)(c) (and that would be prescribed by section 1400 of the Regulations for the purpose of paragraph 20(7)(c)) as a policy reserve for its base year in respect of its insurance policies ifthe generally accepted accounting principles that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, andsection 1400 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year; andBis the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year. (montant transitoire)transition year of an insurer means the insurer’s first taxation year that begins after September 2006. (année transitoire)Transition year income inclusionThere shall be included 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 positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.Transition year income deduction reversalIf an amount has been deducted under subsection 20.4(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be included 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 formulaA × B/1825whereAis the amount deducted under subsection 20.4(2) in computing the insurer’s income for the transition year from that insurance business; andBis the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.Winding-upIf an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the incomes of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up,the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect ofany amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year,any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, andany amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business; andthe insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (3) and 20.4(3) without reference to the start day and days after the start day.AmalgamationsIf there is an amalgamation (within the meaning assigned by subsection 87(1)) of an insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the new corporation’s income for particular taxation years that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the insurer in respect ofany amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year;any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the day on which the amalgamation occurred; andany amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business.Application of subsection (7)Subsection (7) applies if, at any time, an insurer (referred to in this subsection and subsection (7) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (7) as the “transferee”) that is related to the transferor, property in respect of an insurance business carried on by the transferor in Canada (referred to in this subsection and subsection (7) as the “transferred business”) andsubsection 138(11.5) or (11.94) applies to the transfer; orsubsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on an insurance business.Transfer of insurance businessIf this subsection applies in respect of the transfer, at any time, of propertythe transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect ofany amount included under subsection (2) or deducted under subsection 20.4(2) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business,any amount that would — in the absence of this subsection and if the transferor existed and carried on an insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the transferor’s income that can reasonably be attributed to the transferred business; andin determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (3) or 20.4(3) to be included or deducted in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.Ceasing to carry on businessIf 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 (4) to (6) apply, there shall be included 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 formulaA – BwhereAis the amount deducted under subsection 20.4(2) in computing the insurer’s income from the discontinued business for its transition year; andBis the total of all amounts each of which is an amount included under subsection (3) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.Ceasing to existIf at any time an insurer that carried on an insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (4) or (5)), for the purposes of subsections (8) and 20.4(4), the insurer is deemed to have ceased to carry on the insurance business at the earlier ofthe time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, andthe time that is immediately before the end of the last taxation year of the insurer that ended at or before the time at which the insurer ceased to exist.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2009, c. 2, s. 5
DefinitionsThe definitions in section 18.3 apply in this section.Where subsection (3) appliesSubsection (3) applies for a taxation year of an entity in respect of a security of the entity ifthe security becomes, at a particular time in the year, a stapled security of the entity and, as a consequence, amounts described in paragraphs 18.3(3)(a) and (b) are not deductible because of subsection 18.3(3);the security (or any security for which the security was substituted) ceased, at an earlier time, to be a stapled security of any entity and, as a consequence, subsection 18.3(3) ceased to apply to deny the deductibility of amounts that would be described in paragraphs 18.3(3)(a) and (b) if the security were a stapled security; andthroughout the period that began immediately after the most recent time referred to in paragraph (b) and that ends at the particular time, the security (or any security for which the security was substituted) was not a stapled security of any entity.Income inclusionIf this subsection applies for a taxation year of an entity in respect of a security of the entity, the entity shall include in computing its income for the year each amount thatwas deducted by the entity (or by another entity that issued a security for which the security was substituted) in computing its income for a taxation year that includes any part of the period described in paragraph (2)(c); andwould not have been deductible if subsection 18.3(3) had applied in respect of the amount.Deemed excessFor the purposes of subsection 161(1), if an amount described in paragraph (3)(a) is included in the income of an entity for a taxation year under subsection (3), the entity is deemed to have an excess immediately after the entity’s balance-due day for the year computed as ifthe entity were resident in Canada throughout the year;the entity’s tax payable for the year were equal to the tax payable by the entity on its taxable income for the year;the amount were the entity’s only taxable income for the year;the entity claimed no deductions under Division E for the year;the entity had not paid any amounts on account of its tax payable for the year; andthe tax payable determined under paragraph (b) had been outstanding throughout the period that begins immediately after the end of the taxation year for which the amount was deducted and that ends on the entity’s balance-due day for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 40, s. 5
Hybrid mismatch arrangements — definitionsThe definitions in subsection 18.4(1) apply in this section.Secondary rule — conditions for applicationSubsection (3) applies in respect of a payment of which a taxpayer is a recipient ifthe payment arises under a hybrid mismatch arrangement; andthere is a foreign deduction component of the hybrid mismatch arrangement.Secondary rule — consequencesSubject to subsection 18.4(5), if this subsection applies in respect of a payment of which a taxpayer is a recipient, an amount equal to the hybrid mismatch amount in respect of the payment shall beincluded in computing the taxpayer’s income from the same source as the payment; andincluded in computing the taxpayer’s income for the last taxation year of the taxpayer that begins at or before the end of the first foreign taxation year of any entity in which an amount in respect of the payment, in the absence of any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible in computing relevant foreign income or profits of the entity.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2024, c. 15, s. 3
Recaptured depreciationIf, at the end of a taxation year, the total of the amounts determined for E to K in the definition undepreciated capital cost in subsection (21) in respect of a taxpayer’s depreciable property of a particular prescribed class exceeds the total of the amounts determined for A to D.1 in that definition in respect of that property, the excess shall be included in computing the taxpayer’s income of the year.Recapture — Class 10.1 Passenger VehicleNotwithstanding subsection 13(1), where an excess amount is determined under that subsection at the end of a taxation year in respect of a passenger vehicle having a cost to a taxpayer in excess of $20,000 or such other amount as may be prescribed, unless it was, at any time, designated immediate expensing property as defined in subsection 1104(3.1) of the Income Tax Regulations, that excess amount shall not be included in computing the taxpayer’s income for the year but shall be deemed, for the purposes of B in the definition undepreciated capital cost in subsection 13(21), to be an amount included in the taxpayer’s income for the year by reason of this section.“Taxation year”, “year” and “income” of individualWhere a taxpayer is an individual whose income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year and depreciable property acquired for the purpose of gaining or producing income from the business has been disposed of,for greater certainty, each reference in subsections 13(1) and 13(2) to a “taxation year” and “year” shall be read as a reference to a “fiscal period”; anda reference in subsection 13(1) to “the income” shall be read as a reference to “the income from the business”.Exchanges of propertyWhere an amount in respect of the disposition in a taxation year (in this subsection referred to as the “initial year”) of depreciable property (in this section referred to as the “former property”) of a prescribed class of a taxpayer would, but for this subsection, be the amount determined for F or G in the definition undepreciated capital cost in subsection 13(21) in respect of the disposition of the former property that is eitherproperty the proceeds of disposition of which were proceeds referred to in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21), ora property that was, immediately before the disposition, a former business property of the taxpayer,and the taxpayer so elects under this subsection in the taxpayer’s return of income for the taxation year in which the taxpayer acquires a depreciable property of a prescribed class of the taxpayer that is a replacement property for the taxpayer’s former property,the amount otherwise determined for F or G in the definition undepreciated capital cost in subsection 13(21) in respect of the disposition of the former property shall be reduced by the lesser ofthe amount, if any, by which the amount otherwise determined for F or G in that definition exceeds the undepreciated capital cost to the taxpayer of property of the prescribed class to which the former property belonged at the time immediately before the time that the former property was disposed of, andthe amount that has been used by the taxpayer to acquireif the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, orin any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,a replacement property of a prescribed class that has not been disposed of by the taxpayer before the time at which the taxpayer disposed of the former property, andthe amount of the reduction determined under paragraph 13(4)(c) shall be deemed to be proceeds of disposition of a depreciable property of the taxpayer that had a capital cost equal to that amount and that was property of the same class as the replacement property, from a disposition made on the later ofthe time the replacement property was acquired by the taxpayer, andthe time the former property was disposed of by the taxpayer.COVID — time not countedFor the purposes of subparagraph (4)(c)(ii), the period beginning on March 15, 2020 and ending on March 12, 2022 is not to be counted.Replacement for a former propertyFor the purposes of subsection 13(4), a particular depreciable property of a prescribed class of a taxpayer is a replacement for a former property of the taxpayer ifit is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;it was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for a use that is the same as or similar to the use to which the taxpayer or a person related to the taxpayer put the former property;where the former property was used by the taxpayer or a person related to the taxpayer for the purpose of gaining or producing income from a business, the particular depreciable property was acquired for the purpose of gaining or producing income from that or a similar business or for use by a person related to the taxpayer for such a purpose;where the former property was a taxable Canadian property of the taxpayer, the particular depreciable property is a taxable Canadian property of the taxpayer; andwhere the former property was a taxable Canadian property (other than treaty-protected property) of the taxpayer, the particular depreciable property is a taxable Canadian property (other than treaty-protected property) of the taxpayer.Election — limited period franchise, concession or licenseSubsection (4.3) applies ifa taxpayer (in this subsection and subsection (4.3) referred to as the “transferor”) has, pursuant to a written agreement with a person or partnership (in this subsection and subsection (4.3) referred to as the “transferee”), at any time disposed of or terminated a former property that is a franchise, concession or licence for a limited period that is wholly attributable to the carrying on of a business at a fixed place;the transferee acquired the former property from the transferor or, on the termination, acquired a similar property in respect of the same fixed place from another person or partnership; andthe transferor and the transferee jointly elect in their returns of income for their taxation years that include that time to have subsection (4.3) apply in respect of the acquisition and the disposition or termination.Effect of electionIf this subsection applies in respect of an acquisition and a disposition or termination,if the transferee acquired a similar property referred to in paragraph (4.2)(b), the transferee is deemed to have also acquired the former property at the time that the former property was terminated and to own the former property until the transferee no longer owns the similar property;if the transferee acquired the former property referred to in paragraph (4.2)(b), the transferee is deemed to own the former property until such time as the transferee owns neither the former property nor a similar property in respect of the same fixed place to which the former property related;for the purpose of calculating the amount deductible under paragraph 20(1)(a) in respect of the former property in computing the transferee’s income, the life of the former property remaining on its acquisition by the transferee is deemed to be equal to the period that was the life of the former property remaining on its acquisition by the transferor; andany amount that would, if this Act were read without reference to this subsection, be included in the cost of a property of the transferee included in Class 14.1 of Schedule II to the Income Tax Regulations (including a deemed acquisition under subsection (35)) or included in the proceeds of disposition of a property of the transferor included in that Class (including a deemed disposition under subsection (37)) in respect of the disposition or termination of the former property by the transferor is deemed to beneither included in the cost nor the proceeds of disposition of property included in that Class,an amount required to be included in computing the capital cost to the transferee of the former property, andan amount required to be included in computing the proceeds of disposition to the transferor in respect of a disposition of the former property.Reclassification of propertyWhere one or more depreciable properties of a taxpayer that were included in a prescribed class (in this subsection referred to as the “old class”) become included at any time (in this subsection referred to as the “transfer time”) in another prescribed class (in this subsection referred to as the “new class”), for the purpose of determining at any subsequent time the undepreciated capital cost to the taxpayer of depreciable property of the old class and the new classthe value of A in the definition undepreciated capital cost in subsection 13(21) shall be determined as if each of those depreciable properties wereproperties of the new class acquired before the subsequent time, andnever included in the old class; andthere shall be deducted in computing the total depreciation allowed to the taxpayer for property of the old class before the subsequent time, and added in computing the total depreciation allowed to the taxpayer for property of the new class before the subsequent time, the greater ofthe amount determined by the formulaA - BwhereAis the total of all amounts each of which is the capital cost to the taxpayer of each of those depreciable properties, andBis the undepreciated capital cost to the taxpayer of depreciable property of the old class at the transfer time, andthe total of all amounts each of which is an amount that would have been deducted under paragraph 20(1)(a) in respect of a depreciable property that is one of those properties in computing the taxpayer’s income for a taxation year that ended before the transfer time and at the end of which the property was included in the old class ifthe property had been the only property included in a separate prescribed class, andthe rate allowed by the regulations made for the purpose of paragraph 20(1)(a) in respect of that separate class had been the effective rate that was used by the taxpayer to calculate a deduction under that paragraph in respect of the old class for the year.Rules applicableWhere at any time in a taxation year a taxpayer acquires a particular property in respect of which, immediately before that time, the taxpayer had a leasehold interest that was included in a prescribed class, for the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), the following rules apply:the leasehold interest shall be deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to the amount, if any, by whichthe capital cost immediately before that time of the leasehold interestexceedsthe total of all amounts claimed by the taxpayer in respect of the leasehold interest and deductible under paragraph 20(1)(a) in computing the taxpayer’s income in previous taxation years;the particular property shall be deemed to be depreciable property of a prescribed class of the taxpayer acquired by the taxpayer at that time and there shall be added to the capital cost to the taxpayer of the property an amount equal to the capital cost referred to in subparagraph 13(5.1)(a)(i); andthe total referred to in subparagraph 13(5.1)(a)(ii) shall be added to the total depreciation allowed to the taxpayer before that time in respect of the class to which the particular property belongs.Deemed cost and depreciationIf, at any time, a taxpayer has acquired a capital property that is depreciable property or real or immovable property in respect of which, before that time, the taxpayer or any person with whom the taxpayer was not dealing at arm’s length was entitled to a deduction in computing income in respect of any amount paid or payable for the use of, or the right to use, the property and the cost or the capital cost (determined without reference to this subsection) at that time of the property to the taxpayer is less than the fair market value thereof at that time determined without reference to any option with respect to that property, for the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), the following rules apply:the property shall be deemed to have been acquired by the taxpayer at that time at a cost equal to the lesser ofthe fair market value of the property at that time determined without reference to any option with respect to that property, andthe total of the cost or the capital cost (determined without reference to this subsection) of the property to the taxpayer and all amounts (other than amounts paid or payable to a person with whom the taxpayer was not dealing at arm’s length) each of which is an outlay or expense made or incurred by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length at any time for the use of, or the right to use, the property,and for the purposes of this paragraph and subsection 13(5.3), where a particular corporation has been incorporated or otherwise formed after the time any other corporation with which the particular corporation would not have been dealing at arm’s length had the particular corporation been in existence before that time, the particular corporation shall be deemed to have been in existence from the time of the formation of the other corporation and to have been not dealing at arm’s length with the other corporation;the amount by which the cost to the taxpayer of the property determined under paragraph 13(5.2)(a) exceeds the cost or the capital cost thereof (determined without reference to this subsection) shall be added to the total depreciation allowed to the taxpayer before that time in respect of the prescribed class to which the property belongs; andwhere the property would, but for this paragraph, not be depreciable property of the taxpayer, it shall be deemed to be depreciable property of a separate prescribed class of the taxpayer.Deemed recaptureIf, at any time in a taxation year, a taxpayer has disposed of a capital property that is an option with respect to depreciable property or real or immovable property in respect of which the taxpayer or any person with whom the taxpayer was not dealing at arm’s length was entitled to a deduction in computing income in respect of any amount paid for the use of, or the right to use, the property, for the purposes of this section, the amount, if any, by which the proceeds of disposition to the taxpayer of the option exceed the taxpayer’s cost in respect thereof is deemed to be an excess referred to in subsection (1) in respect of the taxpayer for the year.IdemWhere, before the time of disposition of a capital property that was depreciable property of a taxpayer, the taxpayer, or any person with whom the taxpayer was not dealing at arm’s length, was entitled to a deduction in computing income in respect of any outlay or expense made or incurred for the use of, or the right to use, during a period of time, that capital property (other than an outlay or expense made or incurred by the taxpayer or a person with whom the taxpayer was not dealing at arm’s length before the acquisition of the property), except where the taxpayer disposed of the property to a person with whom the taxpayer was not dealing at arm’s length and that person was subject to the provisions of subsection 13(5.2) with respect to the acquisition by that person of the property, the following rules apply:an amount equal to the lesser ofthe total of all amounts (other than amounts paid or payable to the taxpayer or a person with whom the taxpayer was not dealing at arm’s length) each of which was a deductible outlay or expense made or incurred before the time of disposition by the taxpayer, or by a person with whom the taxpayer was not dealing at arm’s length, for the use of, or the right to use, during the period of time, the property, andthe amount, if any, by which the fair market value of the property at the earlier ofthe expiration of the last period of time in respect of which the deductible outlay or expense referred to in subparagraph 13(5.4)(a)(i) was made or incurred, andthe time of the dispositionexceeds the capital cost to the taxpayer of the property immediately before that timeshall immediately before the time of the disposition, be added to the capital cost of the property to the person who owned the property at that time; andthe amount added to the capital cost to the taxpayer of the property pursuant to paragraph 13(5.4)(a) shall be added immediately before the time of the disposition to the total depreciation allowed to the taxpayer before that time in respect of the prescribed class to which the property belongs.Lease cancellation paymentFor the purposes of subsection 13(5.4), an amount deductible by a taxpayer under paragraph 20(1)(z) or 20(1)(z.1) in respect of a cancellation of a lease of property shall, for greater certainty, be deemed not to be an outlay or expense that was made or incurred by the taxpayer for the use of, or the right to use, the property.Misclassified propertyWhere, in calculating the amount of a deduction allowed to a taxpayer under subsection 20(16) or regulations made for the purposes of paragraph 20(1)(a) in respect of depreciable property of the taxpayer of a prescribed class (in this subsection referred to as the “particular class”), there has been added to the capital cost to the taxpayer of depreciable property of the particular class the capital cost of depreciable property (in this subsection referred to as “added property”) of another prescribed class, for the purposes of this section, section 20 and any regulations made for the purposes of paragraph 20(1)(a), the added property shall, if the Minister so directs with respect to any taxation year for which, under subsection 152(4), the Minister may make any reassessment or additional assessment or assess tax, interest or penalties under this Part, be deemed to have been property of the particular class and not of the other class at all times before the beginning of the year and, except to the extent that the added property or any part thereof has been disposed of by the taxpayer before the beginning of the year, to have been transferred from the particular class to the other class at the beginning of the year.Rules applicableSubject to subsection 70(13), for the purposes of paragraphs 8(1)(j) and 8(1)(p), this section, section 20 and any regulations made for the purpose of paragraph 20(1)(a),where a taxpayer, having acquired property for the purpose of gaining or producing income, has begun at a later time to use it for some other purpose, the taxpayer shall be deemed to have disposed of it at that later time for proceeds of disposition equal to its fair market value at that time and to have reacquired it immediately thereafter at a cost equal to that fair market value;where a taxpayer, having acquired property for some other purpose, has begun at a later time to use it for the purpose of gaining or producing income, the taxpayer shall be deemed to have acquired it at that later time at a capital cost to the taxpayer equal to the lesser ofthe fair market value of the property at that later time, andthe total ofthe cost to the taxpayer of the property at that later time determined without reference to this paragraph, paragraph 13(7)(a) and subparagraph 13(7)(d)(ii), and1/2 of the amount, if any, by whichthe fair market value of the property at that later timeexceeds the total ofthe cost to the taxpayer of the property as determined under clause 13(7)(b)(ii)(A), andtwice the amount deducted by the taxpayer under section 110.6 in respect of the amount, if any, by which the fair market value of the property at that later time exceeds the cost to the taxpayer of the property as determined under clause 13(7)(b)(ii)(A);where property has, since it was acquired by a taxpayer, been regularly used in part for the purpose of gaining or producing income and in part for some other purpose, the taxpayer shall be deemed to have acquired, for the purpose of gaining or producing income, the proportion of the property that the use regularly made of the property for gaining or producing income is of the whole use regularly made of the property at a capital cost to the taxpayer equal to the same proportion of the capital cost to the taxpayer of the whole property and, if the property has, in such a case, been disposed of, the proceeds of disposition of the proportion of the property deemed to have been acquired for gaining or producing income shall be deemed to be the same proportion of the proceeds of disposition of the whole property;where, at any time after a taxpayer has acquired property, there has been a change in the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes,if the use regularly made by the taxpayer of the property for the purpose of gaining or producing income has increased, the taxpayer shall be deemed to have acquired at that time depreciable property of that class at a capital cost equal to the total ofthe proportion of the lesser ofits fair market value at that time, andits cost to the taxpayer at that time determined without reference to this subparagraph, subparagraph 13(7)(d)(ii) and paragraph 13(7)(a)that the amount of the increase in the use regularly made by the taxpayer of the property for that purpose is of the whole of the use regularly made of the property, and1/2 of the amount, if any, by whichthe amount deemed under subparagraph 45(1)(c)(ii) to be the taxpayer’s proceeds of disposition of the property in respect of the changeexceeds the total ofthat proportion of the cost to the taxpayer of the property as determined under subclause 13(7)(d)(i)(A)(II) that the amount of the increase in the use regularly made by the taxpayer of the property for that purpose is of the whole of the use regularly made of the property, andtwice the amount deducted by the taxpayer under section 110.6 in respect of the amount, if any, by which the amount determined under subclause 13(7)(d)(i)(B)(I) exceeds the amount determined under subclause 13(7)(d)(i)(B)(II), andif the use regularly made of the property for the purpose of gaining or producing income has decreased, the taxpayer shall be deemed to have disposed at that time of depreciable property of that class and the proceeds of disposition shall be deemed to be an amount equal to the proportion of the fair market value of the property as of that time that the amount of the decrease in the use regularly made by the taxpayer of the property for that purpose is of the whole use regularly made of the property;notwithstanding any other provision of this Act except subsection 70(13), where at a particular time a person or partnership (in this paragraph referred to as the “taxpayer”) has, directly or indirectly, in any manner whatever, acquired (otherwise than as a consequence of the death of the transferor) a depreciable property (other than a timber resource property) of a prescribed class from a person or partnership with whom the taxpayer did not deal at arm’s length (in this paragraph referred to as the “transferor”) and, immediately before the transfer, the property was a capital property of the transferor,where the transferor was an individual resident in Canada or a partnership any member of which was either an individual resident in Canada or another partnership and the cost of the property to the taxpayer at the particular time determined without reference to this paragraph exceeds the cost, or where the property was depreciable property, the capital cost of the property to the transferor immediately before the transferor disposed of it, the capital cost of the property to the taxpayer at the particular time shall be deemed to be the amount that is equal to the total ofthe cost or capital cost, as the case may be, of the property to the transferor immediately before the particular time, and1/2 of the amount, if any, by whichthe transferor’s proceeds of disposition of the propertyexceed the total ofthe cost or capital cost, as the case may be, to the transferor immediately before the particular time,twice the amount deducted by any person under section 110.6 in respect of the amount, if any, by which the amount determined under subclause 13(7)(e)(i)(B)(I) exceeds the amount determined under subclause 13(7)(e)(i)(B)(II), andthe amount, if any, required by subsection 110.6(21) to be deducted in computing the capital cost to the taxpayer of the property at that timeand for the purposes of paragraph 13(7)(b) and subparagraph 13(7)(d)(i), the cost of the property to the taxpayer shall be deemed to be the same amount,where the transferor was neither an individual resident in Canada nor a partnership any member of which was either an individual resident in Canada or another partnership and the cost of the property to the taxpayer at the particular time determined without reference to this paragraph exceeds the cost, or where the property was depreciable property, the capital cost of the property to the transferor immediately before the transferor disposed of it, the capital cost of the property to the taxpayer at that time shall be deemed to be the amount that is equal to the total ofthe cost or capital cost, as the case may be, of the property to the transferor immediately before the particular time, and1/2 of the amount, if any, by which the transferor’s proceeds of disposition of the property exceed the cost or capital cost, as the case may be, to the transferor immediately before the particular timeand for the purposes of paragraph 13(7)(b) and subparagraph 13(7)(d)(i), the cost of the property to the taxpayer shall be deemed to be the same amount, andwhere the cost or capital cost, as the case may be, of the property to the transferor immediately before the transferor disposed of it exceeds the capital cost of the property to the taxpayer at that time determined without reference to this paragraph, the capital cost of the property to the taxpayer at that time shall be deemed to be the amount that was the cost or capital cost, as the case may be, of the property to the transferor immediately before the transferor disposed of it and the excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing the taxpayer’s income for taxation years ending before the acquisition of the property by the taxpayer;where a taxpayer is deemed by paragraph 110.6(19)(a) to have disposed of and reacquired a property that immediately before the disposition was a depreciable property, the taxpayer shall be deemed to have acquired the property from himself, herself or itself and, in so having acquired the property, not to have been dealing with himself, herself or itself at arm’s length;if a taxpayer is deemed under paragraph 111(4)(e) to have disposed of and reacquired depreciable property (other than a timber resource property), the capital cost to the taxpayer of the property at the time of the reacquisition is deemed to be equal to the total ofthe capital cost to the taxpayer of the property at the time of the disposition, and1/2 of the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the capital cost to the taxpayer of the property at the time of the disposition;where the cost to a taxpayer of a passenger vehicle exceeds $20,000 or such other amount as is prescribed, the capital cost to the taxpayer of the vehicle shall be deemed to be $20,000 or that other prescribed amount, as the case may be;notwithstanding paragraph 13(7)(g), where a passenger vehicle is acquired by a taxpayer at any time from a person with whom the taxpayer does not deal at arm’s length, the capital cost at that time to the taxpayer of the vehicle shall be deemed to be the least ofthe fair market value of the vehicle at that time,the amount that immediately before that time was the cost amount to that person of the vehicle, and$20,000 or such other amount as is prescribed; andif the cost to a taxpayer of a zero-emission passenger vehicle exceeds the prescribed amount in subsection 7307(1.1) of the Income Tax Regulations, or if the cost of a passenger vehicle that was, at any time, designated immediate expensing property as defined in subsection 1104(3.1) of the Income Tax Regulations exceeds the prescribed amount in subsection 7307(1) of the Income Tax Regulations,the capital cost to the taxpayer of the vehicle is deemed to be equal to the prescribed amount under subsection 7307(1) or (1.1), as the case may be, andfor the purposes of paragraph (a) of the description of F in the definition undepreciated capital cost in subsection (21), the proceeds of disposition of the vehicle are deemed to be the amount determined by the formulaA × B/CwhereAis the amount that would, in the absence of this subparagraph, be the proceeds of disposition of the vehicle,Bisif the vehicle is disposed of to a person or partnership with which the taxpayer deals at arm’s length, the capital cost to the taxpayer of the vehicle, andin any other case, the amount determined for C, andCis the amount determined by the formulaD + (E + F) − (G + H)whereDis the cost to the taxpayer of the vehicle,Eis the amount determined under paragraph (7.1)(d) in respect of the vehicle at the time of disposition,Fis the maximum amount determined for C in the definition undepreciated capital cost in subsection (21) in respect of the vehicle,Gis the amount determined under paragraph (7.1)(f) in respect of the vehicle at the time of disposition, andHis the maximum amount determined for J in the definition undepreciated capital cost in subsection (21) in respect of the vehicle.Deemed capital cost of certain propertyFor the purposes of this Act, where section 80 applied to reduce the capital cost to a taxpayer of a depreciable property or a taxpayer deducted an amount under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6) in respect of a depreciable property or received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, depreciable property, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other thanan amount described in paragraph 37(1)(d),an amount deducted as an allowance under section 65,an amount included in income by virtue of paragraph 12(1)(u) or 56(1)(s), oran amount received as an excluded loan as defined in subsection 12(11),the capital cost of the property to the taxpayer at any particular time shall be deemed to be the amount, if any, by which the total ofthe capital cost of the property to the taxpayer, determined without reference to this subsection, subsection 13(7.4) and section 80, andsuch part, if any, of the assistance as has been repaid by the taxpayer, pursuant to an obligation to repay all or any part of that assistance, in respect of that property before the disposition thereof by the taxpayer and before the particular timeexceeds the total ofwhere the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6) by the taxpayer for a taxation year ending before the particular time,the amount of assistance the taxpayer has received or is entitled, before the particular time, to receive, andall amounts by which the capital cost of the property to the taxpayer is required because of section 80 to be reduced at or before that time,in respect of that property before the disposition thereof by the taxpayer.Receipt of public assistanceFor the purposes of subsection 13(7.1), where at any time a taxpayer who is a beneficiary of a trust or a member of a partnership has received or is entitled to receive 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, the amount of the assistance that may reasonably be considered to be in respect of, or for the acquisition of, depreciable property of the trust or partnership shall be deemed to have been received at that time by the trust or partnership, as the case may be, as assistance from the government, municipality or other public authority for the acquisition of depreciable property.Control of corporations by one trusteeFor the purposes of paragraph (7)(e), where at a particular time one corporation would, but for this subsection, be related to another corporation by reason of both corporations being controlled by the same executor, liquidator of a succession or trustee and it is established thatthe executor, liquidator or trustee did not acquire control of the corporations as a result of one or more estates or trusts created by the same individual or by two or more individuals not dealing with each other at arm’s length, andthe estate or trust under which the executor, liquidator or trustee acquired control of each of the corporations arose only on the death of the individual creating the estate or trust,the two corporations are deemed not to be related to each other at the particular time.Deemed capital costNotwithstanding subsection 13(7.1), where a taxpayer has in a taxation year received an amount that would, but for this subsection, be included in the taxpayer’s income under paragraph 12(1)(x) in respect of the cost of a depreciable property acquired by the taxpayer in the year, in the three taxation years immediately preceding the year or in the taxation year immediately following the year and the taxpayer elects under this subsection on or before the day on or before which the taxpayer is required to file the taxpayer’s return of income under this Part for the year, or, where the property is acquired in the taxation year immediately following the year, for that following year, the capital cost of the property to the taxpayer shall be deemed to be the amount by which the total ofthe capital cost of the property to the taxpayer otherwise determined, applying the provisions of subsection 13(7.1), where necessary, andsuch part, if any, of the amount received by the taxpayer as has been repaid by the taxpayer pursuant to a legal obligation to repay all or any part of that amount, in respect of that property and before the disposition thereof by the taxpayer, and as may reasonably be considered to be in respect of the amount elected under this subsection in respect of the propertyexceeds the amount elected by the taxpayer under this subsection, but in no case shall the amount elected under this subsection exceed the least ofthe amount so received by the taxpayer,the capital cost of the property to the taxpayer otherwise determined, andwhere the taxpayer has disposed of the property before the year, nil.Deemed capital costSubsection (38) applies in respect of an amount repaid after 2016 as if that amount was repaid immediately before 2017, ifthe amount is repaid by the taxpayer 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;the amount of an eligible capital expenditure of the taxpayer in respect of the business was reduced by paragraph 14(10)(c) because of the assistance referred to in paragraph (a); andparagraph 20(1)(hh.1) does not apply in respect of the amount repaid.Timing of deductionNo amount may be deducted under paragraph 20(1)(a) in respect of an amount of repaid assistance referred to in subsection (7.41) for any taxation year prior to the taxation year in which the assistance is repaid.Deemed capital costFor the purposes of this Act,where a taxpayer, to acquire a property prescribed in respect of the taxpayer, is required under the terms of a contract made after March 6, 1996 to make a payment to Her Majesty in right of Canada or a province or to a Canadian municipality in respect of costs incurred or to be incurred by the recipient of the paymentthe taxpayer is deemed to have acquired the property at a capital cost equal to the portion of that payment made by the taxpayer that can reasonably be regarded as being in respect of those costs, andthe time of acquisition of the property by the taxpayer is deemed to be the later of the time the payment is made and the time at which those costs are incurred;whereat any time after March 6, 1996 a taxpayer incurs a cost on account of capital for the building of, for the right to use or in respect of, a prescribed property, andthe amount of the cost would, if this paragraph did not apply, not be included in the capital cost to the taxpayer of depreciable property of a prescribed class,the taxpayer is deemed to have acquired the property at that time at a capital cost equal to the amount of the cost;if a taxpayer acquires an intangible property, or for civil law an incorporeal property, as a consequence of making a payment to which paragraph (a) applies or incurring a cost to which paragraph (b) applies,the property referred to in paragraph (a) or (b) is deemed to include the intangible or incorporeal property, andthe portion of the capital cost referred to in paragraph (a) or (b) that applies to the intangible or incorporeal property is deemed to be the amount determined by the formulaA × B/CwhereAis the lesser of the amount of the payment made or cost incurred and the amount determined for C,Bis the fair market value of the intangible or incorporeal property at the time the payment was made or the cost was incurred, andCis the fair market value at the time the payment was made or the cost was incurred of all intangible or incorporeal properties acquired as a consequence of making the payment or incurring the cost; andany property deemed by paragraph 13(7.5)(a) or (b) to have been acquired at any time by a taxpayer as a consequence of making a payment or incurring a costis deemed to have been acquired for the purpose for which the payment was made or the cost was incurred, andis deemed to be owned by the taxpayer at any subsequent time that the taxpayer benefits from the property.Capital expenditures — Classes 59 and 60If a taxpayer has incurred an expenditure on account of capital, and the amount of the expenditure would have been included in the taxpayer’s undepreciated capital cost of property included in Class 59 or 60 of Schedule II to the Income Tax Regulations if the taxpayer had acquired a property as a result of the expenditure, then the taxpayer is deemed to have acquired a property, included in Class 59 or 60, as the case may be, at a cost equal to the amount of the expenditure, at the time that the expenditure is incurred.Disposition after ceasing businessNotwithstanding subsections 13(3) and 11(2), 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 13(1) or 13(2), each reference therein to a “taxation year” and “year” shall not be read as a reference to a “fiscal period”.Meaning of gaining or producing incomeIn applying paragraphs 13(7)(a) to 13(7)(d) in respect of a non-resident taxpayer, a reference to gaining or producing income in relation to a business shall be read as a reference to “gaining or producing income from a business wholly carried on in Canada or such part of a business as is wholly carried on in Canada”.Deemed capital costFor the purposes of this Act, where a taxpayer has, after December 3, 1970 and before April 1, 1972, acquired prescribed propertyfor use in a prescribed manufacturing or processing business carried on by the taxpayer, andthat was not used for any purpose whatever before it was acquired by the taxpayer,the taxpayer shall be deemed to have acquired that property at a capital cost to the taxpayer equal to 115% of the amount that, but for this subsection and section 21, would have been the capital cost to the taxpayer of that property.Deduction in respect of property used in performance of dutiesAny amount deducted under subparagraph 8(1)(j)(ii) or 8(1)(p)(ii) of this Act or subsection 11(11) of The Income Tax Act, chapter 52 of the Statutes of Canada, 1948, shall be deemed, for the purposes of this section to have been deducted under regulations made under paragraph 20(1)(a).Application of para. 20(1)(cc)Where, in computing the income of a taxpayer for a taxation year, an amount has been deducted under paragraph 20(1)(cc) or the taxpayer has elected under subsection 20(9) to make a deduction in respect of an amount that would otherwise have been deductible under that paragraph, the amount shall, if it was a payment on account of the capital cost of depreciable property, be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing the income of the taxpayerfor the year, orfor the year in which the property was acquired,whichever is the later.Deduction under Canadian Vessel Construction Assistance ActWhere a deduction has been made under the Canadian Vessel Construction Assistance Act for any taxation year, subsection 13(1) is applicable in respect of the prescribed class created by that Act or any other prescribed class to which the vessel may have been transferred.Conversion costFor the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), a vessel in respect of which any conversion cost is incurred after March 23, 1967 shall, to the extent of the conversion cost, be deemed to be included in a separate prescribed class.Where s. (1) and Subdivision C do not applyWhere a vessel owned by a taxpayer on January 1, 1966 or constructed pursuant to a construction contract entered into by the taxpayer prior to 1966 and not completed by that date was disposed of by the taxpayer before 1974,subsection 13(1) and Subdivision C do not apply to the proceeds of dispositionif an amount at least equal to the proceeds of disposition was used by the taxpayer, before May, 1974 and during the taxation year of the taxpayer in which the vessel was disposed of or within 4 months after the end of that taxation year, under conditions satisfactory to the appropriate minister, either for replacement or to incur any conversion cost with respect to a vessel owned by the taxpayer, orif the appropriate minister certified that the taxpayer had, on satisfactory terms, depositedon or before the day on which the taxpayer was required to file a return of the taxpayer’s income for the taxation year in which the vessel was disposed of, oron or before such day subsequent to the day referred to in clause 13(15)(a)(ii)(A) as the appropriate minister specified in respect of the taxpayer,an amount at least equal to the tax that would, but for this subsection, have been payable by the taxpayer under this Part in respect of the proceeds of disposition, or satisfactory security therefor, as a guarantee that the proceeds of disposition would be used before 1975 for replacement; andif within the time specified for the filing of a return of the taxpayer’s income for the taxation year in which the vessel was disposed ofthe taxpayer elected to have the vessel constituted a prescribed class, orwhere any conversion cost in respect of the vessel was included in a separate prescribed class, the taxpayer elected to have the vessel transferred to that class,the vessel shall be deemed to have been so transferred immediately before the disposition thereof, but this paragraph does not apply unless the proceeds of disposition of the vessel exceed the amount that would be the undepreciated capital cost of property of the class to which it would be so transferred.Election concerning vesselWhere a vessel owned by a taxpayer is disposed of by the taxpayer, the taxpayer may, if subsection 13(15) does not apply to the proceeds of disposition or if the taxpayer did not make an election under paragraph 13(15)(b) in respect of the vessel, within the time specified for the filing of a return of the taxpayer’s income for the taxation year in which the vessel was disposed of, elect to have the proceeds that would be included in computing the taxpayer’s income for the year under this Part treated as proceeds of disposition of property of another prescribed class that includes a vessel owned by the taxpayer.Separate prescribed class concerning vesselWhere a separate prescribed class has been constituted either under this Act or the Canadian Vessel Construction Assistance Act by reason of the conversion of a vessel owned by a taxpayer and the vessel is disposed of by the taxpayer, if no election in respect of the vessel was made under paragraph 13(15)(b), the separate prescribed class constituted by reason of the conversion shall be deemed to have been transferred to the class in which the vessel was included immediately before the disposition thereof.ReassessmentsNotwithstanding any other provision of this Act, where a taxpayer hasused an amount as described in paragraph 13(4)(c), ormade an election under paragraph 13(15)(b) in respect of a vessel and the proceeds of disposition of the vessel were used before 1975 for replacement under conditions satisfactory to the appropriate minister,such reassessments of tax, interest or penalties shall be made as are necessary to give effect to subsections 13(4) and 13(15).Ascertainment of certain propertyFor the purpose of determining whether property meets the criteria set out in the Income Tax Regulations in respect of prescribed energy conservation property, the Technical Guide to Class 43.1 and 43.2, as amended from time to time and published by the Department of Natural Resources, shall apply conclusively with respect to engineering and scientific matters.Disposition of depositAll or any part of a deposit made under subparagraph 13(15)(a)(ii) or under the Canadian Vessel Construction Assistance Act may be paid out to or on behalf of any person who, under conditions satisfactory to the appropriate minister and as a replacement for the vessel disposed of, acquires a vessel before 1975that was constructed in Canada and is registered in Canada or is registered under conditions satisfactory to the appropriate minister in any country or territory to which the British Commonwealth Merchant Shipping Agreement, signed at London on December 10, 1931, applies, andin respect of the capital cost of which no allowance has been made to any other taxpayer under this Act or the Canadian Vessel Construction Assistance Act,or incurs any conversion cost with respect to a vessel owned by that person that is registered in Canada or is registered under conditions satisfactory to the appropriate minister in any country or territory to which the agreement referred to in paragraph 13(19)(a) applies, but the ratio of the amount paid out to the amount of the deposit shall not exceed the ratio of the capital cost to that person of the vessel or the conversion cost to that person of the vessel, as the case may be, to the proceeds of disposition of the vessel disposed of, and any deposit or part of a deposit not so paid out before July 1, 1975 or not paid out pursuant to subsection 13(20) shall be paid to the Receiver General and form part of the Consolidated Revenue Fund.IdemNotwithstanding any other provision of this section, where a taxpayer made a deposit under subparagraph 13(15)(a)(ii) and the proceeds of disposition in respect of which the deposit was made were not used by any person before 1975 under conditions satisfactory to the appropriate minister as a replacement for the vessel disposed of,to acquire a vessel described in paragraphs 13(19)(a) and 13(19)(b), orto incur any conversion cost with respect to a vessel owned by that person that is registered in Canada or is registered under conditions satisfactory to the appropriate minister in any country or territory to which the agreement referred to in paragraph 13(19)(a) applies,the appropriate minister may refund to the taxpayer the deposit, or the part thereof not paid out to the taxpayer under subsection 13(19), as the case may be, in which case there shall be added, in computing the income of the taxpayer for the taxation year of the taxpayer in which the vessel was disposed of, that proportion of the amount that would have been included in computing the income for the year under this Part had the deposit not been made under subparagraph 13(15)(a)(ii) that the portion of the proceeds of disposition not so used before 1975 as such a replacement is of the proceeds of disposition, and, notwithstanding any other provision of this Act, such reassessments of tax, interest or penalties shall be made as are necessary to give effect to this subsection.DefinitionsIn this section,appropriate minister means the Canadian Maritime Commission, the Minister of Industry, Trade and Commerce, the Minister of Regional Industrial Expansion, the Minister of Industry, Science and Technology or the Minister of Industry or any other minister or body that was or is legally authorized to perform the act referred to in the provision in which this expression occurs at the time the act was or is performed; (ministre compétent)conversion, in respect of a vessel, means a conversion or major alteration in Canada by a taxpayer; (conversion)conversion cost, in respect of a vessel, means the cost of a conversion; (frais de conversion)depreciable property of a taxpayer as of any time in a taxation year means property acquired by the taxpayer in respect of which the taxpayer has been allowed, or would, if the taxpayer owned the property at the end of the year and this Act were read without reference to subsection 13(26), be entitled to, a deduction under paragraph 20(1)(a) in computing income for that year or a preceding taxation year; (bien amortissable)disposition of property[Repealed, 2001, c. 17, s. 6]proceeds of disposition of property includesthe sale price of property that has been sold,compensation for property unlawfully taken,compensation for property destroyed and any amount payable under a policy of insurance in respect of loss or destruction of property,compensation for property taken under statutory authority or the sale price of property sold to a person by whom notice of an intention to take it under statutory authority was given,compensation for property injuriously affected, whether lawfully or unlawfully or under statutory authority or otherwise,compensation for property damaged and any amount payable under a policy of insurance in respect of damage to property, except to the extent that the compensation or amount, as the case may be, has within a reasonable time after the damage been expended on repairing the damage,an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec, plus any amount received by the taxpayer out of the proceeds of the sale, andany amount included because of section 79 in computing a taxpayer’s proceeds of disposition of the property; (produit de disposition)timber resource property of a taxpayer meansa right or licence to cut or remove timber from a limit or area in Canada (in this definition referred to as an “original right”) ifthat original right was acquired by the taxpayer (other than in the manner referred to in paragraph 13(21) timber resource property (b)) after May 6, 1974, andat the time of the acquisition of the original rightthe taxpayer may reasonably be regarded as having acquired, directly or indirectly, the right to extend or renew that original right or to acquire another such right or licence in substitution therefor, orin the ordinary course of events, the taxpayer may reasonably expect to be able to extend or renew that original right or to acquire another such right or licence in substitution therefor, orany right or licence owned by the taxpayer to cut or remove timber from a limit or area in Canada if that right or licence may reasonably be regardedas an extension or renewal of or as one of a series of extensions or renewals of an original right of the taxpayer, oras having been acquired in substitution for or as one of a series of substitutions for an original right of the taxpayer or any renewal or extension thereof; (avoir forestier)total depreciation allowed to a taxpayer before any time for property of a prescribed class means the total of all amounts each of which is an amount deducted by the taxpayer under paragraph 20(1)(a) in respect of property of that class or an amount deducted under subsection 20(16), or that would have been so deducted but for subsection 20(16.1), in computing the taxpayer’s income for taxation years ending before that time; (amortissement total)undepreciated capital cost to a taxpayer of depreciable property of a prescribed class as of any time means the amount determined by the formula(A + B + C + D + D.1) - (E + E.1 + F + G + H + I + J + K)whereAis the total of all amounts each of which is the capital cost to the taxpayer of a depreciable property of the class acquired before that time,Bis the total of all amounts included in the taxpayer’s income under this section for a taxation year ending before that time, to the extent that those amounts relate to depreciable property of the class,Cis the total of all amounts each of which is such part of any assistance as has been repaid by the taxpayer, pursuant to an obligation to repay all or any part of that assistance, in respect of a depreciable property of the class subsequent to the disposition thereof by the taxpayer that would have been included in an amount determined under paragraph 13(7.1)(d) had the repayment been made before the disposition,Dis the total of all amounts each of which is an amount repaid in respect of a property of the class subsequent to the disposition thereof by the taxpayer that would have been an amount described in paragraph 13(7.4)(b) had the repayment been made before the disposition,D.1is the total of all amounts each of which is an amount paid by the taxpayer before that time as or on account of an existing or proposed countervailing or anti-dumping duty in respect of depreciable property of the class,Eis the total depreciation allowed to the taxpayer for property of the class before that time, including, if the taxpayer is an insurer, depreciation deemed to have been allowed before that time under subsection (22) or (23) as they read in their application to the taxpayer’s last taxation year that began before November 2011,E.1is the total of all amounts each of which is an amount by which the undepreciated capital cost to the taxpayer of depreciable property of that class is required (otherwise than because of a reduction in the capital cost to the taxpayer of depreciable property) to be reduced at or before that time because of subsection 80(5),Fis the total of all amounts each of which is an amount in respect of a disposition before that time of property (other than a timber resource property) of the taxpayer of the class, and is the lesser ofthe proceeds of disposition of the property minus any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, andthe capital cost to the taxpayer of the property,Gis the total of all amounts each of which is the proceeds of disposition before that time of a timber resource property of the taxpayer of the class minus any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition,His, where the property of the class was acquired by the taxpayer for the purpose of gaining or producing income from a mine and the taxpayer so elects in prescribed manner and within a prescribed time in respect of that property, the amount equal to that portion of the income derived from the operation of the mine that is, by virtue of the provisions of the Income Tax Application Rules relating to income from the operation of new mines, not included in computing income of the taxpayer or any other person,Iis the total of all amounts deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayer’s tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,Jis the total of all amounts of assistance that the taxpayer received or was entitled to receive before that time, in respect of or for the acquisition of a depreciable property of the class of the taxpayer subsequent to the disposition of that property by the taxpayer, that would have been included in an amount determined under paragraph 13(7.1)(f) had the assistance been received before the disposition, andKis the total of all amounts each of which is an amount received by the taxpayer before that time in respect of a refund of an amount added to the undepreciated capital cost of depreciable property of the class because of the description of D.1; (fraction non amortie du coût en capital)vessel means a vessel as defined in the Canada Shipping Act. (navire)Disposition of buildingNotwithstanding subsection 13(7) and the definition proceeds of disposition in section 54, where at any particular time in a taxation year a taxpayer disposes of a building of a prescribed class and the proceeds of disposition of the building determined without reference to this subsection and subsection 13(21.2) are less than the lesser of the cost amount and the capital cost to the taxpayer of the building immediately before the disposition, for the purposes of paragraph (a) of the description of F in the definition undepreciated capital cost in subsection 13(21) and Subdivision C,where in the year the taxpayer or a person with whom the taxpayer does not deal at arm’s length disposes of land subjacent to, or immediately contiguous to and necessary for the use of, the building, the proceeds of disposition of the building are deemed to be the lesser ofthe amount, if any, by whichthe total of the fair market value of the building at the particular time and the fair market value of the land immediately before its dispositionexceedsthe lesser of the fair market value of the land immediately before its disposition and the amount, if any, by which the cost amount to the vendor of the land (determined without reference to this subsection) exceeds the total of the capital gains (determined without reference to subparagraphs 40(1)(a)(ii) and (iii)) in respect of dispositions of the land within 3 years before the particular time by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length to the taxpayer or to another person with whom the taxpayer was not dealing at arm’s length, andthe greater ofthe fair market value of the building at the particular time, andthe lesser of the cost amount and the capital cost to the taxpayer of the building immediately before its disposition,and notwithstanding any other provision of this Act, the proceeds of disposition of the land are deemed to be the amount, if any, by whichthe total of the proceeds of disposition of the building and of the land determined without reference to this subsection and subsection 13(21.2)exceedsthe proceeds of disposition of the building as determined under this paragraph,and the cost to the purchaser of the land shall be determined without reference to this subsection; andwhere paragraph 13(21.1)(a) does not apply with respect to the disposition and, at any time before the disposition, the taxpayer or a person with whom the taxpayer did not deal at arm’s length owned the land subjacent to, or immediately contiguous to and necessary for the use of, the building, the proceeds of disposition of the building are deemed to be an amount equal to the total ofthe proceeds of disposition of the building determined without reference to this subsection and subsection 13(21.2), and1/2 of the amount by which the greater ofthe cost amount to the taxpayer of the building, andthe fair market value of the buildingimmediately before its disposition exceeds the proceeds of disposition referred to in subparagraph 13(21.1)(b)(i).Loss on certain transfersWherea person or partnership (in this subsection referred to as the “transferor”) disposes at a particular time (otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition superficial loss in section 54) of a depreciable property — other than, for the purposes of computing the exempt surplus or exempt 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, depreciable 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 — of a particular prescribed class of the transferor,the lesser ofthe capital cost to the transferor of the transferred property, andthe proportion of the undepreciated capital cost to the transferor of all property of the particular class immediately before that time thatthe fair market value of the transferred property at that timeis ofthe fair market value of all property of the particular class immediately before that timeexceeds the amount that would otherwise be the transferor’s proceeds of disposition of the transferred property at the particular time, andon the 30th day after the particular time, a person or partnership (in this subsection referred to as the “subsequent owner”) who is the transferor or a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation),the following rules apply:sections 85 and 97 do not apply to the disposition,for the purposes of applying this section and section 20 and any regulations made for the purpose of paragraph 20(1)(a) to the transferor for taxation years that end after the particular time,the transferor is deemed to have disposed of the transferred property for proceeds equal to the lesser of the amounts determined under subparagraphs 13(21.2)(b)(i) and 13(21.2)(b)(ii) with respect to the transferred property,where two or more properties of a prescribed class of the transferor are disposed of at the same time, subparagraph (i) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor or, if the transferor does not designate an order, in the order designated by the Minister,the transferor is deemed to own a property that was acquired before the beginning of the taxation year that includes the particular time at a capital cost equal to the amount of the excess described in paragraph 13(21.2)(b), and that is property of the particular class, until the time that is immediately before the first time, after the particular time,at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation),at which the transferred property is not used by the transferor or a person affiliated with the transferor for the purpose of earning income and is used for another purpose,at which the transferred 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,that is immediately before the transferor is subject to a loss restriction event, orif the transferor is a corporation,for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt 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 isa qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, ora designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, andfor any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins, andthe property described in subparagraph 13(21.2)(e)(iii) is considered to have become available for use by the transferor at the time at which the transferred property is considered to have become available for use by the subsequent owner,for the purposes of subparagraphs 13(21.2)(e)(iii) and 13(21.2)(e)(iv), where a partnership otherwise ceases to exist at any time after the particular time, 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 paragraph, 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 clauses 13(21.2)(e)(iii)(A) to 13(21.2)(e)(iii)(E), andfor the purposes of applying this section and section 20 and any regulations made for the purpose of paragraph 20(1)(a) to the subsequent owner,the subsequent owner’s capital cost of the transferred property is deemed to be the amount that was the transferor’s capital cost of the transferred property, andthe amount by which the transferor’s capital cost of the transferred property exceeds its fair market value at the particular time is deemed to have been deducted under paragraph 20(1)(a) by the subsequent owner in respect of property of that class in computing income for taxation years that ended before the particular time.[Repealed, 2013, c. 34, s. 175]Loss restriction eventIf at any time a taxpayer is subject to a loss restriction event and, within the 12-month period that ended immediately before that time, the taxpayer, a partnership of which the taxpayer was a majority-interest partner or a trust of which the taxpayer was a majority-interest beneficiary (as defined in subsection 251.1(3)) acquired depreciable property (other than property that was held, by the taxpayer, partnership or trust or by a person that would be affiliated with the taxpayer if section 251.1 were read without reference to the definition controlled in subsection 251.1(3), throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the taxpayer, partnership or trust) that was not used, or acquired for use, by the taxpayer, partnership or trust in a business that was carried on by it immediately before the 12-month period begansubject to paragraph (b), for the purposes of the description of A in the definition undepreciated capital cost in subsection (21) and of sections 127, 127.1, 127.44, 127.45, 127.48 and 127.49, the property is deemednot to have been acquired by the taxpayer, partnership or trust, as the case may be, before that time, andto have been acquired by it immediately after that time; andif the property was disposed of by the taxpayer, partnership or trust, as the case may be, before that time and was not reacquired by it before that time, for the purposes of the description of A in that definition, the property is deemed to have been acquired by it immediately before the property was disposed of.Affiliation — subsection (24)For the purposes of subsection (24), if the taxpayer referred to in that subsection was formed or created in the 12-month period referred to in that subsection, the taxpayer is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was formed or created,in existence; andaffiliated with every person with whom it was affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) throughout the period that began when it was formed or created and that ended immediately before the time at which the taxpayer was subject to the loss restriction event referred to in that subsection.Restriction on deduction before available for useIn applying the definition undepreciated capital cost in subsection 13(21) for the purpose of paragraph 20(1)(a) and any regulations made for the purpose of that paragraph, in computing a taxpayer’s income for a taxation year from a business or property, no amount shall be included in calculating the undepreciated capital cost to the taxpayer of depreciable property of a prescribed class in respect of the capital cost to the taxpayer of a property of that class (other than property that is a certified production, as defined by regulations made for the purpose of paragraph 20(1)(a)) before the time the property is considered to have become available for use by the taxpayer.Interpretation — available for useFor the purposes of subsection 13(26) and subject to subsection 13(29), property (other than a building or part thereof) acquired by a taxpayer shall be considered to have become available for use by the taxpayer at the earliest ofthe time the property is first used by the taxpayer for the purpose of earning income,the time that is immediately after the beginning of the first taxation year of the taxpayer that begins more than 357 days after the end of the taxation year of the taxpayer in which the property was acquired by the taxpayer,the time that is immediately before the disposition of the property by the taxpayer,the time the propertyis delivered to the taxpayer, or to a person or partnership (in this paragraph referred to as the “other person”) that will use the property for the benefit of the taxpayer, or, where the property is not of a type that is deliverable, is made available to the taxpayer or the other person, andis capable, either alone or in combination with other property in the possession at that time of the taxpayer or the other person, of being used by or for the benefit of the taxpayer or the other person to produce a commercially saleable product or to perform a commercially saleable service, including an intermediate product or service that is used or consumed, or to be used or consumed, by or for the benefit of the taxpayer or the other person in producing or performing any such product or service,in the case of property acquired by the taxpayer for the prevention, reduction or elimination of air or water pollution created by operations carried on by the taxpayer or that would be created by such operations if the property had not been acquired, the time at which the property is installed and capable of performing the function for which it was acquired,in the case of property acquired bya corporation a class of shares of the capital stock of which is listed on a designated stock exchange,a corporation that is a public corporation because of an election made under subparagraph (b)(i) of the definition public corporation in subsection 89(1) or a designation made by the Minister in a notice to the corporation under subparagraph (b)(ii) of that definition, ora subsidiary wholly-owned corporation of a corporation described in subparagraph 13(27)(f)(i) or 13(27)(f)(ii),the end of the taxation year for which depreciation in respect of the property is first deducted in computing the earnings of the corporation in accordance with generally accepted accounting principles and for the purpose of the financial statements of the corporation for the year presented to its shareholders,in the case of property acquired by the taxpayer in the course of carrying on a business of farming or fishing, the time at which the property has been delivered to the taxpayer and is capable of performing the function for which it was acquired,in the case of property of a taxpayer that is a motor vehicle, trailer, trolley bus, aircraft or vessel for which one or more permits, certificates or licences evidencing that the property may be operated by the taxpayer in accordance with any laws regulating the use of such property are required to be obtained, the time all those permits, certificates or licences have been obtained,in the case of property that is a spare part intended to replace a part of another property of the taxpayer if required due to a breakdown of that other property, the time the other property became available for use by the taxpayer,in the case of a concrete gravity base structure and topside modules intended to be used at an oil production facility in a commercial discovery area (within the meaning assigned by section 2 of the Canada Petroleum Resources Act) on which the drilling of the first well that indicated the discovery began before March 5, 1982, in an offshore region prescribed for the purposes of subsection 127(9), the time the gravity base structure deballasts and lifts the assembled topside modules, andwhere the property is (within the meaning assigned by subsection 13(4.1)) a replacement for a former property described in paragraph 13(4)(a) that was acquired before 1990 or that became available for use at or before the time the replacement property is acquired, the time the replacement property is acquired,and, for the purposes of paragraph 13(27)(f), where depreciation is calculated by reference to a portion of the cost of the property, only that portion of the property shall be considered to have become available for use at the end of the taxation year referred to in that paragraph.IdemFor the purposes of subsection 13(26) and subject to subsection 13(29), property that is a building or part thereof of a taxpayer shall be considered to have become available for use by the taxpayer at the earliest ofthe time all or substantially all of the building is first used by the taxpayer for the purpose for which it was acquired,the time the construction of the building is complete,the time that is immediately after the beginning of the taxpayer’s first taxation year that begins more than 357 days after the end of the taxpayer’s taxation year in which the property was acquired by the taxpayer,the time that is immediately before the disposition of the property by the taxpayer, andwhere the property is (within the meaning assigned by subsection 13(4.1)) a replacement for a former property described in paragraph 13(4)(a) that was acquired before 1990 or that became available for use at or before the time the replacement property is acquired, the time the replacement property is acquired,and, for the purpose of this subsection, a renovation, alteration or addition to a particular building shall be considered to be a building separate from the particular building.IdemFor the purposes of subsection 13(26), where a taxpayer acquires property (other than a building that is used or is to be used by the taxpayer principally for the purpose of gaining or producing gross revenue that is rent) in the taxpayer’s first taxation year (in this subsection referred to as the “particular year”) that begins more than 357 days after the end of the taxpayer’s taxation year in which the taxpayer first acquired property after 1989, that is part of a project of the taxpayer, or in a taxation year subsequent to the particular year, and at the end of any taxation year (in this subsection referred to as the “inclusion year”) of the taxpayerthe property can reasonably be considered to be part of the project, andthe property has not otherwise become available for use,if the taxpayer so elects in prescribed form filed with the taxpayer’s return of income under this Part for the particular year, that particular portion of the property the capital cost of which does not exceed the amount, if any, by whichthe total of all amounts each of which is the capital cost to the taxpayer of a depreciable property (other than a building that is used or is to be used by the taxpayer principally for the purpose of gaining or producing gross revenue that is rent) that is part of the project, that was acquired by the taxpayer after 1989 and before the end of the taxpayer’s last taxation year that ends more than 357 days before the beginning of the inclusion year and that has not become available for use at or before the end of the inclusion year (except where the property has first become available for use before the end of the inclusion year because of this subsection or paragraph 13(27)(b) or 13(28)(c))exceedsthe total of all amounts each of which is the capital cost to the taxpayer of a depreciable property, other than the particular portion of the property, that is part of the project to the extent that the property is considered, because of this subsection, to have become available for use before the end of the inclusion yearshall be considered to have become available for use immediately before the end of the inclusion year.Transfers of propertyNotwithstanding subsections 13(27) to 13(29), for the purpose of subsection 13(26), property of a taxpayer shall be deemed to have become available for use by the taxpayer at the earlier of the time the property was acquired by the taxpayer and, if applicable, a prescribed time, wherethe property was acquiredfrom a person with whom the taxpayer was not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)) at the time the property was acquired by the taxpayer, orin the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) would not apply to the dividend because of paragraph 55(3)(b); andbefore the property was acquired by the taxpayer, it became available for use (determined without reference to paragraphs 13(27)(c) and 13(28)(d)) by the person from whom it was acquired.IdemFor the purposes of paragraphs 13(27)(b) and 13(28)(c) and subsection 13(29), where a property of a taxpayer was acquired from a person (in this subsection referred to as “the transferor”)with whom the taxpayer was, at the time the taxpayer acquired the property, not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)), orin the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) would not apply to the dividend because of the application of paragraph 55(3)(b), the taxpayer shall be deemed to have acquired the property at the time it was acquired by the transferor.Leased propertyWhere a taxpayer has leased property that is depreciable property of a person with whom the taxpayer does not deal at arm’s length, the amount, if any, by whichthe total of all amounts paid or payable by the taxpayer for the use of, or the right to use, the property in a particular taxation year and before the time the property would have been considered to have become available for use by the taxpayer if the taxpayer had acquired the property, and that, but for this subsection, would be deductible in computing the taxpayer’s income for any taxation yearexceedsthe total of all amounts received or receivable by the taxpayer for the use of, or the right to use, the property in the particular taxation year and before that time and that are included in the income of the taxpayer for any taxation year shall be deemed to be a cost to the taxpayer of a property included in Class 13 in Schedule II to the Income Tax Regulations and not to be an amount paid or payable for the use of, or the right to use, the property.Consideration given for depreciable propertyFor greater certainty, where a person acquires a depreciable property for consideration that can reasonably be considered to include a transfer of property, the portion of the cost to the person of the depreciable property attributable to the transfer shall not exceed the fair market value of the transferred property.GoodwillWhere a taxpayer carries on a particular business,there is deemed to be a single goodwill property in respect of the particular business;if at any time the taxpayer acquires goodwill as part of an acquisition of all or a part of another business that is carried on, after the acquisition, as part of the particular business — or is deemed by subsection (35) to acquire goodwill in respect of the particular business — the cost of the goodwill is added at that time to the cost of the goodwill property in respect of the particular business;if at any time the taxpayer disposes of goodwill as part of the disposition of part of the particular business, receives proceeds of disposition a portion of which is attributable to goodwill and continues to carry on the particular business or is deemed by subsection (37) to dispose of goodwill in respect of the particular business,the taxpayer is deemed to dispose at that time of a portion of the goodwill property in respect of the particular business having a cost equal to the lesser of the cost of the goodwill property in respect of the particular business otherwise determined and the portion of the proceeds attributable to goodwill, andthe cost of the goodwill property in respect of the particular business is reduced at that time by the amount determined under subparagraph (i); andif paragraph (c) applies to more than one disposition of goodwill at the same time, that paragraph and subsection (39) apply as if each disposition had occurred separately in the order designated by the taxpayer or, if the taxpayer does not designate an order, in the order designated by the Minister.Outlays not relating to propertyIf at any time a taxpayer makes or incurs an outlay or expense on account of capital for the purpose of gaining or producing income from a business carried on by the taxpayer, the taxpayer is deemed to acquire at that time goodwill in respect of the business with a cost equal to the amount of the outlay or expense if no portion of the amount isthe cost, or any part of the cost, of a property;deductible in computing the taxpayer’s income from the business (determined without reference to this subsection);not deductible in computing the taxpayer’s income from the business because of any provision of this Act (other than paragraph 18(1)(b)) or the Income Tax Regulations;paid or payable to a creditor of the taxpayer as, on account of or in lieu of payment of, any debt, or on account of the redemption, cancellation or purchase of any bond or debenture; orwhere the taxpayer is a corporation, partnership or trust, paid or payable to a person as a shareholder, partner or beneficiary, as the case may be, of the taxpayer.No addition to goodwillFor greater certainty, no amount paid or payable may be included in Class 14.1 of Schedule II to the Income Tax Regulations, if the amount isin consideration for the purchase of shares; orin consideration for the cancellation or assignment of an obligation to pay consideration referred to in paragraph (a).Receipts not relating to propertyIf at any time in a taxation year a taxpayer has or may become entitled to receive an amount (in this subsection referred to as the receipt) on account of capital in respect of a business that is or was carried on by the taxpayer, the taxpayer is deemed to dispose, at that time, of goodwill in respect of the business for proceeds of disposition equal to the amount by which the receipt exceeds the total of all outlays or expenses that were made or incurred by the taxpayer for the purpose of obtaining the receipt and that were not otherwise deductible in computing the taxpayer’s income, if the following conditions are satisfied (determined without reference to this subsection):the receipt is not included in computing the taxpayer’s income, or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts for the taxation year or a preceding taxation year;the receipt does not reduce the cost or capital cost of a property or the amount of an outlay or expense; andthe receipt is not included in computing any gain or loss of the taxpayer from a disposition of a capital property.Class 14.1 — transitional rulesIf a taxpayer has incurred an eligible capital expenditure in respect of a business before January 1, 2017,at the beginning of that day, the total capital cost of all property of the taxpayer included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is deemed to be the amount determined by the formula4/3 × (A + B – C)whereAis the amount that is the cumulative eligible capital in respect of the business at the beginning of that day,Bis the amount determined for F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day) in respect of the business at the beginning of that day, andCis the amount by which the total of all amounts determined, in respect of the business, for E or F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day), exceeds the total of all amounts determined for A to D.1 in that definition in respect of the business at the beginning of that day, including any adjustment required by subparagraph (d)(i);at the beginning of that day, the capital cost of each property of the taxpayer included in the class in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is to be determined as follows:the taxpayer shall designate the order in which the capital cost of each property that is not the goodwill property is determined and, if the taxpayer does not designate an order, the Minister may designate the order,the capital cost of a particular property that is not the goodwill property in respect of the business is deemed to be the lesser of the eligible capital expenditure of the taxpayer in respect of the particular property and the amount by which the total capital cost of the class determined under paragraph (a) exceeds the total of all amounts each of which is an amount deemed by this subparagraph to be the capital cost of a property that is determined in advance of the determination of the capital cost of the particular property, andthe capital cost of the goodwill property is deemed to be the amount by which the total capital cost of the class exceeds the total of all amounts each of which is an amount deemed by subparagraph (ii) to be the capital cost of a property;an amount is deemed to have been allowed to the taxpayer in respect of property of the class under regulations made under paragraph 20(1)(a) in computing the taxpayer’s income for taxation years ending before that day equal to the amount by whichthe total of the total capital cost of the class and the amount determined for C in paragraph (a)exceedsthe amount determined for A in paragraph (a); andif no taxation year of the taxpayer ends immediately before that day and the taxpayer would have had a particular amount included, because of paragraph 14(1)(b) (as that paragraph applied immediately before that day), in computing the taxpayer’s income from the business for the particular taxation year that includes that day if the particular year had ended immediately before that day,for the purposes of the formula in paragraph (a), 3/2 of the particular amount is to be included in computing the amount for B of the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day),the taxpayer is deemed to dispose of a capital property in respect of the business immediately before that day for proceeds of disposition equal to twice the particular amount,if the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year, subparagraph (ii) does not apply and an amount equal to the particular amount is to be included in computing the taxpayer’s income from the business for the particular year,if, on or after that day and in the particular year, the taxpayer acquires a property included in the class in respect of the business, or is deemed by subsection (35) to acquire goodwill in respect of the business, and the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year,for the purposes of subparagraphs (ii) and (iii), the particular amount is to be reduced by the lesser of the particular amount otherwise determined and 1/2 of the capital cost of the property or goodwill acquired (determined without reference to clause (B)), andthe capital cost of the property or goodwill acquired, as the case may be, is to be reduced by twice the amount by which the particular amount is reduced under clause (A), andif, in the particular year and before that day, the taxpayer disposed of a qualified farm or fishing property (as defined in subsection 110.6(1)) that was an eligible capital property of the taxpayer, the capital property disposed of under subparagraph (ii), if any, is deemed to be a qualified farm or fishing property to the extent of the lesser ofthe proceeds of disposition of the capital property, andthe amount by which the proceeds of disposition of the qualified farm or fishing property exceed its cost.Class 14.1 — transitional ruleIf at any time a taxpayer disposes of a particular property included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business and none of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply to the disposition, then for the purpose of determining the undepreciated capital cost of the class, the taxpayer is deemed to have acquired a property of the class immediately before that time with a capital cost equal to the least of 1/4 of the proceeds of disposition of the particular property, 1/4 of the capital cost of the particular property andif the particular property is not goodwill and is acquired before January 1, 2017 by the taxpayer, 1/4 of the capital cost of the particular property;if the particular property is not goodwill, is acquired on or after that day by the taxpayer and subsection (40) deems an amount to have been allowed under paragraph 20(1)(a) in respect of the taxpayer’s acquisition of the particular property, that amount;if the particular property (other than a property to which paragraph (b) applies) is not goodwill and is acquired on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnership;if the particular property is goodwill, the amount by whichthe total of all amounts each of which is1/4 of the amount determined under subparagraph (38)(b)(iii) in respect of the business,if goodwill is acquired on or after that day by the taxpayer and subsection (40) deems an amount to have been allowed under paragraph 20(1)(a) in respect of the taxpayer’s acquisition of the goodwill, that amount, orif goodwill is acquired (other than an acquisition in respect of which clause (B) applies) on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnershipexceedsthe total of all amounts each of which is the capital cost of a property deemed by this subsection to have been acquired by the taxpayer at or before that time in respect of another disposition of goodwill in respect of the business; andin any other case, nil.Class 14.1 — transitional ruleIf at any time a taxpayer acquires a particular property included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business, the acquisition of the particular property is part of a transaction or series of transactions or events that includes a disposition (in this subsection referred to as the prior disposition) at or before that time of the particular property, or a similar property, by the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer and subsection (39) applies in respect of the prior disposition, then for the purpose of determining the undepreciated capital cost of the class, an amount is deemed to have been allowed under paragraph 20(1)(a) to the taxpayer in respect of the particular property in computing the taxpayer’s income for taxation years ending before the acquisition equal to the lesser of the capital cost of the property deemed by subsection (39) to be acquired in respect of the prior disposition and 1/4 of the capital cost of the particular property.Class 14.1 — transitional ruleFor the purposes of subsections (38) to (40) and (42), paragraph 20(1)(hh.1), subsections 40(13) to (16) and paragraph 79(4)(b), cumulative eligible capital, eligible capital expenditure, eligible capital property and exempt gains balance have the meanings that would be assigned to those expressions if the Act read as it did immediately before 2017.Class 14.1 — transitional rulesIf a taxpayer owns property included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business at the beginning of 2017, that was an eligible capital property in respect of the business immediately before 2017,for the purposes of the Act and its regulations (other than this section, section 20 and any regulations made for the purposes of paragraph 20(1)(a)), if the amount determined for A in the definition cumulative eligible capital in subsection 14(5) would have been increased immediately before 2017 if the property had been disposed of immediately before that time, the capital cost of the property is deemed to be increased by 4/3 of the amount of that increase;for purposes of this section, section 20 and any regulations made for the purposes of paragraph 20(1)(a), if the taxpayer was deemed by subsection 14(12) to continue to own eligible capital property in respect of the business and not to have ceased to carry on the business until a time that is after 2016, the taxpayer is deemed to continue to own the property and to continue to carry on the business until the time that is immediately before the first time one of the events that would be described in any of paragraphs 14(12)(c) to (g) (as they read immediately before 2017, if the reference to “eligible capital property” in paragraph 14(12)(d) were read as “eligible capital property or capital property”) occurs;for the purposes of the descriptions of D.1 and K in the definition undepreciated capital cost in subsection (21), the taxpayer is deemed not to have paid or received any amounts before 2017 as or on account of an existing or proposed countervailing or anti-dumping duty in respect of depreciable property of the class; andsubsection (7.1) does not apply to assistance that a taxpayer received or is entitled to receive before 2017 in respect of a property that was an eligible capital property immediately before 2017.Transitional ruleAn amount is to be included in computing a taxpayer’s income from a business for a taxation year, and is deemed not to be a taxable capital gain (other than for the purposes of the definition capital dividend account in subsection 89(1)), to the extentthe amount is part of the proceeds of disposition of eligible capital property (as defined in section 54, as it read on December 31, 2016) that is in respect of the business;the disposition is under an agreement between the taxpayer and a purchaser that deals at arm’s length with the taxpayer;the disposition occurred before March 22, 2016;the amount becomes receivable under the agreement after 2016 and before 2024 because of a condition of the agreement, ifat the end of 2016, it was uncertain whether the condition would be met, andthe condition is met after 2016;the amount would, in the absence of this subsection, be a taxable capital gain;the amount would have been included in computing the taxpayer’s income from the business if the amount had become receivable on December 31, 2016; andthe taxpayer files an election with the Minister, no later than the filing-due date for the taxpayer’s first taxation year that ends after August 9, 2022 to have this subsection apply in respect of the amount.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 13; 1994, c. 7, Sch. II, s. 9, Sch. VIII, s. 4, c. 21, s. 7; 1995, c. 1, s. 44, c. 3, s. 4, c. 21, s. 2; 1997, c. 25, s. 3; 1998, c. 19, s. 73; 1999, c. 22, s. 6; 2001, c. 17, ss. 6, 196; 2007, c. 35, s. 68; 2013, c. 34, ss. 54, 92, 175, c. 40, s. 6; 2016, c. 12, s. 32019, c. 29, s. 22021, c. 23, s. 42022, c. 10, s. 32023, c. 26, s. 52024, c. 15, s. 42024, c. 17, s. 62024, c. 17, s. 80
[Repealed, 2016, c. 12, s. 4][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 14; 1994, c. 7, Sch. II, s. 10, c. 21, s. 8; 1995, c. 3, s. 5, c. 21, s. 3; 1998, c. 19, s. 74; 2001, c. 17, ss. 7, 197; 2007, c. 2, s. 3; 2013, c. 34, ss. 55, 93, 176, c. 40, s. 7; 2014, c. 39, s. 3; 2016, c. 12, s. 4
Benefit conferred on shareholderIf, at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholderwhere the corporation is resident in Canada at the time,by the reduction of the paid-up capital of the corporation,by the redemption, acquisition or cancellation by the corporation of shares of its capital stock,on the winding-up, discontinuance or reorganization of the corporation’s business, orby way of a transaction to which subsection 88(1) or (2) applies;where the corporation is not resident in Canada at the time,by way of a distribution to which subsection 86.1(1) applies,by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies,by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, oron the winding-up, or liquidation and dissolution, of the corporation;by the payment of a dividend or a stock dividend;by conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph,the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation ifthe voting rights attached to the particular class differ from the voting rights attached to the other class, andthere are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, andrights are not considered identical if the cost of acquiring the rights differs; orby an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies.Conferring of benefitNotwithstanding subsection (1), if in a taxation year a corporation has paid a stock dividend to a person and it may reasonably be considered that one of the purposes of that payment was to significantly alter the value of the interest of any specified shareholder of the corporation, the fair market value of the stock dividend shall, except to the extent that it is otherwise included in computing that person’s income under any of paragraphs 82(1)(a), (a.1) and (c) to (e), be included in computing the income of that person for the year.Forgiveness of shareholder debtFor the purpose of subsection 15(1), the value of the benefit where an obligation issued by a debtor is settled or extinguished at any time shall be deemed to be the forgiven amount at that time in respect of the obligation.Forgiven amountFor the purpose of subsection 15(1.2), the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by subsection 80(1) ifthe obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor;no amount included in computing income (otherwise than because of paragraph 6(1)(a)) because of the obligation being settled or extinguished were taken into account;the definition forgiven amount in subsection 80(1) were read without reference to paragraphs (f) and (h) of the description B in that definition; andsection 80 were read without reference to paragraphs (2)(b) and (q) of that section.Cost of property or serviceTo the extent that the cost to a person of purchasing a property or service or an amount payable by a person for the purpose of leasing property is taken into account in determining an amount required under this section to be included in computing a taxpayer’s income for a taxation year, that cost or amount payable, as the case may be, shall include any tax that was payable by the person in respect of the property or service or that would have been so payable if the person were not exempt from the payment of that tax because of the nature of the person or the use to which the property or service is to be put.Interpretation — subsection (1)For the purposes of this subsection and subsection (1),a contemplated shareholder of a corporation isa person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, ora member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation;a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership;a benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person — if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm’s length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be; andfor the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm’s length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested.[Repealed, 2018, c. 27, s. 2]Division of corporation under foreign lawsIf a non-resident corporation (in this subsection referred to as the “original corporation”) governed by the laws of a foreign jurisdiction undergoes a division under those laws that results in all or part of its property and liabilities becoming the property and liabilities of one or more other non-resident corporations (each of which is referred to in this subsection as a “new corporation”) and, as a consequence of the division, a shareholder of the original corporation acquires one or more shares (referred to in this subsection as “new shares”) of the capital stock of a new corporation at a particular time, the following rules apply:except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies (determined without reference to this subsection) to the acquisition of the new sharesin the case where, for each class of shares of the capital stock of the original corporation of which shares are held by the shareholder immediately before the division, new shares are received at the particular time by shareholders of that class on a pro rata basis in respect of all the shares (referred to in this subsection as the “original shares”) of that classat the particular time, the original corporation is deemed to have distributed, and the shareholder is deemed to have received, as a dividend in kind in respect of the original shares, the new shares acquired by the shareholder at the particular time, andthe amount of the dividend in kind received by the shareholder in respect of an original share is deemed to be equal to the fair market value, immediately after the particular time, of the new shares acquired by the shareholder at the particular time in respect of the original share, andin any case where subparagraph (i) does not apply, the original corporation is deemed, at the particular time, to have conferred a benefit on the shareholder equal to the total fair market value, at that time, of the new shares acquired by the shareholder as a consequence of the division;any gain or loss of the original corporation from a distribution of the new shares as a consequence of the division is deemed to be nil; andeach property of the original corporation that becomes at any time (referred to in this paragraph as the “disposition time”) property of the new corporation as a consequence of the division is deemed to bedisposed of by the original corporation immediately before the disposition time for proceeds of disposition equal to the property’s fair market value, andacquired by the new corporation at the disposition time at a cost equal to the amount determined under subparagraph (i) to be the original corporation’s proceeds of disposition.Shareholder debtWhere a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) isa shareholder of a particular corporation,connected with a shareholder of a particular corporation, ora member of a partnership, or a beneficiary of a trust, that is a shareholder of a particular corporationand the person or partnership has in a taxation year received a loan from or become indebted to (otherwise than by way of a pertinent loan or indebtedness) the particular corporation, any other corporation related to the particular corporation or a partnership of which the particular corporation or a corporation related to the particular corporation is a member, the amount of the loan or indebtedness is included in computing the income for the year of the person or partnership.Meaning of connectedFor the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person isa foreign affiliate of the particular corporation; ora foreign affiliate of a person resident in Canada with which the particular corporation does not deal at arm’s length.Pertinent loan or indebtednessFor the purposes of subsection (2) and subject to subsection 17.1(3), pertinent loan or indebtedness means a loan received, or an indebtedness incurred, at any time, by a non-resident corporation (in this subsection referred to as the “subject corporation”), or by a partnership of which the subject corporation is, at that time, a member, that is an amount owing to a corporation resident in Canada (in this subsection and subsections (2.12) and (2.14) referred to as the “CRIC”) or to a qualifying Canadian partnership in respect of the CRIC and in respect of which amount owing all of the following apply:subsection (2) would, in the absence of this subsection, apply to the amount owing;the amount becomes owing after March 28, 2012;at that time, the CRIC is controlled by a non-resident corporation thatis the subject corporation, ordoes not deal at arm’s length with the subject corporation; andeitherin the case of an amount owing to the CRIC, the CRIC and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for the taxation year that includes that time, orin the case of an amount owing to the qualifying Canadian partnership, all the members of the qualifying Canadian partnership and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for its taxation year in which ends the fiscal period of the qualifying Canadian partnership that includes that time.Late-filed electionsWhere an election referred to in paragraph (2.11)(d) was not made on or before the day on or before which the election was required by that paragraph to be made, the election is deemed to have been made on that day if the election is made on or before the day that is three years after that day and the penalty in respect of the election is paid by the CRIC when the election is made.Penalty for late-filed electionFor the purposes of subsection (2.12), the penalty in respect of an election referred to in that subsection is the amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period commencing with the day on or before which the election is required by paragraph (2.11)(d) to be made and ending on the day the election is made.PartnershipsFor purposes of this subsection, subsection (2.11), section 17.1 and subsection 18(5),a qualifying Canadian partnership, at any time in respect of a CRIC, means a partnership each member of which is, at that time, the CRIC or another corporation resident in Canada to which the CRIC is, at that time, related; anda person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership.MergersFor the purposes of subsections (2.11) and (2.14),if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; andif there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.Back-to-back arrangement — applicationSubsection (2.17) applies at any time ifat that time, a person or partnership (referred to in this subsection and subsections (2.17) to (2.192) as the intended borrower) has an amount outstanding as or on account of a debt or other obligation to pay an amount (in this subsection and subsections (2.17) to (2.192) referred to as the shareholder debt) to a person or partnership (in this subsection and subsections (2.17) to (2.192) referred to as the immediate funder);subsection (2) would not, in the absence of this subsection and subsection (2.17), apply to the shareholder debt;at that time, a funder, in respect of a particular funding arrangement,has an amount outstanding as or on account of a debt or other obligation to pay an amount (other than a debt or other obligation to pay an amount to which subsection (2) applies or would apply if it were not a pertinent loan or indebtedness, as defined in subsection (2.11)) to a person or partnership that meets either of the following conditions:recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a funding arrangement, orit can reasonably be concluded that all or a portion of the particular funding arrangement was entered into or was permitted to remain outstanding becauseall or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, orthe funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, orhas a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership andthe existence of the specified right is required under the terms and conditions of the particular funding arrangement, orit can reasonably be concluded that all or a portion of the particular funding arrangement was entered into, or was permitted to remain in effect, becausethe specified right was granted, orthe funder anticipated that the specified right would be granted; andat that time, one or more funders is an ultimate funder.Back-to-back arrangement — consequencesIf this subsection applies at a particular time, then for the purposes of this section and section 80.4, the intended borrower is deemed to receive a loan from each particular ultimate funder at the particular time, the amount of which is equal to the amount determined by the formulaA × B/C – (D – E)whereAis the lesser ofthe amount outstanding as or on account of the shareholder debt at the particular time, andthe total of all amounts, each of which is, at the particular time,an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, orthe fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;Bis the total of all amounts, each of which is, at the particular time,an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, orthe fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;Cis the total amount determined under paragraph (b) of the description of A;Dis the total of all amounts, each of which is, in respect of the shareholder debt, an amount that the intended borrower has been deemed by this subsection to have received from the particular ultimate funder as a loan at any time before the particular time; andEis the total amount of any repayments deemed by subsections (2.19) and (2.191) to have occurred before the particular time, in respect of any deemed loans from the particular ultimate funder that are referred to in the description of D.Back-to-back arrangement — conditions for deemed repaymentSubsection (2.19) applies in respect of an intended borrower and a particular ultimate funder at a particular time ifprior to the particular time, subsection (2.17) has applied in respect of a shareholder debt to deem one or more loans to have been received by the intended borrower from the particular ultimate funder; andat the particular time,an amount owing in respect of the shareholder debt is repaid in whole or in part,an amount owing in respect of a debt or other obligation owing to the particular ultimate funder by a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt is repaid in whole or in part, oreitherthere is a decrease in the fair market value of a property in respect of which a specified right was granted by the particular ultimate funder to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, ora right described in clause (A) is extinguished.Back-to-back arrangement — deemed repaymentIf this subsection applies in respect of an intended borrower and a particular ultimate funder at a particular time,the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the deemed loans referred to in paragraph (2.18)(a) at the particular time; andthe total amount of the deemed repayments referred to in paragraph (a) is to be determined by the following formula:A – B – CwhereAis the total of all amounts, each of which is the amount of a loan deemed by subsection (2.17) to have been received, at any time before the particular time, by the intended borrower from the particular ultimate funder in respect of the shareholder debt,Bis the total of all amounts deemed by this subsection to have been repaid, at any time before the particular time, by the intended borrower in respect of any loans referred to in the description of A, andCis the amount determined by the formulaD × E/FwhereDis the lesser ofthe amount outstanding as or on account of the shareholder debt, immediately after the particular time, andthe total of all amounts, each of which is, immediately after the particular time,an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, orthe fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt,Eis the total of all amounts, each of which is, immediately after the particular timean amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, orthe fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, andFis the amount determined under subparagraph (ii) in the description of D.Negative amountsIf, in the absence of section 257, the formula in subsection (2.17) would result in a negative amount at a particular time,the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the loans deemed by subsection (2.17) to have been received by the intended borrower from the particular ultimate funder before the particular time; andthe total amount of the deemed repayments referred to in paragraph (a) is equal to the absolute value of that negative amount.Back-to-back arrangement — definitionsThe following definitions apply in this subsection and subsections (2.16) to (2.191).funder, in respect of a funding arrangement, meansif the funding arrangement is described in paragraph (a) of the definition funding arrangement, the immediate funder;if the funding arrangement is described in paragraph (b) of the definition funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; anda person or partnership that does not deal at arm’s length with a person or partnership referred to in paragraph (a) or (b). (bailleur de fonds)funding arrangement meansthe shareholder debt; andeach debt or other obligation or specified right, owing by or granted to a funder, in respect of a particular funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (2.16)(c)(i) or (ii) in respect of a funding arrangement. (mécanisme de financement)specified right has the same meaning as in subsection 18(5). (droit déterminé) ultimate funder means a funder, if subsection (2) would apply to the shareholder debt if the creditor under the shareholder debt were the funder instead of the immediate funder. (bailleur de fonds ultime) When s. 15(2) not to apply — non-resident personsSubsection 15(2) does not apply to indebtedness between non-resident persons.When s. 15(2) not to apply – ordinary lending businessSubsection (2) does not apply to a debt that arose in the ordinary course of the creditor’s business or a loan made in the ordinary course of the lender’s ordinary business of lending money (other than a business of lending money if, at any time during which the loan is outstanding, less than 90% of the aggregate outstanding amount of the loans of the business is owing by borrowers that deal at arm’s length with the lender) where, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the debt or loan within a reasonable time.Interpretation – partnershipsFor the purposes of this subsection and subsection (2.3),a person or partnership that is a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership; anda borrower shall be considered to deal at arm’s length with a lender only iffor greater certainty, the borrower and the lender deal with each other at arm’s length,where either the borrower or the lender is a partnership and the other party is not, each member of the partnership deals at arm’s length with the other party, andwhere both the borrower and the lender are partnerships, the borrower and each member of the borrower deal at arm’s length with the lender and each member of the lender.When s. 15(2) not to apply — certain employeesSubsection 15(2) does not apply to a loan made or a debt that arosein respect of an individual who is an employee of the lender or creditor but not a specified employee of the lender or creditor,in respect of an individual who is an employee of the lender or creditor or who is the spouse or common-law partner of an employee of the lender or creditor to enable or assist the individual to acquire a dwelling or a share of the capital stock of a cooperative housing corporation acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the corporation, where the dwelling is for the individual’s habitation,where the lender or creditor is a particular corporation, in respect of an employee of the particular corporation or of another corporation that is related to the particular corporation, to enable or assist the employee to acquire from the particular corporation, or from another corporation related to the particular corporation, previously unissued fully paid shares of the capital stock of the particular corporation or the related corporation, as the case may be, to be held by the employee for the employee’s own benefit, orin respect of an employee of the lender or creditor to enable or assist the employee to acquire a motor vehicle to be used by the employee in the performance of the duties of the employee’s office or employment,whereit is reasonable to conclude that the employee or the employee’s spouse or common-law partner received the loan, or became indebted, because of the employee’s employment and not because of any person’s share-holdings, andat the time the loan was made or the debt was incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time.When s. 15(2) not to apply — certain trustsSubsection 15(2) does not apply to a loan made or a debt that arose in respect of a trust wherethe lender or creditor is a private corporation;the corporation is the settlor and sole beneficiary of the trust;the sole purpose of the trust is to facilitate the purchase and sale of the shares of the corporation, or of another corporation related to the corporation, for an amount equal to their fair market value at the time of the purchase or sale, as the case may be, from or to the employees of the corporation or of the related corporation (other than employees who are specified employees of the corporation or of another corporation related to the corporation), as the case may be; andat the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time.When s. 15(2) not to apply — employee ownership trustsSubsection (2) does not apply to a loan made or a debt that arose in respect of a qualifying business transfer ifimmediately following the qualifying business transfer,the lender or creditor is a qualifying business, andthe borrower is the employee ownership trust that controls the qualifying business described in subparagraph (i);the sole purpose of the loan or the debt is to facilitate the qualifying business transfer; andat the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within 15 years of the qualifying business transfer.When s. 15(2) not to apply — repayment within one yearSubsection 15(2) does not apply to a loan or an indebtedness repaid within one year after the end of the taxation year of the lender or creditor in which the loan was made or the indebtedness arose, where it is established, by subsequent events or otherwise, that the repayment was not part of a series of loans or other transactions and repayments.Employee of partnershipFor the purpose of this section, an individual who is an employee of a partnership is deemed to be a specified employee of the partnership where the individual is a specified shareholder of one or more corporations that, in total, are entitled, directly or indirectly, to a share of any income or loss of the partnership, which share is not less than 10% of the income or loss.Interest or dividend on income bond or debentureAn amount paid as interest or a dividend by a corporation resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been paid by the corporation and received by the taxpayer as a dividend on a share of the capital stock of the corporation, unless the corporation is entitled to deduct the amount so paid in computing its income.Idem, where corporation not residentAn amount paid as interest or a dividend by a corporation not resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been received by the taxpayer as a dividend on a share of the capital stock of the corporation unless the amount so paid was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country.Automobile benefitFor the purposes of subsection (1), the value of the benefit to be included in computing a shareholder’s income for a taxation year with respect to an automobile made available to the shareholder, or a person related to the shareholder, by a corporation shall (except where an amount is determined under subparagraph 6(1)(e)(i) in respect of the automobile in computing the shareholder’s income for the year) be computed on the assumption that subsections 6(1), (1.1), (2) and (7) apply, with such modifications as the circumstances require, and as though references therein to “the employer” were read as “the corporation”.Application of ss. (1), (2) and (5)For greater certainty, subsections 15(1), (2) and (5) are applicable in computing, for the purposes of this Part, the income of a shareholder or of a person or partnership whether or not the corporation, or the lender or creditor, as the case may be, was resident or carried on business in Canada.[Repealed, 1998, c. 19, s. 75(3)]Deemed benefit to shareholder by corporationWhere an amount in respect of a loan or debt is deemed by section 80.4 to be a benefit received by a person or partnership in a taxation year, the amount is deemed for the purpose of subsection 15(1) to be a benefit conferred in the year on a shareholder, unless subsection 6(9) or paragraph 12(1)(w) applies to the amount.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 15; 1994, c. 7, Sch. II, s. 11, Sch, VIII, s. 5, c. 21, s. 9; 1995, c. 21, s. 4; 1997, c. 10, s. 269; 1998, c. 19, s. 75; 2000, c. 12, s. 142; 2007, c. 2, s. 43; 2012, c. 31, s. 5; 2013, c. 34, s. 177; 2014, c. 39, s. 4; 2016, c. 12, s. 5; 2018, c. 27, s. 22023, c. 26, s. 62024, c. 15, s. 5
[Repealed, 2023, c. 26, s. 7]
[Repealed, 2023, c. 26, s. 7]
Income and capital combinedWhere, under a contract or other arrangement, an amount can reasonably be regarded as being in part interest or other amount of an income nature and in part an amount of a capital nature, the following rules apply:the part of the amount that can reasonably be regarded as interest shall, irrespective of when the contract or arrangement was made or the form or legal effect thereof, be deemed to be interest on a debt obligation held by the person to whom the amount is paid or payable; andthe part of the amount that can reasonably be regarded as an amount of an income nature, other than interest, shall, irrespective of when the contract or arrangement was made or the form or legal effect thereof, be included in the income of the taxpayer to whom the amount is paid or payable for the taxation year in which the amount was received or became due to the extent it has not otherwise been included in the taxpayer’s income.Obligation issued at discountWhere, in the case of a bond, debenture, bill, note, mortgage or similar obligation issued after December 20, 1960 and before June 19, 1971 by a person exempt from tax under section 149, a non-resident person not carrying on business in Canada, or a government, municipality or municipal or other public body performing a function of government,the obligation was issued for an amount that is less than the principal amount of the obligation,the interest stipulated to be payable on the obligation, expressed in terms of an annual rate onthe principal amount thereof, if no amount is payable on account of the principal amount before the maturity of the obligation, orthe amount outstanding from time to time as or on account of the principal amount thereof, in any other case,is less than 5%, andthe yield from the obligation, expressed in terms of an annual rate on the amount for which the obligation was issued (which annual rate shall, if the terms of the obligation or any agreement relating thereto conferred on the holder thereof a right to demand payment of the principal amount of the obligation or the amount outstanding as or on account of the principal amount, as the case may be, before the maturity of the obligation, be calculated on the basis of the yield that produces the highest annual rate obtainable either on the maturity of the obligation or conditional on the exercise of any such right) exceeds the annual rate determined under paragraph 16(2)(b) by more than 1/3 thereof,the amount by which the principal amount of the obligation exceeds the amount for which the obligation was issued shall be included in computing the income of the first owner of the obligation who is a resident of Canada and is not a person exempt from tax under section 149 or a government, for the taxation year of that owner of the obligation in which he, she or it became the owner thereof.Obligation issued at discountWhere, in the case of a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (other than an obligation that is a prescribed debt obligation for the purpose of subsection 12(9)) issued after June 18, 1971 by a person exempt, because of section 149, from Part I tax on part or on all of the person’s income, a non-resident person not carrying on business in Canada or a government, municipality or municipal or other public body performing a function of government,the obligation was issued for an amount that is less than the principal amount of the obligation, andthe yield from the obligation, expressed in terms of an annual rate on the amount for which the obligation was issued (which annual rate shall, if the terms of the obligation or any agreement relating thereto conferred on the holder thereof a right to demand payment of the principal amount of the obligation or the amount outstanding as or on account of the principal amount, as the case may be, before the maturity of the obligation, be calculated on the basis of the yield that produces the highest annual rate obtainable either on the maturity of the obligation or conditional on the exercise of any such right) exceeds 4/3 of the interest stipulated to be payable on the obligation, expressed in terms of an annual rate onthe principal amount of the obligation, if no amount is payable on account of the principal amount before the maturity of the obligation, orthe amount outstanding from time to time as or on account of the principal amount thereof, in any other case,the amount by which the principal amount of the obligation exceeds the amount for which the obligation was issued shall be included in computing the income of the first owner of the obligationwho is resident in Canada,who is not a government nor a person exempt, because of section 149, from tax under this Part on all or part of the person’s taxable income, andof whom the obligation is a capital property,for the taxation year in which the owner acquired the obligation.Where s. (1) does not applySubsection 16(1) does not apply to any amount received by a taxpayer in a taxation yearas an annuity payment; orin satisfaction of the taxpayer’s rights under an annuity contract.IdemSubsection 16(1) does not apply in any case where subsection 16(2) or 16(3) applies.Indexed debt obligationsSubject to subsection 16(7) and for the purposes of this Act, where at any time in a taxpayer’s taxation yearan interest in an indexed debt obligation is held by the taxpayer,an amount determined in prescribed manner shall be deemed to be received and receivable by the taxpayer in the year as interest in respect of the obligation, andan amount determined in prescribed manner shall be deemed to be paid and payable in respect of the year by the taxpayer as interest under a legal obligation of the taxpayer to pay interest on borrowed money used for the purpose of earning income from a business or property;an indexed debt obligation is an obligation of the taxpayer,an amount determined in prescribed manner shall be deemed to be payable in respect of the year by the taxpayer as interest in respect of the obligation, andan amount determined in prescribed manner shall be deemed to be received and receivable by the taxpayer in the year as interest in respect of the obligation; andthe taxpayer pays or credits an amount in respect of an amount determined under subparagraph 16(6)(b)(i) in respect of an indexed debt obligation, the payment or crediting shall be deemed to be a payment or crediting of interest on the obligation.Impaired indexed debt obligationsParagraph 16(6)(a) does not apply to a taxpayer in respect of an indexed debt obligation for the part of a taxation year throughout which the obligation is impaired where an amount in respect of the obligation is deductible because of subparagraph 20(1)(l)(ii) in computing the taxpayer’s income for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 16; 1994, c. 7, Sch. VIII, s. 7, c. 21, s. 10; 1998, c. 19, s. 78; 2001, c. 17, s. 200
Leasing propertiesWhere a taxpayer (in this section referred to as the “lessee”) leases tangible property, or for civil law corporeal property, that is not prescribed property and that would, if the lessee acquired the property, be depreciable property of the lessee, from a person resident in Canada other than a person whose taxable income is exempt from tax under this Part, or from a non-resident person who holds the lease in the course of carrying on a business through a permanent establishment in Canada, as defined by regulation, any income from which is subject to tax under this Part, who owns the property and with whom the lessee was dealing at arm’s length (in this section referred to as the “lessor”) for a term of more than one year, if the lessee and the lessor jointly elect in prescribed form filed with their returns of income for their respective taxation years that include the particular time when the lease began, the following rules apply for the purpose of computing the income of the lessee for the taxation year that includes the particular time and for all subsequent taxation years:in respect of amounts paid or payable for the use of, or for the right to use, the property, the lease shall be deemed not to be a lease;the lessee shall be deemed to have acquired the property from the lessor at the particular time at a cost equal to its fair market value at that time;the lessee shall be deemed to have borrowed money from the lessor at the particular time, for the purpose of acquiring the property, in a principal amount equal to the fair market value of the property at that time;interest shall be deemed to accrue on the principal amount of the borrowed money outstanding from time to time, compounded semi-annually, not in advance, at the prescribed rate in effectat the earlier ofthe time, if any, before the particular time, at which the lessee last entered into an agreement to lease the property, andthe particular time, orwhere the lease provides that the amount payable by the lessee for the use of, or the right to use, the property varies according to prevailing interest rates in effect from time to time, and the lessee so elects, in respect of all of the property that is subject to the lease, in the lessee’s return of income under this Part for the taxation year of the lessee in which the lease began, at the beginning of the period for which the interest is being calculated;all amounts paid or payable by or on behalf of the lessee for the use of, or the right to use, the property in the year shall be deemed to be blended payments, paid or payable by the lessee, of principal and interest on the borrowed money outstanding from time to time, calculated in accordance with paragraph 16.1(1)(d), applied firstly on account of interest on principal, secondly on account of interest on unpaid interest and thirdly on account of unpaid principal, if any, and the amount, if any, by which any such payment exceeds the total of those amounts shall be deemed to be paid or payable on account of interest, and any amount deemed by reason of this paragraph to be a payment of interest shall be deemed to have been an amount paid or payable, as the case may be, pursuant to a legal obligation to pay interest in respect of the year on the borrowed money;at the time of the expiration or cancellation of the lease, the assignment of the lease or the sublease of the property by the lessee, the lessee shall (except where subsection 16.1(4) applies) be deemed to have disposed of the property at that time for proceeds of disposition equal to the amount, if any, by whichthe total ofthe amount referred to in paragraph 16.1(1)(c), andall amounts received or receivable by the lessee in respect of the cancellation or assignment of the lease or the sublease of the propertyexceedsthe total ofall amounts deemed under paragraph 16.1(1)(e) to have been paid or payable, as the case may be, by the lessee on account of the principal amount of the borrowed money, andall amounts paid or payable by or on behalf of the lessee in respect of the cancellation or assignment of the lease or the sublease of the property;for the purposes of subsections 13(5.2) and 13(5.3), each amount paid or payable by or on behalf of the lessee that would, but for this subsection, have been an amount paid or payable for the use of, or the right to use, the property shall be deemed to have been deducted in computing the lessee’s income as an amount paid or payable by the lessee for the use of, or the right to use, the property after the particular time;any amount paid or payable by or on behalf of the lessee in respect of the granting or assignment of the lease or the sublease of the property that would, but for this paragraph, be the capital cost to the lessee of a leasehold interest in the property shall be deemed to be an amount paid or payable, as the case may be, by the lessee for the use of, or the right to use, the property for the remaining term of the lease; andwhere the lessee elects under this subsection in respect of a property and, at any time after the lease was entered into, the owner of the property is a non-resident person who does not hold the lease in the course of carrying on a business through a permanent establishment in Canada, as defined by regulation, any income from which is subject to tax under this Part, for the purposes of this subsection the lease shall be deemed to have been cancelled at that time.Assignments and subleasesSubject to subsections 16.1(3) and 16.1(4), where at any particular time a lessee who has made an election under subsection 16.1(1) in respect of a leased property assigns the lease or subleases the property to another person (in this section referred to as the “assignee”),subsection 16.1(1) shall not apply in computing the income of the lessee in respect of the lease for any period after the particular time; andif the lessee and the assignee jointly elect in prescribed form filed with their returns of income under this Part for their respective taxation years that include the particular time, subsection 16.1(1) shall apply to the assignee as ifthe assignee leased the property at the particular time from the owner of the property for a term of more than one year, andthe assignee and the owner of the property jointly elected under subsection 16.1(1) in respect of the property with their returns of income under this Part for their respective taxation years that include the particular time.IdemSubject to subsection 16.1(4), where at any particular time a lessee who has made an election under subsection 16.1(1) in respect of a leased property assigns the lease or subleases the property to another person with whom the lessee is not dealing at arm’s length, the other person shall, for the purposes of subsection 16.1(1) and for the purposes of computing that person’s income in respect of the lease for any period after the particular time, be deemed to be the same person as, and a continuation of, the lessee, except that, notwithstanding paragraph 16.1(1)(b), that other person shall be deemed to have acquired the property from the lessee at the time that it was acquired by the lessee at a cost equal to the amount that would be the lessee’s proceeds of disposition of the property determined under paragraph 16.1(1)(f) if that amount were determined without reference to clauses 16.1(1)(f)(i)(B) and (ii)(B).Amalgamations and windings-upNotwithstanding subsection 16.1(2), where at any time a particular corporation that has made an election under subsection 16.1(1) in respect of a lease assigns the leaseby reason of an amalgamation (within the meaning assigned by subsection 87(1)), orin the course of the winding-up of a Canadian corporation in respect of which subsection 88(1) applies,to another corporation with which it does not deal at arm’s length, the other corporation shall, for the purposes of subsection 16.1(1) and for the purposes of computing its income in respect of the lease after that time, be deemed to be the same person as, and a continuation of, the particular corporation.Replacement propertyFor the purposes of subsection 16.1(1), where at any time a property (in this subsection referred to as a “replacement property”) is provided by a lessor to a lessee as a replacement for a similar property of the lessor (in this subsection referred to as the “original property”) that was leased by the lessor to the lessee, and the amount payable by the lessee for the use of, or the right to use, the replacement property is the same as the amount that was so payable in respect of the original property, the replacement property shall be deemed to be the same property as the original property.Additional propertyFor the purposes of subsection 16.1(1), where at any particular timean addition or alteration (in this subsection referred to as “additional property”) is made by a lessor to a property (in this subsection referred to as the “original property”) of the lessor that is the subject of a lease,the lessor and the lessee of the original property have jointly elected under subsection 16.1(1) in respect of the original property, andas a consequence of the addition or alteration, the total amount payable by the lessee for the use of, or the right to use, the original property and the additional property exceeds the amount so payable in respect of the original property,the following rules apply:the lessee shall be deemed to have leased the additional property from the lessor at the particular time,the term of the lease of the additional property shall be deemed to be greater than one year,the lessor and the lessee shall be deemed to have jointly elected under subsection 16.1(1) in respect of the additional property,the prescribed rate in effect at the particular time in respect of the additional property shall be deemed to be equal to the prescribed rate in effect in respect of the original property at the particular time,the additional property shall be deemed not to be prescribed property, andthe excess referred to in paragraph 16.1(6)(c) shall be deemed to be an amount payable by the lessee for the use of, or the right to use, the additional property.Renegotiation of leaseFor the purposes of subsection 16.1(1), where at any timea lease (in this subsection referred to as the “original lease”) of property is renegotiated in the course of a bona fide renegotiation, andas a result of the renegotiation, the amount payable by the lessee of the property for the use of, or the right to use, the property is altered in respect of a period after that time (otherwise than because of an addition or alteration to which subsection 16.1(6) applies),the original lease shall be deemed to have expired and the renegotiated lease shall be deemed to be a new lease of the property entered into at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 16.1; 1994, c. 7, Sch. II, s. 12; 1999, c. 22, s. 7; 2013, c. 34, s. 94
Amount owing by non-residentIf this subsection applies to a corporation resident in Canada in respect of an amount owing to the corporation (in this subsection referred to as the “debt”), the corporation shall include in computing its income for a taxation year the amount determined by the formulaA – BwhereAis the amount of interest that would be included in computing the corporation’s income for the year in respect of the debt if interest on the debt were computed at the prescribed rate for the period in the year during which the debt was outstanding; andBis the total of all amounts each of which isan amount included in computing the corporation’s income for the year as, on account of, in lieu of or in satisfaction of, interest in respect of the debt,an amount received or receivable by the corporation from a trust that is included in computing the corporation’s income for the year or a subsequent taxation year and that can reasonably be attributed to interest on the debt for the period in the year during which the debt was outstanding, oran amount included in computing the corporation’s income for the year or a subsequent taxation year under subsection 91(1) that can reasonably be attributed to interest on an amount owing (in this paragraph referred to as the “original debt”) — or if the amount of the original debt exceeds the amount of the debt, a portion of the original debt that is equal to the amount of the debt  — for the period in the year during which the debt was outstanding ifwithout the existence of the original debt, subsection (2) would not have deemed the debt to be owed by the non-resident person referred to in paragraph (1.1)(a),the original debt was owed by a non-resident person or a partnership each member of which is a non-resident person, andwhere subsection (11.2) applies to the original debt,an amount determined under paragraph (11.2)(a) or (b) in respect of the original debt is an amount referred to in paragraph (2)(a), and because of the amount referred to in paragraph (2)(a), the debt is deemed to be owed by the non-resident person referred to in paragraph (1.1)(a), andthe original debt was owing by an intermediate lender to an initial lender or by an intended borrower to an intermediate lender (within the meanings of those terms assigned by subsection (11.2)).Amount owing by non-residentSubsection (1) applies to a corporation resident in Canada in respect of an amount owing to the corporation if, at any time in a taxation year of the corporation,a non-resident person owes the amount to the corporation;the amount has been or remains outstanding for more than a year; andthe amount that would be determined for B in subsection (1), if that subsection applied, for the year in respect of the amount owing is less than the amount of interest that would be included in computing the corporation’s income for the year in respect of the amount owing if that interest were computed at a reasonable rate for the period in the year during which the amount was outstanding.Anti-avoidance rule — indirect loanFor the purpose of this section and subject to subsection (3), wherea non-resident person owes an amount at any time to a particular person or partnership (other than a corporation resident in Canada), andit is reasonable to conclude that the amount or a portion of the amount became owing, or was permitted to remain owing, to the particular person or partnership becausea corporation resident in Canada made a loan or transfer of property, orthe particular person or partnership anticipated that a corporation resident in Canada would make a loan or transfer of property,either directly or indirectly, in any manner whatever, to or for the benefit of any person or partnership (other than an exempt loan or transfer),the non-resident person is deemed at that time to owe to the corporation an amount equal to the amount, or the portion of the amount, as the case may be, owing to the particular person or partnership.Exception to anti-avoidance rule — indirect loanSubsection (2) does not apply to an amount owing at any time by a non-resident person to a particular person or partnership whereat that time, the non-resident person and the particular person or each member of the particular partnership, as the case may be, are controlled foreign affiliates of the corporation resident in Canada; orat that time,the non-resident person and the particular person are not related or the non-resident person and each member of the particular partnership are not related, as the case may be,the terms or conditions made or imposed in respect of the amount owing, determined without reference to any loan or transfer of property by a corporation resident in Canada described in paragraph (2)(b) in respect of the amount owing, are such that persons dealing at arm’s length would have been willing to enter into them at the time that they were entered into, andif there were an amount of interest payable on the amount owing at that time that would be required to be included in computing the income of a foreign affiliate of the corporation resident in Canada for a taxation year, that amount of interest would not be required to be included in computing the foreign accrual property income of the affiliate for that year.Anti-avoidance rule — loan through partnershipFor the purpose of this section, where a non-resident person owes an amount at any time to a partnership and subsection (2) does not deem the non-resident person to owe an amount equal to that amount to a corporation resident in Canada, the non-resident person is deemed at that time to owe to each member of the partnership, on the same terms as those that apply in respect of the amount owing to the partnership, that proportion of the amount owing to the partnership at that time thatthe fair market value of the member’s interest in the partnership at that timeis ofthe fair market value of all interests in the partnership at that time.Anti-avoidance rule — loan through trustFor the purpose of this section, where a non-resident person owes an amount at any time to a trust and subsection (2) does not deem the non-resident person to owe an amount equal to that amount to a corporation resident in Canada,where the trust is a non-discretionary trust at that time, the non-resident person is deemed at that time to owe to each beneficiary of the trust, on the same terms as those that apply in respect of the amount owing to the trust, that proportion of the amount owing to the trust thatthe fair market value of the beneficiary’s interest in the trust at that timeis ofthe fair market value of all the beneficial interests in the trust at that time; andin any other case, the non-resident person is deemed at that time to owe to each settlor in respect of the trust, on the same terms as those that apply in respect of the amount owing to the trust, an amount equal to the amount owing to the trust.Anti-avoidance rule — loan to partnershipFor the purpose of this section, where a particular partnership owes an amount at any time to any person or any other partnership (in this subsection referred to as the “lender”), each member of the particular partnership is deemed to owe at that time to the lender, on the same terms as those that apply in respect of the amount owing by the particular partnership to the lender, that proportion of the amount owing to the lender thatthe fair market value of the member’s interest in the particular partnership at that timeis ofthe fair market value of all interests in the particular partnership at that time.ExceptionSubsection (1) does not apply in respect of an amount owing to a corporation resident in Canada by a non-resident person if a tax has been paid under Part XIII on the amount owing, except that, for the purpose of this subsection, tax under Part XIII is deemed not to have been paid on that portion of the amount owing in respect of which an amount was repaid or applied under subsection 227(6.1).ExceptionSubsection (1) does not apply to a corporation resident in Canada for a taxation year of the corporation in respect of an amount owing to the corporation by a non-resident person if the non-resident person is a controlled foreign affiliate of the corporation throughout the period in the year during which the amount is owing to the extent that it is established that the amount owingarose as a loan or advance of money to the affiliate that the affiliate has used, throughout the period that began when the loan or advance was made and that ended at the earlier of the end of the year and the time at which the amount was repaid,for the purpose of earningincome from an active business, as defined in subsection 95(1), of the affiliate, orincome that was included in computing the income from an active business of the affiliate under subsection 95(2), orfor the purpose of making a loan or advance to another controlled foreign affiliate of the corporation where, if interest became payable on the loan or advance at any time in the period and the affiliate was required to include the interest in computing its income for a taxation year, that interest would not be required to be included in computing the affiliate’s foreign accrual property income for that year; orarose in the course of an active business, as defined in subsection 95(1), carried on by the affiliate throughout the period that began when the amount owing arose and that ended at the earlier of the end of the year and the time at which the amount was repaid.Borrowed moneySubsection (8.2) applies in respect of money (referred to in this subsection and in subsection (8.2) as “new borrowings”) that a controlled foreign affiliate of a particular corporation resident in Canada has borrowed from the particular corporation to the extent that the affiliate has used the new borrowingsto repay money (referred to in this subsection and in subsection (8.2) as “previous borrowings”) previously borrowed from any person or partnership, ifthe previous borrowings became owing after the last time at which the affiliate became a controlled foreign affiliate of the particular corporation, andthe previous borrowings were, at all times after they became owing, used for a purpose described in subparagraph (8)(a)(i) or (ii); orto pay an amount owing (referred to in this subsection and in subsection (8.2) as the “unpaid purchase price”) by the affiliate for property previously acquired from any person or partnership, ifthe property was acquired, and the unpaid purchase price became owing, by the affiliate after the last time at which it became a controlled foreign affiliate of the particular corporation,the unpaid purchase price is in respect of the property, andthroughout the period that began when the unpaid purchase price became owing by the affiliate and ended when the unpaid purchase price was so paid, the property had been used principally to earn income described in clause (8)(a)(i)(A) or (B).Deemed useTo the extent that this subsection applies in respect of new borrowings, the new borrowings are, for the purpose of subsection (8), deemed to have been used for the purpose for which the proceeds from the previous borrowings were used or were deemed by this subsection to have been used, or to acquire the property in respect of which the unpaid purchase price was payable, as the case may be.ExceptionSubsection (1) does not apply to a corporation resident in Canada for a taxation year of the corporation in respect of an amount owing to the corporation by a non-resident person ifthe corporation is not related to the non-resident person throughout the period in the year during which the amount owing is outstanding;the amount owing arose in respect of goods sold or services provided to the non-resident person by the corporation in the ordinary course of the business carried on by the corporation; andthe terms and conditions in respect of the amount owing are such that persons dealing at arm’s length would have been willing to enter into them at the time that they were entered into.Determination of whether related and controlled foreign affiliate statusFor the purpose of this section, in determining whether persons are related to each other and whether a non-resident corporation is a controlled foreign affiliate of a corporation resident in Canada at any time,each member of a partnership is deemed to own that proportion of the number of shares of a class of the capital stock of a corporation owned by the partnership at that time thatthe fair market value of the member’s interest in the partnership at that timeis ofthe fair market value of all interests in the partnership at that time; andeach beneficiary of a non-discretionary trust is deemed to own that proportion of the number of shares of a class of the capital stock of a corporation owned by the trust at that time thatthe fair market value of the beneficiary’s interest in the trust at that timeis ofthe fair market value of all the beneficial interests in the trust at that time.Determination of whether relatedFor the purpose of this section, in determining whether persons are related to each other at any time, each settlor in respect of a trust, other than a non-discretionary trust, is deemed to own the shares of a class of the capital stock of a corporation owned by the trust at that time.Determination of whether persons relatedFor the purposes of this section, in determining whether persons are related to each other at any time, any rights referred to in subparagraph 251(5)(b)(i) that exist at that time are deemed not to exist at that time to the extent that the exercise of those rights is prohibited at that time under a law of the country under the law of which the corporation was formed or last continued and is governed, that restricts the foreign ownership or control of the corporation.Back-to-back loansFor the purposes of subsection (2) and paragraph (3)(b), where a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intermediate lender”) makes a loan to a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “initial lender”)the loan made by the intermediate lender to the intended borrower is deemed to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) under the same terms and conditions and at the same time as it was made by the intermediate lender; andthe loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to the intended borrower are deemed not to have been made to the extent of the amount of the loan deemed to have been made under paragraph (a).Determination of whether persons relatedFor the purpose of applying paragraph (3)(b) in respect of a corporation resident in Canada described in paragraph (2)(b), in determining whether persons described in subparagraph (3)(b)(i) are related to each other at any time, any rights referred to in paragraph 251(5)(b) that otherwise exist at that time are deemed not to exist at that time where, if the rights were exercised immediately before that time,all of those persons would at that time be controlled foreign affiliates of the corporation resident in Canada; andbecause of subsection (8), subsection (1) would not apply to the corporation resident in Canada in respect of the amount that would, but for this subsection, have been deemed to have been owing at that time to the corporation resident in Canada by the non-resident person described in subparagraph (3)(b)(i).Determination of controlled foreign affiliate statusFor the purpose of this section, in determining whether a non-resident person is a controlled foreign affiliate of a corporation resident in Canada at any time, each settlor in respect of a trust, other than a non-discretionary trust, is deemed to own that proportion of the number of shares of a class of the capital stock of a corporation owned by the trust at that time that one is of the number of settlors in respect of the trust at that time.Extended definition of controlled foreign affiliateFor the purpose of this section, where, at any time, two corporations resident in Canada are related (otherwise than because of a right referred to in paragraph 251(5)(b)), any corporation that is a controlled foreign affiliate of one of the corporations at that time is deemed to be a controlled foreign affiliate of the other corporation at that time.Anti-avoidance rule — where rights or shares issued, acquired or disposed of to avoid taxFor the purpose of this section,where any person or partnership has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares of the capital stock of a corporation and it can reasonably be considered that the principal purpose for the existence of the right is to avoid or reduce the amount of income that subsection (1) would otherwise require any corporation to include in computing its income for any taxation year, those shares are deemed to be owned by that person or partnership; andwhere any person or partnership acquires or disposes of shares of the capital stock of a corporation, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition of the shares is to avoid or reduce the amount of income that subsection (1) would otherwise require any corporation to include in computing its income for any taxation year, those shares are deemed not to have been acquired or disposed of, as the case may be, and where the shares were unissued by the corporation immediately before the acquisition, those shares are deemed not to have been issued.DefinitionsThe definitions in this subsection apply in this section.controlled foreign affiliate, at any time, of a taxpayer resident in Canada, means a corporation that would, at that time, be a controlled foreign affiliate of the taxpayer within the meaning assigned by the definition controlled foreign affiliate in subsection 95(1) if the word “or” were added at the end of paragraph (a) of that definition andsubparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”; andsubparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”. (société étrangère affiliée contrôlée)exempt loan or transfer meansa loan made by a corporation resident in Canada where the interest rate charged on the loan is not less than the interest rate that a lender and a borrower would have been willing to agree to if they were dealing at arm’s length with each other at the time the loan was made;a transfer of property (other than a transfer of property made for the purpose of acquiring shares of the capital stock of a foreign affiliate of a corporation or a foreign affiliate of a person resident in Canada with whom the corporation was not dealing at arm’s length) or payment of an amount owing by a corporation resident in Canada pursuant to an agreement made on terms and conditions that persons who were dealing at arm’s length at the time the agreement was entered into would have been willing to agree to;a dividend paid by a corporation resident in Canada on shares of a class of its capital stock; anda payment made by a corporation resident in Canada on a reduction of the paid-up capital in respect of shares of a class of its capital stock (not exceeding the total amount of the reduction). (prêt ou transfert de biens exclu)non-discretionary trust, at any time, means a trust in which all interests were vested indefeasibly at the beginning of the trust’s taxation year that includes that time. (fiducie non discrétionnaire)settlor in respect of a trust at any time means any person or partnership that has made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust at or before that time, other than, where the person or partnership deals at arm’s length with the trust at that time,a loan made by the person or partnership to the trust at a reasonable rate of interest; ora transfer made by the person or partnership to the trust for fair market value consideration. (auteur)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 17; 1999, c. 22, s. 8; 2001, c. 17, s. 8; 2007, c. 35, s. 10; 2014, c. 39, s. 5
Deemed interest income — sections 15 and 212.3Subject to subsection (2), if — at any time in a taxation year of a corporation resident in Canada (in this section referred to as the “CRIC”) or in a fiscal period of a qualifying Canadian partnership in respect of the CRIC — a non-resident corporation, or a partnership of which the non-resident corporation is a member, owes an amount to the CRIC or the qualifying Canadian partnership and the amount owing is a pertinent loan or indebtedness (as defined in subsection 15(2.11) or 212.3(11)),section 17 does not apply in respect of the amount owing; andthe amount, if any, determined by the following formula is to be included in computing the income of the CRIC for the year or of the qualifying Canadian partnership for the fiscal period, as the case may be:A – BwhereAis the amount that is the greater ofthe amount of interest that would be included in computing the income of the CRIC for the year or of the qualifying Canadian partnership for the fiscal period, as the case may be, in respect of the amount owing for the particular period in the year, or the fiscal period, during which the amount owing was a pertinent loan or indebtedness if that interest were computed at the prescribed rate for the particular period, andthe total of all amounts of interest payable in respect of the period in the year, or the fiscal period, during which the amount owing was a pertinent loan or indebtedness, by the CRIC, the qualifying Canadian partnership, a person resident in Canada with which the CRIC did not, at the time the amount owing arose, deal at arm’s length or a partnership of which the CRIC or the person is a member, in respect of a debt obligation — entered into as part of a series of transactions or events that includes the transaction by which the amount owing arose — to the extent that the proceeds of the debt obligation can reasonably be considered to have directly or indirectly funded, in whole or in part, the amount owing, andBis an amount included in computing the income of the CRIC for the year or of the qualifying Canadian partnership for the fiscal period, as the case may be, as, on account of, in lieu of or in satisfaction of, interest in respect of the amount owing for the period in the year, or the fiscal period, during which the amount owing was a pertinent loan or indebtedness.Acquisition of controlIf at any time a parent or group of parents referred to in section 212.3 acquires control of a CRIC and the CRIC was not controlled by a non-resident person, or a group of non-resident persons not dealing with each other at arm’s length, immediately before that time, no amount is to be included under subsection (1) in computing the income of the CRIC in respect of a pertinent loan or indebtedness (as defined in subsection 212.3(11)) for the period that begins at that time and ends on the day that is 180 days after that time.Tax treatiesA particular loan or indebtedness that would, in the absence of this subsection, be a pertinent loan or indebtedness is deemed not to be a pertinent loan or indebtedness if, because of a provision of a tax treaty, the amount included in computing the income of the CRIC for any taxation year or of the qualifying Canadian partnership for any fiscal period, as the case may be, in respect of the particular loan or indebtedness is less than it would be if no tax treaty applied.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2012, c. 31, s. 62021, c. 23, s. 5
Deductions
General limitationsIn computing the income of a taxpayer from a business or property no deduction shall be made in respect ofGeneral limitationan outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property;Capital outlay or lossan outlay, loss or replacement of capital, a payment on account of capital or an allowance in respect of depreciation, obsolescence or depletion except as expressly permitted by this Part;Limitation re exempt incomean outlay or expense to the extent that it may reasonably be regarded as having been made or incurred for the purpose of gaining or producing exempt income or in connection with property the income from which would be exempt;Annual value of propertythe annual value of property except rent for property leased by the taxpayer for use in the taxpayer’s business;Reserves, etc.an amount as, or on account of, a reserve, a contingent liability or amount or a sinking fund except as expressly permitted by this Part;Unpaid claims under insurance policiesan amount in respect of claims that were received by an insurer before the end of the year under insurance policies and that are unpaid at the end of the year, except as expressly permitted by this Part;Payments on discounted bondsan amount paid or payable as or on account of the principal amount of any obligation described in paragraph 20(1)(f) except as expressly permitted by that paragraph;Payments on income bondsan amount paid by a corporation as interest or otherwise to holders of its income bonds or income debentures unless the bonds or debentures have been issued or the income provisions thereof have been adopted since 1930to afford relief to the debtor from financial difficulties, andin place of or as an amendment to bonds or debentures that at the end of 1930 provided unconditionally for a fixed rate of interest;Personal and living expensespersonal or living expenses of the taxpayer, other than travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer’s business;Limitation re employer’s contribution under supplementary unemployment benefit planan amount paid by an employer to a trustee under a supplementary unemployment benefit plan except as permitted by section 145;Limitation re employer’s contribution under deferred profit sharing planan amount paid by an employer to a trustee under a deferred profit sharing plan except as expressly permitted by section 147;Limitation re employer’s contribution under profit sharing planan amount paid by an employer to a trustee under a profit sharing plan that is notan employees profit sharing plan,a deferred profit sharing plan, ora pooled registered pension plan or registered pension plan;Use of recreational facilities and club duesan outlay or expense made or incurred by the taxpayer after 1971,for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility, unless the taxpayer made or incurred the outlay or expense in the ordinary course of the taxpayer’s business of providing the property for hire or reward, oras membership fees or dues (whether initiation fees or otherwise) in any club the main purpose of which is to provide dining, recreational or sporting facilities for its members;Safety deposit boxan amount paid or payable in respect of the use of a safety deposit box of a financial institution;Limitation re employee stock option expensesan amount in respect of which an election was made by or on behalf of the taxpayer under subsection 110(1.1);Political contributionsa political contribution;Employee benefit plan contributionsan amount paid or payable as a contribution to an employee benefit plan;Salary deferral arrangementexcept as expressly permitted by paragraphs 20(1)(oo) and 20(1)(pp), an outlay or expense made or incurred under a salary deferral arrangement in respect of another person, other than such an arrangement established primarily for the benefit of one or more non-resident employees in respect of services to be rendered outside Canada;Retirement compensation arrangementexcept as expressly permitted by paragraph 20(1)(r), contributions made under a retirement compensation arrangement;Employee life and health trustexcept as expressly permitted by paragraph 20(1)(s), contributions to an employee life and health trust;Limitation re personal services business expensesan outlay or expense to the extent that it was made or incurred by a corporation in a taxation year for the purpose of gaining or producing income from a personal services business, other thanthe salary, wages or other remuneration paid in the year to an incorporated employee of the corporation,the cost to the corporation of any benefit or allowance provided to an incorporated employee in the year,any amount expended by the corporation in connection with the selling of property or the negotiating of contracts by the corporation if the amount would have been deductible in computing the income of an incorporated employee for a taxation year from an office or employment if the amount had been expended by the incorporated employee under a contract of employment that required the employee to pay the amount, andany amount paid by the corporation in the year as or on account of legal expenses incurred by it in collecting amounts owing to it on account of services renderedthat would, if the income of the corporation were from a business other than a personal services business, be deductible in computing its income;Limitation re cancellation of leasean amount paid or payable by the taxpayer for the cancellation of a lease of property of the taxpayer leased by the taxpayer to another person, except to the extent permitted by paragraph 20(1)(z) or 20(1)(z.1);Certain automobile expensesan amount paid or payable by the taxpayer as an allowance for the use by an individual of an automobile to the extent that the amount exceeds an amount determined in accordance with prescribed rules, except where the amount so paid or payable is required to be included in computing the individual’s income;Loans or lending assetsany loss, depreciation or reduction in a taxation year in the value or amortized cost of a loan or lending asset of a taxpayer made or acquired by the taxpayer in the ordinary course of the taxpayer’s business of insurance or the lending of money and not disposed of by the taxpayer in the year, except as expressly permitted by this Part;Payments under different actsany amount paid or payableunder this Act (other than tax paid or payable under Part XII.2 or Part XII.6),as interest under Part IX of the Excise Tax Act,as interest under the Air Travellers Security Charge Act,as interest under the Underused Housing Tax Act, [2022, c. 10, s. 173]as interest under the Select Luxury Items Tax Act, [2022, c. 10, s. 173]as interest under the Digital Services Tax Act, oras interest under the Global Minimum Tax Act;Fees — individual saving plansany amount paid or payable by the taxpayer for services in respect of a FHSA, retirement savings plan, retirement income fund or TFSA under or of which the taxpayer is the annuitant or holder;Interest — authorized foreign bankwhere the taxpayer is an authorized foreign bank, an amount in respect of interest that would otherwise be deductible in computing the taxpayer’s income from a business carried on in Canada, except as provided in section 20.2;Underlying payments on qualified securitiesexcept as expressly permitted, an amount that is deemed by subsection 260(5.1) to have been received by another person as an amount described in any of paragraphs 260(5.1)(a) to (c); andDerivatives — lower of cost and marketany reduction in a taxation year in the value of a property ifthe method used by the taxpayer to value the property at the end of the year for purposes of computing the taxpayer’s profit from a business or property is the cost at which the taxpayer acquired it or its fair market value at the end of the year, whichever is lower,the property is described in subsection 10(15), andthe property is not disposed of by the taxpayer in the year; andPayment for sharesan amount referred to in subsection 13(36).Limit on certain interest and property taxNotwithstanding paragraph 20(1)(c), in computing the taxpayer’s income for a particular taxation year from a business or property, no amount shall be deductible in respect of any expense incurred by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,interest on debt relating to the acquisition of land, orproperty taxes (not including income or profits taxes or taxes computed by reference to the transfer of property) paid or payable by the taxpayer in respect of land to a province or to a Canadian municipality,unless, having regard to all the circumstances (including the cost to the taxpayer of the land in relation to the taxpayer’s gross revenue, if any, from the land for the particular year or any preceding taxation year), the land can reasonably be considered to have been, in the year,used in the course of a business carried on in the particular year by the taxpayer, other than a business in the ordinary course of which land is held primarily for the purpose of resale or development, orheld primarily for the purpose of gaining or producing income of the taxpayer from the land for the particular year,except to the extent of the total ofthe amount, if any, by which the taxpayer’s gross revenue, if any, from the land for the particular year exceeds the total of all amounts deducted in computing the taxpayer’s income from the land for the year, andin the case of a corporation whose principal business is the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm’s length, the corporation’s base level deduction for the particular year.Where taxpayer member of partnershipWhere a taxpayer who is a member of a partnership was obligated to pay any amount as, on account or in lieu of payment of, or in satisfaction of, interest (in this subsection referred to as an “interest amount”) on money that was borrowed by the taxpayer before April 1, 1977 and that was used to acquire land owned by the partnership before that day or on an obligation entered into by the taxpayer before April 1, 1977 to pay for land owned by the partnership before that day, and, in a taxation year of the taxpayer, either,the partnership has disposed of all or any portion of the land, orthe taxpayer has disposed of all or any portion of the taxpayer’s interest in the partnershipto a person other than a person with whom the taxpayer does not deal at arm’s length, in computing the taxpayer’s income for the year or any subsequent year, there may be deducted such portion of the taxpayer’s interest amountthat was, by virtue of subsection 18(2), not deductible in computing the income of the taxpayer for any previous taxation year,that was not deductible in computing the income of any other taxpayer for any taxation year,that was not included in computing the adjusted cost base to the taxpayer of any property, andthat was not deductible under this subsection in computing the income of the taxpayer for any previous taxation yearas is reasonable having regard to the portion of the land or interest in the partnership, as the case may be, so disposed of.Base level deductionFor the purposes of this section, a corporation’s base level deduction for a taxation year is the amount that would be the amount of interest, computed at the prescribed rate, for the year in respect of a loan of $1,000,000 outstanding throughout the year, unless the corporation is associated in the year with one or more other corporations in which case, except as otherwise provided in this section, its base level deduction for the year is nil.Associated corporationsNotwithstanding subsection 18(2.2), if all of the corporations that are associated with each other in a taxation year have filed with the Minister in prescribed form an agreement whereby, for the purposes of this section, they allocate an amount to one or more of them for the taxation year and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed $1,000,000, the base level deduction for the year for each of the corporations is the base level deduction that would be computed under subsection 18(2.2) in respect of the corporation if the reference in that subsection to $1,000,000 were read as a reference to the amount so allocated to it.Failure to file agreementIf any of the corporations that are associated with each other in a taxation year has failed to file with the Minister an agreement as contemplated by subsection 18(2.3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year, which amount or the total of which amounts, as the case may be, shall equal $1,000,000 and in any such case, the amount so allocated to any corporation shall be deemed to be an amount allocated to the corporation pursuant to subsection 18(2.3).Special rules for base level deductionNotwithstanding any other provision of this section,where a corporation, in this paragraph referred to as the “first corporation”, has more than one taxation year ending in the same calendar year and is associated in two or more of those taxation years with another corporation that has a taxation year ending in that calendar year, the base level deduction of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to the application of paragraph 18(2.5)(b), an amount equal to its base level deduction for the first such taxation year determined without reference to paragraph 18(2.5)(b); andwhere a corporation has a taxation year that is less than 51 weeks, its base level deduction for the year is that proportion of its base level deduction for the year determined without reference to this paragraph that the number of days in the year is of 365.DefinitionsIn subsection 18(2),interest on debt relating to the acquisition of land includesinterest paid or payable in a year in respect of borrowed money that cannot be identified with particular land but that may nonetheless reasonably be considered (having regard to all the circumstances) as interest on borrowed money used in respect of or for the acquisition of land, andinterest paid or payable in the year by a taxpayer in respect of borrowed money that may reasonably be considered (having regard to all the circumstances) to have been used to assist, directly or indirectly,another person with whom the taxpayer does not deal at arm’s length,a corporation of which the taxpayer is a specified shareholder, ora partnership of which the taxpayer’s share of any income or loss is 10% or more,to acquire land to be used or held by that person, corporation or partnership otherwise than as described in paragraph 18(2)(c) or 18(2)(d), except where the assistance is in the form of a loan to that person, corporation or partnership and a reasonable rate of interest on the loan is charged by the taxpayer; (intérêts sur une dette concernant l’acquisition d’un fonds de terre)land does not, except to the extent that it is used for the provision of parking facilities for a fee or charge, includeany property that is a building or other structure affixed to land,the land subjacent to any property described in paragraph (a), orsuch land immediately contiguous to the land described in paragraph (b) that is a parking area, driveway, yard, garden or similar land as is necessary for the use of any property described in paragraph (a). (fonds de terre)Costs relating to construction of building or ownership of landNotwithstanding any other provision of this Act, in computing a taxpayer’s income for a taxation year,no deduction shall be made in respect of any outlay or expense made or incurred by the taxpayer (other than an amount deductible under paragraph 20(1)(a), 20(1)(aa) or 20(1)(qq) or subsection 20(29)) that can reasonably be regarded as a cost attributable to the period of the construction, renovation or alteration of a building by or on behalf of the taxpayer, a person with whom the taxpayer does not deal at arm’s length, a corporation of which the taxpayer is a specified shareholder or a partnership of which the taxpayer’s share of any income or loss is 10% or more and relating to the construction, renovation or alteration, or a cost attributable to that period and relating to the ownership during that period of landthat is subjacent to the building, orthatis immediately contiguous to the land subjacent to the building,is used, or is intended to be used, for a parking area, driveway, yard, garden or any other similar use, andis necessary for the use or intended use of the building; andthe amount of such an outlay or expense shall, to the extent that it would otherwise be deductible in computing the taxpayer’s income for the year, be included in computing the cost or capital cost, as the case may be, of the building to the taxpayer, to the person with whom the taxpayer does not deal at arm’s length, to the corporation of which the taxpayer is a specified shareholder or to the partnership of which the taxpayer’s share of any income or loss is 10% or more, as the case may be.Included costsFor the purposes of subsection 18(3.1), costs relating to the construction, renovation or alteration of a building or to the ownership of land includeinterest paid or payable by a taxpayer in respect of borrowed money that cannot be identified with a particular building or particular land, but that can reasonably be considered (having regard to all the circumstances) as interest on borrowed money used by the taxpayer in respect of the construction, renovation or alteration of a building or the ownership of land; andinterest paid or payable by a taxpayer in respect of borrowed money that may reasonably be considered (having regard to all the circumstances) to have been used to assist, directly or indirectly,another person with whom the taxpayer does not deal at arm’s length,a corporation of which the taxpayer is a specified shareholder, ora partnership of which the taxpayer’s share of any income or loss is 10% or more,to construct, renovate or alter a building or to purchase land, except where the assistance is in the form of a loan to that other person, corporation or partnership and a reasonable rate of interest on the loan is charged by the taxpayer.CompletionFor the purposes of subsection 18(3.1), the construction, renovation or alteration of a building is completed at the earlier of the day on which the construction, renovation or alteration is actually completed and the day on which all or substantially all of the building is used for the purpose for which it was constructed, renovated or altered.Where s. (3.1) does not applySubsection 18(3.1) does not apply to prohibit a deduction in a taxation year of the specified percentage of any outlay or expense described in that subsection made or incurred before 1992 bya corporation whose principal business is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm’s length, ora partnershipeach member of which is a corporation described in paragraph (a), andthe principal business of which is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property held by it, to or for a person with whom each member of the partnership is dealing at arm’s length,and for the purposes of this subsection, specified percentage means, in respect of an outlay or expense made or incurred in 1988, 80%, in 1989, 60%, in 1990, 40%, and in 1991, 20%.IdemSubsection 18(3.1) does not apply in respect of an outlay or expense in respect of a building or the land described in subparagraph 18(3.1)(a)(i) or 18(3.1)(a)(ii) in respect of the building,where the construction, renovation or alteration of the building was in progress on November 12, 1981,where the installation of the footings or other base support of the building commenced after November 12, 1981 and before 1982,if, in the case of a new building being constructed in Canada or an existing building being renovated or altered in Canada, arrangements, evidenced in writing, for the construction, renovation or alteration were substantially advanced before November 13, 1981 and the installation of footings or other base support for the new building or the renovation or alteration of the existing building, as the case may be, commenced before June 1, 1982, orif, in the case of a new building being constructed in Canada, the taxpayer was obligated to construct the building under the terms of an agreement in writing entered into before November 13, 1981 and arrangements, evidenced in writing, respecting the construction of the building were substantially advanced before June 1, 1982 and the installation of footings or other base support for the building commenced before 1983,and the construction, renovation or alteration, as the case may be, of the building proceeds after 1982 without undue delay (having regard to acts of God, labour disputes, fire, accidents or unusual delay by common carriers or suppliers of materials or equipment).Undue delayFor the purposes of subsection 18(3.5), where more than one building is being constructed under any of the circumstances described in that subsection on one site or on immediately contiguous sites, no undue delay shall be regarded as occurring in the construction of any such building if construction of at least one such building proceeds after 1982 without undue delay and continuous construction of all other such buildings proceeds after 1983 without undue delay.Commencement of footingsFor the purposes of this section, the installation of footings or other base support for a building shall be deemed to commence on the first placement of concrete, pilings or other material that is to provide permanent support for the building.Limitation on deduction of interestNotwithstanding any other provision of this Act (other than subsection (8)), in computing the income for a taxation year of a corporation or a trust from a business (other than the Canadian banking business of an authorized foreign bank) or property, no deduction shall be made in respect of that proportion of any amount that would, in the absence of this subsection and section 18.2, be deductible in computing that income in respect of interest paid or payable by it on outstanding debts to specified non-residents thatthe amount, if any, by whichthe average of all amounts each of which is, in respect of a calendar month that ends in the year, the greatest total amount at any time in the month of the outstanding debts to specified non-residents of the corporation or trust,exceeds1.5 times the equity amount of the corporation or trust for the year,is ofthe amount determined under subparagraph (a)(i) in respect of the corporation or trust for the year.DefinitionsNotwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) and (5.1) to (6.1),beneficiary has the same meaning as in subsection 108(1); (bénéficiaire)equity amount, of a corporation or trust for a taxation year, meansin the case of a corporation resident in Canada, the total ofthe retained earnings of the corporation at the beginning of the year, except to the extent that those earnings include retained earnings of any other corporation,the average of all amounts each of which is the corporation’s contributed surplus (other than any portion of that contributed surplus that arose at a time when the corporation was non-resident, or that arose in connection with a disposition to which subsection 212.1(1.1) applies or an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, andthe average of all amounts each of which is the corporation’s paid-up capital at the beginning of a calendar month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified non-resident shareholder of the corporation,in the case of a trust resident in Canada, the amount, if any, by whichthe total ofthe average of all amounts each of which is the total amount of all equity contributions to the trust made before a calendar month that ends in the year, to the extent that the contributions were made by a specified non-resident beneficiary of the trust, andthe tax-paid earnings of the trust for the year,exceedsthe average of all amounts each of which is the total of all amounts that were paid or became payable by the trust to a beneficiary of the trust in respect of the beneficiary’s interest under the trust before a calendar month that ends in the year except to the extent that the amount isincluded in the beneficiary’s income for a taxation year because of subsection 104(13),an amount from which tax was deducted under Part XIII because of paragraph 212(1)(c), orpaid or payable to a person other than a specified non-resident beneficiary of the trust, andin the case of a corporation or trust that is not resident in Canada, including a corporation or trust that files a return under this Part in accordance with subsection 216(1) in respect of the year, 40% of the amount, if any, by whichthe average of all amounts each of which is the cost of a property, other than an interest as a member of a partnership, owned by the corporation or trust at the beginning of a calendar month that ends in the yearthat is used by the corporation or trust in the year in, or held by it in the year in the course of, carrying on business in Canada, orthat is an interest in real property, or a real right in immovables, in Canada, or an interest in, or for civil law a right in, timber resource properties and timber limits, in Canada, and in respect of which the corporation or trust files a return under this Part in accordance with subsection 216(1) in respect of the year,exceedsthe average of all amounts each of which is the total of all amounts outstanding, at the beginning of a calendar month that ends in the year, as or on account of a debt or other obligation to pay an amount that was payable by the corporation or trust that may reasonably be regarded as relating to a business carried on by it in Canada or to an interest or right described in clause (i)(B), other than a debt or obligation that is included in the outstanding debts to specified non-residents of the corporation or trust; (montant des capitaux propres)equity contribution, to a trust, means a transfer of property to the trust that is madein exchange for an interest as a beneficiary under the trust,in exchange for a right to acquire an interest as a beneficiary under the trust, orfor no consideration by a person beneficially interested in the trust; (apport de capitaux propres)outstanding debts to specified non-residents, of a corporation or trust at any particular time in a taxation year, meansthe total of all amounts each of which is an amount outstanding at that time as or on account of a debt or other obligation to pay an amountthat was payable by the corporation or trust to a person who was, at any time in the year,a specified non-resident shareholder of the corporation or a specified non-resident beneficiary of the trust, ora non-resident person who was not dealing at arm’s length with a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, andon which any amount in respect of interest paid or payable by the corporation or trust is or would be, but for subsection (4), deductible in computing the income of the corporation or trust for the year,but does not includean amount outstanding at the particular time as or on account of a debt or other obligationto pay an amount toa non-resident insurance corporation to the extent that the obligation was, for the non-resident insurance corporation’s taxation year that included the particular time, designated insurance property in respect of an insurance business carried on in Canada through a permanent establishment as defined by regulation, oran authorized foreign bank, if the bank uses or holds the obligation at the particular time in its Canadian banking business, orthat is a debt obligation described in subparagraph (ii) of the description of A in paragraph 17.1(1)(b) to the extent that the proceeds of the debt obligation can reasonably be considered to directly or indirectly fund at the particular time, in whole or in part, a pertinent loan or indebtedness (as defined in subsection 212.3(11)) owing to the corporation or another corporation resident in Canada that does not, at the particular time, deal at arm’s length with the corporation; (dettes impayées envers des non-résidents déterminés)security interest, in respect of a property, means an interest in, or for civil law a right in, the property that secures payment of an obligation; (garantie)specified beneficiary, of a trust at any time, means a person who at that time, either alone or together with persons with whom that person does not deal at arm’s length, has an interest as a beneficiary under the trust with a fair market value that is not less than 25% of the fair market value of all interests as a beneficiary under the trust and for the purpose of determining whether a particular person is a specified beneficiary of a trust,if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, an interest as a beneficiary under a trust, the particular person or the person with whom the particular person does not deal at arm’s length, as the case may be, is deemed at that time to own the interest,if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently to cause a trust to redeem, acquire or terminate any interest in it as a beneficiary (other than an interest held by the particular person or a person with whom the particular person does not deal at arm’s length), the trust is deemed at that time to have redeemed, acquired or terminated the interest, unless the right is not exercisable at that time because the exercise of the right is contingent on the death, bankruptcy or permanent disability of an individual, andif the amount of income or capital of the trust that the particular person, or a person with whom the particular person does not deal at arm’s length, may receive as a beneficiary of the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be; (bénéficiaire déterminé)specified non-resident beneficiary, of a trust at any time, means a specified beneficiary of the trust who at that time is a non-resident person; (bénéficiaire non-résident déterminé)specified non-resident shareholder of a corporation at any time means a specified shareholder of the corporation who was at that time a non-resident person or a non-resident-owned investment corporation; (actionnaire non-résident déterminé)specified proportion[Repealed, 2013, c. 34, s. 427]specified right, at any time in respect of a property, means a right to, at that time, mortgage, hypothecate, assign, pledge or in any way encumber the property to secure payment of an obligation — other than the particular debt or other obligation described in paragraph (6)(a) or a debt or other obligation described in subparagraph (6)(d)(ii) — or to use, invest, sell or otherwise dispose of, or in any way alienate, the property unless it is established by the taxpayer that all of the proceeds (net of costs, if any) received, or that would be received, from exercising the right must first be applied to reduce an amount described in subparagraph (6)(d)(i) or (ii); (droit déterminé)specified shareholder of a corporation at any time means a person who at that time, either alone or together with persons with whom that person is not dealing at arm’s length, ownsshares of the capital stock of the corporation that give the holders thereof 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, orshares of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the corporation,and for the purpose of determining whether a particular person is a specified shareholder of a corporation at any time, where the particular person or a person with whom the particular person is not dealing at arm’s length has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingentlyto, or to acquire, shares in a corporation or to control the voting rights of shares in a corporation, orto cause a corporation to redeem, acquire or cancel any of its shares (other than shares held by the particular person or a person with whom the particular person is not dealing at arm’s length),the particular person or the person with whom the particular person is not dealing at arm’s length, as the case may be, shall be deemed at that time to own the shares referred to in paragraph (c) and the corporation referred to in paragraph (d) shall be deemed at that time to have redeemed, acquired or cancelled the shares referred to in paragraph (d), unless the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual; (actionnaire déterminé)tax-paid earnings, of a trust resident in Canada for a taxation year, means the total of all amounts each of which is the amount in respect of a particular taxation year of the trust that ended before the year determined by the formulaA – BwhereAis the taxable income of the trust under this Part for the particular year, andBis the total of tax payable under this Part by the trust, and all income taxes payable by the trust under the laws of a province, for the particular year. (bénéfices libérés d’impôt)Specified shareholder or specified beneficiaryFor the purposes of subsections (4) to (6), ifa particular person would, but for this subsection, be a specified shareholder of a corporation or a specified beneficiary of a trust at any time,there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person will cease to be a specified shareholder of the corporation or a specified beneficiary of the trust, andthe purpose for which the particular person became a specified shareholder or specified beneficiary was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm’s length,the particular person is deemed not to be a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, at that time.Specified shareholder or specified beneficiaryFor the purposes of subsections (4) to (6), a non-resident corporation is deemed to be a specified shareholder of itself and a non-resident trust is deemed to be a specified beneficiary of itself.Property used in business — cost attributionFor the purposes of subparagraph (c)(i) of the definition equity amount in subsection (5),if a property is partly used or held by a taxpayer in a taxation year in the course of carrying on business in Canada, the cost of the property to the taxpayer is deemed for the year to be equal to the same proportion of the cost to the taxpayer of the property (determined without reference to this subsection) that the proportion of the use or holding made of the property in the course of carrying on business in Canada in the year is of the whole use or holding made of the property in the year; andif a corporation or trust is deemed to own a portion of a property of a partnership because of subsection (7) at any time,the property is deemed to have, at that time, a cost to the corporation or trust equal to the same proportion of the cost of the property to the partnership as the proportion of the debts and other obligations to pay an amount of the partnership allocated to it under subsection (7) is of the total amount of all debts and other obligations to pay an amount of the partnership, andin the case of a partnership that carries on business in Canada, the corporation or trust is deemed to use or hold the property in the course of carrying on business in Canada to the extent the partnership uses or holds the property in the course of carrying on business in Canada for the fiscal period of the partnership that includes that time.Rules — trust incomeFor the purposes of this Act, a trust resident in Canada may designate in its return of income under this Part for a taxation year that all or any portion of an amount paid or credited as interest by the trust, or by a partnership, in the year to a non-resident person is deemed to be income of the trust that has been paid to the non-resident person as a beneficiary of the trust, and not to have been paid or credited by the trust or the partnership as interest, to the extent that an amount in respect of the interestis included in computing the income of the trust for the year under paragraph 12(1)(l.1); oris not deductible in computing the income of the trust for the year because of subsection (4).Back-to-back loan arrangementSubsection (6.1) applies at any time in respect of a taxpayer if at that timethe taxpayer has a particular amount outstanding as or on account of a particular debt or other obligation to pay an amount to a person (in this subsection and subsection (6.1) referred to as the “intermediary”);the intermediary is neithera person resident in Canada with whom the taxpayer does not deal at arm’s length, nora person that is, in respect of the taxpayer, described in subparagraph (a)(i) of the definition outstanding debts to specified non-residents in subsection (5);the intermediary or a person that does not deal at arm’s length with the intermediaryhas an amount outstanding as or on account of a debt or other obligation to pay an amount to a particular non-resident person that is, in respect of the taxpayer, described in subparagraph (a)(i) of the definition outstanding debts to specified non-residents in subsection (5) that meets any of the following conditions (in this subsection and subsection (6.1) referred to as the “intermediary debt”):recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to the particular debt or other obligation, orit can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, becauseall or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, orthe intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, orhas a specified right in respect of a particular property that was granted directly or indirectly by a person that is, in respect of the taxpayer, a particular non-resident person described in subparagraph (a)(i) of the definition outstanding debts to specified non-residents in subsection (5) andthe existence of the specified right is required under the terms and conditions of the particular debt or other obligation, orit can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, becausethe specified right was granted, orthe intermediary anticipated that the specified right would be granted; andthe total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — is equal to at least 25% of the total ofthe particular amount, andthe total of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into ifthe intermediary is granted a security interest in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, andeach security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause.Back-to-back loan arrangementIf this subsection applies at any time in respect of a taxpayer,then for the purpose of applying subsections (4) and (5),the portion of the particular amount, at that time, referred to in paragraph (6)(a) that is equal to the lesser of the following amounts is deemed to be an amount outstanding as or on account of a debt or other obligation to pay an amount to the particular non-resident person referred to in subparagraph (6)(c)(i) or (ii), as the case may be, and not to the intermediary:the amount outstanding as or on account of the intermediary debt or the fair market value of the particular property referred to in subparagraph (6)(c)(ii), as the case may be, andthe proportion of the particular amount that the amount outstanding or the fair market value, as the case may be, is of the total of all amounts each of which isan amount outstanding as or on account of an intermediary debt in respect of the particular debt or other obligation, owed to the particular non-resident or any other non-resident person that is, in respect of the taxpayer, described in the definition outstanding debts to specified non-residents in subsection (5), orthe fair market value of a particular property referred to in subparagraph (6)(c)(ii) in respect of the particular debt or other obligation, andthe portion of the interest paid or payable by the taxpayer, in respect of a period throughout which subparagraph (a)(i) applies, on the particular debt or other obligation referred to in paragraph (6)(a) that is equal to the amount determined by the following formula is deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, as interest for the period on the amount deemed by subparagraph (a)(i) to be outstanding to the particular non-resident:A × B/CwhereAis the interest paid or payable,Bis the average of all amounts each of which is an amount that is deemed by subparagraph (a)(i) to be outstanding to the particular non-resident at a time during the period, andCis the average of all amounts each of which is the particular amount outstanding at a time during the period; andfor the purposes of Part XIII and subject to subsections 214(16) and (17), interest deemed under subparagraph (a)(ii) to be paid or payable to the particular non-resident in respect of a period is, to the extent that the interest is not deductible in computing the income of the taxpayer for the year because of subsection 18(4), deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, in respect of the period.Partnership debts and propertyFor the purposes of this subsection, paragraph (4)(a), subsections (5) to (6.1) and paragraph 12(1)(l.1), each member of a partnership at any time is deemed at that timeto owe the portion (in this subsection and paragraph 12(1)(l.1) referred to as the “debt amount”) of each debt or other obligation to pay an amount of the partnership and to own the portion of each property of the partnership that is equal tothe member’s specified proportion for the last fiscal period, if any, of the partnership endingat or before the end of the taxation year referred to in subsection (4), andat a time when the member is a member of the partnership, andif the member does not have a specified proportion described in subparagraph (i), the proportion thatthe fair market value of the member’s interest in the partnership at that timeis ofthe fair market value of all interests in the partnership at that time;to owe the debt amount to the person to whom the partnership owes the debt or other obligation to pay an amount; andto have paid interest on the debt amount that is deductible in computing the member’s income to the extent that an amount in respect of interest paid or payable on the debt amount by the partnership is deductible in computing the partnership’s income.Exception — foreign accrual property incomeAn amount in respect of interest paid or payable to a controlled foreign affiliate of a corporation resident in Canada that would otherwise not be deductible by the corporation for a taxation year because of subsection (4) may be deducted to the extent that an amount included under subsection 91(1) in computing the corporation’s income for the year or a subsequent year can reasonably be considered to be in respect of the interest.Limitation respecting prepaid expensesNotwithstanding any other provision of this Act,in computing a taxpayer’s income for a taxation year from a business or property (other than income from a business computed in accordance with the method authorized by subsection 28(1)), no deduction shall be made in respect of an outlay or expense to the extent that it can reasonably be regarded as having been made or incurredas consideration for services to be rendered after the end of the year,as, on account of, in lieu of payment of or in satisfaction of, interest, taxes (other than taxes imposed on an insurer in respect of insurance premiums of a non-cancellable or guaranteed renewable accident and sickness insurance policy, or a life insurance policy other than a group term life insurance policy that provides coverage for a period of 12 months or less), rent or royalties in respect of a period that is after the end of the year,as consideration for insurance in respect of a period after the end of the year, other thanwhere the taxpayer is an insurer, consideration for reinsurance, andconsideration for insurance on the life of an individual under a group term life insurance policy where all or part of the consideration is for insurance that is (or would be if the individual survived) in respect of a period that ends more than 13 months after the consideration is paid, orsubject to clause (iii)(B) and subsections 144.1(4) to (7), as consideration for a designated employee benefit (as defined in subsection 144.1(1)) to be provided after the end of the year (other than consideration payable in the year, to a corporation that is licensed to provide insurance, for insurance coverage in respect of the year);such portion of each outlay or expense (other than an outlay or expense of a corporation, partnership or trust as, on account of, in lieu of payment of or in satisfaction of, interest) made or incurred as would, but for paragraph 18(9)(a), be deductible in computing a taxpayer’s income for a taxation year shall be deductible in computing the taxpayer’s income for the subsequent year to which it can reasonably be considered to relate;for the purposes of section 37.1, such portion of each qualified expenditure (within the meaning assigned by subsection 37.1(5)) as was made by a taxpayer in a taxation year and as would, but for paragraph 18(9)(a), have been deductible in computing the taxpayer’s income for the year shall be deemednot to be a qualified expenditure made by the taxpayer in the year, andto be a qualified expenditure made by the taxpayer in the subsequent year to which the expenditure can reasonably be considered to relate;for the purpose of paragraph 18(9)(a), an outlay or expense of a taxpayer is deemed not to include any payment referred to in subparagraph 37(1)(a)(ii) or 37(1)(a)(iii) thatis made by the taxpayer to a person or partnership with which the taxpayer deals at arm’s length, andis not an expenditure described in subparagraph 37(1)(a)(i); andfor the purposes of section 37 and the definition qualified expenditure in subsection 127(9), the portion of an expenditure that is made or incurred by a taxpayer in a taxation year and that would, but for paragraph 18(9)(a), have been deductible under section 37 in computing the taxpayer’s income for the year, is deemednot to be made or incurred by the taxpayer in the year, andto be made or incurred by the taxpayer in the subsequent taxation year to which the expenditure can reasonably be considered to relate.[Repealed, 2017, c. 20, s. 3]Group term life insuranceWherea taxpayer pays a premium after February 1994 and before 1997 under a group term life insurance policy for insurance on the life of an individual,the insurance is for the remainder of the individual’s lifetime, andno further premiums will be payable for the insurance,no amount may be deducted in computing the taxpayer’s income for a taxation year from a business or property in respect of the premium except that there may be so deducted,where the year is the taxation year in which the premium was paid or a subsequent taxation year and the individual is alive at the end of the year, the lesser ofthe amount determined by the formulaA - Band1/3 of the amount determined by the formula(A × C)/365whereAis the amount that would, if this Act were read without reference to this subsection, be deductible in respect of the premium in computing the taxpayer’s income,Bis the total amount deductible in respect of the premium in computing the taxpayer’s income for preceding taxation years, andCis the number of days in the year, andwhere the individual died in the year, the amount determined under subparagraph 18(9.01)(d)(i).Application of subsection (9) to insurersFor the purpose of subsection (9), an outlay or expense made or incurred by an insurer in a taxation year on account of the acquisition of an insurance policy at any time prior to the issuance of the policy is deemed to be an expense incurred as consideration for services rendered in the particular year that the policy is issued.Penalties, bonuses and rate-reduction paymentsSubject to subsection 142.4(10), where at any time a payment, other than a payment thatcan reasonably be considered to have been made in respect of the extension of the term of a debt obligation or in respect of the substitution or conversion of a debt obligation to another debt obligation or share, oris contingent or dependent on the use of or production from property or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation,is made to a person or partnership by a taxpayer in the course of carrying on a business or earning income from property in respect of borrowed money or on an amount payable for property acquired by the taxpayer (in this subsection referred to as a “debt obligation”)as consideration for a reduction in the rate of interest payable by the taxpayer on the debt obligation, oras a penalty or bonus payable by the taxpayer because of the repayment by the taxpayer of all or part of the principal amount of the debt obligation before its maturity,the payment shall, to the extent that it can reasonably be considered to relate to, and does not exceed the value at that time of, an amount that, but for the reduction described in paragraph 18(9.1)(c) or the repayment described in paragraph 18(9.1)(d), would have been paid or payable by the taxpayer as interest on the debt obligation for a taxation year of the taxpayer ending after that time, be deemed,for the purposes of this Act, to have been paid by the taxpayer and received by the person or partnership at that time as interest on the debt obligation, andfor the purpose of computing the taxpayer’s income in respect of the business or property for the year, to have been paid or payable by the taxpayer in that year as interest pursuant to a legal obligation to pay interest,in the case of a reduction described in paragraph 18(9.1)(c), on the debt obligation, andin the case of a repayment described in paragraph 18(9.1)(d),where the repayment was in respect of all or part of the principal amount of the debt obligation that was borrowed money, except to the extent that the borrowed money was used by the taxpayer to acquire property, on borrowed money used in the year for the purpose for which the borrowed money that was repaid was used, andwhere the repayment was in respect of all or part of the principal amount of the debt obligation that was either borrowed money used to acquire property or an amount payable for property acquired by the taxpayer, on the debt obligation to the extent that the property or property substituted therefor is used by the taxpayer in the year for the purpose of gaining or producing income therefrom or for the purpose of gaining or producing income from a business.Interest on debt obligationsFor the purposes of this Part, the amount of interest payable on borrowed money or on an amount payable for property (in this subsection and subsections 18(9.3) to 18(9.8) referred to as the “debt obligation”) by a corporation, partnership or trust (in this subsection and subsections 18(9.3) to 18(9.7) referred to as the “borrower”) in respect of a taxation year shall, notwithstanding subparagraph 18(9.1)(f)(i), be deemed to be an amount equal to the lesser ofthe amount of interest, not in excess of a reasonable amount, that would be payable on the debt obligation by the borrower in respect of the year if no amount had been paid before the end of the year in satisfaction of the obligation to pay interest on the debt obligation in respect of the year and if the amount outstanding at each particular time in the year that is after 1991 on account of the principal amount of the debt obligation were the amount, if any, by whichthe amount outstanding at the particular time on account of the principal amount of the debt obligationexceeds the total ofall amounts each of which is an amount paid before the particular time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after 1991, after the beginning of the year, and after the time the amount was so paid (other than a period or part thereof that is in the year where no such amount was paid before the particular time in respect of a period, or part of a period, that is after the end of the year), andthe amount, if any, by whichthe total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount)exceedsthe total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year, andthe amount, if any, by whichthe total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of the year or taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount)exceedsthe total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year.Interest on debt obligationsWhere at any time in a taxation year of a borrower a debt obligation of the borrower is settled or extinguished or the holder of the obligation acquires or reacquires property of the borrower in circumstances in which section 79 applies in respect of the debt obligation and the total ofall amounts each of which is an amount paid at or before that time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part of a period that is after that time, andall amounts of interest payable on the debt obligation (determined without reference to subsection 18(9.2)) by the borrower in respect of taxation years ending after 1991 and before that time, or in respect of periods, or parts of periods, that are in such years and before that time (to the extent that the interest does not exceed a reasonable amount),exceeds the total ofall amounts of interest deemed by subsection 18(9.2) to have been payable on the debt obligation by the borrower in respect of taxation years ending before that time, andthe amount of interest that would be deemed by subsection 18(9.2) to have been payable on the debt obligation by the borrower in respect of the year if the year had ended immediately before that time,(which excess is in this subsection referred to as the “excess amount”), the following rules apply:for the purpose of applying section 79 in respect of the borrower, the principal amount at that time of the debt obligation shall be deemed to be equal to the amount, if any, by whichthe principal amount at that time of the debt obligationexceedsthe excess amount, andthe excess amount shall be deducted at that time in computing the forgiven amount in respect of the obligation (within the meaning assigned by subsection 80(1)).IdemWhere an amount is paid at any time by a person or partnership in respect of a debt obligation of a borroweras, on account of, in lieu of payment of or in satisfaction of, interest on the debt obligation in respect of a period or part thereof that is after 1991 and after that time, oras consideration for a reduction in the rate of interest payable on the debt obligation (excluding, for greater certainty, a payment described in paragraph 18(9.1)(a) or 18(9.1)(b)) in respect of a period or part thereof that is after 1991 and after that time,that amount shall be deemed, for the purposes of subsection 18(9.5) and, subject to that subsection, for the purposes of clause 18(9.2)(a)(iii)(A), subparagraph 18(9.2)(b)(i), paragraph 18(9.3)(b) and subsection 18(9.6), to be an amount of interest payable on the debt obligation by the borrower in respect of that period or part thereof and shall be deemed, for the purposes of subparagraph 18(9.2)(a)(ii) and paragraph 18(9.3)(a), to be an amount paid at that time in satisfaction of the obligation to pay interest on the debt obligation in respect of that period or part thereof.IdemWhere the amount of interest payable on a debt obligation (determined without reference to subsection 18(9.2)) by a borrower in respect of a particular period or part thereof that is after 1991 can reasonably be regarded as an amount payable as consideration fora reduction in the amount of interest that would otherwise be payable on the debt obligation in respect of a subsequent period, ora reduction in the amount that was or may be paid before the beginning of a subsequent period in satisfaction of the obligation to pay interest on the debt obligation in respect of that subsequent period(determined without reference to the existence of, or the amount of any interest paid or payable on, any other debt obligation), that amount shall, for the purposes of clause 18(9.2)(a)(iii)(A), subparagraph 18(9.2)(b)(i), paragraph 18(9.3)(b) and subsection 18(9.6), be deemed to be an amount of interest payable on the debt obligation by the borrower in respect of the subsequent period and not to be an amount of interest payable on the debt obligation by the borrower in respect of the particular period and shall, when paid, be deemed for the purposes of subparagraph 18(9.2)(a)(ii) and paragraph 18(9.3)(a) to be an amount paid in satisfaction of the obligation to pay interest on the debt obligation in respect of the subsequent period.IdemWhere the liability in respect of a debt obligation of a person or partnership is assumed by a borrower at any time,the amount of interest payable on the debt obligation (determined without reference to subsection 18(9.2)) by any person or partnership in respect of a period shall, to the extent that that period is included in a taxation year of the borrower ending after 1991, be deemed, for the purposes of clause 18(9.2)(a)(iii)(A), subparagraph 18(9.2)(b)(i) and paragraph 18(9.3)(b), to be an amount of interest payable on the debt obligation by the borrower in respect of that year, andthe application of subsections 18(9.2) and 18(9.3) to the borrower in respect of the debt obligation after that time shall be determined on the assumption that subsection 18(9.2) applied to the borrower in respect of the debt obligation before that time,and, for the purposes of this subsection, where the borrower came into existence at a particular time that is after the beginning of the particular period beginning at the beginning of the first period in respect of which interest was payable on the debt obligation by any person or partnership and ending at the particular time, the borrower shall be deemedto have been in existence throughout the particular period, andto have had, throughout the particular period, taxation years ending on the day of the year on which its first taxation year ended.IdemWhere the amount paid by a borrower at any particular time, in satisfaction of the obligation to pay a particular amount of interest on a debt obligation in respect of a subsequent period or part thereof, exceeds the particular amount of that interest, discountedfor the particular period beginning at the particular time and ending at the end of the subsequent period or part thereof, andat the rate or rates of interest applying under the debt obligation during the particular period (or, where the rate of interest of any part of the particular period is not fixed at the particular time, at the prescribed rate of interest in effect at the particular time),that excess shallfor the purposes of applying subsections 18(9.2) to 18(9.6) and 18(9.8), be deemed to be neither an amount of interest payable on the debt obligation nor an amount paid in satisfaction of the obligation to pay interest on the debt obligation, andbe deemed to be a payment described in paragraph 18(9.1)(d) in respect of the debt obligation.IdemNothing in any of subsections 18(9.2) to 18(9.7) shall be construed as providing thatthe total of all amounts each of which is the amount of interest payable on a debt obligation by an individual (other than a trust), or deemed by subsection 18(9.2) to be payable on the debt obligation by a corporation, partnership or trust, in respect of a taxation year ending after 1991 and before any particular time,may exceedthe total of all amounts each of which is the amount of interest payable on the debt obligation (determined without reference to subsection 18(9.2)) by a person or partnership in respect of a taxation year ending after 1991 and before that particular time.Employee benefit planParagraph 18(1)(o) does not apply in respect of a contribution to an employee benefit planto the extent that the contributionis made in respect of services performed by an employee who is not resident in Canada and is regularly employed in a country other than Canada, andcannot reasonably be regarded as having been made in respect of services performed or to be performed during a period when the employee is resident in Canada;the custodian of which is non-resident, to the extent that the contributionis in respect of an employee who is non-resident at the time the contribution is made, andcannot reasonably be regarded as having been made in respect of services performed or to be performed during a period when the employee is resident in Canada; orthe custodian of which is non-resident, to the extent that the contribution can reasonably be regarded as having been made in respect of services performed by an employee in a particular calendar month wherethe employee was resident in Canada throughout no more than 60 of the 72 calendar months ending with the particular month, andthe employee became a member of the plan before the end of the month following the month in which the employee became resident in Canada,and for the purpose of this paragraph, where benefits provided to an employee under a particular employee benefit plan are replaced by benefits provided under another employee benefit plan, the other plan shall be deemed, in respect of the employee, to be the same plan as the particular plan.LimitationNotwithstanding any other provision of this Act, in computing the income of a taxpayer for a taxation year, no amount is deductible under paragraph 20(1)(c), 20(1)(d), 20(1)(e), 20(1)(e.1) or 20(1)(f) in respect of borrowed money (or other property acquired by the taxpayer) in respect of any period after which the money (or other property) is used by the taxpayer for the purpose ofmaking a payment after November 12, 1981 as consideration for an income-averaging annuity contract, unless the contract was acquired pursuant to an agreement in writing entered into before November 13, 1981;paying a premium (within the meaning assigned by subsection 146(1) read without reference to the portion of the definition premium in that subsection following paragraph (b) of that definition) under a registered retirement savings plan after November 12, 1981;making a contribution to a deferred profit sharing plan, a pooled registered pension plan or a registered pension plan, other thana contribution described in subparagraph 8(1)(m)(ii) or 8(1)(m)(iii) (as they read in their application to the 1990 taxation year) that was required to be made pursuant to an obligation entered into before November 13, 1981, ora contribution deductible under paragraph 20(1)(q) or 20(1)(y) in computing the taxpayer’s income;making a payment as consideration for an annuity the payment for which was deductible in computing the taxpayer’s income by virtue of paragraph 60(l;making a contribution to a retirement compensation arrangement where the contribution was deductible under paragraph 8(1)(m.2) in computing the taxpayer’s income;making a contribution to a net income stabilization account;[Repealed, 2011, c. 24, s. 2]making a contribution into a registered education savings plan;making a contribution to a registered disability savings plan;making a contribution under a TFSA; ormaking a contribution to a FHSA,and, for the purposes of this subsection, to the extent that an indebtedness is incurred by a taxpayer in respect of a property and at any time that property or a property substituted therefor is used for any of the purposes referred to in this subsection, the indebtedness shall be deemed to be incurred at that time for that purpose.Work space in homeNotwithstanding any other provision of this Act, in computing an individual’s income from a business for a taxation year,no amount shall be deducted in respect of an otherwise deductible amount for any part (in this subsection referred to as the “work space”) of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is eitherthe individual’s principal place of business, orused exclusively for the purpose of earning income from business and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business;if the conditions set out in subparagraph (a)(i) or (ii) are met, the amount for the work space that is deductible in computing the individual’s income for the year from the business shall not exceed the individual’s income for the year from the business, computed without reference to the amount and section 34.1; andany amount not deductible by reason only of paragraph 18(12)(b) in computing the individual’s income from the business for the immediately preceding taxation year shall be deemed to be an amount otherwise deductible that, subject to paragraphs 18(12)(a) and 18(12)(b), may be deducted for the year for the work space in respect of the business.When s. (15) applies to money lendersSubsection 18(15) applies, subject to subsection 142.6(7), whena taxpayer (in this subsection and subsection (15) referred to as the “transferor”) disposes of a particular property (other than, for the purposes of computing the exempt surplus or exempt 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);the disposition is not described in any of paragraphs (c) to (g) of the definition superficial loss in section 54;the transferor is not an insurer;the ordinary business of the transferor includes the lending of money and the particular property was used or held in the ordinary course of that business;the particular property is a share, or a loan, bond, debenture, mortgage, hypothecary claim, note, agreement for sale or any other indebtedness;the particular property was, immediately before the disposition, not a capital property of the transferor;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 18(15) referred to as the “substituted property”) that is, or is identical to, the particular property; andat the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.When s. (15) applies to adventurers in tradeSubsection 18(15) applies wherea person (in this subsection and subsection 18(15) referred to as the “transferor”) disposes of a particular property;the particular property is described in an inventory of a business that is an adventure or concern in the nature of trade;the disposition is not a disposition that is deemed to have occurred by subsection 10.1(6) or (7), section 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c) or subsection 138(11.3) or 138.2(4) or 149(10);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 property (in this subsection and subsection 18(15) referred to as the “substituted property”) that is, or is identical to, the particular property; andat the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.Loss on certain propertiesIf this subsection applies because of subsection 18(13) or 18(14) to a disposition of a particular property,the transferor’s loss, if any, from the disposition is deemed to be nil, andthe amount of the transferor’s loss, if any, from the disposition (determined without reference to this subsection) is deemed to be a loss of the transferor from a disposition of the particular property at the first time, after the disposition,at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor ownsthe substituted property, ora property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,at which the substituted 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,that is immediately before the transferor is subject to a loss restriction event, orif the transferor is a corporation,for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt 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 isa qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, ora designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, andfor any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins, andand for the purpose of paragraph 18(15)(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 18(15)(b)(i) to (iv).Deemed identical propertyFor the purposes of subsections (13), (14) and (15), 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.DefinitionsThe following definitions apply in this subsection and subsections (18) to (23).offsetting position, in respect of a particular position of a person or partnership (in this definition referred to as the “holder”), means one or more positions thatare held bythe holder,a person or partnership that does not deal at arm’s length with, or is affiliated with, the holder (in this subsection and subsections (20), (22) and (23) referred to as the “connected person”), orfor greater certainty, by any combination of the holder and one or more connected persons;have the effect, or would have the effect if each of the positions held by a connected person were held by the holder, of eliminating all or substantially all of the holder’s risk of loss and opportunity for gain or profit in respect of the particular position; andif held by a connected person, can reasonably be considered to have been held with the purpose of obtaining the effect described in paragraph (b). (position compensatoire)position, of a person or partnership, means one or more properties, obligations or liabilities of the person or partnership, ifeach property, obligation or liability isa share in the capital stock of a corporation,an interest in a partnership,an interest in a trust,a commodity,foreign currency,a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement,a debt owed to or owing by the person or partnership that, at any time,is denominated in a foreign currency,would be described in paragraph 7000(1)(d) of the Income Tax Regulations if that paragraph were read without reference to the words “other than one described in paragraph (a), (b) or (c)”, oris convertible into or exchangeable for an interest, or for civil law a right, in any property that is described in any of subparagraphs (i) to (iv),an obligation to transfer or return to another person or partnership a property identical to a particular property described in any of subparagraphs (i) to (vii) that was previously transferred or lent to the person or partnership by that other person or partnership, oran interest, or for civil law a right, in any property that is described in any of subparagraphs (i) to (vii); andit is reasonable to conclude that, if there is more than one property, obligation or liability, each of them is held in connection with each other. (position)successor position, in respect of a position (in this definition referred to as the “initial position”), means a particular position ifthe particular position is an offsetting position in respect of a second position;the second position was an offsetting position in respect of the initial position that was disposed of at a particular time; andthe particular position was entered into during the period that begins 30 days before, and ends 30 days after, the particular time. (position remplaçante)unrecognized loss, in respect of a position of a person or partnership at a particular time in a taxation year, means the loss, if any, that would be deductible in computing the income of the person or partnership for the year with respect to the position if it were disposed of immediately before the particular time at its fair market value at the time of disposition. (perte non constatée)unrecognized profit, in respect of a position of a person or partnership at a particular time in a taxation year, means the profit, if any, that would be included in computing the income of the person or partnership for the year with respect to the position if it were disposed of immediately before the particular time at its fair market value at the time of disposition. (bénéfice non constaté)Application of subsection (19)Subject to subsection (20), subsection (19) applies in respect of a disposition of a particular position by a person or partnership (in this subsection and subsections (19), (20) and (22) referred to as the “transferor”), ifthe disposition is not a disposition that is deemed to have occurred by section 70, subsection 104(4), section 128.1 or subsection 138(11.3) or 149(10);the transferor is not a financial institution (as defined in subsection 142.2(1)), a mutual fund corporation or a mutual fund trust; andthe particular position was, immediately before the disposition, not a capital property, or an obligation or liability on account of capital, of the transferor.Straddle lossesIf this subsection applies in respect of a disposition of a particular position by a transferor, the portion of the transferor’s loss, if any, from the disposition of the particular position that is deductible in computing the transferor’s income for a particular taxation year is the amount determined by the formulaA + B − CwhereAisif the particular taxation year is the taxation year in which the disposition occurs, the amount of the loss determined without reference to this subsection (which is, for greater certainty, subject to subsection (15)), andin any other taxation year, nil;Bisif the disposition occurred in a preceding taxation year, the amount determined for C in respect of the disposition for the immediately preceding taxation year, andin any other case, nil; andCis the lesser ofthe amount determined for A for the taxation year in which the disposition occurs, andthe amount determined by the formulaD − (E + F)whereDis the total of all amounts each of which is the amount of unrecognized profit at the end of the particular taxation year in respect ofthe particular position,positions that are offsetting positions in respect of the particular position (or would be, to the extent that there is no successor position in respect of the particular position, if the particular position continued to be held by the transferor),successor positions in respect of the particular position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), andpositions that are offsetting positions in respect of any successor position referred to in subparagraph (iii) (or would be, if any such successor position continued to be held by the holder),Eis the total of all amounts each of which is the amount of unrecognized loss at the end of the particular taxation year in respect of positions referred to in subparagraphs (i) to (iv) of the description of D, andFis the total of all amounts each of which is an amount determined by the formulaG − HwhereGis the amount determined for A for the taxation year in which the disposition occurs in respect of any position that was disposed of prior to the disposition of the particular position, ifthe particular position was a successor position in respect of that position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), andthat position wasan offsetting position in respect of the particular position,an offsetting position in respect of a position in respect of which the particular position was a successor position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), orthe particular position, andHis the total of all amounts each of which is, in respect of a position described in G, an amount determined under the first formula in this subsection for the particular taxation year or a preceding taxation year.ExceptionsSubsection (19) does not apply in respect of a particular position of a transferor ifit is the case thateither the particular position, or the offsetting position in respect of the particular position, consists ofcommodities that the holder of the position manufactures, produces, grows, extracts or processes, ordebt that the holder of the position incurs in the course of a business that consists of one or any combination of the activities described in clause (A), andit can reasonably be considered that the position not described in subparagraph (i) — the particular position if the offsetting position is described in subparagraph (i) or the offsetting position if the particular position is described in that subparagraph — is held to reduce the risk, with respect to the position described in subparagraph (i), fromin the case of a position described in clause (i)(A), price changes or fluctuations in the value of currency with respect to the goods described in clause (i)(A), orin the case of a position described in clause (i)(B), fluctuations in interest rates or in the value of currency with respect to the debt described in clause (i)(B);the transferor or a connected person (in this paragraph referred to as the “holder”) continues to hold a position — that would be an offsetting position in respect of the particular position if the particular position continued to be held by the transferor — throughout a 30-day period beginning on the date of disposition of the particular position, and at no time during the periodis the holder’s risk of loss or opportunity for gain or profit with respect to the position reduced in any material respect by another position entered into or disposed of by the holder, orwould the holder’s risk of loss or opportunity for gain or profit with respect to the position be reduced in any material respect by another position entered into or disposed of by a connected person, if the other position were entered into or disposed of by the holder; orit can reasonably be considered that none of the main purposes of the series of transactions or events, or any of the transactions or events in the series, of which the holding of both the particular position and offsetting position are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act.ApplicationFor the purposes of subsections (17) to (23),if a position of a person or partnership is not a property of the person or partnership, the person or partnership is deemedto hold the position at any time while it is a position of the person or partnership, andto have disposed of the position when the position is settled or extinguished in respect of the person or partnership;a disposition of a position is deemed to include a disposition of a portion of the position;a position held by one or more persons or partnerships referred to in paragraph (a) of the definition offsetting position in subsection (17) is deemed to be an offsetting position in respect of a particular position of a person or partnership ifthere is a high degree of negative correlation between changes in value of the position and the particular position, andit can reasonably be considered that the principal purpose of the series of transactions or events, or any of the transactions in the series, of which the holding of both the position and the particular position are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act; andone or more positions held by one or more persons or partnerships referred to in paragraph (a) of the definition offsetting position in subsection (17) are deemed to be a successor position in respect of a particular position of a person or partnership ifa portion of the particular position was disposed of at a particular time,the position is, or the positions include, as the case may be, a position that consists of the portion of the particular position that was not disposed of (in this paragraph referred to as the “remaining portion of the particular position”),where there is more than one position, the position or positions that do not consist of the remaining portion of the particular position were entered into during the period that begins 30 days before, and ends 30 days after, the particular time,the position is, or the positions taken together would be, as the case may be, an offsetting position in respect of a second position (within the meaning of the definition successor position in subsection (17)),the second position was an offsetting position in respect of the particular position, andit can reasonably be considered that the principal purpose of the series of transactions or events, or any of the transactions in the series, of which the disposition of a portion of the particular position and the holding of one or more positions are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act.Different taxation yearsSubsection (23) applies ifat any time in a particular taxation year of a transferor, a position referred to in any of subparagraphs (ii) to (iv) of the description of D in subsection (19) (in this subsection and subsection (23) referred to as the “gain position”) is held by a connected person;the connected person disposes of the gain position in the particular taxation year; andthe taxation year of the connected person in which the disposition referred to in paragraph (b) occurs ends after the end of the particular taxation year.Different taxation yearsIf this subsection applies, for the purposes of the definition unrecognized profit in subsection (17) and subsection (19), the portion of the profit, if any, realized from the disposition of the gain position referred to in paragraph (22)(b) that is determined by the following formula is deemed to be unrecognized profit in respect of the gain position until the end of the taxation year of the connected person in which the disposition occurs:A × B/CwhereAis the amount of the profit otherwise determined;Bis the number of days in the taxation year of the connected person in which the disposition referred to in paragraph (22)(b) occurs that are after the end of the particular taxation year; andCis the total number of days in the taxation year of the connected person in which the disposition referred to in paragraph (22)(b) occurs.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 18; 1994, c. 7, Sch. II, s. 13, Sch. VIII, s. 8, c. 21, s. 11; 1995, c. 3, s. 6, c. 21, ss. 5 and 48; 1996, c. 21. s. 5; 1997, c. 25, s. 4; 1998, c. 19, ss. 3 and 79; 2001, c. 17, ss. 9, 201; 2003, c. 28, s. 2; 2006, c. 4, s. 161; 2007, c. 35, ss. 11, 102; 2008, c. 28, s. 2; 2010, c. 25, s. 5; 2011, c. 24, s. 2; 2012, c. 31, s. 7; 2013, c. 33, s. 2, c. 34, ss. 56, 95, 178, 427, c. 40, s. 8; 2014, c. 39, s. 6; 2016, c. 12, s. 6; 2017, c. 20, s. 3, c. 33, s. 5; 2018, c. 27, s. 32022, c. 5, s. 272022, c. 10, s. 1582022, c. 10, s. 1732022, c. 19, s. 32024, c. 15, s. 62024, c. 15, s. 1142024, c. 17, s. 982024, c. 17, s. 111
DefinitionsThe definitions in this subsection apply in this section.matchable expenditure of a taxpayer means the amount of an expenditure that is made by the taxpayer toacquire a right to receive production,fulfil a covenant or obligation arising in circumstances in which it is reasonable to conclude that a relationship exists between the covenant or obligation and a right to receive production, orpreserve or protect a right to receive production,but does not include an amount for which a deduction is provided under section 20 in computing the taxpayer’s income. (dépense à rattacher)right to receive production means a right under which a taxpayer is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount all or a portion of which is computed by reference to use of property, production, revenue, profit, cash flow, commodity price, cost or value of property or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares where the amount is in respect of another taxpayer’s activity, property or business but such a right does not include an income interest in a trust, a Canadian resource property or a foreign resource property. (droit aux produits)tax benefit means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act. (avantage fiscal)tax shelter means a property that would be a tax shelter (as defined in subsection 237.1(1)) ifthe cost of a right to receive production were the total of all amounts each of which is a matchable expenditure to which the right relates; andsubsections 18.1(2) to 18.1(13) did not apply for the purpose of computing an amount, or in the case of a partnership a loss, represented to be deductible. (abri fiscal)taxpayer includes a partnership. (contribuable)Limitation on the deductibility of matchable expenditureIn computing a taxpayer’s income from a business or property for a taxation year, no amount of a matchable expenditure may be deducted except as provided by subsection 18.1(3).Deduction of matchable expenditureIf a taxpayer’s matchable expenditure would, but for subsection 18.1(2) and this subsection, be deductible in computing the taxpayer’s income, there may be deducted in respect of the matchable expenditure in computing the taxpayer’s income for a taxation year the amount that is determined under subsection 18.1(4) for the year in respect of the expenditure.Amount of deductionFor the purpose of subsection 18.1(3), the amount determined under this subsection for a taxation year in respect of a taxpayer’s matchable expenditure is the amount, if any, that is the least ofthe total ofthe lesser of1/5 of the matchable expenditure, andthe amount determined by the formula(A/B) × CwhereAis the number of months that are in the year and after the day on which the right to receive production to which the matchable expenditure relates is acquired,Bis the lesser of 240 and the number of months that are in the period that begins on the day on which the right to receive production to which the matchable expenditure relates is acquired and that ends on the day the right is to terminate, andCis the amount of the matchable expenditure, andthe amount, if any, by which the amount determined under this paragraph for the preceding taxation year in respect of the matchable expenditure exceeds the amount of the matchable expenditure deductible in computing the taxpayer’s income for that preceding year,the total ofall amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of such amount that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production to which the matchable expenditure relates, andthe amount by which the amount determined under this paragraph for the preceding taxation year in respect of the matchable expenditure exceeds the amount of the matchable expenditure deductible in computing the taxpayer’s income for that preceding year, andthe amount, if any, by whichthe total of all amounts each of which is an amount of the matchable expenditure that would, but for this section, have been deductible in computing the taxpayer’s income for the year or a preceding taxation yearexceedsthe total of all amounts each of which is an amount of the matchable expenditure deductible under subsection 18.1(3) in computing the taxpayer’s income for a preceding taxation year.Special rulesFor the purpose of this section,where a taxpayer’s matchable expenditure is made before the day on which the related right to receive production is acquired by the taxpayer, the expenditure is deemed to have been made on that day;where a taxpayer has one or more rights to renew a particular right to receive production to which a matchable expenditure relates for one or more additional terms, after the term that includes the time at which the particular right was acquired, the particular right is deemed to terminate on the latest day on which the latest possible such term could terminate if all rights to renew the particular right were exercised;where a taxpayer has 2 or more rights to receive production that can reasonably be considered to be related to each other, the rights are deemed to be one right; andwhere the term of a taxpayer’s right to receive production is for an indeterminate period, the right is deemed to terminate 240 months after it is acquired.Proceeds of disposition considered incomeWhere in a taxation year a taxpayer disposes of all or part of a right to receive production to which a matchable expenditure relates, the proceeds of the disposition shall be included in computing the taxpayer’s income for the year.Arm’s length dispositionSubject to subsections 18.1(8) to 18.1(10), where in a taxation year a taxpayer disposes (otherwise than in a disposition to which subsection 87(1) or 88(1) applies) of all of the taxpayer’s right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to this subsection, be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates, or the taxpayer’s right expires, the amount deductible in respect of the expenditure under subsection 18.1(3) in computing the taxpayer’s income for the year is deemed to be the amount, if any, determined under paragraph 18.1(4)(c) for the year in respect of the expenditure.Non-arm’s length dispositionSubsection 18.1(10) applies wherea taxpayer’s particular right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to subsections 18.1(7) and 18.1(10), be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates has expired or the taxpayer has disposed of all of the right (otherwise than in a disposition to which subsection 87(1) or 88(1) applies);during the period that begins 30 days before and ends 30 days after the disposition or expiry, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer acquires a right to receive production (in this subsection and subsection 18.1(10) referred to as the “substituted property”) that is, or is identical to, the particular right; andat the end of the period, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer owns the substituted property.Special caseSubsection 18.1(10) applies wherea taxpayer’s particular right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to subsections 18.1(7) and 18.1(10), be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates has expired or the taxpayer has disposed of all of the right (otherwise than in a disposition to which subsection 87(1) or 88(1) applies); andduring the period that begins at the time of the disposition or expiry and ends 30 days after that time, a taxpayer that had an interest, directly or indirectly, in the right has another interest, directly or indirectly, in another right to receive production, which other interest is a tax shelter or a tax shelter investment (as defined by section 143.2).Amount of deduction if non-arm’s length dispositionWhere this subsection applies because of subsection 18.1(8) or 18.1(9) to a disposition or expiry in a taxation year or a preceding taxation year of a taxpayer’s right to receive production to which a matchable expenditure relates,the amount deductible under subsection 18.1(3) in respect of the expenditure in computing the taxpayer’s income for a taxation year that ends at or after the disposition or expiry of the right is the least of the amounts determined under subsection 18.1(4) for the year in respect of the expenditure; andthe least of the amounts determined under subsection 18.1(4) in respect of the expenditure for a taxation year is deemed to be the amount, if any, determined under paragraph 18.1(4)(c) in respect of the expenditure for the year where the year includes the time that is immediately before the first time, after the disposition or expiry,at which the right would, if it were owned by the taxpayer, be deemed by section 128.1 or subsection 149(10) to have been disposed of by the taxpayer,that is immediately before the taxpayer is subject to a loss restriction event,at which winding-up of the taxpayer begins (other than a winding-up to which subsection 88(1) applies), if the taxpayer is a corporation,if subsection 18.1(8) applies, at which a 30-day period begins throughout which neither the taxpayer nor a person affiliated, or who does not deal at arm’s length, with the taxpayer ownsthe substituted property, ora property that is identical to the substituted property and that was acquired after the day that is 31 days before the period began, orif subsection 18.1(9) applies, at which a 30-day period begins throughout which no taxpayer who had an interest, directly or indirectly, in the right has an interest, directly or indirectly, in another right to receive production if one or more of those direct or indirect interests in the other right is a tax shelter or tax shelter investment (as defined by section 143.2).PartnershipsFor the purpose of paragraph 18.1(10)(b), where a partnership otherwise ceases to exist at any time after a disposition or expiry referred to in subsection 18.1(10), the partnership is deemed not to have ceased to exist, and each taxpayer 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 of the times described in subparagraphs 18.1(10)(b)(i) to 18.1(10)(b)(v).Identical propertyFor the purposes of subsections (8) and (10), a right to acquire a particular right to receive production (other than a right, as security only, derived from a mortgage, hypothec, agreement of sale or similar obligation) is deemed to be a right to receive production that is identical to the particular right.Application of section 143.2For the purpose of applying section 143.2 to an amount that would, if this section were read without reference to this subsection, be a matchable expenditure any portion of the cost of which is deductible under subsection 18.1(3), the expenditure is deemed to be a tax shelter investment and that section shall be read without reference to subparagraph 143.2(6)(b)(ii).Debt obligationsWhere the rate of return on a taxpayer’s right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to this subsection, be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates is reasonably certain at the time the taxpayer acquires the right,the right is, for the purposes of subsection 12(9) and Part LXX of the Income Tax Regulations, deemed to be a debt obligation in respect of which no interest is stipulated to be payable in respect of its principal amount and the obligation is deemed to be satisfied at the time the right terminates for an amount equal to the total of the return on the obligation and the amount that would otherwise be the matchable expenditure that is related to the right; andnotwithstanding subsection 18.1(3), no amount may be deducted in computing the taxpayer’s income in respect of any matchable expenditure that relates to the right.Non-application — risks ceded between insurersSubsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production ifthe expenditure is in respect of commissions, or other expenses, related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer; andthe taxpayer and the person to whom the expenditure is made, or is to be made, are both insurers who are subject to the supervision ofthe Superintendent of Financial Institutions, if the taxpayer or that person, as the case may be, is an insurer who is required by law to report to the Superintendent of Financial Institutions, orthe Superintendent of Insurance, or other similar officer or authority, of the province under whose laws the insurer is incorporated, in any other case.Non-application — no rights, tax benefits or sheltersSubsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production ifno portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer;no portion of the matchable expenditure can reasonably be considered to relate to a tax shelter or a tax shelter investment (within the meaning assigned by subsection 143.2(1)); andnone of the main purposes for making the matchable expenditure can reasonably be considered to have been to obtain a tax benefit for the taxpayer, a person or partnership with whom the taxpayer does not deal at arm’s length, or a person or partnership that holds, directly or indirectly, an interest in the taxpayer.Revenue exceptionParagraph (4)(a) does not apply in determining the amount for a taxation year that may be deducted in respect of a taxpayer’s matchable expenditure in respect of a right to receive production ifbefore the end of the taxation year in which the matchable expenditure is made, the total of all amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of any of those amounts that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production that relates to the matchable expenditure exceeds 80% of the matchable expenditure; andno portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1998, c. 19, s. 80; 2001, c. 17, ss. 10, 202(E); 2013, c. 34, ss. 96(F), 179, c. 40, s. 9
DefinitionsThe following definitions apply in this section and section 18.21.absorbed capacity of a taxpayer for a taxation year means the lesser ofthe taxpayer’s cumulative unused excess capacity for the year, determined as if the taxpayer’s absorbed capacity for the year were nil, andthe amount determined by the formulaA − (B + C)whereAis the taxpayer’s interest and financing expenses for the year,Bisif subsection 18.21(2) applies in respect of the taxpayer for the year, the amount determined in respect of the taxpayer for the year under that subsection, andin any other case, the amount determined by the formulaD × EwhereDis the taxpayer’s ratio of permissible expenses for the year, andEis the taxpayer’s adjusted taxable income for the year, andCis the taxpayer’s interest and financing revenues for the year. (capacité absorbée)adjusted taxable income of a taxpayer for a taxation year means the amount determined by the formulaA + B − CwhereAis the positive or negative amount determined by the formulaD − EwhereDisif the taxpayer is non-resident, the taxpayer’s taxable income earned in Canada for the year (determined without regard to subsection (2) and paragraphs 12(1)(l.2) and 111(1)(a.1)), andin any other case, the taxpayer’s taxable income for the year (determined without regard to subsection (2), paragraphs 12(1)(l.2) and 111(1)(a.1) and clause 95(2)(f.11)(ii)(D)), andEis the total ofthe taxpayer’s non-capital loss for the year (determined without regard to subsection (2), paragraphs 12(1)(l.2) and 111(1)(a.1) and clause 95(2)(f.11)(ii)(D)), andthe total of all amounts each of which is, in respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year — or a controlled foreign affiliate of a partnership, of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member, at the end of an affiliate taxation year ending in a fiscal period of the partnership — an amount determined by the formulaT × U ÷ VwhereTis the lesser ofthe affiliate’s foreign accrual property loss (determined without regard to clause 95(2)(f.11)(ii)(D)) for the affiliate taxation year, andthe amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year exceeds the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year,Uis the amount that is included in the taxpayer’s interest and financing expenses for the year in respect of the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, andVis the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year;Bis the total of all amounts (subject to paragraph (k), other than an amount that can reasonably be considered to be in respect of exempt interest and financing expenses) each of which isthe taxpayer’s interest and financing expenses for the year,an amount deducted by the taxpayer in computing its income for the year under paragraph 20(1)(a) or 59.1(a) or subsection 66(4), 66.1(2) or (3), 66.2(2), 66.21(4), 66.4(2) or 66.7(1), (2), (2.3), (3), (4) or (5), other than any portion of that amount that is described in subparagraph (c)(ii) of the description of A in the definition interest and financing expenses,an amount deducted by the taxpayer in computing its income for the year under subsection 20(16), other than any portion of that amount that is described in paragraph (d) of the description of A in the definition interest and financing expenses,in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formulaF × G − HwhereFis the total of all amounts, each of which is an amount deducted by the partnership under paragraph 20(1)(a) or subsection 20(16) in computing its income or loss from the source, or the source in a particular place, for the fiscal period, other than any portion of that amount that is described in subparagraph (c)(ii) of the description of A in the definition interest and financing expenses,Gis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”, andHis the portion of an amount referred to in the description of F that can reasonably be considered to not be deductible in computing the taxpayer’s income for the year, or to not be included in computing the taxpayer’s non-capital loss for the year, because of subsection 96(2.1),the portion of an amount deducted under paragraph 111(1)(e) for the year, in respect of a partnership of which the taxpayer is a member, that can reasonably be considered to be attributable to an amount referred to in the description of H in paragraph (d) in respect of a fiscal period of the partnership ending in a preceding taxation year of the taxpayer,an amount deducted by the taxpayer under paragraph 110(1)(k) in computing its taxable income for the year,an amount deducted by the taxpayer under subsection 104(6) in computing its income for the year, except to the extent of any portion of the amount that has been designated under subsection 104(19) for the year,an amount determined by the formulaI × J ÷ KwhereIis the amount deducted by the taxpayer under paragraph 111(1)(a) in computing its taxable income for the year, in respect of the taxpayer’s non-capital loss (other than a specified pre-regime loss of the taxpayer in respect of the year) for another taxation year (referred to in this paragraph as the “taxpayer loss year”),Jis the lesser ofthe non-capital loss for the taxpayer loss year, andthe amount determined by the formulaW − X − YwhereWis the total of all amounts, each of which is an amount that isthe interest and financing expenses of the taxpayer for the taxpayer loss year, determined without regard to any amount or portion of an amount that is not deductible because of subsection (2) or clause 95(2)(f.11)(ii)(D),described in any of paragraphs (b) to (g) or (j) to (m) of the description of B for the taxpayer loss year, ordeducted by the taxpayer under paragraph 111(1)(a.1) in computing its taxable income for the taxpayer loss year,Xis the total of all amounts, each of which is an amountdescribed in any of paragraphs (a) to (f), (h) or (j) of the description of C for the taxpayer loss year, orincluded in the income of the taxpayer for the taxpayer loss year by reason of paragraph 12(1)(l.2), andYis the total of all amounts, each of which is an amount determined by the formulaZ × Z.1 ÷ Z.2whereZis the lesser ofthe foreign accrual property loss, for an affiliate taxation year, of a corporation (referred to throughout the description of Y as the “affiliate”) that, at the end of the affiliate taxation year, is a controlled foreign affiliate of the taxpayer, or is a controlled foreign affiliate of a partnership of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member at any time, andthe amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year (determined without regard to any amount or portion of an amount that is not deductible because of clause 95(2)(f.11)(ii)(D)) exceeds the total of all amounts, each of which isthe affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year, oran amount included under subclause 95(2)(f.11)(ii)(D)(II) in respect of the affiliate for the affiliate taxation year,Z.1is the amount that is included in the taxpayer’s interest and financing expenses for the taxpayer loss year in respect of the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, andZ.2is the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, andKis the non-capital loss for the taxpayer loss year,25% of the amount deducted, in respect of a specified pre-regime loss of the taxpayer in respect of the year, by the taxpayer under paragraph 111(1)(a) in computing its taxable income for the year,in respect of a corporation (referred to in this paragraph as the “affiliate”) that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year — or that is a controlled foreign affiliate of a partnership, of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member at any time, at the end of an affiliate taxation year ending in a fiscal period of the partnership — the additional amount that would be included in the taxpayer’s income, either under subsection 91(1) or because an amount would be included in the income of a partnership under that subsection, in respect of the affiliate’s foreign accrual property income for the affiliate taxation year, if the affiliate’s foreign accrual property income for the affiliate taxation year were increased by the amount determined by the formulaL × M ÷ NwhereLis the amount that, in computing the foreign accrual property income of the affiliate for the affiliate taxation year, is the prescribed amount for the description of F in the definition foreign accrual property income in subsection 95(1), in respect of a foreign accrual property loss of the affiliate for another affiliate taxation year (referred to in this paragraph as the “affiliate loss year”),Mis the lesser ofthe affiliate’s foreign accrual property loss for the affiliate loss year, andthe amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate loss year (determined without regard to any amount or portion of an amount that is not deductible because of clause 95(2)(f.11)(ii)(D)) exceeds the total of all amounts, each of which isthe affiliate’s relevant affiliate interest and financing revenues for the affiliate loss year, oran amount included under subclause 95(2)(f.11)(ii)(D)(II) in respect of the affiliate for the affiliate loss year, andNis the affiliate’s foreign accrual property loss for the affiliate loss year,the amount that would be the taxpayer’s loss for the year, or that would be the taxpayer’s share of the loss of a partnership of which the taxpayer is a member, if the taxpayer or partnership had no income or loss other than a loss that can reasonably be considered to be incurred by the taxpayer or the partnership in respect of activities funded by a borrowing (within the meaning of the definition exempt interest and financing expenses) that results in exempt interest and financing expenses of the taxpayer or the partnership,an amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6) in respect of a property acquired in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that itis included in an amount determined under paragraph 13(7.1)(e) or subparagraph 53(2)(c)(vi) to (vi.4) or (h)(ii) or for I in the definition undepreciated capital cost in subsection 13(21), andwas not includedin computing the taxpayer’s income for the year or a preceding taxation year, andunder this paragraph in calculating the taxpayer’s adjusted taxable income for a preceding taxation year, oran amount described in clause 12(1)(x)(i)(C) or subparagraph 12(1)(x)(ii) that is received by the taxpayer in the year to the extent that itreduces the cost or capital cost of a property,is not included in computing the income of the taxpayer for the year under paragraph 12(1)(x), andwould be included in computing the income of the taxpayer for the year under paragraph 12(1)(x) if that paragraph were read without reference to its subparagraphs (vi) and (vii); andCis the total of all amounts each of which isthe taxpayer’s interest and financing revenues for the year,an amount included under subsection 13(1) in computing the taxpayer’s income for the year,in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formulaO × PwhereOis an amount that is included by the partnership under subsection 13(1) in computing its income or loss from the source, or the source in a particular place, for the fiscal period, andPis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,an amount included under subsection 59(1) or (3.2) or paragraph 59.1(b) in computing the taxpayer’s income for the year,in the case of a corporation100/28 of the total of the amounts that would be deductible by it under subsection 126(1) from its tax for the year otherwise payable under this Part if those amounts were determined without reference to sections 123.3 and 123.4, orthe amount determined by multiplying the total of the amounts that would be deductible by it under subsection 126(2) from its tax for the year otherwise payable under this Part, if those amounts were determined without reference to section 123.4, by the relevant factor for the year,in the case of a trust, the amount determined by the formulaQ × (1 ÷ (R × S))whereQis the total of the amounts deductible by it under subsection 126(1) or (2) from its tax for the year otherwise payable under this Part for the year,Ris the percentage (expressed as a decimal fraction) referred to in paragraph 122(1)(a) in respect of the year, andSis 1 plus the percentage (expressed as a decimal fraction) referred to in subsection 120(1) in respect of the year,an amount included under section 110.5 in computing the taxpayer’s taxable income for the year,an amount included under subsection 104(13) in computing the taxpayer’s income for the year, except to the extent of any portion of the amount thathas been designated under subsection 104(19) for the year, orgives rise to a deduction under paragraph 94.2(3)(a) in computing the foreign accrual property income for an affiliate taxation year of an entity that is a controlled foreign affiliate of the taxpayer at the end of the affiliate taxation year,an amount of the taxpayer’s taxable income for the year that is not, because of an Act of Parliament, subject to tax under this Part, orthe amount that would be the taxpayer’s income for the year, or that would be the taxpayer’s share of the income of a partnership of which the taxpayer is a member, if the taxpayer or partnership had no income or loss other than income that can reasonably be considered to be earned by the taxpayer or the partnership in respect of activities funded by a borrowing (within the meaning of the definition exempt interest and financing expenses) that results in exempt interest and financing expenses of the taxpayer or the partnership. (revenu imposable rajusté)affiliate taxation year of a controlled foreign affiliate means the period for which the accounts of the affiliate have been ordinarily made up, but no such period may exceed 53 weeks. (année d’imposition de la société affiliée)cumulative unused excess capacity of a taxpayer for a particular taxation year means the total of all amounts each of which isthe excess capacity of the taxpayer for the particular year, orthe excess capacity of the taxpayer for any of the three immediately preceding taxation years, if the taxpayer’s excess capacity for each of those years is determined according to the following rules:if the taxpayer has an amount of transferred capacity for any taxation year (referred to in this definition as the “transfer year”) preceding the particular year,there are to be reductions to the taxpayer’s excess capacity for the transfer year and the three taxation years immediately preceding the transfer year (each referred to in this subparagraph as a “relevant year”) in a total amount equal to the total of all amounts each of which is an amount of transferred capacity of the taxpayer for the transfer year (referred to in this definition as the “total transferred capacity amount”), andthe amount by which the taxpayer’s excess capacity for a particular relevant year is to be reduced is equal to the lesser ofthe taxpayer’s excess capacity for the particular relevant year, determined taking into consideration any reductions to that excess capacity underthis subparagraph, in respect of amounts of transferred capacity for years preceding the transfer year, andsubparagraph (ii), in respect of amounts of absorbed capacity for the transfer year and any years preceding the transfer year, andthe amount, if any, by which the total transferred capacity amount for the transfer year exceeds the reductions, under this subparagraph in respect of that total transferred capacity amount, to the taxpayer’s excess capacity for any relevant years preceding the particular relevant year, andif the taxpayer has an amount of absorbed capacity for a taxation year (referred to in this definition as the “absorbed capacity year”),there are to be reductions to the taxpayer’s excess capacity for the three taxation years immediately preceding the absorbed capacity year (each referred to in this subparagraph as a “relevant year”) in a total amount equal to the amount of absorbed capacity for the absorbed capacity year, andthe amount by which the taxpayer’s excess capacity for a particular relevant year is to be reduced is equal to the lesser ofthe taxpayer’s excess capacity for the particular relevant year, determined taking into account any reductions to that excess capacity undersubparagraph (i), in respect of amounts of transferred capacity for years preceding the absorbed capacity year, andthis subparagraph, in respect of amounts of absorbed capacity for years preceding the absorbed capacity year, andthe amount, if any, by which the amount of absorbed capacity for the absorbed capacity year exceeds the reductions under this subparagraph in respect of that amount of absorbed capacity to the taxpayer’s excess capacity for the relevant years preceding the particular relevant year. (capacité excédentaire cumulative inutilisée)eligible group entity, in respect of a taxpayer resident in Canada, at any time, means a corporation, or a trust, resident in Canadathat is, at that time, related (other than because of a right referred to in paragraph 251(5)(b)) to the taxpayer;that would, at that time, be affiliated with the taxpayer if section 251.1 were read without reference to the definition controlled in subsection 251.1(3);that is a trust in respect of which the taxpayer’s interest in the trust is not a fixed interest (as defined in subsection 94(1)); orthat is a beneficiary of the taxpayer, if the taxpayer is a trust, whose interest in the taxpayer is not a fixed interest (as defined in subsection 94(1)) (other than a beneficiary that is a registered charity, or a non-profit organization, with whom the taxpayer deals at arm’s length). (entité admissible du groupe)excess capacity of a taxpayer for a taxation year meansif subsection 18.21(2) applies in respect of the taxpayer for the year, nil; andin any other case, the amount determined by the formulaA − B − CwhereAis the amount determined by the formulaD × E + FwhereDis the ratio of permissible expenses of the taxpayer for the year,Eis the adjusted taxable income of the taxpayer for the year, andFis the amount determined by the formulaG − H × IwhereGis the interest and financing revenues of the taxpayer for the year,His the ratio of permissible expenses of the taxpayer for the year, andIis the lesser ofthe amount by which the interest and financing revenues of the taxpayer for the year exceed the interest and financing expenses of the taxpayer for the year, andeitherif the adjusted taxable income of the taxpayer for the year would, in the absence of section 257, be a negative amount, the absolute value of the negative amount, orin any other case, nil,Bis the interest and financing expenses of the taxpayer for the year, andCis the amount deductible by the taxpayer under paragraph 111(1)(a.1) in the year. (capacité excédentaire)excluded entity for a particular taxation year meansa corporation that is throughout the particular year a Canadian-controlled private corporation in respect of which the amount determined for C in paragraph 125(5.1)(a) for the year is less than $50,000,000;a particular taxpayer resident in Canada, if $1,000,000 is not less than the amount determined by the formulaA − BwhereAis the total of all amounts, each of which is the interest and financing expenses or the exempt interest and financing expenses ofthe particular taxpayer for the particular taxation year, oranother taxpayer resident in Canada for a taxation year (referred to in this subparagraph as the “relevant taxation year”) ending in the particular taxation year, if the other taxpayer is an eligible group entity in respect of the particular taxpayer at the end of the relevant taxation year, andBis the amount that would be determined for A ifthe reference in the description of A to “the interest and financing expenses or the exempt interest and financing expenses” were read as a reference to “the interest and financing revenues”, andthe interest and financing revenues of a financial institution group entity were excluded; ora taxpayer resident in Canada ifall or substantially all of the businesses, if any, and all or substantially all of the undertakings and activities ofthe taxpayer are, throughout the particular year, carried on in Canada, andeach eligible group entity in respect of the taxpayer are, throughout the eligible group entity’s taxation year that ends in the particular year, carried on in Canada,throughout the year, it is the case thatA ≥ BwhereAis $5,000,000, andBis the greater ofthe total of all amounts, each of which is the amount at which the shares of the capital stock of a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member, would be valued for the purpose of the balance sheet of the taxpayer or the eligible group entity if that balance sheet were prepared in accordance with generally accepted accounting principles used in Canada, other than any amount or portion of an amount that is already included under this clause because the value of the shares of the capital stock of a particular foreign affiliate reflects the value of shares of the capital stock of another foreign affiliate that is owned, directly or indirectly, by the particular foreign affiliate, orthe total of all amounts, each of which is the amount that can reasonably be considered to be the proportionate share, of the taxpayer or an eligible group entity in respect of the taxpayer, of the fair market value of all property of a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member, other than a property that is shares of the capital stock of another corporation that is a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member,no person or partnership is, at any time in the particular year,a specified shareholder or a specified beneficiary (as those terms are defined in subsection 18(5)) of the taxpayer, or of any eligible group entity in respect of the taxpayer, that is not resident in Canada, ora partnership more than 50% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by non-resident persons, if the property of the partnership includes,if the taxpayer or the eligible group entity in respect of the taxpayer is a corporation, shares, or a right to acquire shares, of the capital stock of the taxpayer or an eligible group entity in respect of the taxpayer that, either alone or together with shares, or rights to acquire shares, held by persons or partnerships with whom the partnership does not deal at arm’s length,provide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, orhave 25% or more of the fair market value of all capital stock in the corporation, orif the taxpayer or the eligible group entity in respect of the taxpayer is a trust, an interest, or a right to acquire an interest, as a beneficiary in the taxpayer or an eligible group entity in respect of the taxpayer that, either alone or together with interests, or rights to acquire interests, held by persons or partnerships with whom the partnership does not deal at arm’s length, has 25% or more of the fair market value of all interests as a beneficiary in the trust, andall or substantially all of the interest and financing expenses of the taxpayer and of each eligible group entity in respect of the taxpayer for the particular year are paid or payable to persons or partnerships that are not, at any time in the particular year, tax-indifferent persons or partnerships that do not deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer. (entité exclue)excluded interest, for a taxation year or fiscal period, means an amount of interest or a lease financing amount, ifthe amount is paid in, or payable in or in respect of, the year or period by a corporation or partnership (in this definition referred to as the “payer”) to another corporation or partnership (in this definition referred to as the “payee”) in respect of a debt or a lease in respect of a particular property;throughout the period during which the amount accrued (in this definition referred to as the “relevant period”)if the amount is interest, the debt is owed by the payer to the payee, orif the amount is a lease financing amount, the lease is between the payer and payee;where the payer is not a financial institution group entity, the payee is not a financial institution group entity;throughout the relevant period and at the time of paymenteach of the payer and payee isa taxable Canadian corporation, ora partnership, no member of which is a natural person, a trust or a corporation that is not a taxable Canadian corporation, andone of the following conditions is met:if the payee is a partnership, all the members of the payee (other than another partnership) are eligible group entities in respect ofif the payer is a partnership, each member of the payer (other than another partnership), andin any other case, the payer, orif the payee is not a partnership, the payee is an eligible group entity in respect ofif the payer is a partnership, each member of the payer (other than another partnership), andin any other case, the payer; andthe payer — or, if the payer is a partnership, each member of the payer — and the payee — or, if the payee is a partnership, each member of the payee — file with the Minister, in respect of the year or period of both the payer and the payee, a joint election in writing in prescribed manner under this paragraph thatspecifiesthe amount of the interest or lease financing amount,if the amount is interest, the amounts outstanding, at the beginning and end of the relevant period, as or on account of the debt in respect of which this paragraph applies, andif the amount is a lease financing amount, the fair market value of the particular property at the time the lease began, andis filed on or before the earliest of the filing-due date ofthe payer for its year,the payee for its year, andif the payer or the payee is a partnership, any member of the payer or payee for the member’s taxation year that includes the end of the fiscal period of the payer or the payee, as the case may be. (intérêts exclus)excluded lease for a taxation year of a taxpayer means a leaseto which the rules in subsection 16.1(1) apply;that would not be considered to be a lease for a term of more than one year for purposes of paragraph (b) of the definition specified leasing property in subsection 1100(1.11) of the Income Tax Regulations; orthat is in respect of propertythat would not be considered, at the time the lease was entered into, to have a fair market value in excess of $25,000 for purposes of paragraph (c) of that definition, orthat would be considered, at all times in the taxation year, exempt property for purposes of subsection 1100(1.13) of the Income Tax Regulations. (bail exclu)exempt interest and financing expenses of a taxpayer for a taxation year means the total of all amounts, each of which would, if the description of A in the definition interest and financing expenses were read without reference to “exempt interest and financing expenses”, be included in interest and financing expenses of the taxpayer for that year, and that is incurred in respect of a borrowing or other financing (referred to in this definition as the “borrowing”), if the taxpayer or a partnership of which the taxpayer is a member entered into an agreement with a public sector authority to design, build and finance — or to design, build, finance, maintain and operate — property that the public sector authority, or another public sector authority, owns or has a leasehold interest in or right to acquire;the borrowing was entered into in respect of the agreement;it can reasonably be considered that all or substantially all of the amount is directly or indirectly borne by a public sector authority referred to in paragraph (a); andthe amount was paid or payable toa person that deals at arm’s length with the taxpayer or the partnership of which the taxpayer is a member, ora particular person that does not deal at arm’s length with the taxpayer or the partnership of which the taxpayer is a member if it may reasonably be considered that all or substantially all of the amount paid or payable to the particular person was paid or payable by the particular person to one or more persons that deal at arm’s length with the taxpayer or the partnership of which the taxpayer is a member. (dépenses d’intérêts et de financement exonérées)financial holding corporation, for a taxation year, means a corporation (other than a corporation described in any of paragraphs (a) to (f) of the definition financial institution group entity) if, throughout the year,the fair market value of the capital stock of the corporation is primarily attributable to any combination of shares or indebtedness of one or more entities described in any of paragraphs (a) to (f) of the definition financial institution group entity that are controlled by the corporation; orthe corporation is incorporated under the Insurance Companies Act and shares of the capital stock of the corporation are listed on a designated stock exchange. (société de portefeuille financière)financial institution group entity means a taxpayer that at any time in a taxation year isa bank;a credit union;an insurance corporation;an entity authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public;an entity whose principal business consists of one or more ofthe lending of money to persons with whom the entity deals at arm’s length,the purchasing of debt obligations issued by persons with whom the entity deals at arm’s length, oractivities which principally give rise to amounts described in paragraphs (a) to (d) of the description of A in the definition interest and financing revenues and are principally conducted with persons with whom the entity deals at arm’s length;a particular entity that is an eligible group entity in respect of an entity described in any of paragraphs (a) to (e), if the particular entity, or a partnership of which the particular entity is a member and from which the particular entity primarily derives its income,is authorized under provincial securities laws to engage in, and primarily engages in, the business ofdealing in securities, orproviding portfolio management, investment advice, fund administration or fund management; orprimarily engages in the business of providing portfolio management, investment advice, fund administration or fund management, including any services connected to those activities, in respect of real estate; ora particular entity (other than a financial holding corporation) that is an eligible group entity in respect of any entity described in any of paragraphs (a) to (f) if all or substantially all of the activities of the particular entity are ancillary to the activities or business carried on by one or more entities described in paragraphs (a) to (f) that are eligible group entities in respect of the particular entity. (entité du groupe d’institutions financières)fixed interest commercial trust at any time means a trust resident in Canada, if at that time the only beneficiaries that may for any reason receive, at or after that time and directly from the trust, any of the income or capital of the trust are beneficiaries that hold fixed interests (as defined in subsection 94(1)) in the trust; andany of the conditions set out in clauses (h)(ii)(A) to (C) in the definition exempt foreign trust in subsection 94(1) is met. (fiducie commerciale à participation fixe)foreign accrual property loss of a foreign affiliate for an affiliate taxation year has the meaning assigned by subsection 5903(3) of the Income Tax Regulations. (perte étrangère accumulée, relative à des biens)interest and financing expenses of a taxpayer for a particular taxation year means the amount determined by the formulaA − BwhereAis the total of all amounts (other than an amount that is included in exempt interest and financing expenses), each of which isan amount thatis paid in, or payable in or in respect of, a year as, on account of, in lieu of payment of or in satisfaction of, interest (other than excluded interest for the particular year or an amount that is deemed to be interest under subsection 137(4.1)),would, in the absence of this section, be deductible (other than under a provision referred to in subparagraph (c)(i)) by the taxpayer in computing its income for the particular year, andis not described in any other paragraph in this definition,an amount that, in the absence of this section and on the assumption that it is not deductible under another provision of this Act (other than any of the provisions referred to in subparagraph (c)(i)), would be deductible in computing the taxpayer’s income for the particular year under any of subparagraphs 20(1)(e)(ii) to (ii.2) and paragraphs 20(1)(e.1) to (f),the portion of an amount, ifthe amount, in the absence of this section, would be deductible in computing the taxpayer’s income for the particular year and is claimed by the taxpayer under paragraph 20(1)(a) or subsection 66(4), 66.1(2) or (3), 66.2(2), 66.21(4), 66.4(2) or 66.7(1), (2), (2.3), (3), (4) or (5), andthe portion can reasonably be considered to be attributable to an amount paid or payable on or after February 4, 2022 that eitheris described in subparagraph (a)(i), orwould otherwise have been deductible in a taxation year under a provision referred to in paragraph (b), but for the application of another provision of this Act,the portion of an amount that would, in the absence of this section, be deductible in computing the taxpayer’s income for the particular year under subsection 20(16), to the extent that the portion can reasonably be considered to be described in subparagraph (c)(ii),an amount that is paid or payable by the taxpayer in a year or that is a loss or a capital loss of the taxpayer for a year, as the case may be, under or as a result of an agreement or arrangement, ifthe amount would, in the absence of this sectionbe deductible (other than under subparagraph 20(1)(e)(i)) in computing the taxpayer’s income for the particular year, orin the case of a capital loss, reduce the amount determined under paragraph 3(b) in respect of the taxpayer or be deductible in computing the taxpayer’s taxable income for the particular year (except to the extent it has already been included under this paragraph for a previous year),the agreement or arrangement is entered into as or in relation to a borrowing or other financing that the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer enters into, whether currently or in the future, and absolutely or contingently, andthe amount can reasonably be considered to increase (or be part of) the cost of funding with respect to the borrowing or other financing (including as a result of any hedge of the cost of funding or of the borrowing or other financing) of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer;a particular amount thatis in respect of an agreement or arrangement that gives rise to, or can reasonably be expected to give rise to, an amount thatis included in computing a taxpayer’s interest and financing expenses for a taxation year under paragraph (e), orreduces the taxpayer’s interest and financing expenses for a taxation year under the description of B,would, in the absence of this section, be deductible by the taxpayer in computing its income for the particular year,is not deductible under any of the provisions listed in paragraph (b), andis an expense or fee payable under the agreement or arrangement or an expense that is incurred in contemplation of, in the course of entering into or in relation to, the agreement or arrangement,a lease financing amount (other than in respect of an excluded lease for the particular year) thatwould, in the absence of this section, be deductible by the taxpayer in computing its income for the particular year, andis not excluded interest for the particular year,in respect of the income or loss of a partnership, for a fiscal period that ends in the particular year, from any source or from sources in a particular place, an amount determined by the formulaC × D − E − FwhereCis the total of all amounts, each of which is an amount thatis deductible by the partnership in computing its income or loss from the source, or the source in a particular place, for a fiscal period, and that would be described in any of paragraphs (a) to (g) if the references to the taxpayer were read as references to the partnership, orwould be included under paragraph (j) in determining the interest and financing expenses of the partnership for the purposes of determining its income or loss from the source, or the source in a particular place, for the fiscal period, if the partnership were a taxpayer for the purposes of this section,Dis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,Eis the amount, if any, included in computing the taxpayer’s income under paragraph 12(1)(l.1) in respect of the amount referred to in the description of C, andFis the portion of an amount determined for C that can reasonably be considered to not be deductible in computing the taxpayer’s income for the particular year, and to not be included in computing the taxpayer’s non-capital loss for the particular year, because of subsection 96(2.1),the portion of an amount that, in the absence of this section, would be deductible in computing the taxpayer’s taxable income for the particular year and is claimed by the taxpayer under paragraph 111(1)(e) in respect of a partnership of which the taxpayer is a member that can reasonably be considered to be attributable to an amount referred to in the description of F in paragraph (h) in respect of a fiscal period of the partnership ending in another taxation year of the taxpayer, orin respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the particular year, an amount determined by the formulaG × HwhereGis the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, andHis the taxpayer’s specified participating percentage in respect of the affiliate for the affiliate taxation year; andBis the total of all amounts, each of which isan amount received or receivable (other than as a dividend or in respect of exempt interest and financing expenses) by the taxpayer in a year, or a gain of the taxpayer for a year, as the case may be, under or as a result of an agreement or arrangement to the extent thatthe amount is included in computing the taxpayer’s income for the particular year,the agreement or arrangement is entered intoas a borrowing or other financing of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer, orin relation to a borrowing or other financing of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer to hedge the cost of funding or the borrowing or other financing,the amount can reasonably be considered to reduce the cost of funding with respect to the borrowing or other financing of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer, andthe amount cannot reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part becausean amount is deductible under any of subsections 20(11) to (12.1) and 126(1) and (2), andan amount is deductible in respect of income or profits tax paid to a country other than Canada thatcan reasonably be considered to have been paid in respect of the amount, andis not a tax substantially similar to tax under subsection 212(1), orin respect of the income or loss of a partnership, for a fiscal period that ends in the particular year, from any source or from sources in a particular place, an amount determined by the formulaI × JwhereIis an amount that would be described in paragraph (a) ifthe references to the taxpayer in that paragraph were read as references to the partnership, andthe reference in subparagraph (a)(i) to “the taxpayer’s income for the particular year” were read as “the partnership’s income or loss from the source, or the source in a particular place, for a fiscal period”, andJis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”. (dépenses d’intérêts et de financement)interest and financing revenues of a taxpayer for a taxation year means the amount determined by the formulaA − BwhereAis the total of all amounts (other than any amount included under the description of B in the definition interest and financing expenses), each of which isan amount received or receivable as, on account of, in lieu of payment or in satisfaction of, interest (other than excluded interest for the year, an amount that is deemed to be interest under subsection 137(4.1) or any amount described in any other paragraph in this definition) that is included in computing the taxpayer’s income for the year,an amount that is included in computing the taxpayer’s income for the year because of subsection 12(9) or section 17.1 (other than any amount described in any other paragraph in this definition),a fee or similar amount in respect of a guarantee, or similar credit support, provided by the taxpayer for the payment of any amount on a debt obligation owing by another person or partnership that is included in computing the taxpayer’s income for the year (other than any amount described in any other paragraph in this definition),an amount received or receivable (other than as a dividend) by the taxpayer, or a gain of the taxpayer, as the case may be, under or as a result of an agreement or arrangement, ifthe amount is included in computing the taxpayer’s income for the year,the agreement or arrangement is entered into as or in relation to a loan or other financing owing to or provided by the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer, andthe amount can reasonably be considered to increase (or be part of) the return of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer with respect to the loan or other financing (including as a result of any hedge of the return or of the loan or other financing),a lease financing amount (other than in respect of a lease that would be an excluded lease for the year, if the definition excluded lease were read without regard to its paragraph (a)) thatis included in computing the taxpayer’s income for the year, andis not excluded interest for the year,in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formulaC × DwhereCis the total of all amounts, each of which is an amount thatis included by the partnership in computing its income or loss from the source, or the source in a particular place, for a fiscal period and that would be described in paragraphs (a) to (e) if the references to the taxpayer were read as references to the partnership, orwould be included under paragraph (g) in determining the interest and financing revenues of the partnership for the purposes of determining its income or loss from the source, or the source in a particular place, for the fiscal period, if the partnership were a taxpayer for the purposes of this section, andDis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”, orin respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year, an amount determined by the formulaE × F − GwhereEis the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year,Fis the taxpayer’s specified participating percentage in respect of the affiliate for the affiliate taxation year, andGis an amount (other than any portion of the amount that is in respect of income tax paid under subsection 212(1)) that is deducted under subsection 91(4) in computing the taxpayer’s income for any taxation year in respect of foreign accrual tax (as defined in subsection 95(1)) applicable to an amount that is included in the taxpayer’s income under subsection 91(1) in respect of the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year, andBis the total of all amounts, each of which isan amount paid or payable by the taxpayer, or a loss or a capital loss of the taxpayer, as the case may be, under or as a result of an agreement or arrangement, to the extent thatthe amountis deductible in computing the taxpayer’s income for the year, orin the case of a capital loss, reduces the amount determined under paragraph 3(b) in respect of the taxpayer or is deductible in computing the taxpayer’s taxable income for the year (except to the extent it has already been taken into account in determining an amount under this paragraph for a previous year),the agreement or arrangement is entered intoas a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, orin relation to a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, to hedge the cost of funding or the borrowing or other financing, andthe amount can reasonably be considered to reduce the return of the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, in respect of the loan or other financing;in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formulaH × IwhereHis an amount that would be described in paragraph (a) ifthe references to the taxpayer in that paragraph were read as references to the partnership, andthe reference in subparagraph (a)(i) to “the taxpayer’s income for the year” were read as “the partnership’s income or loss from the source, or the source in a particular place, for a fiscal period”, andIis the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,the portion of any amount included under the description of A (referred to in this paragraph as the “subject amount”) that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part because an amount is deductibleunder any of subsections 20(11) to (12.1) and 126(1) and (2), andin respect of income or profits tax paid to a country other than Canada thatcan reasonably be considered to have been paid in respect of the subject amount, andis not a tax substantially similar to tax under subsection 212(1),the portion of any amount included under A that is not, because of an Act of Parliament, subject to tax under this Part. (revenus d’intérêts et de financement)lease financing amount means an amount that is the portion of a particular payment in respect of a particular lease entered into by a taxpayer that would be considered to be on account of interest ifthe lessee had received a loan at the time the particular lease began and in a principal amount equal to the fair market value at that time of the property that is the subject of the particular lease;interest had been charged on the principal amount of the loan outstanding from time to time at the rate — determined in accordance with section 4302 of the Income Tax Regulations — in effect at the time described in paragraph (a), compounded semi-annually not in advance; andthe particular payment was a blended payment of principal and interest, calculated in accordance with paragraph (b), on the loan applied firstly on account of interest on principal, secondly on account of interest on unpaid interest and thirdly on account of principal. (montant du crédit-bail)public sector authority means His Majesty in right of Canada, His Majesty in right of a province, an entity referred to in any of paragraphs 149(1)(c) to (d.6), a hospital authority (as defined in subsection 123(1) of the Excise Tax Act) or a registered charity that is a public college, school authority or university (each as defined in subsection 123(1) of the Excise Tax Act). (administration du secteur public)ratio of permissible expenses of a taxpayer for a taxation year means the percentage that isif the taxpayer’s taxation year begins on or after October 1, 2023, and before January 1, 2024, 40%, other than for the purpose of determining the taxpayer’s cumulative unused excess capacity for any taxation year that begins on or after January 1, 2024; andif the taxpayer’s taxation year begins on or after January 1, 2024, and for the purposes referred to in paragraph (a) for which 40% is not the applicable percentage, 30%. (ratio des dépenses admissibles)received capacity means an amount of received capacity of a transferee for a taxation year as determined under subsection (4). (capacité reçue)relevant affiliate interest and financing expenses of a controlled foreign affiliate of a taxpayer (determined as though the definition taxpayer in this subsection did not include the words “or a partnership”) for an affiliate taxation year means, subject to subsection (19), the total of all amounts (other than an amount that is deductible in computing any income or loss of the affiliate that is included in computing the affiliate’s income or loss from an active business because of paragraph 95(2)(a) or an amount that is described in clause 95(2)(a)(ii)(D) and treated as nil for the purposes of determining an amount for A or D in the definition foreign accrual property income in subsection 95(1)), each of which would be the affiliate’s interest and financing expenses (determined without regard to paragraph (j) of the description of A in the definition interest and financing expenses) for the affiliate taxation year for the purposes of determining, in respect of the taxpayer for the affiliate taxation year, each amount referred to in subparagraph 95(2)(f)(i) or (ii), ifthe references in the definition interest and financing expenses to “in the absence of this section” were read as references to “in the absence of clause 95(2)(f.11)(ii)(D)”; andclause 95(2)(f.11)(ii)(A) were read without regard to the reference to subsection 18.2(2). (dépenses d’intérêts et de financement de la société affiliée pertinentes)relevant affiliate interest and financing revenues of a controlled foreign affiliate of a taxpayer (determined as though the definition taxpayer in this subsection did not include the words “or a partnership”) for an affiliate taxation year means, subject to subsection (19), the total of all amounts (other than an amount included in computing the affiliate’s income or loss from an active business under paragraph 95(2)(a) or (2.44)(b)), each of which would be the affiliate’s interest and financing revenues (determined without regard to paragraph (g) of the description of A in the definition interest and financing revenues) for the affiliate taxation year for the purposes of determining, in respect of the taxpayer for the affiliate taxation year, each amount referred to in subparagraph 95(2)(f)(i) or (ii), if clause 95(2)(f.11)(ii)(A) were read without regard to the reference to subsection 18.2(2). (revenus d’intérêts et de financement de la société affiliée pertinents)relevant inter-affiliate interest, of a controlled foreign affiliate of a taxpayer for an affiliate taxation year, means an amount of interest to the extent that the amountis paid or payable by the affiliate to, or received or receivable by the affiliate from, a controlled foreign affiliate (in this definition referred to as the “other affiliate”) ofthe taxpayer, ora taxpayer that is an eligible group entity in respect of the taxpayer; andwould, in the absence of subsection (19), be included inif the amount is paid or payable by the affiliate, the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year and the other affiliate’s relevant affiliate interest and financing revenues for an affiliate taxation year, orif the amount is received or receivable by the affiliate, the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year and the other affiliate’s relevant affiliate interest and financing expenses for an affiliate taxation year. (intérêts pertinents entre sociétés affiliées)special purpose loss corporation, for a taxation year, means a particular corporation that is an eligible group entity in respect of a financial holding corporation to which the particular corporation has interest paid or payable in the year;is formed or exists solely for the purpose of generating a loss of the particular corporation; andwould, in the absence of this section, have a loss for the year that is, or will be, utilized by a financial institution group entity that is an eligible group entity in respect of the particular corporation. (société à usage déterminé ayant subi des pertes)specified participating percentage of a taxpayer, in respect of a controlled foreign affiliate of the taxpayer for an affiliate taxation year, means the percentage that would be the taxpayer’s aggregate participating percentage (as defined in subsection 91(1.3)), determined without regard to clause 95(2)(f.11)(ii)(D), in respect of the affiliate for the affiliate taxation year, if the definition participating percentage in subsection 95(1) were read without reference toits paragraph (a); andthe portion of its paragraph (b) before its subparagraph (b)(i). (pourcentage de participation déterminé)specified pre-regime loss of a taxpayer, in respect of a taxation year, means the taxpayer’s non-capital loss for a preceding taxation year, ifthe preceding year ends before February 4, 2022;the taxpayer files with the Minister, in respect of the loss, an election in writing in prescribed manner under this definition;the election specifiesthe loss,each amount deducted, in respect of the loss, by the taxpayer under paragraph 111(1)(a) in computing its taxable incomefor the year, andeach taxation year that precedes the year, andthe taxpayer’s adjusted taxable income for the year; andthe election is filed on or before the filing-due date of the taxpayer for the year. (perte antérieure au régime déterminée)tax-indifferent means a person or partnership that isa person exempt from tax under section 149;a non-resident person;a partnership more than 50% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (b); ora trust resident in Canada if more than 50% of the fair market value of all interests as beneficiaries under the trust can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (b). (indifférent relativement à l’impôt)taxpayer has the meaning assigned by subsection 248(1), but does not include a natural person or a partnership. (contribuable)transaction includes an arrangement or event. (opération)transferred capacity means an amount of transferred capacity of a transferor for a taxation year as determined under subsection (4). (capacité transférée)Excessive interest and financing expenses limitationNotwithstanding any other provision of this Act, in computing the income for a taxation year of a taxpayer (other than an excluded entity for the year) from a business or property or the taxable income of the taxpayer for the year, no deduction shall be made — and in determining the amount under paragraph 3(b) in respect of the taxpayer for the year, no reduction shall be made — in respect of any amount that is described in any of paragraphs (a) to (g) and (i) of the description of A in the definition interest and financing expenses in subsection (1) that would, in the absence of this section, be deductible in computing that income or taxable income — or would reduce that amount determined under paragraph 3(b) — to the extent of the proportion of that amount that is determined by the formula(A − (B + C + D + E)) ÷ FwhereAis the taxpayer’s interest and financing expenses for the year;Bisif subsection 18.21(2) applies in respect of the taxpayer for the year, the amount determined in respect of the taxpayer for the year under that subsection, andin any other case, the amount determined by the formulaG × HwhereGis the taxpayer’s ratio of permissible expenses for the year, andHis the taxpayer’s adjusted taxable income for the year;Cis the taxpayer’s interest and financing revenues for the year;Dis the amount by which the total of all amounts each of which is an amount of received capacity of the taxpayer for the year, as determined under subsection (4), exceeds the total amount deductible under paragraph 111(1)(a.1) for the year;Eis the amount of the taxpayer’s absorbed capacity for the year; andFisif no amount is included in the taxpayer’s interest and financing expenses for the year under paragraph (j) of the description of A of that definition, or under paragraph (h) of the description of A of that definition in respect of a controlled foreign affiliate of a partnership of which the taxpayer is a member, the amount determined for A in that definition for the taxpayer for the year, orin any other case, the amount that would be determined for A in the definition interest and financing expenses in subsection (1) for the taxpayer for the year if the reference to “the affiliate’s interest and financing expenses” in the definition relevant affiliate interest and financing expenses were read as a reference to “an amount determined for A in the definition interest and financing expenses for the affiliate”.Amount deemed deductedAll or any portion, of a particular amount described in paragraph (c) or (d) of the description of A in the definition interest and financing expenses in subsection (1), that would, in the absence of subsection (2), have been deducted in computing the income of a taxpayer for a taxation year but that is not deductible because of subsection (2), is deemed to have been deductible and to have been deducted in the year for purposes of determining, in respect of any taxpayer at any time, such of the following amounts to which the particular amount relates:the total depreciation (as defined in subsection 13(21)) allowed for property of a prescribed class;the amount the taxpayer may deduct under subsection 66(4);the cumulative Canadian exploration expense (as defined in subsection 66.1(6));the cumulative Canadian development expense (as defined in subsection 66.2(5));the cumulative foreign resource expense (as defined in subsection 66.21(1)) in respect of a country;the cumulative Canadian oil and gas property expense (as defined in subsection 66.4(5)); andthe amount the taxpayer may deduct under subsections 66.7(1), (2) or (2.3) to (5).Transfer of cumulative unused excess capacityFor the purposes of this section, a taxpayer and another taxpayer (referred to in this section as the “transferor” and the “transferee”, respectively) may jointly elect in prescribed form to designate an amount equal to all or a portion of the transferor’s cumulative unused excess capacity, and that amount is an amount of transferred capacity of the transferor for a taxation year and an amount of received capacity of the transferee for a taxation year, ifthe taxation year of the transferor ends in the taxation year of the transferee;each of the transferor and the transferee isa taxable Canadian corporation or a fixed interest commercial trust throughout its taxation year, andan eligible group entity in respect of the other at the end of its taxation year;where the transferor is a financial institution group entity or a financial holding corporation for its taxation year, the transferee is, for its taxation year,a financial institution group entity,a financial holding corporation, ora special purpose loss corporation;the election or amended electionspecifies the amount of the transferred capacity, andis filed with the Minister by the transferoron or before the later of the filing-due date ofthe transferor for its taxation year, andthe transferee for its taxation year, oron or before the day that is 90 days after the day of sending ofa notice of assessment of tax payable under this Part by the transferor or the transferee for their respective taxation years, ora notification that no tax is payable under this Part by the transferor or the transferee for their respective taxation years;the total of all amounts each of which would, if this subsection were read without reference to this paragraph, be an amount of transferred capacity of the transferor for its taxation year in respect of any transferee, does not exceed the transferor’s cumulative unused excess capacity for the year;if the transferee is a financial holding corporation and the transferor is a financial institution group entity, it is the case thatA ≥ BwhereAis the total of all amounts, each of which is an amount that is included in computing the income of the financial holding corporation for its taxation year in respect of excluded interest, the payer of which is, for the taxation year of the payer in which the interest is payable,a financial institution group entity, ora special purpose loss corporation, if the amount gives rise to a loss of the special purpose loss corporation that is, or will be, utilized solely by a financial institution group entity, andBis the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is bothreceived capacity of the financial holding corporation for its taxation year, andtransferred capacity of a financial institution group entity for one of its taxation years;if the transferee is a special purpose loss corporation and the transferor is a financial institution group entity, it is the case thatC ≥ DwhereCis the total of all amounts, each of which is an amount thatwould, in the absence of this section, be deductible in computing the income of the special purpose loss corporation for its taxation year,is paid or payable to a financial holding corporation,meets the conditions set out in paragraphs (a) to (d) of the definition excluded interest, andwould, in the absence of this section, give rise to a loss that is, or will be, utilized solely by a financial institution group entity, andDis the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is bothreceived capacity of the special purpose loss corporation for its taxation year, andtransferred capacity of a financial institution group entity for one of its taxation years;an amended election has not been filed in accordance with this section;where the election is an amended election,the following conditions are met:in the absence of any assessment, the condition set out in paragraph (e) would be met in respect of a prior election under this subsection made by the transferor and transferee for their respective taxation years, andsubsection (9) does not apply to a tax benefit in respect of a prior election for the taxation year of the transferor or transferee, orthe Minister grants permission to amend the prior election under subsection (5); andthe transferee files an information return in accordance with subsection (6) for the calendar year in which the transferee’s taxation year ends.Late or amended electionThe Minister may extend the time for making an election, or grant permission to amend an election, under subsection (4) ifthe transferor and the transferee demonstrate to the satisfaction of the Minister thatthe transferor, the transferee and each other eligible group entity in respect of the transferor and transferee made reasonable efforts to determine all amounts that may reasonably be considered relevant in making the election, andthe election or amended election, as the case may be, is filed as soon as circumstances permit; andin the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the election to be made or amended.Summary — cumulative unused excess capacity transfersIf one or more elections are filed under subsection (4), in which amounts are designated as received capacity of a particular transferee for a taxation year ending in a calendar year, the particular transferee shall file with the Minister for the calendar year an information return in prescribed form within six months after the end of the calendar year in respect ofeach such election; andeach election filed under subsection (4) for a taxation year ending in the calendar year, by any other transferee that is an eligible group entity in respect of the particular transferee at the end of the other transferee’s taxation year.Summary — filing by designated filerFor the purposes of this section, if any taxpayer is required to file an information return for a calendar year under subsection (6), the taxpayer is deemed to have filed the information return ifan information return under subsection (6) is filed for the calendar year by any other taxpayer (in this subsection referred to as the “designated filer” in respect of the taxpayer for the year) that is an eligible group entity in respect of the taxpayer at the end of the taxpayer’s taxation year ending in the calendar year; andthe taxpayer jointly elects, with each other transferee described in paragraph (6)(b), to designate under this paragraph the designated filer to be a designated filer in respect of the taxpayer and each other transferee for the calendar year.AssessmentIf an election or an amended election has been made under subsection (4), the Minister shall, notwithstanding subsections 152(4) and (5), assess or reassess the tax, interest or penalties payable under this Act by any taxpayer for any relevant taxation year as is necessary to give effect to the election or amended election.Anti-avoidance — group statusIf, at any time, a particular taxpayer is, becomes or ceases to be an eligible group entity, in respect of another taxpayer, a financial institution group entity or a financial holding corporation and it may reasonably be considered, having regard to all the circumstances, that one of the main purposes of the particular taxpayer being, becoming or ceasing to be an eligible group entity, in respect of the other taxpayer, a financial institution group entity or a financial holding corporation is to enable any taxpayer to obtain a tax benefit (within the meaning of subsection 245(1)), the particular taxpayer is deemed not to be, to have become, or to remain, as the case may be, an eligible group entity, in respect of the other taxpayer, a financial institution group entity or a financial holding corporation, as the case may be, at that time.Benefits conferredFor the purposes of this Part, if a transferor and a transferee file an election (including an amended election) under subsection (4), no benefit is considered to have been conferred on the transferee as a consequence of the election.Consideration for electionFor the purposes of this Part, if property is acquired at any time by a transferor as consideration for filing an election or amended election with a transferee under subsection (4)where the property was owned by the transferee immediately before that time,the transferee is deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, andno amount may be deducted in computing the transferee’s income as a consequence of the transfer of the property, except any amount arising as a consequence of subparagraph (i);the cost at which the property was acquired by the transferor at that time is deemed to be equal to the fair market value of the property at that time; andthe transferor is not required to add an amount in computing income solely because of the acquisition at that time of the property.PartnershipsFor the purposes of this section,a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership; anda person’s share of the income or loss of a partnership includes the person’s direct or indirect, through one or more other partnerships, share of that income or loss.Anti-avoidance — interest and financing revenues and expensesA particular amount that would, in the absence of this subsection, be included under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of a taxpayer for a taxation year, must not be so included, ifan amount in respect of the particular amount is deductible in computing the foreign accrual property income of a corporation that is a foreign affiliate, but not a controlled foreign affiliate, of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer;the particular amount is received or receivable, directly or indirectly and in whole or in part, by the taxpayer, or a partnership of which it is a member, froma person that does not deal at arm’s length with the taxpayer and that isan excluded entity,a natural person, orif the taxpayer is not a financial institution group entity or a financial holding corporation, a financial institution group entity or a financial holding corporation, ora partnership of which a person described in subparagraph (i) is a member; orone of the main purposes of a transaction or series of transactions is to include the particular amount under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of the taxpayer for a taxation year andthe transaction or series results in an amount thatis not included in the description of B in the definition interest and financing revenues, or the description of A in the definition interest and financing expenses, in computing the income or loss of the taxpayer, or of a person not dealing at arm’s length with the taxpayer, for a taxation year, andis deductible in computing the income of loss for a taxation year of the taxpayer or a person or partnership not dealing at arm’s length with the taxpayer, orit can reasonably be considered that, in the absence of the transaction or series, the particular amount or an amount for which the particular amount was substitutedwould have been included in computing the income or loss for a taxation year (other than as a dividend) of the taxpayer, or a person or partnership not dealing at arm’s length with the taxpayer, andwould not have been included under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of the taxpayer or a person not dealing at arm’s length with the taxpayer.Anti-avoidance — excluded entityFor the purposes of subparagraph (c)(iv) of the definition excluded entity, a person or partnership is deemed to be tax-indifferent and not to deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer throughout a taxation year of the taxpayer ifany portion of the interest and financing expenses of the taxpayer for the year is paid or payable by the taxpayer or any eligible group entity in respect of the taxpayer to the person or partnership as part of a transaction or series of transactions; andit can reasonably be considered that one of the main purposes of the transaction or series is to avoid that portion of the interest and financing expenses being paid or payable to a person or partnership that is tax-indifferent and does not deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer.Deemed eligible group entitiesIf two taxpayers are eligible group entities in respect of a third taxpayer, they are deemed to be eligible group entities in respect of each other.Eligible group entities — relatedFor the purposes of paragraph (a) of the definition eligible group entity in subsection (1)despite subsection 104(1), a reference to a person that is a trust does not include a reference to the trustee or other persons that own or control the trust property; anda corporation or a trust is deemed not to be related to a taxpayer where the corporation or trust would, but for this paragraph, be related to the taxpayer solely because the taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)(c) to (d.6).Eligible group entities — affiliatedFor the purposes of paragraph (b) of the definition eligible group entity in subsection (1), a corporation or a trust is deemed not to be affiliated with a taxpayer where that corporation or trust would, but for this subsection, be affiliated with the taxpayer solely becausethe taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)(c) to (d.6); orif the corporation or trust is a registered charity or a non-profit organization with whom the taxpayer deals at arm’s length, the corporation or trust is a majority-interest beneficiary (within the meaning of subsection 251.1(3)) of the taxpayer.Filing requirementEach taxpayer shall file with its return of income for the taxation year a prescribed form containing prescribed information for the purpose of determining the deductibility of its interest and financing expenses and determining its exempt interest and financing expenses.Relevant inter-affiliate interestIf an amount is paid or payable by a controlled foreign affiliate (referred to in this subsection as the “payer affiliate”) of a taxpayer and received or receivable by a controlled foreign affiliate (referred to in this subsection as the “recipient affiliate”) of the taxpayer, or a taxpayer that is an eligible group entity in respect of the taxpayer, and the amount is relevant inter-affiliate interest of the payer affiliate for an affiliate taxation year (referred to in this subsection as the “payer affiliate year”) and of the recipient affiliate for an affiliate taxation year (referred to in this subsection as the “recipient affiliate year”),the amount included, in respect of the relevant inter-affiliate interest, in the payer affiliate’s relevant affiliate interest and financing expenses for the payer affiliate year is the lesser ofthe relevant inter-affiliate interest, andthe amount determined by the formulaA + BwhereAis the amount determined by the formula(C − D) × E ÷ CwhereCis the total of all amounts, each of which would — if the relevant inter-affiliate interest were not paid or payable — be, in respect of the payer affiliate for the payer affiliate year, the specified participating percentage ofthe taxpayer, oranother taxpayer that is an eligible group entity in respect of the taxpayer, andDis the total of all amounts, each of which is, in respect of the recipient affiliate for the recipient affiliate year, the specified participating percentage ofthe taxpayer, oranother taxpayer that is an eligible group entity in respect of the taxpayer, andEis the relevant inter-affiliate interest, andBis the lesser ofthe relevant inter-affiliate interest, andthe amount determined by the formula(F − G) × H ÷ IwhereFis the payer affiliate’s relevant affiliate interest and financing revenues for the payer affiliate year,Gis the amount that would be the payer affiliate’s relevant affiliate interest and financing expenses for the payer affiliate year if the payer affiliate had no relevant inter-affiliate interest for the payer affiliate year,His the amount determined for E, andIis the total of all amounts, each of which is an amount of relevant inter-affiliate interest of the payer affiliate for the payer affiliate year that would, in the absence of this paragraph, be included in the payer affiliate’s relevant affiliate interest and financing expenses; andthe amount included, in respect of the relevant inter-affiliate interest, in the recipient affiliate’s relevant affiliate interest and financing revenues for the recipient affiliate year is the lesser ofthe amount referred to in E, andthe amount determined by the formulaJ × K ÷ LwhereJis the amount determined for B,Kis the amount determined for C, andLis the amount determined for D.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2007, c. 35, s. 12; 2009, c. 2, s. 62024, c. 15, s. 72024, c. 17, s. 80
Group ratio — definitionsThe following definitions apply in this section.acceptable accounting standards means International Financial Reporting Standards and the generally accepted accounting principles ofCanada;Australia;Brazil;member states of the European Union;member states of the European Economic Area;Hong Kong (China);Japan;Mexico;New Zealand;the People’s Republic of China;the Republic of India;the Republic of Korea;Singapore;Switzerland;the United Kingdom; andthe United States. (principes comptables acceptables)consolidated financial statements means financial statements prepared in accordance with a relevant acceptable accounting standard in which the assets, liabilities, income, expenses and cash flows of two or more entities are presented as those of a single economic entity and, for greater certainty, the financial statements include the notes to the financial statements. (états financiers consolidés)consolidated group means two or more entities, other than an equity-accounted entity but including an ultimate parent, (each such entity referred to in this section as a “member of the consolidated group”) in respect of which consolidated financial statements are required to be prepared for financial reporting purposes or would be so required if the entities were subject to International Financial Reporting Standards. (groupe consolidé)equity-accounted entity means an entity the net income or loss of which is included in the consolidated financial statements of a consolidated group under the equity method of accounting. (entité comptabilisée à la valeur de consolidation)equity interest meansa share of the capital stock of a corporation;an interest as a beneficiary under a trust;an interest as a member of a partnership; orany similar interest in respect of any entity. (participation au capital)fair value amount means any amount reflected in the net income or net loss reported in the consolidated financial statements of a consolidated group for a relevant period wherethe carrying value of any asset or liability of the consolidated group is measured using the fair value method of accounting; andthe amount reflects a change in the carrying value of the asset or liability during the relevant period and is included in either the description of C or H in the definition group adjusted net book income. (montant de la juste valeur)group adjusted net book income, of a consolidated group for a relevant period, means the amount determined by the formula A − BwhereAis the amount determined by the formulaC + D + E + F + GwhereCis the amount, if any, of net income reported in the consolidated financial statements of the group for the period,Dis the amount, if any, of income tax expense reported in those statements,Eis the amount that would be the specified interest expense of the group for the period if the definition specified interest expense were read without reference to paragraph (b) of the description of A,Fis the total of all amounts used in determining the amounts reported in those statements each of which is the amount ofa depreciation or amortization expense in respect of an asset,a charge in respect of the impairment or write-off of an asset referred to in paragraph (a),a loss on the disposal of an asset referred to in paragraph (a),if an election is made under subsection (4) and the net fair value amount for the period is negative, the absolute value of the net fair value amount, andan expense, charge, deduction or loss that is similar to any of those referred to in paragraphs (a) to (d), andGis the total of all amounts referred to in the description of D or F that are included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss; andBis the amount determined by the formulaH + I + J + K + L + M + NwhereHis the amount, if any, of net loss reported in those statements,Iis the amount, if any, of income tax recoverable reported in those statements,Jis the specified interest income of the group for the period,Kif an election is made under subsection (4) and the net fair value amount for the period is positive, the net fair value amount,Lis the total of all amounts used in determining the amounts reported in those statements each of which is the amount of a gain on the disposal of an asset referred to in paragraph (a) of the description of F, to the extent that the sale proceeds do not exceed the original cost of the asset,Mis the total of all amounts referred to in the descriptions of I, K and L that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss, andNis the total of all amounts, each of which is the portion of net income reported in those statements that can reasonably be considered to be earned by a borrower (within the meaning of the definition exempt interest and financing expenses in subsection 18.2(1)) in respect of a borrowing (within the meaning of the definition exempt interest and financing expenses in subsection 18.2(1)) that results in exempt interest and financing expenses of the borrower. (bénéfice net comptable rajusté du groupe)group net interest expense, of a consolidated group for a relevant period, means the amount determined by the formulaA − BwhereAis the amount determined by the formulaC − DwhereCis the specified interest expense of the group for the period, andDis the specified interest income of the group for the period; andBis the total of all amounts each of which is an amount determined, in respect of a specified non-member of the group, by the formulaE − FwhereEis the portion of the amount of the specified interest expense of the group for the period that is paid or payable to the specified non-member, andFis the portion of the amount of the specified interest income of the group for the period that is received or receivable from the specified non-member. (dépenses nettes d’intérêts du groupe)group ratio, of a consolidated group for a relevant period, meansexcept where paragraph (b) applies, the percentage determined by the formula1.1 × A ÷ BwhereAis the group net interest expense of the consolidated group for the relevant period, andBis the group adjusted net book income of the consolidated group for the relevant period; andif the group adjusted net book income of the consolidated group for the relevant period is nil, nil. (ratio de groupe)net fair value amount means the positive or negative amount that is the total of all amounts, each of which is a positive or negative fair value amount in the consolidated financial statements of the consolidated group for a relevant period. (montant de la juste valeur net)relevant period means a period in respect of which the consolidated financial statements of a consolidated group are presented. (période pertinente)specified interest expense, of a consolidated group for a relevant period, means the amount determined by the formulaA − BwhereAis the total of all amounts (other than amounts that are included in exempt interest and financing expenses), each of which isan amount of interest expense used in determining the amounts reported in the consolidated financial statements of the consolidated group for the relevant period,an amount of capitalized interest used in determining the amounts reported in those statements,the amount of a guarantee fee, standby charge, arrangement fee or similar fee paid or payable that is used in determining the amounts reported in those statements and that is not included in paragraph (a) or (b), oran amount referred to in any of paragraphs (a) to (c) that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss; andBis the total of all amounts each of which is the amount of a dividend included in the determination of an amount referred to in any of paragraphs (a) to (d) of the description of A. (dépenses d’intérêts déterminées)specified interest income, of a consolidated group for a relevant period, means the amount determined by the formulaA − BwhereAis the total of all amounts, each of which isan amount of interest income used in determining the amounts reported in the consolidated financial statements of the consolidated group for the relevant period,the amount of a guarantee fee, standby charge, arrangement fee or similar fee received or receivable that is used in determining the amounts reported in those statements and that is not included in paragraph (a), oran amount referred to in paragraph (a) or (b) that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that income or loss; andBis the total of all amounts each of which is the amount of a dividend included in the determination of an amount referred to in any of paragraphs (a) to (c) of the description of A. (revenus d’intérêts déterminés)specified non-member, of a consolidated group for a relevant period, means a particular person or partnership that is not a member of the consolidated group and that, at any time in the period, does not deal at arm’s length with a member of the group;alone or together with persons or partnerships with whom the particular person or partnership does not deal at arm’s length owns, or has the right to acquire, one or more equity interests in a member of the group thatprovide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the member, if the member is a corporation, orhave 25% or more of the fair market value of all equity interests in the member; oris a person or partnership in respect of which a member of the group — alone or together with persons or partnerships with whom the member does not deal at arm’s length — owns, or has the right to acquire, one or more equity interests in the particular person or partnership thatprovide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the particular person, if the particular person is a corporation, orhave 25% or more of the fair market value of all equity interests in the particular person or partnership. (non-membre déterminé)ultimate parent means a particular entity ifthe particular entity is not His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)(c) to (d.6);it holds directly or indirectly an interest in one or more other entities in respect of which it is required to prepare consolidated financial statements for financial reporting purposes, or would be so required if it was subject to International Financial Reporting Standards; and no entity (other than an entity described in paragraph (a)) holds, directly or indirectly, in the particular entity an interest that is described in paragraph (b). (mère ultime)Allocated group ratio amountA taxpayer and each corporation or trust that is, throughout the relevant period, an eligible group entity in respect of that taxpayer and a member of the same consolidated group as the taxpayer (the taxpayer and each of the corporations or trusts being referred to in this subsection and subsection (4) as a “Canadian group member”) may, if the taxpayer is a taxpayer described in subsection (7), elect, and otherwise jointly elect in respect of their taxation years ending in the relevant period (each referred to in this subsection and subsection (4) as a “relevant taxation year”) to allocate amounts in respect of each relevant taxation year and the amount allocated to a member for a relevant taxation year is the amount determined in respect of that member for that relevant taxation year for the purposes of this section and subsection 18.2(2), ifthe consolidated financial statements of the consolidated group for the relevant period are audited financial statements;the election or amended electionspecifies the amount allocated to each Canadian group member for each relevant taxation year, andis filed with the Minister by the taxpayer or a Canadian group member of the taxpayer on or beforethe latest filing-due date of a Canadian group member for a relevant taxation year, orthe day that is 90 days after the sending ofa notice of assessment of tax payable under this Part by a Canadian group member for a relevant taxation year, ora notification that no tax is payable under this Part by a Canadian group member for a relevant taxation year;the total of all amounts, each of which is an amount allocated to a Canadian group member for a relevant taxation year, does not exceed the least ofthe total of all amounts in respect of a member each of which is determined by the formulaA × BwhereAis the group ratio of the consolidated group for the relevant period, andBis the adjusted taxable income of the member for each relevant taxation year,the group net interest expense of the consolidated group in respect of the relevant period, andthe total of all amounts, each of which would, in the absence of section 257, be the adjusted taxable income of a member for each relevant taxation year;an amended election has not been filed in accordance with this section; andwhere the election is an amended election,the following conditions are met:in the absence of any assessment, the condition set out in paragraph (c) would be met in respect of a prior election under this subsection made by the Canadian group members for a relevant taxation year under this subsection, andsubsection 18.2(9) does not apply to a tax benefit in respect of a prior election for the relevant period, orthe Minister grants permission to amend the prior election under subsection (3).Late or amended electionThe Minister may extend the time for making an election or grant permission to amend or revoke an election under subsection (2) ifthe Canadian group members demonstrate to the satisfaction of the Minister thatthey made reasonable efforts to determine all amounts that may reasonably be considered relevant in making the election, andthe election or amended election, as the case may be, is filed as soon as circumstances permit; andin the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the election to be made, amended or revoked.Fair value adjustments — electionFor the purposes of calculating group adjusted net book income, the following rules apply:no amounts may be included in paragraph (d) of the description of F or in the description of K in the definition group adjusted net book income for any relevant period unless the Canadian group members jointly elect, for the first relevant taxation year in respect of which the Canadian group members jointly elect under subsection (2), to include net fair value amounts in calculating group adjusted net book income for the relevant period in which the first relevant taxation year ends;if an election to include net fair value amounts in the calculation is not made in the first relevant taxation year, each Canadian group member is deemed not to have so elected in that taxation year and any subsequent taxation year; andif an election to include net fair value amounts in the calculation is made in the first relevant taxation year, each Canadian group member is deemed to have so elected in that taxation year and any subsequent taxation year.AssessmentIf an election or amended election has been made under subsection (2), the Minister shall, notwithstanding subsections 152(4) and (5), assess or reassess the tax, interest or penalties payable under this Act by any taxpayer for any relevant taxation year as is necessary to give effect to the election or amended election.Use of accounting termsFor the purposes of the definitions consolidated financial statements, consolidated group, equity-accounted entity, fair value amount, group adjusted net book income, specified interest expense, specified interest income and ultimate parent in subsection (1), a term that is not defined under this Act has the meaning assigned to the term for financial reporting purposes under the relevant acceptable accounting standards.Single member groupFor the purposes of this section, if a taxpayer resident in Canada is not a member of a consolidated group for a relevant period,the taxpayer is deemed to be an eligible group entity in respect of itself;the taxpayer is deemed to bea member of a consolidated group that comprises only itself, andthe ultimate parent of the group; andthe taxpayer’s financial statements are deemed to be consolidated financial statements.Anti-avoidance — specified non-memberA particular person or partnership that is not a member of a consolidated group for a relevant period is deemed to be a specified non-member in respect of the group for the period if a portion of the amount of the specified interest expense of the group is paid or payable by a member of the group to the particular person or partnership as part of a transaction or series of transactions where it can reasonably be considered that one of the main purposes of the transaction or series is to avoid the inclusion of that portion in the determination of the amount for E in the definition group net interest expense in subsection (1).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2024, c. 15, s. 7
DefinitionsThe following definitions apply in this section.entity has the same meaning as in subsection 122.1(1). (entité)equity value has the same meaning as in subsection 122.1(1). (valeur des capitaux propres)real estate investment trust has the same meaning as in subsection 122.1(1). (fiducie de placement immobilier)security, of an entity, means a liability of the entity;if the entity is a corporation,a share of the capital stock of the corporation, anda right to control in any manner whatever the voting rights of a share of the capital stock of the corporation if it can reasonably be concluded that one of the reasons that a person or partnership holds the right to control is to avoid the application of subsection (3) or 12.6(3);if the entity is a trust, an income or a capital interest in the trust; andif the entity is a partnership, an interest as a member of the partnership. (titre)stapled security, of a particular entity at any time, means a particular security of the particular entity if at that time another security (referred to in this section as the “reference security”)is or may be required to be transferred together or concurrently with the particular security as a term or condition of the particular security, the reference security, or an agreement or arrangement to which the particular entity (or if the reference security is a security of another entity, the other entity) is a party, oris listed or traded with the particular security on a stock exchange or other public market under a single trading symbol;the particular security or the reference security is listed or traded on a stock exchange or other public market; andany of the following applies:the reference security and the particular security are securities of the particular entity and the particular entity is a corporation, SIFT partnership or SIFT trust,the reference security is a security of another entity, one of the particular entity or the other entity is a subsidiary of the other, and the particular entity or the other entity is a corporation, SIFT partnership or SIFT trust, orthe reference security is a security of another entity and the particular entity or the other entity is a real estate investment trust or a subsidiary of a real estate investment trust. (titre agrafé)subsidiary, of a particular entity at any time, means an entity in which the particular entity holds at that time securities that have a total fair market value greater than 10% of the equity value of the entity; andan entity that at that time is a subsidiary of an entity that is a subsidiary of the particular entity. (filiale)transition period, of an entity, means if one or more securities of the entity would have been stapled securities of the entity on October 31, 2006 and July 19, 2011 had the definition stapled security in this subsection come into force on October 31, 2006, the period that begins on July 20, 2011 and ends on the earliest ofJanuary 1, 2016,the first day after July 20, 2011 on which any of those securities is materially altered, andthe first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way ofa transactionthat is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, andthat is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, orthe issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011;if paragraph (a) does not apply to the entity and one or more securities of the entity would have been stapled securities of the entity on July 19, 2011 had the definition stapled security in this subsection come into force on July 19, 2011, the period that begins on July 20, 2011 and ends on the earliest ofJuly 20, 2012,the first day after July 20, 2011 on which any of those securities is materially altered, andthe first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way ofa transactionthat is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, andthat is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, orthe issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011; andin any other case, if the entity is a subsidiary of another entity on July 20, 2011 and the other entity has a transition period, the period that begins on July 20, 2011 and ends on the earliest ofthe day on which the other entity’s transition period ends,the first day after July 20, 2011 on which the entity ceases to be a subsidiary of the other entity, andthe first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way ofa transactionthat is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, andthat is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, orthe issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011. (période de transition)Property representing securityFor the purpose of determining whether a particular security of an entity is a stapled security, if a receipt or similar property (referred to in this subsection as the “receipt”) represents all or a portion of the particular security and the receipt would be described in paragraphs (a) and (b) of the definition stapled security in subsection (1) if it were a security of the entity, thenthe particular security is deemed to be described in those paragraphs; anda security that would be a reference security in respect of the receipt is deemed to be a reference security in respect of the particular security.Amounts not deductibleNotwithstanding any other provision of this Act, in computing the income of a particular entity for a taxation year from a business or property, no deduction may be made in respect of an amountthat is paid or payable after July 19, 2011, unless the amount is paid or payable in respect of the entity’s transition period; andthat isinterest paid or payable on a liability of the particular entity that is a stapled security, unless each reference security in respect of the stapled security is a liability, orif a security of the particular entity, a subsidiary of the particular entity or an entity of which the particular entity is a subsidiary is a reference security in respect of a stapled security of a real estate investment trust or a subsidiary of a real estate investment trust, an amount paid or payable tothe real estate investment trust,a subsidiary of the real estate investment trust, orany person or partnership on condition that any person or partnership pays or makes payable an amount to the real estate investment trust or a subsidiary of the real estate investment trust.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 40, s. 10
Hybrid mismatch arrangements — definitionsThe following definitions apply in this section and paragraph 20(1)(yy).Canadian ordinary income, of a taxpayer for a taxation year in respect of a payment, means an amount that isif the taxpayer is not a partnership, included in respect of the payment in computing, in the case of a taxpayer resident in Canada, the income of the taxpayer for the purposes of this Part — or, in the case of a taxpayer that is a non-resident person, the taxable income earned in Canada of the taxpayer — for the year, except to the extent thatthe amount is included in the Canadian ordinary income of any taxpayer under paragraph (b) or (c),the taxpayer is entitled to a deduction under section 112 or 113 in respect of the payment, orthe amount can otherwise reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part by reason of any exemption, exclusion, deduction, credit (other than a credit for a tax substantially similar to tax under Part XIII) or other form of relief under this Act thatapplies specifically in respect of all or a portion of the amount and not in computing income generally, orarises in respect of the payment;if the taxpayer is a partnership, determined by the formulaA × B ÷ C − DwhereAis an amount that is included in respect of the payment in computing the income or loss of the partnership from any source, or from sources in a particular place, for the year, except to the extent that the amountis included in the Canadian ordinary income of any taxpayer under paragraph (c), orcan reasonably be considered to be excluded, reduced, offset or otherwise sheltered by any reason described in subparagraph (a)(iii),Bis the total of all amounts, each of which is, in respect of the partnership’s income or loss from that source or the sources in the particular place for the year,the share of a member of the partnership that is a person resident in Canada, orthe share of a member of the partnership that is a non-resident person to the extent it is included in computing the non-resident person’s taxable income earned in Canada,Cis the income or loss of the partnership from the source, or the sources in the particular place, for the year, andDis the total of all amounts, each of which is an amount deductible, in respect of the payment, by a member of the partnership under section 112 or 113; ordetermined by the formulaE × FwhereEis the amount determined by the formulaG × HwhereGis an amount that is included in respect of the payment in computing the foreign accrual property income of a controlled foreign affiliate of the taxpayer for a taxation year (as defined in subsection 95(1)) of the affiliate ending in the year, except to the extent the amount can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered for any reason described in subparagraph (a)(iii), andHis the aggregate participating percentage (as defined in subsection 91(1.3)) of the taxpayer in respect of the affiliate for the taxation year of the affiliate, andFisif the taxpayer is a partnership, the amount determined by the formulaI ÷ EwhereIis the total of all amounts each of which is a share of the amount determined for E of a member of the partnership that is a person resident in Canada, andin any other case, 1. (revenu ordinaire canadien)controlled foreign company tax regime means a set of provisions under the tax laws of a particular country other than Canada under which a direct or indirect shareholder of an entity that is located in a country other than the particular country is subject to current taxation in respect of its share of all or part of the income earned by the entity, irrespective of whether that income is distributed currently to the shareholder. (régime fiscal des sociétés étrangères contrôlées)deductible, in relation to an amount in respect of a payment, in computing relevant foreign income or profits, includes any relief that arises in respect of the payment and is equivalent in effect to a deduction, including an exemption or exclusion in computing the relevant foreign income or profits; anda refund of, or credit that can be applied to reduce or offset, income or profits tax paid or payable to a government of a country other than Canada in respect of the relevant foreign income or profits. (déductible)entity has the same meaning as in subsection 95(1). (entité)equity interest means any of the following:a share of the capital stock of a corporation;an interest as a beneficiary under a trust;an interest as a member of a partnership; orany similar interest in respect of any entity. (participation au capital)equity or financing return means a payment that can reasonably be considered to be in respect of, or determined by reference to,revenue, profit, cash flow, commodity price or any other similar criterion;dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or income or capital paid or payable to any member of a partnership or beneficiary under a trust, or any other distribution in respect of any entity; oran amount that is, or is on account of, in lieu of payment of or in satisfaction of, interest, or that is otherwise compensation for the use of money. (rendement financier ou de capitaux propres)exempt dealer compensation payment means a payment thatis a dealer compensation payment (as defined in subsection 260(1));is received by a registered securities dealer resident in Canada, as compensation for a taxable dividend paid on a share of the capital stock of a public corporation, from a non-resident corporation (referred to in this definition as the “affiliate”) that, at the time the payment is received,is a controlled foreign affiliate ofthe registered securities dealer, oranother taxpayer that does not deal at arm’s length with the registered securities dealer,has a substantial market presence in a particular country other than Canada,makes the payment in the ordinary course of a business of trading in securities, ifthe business is carried on by the affiliate as a foreign bank (as defined in subsection 95(1)), a trust company, a credit union, an insurance corporation or a trader or dealer in securities,the activities of the business are regulated under the laws ofthe particular country,another country under the laws of which the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued and of each country in which the business is carried on through a permanent establishment, orif the affiliate is related to a corporation, another country under the laws of which the related corporation is governed and any of exists, was (unless the related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, andconducts the business, directly or indirectly,principally with persons thatdeal at arm’s length with the affiliate, andare resident, or carry on business through a permanent establishment, in the particular country, andin competition with other entities thatdeal at arm’s length with the affiliate, andhave a substantial market presence in the particular country; anddoes not arise under, or in connection with, a structured arrangement. (paiement compensatoire (courtier) exonéré)financial instrument meansa debt;an equity interest or any right that may reasonably be considered to replicate a right to participate in profits or gain of any entity; orany other arrangement that gives rise to an equity or financing return. (instrument financier)foreign expense restriction rule means a provision under the tax laws of a country other than Canada that can reasonably be considered tohave an effect, or be intended to have an effect, that is substantially similar to subsection 18(4) or 18.2(2); orhave been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part,any of the recommendations set out in Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 – 2016 Update, published by the Organisation for Economic Co-operation and Development, orthe Global Anti-Base Erosion Model Rules set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), published by the Organisation for Economic Co-operation and Development. (règle étrangère de restriction des dépenses)foreign hybrid mismatch rule means a provision, under the tax laws of a country other than Canada, that can reasonably be considered tohave an effect that is substantially similar to that of a provision under this section, section 12.7 or subsection 113(5); orhave been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 – 2015 Final Report published by the Organisation for Economic Co-operation and Development, as amended from time to time. (règle étrangère d’asymétrie hybride)foreign ordinary income, of an entity for a foreign taxation year in respect of a payment, means an amount that is determined by the formulaA − B − C − D − E − FwhereAis an amount (referred to in this definition as the “relevant amount”) that is included in respect of the payment in computing relevant foreign income or profits of the entity for the year (other than income or profits in respect of which the entity is subject to a tax substantially similar to tax under Part XIII, or a tax under a controlled foreign company tax regime or a specified minimum tax regime) because the entity is a recipient of the payment or has a direct or indirect equity interest in a recipient of the payment;Bisif the relevant amount is included in computing relevant foreign income or profits in respect of which the entity is subject to an income or profits tax that is charged at a nil rate, the relevant amount, orin any other case, nil;Cis any portion of the relevant amount that is included in computing relevant foreign income or profits of the entity for the year because of any foreign hybrid mismatch rule (other than any rule that is substantially similar in effect to subsection 113(5));Dis any portion of the relevant amount that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from income or profits tax by reason of any exemption, exclusion, deduction, credit (other than a credit for tax payable under Part XIII) or other form of relief thatapplies specifically in respect of all or a portion of the relevant amount and not in computing the entity’s relevant foreign income or profits in general, orarises in respect of the payment;Eis the amount determined by the formula(A − C − D) × G ÷ HwhereGis the total of all amounts, each of which is an amount thatmeets the following conditions:is repaid or repayable in respect of income or profits tax paid or payable by the entity to the government of a country other than Canada in respect of the relevant foreign income or profits for the year, andis not repaid or repayable because a loss is used to reduce or offset the relevant foreign income or profits for the year, oris paid or payable in respect of a credit that can reasonably be considered to reduce or offset, directly or indirectly, the income or profits tax referred to in clause (i)(A), andHis the total amount of the income or profits tax referred to in clause (i)(A) of the description of G; andFis the amount determined by the formula(A − C − D − E) × (1 − I ÷ J)whereIis the rate at which the income or profits tax referred to in clause (i)(A) in the description of G is charged in respect of the relevant amount, andJis the highest rate at which an income or profits tax imposed by the government of the country is charged in respect of an amount of income in respect of a financial instrument. (revenu ordinaire étranger)foreign taxation year of an entity means the period for which the accounts of the entity have been ordinarily made up for the purpose of computing relevant foreign income or profits of the entity, but no such period may exceed 53 weeks. (année d’imposition étrangère)hybrid mismatch amount, in respect of a payment, meansif the payment arises under a hybrid financial instrument arrangement, the amount of the hybrid financial instrument mismatch in respect of the payment;if the payment arises under a hybrid transfer arrangement, the amount of the hybrid transfer mismatch in respect of the payment; orif the payment arises under a substitute payment arrangement, the amount of the substitute payment mismatch in respect of the payment. (montant de l’asymétrie hybride)hybrid mismatch arrangement under which a payment arises meansa hybrid financial instrument arrangement under which the payment arises;a hybrid transfer arrangement under which the payment arises; or a substitute payment arrangement under which the payment arises. (dispositif hybride)payer of a payment includes any entity that has an obligation to pay, credit or confer, either immediately or in the future and either absolutely or contingently, the payment to an entity. (payeur)payment includes any amount or benefit that any entity has an obligation to pay, credit or confer, either immediately or in the future and either absolutely or contingently, to an entity. (paiement)recipient of a payment includes any entity that has an entitlement to be paid, credited or conferred, either immediately or in the future and either absolutely or contingently, the payment by an entity. (bénéficiaire)relevant foreign income or profits of an entity means income or profits in respect of which the entity is subject to an income or profits tax that is imposed by the government of a country other than Canada. (revenus ou bénéfices étrangers pertinents)specified entity, in respect of another entity at any time, means a particular entity if, taking into consideration the rules in subsection (17),the particular entity at that time, either alone or together with entities with whom the particular entity does not deal at arm’s length, owns directly or indirectly equity interests in the other entity thatprovide 25% or more of the votes that could be cast at an annual meeting of the shareholders, if the other entity is a corporation, orhave 25% or more of the fair market value of all equity interests in the other entity;the condition in paragraph (a) would be satisfied if the references in that paragraph to “particular entity” were read as references to “other entity” and the references to “other entity” were read as references to “particular entity”; ora third entity at that time, either alone or together with entities with which the third entity does not deal at arm’s length, owns directly or indirectly equity interests in the particular entity and the other entity that, in respect of each of the particular entity and the other entity,provide 25% or more of the votes that could be cast at an annual meeting of the shareholders, if the particular entity or the other entity, as the case may be, is a corporation, orhave 25% or more of the fair market value of all equity interests in the particular entity or the other entity, as the case may be. (entité déterminée)specified minimum tax regime meansany provisions in respect of global intangible low-taxed income (as defined in section 951A of the Internal Revenue Code of 1986 of the United States, as amended from time to time);any provisions under the tax laws of a country that can reasonably be considered to have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, the Global Anti-Base Erosion Model Rules set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), published by the Organisation for Economic Co-operation and Development; orany provisions under the tax laws of a country that can reasonably be considered to have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, a Qualified Domestic Minimum Top-up Tax (as defined in the model rules referred to in paragraph (b)). (régime fiscal minimum déterminé)structured arrangement means any transaction, or series of transactions, ifthe transaction or series includes a payment that gives rise to a deduction/non-inclusion mismatch; andit can reasonably be considered, having regard to all the facts and circumstances, including the terms or conditions of the transaction or series, thatportion of any economic benefit arising from the deduction/non-inclusion mismatch is reflected in the pricing of the transaction or series, orthe transaction or series was otherwise designed to, directly or indirectly, give rise to the deduction/non-inclusion mismatch. (dispositif structuré)transaction includes an arrangement or event. (opération)InterpretationThis section, section 12.7 and subsection 113(5), as well as related provisions of the Act and the Income Tax Regulations, relate to the implementation of Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 — 2015 Final Report published by the Organisation for Economic Co-operation and Development and, unless the context otherwise requires, are to be interpreted consistently with that report, as amended from time to time.Primary rule — conditions for applicationSubsection (4) applies in respect of a payment ifin the absence of this section and subsections 18(4) and 18.2(2), an amount would be deductible, in respect of the payment, in computing a taxpayer’s income from a business or property for a taxation year; andthat amount is the deduction component of a hybrid mismatch arrangement under which the payment arises.Primary rule — consequencesIf this subsection applies in respect of a payment, notwithstanding any other provision of this Act, in computing a taxpayer’s income from a business or property for a taxation year, no deduction shall be made in respect of the payment to the extent of the hybrid mismatch amount in respect of the payment.Structured arrangements — exceptionIf subsection (4) or 12.7(3) would, in the absence of this subsection, apply in respect of a payment in computing a taxpayer’s income from a business or property for a taxation year, that subsection does not apply in respect of the payment ifthere would be no hybrid mismatch arrangement in respect of the payment if the payment did not arise under, or in connection with, a structured arrangement;at the time that the taxpayer entered into, or acquired an interest in any part of a transaction that is, or is part of, the structured arrangement, it was not reasonable to expect that any of the following entities were aware of the deduction/non-inclusion mismatch arising from the payment:the taxpayer,an entity with which the taxpayer does not deal at arm’s length, ora specified entity in respect of the taxpayer; andnone of the entities described in subparagraphs (b)(i) to (iii) shared in the value of any economic benefit resulting from the deduction/non-inclusion mismatch.Deduction/non-inclusion mismatch — conditionsFor the purposes of this section and section 12.7, a payment gives rise to a deduction/non-inclusion mismatch ifthe following condition is met:A > BwhereAis the total of all amounts, each of which would, in the absence of this section and subsections 18(4) and 18.2(2), be deductible in respect of the payment, in computing the income of a taxpayer from a business or property under this Part for a taxation year (referred to in this paragraph as the “relevant year”), andBis the total of all amounts each of which, in respect of the payment,can reasonably be expected to be — and actually is — foreign ordinary income of an entity for a foreign taxation year that begins on or before the day that is 12 months after the end of the relevant year, oris Canadian ordinary income of a taxpayer for a taxation year that begins on or before the day that is 12 months after the end of the relevant year; orthe following condition is met:C > DwhereCis the total of all amounts, each of which, in the absence of any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible, in respect of the payment, in computing relevant foreign income or profits of an entity for a foreign taxation year (referred to in this paragraph as the “relevant foreign year”), andDis the total of all amounts, each of which, in respect of the payment,would, in the absence of section 12.7, be Canadian ordinary income of a taxpayer for a taxation year that begins on or before the day that is 12 months after the end of the relevant foreign year, orcan reasonably be expected to be — and actually is — foreign ordinary income of another entity for a foreign taxation year that begins on or before the day that is 12 months after the end of the relevant foreign year.Deduction/non-inclusion mismatch — applicationFor the purposes of this section and section 12.7, if a payment gives rise to a deduction/non-inclusion mismatch,the amount, if any, determined for A in paragraph (6)(a) in respect of the payment is the deduction component of the deduction/non-inclusion mismatch;the amount, if any, determined for C in paragraph (6)(b) in respect of the payment is the foreign deduction component of the deduction/non-inclusion mismatch; andthe amount of the deduction/non-inclusion mismatch arising from the payment is determined by the formulaA − BwhereAisif paragraph (6)(a) applies in respect of the payment, the deduction component of the deduction/non-inclusion mismatch, orif paragraph (6)(b) applies in respect of the payment, the foreign deduction component of the deduction/non-inclusion mismatch, andBisif subparagraph (i) of the description of A applies,where the amount determined for B in paragraph (6)(a) in respect of the payment is equal to 10% or less of the amount determined for A, nil, andin any other case, the amount determined for B in paragraph (6)(a) in respect of the payment, orif subparagraph (ii) of the description of A applies,where the amount determined for D in paragraph (6)(b) in respect of the payment is equal to 10% or less of the amount determined for A, nil, andin any other case, the amount determined for D in paragraph (6)(b) in respect of the payment.No double countingAny amount that has already been included, directly or indirectly, in computing foreign ordinary income or Canadian ordinary income of a particular entity in respect of a payment shall not be included, directly or indirectly, in computing foreign ordinary income or Canadian ordinary income of the particular entity or any other entity in respect of the payment.Notional interest expense — deemed paymentFor the purposes of this section (other than this subsection) and section 12.7, if, in the absence of any foreign expense restriction rule, an amount (referred to in this subsection as the “deductible amount”) would be, or can reasonably be expected to be, deductible in respect of a notional interest expense on a debt in computing the relevant foreign income or profits of an entity for a foreign taxation yearthe entity is deemed to make a payment in the year under the debt to the creditor in respect of the debt, in an amount equal to the deductible amount, and the creditor is deemed to be a recipient of the payment;the deductible amount is deemed to be in respect of the payment;any amount that is foreign ordinary income or Canadian ordinary income of the creditor in respect of notional interest income on the debt, that is calculated in respect of the same time period as the notional interest expense, is deemed to arise in respect of the payment; andany deduction/non-inclusion mismatch arising from the payment is deemed to satisfy the condition in paragraph (10)(d).Hybrid financial instrument arrangement — conditionsFor the purposes of this section and section 12.7, a payment arises under a hybrid financial instrument arrangement ifthe payment (other than a payment described in paragraphs (14)(a) to (d)) arises under, or in connection with, a financial instrument;any of the following conditions is satisfied:a payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, orthe payment arises under, or in connection with, a structured arrangement;the payment gives rise to a deduction/non-inclusion mismatch; andit can reasonably be considered that the deduction/non-inclusion mismatcharises in whole or in part because of a difference in the treatment of the financial instrument — or of one or more transactions, either alone or together, where the transaction or transactions are part of a transaction or series of transactions that includes the payment or relates to the financial instrument — for tax purposes under the laws of more than one country that is attributable to the terms or conditions of the financial instrument or transaction or transactions, orwould arise in whole or in part because of a difference described in subparagraph (i), if any other reason for the deduction/non-inclusion mismatch were disregarded.Hybrid financial instrument arrangement — amountFor the purposes of this section and section 12.7, if a payment arises under a hybrid financial instrument arrangement,the amount of the hybrid financial instrument mismatch, in respect of the payment, is the portion of the amount of the deduction/non-inclusion mismatch arising from the payment that meets the condition in subparagraph (10)(d)(i) or (ii);the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the hybrid financial instrument arrangement in respect of the payment; andthe foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the hybrid financial instrument arrangement in respect of the payment.Hybrid transfer arrangement — conditionsFor the purposes of this section and section 12.7, a payment (other than an exempt dealer compensation payment) arises under a hybrid transfer arrangement ifthe payment arises under, or in connection with,a transaction or series of transactions (referred to in this subsection as the “transfer arrangement”) that includes a loan or a disposition or other transfer by an entity to another entity (referred to in this subsection as the “transferor” and “transferee”, respectively) of all or a portion of a financial instrument (referred to in this subsection as the “transferred instrument”), orthe transferred instrument;any of the following conditions is satisfied:at any time during the transfer arrangementa payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, orthe transferor does not deal at arm’s length with, or is a specified entity in respect of, the transferee, orthe payment arises under, or in connection with, a structured arrangement;the payment gives rise to a deduction/non-inclusion mismatch; andit can reasonably be considered that the deduction/non-inclusion mismatch arises (or would arise, if any reason for the mismatch other than the reasons described in subparagraphs (i) and (ii) were disregarded), in whole or in part, becauseif the payment arises as compensation for a particular payment under the transferred instrument,the tax laws of one country treat all or a portion of the payment as though it has the same character as, or represents, the particular payment, in determining the tax consequences to an entity that is a recipient of the payment but not of the particular payment, andthe tax laws of another country treat all or a portion of the payment as a deductible expense of another entity, orin any other case,the tax laws of one country treat one or more transactions included in the transfer arrangement, either alone or together, as or as equivalent to a borrowing or other indebtedness, or treat all or a portion of the payment as arising under, or in connection with, a borrowing or other indebtedness, and the tax laws of another country do not treat the transaction or transactions, or the payment, as the case may be, in that manner, orthe tax laws of one country treat the payment, or any other payment arising under, or in connection with, the transfer arrangement or transferred instrument, as though the payment or other payment, as the case may be, was derived by one entity and the tax laws of another country treat the payment or other payment, as the case may be, as though it was derived by another entity, because of a difference in how the countries treat one or more transactions included in the transfer arrangement, either alone or together.Hybrid transfer arrangement — amountFor the purposes of this section and section 12.7, if a payment arises under a hybrid transfer arrangement,the amount of the hybrid transfer mismatch, in respect of the payment, is the portion of the amount of the deduction/non-inclusion mismatch arising from the payment that meets a condition in subparagraph (12)(d)(i) or (ii);the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the hybrid transfer arrangement in respect of the payment; andthe foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the hybrid transfer arrangement in respect of the payment.Substitute payment arrangement — conditionsFor the purposes of this section and section 12.7, a payment arises under a substitute payment arrangement ifthe payment arises under, or in connection with, an arrangement under which all or a portion of a financial instrument is loaned or disposed of or otherwise transferred by an entity to another entity (referred to in this subsection as the “transferor” and “transferee”, respectively);the transferee, or an entity that does not deal at arm’s length with the transferee, is a payer of the payment;the transferor, or an entity that does not deal at arm’s length with the transferor, is a recipient of the payment;all or a portion of the payment can reasonably be considered to represent or otherwise reflect, or be determined by reference toanother payment (referred to in this subsection and subsection (15) as the “underlying return”) that arises under, or in connection with, the financial instrument, orrevenue, profit, cash flow, commodity price or any other similar criterion;any of the following conditions is satisfied:at any time during that series of transactions that includes the arrangement,a payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, orthe transferor does not deal at arm’s length with, or is a specified entity in respect of, the transferee, orthe payment arises under, or in connection with, a structured arrangement;the paymentwould give rise to a deduction/non-inclusion mismatch if any Canadian ordinary income of a taxpayer for a taxation year and any foreign ordinary income of an entity for a foreign taxation year, in respect of the payment, were limited to the portion of those amounts that can reasonably be considered to relate to the portion of the payment that is described in paragraph (d), orif the condition in subparagraph (i) is not met, would meet the condition in that subparagraph if any amount that, in the absence of this section, subsections 18(4) and 18.2(2) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return were instead considered to be deductible in respect of the payment, to the extent that the amountwould be — or would reasonably be expected to be — deductible by the transferee in computing its income from a business or property for a taxation year or its relevant foreign income or profits for a foreign taxation year, as the case may be, andwould be — or would reasonably be expected to be — so deductible because the underlying return accrued (or is considered to accrue) for a period before the transfer;one of the following conditions is satisfied:the transferee or an entity that does not deal at arm’s length with the transferee is a recipient of the underlying return — or, if subparagraph (d)(ii) applies, a distribution under the financial instrument — and the amount of the underlying return or the distribution, as the case may be, exceeds the total of all amounts, in respect of the underlying return or the distribution, as the case may be, each of which can reasonably be expected to be — and actually is — foreign ordinary income for a foreign taxation year or Canadian ordinary income for a taxation year, as the case may be, of the recipient,the condition in subparagraph (i) would be satisfied if the transferee were the recipient of the underlying return, or, if subparagraph (d)(ii) applies, a distribution under the financial instrument, orif the transferor were the recipient of the underlying return, or, if subparagraph (d)(ii) applies, a distribution under the financial instrument,an amount in respect of the underlying return or distribution, as the case may be, would reasonably be expected to be foreign ordinary income for a foreign taxation year or Canadian ordinary income for a taxation year, as the case may be, of the transferor,the underlying return or distribution, as the case may be, would arise under a hybrid mismatch arrangement, ora foreign hybrid mismatch rule would reasonably be expected to apply in respect of the underlying return or distribution, as the case may be; andone of the following entities is not resident in Canada:the transferor,the transferee,a recipient of the payment,a payer of the payment,the issuer of the financial instrument,a recipient of the underlying return, andif an entity described in any of subparagraphs (i) to (vi) is a partnership, a member of that entity.Substitute payment arrangement — amountFor the purposes of this section and section 12.7, if a payment arises under a substitute payment arrangement,the amount of the substitute payment mismatch, in respect of the payment, is the lesser ofthe amount of the deduction/non-inclusion mismatch arising from the payment,if the condition in subparagraph (14)(f)(i) applies, determined based on the assumption in that subparagraph, orif the condition in subparagraph (14)(f)(ii) applies, determined based on the assumption in that subparagraph, andthe amount of the payment, or the portion of the payment, as the case may be, described in paragraph (14)(d);the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the substitute payment arrangement in respect of the payment;the foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the substitute payment arrangement in respect of the payment; andif the condition in subparagraph (14)(f)(ii) is met in respect of the payment, any amount that, in the absence of this section, subsections 18(4) and 18.2(2) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return that meets the conditions in clauses 14(f)(ii)(A) and (B) is deemed to be deductible by the transferee in respect of the payment for the purposes of applying subsections (3) and (4) and section 12.7.Substituted instrumentsFor the purposes of this section and section 12.7, any financial instrument that is substituted for a particular financial instrument is deemed to be the particular financial instrument.Specified entity — deeming rulesFor the purposes of the definition specified entity in subsection (1), the following rules apply:in determining the equity interests owned, directly or indirectly, by any entity (in this paragraph referred to as the “first entity”) in any other entity at any time,the rights of the first entity, and any entities with which it does not deal at arm’s length, that are rights referred to in the portion of the definition specified shareholder in subsection 18(5) after paragraph (b) of that definition or in paragraph (a) or (b) of the definition specified beneficiary in that subsection, or that are similar rights in respect of partnerships or any other entity, are deemed to be immediate and absolute and to have been exercised at that time, andparagraph (c) of the definition specified beneficiary in subsection 18(5) is deemed to apply at that time and the references in that definition to “particular person” are to be read as references to “first entity”; andnotwithstanding paragraph (a), a particular entity is deemed not to be a specified entity in respect of another entity at any time ifthe particular entity would, but for this paragraph, be a specified entity in respect of the other entity at that time,there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular entity will cease to be a specified entity in respect of the other entity, andthe purpose for which the particular entity became a specified entity was the safeguarding of rights or interests of the particular entity or an entity with which the particular entity is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular entity or an entity with which the particular entity is not dealing at arm’s length.Tiered partnershipsFor the purposes of this section and section 12.7, a person or partnership that is a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership, and the person or partnership is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the person or partnership’s direct and indirect rights to that income or capital.Multiple recipientsFor the purposes of this section and section 12.7, if there would, in the absence of this subsection, be multiple recipients of a particular payment, each portion of the particular payment that arises to each recipient is deemed to be a separate payment.Anti-avoidanceThe tax consequences (as defined in subsection 245(1)) to a person shall be determined in order to deny a tax benefit (as defined in subsection 245(1)) to the extent necessary to eliminate any deduction/non-inclusion mismatch, or other outcome that is substantially similar to a deduction/non-inclusion mismatch, arising from a payment ifit can reasonably be considered that one of the main purposes of a transaction or series of transactions that includes the payment is to avoid or limit the application of subsection (4), 12.7(3) or 113(5) in respect of the payment; andany of the following conditions is met:the payment is a dividend and an amount would be — or would reasonably be expected to be — deductible in respect of the payment in computing relevant foreign income or profits of an entity for a foreign taxation year,the mismatch or other outcome arises in whole or in part because of a difference in tax treatment of any transaction or series of transactions under the laws of more than one country that is attributable to the terms or conditions of the transaction or one or more transactions included in the series, orthe mismatch or other outcome would arise in whole or in part because of a difference described in subparagraph (ii), if any other reason for the mismatch or other outcome were disregarded.Filing RequirementEach taxpayer shall file with its return of income for a taxation year a prescribed form containing prescribed information if, in computing the taxpayer’s income for the taxation year,an amount is not deductible in respect of a payment because of subsection (4); orsubsection 12.7(3) includes an amount in respect of a payment.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2024, c. 15, s. 8
Limitation re advertising expense — newspapersIn computing income, no deduction shall be made in respect of an otherwise deductible outlay or expense of a taxpayer for advertising space in an issue of a newspaper for an advertisement directed primarily to a market in Canada unlessthe issue is a Canadian issue of a Canadian newspaper; orthe issue is an issue of a newspaper that would be a Canadian issue of a Canadian newspaper except thatits type has been wholly set in the United States or has been partly set in the United States with the remainder having been set in Canada, orit has been wholly printed in the United States or has been partly printed in the United States with the remainder having been printed in Canada.Where s. (1) does not applySubsection 19(1) does not apply with respect to an advertisement in a special issue or edition of a newspaper that is edited in whole or in part and printed and published outside Canada if that special issue or edition is devoted to features or news related primarily to Canada and the publishers thereof publish such an issue or edition not more frequently than twice a year.DefinitionsIn this section,Canadian issue of a newspaper means an issue, including a special issue,the type of which, other than the type for advertisements or features, is set in Canada,all of which, exclusive of any comics supplement, is printed in Canada,that is edited in Canada by individuals resident in Canada, andthat is published in Canada; (édition canadienne)Canadian newspaper means a newspaper the exclusive right to produce and publish issues of which is held by one or more of the following:a Canadian citizen,a partnershipin which interests representing in value at least 3/4 of the total value of the partnership property are beneficially owned by, andat least 3/4 of each income or loss of which from any source is included in the determination of the income of,corporations described in paragraph (e) or Canadian citizens or any combination thereof,an association or society of which at least 3/4 of the members are Canadian citizens,Her Majesty in right of Canada or a province, or a municipality in Canada, ora corporationthat is incorporated under the laws of Canada or a province,of which the chairperson or other presiding officer and at least 3/4 of the directors or other similar officers are Canadian citizens, andthat, if it is a corporation having share capital, isa public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a corporation controlled by citizens or subjects of a country other than Canada, ora corporation of which at least 3/4 of the shares having full voting rights under all circumstances, and shares having a fair market value in total of at least 3/4 of the fair market value of all of the issued shares of the corporation, are beneficially owned by Canadian citizens or by public corporations a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a public corporation controlled by citizens or subjects of a country other than Canada,and, for the purposes of clause (B), where shares of a class of the capital stock of a corporation are owned, or deemed by this definition to be owned, at any time by another corporation (in this definition referred to as the “holding corporation”), other than a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, each shareholder of the holding corporation shall be deemed to own at that time that proportion of the number of such shares of that class thatthe fair market value of the shares of the capital stock of the holding corporation owned at that time by the shareholderis ofthe fair market value of all the issued shares of the capital stock of the holding corporation outstanding at that time,and where at any time shares of a class of the capital stock of a corporation are owned, or are deemed by this definition to be owned, by a partnership, each member of the partnership shall be deemed to own at that time the least proportion of the number of such shares of that class thatthe member’s share of the income or loss of the partnership from any source for its fiscal period that includes that timeis ofthe income or loss of the partnership from that source for its fiscal period that includes that time,and for this purpose, where the income and loss of a partnership from any source for a fiscal period are nil, the partnership shall be deemed to have had income from that source for that period in the amount of $1,000,000; (journal canadien)substantially the same[Repealed, 2001, c. 17, s. 11(2)]United States meansthe United States of America, but does not include Puerto Rico, the Virgin Islands, Guam or any other United States possession or territory, andany areas beyond the territorial sea of the United States within which, in accordance with international law and its domestic laws, the United States may exercise rights with respect to the seabed and subsoil and the natural resources of those areas. (États-Unis)InterpretationIn this section, each of the following is deemed to be a Canadian citizen:a trust or corporation described in paragraph 149(1)(o) or (o.1) formed in connection with a pension plan that exists for the benefit of individuals a majority of whom are Canadian citizens;a trust described in paragraph 149(1)(r) or (x), the annuitant in respect of which is a Canadian citizen;a mutual fund trust, within the meaning assigned by subsection 132(6), other than a mutual fund trust the majority of the units of which are held by citizens or subjects of a country other than Canada;a trust, each beneficiary of which is a person, partnership, association or society described in any of paragraphs (a) to (e) of the definition Canadian newspaper in subsection (5); anda person, association or society described in paragraph (c) or (d) of the definition Canadian newspaper in subsection (5).Trust propertyWhere the right that is held by any person, partnership, association or society described in the definition Canadian newspaper in subsection (5) to produce and publish issues of a newspaper is held as property of a trust or estate, the newspaper is not a Canadian newspaper unless each beneficiary under the trust or estate is a person, partnership, association or society described in that definition.Grace periodA Canadian newspaper that would, but for this subsection, cease to be a Canadian newspaper, is deemed to continue to be a Canadian newspaper until the end of the 12th month that follows the month in which it would, but for this subsection, have ceased to be a Canadian newspaper.Non-Canadian newspaperWhere at any time one or more persons or partnerships that are not described in any of paragraphs (a) to (e) of the definition Canadian newspaper in subsection (5) have any direct or indirect influence that, if exercised, would result in control in fact of a person or partnership that holds a right to produce or publish issues of a newspaper, the newspaper is deemed not to be a Canadian newspaper at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 19; 1994, c. 7, Sch. II, s. 14; 1995, c. 46, s. 5; 2001, c. 17, s. 11; 2007, c. 35, s. 13
DefinitionsThe definitions in this subsection apply in this section.advertisement directed at the Canadian market has the same meaning as the expression directed at the Canadian market in section 2 of the Foreign Publishers Advertising Services Act and includes a reference to that expression made by or under that Act. (annonce destinée au marché canadien)original editorial content in respect of an issue of a periodical means non-advertising contentthe author of which is a Canadian citizen or a permanent resident of Canada within the meaning assigned by the Immigration Act and, for this purpose, “author” includes a writer, a journalist, an illustrator and a photographer; orthat is created for the Canadian market and has not been published in any other edition of that issue of the periodical published outside Canada. (contenu rédactionnel original)periodical has the meaning assigned by section 2 of the Foreign Publishers Advertising Services Act. (périodique)Limitation re advertising expenses — periodicalsSubject to subsections (3) and (4), in computing income, no deduction shall be made by a taxpayer in respect of an otherwise deductible outlay or expense for advertising space in an issue of a periodical for an advertisement directed at the Canadian market.100% deductionA taxpayer may deduct in computing income an outlay or expense of the taxpayer for advertising space in an issue of a periodical for an advertisement directed at the Canadian market ifthe original editorial content in the issue is 80% or more of the total non-advertising content in the issue; andthe outlay or expense would, but for subsection (2), be deductible in computing the taxpayer’s income.50% deductionA taxpayer may deduct in computing income 50% of an outlay or expense of the taxpayer for advertising space in an issue of a periodical for an advertisement directed at the Canadian market ifthe original editorial content in the issue is less than 80% of the total non-advertising content in the issue; andthe outlay or expense would, but for subsection (2), be deductible in computing the taxpayer’s income.ApplicationFor the purposes of subsections (3) and (4),the percentage that original editorial content is of total non-advertising content is the percentage that the total space occupied by original editorial content in the issue is of the total space occupied by non-advertising content in the issue; andthe Minister may obtain the advice of the Department of Canadian Heritage for the purpose ofdetermining the result obtained under paragraph (a), andinterpreting any expression defined in this section that is defined in the Foreign Publishers Advertising Services Act.Editions of issuesFor the purposes of this section,where an issue of a periodical is published in several versions, each version is an edition of that issue; andwhere an issue of a periodical is published in only one version, that version is an edition of that issue.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 12
Limitation re advertising expense on broadcasting undertakingSubject to subsection 19.1(2), in computing income, no deduction shall be made in respect of an otherwise deductible outlay or expense of a taxpayer made or incurred after September 21, 1976 for an advertisement directed primarily to a market in Canada and broadcast by a foreign broadcasting undertaking.ExceptionIn computing income, a deduction may be made in respect of an outlay or expense made or incurred before September 22, 1977 for an advertisement directed primarily to a market in Canada and broadcast by a foreign broadcasting undertaking pursuant toa written agreement entered into on or before January 23, 1975; ora written agreement entered into after January 23, 1975 and before September 22, 1976 if the agreement is for a term of one year or less and by its express terms is not capable of being extended or renewed.DefinitionsIn this section,foreign broadcasting undertaking means a network operation or a broadcasting transmitting undertaking located outside Canada or on a ship or aircraft not registered in Canada; (entreprise étrangère de radiodiffusion)network includes any operation involving two or more broadcasting undertakings whereby control over all or any part of the programs or program schedules of any of the broadcasting undertakings involved in the operation is delegated to a network operator. (réseau)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1974-75-76, c. 106, s. 3; 1977-78, c. 1, s. 13; 1985, c. 45, s. 126(F)
Deductions permitted in computing income from business or propertyNotwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), in computing a taxpayer’s income for a taxation year from a business or property, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable theretoCapital cost of propertysuch part of the capital cost to the taxpayer of property, or such amount in respect of the capital cost to the taxpayer of property, if any, as is allowed by regulation;Incorporation expensesthe lesser ofthe portion of the amount (that is not otherwise deductible in computing the income of the taxpayer) that is an expense incurred in the year for the incorporation of a corporation, and$3,000 less the total of all amounts each of which is an amount deducted by another taxpayer in respect of the incorporation of the corporation;Interestan amount paid in the year or payable in respect of the year (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income), pursuant to a legal obligation to pay interest onborrowed money used for the purpose of earning income from a business or property (other than borrowed money used to acquire property the income from which would be exempt or to acquire a life insurance policy),an amount payable for property acquired for the purpose of gaining or producing income from the property or for the purpose of gaining or producing income from a business (other than property the income from which would be exempt or property that is an interest in a life insurance policy),an amount paid to the taxpayer underan appropriation Act and on terms and conditions approved by the Treasury Board for the purpose of advancing or sustaining the technological capability of Canadian manufacturing or other industry, orthe Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, orborrowed money used to acquire an interest in an annuity contract in respect of which section 12.2 applies (or would apply if the contract had an anniversary day in the year at a time when the taxpayer held the interest) except that, where annuity payments have begun under the contract in a preceding taxation year, the amount of interest paid or payable in the year shall not be deducted to the extent that it exceeds the amount included under section 12.2 in computing the taxpayer’s income for the year in respect of the taxpayer’s interest in the contract,or a reasonable amount in respect thereof, whichever is the lesser;Compound interestan amount paid in the year pursuant to a legal obligation to pay interest on an amount that would be deductible under paragraph 20(1)(c) if it were paid in the year or payable in respect of the year;Expenses re financingsuch part of an amount (other than an excluded amount) that is not otherwise deductible in computing the income of the taxpayer and that is an expense incurred in the year or a preceding taxation yearin the course of an issuance or sale of units of the taxpayer where the taxpayer is a unit trust, of interests in a partnership or syndicate by the partnership or syndicate, as the case may be, or of shares of the capital stock of the taxpayer,in the course of a borrowing of money used by the taxpayer for the purpose of earning income from a business or property (other than money used by the taxpayer for the purpose of acquiring property the income from which would be exempt),in the course of incurring indebtedness that is an amount payable for property acquired for the purpose of gaining or producing income therefrom or for the purpose of gaining or producing income from a business (other than property the income from which would be exempt or property that is an interest in a life insurance policy), orin the course of a rescheduling or restructuring of a debt obligation of the taxpayer or an assumption of a debt obligation by the taxpayer, where the debt obligation isin respect of a borrowing described in subparagraph 20(1)(e)(ii), orin respect of an amount payable described in subparagraph 20(1)(e)(ii.1),and in the case of a rescheduling or restructuring, the rescheduling or restructuring, as the case may be, provides for the modification of the terms or conditions of the debt obligation or the conversion or substitution of the debt obligation to or with a share or another debt obligation,(including a commission, fee, or other amount paid or payable for or on account of services rendered by a person as a salesperson, agent or dealer in securities in the course of the issuance, sale or borrowing) that is the lesser ofthat proportion of 20% of the expense that the number of days in the year is of 365 andthe amount, if any, by which the expense exceeds the total of all amounts deductible by the taxpayer in respect of the expense in computing the taxpayer’s income for a preceding taxation year,and for the purposes of this paragraph,excluded amount meansan amount paid or payable as or on account of the principal amount of a debt obligation or interest in respect of a debt obligation,an amount that is contingent or dependent on the use of, or production from, property, oran amount that is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation,where in a taxation year all debt obligations in respect of a borrowing described in subparagraph 20(1)(e)(ii) or in respect of indebtedness described in subparagraph 20(1)(e)(ii.1) are settled or extinguished (otherwise than in a transaction made as part of a series of borrowings or other transactions and repayments), by the taxpayer for consideration that does not include any unit, interest, share or debt obligation of the taxpayer or any person with whom the taxpayer does not deal at arm’s length or any partnership or trust of which the taxpayer or any person with whom the taxpayer does not deal at arm’s length is a member or beneficiary, this paragraph shall be read without reference to the words “the lesser of” and to subparagraph 20(1)(e)(iii), andwhere a partnership has ceased to exist,no amount may be deducted by the partnership under this paragraph in computing its income for its last fiscal period, andthere may be deducted for a taxation year ending after the time that is immediately before the end of the partnership’s last fiscal period (referred to in this clause as the “particular time”) by any person or partnership that was a member of the partnership at the particular time, that proportion of the amount that would, but for this subparagraph, have been deductible under this paragraph by the partnership in the fiscal period ending in the year had it continued to exist and had the partnership interest not been redeemed, acquired or cancelled, that the fair market value of the member’s interest in the partnership at the particular time is of the fair market value of all the interests in the partnership at the particular time;Annual fees, etc.an amount payable by the taxpayer (other than a payment that is contingent or dependent on the use of, or production from, property or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation) as a standby charge, guarantee fee, registrar fee, transfer agent fee, filing fee, service fee or any similar fee, that can reasonably be considered to relate solely to the year and that is incurred by the taxpayerfor the purpose of borrowing money to be used by the taxpayer for the purpose of earning income from a business or property (other than borrowed money used by the taxpayer for the purpose of acquiring property the income from which would be exempt income),in the course of incurring indebtedness that is an amount payable for property acquired for the purpose of gaining or producing income therefrom or for the purpose of gaining or producing income from a business (other than property the income from which would be exempt or property that is an interest in a life insurance policy), orfor the purpose of rescheduling or restructuring a debt obligation of the taxpayer or an assumption of a debt obligation by the taxpayer, where the debt obligation isin respect of a borrowing described in subparagraph 20(1)(e.1)(i), orin respect of an amount payable described in subparagraph 20(1)(e.1)(ii),and in the case of a rescheduling or restructuring, the rescheduling or restructuring, as the case may be, provides for the modification of the terms or conditions of the debt obligation or the conversion or substitution of the debt obligation to or with a share or another debt obligation.Premiums on life insurance — collateralthe least of the following amounts in respect of a life insurance policy (other than an annuity contract or LIA policy):the premiums payable by the taxpayer under the policy in respect of the year, ifan interest in the policy is assigned to a restricted financial institution in the course of a borrowing from the institution,the interest payable in respect of the borrowing is or would, but for subsections 18(2) and 18(3.1) and sections 21 and 28, be deductible in computing the taxpayer’s income for the year, andthe assignment referred to in clause 20(1)(e.2)(i)(A) is required by the institution as collateral for the borrowingthe net cost of pure insurance in respect of the year (other than in respect of a period after 2013 during which the policy is a 10/8 policy), as determined in accordance with the regulations, in respect of the interest in the policy referred to in clause (i)(A), andthe portion, of the lesser of the amounts determined under subparagraphs (i) and (ii) in respect of the policy, that can reasonably be considered to relate to the amount owing from time to time during the year by the taxpayer to the institution under the borrowing;Discount on certain obligationsan amount paid in the year in satisfaction of the principal amount of any bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by the taxpayer after June 18, 1971 on which interest was stipulated to be payable, to the extent that the amount so paid does not exceed,in any case where the obligation was issued for an amount not less than 97% of its principal amount, and the yield from the obligation, expressed in terms of an annual rate on the amount for which the obligation was issued (which annual rate shall, if the terms of the obligation or any agreement relating thereto conferred on its holder a right to demand payment of the principal amount of the obligation or the amount outstanding as or on account of its principal amount, as the case may be, before the maturity of the obligation, be calculated on the basis of the yield that produces the highest annual rate obtainable either on the maturity of the obligation or conditional on the exercise of any such right) does not exceed 4/3 of the interest stipulated to be payable on the obligation, expressed in terms of an annual rate onthe principal amount of the obligation, if no amount is payable on account of the principal amount before the maturity of the obligation, orthe amount outstanding from time to time as or on account of the principal amount of the obligation, in any other case,the amount by which the lesser of the principal amount of the obligation and all amounts paid in the year or in any preceding year in satisfaction of its principal amount exceeds the amount for which the obligation was issued, andin any other case, 1/2 of the lesser of the amount so paid and the amount by which the lesser of the principal amount of the obligation and all amounts paid in the year or in any preceding taxation year in satisfaction of its principal amount exceeds the amount for which the obligation was issued;Share transfer and other feeswhere the taxpayer is a corporation,an amount payable in the year as a fee for services rendered by a person as a registrar of or agent for the transfer of shares of the capital stock of the taxpayer or as an agent for the remittance to shareholders of the taxpayer of dividends declared by it,an amount payable in the year as a fee to a stock exchange for the listing of shares of the capital stock of the taxpayer, andan expense incurred in the year in the course of printing and issuing a financial report to shareholders of the taxpayer or to any other person entitled by law to receive the report;Repayment of loan by shareholdersuch part of any loan or indebtedness repaid by the taxpayer in the year as was by virtue of subsection 15(2) included in computing the taxpayer’s income for a preceding taxation year (except to the extent that the amount of the loan or indebtedness was deductible from the taxpayer’s income for the purpose of computing the taxpayer’s taxable income for that preceding taxation year), if it is established by subsequent events or otherwise that the repayment was not made as part of a series of loans or other transactions and repayments;Doubtful or impaired debtsa reserve determined as the total ofa reasonable amount in respect of doubtful debts (other than a debt to which subparagraph 20(1)(l)(ii) applies) that have been included in computing the taxpayer’s income for the year or a preceding taxation year, andwhere the taxpayer is a financial institution (as defined in subsection 142.2(1)) in the year or a taxpayer whose ordinary business includes the lending of money, an amount in respect of properties (other than mark-to-market properties, as defined in that subsection) that areimpaired loans or lending assets that are specified debt obligations (as defined in that subsection) of the taxpayer, orimpaired loans or lending assets that were made or acquired by the taxpayer in the ordinary course of the taxpayer’s business of insurance or the lending of moneyequal to the total ofthe percentage (not exceeding 100%) that the taxpayer claims of the prescribed reserve amount for the taxpayer for the year, andin respect of loans, lending assets or specified debt obligations that are impaired and for which an amount is not deductible for the year because of clause 20(1)(l)(ii)(C) (each of which in this clause is referred to as a “loan”), the taxpayer’s specified percentage for the year of the lesser ofthe total of all amounts each of which is a reasonable amount as a reserve (other than any portion of which is in respect of a sectoral reserve) for a loan in respect of the amortized cost of the loan to the taxpayer at the end of the year, andthe amount determined by the formula0.9M - NwhereMis the amount that is the taxpayer’s reserve or allowance for impairment (other than any portion of the amount that is in respect of a sectoral reserve) for all loans that is determined for the year in accordance with generally accepted accounting principles, andNis the total of all amounts each of which is the specified reserve adjustment for a loan (other than an income bond or an income debenture) for the year or a preceding taxation year;Reserve for guarantees, etc.a reserve in respect of credit risks under guarantees, indemnities, letters of credit or other credit facilities, bankers’ acceptances, interest rate or currency swaps, foreign exchange or other future or option contracts, interest rate protection agreements, risk participations and other similar instruments or commitments issued, made or assumed by a taxpayer who was an insurer or whose ordinary business included the lending of money in favour of persons with whom the taxpayer deals at arm’s length in the ordinary course of the taxpayer’s business of insurance or the lending of money, equal to the lesser ofa reasonable amount as a reserve for credit risk losses of the taxpayer expected to arise after the end of the year under or in respect of those instruments or commitments, and90% of the reserve for credit risk losses of the taxpayer expected to arise after the end of the year under or in respect of those instruments or commitments determined for the year in accordance with generally accepted accounting principles,or such lesser amount as the taxpayer may claim;Reserve in respect of certain goods and servicessubject to subsection 20(6), where amounts described in paragraph 12(1)(a) have been included in computing the taxpayer’s income from a business for the year or a previous year, a reasonable amount as a reserve in respect ofgoods that it is reasonably anticipated will have to be delivered after the end of the year,services that it is reasonably anticipated will have to be rendered after the end of the year,periods for which rent or other amounts for the possession or use of land or of chattels or movables have been paid in advance, orrepayments under arrangements or understandings of the class described in subparagraph 12(1)(a)(ii) that it is reasonably anticipated will have to be made after the end of the year on the return or resale to the taxpayer of articles other than bottles;Manufacturer’s warranty reservewhere an amount described in paragraph 12(1)(a) has been included in computing the taxpayer’s income from a business for the year or a preceding taxation year, a reasonable amount as a reserve in respect of goods or services that it is reasonably anticipated will have to be delivered or rendered after the end of the year pursuant to an agreement for an extended warrantyentered into by the taxpayer with a person with whom the taxpayer was dealing at arm’s length, andunder which the only obligation of the taxpayer is to provide those goods or services with respect to property manufactured by the taxpayer or by a corporation related to the taxpayer,not exceeding that portion of the amount paid or payable by the taxpayer to an insurer that carries on an insurance business in Canada to insure the taxpayer’s liability under the agreement in respect of an outlay or expense made or incurred after December 11, 1979 and in respect of the period after the end of the year;Repayment of amount previously included in incomea repayment in the year by the taxpayer of an amount required by paragraph 12(1)(a) to be included in computing the taxpayer’s income from a business for the year or a preceding taxation year;the unamortized amount at the end of the year in respect of the amount that was received in excess of the principal amount of a bond (in this paragraph referred to as the “premium”) received by the issuer in the year, or a previous year, for issuing the bond (in this paragraph referred to as the “new bond”) ifthe terms of the new bond are identical to the terms of bonds previously issued by the taxpayer (in this paragraph referred to as the “old bonds”), except for the date of issuance and total principal amount of the bonds,the old bonds were part of an issuance (in this paragraph referred to as the “original issuance”) of bonds by the taxpayer,the interest rate on the old bonds was reasonable at the time of the original issuance,the new bond is issued on the re-opening of the original issuance,the amount of the premium at the time of issuance of the new bond is reasonable, andthe amount of the premium has been included in the taxpayer’s income for the year or a previous taxation year;Reserve for unpaid amountsif an amount included in computing the taxpayer’s income from the business for the year or for a preceding taxation year in respect of property sold in the course of the business is payable to the taxpayer after the end of the year and, except where the property is real or immovable property, all or part of the amount was, at the time of the sale, not due until at least two years after that time, a reasonable amount as a reserve in respect of any part of the amount that can reasonably be regarded as a portion of the profit from the sale;Reserve for quadrennial surveysuch amount as may be prescribed as a reserve for expenses to be incurred by the taxpayer by reason of quadrennial or other special surveys required under the Canada Shipping Act, or the regulations under that Act, or under the rules of any society or association for the classification and registry of shipping approved by the Minister of Transport for the purposes of the Canada Shipping Act;Bad debtsthe total ofall debts owing to the taxpayer that are established by the taxpayer to have become bad debts in the year and that have been included in computing the taxpayer’s income for the year or a preceding taxation year, andall amounts each of which is that part of the amortized cost to the taxpayer at the end of the year of a loan or lending asset (other than a mark-to-market property, as defined in subsection 142.2(1)) that is established in the year by the taxpayer to have become uncollectible and that,where the taxpayer is an insurer or a taxpayer whose ordinary business includes the lending of money, was made or acquired in the ordinary course of the taxpayer’s business of insurance or the lending of money, orwhere the taxpayer is a financial institution (as defined in subsection 142.2(1)) in the year, is a specified debt obligation (as defined in that subsection) of the taxpayer;Employer’s contributions to RPP or PRPPsuch amount in respect of employer contributions to registered pension plans or pooled registered pension plans as is permitted under subsection 147.2(1) or 147.5(10);Employer’s contributions under retirement compensation arrangementamounts paid by the taxpayer in the year as contributions under a retirement compensation arrangement in respect of services rendered by an employee or former employee of the taxpayer, other than where it is established, by subsequent events or otherwise, that the amounts were paid as part of a series of payments and refunds of contributions under the arrangement;Employer’s contributions under employee life and health trustsuch amount in respect of employer contributions paid to a trustee under an employee life and health trust as is permitted by subsections 144.1(4) to (7);Patronage dividendssuch amounts in respect of payments made by the taxpayer pursuant to allocations in proportion to patronage as are permitted by section 135;Mining taxessuch amount as is allowed by regulation in respect of taxes on income from mining operations;[Repealed, 2003, c. 28, s. 3]Employer’s contributions under profit sharing planan amount paid by the taxpayer to a trustee in trust for employees of the taxpayer or of a corporation with whom the taxpayer does not deal at arm’s length, under an employees profit sharing plan as permitted by section 144;Employer’s contributions under registered supplementary unemployment benefit planan amount paid by the taxpayer to a trustee under a registered supplementary unemployment benefit plan as permitted by section 145;Employer’s contributions under deferred profit sharing planan amount paid by the taxpayer to a trustee under a deferred profit sharing plan as permitted by subsection 147(8);Cancellation of leasethe proportion of an amount not otherwise deductible that was paid or that became payable by the taxpayer before the end of the year to a person for the cancellation of a lease of property of the taxpayer leased by the taxpayer to that person thatthe number of days that remained in the term of the lease (including all renewal periods of the lease), not exceeding 40 years, immediately before its cancellation and that were in the yearis ofthe number of days that remained in the term of the lease (including all renewal periods of the lease), not exceeding 40 years, immediately before its cancellation,in any case where the property was owned at the end of the year by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length and no part of the amount was deductible by the taxpayer under paragraph 20(1)(z.1) in computing the taxpayer’s income for a preceding taxation year;Ideman amount not otherwise deductible that was paid or that became payable by the taxpayer before the end of the year to a person for the cancellation of a lease of property of the taxpayer leased by the taxpayer to that person, in any case wherethe property was not owned at the end of the year by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length, andno part of the amount was deductible by the taxpayer under this paragraph in computing the taxpayer’s income for any preceding taxation year,to the extent of the amount thereof (or in the case of capital property, 1/2 of the amount thereof) that was not deductible by the taxpayer under paragraph 20(1)(z) in computing the taxpayer’s income for any preceding taxation year;Landscaping of groundsan amount paid by the taxpayer in the year for the landscaping of grounds around a building or other structure of the taxpayer that is used by the taxpayer primarily for the purpose of gaining or producing income therefrom or from a business;Fees paid to investment counselan amount, other than a commission, thatis paid by the taxpayer in the year to a person or partnership the principal business of whichis advising others as to the advisability of purchasing or selling specific shares or securities, orincludes the provision of services in respect of the administration or management of shares or securities, andis paid foradvice as to the advisability of purchasing or selling a specific share or security of the taxpayer, orservices in respect of the administration or management of shares or securities of the taxpayer;Expenses of representationan amount paid by the taxpayer in the year as or on account of expenses incurred by the taxpayer in making any representation relating to a business carried on by the taxpayer,to the government of a country, province or state or to a municipal or public body performing a function of government in Canada, orto an agency of a government or of a municipal or public body referred to in subparagraph 20(1)(cc)(i) that had authority to make rules, regulations or by-laws relating to the business carried on by the taxpayer,including any representation for the purpose of obtaining a licence, permit, franchise or trademark relating to the business carried on by the taxpayer;Investigation of sitean amount paid by the taxpayer in the year for investigating the suitability of a site for a building or other structure planned by the taxpayer for use in connection with a business carried on by the taxpayer;Utilities service connectionan amount paid by the taxpayer in the year to a person (other than a person with whom the taxpayer was not dealing at arm’s length) for the purpose of making a service connection to the taxpayer’s place of business for the supply, by means of wires, pipes or conduits, of electricity, gas, telephone service, water or sewers supplied by that person, to the extent that the amount so paid was not paidto acquire property of the taxpayer, oras consideration for the goods or services for the supply of which the service connection was undertaken or made;Payments by farmersan amount paid by the taxpayer in the year as a levy under the Western Grain Stabilization Act, as a premium in respect of the gross revenue insurance program established under the Farm Income Protection Act or as an administration fee in respect of a net income stabilization account;[Repealed, 1994, c. 7, Sch. VIII, s. 157]Repayments of inducements, etc.an amount repaid by the taxpayer in the year pursuant to a legal obligation to repay all or part of a particular amountincluded under paragraph 12(1)(x) in computing the taxpayer’s income for the year or a preceding taxation year, orthat 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;Repayment of obligation3/4 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;Inventory adjustmentthe amount required by paragraph 12(1)(r) to be included in computing the taxpayer’s income for the immediately preceding taxation year;[Repealed, 2013, c. 34, s. 180]Exploration and development grantsthe 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 thatthe 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, andthe deduction or reimbursement was included by the taxpayer in the amount determined for J in the definition cumulative Canadian exploration expense in subsection 66.1(6), for M in the definition cumulative Canadian development expense in subsection 66.2(5) or for I in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5);Repayment of interestsuch 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;Cost of substances injected in reservoirthe 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 nototherwise deducted in computing the taxpayer’s income for the year, ordeducted 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 ofthat 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, andthe 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;Part XII.6 taxthe 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);[Repealed, 2017, c. 20, s. 4]Salary deferral arrangementany deferred amount under a salary deferral arrangement in respect of another person to the extent that it wasincluded 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, andin respect of services rendered to the taxpayer;Idemany 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 wasincluded 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, andin respect of services rendered to the taxpayer;Disability-related modifications to buildingsan 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;Disability-related equipmentan amount paid by the taxpayer in the year for any prescribed disability-specific device or equipment;Qualifying environmental trustsa contribution made in the year by the taxpayer to a qualifying environmental trust under which the taxpayer is a beneficiary;Acquisition of interests in qualifying environmental truststhe 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;Debt forgivenessany amount deducted in computing the taxpayer’s income for the year because of paragraph 80(15)(a) or subsection 80.01(10);Countervailing or anti-dumping dutyan 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);Split incomewhere the taxpayer is a specified individual in relation to the year, the individual’s split income for the year;Derivative forward agreementin respect of a derivative forward agreement of a taxpayer, the amount determined by the formulaA – BwhereAis the lesser ofthe total of all amounts each of which isif 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 definition derivative forward agreement in subsection 248(1), orif 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 the proceeds 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 definition derivative forward agreement in subsection 248(1), andthe amount that is,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), orin 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, andBis the total of all amounts deducted under this paragraph in respect of the agreement for a preceding taxation year; andAdjustment for hybrid mismatchif subsection 18.4(4) has applied to deny a taxpayer a deduction, for the year or a preceding taxation year, for all or a portion of an amount in respect of a payment arising under a hybrid mismatch arrangement, and the taxpayer demonstrates that an amount is foreign ordinary income of an entity in respect of the payment (other than any amount of foreign ordinary income already taken into account in determining the amount of the deduction that was previously denied or a deduction under this paragraph) for a foreign taxation year that ends on or before the day that is 12 months after the end of the year,the lesser ofthe amount by which the deduction that was denied exceeds the total of all amounts already deducted under this paragraph in respect of the payment for the year or any previous year, andthe amount of the foreign ordinary income, andthe amount that is deductible under this paragraph is deemed to be deductible in respect of the payment.Application of s. 13(21)The definitions in subsection 13(21) apply to any regulations made under paragraph 20(1)(a).Application of s. 12.2(11)The definitions in subsection 12.2(11) apply to paragraph 20(1)(c).Borrowed moneyFor 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,the larger amount shall be deemed to be the amount borrowed; andwhere 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.Limitation of expression “interest” — 10/8 policyFor the purposes of paragraphs (1)(c) and (d), interest does not include an amount ifthe amountis 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, andis described in paragraph (a) of the definition 10/8 policy in subsection 248(1); orthe amountis 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, andis described in paragraph (a) of the definition 10/8 policy in subsection 248(1).Limitation of expression “interest”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 beinterest paid in the year on that loan; andinterest (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.Limitation of expression “life insurance policy”For the purposes of paragraphs 20(1)(c) and 20(1)(d), a “life insurance policy” does not include a policythat 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;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; orthat 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.Sectoral reserveFor 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.Specified PercentageFor the purpose of clause 20(1)(l)(ii)(D), a taxpayer’s specified percentage for a taxation year iswhere 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, andin any other case, 100%.Borrowed moneyFor 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 the Income 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.Bad debts — dispositions of depreciable propertyIf 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 ofthe amount so owing to the taxpayer, andthe 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.IdemWhere 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.Bad debts — zero-emission passenger vehiclesIf 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 ofthe 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, andthe amount determined by the formulaA – BwhereAis the capital cost to the taxpayer of the vehicle, andBis 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 total amount, if any, realized by the taxpayer on account of the proceeds of disposition.Former eligible capital propertyIf 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.[Repealed, 2016, c. 12, s. 7]Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of dispositionWhere 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 ofthe 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, andthe 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.Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of dispositionWhere 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.Special reservesWhere an amount is deductible in computing income for a taxation year under paragraph 20(1)(m) as a reserve in respect ofarticles of food or drink that it is reasonably anticipated will have to be delivered after the end of the year, ortransportation 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 ofarticles of food or drink not delivered before the end of the year, ortransportation not provided before the end of the year, as the case may be.Where para. (1)(m) does not applyParagraph 20(1)(m) does not apply to allow a deductionas a reserve in respect of guarantees, indemnities or warranties;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);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; oras a reserve in respect of a reclamation obligation.No deduction in respect of property in certain circumstancesParagraph 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 ifthe taxpayer, at the end of the year or at any time in the immediately following taxation year,was exempt from tax under any provision of this Part, orwas not resident in Canada and did not carry on the business in Canada;the sale occurred more than 36 months before the end of the year;the purchaser of the property sold was a corporation that, immediately after the sale,was controlled, directly or indirectly, in any manner whatever, by the taxpayer,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, orcontrolled the taxpayer, directly or indirectly, in any manner whatever; orthe purchaser of the property sold was a partnership in which the taxpayer was, immediately after the sale, a majority-interest partner.Application of para. (1)(cc)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.Convention expensesNotwithstanding 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.Foreign taxes on income from property exceeding 15%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,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,exceeds15% of the amount referred to in paragraph 20(11)(a).Foreign non-business-income taxIn 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 definition non-business-income tax in 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.Foreign tax where no economic profitIn 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 ofthe amount of foreign tax (within the meaning assigned by subsection 126(4.1)) thatis 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)),is paid by the taxpayer for the year,is, because of subsection 126(4.1), not included in computing the taxpayer’s business-income tax or non-business-income tax, andwhere 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, andthe 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)).Deductions under Subdivision IIn 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.Accrued bond interestWhere, by virtue of an assignment or other transfer of a debt obligation, other than an income bond or an income debenture, 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 amountshall 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; andmay 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.Interest on debt obligationWhere a person who has issued a debt obligation, other than an income bond or an income debenture, 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,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; andnotwithstanding 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.Sales of linked notesFor 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 the Income 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 − BwhereAis the price for which the debt obligation was assigned or otherwise transferred at the particular time; andBis the amount by which the price (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) for which the debt obligation was issued exceeds the portion, if any, of the principal amount of the debt obligation (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) that was repaid by the issuer on or before the particular time.[Repealed, 2003, c. 28, s. 3]Terminal lossNotwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), where at the end of a taxation year,the total of all amounts used to determine A to D.1 in the definition undepreciated capital cost in 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, andthe taxpayer no longer owns any property of that class,in computing the taxpayer’s income for the yearthere shall be deducted the amount of the excess determined under paragraph 20(16)(a), andno amount shall be deducted for the year under paragraph 20(1)(a) in respect of property of that class.Non-application of subsection (16)Subsection (16) does not applyin 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;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, ifwithin 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, andat 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; andin respect of a taxation year in respect of property included in Class 14.1 of Schedule II to the Income Tax Regulations unless the taxpayer has ceased to carry on the business to which the class relates.Reference to “taxation year” and “year” of individualWhere 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”.Disposition after ceasing businessWhere 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”.[Repealed, 2013, c. 34, s. 180]Annuity contractWhere 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.Life insurance policyWhere 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 ofthe 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 the Income 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, andthe 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.Debt obligationIf 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 whichthe 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 propertyexceeds the total of all amounts each of which isthe 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, oran 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.Deduction for negative reservesIn 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.Amounts paid for undertaking future obligationsWhere 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,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; andwhere 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).Manner of electionAn 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.[Repealed, 2013, c. 34, s. 180]Loans, etc., acquired in ordinary course of businessFor 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 wherethe 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; andthe 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.Application of ss. 13(21) and 138(12)The definitions in subsections 13(21) and 138(12) apply to this section.Deduction before available for useIn 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 ofthe 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, andthe 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)exceedsthe 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.IdemWhere, 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 ofthe total of all such outlays or expenses, andthe taxpayer’s income for the year from renting the building or the part thereof computed without reference to subsection 20(28) and this subsection.Specified reserve adjustmentFor 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 formula0.1(A × B × C/365)whereAis the carrying amount of the impaired loan that is used or would be used in determining the interest income on the loan for the year in accordance with generally accepted accounting principles;Bis the effective interest rate on the loan for the year determined in accordance with generally accepted accounting principles; andCis the number of days in the year on which the loan is impaired.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 20; 1994, c. 7, Sch. II, s. 15, Sch. VIII, ss. 9, 157, c. 8, s. 3, c. 21, s. 12; 1995, c. 3, s. 7, c. 21, ss. 6, 45; 1997, c. 25, s. 5; 1998, c. 19, ss. 4, 81; 1999, c. 22, s. 9; 2000, c. 19, s. 2; 2001, c. 17, ss. 13, 203; 2003, c. 28, s. 3; 2007, c. 35, s. 14; 2009, c. 2, s. 7; 2010, c. 25, s. 6; 2012, c. 31, s. 8; 2013, c. 33, s. 3, c. 34, ss. 57, 97, 180, c. 40, s. 11; 2014, c. 20, s. 366(E); 2016, c. 12, s. 7; 2017, c. 20, s. 4, c. 33, s. 62019, c. 29, s. 32023, c. 26, s. 82024, c. 15, s. 9
PHSP premiumsNotwithstanding 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 ifin the year or in the preceding taxation yearthe 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, orthe 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; andthe amount is payable under a contract between the individual or partnership anda 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,a person or partnership engaged in the business of offering to the public its services as an administrator of private health services plans, ora 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.LimitFor the purpose of calculating the amount deductible under subsection (1) in computing an individual’s income for a taxation year from a particular business,no amount may be deducted to the extent thatit is deducted under this section in computing another individual’s income for any taxation year, orit is included in calculating a deduction under section 118.2 in computing an individual’s tax payable under this Part for any taxation year;where an amount payable under a private health services plan relates to a period in the year throughout whicheach of one or more personsis employed on a full-time basis (other than on a temporary or seasonal basis) in the particular business or in another business carried on bythe individual (otherwise than as a member of a partnership),a partnership of which the individual is a majority-interest partner, ora corporation affiliated with the individual, andhas accumulated not less than three months of service in that employment since the person last became so employed, andthe 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 personwho carries on the particular business or is employed in a business described in clause (i)(A), andto 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;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)whereAis the number of days in the year that are included in the particular period,Bis the product obtained when $1,500 is multiplied by the number of persons each of whom is covered under the plan, andis the individual or the individual’s spouse or common-law partner, oris a member of the individual’s household and has attained the age of 18 years before the beginning of the particular period, andCis the product obtained when $750 is multiplied by the number of members of the individual’s household who, but for the fact that they have not attained the age of 18 years before the particular period began, would be included in computing the product under the description of B; andwhere 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.Equivalent coverageFor 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 whenthe 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 householdis multiplied bythe 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1999, c. 22, s. 10; 2000, c. 12, s. 142; 2013, c. 40, s. 12(E)
Borrowed money used to earn income from propertyWhereat 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), andthe amount of the borrowed money that was so used by the taxpayer immediately before that time exceeds the total ofwhere 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,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,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, andwhere 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.Borrowed money used to earn income from businessWhere 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: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 ofthe fair market value of the property at the time of disposition, andthe 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 propertyshall be deemed to have been used by the taxpayer immediately before the time of disposition to acquire the property;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;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; andthe 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.Deemed dispositionsFor the purpose of paragraph 20.1(2)(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;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,the taxpayer shall be deemed to have disposed of the property at that time, andthe 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; andwhere the taxpayer is a trust, subsections 104(4) to 104(5.2) do not apply.Amount payable for propertyWhere 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.Interest in partnershipFor 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.RefinancingsWhere 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,paragraphs 20.1(2)(a) to 20.1(2)(c) apply with respect to the borrowed money; andsubsection 20(3) does not apply with respect to the borrowed money.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1994, c. 21, s. 13; 2013, c. 34, s. 98
Interest — authorized foreign bank — interpretationThe following definitions apply in this section.branch advance of 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 statements of 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,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 the Bank Act, and accepted by the Superintendent, andif 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 the Bank 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 period of 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,none of which is longer than 31 days;the first of which commences at the beginning of the year and the last of which ends at the end of the year; andthat are, unless the Minister otherwise agrees in writing, consistent with the calculation periods designated for the bank’s preceding taxation year. (période de calcul)Formula elementsThe 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:Ais the amount of the bank’s assets at the end of the period;BAis the amount of the bank’s branch advances at the end of the period;IBAis the total of all amounts each of which is a reasonable amount on account of notional interest for the period, in respect of a branch advance, that would be deductible in computing the bank’s income for the year if it were interest payable by, and the advance were indebtedness of, the bank to another person and if this Act were read without reference to paragraph 18(1)(v) and this section;ILis the total of all amounts each of which is an amount on account of interest for the period in respect of a liability of the bank to another person or partnership that would be deductible in computing the bank’s income for the year if this Act were read without reference to paragraph 18(1)(v) and this section; andLis the amount of the bank’s liabilities to other persons and partnerships at the end of the period.Interest deductionIn 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,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 exceedingif 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 formulaIL + IBA × (0.95 × A - L)/BAandif 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 formulaIL × (0.95 × A)/Landin any other case, the total ofthe amount determined by the formulaIL + IBAandthe product ofthe 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)andthe average, based on daily observations, of the Bank of Canada bank rate for the period.Branch amountsOnly 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 determinethe amounts in subsection (2); andthe amounts in subsection (3) of an authorized foreign bank’s assets, liabilities to other persons and partnerships, and branch advances.Notional interestFor 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, ifthe 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;the advance were a loan by the bank to the borrower; andany 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 14
Weak currency debt — interpretationThe definitions in this subsection apply in this section.exchange date in 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 taxpayerin respect of borrowed money that is denominated in the final currency, the day that the debt is incurred or assumed by the taxpayer; andin 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)hedge in respect of a debt of a taxpayer that is at any time a weak currency debt means any agreement made by the taxpayerthat 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; andthat 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 debt of 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, whereany of the following applies, namely,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,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,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, orthe 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;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; andeither of the following applies, namely,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 ifthe 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, andinterest on the equivalent amount of debt referred to in clause (A) was payable at the commitment time, orin 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)Interest and gainNotwithstanding 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 definition specified financial institution in subsection 248(1)) that is at any time a weak currency debt: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;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; andthe 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.HedgesIn 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.Repayment of principalIf 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 definition weak currency debt in subsection (1), to have been a separate debt from the commitment time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 14
DefinitionsThe definitions in section 12.5 apply for the purposes of this section.Transition year income deductionThere 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.Transition year income inclusion reversalIf 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 formulaA × B/1825whereAis the amount included under subsection 12.5(2) in computing the insurer’s income for the transition year from that insurance business; andBis the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.Ceasing to carry on businessIf 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 formulaA – BwhereAis any amount included under subsection 12.5(2) in computing the insurer’s income from the discontinued business for its transition year; andBis the total of all amounts each of which is an amount deducted under subsection (3) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2009, c. 2, s. 8
Cost of borrowed moneyWhere 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,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; andthe 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.Borrowed money used for exploration or developmentWhere 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,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; andthe 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.Borrowing for depreciable propertyIn computing the income of a taxpayer for a particular taxation year, where the taxpayerin any preceding taxation yearmade 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, orwas, 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, andin 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.Borrowing for exploration, etc.In computing the income of a taxpayer for a particular taxation year, where the taxpayerin 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,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, andso elects in the taxpayer’s return of income for the particular year,the following rules apply: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, andthe 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.ReassessmentsNotwithstanding 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 21; 1994, c. 7, Sch. II, s. 16; 2001, c. 17, s. 15
Ceasing to carry on business
Sale of accounts receivableWhere 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: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;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;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; andeach 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.Statement by vendor and purchaserAn 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“22”; 1974-75-76, c. 26, s. 10
Sale of inventoryWhere, 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.Reference to property in inventoryA 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).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“23”; 1974-75-76, c. 26, s. 11; 1985, c. 45, s. 13
[Repealed, 2016, c. 12, s. 8]Business carried on by spouse or common-law partner or controlled corporationIf, 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 the Income Tax Regulations in respect of the business owned by the individual immediately before that time and that had value at that time, the following rules apply: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;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; andif 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),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, andthe 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.[Repealed, 2016, c. 12, s. 8][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 24; 1994, c. 7, Sch. II, s. 17, Sch. VIII, s. 10; 1995, c. 3, s. 8; 2000, c. 12, s. 142; 2001, c. 17, s. 16; 2016, c. 12, s. 8
[Repealed, 1996, c. 21, s. 6(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 24.1; 1996, c. 21, s. 6
Fiscal period of business disposed of by individualWhere 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.ElectionAn 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.Dispositions in extended fiscal periodIf 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).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 25; 1996, c. 21, s. 7; 2016, c. 12, s. 9
Special Cases
Banks — inclusions in incomeThere 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 ofthe 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,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,the amount, if any, by whichthe 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 yearexceedsthat 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, andthe 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.Banks — deductions from incomeIn computing the income for a taxation year of a bank, there may be deducted an amount not exceeding the total ofthat 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,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,that part of the amount, if any, by whichthe 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 1987exceedsthat part of the amount determined under subparagraph 26(2)(c)(i) that was a realized loss of the bank for that last taxation yearthat is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,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, andthat 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.Write-offs and recoveriesIn computing the income of a bank, the following rules apply: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; andany 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 of Minister’s rulesFor the purposes of this section, Minister’s rules means 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 the Bank Act for the purposes of subsections (1) and (2) of this section.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 26; 1994, c. 7, Sch. III, s. 14(F)
Application of Part I to Crown corporationThis Part applies to a federal Crown corporation as ifany 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; andany 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.PresumptionNotwithstanding 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.Transfers of land for dispositionWhere 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 27; 1998, c. 19, s. 82; 2001, c. 17, s. 17
Emissions allowancesNotwithstanding 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.Determination of cost of emissions allowancesIf 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 as newly 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,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; andthe 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)/CwhereAis the total cost to the taxpayer immediately before the particular time of the previously-acquired emissions allowances,Bis the total cost to the taxpayer (determined without reference to this section) of the newly-acquired emissions allowances, andCis the number of the identical emissions allowances owned by the taxpayer immediately after the particular time.Expense restrictionNotwithstanding 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 formulaA + B x CwhereAis the total cost of emissions allowances eitherused by the taxpayer to settle the particular emissions obligation in the year, orheld 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;Bis the amount determined by the formulaD − (E + F)whereDis the number of emissions allowances required to satisfy the particular emissions obligation in respect of the taxation year,Eis the number of emissions allowances used by the taxpayer to settle the particular emissions obligation in the year, andFis the number of emissions allowances 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; andCis the fair market value of an emissions allowance at the end of the taxation year that could be used to satisfy the particular emissions obligation in respect of the year.Income inclusion in following yearThere 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.Proceeds of dispositionIf 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.Loss restriction eventNotwithstanding 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2016, c. 12, s. 10
Farming or fishing businessFor 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 ofall amounts thatwere 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, andwere 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,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 whichthe fair market value at the end of the year of inventory owned by the taxpayer in connection with the business at that timeexceedsthe amount determined under paragraph 28(1)(c) for the year,with respect to a farming business, the amount, if any, that is the lesser ofthe taxpayer’s loss from the business for the year computed without reference to this paragraph and to paragraph 28(1)(b), andthe value of inventory purchased by the taxpayer that was owned by the taxpayer in connection with the business at the end of the year, andthe 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 ofall amounts, other than amounts described in section 30, thatwere 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,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, andin 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,all amounts, other than amounts described in section 30, thatwould be deductible in computing the income from the business for the year if that income were not computed in accordance with the cash method,are not deductible in computing the income from the business for any other taxation year, andwere paid in a preceding taxation year in the course of carrying on the business,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, andthe 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.Acquisition of inventoryWhere 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 deemedto have been paid by the taxpayer at that time and in the course of carrying on that business, andto 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.Valuation of inventoryFor 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 the Animal Pedigree Act, shall be valuedat 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; andat 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 ofits value determined under this subsection at the end of the preceding taxation year, andthe total amount paid on account of the purchase price of the animal during the year.Short fiscal periodFor 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 formula100 - (30 × A/365)whereAis the number of days in the taxation year.Where joint farming or fishing businessSubsection 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.Concurrence of MinisterWhere 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.Non-residentNotwithstanding 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 businessfor the year, if the taxpayer was non-resident throughout the year; andfor 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.[Repealed, 2001, c. 17, s. 18]Accounts receivableThere 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 28; 1994, c. 7, Sch. II, s. 18; 1995, c. 21, s. 7; 1998, c. 19, s. 83; 2001, c. 17, s. 18; 2013, c. 40, s. 13(E); 2014, c. 39, s. 7; 2016, c. 12, s. 11
Disposition of animal of basic herd classWhere 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: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 ofthe number of animals of that class so disposed of by the taxpayer in that year,1/10 of the taxpayer’s basic herd of that class on December 31, 1971, andthe taxpayer’s basic herd of that class of animal at the end of the immediately preceding taxation year; andthere shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained whenthe number determined under paragraph 29(1)(a) in respect of the taxpayer’s basic herd of that class for the yearis multiplied bythe 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.Reduction in basic herdWhere 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,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; andthere shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained whenthe number of animals comprising the excessis multiplied bythe 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.InterpretationFor the purposes of this section,a taxpayer’s basic herd of 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;class of animals means animals of a particular species, namely, cattle, horses, sheep or swine, that arepurebred 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, oranimals 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; andin 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,in the case of cattle, 2 years,in the case of horses, 3 years, andin 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1 “29”; 1985, c. 45, s. 126(F)
Improving land for farmingNotwithstanding 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“30”; 1988, c. 55, s. 15
Restricted farm lossIf 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 ofthe lesser ofthe 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$2,500 plus the lesser of1/2 of the amount by which the amount determined under subparagraph 31(1)(a)(i) exceeds $2,500, and$15,000, andthe amount, if any, by whichthe amount that would be determined under subparagraph (a)(i) if it were read without reference to “and before making any deduction under section 37”,exceedsthe amount determined under subparagraph 31(1)(a)(i).Restricted farm lossFor the purposes of this Act, a taxpayer’s “restricted farm loss” for a taxation year is the amount, if any, by whichthe amount determined under subparagraph 31(1)(a)(i) in respect of the taxpayer for the yearexceedsthe 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.Farming and manufacturing or processingSubsection (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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 31; 1995, c. 21, s. 8; 2013, c. 40, s. 14
Insurance agents and brokersIn 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 ofthe 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) thatthe number of days in the period provided for in the insurance contract that are after the end of the taxation yearis ofthe number of days in that period, andthe 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).Reserve to be includedThere 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.Additional reserveIn 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 exceedingwhere the year ends in 1991, 90%,where the year ends in 1992, 80%,where the year ends in 1993, 70%,where the year ends in 1994, 60%,where the year ends in 1995, 50%,where the year ends in 1996, 40%,where the year ends in 1997, 30%,where the year ends in 1998, 20%,where the year ends in 1999, 10%, andwhere the year ends after 1999, 0%of the amount, if any, by whichthe reserve that was deducted by the taxpayer under subsection 32(1) for the taxpayer’s last taxation year ending before 1991exceedsthe 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).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 32; 1994, c. 7, Sch. II, s. 19
Employee benefit plan deductionsWhere 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 yearsuch 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 whichthe total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding yearexceeds the total of all amounts each of which isan amount in respect of the plan deducted by the taxpayer in computing the taxpayer’s income for a preceding year, oran 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; andwhere 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 whichthe total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding yearexceeds the total of all amounts each of which isan 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, oran 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.AllocationEvery 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 ofall 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), andall payments made in the year out of or under the plan to the heirs or the legal representatives of their employees or former employeesexceeds the income of the plan for the year.Income of employee benefit planFor the purposes of subsection 32.1(2), the income of an employee benefit plan for a yearin 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); andin 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 exceedsin the case of an annuity, that part of the payment determined in prescribed manner to have been a return of capital, andin 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1980-81-82-83, c. 48, s. 14, c. 140, s. 15
[Repealed, 2013, c. 33, s. 4][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 33.1; 1994, c. 7, Sch. II, s. 20; 2001, c. 17, s. 19; 2010, c. 25, s. 7; 2013, c. 33, s. 4
[Repealed, 2017, c. 33, s. 7][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 34; 2017, c. 33, s. 7
Additional Business IncomeWherean individual (other than a graduated rate estate) carries on a business in a taxation year,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”), andthe 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/DwhereAis the total of the individual’s income from the business for the fiscal periods of the business that end in the year,Bis the lesser ofthe 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, andthe total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,Cis the number of days on which the individual carries on the business that are both in the year and in the particular period, andDis the number of days on which the individual carries on the business that are in fiscal periods of the business that end in the year.Additional income electionWherean 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”), andthe 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 ofthe amount designated in the individual’s return of income for the year, andthe amount determined by the formula(A - B) × C/DwhereAis the individual’s income from the business for the particular period,Bis the lesser ofthe 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, andthe 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,Cis the number of days on which the individual carries on the business that are both in the year and in the particular period, andDis the number of days on which the individual carries on the business that are in the particular period.DeductionThere 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.[Repealed, 2013, c. 40, s. 15]No additional income inclusionSubsections 34.1(1) and 34.1(2) do not apply in computing an individual’s income for a taxation year from a business wherethe individual dies or otherwise ceases to carry on the business in the year; orthe individual becomes a bankrupt in the calendar year in which the taxation year ends.Death of partner or proprietorWherean individual carries on a business in a taxation year,the individual dies in the year and after the end of a fiscal period of the business that ends in the year,another fiscal period of the business ends because of the individual’s death (in this subsection referred to as the “short period”), andthe individual’s legal representativeelects that this subsection apply in computing the individual’s income for the year, orfiles 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/DwhereAis the total of the individual’s income from the business for fiscal periods (other than the short period) of the business that end in the year,Bis the lesser ofthe 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, andthe total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,Cis the number of days in the short period, andDis the total number of days in fiscal periods of the business (other than the short period) that end in the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1996, c. 21, s. 8; 1998, c. 19, s. 84; 2013, c. 40, s. 15; 2014, c. 39, s. 8
DefinitionsThe definitions in this subsection apply in this section.adjusted stub period accrual of 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 if paragraph (b) does not apply, the amount determined by the formula[(A – B) × C/D] – (E + F)whereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for a fiscal period of the partnership that ends in the year (other than any amount for which a deduction is available under section 112 or 113),Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for a fiscal period of the partnership that ends in the year,Cis the number of days that are in both the year and the particular period,Dis the number of days in fiscal periods of the partnership that end in the year,Eis the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, andFis an amount designated by the corporation in its return of income for the year (other than an amount included in the description of E) and filed with the Minister on or before its filing-due date for the year; andif 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”),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)whereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the first fiscal period of the partnership that ends in the year (other than any amount for which a deduction is available under section 112 or 113),Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the first fiscal period of the partnership that ends in the year,Cis the number of days that are in both the year and the particular period,Dis the number of days in the first fiscal period of the partnership that ends in the year,Eis the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, andFis an amount designated by the corporation in its return of income for the year (other than an amount included in the description of E) and filed with the Minister on or before its filing-due date for the year, andwhere 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)whereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount for which a deduction is available under section 112 or 113),Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the eligible fiscal period,Cis the corporation’s eligible alignment income for the eligible fiscal period,Dis the number of days that are in both the year and the particular period,Eis the number of days that are in the eligible fiscal period that ends in the year,Fis the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, andGis an amount designated by the corporation in its return of income for the year (other than an amount included in the description of F) and filed with the Minister on or before its filing-due date for the year. (montant comptabilisé ajusté pour la période tampon)eligible alignment income, of a corporation, meansif 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,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 formulaA – B – CwhereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount for which a deduction is available under section 112 or 113),Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the eligible fiscal period, andCis, where an outlay or expense of the partnership is deemed by subsection 66(18) to be made or incurred by the corporation at the end of the eligible fiscal period, the total of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of sections 66.1, 66.2, 66.21 and 66.4 determined as if each such outlay or expense were the only amount relevant in determining the amount deductible, orwhere 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; andif 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 formulaA – B – CwhereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the eligible fiscal period, other than any amountfor which a deduction is available under section 112 or 113, orthat would be included in computing the income of the corporation for the year if there were no multi-tier alignment,Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of a partnership for the eligible fiscal period, andCis, where an outlay or expense of the partnership is deemed by subsection 66(18) to be made or incurred by the corporation at the end of the eligible fiscal period, the total of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of sections 66.1, 66.2, 66.21 and 66.4 determined as if each such outlay or expense were the only amount relevant in determining the amount deductible. (revenu d’alignement admissible)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:Canadian exploration expense in subsection 66.1(6);Canadian development expense in subsection 66.2(5);foreign resource expense in subsection 66.21(1); andCanadian oil and gas property expense in 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), the corporation’s eligible alignment income in respect of the partnership, andthe corporation’s adjusted stub period accrual in respect of the partnership forif 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, orin 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 the income or loss of the partnership; orthe 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, meansif the first taxation year for which the corporation has qualifying transitional income ends in 2011 and the particular year ends in2011, 100%,2012, 85%,2013, 65%,2014, 45%,2015, 25%, and2016, 0%;if the first taxation year for which the corporation has qualifying transitional income ends in 2012 and the particular year ends in2012, 100%,2013, 85%,2014, 65%,2015, 45%,2016, 25%, and2017, 0%; andif the first taxation year for which the corporation has qualifying transitional income ends in 2013 and the particular year ends in2013, 85%,2014, 65%,2015, 45%,2016, 25%, and2017, 0%. (pourcentage déterminé)Income inclusion — adjusted stub period accrualSubject 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 ifthe corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the year;another fiscal period of the partnership begins in the year and ends after the year; andat 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).Income inclusion — new partner designationSubject 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 ofthe amount, if any, designated by the corporation in its return of income for the taxation year, andthe amount determined by the formulaA × B/CwhereAis the corporation’s income from the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),Bis the number of days that are both in the corporation’s taxation year and the particular period, andCis the number of days in the particular period.Treatment in following yearIf 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),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; andthe 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.Character of amountsFor the purposes of this Act, the following rules apply:in computing the income of a corporation for a taxation year,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,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,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,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, andan 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;a corporation’s capital dividend account, as defined in subsection 89(1), is to be determined without reference to this section; andthe 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).Designation — qualified resource expenseA corporation may designate an amount for a taxation year in respect of a qualified resource expense under the definition adjusted stub period accrual in subsection (1) subject to the following rules: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 describedin paragraph (h) of the definition Canadian exploration expense in 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,in paragraph (f) of the definition Canadian development expense in 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,in paragraph (e) of the definition foreign resource expense in 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, andin paragraph (b) of the definition Canadian oil and gas property expense in 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; andthe 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 ifthe amounts referred to in paragraph (a) in respect of the partnership were the only amounts relevant in determining the maximum amount, andthe 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.No additional income — bankruptSubsections (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.Foreign affiliatesThis section does not apply for the purposes of computing, for a taxation year of a foreign affiliate of a corporation resident in Canada,the foreign accrual property income of the affiliate in respect of the corporation; andexcept 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 the Income Tax Regulations) of the affiliate in respect of the corporation.Special case — multi-tier alignmentIf 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.DesignationsOnce 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 definition adjusted stub period accrual in subsection (1), the designation cannot be amended or revoked.Transitional reserveIf a corporation has qualifying transitional income in respect of a partnership for a particular taxation year,the corporation may, in computing its income for the particular year, claim an amount, as a reserve, not exceeding the least ofthe specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership,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 ofthe amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, andthe 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), andthe amount determined by the formulaA – BwhereAis the corporation’s income for the particular year computed before deducting or claiming any amount under this subsection in respect of the partnership or under section 61.3 and 61.4, andBis the total of all amounts each of which is an amount deductible by the corporation for the year under section 112 or 113 in respect of a dividend received by the corporation after December 20, 2012; andthe portion of the amount claimed under paragraph (a) for the particular year that, because of subparagraph (5)(a)(iv), hasa character other than capital is deductible in computing the income of the corporation for the particular year, andthe character of capital is deemed to be an allowable capital loss of the corporation for the particular year from the disposition of property.Inclusion of prior year reserveSubject 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,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; andthe 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.No reserveNo claim shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnershipunless,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,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 partnershipat 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,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, andcontinuously since before March 22, 2011 until the end of the year;if at the end of the year or at any time in the following taxation year,the corporation’s income is exempt from tax under this Part, orthe 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; orif the year ends immediately before another taxation yearat the beginning of which the partnership no longer principally carries on the activities to which the reserve relates,in which the corporation becomes a bankrupt, orin which the corporation is dissolved or wound up (other than in circumstances to which subsection 88(1) applies).Deemed partnerA 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 ifthe corporation disposed of its interest to another corporation related to, or affiliated with, the corporation at the time of the disposition; anda corporation related to, or affiliated with, the corporation has the partnership interest referred to in paragraph (a) at the end of the taxation year.Computing qualifying transitional income — special rulesFor 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 ifthe partnership had deducted for the period the maximum amount deductible in respect of any expense, reserve, allowance or other amount;this Act were read without reference to paragraph 28(1)(b); andthe partnership had made an election under paragraph 34(a).Qualifying transition income adjustment  — conditions for applicationSubsection (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 yearthat 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 definition qualifying transitional income in subsection (1); andin which ends the fiscal period of the partnership that began in the taxation year referred to in paragraph (a).Adjustment of qualifying transitional incomeIf 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 ifthe descriptions in paragraph (a) and subparagraph (b)(i) of the definition adjusted stub period accrual in subsection (1) read as follows:Ais the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the particular period,Cis the number of days that are in both the year and the particular period,Dis the number of days in the particular period,Eis the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, andFis nil; andthe descriptions in subparagraph (b)(ii) of the definition adjusted stub period accrual in subsection (1) read as follows:Ais the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the partnership for the particular period (other than any amount for which a deduction is available under section 112 or 113),Bthe total of all amounts each of which is the corporation’s share of a loss or allowable capital loss — to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the description of A — of the partnership for the particular period,Cis nil,Dis the number of days that are in both the year and the particular period,Eis the number of days in the particular period,Fis the amount of the qualified resource expense in respect of the particular period of the partnership that is designated by the corporation for the year under subsection (6) in its return of income for the year filed with the Minister on or before its filing-due date for the year, andGis nil.Anti-avoidanceIf 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1996, c. 21, s. 8; 1998, c. 19, s. 85; 2011, c. 24, s. 3; 2013, c. 34, s. 58, c. 40, s. 16
DefinitionsThe 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 – EwhereAis the total of all amounts each of which is the corporation’s share of an income or taxable capital gain of the qualifying partnership for the last fiscal period of the partnership that began in the base year (other than any amount for which a deduction was available under section 112 or 113);Bis the total of all amounts each of which is the corporation’s share of a loss or allowable capital loss of the qualifying partnership for the last fiscal period of the partnership that began in the base year (to the extent that the total of all allowable capital losses included under this description in respect of all qualifying partnerships for the taxation year does not exceed the corporation’s share of all taxable capital gains of all qualifying partnerships for the taxation year);Cis the number of days that are in both the base year and the fiscal period;Dis the number of days in the fiscal period; andEis the amount of the qualified resource expense in respect of the qualifying partnership that was designated by the corporation for the base year under subsection 34.2(6) in its return of income for the base year filed with the Minister on or before its filing-due date for the base year. (montant comptabilisé réel pour la période tampon)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 × DwhereAis the amount that is the lesser ofthe actual stub period accrual in respect of the qualifying partnership, andthe 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 definition adjusted stub period accrual in subsection 34.2(1) were nil;Bis the amount included under subsection 34.2(2) in computing the corporation’s income for the base year in respect of the qualifying partnership;Cis the number of days in the period thatbegins on the day after the day on which the base year ends, andends on the day on which the taxation year ends; andDis the average daily rate of interest determined by reference to the rate of interest prescribed under paragraph 4301(a) of the Income Tax Regulations for the period referred to in the description of C. (rajustement pour revenu insuffisant)qualifying partnership, in respect of a corporation for a particular taxation year, means a partnershipa fiscal period of which began in a preceding taxation year and ends in the particular taxation year; andin respect of which the corporation was required to calculate an adjusted stub period accrual for the preceding taxation year. (société de personnes admissible)Application of subsection (3)Subsection (3) applies to a corporation for a taxation year ifthe corporation has designated an amount for the purpose of the description of F in paragraph (a) of the definition adjusted stub period accrual in 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; andwhere 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.Income shortfall adjustment — inclusionIf 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 formulaA + 0.50 × (A – B)whereAis the amount that is the total of all amounts each of which is the corporation’s income shortfall adjustment in respect of a qualifying partnership for the year; andBis the amount that is the lesser of A and the total of all amounts each of which is 25% of the positive amount, if any, that would be the income shortfall adjustment in respect of a qualifying partnership for the year if the value of the description of B in the definition income shortfall adjustment in subsection (1) were nil.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2011, c. 24, s. 3
Prospectors and grubstakersWhere a share of the capital stock of a corporationis 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, oris received in a taxation yearby 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, andas 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:notwithstanding any other provision of this Act, no amount in respect of the receipt of the share shall be includedin computing the income for the year of the individual or person, as the case may be, except as provided in paragraph 35(1)(d), orin computing at any time the amount to be determined for F in the definition cumulative Canadian development expense in subsection 66.2(5) in respect of the individual or person, as the case may be,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,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,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, andfor 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.DefinitionsIn this section,mining property meansa right, licence or privilege to prospect, explore, drill or mine for minerals in a mineral resource in Canada, orreal property or an immovable in Canada (other than depreciable property) the principal value of which depends on its mineral resource content; (bien minier)prospector means 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)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 35; 2001, c. 17, s. 20; 2013, c. 34, ss. 99, 100
[Repealed, 2013, c. 40, s. 17][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 36; 2013, c. 40, s. 17
Scientific research and experimental developmentWhere 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 ofthe 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 1973on scientific research and experimental development related to a business of the taxpayer, carried on in Canada and directly undertaken by the taxpayer,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,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,by payments toan approved association that undertakes scientific research and experimental development,an approved university, college, research institute or other similar institution,a corporation resident in Canada and exempt from tax under paragraph 149(1)(j), or[Repealed, 1996, c. 21, s. 9(4)]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, orwhere 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 Canadathe 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, andthat has the technological potential for application to other businesses of a type unrelated to that carried on by the taxpayer, and[Repealed, 2012, c. 31, s. 9]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),all amounts included by virtue of paragraph 12(1)(v), in computing the taxpayer’s income for any previous taxation year,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, andin 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 ofthe 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,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,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 toa prescribed proxy amount for a preceding taxation year,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, oran 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),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),the total of all amounts each of which is the lesser ofthe amount deducted under section 61.3 in computing the taxpayer’s income for a preceding taxation year, andthe 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,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, andif 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.Business of related corporationsNotwithstanding 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.Deemed time of capital expenditureFor 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.SR&ED in the exclusive economic zoneFor the purposes of this section and section 127 of this Act and Part XXIX of the Income Tax Regulations, an expenditure is deemed to have been made by a taxpayer in Canada if the expenditure ismade by the taxpayer in the course of a business carried on by the taxpayer in Canada; andmade for the prosecution of scientific research and experimental development in the exclusive economic zone of Canada, within the meaning of the Oceans Act, or in the airspace above that zone or the seabed or subsoil below that zone.Salary or wages for SR&ED outside CanadaFor the purposes of this section, section 127 and Part XXIX of the Income 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.Salary or wages outside Canada — limit determinedThe amount of a taxpayer’s expenditure for a taxation year determined under this subsection is the lesser ofthe 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,that was carried on outside Canada,that was directly undertaken by the taxpayer,that related to a business of the taxpayer, andthat was solely in support of scientific research and experimental development carried on in Canada by the taxpayer, andthe 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.Research outside CanadaIn 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 yearon 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); orby 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.Minister may obtain adviceThe 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.Where no deduction allowed under sectionNo 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.Where no deduction allowed under ss. 110.1 and 118.1Where, 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.Expenditures of a capital natureFor 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.Loss restriction eventIf 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 whichthe amount, if any, by whichthe total of all amounts each of which isan expenditure described in paragraph (1)(a) or (c) that was made by the taxpayer before that time,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, oran amount determined in respect of the taxpayer under paragraph (1)(c.1) for its taxation year that ended immediately before that timeexceeds the total of all amounts each of which isthe 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, orthe amount deducted under subsection (1) in computing the taxpayer’s income for its taxation year that ended immediately before that timeexceedsthe total ofif 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 ofthe taxpayer’s income for the year from the business before making any deduction under subsection (1), andif 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, andthe 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 ofthe amount determined under subparagraph (i) with respect to the taxpayer in respect of the business for that preceding year, andthe amount in respect of the business deducted under subsection (1) in computing the taxpayer’s income for that preceding year.DefinitionsIn this section,approved means 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)]InterpretationIn this section,references to expenditures on or in respect of scientific research and experimental developmentwhere the references occur in subsection 37(2), include onlyexpenditures 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, andexpenditures of a current nature that were directly attributable, as determined by regulation, to the prosecution of scientific research and experimental development, andwhere the references occur other than in subsection 37(2), include onlyexpenditures 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 isan 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, oran 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[Repealed, 2012, c. 31, s. 9]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[Repealed, 2012, c. 31, s. 9]an expenditure of a current nature for the prosecution of scientific research and experimental development in Canada directly undertaken on behalf of the taxpayer,[Repealed, 2012, c. 31, s. 9]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, orthe cost of materials consumed or transformed in the prosecution of scientific research and experimental development in Canada, or[Repealed, 2012, c. 31, s. 9]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;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; andreferences to expenditures of a current nature include any expenditure made by a taxpayer other than an expenditure made by the taxpayer forthe acquisition from a person or partnership of a property that is a capital property of the taxpayer, orthe use of, or the right to use, property that would be capital property of the taxpayer if it were owned by the taxpayer.Salary or wagesAn expenditure of a taxpayerdoes 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, andincludes, 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.Limitation re specified employeesFor 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 formulaA × B/365whereAis 5 times the Year’s Maximum Pensionable Earnings (as determined under section 18 of the Canada Pension Plan) for the calendar year in which the taxation year ends; andBis the number of days in the taxation year on which the employee is a specified employee of the taxpayer.Associated corporationsWherein 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,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, andthe 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.Agreement among associated corporationsWhere 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 formulaA × B/365whereAis 5 times the Year’s Maximum Pensionable Earnings (as determined under section 18 of the Canada Pension Plan) for the particular calendar year, andBis the lesser of 365 and the number of days in those taxation years on which the individual was a specified employee of one or more of the corporations,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.FilingAn agreement referred to in subsection 37(9.3) is deemed not to have been filed by a taxpayer unlessit is in prescribed form; andwhere the taxpayer is a corporation, it is accompanied bywhere its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, andwhere 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.Deemed corporationFor the purposes of subsections 37(9.2) and 37(9.3) and this subsection, eachindividual related to a particular corporation,partnership of which a majority-interest partner isan individual related to a particular corporation, ora corporation associated with a particular corporation, andlimited partnership of which a member whose liability as a member is not limited isan individual related to a particular corporation, ora corporation associated with a particular corporation,is deemed to be a corporation associated with the particularcorporation.Time for electionAny 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.Filing requirementA 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, containingprescribed information in respect of the expenditure; andclaim preparer information, as defined in subsection 162(5.3).Failure to fileSubject 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).Misclassified expendituresIf 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.Non-arm’s length contract — linked workFor the purposes of this section and sections 127 and 127.1, wherework 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, andthe 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.Look-through ruleFor 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.Reporting of certain paymentsIf 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 37; 1994, c. 7, Sch. II, s. 21, c. 8, s. 4; 1995, c. 1, s. 63, c. 3, s. 9, c. 21, s. 9; 1996, c. 21, s. 9; 1997, c. 25, ss. 6, 74; 1998, c. 19, ss. 5, 86; 1999, c. 22, s. 11; 2001, c. 17, s. 21; 2005, c. 30, s. 2; 2008, c. 28, s. 3; 2012, c. 31, s. 9; 2013, c. 34, s. 181, c. 40, s. 18; 2017, c. 33, s. 8
[Repealed, 1998, c. 19, s. 87(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 37.1; 1998, c. 19, s. 87
[Repealed, 1998, c. 19, s. 87(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 37.2; 1998, c. 19, s. 87
[Repealed, 1998, c. 19, s. 87(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 37.3; 1998, c. 19, s. 87
Taxable Capital Gains and Allowable Capital Losses
Taxable capital gain and allowable capital lossFor the purposes of this Act,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 taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero ifthe 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,the disposition is deemed by section 70 to have occurred and the property isa security described in subparagraph (i), andthe 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, orthe 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 taxpayerreceives no consideration on the exchange other than the security, andmakes a gift of the security to a qualified donee not more than 30 days after the exchange;a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero ifthe 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 definition total ecological gifts in subsection 118.1(1), orthe disposition is deemed by section 70 to have occurred and the property isdescribed in subparagraph (i), andthe 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 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 ofthat taxable capital gain determined without reference to this paragraph, and½ of the amount, if any, by whichthe total ofthe cost to the taxpayer of the partnership interest, andeach 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,exceedsthe adjusted cost base to the taxpayer of the partnership interest (determined without reference to subparagraphs 53(2)(c)(iv) and (v));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; anda 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 38; 1998, c. 19, s. 6; 2001, c. 17, s. 22; 2002, c. 9, s. 22; 2006, c. 4, s. 51; 2007, c. 35, s. 15; 2008, c. 28, s. 4; 2014, c. 39, s. 9; 2016, c. 12, s. 12
Tax-deferred transaction — flow-through sharesIf 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) applyif 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 formulaA × BwhereAis the amount by which the transferor’s exemption threshold in respect of the flow-through share class of property immediately before that time exceeds the capital gain, if any, of the transferor as a result of the transfer, andBis the proportion that the fair market value of the acquired property immediately before the transfer is of the fair market value of all property of the transferor immediately before the transfer that is included in the flow-through share class of property; andif 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)the particular shares are deemed to be flow-through shares of the transferor, andthere 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2011, c. 24, s. 4
Allocation of gain re certain giftsIf 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),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; andparagraph 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 34, s. 182
Meaning of capital gain and capital lossFor the purposes of this Act,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[Repealed, 2016, c. 12, s. 13]an object that the Canadian Cultural Property Export Review Board has determined meets the criterion set out in paragraph 29(3)(b) of the Cultural Property Export and Import Act ifthe 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, orthe 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,a Canadian resource property,a foreign resource property,a property if the disposition is a disposition to which subsection 142.4(4) or (5) or 142.5(1) applies,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,a timber resource property; oran interest of a beneficiary under a qualifying environmental trust;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 thandepreciable property, orproperty described in any of subparagraphs 39(1)(a)(ii) to (iii) and (v); anda 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 1977to which subsection 50(1) applies, orto a person with whom the taxpayer was dealing at arm’s lengthof any property that isa share of the capital stock of a small business corporation, ora 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 isa small business corporation,a bankrupt that was a small business corporation at the time it last became a bankrupt, ora corporation referred to in section 6 of the Winding-up and Restructuring 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 ofin 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,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 bythe taxpayer,where the taxpayer is an individual, the taxpayer’s spouse or common-law partner, ora trust of which the taxpayer or the taxpayer’s spouse or common-law partner was a beneficiaryas 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,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, andthe amount determined in respect of the taxpayer under subsection 39(9) or 39(10), as the case may be.Foreign currency dispositions by an individualIf, 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)subsection (1) does not apply to any of the particular gains or losses;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)whereAis the total of all the particular gains made by the individual in the year,Bis the total of all the particular losses sustained by the individual in the year, andCis $200; andthe 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)whereDis the total of all the particular losses sustained by the individual in the year,Eis the total of all the particular gains made by the individual in the year, andFis $200.Foreign exchange capital gains and lossesIf, 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)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; andthe 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.Deemed gain — parked obligationFor 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 the debtor) 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 toif 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; andin any other case, the fair market value of the debt obligation at the particular time.Parked obligationFor the purposes of subsection (2.01), a debt obligation owing by a debtor is a parked obligation at a particular time ifbothat 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, andat 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; andit 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).InterpretationFor the purposes of subsections (2.01) and (2.02),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; andparagraph 80.01(2)(b) applies for the purpose of determining whether a person has a significant interest in a corporation.Upstream loan — transitional set-offIf 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 reducedin the case of a capital gainif 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, orif 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; andin the case of a capital lossif 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, orif 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.Definition of qualifying entityFor purposes of subsections (2.1) and (2.3), qualifying entity meansin the case of a borrowing party that is a corporation,the borrowing party,a corporation resident in Canada of whichthe borrowing party is a subsidiary wholly-owned corporation, ora corporation described in this paragraph is a subsidiary wholly-owned corporation,a corporation resident in Canadaeach share of the capital stock of which is owned bythe borrowing party, ora corporation that is described in this subparagraph or subparagraph (ii), orall 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), ora partnership each member of which isa corporation described in any of subparagraphs (i) to (iii), oranother partnership described in this subparagraph; andin the case of a borrowing party that is a partnership,the borrowing party,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 a subsidiary wholly-owned corporation, as defined in subsection 87(1.4), of the parent,the parent, ora corporation resident in Canada that is a subsidiary wholly-owned corporation, as defined in subsection 87(1.4), of the parent, ora partnership each member of which is any ofthe borrowing party,a corporation described in subparagraph (ii), andanother partnership described in this subparagraph.Upstream loan — transitional set-off electionSubsection (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 bythe borrowing party;if the creditor is a creditor affiliate, each qualifying entity of which the creditor affiliate is a foreign affiliate; andif the creditor is a creditor partnership, each qualifying entity of which a member of the creditor partnership is a foreign affiliate.Gain in respect of purchase of bonds, etc., by issuerWhere 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,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, andthe 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.Election concerning disposition of Canadian securitiesExcept 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,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; andevery disposition by the taxpayer of any such Canadian security shall be deemed to be a disposition by the taxpayer of a capital property.Members of partnershipsFor the purpose of determining the income of a taxpayer who is a member of a partnership, subsections 39(4) and 39(5) apply as ifevery Canadian security owned by the partnership were owned by the taxpayer; andevery 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.ExceptionAn 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 isa trader or dealer in securities,a financial institution (as defined in subsection 142.2(1)),[Repealed, 1995, c. 21, s. 49]a corporation whose principal business is the lending of money or the purchasing of debt obligations or a combination thereof, ora non-resident,or any combination thereof.Definition of Canadian securityFor the purposes of this section, Canadian security means 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.Unused share-purchase tax creditThe 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.Unused scientific research and experimental development tax creditThe 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.Deduction from business investment lossIn 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 ofthe 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), andthe amount, if any, by which the total ofthe 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 thatended before 1988, orbegins after October 17, 2000,the total of all amounts each of which is3/2 of the amount deducted under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year thatended after 1987 and before 1990, orbegan after February 27, 2000 and ended before October 18, 2000, orthe 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, andthe 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, 2000exceedsthe 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 lossfrom the disposition of property in taxation years preceding the year, orfrom 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”.Idem, of a trustIn 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 ofthe 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), andthe amount, if any, by which the total ofthe 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 thatended before 1988, orbegins after October 17, 2000,the total of all amounts each of which is3/2 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 thatended after 1987 and before 1990, orbegan after February 27, 2000 and ended before October 18, 2000, orthe 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, andthe 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, 2000exceedsthe 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 lossfrom the disposition of property in taxation years preceding the year, orfrom 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”.Recovery of bad debtWhere 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.GuaranteesFor the purpose of paragraph 39(1)(c), wherean amount was paid by a taxpayer in respect of a debt of a corporation under an arrangement under which the taxpayer guaranteed the debt,the amount was paid to a person with whom the taxpayer was dealing at arm’s length, andthe corporation was a small business corporationat the time the debt was incurred, andat 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.Repayment of assistanceThe total of all amounts paid by a taxpayer in a taxation year each of which issuch 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, oran 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 39; 1994, c. 7, Sch. II, s. 22, Sch. VIII, s. 11, c. 21, s. 14; 1995, c. 3, s. 10, c. 21, ss. 10, 49; 1998, c. 19, s. 7; 2000, c. 12, s. 142; 2001, c. 17, ss. 23, 204; 2009, c. 2, s. 9; 2013, c. 34, s. 59; 2014, c. 39, s. 10; 2016, c. 12, s. 13; 2017, c. 33, s. 92019, c. 29, s. 42024, c. 17, s. 7
DefinitionsIn this section,exempt capital gains balance of an individual for a taxation year that ends before 2005 in respect of a flow-through entity means the amount determined by the formulaA - B - C - FwhereAisif the entity is a trust referred to in any of paragraphs (f) to (j) of the definition flow-through entity in this subsection, the amount determined under paragraph 110.6(19)(c) in respect of the individual’s interest or interests therein, andin any other case, the lesser of4/3 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, andthe amount that would be determined under subparagraph (i) ifthe amount designated in the election in respect of each interest or share were equal to the amount determined by the formulaD - EwhereDis the fair market value of the interest or share at the end of February 22, 1994, andEis the amount, if any, by which the amount designated in the election that was made in respect of the interest or share exceeds 11/10 of its fair market value at the end of February 22, 1994, andthis Act were read without reference to subsection 110.6(20),Bis the total of all amounts each of which is the amount by which the individual’s capital gain for a preceding taxation year, determined without reference to subsection 39.1(2), from the disposition of an interest in or a share of the capital stock of the entity was reduced under that subsection,Cisif the entity is a trust described in any of paragraphs (d) and (h) to (j) of the definition flow-through entity in this subsection, the total of3/2 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),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),the amount claimed by the individual under subparagraph 104(21.4)(a)(ii) or (21.7)(b)(ii) for a preceding taxation year, andtwice 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),if the entity is a partnership, the total of3/2 of the total ofthe 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), andthe 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),4/3 of the total ofthe 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), andthe 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),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 ofthe 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), andthe 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), andtwice the total ofthe 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), andthe 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), andin 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); andFisif the entity is a trust described in any of paragraphs (g) to (j) of the definition flow-through entity in 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, andin any other case, nil; (solde des gains en capital exonérés)flow-through entity meansan investment corporation,a mortgage investment corporation,a mutual fund corporation,a mutual fund trust,a partnership,a related segregated fund trust for the purpose of section 138.1,a trust governed by an employees profit sharing plan,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,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, anda 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)Reduction of capital gainWhere 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 formulaA - B - CwhereAis the exempt capital gains balance of the individual for the year in respect of the entity,Bisif 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,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, andin any other case, the amount, if any, claimed under subsection 39.1(6) by the individual for the year in respect of the entity, andCis the total of all reductions under this subsection in the individual’s capital gains otherwise determined for the year from the disposition of other interests in or shares of the capital stock of the entity.Reduction of taxable capital gainThe 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.Reduction in share of partnership’s taxable capital gainsAn 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 formulaA - BwhereAis 1/2 of the individual’s exempt capital gains balance for the year in respect of the partnership, andBis the total of amounts claimed by the individual under this subsection in respect of other taxable capital gains of the partnership for that fiscal period.[Repealed, 2016, c. 12, s. 14]Reduction of capital gainsThe 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.Nil exempt capital gains balanceNotwithstanding 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.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 3, s. 11; 1998, c. 19, s. 88; 2001, c. 17, s. 24; 2013, c. 34, s. 101; 2016, c. 12, s. 14
General rulesExcept as otherwise expressly provided in this Parta taxpayer’s gain for a taxation year from the disposition of any property is the amount, if any, by whichif 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, orif 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,exceedssubject to subsections (1.1) to (1.3), such amount as the taxpayer may claimin 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, andin any other case, in the taxpayer’s return of income under this Part for the year,as a deduction, not exceeding the lesser ofa 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, andan 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; anda taxpayer’s loss for a taxation year from the disposition of any property is,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, andin any other case, nil.Gift of non-qualifying securityA 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 whichwhere 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, andwhere 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 securityexceedsthe 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.Reserve — property disposed of to a childIn 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,the property was disposed of by the taxpayer to the taxpayer’s child,that child was resident in Canada immediately before the disposition, andthe property was immediately before the disposition,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,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)), ora qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)).[Repealed, 2014, c. 39, s. 11]Reserve — intergenerational business transfersIn computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) on a disposition of shares of the capital stock of a corporation resident in Canada to another corporation, that subparagraph is to be read as if the references to “1/5” and “4” were references to “1/10” and “9” respectively, if the conditions set out in subsection 84.1(2.31) or (2.32) are satisfied in respect of the disposition.Reserve — dispositions to employee ownership trustsIn computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a share of the capital stock of a qualifying business, that subparagraph is to be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if the shares of the qualifying business were disposed of by the taxpayer to an employee ownership trust, or to a Canadian-controlled private corporation that is controlled and wholly-owned by an employee ownership trust, pursuant to a qualifying business transfer.LimitationsNotwithstanding subsection 40(1),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 ifthe 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,the purchaser of the property sold is a corporation that, immediately after the sale,was controlled, directly or indirectly, in any manner whatever, by the taxpayer,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, orcontrolled the taxpayer, directly or indirectly, in any manner whatever, where the taxpayer is a corporation, orthe purchaser of the property sold is a partnership in which the taxpayer was, immediately after the sale, a majority-interest partner;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 formulaA - (A × B/C) - DwhereAis the amount that would, if this Act were read without reference to this paragraph and subsections 110.6(19) and 110.6(21), be the taxpayer’s gain therefrom for the year,Bisif 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, orif 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,Cis the number of taxation years that end after the acquisition date during which the taxpayer owned the property whether jointly with another person or otherwise, andDisif 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 ofthe 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 ifthis Act were read without reference to subsection 110.6(20), andthe 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 formulaE – 1.1FwhereEis the amount designated in the election that was made in respect of the property or the interest or right, andFis the fair market value of the property or the interest or right at the end of February 22, 1994, andthe 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, andin any other case, zero;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 isthe 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, orif 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$1,000, and$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;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;[Repealed, 1998, c. 19, s. 89]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;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)/BwhereAis the amount, if any, that would be the taxpayer’s loss from the disposition of the particular obligation if this Act were read without reference to this paragraph,Bis the total fair market value of all the consideration given by the person or partnership for the settlement or extinguishment of the particular obligation, andCis the total fair market value of the other obligations;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;a taxpayer’s gain or loss from the disposition ofa chance to win a prize or bet, ora 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 the Criminal Code is nil;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 isa superficial loss,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,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)), ora loss from the disposition of property toa 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, ora 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;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 whichall 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,exceedsall 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; andwhere 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 whichthe loss otherwise determinedexceedsthe amount, if any, by whichthe 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 shareexceedsthe 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.Deemed gain where amounts to be deducted from adjusted cost base exceed cost plus amounts to be added to adjusted cost baseWherethe 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 yearexceedsthe total ofthe 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, andall 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: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,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, andfor 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.Deemed gain for certain partnersWhere, 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,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; andfor 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.Amount of gainFor 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 formulaA - BwhereAis the total ofall 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, andif 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; andBis the total ofthe 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,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, andif 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 of professional partnershipIn this section, professional partnership means 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.Deemed loss for certain partnersIf 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 ofthe amount, if any, by whichthe 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 timeexceedsthe 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, andthe adjusted cost base to the taxpayer of the interest at that time.Artificial transactionsFor 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 andthe partnership or a person or partnership with whom the partnership does not deal at arm’s lengthmakes a loan to the member or to a person with whom the member does not deal at arm’s length, orpays 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, orthe 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.Specified member of a partnershipWhere 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.Limited partnerFor 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,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);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);one of the reasons for the existence of the member who owns the interestcan reasonably be considered to be to limit the liability of any person with respect to that interest, andcannot 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; orthere 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.Excluded interestFor 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.Amounts considered not to be substantialFor the purpose of subsection 40(3.15), an amount will be considered not to be substantial wherethe amountwas 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),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),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, orwas used to repay a loan, debt or contribution of capital that had been received or incurred in respect of any such expenditure;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;the amount was raised before 1995 pursuant to the terms of an offering memorandum distributed as part of an offering of securities wherethe 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,the memorandum was distributed before February 22, 1994,solicitations in respect of the sale of the securities contemplated by the memorandum were made before February 22, 1994,the sale of the securities was substantially in accordance with the memorandum, andthe 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); orthe 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.Whether carrying on business before February 22, 1994For 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.Deemed partnerFor 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 interestin circumstances in whichparagraph 70(6)(d.1) applied,where the member is an individual, the member’s spouse or common-law partner held the partnership interest on February 22, 1994,where the member is a trust, the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, andthe 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;in circumstances in whichparagraph 70(9.2)(c) applied,the member’s parent held the partnership interest on February 22, 1994, andthe partnership interest was, immediately before the parent’s death, an excluded interest;in circumstances in whichparagraph 70(9.3)(e) applied,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, andthe partnership interest was, immediately before the death of the spouse or common-law partner referred to in subsection 70(9.3), an excluded interest; orbefore 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).Non-application of subsection (3)Subsection 40(3) does not apply in any case where subsection 40(3.1) applies.Non-application of subsection (3.1)Subsection 40(3.1) does not apply in any case where paragraph 98(1)(c) or 98.1(1)(c) applies.Deemed capital gain under section 180.01If, 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.When subsection (3.4) appliesSubsection 40(3.4) applies whena 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 definition superficial loss in section 54;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; andat the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.Loss on certain propertiesIf this subsection applies because of subsection 40(3.3) to a disposition of a particular property,the transferor’s loss, if any, from the disposition is deemed to be nil, andthe 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,at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor ownsthe substituted property, ora property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,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,that is immediately before the transferor is subject to a loss restriction event,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, orif the transferor is a corporation,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 isa qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, ora designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, andfor 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).Deemed identical propertyFor the purposes of subsections 40(3.3) and 40(3.4),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;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 ifsection 51, 86 or 87 applies to the transaction, orthe following conditions are met, namely,section 85.1 applies to the transaction,subsection (3.4) applied to a prior disposition of the other share, andnone of the times described in any of subparagraphs (3.4)(b)(i) to (v) has occurred in respect of the prior disposition;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;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 dispositionthe 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,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, orthe 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 definition designated liquidation and dissolution in 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; andwhere 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.Loss on sharesIf 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),the taxpayer’s loss, if any, from the disposition is deemed to be nil; andin 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) thatthe fair market value, immediately after the disposition, of the shareis ofthe fair market value, immediately after the disposition, of all shares of the capital stock of the corporation owned by the taxpayer.Exception — estate loss carried backIf, 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.Losses of non-residentIf 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,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; andan amount on account ofeach taxable dividend received by the individual at a particular time described in paragraph (a), andeach 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.Disposal of principal residence to spouse or trust for spouseWhere 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,the individual shall be deemed to have owned the property throughout the period during which the taxpayer owned it;the property shall be deemed to have been the individual’s principal residencein 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, andin any case where subsection 73(1) is applicable, for any taxation year for which it was the taxpayer’s principal residence; andwhere 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.[Repealed, 1994, Sch. VIII, c. 7, s. 12]Principal residence — property owned at end of 1981Subject to subsection (6.1), if a property was owned by a taxpayer, whether jointly with another person or otherwise, at the end of 1981 and continuously from the beginning of 1982 until disposed of by the taxpayer, the amount of the gain determined under paragraph (2)(b) in respect of the disposition shall not exceed the amount, if any, by which the total ofthe taxpayer’s gain calculated in accordance with paragraph 40(2)(b) on the assumption that the taxpayer had disposed of the property on Dec ember 31, 1981 for proceeds of disposition equal to its fair market value on that date, andthe taxpayer’s gain calculated in accordance with paragraph 40(2)(b) on the assumption that that paragraph applies and thatthe taxpayer acquired the property on January 1, 1982 at a cost equal to its proceeds of disposition as determined under paragraph 40(6)(a), andthe description of B in paragraph 40(2)(b) is read without reference to “one plus”exceedsthe amount, if any, by which the fair market value of the property on December 31, 1981 exceeds the proceeds of disposition of the property determined without reference to this subsection.Principal residence — property owned at end of 2016If a trust owns property at the end of 2016, the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definition principal residence in section 54, the trust disposes of the property after 2016, the disposition is the trust’s first disposition of the property after 2016 and the trust owns the property, whether jointly with another person or otherwise, continuously from the beginning of 2017 until the disposition,subsection (6) does not apply to the disposition; andthe trust’s gain determined under paragraph (2)(b) in respect of the disposition is the amount, if any, determined by the formulaA + B − CwhereAis the trust’s gain calculated in accordance with paragraph (2)(b) on the assumption thatthe trust disposed of the property on December 31, 2016 for proceeds of disposition equal to its fair market value on that date, andparagraph (a) did not apply in respect of the disposition described in subparagraph (i),Bis the trust’s gain in respect of the disposition calculated in accordance with paragraph (2)(b) on the assumption thatthe description of B in that paragraph is read without reference to “one plus”, andthe trust acquired the property on January 1, 2017 at a cost equal to its fair market value on December 31, 2016, andCis the amount, if any, by which the fair market value of the property on December 31, 2016 exceeds the proceeds of disposition of the property determined without reference to this subsection.Property in satisfaction of interest in trustWhere property has been acquired by a taxpayer in satisfaction of all or any part of the taxpayer’s capital interest in a trust, in circumstances to which subsection 107(2) applies and subsection 107(4) does not apply, for the purposes of paragraph 40(2)(b) and the definition principal residence in section 54 the taxpayer shall be deemed to have owned the property continuously since the trust last acquired it.Effect of election under subsection 110.6(19)Where an election was made under subsection 110.6(19) in respect of a property of a taxpayer that was the taxpayer’s principal residence for the 1994 taxation year or that, in the taxpayer’s return of income for the taxation year in which the taxpayer disposes of the property or grants an option to acquire the property, is designated as the taxpayer’s principal residence, in determining, for the purposes of paragraph 40(2)(b) and subsections 40(4) to 40(7), the day on which the property was last acquired or reacquired by the taxpayer and the period throughout which the property was owned by the taxpayer this Act shall be read without reference to subsection 110.6(19).Application of s. 70(10)The definitions in subsection 70(10) apply to this section.Additions to taxable Canadian propertyIf a non-resident person disposes of a taxable Canadian propertythat the person last acquired before April 27, 1995,that would not be a taxable Canadian property immediately before the disposition if section 115 were read as it applied to dispositions that occurred on April 26, 1995, andthat would be a taxable Canadian property immediately before the disposition if section 115 were read as it applied to dispositions that occurred on January 1, 1996,the person’s gain or loss from the disposition is deemed to be the amount determined by the formulaA × B/CwhereAis the amount of the gain or loss determined without reference to this subsection;Bis the number of calendar months in the period that begins with May 1995 and ends with the calendar month that includes the time of the disposition; andCis the number of calendar months in the period that begins with the calendar month in which the person last acquired the property and ends with the calendar month that includes the time of the disposition.Application of subsection (11)Subsection (11) applies in computing at any particular time a taxpayer’s gain or loss (in this subsection and subsection (11) referred to as the “new gain” or “new loss”, as the case may be), in respect of any part (which in this subsection and subsection (11) is referred to as the “relevant part” and which may for greater certainty be the whole) of a foreign currency debt of the taxpayer, arising from a fluctuation in the value of the currency of the foreign currency debt (other than, for greater certainty, a gain or a capital loss that arises because of the application of subsection 111(12)), if at any time before the particular time the taxpayer realized a capital loss or gain in respect of the foreign currency debt because of subsection 111(12).Gain or loss on foreign currency debtIf this subsection applies, the new gain is the positive amount, or the new loss is the negative amount, as the case may be, determined by the formulaA + B – CwhereAisif the taxpayer would, but for any application of subsection 111(12), recognize a new gain, the amount of the new gain, determined without reference to this subsection, orif the taxpayer would, but for any application of subsection 111(12), recognize a new loss, the amount of the new loss, determined without reference to this subsection, multiplied by (–1);Bis the total of all amounts each of which is that portion of the amount of a capital loss realized by the taxpayer at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable tothe relevant part of the foreign currency debt at the particular time, orthe forgiven amount, if any, (as defined in subsection 80(1)) in respect of the foreign currency debt at the particular time; andCis the total of all amounts each of which is that portion of the amount of a gain realized by the taxpayer at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable tothe relevant part of the foreign currency debt at the particular time, orthe forgiven amount, if any, (as defined in subsection 80(1)) in respect of the foreign currency debt at the particular time.Donated flow-through sharesIf at any time a taxpayer disposes of one or more capital properties that are included in a flow-through share class of property and subparagraph 38(a.1)(i) or (iii) applies to the disposition (in this subsection referred to as the “actual disposition”), then the taxpayer is deemed to have a capital gain from a disposition at that time of another capital property equal to the lesser ofthe taxpayer’s exemption threshold at that time in respect of the flow-through share class of property, andthe total of all amounts each of which is a capital gain from the actual disposition (for greater certainty, calculated without reference to this subsection).Class 14.1 — transitional rulesSubsection (14) applies in respect of a disposition by a taxpayer of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the taxpayer ifthe property was an eligible capital property of the taxpayer immediately before January 1, 2017;the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before January 1, 2017 is greater than nil;the amount determined for B in that definition in respect of the business immediately before January 1, 2017 is nil; andno amount is included in the taxpayer’s income for a taxation year because of paragraph 13(38)(d).Class 14.1 — transitional rulesIf this subsection applies in respect of a disposition at any time by a taxpayer of a property, the taxpayer’s capital gain from the disposition is to be reduced by such amount as the taxpayer claims, not exceeding the amount by which2/3 of the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before 2017exceedsthe total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.Class 14.1 — transitional rulesSubsection (16) applies in respect of a disposition by an individual of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the individual ifthe property was an eligible capital property of the individual immediately before January 1, 2017; andthe individual’s exempt gains balance in respect of the business is greater than nil for the taxation year that includes January 1, 2017.Class 14.1 — transitional rulesIf this subsection applies in respect of a disposition at any time by an individual of a property, the individual’s capital gain from the disposition is to be reduced by such amount as the individual claims, not exceeding the amount by whichtwice the amount of the individual’s exempt gains balance in respect of the business for the taxation year that includes January 1, 2017exceedsthe total ofif paragraph 13(38)(d) applies in respect of the business for the individual’s taxation year that includes January 1, 2017, the amount determined for D in paragraph 14(1)(b) for the purposes of paragraph 13(38)(d), andthe total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 40; 1994, c. 7, Sch. II, s. 23, Sch. VIII, s. 12, c. 21, s. 15; 1995, c. 3, s. 12, c. 21, s. 11; 1998, c. 19, ss. 8, 89; 2000, c. 12, s. 142; 2001, c. 17, ss. 25, 205(E); 2005, c. 19, s. 13; 2007, c. 2, s. 4, c. 35, s. 103; 2008, c. 28, s. 5; 2009, c. 2, s. 10; 2010, c. 25, s. 8; 2011, c. 24, s. 5; 2013, c. 34, ss. 60, 102, 183, c. 40, s. 19; 2014, c. 39, s. 11; 2016, c. 12, s. 15; 2017, c. 33, s. 102022, c. 19, s. 42024, c. 15, s. 10
Taxable net gain from disposition of listed personal propertyFor the purposes of this Part, a taxpayer’s taxable net gain for a taxation year from dispositions of listed personal property is 1/2 of the amount determined under subsection 41(2) to be the taxpayer’s net gain for the year from dispositions of such property.Determination of net gainA taxpayer’s net gain for a taxation year from dispositions of listed personal property is an amount determined as follows:determine the amount, if any, by which the total of the taxpayer’s gains for the year from the disposition of listed personal property, other than property described in subparagraph 39(1)(a)(i.1), exceeds the total of the taxpayer’s losses for the year from dispositions of listed personal property, anddeduct from the amount determined under paragraph 41(2)(a) such portion as the taxpayer may claim of the taxpayer’s listed-personal-property losses for the 7 taxation years immediately preceding and the 3 taxation years immediately following the taxation year, except that for the purposes of this paragraphan amount in respect of a listed-personal-property loss is deductible for a taxation year only to the extent that it exceeds the total of amounts deducted under this paragraph in respect of that loss for preceding taxation years,no amount is deductible in respect of the listed-personal-property loss of any year until the deductible listed-personal-property losses for previous years have been deducted, andno amount is deductible in respect of listed-personal-property losses from the amount determined under paragraph 41(2)(a) for a taxation year except to the extent of the amount so determined for the year,and the remainder determined under paragraph 41(2)(b) is the taxpayer’s net gain for the year from dispositions of listed personal property.Definition of listed-personal-property lossIn this section, listed-personal-property loss of a taxpayer for a taxation year means the amount, if any, by which the total of the taxpayer’s losses for the year from dispositions of listed personal property exceeds the total of the taxpayer’s gains for the year from dispositions of listed personal property, other than property described in subparagraph 39(1)(a)(i.1).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 41; 2001, c. 17, s. 26
Dispositions subject to warrantyFor the purposes of this Subdivision,an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, andin any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; andan outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, andin any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.Meaning of specified dateIn subsection (1), specified date means,if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; andin any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 42; 2013, c. 34, s. 184
General rule for part dispositionsFor the purpose of computing a taxpayer’s gain or loss for a taxation year from the disposition of part of a property, the adjusted cost base to the taxpayer, immediately before the disposition, of that part is the portion of the adjusted cost base to the taxpayer at that time of the whole property that can reasonably be regarded as attributable to that part.Ecological giftsFor the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real or personal servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or servitude, as the case may be, is deemed to be equal to the amount determined by the formulaA × B/CwhereAis the adjusted cost base to the taxpayer of the land immediately before the disposition,Bis the amount determined under subsection 110.1(5) or 118.1(12) in respect of the disposition, andCis the fair market value of the land immediately before the disposition; andfor greater certainty, the cost to the taxpayer of the land shall be reduced at the time of the disposition by the amount determined under paragraph (a).Payments out of trust income, etc.Notwithstanding subsection (1), where part of a capital interest of a taxpayer in a trust would, but for paragraph (h) or (i) of the definition disposition in subsection 248(1), be disposed of solely because of the satisfaction of a right to enforce payment of an amount by the trust, no part of the adjusted cost base to the taxpayer of the taxpayer’s capital interest in the trust shall be allocated to that part of the capital interest.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 43; 2001, c. 17, s. 27; 2013, c. 34, s. 185; 2017, c. 33, s. 11
Life estates in real propertyNotwithstanding any other provision of this Act, if at any time a taxpayer disposes of a remainder interest in real property (except as a result of a transaction to which subsection 73(3) would otherwise apply or by way of a gift to a qualified donee) to a person or partnership and retains a life estate or an estate pur autre vie (in this section referred to as the “life estate”) in the property, the taxpayer is deemedto have disposed at that time of the life estate in the property for proceeds of disposition equal to its fair market value at that time; andto have reacquired the life estate immediately after that time at a cost equal to the proceeds of disposition referred to in paragraph 43.1(1)(a).IdemWhere, as a result of an individual’s death, a life estate to which subsection 43.1(1) applied is terminated,the holder of the life estate immediately before the death shall be deemed to have disposed of the life estate immediately before the death for proceeds of disposition equal to the adjusted cost base to that person of the life estate immediately before the death; andwhere a person who is the holder of the remainder interest in the real property immediately before the death was not dealing at arm’s length with the holder of the life estate, there shall, after the death, be added in computing the adjusted cost base to that person of the real property an amount equal to the lesser ofthe adjusted cost base of the life estate in the property immediately before the death, andthe amount, if any, by which the fair market value of the real property immediately after the death exceeds the adjusted cost base to that person of the remainder interest immediately before the death.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1994, c. 7, Sch. VIII, s. 13, c. 21, s. 16; 2011, c. 24, s. 6; 2013, c. 34, s. 103(F)
Exchanges of propertyWhere at any time in a taxation year (in this subsection referred to as the “initial year”) an amount has become receivable by a taxpayer as proceeds of disposition of a capital property that is not a share of the capital stock of a corporation (which capital property is in this section referred to as the taxpayer’s “former property”) that is eitherproperty the proceeds of disposition of which are described in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54, ora property that was, immediately before the disposition, a former business property of the taxpayer,and the taxpayer hasif the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, andin any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,acquired a capital property that is a replacement property for the taxpayer’s former property and the replacement property has not been disposed of by the taxpayer before the time the taxpayer disposed of the taxpayer’s former property, notwithstanding subsection 40(1), if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquired the replacement property,the gain for a particular taxation year from the disposition of the taxpayer’s former property shall be deemed to be the amount, if any, by whichwhere the particular year is the initial year, the lesser ofthe amount, if any, by which the proceeds of disposition of the former property exceedin the case of depreciable property, the lesser of the proceeds of disposition of the former property computed without reference to subsection 44(6) and the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, andin any other case, the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, andthe amount, if any, by which the proceeds of disposition of the former property exceed the total of the cost to the taxpayer, or in the case of depreciable property, the capital cost to the taxpayer, determined without reference to paragraph (f), of the taxpayer’s replacement property and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, orwhere the particular year is subsequent to the initial year, the amount, if any, claimed by the taxpayer under subparagraph 44(1)(e)(iii) in computing the taxpayer’s gain for the immediately preceding year from the disposition of the former property,exceedssubject to subsection 44(1.1), such amount as the taxpayer claims,in the case of an individual (other than a trust), in prescribed form filed with the taxpayer’s return of income under this Part for the particular year, andin any other case, in the taxpayer’s return of income under this Part for the particular year,as a deduction, not exceeding the lesser ofa reasonable amount as a reserve in respect of such of the proceeds of disposition of the former property that are payable to the taxpayer after the end of the particular year as can reasonably be regarded as a portion of the amount determined under subparagraph 44(1)(e)(i) in respect of the property, andan amount equal to the product obtained when 1/5 of the amount determined under subparagraph 44(1)(e)(i) in respect of the property is multiplied by the amount, if any, by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property, andthe cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer, of the taxpayer’s replacement property at any time after the time the taxpayer disposed of the taxpayer’s former property, shall be deemed to bethe cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer of the taxpayer’s replacement property otherwise determined,minusthe amount, if any, by which the amount determined under clause 44(1)(e)(i)(A) exceeds the amount determined under clause 44(1)(e)(i)(B).COVID — time not countedFor the purposes of paragraphs (1)(c) and (d), the period beginning on March 15, 2020 and ending on March 12, 2022 is not to be counted.Reserve — property disposed of to a childIn computing the amount that a taxpayer may claim under subparagraph (1)(e)(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.Time of disposition and of receipt of proceedsFor the purposes of this Act, the time at which a taxpayer has disposed of a property for which there are proceeds of disposition as described in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54, and the time at which an amount, in respect of those proceeds of disposition has become receivable by the taxpayer shall be deemed to be the earliest ofthe day the taxpayer has agreed to an amount as full compensation to the taxpayer for the property lost, destroyed, taken or sold,where a claim, suit, appeal or other proceeding has been taken before one or more tribunals or courts of competent jurisdiction, the day on which the taxpayer’s compensation for the property is finally determined by those tribunals or courts,where a claim, suit, appeal or other proceeding referred to in paragraph 44(2)(b) has not been taken before a tribunal or court of competent jurisdiction within two years of the loss, destruction or taking of the property, the day that is two years following the day of the loss, destruction or taking,the time at which the taxpayer is deemed by section 70 or paragraph 128.1(4)(b) to have disposed of the property, andwhere the taxpayer is a corporation other than a subsidiary corporation referred to in subsection 88(1), the time immediately before the winding-up of the corporation,and the taxpayer shall be deemed to have owned the property continuously until the time so determined.Where s. 70(3) does not applySubsection 70(3) does not apply to compensation referred to in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54 that has been transferred or distributed to beneficiaries or other persons beneficially interested in an estate or trust.Deemed electionWhere a former property of a taxpayer was a depreciable property of the taxpayerif the taxpayer has elected in respect of that property under subsection 44(1), the taxpayer shall be deemed to have elected in respect thereof under subsection 13(4); andif the taxpayer has elected in respect of that property under subsection 13(4), the taxpayer shall be deemed to have elected in respect thereof under subsection 44(1).Replacement propertyFor the purposes of this section, a particular capital property of a taxpayer is a replacement property for a former property of the taxpayer, ifit is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;it was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for a use that is the same as or similar to the use to which the taxpayer or a person related to the taxpayer put the former property;where the former property was used by the taxpayer or a person related to the taxpayer for the purpose of gaining or producing income from a business, the particular capital property was acquired for the purpose of gaining or producing income from that or a similar business or for use by a person related to the taxpayer for such a purpose;where the former property was a taxable Canadian property of the taxpayer, the particular capital property is a taxable Canadian property of the taxpayer; andwhere the former property was a taxable Canadian property (other than treaty-protected property) of the taxpayer, the particular capital property is a taxable Canadian property (other than treaty-protected property) of the taxpayer.Deemed proceeds of dispositionIf a taxpayer has disposed of property that was a former business property and was in part a building and in part the land (or an interest, or for civil law a right, therein) subjacent to, or immediately contiguous to and necessary for the use of, the building, for the purposes of this Subdivision, the amount if any, by whichthe proceeds of disposition of one such part determined without regard to this subsectionexceedthe adjusted cost base to the taxpayer of that partshall, to the extent that the taxpayer so elects in the taxpayer’s return of income under this Part for the year in which the taxpayer acquired a replacement property for the former business property, be deemed not to be proceeds of disposition of that part and to be proceeds of disposition of the other part.Where subpara. (1)(e)(iii) does not applySubparagraph 44(1)(e)(iii) does not apply to permit a taxpayer to claim any amount under that subparagraph in computing a gain for a taxation year wherethe 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;the person to whom the former property of the taxpayer was disposed of was a corporation that, immediately after the disposition,was controlled, directly or indirectly in any manner whatever, by the taxpayer,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, orcontrolled the taxpayer, directly or indirectly in any manner whatever, where the taxpayer is a corporation; orthe former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority-interest partner.Application of s. 70(10)The definitions in subsection 70(10) apply to this section.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 44; 1994, c. 7, Sch. II, s. 24, c. 21, s. 17; 1995, c. 21, s. 12; 1998, c. 19, s. 90; 1999, c. 22, s. 12; 2001, c. 17, s. 28; 2007, c. 2, s. 5; 2013, c. 34, ss. 104, 186, c. 40, s. 20(E)2023, c. 26, s. 9(F)2024, c. 17, s. 8
DefinitionsThe definitions in this subsection apply in this section.ACB reduction of an individual in respect of a replacement share of the individual in respect of a qualifying disposition of the individual means the amount determined by the formulaD × (E/F)whereDis the permitted deferral of the individual in respect of the qualifying disposition;Eis the cost to the individual of the replacement share; andFis the cost to the individual of all the replacement shares of the individual in respect of the qualifying disposition. (réduction du prix de base rajusté)active business corporation at any time means, subject to subsection (10), a corporation that is, at that time, a taxable Canadian corporation all or substantially all of the fair market value of the assets of which at that time is attributable to assets of the corporation that areassets used principally in an active business carried on by the corporation or by an active business corporation that is related to the corporation;shares issued by or debt owing by other active business corporations that are related to the corporation; ora combination of assets described in paragraphs (a) and (b). (société exploitant activement une entreprise)carrying value of the assets of a corporation at any time means the amount at which the assets of the corporation would be valued for the purpose of the corporation’s balance sheet as of that time if that balance sheet were prepared in accordance with generally accepted accounting principles used in Canada at that time, except that an asset of a corporation that is a share or debt issued by a related corporation is deemed to have a carrying value of nil. (valeur comptable)common share means a share prescribed for the purpose of paragraph 110(1)(d). (action ordinaire)eligible pooling arrangement in respect of an individual means an agreement in writing made between the individual and another person or partnership (which other person or partnership is referred to in this definition and subsection (3) as the “investment manager”) where the agreement provides forthe transfer of funds or other property by the individual to the investment manager for the purpose of making investments on behalf of the individual;the purchase of eligible small business corporation shares with those funds, or the proceeds of a disposition of the other property, within 60 days after receipt of those funds or the other property by the investment manager; andthe provision of a statement of account to the individual by the investment manager at the end of each month that ends after the transfer disclosing the details of the investment portfolio held by the investment manager on behalf of the individual at the end of that month and the details of the transactions made by the investment manager on behalf of the individual during the month. (arrangement admissible de mis en commun)eligible small business corporation at any time means, subject to subsection (10), a corporation that, at that time, is a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which at that time is attributable to assets of the corporation that areassets used principally in an active business carried on primarily in Canada by the corporation or by an eligible small business corporation that is related to the corporation;shares issued by or debt owing by other eligible small business corporations that are related to the corporation; ora combination of assets described in paragraphs (a) and (b). (société admissible exploitant une petite entreprise)eligible small business corporation share of an individual means a common share issued by a corporation to the individual ifat the time the share was issued, the corporation was an eligible small business corporation; andimmediately before and after the share was issued, the total carrying value of the assets of the corporation and corporations related to it did not exceed $50,000,000. (action déterminée de petite entreprise)permitted deferral of an individual in respect of a qualifying disposition of the individual means the amount determined by the formula(G/H) × IwhereGis the lesser of the individual’s proceeds of disposition from the qualifying disposition and the total of all amounts each of which is the cost to the individual of a replacement share in respect of the qualifying disposition;His the individual’s proceeds of disposition from the qualifying disposition; andIis the individual’s capital gain from the qualifying disposition. (montant de report autorisé)qualifying cost[Repealed, 2003, c. 15, s. 70(1)]qualifying disposition of an individual (other than a trust) means, subject to subsection (9), a disposition of shares of the capital stock of a corporation where each such share disposed of wasan eligible small business corporation share of the individual;throughout the period during which the individual owned the share, a common share of an active business corporation; andthroughout the 185-day period that ended immediately before the disposition of the share, owned by the individual. (disposition admissible)qualifying portion of a capital gain[Repealed, 2003, c. 15, s. 70(1)]qualifying portion of the proceeds of disposition[Repealed, 2003, c. 15, s. 70(1)]replacement share of an individual in respect of a qualifying disposition of the individual in a taxation year means an eligible small business corporation share of the individual that isacquired by the individual in the year or within 120 days after the end of the year; anddesignated by the individual in the individual’s return of income for the year to be a replacement share in respect of the qualifying disposition. (action de remplacement)Capital gain deferralWhere an individual has made a qualifying disposition in a taxation year,the individual’s capital gain for the year from the qualifying disposition is deemed to be the amount by which the individual’s capital gain for the year from the qualifying disposition, determined without reference to this section, exceeds the individual’s permitted deferral in respect of the qualifying disposition;in computing the adjusted cost base to the individual of a replacement share of the individual in respect of the qualifying disposition at any time after its acquisition, there shall be deducted the amount of the ACB reduction of the individual in respect of the replacement share; andwhere the qualifying disposition was a disposition of a share that was taxable Canadian property of the individual, the replacement share of the individual in respect of the qualifying disposition is deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the individual.Special rule — re eligible pooling arrangementsExcept for the purpose of the definition eligible pooling arrangement in subsection (1), any transaction entered into by an investment manager under an eligible pooling arrangement on behalf of an individual is deemed to be a transaction of the individual and not a transaction of the investment manager.Special rule — re acquisitions on deathFor the purpose of this section, a share of the capital stock of a corporation, acquired by an individual as a consequence of the death of a person who is the individual’s spouse, common-law partner or parent, is deemed to be a share that was acquired by the individual at the time it was acquired by that person and owned by the individual throughout the period that it was owned by that person, ifwhere the person was the spouse or common-law partner of the individual, the share was an eligible small business share of the person and subsection 70(6) applied to the individual in respect of the share; orwhere the person was the individual’s parent, the share was an eligible small business share of the parent and subsection 70(9.2) applied to the individual in respect of the share.Special rule — re breakdown of relationshipsFor the purpose of this section, a share of the capital stock of a corporation, acquired by an individual from a person who was the individual’s former spouse or common-law partner as a consequence of the settlement of rights arising out of their marriage or common-law partnership, is deemed to be a share that was acquired by the individual at the time it was acquired by that person and owned by the individual throughout the period that it was owned by that person if the share was an eligible small business share of the person and subsection 73(1) applied to the individual in respect of the share.Special rule — re eligible small business corporation share exchangesFor the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the “exchanged shares”), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual ifsection 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; andthe individual’s total proceeds of disposition of the exchanged shares was equal to the total of all amounts each of which was the individual’s adjusted cost base of an exchanged share immediately before the disposition.Special rule — re active business corporation share exchangesFor the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the “exchanged shares”), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, ifsection 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;the total of the individual’s proceeds of disposition in respect of the disposition of the exchanged shares was equal to the total of the individual’s adjusted cost bases immediately before the disposition of such shares; andthe disposition of the exchanged shares was a qualifying disposition of the individual.Special rule — re carrying on an active businessFor the purpose of the definitions in subsection (1), a property held at any particular time by a corporation that would, if this Act were read without reference to this subsection, be considered to carry on an active business at that time, is deemed to be used or held by the corporation in the course of carrying on that active business if the property (or other property for which the property is substituted property) was acquired by the corporation, at any time in the 36-month period ending at the particular time, because the corporationissued a debt or a share of a class of its capital stock in order to acquire money for the purpose of acquiring property to be used in or held in the course of, or making expenditures for the purpose of, earning income from an active business carried on by it;disposed of property used or held by it in the course of carrying on an active business in order to acquire money for the purpose of acquiring property to be used in or held in the course of, or making expenditures for the purpose of, earning income from an active business carried on by it; oraccumulated income derived from an active business carried on by it in order to acquire property to be used in or held in the course of, or to make expenditures for the purpose of, earning income from an active business carried on by it.Special rule — re qualifying dispositionA disposition of a common share of an active business corporation (in this subsection referred to as the “subject share”) by an individual that, but for this subsection, would be a qualifying disposition of the individual is deemed not to be a qualifying disposition of the individual unless the active business of the corporation referred to in paragraph (a) of the definition active business corporation in subsection (1) was carried on primarily in Canadaat all times in the period that began at the time the individual last acquired the subject share and ended at the time of disposition, if that period is less than 730 days; orin any other case, for at least 730 days in the period referred to in paragraph (a).Special rule — re exceptionsFor the purpose of this section, an eligible small business corporation and an active business corporation at any time do not include a corporation that is, at that time,a professional corporation;a specified financial institution;a corporation the principal business of which is the leasing, rental, development or sale, or any combination of those activities, of real or immovable property owned by it; ora corporation more than 50% of the fair market value of the property of which (net of debts incurred to acquire the property) is attributable to real or immovable property.Determination ruleIn determining whether a share owned by an individual is an eligible small business corporation share of the individual, this Act shall be read without reference to section 48.1.Anti-avoidance ruleThe permitted deferral of an individual in respect of a qualifying disposition of shares issued by a corporation (in this subsection referred to as “new shares”) is deemed to be nil wherethe new shares (or shares for which the new shares are substituted property) were issued to the individual or a person related to the individual as part of a series of transactions or events in whichshares of the capital stock of a corporation (in this subsection referred to as the “old shares”) were disposed of by the individual or a person related to the individual, orthe paid-up capital of old shares or the adjusted cost base to the individual or to a person related to the individual of the old shares was reduced;the new shares (or shares for which the new shares are substituted property) wereissued by the corporation that issued the old shares,issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm’s length withthe corporation that issued the old shares, orthe individual, orissued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; andit is reasonable to conclude that one of the main reasons for the series of transactions or events or a transaction in the series was to permit the individual, persons related to the individual, or the individual and persons related to the individual to become eligible to deduct under subsection (2) permitted deferrals in respect of qualifying dispositions of new shares (or shares substituted for the new shares) the total of which would exceed the total that those persons would have been eligible to deduct under subsection (2) in respect of permitted deferrals in respect of qualifying dispositions of old shares.Order of disposition of sharesFor the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 29; 2003, c. 15, s. 70; 2010, c. 12, s. 2; 2013, c. 34, ss. 105, 187
Property with more than one useFor the purposes of this Subdivision the following rules apply:where a taxpayer,having acquired property for some other purpose, has commenced at a later time to use it for the purpose of gaining or producing income, orhaving acquired property for the purpose of gaining or producing income, has commenced at a later time to use it for some other purpose,the taxpayer shall be deemed to havedisposed of it at that later time for proceeds equal to its fair market value at that later time, andimmediately thereafter reacquired it at a cost equal to that fair market value;where property has, since it was acquired by a taxpayer, been regularly used in part for the purpose of gaining or producing income and in part for some other purpose, the taxpayer shall be deemed to have acquired, for that other purpose, the proportion of the property that the use regularly made of the property for that other purpose is of the whole use regularly made of the property at a cost to the taxpayer equal to the same proportion of the cost to the taxpayer of the whole property, and, if the property has, in such a case, been disposed of, the proceeds of disposition of the proportion of the property deemed to have been acquired for that other purpose shall be deemed to be the same proportion of the proceeds of disposition of the whole property;where, at any time after a taxpayer has acquired property, there has been a change in the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes,if the use regularly made of the property for those other purposes has increased, the taxpayer shall be deemed to havedisposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, andimmediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(i)(A), andif the use regularly made of the property for those other purposes has decreased, the taxpayer shall be deemed to havedisposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the decrease in use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, andimmediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(ii)(A); andin applying this subsection in respect of a non-resident taxpayer, a reference to “gaining or producing income” shall be read as a reference to “gaining or producing income from a source in Canada”.Election where change of useFor the purposes of this Subdivision and section 13, if a taxpayer elects in respect of any property of the taxpayer in the taxpayer’s return of income for a taxation year under this Part,if subparagraph (1)(a)(i) or paragraph 13(7)(b) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have begun to use the property for the purpose of gaining or producing income;if subparagraph (1)(c)(ii) or 13(7)(d)(i) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have increased the use regularly made of the property for the purpose of gaining or producing income relative to the use regularly made of the property for other purposes; andif the taxpayer rescinds the election in respect of the property in the taxpayer’s return of income under this Part for a subsequent taxation year,if paragraph (a) applied to the taxpayer in the taxation year, the taxpayer is deemed to have begun to use the property for the purpose of gaining or producing income on the first day of the subsequent taxation year, andif paragraph (b) applied to the taxpayer in the taxation year, the taxpayer is deemed to have increased the use regularly made of the property for the purpose of gaining or producing income on the first day of the subsequent taxation year by the amount that would have been the increase in the taxation year if the election had not been made.Election concerning principal residenceIf at any time a property that was acquired by a taxpayer for the purpose of gaining or producing income, or that was acquired in part for that purpose, ceases in whole or in part to be used for that purpose and becomes, or becomes part of, the principal residence of the taxpayer, paragraphs (1)(a) and (c) shall not apply to deem the taxpayer to have disposed of the property at that time and to have reacquired it immediately thereafter if the taxpayer so elects by notifying the Minister in writing on or before the earlier ofthe day that is 90 days after a demand by the Minister for an election under this subsection is sent to the taxpayer, andthe taxpayer’s filing-due date for the taxation year in which the property is actually disposed of by the taxpayer.Where election cannot be madeNotwithstanding subsection 45(3), an election described in that subsection shall be deemed not to have been made in respect of a change in use of property if any deduction in respect of the property has been allowed for any taxation year ending after 1984 and on or before the change in use under regulations made under paragraph 20(1)(a) to the taxpayer, the taxpayer’s spouse or common-law partner or a trust under which the taxpayer or the taxpayer’s spouse or common-law partner is a beneficiary.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 45; 1994, c. 7, Sch. II, s. 25, c. 21, s. 18; 1996, c. 21, s. 10; 2000, c. 12, s. 142; 2001, c. 17, s. 302021, c. 23, s. 6
Personal-use propertyWhere a taxpayer has disposed of a personal-use property (other than an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) of the taxpayer, for the purposes of this Subdivisionthe adjusted cost base to the taxpayer of the property immediately before the disposition shall be deemed to be the greater of $1,000 and the amount otherwise determined to be its adjusted cost base to the taxpayer at that time; andthe taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of $1,000 and the taxpayer’s proceeds of disposition of the property otherwise determined.Where part only of property disposed ofWhere a taxpayer has disposed of part of a personal-use property (other than a part of an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) owned by the taxpayer and has retained another part of the property, for the purposes of this Subdivisionthe adjusted cost base to the taxpayer, immediately before the disposition, of the part so disposed of shall be deemed to be the greater ofthe adjusted cost base to the taxpayer at that time of that part otherwise determined, andthat proportion of $1,000 that the amount determined under subparagraph 46(2)(a)(i) is of the adjusted cost base to the taxpayer at that time of the whole property; andthe proceeds of disposition of the part so disposed of shall be deemed to be the greater ofthe proceeds of disposition of that part otherwise determined, andthe amount determined under subparagraph 46(2)(a)(ii).Properties ordinarily disposed of as a setFor the purposes of this Subdivision, where a number of personal-use personal-use properties of a taxpayer that would, if the properties were disposed of, ordinarily be disposed of in one disposition as a set,have been disposed of by more than one disposition so that all of the properties have been acquired by one person or by a group of persons not dealing with each other at arm’s length, andhad, immediately before the first disposition referred to in paragraph 46(3)(a), a total fair market value greater than $1,000,the properties shall be deemed to be a single personal-use property and each such disposition shall be deemed to be a disposition of a part of that property.Decrease in value of personal-use property of corporation, etc.Where it may reasonably be regarded that, by reason of a decrease in the fair market value of any personal-use property of a corporation, partnership or trust,a taxpayer’s gain, if any, from the disposition of a share of the capital stock of a corporation, an interest in a trust or an interest in a partnership has become a loss, or is less than it would have been if the decrease had not occurred, ora taxpayer’s loss, if any, from the disposition of a share or interest described in paragraph 46(4)(a) is greater than it would have been if the decrease had not occurred,the amount of the gain or loss, as the case may be, shall be deemed to be the amount that it would have been but for the decrease.Excluded propertyFor the purpose of this section, excluded property of a taxpayer means property acquired by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, in circumstances in which it is reasonable to conclude that the acquisition of the property relates to an arrangement, plan or scheme that is promoted by another person or partnership and under which it is reasonable to conclude that the property will be the subject of a gift to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 46; 2001, c. 17, s. 31
Identical propertiesWhere at any particular time after 1971 a taxpayer who owns one property that was or two or more identical properties each of which was, as the case may be, acquired by the taxpayer after 1971, acquires one or more other properties (in this subsection referred to as “newly-acquired properties”) each of which is identical to each such previously-acquired property, for the purposes of computing, at any subsequent time, the adjusted cost base of the taxpayer of each such identical property,the taxpayer shall be deemed to have disposed of each such previously-acquired property immediately before the particular time for proceeds equal to its adjusted cost base to the taxpayer immediately before the particular time;the taxpayer shall be deemed to have acquired the identical property at the particular time at a cost equal to the quotient obtained whenthe total of the adjusted cost bases to the taxpayer immediately before the particular time of the previously-acquired properties, and the cost to the taxpayer (determined without reference to this section) of the newly-acquired propertiesis divided bythe number of the identical properties owned by the taxpayer immediately after the particular time;there shall be deducted, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property, the amount determined by the formulaA/BwhereAis the total of all amounts deducted under paragraph 53(2)(g.1) in computing immediately before the particular time the adjusted cost base to the taxpayer of the previously-acquired properties, andBis the number of such identical properties owned by the taxpayer immediately after the particular time or, where subsection 47(2) applies, the quotient determined under that subsection in respect of the acquisition; andthere shall be added, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property the amount determined under paragraph 47(1)(c) in respect of the identical property.Where identical properties are bonds, etc.For the purposes of subsection 47(1), where a group of identical properties referred to in that subsection is a group of identical bonds, debentures, bills, notes or similar obligations issued by a debtor, subparagraph 47(1)(b)(ii) shall be read as follows:the quotient obtained when the total of the principal amounts of all such identical properties owned by the taxpayer immediately after the particular time is divided by the principal amount of the identical property.”Securities acquired by employeeFor the purpose of subsection (1), a security (within the meaning assigned by subsection 7(7)) acquired by a taxpayer after February 27, 2000 is deemed not to be identical to any other security acquired by the taxpayer ifthe security is acquired in circumstances to which any of subsections 7(1.1), (1.5) or (8) or 147(10.1) applies; orthe security is a security to which subsection 7(1.31) applies.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 47; 1995, c. 21, s 13; 2001, c. 17, s. 32
Indexed Security Investment Plans
Application of s. 47.1 of R.S.C., 1952, c. 148Words and expressions used in subsections 47.1(27) and 47.1(28) have the meanings assigned to them by subsections 47.1(1) to (26) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as the latter subsections read on July 1, 1986 and in so far as they are not inconsistent with subsections 47.1(27) and 47.1(28).Capital losses in 1986Notwithstanding any other provision of this Act, where paragraph 47.1(10)(f) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that paragraph read on January 1, 1986, applied in respect of the termination before 1986 of an indexed security investment plan under which a taxpayer was a participant, any amount that would have been deemed under that paragraph to be a capital loss of the taxpayer from the Plan for the 1986 or a subsequent taxation year shall be deemed to be a capital loss of the taxpayer for the 1986 taxation year from the disposition of property in 1986.Transition for 1986Where a taxpayer was a participant under a Plan on January 1, 1986, the following rules apply:each indexed security owned under the Plan by the taxpayer on that date shall be deemed to have been disposed of under the Plan on that date for proceeds of disposition determined by the formulaA × B/CwhereAis the indexing base of the Plan on that date determined as if subparagraph 47.1(3)(a)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, were read as “the fair market value of all indexed securities owned by the taxpayer under the Plan at the end of the preceding taxation year”,Bis the fair market value of the security on that date, andCis the fair market value of all indexed securities owned under the Plan by the taxpayer on that date;each indexed security deemed under paragraph 47.1(28)(a) to have been disposed of under the Plan shall be deemed to have been reacquired outside the Plan by the taxpayer immediately after that date at a cost equal to the amount deemed under paragraph 47.1(28)(a) to be the proceeds of the disposition of that security;each put or call option referred to in clause 47.1(4)(a)(iv)(B) or (C) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that clause read on January 1, 1986, outstanding under the Plan on that date shall be deemed to have been closed out under the Plan on that date at a cost equal to the amount that the taxpayer would have had to pay on that date if the taxpayer had actually closed out the option on a prescribed stock exchange in Canada on that date;each put or call option deemed under paragraph 47.1(28)(c) to have been closed out shall be deemed to be written outside the Plan immediately after that date for proceeds equal to the amount deemed under paragraph 47.1(28)(c) to be the cost at which the option was closed out; andfor greater certainty, the taxpayer’s indexed gain or loss, as the case may be, for the 1986 taxation year from the Plan and unindexed gain or loss, as the case may be, for that year from the Plan shall be nil.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1984, c. 1, s. 17; 1985, c. 45, ss. 19, 126(F); 1986, c. 6, s. 20, c. 55, s. 7
[Repealed, 1994, c. 21, s. 19(1)][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 48; 1994, c. 21, s. 19
Gain when small business corporation becomes publicWhereat any time in a taxation year an individual owns capital property that is a share of a class of the capital stock of a corporation that,at that time, is a small business corporation, andimmediately after that time, ceases to be a small business corporation because a class of its or another corporation’s shares is listed on a designated stock exchange, andthe individual elects in prescribed form to have this section apply,the individual is deemed, except for the purposes of sections 7 and 35, paragraph 110(1)(d.1) and subsections 120.4(4) and (5),to have disposed of the share at that time for proceeds of disposition equal to the greater ofthe adjusted cost base to the individual of the share at that time, andthe lesser of the fair market value of the share at that time and such amount as is designated in the prescribed form by the individual in respect of the share, andto have reacquired the share immediately after that time at a cost equal to those proceeds of disposition.Time for electionAn election made under subsection 48.1(1) by an individual for a taxation year shall be made on or before the individual’s filing-due date for the year.Late filed electionWhere the election referred to in subsection 48.1(2) was not made on or before the day referred to therein, the election shall be deemed for the purposes of subsections 48.1(1) and 48.1(2) to have been made on that day if, on or before the day that is 2 years after that day,the election is made in prescribed form; andan estimate of the penalty in respect of that election is paid by the individual when the election is made.Penalty for late filed electionFor the purposes of this section, the penalty in respect of an election referred to in paragraph 48.1(3)(a) is an amount equal to the lesser of1/4 of 1% of the amount, if any, by whichthe proceeds of disposition determined under subsection 48.1(1)exceedthe amount referred to in subparagraph 48.1(1)(c)(i)for each month or part of a month during the period commencing on the day referred to in subsection 48.1(2) and ending on the day the election is made, andan amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 48.1(4)(a).Unpaid balance of penaltyThe Minister shall, with all due dispatch, examine each election referred to in paragraph 48.1(3)(a), assess the penalty payable and send a notice of assessment to the individual, who shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1994, c. 7, Sch. II, s. 26; 1996, c. 21, s. 11; 1998, c. 19, s. 91; 2001, c. 17, s. 33; 2007, c. 35, s. 68; 2011, c. 24, s. 7
Granting of optionsSubject to subsections 49(3) and 49(3.1), for the purposes of this Subdivision, the granting of an option, other thanan option to acquire or to dispose of a principal residence,an option granted by a corporation to acquire shares of its capital stock or bonds or debentures to be issued by it, oran option granted by a trust to acquire units of the trust to be issued by the trust,is a disposition of a property the adjusted cost base of which to the grantor immediately before the grant is nil.Expired option — sharesIf at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unlessthe option is held, at that time, by a person who deals at arm’s length with the corporation and the option was granted by the corporation to a person who was dealing at arm’s length with the corporation at the time that the option was granted, orthe option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definition Canadian exploration and development expenses in subsection 66(15), paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (g) of the definition Canadian development expense in subsection 66.2(5) or paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.Expired option — trust unitsIf, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm’s length with the trust or was granted to a person who did not deal at arm’s length with the trust at the time that the option was granted,the trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; andthe adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.Where option to acquire exercisedWhere an option to acquire property is exercised so that property is disposed of by a taxpayer (in this subsection referred to as the “vendor”) or so that property is acquired by another taxpayer (in this subsection referred to as the “purchaser”), for the purpose of computing the income of each such taxpayer the granting and the exercise of the option shall be deemed not to be dispositions of property and there shall be includedin computing the vendor’s proceeds of disposition of the property, the consideration received by the vendor for the option; andin computing the cost to the purchaser of the property,where paragraph 53(1)(j) applied to the acquisition of the property by the purchaser because a person who did not deal at arm’s length with the purchaser was deemed because of the acquisition to have received a benefit under section 7, the adjusted cost base to that person of the option immediately before that person last disposed of the option, andin any other case, the adjusted cost base to the purchaser of the option.Option to acquire specified property exercisedWhere at any time a taxpayer exercises an option to acquire a specified property,there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the specified property the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the option; andthe amount determined under paragraph 49(3.01)(a) in respect of that acquisition shall be added after that time in computing the adjusted cost base to the taxpayer of the specified property.Where option to dispose exercisedWhere an option to dispose of property is exercised so that property is disposed of by a taxpayer (in this subsection referred to as the “vendor”) or so that property is acquired by another taxpayer (in this subsection referred to as the “purchaser”), for the purpose of computing the income of each such taxpayer the granting and the exercise of the option shall be deemed not to be dispositions of property and there shall be deductedin computing the vendor’s proceeds of disposition of the property, the adjusted cost base to the vendor of the option; andin computing the cost to the purchaser of the property, the consideration received by the purchaser for the option.Option granted before February 23, 1994Where an individual (other than a trust) who disposes of property pursuant to the exercise of an option that was granted by the individual before February 23, 1994 so elects in the individual’s return of income for the taxation year in which the disposition occurs, subsection 49(3) does not apply in respect of the disposition in computing the income of the individual.Reassessment where option exercised in subsequent yearWherean option granted by a taxpayer in a taxation year (in this subsection referred to as the “initial year”) is exercised in a subsequent taxation year (in this subsection referred to as the “subsequent year”),the taxpayer has filed a return of the taxpayer’s income for the initial year as required by section 150, andon or before the day on or before which the taxpayer was required by section 150 to file a return of the taxpayer’s income for the subsequent year, the taxpayer has filed an amended return for the initial year excluding from the taxpayer’s income the proceeds received by the taxpayer for the granting of the option,such reassessment of the taxpayer’s tax, interest or penalties for the year shall be made as is necessary to give effect to the exclusion.IdemWhere a taxpayer has granted an option (in this subsection referred to as the “original option”) to which subsection 49(1), 49(2) or 49(2.1) applies, and grants one or more extensions or renewals of that original option,for the purposes of subsections 49(1), 49(2) and 49(2.1), the granting of each extension or renewal shall be deemed to be the granting of an option at the time the extension or renewal is granted;for the purposes of subsections (2) to (4) and subparagraph (b)(iv) of the definition disposition in subsection 248(1), the original option and each extension or renewal of it is deemed to be the same option; andsubsection 49(4) shall be read as if the year in which the original option was granted and each year in which any extension or renewal thereof was granted were all initial years.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 49; 1994, c. 7, Sch. II, s. 27; 1995, c. 3, s. 13, c. 21, s. 14; 2001, c. 17, s. 34; 2013, c. 34, s. 188
No disposition where obligation satisfiedFor greater certainty, where a taxpayer acquires a particular property in satisfaction of an absolute or contingent obligation of a person or partnership to provide the particular property pursuant to a contract or other arrangement one of the main objectives of which was to establish a right, whether absolute or contingent, to the particular property and that right was not under the terms of a trust, partnership agreement, share or debt obligation, the satisfaction of the obligation is not a disposition of that right.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2000, c. 19, s. 3
Debts established to be bad debts and shares of bankrupt corporationFor the purposes of this Subdivision, wherea debt owing to a taxpayer at the end of a taxation year (other than a debt owing to the taxpayer in respect of the disposition of personal-use property) is established by the taxpayer to have become a bad debt in the year, ora share (other than a share received by a taxpayer as consideration in respect of the disposition of personal-use property) of the capital stock of a corporation is owned by the taxpayer at the end of a taxation year andthe corporation has during the year become a bankrupt,the corporation is a corporation referred to in section 6 of the Winding-up and Restructuring Act that is insolvent (within the meaning of that Act) and in respect of which a winding-up order under that Act has been made in the year, orat the end of the year,the corporation is insolvent,neither the corporation nor a corporation controlled by it carries on business,the fair market value of the share is nil, andit is reasonable to expect that the corporation will be dissolved or wound up and will not commence to carry on businessand the taxpayer elects in the taxpayer’s return of income for the year to have this subsection apply in respect of the debt or the share, as the case may be, the taxpayer shall be deemed to have disposed of the debt or the share, as the case may be, at the end of the year for proceeds equal to nil and to have reacquired it immediately after the end of the year at a cost equal to nil.IdemWherea taxpayer is deemed because of subparagraph 50(1)(b)(iii) to have disposed of a share of the capital stock of a corporation at the end of a taxation year, andthe taxpayer or a person with whom the taxpayer is not dealing at arm’s length owns the share at the earliest time, during the 24-month period immediately following the disposition, that the corporation or a corporation controlled by it carries on business,the taxpayer or the person, as the case may be, shall be deemed to have disposed of the share at that earliest time for proceeds of disposition equal to its adjusted cost base to the taxpayer determined immediately before the time of the disposition referred to in paragraph 50(1.1)(a) and to have reacquired it immediately after that earliest time at a cost equal to those proceeds.Where debt a personal-use propertyWhere at the end of a taxation year a debt that is a personal-use property of a taxpayer is owing to the taxpayer by a person with whom the taxpayer deals at arm’s length and is established by the taxpayer to have become a bad debt in the year,the taxpayer shall be deemed to have disposed of it at the end of the year for proceeds equal to the amount, if any, by whichits adjusted cost base to the taxpayer immediately before the end of the yearexceedsthe amount of the taxpayer’s gain, if any, from the disposition of the personal-use property the proceeds of disposition of which included the debt; andthe taxpayer shall be deemed to have reacquired the debt immediately after the end of the year at a cost equal to the amount of the proceeds determined under paragraph 50(2)(a).Disposal of R.H.O.S.P. propertiesEach trust that was at the end of 1985 governed by a registered home ownership savings plan (within the meaning assigned by paragraph 146.2(1)(h) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1985 taxation year) shall be deemed to have disposed, immediately before 1986, of each property it holds at that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired it immediately after 1985 at a cost equal to that fair market value.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 50; 1994, c. 7, Sch. II, s. 28; 1995, c. 21, s. 15; 2013, c. 40, s. 212024, c. 17, s. 9
Convertible propertyWhere a share of the capital stock of a corporation is acquired by a taxpayer from the corporation in exchange fora capital property of the taxpayer that is another share of the corporation (in this section referred to as a “convertible property”), ora capital property of the taxpayer that is a bond, debenture or note of the corporation the terms of which confer on the holder the right to make the exchange (in this section referred to as a “convertible property”)and no consideration other than the share is received by the taxpayer for the convertible property,except for the purposes of subsections 20(21) and 44.1(6) and (7) and paragraph 94(2)(m), the exchange is deemed not to be a disposition of the convertible property,the cost to the taxpayer of all the shares of a particular class acquired by the taxpayer on the exchange shall be deemed to be the amount determined by the formulaA × B/CwhereAis the adjusted cost base to the taxpayer of the convertible property immediately before the exchange,Bis the fair market value, immediately after the exchange, of all the shares of the particular class acquired by the taxpayer on the exchange, andCis the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange,there shall be deducted, after the exchange, in computing the adjusted cost base to the taxpayer of a share acquired by the taxpayer on the exchange, the amount determined by the formulaA × B/CwhereAis the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before the exchange, the adjusted cost base to the taxpayer of the convertible property,Bis the fair market value, immediately after the exchange, of that share, andCis the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange,the amount determined under paragraph 51(1)(d.1) in respect of a share shall be added, after the exchange, in computing the adjusted cost base to the taxpayer of the share,for the purposes of sections 74.4 and 74.5, the exchange shall be deemed to be a transfer of the convertible property by the taxpayer to the corporation, andwhere the convertible property is taxable Canadian property of the taxpayer, the share acquired by the taxpayer on the exchange is deemed to be, at any time that is within 60 months after the exchange, taxable Canadian property of the taxpayer.IdemNotwithstanding subsection 51(1), whereshares of the capital stock of a corporation have been acquired by a taxpayer in exchange for a convertible property in circumstances such that, but for this subsection, subsection 51(1) would have applied,the fair market value of the convertible property immediately before the exchange exceeds the fair market value of the shares immediately after the exchange, andit is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer,the following rules apply:the taxpayer shall be deemed to have disposed of the convertible property for proceeds of disposition equal to the lesser ofthe total of its adjusted cost base to the taxpayer immediately before the exchange and the gift portion, andthe fair market value of the convertible property immediately before the exchange,the taxpayer’s capital loss from the disposition of the convertible property shall be deemed to be nil, andthe cost to the taxpayer of all the shares of a particular class acquired in exchange for the convertible property shall be deemed to be that proportion of the lesser ofthe adjusted cost base to the taxpayer of the convertible property immediately before the exchange, andthe total of the fair market value immediately after the exchange of all the shares acquired by the taxpayer in exchange for the convertible property and the amount that, but for paragraph 51(2)(e), would have been the taxpayer’s capital loss on the disposition of the convertible property,thatthe fair market value, immediately after the exchange, of all the shares of the particular class acquired by the taxpayer on the exchangeis ofthe fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange.Computation of paid-up capitalWhere subsection 51(1) applies to the exchange of convertible property described in paragraph 51(1)(a) (referred to in this subsection as the “old shares”), in computing the paid-up capital in respect of a particular class of shares of the capital stock of the corporation at any particular time that is the time of, or any time after, the exchangethere shall be deducted the amount determined by the formula(A - B) × C/AwhereAis the total of all amounts each of which is the amount of the increase, if any, as a result of the exchange, in the paid-up capital in respect of a class of shares of the capital stock of the corporation, computed without reference to this subsection as it applies to the exchange,Bis the paid-up capital immediately before the exchange in respect of the old shares, andCis the increase, if any, as a result of the exchange, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the exchange; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular timeexceedsthe total that would be determined under clause 51(3)(b)(i)(A) if this Act were read without reference to paragraph 51(3)(a), andthe total of all amounts required by paragraph 51(3)(a) to be deducted in respect of that particular class of shares before the particular time.ApplicationSubsections 51(1) and 51(2) do not apply to any exchange to which subsection 85(1) or 85(2) or section 86 applies.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 51; 1994, c. 21, s. 20; 1995, c. 21, s. 16; 1998, c. 19, s. 92; 2010, c. 12, s. 3; 2013, c. 34, s. 3
Conversion of debt obligationWherea taxpayer acquires a bond, debenture or note of a debtor (in this section referred to as the “new obligation”) in exchange for a capital property of the taxpayer that is another bond, debenture or note of the same debtor (in this section referred to as the “convertible obligation”),the terms of the convertible obligation conferred on the holder the right to make the exchange, andthe principal amount of the new obligation is equal to the principal amount of the convertible obligation,the cost to the taxpayer of the new obligation and the proceeds of disposition of the convertible obligation shall be deemed to be equal to the adjusted cost base to the taxpayer of the convertible obligation immediately before the exchange.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 50
Cost of certain property the value of which included in incomeIn applying this Subdivision, an amount equal to the particular amount described by paragraph (d) shall be added in computing the cost at any time to a taxpayer of a property ifthe taxpayer acquired the property after 1971;the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; anda particular amount in respect of the property’s value wasincluded, otherwise than under section 7, in computingthe taxpayer’s taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, orthe taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, orfor the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.[Repealed, 2001, c. 17, s. 35(1)]Cost of property received as dividend in kindWhere any property has, after 1971, been received by a shareholder of a corporation at any time as, on account or in lieu of payment of, or in satisfaction of, a dividend payable in kind (other than a stock dividend) in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the property at a cost to the shareholder equal to its fair market value at that time, and the corporation shall be deemed to have disposed of the property at that time for proceeds equal to that fair market value.Cost of stock dividendWhere a shareholder of a corporation has, after 1971, received a stock dividend in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the share or shares received by the shareholder as a stock dividend at a cost to the shareholder equal to the total ofwhere the stock dividend is a dividend,in the case of a shareholder that is an individual, the amount of the stock dividend, andin any other case, the total of all amounts each of which isthe amount, if any, by whichthe amount that is the lesser of the amount of the stock dividend and its fair market valueexceedsthe amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the amount of the separate dividend would not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series of transactions or events as part of which the dividend is received — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received, andthe amount determined by the formulaA + BwhereAis the amount of the deemed gain under paragraph 55(2)(c) in respect of that stock dividend, andBis the amount, if any, by which the amount of the reduction under paragraph 55(2.3)(b) in respect of that stock dividend to which paragraph 55(2)(a) would otherwise apply exceeds the amount determined for clause (A) in respect of that dividend;where the stock dividend is not a dividend, nil, andwhere an amount is included in the shareholder’s income in respect of the stock dividend under subsection 15(1.1), the amount so included.Cost of property acquired as prizeWhere any property has been acquired by a taxpayer at any time after 1971 as a prize in connection with a lottery scheme, the taxpayer shall be deemed to have acquired the property at a cost to the taxpayer equal to its fair market value at that time.[Repealed, 2001, c. 17, s. 35(2)]Cost of shares of subsidiaryNotwithstanding any other provision of this Act, where a corporation disposes of property to another corporation in a transaction to which paragraph 219(1)(l) applies, the cost to it of any share of a particular class of the capital stock of the other corporation received by it as consideration for the property is deemed to be the lesser of the cost of the share to the corporation otherwise determined immediately after the disposition and the amount by which the paid-up capital in respect of that class increases because of the issuance of the share.Cost of shares of immigrant corporationNotwithstanding any other provision of this Act, where at any time a corporation becomes resident in Canada, the cost to any shareholder who is not at that time resident in Canada of any share of the corporation’s capital stock, other than a share that was taxable Canadian property immediately before that time, is deemed to be equal to the fair market value of the share at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 52; 1994, c. 7, Sch. II, s. 29, Sch. VIII, s. 14, c. 21, s. 21; 1998, c. 19, s. 93; 1999, c. 22, s. 13; 2001, c. 17, s. 35; 2013, c. 34, s. 189; 2016, c. 7, s. 2
Adjustments to cost baseIn computing the adjusted cost base to a taxpayer of property at any time, there shall be added to the cost to the taxpayer of the property such of the following amounts in respect of the property as are applicable:any amount deemed by subsection 40(3) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property;where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by whichthe total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that timeexceedsthe portion of the total determined under subparagraph (i) that relates to dividends in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the amount of the separate dividend would not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series of transactions or events as part of which the dividend is received — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received;where the property is a share of the capital stock of a corporation, the amount of any dividend deemed by paragraph 128.1(1)(c.2) to have been received in respect of the share by the taxpayer before that time and while the taxpayer was resident in Canada;where the property is a share of the capital stock of a corporation and the taxpayer has, after 1971, made a contribution of capital to the corporation otherwise than by way of a loan, by way of a disposition of shares of a foreign affiliate of the taxpayer to which subsection 85.1(3) or paragraph 95(2)(c) applies or, subject to subsection 53(1.1), a disposition of property in respect of which the taxpayer and the corporation have made an election under section 85, that proportion of such part of the amount of the contribution as cannot reasonably be regarded as a benefit conferred by the taxpayer on a person (other than the corporation) who was related to the taxpayer thatthe amount that may reasonably be regarded as the increase in the fair market value, as a result of the contribution, of the shareis ofthe amount that may reasonably be regarded as the increase in the fair market value, as a result of the contribution, of all shares of the capital stock of the corporation owned by the taxpayer immediately after the contribution;if the property is a share of the capital stock of a foreign affiliate of the taxpayer, any amount required by section 92 to be added in computing the adjusted cost base to the taxpayer of the share;where the property is a share of the capital stock of a corporation, any amount required by paragraph 139.1(16)(l) to be added in computing the adjusted cost base to the taxpayer of the share;if the property is a capital interest in a trust, any amount included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been required to have been included under those subsections but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;where the property is a unit in a mutual fund trust, any amount required by subsection 132.1(2) to be added in computing the adjusted cost base to the taxpayer of the unit;where the property is a share of the capital stock of a corporation of which the taxpayer was, at any time, a specified shareholder, any expense incurred by the taxpayer in respect of land or a building of the corporation that was by reason of subsection 18(2) or 18(3.1) not deductible by the taxpayer in computing the taxpayer’s income for any taxation year commencing before that time;where the property is an interest in a partnership,an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, equal to the total of all amounts each of which is the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of the income of the partnership from any source for that fiscal period, computed as if this Act were read without reference toparagraphs 38(a.1) to (a.3) and the fractions set out in the formula in paragraph 14(1)(b) and in subsection 14(5), paragraph 38(a) and subsection 41(1),subparagraph 39(1)(a)(i.1) in respect of an object referred to in that subparagraph that is not the subject of a gifting arrangement, as defined in subsection 237.1(1), nor a property that is a tax shelter,the description of C in the formula in paragraph 14(1)(b), andparagraph (i), paragraphs 12(1)(o) and (z.5), 18(1)(m), 20(1)(v.1) and 29(1)(b) and (2)(b), section 55, subsections 69(6) and (7) and paragraph 82(1)(b) of this Act and paragraphs 20(1)(gg) and 81(1)(r) and (s) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and the provisions of the Income Tax Application Rules relating to income from the operation of new mines,the taxpayer’s share of any capital dividends and any life insurance capital dividends received by the partnership before that time on shares of the capital stock of a corporation that were partnership property,the taxpayer’s share of the amount, if any, by whichany proceeds of a life insurance policy received by the partnership after 1971 and before that time in consequence of the death of any person whose life was insured under the policy,exceeds the total of all amounts each of which isthe adjusted cost basis (in this subparagraph as defined in subsection 148(9)), immediately before the death, ofif the death occurs before March 22, 2016, the policy to the partnership, andif the death occurs after March 21, 2016, a policyholder’s interest in the policy,the amount by which the fair market value of consideration given in respect of a disposition of an interest in the policy exceeds the greater of the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, ifthe death occurs after March 21, 2016, andthe disposition was by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016, orif the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formulaA − BwhereAis the amount, if any, by which the lesser of the adjusted cost basis to the policyholder of the interest immediately before the disposition and the fair market value of consideration given in respect of the disposition exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, andBis the absolute value of the negative amount, if any, that would be, in the absence of section 257, the adjusted cost basis, immediately before the death, of the interest in the policy,where the taxpayer has, after 1971, made a contribution of capital to the partnership otherwise than by way of loan, such part of the amount of the contribution as cannot reasonably be regarded as a benefit conferred on any other member of the partnership who was related to the taxpayer,each amount that is in respect of a specified amount described in subsection 80.2(1) and that is paid by the taxpayer to the partnership, to the extent that the amount paid is not deductible in computing the income of the taxpayer,where the time is immediately before the taxpayer’s death and the taxpayer was at that time a member of a partnership, the value, at the time of the taxpayer’s death, of the rights or things referred to in subsection 70(2) in respect of a partnership interest held by the taxpayer immediately before the taxpayer’s death, other than an interest referred to in subsection 96(1.5),any amount deemed by subsection 40(3.1) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property,any amount deemed by paragraph 98(1)(c) or 98.1(1)(c) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property,a share of the taxpayer’s Canadian development expense or Canadian oil and gas property expense that was deducted at or before that time in computing the adjusted cost base to the taxpayer of the interest because of subparagraph 53(2)(c)(ii) and in respect of which the taxpayer elected under paragraph (f) of the definition Canadian development expense in subsection 66.2(5) or paragraph (b) of the definition Canadian oil and gas property expense in subsection 66.4(5), as the case may be,an amount deemed, before that time, by subsection 66.1(7), 66.2(6) or 66.4(6) to be an amount referred to in the description of G in the definition cumulative Canadian exploration expense in subsection 66.1(6), paragraph (a) of the description of F in the definition cumulative Canadian development expense in subsection 66.2(5) or the description of G in that definition, or paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) or the description of G in that definition in respect of the taxpayer,an amount deemed, before that time, by subsection 59(1.1) to be proceeds of disposition receivable by the taxpayer in respect of the disposition of a foreign resource property,the amount, if any, by whichthe taxpayer’s share of the amount of any assistance or benefit that the partnership received or became entitled to receive after 1971 and before that time from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from royalty or tax, investment allowance or any other form of assistance or benefit, in respect of or related to a Canadian resource property or an exploration or development expense incurred in Canadaexceedsthe part, if any, of the amount included in clause 53(1)(e)(ix)(A) in respect of the interest that was repaid before that time by the taxpayer under a legal obligation to repay all or any part of the amount,any amount required by section 97 to be added before that time in computing the adjusted cost base to the taxpayer of the interest,of which the taxpayer’s share of any income or loss of the partnership was, at any time, 10% or more, any expense incurred by the taxpayer in respect of land or a building of the partnership that was by reason of subsection 18(2) or 18(3.1) not deductible by the taxpayer in computing the taxpayer’s income for any taxation year commencing before that time,any amount required by paragraph 110.6(23)(a) to be added at that time in computing the adjusted cost base to the taxpayer of the interest, andany amount required by subsection 127(30), 127.45(17), section 127.48, subsection 127.49(17) or section 211.92 to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time in respect of the interest in the partnership;[Repealed, 2009, c. 2, s. 11]where the property is substituted property (within the meaning assigned by paragraph (a) of the definition superficial loss in section 54) of the taxpayer, the amount, if any, by whichthe amount of the loss that was, because of the acquisition by the taxpayer of the property, a superficial loss of any taxpayer from a disposition of a propertyexceedswhere the property disposed of was a share of the capital stock of a corporation, the amount that would, but for paragraph 40(2)(g), be deducted under subsection 112(3), 112(3.1) or 112(3.2) in computing the loss of any taxpayer in respect of the disposition of the share;where the taxpayer is a taxable Canadian corporation and the property was disposed of by another taxable Canadian corporation to the taxpayer in circumstances such thatparagraph 53(1)(f.2) does not apply to increase the adjusted cost base to the other corporation of shares of the capital stock of the taxpayer, andthe capital loss from the disposition was deemed by paragraph 40(2)(e.1) (or, where the property was acquired by the taxpayer before 1996, by paragraph 40(2)(e) or 85(4)(a) as those paragraphs read in their application to property acquired before April 26, 1995) to be nil,the amount that would otherwise have been the capital loss from the disposition;where the property was disposed of by a person (other than a non-resident person or a person exempt from tax under this Part on the person’s taxable income) or by an eligible Canadian partnership (as defined in subsection 80(1)) to the taxpayer in circumstances such thatparagraph 53(1)(f.1) does not apply to increase the adjusted cost base to the taxpayer of the property,paragraph 53(1)(f.2) does not apply to increase the adjusted cost base to that person of shares of the capital stock of the taxpayer, andthe capital loss from the disposition was deemed by paragraph 40(2)(e.1) (or, where the property was acquired by the taxpayer before 1996, by paragraph 85(4)(a) as it read in its application to property acquired before April 26, 1995) to be nil,the amount that would otherwise be the capital loss from the disposition;where the property is a particular commercial obligation (in this paragraph having the meaning assigned by subsection 80(1)) payable to the taxpayer as consideration for the settlement or extinguishment of another commercial obligation payable to the taxpayer and the taxpayer’s loss from the disposition of the other obligation was reduced because of paragraph 40(2)(e.2), the proportion of the reduction that the principal amount of the particular obligation is of the total of all amounts each of which is the principal amount of a commercial obligation payable to the taxpayer as consideration for the settlement or extinguishment of that other obligation;where the property is a share, any amount required by paragraph 40(3.6)(b) (or, where the property was acquired by the taxpayer before 1996, by paragraph 85(4)(b) as it read in its application to property disposed of before April 26, 1995) to be added in computing the adjusted cost base to the taxpayer of the share;where the property is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation, the amount, if any, by which the principal amount of the obligation exceeds the amount for which the obligation was issued, if the excess was required by subsection 16(2) or (3) to be included in computing the income of the taxpayer for a taxation year commencing before that time;where the property is an indexed debt obligation, any amount determined under subparagraph 16(6)(a)(i) in respect of the obligation and required to be included in computing the taxpayer’s income for a taxation year beginning before that time;where the property is land of the taxpayer, any amount paid by the taxpayer or by another taxpayer in respect of whom the taxpayer was a person, corporation or partnership described in subparagraph (b)(i), (ii) or (iii) of the definition interest on debt relating to the acquisition of land in subsection 18(3), after 1971 and before that time pursuant to a legal obligation to payinterest on debt relating to the acquisition of land (within the meaning assigned by subsection 18(3)), orproperty taxes (not including income or profits taxes or taxes imposed by reference to the transfer of property) paid by the taxpayer in respect of the property to a province or to a Canadian municipalityto the extent that the amount was, because of subsection 18(2),not deductible in computing the taxpayer’s income from the land or from a business for any taxation year beginning before that time, ornot deductible in computing the income of the other taxpayer and was not included in or added to the cost to the other taxpayer of any property otherwise than because of subparagraph (d.3) or subparagraph (e)(xi);where the property is land used in a farming business carried on by the taxpayer, an amount in respect of each taxation year ending after 1971 and commencing before that time, equal to the taxpayer’s loss, if any, for that year from the farming business, to the extent that the losswas not, by virtue of section 31, deductible in computing the taxpayer’s income for that year,was not deducted in computing the taxpayer’s taxable income for the taxation year in which the taxpayer disposed of the property or any preceding taxation year,did not exceed the total oftaxes (other than income or profits taxes or taxes imposed by reference to the transfer of the property) paid by the taxpayer in that year or payable by the taxpayer in respect of that year to a province or a Canadian municipality in respect of the property, andinterest, paid by the taxpayer in that year or payable by the taxpayer in respect of that year, pursuant to a legal obligation to pay interest on borrowed money used to acquire the property or on any amount as consideration payable for the property,to the extent that those taxes and interest were included in computing the loss, anddid not exceed the remainder obtained whenthe total of each of the taxpayer’s losses from the farming business for taxation years preceding that year (to the extent that they are required by this paragraph to be added in computing the taxpayer’s adjusted cost base of the property),is deducted fromthe amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the adjusted cost base to the taxpayer of the property immediately before that time, determined without reference to this paragraph;if the property is a security (within the meaning assigned by subsection 7(7)) and, in respect of its acquisition by the taxpayer, a benefit was deemed by section 7 to have been received in any taxation year that ends after 1971 and begins before that time by the taxpayer or by a person that did not deal at arm’s length with the taxpayer or, if the security was acquired after February 27, 2000, would have been so deemed if section 7 were read without reference to subsections 7(1.1) and (8), the amount of the benefit that was, or would have been, so deemed to have been received;where the property is an expropriation asset of the taxpayer (within the meaning assigned by section 80.1) or an asset of the taxpayer assumed for the purposes of that section to be an expropriation asset thereof, any amount required by paragraph 80.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the asset;where the property is an interest in a related segregated fund trust referred to in section 138.1,each amount deemed by paragraph 138.1(1)(f) to be an amount payable to the taxpayer before that time in respect of that interest,each amount required by subparagraph 138.1(1)(g)(ii) to be added before that time in respect of that interest,each amount in respect of that interest that is a capital gain deemed to have been allocated under subsection 138.1(4) to the taxpayer before that time, andeach amount in respect of that interest that before that time was deemed by subsection 138.1(3) to be a capital gain of the taxpayer;where the property is an offshore investment fund property (within the meaning assigned by subsection 94.1(1)),any amount included in respect of the property by virtue of subsection 94.1(1) in computing the taxpayer’s income for a taxation year commencing before that time, orwhere the taxpayer is a controlled foreign affiliate (within the meaning of subsection 95(1)), of a person resident in Canada, any amount included in respect of the property in computing the foreign accrual property income of the controlled foreign affiliate by reason of the description of C in the definition foreign accrual property income in subsection 95(1) for a taxation year commencing before that time;the reasonable costs incurred by the taxpayer, before that time, of surveying or valuing the property for the purpose of its acquisition or disposition (to the extent that those costs are not deducted by the taxpayer in computing the taxpayer’s income for any taxation year or attributable to any other property);where the property is real property of the taxpayer, any amount required by paragraph 43.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the property;where the time is after 2004 and the property is an interest in or a share of the capital stock of a flow-through entity (within the meaning assigned by subsection 39.1(1)), the amount determined by the formulaA × B/CwhereAis the amount, if any, that would, if the definition exempt capital gains balance in subsection 39.1(1) were read without reference to “that ends before 2005”, be the taxpayer’s exempt capital gains balance in respect of the entity for the taxpayer’s 2005 taxation year,Bis the fair market value at that time of the property, andCis the fair market value at that time of all the taxpayer’s interests in or shares of the capital stock of the entity;any amount required under paragraph 53(4)(b), (5)(b), (6)(b), 47(1)(d), 49(3.01)(b), 51(1)(d.2), 86(4)(b) or 87(5.1)(b) or (6.1)(b) to be added in computing the adjusted cost base to the taxpayer of the property;if the time is before 2005, the property is an interest in, or a share of the capital stock of, a flow-through entity described in any of paragraphs (a) to (f) and (h) of the definition flow-through entity in subsection 39.1(1) and immediately after that time the taxpayer disposed of all their interests in, and shares of the capital stock of, the entity, the amount determined by the formulaA × B/CwhereAis the amount, if any, by which the taxpayer’s exempt capital gains balance (as defined in subsection 39.1(1)) in respect of the entity for the taxpayer’s taxation year that includes that time exceeds the total of all amounts each of which isthe amount by which a capital gain is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity, ortwice an amount by which a taxable capital gain, or the income from a business, is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity,Bis the fair market value at that time of the property, andCis the fair market value at that time of all the taxpayer’s interests in, and shares of the capital stock of, the entity;if the property was acquired under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(i) in computing the income of the taxpayer for a taxation year; andif the property is disposed of under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(ii) in computing the income of the taxpayer for the taxation year that includes that time.Deemed contribution of capitalFor the purposes of paragraph 53(1)(c), where there has been a disposition of property before May 7, 1974 andthe taxpayer and the corporation referred to in that paragraph have made an election under section 85 in respect of that property, andthe consideration received by the taxpayer for the property did not include shares of the capital stock of the corporation,the disposition of property shall be deemed to be a contribution of capital equal to the amount, if any, by whichthe amount that the taxpayer and the corporation have agreed on in the electionexceedsthe fair market value at the time of the disposition of any consideration received by the taxpayer for the property so disposed of.Flow-through entity before 2005For the purposes of paragraph (1)(r), if the fair market value of all of a taxpayer’s interests in, and shares of the capital stock of, a flow-through entity is nil when the taxpayer disposes of those interests and shares, the fair market value of each such interest or share at that time is deemed to be $1.Amounts to be deductedIn computing the adjusted cost base to a taxpayer of property at any time, there shall be deducted such of the following amounts in respect of the property as are applicable:where the property is a share of the capital stock of a corporation resident in Canada,any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a dividend on the share (other than a taxable dividend or a dividend in respect of which the corporation paying the dividend has elected in accordance with subsection 83(2) or 83(2.1) in respect of the full amount thereof),any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share, except to the extent that the amount is deemed by subsection 84(4) or 84(4.1) to be a dividend received by the taxpayer,any amount required to be deducted before that time under section 84.1 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applied before May 23, 1985 in computing the adjusted cost base to the taxpayer of the share,any amount, to the extent that such amount is not proceeds of disposition of a share, received by the taxpayer before that time that would, but for subsection 84(8), be deemed by subsection 84(2) to be a dividend received by the taxpayer, andany amount required by paragraph 44.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share;where the property is a share of the capital stock of a non-resident corporation,if the corporation is a foreign affiliate of the taxpayer,any amount required under paragraph 80.1(4)(d) or section 92 to be deducted in computing the adjusted cost base to the taxpayer of the share, andany amount received by the taxpayer before that time, on a reduction of the paid-up capital of the corporation in respect of the share, that is so receivedafter 1971 and on or before August 19, 2011, orafter August 19, 2011, where the reduction is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, orin any other case, any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share;if the property is a capital interest in a trust, any amount deducted by the taxpayer by reason of subsection 91(2) or (4) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been so deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;if the property is property of a taxpayer that was subject to a loss restriction event at or before that time, any amount required by paragraph 111(4)(c) to be deducted in computing the adjusted cost base of the property;where the property is an interest in a partnership,an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, equal to the total of amounts each of which is the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of any loss of the partnership from any source for that fiscal period, computed as if this Act were read without reference tothe fractions set out in subsection 14(5), paragraph 38(b) and in the formula in paragraph 14(1)(b),[Repealed, 2013, c. 34, s. 190]the description of C in the formula in paragraph 14(1)(b),paragraphs 12(1)(o) and 12(1)(z.5), 18(1)(m) and 20(1)(v.1), section 31, subsection 40(2), section 55 and subsections 69(6) and 69(7) of this Act and paragraphs 20(1)(gg) and 81(1)(r) and (s) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, andsubsections 100(4), 112(3.1), (4), (4.2) as it read in its application to dispositions of property that occurred before April 27, 1995 and (5.2),except to the extent that all or a portion of such a loss may reasonably be considered to have been included in the taxpayer’s limited partnership loss in respect of the partnership for the taxpayer’s taxation year in which that fiscal period ended,an amount in respect of each fiscal period of the partnership ending before that time that is the taxpayer’s limited partnership loss in respect of the partnership for the taxation year in which that fiscal period ends to the extent that such loss was deducted by the taxpayer in computing the taxpayer’s taxable income for any taxation year that commenced before that time,any amount deemed by subsection 40(3.12) to be a loss of the taxpayer for a taxation year from a disposition before that time of the property,if at that time the property is not a tax shelter investment as defined by section 143.2 and the taxpayer would be a member, described in subsection 40(3.1), of the partnership if the fiscal period of the partnership that includes that time ended at that time, the unpaid principal amount of any indebtedness of the taxpayer for which recourse is limited, either immediately or in the future and either absolutely or contingently, and that can reasonably be considered to have been used to acquire the property,unless that time is immediately before a disposition of the interest, if the taxpayer is a member of the partnership and the taxpayer has been a specified member of the partnership at all times since becoming a member of the partnership, or the taxpayer is at that time a limited partner of the partnership for the purposes of subsection 40(3.1),where that time is in the taxpayer’s first taxation year for which the taxpayer is eligible to deduct an amount in respect of the partnership under subsection 34.2(11), the portion of the amount deducted in computing the taxpayer’s income for the taxation year under subsection 34.2(11) in respect of the partnership that would have been deductible if the definition qualifying transitional income in subsection 34.2(1) were read without reference to paragraph (b), andwhere that time is in any other taxation year, the portion of the amount deducted in computing the taxpayer’s income for the taxation year immediately preceding that other year under subsection 34.2(11) in respect of the partnership that would have been deductible if the definition qualifying transitional income in subsection 34.2(1) were read without reference to paragraph (b),an amount in respect of each fiscal period of the partnership ending after 1971 and before that time, other than a fiscal period after the fiscal period in which the taxpayer ceased to be a member of the partnership, equal to the taxpayer’s share of the total ofamounts that, but for paragraph 96(1)(d), would be deductible in computing the income of the partnership for the fiscal period by virtue of the provisions of the Income Tax Application Rules relating to the exploration and development expenses,the Canadian exploration and development expenses and foreign resource pool expenses, if any, incurred by the partnership in the fiscal period,the Canadian exploration expense, if any, incurred by the partnership in the fiscal period,the Canadian development expense, if any, incurred by the partnership in the fiscal period, andthe Canadian oil and gas property expense, if any, incurred by the partnership in the fiscal period,any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,any amount required by section 97 to be deducted before that time in computing the adjusted cost base to the taxpayer of the interest,any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a distribution of the taxpayer’s share (other than a share under an agreement referred to in subsection 96(1.1)) of the partnership profits or partnership capital,an amount equal to that portion of all amounts deducted under subsection 127(5) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the investment tax credit of the taxpayer by virtue of subsection 127(8),an amount equal to that portion of all amounts of a CCUS tax credit deducted under subsection 127.44(3) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.44(11),an amount equal to that portion of all amounts of a clean technology investment tax credit deducted under subsection 127.45(6) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.45(8),an amount equal to that portion of all amounts deemed deducted under subsection 127.48(3) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the clean hydrogen tax credit (as defined in subsection 127.48(1)) of the taxpayer under subsection 127.48(12),an amount equal to that portion of all amounts deemed deducted under subsection 127.49(6) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the CTM investment tax credit (as defined in subsection 127.49(1)) of the taxpayer under subsection 127.49(8),any amount added pursuant to subsection 127.2(4) in computing the taxpayer’s share-purchase tax credit for a taxation year ending before or after that time,an amount equal to 50% of the amount deemed to be designated pursuant to subsection 127.3(4) before that time in respect of each share, debt obligation or right acquired by the partnership and deemed to have been acquired by the taxpayer under that subsection,the amount of all assistance received by the taxpayer before that time that has resulted in a reduction of the capital cost of a depreciable property to the partnership by virtue of subsection 13(7.2),any amount deductible by the taxpayer under subparagraph 20(1)(e)(vi) in respect of the partnership for a taxation year of the taxpayer ending at or after that time,any amount required by paragraph 110.6(23)(b) to be deducted at that time in computing the adjusted cost base to the taxpayer of the interest,any amount payable by the partnership, to the extent that the amount is deductible under subsection 20.01(1) in computing the taxpayer’s income for a taxation year that began before that time, andthe amount of any reduction (within the meaning of paragraph 247(13)(a)) of the amount of a dividend deemed to have been received by the taxpayer in respect of a transaction (as defined in subsection 247(1)) or series of transactions in which the partnership was a participant;where the property is such that the taxpayer has, after 1971 and before that time, disposed of a part of it while retaining another part of it, the amount determined under section 43 to be the adjusted cost base to the taxpayer of the part so disposed of;if the property is a share, or an interest in or a right to — or, for civil law, a right in or to — a share, of the capital stock of a corporation acquired before August 1976, an amount equal to any expense incurred by the taxpayer in consideration therefor, to the extent that the expense was, by virtue ofparagraph (e) of the definition Canadian exploration and development expenses in subsection 66(15), a Canadian exploration and development expense,paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), a Canadian exploration expense,paragraph (g) of the definition Canadian development expense in subsection 66.2(5), a Canadian development expense, orparagraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5), a Canadian oil and gas property expenseincurred by the taxpayer;where the property was received by the taxpayer as consideration for any payment or loanmade before April 20, 1983 by the taxpayer as a shareholder corporation (within the meaning assigned by subsection 66(15)) to a joint exploration corporation of the shareholder, anddescribed in paragraph (a) of the definition agreed portion in subsection 66(15),or the property was substituted for such a property, such portion of the payment or loan as may reasonably be considered to be related to an agreed portion (within the meaning assigned by subsection 66(15)) of the joint exploration corporation’sCanadian exploration and development expenses,Canadian exploration expense,Canadian development expense, orCanadian oil and gas property expense,as the case may be;where the property is a share of the capital stock of a joint exploration corporation resident in Canada and the taxpayer has, after 1971, made a contribution of capital to the corporation otherwise than by way of a loan, which contribution was included in computing the adjusted cost base of the property by virtue of paragraph 53(1)(c), such portion of the contribution as may reasonably be considered to be part of an agreed portion (within the meaning assigned by subsection 66(15)) of the corporation’sCanadian exploration and development expenses,Canadian exploration expense,Canadian development expense, orCanadian oil and gas property expense,as the case may be;any amount required by paragraph 66(10.4)(a) to be deducted before that time in computing the adjusted cost base to the taxpayer of the property;where section 80 is applicable in respect of the taxpayer, the amount, if any, by which the adjusted cost base to the taxpayer of the property is required in prescribed manner to be reduced before that time;any amount required under paragraph 53(4)(a), 53(5)(a), 53(6)(a), 47(1)(c), 49(3.01)(a), 51(1)(d.1), 86(4)(a) or 87(5.1)(a) or 87(6.1)(a) to be deducted in computing the adjusted cost base to the taxpayer of the property or any amount by which that adjusted cost base is required to be reduced because of subsection 80(9), 80(10) or 80(11);where the property is a capital interest of the taxpayer in a trust (other than an interest in a personal trust that has never been acquired for consideration or an interest of a taxpayer in a trust described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1)),any amount paid to the taxpayer by the trust after 1971 and before that time as a distribution or payment of capital by the trust (otherwise than as proceeds of disposition of the interest or part thereof), to the extent that the amount became payable before 1988,any amount that has become payable to the taxpayer by the trust after 1987 and before that time in respect of the interest (otherwise than as proceeds of disposition of the interest or part thereof), except to the extent of the portion thereofthat was included in the taxpayer’s income by reason of subsection 104(13) or from which an amount of tax was deducted under Part XIII by reason of paragraph 212(1)(c),that was deemed by subsection 104(16) to be a dividend received by the taxpayer, orwhere the trust was resident in Canada throughout its taxation year in which the amount became payablethat is equal to the amount designated by the trust under subsection 104(21) in respect of the taxpayer,that was designated by the trust under subsection 104(20) in respect of the taxpayer, orthat is an assessable distribution (as defined in subsection 218.3(1)) to the taxpayer,an amount equal to that portion of all amounts deducted under subsection 127(5) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the investment tax credit of the taxpayer by virtue of subsection 127(7),any amount added pursuant to subsection 127.2(3) in computing the taxpayer’s share-purchase tax credit for a taxation year ending before or after that time,an amount equal to 50% of the amount deemed to be designated pursuant to subsection 127.3(3) before that time in respect of each share, debt obligation or right acquired by the trust and deemed to have been acquired by the taxpayer under that subsection, andan amount equal to the amount of all assistance received by the taxpayer before that time that has resulted in a reduction of the capital cost of a depreciable property to the trust by virtue of subsection 13(7.2);where the property is a capital interest in a trust (other than a unit trust) not resident in Canada that was purchased after 1971 and before that time by the taxpayer from a non-resident person at a time (in this paragraph referred to as the “purchase time”) when the property was not taxable Canadian property and the fair market value of such of the trust property as wasa Canadian resource property,an income interest in a trust resident in Canada,taxable Canadian property, ora timber resource propertywas not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by whichthe fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)exceedsthe total of the cost amounts to the trust at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v),that the fair market value at the purchase time of the interest is of the fair market value at the purchase time of all capital interests in the trust;where the property is a unit of a unit trust not resident in Canada that was purchased after 1971 and before that time by the taxpayer from a non-resident person at a time (in this paragraph referred to as the “purchase time”) when the property was not taxable Canadian property and the fair market value of such of the trust property as wasa Canadian resource property,an income interest in a trust resident in Canada,taxable Canadian property, ora timber resource propertywas not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by whichthe fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)exceedsthe total of the cost amounts to the trust at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v),that the fair market value at the purchase time of the unit is of the fair market value at the purchase time of all the issued units of the trust;where the property was acquired by the taxpayer after 1971, the amount, if any, by which the total ofthe amount of any assistance which the taxpayer has received or is entitled to receive before that time from a government, municipality or other public authority, in respect of, or for the acquisition of, the property, whether as a grant, subsidy, forgivable loan, deduction from tax not otherwise provided for under this paragraph, investment allowance or as any other form of assistance other thanan amount described in paragraph 37(1)(d),an amount deducted as an allowance under section 65,the amount of prescribed assistance that the taxpayer has received or is entitled to receive in respect of, or for the acquisition of, shares of the capital stock of a prescribed venture capital corporation or a prescribed labour-sponsored venture capital corporation or shares of the capital stock of a taxable Canadian corporation that are held in a prescribed stock savings plan, oran amount included in income by virtue of paragraph 12(1)(u) or 56(1)(s), andall amounts deducted under subsection 127(5) or 127(6) in respect of the property before that time,exceeds such part, if any, of the assistance referred to in subparagraph 53(2)(k)(i) as has been repaid before that time by the taxpayer pursuant to an obligation to repay all or any part of that assistance;where the property is a debt obligation, any amount that was deductible by virtue of subsection 20(14) in computing the taxpayer’s income for any taxation year commencing before that time in respect of interest on that debt obligation;where the property is an indexed debt obligation,any amount determined under subparagraph 16(6)(a)(ii) in respect of the obligation and deductible in computing the income of the taxpayer for a taxation year beginning before that time, andthe amount of any payment that was received or that became receivable by the taxpayer at or before that time in respect of an amount that was added under paragraph 53(1)(g.1) to the cost to the taxpayer of the obligation;any part of the cost to the taxpayer of the property that was deductible (otherwise than because of this Subdivision or paragraph 8(1)(r)) in computing the taxpayer’s income for any taxation year commencing before that time and ending after 1971;where the property is an expropriation asset of the taxpayer (within the meaning assigned by section 80.1) or an asset of the taxpayer assumed for the purposes of that section to be an expropriation asset thereof, any amount required by paragraph 80.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the asset;where the property is a right to receive partnership property within the meaning assigned by paragraph 98.2(a) or 100(3)(a), any amount received by the taxpayer in full or partial satisfaction of that right;where the property is a debt owing to the taxpayer by a corporation, any amount required to be deducted before that time under section 84.1 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applied before May 23, 1985 or subsection 84.2(2) in computing the adjusted cost base to the taxpayer of the debt;where the property is an interest in a related segregated fund trust referred to in section 138.1,each amount in respect of that interest that is a capital loss deemed to have been allocated under subsection 138.1(4) to the taxpayer before that time, andeach amount in respect of that interest that before that time was deemed by subsection 138.1(3) to be a capital loss of the taxpayer;the amount, if any, by whichthe amount elected by the taxpayer before that time under subsection 53(2.1)exceedsany repayment before that time by the taxpayer of an amount received by the taxpayer as described in subsection 53(2.1) that may reasonably be considered to relate to the amount elected where the repayment is made pursuant to a legal obligation to repay all or any part of the amount so received;if the property is a right to acquire shares or units under an agreement, any amount required by paragraph 164(6.1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the right;where the property was at the end of February 22, 1994 a non-qualifying real property (within the meaning assigned by subsection 110.6(1) as that subsection applies to the 1994 taxation year) of a taxpayer, any amount required by paragraph 110.6(21)(b) to be deducted in computing the adjusted cost base to the taxpayer of the property;where the taxpayer elected under subsection 110.6(19) in respect of the property, any amount required by subsection 110.6(22) to be deducted in computing the adjusted cost base to the taxpayer of the property at that time;if the property was acquired under a derivative forward agreement, any amount deductible in respect of the property under paragraph 20(1)(xx) in computing the income of the taxpayer for a taxation year; andif the property is disposed of under a derivative forward agreement, any amount deductible in respect of the property under paragraph 20(1)(xx) in computing the income of the taxpayer for the taxation year that includes that time.ElectionFor the purpose of paragraph 53(2)(s), where in a taxation year a taxpayer receives an amount that would, but for this subsection, be included in the taxpayer’s income under paragraph 12(1)(x) in respect of the cost of a property (other than depreciable property) acquired by the taxpayer in the year, in the 3 taxation years preceding the year or in the taxation year following the year, the taxpayer may elect under this subsection on or before the date on or before which the taxpayer’s return of income under this Part for the year is required to be filed or, where the property is acquired in the following year, for that following year, to reduce the cost of the property by such amount as the taxpayer specifies, not exceeding the least ofthe adjusted cost base, determined without reference to paragraph 53(2)(s), at the time the property was acquired,the amount so received by the taxpayer, andwhere the taxpayer has disposed of the property before the year, nil.[Repealed, 2001, c. 17, s. 36(13)]Recomputation of adjusted cost base on transfers and deemed dispositionsIf at any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property and the proceeds of disposition of the property are determined under paragraph 48.1(1)(c), section 70 or 73, subsection 85(1), paragraph 87(4)(a) or (c) or 88(1)(a), subsection 97(2) or 98(2), paragraph 98(3)(f) or (5)(f), subsection 104(4), paragraph 107(2)(a) or (2.1)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,there shall be deducted after that time in computing the adjusted cost base to the person or partnership (in this subsection referred to as the “transferee”) who acquires or reacquires the property at or immediately after that time the amount, if any, by whichthe total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the vendor of the property,exceedsthe amount that would be the vendor’s capital gain for the year from that disposition if this Act were read without reference to subparagraph 40(1)(a)(iii) and subsection 100(2); andthe amount determined under paragraph 53(4)(a) in respect of that disposition shall be added after that time in computing the adjusted cost base to the transferee of the property.Recomputation of adjusted cost base on other transferWhereat any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property to another person or partnership (in this subsection referred to as the “transferee”),immediately before that time, the vendor and the transferee do not deal with each other at arm’s length or would not deal with each other at arm’s length if paragraph 80(2)(j) applied for the purpose of this subsection,paragraph 53(5)(b) would apply in respect of the disposition if each right referred to in paragraph 251(5)(b) that is a right of the transferee to acquire the specified property from the vendor or a right of the transferee to acquire other property as part of a transaction or event or series of transactions or events that includes the disposition were not taken into account, andthe proceeds of the disposition are not determined under any of the provisions referred to in subsection 53(4),the following rules apply:there shall be deducted after that time in computing the adjusted cost base to the transferee of the property the amount, if any, by whichthe total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the vendor of the property immediately before that timeexceedsthe amount that would be the vendor’s capital gain for the year from that disposition if this Act were read without reference to subparagraph 40(1)(a)(iii) and subsection 100(2), andthe amount determined under paragraph 53(5)(e) in respect of that disposition shall be added after that time in computing the adjusted cost base to the transferee of the property.Recomputation of adjusted cost base on amalgamationWhere a capital property that is a specified property is acquired by a new corporate entity at any time as a result of the amalgamation or merger of 2 or more predecessor corporations,there shall be deducted after that time in computing the adjusted cost base to the new entity of the property the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to a predecessor corporation of the property, unless those amounts are otherwise deducted under that paragraph in computing the adjusted cost base to the new entity of the property; andthe amount deducted under paragraph 53(6)(a) in respect of the acquisition shall be added after that time in computing the adjusted cost base to the new entity of the property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 53; 1994, c. 7, Sch II, s. 30, Sch VIII, s. 15, c. 21, s. 22; 1995, c. 3, s. 14, c. 21, s. 17; 1996, c. 21, s. 12; 1997, c. 25, s. 7; 1998, c. 19, s. 94; 1999, c. 22, s. 14; 2000, c. 19, s. 4; 2001, c. 17, ss. 36, 206; 2002, c. 9, s. 23; 2005, c. 19, s. 14; 2006, c. 4, s. 52; 2007, c. 29, s. 2, c. 35, s. 16; 2009, c. 2, s. 11; 2011, c. 24, s. 8; 2012, c. 31, s. 10; 2013, c. 34, ss. 4, 29, 61, 106, 190, c. 40, s. 22; 2016, c. 7, s. 3, c. 12, s. 16; 2017, c. 33, s. 122024, c. 15, s. 112024, c. 17, s. 102024, c. 17, s. 80
DefinitionsIn this Subdivision,adjusted cost base to a taxpayer of any property at any time means, except as otherwise provided,where the property is depreciable property of the taxpayer, the capital cost to the taxpayer of the property as of that time, andin any other case, the cost to the taxpayer of the property adjusted, as of that time, in accordance with section 53,except thatfor greater certainty, where any property (other than an interest in or a share of the capital stock of a flow-through entity within the meaning assigned by subsection 39.1(1) that was last reacquired by the taxpayer as a result of an election under subsection 110.6(19)) of the taxpayer is property that was reacquired by the taxpayer after having been previously disposed of by the taxpayer, no adjustment to the cost to the taxpayer of the property that was required to be made under section 53 before its reacquisition by the taxpayer shall be made under that section to the cost to the taxpayer of the property as reacquired property of the taxpayer, andin no case shall the adjusted cost base to a taxpayer of any property at any time be less than nil; (prix de base rajusté)capital property of a taxpayer meansany depreciable property of the taxpayer, andany property (other than depreciable property), any gain or loss from the disposition of which would, if the property were disposed of, be a capital gain or a capital loss, as the case may be, of the taxpayer; (immobilisations)disposition[Repealed, 2001, c. 17, s. 37]eligible capital property[Repealed, 2016, c. 12, s. 17]exemption threshold, of a taxpayer at a particular time in respect of a flow-through share class of property, means the amount determined by the formulaA – BwhereAis the total ofthe total of all amounts, each of which is an amount that would be the cost to the taxpayer, computed without reference to subsection 66.3(3), of a flow-through share that was included at any time before the particular time in the flow-through share class of property and that was issued by a corporation to the taxpayer on or after the taxpayer’s fresh-start date in respect of the flow-through share class of property at that time, other than a flow-through share that the taxpayer was obligated, before March 22, 2011, to acquire pursuant to the terms of a flow-through share agreement entered into between the corporation and the taxpayer, andthe total of all amounts, each of which is an amount that would be the adjusted cost base to the taxpayer of an interest in a partnership — computed as if subparagraph 53(1)(e)(vii.1) and clauses 53(2)(c)(ii)(C) and (D) did not apply to any amount incurred by the partnership in respect of a flow-through share held by the partnership, either directly or indirectly through another partnership — that was included at any time before the particular time in the flow-through share class of property, ifthe taxpayeracquired the interest on or after the taxpayer’s fresh-start date in respect of the flow-through share class of property at the particular time (other than an interest that the taxpayer was obligated, before August 16, 2011, to acquire pursuant to the terms of an agreement in writing entered into by the taxpayer), ormade a contribution of capital to the partnership on or after August 16, 2011,at any time after the taxpayer acquired the interest or made the contribution of capital, the taxpayer is deemed by subsection 66(18) to have made or incurred an outlay or expense in respect of a flow-through share held by the partnership, either directly or indirectly through another partnership, andat any time between the time that the taxpayer acquired the interest or made the contribution of capital and the particular time, more than 50% of the fair market value of the assets of the partnership is attributable to property included in a flow-through share class of property, andBis the total, if any, of all amounts, each of which is the lesser ofthe total of all amounts, each of which is a capital gain from a disposition of a property included in the flow-through share class of property, other than a capital gain referred to in paragraph 38.1(a), at an earlier time that isbefore the particular time, andafter the first time that the taxpayer acquired a flow-through share referred to in paragraph (a) of the description of A or acquired a partnership interest referred to in paragraph (b) of the description of A, andthe exemption threshold of the taxpayer in respect of the flow-through share class of property immediately before that earlier time; (seuil d’exonération)flow-through share class of property means a group of properties,in respect of a class of shares of the capital stock of a corporation, each of which isa share of the class, if any share of the class or any right described in subparagraph (ii) is, at any time, a flow-through share to any person,a right to acquire a share of the class, if any share of that class or any right described in this subparagraph is, at any time, a flow-through share to any person, ora property that is an identical property of a property described in subparagraph (i) or (ii), oreach of which is an interest in a partnership, if at any time more than 50% of the fair market value of the partnership’s assets is attributable to property included in a flow-through share class of property; (catégorie de biens constituée d’actions accréditives)fresh-start date, of a taxpayer at a particular time in respect of a flow-through share class of property, meansin the case of a partnership interest that is included in the flow-through share class of property, the day that is the later ofAugust 16, 2011, andthe last day, if any, before the particular time, on which the taxpayer held an interest in the partnership, andin the case of any other property that is included in the flow-through share class of property, the day that is the later ofMarch 22, 2011, andthe last day, if any, before the particular time, on which the taxpayer disposed of all property included in the flow-through share class of property; (date de nouveau départ)listed personal property of a taxpayer means the taxpayer’s personal-use property that is all or any portion of, or any interest in or right to — or, for civil law, any right in or to — anyprint, etching, drawing, painting, sculpture, or other similar work of art,jewellery,rare folio, rare manuscript, or rare book,stamp, orcoin; (biens meubles déterminés)personal-use property of a taxpayer includesproperty owned by the taxpayer that is used primarily for the personal use or enjoyment of the taxpayer or for the personal use or enjoyment of one or more individuals each of whom isthe taxpayer,a person related to the taxpayer, orwhere the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary,any debt owing to the taxpayer in respect of the disposition of property that was the taxpayer’s personal-use property, andany property of the taxpayer that is an option to acquire property that would, if the taxpayer acquired it, be personal-use property of the taxpayer,and personal-use property of a partnership includes any partnership property that is used primarily for the personal use or enjoyment of any member of the partnership or for the personal use or enjoyment of one or more individuals each of whom is a member of the partnership or a person related to such a member; (biens à usage personnel)principal residence of a taxpayer for a taxation year means a particular property that is a housing unit, a leasehold interest in a housing unit or a share of the capital stock of a co-operative housing corporation acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, ifwhere the taxpayer is an individual other than a personal trust, the housing unit was ordinarily inhabited in the year by the taxpayer, by the taxpayer’s spouse or common-law partner or former spouse or common-law partner or by a child of the taxpayer,where the taxpayer is a personal trust, the housing unit was ordinarily inhabited in the calendar year ending in the year by a specified beneficiary of the trust for the year, by the spouse or common-law partner or former spouse or common-law partner of such a beneficiary or by a child of such a beneficiary, orwhere the taxpayer is a personal trust or an individual other than a trust, the taxpayerelected under subsection 45(2) that relates to the change in use of the particular property in the year or a preceding taxation year, other than an election rescinded under subsection 45(2) in the taxpayer’s return of income for the year or a preceding taxation year, orelected under subsection 45(3) that relates to a change in use of the particular property in a subsequent taxation year,except that, subject to section 54.1, a particular property shall be considered not to be a taxpayer’s principal residence for a taxation yearwhere the taxpayer is an individual other than a personal trust, unless the particular property was designated by the taxpayer in prescribed form and manner to be the taxpayer’s principal residence for the year and no other property has been designated for the purposes of this definition for the yearwhere the year is before 1982, by the taxpayer, orwhere the year is after 1981,by the taxpayer,by a person who was throughout the year the taxpayer’s spouse or common-law partner (other than a spouse or common-law partner who was throughout the year living apart from, and was separated under a judicial separation or written separation agreement from, the taxpayer),by a person who was the taxpayer’s child (other than a child who was at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older), orwhere the taxpayer was not at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older, by a person who was the taxpayer’smother or father, orbrother or sister, where that brother or sister was not at any time in the year a married person, a person who is in a common-law partnership or 18 years of age or older,where the taxpayer is a personal trust, unlessthe particular property was designated by the trust in prescribed form and manner to be the taxpayer’s principal residence for the year,the trust specifies in the designation each individual (in this definition referred to as a “specified beneficiary” of the trust for the year) who, in the calendar year ending in the year,is beneficially interested in the trust, andexcept where the trust is entitled to designate it for the year solely because of paragraph (b), ordinarily inhabited the housing unit or has a spouse or common-law partner, former spouse or common-law partner or child who ordinarily inhabited the housing unit,no corporation (other than a registered charity) or partnership is beneficially interested in the trust at any time in the year,if the year begins after 2016, the trust is, in the year,a trustfor which a day is to be determined under paragraph 104(4)(a), (a.1) or (a.4) by reference to the death or later death, as the case may be, that has not occurred before the beginning of the year, of an individual who is resident in Canada during the year, anda specified beneficiary of which for the year is the individual referred to in subclause (I),a trustthat is a qualified disability trust (as defined in subsection 122(3)) for the year, andan electing beneficiary (in this clause, as defined in subsection 122(3)) of which for the year isresident in Canada during the year,a specified beneficiary of the trust for the year, anda spouse, common-law partner, former spouse or common-law partner or child of the settlor (in this subparagraph, as defined in subsection 108(1)) of the trust,a trusta specified beneficiary of which for the year is an individualwho is resident in Canada during the year,who has not attained 18 years of age before the end of the year, anda mother or father of whom is a settlor of the trust, andin respect of which either of the following conditions is met:no mother or father of the individual referred to in subclause (I) is alive at the beginning of the year, orthe trust arose before the beginning of the year on and as a consequence of the death of a mother or father of the individual referred to in subclause (I), ora trusta specified beneficiary of which for the year is a qualifying individual for the year in respect of the trust, andunder which no person other than a beneficiary described in subclause (I) may receive or otherwise obtain the use of, during the beneficiary’s lifetime, any of the income or capital of the trust and the trustees are required to consider the needs of the beneficiary including, without limiting the generality of the foregoing, the comfort, care and maintenance of the beneficiary, andno other property has been designated for the purpose of this definition for the calendar year ending in the year by any specified beneficiary of the trust for the year, by a person who was throughout that calendar year such a beneficiary’s spouse or common-law partner (other than a spouse or common-law partner who was throughout that calendar year living apart from, and was separated pursuant to a judicial separation or written separation agreement from, the beneficiary), by a person who was such a beneficiary’s child (other than a child who was during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over) or, where such a beneficiary was not during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over, by a person who was such a beneficiary’smother or father, orbrother or sister, where that brother or sister was not during that calendar year a married person or a person who is in a common-law partnership or a person 18 years or over, orbecause of paragraph (b), if solely because of that paragraph the property would, but for this paragraph, have been a principal residence of the taxpayer for 4 or more preceding taxation years,and, for the purpose of this definition,the principal residence of a taxpayer for a taxation year shall be deemed to include, except where the particular property consists of a share of the capital stock of a co-operative housing corporation, the land subjacent to the housing unit and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the housing unit as a residence, except that where the total area of the subjacent land and of that portion exceeds 1/2 hectare, the excess shall be deemed not to have contributed to the use and enjoyment of the housing unit as a residence unless the taxpayer establishes that it was necessary to such use and enjoyment,a particular property designated under paragraph (c.1) by a trust for a year shall be deemed to be property designated for the purposes of this definition by each specified beneficiary of the trust for the calendar year ending in the year, anda qualifying individual, for a taxation year in respect of a trust, means an individual who meets the following conditions:the individual is, in the year, any ofthe settlor of the trust,the child, grandchild, great grandchild, parent, grandparent, great grandparent, brother, sister, uncle, aunt, niece or nephew of the settlor or of the spouse or common-law partner or former spouse or common-law partner of the settlor, andthe spouse or common-law partner or former spouse or common-law partner of any person described in clause (A) or (B),the individual is resident in Canada during the year, andan amount is deductible, or would be deductible if this Act were read without reference to paragraph 118.3(1)(c), under subsection 118.3(1) in computing the individual’s tax payable under this Part for the year; (résidence principale)proceeds of disposition of property includes,the sale price of property that has been sold,compensation for property unlawfully taken,compensation for property destroyed, and any amount payable under a policy of insurance in respect of loss or destruction of property,compensation for property taken under statutory authority or the sale price of property sold to a person by whom notice of an intention to take it under statutory authority was given,compensation for property injuriously affected, whether lawfully or unlawfully or under statutory authority or otherwise,compensation for property damaged and any amount payable under a policy of insurance in respect of damage to property, except to the extent that such compensation or amount, as the case may be, has within a reasonable time after the damage been expended on repairing the damage,an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec, plus any amount received by the taxpayer out of the proceeds of the sale,any amount included in computing a taxpayer’s proceeds of disposition of the property because of section 79, andin the case of a share, an amount deemed by subparagraph 88(2)(b)(ii) not to be a dividend on that share,but notwithstanding any other provision of this Part, does not includeany amount that would otherwise be proceeds of disposition of a share to the extent that the amount is deemed by subsection 84(2) or (3) to be a dividend received except to the extent the dividend is deemedby paragraph 55(2)(b) to be proceeds of disposition of the share, orby subparagraph 88(2)(b)(ii) not to be a dividend, orany amount that would otherwise be proceeds of disposition of property of a taxpayer to the extent that the amount is deemed by subsection 84.1(1), 212.1(1.1) or 212.2(2) to be a dividend paid to the taxpayer or, if the taxpayer is a partnership, to a member of the taxpayer; (produit de disposition)specified property of a taxpayer is capital property of the taxpayer that isa share,a capital interest in a trust,an interest in a partnership, oran option to acquire specified property of the taxpayer; (bien déterminé)superficial loss of a taxpayer means the taxpayer’s loss from the disposition of a particular property whereduring the period that begins 30 days before and ends 30 days after the disposition, the taxpayer or a person affiliated with the taxpayer acquires a property (in this definition referred to as the “substituted property”) that is, or is identical to, the particular property, andat the end of that period, the taxpayer or a person affiliated with the taxpayer owns or had a right to acquire the substituted property,except where the disposition wasa disposition deemed to have been made by subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 138.2(4) or 142.5(2), section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),the expiry of an option,a disposition to which paragraph 40(2)(e.1) applies,a disposition by a taxpayer that was subject to a loss restriction event within 30 days after the disposition,a disposition by a person that, within 30 days after the disposition, became or ceased to be exempt from tax under this Part on its taxable income, ora disposition to which subsection 40(3.4) or 69(5) applies,and, for the purpose of this definition,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, anda share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 2013, deemed to be a property that is identical to equity in the SIFT wind-up entity. (perte apparente)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 54; 1994, c. 7, Sch. II, s. 31, Sch. VIII, s. 16, c. 21, s. 23; 1995, c. 3, s. 15, c. 21, ss. 18, 77; 1998, c. 19, s. 95; 2000, c. 12, ss. 130(F), 142, c. 19, s. 5; 2001, c. 17, ss. 37, 207(E); 2009, c. 2, s. 12; 2011, c. 24, s. 9; 2013, c. 34, ss. 107, 191, c. 40, s. 23; 2016, c. 7, s. 4, c. 12, s. 17; 2017, c. 33, s. 13; 2018, c. 27, s. 42023, c. 26, s. 102024, c. 17, s. 11(E)
Exception to principal residence rulesA taxation year in which a taxpayer does not ordinarily inhabit the taxpayer’s property as a consequence of the relocation of the place of employment of the taxpayer or the taxpayer’s spouse or common-law partner while the taxpayer or the taxpayer’s spouse or common-law partner, as the case may be, is employed by an employer who is not a person to whom the taxpayer or the taxpayer’s spouse or common-law partner is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definition principal residence in section 54 ifthe property subsequently becomes ordinarily inhabited by the taxpayer during the term of the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s employment by that employer or before the end of the taxation year immediately following the taxation year in which the taxpayer’s or the spouse’s or common-law partner’s employment by that employer terminates; orthe taxpayer dies during the term of the taxpayer’s or the spouse’s or common-law partner’s employment by that employer.Definition of propertyIn this section, property, in relation to a taxpayer, means a housing unitowned by the taxpayer,in respect of which the taxpayer has a leasehold interest, orin respect of which the taxpayer owned a share of the capital stock of a co-operative housing corporation if the share was acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporationwhether jointly with another person or otherwise in the year and that at all times was at least 40 kilometres farther from the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s new place of employment than was the taxpayer’s subsequent place or places of residence.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 54.1; 2000, c. 12, s. 142; 2001, c. 17, s. 238(E); 2013, c. 34, s. 192(E)
Certain shares deemed to be capital propertyWhere any person has disposed of property that consisted of all or substantially all of the assets used in an active business carried on by that person to a corporation for consideration that included shares of the corporation, the shares shall be deemed to be capital property of the person.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1988, c. 55, s. 32
DefinitionsIn this section,distribution means a direct or indirect transfer of property of a corporation (referred to in this section as the “distributing corporation”) to one or more corporations (each of which is referred to in this section as a “transferee corporation”) where, in respect of each type of property owned by the distributing corporation immediately before the transfer, each transferee corporation receives property of that type the fair market value of which is equal to or approximates the amount determined by the formulaA × B/CwhereAis the fair market value, immediately before the transfer, of all property of that type owned at that time by the distributing corporation,Bis the fair market value, immediately before the transfer, of all the shares of the capital stock of the distributing corporation owned at that time by the transferee corporation, andCis the fair market value, immediately before the transfer, of all the issued shares of the capital stock of the distributing corporation; (attribution)permitted acquisition, in relation to a distribution by a distributing corporation, means an acquisition of property by a person or partnership on, or as part of,a distribution, ora permitted exchange or permitted redemption in relation to a distribution by another distributing corporation; (acquisition autorisée)permitted exchange, in relation to a distribution by a distributing corporation, meansan exchange of shares for shares of the capital stock of the distributing corporation to which subsection 51(1) or 86(1) applies or would, if the shares were capital property to the holder thereof, apply, other than an exchange that resulted in an acquisition of control of the distributing corporation by any person or group of persons, andan exchange of shares of the capital stock of the distributing corporation by one or more shareholders of the distributing corporation (each of whom is referred to in this paragraph as a “participant”) for shares of the capital stock of another corporation (referred to in this paragraph as the “acquiror”) in contemplation of the distribution whereno share of the capital stock of the acquiror outstanding immediately after the exchange (other than directors’ qualifying shares) is owned at that time by any person or partnership other than a participant,and eitherthe acquiror owns, immediately before the distribution, all the shares each of which is a share of the capital stock of the distributing corporation that was owned immediately before the exchange by a participant, orthe fair market value, immediately before the distribution, of each participant’s shares of the capital stock of the acquiror is equal to or approximates the amount determined by the formula(A × B/C) + DwhereAis the fair market value, immediately before the distribution, of all the shares of the capital stock of the acquiror then outstanding (other than shares issued to participants in consideration for shares of a specified class all the shares of which were acquired by the acquiror on the exchange),Bis the fair market value, immediately before the exchange, of all the shares of the capital stock of the distributing corporation (other than shares of a specified class none or all of the shares of which were acquired by the acquiror on the exchange) owned at that time by the participant,Cis the fair market value, immediately before the exchange, of all the shares (other than shares of a specified class none or all of the shares of which were acquired by the acquiror on the exchange and shares to be redeemed, acquired or cancelled by the distributing corporation pursuant to the exercise of a statutory right of dissent by the holder of the share) of the capital stock of the distributing corporation outstanding immediately before the exchange, andDis the fair market value, immediately before the distribution, of all the shares issued to the participant by the acquiror in consideration for shares of a specified class all of the shares of which were acquired by the acquiror on the exchange; (échange autorisé)permitted redemption, in relation to a distribution by a distributing corporation, meansa redemption or purchase for cancellation by the distributing corporation, as part of the reorganization in which the distribution was made, of all the shares of its capital stock that were owned, immediately before the distribution, by a transferee corporation in relation to the distributing corporation,a redemption or purchase for cancellation by a transferee corporation in relation to the distributing corporation, or by a corporation that, immediately after the redemption or purchase, was a subsidiary wholly-owned corporation of the transferee corporation, as part of the reorganization in which the distribution was made, of all of the shares of the capital stock of the transferee corporation or the subsidiary wholly-owned corporation that were acquired by the distributing corporation in consideration for the transfer of property received by the transferee corporation on the distribution, anda redemption or purchase for cancellation by the distributing corporation, in contemplation of the distribution, of all the shares of its capital stock each of which isa share of a specified class the cost of which, at the time of its issuance, to its original owner was equal to the fair market value at that time of the consideration for which it was issued, ora share that was issued, in contemplation of the distribution, by the distributing corporation in exchange for a share described in subparagraph 55(1) permitted redemption (c)(i); (rachat autorisé)qualified person, in relation to a distribution, means a person or partnership with whom the distributing corporation deals at arm’s length at all times during the course of the series of transactions or events that includes the distribution ifat any time before the distribution,all of the shares of each class of the capital stock of the distributing corporation that includes shares that cause that person or partnership to be a specified shareholder of the distributing corporation (in this definition all of those shares in all of those classes are referred to as the “exchanged shares”) are, in the circumstances described in paragraph (a) of the definition permitted exchange, exchanged for consideration that consists solely of shares of a specified class of the capital stock of the distributing corporation (in this definition referred to as the “new shares”), orthe terms or conditions of all of the exchanged shares are amended (which shares are in this definition referred to after the amendment as the “amended shares”) and the amended shares are shares of a specified class of the capital stock of the distributing corporation,immediately before the exchange or amendment, the exchanged shares are listed on a designated stock exchange,immediately after the exchange or amendment, the new shares or the amended shares, as the case may be, are listed on a designated stock exchange,the exchanged shares would be shares of a specified class if they were not convertible into, or exchangeable for, other shares,the new shares or the amended shares, as the case may be, and the exchanged shares are non-voting in respect of the election of the board of directors of the distributing corporation except in the event of a failure or default under the terms or conditions of the shares, andno holder of the new shares or the amended shares, as the case may be, is entitled to receive on the redemption, cancellation or acquisition of the new shares or the amended shares, as the case may be, by the distributing corporation or by any person with whom the distributing corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the exchanged shares were issued and the amount of any unpaid dividends on the new shares or on the amended shares, as the case may be; (personne admissible)safe-income determination time for a transaction or event or a series of transactions or events means the time that is the earlier ofthe time that is immediately after the earliest disposition or increase in interest described in any of subparagraphs 55(3)(a)(i) to 55(3)(a)(v) that resulted from the transaction, event or series, andthe time that is immediately before the earliest time that a dividend is paid as part of the transaction, event or series; (moment de détermination du revenu protégé)specified class means a class of shares of the capital stock of a distributing corporation wherethe paid-up capital in respect of the class immediately before the beginning of the series of transactions or events that includes a distribution by the distributing corporation was not less than the fair market value of the consideration for which the shares of that class then outstanding were issued,under neither the terms and conditions of the shares nor any agreement in respect of the shares are the shares convertible into or exchangeable for shares other than shares of a specified class or shares of the capital stock of a transferee corporation in relation to the distributing corporation,no holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares, andthe shares are non-voting in respect of the election of the board of directors except in the event of a failure or default under the terms or conditions of the shares; (catégorie exclue)specified corporation in relation to a distribution means a distributing corporationthat is a public corporation or a specified wholly-owned corporation of a public corporation,shares of the capital stock of which are exchanged for shares of the capital stock of another corporation (referred to in this definition and subsection (3.02) as an “acquiror”) in an exchange to which the definition permitted exchange in this subsection would apply if that definition were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition,that does not make a distribution, to a corporation that is not an acquiror, after 1998 and before the day that is three years after the day on which the shares of the capital stock of the distributing corporation are exchanged in a transaction described in paragraph (b), andno acquiror in relation to which makes a distribution after 1998 and before the day that is three years after the day on which the shares of the capital stock of the distributing corporation are exchanged in a transaction described in paragraph (b),and for the purposes of paragraphs (c) and (d)a corporation that is formed by an amalgamation of two or more other corporations is deemed to be the same corporation as, and a continuation of, each of the other corporations, andwhere there has been a winding-up of a corporation to which subsection 88(1) applies, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary; (société déterminée)specified wholly-owned corporation of a public corporation means a corporation all of the outstanding shares of the capital stock of which (other than directors’ qualifying shares and shares of a specified class) are held bythe public corporation,a specified wholly-owned corporation of the public corporation, orany combination of corporations described in paragraph (a) or (b). (filiale à cent pour cent déterminée)Deemed proceeds or gainIf this subsection applies to a taxable dividend received by a dividend recipient, notwithstanding any other provision of this Act, the amount of the dividend (other than the portion of it, if any, subject to tax under Part IV that is not refunded as a consequence of the payment of a dividend by a corporation where the payment is part of the series referred to in subsection (2.1)) is deemednot to be a dividend received by the dividend recipient;if the dividend is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies, to be proceeds of disposition of the share that is redeemed, acquired or cancelled except to the extent that the dividend is otherwise included in computing those proceeds; andif paragraph (b) does not apply to the dividend, to be a gain of the dividend recipient, for the year in which the dividend was received, from the disposition of a capital property.Application of subsection (2)Subsection (2) applies to a taxable dividend received by a corporation resident in Canada (in subsections (2) to (2.2) and (2.4) referred to as the dividend recipient) as part of a transaction or event or a series of transactions or events ifthe dividend recipient is entitled to a deduction in respect of the dividend under subsection 112(1) or (2) or 138(6);it is the case thatone of the purposes of the payment or receipt of the dividend (or, in the case of a dividend under subsection 84(3), one of the results of which) is to effect a significant reduction in the portion of the capital gain that, but for the dividend, would have been realized on a disposition at fair market value of any share of capital stock immediately before the dividend, orthe dividend (other than a dividend that is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies) is received on a share that is held as capital property by the dividend recipient and one of the purposes of the payment or receipt of the dividend is to effecta significant reduction in the fair market value of any share, ora significant increase in the cost of property, such that the amount that is the total of the cost amounts of all properties of the dividend recipient immediately after the dividend is significantly greater than the amount that is the total of the cost amounts of all properties of the dividend recipient immediately before the dividend; andthe amount of the dividend exceeds the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received.Special rule — amount of the stock dividendFor the purpose of applying subsections (2), (2.1), (2.3) and (2.4), the amount of a stock dividend and the dividend recipient’s entitlement to a deduction under subsection 112(1) or (2) or 138(6) in respect of the amount of that dividend are to be determined as if paragraph (b) of the definition amount in subsection 248(1) read as follows:in the case of a stock dividend paid by a corporation, the greater ofthe amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend, andthe fair market value of the share or shares issued as a stock dividend at the time of payment,Stock dividends and safe incomeIf this subsection applies in respect of a stock dividendthe amount of the stock dividend is deemed for the purpose of subsection (2) to be a separate taxable dividend to the extent of the portion of the amount that does not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received; andthe amount of the separate taxable dividend referred to in paragraph (a) is deemed to reduce the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received.Application of subsection (2.3)Subsection (2.3) applies in respect of a stock dividend ifa dividend recipient holds a share upon which it receives the stock dividend;the fair market value of the share or shares issued as a stock dividend exceeds the amount by which the paid-up capital of the corporation that paid the stock dividend is increased because of the dividend; andsubsection (2) would apply to the dividend if subsection (2.1) were read without reference to its paragraph (c).Determination of reduction in fair market valueFor the purpose of applying clause (2.1)(b)(ii)(A), whether a dividend causes a significant reduction in the fair market value of any share is to be determined as if the fair market value of the share, immediately before the dividend, was increased by an amount equal to the amount, if any, by which the fair market value of the dividend received on the share exceeds the fair market value of the share.ApplicationSubsection 55(2) does not apply to any dividend received by a corporation (in this subsection and subsection 55(3.01) referred to as the “dividend recipient”)in the case of a dividend that is received on a redemption, acquisition or cancellation of a share, by the corporation that issued the share, to which subsection 84(2) or (3) applies, if, as part of a transaction or event or a series of transactions or events as a part of which the dividend is received, there was not at any particular timea disposition of property, other thanmoney disposed of on the payment of a dividend or on a reduction of the paid-up capital of a share, andproperty disposed of for proceeds that are not less than its fair market value,to a person or partnership that was an unrelated person immediately before the particular time,a significant increase (other than as a consequence of a disposition of shares of the capital stock of a corporation for proceeds of disposition that are not less than their fair market value) in the total direct interest in any corporation of one or more persons or partnerships that were unrelated persons immediately before the particular time,a disposition, to a person or partnership who was an unrelated person immediately before the particular time, ofshares of the capital stock of the corporation that paid the dividend (referred to in this paragraph and subsection 55(3.01) as the “dividend payer”), orproperty (other than shares of the capital stock of the dividend recipient) more than 10% of the fair market value of which was, at any time during the series, derived from any combination of shares of the capital stock and debt of the dividend payer,after the time the dividend was received, a disposition, to a person or partnership that was an unrelated person immediately before the particular time, ofshares of the capital stock of the dividend recipient, orproperty more than 10% of the fair market value of which was, at any time during the series, derived from any combination of shares of the capital stock and debt of the dividend recipient, anda significant increase in the total of all direct interests in the dividend payer of one or more persons or partnerships who were unrelated persons immediately before the particular time; orif the dividend was receivedin the course of a reorganization in whicha distributing corporation made a distribution to one or more transferee corporations, andthe distributing corporation was wound up or all of the shares of its capital stock owned by each transferee corporation immediately before the distribution were redeemed or cancelled otherwise than on an exchange to which subsection 51(1), 85(1) or 86(1) applies, andon a permitted redemption in relation to the distribution or on the winding-up of the distributing corporation.Interpretation for par. (3)(a)For the purposes of paragraph 55(3)(a),an unrelated person means a person (other than the dividend recipient) to whom the dividend recipient is not related or a partnership any member of which (other than the dividend recipient) is not related to the dividend recipient;a corporation that is formed by an amalgamation of 2 or more other corporations is deemed to be the same corporation as, and a continuation of, each of the other corporations;where there has been a winding-up of a corporation to which subsection 88(1) applies, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary;proceeds of disposition are to be determined without reference tosubparagraph (j)(i) of the definition proceeds of disposition in section 54, andsection 93;notwithstanding any other provision of this Act, where a non-resident person disposes of a property in a taxation year and the gain or loss from the disposition is not included in computing the person’s taxable income earned in Canada for the year, the person is deemed to have disposed of the property for proceeds of disposition that are less than its fair market value unless, under the income tax laws of the country in which the person is resident, the gain or loss is computed as if the property were disposed of for proceeds of disposition that are not less than its fair market value and the gain or loss so computed is recognized for the purposes of those laws;a significant increase in the total direct interest in a corporation that would, but for this paragraph, be described in subparagraph (3)(a)(ii) is deemed not to be described in that subparagraph if the increase was the result of the issuance of shares of the capital stock of the corporation solely for money and the shares were redeemed, acquired or cancelled by the corporation before the dividend was received;a disposition of property that would, but for this paragraph, be described in subparagraph (3)(a)(i), or a significant increase in the total direct interest in a corporation that would, but for this paragraph, be described in subparagraph (3)(a)(ii), is deemed not to be described in those subparagraphs ifthe dividend payer was related to the dividend recipient immediately before the dividend was received,the dividend payer did not, as part of the series of transactions or events that includes the receipt of the dividend, cease to be related to the dividend recipient,the disposition or increase occurred before the dividend was received,the disposition or increase was the result of the disposition of shares to, or the acquisition of shares of, a particular corporation, andat the time the dividend was received, all the shares of the capital stock of the dividend recipient and the dividend payer were owned by the particular corporation, a corporation that controlled the particular corporation, a corporation controlled by the particular corporation or any combination of those corporations; anda winding-up of a subsidiary wholly-owned corporation to which subsection 88(1) applies, or an amalgamation to which subsection 87(11) applies of a corporation with one or more subsidiary wholly-owned corporations, is deemed not to result in a significant increase in the total direct interest, or in the total of all direct interests, in the subsidiary or subsidiaries, as the case may be.Distribution by a specified corporationFor the purposes of the definition distribution in subsection (1), where the transfer referred to in that definition is by a specified corporation to an acquiror described in the definition specified corporation in subsection (1), the references in the definition distribution to“each type of property” shall be read as “property”; and“property of that type” shall be read as “property”.Where paragraph (3)(b) not applicableNotwithstanding subsection 55(3), a dividend to which subsection 55(2) would, but for paragraph 55(3)(b), apply is not excluded from the application of subsection 55(2) wherein contemplation of and before a distribution (other than a distribution by a specified corporation) made in the course of the reorganization in which the dividend was received, property became property of the distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation otherwise than as a result ofan amalgamation of corporations each of which was related to the distributing corporation,an amalgamation of a predecessor corporation of the distributing corporation and one or more corporations controlled by that predecessor corporation,a reorganization in which a dividend was received to which subsection 55(2) would, but for paragraph 55(3)(b), apply, ora disposition of property bythe distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation to a corporation controlled by the distributing corporation or a predecessor corporation of the distributing corporation,a corporation controlled by the distributing corporation or by a predecessor corporation of the distributing corporation to the distributing corporation or predecessor corporation, as the case may be, orthe distributing corporation, a corporation controlled by it or a predecessor corporation of any such corporation for consideration that consists only of money or indebtedness that is not convertible into other property, or of any combination thereof,the dividend was received as part of a series of transactions or events in whicha person or partnership (referred to in this subparagraph as the “vendor”) disposed of property andthe property isa share of the capital stock of a distributing corporation that made a distribution as part of the series or of a transferee corporation in relation to the distributing corporation, orproperty 10% or more of the fair market value of which was, at any time during the course of the series, derived from one or more shares described in subclause 55(3.1)(b)(i)(A)(I),the vendor (other than a qualified person in relation to the distribution) was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, andthe property or any other property (other than property received by the transferee corporation on the (distribution) acquired by any person or partnership in substitution therefor was acquired (otherwise than on a permitted acquisition, permitted exchange or permitted redemption in relation to the (distribution) by a person (other than the vendor) who was not related to the vendor or, as part of the series, ceased to be related to the vendor or by a partnership,control of a distributing corporation that made a distribution as part of the series or of a transferee corporation in relation to the distributing corporation was acquired (otherwise than as a result of a permitted acquisition, permitted exchange or permitted redemption in relation to the (distribution) by any person or group of persons, orin contemplation of a distribution by a distributing corporation, a share of the capital stock of the distributing corporation was acquired (otherwise than on a permitted acquisition or permitted exchange in relation to the distribution or on an amalgamation of 2 or more predecessor corporations of the distributing corporation) bya transferee corporation in relation to the distributing corporation or by a person or partnership with whom the transferee corporation did not deal at arm’s length from a person to whom the acquiror was not related or from a partnership,a person or any member of a group of persons who acquired control of the distributing corporation as part of the series,a particular partnership any interest in which is held, directly or indirectly through one or more partnerships, by a person referred to in clause 55(3.1)(b)(iii)(B), ora person or partnership with whom a person referred to in clause 55(3.1)(b)(iii)(B) or a particular partnership referred to in clause 55(3.1)(b)(iii)(C) did not deal at arm’s length,the dividend was received by a transferee corporation from a distributing corporation that, immediately after the reorganization in the course of which a distribution was made and the dividend was received, was not related to the transferee corporation and the total of all amounts each of which is the fair market value, at the time of acquisition, of a property thatwas acquired, as part of the series of transactions or events that includes the receipt of the dividend, by a person (other than the transferee corporation) who was not related to the transferee corporation or, as part of the series, ceased to be related to the transferee corporation or by a partnership, otherwise thanas a result of a dispositionin the ordinary course of business, orbefore the distribution for consideration that consists solely of money or indebtedness that is not convertible into other property, or of any combination of the two,on a permitted acquisition in relation to a distribution, oras a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, andis a property (other than money, indebtedness that is not convertible into other property, a share of the capital stock of the transferee corporation and property more than 10% of the fair market value of which is attributable to one or more such shares)that was received by the transferee corporation on the distribution,more than 10% of the fair market value of which was, at any time after the distribution and before the end of the series, attributable to property (other than money and indebtedness that is not convertible into other property) described in clause 55(3.1)(c)(ii)(A) or 55(3.1)(c)(ii)(C), orto which, at any time during the course of the series, the fair market value of property described in clause 55(3.1)(c)(ii)(A) was wholly or partly attributableis greater than 10% of the fair market value, at the time of the distribution, of all the property (other than money and indebtedness that is not convertible into other property) received by the transferee corporation on the distribution, orthe dividend was received by a distributing corporation that, immediately after the reorganization in the course of which a distribution was made and the dividend was received, was not related to the transferee corporation that paid the dividend and the total of all amounts each of which is the fair market value, at the time of acquisition, of a property thatwas acquired, as part of the series of transactions or events that includes the receipt of the dividend, by a person (other than the distributing corporation) who was not related to the distributing corporation or, as part of the series, ceased to be related to the distributing corporation or by a partnership, otherwise thanas a result of a dispositionin the ordinary course of business, orbefore the distribution for consideration that consists solely of money or indebtedness that is not convertible into other property, or of any combination of the two,on a permitted acquisition in relation to a distribution, oras a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, andis a property (other than money, indebtedness that is not convertible into other property, a share of the capital stock of the distributing corporation and property more than 10% of the fair market value of which is attributable to one or more such shares)that was owned by the distributing corporation immediately before the distribution and not disposed of by it on the distribution,more than 10% of the fair market value of which was, at any time after the distribution and before the end of the series, attributable to property (other than money and indebtedness that is not convertible into other property) described in clause 55(3.1)(d)(ii)(A) or 55(3.1)(d)(ii)(C), orto which, at any time during the course of the series, the fair market value of property described in clause 55(3.1)(d)(ii)(A) was wholly or partly attributableis greater than 10% of the fair market value at the time of the distribution, of all the property (other than money and indebtedness that is not convertible into other property) owned immediately before that time by the distributing corporation and not disposed of by it on the distribution.Interpretation of paragraph (3.1)(b)For the purpose of paragraph 55(3.1)(b),in determining whether the vendor referred to in subparagraph 55(3.1)(b)(i) is at any time a specified shareholder of a transferee corporation or of a distributing corporation, the references in the definition specified shareholder in subsection 248(1) to “taxpayer” shall be read as “person or partnership”;a corporation that is formed by the amalgamation of 2 or more corporations (each of which is referred to in this paragraph as a “predecessor corporation”) shall be deemed to be the same corporation as, and a continuation of, each of the predecessor corporations;subject to paragraph 55(3.2)(d), each particular person who acquired a share of the capital stock of a distributing corporation in contemplation of a distribution by the distributing corporation shall be deemed, in respect of that acquisition, not to be related to the person from whom the particular person acquired the share unlessthe particular person acquired all the shares of the capital stock of the distributing corporation that were owned, at any time during the course of the series of transactions or events that included the distribution and before the acquisition, by the other person, orimmediately after the reorganization in the course of which the distribution was made, the particular person was related to the distributing corporation;where a share is acquired by an individual from a personal trust in satisfaction of all or a part of the individual’s capital interest in the trust, the individual shall be deemed, in respect of that acquisition, to be related to the trust;subject to paragraph 55(3.2)(f), where at any time a share of the capital stock of a corporation is redeemed or cancelled (otherwise than on an amalgamation where the only consideration received or receivable for the share by the shareholder on the amalgamation is a share of the capital stock of the corporation formed by the amalgamation), the corporation shall be deemed to have acquired the share at that time;where a share of the capital stock of a corporation is redeemed, acquired or cancelled by the corporation pursuant to the exercise of a statutory right of dissent by the holder of the share, the corporation shall be deemed not to have acquired the share;control of a corporation shall be deemed not to have been acquired by a person or group of persons where it is so acquired solely because ofthe incorporation of the corporation, orthe acquisition by an individual of one or more shares for the sole purpose of qualifying as a director of the corporation; andin relation to a distribution each corporation (other than a qualified person in relation to the distribution) that is a shareholder and a specified shareholder of the distributing corporation at any time during the course of a series of transactions or events, a part of which includes the distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.Interpretation of specified shareholder changedIn determining whether a person is a specified shareholder of a corporation for the purposes of subparagraph 55(3.1)(b)(i) and paragraph 55(3.2)(h), the reference in the definition specified shareholder in subsection 248(1) to “or of any other corporation that is related to the corporation” shall be read as “or of any other corporation that is related to the corporation and that has a significant direct or indirect interest in any issued shares of the capital stock of the corporation”.Specified shareholder exclusionIn determining whether a person is a specified shareholder of a corporation for the purposes of the definition qualified person in subsection (1), subparagraph (3.1)(b)(i) and paragraph (3.2)(h) as it applies for the purpose of subparagraph (3.1)(b)(iii), the reference to “not less than 10% of the issued shares of any class of the capital stock of the corporation” in the definition specified shareholder in subsection 248(1) is to be read as “not less than 10% of the issued shares of any class of the capital stock of the corporation, other than shares of a specified class (within the meaning of subsection 55(1))”.Amalgamation of related corporationsFor the purposes of paragraphs (3.1)(c) and (d), a corporation formed by an amalgamation of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) that were related to each other immediately before the amalgamation, is deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.Avoidance of subsection (2)For the purposes of this section, where it can reasonably be considered that one of the main purposes of one or more transactions or events was to cause 2 or more persons to be related to each other or to cause a corporation to control another corporation, so that subsection 55(2) would, but for this subsection, not apply to a dividend, those persons shall be deemed not to be related to each other or the corporation shall be deemed not to control the other corporation, as the case may be.Applicable rulesFor the purposes of this section,where a dividend referred to in subsection 55(2) was received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series is deemed to be a portion of a capital gain attributable to anything other than income;the income earned or realized by a corporation for a period throughout which it was resident in Canada and not a private corporation shall be deemed to be the total ofits income for the period otherwise determined on the assumption that no amounts were deductible by the corporation by reason of section 37.1 of this Act or paragraph 20(1)(gg) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,the amount, if any, by whichthe amount, if any, by which the total of the capital gains of the corporation for the period exceeds the total of the taxable capital gains of the corporation for the periodexceedsthe amount, if any, by which the total of the capital losses of the corporation for the period exceeds the total of the allowable capital losses of the corporation for the period,the total of all amounts each of which is an amount required to have been included under this subparagraph as it read in its application to a taxation year that ended before February 28, 2000,the amount, if any, by which1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,exceedswhere the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formulaV + WwhereVis 1/2 of the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andWis 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andin any other case, nil, andthe amount, if any, by whichthe total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,exceedswhere the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after October 17, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formulaX + YwhereXis the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andYis 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andin any other case, nil;the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation under section 37.1 of this Act, as that section applies for taxation years that ended before 1995, or paragraph 20(1)(gg) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952;the income earned or realized by a corporation (referred to in this paragraph as the “affiliate”) for a period ending at a time when the affiliate was a foreign affiliate of another corporation is deemed to be the lesser ofthe amount that would, if the Income Tax Regulations were read without reference to their subsection 5905(5.6), be the tax-free surplus balance (within the meaning of their subsection 5905(5.5)) of the affiliate in respect of the other corporation at that time, andthe fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;in determining whether 2 or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,a person shall be deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person, except in the case where the dividend was received or paid, as part of a transaction or event or a series of transactions or events, by a corporation of which a share of the capital stock is a qualified small business corporation share or a share of the capital stock of a family farm or fishing corporation within the meaning of subsection 110.6(1),where at any time a person is related to each beneficiary (other than a registered charity) under a trust who is or may (otherwise than by reason of the death of another beneficiary under the trust) be entitled to share in the income or capital of the trust, the person and the trust shall be deemed to be related at that time to each other and, for this purpose, a person shall be deemed to be related to himself, herself or itself,a trust and a person shall be deemed not to be related to each other unless they are deemed by paragraph 55(3.2)(d) or subparagraph 55(5)(e)(ii) to be related to each other or the person is a corporation that is controlled by the trust, andthis Act shall be read without reference to subsection 251(3) and paragraph 251(5)(b); andunless subsection (2.3) applies, if a corporation has received a dividend any portion of which is a taxable dividend (such a portion referred to as the taxable part in this paragraph), as part of a transaction or event or series of transactions or eventsa portion of the dividend is deemed to be a separate taxable dividend equal to the lesser ofthe taxable part, andthe amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received, andthe amount, if any, by which the taxable part exceeds the portion referred to in subparagraph (i) is deemed to be a separate taxable dividend.Unlisted shares deemed listedA share (in this subsection referred to as the “reorganization share”) is deemed, for the purposes of subsection 116(6) and the definition taxable Canadian property in subsection 248(1), to be listed on a designated stock exchange ifa dividend, to which subsection (2) does not apply because of paragraph (3)(b), is received in the course of a reorganization;in contemplation of the reorganizationthe reorganization share is issued to a taxpayer by a public corporation in exchange for another share of that corporation (in this subsection referred to as the “old share”) owned by the taxpayer, andthe reorganization share is exchanged by the taxpayer for a share of another public corporation (in this subsection referred to as the “new share”) in an exchange that would be a permitted exchange if the definition permitted exchange were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition;immediately before the exchange, the old shareis listed on a designated stock exchange, andis not taxable Canadian property of the taxpayer; andthe new share is listed on a designated stock exchange.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 55; 1994, c. 21, s. 24; 1995, c. 3, s. 16; 1998, c. 19, s. 96; 2001, c. 17, s. 38; 2013, c. 34, ss. 62, 193, c. 40, s. 24; 2016, c. 7, s. 52021, c. 21, s. 1
Other Sources of Income
Amounts to be included in income for yearWithout restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,Pension benefits, unemployment insurance benefits, etc.any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,a superannuation or pension benefit including, without limiting the generality of the foregoing,the amount of any pension, supplement or spouse’s or common-law partner’s allowance under the Old Age Security Act and the amount of any similar payment under a law of a province,the amount of any benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,the amount of any payment out of or under a specified pension plan, andthe amount of any payment out of or under a foreign retirement arrangement established under the laws of a country, except to the extent that the amount would not, if the taxpayer were resident in the country, be subject to income taxation in the country,but not includingthe portion of a benefit received out of or under an employee benefit plan that is required by paragraph 6(1)(g) to be included in computing the taxpayer’s income for the year, or would be required to be so included if that paragraph were read without reference to subparagraph 6(1)(g)(ii),the portion of an amount received out of or under a retirement compensation arrangement that is required by paragraph 56(1)(x) or 56(1)(z) to be included in computing the taxpayer’s income for the year,a benefit received under section 71 of the Canada Pension Plan or under a similar provision of a provincial pension plan as defined in section 3 of that Act, andan amount received out of or under a registered pension plan as a return of all or a portion of a contribution to the plan to the extent that the amountis a payment made to the taxpayer under subsection 147.1(19) or subparagraph 8502(d)(iii) of the Income Tax Regulations, andis not deducted in computing the taxpayer’s income for the year or a preceding taxation year,a retiring allowance, other than an amount received out of or under an employee benefit plan, a retirement compensation arrangement or a salary deferral arrangement,a death benefit,a benefit under Part I, VII.1, VIII or VIII.1 of the Employment Insurance Act,a benefit under regulations made under an appropriation Act providing for a scheme of transitional assistance benefits to persons employed in the production of products to which the Canada-United States Agreement on Automotive Products, signed on January 16, 1965 applies,except to the extent otherwise required to be included in computing the taxpayer’s income, a prescribed benefit under a government assistance program,a benefit under the Act respecting parental insurance, R.S.Q., c. A-29.011, oran income replacement benefit payable to the taxpayer under Part 2 of the Veterans Well-being Act, if the amount is determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of that Act (as modified, where applicable, under Part 5 of that Act);Benefits under CPP/QPPwhere the taxpayer is an estate that arose on or as a consequence of the death of an individual, each benefit received under section 71 of the Canada Pension Plan, or under a similar provision of a provincial pension plan as defined in section 3 of that Act, after July 1997 and in the year in respect of the death of the individual;Pension income reallocationwhere the taxpayer is a pension transferee (as defined in subsection 60.03(1)), any amount that is a split-pension amount (as defined in that subsection) in respect of the pension transferee for the taxation year;Parents of victims of crimeamounts received by the taxpayer in the year under a program established under the authority of the Department of Employment and Social Development Act in respect of children who are deceased or missing as a result of an offence, or a probable offence, under the Criminal Code;Supportthe total of all amounts each of which is an amount determined by the formulaA - (B + C)whereAis the total of all amounts each of which is a support amount received after 1996 and before the end of the year by the taxpayer from a particular person where the taxpayer and the particular person were living separate and apart at the time the amount was received,Bis the total of all amounts each of which is a child support amount that became receivable by the taxpayer from the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, andCis the total of all amounts each of which is a support amount received after 1996 by the taxpayer from the particular person and included in the taxpayer’s income for a preceding taxation year;[Repealed, 1997, c. 25, s. 8][Repealed, 1994, c. 7, Sch. VIII, s. 17]Reimbursement of support paymentsan amount received by the taxpayer in the year under a decree, order or judgment of a competent tribunal as a reimbursement of an amount deducted under paragraph 60(b) or 60(c), or under paragraph 60(c.1) as it applies, in computing the taxpayer’s income for the year or a preceding taxation year to decrees, orders and judgments made before 1993;Annuity paymentsany amount received by the taxpayer in the year as an annuity payment other than an amountotherwise required to be included in computing the taxpayer’s income for the year,with respect to an interest in an annuity contract to which subsection 12.2(1) applies (or would apply if the contract had an anniversary day in the year at a time when the taxpayer held the interest),received out of or under an annuity contract issued or effected as a TFSA, ordescribed in subsection 146.5(3) that is not required by that subsection to be included in the taxpayer’s income;Idemany amount received out of or under, or as proceeds of disposition of, an annuity the payment for which wasdeductible in computing the taxpayer’s income because of paragraph 60(l) or because of subsection 146(5.5) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,made in circumstances to which subsection 146(21) applied, ormade pursuant to or under a deferred profit sharing plan by a trustee under the plan to purchase the annuity for a beneficiary under the plan;Disposition of income-averaging annuity contractany amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation, redemption, sale or other disposition of an income-averaging annuity contract;Idemany amount deemed by subsection 61.1(1) to have been received by the taxpayer in the year as proceeds of the disposition of an income-averaging annuity contract;Supplementary unemployment benefit planamounts received by the taxpayer in the year from a trustee under a supplementary unemployment benefit plan as provided by section 145;Registered retirement savings plan, etc.amounts required by section 146 in respect of a registered retirement savings plan or a registered retirement income fund to be included in computing the taxpayer’s income for the year;Home buyers’ planamounts required by section 146.01 to be included in computing the taxpayer’s income for the year;Lifelong learning planamounts required by section 146.02 to be included in computing the taxpayer’s income for the year;Deferred profit sharing planamounts received by the taxpayer in the year under a deferred profit sharing plan as provided by section 147;Life insurance policy proceedsany amount required by subsection 148(1) or 148(1.1) to be included in computing the taxpayer’s income for the year;Certain tools of an employee, re proceedsall amounts received in the year by a person or partnership (in this paragraph referred to as the “vendor”) as consideration for the disposition by the vendor of a property the cost of which was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the vendor or in respect of a person with whom the vendor does not deal at arm’s length, to the extent that the total of those amounts received in respect of the disposition in the year and in preceding taxation years exceeds the total of the cost to the vendor of the property immediately before the disposition and all amounts included in respect of the disposition under this paragraph in computing the vendor’s income for a preceding taxation year, unless the property was acquired by the vendor in circumstances to which subsection 85(5.1) or subsection 97(5) applied;Legal expensesamounts received by the taxpayer in the year aslegal costs awarded to the taxpayer by a court on an appeal in relation to an assessment of any tax, interest or penalties referred to in paragraph 60(o,reimbursement of costs incurred in relation to a decision of the Canada Employment Insurance Commission under the Employment Insurance Act or to an appeal of such a decision to the Social Security Tribunal,reimbursement of costs incurred in relation to an assessment or a decision under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,if with respect to that assessment or decision, as the case may be, an amount has been deducted or may be deductible under paragraph 60(o) in computing the taxpayer’s income;Idemamounts received by the taxpayer in the year as an award or a reimbursement in respect of legal expenses (other than those relating to a division or settlement of property arising out of, or on a breakdown of, a marriage or common-law partnership) paid to collect or establish a right to a retiring allowance or a benefit under a pension fund or plan (other than a benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act) in respect of employment;Bad debt recoveredany amount received by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year on account of a debt in respect of which a deduction was made under paragraph 60(f) in computing the taxpayer’s income for a preceding taxation year;Scholarships, bursaries, etc.the amount, if any, by whichthe total of all amounts (other than amounts described in paragraph 56(1)(q), amounts received in the course of business, and amounts received in respect of, in the course of or by virtue of an office or employment) received by the taxpayer in the year, each of which is an amount received by the taxpayer as or on account of a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the taxpayer, other than a prescribed prize,exceedsthe taxpayer’s scholarship exemption for the year computed under subsection (3);[Repealed, 2001, c. 17, s. 39]Apprenticeship grantsthe total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program administered by the Department of Employment and Social Development;Research grantsthe amount, if any, by which any grant received by the taxpayer in the year to enable the taxpayer to carry on research or any similar work exceeds the total of expenses incurred by the taxpayer in the year for the purpose of carrying on the work, other thanpersonal or living expenses of the taxpayer except travel expenses (including the entire amount expended for meals and lodging) incurred by the taxpayer while away from home in the course of carrying on the work,expenses in respect of which the taxpayer has been reimbursed, orexpenses that are otherwise deductible in computing the taxpayer’s income for the year;Refund of scholarships, bursaries and research grantsamounts as described in paragraph 60(q) received by the taxpayer in the year from an individual;Education savings plan paymentsamounts in respect of a registered education savings plan required by section 146.1 to be included in computing the taxpayer’s income for the year;Registered disability savings plan paymentsamounts in respect of a registered disability savings plan required by section 146.4 to be included in computing the taxpayer’s income for the year;Financial assistanceamounts received in the year by the taxpayer asearnings supplements provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment,financial assistance under a program established by the Canada Employment Insurance Commission under Part II of the Employment Insurance Act,financial assistance under a program that isestablished by a government or government agency in Canada or by an organization, and[Repealed, 2022, c. 10, s. 407]the subject of an agreement between the government, government agency or organization and the Canada Employment Insurance Commission because of section 63 of that Act,financial assistance provided under a program established by a government, or government agency, in Canada that provides income replacement benefits similar to income replacement benefits provided under a program established under the Employment Insurance Act, other than amounts referred to in subparagraph (iv.1),financial assistance provided underthe Canada Emergency Response Benefit Act,Part VIII.4 of the Employment Insurance Act,the Canada Emergency Student Benefit Act,the Canada Recovery Benefits Act,the Canada Worker Lockdown Benefit Act, ora program established by a government, or government agency, of a province, that provides income replacement benefits similar to income replacement benefits provided under a program established under an Act referred to in any of clauses (A) to (D), oramounts received by the taxpayer in the year under the Wage Earner Protection Program Act in respect of wages (within the meaning of that Act);Grants under prescribed programsthe amount of any grant received in the year under a prescribed program of the Government of Canada relating to home insulation or energy conversion bythe taxpayer, other than a married taxpayer or a taxpayer who is in a common-law partnership who resided with the taxpayer’s spouse or common-law partner at the time the grant was received and whose income for the year is less than the taxpayer’s spouse’s or common-law partner’s income for the year, orthe spouse or common-law partner of the taxpayer with whom the taxpayer resided at the time the grant was received, if the spouse’s or common-law partner’s income for the year is less than the taxpayer’s income for the yearto the extent that the amount is not required by paragraph 12(1)(u) to be included in computing the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s income for the year or a subsequent year;Registered retirement income fundamounts in respect of a registered retirement income fund required by section 146.3 to be included in computing the taxpayer’s income for the year;Social assistance paymentsa social assistance payment made on the basis of a means, needs or income test and received in the year bythe taxpayer, other than a married taxpayer or a taxpayer who is in a common-law partnership who resided with the taxpayer’s spouse or common-law partner at the time the payment was received and whose income for the year is less than the spouse’s or common-law partner’s income for the year, orthe taxpayer’s spouse or common-law partner, if the taxpayer resided with the spouse or common-law partner at the time the payment was received and if the spouse’s or common-law partners income for the year is less than the taxpayer’s income for the year,except to the extent that the payment is otherwise required to be included in computing the income for a taxation year of the taxpayer or the taxpayer’s spouse or common-law partner;Workers’ compensationcompensation received under an employees’ or workers’ compensation law of Canada or a province in respect of an injury, a disability or death;Salary deferral arrangementthe total of all amounts each of which is an amount received by the taxpayer as a benefit (other than an amount received by or from a trust governed by a salary deferral arrangement) in the year out of or under a salary deferral arrangement in respect of a person other than the taxpayer except to the extent that the amount, or another amount that may reasonably be considered to relate thereto, has been included in computing the income of that other person for the year or for any preceding taxation year;Retirement compensation arrangementany amount, including a return of contributions, received in the year by the taxpayer or another person, other than an amount required to be included in that other person’s income for a taxation year under paragraph 12(1)(n.3), out of or under a retirement compensation arrangement that can reasonably be considered to have been received in respect of an office or employment of the taxpayer;Idemany amount received or that became receivable in the year by the taxpayer as proceeds from the disposition of an interest in a retirement compensation arrangement;Idemthe total of all amounts, including a return of contributions, each of which is an amount received in the year by the taxpayer out of or under a retirement compensation arrangement that can reasonably be considered to have been received in respect of an office or employment of a person other than the taxpayer, except to the extent that the amount was requiredunder paragraph 12(1)(n.3) to be included in computing the taxpayer’s income for a taxation year, orunder paragraph 56(1)(x) or subsection 70(2) to be included in computing the income for the year of a person resident in Canada other than the taxpayer;Value of benefitsthe value of benefits received or enjoyed by any person in the year in respect of workshops, seminars, training programs and similar development programs because of the taxpayer’s membership in a registered national arts service organization;Employee life and health trustthe total of all amounts, each of which is an amount received in the year by the taxpayer that is required to be included in income under subsection 144.1(11) except to the extent that the amount was required under subsection 70(2) to be included in computing the income for the year by the taxpayer or other person resident in Canada;Pooled registered pension planany amount required by section 147.5 to be included in computing the taxpayer’s income for the year other than an amount distributed under a PRPP as a return of all or a portion of a contribution to the plan to the extent that the amountis a payment described under clause 147.5(3)(d)(ii)(A) or (B), andis not deducted in computing the taxpayer’s income for the year or a preceding taxation year;Tax informant programany amount received in the year by the taxpayer under a contract, to provide information to the Canada Revenue Agency, entered into by the taxpayer under a program administered by the Canada Revenue Agency to obtain information relating to tax non-compliance;Advanced life deferred annuityany amount required by section 146.5 to be included in computing the taxpayer’s income for the year; andFirst home savings accountany amount required by section 146.6 to be included in computing the taxpayer’s income for the year.Application of s. 12.2(11)The definitions in subsection 12.2(11) apply to paragraph 56(1)(d).Indirect paymentsA payment or transfer of property made pursuant to the direction of, or with the concurrence of, a taxpayer to another person for the benefit of the taxpayer or as a benefit that the taxpayer desired to have conferred on the other person (other than by an assignment of any portion of a retirement pension under section 65.1 of the Canada Pension Plan or a comparable provision of a provincial pension plan as defined in section 3 of that Act) shall be included in computing the taxpayer’s income to the extent that it would be if the payment or transfer had been made to the taxpayer.Exemption for scholarships, fellowships, bursaries and prizesFor the purpose of subparagraph (1)(n)(ii), a taxpayer’s scholarship exemption for a taxation year is the total ofthe total of all amounts each of which is the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolmentin an educational program in respect of which the taxpayer is a qualifying student (as defined in subsection 118.6(1)) in the taxation year, in the immediately preceding taxation year or in the following taxation year, orin an elementary or secondary school educational program,the total of all amounts each of which is the lesser ofthe amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, andthe total of all amounts each of which is an expense incurred by the taxpayer in the taxation year for the purpose of fulfilling the conditions under which the amount described in subparagraph (i) was received, other thanpersonal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),expenses for which the taxpayer is entitled to be reimbursed, andexpenses that are otherwise deductible in computing the taxpayer’s income, andthe lesser of $500 and the amount by which the total described in subparagraph (1)(n)(i) for the taxation year exceeds the total of the amounts determined under paragraphs (a) and (b).Limitations of scholarship exemptionFor the purpose of determining the total in paragraph (3)(a) for a taxation year,a scholarship, fellowship or bursary (in this subsection referred to as an “award”) is not considered to be received in connection with the taxpayer’s enrolment in an educational program described in subparagraph (3)(a)(i) except to the extent that it is reasonable to conclude that the award is intended to support the taxpayer’s enrolment in the program, having regard to all the circumstances, including the terms and conditions that apply in respect of the award, the duration of the program and the period for which support is intended to be provided; andif an award is received in connection with an educational program in respect of which the taxpayer is a qualifying student because of subparagraph (a)(ii) of the definition qualifying student in subsection 118.6(1) in the taxation year, in the immediately preceding taxation year or in the following taxation year (in this paragraph referred to as the claim year), the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of the award may not exceed the amount that is the total of amounts, each of which is the cost of materials related to the program or a fee paid to a designated educational institution in respect of the program, as defined in subsection 118.6(1), in respect of the claim year.Transfer of rights to incomeWhere a taxpayer has, at any time before the end of a taxation year, transferred or assigned to a person with whom the taxpayer was not dealing at arm’s length the right to an amount (other than any portion of a retirement pension assigned by the taxpayer under section 65.1 of the Canada Pension Plan or a comparable provision of a provincial pension plan as defined in section 3 of that Act) that would, if the right had not been so transferred or assigned, be included in computing the taxpayer’s income for the taxation year, the part of the amount that relates to the period in the year throughout which the taxpayer is resident in Canada shall be included in computing the taxpayer’s income for the year unless the income is from property and the taxpayer has also transferred or assigned the property.Interest free or low interest loansWherea particular individual (other than a trust) or a trust in which the particular individual is beneficially interested has, directly or indirectly by means of a trust or by any means whatever, received a loan from or become indebted toanother individual (in this subsection referred to as the “creditor”) whodoes not deal at arm’s length with the particular individual, andis not a trust, ora trust (in this subsection referred to as the “creditor trust”) to which another individual (in this subsection referred to as the “original transferor”) whodoes not deal at arm’s length with the particular individual,was resident in Canada at any time in the period during which the loan or indebtedness is outstanding, andis not a trust,has directly or indirectly by means of a trust or by any means whatever, transferred property, andit can reasonably be considered that one of the main reasons for making the loan or incurring the indebtedness was to reduce or avoid tax by causing income fromthe loaned property,property that the loan or indebtedness enabled or assisted the particular individual, or the trust in which the particular individual is beneficially interested, to acquire, orproperty substituted for property referred to in subparagraph 56(4.1)(b)(i) or 56(4.1)(b)(ii)to be included in the income of the particular individual,the following rules apply:any income of the particular individual for a taxation year from the property referred to in paragraph 56(4.1)(b) that relates to the period or periods in the year throughout which the creditor or the creditor trust, as the case may be, was resident in Canada and the particular individual was not dealing at arm’s length with the creditor or the original transferor, as the case may be, shall be deemed,where subparagraph 56(4.1)(a)(i) applies, to be income of the creditor for that year and not of the particular individual except to the extent thatsection 74.1 applies or would, but for subsection 74.5(3), apply, orsubsection 75(2) appliesto that income, andwhere subparagraph 56(4.1)(a)(ii) applies, to be income of the creditor trust for that year and not of the particular individual except to the extent thatsubparagraph 56(4.1)(c)(i) applies,section 74.1 applies or would, but for subsection 74.5(3), apply, orsubsection 75(2) applies (otherwise than because of paragraph 56(4.1)(d))to that income; andwhere subsection 75(2) applies to any of the property referred to in paragraph 56(4.1)(b) and subparagraph 56(4.1)(c)(ii) applies to income from the property, subsection 75(2) applies after subparagraph 56(4.1)(c)(ii) is applied.ExceptionNotwithstanding any other provision of this Act, subsection 56(4.1) does not apply to any income derived in a particular taxation year whereinterest was charged on the loan or indebtedness at a rate equal to or greater than the lesser ofthe prescribed rate of interest in effect at the time the loan was made or the indebtedness arose, andthe rate that would, having regard to all the circumstances, have been agreed on, at the time the loan was made or the indebtedness arose, between parties dealing with each other at arm’s length;the amount of interest that was payable in respect of the particular year in respect of the loan or indebtedness was paid not later than 30 days after the end of the particular year; andthe amount of interest that was payable in respect of each taxation year preceding the particular year in respect of the loan or indebtedness was paid not later than 30 days after the end of each of those preceding taxation years.Repayment of existing indebtednessFor the purposes of subsection 56(4.1), where at any time a particular property is used to repay, in whole or in part, a loan or indebtedness that enabled or assisted an individual to acquire another property, there shall be included in computing the income from the particular property that proportion of the income or loss, as the case may be, derived after that time from the other property or from property substituted therefor that the amount so repaid is of the cost to the individual of the other property, but for greater certainty nothing in this subsection shall affect the application of subsection 56(4.1) to any income or loss derived from the other property or from property substituted therefor.Exception for split incomeSubsections (2), (4) and (4.1) do not apply to any amount that is included in computing a specified individual’s split income for a taxation year.Child care benefitThere shall be included in computing the income of a taxpayer for a taxation year the total of all amounts each of which is a benefit paid under section 4 of the Universal Child Care Benefit Act that is received in the taxation year bythe taxpayer, ifthe taxpayer does not have a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6) at the end of the year and the taxpayer does not make a designation under subsection (6.1) for the taxation year, orthe income, for the taxation year, of the person who is the taxpayer’s cohabiting spouse or common-law partner at the end of the taxation year is equal to or greater than the income of the taxpayer for the taxation year;the taxpayer’s cohabiting spouse or common-law partner at the end of the taxation year, if the income of the cohabiting spouse or common-law partner for the taxation year is greater than the taxpayer’s income for the taxation year; oran individual who makes a designation under subsection (6.1) in respect of the taxpayer for the taxation year.DesignationIf, at the end of the taxation year, a taxpayer does not have a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6), the taxpayer may designate, in the taxpayer’s return of income for the taxation year, the total of all amounts, each of which is a benefit received in the taxation year by the taxpayer under section 4 of the Universal Child Care Benefit Act, to be income ofif the taxpayer deducts an amount for the taxation year under subsection 118(1) because of paragraph (b) of the description of B in that subsection in respect of an individual, the individual; orin any other case, a child who is a qualified dependant (as defined in section 2 of the Universal Child Care Benefit Act) of the taxpayer.[Repealed, 1994, c. 7, Sch. VII, s. 1]CPP/QPP and UCCB amounts for previous yearsNotwithstanding subsections (1) and (6), ifone or more amountsare received by an individual (other than a trust) in a taxation year as, on account of, in lieu of payment of or in satisfaction of, any benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act, orwould be, but for this subsection, included in computing the income of an individual for a taxation year under subsection (6), anda portion, not less than $300, of the total of those amounts relates to one or more preceding taxation years,that portion shall, at the option of the individual, not be included in the individual’s income.Meaning of income for the yearFor the purposes of paragraphs 56(1)(s) and 56(1)(u), income for the year of a person means the amount that would, but for those paragraphs, paragraphs 60(v.1) and 60(w) and section 63, be the income of that person for the year.Meaning of incomeFor the purposes of subsection (6), income of a person for a taxation year means the amount that would, in the absence of that subsection, paragraphs (1)(s) and (u) and 60(v.1), (w) and (y) and section 63, be the income of the person for the taxation year.Severability of retirement compensation arrangementWhere a retirement compensation arrangement is part of a plan or arrangement (in this subsection referred to as the “plan”) under which amounts not related to the retirement compensation arrangement are payable or provided, for the purposes of this Act, other than this subsection,the retirement compensation arrangement shall be deemed to be a separate arrangement independent of other parts of the plan of which it is a part; andsubject to subsection 6(14), amounts paid out of or under the plan shall be deemed to have first been paid out of the retirement compensation arrangement unless a provision in the plan otherwise provides.Disposition of property by RCA trustFor the purposes of paragraphs 56(1)(x) and 56(1)(z), where, at any time in a year, a trust governed by a retirement compensation arrangementdisposes of property to a person for consideration less than the fair market value of the property at the time of the disposition, or for no consideration,acquires property from a person for consideration greater than the fair market value of the property at the time of the acquisition, orpermits a person to use or enjoy property of the trust for no consideration or for consideration less than the fair market value of such use or enjoyment,the amount, if any, by which the fair market value differs from the consideration or, if there is no consideration, the amount of the fair market value shall be deemed to be an amount received at that time by the person out of or under the arrangement that can reasonably be considered to have been received in respect of an office or employment of a taxpayer.Foreign retirement arrangementIf an amount in respect of a foreign retirement arrangement is, as a result of a transaction, an event or a circumstance, considered to be distributed to an individual under the income tax laws of the country in which the arrangement is established, the amount is, for the purpose of paragraph (1)(a), deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the transaction, event or circumstance.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 56; 1994, c. 7, Sch. II, s. 32, Sch. III, s. 13(E), Sch. VII, s. 1, Sch. VIII, s. 17, c. 21, s. 25; 1996, c. 11, s. 99, c. 23, ss. 172, 187; 1997, c. 25, s. 8; 1998, c. 19, ss. 9, 97; 1999, c. 22, s. 15; 2000, c. 12, s. 142, c. 19, s. 6; 2001, c. 17, s. 39; 2002, c. 9, s. 24; 2006, c. 4, s. 173; 2007, c. 2, s. 6, c. 29, s. 3, c. 35, ss. 17, 104; 2009, c. 2, s. 13; 2010, c. 12, s. 4, c. 25, s. 9; 2011, c. 24, s. 10; 2012, c. 19, s. 277, c. 27, ss. 26, 36, c. 31, s. 11; 2013, c. 34, s. 194, c. 40, ss. 25, 236, 237; 2014, c. 20, s. 2; 2016, c. 7, s. 6; 2017, c. 33, s. 142018, c. 12, s. 32021, c. 23, s. 72021, c. 26, s. 62022, c. 10, s. 4072022, c. 19, s. 52024, c. 17, s. 12
SupportFor the purposes of paragraph 56(1)(b) and subsection 118(5), where an order or agreement, or any variation thereof, provides for the payment of an amount to a taxpayer or for the benefit of the taxpayer, children in the taxpayer’s custody or both the taxpayer and those children, the amount or any part thereofwhen payable, is deemed to be payable to and receivable by the taxpayer; andwhen paid, is deemed to have been paid to and received by the taxpayer.AgreementFor the purposes of section 56, this section and subsection 118(5), the amount determined by the formulaA - BwhereAis the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a person in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the person resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the taxpayer described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a taxpayer, children in the taxpayer’s custody or both the taxpayer and those children, if the taxpayer isthe person’s spouse or common-law partner or former spouse or common-law partner, orwhere the amount became payable under an order made by a competent tribunal in accordance with the laws of a province, an individual who is the parent of a child of whom the person is a legal parent,andBis the amount, if any, by whichthe total of all amounts each of which is an amount included in the total determined for A in respect of the acquisition or improvement of a self-contained domestic establishment in which the taxpayer resides, including any payment of principal or interest in respect of a loan made or indebtedness incurred to finance, in any manner whatever, such acquisition or improvementexceedsthe total of all amounts each of which is an amount equal to 1/5 of the original principal amount of a loan or indebtedness described in paragraph (a),is, where the order or written agreement, as the case may be, provides that this subsection and subsection 60.1(2) shall apply to any amount paid or payable thereunder, deemed to be an amount payable to and receivable by the taxpayer as an allowance on a periodic basis, and the taxpayer is deemed to have discretion as to the use of that amount.Prior paymentsFor the purposes of this section and section 56, where a written agreement or order of a competent tribunal made at any time in a taxation year provides that an amount received before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder,the amount is deemed to have been received thereunder; andthe agreement or order is deemed, except for the purpose of this subsection, to have been made on the day on which the first such amount was received, except that, where the agreement or order is made after April 1997 and varies a child support amount payable to the recipient from the last such amount received by the recipient before May 1997, each varied amount of child support received under the agreement or order is deemed to have been receivable under an agreement or order the commencement day of which is the day on which the first payment of the varied amount is required to be made.DefinitionsThe definitions in this subsection apply in this section and section 56.child support amount means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or common-law partner or former spouse or common-law partner of the payer or who is a parent of a child of whom the payer is a legal parent. (pension alimentaire pour enfants)commencement day at any time of an agreement or order meanswhere the agreement or order is made after April 1997, the day it is made; andwhere the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest ofthe day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, andthe day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this Act. (date d’exécution)support amount means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, andthe recipient is the spouse or common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership and the amount is receivable under an order of a competent tribunal or under a written agreement; orthe payer is a legal parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province. (pension alimentaire)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 56.1; 1994, c. 7, Sch. VIII, s. 18, c. 21, s. 134; 1997, c. 25, s. 9; 1998, c. 19, s. 98(F), s. 307; 2000, c. 12, s. 142; 2005, c. 33, s. 10; 2013, c. 34, s. 108
Reserve claimed for debt forgivenessThere shall be included in computing an individual’s income for a taxation year during which the individual was not a bankrupt the amount, if any, deducted under section 61.2 in computing the individual’s income for the preceding taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 19
Reserve claimed for debt forgivenessThere shall be included in computing a taxpayer’s income for a taxation year during which the taxpayer was not a bankrupt the amount, if any, deducted under section 61.4 in computing the taxpayer’s income for the preceding taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 19
Restrictive Covenants
DefinitionsThe following definitions apply in this section.eligible corporation, of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock. (société admissible)eligible individual, in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time. (particulier admissible)eligible interest, of a taxpayer, means capital property of the taxpayer that isa partnership interest in a partnership that carries on a business;a share of the capital stock of a corporation that carries on a business; ora share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation. (participation admissible)goodwill amount, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of a business carried on by the taxpayer through a permanent establishment located in Canada. (montant pour achalandage)permanent establishment means a permanent establishment as defined for the purpose of subsection 16.1(1). (établissement stable)restrictive covenant, of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm’s length with the taxpayer, other than an agreement or undertakingthat disposes of the taxpayer’s property; orthat is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value. (clause restrictive)taxpayer includes a partnership. (contribuable)Income — restrictive covenantsThere is to be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm’s length (other than an amount that has been included in computing the taxpayer’s income because of this subsection for a preceding taxation year or in the taxpayer’s eligible corporation’s income because of this subsection for the taxation year or a preceding taxation year).Non-application of subsection (2)Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the “purchaser”) with whom the particular taxpayer deals at arm’s length (determined without reference to paragraph 251(5)(b)), ifsection 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year;the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; orsubject to subsection (9), the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition eligible interest in subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, andthe disposition is to the purchaser (or to a person related to the purchaser),the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, andthe particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.Treatment of purchaserAn amount paid or payable by a purchaser for a restrictive covenant isif the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of determining the cost of the property or for the purposes of subsection 13(35), as the case may be, and not to be an amount paid or payable for all other purposes of the Act; andif an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser’s acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.Non-application of section 68If this subsection applies to a restrictive covenant granted by a taxpayer, section 68 does not apply to deem consideration to be received or receivable by the taxpayer for the restrictive covenant.Application of subsection (5) — if employee provides covenantSubsection (5) applies to a restrictive covenant ifthe restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm’s length (referred to in this subsection as the “purchaser”);the restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the “vendors”) by the purchaser of an interest, or for civil law purposes a right, in the individual’s employer, in a corporation related to that employer or in a business carried on by that employer;the individual deals at arm’s length with the employer and with the vendors;the restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;no proceeds are received or receivable by the individual for granting the restrictive covenant; andthe amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.Application of subsection (5) — realization of goodwill amount and disposition of propertySubject to subsection (10), subsection (5) applies to a restrictive covenant granted by a taxpayer ifthe restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the “vendor”) toanother taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, oranother person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;where subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, andthe amount that can reasonably be regarded as being consideration for the restrictive covenant isincluded by the vendor in computing a goodwill amount of the vendor, orreceived or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, orit is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, orunder which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),where subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, andeitherthe amount that can reasonably be regarded as being consideration for the restrictive covenant isincluded by the vendor in computing a goodwill amount of the vendor, orreceived or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, orit is reasonable to conclude that the restrictive covenant is integral to an agreement in writingunder which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, orunder which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), andthe vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;no proceeds are received or receivable by the vendor for granting the restrictive covenant;subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any ofthe benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), orthe shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); anda joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made byin the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, orin the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.Application of subsection (7) and section 69 — special rulesFor the purposeof applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only ifthe consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, andif all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; andof determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.Anti-avoidance rule — non-application of paragraph (3)(c)Paragraph (3)(c) does not apply to an amount that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property under paragraph 3(a).Anti-avoidance — non-application of subsection (7)Subsection (7) does not apply in respect of a taxpayer’s grant of a restrictive covenant if one of the results of not applying section 68 to the consideration received or receivable in respect of the taxpayer’s grant of the restrictive covenant would be that paragraph 3(a) would not apply to consideration that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property.Clarification if subsection (2) applies — where another person receives the amountFor greater certainty, if subsection (2) applies to include in computing a taxpayer’s income an amount received or receivable by another taxpayer, that amount is not to be included in computing the income of that other taxpayer.Clarification if subsection (5) appliesFor greater certainty, if subsection (5) applies in respect of a restrictive covenant,the amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); andthe amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.Filing of prescribed formFor the purpose of paragraphs (3)(b) and (c) and subsection (7), an election in prescribed form filed under any of those provisions is to include a copy of the restrictive covenant and be filedif the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person’s filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; andin any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.Non-application of section 42Section 42 does not apply to an amount received or receivable as consideration for a restrictive covenant.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 34, s. 195; 2016, c. 12, s. 18; 2017, c. 33, s. 15
Certain superannuation or pension benefitsNotwithstanding subparagraph 56(1)(a)(i), there shall be included in computing the income of a taxpayer in respect of a payment received by the taxpayer out of or under a superannuation or pension fund or plan the investment income of which has at some time been exempt from taxation under the Income War Tax Act by reason of an election for that exemption by the trustees or corporation administering the fund or plan, only that part of the payment that remains after deducting the proportion thereofthat the total of the paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election is of the total of all amounts paid by the taxpayer into or under the fund or plan, orthat the total of the amounts paid by the taxpayer into or under the fund or plan during the period when its income was exempt by reason of that election together with simple interest on each amount so paid from the end of the year of payment thereof to the commencement of the superannuation allowance or pension at 3% per annum is of the total of all amounts paid by the taxpayer into or under the fund or plan together with simple interest, computed in the same manner, on each amount so paid,whichever is the greater.ExceptionThis section does not apply in respect of a payment received by a taxpayer out of or under a superannuation or pension fund or plan if the taxpayer made no payment into or under the fund or plan.LimitationWhere a payment, to which subsection 57(1) would otherwise be applicable, is received by a taxpayer out of or under a superannuation or pension fund or plan in respect of a period of service for part only of which the taxpayer made payments into or under the fund or plan, subsection 57(1) is applicable only to that part of the payment which may reasonably be regarded as having been received in respect of the period for which the taxpayer made payments into or under the fund or plan and any part of the payment which may reasonably be regarded as having been received in respect of a period for which the taxpayer made no payments into or under the fund or plan shall be included in computing the taxpayer’s income for the year without any deduction whatever.Certain payments from pension planWhere a taxpayer, during the period from August 15, 1944 to December 31, 1945, made a contribution in excess of $300 to or under a registered pension plan in respect of services rendered by the taxpayer before the taxpayer became a contributor, there shall be included in computing the taxpayer’s income in respect of a payment received by the taxpayer out of or under the plan only that part of the payment that remains after deducting the proportion thereof that the contribution so made minus $300 is of the total of the amounts paid by the taxpayer to or under the plan.Payments to widow, etc., of contributorWhere, in respect of the death of a taxpayer who was a contributor to or under a superannuation or pension fund or plan described in subsection 57(1) or 57(4), a payment is received by a person in a taxation year out of or under the fund or plan, there shall be included in computing the income of that person for the year in respect thereof only that part of the payment that would, if the payment had been received by the taxpayer in the year out of or under the fund or plan, have been included by virtue of this section in computing the income of the taxpayer for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1 “57”; 1977-78, c. 1, s. 101(F); 1990, c. 35, s. 29
Government annuities and like annuitiesIn determining the amount that shall be included in computing the income of a taxpayer in respect of payments received by the taxpayer in a taxation year under contracts entered into before May 26, 1932 with the Government of Canada or annuity contracts like those issued under the Government Annuities Act entered into before that day with the government of a province or a corporation incorporated or licensed to carry on an annuities business in Canada, there may be deducted from the total of the payments received the lesser ofthe total of the amounts that would have been so received if the contracts had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless those additional sums or premiums had been paid before that day, and$5,000.Annuities before 1940In determining the amount that shall be included in computing the income of a taxpayer in respect of payments received by the taxpayer in a taxation year under annuity contracts entered into after May 25, 1932, and before June 25, 1940, with the Government of Canada or annuity contracts like those issued under the Government Annuities Act entered into during that period with the government of a province or a corporation incorporated or licensed to carry on an annuities business in Canada, there may be deducted from the total of the payments received the lesser ofthe total of the amounts that would have been received under the contracts if they had continued in force as they were immediately before June 25, 1940, without the exercise of any option or contractual right to enlarge the annuity by the payment of additional sums or premiums unless such additional sums or premiums had been paid before that day, and$1,200.LimitationWhere a taxpayer has received annuity payments in respect of which the taxpayer would otherwise be entitled to make deductions under both subsection 58(1) and subsection 58(2),if the amount deductible under subsection 58(1) is $1,200 or more, he may not make a deduction under subsection 58(2); andif the amount deductible under subsection 58(1) is less than $1,200, the taxpayer may make one deduction computed as though subsection 58(2) applied to all contracts entered into before June 25, 1940.Capital elementThe amount remaining after deducting from the total of the annuity payments to which this section applies received in a taxation year the deductions permitted by subsection 58(1), 58(2) or 58(3) shall be deemed to be the annuity payment in respect of which the capital element is deductible under paragraph 60(a.Spouses or common-law partnersWhere a taxpayer and the taxpayer’s spouse or common-law partner each received annuity payments in respect of which they may deduct amounts under this section, the amount deductible shall be computed as if their annuities belonged to one person and may be deducted by either of them or be apportioned between them in such manner as is agreed to by them or, in case of disagreement, as the Minister determines.Pension benefitsThis section does not apply to superannuation or pension benefits received out of or under a registered pension plan.Enlargement of annuityFor the purpose of this section, an annuity shall be deemed to have been enlarged on or after June 25, 1940, if what is payable under the contract has, at any such time, been increased whether by increasing the amount of each periodic payment, by increasing the number of payments or otherwise.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 58; 1994, c. 7, Sch. VIII, s. 19(E); 2000, c. 12, s. 142
Consideration for foreign resource propertyWhere a taxpayer has disposed of a foreign resource property, there shall be included in computing the taxpayer’s income for a taxation year the amount, if any, by whichthe portion of the taxpayer’s proceeds of disposition from the disposition of the property that becomes receivable in the yearexceedsthe total ofall amounts each of which is an outlay or expense made or incurred by the taxpayer for the purpose of making the disposition that was not otherwise deductible for the purposes of this Part, andwhere the property is a foreign resource property in respect of a country, the amount designated under this subparagraph in prescribed form filed with the taxpayer’s return of income for the year in respect of the disposition.PartnershipsWhere a taxpayer is a member of a partnership in a fiscal period of the partnership, the taxpayer’s share of the amount that would be included under subsection (1) in respect of a disposition of a foreign resource property in computing the partnership’s income for a taxation year if the partnership were a person, the fiscal period were a taxation year, subsection (1) were read without reference to subparagraph (1)(b)(ii) and section 96 were read without reference to paragraph 96(1)(d) is deemed to be proceeds of disposition that become receivable by the taxpayer at the end of the fiscal period in respect of a disposition of the property by the taxpayer.Deduction under former s. 64 in preceding yearThere shall be included in computing a taxpayer’s income for a taxation year any amount that has been deducted as a reserve under subsection 64(1), (1.1) or (1.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in computing the taxpayer’s income for the immediately preceding taxation year.Recovery of exploration and development expensesThere shall be included in computing a taxpayer’s income for a taxation yearany amount referred to in paragraph 66(12.4)(b);any amount referred to in subsection 66.1(1);any amount referred to in subsection 66.2(1);any amount referred to in subsection 66.21(3);any amount referred to in subparagraph 66(10.4)(b)(ii); andany amount referred to in paragraph 66(10.4)(c).Amounts to be included in incomeThere shall be included in computing a taxpayer’s income for a taxation year33 1/3% of the total of all amounts, each of which is the stated percentage ofan amount that became receivable by the taxpayer after December 31, 1983 and in the year (other than an amount that would have been a Canadian oil and gas exploration expense if it had been an expense incurred by the taxpayer at the time it became receivable),an amount that became receivable by the taxpayer after December 31, 1983 and in the year that would have been a Canadian oil and gas exploration expense described in paragraph (c) or (d) of the definition Canadian exploration expense in subsection 66.1(6) in respect of a qualified tertiary oil recovery project if it had been an expense incurred by the taxpayer at the time it became receivable, or30% of an amount that became receivable by the taxpayer in the year and in 1984 that would have been a Canadian oil and gas exploration expense (other than an expense described in paragraph (c) of the definition Canadian exploration expense in subsection 66.1(6) in respect of a qualified tertiary oil recovery project) incurred in respect of non-conventional lands if it had been an expense incurred by the taxpayer at the time it became receivableand in respect of which the consideration given by the taxpayer was a property (other than a share, depreciable property of a prescribed class or a Canadian resource property) or services the cost of which may reasonably be regarded as having been an expenditure that was added in computing the earned depletion base of the taxpayer or in computing the earned depletion base of a predecessor where the taxpayer is a successor corporation to the predecessor;33 1/3% of the total of all amounts, each of which is the stated percentage of an amount in respect of a disposition of depreciable property of a prescribed class (other than a disposition of such property that had been used by the taxpayer to any person with whom the taxpayer was not dealing at arm’s length) of the taxpayer after December 11, 1979 and in the year, the capital cost of which was added in computing the earned depletion base of the taxpayer or of a person with whom the taxpayer was not dealing at arm’s length or in computing the earned depletion base of a predecessor where the taxpayer is a successor corporation to the predecessor, that is equal to the lesser ofthe proceeds of disposition of the property, andthe capital cost of the property to the taxpayer, the person with whom the taxpayer was not dealing at arm’s length or the predecessor, as the case may be, computed as if no amount had been added thereto by virtue of paragraph 21(1)(b) or subsection 21(3);33 1/3% of the total of all amounts, each of which is an amount in respect of a disposition of depreciable property of a prescribed class that is bituminous sands equipment (other than a disposition of such property that had been used by the taxpayer to any person with whom the taxpayer was not dealing at arm’s length) of the taxpayer after December 11, 1979 and before 1990 and in the year, the capital cost of which was added in computing the supplementary depletion base of the taxpayer or of a person with whom the taxpayer was not dealing at arm’s length or in computing the supplementary depletion base of a predecessor where the taxpayer is a successor corporation to the predecessor, that is equal to the lesser ofthe proceeds of disposition of the property, andthe capital cost of the property to the taxpayer, the person with whom the taxpayer was not dealing at arm’s length or the predecessor, as the case may be, computed as if no amount had been added thereto by virtue of paragraph 21(1)(b) or subsection 21(3);50% of the total of all amounts, each of which is an amount in respect of a disposition of depreciable property of a prescribed class that is enhanced recovery equipment (other than a disposition of such property that had been used by the taxpayer to any person with whom the taxpayer was not dealing at arm’s length) of the taxpayer after December 11, 1979 and before 1990 and in the year, the capital cost of which was added in computing the supplementary depletion base of the taxpayer or of a person with whom the taxpayer was not dealing at arm’s length or in computing the supplementary depletion base of a predecessor where the taxpayer is a successor corporation to the predecessor, that is equal to the lesser ofthe proceeds of disposition of the property, andthe capital cost of the property to the taxpayer, the person with whom the taxpayer was not dealing at arms’ length or the predecessor, as the case may be, computed as if no amount had been added thereto by virtue of paragraph 21(1)(b) or subsection 21(3);66 2/3% of the total of all amounts, each of which is an amount that became receivable by the taxpayer after December 11, 1979 and before 1990 and in the year and in respect of which the consideration given by the taxpayer was a property (other than a share or a Canadian resource property) or services the cost of which may reasonably be regarded as having been an expenditure in connection with an oil or gas well in respect of which an amount was included in computing the taxpayer’s frontier exploration base or in computing the frontier exploration base of a predecessor where the taxpayer is a successor corporation to the predecessor; and33 1/3% of the total of all amounts, each of which is the stated percentage of an amount that became receivable by the taxpayer after April 19, 1983 and in the year and in respect of which the consideration given by the taxpayer was a property (other than a share, depreciable property of a prescribed class or a Canadian resource property) or services the cost of which may reasonably be regarded as having been an expenditure that was included in computing the mining exploration depletion base of the taxpayer or in computing the mining exploration depletion base of a specified predecessor of the taxpayer.DefinitionsFor the purposes of this subsection and subsection 59(3.3),specified predecessor of a taxpayer means a person who is a predecessor ofthe taxpayer, ora person who is a specified predecessor of the taxpayer; (prédécesseur déterminé)stated percentage meansin respect of an amount described in paragraph 59(3.3)(a) or 59(3.3)(f) that became receivable by a taxpayer,100% where the amount became receivable before July, 1988,50% where the amount became receivable after June, 1988 and before 1990, and0% where the amount became receivable after 1989, andin respect of the disposition described in paragraph 59(3.3)(b) of a depreciable property of a taxpayer,100% where the property was disposed of before July, 1988,50% where the property was disposed of after June, 1988 and before 1990, and0% where the property was disposed of after 1989; (pourcentage indiqué)successor corporation means a corporation that has at any time after November 7, 1969 acquired, by purchase, amalgamation, merger, winding-up or otherwise (other than pursuant to an amalgamation that is described in subsection 87(1.2) or a winding-up to which the rules in subsection 88(1) apply), from another person (in this subsection and subsection 59(3.3) referred to as the “predecessor”) all or substantially all of the Canadian resource properties of the predecessor in circumstances in which any of subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) and 66.7(3) to 66.7(5) apply to the corporation. (société remplaçante)Variation of stated percentageNotwithstanding the definition stated percentage in subsection 59(3.4), wherean amount became receivable by a taxpayer within 60 days after the end of 1989 in respect of a disposition of property or services, andthe person to whom the disposition was made is a corporation that, before the end of 1989, had issued, or had undertaken to issue, a flow-through share and the corporation renounces under subsection 66(12.66), effective on December 31, 1989, an amount in respect of Canadian exploration expenses that includes an expenditure in respect of the amount referred to in paragraph 59(3.5)(a),the stated percentage in respect of the amount described in paragraph 59(3.5)(a) shall be 50%.Definition of proceeds of dispositionIn this section, proceeds of disposition has the meaning assigned by section 54.Definitions in regulations under s. 65In this section, bituminous sands equipment,Canadian oil and gas exploration expense, earned depletion base, enhanced recovery equipment, frontier exploration base, mining exploration depletion base, non-conventional lands, qualified tertiary oil recovery project and supplementary depletion base have the meanings assigned by regulations made for the purposes of section 65.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 59; 2001, c. 17, s. 40
Involuntary disposition of resource propertyWhere in a particular taxation year an amount is deemed by subsection 44(2) to have become receivable by a taxpayer as proceeds of disposition described in paragraph (d) of the definition proceeds of disposition in section 54 of any Canadian resource property and the taxpayer elects, in the taxpayer’s return of income under this Part for the year, to have this section apply to those proceeds of disposition,there shall be deducted in computing the taxpayer’s income for the particular year such amount as the taxpayer may claim, not exceeding the least of,the total of all those proceeds so becoming receivable in the particular year by the taxpayer to the extent that they have been included in the amount referred to in paragraph (a) of the description of F in the definition cumulative Canadian development expense in subsection 66.2(5) or in paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) in respect of the taxpayer,the amount required to be included in computing the taxpayer’s income for the particular year by virtue of paragraph 59(3.2)(c), andthe taxpayer’s income for the particular year determined without reference to this section;the amount, if any, by whichthe amount deducted under paragraph 59.1(aexceedsthe total of such of the Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses made or incurred by the taxpayer in the taxpayer’s ten taxation years immediately following the particular year as were designated by the taxpayer in the taxpayer’s return of income for the year in which the expense was made or incurred,shall be included in computing the taxpayer’s income for the particular year and, notwithstanding subsections 152(4) and 152(5), such reassessment of the taxpayer’s tax, interest or penalties for any year shall be made as is necessary to give effect to the inclusion; andany Canadian exploration expense, Canadian development expense or Canadian oil and gas property expense made or incurred by the taxpayer and designated in the taxpayer’s return of income in accordance with subparagraph 59.1(b(ii) shall (except for the purposes of subsections 66(12.1), 66(12.2), 66(12.3) and 66(12.5) and for the purpose of computing the taxpayer’s earned depletion base within the meaning assigned by regulations made for the purposes of section 65) be deemed not to be a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense, as the case may be, of the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 59.1; 1994, c. 7, Sch. II, s. 33
Deductions in Computing Income
Other deductionsThere may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicableCapital element of annuity paymentsthe capital element of each annuity payment included by virtue of paragraph 56(1)(d) in computing the taxpayer’s income for the year, that is to say,if the annuity was paid under a contract, an amount equal to that part of the payment determined in prescribed manner to have been a return of capital, andif the annuity was paid under a will or trust, such part of the payment as can be established by the recipient not to have been paid out of the income of the estate or trust;Supportthe total of all amounts each of which is an amount determined by the formulaA - (B + C)whereAis the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,Bis the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, andCis the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer’s income for a preceding taxation year;Pension income reallocationwhere the taxpayer is a pensioner (as defined in subsection 60.03(1)), any amount that is a split-pension amount (as defined in that subsection) in respect of the pensioner for the taxation year;[Repealed, 1994, c. 7, Sch. VIII, s. 20(2)]Repayment of support paymentsan amount paid by the taxpayer in the year or one of the 2 preceding taxation years under a decree, order or judgment of a competent tribunal as a repayment of an amount included under paragraph 56(1)(b) or 56(1)(c), or under paragraph 56(1)(c.1) (as it applies, in computing the taxpayer’s income for the year or a preceding taxation year, to decrees, orders and judgments made before 1993) to the extent that it was not so deducted for a preceding taxation year;Interest on death dutiesan amount equal to annual interest accruing within the taxation year in respect of succession duties, inheritance taxes or estate taxes;CPP/QPP contributions on self-employed earningsthe total of1/2 of the lesser ofthe total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the year as a contribution under subsection 10(1) of the Canada Pension Plan or as a like contribution under a provincial pension plan, as defined in section 3 of that Act, andthe maximum amount of such contributions payable by the taxpayer for the year under the plan, andthe lesser ofthe total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the year as a contribution under subsection 10(1.‍1) or (1.‍2) of the Canada Pension Plan or as a like contribution under a provincial pension plan, as defined in section 3 of that Act, andthe maximum amount of such contributions payable by the taxpayer for the year under the plan;Enhanced CPP contributionsthe lesser ofthe total of all amounts each of which is an amount payable by the taxpayer for the year as an employee’s contribution under subsection 8(1.‍1) or (1.‍2) of the Canada Pension Plan or as a like contribution under a provincial pension plan, as defined in section 3 of that Act, andthe maximum amount of such contributions payable by the taxpayer for the year under the plan;Restrictive covenant — bad debtall debts owing to a taxpayer that are established by the taxpayer to have become bad debts in the taxation year and that are in respect of an amount included because of the operation of subsection 6(3.1) or 56.4(2) in computing the taxpayer’s income in a preceding taxation year;Quebec parental insurance plan — self-employed premiumsthe amount determined by the formulaA – BwhereAis the total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the taxation year as a premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, andBis the total of all amounts each of which is an amount that would be payable by the taxpayer as an employee’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, if those earnings were employment income of the taxpayer for the taxation year;Premium or payment – FHSA, PRPP, RRSP or RRIFany amount that is deductible under section 146, 146.3 or 146.6 or subsection 147.3(13.1) or 147.5(19) in computing the income of the taxpayer for the year;Transfer of superannuation benefitssuch part of the total of all amounts each of which isa superannuation or pension benefit (other than any amount in respect of the benefit that is deducted in computing the taxable income of the taxpayer for a taxation year because of subparagraph 110(1)(f)(i) or a benefit that is part of a series of periodic payments) payable out of or under a pension plan that is not a registered pension plan, attributable to services rendered by the taxpayer or a spouse or common-law partner or former spouse or common-law partner of the taxpayer in a period throughout which that person was not resident in Canada, and included in computing the income of the taxpayer for the year because of subparagraph 56(1)(a)(i), oran eligible amount in respect of the taxpayer for the year under section 60.01, subsection 104(27) or 104(27.1) or paragraph 147(10.2)(d),asis designated by the taxpayer in the taxpayer’s return of income under this Part for the year, anddoes not exceed the total of all amounts each of which is an amount paid by the taxpayer in the year or within 60 days after the end of the yearas a contribution to or under a registered pension plan for the taxpayer’s benefit, other than the portion thereof deductible under paragraph 8(1)(m) in computing the taxpayer’s income for the year,as a premium (within the meaning assigned by subsection 146(1)) under a registered retirement savings plan under which the taxpayer is the annuitant (within the meaning assigned by subsection 146(1)), other than the portion thereof designated for a taxation year for the purposes of paragraph 60(l, orto or under a registered retirement income fund under which the taxpayer is the annuitant, as defined in subsection 146.3(1), other than the portion thereof designated for a taxation year for the purposes of paragraph (l),to the extent that the amount was not deducted in computing the taxpayer’s income for a preceding taxation year;Transfer of surplussuch part of the total of all amounts each of which is an amount received by the taxpayer before March 28, 1988 that can reasonably be considered to be a payment in respect of the actuarial surplus under a defined benefit provision (within the meaning assigned by subsection 147.1(1)) of a registered pension plan and that is included in computing the income of the taxpayer for the year by virtue of subparagraph 56(1)(a)(i) (other than any portion thereof deducted by the taxpayer under subsection 60.2(1) in computing the taxpayer’s income for the year) asis designated by the taxpayer in the taxpayer’s return of income under this Part for the year, anddoes not exceed the total of all amounts each of which as an amount paid by the taxpayer in the year or within 60 days after the end of the yearas a contribution to or under a registered pension plan for the taxpayer’s benefit, other than the portion thereof deductible under paragraph 60(j) or 60(j.1) or 8(1)(m) of this Act or paragraph 8(1)(m.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in computing the taxpayer’s income for the year, oras a premium (within the meaning assigned by subsection 146(1)) under a registered retirement savings plan under which the taxpayer is the annuitant (within the meaning assigned by subsection 146(1)), other than the portion thereof that has been designated for the purposes of paragraph 60(j), 60(j.1) or 60(l,to the extent that it was not deducted in computing the taxpayer’s income for a preceding taxation year;Payment to registered pension planan amount equal to the lesser ofthe total ofall contributions made in the year by the taxpayer to registered pension plans in respect of eligible service of the taxpayer before 1990 under the plans, where the taxpayer was obliged under the terms of an agreement in writing entered into before March 28, 1988 to make the contributions, andall amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan asa repayment under a prescribed statutory provision of an amount received from the plan that was included under subsection 56(1) in computing the taxpayer’s income for a taxation year ending before 1990, where the taxpayer was obliged as a consequence of a written election made before March 28, 1988 to make the repayment, orinterest in respect of a repayment referred to in subclause 60(j.02)(i)(B)(I),other than the portion of that total that is deductible under paragraph 8(1)(m) or paragraph 60(j.03) in computing the taxpayer’s income for the year, andthe total of all amounts each of which is an amount paid out of or under a registered pension plan as part of a series of periodic payments and included under subsection 56(1) in computing the taxpayer’s income for the year, other than the portion of that total that can reasonably be considered to have been designated by the taxpayer for the purpose of paragraph 60(j.2);Repayments of pre-1990 pension benefitsan amount equal to the lesser ofthe total of all amounts each of which is an amount paid in the year or a preceding taxation year by the taxpayer to a registered pension plan that was not deductible in computing the taxpayer’s income for a preceding taxation year and that was paid asa repayment under a prescribed statutory provision of an amount received from the plan that was included under subsection 56(1) in computing the taxpayer’s income for a taxation year ending before 1990, orinterest in respect of a repayment referred to in clause 60(j.03)(i)(A), andthe amount, if any, by which $3,500 exceeds the amount deducted under paragraph 8(1)(m) in computing the taxpayer’s income for the year;Repayments of post-1989 pension benefitsthe total of all amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan asa repayment under a prescribed statutory provision of an amount received from the plan thatwas included under subsection 56(1) in computing the taxpayer’s income for a taxation year ending after 1989, andcan reasonably be considered not to have been designated by the taxpayer for the purpose of paragraph 60(j.2), orinterest in respect of a repayment referred to in subparagraph 60(j.04)(i),except to the extent that the total was deductible under paragraph 8(1)(m) in computing the taxpayer’s income for the year;Transfer of retiring allowancessuch part of the total of all amounts each of which is an amount paid to the taxpayer by an employer, or under a retirement compensation arrangement to which the employer has contributed, as a retiring allowance and included in computing the taxpayer’s income for the year by virtue of subparagraph 56(1)(a)(ii) or paragraph 56(1)(x) asis designated by the taxpayer in the taxpayer’s return of income under this Part for the year,does not exceed the amount, if any, by which the total of$2,000 multiplied by the number of years before 1996 during which the employee or former employee in respect of whom the payment was made (in this paragraph referred to as the “retiree”) was employed by the employer or a person related to the employer, and$1,500 multiplied by the number by which the number of years before 1989 described in clause 60(j.1)(ii)(A) exceeds the number that can reasonably be regarded as the equivalent number of years before 1989 in respect of which employer contributions under either a pension plan or a deferred profit sharing plan of the employer or a person related to the employer had vested in the retiree at the time of the paymentexceeds the total ofall amounts deducted under this paragraph in respect of amounts paid before the year in respect of the retireeby the employer or a person related to the employer, orunder a retirement compensation arrangement to which the employer or a person related to the employer has contributed,all other amounts deducted under this paragraph for the year in respect of amounts paid in the year in respect of the retireeby a person related to the employer, orunder a retirement compensation arrangement to which a person related to the employer has contributed, andall amounts deducted under paragraph 60(t) in computing the retiree’s income for the year in respect of a retirement compensation arrangement to which the employer or a person related to the employer has contributed, anddoes not exceed the total of all amounts each of which is an amount paid by the taxpayer in the year or within 60 days after the end of the year in respect of the amount so designatedas a contribution to or under a registered pension plan, other than the portion thereof deductible under paragraph 60(j) or 8(1)(m) in computing the taxpayer’s income for the year, oras a premium (within the meaning assigned by section 146) under a registered retirement savings plan under which the taxpayer is the annuitant (within the meaning assigned by section 146), other than the portion thereof that has been designated for the purposes of paragraph 60(j) or 60(l,to the extent that it was not deducted in computing the taxpayer’s income for a preceding taxation yearand for the purposes of this paragraph, person related to the employer includesany person whose business was acquired or continued by the employer, anda previous employer of the retiree whose service therewith is recognized in determining the retiree’s pension benefits;Transfer to spousal RRSPfor taxation years ending after 1988 and before 1995, such part of the total of all amounts (other than amounts paid out of or under a registered retirement savings plan or a registered retirement income fund that by reason of section 254 are considered to be amounts paid out of or under a registered pension plan) paid on a periodic basis out of or under a registered pension plan or a deferred profit sharing plan and included, by reason of subsection 56(1), in computing the taxpayer’s income for the year asis designated by the taxpayer in the taxpayer’s return of income under this Part for the year, anddoes not exceed the least of$6,000,the amount, if any, by which that total exceeds the part of that total designated for the year for the purposes of paragraph 60(j) of this Act or deducted under paragraph 60(k) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in computing the taxpayer’s income for the year, andthe total of all amounts each of which is paid by the taxpayer in the year or within 60 days after the end of the year as a premium (within the meaning assigned by subsection 146(1)) under a registered retirement savings plan under which the taxpayer’s spouse or common-law partner (or, where the taxpayer died in the year or within 60 days after the end of the year, an individual who was the taxpayer’s spouse or common-law partner immediately before the death) is the annuitant (within the meaning assigned by subsection 146(1)), to the extent that the amount was not deducted in computing the taxpayer’s income for a preceding taxation year;Transfer of refund of premiums under RRSPthe total of all amounts each of which is an amount paid by or on behalf of the taxpayer in the year or within 60 days after the end of the year (or within such longer period after the end of the year as is acceptable to the Minister)as a premium under a registered retirement savings plan under which the taxpayer is the annuitant,to acquire, from a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business, an annuityunder which the taxpayer is the annuitantfor the taxpayer’s life, or for the lives jointly of the taxpayer and the taxpayer’s spouse or common-law partner either without a guaranteed period, or with a guaranteed period that is not greater than 90 years minus the lesser of the age in whole years of the taxpayer and the age in whole years of the taxpayer’s spouse or common-law partner at the time the annuity was acquired, orfor a term equal to 90 years minus the age in whole years of the taxpayer or the age in whole years of the taxpayer’s spouse or common-law partner, at the time the annuity was acquired, orunder which the taxpayer is the annuitant for a term not exceeding 18 years minus the age in whole years of the taxpayer at the time the annuity was acquiredthat does not provide for any payment thereunder exceptthe single payment by or on behalf of the taxpayer,annual or more frequent periodic paymentsbeginning not later than one year after the date of the payment referred to in clause 60(l(ii)(C), andeach of which is equal to all other such payments or not equal to all other such payments solely because of an adjustment that would, if the annuity were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to 146(3)(b)(v), andpayments in full or partial commutation of the annuity and, where the commutation is partial,equal annual or more frequent periodic payments thereafter, orannual or more frequent periodic payments thereafter that are not equal solely because of an adjustment that would, if the annuity were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to 146(3)(b)(v);orto a carrier as consideration for a registered retirement income fund under which the taxpayer is the annuitantwhere that totalis designated by the taxpayer in the taxpayer’s return of income under this Part for the year,does not exceed the total ofthe amount included in computing the taxpayer’s income for the year as a refund of premiums out of or under a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant,the amount included in computing the taxpayer’s income for the year as a payment (other than a payment that is part of a series of periodic payments) received by the taxpayer out of or under a pooled registered pension plan as a consequence of the death of an individual who was, immediately before the death, a spouse or common-law partner of the taxpayer,the amount included by subsection 146.5(3) in computing the taxpayer’s income for the year as a payment received by the taxpayer as a consequence of the death of an individual who wasimmediately before the death, the spouse or common-law partner of the taxpayer, ora parent or grandparent of the taxpayer, if, immediately before the death, the taxpayer was financially dependent on the individual for support because of mental or physical infirmity,the amount included in computing the taxpayer’s income for the year as a refund of premiums out of or under a registered retirement savings plan where the taxpayer was dependent by reason of physical or mental infirmity on the annuitant under the plan,the amount included in computing the taxpayer’s income for the year as a payment (other than a payment that is part of a series of periodic payments or that relates to an actuarial surplus) received by the taxpayer out of or under a pooled registered pension plan, a registered pension plan or a specified pension plan as a consequence of the death of an individual of whom the taxpayer was a child or grandchild, if the taxpayer was, immediately before the death, financially dependent on the individual for support because of mental or physical infirmity,the least ofthe amount paid by or on behalf of the taxpayer to acquire an annuity that would be described in subparagraph 60(l(ii) if that subparagraph were read without reference to clause (A) thereof,the amount (other than any portion of it that is included in the amount determined under clause (B), (B.01) or (B.2)) that is included in computing the taxpayer’s income for the year asa payment (other than a payment that is part of a series of periodic payments or that relates to an actuarial surplus) received by the taxpayer out of or under a pooled registered pension plan, a registered pension plan or a specified pension plan,a refund of premiums out of or under a registered retirement savings plan, ora designated benefit in respect of a registered retirement income fund (in this clause having the meaning assigned by subsection 146.3(1))as a consequence of the death of an individual of whom the taxpayer is a child or grandchild, andthe amount, if any, by which the amount determined for the year under subclause 60(1)(v)(B.1)(II) in respect of the taxpayer exceeds the amount, if any, by whichthe total of all designated benefits of the taxpayer for the year in respect of registered retirement income fundsexceedsthe total of all amounts that would be eligible amounts of the taxpayer for the year in respect of those funds (within the meaning that would be assigned by subsection 146.3(6.11) if the taxpayer were described in paragraph (b) thereof), andall eligible amounts of the taxpayer for the year in respect of registered retirement income funds (within the meaning assigned by subsection 146.3(6.11)),and where the amount is paid by a direct transfer from the issuer of a registered retirement savings plan or a carrier of a registered retirement income fund,the amount included in computing the taxpayer’s income for the year as a consequence of a payment described in subparagraph 146(2)(b)(ii), andthe amount, if any, by whichthe amount received by the taxpayer out of or under a registered retirement income fund under which the taxpayer is the annuitant and included because of subsection 146.3(5) in computing the taxpayer’s income for the yearexceedsthe amount, if any, by which the minimum amount (within the meaning assigned by subsection 146.3(1)) under the fund for the year exceeds the total of all amounts received out of or under the fund in the year by an individual who was an annuitant under the fund before the taxpayer became the annuitant under the fund and that were included because of subsection 146.3(5) in computing that individual’s income for the year, andwas not deducted in computing the taxpayer’s income for a preceding taxation year;such amount in respect of payments to a registered disability savings plan as is permitted under section 60.02;Succession duties applicable to certain propertythat proportion of any superannuation or pension benefit, death benefit, benefit under a registered retirement savings plan, benefit under a deferred profit sharing plan or benefit that is a payment under an income-averaging annuity contract, received by the taxpayer in the year, on or after the death of a predecessor, in payment of or on account of property to which the taxpayer is the successor, thatsuch part of any succession duties payable under a law of a province in respect of the death of the predecessor as may reasonably be regarded as attributable to the property in payment of or on account of which the benefit was so received,is ofthe value of the property in payment of or on account of which the benefit was so received, as computed for the purposes of the law referred to in subparagraph 60(m.1)(i);Repayment of pension or benefitsany amount paid by the taxpayer in the year as a repayment (otherwise than because of Part VII of the Employment Insurance Act or section 8 of the Canada Recovery Benefits Act) of any of the following amounts to the extent that the amount was included in computing the taxpayer’s income, and not deducted in computing the taxpayer’s taxable income, for the year or for a preceding taxation year, namely,a pension described in clause 56(1)(a)(i)(A),a benefit described in clause 56(1)(a)(i)(B),an amount described in subparagraph 56(1)(a)(ii),a benefit described in subparagraph 56(1)(a)(iv),a benefit described in subparagraph 56(1)(a)(vi),a benefit described in subparagraph 56(1)(a)(vii), andan amount described in paragraph 56(1)(r);Repayment of pension benefitsan amount paid by the taxpayer in the year to a pooled registered pension plan or registered pension plan ifthe taxpayer is an individual,the amount is paid asa repayment of an amount received from the plan that was included in computing the taxpayer’s income for the year or a preceding year, ifit is reasonable to consider that the amount was paid under the plan as a consequence of an error and not as an entitlement to benefits, orit was subsequently determined that, as a consequence of a settlement of a dispute in respect of the taxpayer’s employment, the taxpayer was not entitled to the amount, orinterest in respect of a repayment described in clause (A), andno portion of the amount is deductible under any of paragraph 8(1)(m) and subsections 146(5) to (5.2) in computing the taxpayer’s income for the year;Amounts repaid in subsequent yearsany amount paid by the taxpayer in a year (in this paragraph referred to as the “subsequent year”) that is after the year as a repayment of an amount that was included in computing the taxpayer’s income for the year under any of subparagraphs 56(1)(a)(i), (ii), (iv), (vi) or (vii) or paragraph 56(1)(r), to the extent that the amount paidexceeds the taxpayer’s taxable income for the subsequent year (determined without reference to paragraphs (n), (n.1) and (v.1)), andis not deducted in computing the taxpayer’s taxable income for any other taxation year;Legal Expensesamounts paid by the taxpayer in the year in respect of fees or expenses incurred in preparing, instituting or prosecuting an objection to, or an appeal in relation to,an assessment of tax, interest or penalties under this Act or an Act of a province that imposes a tax similar to the tax imposed under this Act,a decision of the Canada Employment Insurance Commission under the Employment Insurance Act or to an appeal of such a decision to the Social Security Tribunal,an assessment of any income tax deductible by the taxpayer under section 126 or any interest or penalty with respect thereto, oran assessment or a decision made under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act;Idemthe amount, if any, by which the lesser ofthe total of all legal expenses (other than those relating to a division or settlement of property arising out of, or on a breakdown of, a marriage or common-law partnership) paid by the taxpayer in the year or in any of the 7 preceding taxation years to collect or establish a right to an amount ofa benefit under a pension fund or plan (other than a benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act) in respect of the employment of the taxpayer or a deceased individual of whom the taxpayer was a dependant, relation or legal representative, ora retiring allowance of the taxpayer or a deceased individual of whom the taxpayer was a dependant, relation or legal representative, andthe amount, if any, by which the total of all amounts each of which isan amount described in clause 60(o.1)(i)(A) or 60(o.1)(i)(B)that is received after 1985,in respect of which legal expenses described in subparagraph 60(o.1)(i) were paid, andthat is included in computing the income of the taxpayer for the year or a preceding taxation year, oran amount included in computing the income of the taxpayer under paragraph 56(1)(l.1) for the year or a preceding taxation year,exceeds the total of all amounts each of which is an amount deducted under paragraph 60(j), 60(j.01), 60(j.1) or 60(j.2) in computing the income of the taxpayer for the year or a preceding taxation year, to the extent that the amount may reasonably be considered to have been deductible as a consequence of the receipt of an amount referred to in clause 60(o.1)(ii)(A),exceedsthe portion of the total described in subparagraph 60(o.1)(i) in respect of the taxpayer that may reasonably be considered to have been deductible under this paragraph in computing the income of the taxpayer for a preceding taxation year;Repayment of apprenticeship grantsthe total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program of an amount that was included under paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;Refund of income paymentswhere the taxpayer is an individual, an amount paid by the taxpayer in the year to a person with whom the taxpayer was dealing at arm’s length (in this paragraph referred to as the “payer”) ifthe amount has been included in computing the income of the taxpayer for the year or a preceding taxation year as an amount described in subparagraph 56(1)(n)(i) or paragraph 56(1)(o) paid to the taxpayer by the payer,at the time the amount was paid by the payer to the taxpayer a condition was stipulated for the taxpayer to fulfil,as a result of the failure of the taxpayer to fulfil the condition referred to in subparagraph 60(q(ii) the taxpayer was required to repay the amount to the payer,during the period for which the amount referred to in subparagraph 60(q(i) was paid the taxpayer did not provide other than occasional services to the payer as an officer or under a contract of employment, andthe amount was paid to the taxpayer for the purpose of enabling the taxpayer to further the taxpayer’s education;[Repealed, 2024, c. 17, s. 13]Repayment of policy loanthe total of all repayments made by the taxpayer in the year in respect of a policy loan (within the meaning assigned by subsection 148(9)) made under a life insurance policy, not exceeding the amount, if any, by whichthe total of all amounts required by subsection 148(1) to be included in computing the taxpayer’s income for the year or a preceding taxation year from a disposition described in paragraph (b) of the definition disposition in subsection 148(9) in respect of that policyexceedsthe total of all repayments made by the taxpayer in respect of the policy loan that were deductible in computing the taxpayer’s income for a preceding taxation year;RCA distributionswhere an amount in respect of a particular retirement compensation arrangement is required by paragraph 56(1)(x) or 56(1)(z) or subsection 70(2) to be included in computing the taxpayer’s income for the year, an amount equal to the lesser ofthe total of all amounts in respect of the particular arrangement so required to be included in computing the taxpayer’s income for the year, andthe amount, if any, by which the total of all amounts each of which isan amount (other than an amount deductible under paragraph 8(1)(m.2) or transferred to the particular arrangement under circumstances in which subsection 207.6(7) applies) contributed under the particular arrangement by the taxpayer while it was a retirement compensation arrangement and before the end of the year,an amount transferred in respect of the taxpayer before the end of the year to the particular arrangement from another retirement compensation arrangement under circumstances in which subsection 207.6(7) applies, to the extent that the amount would have been deductible under this paragraph in respect of the other arrangement in computing the taxpayer’s income if it had been received by the taxpayer out of the other arrangement,an amount paid by the taxpayer before the end of the year and at a time when the taxpayer was resident in Canada to acquire an interest in the particular arrangement, oran amount that was received or became receivable by the taxpayer before the end of the year and at a time when the taxpayer was resident in Canada as proceeds from the disposition of an interest in the particular arrangement,exceeds the total of all amounts each of which isan amount deducted under this paragraph or paragraph 60(u) in respect of the particular arrangement in computing the taxpayer’s income for a preceding taxation year, oran amount transferred in respect of the taxpayer before the end of the year from the particular arrangement to another retirement compensation arrangement under circumstances in which subsection 207.6(7) applies, to the extent that the amount would have been deductible under this paragraph in respect of the particular arrangement in computing the taxpayer’s income if it had been received by the taxpayer out of the particular arrangement;RCA dispositionswhere an amount in respect of a particular retirement compensation arrangement is required by paragraph 56(1)(y) to be included in computing the taxpayer’s income for the year, an amount equal to the lesser ofthe total of all amounts in respect of the particular arrangement so required to be included in computing the taxpayer’s income for the year, andthe amount, if any, by which the total of all amounts each of which isan amount (other than an amount deductible under paragraph 8(1)(m.2) or transferred to the particular arrangement under circumstances in which subsection 207.6(7) applies) contributed under the particular arrangement by the taxpayer while it was a retirement compensation arrangement and before the end of the year,an amount transferred in respect of the taxpayer before the end of the year to the particular arrangement from another retirement compensation arrangement under circumstances in which subsection 207.6(7) applies, to the extent that the amount would have been deductible under paragraph 60(t) in respect of the other arrangement in computing the taxpayer’s income if it had been received by the taxpayer out of the other arrangement, oran amount paid by the taxpayer before the end of the year and at a time when the taxpayer was resident in Canada to acquire an interest in the particular arrangementexceeds the total of all amounts each of which isan amount deducted under paragraph 60(t) in respect of the particular arrangement in computing the taxpayer’s income for the year or a preceding taxation year,an amount deducted under this paragraph in respect of the particular arrangement in computing the taxpayer’s income for a preceding taxation year, oran amount transferred in respect of the taxpayer before the end of the year from the particular arrangement to another retirement compensation arrangement under circumstances in which subsection 207.6(7) applies, to the extent that the amount would have been deductible under paragraph 60(t) in respect of the particular arrangement in computing the taxpayer’s income if it had been received by the taxpayer out of the particular arrangement;Repayment — parents of victims of crimethe total of all amounts each of which is an amount paid in the year as a repayment of a benefit that was included because of paragraph 56(1)(a.3) in computing the taxpayer’s income for the year or a preceding taxation year;EI benefit repaymentany benefit repayment payable by the taxpayer under Part VII of the Employment Insurance Act on or before April 30 of the following year, to the extent that the amount was not deductible in computing the taxpayer’s income for any preceding taxation year;Canada Recovery Benefit Repaymentany benefit repayment payable by the taxpayer under section 8 of the Canada Recovery Benefits Act on or before the taxpayer’s balance-due day for the taxation year, to the extent that the amount was not deductible in computing the taxpayer’s income for any preceding taxation year;COVID-19 – other benefit repaymentsany benefit repaid by the taxpayer before 2023 to the extent that the amount of the benefit was included in computing the taxpayer’s income for the year under any of clauses 56(1)(r)(iv.1)(A) to (D), except to the extent that the amount isdeducted in computing the taxpayer’s income for any year under paragraph (n), ordeductible in computing the taxpayer’s income for any year under paragraph (v.2);Tax under Part I.2the amount of the taxpayer’s tax payable under Part I.2 for the year;Repayment under Canada Education Savings Actthe total of all amounts each of which is an amount paid by the taxpayer in the year as a repayment, under the Canada Education Savings Act or under a designated provincial program (as defined in subsection 146.1(1)), of an amount that was included because of subsection 146.1(7) in computing the taxpayer’s income for the year or a preceding taxation year;Repayment of UCCBthe total of all amounts each of which is an amount paid in the taxation year as a repayment, under the Universal Child Care Benefit Act, of a benefit that was included because of subsection 56(6) in computing the taxpayer’s income for the taxation year or a preceding taxation year;Repayment under the Canada Disability Savings Actthe total of all amounts each of which is an amount paid in the taxation year as a repayment, under or because of the Canada Disability Savings Act or a designated provincial program as defined in subsection 146.4(1), of an amount that was included because of section 146.4 in computing the taxpayer’s income for the taxation year or a preceding taxation year; andTax informant programthe total of all amounts each of which is an amount paid in the year as a repayment of an amount that was included, because of paragraph 56(1)(z.4), in computing the taxpayer’s income for the year or a preceding taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 60; 1994, c. 7, Sch. II, s. 34, Sch. VII, s. 2, Sch. VIII, s. 20, c. 21, s. 26; 1996, c. 11, s. 99, c. 21, s. 13, c. 23, ss. 172.1, 187; 1997, c. 25, s. 10; 1998, c. 19, s. 99; 1999, c. 22, s. 16; 2000, c. 12, s. 142, c. 19, s. 7; 2001, c. 17, s. 41; 2002, c. 9, s. 25; 2003, c. 15, s. 71; 2004, c. 26, s. 20; 2006, c. 4, s. 174; 2007, c. 2, s. 7, c. 29, s. 4, c. 35, ss. 18, 105; 2009, c. 2, s. 14; 2010, c. 12, s. 5, c. 25, s. 10; 2011, c. 24, s. 11; 2012, c. 19, s. 278, c. 27, s. 27, c. 31, s. 12; 2013, c. 34, ss. 196, 426, c. 40, s. 26; 2014, c. 20, s. 3; 2016, c. 14, s. 66; 2018, c. 27, s. 342020, c. 12, s. 2 “42”2021, c. 23, s. 82022, c. 19, s. 62023, c. 26, s. 112024, c. 17, s. 13
[Repealed, 2013, c. 40, s. 27][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 60.001; 2013, c. 40, s. 27
Eligible amountFor the purpose of paragraph 60(j), the amount, if any, by whichthe amount of any payment received by a taxpayer in a taxation year out of or under a foreign retirement arrangement and included in computing the taxpayer’s income because of clause 56(1)(a)(i)(C.1) (other than any portion thereof that is included in respect of the taxpayer for the year under subparagraph 60(j(i) or that is part of a series of periodic payments)exceedsthe portion, if any, of the payment included under paragraph 60.01(a) that can reasonably be considered to derive from contributions to the foreign retirement arrangement made by a person other than the taxpayer or the taxpayer’s spouse or common-law partner or former spouse or common-law partner,is an eligible amount in respect of the taxpayer for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1994, c. 7, Sch. II, s. 35, Sch. VIII, s. 21; 2000, c. 12, s. 142; 2001, c. 17, s. 239(F)
Meaning of lifetime benefit trustFor the purpose of subsection (2), a trust is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual ifimmediately before the death of the deceased individual, the taxpayerwas both a spouse or common-law partner of the deceased individual and mentally infirm, orwas both a child or grandchild of the deceased individual and dependent on the deceased individual for support because of mental infirmity; andthe trust is, at the particular time, a personal trust under whichno person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer’s lifetime, any of the income or capital of the trust, andthe trusteesare empowered to pay amounts from the trust to the taxpayer, andare required — in determining whether to pay, or not to pay, an amount to the taxpayer — to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer.Meaning of qualifying trust annuityEach of the following is a qualifying trust annuity with respect to a taxpayer:an annuity that meets the following conditions:it is acquired after 2005,the annuitant under it is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the estate of a deceased individual,it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, andif it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;an annuity that meets the following conditions:it is acquired after 1988,the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, andif it is acquired after 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; andan annuity that meets the following conditions:it is acquiredafter 2000 and before 2005 at a time at which the taxpayer was mentally or physically infirm, orin 2005 at a time at which the taxpayer was mentally infirm,the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity, andit is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.Application of paragraph 60(l) to qualifying trust annuityFor the purpose of paragraph 60(l),in determining if a qualifying trust annuity with respect to a taxpayer is an annuity described in subparagraph 60(l)(ii), clauses 60(l)(ii)(A) and (B) are to be read without regard to their requirement that the taxpayer be the annuitant under the annuity; andif an amount paid to acquire a qualifying trust annuity with respect to a taxpayer would, if this Act were read without reference to this subsection, not be considered to have been paid by or on behalf of the taxpayer, the amount is deemed to have been paid on behalf of the taxpayer whereit is paidby the estate of a deceased individual who was, immediately before death,a spouse or common-law partner of the taxpayer, ora parent or grandparent of the taxpayer on whom the taxpayer was dependent for support, orby the trust that is the annuitant under the qualifying trust annuity, andit would, if it had been paid by the taxpayer, be deductible under paragraph 60(l) in computing the taxpayer’s income for a taxation year and the taxpayer elects, in the taxpayer’s return of income under this Part for that taxation year, to have this paragraph apply to the amount.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 34, s. 197
DefinitionsThe definitions in this subsection apply in this section and section 146.4,eligible individual means a child or grandchild of a deceased annuitant under a registered retirement savings plan or a registered retirement income fund, or of a deceased member of a pooled registered pension plan, a registered pension plan or a specified pension plan, who was financially dependent on the deceased for support, at the time of the deceased’s death, by reason of mental or physical infirmity. (particulier admissible)eligible proceeds means an amount (other than an amount that was deducted under paragraph 60(l) in computing the eligible individual’s income) received by an eligible individual as a consequence of the death after March 3, 2010 of a parent or grandparent of the eligible individual that is a refund of premiums (as defined in subsection 146(1));an eligible amount under subsection 146.3(6.11); ora payment (other than a payment that is part of a series of periodic payments or that relates to an actuarial surplus) out of or under a pooled registered pension plan, a registered pension plan or a specified pension plan. (produit admissible)specified RDSP payment in respect of an eligible individual means a payment that is made to a registered disability savings plan under which the eligible individual is the beneficiary;complies with the conditions set out in paragraphs 146.4(4)(f) to (h);is made after June 2011;has been designated in prescribed form for a taxation year by the holder of the plan and the eligible individual at the time that the payment is made; andif the eligible individual is not a DTC-eligible individual (as defined in subsection 146.4(1)), is made not later than the end of the fourth taxation year following the first taxation year throughout which the beneficiary is not a DTC-eligible individual. (paiement de REEI déterminé)transitional eligible proceeds of a taxpayer meansany amount (other than an amount that is eligible proceeds or an amount that was deducted under paragraph 60(l) in computing the taxpayer’s income) that is received by the taxpayer as a consequence of the death of an individual after 2007 and before 2011 out of or undera registered retirement savings plan or registered retirement income fund, ora registered pension plan (other than an amount that is received as part of a series of periodic payments or that relates to an actuarial surplus); oran amount withdrawn from the taxpayer’s registered retirement savings plan or a registered retirement income fund (in this subsection referred to as the “RRSP withdrawal”) ifthe taxpayer previously deducted an amount under paragraph 60(l) in respect of an amount that would be described by paragraph (a) if it were read without reference to “other than an amount that is eligible proceeds or an amount that was deducted under paragraph 60(l) in computing the taxpayer’s income”,the RRSP withdrawal is included in computing the taxpayer’s income for the year of the withdrawal, andthe RRSP withdrawal does not exceed the amount deducted under subparagraph (i). (produit admissible transitoire)Rollover to RDSP on deathThere may be deducted in computing the income for a taxation year of a taxpayer who is an eligible individual an amount thatdoes not exceed the lesser ofthe total specified RDSP payments made in the year or within 60 days after the end of the year (or within any longer period after the end of the year that is acceptable to the Minister) in respect of the taxpayer; andthe total amount of eligible proceeds that is included in computing the taxpayer’s income in the year; andwas not deducted in computing the taxpayer’s income for a preceding taxation year.Application of subsections (4) and (5)Subsections (4) and (5) do not apply unlessa taxpayer who was the annuitant under a registered retirement savings plan or a registered retirement income fund or was a member of a registered pension plan died after 2007 and before 2011;the taxpayer was, immediately before the taxpayer’s death, the parent or grandparent of an eligible individual;transitional eligible proceeds were received from the plan or fund byan eligible individual in respect of the taxpayer,a person who was the spouse or common-law partner of the taxpayer immediately before the taxpayer’s death, ora person who is a beneficiary of the taxpayer’s estate or who directly received transitional eligible proceeds as a consequence of the death of the taxpayer; andthe transitional eligible proceeds were included in computing the income of a person for a taxation year.Transitional ruleThere may be deducted in computing the income of a taxpayer described in paragraph (3)(c) for a taxation year an amount approved by the Minister that does not exceed the lesser ofthe total specified RDSP payments made by the taxpayer before 2012, andthe amount of transitional eligible proceeds included in computing the taxpayer’s income for the year.Transitional rule — deceased taxpayerThere may be deducted in computing the income of a taxpayer for the taxation year in which the taxpayer died an amount approved by the Minister that does not exceed the lesser ofthe total specified RDSP payments made before 2012 by an individual described in subparagraph (3)(c)(iii), andthe amount by which the total of all amounts that were included in computing the taxpayer’s income for the year under subsection 146(8.8) or 146.3(6) exceeds the total of all amounts, if any, that were deducted in computing the taxpayer’s income for the year under subsection 146(8.92) or 146.3(6.3).LimitationThe total amounts that may be deducted under subsections (4) and (5) in respect of transitional eligible proceeds received in respect of the death of a taxpayer shall not exceed the total transitional eligible proceeds received in respect of the deceased taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1990, c. 35, s. 5; 2010, c. 25, s. 11; 2011, c. 24, s. 12; 2012, c. 31, s. 132021, c. 23, s. 9
Additions to clause 60(l)(v)(B.2) for 2008In determining the amount that may be deducted because of paragraph 60(l) in computing a taxpayer’s income for the 2008 taxation year, clause 60(l)(v)(B.2) shall be read as follows:the total of all amounts each of which isthe taxpayer’s eligible amount (within the meaning assigned by subsection 146.3(6.11)) for the year in respect of a registered retirement income fund,the taxpayer’s eligible RRIF withdrawal amount (within the meaning assigned by subsection 60.021(2)) for the year in respect of a registered retirement income fund, orthe taxpayer’s eligible variable benefit withdrawal amount (within the meaning assigned by subsection 60.021(3)) for the year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan,Meaning of eligible RRIF withdrawal amountA taxpayer’s eligible RRIF withdrawal amount for a taxation year in respect of a registered retirement income fund under which the taxpayer is the annuitant at the beginning of the taxation year isexcept where paragraph (b) applies, the amount determined by the formulaA – BwhereAis the lesser ofthe total of all amounts included, because of subsection 146.3(5), in computing the income of the taxpayer for the taxation year in respect of amounts received out of or under the fund (other than an amount paid by direct transfer from the fund to another fund or to a registered retirement savings plan), andthe amount that would, in the absence of subsection 146.3(1.1), be the minimum amount under the fund for the taxation year, andBis the minimum amount under the fund for the taxation year; andif the taxpayer attained 70 years of age in 2007, nil.Meaning of eligible variable benefit withdrawal amountA taxpayer’s eligible variable benefit withdrawal amount for a taxation year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan is the amount determined by the formulaA – B – CwhereAis the lesser ofthe total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs 8506(1)(a) to (e) of the Regulations) paid from the plan in the taxation year in respect of the account and included, because of paragraph 56(1)(a), in computing the taxpayer’s income for the taxation year, andthe amount that would, in the absence of paragraph 8506(7)(b) of the Regulations, be the minimum amount for the account for the taxation year;Bis the minimum amount for the account for the taxation year; andCis the total of all contributions made by the taxpayer under the provision and designated for the purposes of subsection 8506(10) of the Regulations.Expressions used in this sectionFor the purposes of this section,the term “money purchase provision” has the meaning assigned by subsection 147.1(1);the term “retirement benefit” has the meaning assigned by subsection 8500(1) of the Regulations; andthe minimum amount for an account of a taxpayer under a money purchase provision of a registered pension plan is the amount determined in accordance with subsection 8506(5) of the Regulations.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2009, c. 2, s. 15
Additions to clause 60(l)(v)(B.2) for 2015In determining the amount that may be deducted because of paragraph 60(l) in computing a taxpayer’s income for the 2015 taxation year, clause 60(l)(v)(B.2) is to be read as follows:the total of all amounts each of which isthe taxpayer’s eligible amount (within the meaning of subsection 146.3(6.11)) for the year in respect of a registered retirement income fund,the taxpayer’s eligible RRIF withdrawal amount (within the meaning of subsection 60.022(2)) for the year in respect of a RRIF,the taxpayer’s eligible variable benefit withdrawal amount (within the meaning of subsection 60.022(3)) for the year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan, orthe taxpayer’s eligible PRPP withdrawal amount (within the meaning of subsection 60.022(4)) for the year in respect of an account of the taxpayer under a PRPP,Eligible RRIF withdrawal amountA taxpayer’s eligible RRIF withdrawal amount for the taxation year in respect of a RRIF under which the taxpayer is the annuitant at the beginning of the taxation year is the amount determined by the formulaA – BwhereAis the lesser ofthe total of all amounts included, because of subsection 146.3(5), in computing the taxpayer’s income for the taxation year in respect of amounts received out of or under the fund (other than an amount paid by direct transfer from the fund to another fund or to a registered retirement savings plan), andthe amount that would be the minimum amount under the fund for the 2015 taxation year if it were determined using the prescribed factors under subsection 7308(3) or (4), as the case may be, of the Income Tax Regulations as they read on December 31, 2014; andBis the minimum amount under the fund for the taxation year.Eligible variable benefit withdrawal amountA taxpayer’s eligible variable benefit withdrawal amount for a taxation year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan is the amount determined by the formulaA – B – CwhereAis the lesser ofthe total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs 8506(1)(a) to (e) of the Income Tax Regulations) paid from the plan in the taxation year in respect of the account and included, because of paragraph 56(1)(a), in computing the taxpayer’s income for the taxation year, andthe amount that would be the minimum amount for the account for the 2015 taxation year if it were determined using the factor designated under subsection 7308(4) of the Income Tax Regulations as they read on December 31, 2014;Bis the minimum amount for the account for the taxation year; andCis the total of all contributions made by the taxpayer under the provision and designated for the purposes of subsection 8506(12) of the Income Tax Regulations.Eligible PRPP withdrawal amountA taxpayer’s eligible PRPP withdrawal amount for a taxation year in respect of an account of the taxpayer under a PRPP is the amount determined by the formulaA – BwhereAis the lesser ofthe total of all amounts each of which is the amount of a distribution made from the account in the taxation year and included, because of subsection 147.5(13), in computing the taxpayer’s income for the taxation year, andthe amount that would be the minimum amount for the account for the 2015 taxation year if it were determined using the factor designated under subsection 7308(4) of the Income Tax Regulations as they read on December 31, 2014, andBis the minimum amount for the account for the taxation year.Expressions used in this sectionFor the purposes of this section,money purchase provision has the same meaning as in subsection 147.1(1);retirement benefits has the same meaning as in subsection 8500(1) of the Income Tax Regulations;the minimum amount for an account of a taxpayer under a money purchase provision of a registered pension plan is the amount determined under subsection 8506(5) of the Income Tax Regulations; andthe minimum amount for an account of a taxpayer under a PRPP is the amount that would be the minimum amount for the calendar year under subsection 8506(5) of the Income Tax Regulations if the taxpayer’s account were an account under a money purchase provision of a registered pension plan.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2015, c. 36, s. 2
DefinitionsThe following definitions apply in this section.eligible pension income, of an individual for a taxation year, means the total ofthe eligible pension income (as defined in subsection 118(7)) of the individual for the year,if the individual has attained the age of 65 years before the end of the year, the lesser ofthe total of all amounts each of which is a payment made in the year to the individualout of or under a retirement compensation arrangement that provides benefits that supplement the benefits provided under a registered pension plan (other than an individual pension plan for the purposes of Part LXXXIII of the Income Tax Regulations), andin respect of a life annuity that is attributable to periods of employment for which benefits are also provided to the individual under the registered pension plan,the amount, if any, by which the defined benefit limit (as defined in subsection 8500(1) of the Income Tax Regulations) for the year multiplied by 35 exceeds the amount determined under paragraph (a), andthe lesser ofthe total of all amounts received by the individual in the year on account ofa retirement income security benefit payable to the individual under Part 2 of the Veterans Well-being Act, oran income replacement benefit payable to the individual under Part 2 of the Veterans Well-being Act, if the amount is determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of that Act (as modified, where applicable, under Part 5 of that Act), andthe amount, if any, by which the defined benefit limit (as defined in subsection 8500(1) of the Income Tax Regulations) for the year multiplied by 35 exceeds the total of the amounts determined under paragraphs (a) and (b). (revenu de pension déterminé)joint election in respect of a pensioner and a pension transferee for a taxation year means an election made jointly in prescribed form by the pensioner and the pension transferee and filed with the Minister with both the pensioner’s and the pension transferee’s returns of income for the taxation year in respect of which the election is made, on or before their respective filing-due dates for the taxation year. (choix conjoint)pensioner for a taxation year means an individual whoreceives eligible pension income in the taxation year; andis resident in Canada,if the individual dies in the taxation year, at the time that is immediately before the individual’s death, orin any other case, at the end of the calendar year in which the taxation year ends. (pensionné)pension income has the meaning assigned by section 118. (revenu de pension)pension transferee for a taxation year means an individual whois resident in Canada,if the individual dies in the taxation year, at the time that is immediately before the individual’s death, orin any other case, at the end of the calendar year in which the taxation year ends; andat any time in the taxation year is married to, or in a common-law partnership with, a pensioner and is not, by reason of the breakdown of their marriage or common-law partnership, living separate and apart from the pensioner at the end of the taxation year and for a period of at least 90 days commencing in the taxation year. (cessionnaire)qualified pension income has the meaning assigned by section 118. (revenu de pension admissible)split-pension amount for a taxation year is the amount elected by a pensioner and a pension transferee in a joint election for the taxation year not exceeding the amount determined by the formula 0.5A × B/CwhereAis the eligible pension income of the pensioner for the taxation year;Bis the number of months in the pensioner’s taxation year at any time during which the pensioner was married to, or was in a common-law partnership with, the pension transferee; andCis the number of months in the pensioner’s taxation year. (montant de pension fractionné)Effect of pension income splitFor the purpose of subsection 118(3), if a pensioner and a pension transferee have made a joint election in a taxation year,the pensioner is deemed not to have received the portion of the pensioner’s pension income, qualified pension income or an amount described in subparagraph (c)(i) of the definition eligible pension income in subsection (1), as the case may be, for the taxation year that is equal to the amount of the pensioner’s split-pension amount for that taxation year; andthe pension transferee is deemed to have received the split-pension amountas pension income, to the extent that the split-pension amount was pension income to the pensioner,as qualified pension income, to the extent that the split-pension amount was qualified pension income to the pensioner, andas an amount described in subparagraph (c)(i) of the definition eligible pension income in subsection (1) to the extent that the split-pension amount was received by the pensioner as an amount described in subparagraph (c)(i) of that definition, if the pension transferee has attained the age of 65 years before the end of the taxation year.LimitationA pensioner may file only one joint election for a particular taxation year.False declarationA joint election is invalid if the Minister establishes that a pensioner or a pension transferee has knowingly or under circumstances amounting to gross negligence made a false declaration in the joint election.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2007, c. 29, s. 5; 2012, c. 31, s. 14; 2017, c. 33, s. 162018, c. 12, s. 42023, c. 26, s. 12
SupportFor the purposes of paragraph 60(b) and subsection 118(5), where an order or agreement, or any variation thereof, provides for the payment of an amount by a taxpayer to a person or for the benefit of the person, children in the person’s custody or both the person and those children, the amount or any part thereofwhen payable, is deemed to be payable to and receivable by that person; andwhen paid, is deemed to have been paid to and received by that person.AgreementFor the purposes of section 60, this section and subsection 118(5), the amount determined by the formulaA - BwhereAis the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a taxpayer in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the taxpayer resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the person described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a person, children in the person’s custody or both the person and those children, if the person isthe taxpayer’s spouse or common-law partner or former spouse or common-law partner, orwhere the amount became payable under an order made by a competent tribunal in accordance with the laws of a province, an individual who is a parent of a child of whom the taxpayer is a legal parent,andBis the amount, if any, by whichthe total of all amounts each of which is an amount included in the total determined for A in respect of the acquisition or improvement of a self-contained domestic establishment in which that person resides, including any payment of principal or interest in respect of a loan made or indebtedness incurred to finance, in any manner whatever, such acquisition or improvementexceedsthe total of all amounts each of which is an amount equal to 1/5 of the original principal amount of a loan or indebtedness described in paragraph (a),is, where the order or written agreement, as the case may be, provides that this subsection and subsection 56.1(2) shall apply to any amount paid or payable thereunder, deemed to be an amount payable by the taxpayer to that person and receivable by that person as an allowance on a periodic basis, and that person is deemed to have discretion as to the use of that amount.Prior paymentsFor the purposes of this section and section 60, where a written agreement or order of a competent tribunal made at any time in a taxation year provides that an amount paid before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder,the amount is deemed to have been paid thereunder; andthe agreement or order is deemed, except for the purpose of this subsection, to have been made on the day on which the first such amount was paid, except that, where the agreement or order is made after April 1997 and varies a child support amount payable to the recipient from the last such amount paid to the recipient before May 1997, each varied amount of child support paid under the agreement or order is deemed to have been payable under an agreement or order the commencement day of which is the day on which the first payment of the varied amount is required to be made.DefinitionsThe definitions in subsection 56.1(4) apply in this section and section 60.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 60.1; 1994, c. 7, Sch. VIII, s. 22, c. 21, s. 135; 1997, c. 25, s. 11; 1998, c. 19, s. 100(F); 2000, c. 12, s. 142; 2001, c. 17, s. 240(F); 2005, c. 33, s. 11; 2013, c. 34, s. 109, c. 40, s. 28(F)
[Repealed, 2013, c. 40, s. 29][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 60.11; 2013, c. 40, s. 29
Refund of undeducted past service AVCsThere may be deducted in computing a taxpayer’s income for a taxation year an amount equal to the total ofwhere the taxation year ends before 1991, the total of all amounts each of which is that portion of an amount paid to the taxpayer before 1991 and included by reason of subparagraph 56(1)(a)(i) or paragraph 56(1)(h) or 56(1)(t) in computing the taxpayer’s income for the year or a preceding taxation year that can reasonably be considered to be a refund of additional voluntary contributions made by the taxpayer before October 9, 1986 to a registered pension plan for the taxpayer’s benefit in respect of services rendered by the taxpayer before the year in which the contributions were made, to the extent that the contributions were not deducted in computing the taxpayer’s income for any taxation year; andthe least of$3,500,the total of all amounts each of which is an amount included after 1986 by reason of subparagraph 56(1)(a)(i) or paragraph 56(1)(d.2), 56(1)(h) or 56(1)(t) in computing the taxpayer’s income for the year, andthe balance of the annuitized voluntary contributions of the taxpayer at the end of the year.Definition of balance of the annuitized voluntary contributionsFor the purposes of subsection 60.2(1), balance of the annuitized voluntary contributions of a taxpayer at the end of a taxation year means the amount, if any, by whichsuch part of the total of all amounts each of which is an additional voluntary contribution made by the taxpayer to a registered pension plan before October 9, 1986 in respect of services rendered by the taxpayer before the year in which the contribution was made, to the extent that the contribution was not deducted in computing the taxpayer’s income for any taxation year, as may reasonably be considered as having beenused before October 9, 1986 to acquire or provide an annuity for the taxpayer’s benefit under a registered pension plan or registered retirement savings plan, ortransferred before October 9, 1986 to a registered retirement income fund under which the taxpayer was the annuitant (within the meaning assigned by subsection 146.3(1)) at the time of the transferexceedsthe total of all amounts each of which isan amount deducted under paragraph 60.2(1)(b) in computing the taxpayer’s income for a preceding taxation year, oran amount deducted under paragraph 60.2(1)(a) in computing the taxpayer’s income for the year or a preceding taxation year, to the extent that the amount can reasonably be considered to be in respect of a refund of additional voluntary contributions included in determining the total under paragraph 60.2(2)(a).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1990, c. 35, s. 6
Payment made as consideration for income-averaging annuityIn computing the income for a taxation year of an individual resident in Canada, there may be deducted an amount equal to the lesser ofsuch amount as the individual may claim, not exceeding the total of amounts each of which is a single paymentmade by the individual in the year or within 60 days after the end of the year as consideration for an income-averaging annuity contract of the individual, andin respect of which no amount has been deducted in computing the individual’s income for the immediately preceding taxation year, andthe amount, if any, by which the total ofthe remainder obtained when the total of the amounts deductible in computing the individual’s income for the year by reason of paragraphs 60(j) and 60(l) of this Act and paragraph 60(k) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, is deducted from the total of amounts described in subsection 61(2) in respect of the individual for the year,the amount, if any, by which the amount determined under paragraph 3(b) in respect of the individual for the year exceeds the total of amounts each of which is an allowable business investment loss of the individual for the year,the individual’s income for the year from the production of a literary, dramatic, musical or artistic work,the individual’s income for the year from the individual’s activities as an athlete, a musician or a public entertainer such as a theatre, motion picture, radio or television artist, andthe amount, if any, by which the amount included in computing the income of the individual for the year by virtue of section 59 exceeds the total of amounts deducted in computing the individual’s income for the year under sections 64, 66, 66.1, 66.2 and 66.4 and under section 29 of the Income Tax Application Rules,exceedsthe total of amounts each of which is the annual annuity amount of the individual in respect of an income-averaging annuity contract in respect of the consideration for which any amount has been deducted under this subsection in computing the individual’s income for the year.IdemFor the purposes of subsection 61(1), an amount described in this subsection in respect of an individual for a taxation year is any following amount:any single payment received by the individual in the yearout of or under a superannuation or pension fund or planon the death, withdrawal or retirement from employment of an employee or former employee,on the winding-up of the fund or plan in full satisfaction of all rights of the payee in or under the fund or plan, orto which the payee is entitled by virtue of an amendment to the plan although the payee continues to be an employee to whom the plan is applicable,on retirement as an employee in recognition of long service and not made out of or under a superannuation fund or plan,pursuant to an employees profit sharing plan in full satisfaction of all the individual’s rights in or under the plan, to the extent that the amount thereof is required to be included in computing the individual’s income for the year in which the payment was received, orpursuant to a deferred profit sharing plan on the death, withdrawal or retirement from employment of an employee or former employee, to the extent that the amount thereof is required to be included in computing the individual’s income for the year;a payment or payments made by an employer to the individual as an employee or former employee on or after retirement in respect of loss of office or employment, if made in the year of retirement or within one year after that year;a payment or payments paid to the individual as a death benefit, if paid in the year of death or within one year after that year;any amount included in computing the individual’s income for the year by virtue of subsection 146(8), to the extent that the amount is a refund of premiums, as defined by section 146, under a registered retirement savings plan received by the individual under the plan on or after the death of the person who was, immediately before the person’s death, the annuitant thereunder;any amount included in computing the individual’s income for the year by virtue of section 13, 14 or 23, subsection 28(4) or 28(5) or paragraph 106(2)(a) of this Act or subparagraph 56(1)(a)(viii) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952;any amount deemed by section 7 to be a benefit received by the individual in the year by virtue of the individual’s employment;the amount, if any, by which any amount received by the individual in the year as or on account of a prize for achievement in a field of endeavour ordinarily carried on by the individual exceeds $500;any amount included in computing the individual’s income for the year by virtue of subsection 146.2(6) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952;a payment made in the year to an individual by virtue of paragraph 51(2)(b) of the Judges Act;except where the individual claimed a deduction under paragraph 23(3)(a) of the Income Tax Application Rules in computing the individual’s income for the year, any amount included in computing that income by virtue of paragraph 23(3)(c) of that Act; andwhere the individual ceased to be a member of a partnership in the year or the preceding year and paragraph 34(a) applied in computing the individual’s income therefrom in the preceding year, the amount included in the individual’s income for the year by virtue of paragraph 3(a) to the extent that, having regard to all the circumstances including the proportion in which the members of the partnership have agreed to share the profits of the partnership, it can reasonably be considered to be in respect of the individual’s share of the work in progress of the partnership at the time the individual ceased to be a member thereof, if, during the remainder of the year in which the individual ceased to be a member and in the following year, the individual did notbecome employed in the business that had been carried on by the partnership,carry on a business that is a profession, orbecome a member of a partnership that carries on a business that is a profession.DefinitionsIn this section,annual annuity amount of an individual in respect of an income-averaging annuity contract means the total of the equal payments described in paragraph (c) of the definition income-averaging annuity contract in this subsection that, under the contract, are receivable by the individual in the twelve month period commencing on the day that the first such payment under the contract becomes receivable by the individual; (montant annuel de la rente)income-averaging annuity contract of an individual means a contract between the individual and a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business or a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, under whichin consideration of a qualifying payment as consideration under the contract, that person agrees to pay to the individual, commencing at a time not later than 10 months after the individual has made the qualifying payment,an annuity to the individual for the individual’s life, with or without a guaranteed term not exceeding the number of years that is the lesser of15, and85 minus the age of the individual at the time the annuity payments commence, oran annuity to the individual for a guaranteed term described in subparagraph (i), orin consideration of a single payment in respect of the individual’s 1981 taxation year, other than a qualifying payment, made by the individual as consideration under the contract, that person makes all payments provided for under the contract to the individual before 1983and under which no payments are provided except the single payment by the individual and,in respect of a contract referred to in paragraph (a), equal annuity payments that are to be made annually or at more frequent periodic intervals, orin respect of a contract referred to in paragraph (b), payments described therein to the individual; (contrat de rente à versements invariables)qualifying payment means a single payment made before November 13, 1981 (or made on or after November 13, 1981 pursuant to an agreement in writing entered into before that date to make such a payment in respect of the individual’s 1981 taxation year, or pursuant to an arrangement in writing made before that date to have funds withheld before 1982 from any of the individual’s remuneration described in paragraph 61(1)(b) earned or received before November 13, 1981 and paid by or on behalf of the individual). (paiement admissible)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1 “61”; 1973-74, c. 14, s. 17, c. 30, s. 5; 1974-75-76, c. 26, s. 32; 1976-77, c. 4, s. 18; 1977-78, c. 1, ss. 26, 101(F); 1979, c. 5, s. 18; 1980-81-82-83, c. 48, s. 31, c. 140, s. 30
Where income-averaging annuity contract ceases to be suchWhere a contract that was at any time an income-averaging annuity contract of an individual has, at a subsequent time, ceased to be an income-averaging annuity contract otherwise than by virtue of the surrender, cancellation, redemption, sale or the disposition thereof, the individual shall be deemed to have received at that subsequent time as proceeds of the disposition of an income-averaging annuity contract an amount equal to the fair market value of the contract at that subsequent time and to have acquired the contract, as another contract not being an income-averaging annuity contract, immediately thereafter at a cost to the individual equal to that fair market value.Where annuitant dies and payments continuedWhere an individual who was an annuitant under an income-averaging annuity contract has died and payments are subsequently made under that contract, the payments shall be deemed to be payments under an income-averaging annuity contract.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1976-77, c. 4, s. 19
Reserve for debt forgiveness for resident individualsThere may be deducted in computing the income for a taxation year of an individual (other than a trust) resident in Canada throughout the year such amount as the individual claims not exceeding the amount determined by the formulaA + B - 0.2(C - $40,000)whereAis the amount, if any, by whichthe total of all amounts each of which is an amount that, because of the application of section 80 to an obligation payable by the individual (or a partnership of which the individual was a member) was included under subsection 80(13) in computing the income of the individual for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that, where the amount was included in computing income of a partnership, it relates to the individual’s share of that income)exceedsthe total of all amounts deducted because of paragraph 80(15)(a) in computing the individual’s income for the year,Bis the amount, if any, included under section 56.2 in computing the individual’s income for the year, andCis the greater of $40,000 and the individual’s income for the year, determined without reference to this section, paragraph 20(1)(ww), section 56.2, paragraph 60(w), subsection 80(13) and paragraph 80(15)(a).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 20; 2000, c. 19, s. 8
Deduction for insolvency with respect to resident corporationsThere shall be deducted in computing the income for a taxation year of a corporation resident in Canada throughout the year that is not exempt from tax under this Part on its taxable income, the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation (in this section having the meaning assigned by subsection 80(1)) issued by the corporation (or a partnership of which the corporation was a member) was included under subsection 80(13) in computing the income of the corporation for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that the amount, where it was included in computing income of a partnership, relates to the corporation’s share of that income)exceedsthe total of all amounts deducted because of paragraph 80(15)(a) in computing the corporation’s income for the year, andthe amount determined by the formulaA - 2(B - C - D - E)whereAis the amount determined under paragraph 61.3(1)(a) in respect of the corporation for the year,Bis the total ofthe fair market value of the assets of the corporation at the end of the year,the amounts paid before the end of the year on account of the corporation’s tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or on account of a similar tax payable for the year under an Act of a province, andall amounts paid by the corporation in the 12-month period preceding the end of the year to a person with whom the corporation does not deal at arm’s lengthas a dividend (other than a stock dividend),on a reduction of paid-up capital in respect of any class of shares of its capital stock,on a redemption, acquisition or cancellation of its shares, oras a distribution or appropriation in any manner whatever to or for the benefit of the shareholders of any class of its capital stock, to the extent that the distribution or appropriation cannot reasonably be considered to have resulted in a reduction in the amount otherwise determined for C in respect of the corporation for the year,Cis the total liabilities of the corporation at the end of the year (determined without reference to the corporation’s liabilities for tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or for a similar tax payable for the year under an Act of a province) and, for this purpose,the equity and consolidation methods of accounting shall not be used, andsubject to subparagraph 61.3(1)(b)(i) and except as otherwise provided in this description, the total liabilities of the corporation shallwhere the corporation is not an insurance corporation, a federal credit union or a bank to which clause (B) or (C) applies and the balance sheet as of the end of the year was presented to the shareholders of the corporation and was prepared in accordance with generally accepted accounting principles, be considered to be the total liabilities shown on the balance sheet,where the corporation is a bank, a federal credit union or an insurance corporation that is required to report to the Superintendent of Financial Institutions and the balance sheet as of the end of the year was accepted by the Superintendent, be considered to be the total liabilities shown on that balance sheet,where the corporation is an insurance corporation that is required to report to the superintendent of insurance or other similar officer or authority of the province under whose laws the corporation is incorporated and the balance sheet as of the end of the year was accepted by that officer or authority, be considered to be the total liabilities shown on that balance sheet, andin any other case, be considered to be the amount that would be shown as total liabilities of the corporation at the end of the year on a balance sheet prepared in accordance with generally accepted accounting principles,Dis the total of all amounts each of which is the principal amount at the end of the year of a distress preferred share (within the meaning assigned by subsection 80(1)) issued by the corporation, andEis 50% of the amount, if any, by whichthe amount that would be the corporation’s income for the year if that amount were determined without reference to this section and section 61.4exceedsthe amount determined under paragraph 61.3(1)(a) in respect of the corporation for the year.Reserve for insolvency with respect to non-resident corporationsThere shall be deducted in computing the income for a taxation year of a corporation that is non-resident at any time in the year, the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation issued by the corporation (or a partnership of which the corporation was a member) was included under subsection 80(13) in computing the corporation’s taxable income or taxable income earned in Canada for the year or the income of the partnership for a fiscal period that ends in the year (to the extent that, where the amount was included in computing income of a partnership, it relates to the corporation’s share of the partnership’s income added in computing the corporation’s taxable income or taxable income earned in Canada for the year)exceedsthe total of all amounts deducted because of paragraph 80(15)(a) in computing the corporation’s taxable income or taxable income earned in Canada for the year, andthe amount determined by the formulaA - 2(B - C - D - E)whereAis the amount determined under paragraph 61.3(2)(a) in respect of the corporation for the year,Bis the total ofthe fair market value of the assets of the corporation at the end of the year,the amounts paid before the end of the year on account of the corporation’s tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or on account of a similar tax payable for the year under an Act of a province, andall amounts paid in the 12-month period preceding the end of the year by the corporation to a person with whom the corporation does not deal at arm’s lengthas a dividend (other than a stock dividend),on a reduction of paid-up capital in respect of any class of shares of its capital stock,on a redemption, acquisition or cancellation of its shares, oras a distribution or appropriation in any manner whatever to or for the benefit of the shareholders of any class of its capital stock, to the extent that the distribution or appropriation cannot reasonably be considered to have resulted in a reduction of the amount otherwise determined for C in respect of the corporation for the year,Cis the total liabilities of the corporation at the end of the year (determined without reference to the corporation’s liabilities for tax payable under this Part or any of Parts I.3, II, VI and XIV for the year or for a similar tax payable for the year under an Act of a province), determined in the manner described in the description of C in paragraph 61.3(1)(b),Dis the total of all amounts each of which is the principal amount at the end of the year of a distress preferred share (within the meaning assigned by subsection 80(1)) issued by the corporation, andEis 50% of the amount, if any, by whichthe amount that would be the corporation’s taxable income or taxable income earned in Canada for the year if that amount were determined without reference to this section and section 61.4exceedsthe amount determined under paragraph 61.3(2)(a) in respect of the corporation for the year.Anti-avoidanceSubsections 61.3(1) and 61.3(2) do not apply to a corporation for a taxation year where property was transferred in the 12-month period preceding the end of the year or the corporation became indebted in that period and it can reasonably be considered that one of the reasons for the transfer or the indebtedness was to increase the amount that the corporation would, but for this subsection, be entitled to deduct under subsection 61.3(1) or 61.3(2).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 20; 1998, c. 19, s. 101; 2010, c. 12, s. 2108
Reserve for debt forgiveness for corporations and othersThere may be deducted as a reserve in computing the income for a taxation year of a taxpayer that is a corporation or trust resident in Canada throughout the year or a non-resident person who carried on business through a fixed place of business in Canada at the end of the year such amount as the taxpayer claims not exceeding the least ofthe amount determined by the formulaA - BwhereAis the amount, if any, by whichthe total of all amounts each of which is an amount that, because of the application of section 80 to a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the taxpayer (or a partnership of which the taxpayer was a member) was included under subsection 80(13) in computing the income of the taxpayer for the year or a preceding taxation year or of the partnership for a fiscal period that ends in that year or preceding year (to the extent that, where the amount was included in computing income of a partnership, it relates to the taxpayer’s share of that income)exceeds the total ofall amounts each of which is an amount deducted under paragraph 80(15)(a) in computing the taxpayer’s income for the year or a preceding taxation year, andall amounts deducted under section 61.3 in computing the taxpayer’s income for the year or a preceding taxation year, andBis the amount, if any, by which the amount determined for A in respect of the taxpayer for the year exceeds the total ofthe amount that would be determined for A in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year, andthe amount, if any, included under section 56.3 in computing the taxpayer’s income for the year,the total of4/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for any preceding taxation year,3/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the last preceding taxation year),2/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the second last preceding taxation year), and1/5 of the amount that would be determined for A in paragraph 61.4(a) in respect of the taxpayer for the year if that value did not take into account amounts included or deducted in computing the taxpayer’s income for the year or any preceding taxation year (other than the third last preceding taxation year), andwhere the taxpayer is a corporation that commences to wind up in the year (otherwise than in circumstances to which the rules in subsection 88(1) apply), nil.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 20
Moving expensesThere may be deducted in computing a taxpayer’s income for a taxation year amounts paid by the taxpayer as or on account of moving expenses incurred in respect of an eligible relocation, to the extent thatthey were not paid on the taxpayer’s behalf in respect of, in the course of or because of, the taxpayer’s office or employment;they were not deductible because of this section in computing the taxpayer’s income for the preceding taxation year;the total of those amounts does not exceedin any case described in subparagraph (a)(i) of the definition eligible relocation in subsection 248(1), the total of all amounts, each of which is an amount included in computing the taxpayer’s income for the taxation year from the taxpayer’s employment at a new work location or from carrying on the business at the new work location, or because of subparagraph 56(1)(r)(v) in respect of the taxpayer’s employment at the new work location, andin any case described in subparagraph (a)(ii) of the definition eligible relocation in subsection 248(1), the total of amounts included in computing the taxpayer’s income for the year because of paragraphs 56(1)(n) and (o); andall reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer’s income.Moving expenses of studentsThere may be deducted in computing a taxpayer’s income for a taxation year the amount, if any, that the taxpayer would be entitled to deduct under subsection (1) if the definition eligible relocation in subsection 248(1) were read without reference to subparagraph (a)(i) of that definition and if the word “both” in paragraph (c) of that definition were read as “either or both”.Definition of moving expensesIn subsection 62(1), moving expenses includes any expense incurred as or on account oftravel costs (including a reasonable amount expended for meals and lodging), in the course of moving the taxpayer and members of the taxpayer’s household from the old residence to the new residence,the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence,the cost to the taxpayer of meals and lodging near the old residence or the new residence for the taxpayer and members of the taxpayer’s household for a period not exceeding 15 days,the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence,the taxpayer’s selling costs in respect of the sale of the old residence,where the old residence is sold by the taxpayer or the taxpayer’s spouse or common-law partner as a result of the move, the cost to the taxpayer of legal services in respect of the purchase of the new residence and of any tax, fee or duty (other than any goods and services tax or value-added tax) imposed on the transfer or registration of title to the new residence,interest, property taxes, insurance premiums and the cost of heating and utilities in respect of the old residence, to the extent of the lesser of $5,000 and the total of such expenses of the taxpayer for the periodthroughout which the old residence is neither ordinarily occupied by the taxpayer or by any other person who ordinarily resided with the taxpayer at the old residence immediately before the move nor rented by the taxpayer to any other person, andin which reasonable efforts are made to sell the old residence, andthe cost of revising legal documents to reflect the address of the taxpayer’s new residence, of replacing drivers’ licenses and non-commercial vehicle permits (excluding any cost for vehicle insurance) and of connecting or disconnecting utilities,but, for greater certainty, does not include costs (other than costs referred to in paragraph 62(3)(f)) incurred by the taxpayer in respect of the acquisition of the new residence.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 62; 1998, c. 19, s. 102; 1999, c. 22, s. 17; 2000, c. 12, s. 142; 2009, c. 2, s. 16; 2017, c. 33, s. 17
Child care expensesSubject to subsection 63(2), where a prescribed form containing prescribed information is filed with a taxpayer’s return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) under this Part for a taxation year, there may be deducted in computing the taxpayer’s income for the year such amount as the taxpayer claims not exceeding the total of all amounts each of which is an amount paid, as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer,by the taxpayer, where the taxpayer is described in subsection (2) and the supporting person of the child for the year is a person described in clause (i)(D) of the description of C in the formula in that subsection, orby the taxpayer or a supporting person of the child for the year, in any other case,to the extent thatthe amount is not included in computing the amount deductible under this subsection by an individual (other than the taxpayer), andthe amount is not an amount (other than an amount that is included in computing a taxpayer’s income and that is not deductible in computing the taxpayer’s taxable income) in respect of which any taxpayer is or was entitled to a reimbursement or any other form of assistance,and the payment of which is proven by filing with the Minister one or more receipts each of which was issued by the payee and contains, where the payee is an individual, that individual’s Social Insurance Number, but not exceeding the amount, if any, by whichthe lesser of2/3 of the taxpayer’s earned income for the year, andthe total of all amounts each of which is the annual child care expense amount in respect of an eligible child of the taxpayer for the yearexceedsthe total of all amounts each of which is an amount that is deducted, in respect of the taxpayer’s eligible children for the year, under this section in computing the income for the year of an individual (other than the taxpayer) to whom subsection 63(2) applies for the year.Income exceeding income of supporting personWhere the income for a taxation year of a taxpayer who has an eligible child for the year exceeds the income for that year of a supporting person of that child (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w), the amount that may be deducted by the taxpayer under subsection 63(1) for the year as or on account of child care expenses shall not exceed the lesser ofthe amount that would, but for this subsection, be deductible by the taxpayer for the year under subsection 63(1), andthe amount determined by the formulaA × CwhereAis the total of all amounts each of which is the periodic child care expense amount in respect of an eligible child of the taxpayer for the year, andB[Repealed, 2001, c. 17, s. 42]Cis the total ofthe number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person wasa student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than 10 hours per week on courses or work in the program,a person certified in writing by a medical doctor or a nurse practitioner to be a person whowas incapable of caring for children because of the person’s mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed, to a wheelchair or as a patient in a hospital, an asylum or other similar institution, orwas in the year, and is likely to be for a long, continuous and indefinite period, incapable of caring for children, because of the person’s mental or physical infirmity,a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, ora person who, because of a breakdown of the person’s marriage or common-law partnership, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days that began in the year, andthe number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in subparagraph (i)), each of which is a month during which the child care expenses were incurred and the supporting person was a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school that is not less than 3 consecutive weeks duration and that provides that each student in the program spend not less than 12 hours in the month on courses in the program.Taxpayer and supporting person with equal incomesFor the purposes of this section, where in any taxation year the income of a taxpayer who has an eligible child for the year and the income of a supporting person of the child are equal (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w), no deduction shall be allowed under this section to the taxpayer and the supporting person in respect of the child unless they jointly elect to treat the income of one of them as exceeding the income of the other for the year.Expenses while at schoolThere may be deducted in computing a taxpayer’s income for a taxation year such part of the amount determined under subsection 63(2.3) as the taxpayer claims, wherethe taxpayer is, at any time in the year, a student in attendance at a designated educational institution or a secondary school and enrolled in a program of the institution or school of not less than 3 consecutive weeks duration that provides that each student in the program spend not less than10 hours per week on courses or work in the program, or12 hours per month on courses in the program;there is no supporting person of an eligible child of the taxpayer for the year or the income of the taxpayer for the year exceeds the income for the year of a supporting person of the child (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and 60(w); anda prescribed form containing prescribed information is filed with the taxpayer’s return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year.Amount deductibleFor the purpose of subsection 63(2.2), the amount determined in respect of a taxpayer for a taxation year is the least ofthe amount by which the total of all amounts, each of which is an amount paid as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer, exceeds the amount that is deductible under subsection 63(1) in computing the taxpayer’s income for the year,2/3 of the taxpayer’s income for the year computed without reference to this section and paragraphs 60(v.1) and 60(w,the amount determined by the formulaA × CwhereAis the total of all amounts each of which is the periodic child care expense amount in respect of an eligible child of the taxpayer for the year, andB[Repealed, 2001, c. 17, s. 42]Cisif there is a supporting person of an eligible child of the taxpayer for the year,the number of weeks, in the year, in which both the taxpayer and the supporting person were students who would be described in paragraph (2.2)(a) if that paragraph were read without reference to subparagraph (ii), andthe number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in clause (A)), in which both the taxpayer and the supporting person were students described in paragraph (2.2)(a), andin any other case,the number of weeks, in the year, in which the taxpayer was a student who would be described in paragraph (2.2)(a) if that paragraph were read without reference to subparagraph (ii), andthe number of months in the year (other than a month that includes all or part of a week included in the number of weeks referred to in clause (A)), in which the taxpayer was a student described in paragraph (2.2)(a),the amount by which the total calculated under subparagraph 63(1)(e)(ii) in respect of eligible children of the taxpayer for the year exceeds the amount that is deductible under subsection 63(1) in computing the taxpayer’s income for the year, andwhere there is a supporting person of an eligible child of the taxpayer for the year, the amount by which the amount calculated under paragraph 63(2)(b) for the year in respect of the taxpayer exceeds 2/3 of the taxpayer’s earned income for the year.DefinitionsIn this section,annual child care expense amount, in respect of an eligible child of a taxpayer for a taxation year, means$11,000, if the child is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the year, andif the child is not a person referred to in paragraph (a),$8,000, if the child is under 7 years of age at the end of the year, and$5,000, in any other case; (montant annuel de frais de garde d’enfants)child care expense means an expense incurred in a taxation year for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including baby sitting services, day nursery services or services provided at a boarding school or camp if the services were providedto enable the taxpayer, or the supporting person of the child for the year, who resided with the child at the time the expense was incurred,to perform the duties of an office or employment,to carry on a business either alone or as a partner actively engaged in the business,[Repealed, 1996, c. 23, s. 173]to carry on research or any similar work in respect of which the taxpayer or supporting person received a grant, orto attend a designated educational institution or a secondary school, where the taxpayer is enrolled in a program of the institution or school of not less than three consecutive weeks duration that provides that each student in the program spend not less than10 hours per week on courses or work in the program, or12 hours per month on courses in the program, andby a resident of Canada other than a personwho is the father or the mother of the child,who is a supporting person of the child or is under 18 years of age and related to the taxpayer, orin respect of whom an amount is deducted under section 118 in computing the tax payable under this Part for the year by the taxpayer or by a supporting person of the child,except thatany such expenses paid in the year for a child’s attendance at a boarding school or camp to the extent that the total of those expenses exceeds the product obtained when the periodic child care expense amount in respect of the child for the year is multiplied by the number of weeks in the year during which the child attended the school or camp, andfor greater certainty, any expenses described in subsection 118.2(2) and any other expenses that are paid for medical or hospital care, clothing, transportation or education or for board and lodging, except as otherwise expressly provided in this definition,are not child care expenses; (frais de garde d’enfants)earned income of a taxpayer means the total ofall salaries, wages and other remuneration, including gratuities, received by the taxpayer in respect of in the course of, or because of, offices and employments,all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7 or paragraph 56(1) (n), (n.1), (o) or (r), in computing the taxpayer’s income,all the taxpayer’s incomes or the amounts that would, but for paragraph 81(1)(a), be the taxpayer’s incomes from all businesses carried on either alone or as a partner actively engaged in the business, andall amounts received by the taxpayer as, on account of, in lieu of payment of or in satisfaction of, a disability pension under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act; (revenu gagné)eligible child of a taxpayer for a taxation year meansa child of the taxpayer or of the taxpayer’s spouse or common-law partner, ora child dependent on the taxpayer or the taxpayer’s spouse or common-law partner for support and whose income for the year does not exceed the amount determined for F in subsection 118(1.1) for the yearif at any time during the year, the childis under 16 years of age, oris dependent on the taxpayer or on the taxpayer’s spouse or common-law partner and has a mental or physical infirmity; (enfant admissible)periodic child care expense amount, in respect of an eligible child of a taxpayer for a taxation year, means 1/40 of the annual child care expense amount in respect of the child for the year; (montant périodique de frais de garde d’enfants)supporting person of an eligible child of a taxpayer for a taxation year means a person, other than the taxpayer, who isa parent of the child,the taxpayer’s spouse or common-law partner, oran individual who deducted an amount under section 118 for the year in respect of the childif the parent, spouse or common-law partner or individual, as the case may be, resided with the taxpayer at any time during the year and at any time within 60 days after the end of the year. (personne assumant les frais d’entretien)COVID-19 – child care expensesFor the purpose of applying this section in respect of a taxpayer for the 2020 or 2021 taxation year,the definition child care expense in subsection (3) is to be read without reference to its paragraph (a) if at any time in the year the taxpayer was entitled to an amount referred to in subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(r), in respect of the year; andparagraph (b) of the definition earned income in subsection (3) is to be read as follows:all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7, subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(n), (n.1), (o) or (r), in computing the taxpayer’s income,Commuter’s child care expenseWhere in a taxation year a person resides in Canada near the boundary between Canada and the United States and while so resident incurs expenses for child care services that would be child care expenses ifthe definition child care expense in subsection 248(1) were read without reference to the words “in Canada”, andthe reference in paragraph (b) of the definition child care expense in subsection 248(1) to “resident of Canada” were read as “person”,those expenses (other than expenses paid for a child’s attendance at a boarding school or camp outside Canada) shall be deemed to be child care expenses for the purpose of this section if the child care services are provided at a place that is closer to the person’s principal place of residence by a reasonably accessible route, having regard to the circumstances, than any place in Canada where such child care services are available and, in respect of those expenses, subsection 63(1) shall be read without reference to the words “and contains, where the payee is an individual, that individual’s Social Insurance Number”.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 63; 1994, c. 7, Sch. II, s. 36, Sch. VII, s. 3, Sch. VIII, s. 23, c. 21, s. 27; 1996, c. 23, s. 173; 1997, c. 25, s. 12; 1998, c. 19, ss. 10, 103; 1999, c. 22, s. 18; 2000, c. 12, s. 142, c. 19, s. 9; 2001, c. 17, s. 42; 2007, c. 2, s. 8; 2013, c. 34, s. 198; 2015, c. 36, s. 29; 2017, c. 33, s. 182021, c. 23, s. 102023, c. 26, s. 13(F)
Disability supports deductionIf a taxpayer files with the taxpayer’s return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) for the taxation year a prescribed form containing prescribed information, there may be deducted in computing the taxpayer’s income for the year the lesser ofthe amount determined by the formulaA - BwhereAis the total of all amounts each of which is an amount paid by the taxpayer in the year and thatwas paid to enable the taxpayerto perform the duties of an office or employment,to carry on a business either alone or as a partner actively engaged in the business,to attend a designated educational institution or a secondary school at which the taxpayer is enrolled in an educational program, orto carry on research or any similar work in respect of which the taxpayer received a grant,was paidwhere the taxpayer has a speech or hearing impairment, for the cost of sign-language interpretation services or real time captioning services and to a person engaged in the business of providing such services,where the taxpayer is deaf or mute, for the cost of a teletypewriter or similar device, including a telephone ringing indicator, prescribed by a medical practitioner, to enable the taxpayer to make and receive telephone calls,where the taxpayer is blind, for the cost of a device or equipment, including synthetic speech systems, Braille printers, and large-print on-screen devices, prescribed by a medical practitioner, and designed to be used by blind individuals in the operation of a computer,where the taxpayer is blind, for the cost of an optical scanner or similar device, prescribed by a medical practitioner, and designed to be used by blind individuals to enable them to read print,where the taxpayer is mute, for the cost of an electronic speech synthesizer, prescribed by a medical practitioner, and designed to be used by mute individuals to enable them to communicate by use of a portable keyboard,where the taxpayer has an impairment in physical or mental functions, for the cost of note-taking services and to a person engaged in the business of providing such services, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment, requires such services,where the taxpayer has an impairment in physical functions, for the cost of voice recognition software, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment, requires that software,where the taxpayer has a learning disability or an impairment in mental functions, for the cost of tutoring services that are rendered to, and supplementary to the primary education of, the taxpayer and to a person ordinarily engaged in the business of providing such services to individuals who are not related to the person, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that disability or impairment, requires those services,where the taxpayer has a perceptual disability, for the cost of talking textbooks used by the taxpayer in connection with the taxpayer’s enrolment at a secondary school in Canada or at a designated educational institution, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that disability, requires those textbooks,where the taxpayer has an impairment in physical or mental functions, for the cost of attendant care services provided in Canada and to a person who is neither the taxpayer’s spouse or common-law partner nor under 18 years of age, if the taxpayer is a taxpayer in respect of whom an amount may be deducted because of section 118.3, or if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment is, and is likely to be indefinitely, dependent on others for their personal needs and care and who as a result requires a full-time attendant,where the taxpayer has a severe and prolonged impairment in physical or mental functions, for the cost of job coaching services (not including job placement or career counselling serv­ices) and to a person engaged in the business of providing such services if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment, requires such services,where the taxpayer is blind or has a severe learning disability, for the cost of reading services and to a person engaged in the business of providing such services, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment or disability, requires those services,where the taxpayer is blind and profoundly deaf, for the cost of deaf-blind intervening services and to a person engaged in the business of providing such services,where the taxpayer has a speech impairment, for the cost of a device that is a Bliss symbol board, or a similar device, that is prescribed by a medical practitioner to help the taxpayer communicate by selecting the symbols or spelling out words,where the taxpayer is blind, for the cost of a device that is a Braille note-taker, prescribed by a medical practitioner, to allow the taxpayer to take notes (that can, by the device, be read back to them or printed or displayed in Braille) with the help of a keyboard,where the taxpayer has a severe and prolonged impairment in physical functions that markedly restricts their ability to use their arms or hands, for the cost of a device that is a page turner prescribed by a medical practitioner to help the taxpayer to turn the pages of a book or other bound document, andwhere the taxpayer is blind, or has a severe learning disability, for the cost of a device or software that is prescribed by a medical practitioner and designed to enable the taxpayer to read print,is evidenced by one or more receipts filed with the Minister each of which was issued by the payee and contains, where the payee is an individual who is a person referred to in clause (ii)(J), that individual’s Social Insurance Number, andis not included in computing a deduction under section 118.2 for any taxpayer for any taxation year, andBis the total of all amounts each of which is the amount of a reimbursement or any other form of assistance (other than prescribed assistance or an amount that is included in computing a taxpayer’s income and that is not deductible in computing the taxpayer’s taxable income) that any taxpayer is or was entitled to receive in respect of an amount included in computing the value of A, andthe total ofthe total of all amounts each of which isan amount included under section 5, 6 or 7 or paragraph 56(1)(n), (o) or (r) in computing the taxpayer’s income for the year, orthe taxpayer’s income for the year from a business carried on either alone or as a partner actively engaged in the business, andwhere the taxpayer is in attendance at a designated educational institution or a secondary school at which the taxpayer is enrolled in an educational program, the least of$15,000,$375 times the number of weeks in the year during which the taxpayer is in attendance at the institution or school, andthe amount, if any, by which the amount that would, if this Act were read without reference to this section, be the taxpayer’s income for the year exceeds the total determined under subparagraph (i) in respect of the taxpayer for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 64; 1994, c. 7, Sch. II, s. 37; 1996, c. 23, s. 174; 1998, c. 19, s. 11; 2000, c. 12, s. 142; 2001, c. 17, s. 43; 2005, c. 19, s. 15; 2006, c. 4, s. 53; 2007, c. 2, s. 9
COVID-19 – disability supports deductionFor the purpose of applying section 64 in respect of a taxpayer for the 2020 or 2021 taxation year,the description of A in paragraph 64(a) is to be read without reference to its subparagraph (i) if at any time in the year the taxpayer was entitled to an amount referred to in subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(r), in respect of the year; andclause 64(b)(i)(A) is to be read as follows:an amount included under section 5, 6 or 7, subparagraph 56(1)(a)(iv) or (vii) or paragraph 56(1)(n), (o) or (r) in computing the taxpayer’s income for the year, or[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2021, c. 23, s. 11
Individuals absent from CanadaIn applying sections 63 and 64 in respect of a taxpayer who is, throughout all or part of a taxation year, absent from but resident in Canada, the following rules apply for the year or that part of the year, as the case may be:the definition child care expense in subsection 63(3), and section 64, shall be read without reference to the words “in Canada”;subsection 63(1) and section 64 shall be read without reference to the words “and contains, where the payee is an individual, that individual’s Social Insurance Number”, if the payment referred to in that subsection or section, as the case may be, is made to a person who is not resident in Canada; andparagraph (b) of the definition child care expense in subsection 63(3) shall be read as if the word “person” were substituted for the words “resident of Canada” where they appear therein.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 64.1; 1999, c. 22, s. 19
Allowance for oil or gas well, mine or timber limitThere may be deducted in computing a taxpayer’s income for a taxation year such amount as an allowance, if any, in respect ofa natural accumulation of petroleum or natural gas, oil or gas well, mineral resource or timber limit,the processing of ore (other than iron ore or tar sands) from a mineral resource to any stage that is not beyond the prime metal stage or its equivalent,the processing of iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent, orthe processing of tar sands from a mineral resource to any stage that is not beyond the crude oil stage or its equivalentas is allowed to the taxpayer by regulation.RegulationsFor greater certainty it is hereby declared that, in the case of a regulation made under subsection 65(1) allowing to a taxpayer an amount in respect of a natural accumulation of petroleum or natural gas, an oil or gas well or a mineral resource or in respect of the processing of ore,there may be allowed to the taxpayer by that regulation an amount in respect of any or allnatural accumulations of petroleum or natural gas, oil or gas wells or mineral resources in which the taxpayer has any interest or, for civil law, right, orprocessing operations described in any of paragraphs 65(1)(b), (c) and (d) that are carried on by the taxpayer; andnotwithstanding any other provision contained in this Act, the Governor in Council may prescribe the formula by which the amount that may be allowed to the taxpayer by that regulation shall be determined.Lessee’s share of allowanceWhere a deduction is allowed under subsection 65(1) in respect of a coal mine operated by a lessee, the lessor and lessee may agree as to what portion of the allowance each may deduct and, in the event that they cannot agree, the Minister may fix the portions.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 65; 2013, c. 34, s. 110
Exploration and development expenses of principal-business corporationsA principal-business corporation may deduct, in computing its income for a taxation year, the lesser ofthe total of such of its Canadian exploration and development expenses as were incurred by it before the end of the taxation year, to the extent that they were not deductible in computing income for a previous taxation year, andof that total, an amount equal to its income for the taxation year if no deduction were allowed under this subsection, section 65 or subsection 66.1(2), minus the deductions allowed for the year by sections 112 and 113.Expenses of special product corporationsA corporation (other than a principal-business corporation the principal business of which is described in paragraph (a) or (b) of the definition principal-business corporation in subsection 66(15)), whose principal business is the production or marketing of sodium chloride or potash or whose business includes manufacturing products the manufacturing of which involves processing sodium chloride or potash, may deduct, in computing its income for a taxation year, the drilling and exploration expenses incurred by it in the year and before May 7, 1974 on or in respect of exploring or drilling for halite or sylvite.Expenses of other taxpayersA taxpayer other than a principal-business corporation may deduct, in computing the taxpayer’s income for a taxation year, the total of the taxpayer’s Canadian exploration and development expenses to the extent that they were not deducted in computing the taxpayer’s income for a preceding taxation year.Foreign exploration and development expensesA taxpayer who is resident throughout a taxation year in Canada may deduct, in computing the taxpayer’s income for that taxation year, the lesser ofthe amount, if any, by whichthe total of the foreign exploration and development expenses incurred by the taxpayerbefore the end of the year,at a time at which the taxpayer was resident in Canada, andwhere the taxpayer became resident in Canada before the end of the year, after the last time (before the end of the year) that the taxpayer became resident in Canada,exceeds the total ofsuch of the expenses described in subparagraph 66(4)(a)(i) as were deductible in computing the taxpayer’s income for a preceding taxation year, andall amounts by which the amount described in this paragraph in respect of the taxpayer is required because of subsection 80(8) to be reduced at or before the end of the year, andof that total, the greater ofthe amount, if any, claimed by the taxpayer not exceeding 10% of the amount determined under paragraph (a) in respect of the taxpayer for the year, andthe total ofthe part of the taxpayer’s income for the year, determined without reference to this subsection and subsection 66.21(4), that can reasonably be regarded as attributable tothe production of petroleum or natural gas from natural accumulations outside Canada or from oil or gas wells outside Canada, orthe production of minerals from mines outside Canada,the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas outside Canada, an oil or gas well outside Canada or a mine outside Canada, determined without reference to this subsection and subsection 66.21(4), andall amounts each of which is an amount, in respect of a foreign resource property that has been disposed of by the taxpayer, equal to the amount, if any, by whichthe amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of the dispositionexceedsthe total of all amounts each of which is that portion of an amount deducted under subsection 66.7(2) in computing the taxpayer’s income for the year thatcan reasonably be considered to be in respect of the foreign resource property, andcannot reasonably be considered to have reduced the amount otherwise determined under clause (A) or (B) in respect of the taxpayer for the year.Country-by-country FEDE allocationsFor greater certainty, the portion of an amount deducted under subsection (4) in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in respect of a country is considered to apply to a source in that country.Method of allocationFor the purpose of subsection (4.1), where a taxpayer has incurred specified foreign exploration and development expenses in respect of two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that isreasonable having regard to all the circumstances, including the level and timing ofthe taxpayer’s specified foreign exploration and development expenses in respect of the country, andthe profits or gains to which those expenses relate; andnot inconsistent with the allocation made under subsection (4.1) for the preceding taxation year.FEDE deductions where change of individual’s residenceWhere at any time in a taxation year an individual becomes or ceases to be resident in Canada,subsection (4) applies to the individual as if the year were the period or periods in the year throughout which the individual was resident in Canada; andfor the purpose of applying subsection (4), subsection (13.1) does not apply to the individual for the year.DealersSubsections (3) and (4) and sections 59, 64, 66.1, 66.2, 66.21, 66.4 and 66.7 do not apply in computing the income for a taxation year of a taxpayer (other than a principal-business corporation) whose business includes trading or dealing in rights, licences or privileges to explore for, drill for or take minerals, petroleum, natural gas or other related hydrocarbons.[Repealed, 1997, c. 25, s. 13(1)]IdemWhere a taxpayer has, after April 19, 1983, made a payment or loan described in paragraph (a) of the definition agreed portion in subsection 66(15) to a joint exploration corporation in respect of which the corporation has at any time renounced in favour of the taxpayer any Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) under subsection 66(10.1), 66(10.2) or 66(10.3), the following rules apply:where the taxpayer receives as consideration for the payment or loan property that is capital property to the taxpayer,there shall be deducted in computing the adjusted cost base to the taxpayer of the property at any time the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time,there shall be deducted in computing the adjusted cost base to the taxpayer at any time of any property for which the property, or any property substituted therefor, was exchanged the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time (except to the extent such amount has been deducted under subparagraph 66(10.4)(a)(i)), andthe amount of any resource expenses renounced by the corporation in favour of the taxpayer in respect of the loan or payment at any time, except to the extent that the renunciation of those expenses results in a deduction under subparagraph 66(10.4)(a)(i) or 66(10.4)(a)(ii), shall, for the purposes of this Act, be deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of property at that time;where the taxpayer receives as consideration for the payment or loan property that is not capital property to the taxpayer,there shall be deducted in computing the cost to the taxpayer of the property at any time the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time, andthere shall be included in computing the amount referred to in paragraph 59(3.2)(d) for a taxation year the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at any time in the year, except to the extent that the amount has been deducted under subparagraph 66(10.4)(b)(i); andwhere the taxpayer does not receive any property as consideration for the payment, there shall be included in computing the amount referred to in paragraph 59(3.2)(e) for a taxation year the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the payment in the year, except to the extent that the amount has been deducted from the adjusted cost base to the taxpayer of shares of the corporation under paragraph 53(2)(f.1) in respect of the payment.Acquisition of controlWhere after March 31, 1977 and before November 13, 1981 control of a corporation has been acquired by a person or persons who did not control the corporation at the time when it last ceased to carry on active business,the amount by which the Canadian exploration and development expenses incurred by the corporation before it last ceased to carry on active business exceeds the total of all amounts otherwise deductible by the corporation in respect of Canadian exploration and development expenses in computing its income for taxation years ending before control was so acquired, shall be deemed to have been deductible under this section by the corporation in computing its income for taxation years ending before control was so acquired;the amount by which the cumulative Canadian exploration expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.1 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired;the amount by which the cumulative Canadian development expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.2 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired;the amount by which the cumulative Canadian oil and gas property expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.4 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired; andthe amount by which the foreign exploration and development expenses incurred by the corporation before it last ceased to carry on active business exceeds the total of all amounts otherwise deductible by the corporation in respect of foreign exploration and development expenses in computing its income for taxation years ending before control was so acquired, shall be deemed to have been deductible under this section by the corporation in computing its income for taxation years ending before control was so acquired.ControlFor the purposes of subsections 66(11) and 66.7(10), where a corporation acquired control of another corporation after November 12, 1981 and before 1983 by reason of the acquisition of shares of the other corporation pursuant to an agreement in writing concluded on or before November 12, 1981, it shall be deemed to have acquired that control on or before November 12, 1981.Loss restriction eventIfat any time a taxpayer is subject to a loss restriction event,within the 12-month period that ended immediately before that time, the taxpayer, a partnership of which the taxpayer was a majority-interest partner or a trust of which the taxpayer was a majority-interest beneficiary (as defined in subsection 251.1(3)) acquired a Canadian resource property or a foreign resource property (other than a property that was held, by the taxpayer, partnership or trust or by a person that would be affiliated with the taxpayer if section 251.1 were read without reference to the definition controlled in subsection 251.1(3), throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the taxpayer, partnership or trust), andimmediately before the 12-month period began the taxpayer, partnership or trust was not, or would not be if it were a corporation, a principal-business corporation,for the purposes of subsection (4) and sections 66.2, 66.21 and 66.4, except as those provisions apply for the purposes of section 66.7, the property is deemed not to have been acquired by the taxpayer, partnership or trust, as the case may be, before that time, except that if the property has been disposed of by it before that time and not reacquired by it before that time, the property is deemed to have been acquired by the taxpayer, partnership or trust, as the case may be, immediately before it disposed of the property.Affiliation  — subsection (11.4)For the purposes of subsection (11.4), if the taxpayer referred to in that subsection was formed or created in the 12-month period referred to in that subsection, the taxpayer is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was formed or created,in existence; andaffiliated with every person with whom it was affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) throughout the period that began when it was formed or created and that ended immediately before the time at which the taxpayer was subject to the loss restriction event referred to in that subsection.Trust loss restriction event  — successorIf at any time a trust is subject to a loss restriction event,for the purposes of the provisions of this Act relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) incurred by the trust before that time, the following rules apply:the trust is (other than for purposes of this subsection and subsections (11.4), (11.5) and 66.7(10) to (11)) deemed to be a corporation thatafter that time is a successor (within the meaning assigned by any of subsections 66.7(1), (2) and (2.3) to (5)), andat that time, acquired all the properties held by the trust immediately before that time from an original owner of those properties,if the trust did not hold a foreign resource property immediately before that time, the trust is deemed to have owned a foreign resource property immediately before that time,a joint election is deemed to have been filed in accordance with subsections 66.7(7) and (8) in respect of the acquisition described in clause (i)(B),the resource expenses incurred by the trust before that time are deemed to have been incurred by an original owner of the properties and not by the trust,the original owner is deemed to have been resident in Canada at every time before that time at which the trust was resident in Canada,if at that time the trust is a member of a partnership and the property of the partnership includes a Canadian resource property or a foreign resource property,for the purposes of clause (i)(B), the trust is deemed to have held immediately before that time that portion of the partnership’s property at that time that is equal to the trust’s percentage share of the total of amounts that would be paid to all members of the partnership if it were wound up at that time, andfor the purposes of clauses 66.7(1)(b)(i)(C) and (2)(b)(i)(B), subparagraph 66.7(2.3)(b)(i) and clauses 66.7(3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) for a taxation year that ends after that time, the lesser of the following amounts is deemed to be income of the trust for the year that can reasonably be regarded as attributable to production from the property:the trust’s share of the part of the income of the partnership for the fiscal period of the partnership that ends in the year that can reasonably be regarded as attributable to the production from the property, andan amount that would be determined under subclause (I) for the year if the trust’s share of the income of the partnership for the fiscal period of the partnership that ends in the year were determined on the basis of the percentage share referred to in clause (A), andif after that time the trust disposes of property that was at that time held by the trust to another person, subsections 66.7(1) to (5) do not apply in respect of the acquisition by the other person of the property; andif before that time, the trust or a partnership of which the trust was a member acquired a property that is a Canadian resource property, a foreign resource property or an interest in a partnership and it can reasonably be considered that one of the main purposes of the acquisition is to avoid any limitation provided in any of subsections 66.7(1) to (5) on the deduction in respect of any expenses incurred by the trust, then the trust or the partnership, as the case may be, is deemed, for the purposes of applying those subsections to or in respect of the trust, not to have acquired the property.Computation of exploration and development expensesIn computing a taxpayer’s Canadian exploration and development expenses,there shall be deducted any amount paid to the taxpayer before May 7, 1974and after 1971 under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, orpursuant to any agreement entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development, to the extent that the amount has been expended by the taxpayer as or on account of Canadian exploration and development expenses incurred by the taxpayer; andthere shall be included any amount, except an amount in respect of interest, paid by the taxpayer after 1971 and before May 7, 1974 under the Regulations referred to in subparagraph 66(12)(a)(i) to Her Majesty in right of Canada.Limitations of Canadian exploration and development expensesExcept as expressly otherwise provided in this Act,if as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily Canadian exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and before May 7, 1974) or a Canadian exploration expense, there shall at that time be included in the amount determined for G in the definition cumulative Canadian exploration expense in subsection 66.1(6) in respect of the taxpayer the amount that became receivable by the taxpayer at that time; andif as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily a Canadian development expense, there shall at that time be included in the amount determined for G in the definition cumulative Canadian development expense in subsection 66.2(5) in respect of the taxpayer the amount that became receivable by the taxpayer at that time.Unitized oil or gas field in CanadaWhere, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian exploration expense incurred by the taxpayer or Canadian exploration and development expenses incurred by the taxpayer (or expenses that would have been Canadian exploration and development expenses if they had been incurred by the taxpayer after 1971 and before May 7, 1974) in respect of that field or any part thereof, the following rules apply:there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian exploration expense in subsection 66.1(6) the amount that became receivable by the taxpayer; andthere shall, at that time, be included by the other person in the amount referred to in paragraph (c) of the definition Canadian exploration expense in subsection 66.1(6) the amount that became payable by that person.IdemWhere, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian development expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian development expense in subsection 66.2(5) the amount that became receivable by the taxpayer; andthere shall, at that time, be included by the other person in the amount referred to in paragraph (a) of the definition Canadian development expense in subsection 66.2(5) the amount that became payable by that person.Limitation of FEDEWhere, as a result of a transaction that occurs after May 6, 1974, an amount becomes receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer for the amount receivable is property (other than a foreign resource property) or services, the original cost of which to the taxpayer can reasonably be regarded as having been primarily foreign exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and the definition foreign exploration and development expenses in subsection (15) were read without reference to paragraph (k) of that definition), the following rules apply:in computing the taxpayer’s foreign exploration and development expenses at that time, there shall be deducted the amount receivable by the taxpayer;where the amount receivable exceeds the total of the taxpayer’s foreign exploration and development expenses incurred before that time to the extent that those expenses were not deducted or deductible, as the case may be, in computing the taxpayer’s income for a preceding taxation year, there shall be included in the amount referred to in paragraph 59(3.2)(a) the amount, if any, by which the amount receivable exceeds the total ofthe taxpayer’s foreign exploration and development expenses incurred before that time to the extent that those expenses were not deducted or deductible, as the case may be, in computing the taxpayer’s income for a preceding taxation year, andthe amount, designated by the taxpayer in prescribed form filed with the taxpayer’s return of income for the year, not exceeding the portion of the amount receivable for which the consideration given by the taxpayer was property (other than a foreign resource property) or services, the original cost of which to the taxpayer can reasonably be regarded as having been primarilyspecified foreign exploration and development expenses in respect of a country, orforeign resource expenses in respect of a country; andwhere an amount is included in the amount referred to in paragraph 59(3.2)(a) by virtue of paragraph 66(12.4)(b), the total of the taxpayer’s foreign exploration and development expenses at that time shall be deemed to be nil.Limitations of foreign resource expensesWhere a particular amount described in subsection (12.4) becomes receivable by a taxpayer at a particular time, there shall at that time be included in the value determined for G in the definition cumulative foreign resource expense in subsection 66.21(1) in respect of the taxpayer and a country the amount designated under subparagraph (12.4)(b)(ii) by the taxpayer in respect of the particular amount and the country.PartnershipsFor the purposes of subsections (12.4) and (12.41), where a person or partnership is a member of a particular partnership and a particular amount described in subsection (12.4) becomes receivable by the particular partnership in a fiscal period of the particular partnership,the member’s share of the particular amount is deemed to be an amount that became receivable by the member at the end of the fiscal period; andthe amount deemed by paragraph (a) to be an amount receivable by the member is deemed to be an amountthat is described in subsection (12.4) in respect of the member, andthat has the same attributes for the member as it did for the particular partnership.Unitized oil or gas field in CanadaWhere, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time from that other person in respect of Canadian oil and gas property expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) the amount that became receivable by the taxpayer; andthere shall, at that time, be included by the other person in the amount referred to in paragraph (a) of the definition Canadian oil and gas property expense in subsection 66.4(5) the amount that became payable by that person.Canadian exploration expenses to flow-through shareholderIf a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation), the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the “specified expenses”) exceeds the total ofthe assistance that the corporation has received, is entitled to receive or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian exploration activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in any of paragraphs (b) to (b.2)),all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,all specified expenses each of which is a cost of, or for the use of, seismic datathat had been acquired (otherwise than as a consequence of performing work that resulted in the creation of the data) by any other person before the cost was incurred,in respect of which a right to use had been acquired by any other person before the cost was incurred, orall or substantially all of which resulted from work performed more than one year before the cost was incurred,if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian exploration expenses ifthe definition Canadian exploration expense in subsection 66.1(6) were read without reference to its paragraph (g.1), andthe definition mineral resource in subsection 248(1) were read without reference to its paragraphs (a) and (d), andthe total of amounts that are renounced on or before the date on which the renunciation is made by any other renunciation under this subsection in respect of those expenses,but not in any caseexceeding the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced under this subsection or subsection 66(12.601) or 66(12.62) in respect of the share on or before the day on which the renunciation is made, orexceeding the amount, if any, by which the cumulative Canadian exploration expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced under this subsection on the date on which the renunciation is made, exceeds the total of all amounts renounced under this subsection in respect of any other shareon the date on which the renunciation is made, andeffective on or before the effective date of the renunciation.COVID-19 – time extension to 36 monthsThe references to “24 months” in subsections (12.6) and (12.62) are to be read as references to “36 months” in respect of agreements entered into after February 2018 and before 2021.Flow-through share rules for first $1 million of Canadian development expensesWherea person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation,the corporation’s taxable capital amount at the time the consideration was given was not more than $15,000,000, andduring the period beginning on the particular day the agreement was entered into and ending on the earlier of December 31, 2018 and the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses (excluding expenses that are deemed by subsection (12.66) to have been incurred on December 31, 2018) described in paragraph (a) or (b) of the definition Canadian development expense in subsection 66.2(5) or that would be described in paragraph (f) of that definition if the words “paragraphs (a) to (e)” in that paragraph were read as “paragraphs (a) and (b)”,the corporation may, after it complies with subsection 66(12.68) in respect of the share and before March of the first calendar year that begins after that period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection 66(12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the “specified expenses”) exceeds the total ofthe assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in paragraph 66(12.601)(d)),all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation, andall amounts that are renounced on or before the day on which the renunciation is made by any other renunciation under this subsection or subsection 66(12.62) in respect of those expenses.Taxable capital amountFor the purpose of subsection 66(12.601), a particular corporation’s taxable capital amount at any time is the total ofits taxable capital employed in Canada for its last taxation year that ended more than 30 days before that time, andthe total of all amounts each of which is the taxable capital employed in Canada of another corporation associated at that time with the particular corporation for the other corporation’s last taxation year that ended more than 30 days before that time.Taxable capital employed in CanadaFor the purpose of determining a corporation’s taxable capital amount at a particular time under subsection 66(12.6011) and for the purpose of subsection 66(12.6013), a particular corporation’s taxable capital employed in Canada for a taxation year is the amount that would be its taxable capital employed in Canada for the year, determined in accordance with subsection 181.2(1) and without reference to the portion of its investment allowance (as determined under subsection 181.2(4)) that is attributable to shares of the capital stock of, dividends payable by, or indebtedness of, another corporation thatwas not associated with the particular corporation at the particular time; andwas associated with the particular corporation at the end of the particular corporation’s last taxation year that ended more than 30 days before that time.Amalgamations and mergersFor the purpose of determining the taxable capital amount at a particular time under subsection 66(12.6011) of any corporation and for the purpose of this subsection, a particular corporation that was created as a consequence of an amalgamation or merger of other corporations (each of which is in this subsection referred to as a “predecessor corporation”), and that does not have a taxation year that ended more than 30 days before the particular time, is deemed to have taxable capital employed in Canada for a taxation year that ended more than 30 days before the particular time equal to the total of all amounts each of which is the taxable capital employed in Canada of a predecessor corporation for its last taxation year that ended more than 30 days before the particular time.IdemA corporation shall be deemed not to have renounced any particular amount under subsection 66(12.601) in respect of a share wherethe particular amount exceeds the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced in respect of the share under subsection 66(12.6), 66(12.601) or 66(12.62) on or before the day on which the renunciation is made;the particular amount exceeds the amount, if any, by whichthe cumulative Canadian development expense of the corporation on the effective date of the renunciation, computed before taking into account any amounts renounced under subsection 66(12.601) on the day on which the renunciation is made,exceedsthe total of all amounts renounced under subsection 66(12.601) by the corporation in respect of any other shareon the day on which the renunciation is made, andeffective on or before the effective date of the renunciation; orthe particular amount relates Canadian development expenses incurred by the corporation in a calendar year and the total amounts renounced, on or before the day on which the renunciation is made, under subsection 66(12.601) in respect ofCanadian development expenses incurred by the corporation in that calendar year, orCanadian development expenses incurred in that calendar year by another corporation associated with the corporation at the time the other corporation incurred such expensesexceeds $1,000,000.Effect of renunciationSubject to subsections 66(12.69) to 66(12.702), where under subsection 66(12.6) or 66(12.601) a corporation renounces an amount to a person,the Canadian exploration expenses or Canadian development expenses to which the amount relates shall be deemed to be Canadian exploration expenses incurred in that amount by the person on the effective date of the renunciation; andthe Canadian exploration expenses or Canadian development expenses to which the amount relates shall, except for the purposes of that renunciation, be deemed on and after the effective date of the renunciation never to have been Canadian exploration expenses or Canadian development expenses incurred by the corporation.Canadian development expenses to flow-through shareholderWhere a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian development expenses, the corporation may, after it complies with subsection 66(12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection 66(12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the “specified expenses”) exceeds the total ofthe assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in any of paragraphs (b) to (b.2)),all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,all specified expenses that are described in paragraph (e) of the definition Canadian development expense in subsection 66.2(5) or that are described in paragraph (f) of that definition because of the reference in the latter paragraph to paragraph 66(12.62)(e),if the agreement is made after March 2023, all specified expenses that are not described in paragraph (b) or (b.1) and that would be Canadian development expenses if the definition mineral resource in subsection 248(1) were read without reference to its paragraphs (a) and (d), andthe total of amounts that are renounced on or before the day on which the renunciation is made by any other renunciation under this subsection or subsection 66(12.601) in respect of those expenses,but not in any caseexceeding the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced in respect of the share under this subsection or subsection 66(12.6) or 66(12.601) on or before the day on which the renunciation is made, orexceeding the amount, if any, by which the cumulative Canadian development expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced under this subsection on the date on which the renunciation is made, exceeds the total of all amounts renounced under this subsection in respect of any other shareon the date on which the renunciation is made, andeffective on or before the effective date of the renunciation.Effect of renunciationSubject to subsections (12.69) to (12.702), if under subsection (12.62) a corporation renounces an amount to a person,the Canadian development expenses to which the amount relates shall be deemed to be Canadian development expenses incurred in that amount by the person on the effective date of the renunciation; andthe Canadian development expenses to which the amount relates shall, except for the purposes of that renunciation, be deemed on and after the effective date of the renunciation never to have been Canadian development expenses incurred by the corporation.[Repealed, 1997, c. 25, s. 13(15)]Expenses in the first 60 days of yearWherea corporation that issues a flow-through share to a person under an agreement incurs, in a particular calendar year, Canadian exploration expenses or Canadian development expenses,the agreement was made in the preceding calendar year,the expensesare described in paragraph (a), (d), (f) or (g.1) of the definition Canadian exploration expense in subsection 66.1(6) or paragraph (a) or (b) of the definition Canadian development expense in subsection 66.2(5),would be described in paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6) if the reference to “paragraphs (a) to (d) and (f) to (g.4)” in that paragraph were read as “paragraphs (a), (d), (f) and (g.1)”, orwould be described in paragraph (f) of the definition Canadian development expense in subsection 66.2(5) if the words “any of paragraphs 66(12.66)(a) to (e)” were read as “paragraph 66(12.66)(a) or (b)”,before the end of that preceding year the person paid the consideration in money for the share to be issued,the corporation and the person deal with each other at arm’s length throughout the particular year, andin January, February or March of the particular year, the corporation renounces an amount in respect of the expenses to the person in respect of the share in accordance with subsection 66(12.6) or 66(12.601) and the effective date of the renunciation is the last day of that preceding year,the corporation is, for the purpose of subsection (12.6), or of subsection (12.601) and paragraph (12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of that preceding year.Restrictions on renunciationA corporation shall be deemednot to have renounced under any of subsections 66(12.6), 66(12.601) and 66(12.62) any expenses that are deemed to have been incurred by it because of a renunciation under this section by another corporation that is not related to it;not to have renounced under subsection 66(12.601) to a trust, corporation or partnership any Canadian development expenses (other than expenses renounced to another corporation that renounces under subsection 66(12.6) any Canadian exploration expense deemed to have been incurred by it because of the renunciation under subsection 66(12.601)) if, in respect of the renunciation under subsection 66(12.601), it has a prohibited relationship with the trust, corporation or partnership;not to have renounced under subsection 66(12.601) any Canadian development expenses deemed to have been incurred by it because of a renunciation under subsection 66(12.62); andnot to have renounced under subsection 66(12.6) to a particular trust, corporation or partnership any Canadian exploration expenses (other than expenses ultimately renounced by another corporation under subsection 66(12.6) to an individual (other than a trust) or to a trust, corporation or partnership with which that other corporation does not have, in respect of that ultimate renunciation, a prohibited relationship) deemed to be incurred by it because of a renunciation under subsection 66(12.601) if, in respect of the renunciation under subsection 66(12.6), it has a prohibited relationship with the particular trust, corporation or partnership.Prohibited relationshipFor the purposes of subsection 66(12.67), where a trust, corporation (in paragraph 66(12.671)(b) referred to as the “shareholder corporation”) or partnership, as the case may be, gave consideration under a particular agreement for the issue of a flow-through share of a particular corporation, the particular corporation has, in respect of a renunciation under subsection 66(12.6) or 66(12.601) in respect of the share, a prohibited relationshipwith the trust if, at any time after the particular agreement was entered into and before the share is issued to the trust, the particular corporation or any corporation related to the particular corporation is beneficially interested in the trust;with the shareholder corporation if, immediately before the particular agreement was entered into, the shareholder corporation was related to the particular corporation; orwith the partnership if any part of the amount renounced would, but for subsection 66(12.7001), be included, because of paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), in the Canadian exploration expense ofthe particular corporation, orany other corporation that, at any timeafter the particular agreement was entered into, andbefore that part of the amount renounced would, but for this paragraph, be incurred,would, if flow-through shares issued by the particular corporation under agreements entered into at the same time as or after the time the particular agreement was entered into were disregarded, be related to the particular corporation.Filing selling instrumentsA corporation that agrees to issue or prepares a selling instrument in respect of flow-through shares shall file with the Minister a prescribed form together with a copy of the selling instrument or agreement to issue the shares on or before the last day of the month following the earlier ofthe month in which the agreement to issue the shares is entered into, andthe month in which the selling instrument is first delivered to a potential investor,and the Minister shall thereupon assign an identification number to the form and notify the corporation of the number.Filing re partnersWhere, in a fiscal period of a partnership, an expense is incurred by the partnership as a consequence of a renunciation of an amount under subsection 66(12.6), 66(12.601) or 66(12.62), the partnership shall, before the end of the third month that begins after the end of the period, file with the Minister a prescribed form identifying the share of the expense attributable to each member of the partnership at the end of the period.Consequences of failure to fileWhere a partnership fails to file a prescribed form as required under subsection 66(12.69) in respect of an expense, except for the purpose of subsection 66(12.69) the partnership is deemed not to have incurred the expense.Filing re assistanceWhere a partnership receives or becomes entitled to receive assistance as an agent for its members or former members at a particular time in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph 66(12.61)(b) or 66(12.63)(b), would be incurred by a corporation, the following rules apply:where the entitlement of any such member or former member to any part of the assistance is known by the partnership as of the end of the partnership’s first fiscal period ending after the particular time and that part of the assistance was not required to be reported under paragraph 66(12.691)(b) in respect of a calendar year ending before the end of that fiscal period, the partnership shall, on or before the last day of the third month following the end of that fiscal period, file with the Minister a prescribed form indicating the share of that part of the assistance paid to each of those members or former members before the end of that fiscal period or to which each of those members or former members is entitled at the end of that fiscal period;where the entitlement of any of those members or former members to any part of the assistance is known by the partnership as of the end of a calendar year that ends after the particular time and that part of the assistance was not required to be reported under paragraph 66(12.691)(a) in respect of a fiscal period ending at or before the end of that calendar year, or under this paragraph in respect of a preceding calendar year, the partnership shall, on or before the last day of the third month following the end of that calendar year, file with the Minister a prescribed form indicating the share of that part of the assistance paid to each of those members or former members before the end of that fiscal period or to which each of those members or former members is entitled at the end of that calendar year; andwhere a prescribed form required to be filed under paragraph 66(12.691)(a) or 66(12.691)(b) is not so filed, the part of that expense relating to the assistance required to be reported in the prescribed form shall be deemed not to have been incurred by the partnership.Filing re renunciationWhere a corporation renounces an amount in respect of Canadian exploration expenses or Canadian development expenses under subsection 66(12.6), 66(12.601) or 66(12.62), the corporation shall file a prescribed form in respect of the renunciation with the Minister before the end of the first month after the month in which the renunciation is made.Consequences of failure to fileWhere a corporation fails to file a prescribed form as required under subsection 66(12.7) in respect of a renunciation of an amount, subsections 66(12.61) and 66(12.63) do not apply in respect of the amount.Filing re assistanceWhere a corporation receives or becomes entitled to receive assistance as an agent in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph 66(12.61)(b) or 66(12.63)(b), would be incurred by the corporation, the corporation shall, before the end of the first month after the particular month in which it first becomes known to the corporation that a person that holds a flow-through share of the corporation is entitled to a share of any part of the assistance, file with the Minister a prescribed form identifying the share of the assistance to which each of those persons is entitled at the end of the particular month.Consequences of failure to fileWhere a corporation fails to file a prescribed form as required under subsection 66(12.701) in respect of assistance, except for the purpose of subsection 66(12.701) the Canadian exploration expense or Canadian development expense to which the assistance relates is deemed not to have been incurred by the corporation.Restriction on renunciationA corporation may renounce an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses incurred by it only to the extent that, but for the renunciation, it would be entitled to a deduction in respect of the expenses in computing its income.[Repealed, 1997, c. 25, s. 13(23)]Reductions in renunciationsWhere an amount that a corporation purports to renounce to a person under subsection 66(12.6), 66(12.601) or 66(12.62) exceeds the amount that it can renounce to the person under that subsection,the corporation shall file a statement with the Minister in prescribed form wherethe Minister sends a notice in writing to the corporation demanding the statement, orthe excess arose as a consequence of a renunciation purported to be made in a calendar year under subsection 66(12.6) or 66(12.601) because of the application of subsection 66(12.66) and, at the end of the year, the corporation knew or ought to have known of all or part of the excess;where subparagraph 66(12.73)(a)(i) applies, the statement shall be filed not later than 30 days after the Minister sends a notice in writing to the corporation demanding the statement;where subparagraph 66(12.73)(a)(ii) applies, the statement shall be filed before March of the calendar year following the calendar year in which the purported renunciation was made;except for the purpose of Part XII.6, any amount that is purported to have been so renounced to any person is deemed, after the statement is filed with the Minister, to have always been reduced by the portion of the excess identified in the statement in respect of that purported renunciation; andif a corporation fails to file the statement within the time required or fails in the statement filed to apply the excess fully to reduce one or more purported renunciations, the Minister may at any time reduce the total amount purported to be renounced by the corporation to one or more persons by the amount of the unapplied excess in which case, except for the purpose of Part XII.6, the amount purported to have been so renounced to a person is deemed, after that time, always to have been reduced by the portion of the unapplied excess allocated by the Minister in respect of that person.COVID-19 – agreements in 2019 or 2020If an agreement is entered into in 2019 or 2020 by a corporation to issue flow-through shares of the corporation,the reference in subparagraph (12.73)(a)(ii) to “at the end of the year” is to be read as a reference to “at the end of the subsequent year”; andthe reference in paragraph (12.73)(c) to “before March of the calendar year” is to be read as a reference to “before March of the second calendar year”.Late filed formsA corporation or partnership may file with the Minister a document referred to in subsection 66(12.68), 66(12.69), 66(12.691), 66(12.7) or 66(12.701) after the particular day on or before which the document is required to be filed under the applicable subsection and the document shall, except for the purposes of this subsection and subsection 66(12.75), be deemed to have been filed on the day on or before which it was required to be filed ifit is filedon or before the day that is 90 days after the particular day, orafter the day that is 90 days after the particular day where, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the document to be filed; andthe corporation or partnership, as the case may be, pays to the Receiver General at the time of filing a penalty in respect of the late filing.Late renunciationWhere a corporation purports to renounce an amount under subsection 66(12.6), 66(12.601) or 66(12.62) after the period in which the corporation was entitled to renounce the amount, the amount is deemed, except for the purposes of this subsection and subsections 66(12.7) and 66(12.75), to have been renounced at the end of the period ifthe corporation purports to renounce the amounton or before the day that is 90 days after the end of that period, orafter the day that is 90 days after the end of that period where, in the opinion of the Minister, the circumstances are such that it would be just and equitable that the amount be renounced; andthe corporation pays to the Receiver General a penalty in respect of the renunciation not more than 90 days after the renunciation.PenaltyFor the purposes of subsections 66(12.74) and 66(12.741), the penalty in respect of the late filing of a document referred to in subsection 66(12.68), 66(12.69), 66(12.691), 66(12.7) or 66(12.701) or in respect of a renunciation referred to in subsection 66(12.741) is the lesser of $15,000 andwhere the penalty is in respect of the late filing of a document referred to in subsection 66(12.68), 66(12.69) or 66(12.7), the greater of$100, and1/4 of 1% of the maximum amount in respect of the Canadian exploration expenses and Canadian development expenses renounced or attributed or to be renounced or attributed as set out in the document;where the penalty is in respect of the late filing of a document referred to in subsection 66(12.691) or 66(12.701), the greater of$100, and1/4 of 1% of the assistance reported in the document; andwhere the penalty is in respect of a renunciation referred to in subsection 66(12.741), the greater of$100, and1/4 of 1% of the amount of the renunciation.LimitationWhere a taxpayer has incurred an outlay or expense in respect of which a deduction from income is authorized under more than one provision of this section or section 66.1, 66.2 or 66.4, the taxpayer is not entitled to make the deduction under more than one provision but is entitled to select the provision under which to make the deduction.Short taxation yearIf a taxpayer has a taxation year that is less than 51 weeks, the amount determined in respect of the year under each of subparagraph (4)(b)(i), paragraphs 66.2(2)(c) and (d), subparagraph (b)(i) of the definition global foreign resource limit in subsection 66.21(1), subparagraph 66.21(4)(a)(i), clause 66.21(4)(a)(ii)(B) and paragraphs 66.4(2)(b) and (c) and 66.7(2.3)(a), (4)(a) and (5)(a) shall not exceed that proportion of the amount otherwise determined that the number of days in the year is of 365.Amounts deemed deductible under this SubdivisionFor the purposes of section 3, any amount deductible under the Income Tax Application Rules in respect of this subsection shall be deemed to be deductible under this Subdivision.Designation respecting Canadian exploration expenseA corporation may designate for a taxation year, by filing a designation in prescribed form with the Minister on or before the day on or before which it is required to file a return of its income for the year under section 150, a particular amount not exceeding the lesser ofits prescribed Canadian exploration expense for the year, andits cumulative Canadian exploration expense at the end of the year,and the particular amount shall be added in computing its cumulative offset account immediately before the end of the year and deducted in computing its cumulative Canadian exploration expense at any time after the end of the year.Designation respecting cumulative Canadian development expenseA corporation may designate for a taxation year, by filing a designation in prescribed form with the Minister on or before the day on or before which it is required to file a return of its income for the year under section 150, a particular amount not exceedingwhere a deduction has been made under subsection 66.2(2) in computing its income for the year, the lesser of30% of its prescribed Canadian development expense for the year, andthe amount, if any, by which 30% of its cumulative Canadian development expense at the end of the year exceeds the amount, if any, deducted for the year under subsection 66.2(2) in computing its income for the year, orwhere a deduction has not been made under subsection 66.2(2) in computing its income for the year, the lesser of30% of its prescribed Canadian development expense for the year, and30% of the amount, if any, of its adjusted cumulative Canadian development expense at the end of the year,and the particular amount shall be added in computing its cumulative offset account immediately before the end of the year and deducted in computing its cumulative Canadian development expense at any time after the end of the year.Definition of adjusted cumulative Canadian development expenseFor the purposes of paragraph 66(14.2)(b), adjusted cumulative Canadian development expense of a corporation at the end of a taxation year means the amount, if any, that would be its cumulative Canadian development expense at the end of the year, if no Canadian resource property were disposed of by it in the year.Special casesWhere, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitableto permit a designation under subsection 66(14.1) or 66(14.2) to be filed after the day on or before which it is required by that subsection to be filed, orto permit a designation filed under subsection 66(14.1) or 66(14.2) to be amended,the Minister may permit the designation to be filed or amended, as the case may be, after that day, and where the designation or amendment is filed pursuant to that permission, it shall be deemed to have been filed on the day on or before which it was required to be filed ifit is filed with the Minister in prescribed form, andthe corporation filing it pays to the Receiver General at the time of filing the penalty in respect of it,and where a designation is amended under this subsection, the designation to which the amendment is made shall be deemed not to have been effective.Penalty for late designationFor the purposes of this section, the penalty in respect of a designation or amended designation referred to in paragraph 66(14.4)(a) or 66(14.4)(b) is the lesser ofan amount determined by the formula0.0025 × A × BwhereAisin the case of a late-filed designation, the amount designated therein, andin the case of an amended designation, the amount, if any, by which the amount designated in the designation being amended differs from the amount designated in the amended designation, andBis the number of months each of which is included in whole or in part in the period commencing on the day on or before which the designation was required to be filed under subsection 66(14.1) or 66(14.2), as the case may be, and ending on the day the late-filed designation or amended designation, as the case may be, is filed, andan amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is included in whole or in part in the period referred to in the description of B in paragraph 66(14.5)(a).Deduction of carved-out incomeA taxpayer may deduct in computing the taxpayer’s income under this Part for a taxation year, an amount equal to the total of the taxpayer’s carved-out incomes for the year within the meaning assigned by subsection 209(1).DefinitionsIn this section,agreed portion in respect of a corporation that was a shareholder corporation of a joint exploration corporation means such amount as may be agreed on between the joint exploration corporation and the shareholder corporation not exceedingthe total of all amounts each of which is a payment or loan referred to in paragraph (b) of the definition shareholder corporation in this subsection 66(15) except to the extent that the payment or loan was made by a shareholder corporation that was not a Canadian corporation and was used by the joint exploration corporation to acquire a Canadian resource property after December 11, 1979 from a shareholder corporation that was not a Canadian corporation) made by the shareholder corporation to the joint exploration corporation during the period it was a shareholder corporation of the joint exploration corporation,minusthe total of the amounts, if any, previously renounced by the joint exploration corporation under any of subsections 66(10) to 66(10.3) in favour of the shareholder corporation; (partie convenue)assistance means any amount, other than a prescribed amount, received or receivable at any time from a person or government, municipality or other public authority whether the amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit; (montant à titre d’aide)Canadian exploration and development expenses incurred by a taxpayer means any expense incurred before May 7, 1974 that isany drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer after 1971 on or in respect of exploring or drilling for petroleum or natural gas in Canada,any prospecting, exploration or development expense incurred by the taxpayer after 1971 in searching for minerals in Canada,the cost to the taxpayer of any Canadian resource property acquired by the taxpayer after 1971,the taxpayer’s share of the Canadian exploration and development expenses incurred after 1971 by any association, partnership or syndicate in a fiscal period thereof, if at the end of that fiscal period the taxpayer was a member or partner thereof,any expense incurred by the taxpayer after 1971 pursuant to an agreement with a corporation under which the taxpayer incurred the expense solely in consideration for shares of the capital stock of the corporation issued to the taxpayer by the corporation or any interest in such shares or right thereto, to the extent that the expense was incurred as or on account of the cost ofdrilling or exploration activities, including any general geological or geophysical activities, in or in respect of exploring or drilling for petroleum or natural gas in Canada,prospecting, exploration or development activities in searching for minerals in Canada, oracquiring a Canadian resource property, andany annual payment made by the taxpayer for the preservation of a Canadian resource property,but, for greater certainty, does not includeany consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (e), orany expense described in paragraph (e) incurred by another taxpayer to the extent that the expense was, by virtue of that paragraph, a Canadian exploration and development expense of that other taxpayer; (frais d’exploration et d’aménagement au Canada)Canadian resource property of a taxpayer means any property of the taxpayer that isany right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in Canada,any right, licence or privilege tostore underground petroleum, natural gas or related hydrocarbons in Canada, orprospect, explore, drill or mine for minerals in a mineral resource in Canada other than a bituminous sands deposit or an oil shale deposit,any oil or gas well in Canada or any real property or immovable in Canada the principal value of which depends on its petroleum, natural gas or related hydrocarbon content (not including any depreciable property),any right to a rental or royalty computed by reference to the amount or value of production from an oil or a gas well in Canada, or from a natural accumulation of petroleum, natural gas or a related hydrocarbon in Canada, if the payer of the rental or royalty has an interest in, or for civil law a right in, the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation,any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, if the payer of the rental or royalty has an interest in, or for civil law a right in, the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource,any real property or immovable in Canada (not including any depreciable property) the principal value of which depends on its mineral resource content other than where the mineral resource is a bituminous sands deposit or an oil shale deposit,any right to or interest in — or, for civil law, any right to or in — any property described in any of paragraphs (a) to (e), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, oran interest in real property described in paragraph (f) or a real right in an immovable described in that paragraph, other than an interest or a right that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership; (avoir minier canadien)drilling or exploration expense incurred on or in respect of exploring or drilling for petroleum or natural gas includes any expense incurred on or in respect ofdrilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well,drilling for water or gas for injection into a petroleum or natural gas formation, ordrilling or converting a well for the injection of water or gas to assist in the recovery of petroleum or natural gas from another well; (frais d’exploration ou de forage)expense, incurred before a particular time by a taxpayer,includes an amount designated by the taxpayer at that time under paragraph 98(3)(d) or (5)(d) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as a cost in respect of property that is a Canadian resource property or a foreign resource property,butfor greater certainty, does not include any amount paid or payableas consideration for services to be rendered after that time, oras, on account or in lieu of payment of, or in satisfaction of, rent in respect of a period after that time; (dépenses)flow-through share means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agreesto incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, andto renounce, in prescribed form and before March of the first calendar year that begins after that period, to the person in respect of the share or right, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right; (action accréditive)foreign exploration and development expenses incurred by a taxpayer meansany drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer after 1971 on or in respect of exploring or drilling for petroleum or natural gas outside Canada,any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource outside Canada, including any expense incurred in the course ofprospecting,carrying out geological, geophysical or geochemical surveys,drilling by rotary, diamond, percussion or other method, ortrenching, digging test pits and preliminary sampling,the cost to the taxpayer of any foreign resource property acquired by him,subject to section 66.8, the taxpayer’s share of the foreign exploration and development expenses incurred after 1971 by a partnership in a fiscal period thereof, if at the end of that period the taxpayer was a member of the partnership, andany annual payment made by the taxpayer for the preservation of a foreign resource property;but does not includeany amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class,an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,an expenditure (other than a drilling expense) incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir,an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after December 21, 2000,foreign resource expenses in respect of a country, oran expenditure made after February 27, 2000 by the taxpayer unless the expenditure was madepursuant to an agreement in writing made by the taxpayer before February 28, 2000,for the acquisition of foreign resource property by the taxpayer, orfor the purpose ofenhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, orassisting in evaluating whether a foreign resource property is to be acquired by the taxpayer; (frais d’exploration et d’aménagement à l’étranger)foreign resource property of a taxpayer means any property that would be a Canadian resource property of the taxpayer if the definition Canadian resource property in this subsection were read as if the references therein to “in Canada” were references to “outside Canada”; (avoir minier étranger)joint exploration corporation means a principal-business corporation that has not at any time since its incorporation had more than 10 shareholders, not including any individual holding a share for the sole purpose of qualifying as a director; (société d’exploration en commun)original owner of a Canadian resource property or a foreign resource property means a personwho owned the property and disposed of it to a corporation that acquired it in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property, andwho would, but for subsection 66.7(12), (13), (13.1) or (17), as the case may be, be entitled in computing that person’s income for a taxation year that ends after that person disposed of the property to a deduction under section 29 of the Income Tax Application Rules or subsection (2), (3) or (4), 66.1(2) or (3), 66.2(2), 66.21(4) or 66.4(2) of this Act in respect of expenses described in subparagraph 29(25)(c)(i) or (ii) of that Act, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses incurred by the person before the person disposed of the property; (propriétaire obligé)outlay, made before a particular time by a taxpayer, has the meaning assigned to the expression expense by this subsection; (dépenses)predecessor owner of a Canadian resource property or a foreign resource property means a corporationthat acquired the property in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property,that disposed of the property to another corporation that acquired it in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the other corporation had continued to own the property, to the other corporation in respect of the property, andthat would, but for subsection 66.7(14), (15), (15.1) or (17), as the case may be, be entitled in computing its income for a taxation year ending after it disposed of the property to a deduction under subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) in respect of expenses incurred by an original owner of the property; (propriétaire antérieur)principal-business corporation means a corporation the principal business of which is any of, or a combination of,the production, refining or marketing of petroleum, petroleum products or natural gas,exploring or drilling for petroleum or natural gas,mining or exploring for minerals,the processing of mineral ores for the purpose of recovering metals or minerals from the ores,the processing or marketing of metals or minerals that were recovered from mineral ores and that include metals or minerals recovered from mineral ores processed by the corporation,the fabrication of metals,the operation of a pipeline for the transmission of oil or gas,the production or marketing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,the manufacturing of products, where the manufacturing involves the processing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,the generation or distribution of energy, or the production of fuel, using property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations, andthe development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would be the capital cost of property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations,or a corporation all or substantially all of the assets of which are shares of the capital stock or indebtedness of one or more principal-business corporations that are related to the corporation (otherwise than because of a right referred to in paragraph 251(5)(b)), (société exploitant une entreprise principale)production from a Canadian resource property or a foreign resource property meanspetroleum, natural gas and related hydrocarbons produced from the property,heavy crude oil produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, (c) ore (other than iron ore or tar sands) produced from the property processed to any stage that is not beyond the prime metal stage or its equivalent,iron ore produced from the property processed to any stage that is not beyond the pellet stage or its equivalent,tar sands produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, andany rental or royalty from the property computed by reference to the amount or value of the production of petroleum, natural gas or related hydrocarbons or ore; (production)reserve amount of a corporation for a taxation year in respect of an owner or predecessor owner of a Canadian resource property means the amount determined by the formulaA - BwhereAis the total of all amounts that arerequired by subsection 59(2) to be included in computing the corporation’s income for the year, andin respect of a reserve, deducted in computing the income of the original owner or predecessor owner and deemed by paragraph 87(2)(g) or by virtue of that paragraph and paragraph 88(1)(e.2) to have been deducted by the corporation as a reserve in computing its income for a preceding taxation year, andBis the total of amounts deducted in computing the corporation’s income for the year by virtue of subsection 64(1), 64(1.1) or 64(1.2) in respect of dispositions by the original owner or predecessor owner, as the case may be; (provision)selling instrument in respect of flow-through shares means a prospectus, registration statement, offering memorandum, term sheet or other similar document that describes the terms of the offer (including the price and number of shares) pursuant to which a corporation offers to issue flow-through shares; (avis d’émission)shareholder corporation of a joint exploration corporation means a corporation that for the period in respect of which the expression is being appliedwas a shareholder of the joint exploration corporation, andmade a payment or loan to the joint exploration corporation in respect of Canadian exploration and development expenses, a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense incurred or to be incurred by the joint exploration corporation; (société actionnaire)specified foreign exploration and development expense of a taxpayer in respect of a country (other than Canada) means an amount that is included in the taxpayer’s foreign exploration and development expenses and that isa drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country,an expense incurred by the taxpayer after December 21, 2000 (otherwise than pursuant to an agreement in writing made before December 22, 2000) for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course ofprospecting,carrying out geological, geophysical or geochemical surveys,drilling by rotary, diamond, percussion or other methods, ortrenching, digging test pits and preliminary sampling,a prospecting, exploration or development expense incurred by the taxpayer before December 22, 2000 (or after December 21, 2000 pursuant to an agreement in writing made before December 22, 2000) in searching for minerals in that country,the cost to the taxpayer of the taxpayer’s foreign resource property in respect of that country,an annual payment made by the taxpayer in a taxation year of the taxpayer for the preservation of a foreign resource property in respect of that country,an amount deemed by subsection 21(2) or (4) to be a foreign exploration and development expense incurred by the taxpayer, to the extent that it can reasonably be considered to relate to an amount that, without reference to this paragraph and paragraph (f), would be a specified foreign exploration and development expense in respect of that country, orsubject to section 66.8, the taxpayer’s share of the specified foreign exploration and development expenses of a partnership incurred in respect of that country in a fiscal period of the partnership if, at the end of that period, the taxpayer was a member of the partnership. (frais d’exploration et d’aménagement à l’étranger déterminés)Other definitionsThe definitions in subsections 66.1(6), 66.2(5), 66.21(1), 66.4(5) and 66.5(2) apply in this section.PartnershipsFor the purposes of subsections 66(12.6) to 66(12.73), the definitions assistance and flow-through share in subsection 66(15) and subsections 66(18), 66(19) and 66.3(3) and 66.3(4), a partnership is deemed to be a person and its taxation year is deemed to be its fiscal period.Non-arm’s length partnershipsFor the purpose of paragraph (12.66)(d), a partnership and a corporation are, at all times in a calendar year,deemed not to deal with each other at arm’s length, ifan expense is deemed by subsection (12.61) to be incurred by the partnership,the expense would, if this Act were read without reference to paragraph (12.61)(b), be incurred in the calendar year by the corporation, anda share of the expense is included, because of paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), in the Canadian exploration expense of the corporation or of a member of the partnership with whom the corporation, at any time in that calendar year, does not deal at arm’s length; anddeemed to deal with each other at arm’s length, in any other case.Members of partnershipsFor the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition investment expense in subsection 110.6(1), the definition pre-production mining expenditure in subsection 127(9) and the descriptions of C and D in subsection 211.91(1), where a person’s share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition foreign exploration and development expenses in subsection (15), paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (f) of the definition Canadian development expense in subsection 66.2(5), paragraph (e) of the definition foreign resource expense in subsection 66.21(1) or paragraph (b) of the definition Canadian oil and gas property expense in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions foreign exploration and development expenses, Canadian exploration expense, Canadian development expense, foreign resource expense and Canadian oil and gas property expense in respect of the person, to be made or incurred by the person at the end of that fiscal period.Renunciation by corporate partner, etc.A corporation is not entitled to renounce under subsection 66(12.6), 66(12.601) or 66(12.62) to a person a specified amount in respect of the corporation where the corporation would not be entitled to so renounce the specified amount ifthe expression “end of that fiscal period” in subsection 66(18) were read as “time the outlay or expense was made or incurred by the partnership”; andthe expression “on the effective date of the renunciation” in each of paragraphs 66(12.61)(a) and 66(12.63)(a) were read as “at the earliest time that any part of such expense was incurred by the corporation”.Specified amountFor the purpose of subsection 66(19), a specified amount in respect of a corporation is an amount that representsall or part of the corporation’s share of an outlay or expense made or incurred by a partnership of which the corporation is a member or former member; orall or part of an amount renounced to the corporation under subsection 66(12.6), 66(12.601) or 66(12.62).Lithium brine wellFor the purposes of paragraph (f) of the definition Canadian exploration expense in subsection 66.1(6) and paragraphs (c.2) and (d) of the definition Canadian development expense in subsection 66.2(5),a mine includes a well for the extraction of material from a lithium brine deposit;all wells of a taxpayer for the extraction of material from one or more lithium brine deposits, the material produced from which is sent to the same plant for processing, are deemed to be one mine of the taxpayer; andall wells of a taxpayer for the extraction of material from one or more lithium brine deposits that the Minister, in consultation with the Minister of Natural Resources, determines constitute one project, are deemed to be one mine of the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66; 1994, c. 7 Sch. II, s. 38, c. 8, s. 5, c. 21, s. 28; 1995, c. 21, s. 21; 1997, c. 25, s. 13; 1998, c. 19, s. 104; 2001, c. 17, s. 44; 2003, c. 28, s. 4; 2007, c. 35, s. 19; 2010, c. 25, s. 12; 2011, c. 24, s. 13; 2013, c. 34, ss. 111, 199, c. 40, s. 30; 2017, c. 33, s. 192021, c. 23, s. 122022, c. 19, s. 72024, c. 15, s. 122024, c. 17, s. 14
Amount to be included in incomeThere shall be included in computing the amount referred to in paragraph 59(3.2)(b) in respect of a taxpayer for a taxation year the amount, if any, by whichthe total of all amounts referred to in the descriptions of F to M in the definition cumulative Canadian exploration expense in subsection 66.1(6) that are deducted in computing the taxpayer’s cumulative Canadian exploration expense at the end of the yearexceeds the total ofall amounts referred to in the descriptions of A to E.1 in the definition cumulative Canadian exploration expense in subsection 66.1(6) that are included in computing the taxpayer’s cumulative Canadian exploration expense at the end of the year, andthe total determined under subparagraph 66.7(12.1)(a)(i) in respect of the taxpayer for the year.Deduction for certain principal-business corporationsIn computing the income for a taxation year of a principal-business corporation (other than a corporation that would not be a principal-business corporation if the definition principal-business corporation in subsection 66(15) were read without reference to paragraphs (h) and (i) of that definition), there may be deducted any amount that the corporation claims not exceeding the lesser ofthe total ofthe amount, if any, by which its cumulative Canadian exploration expense at the end of the year exceeds the amount, if any, designated by it for the year under subsection 66(14.1), andthe amount, if any, by whichthe total determined under subparagraph 66.7(12.1)(a)(i) in respect of the corporation for the yearexceedsthe amount that would be determined under subsection 66.1(1) in respect of the corporation for the year, if that subsection were read without reference to paragraph (c) thereof, andthe amount, if any, by whichthe amount that would be its income for the year if no deduction (other than a prescribed deduction) were allowed under this subsection or section 65exceedsthe total of all amounts each of which is an amount deducted by the corporation under section 112 or 113 in computing its taxable income for the year.Expenses of other taxpayerIn computing the income for a taxation year of a taxpayer that is not a principal-business corporation, or that is a corporation that would not be a principal-business corporation if the definition principal-business corporation in subsection 66(15) were read without reference to paragraphs (h) and (i) of that definition, there may be deducted such amount as the taxpayer claims not exceeding the total ofthe amount, if any, by which the taxpayer’s cumulative Canadian exploration expense at the end of the year exceeds the amount, if any, designated by the taxpayer for the year under subsection 66(14.1), andthe amount, if any, by whichthe total determined under subparagraph 66.7(12.1)(a)(i) in respect of the taxpayer for the yearexceedsthe amount that would, but for paragraph 66.1(1)(c), be the amount determined under subsection 66.1(1) in respect of the taxpayer for the year.DefinitionsIn this section,bitumen mine development project, of a taxpayer, means an undertaking for the sole purpose of developing a new mine to extract and process tar sands from a mineral resource of the taxpayer to produce bitumen or a similar product; (projet de mise en valeur d’une mine de bitume)bitumen upgrading development project, of a taxpayer, means an undertaking for the sole purpose of constructing an upgrading facility to process bitumen or a similar feedstock (all or substantially all of which is from a mineral resource of the taxpayer) from a new mine to the crude oil stage or its equivalent; (projet de valorisation du bitume)Canadian exploration expense of a taxpayer means any expense incurred after May 6, 1974 that isany expense incurred by the taxpayer (other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well) for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas (other than a mineral resource) in Canada, including such an expense that isa geological, geophysical or geochemical expense, oran expense for environmental studies or community consultations (including studies or consultations that are undertaken to obtain a right, licence or privilege for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas),any expense (other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well) incurred by the taxpayer after March, 1985 for the purpose of bringing a natural accumulation of petroleum or natural gas (other than a mineral resource) in Canada into production and incurred prior to the commencement of the production (other than the production from an oil or gas well) in reasonable commercial quantities from such accumulation, includingclearing, removing overburden and stripping, andsinking a shaft or constructing an adit or other underground entry,any expense incurred before April, 1987 in drilling or completing an oil or gas well in Canada or in building a temporary access road to, or preparing a site in respect of, any such well,incurred by the taxpayer in the year, orincurred by the taxpayer in any previous year and included by the taxpayer in computing the taxpayer’s Canadian development expense for a previous taxation year,if, within six months after the end of the year, the drilling of the well is completed andit is determined that the well is the first well capable of production in commercial quantities from an accumulation of petroleum or natural gas (other than a mineral resource) not previously known to exist, orit is reasonable to expect that the well will not come into production in commercial quantities within twelve months of its completion,any expense incurred by the taxpayer after March, 1987 and in a taxation year of the taxpayer in drilling or completing an oil or gas well in Canada or in building a temporary access road to, or preparing a site in respect of, any such well ifthe drilling or completing of the well resulted in the discovery that a natural underground reservoir contains petroleum or natural gas, wherebefore the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas,the discovery occurred at any time before six months after the end of the year, andthe expense is incurredbefore 2021 (excluding an expense that is deemed by subsection 66(12.66) to have been incurred on December 31, 2020), if the expense is incurred in connection with an obligation that was committed to in writing (including a commitment to a government under the terms of a license or permit) by the taxpayer before March 22, 2017, orbefore 2019 (excluding an expense that is deemed by subsection 66(12.66) to have been incurred on December 31, 2018), in any other case,the well is abandoned in the year or within six months after the end of the year without ever having produced otherwise than for specified purposes,the period of 24 months commencing on the day of completion of the drilling of the well ends in the year, the expense was incurred within that period and in the year and the well has not within that period produced otherwise than for specified purposes, orthere has been filed with the Minister, on or before the day that is 6 months after the end of the taxation year of the taxpayer in which the drilling of the well was commenced, a certificate issued by the Minister of Natural Resources certifying that, on the basis of evidence submitted to that Minister, that Minister is satisfied thatthe total of expenses incurred and to be incurred in drilling and completing the well, in building a temporary access road to the well and in preparing the site in respect of the well will exceed $5,000,000, andthe well will not produce, otherwise than for a specified purpose, within the period of 24 months commencing on the day on which the drilling of the well is completed,any expense deemed by subsection 66.1(9) to be a Canadian exploration expense incurred by the taxpayer,any expense incurred by the taxpayer (other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well) for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada including such an expense for environmental studies or community consultations (including, notwithstanding subparagraph (v), studies or consultations that are undertaken to obtain a right, licence or privilege for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada) and any expense incurred in the course ofprospecting,carrying out geological, geophysical or geochemical surveys,drilling by rotary, diamond, percussion or other methods, ortrenching, digging test pits and preliminary sampling,but not includingany Canadian development expense,any expense described in subparagraph (i), (iii) or (iv) in respect of the mineral resource, incurred before a new mine in the mineral resource comes into production in reasonable commercial quantities, that results in revenue or can reasonably be expected to result in revenue earned before the new mine comes into production in reasonable commercial quantities, except to the extent that the total of all such expenses exceeds the total of those revenues, orany expense that may reasonably be considered to be related to a mine in the mineral resource that has come into production in reasonable commercial quantities or to be related to a potential or actual extension of the mine,any expense incurred by the taxpayer after November 16, 1978 and before March 21, 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft or constructing an adit or other underground entry, but not including any expense that results in revenue or can reasonably be expected to result in revenue earned before the new mine comes into production in reasonable commercial quantities, except to the extent that the total of all such expenses exceeds the total of those revenues,any Canadian renewable and conservation expense incurred by the taxpayer,any expense incurred by the taxpayer after March 21, 2011, that isa specified oil sands mine development expense, oran eligible oil sands mine development expense,any expense incurred by the taxpayer that would be described in paragraph (g) if the reference to “March 21, 2013” in that paragraph were “2017” and that is incurredunder an agreement in writing entered into by the taxpayer before March 21, 2013, oras part of the development of a new mine, ifthe construction of the new mine was started by, or on behalf of, the taxpayer before March 21, 2013 (and for this purpose construction does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), orthe engineering and design work for the construction of the new mine, as evidenced in writing, was started by, or on behalf of, the taxpayer before March 21, 2013 (and for this purpose engineering and design work does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities),any expense incurred by the taxpayer, the amount of which is determined by the formulaA × BwhereAis an expense that would be described in paragraph (g) if the reference to “March 21, 2013” in that paragraph were “2018” and that is not described in paragraph (g.3), andBis100% if the expense is incurred before 2015,80% if the expense is incurred in 2015,60% if the expense is incurred in 2016, and30% if the expense is incurred in 2017,subject to section 66.8, the taxpayer’s share of any expense referred to in any of paragraphs (a) to (d) and (f) to (g.4) incurred by a partnership in a fiscal period of the partnership, if at the end of the period the taxpayer is a member of the partnership, orany expense referred to in any of paragraphs (a) to (g) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,but for greater certainty, shall not includeany consideration given by the taxpayer for any share or any interest in or right to — or, for civil law, any right in or to — a share, except as provided by paragraph (i),any expense described in paragraph (i) incurred by any other taxpayer to the extent that the expense was,by virtue of that paragraph, a Canadian exploration expense of that other taxpayer,by virtue of paragraph (g) of the definition Canadian development expense in subsection 66.2(5), a Canadian development expense of that other taxpayer, orby virtue of paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5), a Canadian oil and gas property expense of that other taxpayer,an expense that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 1987,[Repealed, 2011, c. 24, s. 14]any amount (other than a Canadian renewable and conservation expense) included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class,an expenditure incurred at any time after the commencement of production from a Canadian resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of, or to assist in the recovery of, petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the Canadian resource property relates,an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir, orthe taxpayer’s share of any consideration, expense, cost or expenditure referred to in any of paragraphs (j) to (n) given or incurred by a partnership,but any assistance that a taxpayer has received or is entitled to receive after May 25, 1976 in respect of or related to the taxpayer’s Canadian exploration expense shall not reduce the amount of any of the expenses described in any of paragraphs (a) to (i); (frais d’exploration au Canada)Canadian renewable and conservation expense has the meaning assigned by regulation, and for the purpose of determining whether an outlay or expense in respect of a prescribed energy conservation property is a Canadian renewable and conservation expense, the Technical Guide to Canadian Renewable and Conservation Expenses (CRCE), as amended from time to time and published by the Department of Natural Resources, shall apply conclusively with respect to engineering and scientific matters; (frais liés aux énergies renouvelables et à l’économie d’énergie au Canada)completion, of a specified oil sands mine development project, means the first attainment of a level of average output, measured over a 60-day period, equal to at least 60% of the planned level of average daily output (as determined in paragraph (b) of the definition specified oil sands mine development project) for the specified oil sands mine development project; (achèvement)cumulative Canadian exploration expense of a taxpayer at any time in a taxation year means the amount determined by the formula(A+B+C+D+E+E.1) - (F+G+H+I+J+J.1+K+L+M)whereAis the total of all Canadian exploration expenses made or incurred by the taxpayer before that time,Bis the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(b) for the taxpayer’s taxation years ending before that time,Cis the total of all amounts, except amounts in respect of interest, paid by the taxpayer after May 6, 1974 and before that time to Her Majesty in right of Canada in respect of amounts paid to the taxpayer before May 25, 1976 under the regulations referred to in paragraph (a) of the description of H,Dis the total of all amounts referred to in the description of G that are established by the taxpayer to have become bad debts before that time,Eis such part, if any, of the amount determined for J as has been repaid before that time by the taxpayer pursuant to a legal obligation to repay all or any part of that amount,E.1is the total of all specified amounts determined under paragraph 66.7(12.1)(a) in respect of the taxpayer for taxation years ending before that time,Fis the total of all amounts deducted or required to be deducted in computing the taxpayer’s income for a taxation year ending before that time in respect of the taxpayer’s cumulative Canadian exploration expense,Gis the total of all amounts that became receivable by the taxpayer before that time that are to be included in the amount determined under this description by virtue of paragraph 66(12.1)(a) or 66(12.2)(a),His the total of all amounts paid to the taxpayer after May 6, 1974 and before May 25, 1976under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, orpursuant to any agreement entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development,to the extent that the amounts have been expended by the taxpayer as or on account of Canadian exploration and development expenses or Canadian exploration expense incurred by the taxpayer,Iis the total of all amounts each of which is an amount received before that time on account of any amount referred to in the description of,Jis the total amount of assistance that the taxpayer has received or is entitled to receive in respect of any Canadian exploration expense incurred after 1980 or that can reasonably be related to Canadian exploration activities after 1980, to the extent that the assistance has not reduced the taxpayer’s Canadian exploration expense by virtue of paragraph 66.1(9)(g),J.1is the total of all amounts by which the cumulative Canadian exploration expense of the taxpayer is required because of subsection 80(8) to be reduced at or before that time,Kis the total of all amounts that are required to be deducted before that time under subsection 66(14.1) in computing the taxpayer’s cumulative Canadian exploration expense,Lis that portion of the total of all amounts each of which was deducted by the taxpayer under subsection 127(5) or (6) for a taxation year that ended before that time and that can reasonably be attributed to a qualified Canadian exploration expenditure, a pre-production mining expenditure, a flow-through mining expenditure or a flow-through critical mineral mining expenditure (each expenditure as defined in subsection 127(9)) made in a preceding taxation year, andMis the total of all amounts that are required to be deducted before that time under paragraph 66.7(12)(b) in computing the taxpayer’s cumulative Canadian exploration expense; (frais cumulatifs d’exploration au Canada)designated asset, in respect of an oil sands mine development project of a taxpayer, means a property that is a building, a structure, machinery or equipment and is, or is an integral and substantial part of,in the case of a bitumen mine development project,a crusher,a froth treatment plant,a primary separation unit,a steam generation plant,a cogeneration plant, ora water treatment plant, orin the case of a bitumen upgrading development project,a gasifier unit,a vacuum distillation unit,a hydrocracker unit,a hydrotreater unit,a hydroprocessor unit, ora coker; (bien désigné)eligible oil sands mine development expense, of a taxpayer, means an expense incurred by the taxpayer after March 21, 2011 and before 2016, the amount of which is determined by the formulaA × BwhereAis an expense that would be a Canadian exploration expense of the taxpayer described in paragraph (g) of the definition Canadian exploration expense if that paragraph were read without reference to “and before March 21, 2013” and “other than a bituminous sands deposit or an oil shale deposit”, but does not include an expense that is a specified oil sands mine development expense, andBis100% if the expense is incurred before 2013,80% if the expense is incurred in 2013,60% if the expense is incurred in 2014, and30% if the expense is incurred in 2015; (frais d’aménagement admissibles relatifs à une mine de sables bitumineux)oil sands mine development project, of a taxpayer, means a bitumen mine development project or a bitumen upgrading development project of the taxpayer; (projet de mise en valeur d’une mine de sables bitumineux)preliminary work activity, in respect of an oil sands mine development project, means activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of a taxpayer of designated assets in respect of the taxpayer’s oil sands mine development project including, without limiting the generality of the foregoing, the following activities:obtaining permits or regulatory approvals,performing design or engineering work,conducting feasibility studies,conducting environmental assessments, andentering into contracts; (travaux préliminaires)restricted expense of a taxpayer means an expenseincurred by the taxpayer before April, 1987,that is deemed by paragraph 66(10.2)(c) to have been incurred by the taxpayer, or included by the taxpayer in the amount referred to in paragraph (a) of the definition Canadian development expense in subsection 66.2(5) by virtue of paragraph 66(12.3)(b), to the extent that the expense was originally incurred before April, 1987,that was renounced by the taxpayer under subsection 66(10.2), 66(12.601) or 66(12.62),in respect of which an amount referred to in subsection 66(12.3) becomes receivable by the taxpayer,deemed to be a Canadian exploration expense of the taxpayer or any other taxpayer by virtue of subsection 66.1(9), orwhere the taxpayer is a corporation, that was incurred by the corporation before the time control of the corporation was last acquired by a person or persons; (frais spécifiés)specified oil sands mine development expense, of a taxpayer, means an expense thatwould be a Canadian exploration expense described in paragraph (g) of the definition Canadian exploration expense if that paragraph were read without reference to “and before March 21, 2013” and “other than a bituminous sands deposit or an oil shale deposit”,is incurred by the taxpayer after March 21, 2011 and before 2015, andis incurred by the taxpayer to achieve completion of a specified oil sands mine development project of the taxpayer; (frais d’aménagement déterminés relatifs à une mine de sables bitumineux)specified oil sands mine development project, of a taxpayer, means an oil sands mine development project (not including any preliminary work activity) in respect of whichone or more designated assets was, before March 22, 2011,acquired by the taxpayer, orin the process of being constructed, fabricated or installed, by or on behalf of the taxpayer, andthe planned level of average daily output (where that output is bitumen or a similar product in the case of a bitumen mine development project, or synthetic crude oil or a similar product in the case of a bitumen upgrading development project) that can reasonably be expected, is the lesser ofthe level that was the demonstrated intention of the taxpayer as of March 21, 2011 to produce from the oil sands mine development project, andthe maximum level of output associated with the design capacity, as of March 21, 2011, of the designated asset referred to in paragraph (a); (projet déterminé de mise en valeur d’une mine de sables bitumineux)specified purpose meansthe operation of an oil or gas well for the sole purpose of testing the well or the well head and related equipment, in accordance with generally accepted engineering practices,the burning of natural gas and related hydrocarbons to protect the environment, andprescribed purposes. (fin admise)Application of ss. 66(15), 66.2(5) and 66.4(5)The definitions in subsections 66(15), 66.2(5) and 66.4(5) apply to this section.Deductible expenseAn expense of a taxpayer that is not included in paragraph (f) or (g) of the definition Canadian exploration expense in subsection (6) because the taxpayer earned revenue from a mine in a mineral resource is deemed, for the purposes of this Part, not to be an outlay or payment described in paragraph 18(1)(b).Share of partnerWhere a taxpayer is a member of a partnership, the taxpayer’s share of any amount that would be an amount referred to in the description of E, G or J in the definition cumulative Canadian exploration expense in subsection 66.1(6) in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of E, G or J, as the case may be, in that definition in respect of the taxpayer for the taxation year of the taxpayer in which the partnership’s taxation year ends.[Repealed, 1997, c. 25, s. 14(6)]Canadian development expenses for preceding yearsWhere at any time in a taxpayer’s taxation yearthe drilling or completing of an oil or gas well resulted in the discovery that a natural underground reservoir contains petroleum or natural gas and, before the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas,the period of 24 months commencing on the day of completion of the drilling of an oil or gas well ends and the well has not, within that period, produced otherwise than for specified purposes, oran oil or gas well that has never produced, otherwise than for specified purposes, is abandoned,the amount, if any, by which the total ofall Canadian development expenses (other than restricted expenses) described in subparagraph (a)(ii) of the definition Canadian development expense in subsection 66.2(5) in respect of the well that are deemed by subsection 66(10.2) or 66(12.63) to have been incurred by the taxpayer in the year or a preceding taxation year,all Canadian development Canadian development expenses (other than restricted expenses) described in subparagraph (a)(ii) of the definition Canadian development expense in subsection 66.2(5) in respect of the well that are required by paragraph 66(12.3)(b) to be included by the taxpayer in the amount referred to in paragraph (a) of that definition for the year or a preceding taxation year, andall Canadian development expenses described in subparagraph (a)(ii) of the definition Canadian development expense in subsection 66.2(5) incurred by the taxpayer in respect of the well in a taxation year preceding the year, other thanexpenses referred to in paragraph (d) or (e),restricted expenses, andexpenses for a well referred to in paragraph (a) that are incurredafter 2020 (including expenses that are deemed by subsection 66(12.66) to have been incurred on December 31, 2020), if the expenses are incurred in connection with an obligation that was committed to in writing (including a commitment to a government under the terms of a licence or permit) by the taxpayer before March 22, 2017, andafter 2018 (including expenses that are deemed by subsection 66(12.66) to have been incurred on December 31, 2018), in any other case,exceedsany assistance that the taxpayer or a partnership of which the taxpayer is a member has received or is entitled to receive in respect of the expenses referred to in any of paragraphs 66.1(9)(d) to 66.1(9)(f),shall, for the purposes of this Act, be deemed to be a Canadian exploration expense referred to in paragraph (e) of the definition Canadian exploration expense in subsection 66.1(6) incurred by the taxpayer at that time.Certificate ceasing to be validA certificate in respect of an oil or gas well issued by the Minister of Natural Resources for the purposes of subparagraph (d)(iv) of the definition Canadian exploration expense in subsection 66.1(6) shall be deemed never to have been issued and never to have been filed with the Minister wherethe well produces, otherwise than for a specified purpose, within the period of 24 months commencing on the day on which the drilling of the well was completed; orin applying for the certificate, the applicant, in any material respect, provided any incorrect information or failed to provide information.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.1; 1994, c. 7, Sch. II, s. 39, c. 8, s. 6, c. 41, par. 37(1)(o); 1995, c. 21, s. 22; 1997, c. 25, s. 14; 2001, c. 17, s. 45; 2003, c. 28, s. 5; 2011, c. 24, s. 14; 2013, c. 34, ss. 112, 200, c. 40, s. 31; 2016, c. 7, s. 7; 2017, c. 33, s. 202022, c. 19, s. 82023, c. 26, s. 14
Amount to be included in incomeThere shall be included in computing the amount referred to in paragraph 59(3.2)(c) in respect of a taxpayer for a taxation year the amount, if any, by which the total ofall amounts referred to in the descriptions of E to O in the definition cumulative Canadian development expense in subsection 66.2(5) that are deducted in computing the taxpayer’s cumulative Canadian development expense at the end of the year, andthe amount that is designated by the taxpayer for the year under subsection 66(14.2)exceeds the total ofall amounts referred to in the descriptions of A to .1 in the definition cumulative Canadian development expense in subsection 66.2(5) that are included in computing the taxpayer’s cumulative Canadian development expense at the end of the year, andthe total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the year.Deduction for cumulative Canadian development expensesA taxpayer may deduct, in computing the taxpayer’s income for a taxation year, such amount as the taxpayer may claim not exceeding the total ofthe lesser ofthe total ofthe taxpayer’s cumulative Canadian development expense at the end of the year, andthe amount, if any, by whichthe total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the yearexceedsthe amount that would, but for paragraph 66.2(1)(d), be determined under subsection 66.2(1) in respect of the taxpayer for the year, andthe amount, if any, by which the amount determined under subparagraph 66.4(2)(a)(ii) exceeds the amount determined under subparagraph 66.4(2)(a)(i),the lesser ofthe amount, if any, by which the amount determined under subparagraph 66.2(2)(a)(i) exceeds the amount determined under subparagraph 66.2(2)(a)(ii), andthe amount, if any, by which the total of all amounts each of which isan amount included in the taxpayer’s income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to — or, for civil law, any right in or to — a share, acquired by the taxpayer under circumstances described in paragraph (g) of the definition Canadian development expense in subsection (5) or paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), oran amount included by virtue of paragraph 12(1)(e) in computing the taxpayer’s income for the year to the extent that it relates to inventory described in clause 66.2(2)(b)(ii)(A)exceedsthe total of all amounts deducted as a reserve by virtue of paragraph 20(1)(n) in computing the taxpayer’s income for the year to the extent that the reserve relates to inventory described in clause 66.2(2)(b)(ii)(A),30% of the amount, if any, by which the amount determined under subparagraph 66.2(2)(b)(i) exceeds the amount determined under subparagraph 66.2(2)(b)(ii), andthe amount determined by the formulaA(B − C)whereAisfor taxation years that end before 2024, 15%,for taxation years that begin before 2024 and end after 2023, the amount determined by the formula0.15(I/J) + 0.075(K/J)whereIis the total of all accelerated Canadian development expenses incurred by the taxpayer before 2024 and in the taxation year,Jis the total of all accelerated Canadian development expenses incurred by the taxpayer in the taxation year, andKis the total of all accelerated Canadian development expenses incurred by the taxpayer after 2023 and in the taxation year, andfor taxation years that begin after 2023, 7.5%,Bis the total of all accelerated Canadian development expenses incurred by the taxpayer in the taxation year, andCis the amount determined by the formula(D − E) − (F − G − H)whereDis the total of the amounts determined for E to O in the definition cumulative Canadian development expense in subsection (5) at the end of the taxation year,Eis the total of the amounts determined for E to O in the definition cumulative Canadian development expense in subsection (5) at the beginning of the taxation year,Fis the total of the amounts determined for A to D.1 in the definition cumulative Canadian development expense in subsection (5) at the end of the taxation year,Gis the total of the amounts determined for A to D.1 in the definition cumulative Canadian development expense in subsection (5) at the end of the preceding taxation year, andHis the amount determined for B.DefinitionsIn this section,accelerated Canadian development expense, of a taxpayer, means any cost or expense incurred by the taxpayer during a taxation year if the cost or expensequalifies as a Canadian development expense at the time it is incurred, other thanan expense in respect of which the taxpayer is a successor, within the meaning of subsection 66.7(4), anda cost in respect of a Canadian resource property acquired by the taxpayer, or a partnership in which the taxpayer is a member, from a person or partnership with which the taxpayer does not deal at arm’s length,is incurred after November 20, 2018 and before 2028, other than expenses deemed to have been incurred on December 31, 2027 because of subsection 66(12.66), andif the Canadian development expense is deemed to be a Canadian development expense incurred by the taxpayer because of paragraph 66(12.63)(a), is an amount renounced under an agreement entered into after November 20, 2018; (frais d’aménagement au Canada accélérés)Canadian development expense of a taxpayer means any cost or expense incurred after May 6, 1974 that isany expense incurred by the taxpayer indrilling or converting a well in Canada for the disposal of waste liquids from an oil or gas well,drilling or completing an oil or gas well in Canada, building a temporary access road to the well or preparing a site in respect of the well, to the extent that the expense was not a Canadian exploration expense of the taxpayer in the taxation year in which it was incurred,drilling or converting a well in Canada for the injection of water, gas or any other substance to assist in the recovery of petroleum or natural gas from another well,drilling for water or gas in Canada for injection into a petroleum or natural gas formation, ordrilling or converting a well in Canada for the purposes of monitoring fluid levels, pressure changes or other phenomena in an accumulation of petroleum or natural gas,any expense incurred by the taxpayer in drilling or recompleting an oil or gas well in Canada after the commencement of production from the well,any expense incurred by the taxpayer before November 17, 1978 for the purpose of bringing a mineral resource in Canada into production and incurred prior to the commencement of production from the resource in reasonable commercial quantities, includingclearing, removing overburden and stripping, andsinking a mine shaft, constructing an adit or other underground entry,any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer for the purpose of bringing a new mine in a mineral resource in Canada that is a bituminous sands deposit or an oil shale deposit into production and incurred before the new mine comes into production in reasonable commercial quantities, including an expense for clearing the land, removing overburden and stripping, or building an entry ramp,any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer after March 20, 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft, constructing an adit or other underground entry or drilling a well for the extraction of lithium from brines,any expense (other than an amount included in the capital cost of depreciable property) incurred by the taxpayer after 1987in sinking or excavating a mine shaft, main haulage way or similar underground work designed for continuing use, for a mine in a mineral resource in Canada built or excavated after the mine came into production,in extending any such shaft, haulage way or work referred to in subparagraph (i), orin drilling or completing a well for the extraction of lithium from brines in Canada after the mine came into production,the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition Canadian resource property in subsection 66(15), or any right to or interest in — or for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),subject to section 66.8, the taxpayer’s share of any expense referred to in any of paragraphs (a) to (e) incurred by a partnership in a fiscal period thereof at the end of which the taxpayer was a member of the partnership, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is 6 months after the taxpayer’s taxation year in which that period ends, orany cost or expense referred to in any of paragraphs (a) to (e) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,but for greater certainty, shall not includeany consideration given by the taxpayer for any share or any interest in or right to — or, for civil law, any right in or to — a share, except as provided by paragraph (g),any expense described in paragraph (g) incurred by any other taxpayer to the extent that the expense was,by virtue of that paragraph, a Canadian development expense of that other taxpayer,by virtue of paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), a Canadian exploration expense of that other taxpayer, orby virtue of paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5), a Canadian oil and gas property expense of that other taxpayer,an expense that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 1987,any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class, orthe taxpayer’s share of any consideration, expense, cost or expenditure referred to in any of paragraphs (h) to (j) given or incurred by a partnership,but any assistance that a taxpayer has received or is entitled to receive after May 25, 1976 in respect of or related to the taxpayer’s Canadian development expense shall not reduce the amount of any of the expenses described in any of paragraphs (a) to (g); (frais d’aménagement au Canada)cumulative Canadian development expense of a taxpayer at any time in a taxation year means the amount determined by the formula(A+B+C+D+D.1) - (E+F+G+H+I+J+K+L+M+M.1+N+O)whereAis the total of all Canadian development expenses made or incurred by the taxpayer before that time,Bis the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,Cis the total of all amounts referred to in the description of F or G that are established by the taxpayer to have become bad debts before that time,Dis such part, if any, of the amount determined for M as has been repaid before that time by the taxpayer pursuant to a legal obligation to repay all or any part of that amount,D.1is the total of all specified amounts, determined under paragraph 66.7(12.1)(b) in respect of the taxpayer for taxation years ending before that time,Eis the total of all amounts deducted in computing the taxpayer’s income for a taxation year ending before that time in respect of the taxpayer’s cumulative Canadian development expense,Fis the total of all amounts each of which is an amount in respect of property described in paragraph (b), (e) or (f) of the definition Canadian resource property in subsection 66(15) or property disposed of after March 21, 2011 which was described in any of those paragraphs and the cost of which when acquired by the taxpayer was included in the Canadian development expense of the taxpayer, or any right to or interest in — or, for civil law, any right in or to — such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as “the particular property”) disposed of by the taxpayer before that time equal to the amount, if any, by whichthe amount, if any, by which the proceeds of disposition in respect of the particular property that became receivable by the taxpayer after May 6, 1974 and before that time exceed any outlays or expenses that were made or incurred by the taxpayer after May 6, 1974 and before that time for the purpose of making the disposition and that were not otherwise deductible for the purposes of this Partexceedsthe amount, if any, by whichthe total of all amounts that would be determined under paragraph 66.7(4)(a), immediately before the time (in this paragraph referred to as the “relevant time”) when such proceeds of disposition became receivable, in respect of the taxpayer and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances in which subsection 66.7(4) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) ifamounts that became receivable at or after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the relevant time were made before the relevant time,paragraph 66.7(4)(a) were read without reference to “30% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into accountexceeds the total ofall amounts that would be determined under paragraph 66.7(4)(a) at the relevant time in respect of the taxpayer and an original owner of the particular property (or of that other property) ifamounts that became receivable after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable at or before the relevant time were made before the relevant time,paragraph 66.7(4)(a) were read without reference to “30% of”,amounts described in subparagraph 66.7(4)(a)(iii) that became receivable at the relevant time were not taken into account, andno reduction under subsection 80(8) at or after the relevant time were taken into account, andsuch portion of the amount otherwise determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description,Gis the total of all amounts that became receivable by the taxpayer before that time that are to be included in the amount determined under this description by virtue of paragraph 66(12.1)(b) or 66(12.3)(a),His the total of all amounts each of which is an amount included by the taxpayer as an expense under paragraph (a) of the definition Canadian development expense in this subsection in computing the taxpayer’s Canadian development expense for a previous taxation year that has become a Canadian exploration expense of the taxpayer by virtue of subparagraph (c)(ii) of the definition Canadian exploration expense in subsection 66.1(6),Iis the total of all amounts each of which is an amount that before that time has become a Canadian exploration expense of the taxpayer by virtue of subsection 66.1(9),Jis the total of all amounts each of which is an amount received before that time on account of any amount referred to in the description of CKis the total of all amounts paid to the taxpayer after May 6, 1974 and before May 25, 1976under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, orpursuant to any agreement, entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development,to the extent that the amounts have been expended by the taxpayer as or on account of Canadian development expense incurred by the taxpayer,Lis the amount by which the total of all amounts determined under subsection 66.4(1) in respect of a taxation year of the taxpayer ending at or before that time exceeds the total of all amounts each of which is the least ofthe amount that would be determined under paragraph 66.7(4)(a), at a time (hereafter in this description referred to only as the “particular time”) that is the end of the latest taxation year of the taxpayer ending at or before that time, in respect of the taxpayer as successor in respect of a disposition (in this description referred to as the “original disposition”) of Canadian resource property by a person who is an original owner of the property because of the original disposition, ifthat paragraph were read without reference to “30% of”,where the taxpayer has disposed of all or part of the property in circumstances in which subsection 66.7(4) applied, that subsection continued to apply to the taxpayer in respect of the original disposition as if subsequent successors were the same person as the taxpayer, andeach designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the particular time were made before the particular time,the amount, if any, by which the total of all amounts each of which became receivable at or before the particular time and before 1993 by the taxpayer and is included in computing the amount determined under subparagraph 66.7(5)(a)(ii) in respect of the original disposition exceeds the amount, if any, by whichwhere the taxpayer disposed of all or part of the property before the particular time in circumstances in which subsection 66.7(5) applied, the amount that would be determined at the particular time under subparagraph 66.7(5)(a)(i) in respect of the original disposition if that subparagraph continued to apply to the taxpayer in respect of the original disposition as if subsequent successors were the same person as the taxpayer, andin any other case, the amount determined at the particular time under subparagraph 66.7(5)(a)(i) in respect of the original dispositionexceedsthe amount that would be determined at the particular time under subparagraph 66.7(5)(a)(ii) in respect of the original disposition if that subparagraph were read without reference to the words “or the successor”, wherever they appear therein, and if amounts that became receivable after 1992 were not taken into account, andwhereafter the original disposition and at or before the particular time, the taxpayer disposed of all or part of the property in circumstances in which subsection 66.7(4) applied, otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c), andthe winding-up of the taxpayer began at or before that time or the taxpayer’s disposition referred to in subparagraph (i) (other than a disposition under an agreement in writing entered into before December 22, 1992) occurred after December 21, 1992,nilMis the total amount of assistance that the taxpayer has received or is entitled to receive in respect of any Canadian development expense (including an expense that has become a Canadian exploration expense of the taxpayer by virtue of subsection 66.1(9)) incurred after 1980 or that can reasonably be related to Canadian development activities after 1980,M.1is the total of all amounts by which the cumulative Canadian development expense of the taxpayer is required because of subsection 80(8) to be reduced at or before that time,Nis the total of all amounts that are required to be deducted before that time under subsection 66(14.2) in computing the taxpayer’s cumulative Canadian development expense, andOis the total of all amounts that are required to be deducted before that time under paragraph 66.7(12)(c) in computing the taxpayer’s cumulative Canadian development expense. (frais cumulatifs d’aménagement au Canada)Application of ss. 66(15), 66.1(6) and 66.4(5)The definitions in subsections 66(15), 66.1(6) and 66.4(5) apply to this section.Share of partnerExcept as provided in subsection 66.2(7), where a taxpayer is a member of a partnership, the taxpayer’s share of any amount that would be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection 66.2(5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection (5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition, whichever is applicable, in respect of the taxpayer for the taxation year of the taxpayer in which the partnership’s taxation year ends.ExceptionWhere a non-resident person is a member of a partnership that is deemed under paragraph 115(4)(b) to have disposed of any Canadian resource property, the person’s share of any amount that would be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection 66.2(5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection (5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition, whichever is applicable, in respect of the person for the taxation year of the person that is deemed under paragraph 115(4)(a) to have ended.PresumptionWhere pursuant to the terms of an arrangement in writing entered into before December 12, 1979 a taxpayer acquired a property described in paragraph (a) of the definition Canadian oil and gas property expense in subsection 66.4(5), for the purposes of this Act, the cost of acquisition shall be deemed to be a Canadian development expense incurred at the time the taxpayer acquired the property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.2; 1994, c. 7, Sch. II, s. 40, Sch. VIII, s. 24, c. 21, s. 29; 1995, c. 21, s. 23; 1997, c. 25, s. 15; 2001, c. 17, s. 46; 2003, c. 28, s. 6; 2011, c. 24, s. 15; 2013, c. 34, ss. 113, 201, c. 40, s. 322019, c. 29, s. 52024, c. 15, s. 13
DefinitionsThe definitions in this subsection apply in this section.adjusted cumulative foreign resource expense of a taxpayer, in respect of a country, at the end of a taxation year means the total ofthe cumulative foreign resource expense of the taxpayer, in respect of that country, at the end of the year; andthe amount, if any, by whichthe total determined under paragraph 66.7(13.2)(a) in respect of that country and the taxpayer for the yearexceedsthe amount that would, but for paragraph (3)(c), be determined under subsection (3) in respect of that country and the taxpayer for the year. (frais cumulatifs rajustés relatifs à des ressources à l’étranger)cumulative foreign resource expense of a taxpayer, in respect of a country other than Canada at a particular time, means the amount determined by the formula(A + A.1 + B + C + D) – (E + F + G + H + I + J)whereAis the total of all foreign resource expenses, in respect of that country, made or incurred by the taxpayerbefore the particular time, andat a time (in this definition referred to as a “resident time”)at which the taxpayer was resident in Canada, andwhere the taxpayer became resident in Canada before the particular time, that is after the last time (before the particular time) that the taxpayer became resident in Canada;A.1is the total of all foreign resource expenses, in respect of that country, that is the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country that is deemed to have been acquired by the taxpayer under paragraph 128.1(1)(c) at the last time (before the particular time) that the taxpayer became resident in Canada;Bis the total of all amounts included in computing the amount referred to in paragraph 59(3.2)(c.1) in respect of that country, for taxation years that ended before the particular time and at a resident time;Cis the total of all amounts referred to in the description of F or G that are established by the taxpayer to have become a bad debt before the particular time and at a resident time;Dis the total of all specified amounts determined under subsection 66.7(13.2), in respect of the taxpayer and that country, for taxation years that ended before the particular time and at a resident time;Eis the total of all amounts deducted, in computing the taxpayer’s income for a taxation year that ended before the particular time and at a resident time, in respect of the taxpayer’s cumulative foreign resource expense in respect of that country;Fis the total of all amounts each of which is an amount in respect of a foreign resource property, in respect of that country, (in this description referred to as the “particular property”) disposed of by the taxpayer equal to the amount, if any, by whichthe amount designated under subparagraph 59(1)(b)(ii) by the taxpayer in respect of the portion of the proceeds of that disposition that became receivable before the particular time and at a resident timeexceedsthe amount, if any, by whichthe total of all amounts that would be determined under paragraph 66.7(2.3)(a), immediately before the time (in this paragraph referred to as the “relevant time”) when such proceeds of disposition became receivable, in respect of the taxpayer, that country and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances to which subsection 66.7(2.3) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) ifamounts that became receivable at or after the relevant time were not taken into account,paragraph 66.7(2.3)(a) were read without reference to “30% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into accountexceeds the total ofall amounts that would be determined under paragraph 66.7(2.3)(a) at the relevant time in respect of the taxpayer, that country and an original owner of the particular property (or of that other property) ifamounts that became receivable after the relevant time were not taken into account,paragraph 66.7(2.3)(a) were read without reference to “30% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into account, andthe portion of the amount otherwise determined under this paragraph that was otherwise applied to reduce the amount otherwise determined under this description;Gis the total of all amounts, in respect of that country, each of which is an amount included in the amount determined under this description by reason of subsection 66(12.41) that became receivable by the taxpayer before the particular time and at a resident time;His the total of all amounts each of which is an amount received before the particular time and at a resident time on account of any amount referred to in the description of C;Iis the total of all amounts each of which is an amount by which the cumulative foreign resource expense of the taxpayer, in respect of that country, is required, by reason of subsection 80(8), to be reduced at or before the particular time and at a resident time; andJis the total of all amounts each of which is an amount that is required to be deducted, before the particular time and at a resident time, under paragraph 66.7(13.1)(a) in computing the taxpayer’s cumulative foreign resource expense. (frais cumulatifs relatifs à des ressources à l’étranger)foreign resource expense of a taxpayer, in respect of a country other than Canada, meansany drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country,any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course ofprospecting,carrying out geological, geophysical or geochemical surveys,drilling by rotary, diamond, percussion or other methods, ortrenching, digging test pits and preliminary sampling,the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country,any annual payment made by the taxpayer for the preservation of a foreign resource property in respect of that country, andsubject to section 66.8, the taxpayer’s share of an expense, cost or payment referred to in any of paragraphs (a) to (d) that is made or incurred by a partnership in a fiscal period of the partnership that begins after 2000 if, at the end of that period, the taxpayer was a member of the partnershipbut does not includean expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class,an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,an expenditure (other than a drilling expense) incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,an expenditure, incurred at any time, that relates to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir,an expenditure incurred by the taxpayer, unless the expenditure was madefor the acquisition of foreign resource property by the taxpayer, orfor the purpose ofenhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, orassisting in evaluating whether a foreign resource property is to be acquired by the taxpayer, orthe taxpayer’s share of any cost or expenditure referred to in any of paragraphs (f) to (j) that is incurred by a partnership. (frais relatifs à des ressources à l’étranger)foreign resource income of a taxpayer for a taxation year, in respect of a country other than Canada, means the total ofthat part of the taxpayer’s income for the year, determined without reference to subsections (4) and 66(4), that is reasonably attributable tothe production of petroleum or natural gas from natural accumulations of petroleum or natural gas in that country or from oil or gas wells in that country, orthe production of minerals from mines in that country;the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas in that country, an oil or gas well in that country or a mine in that country, determined without reference to subsections (4) and 66(4); andall amounts each of which is an amount, in respect of a foreign resource property in respect of that country that has been disposed of by the taxpayer, equal to the amount, if any, by whichthe amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of that dispositionexceedsthe total of all amounts each of which is that portion of an amount deducted under subsection 66.7(2) in computing the taxpayer’s income for the year thatcan reasonably be considered to be in respect of the foreign resource property, andcannot reasonably be considered to have reduced the amount otherwise determined under paragraph (a) or (b) in respect of the taxpayer for the year. (revenu provenant de ressources à l’étranger)foreign resource loss of a taxpayer for a taxation year in respect of a country other than Canada means the taxpayer’s loss for the year in respect of the country determined in accordance with the definition foreign resource income with such modifications as the circumstances require. (perte résultant de ressources à l’étranger)global foreign resource limit of a taxpayer for a taxation year means the amount that is the lesser ofthe amount, if any, by whichthe amount determined under subparagraph 66(4)(b)(ii) in respect of the taxpayer for the yearexceeds the total ofthe total of all amounts each of which is the maximum amount that the taxpayer would be permitted to deduct, in respect of a country, under subsection (4) in computing the taxpayer’s income for the year if, in its application to the year, subsection (4) were read without reference to paragraph (4)(b), andthe amount deducted for the year under subsection 66(4) in computing the taxpayer’s income for the year; andthe amount, if any, by which30% of the total of all amounts each of which is, at the end of the year, the taxpayer’s adjusted cumulative foreign resource expense in respect of a countryexceedsthe total described in subparagraph (a)(ii). (limite globale des frais relatifs à des ressources à l’étranger)Application of subsection 66(15)The definitions in subsection 66(15) apply in this section.Amount to be included in incomeFor the purpose of paragraph 59(3.2)(c.1), the amount referred to in this subsection in respect of a taxpayer for a taxation year is the amount, if any, by whichthe total of all amounts referred to in the descriptions of E to J in the definition cumulative foreign resource expense in subsection (1) that are deducted in computing the taxpayer’s cumulative foreign resource expense at the end of the year in respect of a countryexceeds the total ofthe total of all amounts referred to in the descriptions of A to D in the definition cumulative foreign resource expense in subsection (1) that are included in computing the taxpayer’s cumulative foreign resource expense at the end of the year in respect of the country, andthe total determined under paragraph 66.7(13.2)(a) for the year in respect of the taxpayer and the country.Deduction for cumulative foreign resource expenseIn computing a taxpayer’s income for a taxation year throughout which the taxpayer is resident in Canada, the taxpayer may deduct the amount claimed by the taxpayer, in respect of a country other than Canada, not exceeding the total ofthe greater of10% of a particular amount equal to the taxpayer’s adjusted cumulative foreign resource expense in respect of the country at the end of the year, andthe least ofif the taxpayer ceased to be resident in Canada immediately after the end of the year, the particular amount,if clause (A) does not apply, 30% of the particular amount,the amount, if any, by which the taxpayer’s foreign resource income for the year in respect of the country exceeds the portion of the amount, deducted under subsection 66(4) in computing the taxpayer’s income for the year, that applies to a source in the country, andthe amount, if any, by whichthe total of all amounts each of which is the taxpayer’s foreign resource income for the year in respect of a countryexceeds the total ofall amounts each of which is the taxpayer’s foreign resource loss for the year in respect of a country, andthe amount deducted under subsection 66(4) in computing the taxpayer’s income for the year, andthe lesser ofthe amount, if any, by which the particular amount exceeds the amount determined for the year under paragraph (a) in respect of the taxpayer, andthat portion of the taxpayer’s global foreign resource limit for the year that is designated for the year by the taxpayer, in respect of that country and no other country, in prescribed form filed with the Minister with the taxpayer’s return of income for the year.Individual changing residenceWhere at any time in a taxation year an individual becomes or ceases to be resident in Canada,subsection (4) applies to the individual as if the year were the period or periods in the year throughout which the individual was resident in Canada; andfor the purpose of applying this section, subsection 66(13.1) does not apply to the individual for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 47; 2013, c. 34, s. 202
Exploration and development sharesAny shares of the capital stock of a corporation or any interest in any such shares or right thereto acquired by a taxpayer under circumstances described in paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (g) of the definition Canadian development expense in subsection 66.2(5) or paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5)shall, if acquired before November 13, 1981, be deemednot to be a capital property of the taxpayer,subject to subsection 142.6(3), to be inventory of the taxpayer, andto have been acquired by the taxpayer at a cost to the taxpayer of nil; andshall, if acquired after November 12, 1981, be deemed to have been acquired by the taxpayer at a cost to the taxpayer of nil.Deductions from paid-up capitalIf, at any time after May 23, 1985, a corporation has issued a share of its capital stock under circumstances described in paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (g) of the definition Canadian development expense in subsection 66.2(5) or paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5) or has issued a share of its capital stock on the exercise of an interest in or right to — or, for civil law, a right in or to — such a share granted under circumstances described in any of those paragraphs, in computing, at any particular time after that time, the paid-up capital in respect of the class of shares of the capital stock of the corporation that included that sharethere shall be deducted the amount, if any, by whichthe increase as a result of the issue of the share in the paid-up capital, determined without reference to this subsection as it applies to the share, in respect of all of the shares of that classexceedsthe amount, if any, by whichthe total amount of consideration received by the corporation in respect of the share, including any consideration for the interest or right in respect of the shareexceeds50% of the amount of the expense referred to in paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (g) of the definition Canadian development expense in subsection 66.2(5) or paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5) that was incurred by a taxpayer who acquired the share or the interest or right on the exercise of which the share was issued, as the case may be, pursuant to an agreement with the corporation under which the taxpayer incurred the expense solely as consideration for the share, interest or right, as the case may be; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the corporation after May 23, 1985 and before the particular timeexceedsthe total that would be determined under clause (A) if this Act were read without reference to paragraph 66.3(2)(a), andthe total of all amounts each of which is an amount required by paragraph 66.3(2)(a) to be deducted in computing the paid-up capital in respect of that class of shares after May 22, 1985 and before the particular time.Cost of flow-through sharesAny flow-through share (within the meaning assigned by subsection 66(15)) of a corporation acquired by a person who was a party to the agreement pursuant to which it was issued shall be deemed to have been acquired by the person at a cost to the person of nil.Paid-up capitalWhere, at any time after February, 1986, a corporation has issued a flow-through share (within the meaning assigned by subsection 66(15)), in computing, at any particular time after that time, the paid-up capital in respect of the class of shares of the capital stock of the corporation that included that sharethere shall be deducted the amount, if any, by whichthe increase as a result of the issue of the share in the paid-up capital, determined without reference to this subsection as it applies to the share, in respect of all of the shares of that classexceedsthe amount, if any, by whichthe total amount of consideration received by the corporation in respect of the shareexceeds50% of the total of the expenses that were renounced by the corporation under subsection 66(12.6), (12.601), (12.62) or (12.64) in respect of the share; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the corporation after February, 1986 and before the particular timeexceedsthe total that would be determined under clause (A) if this Act were read without reference to paragraph 66.3(4)(a), andthe total of all amounts each of which is an amount required by paragraph 66.3(4)(a) to be deducted in computing the paid-up capital in respect of that class of shares after February, 1986 and before the particular time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.3; 1994, c. 8, s. 7; 1995, c. 21, s. 51; 2013, c. 34, s. 114
Recovery of costsFor the purposes of the description of B in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) and the description of L in the definition cumulative Canadian development expense in subsection 66.2(5) and for the purpose of subparagraph 64(1.2)(a)(ii) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applies to dispositions occurring before November 13, 1981, the amount determined under this subsection in respect of a taxpayer for a taxation year is the amount, if any, by whichthe total of all amounts referred to in the descriptions of E to J in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) that are deducted in computing the taxpayer’s cumulative Canadian oil and gas property expense at the end of the yearexceeds the total ofall amounts referred to in the descriptions of A to D.1 in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) that are included in computing the taxpayer’s cumulative Canadian oil and gas property expense at the end of the year, andthe total determined under subparagraph 66.7(12.1)(c)(i) in respect of the taxpayer for the year.Deduction for cumulative Canadian oil and gas property expenseA taxpayer may deduct, in computing the taxpayer’s income for a taxation year, such amount as the taxpayer may claim not exceeding the total ofthe lesser ofthe total ofthe taxpayer’s cumulative Canadian oil and gas property expense at the end of the year, andthe amount, if any, by whichthe total determined under subparagraph 66.7(12.1)(c)(i) in respect of the taxpayer for the yearexceedsthe amount that would, but for paragraph 66.4(1)(c), be determined under subsection 66.4(1) in respect of the taxpayer for the year, andthe amount, if any, by which the total of all amounts each of which isan amount included in the taxpayer’s income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to — or, for civil law, any right in or to — a share acquired by the taxpayer under circumstances described in paragraph (c) of the definition Canadian oil and gas property expense in subsection (5), oran amount included by virtue of paragraph 12(1)(e) in computing the taxpayer’s income for the year to the extent that it relates to inventory described in clause (A)exceedsthe total of all amounts deducted as a reserve by virtue of paragraph 20(1)(n) in computing the taxpayer’s income for the year to the extent that the reserve relates to inventory described in clause (A);10% of the amount, if any, by which the amount determined under subparagraph 66.4(2)(a)(i) exceeds the amount determined under subparagraph 66.4(2)(a)(ii); andthe amount determined by the formulaA(B − C)whereAisfor taxation years that end before 2024, 5%,for taxation years that begin before 2024 and end after 2023, the amount determined by the formula0.05(I/J) + 0.025(K/J)whereIis the total of all accelerated Canadian oil and gas property expenses incurred by the taxpayer before 2024 and in the taxation year,Jis the total of all accelerated Canadian oil and gas property expenses incurred by the taxpayer in the taxation year, andKis the total of all accelerated Canadian oil and gas property expenses incurred by the taxpayer after 2023 and in the taxation year, andfor taxation years that begin after 2023, 2.5%,Bis the total of all accelerated Canadian oil and gas property expenses incurred by the taxpayer in the taxation year, andCis the amount determined by the formula(D − E) − (F − G − H)whereDis the total of the amounts determined for E to J in the definition cumulative Canadian oil and gas property expense in subsection (5) at the end of the taxation year,Eis the total of the amounts determined for E to J in the definition cumulative Canadian oil and gas property expense in subsection (5) at the beginning of the taxation year,Fis the total of the amounts determined for A to D.1 in the definition cumulative Canadian oil and gas property expense in subsection (5) at the end of the taxation year,Gis the total of the amounts determined for A to D.1 in the definition cumulative Canadian oil and gas property expense in subsection (5) at the end of the preceding taxation year, andHis the amount determined for B.DefinitionsIn this section,accelerated Canadian oil and gas property expense, of a taxpayer, means any cost or expense incurred by the taxpayer during a taxation year, if the cost or expensequalifies as a Canadian oil and gas property expense at the time it is incurred, other thanan expense in respect of which the taxpayer is a successor, within the meaning of subsection 66.7(5), anda cost in respect of a Canadian resource property acquired by the taxpayer, or a partnership in which the taxpayer is a member, from a person or partnership with which the taxpayer does not deal at arm’s length, andis incurred after November 20, 2018 and before 2028; (frais à l’égard de biens canadiens relatifs au pétrole et au gaz accélérés)Canadian oil and gas property expense of a taxpayer means any cost or expense incurred after December 11, 1979 that isthe cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (a), (c) or (d) of the definition Canadian resource property in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease,subject to section 66.8, the taxpayer’s share of any expense referred to in paragraph (a) incurred by a partnership in a fiscal period thereof at the end of which the taxpayer was a member of the partnership, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is 6 months after the taxpayer’s taxation year in which that period ends, orany cost or expense referred to in paragraph (a) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,but for greater certainty, shall not includeany consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (c), orany expense described in paragraph (c) incurred by any other taxpayer to the extent that the expense was,by virtue of that paragraph, a Canadian oil and gas property expense of that other taxpayer,by virtue of paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), a Canadian exploration expense of that other taxpayer, orby virtue of paragraph (g) of the definition Canadian development expense in subsection 66.2(5), a Canadian development expense of that other taxpayer,but any amount of assistance that a taxpayer has received or is entitled to receive in respect of or related to the taxpayer’s Canadian oil and gas property expense shall not reduce the amount of any of the expenses described in any of paragraphs (a) to (c); (frais à l’égard de biens canadiens relatifs au pétrole et au gaz)cumulative Canadian oil and gas property expense of a taxpayer at any time in a taxation year means the amount determined by the formula(A + B + C + D + D.1) - (E + F + G + H + I + I.1 + J)whereAis the total of all Canadian oil and gas property expenses made or incurred by the taxpayer before that time,Bis the total of all amounts determined under subsection 66.4(1) in respect of the taxpayer for taxation years ending before that time,Cis the total of all amounts referred to in the description of F or G that are established by the taxpayer to have become bad debts before that time,Dis such part, if any, of the amount determined for I as has been repaid before that time by the taxpayer pursuant to a legal obligation to repay all or any part of that amount,D.1is the total of all specified amounts, determined under paragraph 66.7(12.1)(c) in respect of the taxpayer for taxation years ending before that time,Eis the total of all amounts deducted in computing the taxpayer’s income for a taxation year ending before that time in respect of the taxpayer’s cumulative Canadian oil and gas property expense,Fis the total of all amounts each of which is an amount in respect of property described in paragraph (a), (c) or (d) of the definition Canadian resource property in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — such a property, other than such a right or interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as “the particular property”) disposed of by the taxpayer before that time equal to the amount, if any, by whichthe amount, if any, by which the proceeds of disposition in respect of the particular property that became receivable by the taxpayer before that time exceed any outlays or expenses made or incurred by the taxpayer before that time for the purpose of making the disposition and that were not otherwise deductible for the purposes of this Partexceeds the total ofthe amount, if any, by whichthe total of all amounts that would be determined under paragraph 66.7(5)(a), immediately before the time (in this paragraph and paragraph (c) referred to as the “relevant time”) when such proceeds of disposition became receivable, in respect of the taxpayer and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances in which subsection 66.7(5) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) ifamounts that became receivable at or after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the relevant time were made before the relevant time,paragraph 66.7(5)(a) were read without reference to “10% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into accountexceeds the total ofall amounts that would be determined under paragraph 66.7(5)(a) at the relevant time in respect of the taxpayer and an original owner of the particular property (or of that other property described in subparagraph (i)) ifamounts that became receivable after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable at or before the relevant time were made before the relevant time,paragraph 66.7(5)(a) were read without reference to “10% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into account, andsuch portion of the amount determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description, andthe amount, if any, by whichthe total of all amounts that would be determined under paragraph 66.7(4)(a), immediately before the relevant time, in respect of the taxpayer and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances in which subsection 66.7(4) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) ifamounts that became receivable at or after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the relevant time were made before the relevant time,paragraph 66.7(4)(a) were read without reference to “30% of”, andno reduction under subsection 80(8) at or after the relevant time were taken into accountexceeds the total ofall amounts that would be determined under paragraph 66.7(4)(a) at the relevant time in respect of the taxpayer and an original owner of the particular property (or of that other property described in subparagraph (i)) ifamounts that became receivable after the relevant time were not taken into account,each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable at or before the relevant time were made before the relevant time,paragraph 66.7(4)(a) were read without reference to “30% of”,amounts described in subparagraph 66.7(4)(a)(ii) that became receivable at the relevant time were not taken into account, andno reduction under subsection 80(8) at or after the relevant time were taken into account, andsuch portion of the amount otherwise determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description,Gis the total of all amounts that became receivable by the taxpayer before that time that are to be included in the amount determined under this description by virtue of paragraph 66(12.5)(a),His the total of all amounts each of which is an amount received before that time on account of any amount referred to in the description of C,Iis the total amount of assistance that the taxpayer has received or is entitled to receive in respect of any Canadian oil and gas property expense incurred after 1980 or that can reasonably be related to any such expense after 1980,I.1is the total of all amounts by which the cumulative Canadian oil and gas property expense of the taxpayer is required because of subsection 80(8) to be reduced at or before that time, andJis the total of all amounts that are required to be deducted before that time under paragraph 66.7(12)(d) in computing the taxpayer’s cumulative Canadian oil and gas property expense; (frais cumulatifs à l’égard de biens canadiens relatifs au pétrole et au gaz)proceeds of disposition has the meaning assigned by section 54. (produit de disposition)Application of ss. 66(15) and 66.1(6)The definitions in subsections 66(15) and 66.1(6) apply to this section.Share of partnerExcept as provided in subsection 66.4(7), where a taxpayer is a member of a partnership, the taxpayer’s share of any amount that would be an amount referred to in the description of in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), in paragraph (a) of the description of F in that definition or in the description of G or I in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), in paragraph (a) of the description of F in that definition or in the description of G or I in that definition, whichever is applicable, in respect of the taxpayer for the taxation year of the taxpayer in which the partnership’s taxation year ends.ExceptionWhere a non-resident person is a member of a partnership that is deemed under paragraph 115(4)(b) to have disposed of any Canadian resource property, the person’s share of any amount that would be an amount referred to in the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), in paragraph (a) of the description of F in that definition or in the description of G or I in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), in paragraph (a) of the description of F in that definition or in the description of G or I in that definition, whichever is applicable, in respect of the person for the taxation year of the person that is deemed under paragraph 115(4)(a) to have ended.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.4; 1994, c. 7, Sch. II, s. 41, Sch. VIII, s. 25, c. 21, s. 30; 1995, c. 21, s. 24; 2001, c. 17, s. 48; 2003, c. 28, s. 7; 2013, c. 34, ss. 115, 2032019, c. 29, s. 6
Deduction from incomeIn computing its income for a taxation year that ends before 1995, a corporation that has not made a designation for the year under subsection 66(14.1) or (14.2) may deduct such amount as it may claim not exceeding its cumulative offset account at the end of the year.Definition of cumulative offset accountIn this section, cumulative offset account of a corporation at any time means the amount, if any, by whichthe total of all amounts required to be added under subsections 66(14.1) and (14.2) in computing its cumulative offset account before that time,exceedsthe total of all amounts deducted under subsection 66.5(1) in computing its income for taxation years ending before that time.Change of controlWhere at any time after June 5, 1987 control of a corporation has been acquired by a person or group of persons, the amount deductible under subsection 66.5(1) by the corporation in computing its income for a taxation year ending after that time shall not exceed the amount, if any, by whichthe part of its income for the year that may reasonably be regarded as attributable to production from Canadian resource properties owned by it immediately before that timeexceedsthe total of all amounts deducted under subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1), (3), (4) and (5) by it in respect of its income for the year in computing its income for the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1986, c. 2, s. 19, c. 58, s. 9; 1987, c. 46, s. 22
Acquisition from tax-exemptWhere a corporation acquires, by purchase, amalgamation, merger, winding-up or otherwise, all or substantially all of the Canadian resource properties or foreign resource properties of a person whose taxable income is exempt from tax under this Part, subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) do not apply to the corporation in respect of the acquisition of the properties.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.6; 1998, c. 19, s. 105
Successor of Canadian exploration and development expensesSubject to subsections 66.7(6) and 66.7(7), where after 1971 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser ofthe Canadian exploration and development expenses incurred by the original owner before the original owner disposed of the particular property to the extent that those expenses were not otherwise deducted in computing the income of the successor for the year, were not deducted in computing the income of the successor for a preceding taxation year and were not deductible under subsection 66(1) or deducted under subsection 66(2) or 66(3) by the original owner, or deducted by any predecessor owner of the particular property, in computing income for any taxation year, andthe amount, if any, by whichthe part of the successor’s income for the year that may reasonably be regarded as attributable tothe amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds of the disposition have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (3)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, orproduction from the particular property,computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5,exceeds the total ofall other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(3), 66.7(4) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(1)(b)(i) in respect of the particular property, andall amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(1)(b)(i).Successor of foreign exploration and development expensesSubject to subsections 66.7(6) and 66.7(8), where after 1971 a corporation (in this subsection referred to as the “successor”) acquired a particular foreign resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser ofthe amount, if any, by whichthe foreign exploration and development expenses incurred by the original owner before the original owner disposed of the particular property to the extent that those expenses were incurred when the original owner was resident in Canada, were not otherwise deducted in computing the successor’s income for the year, were not deducted in computing the successor’s income for a preceding taxation year and were not deductible by the original owner, nor deducted by any predecessor owner of the particular property, in computing income for any taxation yearexceedsthe total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, andthe amount, if any, by which the total ofthe part of the successor’s income for the year that can reasonably be regarded as attributable tothe amount included under subsection 59(1) in computing its income for the year that can reasonably be regarded as attributable to the disposition by it of any interest in or right to — or, for civil law, any right in or to — the particular property, orproduction from the particular property,computed as if no deduction were allowed under sections 65 to 66.5 and this section, andthe lesser ofthe total of all amounts each of which is the amount designated by the successor for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property, not exceeding the amount included in the successor’s income for the year, computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, that can reasonably be regarded as being attributable to the production after 1988 from the Canadian resource property, andthe amount, if any, by which 10% of the amount described in paragraph 66.7(2)(a) for the year in respect of the original owner exceeds the total of all amounts each of which would, but for this subparagraph, clause 66.7(2)(b)(iii)(B) and subparagraph 66.7(10)(h)(vi), be determined under this paragraph for the year in respect of the particular property or other foreign resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular propertyexceeds the total ofall other amounts deducted under this subsection for the year that can reasonably be regarded as attributable tothe part of its income for the year described in subparagraph 66.7(2)(b)(i) in respect of the particular property, ora part of its income for the year described in clause 66.7(2)(b)(ii)(A) in respect of which an amount is designated by the successor under clause 66.7(2)(b)(ii)(A), andall amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(2)(b)(i),and income in respect of which an amount is designated under clause 66.7(2)(b)(ii)(A) shall, for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses 66.7(1)(b)(i)(C), 66.7(3)(b)(i)(C), 66.7(4)(b)(i)(B) and 66.7(5)(b)(i)(B) and subparagraph 66.7(10)(g)(iii), be deemed not to be attributable to production from a Canadian resource property.Country-by-country successor FEDE allocationsFor greater certainty, the portion of an amount deducted under subsection (2) in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in respect of a country is considered to apply to a source in that country.Method of allocationFor the purpose of subsection (2.1), where a taxpayer has incurred specified foreign exploration and development expenses in respect of two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that isreasonable having regard to all the circumstances, including the level and timing ofthe taxpayer’s specified foreign exploration and development expenses in respect of the country, andthe profits or gains to which those expenses relate; andnot inconsistent with the allocation made under subsection (2.1) for the preceding taxation year.Successor of foreign resource expensesSubject to subsections (6) and (8), where a corporation (in this subsection referred to as the “successor”) acquired a particular foreign resource property in respect of a country (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of30% of the amount, if any, by whichthe cumulative foreign resource expense, in respect of the country, of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not beendeducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,otherwise deducted in computing the income of the successor for the year, ordeducted by the successor in computing its income for any preceding taxation yearexceeds the total ofall amounts each of which is an amount (other than any portion of the amount that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph in respect of another original owner of a relevant resource property who is not a predecessor owner of a relevant resource property or who became a predecessor owner of a relevant resource property before the original owner became a predecessor owner of a relevant resource property) that became receivable by a predecessor owner of the particular property, or by the successor in the year or a preceding taxation year, and thatwas included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative foreign resource expense in subsection 66.21(1) at the end of the year, andcan reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant resource property”) that isthe particular property, oranother foreign resource property in respect of the country that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, andall amounts each of which is an amount by which the amount described in this paragraph is required by reason of subsection 80(8) to be reduced at or before the end of the year, andthe amount, if any, by which the total ofthe part of the successor’s income for the year that can reasonably be regarded as attributable to production from the particular property, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely by reason of the application of paragraph (10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph is deemed to be nil, andunless the amount determined under subparagraph (i) is nil by reason of the exception provided under that subparagraph, the lesser ofthe total of all amounts each of which is the amount designated by the successor for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property, not exceeding the amount included in the successor’s income for the year, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, that can reasonably be regarded as being attributable to the production from the Canadian resource property, andthe amount, if any, by which 10% of the amount described in paragraph (a) for the year, in respect of the original owner, exceeds the total of all amounts each of which would, but for this subparagraph, clause (2)(b)(iii)(B) and subparagraph (10)(h)(vi), be determined under this paragraph for the year in respect of the particular property or other foreign resource property, in respect of the country, owned by the original owner immediately before being acquired with the particular property by the successor or by a predecessor owner of the particular propertyexceeds the total ofall other amounts each of which is an amount deducted for the year under this subsection or subsection (2) that can reasonably be regarded as attributable tothe part of its income for the year described in subparagraph (i) in respect of the particular property, ora part of its income for the year described in clause (ii)(A) in respect of which an amount is designated by the successor under clause (ii)(A), andall amounts added by reason of subsection 80(13) in computing the amount determined under subparagraph (i),and income in respect of which an amount is designated under clause (b)(ii)(A) is, for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C), (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) and subparagraph (10)(g)(iii), deemed not to be attributable to production from a Canadian resource property.Successor of Canadian exploration expenseSubject to subsections 66.7(6) and 66.7(7), where after May 6, 1974 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser ofthe amount, if any, by whichthe total ofthe cumulative Canadian exploration expense of the original owner determined immediately after the disposition of the particular property by the original owner, andall amounts required to be added under paragraph 66.7(9)(f) to the cumulative Canadian exploration expense of the original owner in respect of a predecessor owner of the particular property, or the successor, as the case may be, at any time after the disposition of the particular property by the original owner and before the end of the year,to the extent that an amount in respect of that total was notdeducted or required to be deducted under subsection 66.1(2) or 66.1(3) by the original owner or deducted by any predecessor owner of the particular property in computing income for any taxation year,otherwise deducted in computing the successor’s income for the year,deducted in computing the successor’s income for a preceding taxation year, ordesignated by the original owner pursuant to subsection 66(14.1) for any taxation year,exceedsthe total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, andthe amount, if any, by whichthe part of the successor’s income for the year that may reasonably be regarded as attributable tothe amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as being attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (1)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, orproduction from the particular property,computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5,exceeds the total ofall other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(4) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(3)(b)(i) in respect of the particular property, andall amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(3)(b)(i).Successor of Canadian development expenseSubject to subsections 66.7(6) and 66.7(7), where after May 6, 1974 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of30% of the amount, if any, by whichthe amount, if any, by whichthe cumulative Canadian development expense of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not beendeducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,otherwise deducted in computing the income of the successor for the year,deducted by the successor in computing its income for any preceding taxation year, ordesignated by the original owner pursuant to subsection 66(14.2) for any taxation year,any amount required to be deducted under paragraph (9)(e) from the cumulative Canadian development expense of the original owner in respect of a predecessor owner of the particular property or the successor, as the case may be, at any time after the disposition of the particular property by the original owner and before the end of the year,exceeds the total ofall amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph in respect of another original owner of a relevant mining property who is not a predecessor owner of a relevant mining property or who became a predecessor owner of a relevant mining property before the original owner became a predecessor owner of a relevant mining property) that became receivable by a predecessor owner of the particular property or the successor in the year or a preceding taxation year and thatwas included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian development expense in subsection 66.2(5) at the end of the year, andcan reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant mining property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property,all amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under paragraph 66.7(5)(a) in respect of the original owner or under this paragraph or paragraph 66.7(5)(a) in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property) that became receivable by a predecessor owner of the particular property or the successor after 1992 and in the year or a preceding taxation year and thatis designated in respect of the original owner by the predecessor owner or the successor, as the case may be, in prescribed form filed with the Minister within 6 months after the end of the taxation year in which the amount became receivable,was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) at the end of the year, andcan reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant oil and gas property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, andall amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, andthe amount, if any, by whichthe part of the successor’s income for the year that can reasonably be regarded as attributable toits reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, orproduction from the particular property,computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph shall be deemed to be nil,exceeds the total ofall other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(3) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(4)(b)(i) in respect of the particular property, andall amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(4)(b)(i).Successor of Canadian oil and gas property expenseSubject to subsections 66.7(6) and 66.7(7), where after December 11, 1979 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of10% of the amount, if any, by whichthe cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition of the particular property by the original owner to the extent it has not beendeducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,otherwise deducted in computing the income of the successor for the year, ordeducted by the successor in computing its income for any preceding taxation yearexceeds the total ofthe total of all amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph or paragraph 66.7(4)(a) in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property) that became receivable by a predecessor owner of the particular property or the successor in the year or a preceding taxation year and thatwas included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) at the end of the year, andcan reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant oil and gas property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, andthe total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, andthe amount, if any, by whichthe part of the successor’s income for the year that can reasonably be regarded as attributable toits reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, orproduction from the particular property,computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph shall be deemed to be nil,exceeds the total ofall other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(3) and 66.7(4) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(5)(b)(i) in respect of the particular property, andall amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(5)(b)(i).Where s. 29(25) of ITAR and ss. (1) to (5) do not applySubsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) do not applyin respect of a Canadian resource property or a foreign resource property acquired by way of an amalgamation to which subsection 87(1.2) applies or a winding-up to which subsection 88(1.5) applies; orto permit, in respect of the acquisition by a corporation before February 18, 1987 of a Canadian resource property or a foreign resource property, a deduction by the corporation of an amount that the corporation would not have been entitled to deduct under section 29 of the Income Tax Application Rules or section 66, 66.1, 66.2 or 66.4 if those sections, as they read in their application to taxation years ending before February 18, 1987, applied to taxation years ending after February 17, 1987.Application of s. 29(25) of ITAR and ss. (1), (3), (4) and (5)Subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1), 66.7(3), 66.7(4) and 66.7(5) apply only to a corporation that has acquired a particular Canadian resource propertywhere it acquired the particular property in a taxation year commencing before 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on in Canada such of the businesses described in paragraphs (a) to (g) of the definition principal-business corporation in subsection 66(15) as were carried on by the person;where it acquired the particular property in a taxation year commencing after 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the Canadian resource properties of the person from whom it acquired the particular property;where it acquired the particular property after June 5, 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the day on or before which the corporation is required to file a return of income pursuant to section 150 for its taxation year in which it acquired the particular property;where it acquired the particular property after November 16, 1978 and in a taxation year ending before February 18, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property, have filed with the Minister a joint election under and in accordance with any of subsection 29(25) of the Income Tax Application Rules, subsection 29(29) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, and subsections 66(6) and (7), 66.1(4) and (5), 66.2(3) and (4) and 66.4(3) and (4) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as all of those subsections read in their application to that year; andwhere it acquired the particular property in a taxation year ending after February 17, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earlier of the days on or before which either of them is required to file a return of income pursuant to section 150 for its or the person’s taxation year in which the corporation acquired the particular property.Application of subsections (2) and (2.3)Subsections (2) and (2.3) apply only to a corporation that has acquired a particular foreign resource propertywhere it acquired the particular property in a taxation year commencing before 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on outside Canada such of the businesses described in paragraphs (a) to (g) of the definition principal-business corporation in subsection 66(15) as were carried on by that person;where it acquired the particular property in a taxation year commencing after 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the foreign resource properties of the person from whom it acquired the particular property;where it acquired the particular property after June 5, 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the day on or before which the corporation is required to file a return of income pursuant to section 150 for its taxation year in which it acquired the particular property;where it acquired the particular property after November 16, 1978 and in a taxation year ending before February 18, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property, have filed with the Minister a joint election under and in accordance with subsection 66(6) or 66(7) (as modified by subsections 66(8) and 66(9), respectively) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as those subsections read in their application to that year; andwhere it acquired the particular property in a taxation year ending after February 17, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earlier of the days on or before which either of them is required to file a return of income pursuant to section 150 for its or the person’s taxation year in which the corporation acquired the particular property.Canadian development expense becoming Canadian exploration expenseWherea corporation acquires a Canadian resource property,subsection 66.7(4) applies in respect of the acquisition, andthe cumulative Canadian development expense of an original owner of the property determined under clause 66.7(4)(a)(i)(A) in respect of the corporation includes a Canadian development expense incurred by the original owner in respect of an oil or gas well that would, but for this subsection, be deemed by subsection 66.1(9) to be a Canadian exploration expense incurred in respect of the well by the original owner at any particular time after the acquisition by the corporation and before it disposed of the property,the following rules apply:subsection 66.1(9) does not apply in respect of the Canadian development expense incurred in respect of the well by the original owner,an amount equal to the lesser ofthe amount that would be deemed by subsection 66.1(9) to be a Canadian exploration expense incurred in respect of the well by the original owner at the particular time if that subsection applied in respect of the expense, andthe cumulative Canadian development expense of the original owner as determined under clause 66.7(4)(a)(i)(A) in respect of the corporation immediately before the particular timeshall be deducted at the particular time from the cumulative Canadian development expense of the original owner in respect of the corporation for the purposes of subparagraph 66.7(4)(a)(i), andthe amount required by paragraph 66.7(9)(e) to be deducted shall be added at the particular time to the cumulative Canadian exploration expense of the original owner in respect of the corporation for the purpose of paragraph 66.7(3)(a).Change of controlWhere at any time after November 12, 1981control of a corporation has been acquired by a person or group of persons, ora corporation ceased on or before April 26, 1995 to be exempt from tax under this Part on its taxable income,for the purposes of the provisions of the Income Tax Application Rules and this Act (other than subsections 66(12.6), (12.601), (12.602), (12.62) and (12.71)) relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) incurred by the corporation before that time, the following rules apply:the corporation shall be deemed after that time to be a successor (within the meaning assigned by subsection 29(25) of the Income Tax Application Rules or any of subsections 66.7(1) to 66.7(5)) that had, at that time, acquired all the properties owned by the corporation immediately before that time from an original owner thereof,where the corporation did not own a foreign resource property immediately before that time, the corporation is deemed to have owned a foreign resource property immediately before that time,a joint election shall be deemed to have been filed in accordance with subsections 66.7(7) and 66.7(8) in respect of the acquisition,the resource expenses incurred by the corporation before that time shall be deemed to have been incurred by an original owner of the properties and not by the corporation,the original owner is deemed to have been resident in Canada before that time while the corporation was resident in Canada,where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,a parent corporation (within the meaning assigned by subsection 87(1.4)), ora subsidiary wholly-owned corporation (within the meaning assigned by subsection 87(1.4))of a particular corporation (in this paragraph referred to as the “transferor”), if both corporations agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, the transferor may, if throughout that year the transferee was such a parent corporation or subsidiary wholly-owned corporation of the transferor, designate in favour of the transferee, in respect of that year, for the purpose of making a deduction under subsection 29(25) of the Income Tax Application Rules or this section in respect of resource expenses incurred by the transferee before that time and when it was such a parent corporation or subsidiary wholly-owned corporation of the transferor, an amount not exceeding such portion of the amount that would be its income for the year, if no deductions were allowed under any of section 29 of the Income Tax Application Rules, this section and sections 65 to 66.5, that may reasonably be regarded as being attributable tothe production from Canadian resource properties owned by the transferor immediately before that time, andthe disposition in the year of any Canadian resource properties owned by the transferor immediately before that time,to the extent that the portion of the amount so designated is not designated under this paragraph in favour of any other taxpayer, and the amount so designated shall be deemed, for the purposes of determining the amount under paragraph 29(25)(d) of the Income Tax Application Rules and paragraphs 66.7(1)(b), 66.7(3)(b), 66.7(4)(b) and 66.7(5)(b),to be income from the sources described in subparagraph 66.7(10)(g)(iii) or 66.7(10)(g)(iv), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, andnot to be income from the sources described in subparagraph 66.7(10)(g)(iii) or 66.7(10)(g)(iv), as the case may be, of the transferor for that year,where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,a parent corporation (within the meaning assigned by subsection 87(1.4)), ora subsidiary wholly-owned corporation (within the meaning assigned by subsection 87(1.4))of a particular corporation (in this paragraph referred to as the “transferor”), if both corporations agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, the transferor may, if throughout that year the transferee was such a parent corporation or subsidiary wholly-owned corporation of the transferor, designate in favour of the transferee, in respect of that year, for the purpose of making a deduction under this section in respect of resource expenses incurred by the transferee before that time and when it was such a parent corporation or subsidiary wholly-owned corporation of the transferor, an amount not exceeding such portion of the amount that would be its income for the year, if no deductions were allowed under this section and sections 65 to 66.5, that may reasonably be regarded as being attributable tothe production from foreign resource properties owned by the transferor immediately before that time, andthe disposition of any foreign resource properties owned by the transferor immediately before that time,to the extent that the portion of the amount so designated is not designated under this paragraph in favour of any other taxpayer, and the amount so designated shall be deemed,for the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, andfor the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), not to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferor for that year,where, immediately before and at that time, the corporation (in this paragraph referred to as the “transferee”) and another corporation (in this paragraph referred to as the “transferor”) were both subsidiary wholly-owned corporations (within the meaning assigned by subsection 87(1.4)) of a particular parent corporation (within the meaning assigned by subsection 87(1.4)), if the transferee and the transferor agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, paragraph 66.7(10)(g) or 66.7(10)(h), or both, as the agreement provides, shall apply for that year to the transferee and transferor as though one were the parent corporation (within the meaning of subsection 87(1.4)) of the other, andwhere that time is after January 15, 1987 and at that time the corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property at that timefor the purpose of paragraph 66.7(10)(c), the corporation shall be deemed to have owned immediately before that time that portion of the property owned by the partnership at that time that is equal to its percentage share of the total of amounts that would be paid to all members of the partnership if it were wound up at that time, andfor the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C) and (2)(b)(i)(B), subparagraph (2.3)(b)(i) and clauses (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) for a taxation year ending after that time, the lesser ofits share of the part of the income of the partnership for the fiscal period of the partnership ending in the year that may reasonably be regarded as being attributable to the production from the property, andan amount that would be determined under clause 66.7(10)(j)(ii)(A) for the year if its share of the income of the partnership for the fiscal period of the partnership ending in the year were determined on the basis of the percentage share referred to in subparagraph 66.7(10)(j)(i),shall be deemed to be income of the corporation for the year that may reasonably be attributable to production from the property.Amalgamation — partnership propertyFor the purposes of subsections (1) to (5) and the definition original owner in subsection 66(15), if at any particular time there has been an amalgamation within the meaning assigned by subsection 87(1), other than an amalgamation to which subsection 87(1.2) applies, of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) to form one corporate entity (referred to in this subsection as the “new corporation”) and immediately before the particular time a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property,the predecessor corporation is deemedto have owned, immediately before the particular time, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the particular time that is equal to the predecessor corporation’s percentage share of the total of the amounts that would be paid to all members of the partnership if the partnership were wound up immediately before the particular time, andto have disposed of those portions to the new corporation at the particular time;the new corporation is deemed to have, by way of the amalgamation, acquired those portions at the particular time; andthe income of the new corporation for a taxation year that ends after the particular time that can reasonably be attributable to production from those properties is deemed to be the lesser ofthe new corporation’s share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, andthe amount that would be determined under subparagraph (i) for the year if the new corporation’s share of the income of the partnership for the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph (a).IdemWhere, at any time,control of a taxpayer that is a corporation has been acquired by a person or group of persons, ora taxpayer has disposed of all or substantially all of the taxpayer’s Canadian resource properties or foreign resource properties,and, before that time, the taxpayer or a partnership of which the taxpayer was a member acquired a property that is a Canadian resource property, a foreign resource property or an interest in a partnership and it may reasonably be considered that one of the main purposes of the acquisition was to avoid any limitation provided in subsection 29(25) of the Income Tax Application Rules or any of subsections 66.7(1) to 66.7(5) on the deduction in respect of any expenses incurred by the taxpayer or a corporation referred to as a transferee in paragraph 66.7(10)(g) or 66.7(10)(h), the taxpayer or the partnership, as the case may be, shall be deemed, for the purposes of applying those subsections to or in respect of the taxpayer, not to have acquired the property.Reduction of Canadian resource expensesWhere in a taxation year an owner of Canadian resource properties disposes of all or substantially all of the original owner’s Canadian resource properties to a particular corporation in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), 66.7(3), 66.7(4) or 66.7(5) applies,the Canadian exploration and development expenses incurred by the original owner before that owner so disposed of the properties shall, for the purposes of this Subdivision, be deemed after the disposition not to have been incurred by the original owner except for the purposes of making a deduction under subsection 66(1) or 66(2) for the year and of determining the amount that may be deducted under subsection 66.7(1) by the particular corporation or by any other corporation that subsequently acquires any of the properties;in determining the cumulative Canadian exploration expense of the original owner at any time after the time referred to in subparagraph 66.7(3)(a)(i), there shall be deducted the amount thereof determined immediately after the disposition;for the purposes of paragraph 66.7(3)(a), the cumulative Canadian exploration expenses of the original owner determined immediately after the disposition that was deducted or required to be deducted under subsection 66.1(2) or 66.1(3) in computing the original owner’s income for the year shall be deemed to be equal to the lesser ofthe amount deducted under paragraph 66.7(12)(b) in respect of the disposition, andthe amount, if any, by whichthe specified amount determined under paragraph 66.7(12.1)(a) in respect of the original owner for the yearexceedsthe total of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner before the disposition and in the year;for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(b.1)) that was deducted or required to be deducted under subsection 66.1(2) or 66.1(3) by the original owner for the year or a subsequent taxation year shall, for the purposes of paragraph 66.7(3)(a), be deemed not to be in respect of the cumulative Canadian exploration expense of the original owner determined immediately after the disposition;in determining the cumulative Canadian development expense of the original owner at any time after the time referred to in clause 66.7(4)(a)(i)(A), there shall be deducted the amount thereof determined immediately after the disposition;for the purpose of paragraph 66.7(4)(a), the cumulative Canadian development expense of the original owner determined immediately after the disposition that was deducted under subsection 66.2(2) in computing the original owner’s income for the year shall be deemed to be equal to the lesser ofthe amount deducted under paragraph 66.7(12)(c) in respect of the disposition, andthe amount, if any, by whichthe specified amount determined under paragraph 66.7(12.1)(b) in respect of the original owner for the yearexceedsthe total of all amounts determined under this paragraph in respect of any dispositions made by the original owner before the disposition and in the year;for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(c.1)) that was deducted under subsection 66.2(2) by the original owner for the year or a subsequent taxation year shall, for the purpose of paragraph 66.7(4)(a), be deemed not to be in respect of the cumulative Canadian development expense of the original owner determined immediately after the disposition;in determining the cumulative Canadian oil and gas property expense of the original owner at any time after the time referred to in subparagraph 66.7(5)(a)(i), there shall be deducted the amount thereof determined immediately after the disposition;for the purpose of paragraph 66.7(5)(a), the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition that was deducted under subsection 66.4(2) in computing the original owner’s income for the year shall be deemed to be equal to the lesser ofthe amount deducted under paragraph 66.7(12)(d) in respect of the disposition, andthe amount, if any, by whichthe specified amount determined under paragraph 66.7(12.1)(c) in respect of the original owner for the yearexceedsthe total of all amounts determined under this paragraph in respect of any dispositions made by the original owner before the disposition and in the year;for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(d.1)) that was deducted under subsection 66.4(2) by the original owner for the year or a subsequent taxation year shall, for the purpose of paragraph 66.7(5)(a), be deemed not to be in respect of the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition; andthe drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the original owner before 1972 on or in respect of exploring or drilling for petroleum or natural gas in Canada and the prospecting, exploration and development expenses incurred by the original owner before 1972 in searching for minerals in Canada shall, for the purposes of section 29 of the Income Tax Application Rules, be deemed after the disposition not to have been incurred by the original owner except for the purposes of making a deduction under that section for the year and of determining the amount that may be deducted under subsection 29(25) of that Act by the particular corporation or any other corporation that subsequently acquires any of the properties.Specified amountWhere in a taxation year an original owner of Canadian resource properties disposes of all or substantially all of the original owner’s Canadian resource properties in circumstances in which subsection 66.7(3), 66.7(4) or 66.7(5) applies,the lesser ofthe total of all amounts each of which is the amount, if any, by whichan amount deducted under paragraph 66.7(12)(b) in respect of a disposition in the year by the original ownerexceedsthe amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(a)(i)(A), andthe total ofthe amount claimed under subsection 66.1(2) or 66.1(3) by the original owner for the year, andthe amount that would, but for paragraph 66.1(1)(c), be determined under subsection 66.1(1) in respect of the original owner for the yearis the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(b.1)(ii)(A) and of determining the value of E.1 in the definition cumulative Canadian exploration expense in subsection 66.1(6);the lesser ofthe total of all amounts each of which is the amount, if any, by whichan amount deducted under paragraph 66.7(12)(c) in respect of a disposition in the year by the original ownerexceedsthe amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(b)(i)(A), andthe total ofthe amount claimed under subsection 66.2(2) by the original owner for the year, andthe amount that would, but for paragraph 66.2(1)(d), be determined under subsection 66.2(1) in respect of the original owner for the yearis the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(c.1)(ii)(A) and of determining the value of D.1 in the definition cumulative Canadian development expense in subsection 66.2(5); andthe lesser ofthe total of all amounts each of which is the amount, if any, by whichan amount deducted under paragraph 66.7(12)(d) in respect of a disposition in the year by the original ownerexceedsthe amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(c)(i)(A), andthe total ofthe amount claimed under subsection 66.4(2) by the original owner for the year, andthe amount that would, but for paragraph 66.4(1)(c), be determined under subsection 66.4(1) in respect of the original owner for the yearis the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(d.1)(ii)(A) and of determining the value of D.1 in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5).Reduction of foreign resource expensesWhere after June 5, 1987 an original owner of foreign resource properties disposes of all or substantially all of the original owner’s foreign resource properties to a particular corporation in circumstances in which subsection 66.7(2) applies, the foreign exploration and development expenses incurred by the original owner before that owner so disposed of the properties shall be deemed after the disposition not to have been incurred by the original owner except for the purposes of determining the amounts that may be deducted under that subsection by the particular corporation or any other corporation that subsequently acquires any of the properties.Reduction of foreign resource expensesWhere in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies,in determining the cumulative foreign resource expense of the original owner in respect of the country at any time after the time referred to in subparagraph (2.3)(a)(i), there shall be deducted the amount of that cumulative foreign resource expense determined immediately after the disposition; andfor the purpose of paragraph (2.3)(a), the cumulative foreign resource expense of the original owner in respect of the country determined immediately after the disposition that was deducted under subsection 66.21(4) in computing the original owner’s income for the year is deemed to be equal to the lesser ofthe amount deducted under paragraph (a) in respect of the disposition, andthe amount, if any, by whichthe specified amount determined under subsection (13.2) in respect of the original owner and the country for the yearexceedsthe total of all amounts determined under this paragraph in respect of another disposition of foreign resource property in respect of the country made by the original owner before the disposition and in the year.Specified amount — foreign resource expensesWhere in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies, the specified amount in respect of the country and the original owner for the year for the purposes of clause (13.1)(b)(ii)(A) and of determining the value of D in the definition cumulative foreign resource expense in subsection 66.21(1) is the lesser ofthe total of all amounts each of which is the amount, if any, by whichan amount deducted under paragraph (13.1)(a) in respect of a disposition in the year by the original owner of foreign resource property in respect of the countryexceedsthe amount, if any, designated by the original owner in the prescribed form filed with the Minister within six months after the end of the year in respect of an amount described under subparagraph (i), andthe total ofthe amount claimed under subsection 66.21(4) by the original owner in respect of the country for the year, andthe amount that would, but for paragraph 66.21(3)(c), be determined under subsection 66.21(3) in respect of the country and the original owner for the year.Disposal of Canadian resource propertiesWhere in a taxation year a predecessor owner of Canadian resource properties disposes of Canadian resource properties to a corporation in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), 66.7(3), 66.7(4) or 66.7(5) applies,for the purposes of applying any of those subsections to the predecessor owner in respect of its acquisition of any Canadian resource property owned by it immediately before the disposition, it shall be deemed, after the disposition, never to have acquired any such properties except for the purposes ofdetermining an amount deductible under subsection 66.7(1) or 66.7(3) for the year,where the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition was by way of an amalgamation or merger, determining an amount deductible under subsection 66.7(4) or 66.7(5) for the year, anddetermining the amount for F in the definition cumulative Canadian development expense in subsection 66.2(5), the amounts for paragraphs 66.7(14)(a) and 66.7(14)(b) in the description of L in that definition and the amount for F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5); andwhere the corporation or another corporation acquires any of the properties on or after the disposition in circumstances in which subsection 66.7(4) or 66.7(5) applies, amounts that become receivable by the predecessor owner after the disposition in respect of Canadian resource properties retained by it at the time of the disposition shall, for the purposes of applying subsection 66.7(4) or 66.7(5) to the corporation or the other corporation in respect of the acquisition, be deemed not to have become receivable by the predecessor owner.Disposal of foreign resource propertiesWhere after June 5, 1987 a predecessor owner of foreign resource properties disposes of all or substantially all of its foreign resource properties to a corporation in circumstances in which subsection 66.7(2) applies, for the purpose of applying that subsection to the predecessor owner in respect of its acquisition of any of those properties (or other foreign resource properties retained by it at the time of the disposition which were acquired by it in circumstances in which subsection 66.7(2) applied), it shall be deemed, after the disposition, never to have acquired the properties.Disposal of foreign resource properties — subsection (2.3)Where in a taxation year a predecessor owner of foreign resource properties disposes of foreign resource properties to a corporation in circumstances to which subsection (2.3) applies,for the purpose of applying that subsection to the predecessor owner in respect of its acquisition of any foreign resource properties owned by it immediately before the disposition, it is deemed, after the disposition, never to have acquired any such properties except for the purposes ofwhere the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition was by way of an amalgamation or merger, determining an amount deductible under subsection (2.3) for the year, anddetermining the value of F in the definition cumulative foreign resource expense in subsection 66.21(1); andwhere the corporation or another corporation acquires any of the properties on or after the disposition in circumstances to which subsection (2.3) applies, amounts that become receivable by the predecessor owner after the disposition in respect of foreign resource properties retained by it at the time of the disposition are, for the purposes of applying subsection (2.3) to the corporation or the other corporation in respect of the acquisition, deemed not to have become receivable by the predecessor owner.Non-successor acquisitionsIf at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsections (1) to (5), nor subsection 29(25) of the Income Tax Application Rules, apply, every person who was an original owner or predecessor owner of the property before that time is, for the purpose of applying those subsections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property before that time.Restriction on deductionsWhere in a particular taxation year and before June 6, 1987 a person disposed of a Canadian resource property or a foreign resource property in circumstances in which any of subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) applies, no deduction in respect of an expense incurred before the property was disposed of may be made under this section or section 66, 66.1, 66.2 or 66.4 by the person in computing the person’s income for a taxation year subsequent to the particular taxation year.Application of interpretation provisionsThe definitions in subsection 66(15) and sections 66.1 to 66.4 apply in this section.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.7; 1994, c. 7, Sch. II, s. 42, c. 8, s. 8, c. 21, s. 31; 1995, c. 21, s. 25; 1997, c. 25, s. 16; 1998, c. 19, s. 106; 2001, c. 17, s. 49; 2013, c. 34, ss. 116, 204
Resource expenses of limited partnerWhere a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the following rules apply:determine the amount, if any, by whichthe total of all amounts each of which is the taxpayer’s share ofthe Canadian oil and gas property expenses (in this subsection referred to as “property expenses”),the Canadian development expenses (in this subsection referred to as “development expenses”),the Canadian exploration expenses (in this subsection referred to as “exploration expenses”),the foreign resource expenses in respect of a country (in this subsection referred to as “country-specific foreign expenses”), orthe foreign exploration and development expenses (in this subsection referred to as “global foreign expenses”),incurred by the partnership in the fiscal period determined without reference to this subsectionexceedsthe amount, if any, by whichthe taxpayer’s at-risk amount at the end of the fiscal period in respect of the partnershipexceedsthe total ofthe total of all amounts required by subsections 127(8), 127.44(11), 127.45(8), 127.48(12) and 127.49(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.44(1)), the clean technology investment tax credit (as defined in subsection 127.45(1)), the clean hydrogen tax credit (as defined in subsection 127.48(1)) or the CTM investment tax credit (as defined in subsection 127.49(1)) of the taxpayer in respect of the fiscal period, andthe taxpayer’s share of any losses of the partnership for the fiscal period from a farming business;the amount determined under paragraph 66.8(1)(a) shall be appliedfirst to reduce the taxpayer’s share of property expenses,if any remains unapplied, then to reduce the taxpayer’s share of development expenses,if any remains unapplied, then to reduce the taxpayer’s share of exploration expenses,if any remains unapplied, then to reduce (in the order specified by the taxpayer in writing filed with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the fiscal period ends or, where no such specification is made, in the order determined by the Minister) the taxpayer’s share of country-specific foreign expenses, andif any remains unapplied, then to reduce the taxpayer’s share of global foreign expenses; andincurred by the partnership in the fiscal period; andfor the purposes of subparagraph 53(2)(c)(ii), sections 66 to 66.7, subsection 96(2.1) and section 111, the taxpayer’s share of each class of expenses described in subparagraph 66.8(1)(a)(i) incurred by the partnership in the fiscal period shall be deemed to be the amount by which the taxpayer’s share of that class of expenses as determined under subparagraph 66.8(1)(a)(i) exceeds the amount, if any, that was applied under paragraph 66.8(1)(b) to reduce the taxpayer’s share of that class of expenses.Expenses in following fiscal periodFor the purposes of subparagraph 66.8(1)(a)(i), the amount by which a taxpayer’s share of a class of expenses incurred by a partnership is reduced under paragraph 66.8(1)(b) in respect of a fiscal period of the partnership shall be added to the taxpayer’s share, otherwise determined, of that class of expenses incurred by the partnership in the immediately following fiscal period of the partnership.InterpretationIn this section,the expression limited partner of a partnership has the meaning that would be assigned by subsection 96(2.4), if in subsection 96(2.5) each reference to“February 25, 1986” were a reference to “June 17, 1987”,“February 26, 1986” were a reference to “June 18, 1987”,“January 1, 1987” were a reference to “January 1, 1988”,“June 12, 1986” were a reference to “June 18, 1987”, and“prospectus, preliminary prospectus or registration statement” were a reference to “prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence”;the expression at-risk amount of a taxpayer in respect of a partnership has the meaning that would be assigned by subsection 96(2.2) if paragraph 96(2.2)(c) read as follows:all amounts each of which is an amount owing at that time to the partnership, or to a person or partnership not dealing at arm’s length with the partnership, by the taxpayer or by a person or partnership not dealing at arm’s length with the taxpayer, other than any amount deducted under subparagraph 53(2)(c)(i.3) in computing the adjusted cost base, or under section 143.2 in computing the cost, to the taxpayer of the taxpayer’s partnership interest at that time, or any amount owing by the taxpayer to a person in respect of which the taxpayer is a subsidiary wholly-owned corporation or where the taxpayer is a trust, to a person that is the sole beneficiary of the taxpayer, and;a reference to a taxpayer who is a member of a particular partnership shall include a reference to another partnership that is a member if the particular partnership; anda taxpayer’s share of Canadian development expenses or Canadian oil and gas property expenses incurred by a partnership in a fiscal period in respect of which the taxpayer has elected in respect of the share under paragraph (f) of the definition Canadian development expense in subsection 66.2(5) or paragraph (b) of the definition Canadian oil and gas property expense in subsection 66.4(5), as the case may be, shall be deemed to be nil.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 66.8; 1994, c. 7, Sch. VIII, s. 26; 2001, c. 17, s. 50; 2013, c. 34, s. 2052024, c. 15, s. 142024, c. 17, s. 152024, c. 17, s. 80
Rules Relating to Computation of Income
General limitation re expensesIn computing income, no deduction shall be made in respect of an outlay or expense in respect of which any amount is otherwise deductible under this Act, except to the extent that the outlay or expense was reasonable in the circumstances.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“67”
Expenses for food, etc.Subject to subsection (1.1), for the purposes of this Act, other than sections 62, 63, 118.01 and 118.2, an amount paid or payable in respect of the human consumption of food or beverages or the enjoyment of entertainment is deemed to be 50 per cent of the lesser ofthe amount actually paid or payable in respect thereof, andan amount in respect thereof that would be reasonable in the circumstances.Meal expenses for long-haul truck driversAn amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during an eligible travel period of the driver is deemed to be the amount determined by multiplying the specified percentage in respect of the amount so paid or payable by the lesser ofthe amount so paid or payable, anda reasonable amount in the circumstances.ExceptionsSubsection 67.1(1) does not apply to an amount paid or payable by a person in respect of the consumption of food or beverages or the enjoyment of entertainment where the amountis paid or payable for food, beverages or entertainment provided for, or in expectation of, compensation in the ordinary course of a business carried on by that person of providing the food, beverages or entertainment for compensation;relates to a fund-raising event the primary purpose of which is to benefit a registered charity;is an amount for which the person is compensated and the amount of the compensation is reasonable and specifically identified in writing to the person paying the compensation;is required to be included in computing any taxpayer’s income because of the application of section 6 in respect of food or beverages consumed or entertainment enjoyed by the taxpayer or a person with whom the taxpayer does not deal at arm’s length, or would be so required but for subparagraph 6(6)(a)(ii);is an amount thatis not paid or payable in respect of a conference, convention, seminar or similar event,would, but for subparagraph 6(6)(a)(i), be required to be included in computing any taxpayer’s income for a taxation year because of the application of section 6 in respect of food or beverages consumed or entertainment enjoyed by the taxpayer or a person with whom the taxpayer does not deal at arm’s length, andis paid or payable in respect of the taxpayer’s duties performed at a work site in Canada that isoutside any population centre, as defined by the last Census Dictionary published by Statistics Canada before the year, that has a population of at least 40,000 individuals as determined in the last census published by Statistics Canada before the year, andat least 30 kilometres from the nearest point on the boundary of the nearest such population centre;is an amount thatis not paid or payable in respect of entertainment or of a conference, convention, seminar or similar event,would, if this Act were read without reference to subparagraph 6(6)(a)(i), be required to be included in computing a taxpayer’s income for a taxation year because of the application of section 6 in respect of food or beverages consumed by the taxpayer or by a person with whom the taxpayer does not deal at arm’s length,is paid or payable in respect of the taxpayer’s duties performed at a site in Canada at which the person carries on a construction activity or at a construction work camp referred to in subparagraph (iv) in respect of the site, andis paid or payable for food or beverages provided at a construction work camp, at which the taxpayer is lodged, that was constructed or installed at or near the site to provide board and lodging to employees while they are engaged in construction services at the site; oris in respect of one of six or fewer special events held in a calendar year at which the food, beverages or entertainment is generally available to all individuals employed by the person at a particular place of business of the person and consumed or enjoyed by those individuals.Fees for convention, etc.For the purposes of this section, where a fee paid or payable for a conference, convention, seminar or similar event entitles the participant to food, beverages or entertainment (other than incidental beverages and refreshments made available during the course of meetings or receptions at the event) and a reasonable part of the fee, determined on the basis of the cost of providing the food, beverages and entertainment, is not identified in the account for the fee as compensation for the food, beverages and entertainment, $50 or such other amount as may be prescribed shall be deemed to be the actual amount paid or payable in respect of food, beverages and entertainment for each day of the event on which food, beverages or entertainment is provided and, for the purposes of this Act, the fee for the event shall be deemed to be the actual amount of the fee minus the amount deemed by this subsection to be the actual amount paid or payable for the food, beverages and entertainment.InterpretationFor the purposes of this section,no amount paid or payable for travel on an airplane, train or bus shall be considered to be in respect of food, beverages or entertainment consumed or enjoyed while travelling thereon; andentertainment includes amusement and recreation.DefinitionsThe following definitions apply for the purpose of this section.eligible travel period in respect of a long-haul truck driver is a period during which the driver is away from the municipality or metropolitan area where the specified place in respect of the driver is located for a period of at least 24 continuous hours for the purpose of driving a long-haul truck that transports goods to, or from, a location that is beyond a radius of 160 kilometres from the specified place. (période de déplacement admissible)long-haul truck means a truck or a tractor that is designed for hauling freight and that has a gross vehicle weight rating (as that term is defined in subsection 2(1) of the Motor Vehicle Safety Regulations) that exceeds 11 788 kilograms. (grand routier)long-haul truck driver means an individual whose principal business or principal duty of employment is driving a long-haul truck that transports goods. (conducteur de grand routier)specified percentage in respect of an amount paid or payable is60 per cent, if the amount is paid or becomes payable on or after March 19, 2007 and before 2008;65 per cent, if the amount is paid or becomes payable in 2008;70 per cent, if the amount is paid or becomes payable in 2009;75 per cent, if the amount is paid or becomes payable in 2010; and80 per cent, if the amount is paid or becomes payable after 2010. (pourcentage déterminé)specified place means, in the case of an employee, the employer’s establishment to which the employee ordinarily reports to work is located and, in the case of an individual whose principal business is to drive a long-haul truck to transport goods, the place where the individual resides. (endroit déterminé)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 67.1; 1994, c. 7, Sch. II, s. 43; 1995, c. 3, s. 17; 1999, c. 22, s. 20; 2002, c. 9, s. 26; 2006, c. 4, s. 54; 2007, c. 35, s. 20; 2013, c. 34, s. 206, c. 40, s. 33
Interest on money borrowed for certain vehiclesFor the purposes of this Act, if an amount is paid or payable for a period by a person in respect of interest on borrowed money used to acquire a passenger vehicle or zero-emission passenger vehicle, or on an amount paid or payable for the acquisition of such a vehicle, then in computing the person’s income for a taxation year the amount of interest so paid or payable is deemed to be the lesser of the actual amount paid or payable and the amount determined by the formulaA/30 × BwhereAis $250 or such other amount as may be prescribed; andBis the number of days in the period in respect of which the interest was paid or payable, as the case may be.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 67.2; 1994, c. 7, Sch. II, s. 442019, c. 29, s. 7
Limitation re cost of leasing passenger vehicleNotwithstanding any other section of this Act, wherein a taxation year all or part of the actual lease charges in respect of a passenger vehicle are paid or payable, directly or indirectly, by a taxpayer, andin computing the taxpayer’s income for the year an amount may be deducted in respect of those charges,in determining the amount that may be so deducted, the total of those charges shall be deemed not to exceed the lesser ofthe amount determined by the formula(A × B)/30 - C - D - EwhereAis $600 or such other amount as is prescribed,Bis the number of days in the period commencing at the beginning of the term of the lease and ending at the earlier of the end of the year and the end of the lease,Cis the total of all amounts deducted in computing the taxpayer’s income for preceding taxation years in respect of the actual lease charges in respect of the vehicle,Dis the amount of interest that would be earned on the part of the total of all refundable amounts in respect of the lease that exceeds $1,000 if interest werepayable on the refundable amounts at the prescribed rate, andcomputed for the period before the end of the year during which the refundable amounts were outstanding, andEis the total of all reimbursements that became receivable before the end of the year by the taxpayer in respect of the lease, andthe amount determined by the formula(A × B)/0.85C - D - EwhereAis the total of the actual lease charges in respect of the lease incurred in respect of the year or the total of the actual lease charges in respect of the lease paid in the year (depending on the method regularly followed by the taxpayer in computing income),Bis $20,000 or such other amount as is prescribed,Cis the greater of $23,529 (or such other amount as is prescribed) and the manufacturer’s list price for the vehicle,Dis the amount of interest that would be earned on that part of the total of all refundable amounts paid in respect of the lease that exceeds $1,000 if interest werepayable on the refundable amounts at the prescribed rate, andcomputed for the period in the year during which the refundable amounts are outstanding, andEis the total of all reimbursements that became receivable during the year by the taxpayer in respect of the lease.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 67.3; 1994, c. 7, Sch. II, s. 45
More than one owner or lesseeWhere a person owns or leases a motor vehicle jointly with one or more other persons, the reference in paragraph 13(7)(g) to the amount of $20,000, in section 67.2 to the amount of $250 and in section 67.3 to the amounts of $600, $20,000 and $23,529 shall be read as a reference to that proportion of each of those amounts or such other amounts as may be prescribed for the purposes thereof that the fair market value of the first-mentioned person’s interest in the vehicle is of the fair market value of the interests in the vehicle of all those persons.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1988, c. 55, s. 46
More than one ownerIf a person owns a zero-emission passenger vehicle jointly with one or more other persons, any reference in paragraph 13(7)(i) to the prescribed amount and in section 67.2 to the amount of $250 or such other amount as may be prescribed is to be read as a reference to that proportion of each of those amounts that the fair market value of the first-mentioned person’s interest in the vehicle is of the fair market value of the interests in the vehicle of all those persons.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2019, c. 29, s. 8
Non-deductibility of illegal paymentsIn computing income, no deduction shall be made in respect of an outlay made or expense incurred for the purpose of doing anything that is an offence under section 3 of the Corruption of Foreign Public Officials Act or under any of sections 119 to 121, 123 to 125, 393 and 426 of the Criminal Code, or an offence under section 465 of the Criminal Code as it relates to an offence described in any of those sections.ReassessmentsNotwithstanding subsections 152(4) to (5), the Minister may make such assessments, reassessments and additional assessments of tax, interest and penalties and such determinations and redeterminations as are necessary to give effect to subsection (1) for any taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1994, c. 7, Sch. II, s. 46; 1998, c. 34, s. 10
Non-deductibility of fines and penaltiesIn computing income, no deduction shall be made in respect of any amount that is a fine or penalty (other than a prescribed fine or penalty) imposed under a law of a country or of a political subdivision of a country (including a state, province or territory) by any person or public body that has authority to impose the fine or penalty.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2005, c. 19, s. 16
DefinitionsThe following definitions apply in this section.non-compliant amount, for a taxation year, means the amount determined by the formulaA × B ÷ CwhereAis the total of all amounts that would, if subsection (2) did not apply, be deductible in computing income in the taxation year in respect of the use of a residential property as a short-term rental in the taxation year;Bis the number of days in the taxation year that the residential property was a non-compliant short-term rental; andCis the number of days in the taxation year that the residential property was a short-term rental. (montant non conforme)non-compliant short-term rental means, at any time, a short-term rental that is located in a province or municipality that, at that time,does not permit the operation of the short-term rental at the location of the short-term rental; orrequires registration, a licence or a permit to operate the short-term rental, and the short-term rental does not comply with all applicable registration, licensing and permit requirements. (location à court terme non conforme)residential property means all or any part of a house, apartment, condominium unit, cottage, mobile home, trailer, houseboat or other property, located in Canada, the use of which is permitted for residential purposes under applicable law. (bien résidentiel)short-term rental means a residential property that is rented or offered for rent for a period of less than 90 consecutive days. (location à court terme)Non-deductibility of expenses — short-term rentalNotwithstanding any other provision of this Act, no amount is deductible in computing income in respect of a short-term rental for a taxation year, to the extent the amount is a non-compliant amount for the taxation year.Deemed complianceFor the purposes of subsection (1), a short-term rental of a person or partnership is deemed not to be a non-compliant short-term rental for the 2024 taxation year of the person or partnership ifthe short-term rental is located in a province or municipality that requires registration, a licence or a permit to operate as a short-term rental; andthe short-term rental complies with all applicable registration, licensing and permit requirements by December 31, 2024.ReassessmentsNotwithstanding subsections 152(4) to (5), the Minister may make any assessments, reassessments and additional assessments of tax, interest and penalties and any determinations and redeterminations that are necessary to give effect to subsection (2) for any taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2024, c. 17, s. 16
Allocation of amounts in consideration for property, services or restrictive covenantsIf an amount received or receivable from a person can reasonably be regarded as being in part the consideration for the disposition of a particular property of a taxpayer, for the provision of particular services by a taxpayer or for a restrictive covenant as defined by subsection 56.4(1) granted by a taxpayer,the part of the amount that can reasonably be regarded as being the consideration for the disposition shall be deemed to be proceeds of disposition of the particular property irrespective of the form or legal effect of the contract or agreement, and the person to whom the property was disposed of shall be deemed to have acquired it for an amount equal to that part;the part of the amount that can reasonably be regarded as being consideration for the provision of particular services shall be deemed to be an amount received or receivable by the taxpayer in respect of those services irrespective of the form or legal effect of the contract or agreement, and that part shall be deemed to be an amount paid or payable to the taxpayer by the person to whom the services were rendered in respect of those services; andthe part of the amount that can reasonably be regarded as being consideration for the restrictive covenant is deemed to be an amount received or receivable by the taxpayer in respect of the restrictive covenant irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the restrictive covenant was granted.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 68; 2013, c. 34, s. 207
Inadequate considerationsExcept as expressly otherwise provided in this Act,where a taxpayer has acquired anything from a person with whom the taxpayer was not dealing at arm’s length at an amount in excess of the fair market value thereof at the time the taxpayer so acquired it, the taxpayer shall be deemed to have acquired it at that fair market value;where a taxpayer has disposed of anythingto a person with whom the taxpayer was not dealing at arm’s length for no proceeds or for proceeds less than the fair market value thereof at the time the taxpayer so disposed of it,to any person by way of gift, orto a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property;the taxpayer shall be deemed to have received proceeds of disposition therefor equal to that fair market value; andwhere a taxpayer acquires a property by way of gift, bequest or inheritance or because of a disposition that does not result in a change in the beneficial ownership of the property, the taxpayer is deemed to acquire the property at its fair market value.Idem, where s. 70(3) appliesWhere a taxpayer has acquired property that is a right or thing to which subsection 70(3) applies, the following rules apply:paragraph 69(1)(c) is not applicable to that property; andthe taxpayer shall be deemed to have acquired the property at a cost equal to the total ofsuch part, if any, of the cost thereof to the taxpayer who has died as had not been deducted by the taxpayer in computing the taxpayer’s income for any year, andany expenditures made or incurred by the taxpayer to acquire the property.IdemWhere, at any time,a taxpayer disposed of property for proceeds of disposition (determined without reference to this subsection) equal to or greater than the fair market value at that time of the property, andthere existed at that time an agreement under which a person with whom the taxpayer was not dealing at arm’s length agreed to pay as rent, royalty or other payment for the use of or the right to use the property an amount less than the amount that would have been reasonable in the circumstances if the taxpayer and the person had been dealing at arm’s length at the time the agreement was entered into,the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater ofthose proceeds determined without reference to this subsection, andthe fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement.[Repealed, 1998, c. 19, s. 107]Shareholder appropriationsWhere at any time property of a corporation has been appropriated in any manner whatever to or for the benefit of a shareholder of the corporation for no consideration or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have increased the corporation’s income or reduced a loss of the corporation, the corporation shall be deemed to have disposed of the property, and to have received proceeds of disposition therefor equal to its fair market value, at that time.IdemWhere in a taxation year of a corporation property of the corporation has been appropriated in any manner whatever to, or for the benefit of, a shareholder, on the winding-up of the corporation, the following rules apply:the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds equal to its fair market value at that time;the shareholder shall be deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;subsections 52(1) and (2) do not apply for the purposes of determining the cost to the shareholder of the property; andsubsections 13(21.2), 18(15) and 40(3.4) and (3.6) do not apply in respect of any property disposed of on the winding-up.[Repealed, 1998, c. 19, s. 107][Repealed, 2003, c. 28, s. 8]Deemed proceeds of dispositionWhere, at any particular time as part of a series of transactions or events, a taxpayer disposes of property for proceeds of disposition that are less than its fair market value and it can reasonably be considered that one of the main purposes of the series isto obtain the benefit ofany deduction (other than a deduction under subsection 110.6(2.1) in respect of a capital gain from a disposition of a share acquired by the taxpayer in an acquisition to which subsection 85(3) or 98(3) applied) in computing income, taxable income, taxable income earned in Canada or tax payable under this Act, orany balance of undeducted outlays, expenses or other amountsavailable to a person (other than a person that would be affiliated with the taxpayer immediately before the series began, if section 251.1 were read without reference to the definition controlled in subsection 251.1(3)) in respect of a subsequent disposition of the property or property substituted for the property, orto obtain the benefit of an exemption available to any person from tax payable under this Act on any income arising on a subsequent disposition of the property or property substituted for the property,notwithstanding any other provision of this Act, where the subsequent disposition occurs, or arrangements for the subsequent disposition are made, before the day that is 3 years after the particular time, the taxpayer is deemed to have disposed of the property at the particular time for proceeds of disposition equal to its fair market value at the particular time.ReassessmentsNotwithstanding subsections 152(4) to 152(5), the Minister may at any time make any assessments or reassessments of the tax, interest and penalties payable by the taxpayer that are necessary to give effect to subsection 69(11).[Repealed, 1998, c. 19, s. 107]Amalgamation or mergerWhere there is an amalgamation or merger of a corporation with one or more other corporations to form one corporate entity (in this subsection referred to as the “new corporation”), each property of the corporation that becomes property of the new corporation as a result of the amalgamation or merger is deemed, for the purpose of determining whether subsection 69(11) applies to the amalgamation or merger, to have been disposed of by the corporation immediately before the amalgamation or merger for proceeds equal toin the case of a Canadian resource property or a foreign resource property, nil; andin the case of any other property, the cost amount to the corporation of the property immediately before the amalgamation or merger.New taxpayerFor the purpose of subsection 69(11), where a taxpayer is incorporated or otherwise comes into existence at a particular time during a series of transactions or events, the taxpayer is deemedto have existed at the time that was immediately before the series began; andto have been affiliated at that time with every person with whom the taxpayer is affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) at the particular time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 69; 1994, c. 7, Sch. II, s. 47, Sch. VIII, s. 27, c. 21, s. 32; 1998, c. 19, s. 107; 2001, c. 17, s. 51; 2003, c. 28, s. 8; 2013, c. 34, s. 208(E); 2014, c. 39, s. 12; 2016, c. 12, s. 19
Death of a taxpayerIn computing the income of a taxpayer for the taxation year in which the taxpayer died,an amount of interest, rent, royalty, annuity (other than an amount with respect to an interest in an annuity contract to which paragraph 148(2)(b) applies), remuneration from an office or employment, or other amount payable periodically, that was not paid before the taxpayer’s death, shall be deemed to have accrued in equal daily amounts in the period for or in respect of which the amount was payable, and the value of the portion thereof so deemed to have accrued to the day of death shall be included in computing the taxpayer’s income for the year in which the taxpayer died; andparagraph 12(1)(t) shall be read as follows:the amount deducted under subsection 127(5) or 127(6) in computing the taxpayer’s tax payable for the year or a preceding taxation year to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e) or subparagraph 53(2)(c)(vi) or 53(2)(h)(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);”Amounts receivableIf a taxpayer who has died had at the time of death rights or things (other than any capital property or any amount included in computing the taxpayer’s income by virtue of subsection (1)), the amount of which when realized or disposed of would have been included in computing the taxpayer’s income, the value of the rights or things at the time of death shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer died, unless the taxpayer’s legal representative has, not later than the later of the day that is one year after the date of death of the taxpayer and the day that is 90 days after the sending of any notice of assessment in respect of the tax of the taxpayer for the year of death, elected otherwise, in which case the legal representative shall file a separate return of income for the year under this Part and pay the tax for the year under this Part as ifthe taxpayer were another person;that other person’s only income for the year were the value of the rights or things; andsubject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the taxpayer was entitled under sections 110, 118 to 118.7 and 118.9 for the year in computing the taxpayer’s taxable income or tax payable under this Part, as the case may be, for the year.Rights or things transferred to beneficiariesWhere before the time for making an election under subsection 70(2) has expired, a right or thing to which that subsection would otherwise apply has been transferred or distributed to beneficiaries or other persons beneficially interested in the estate or trust,subsection 70(2) is not applicable to that right or thing; andan amount received by one of the beneficiaries or persons on the realization or disposition of the right or thing shall be included in computing the income of the beneficiary or person for the taxation year in which the beneficiary or person received it.ExceptionFor the purposes of this section, rights or things do not include an interest in a life insurance policy (other than an annuity contract of a taxpayer where the payment therefor was deductible in computing the taxpayer’s income because of paragraph 60(l) or was made in circumstances in which subsection 146(21) applied), land included in the inventory of a business, a Canadian resource property or a foreign resource property.Revocation of electionAn election made under subsection 70(2) may be revoked by a notice of revocation signed by the legal representative of the taxpayer and filed with the Minister within the time that an election under that subsection may be made.Capital property of a deceased taxpayerWhere in a taxation year a taxpayer dies,the taxpayer shall be deemed to have, immediately before the taxpayer’s death, disposed of each capital property of the taxpayer and received proceeds of disposition therefor equal to the fair market value of the property immediately before the death;any person who as a consequence of the taxpayer’s death acquires any property that is deemed by paragraph 70(5)(a) to have been disposed of by the taxpayer shall be deemed to have acquired it at the time of the death at a cost equal to its fair market value immediately before the death;where any depreciable property of the taxpayer of a prescribed class that is deemed by paragraph 70(5)(a) to have been disposed of is acquired by any person as a consequence of the taxpayer’s death (other than where the taxpayer’s proceeds of disposition of the property under paragraph 70(5)(a) are redetermined under subsection 13(21.1)) and the amount that was the capital cost to the taxpayer of the property exceeds the amount determined under paragraph 70(5)(b) to be the cost to the person thereof, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),the capital cost to the person of the property shall be deemed to be the amount that was the capital cost to the taxpayer of the property, andthe excess shall be deemed to have been allowed to the person in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the person acquired the property; andwhere a property of the taxpayer that was deemed by paragraph 70(5)(a) to have been disposed of is acquired by any person as a consequence of the taxpayer’s death and the taxpayer’s proceeds of disposition of the property under paragraph 70(5)(a) are redetermined under subsection 13(21.1), notwithstanding paragraph 70(5)(b),where the property was depreciable property of a prescribed class and the amount that was the capital cost to the taxpayer of the property exceeds the amount so redetermined under subsection 13(21.1), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),its capital cost to the person shall be deemed to be the amount that was its capital cost to the taxpayer, andthe excess shall be deemed to have been allowed to the person in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the person acquired the property, andwhere the property is land (other than land to which subparagraph 70(5)(d)(i) applies), its cost to the person shall be deemed to be the amount that was the taxpayer’s proceeds of disposition of the land as redetermined under subsection 13(21.1).Transfer or distribution — Class 14.1Notwithstanding subsection (6), if property included in Class 14.1 of Schedule II to the Income Tax Regulations of the taxpayer in respect of a business carried on by the taxpayer immediately before the taxpayer’s death that is a property to which subsection (5) would otherwise apply is, as a consequence of the death, transferred or distributed (otherwise than by way of a distribution of property by a trust that claimed a deduction under paragraph 20(1)(a) or (b) in respect of the property or in circumstances to which subsection 24(2) applies) to any person (in this subsection referred to as the beneficiary), the following rules apply:paragraphs (5)(a) and (b) do not apply in respect of the property;the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the taxpayer of the property immediately before the death;the beneficiary is deemed to have acquired the property at the time of the death at a cost equal to those proceeds; andparagraph (5)(c) applies as if the references to “paragraph (a)” were read as references to “paragraph (5.1)(b)” and the reference to “paragraph (b)” were read as reference to “paragraph (5.1)(c)”.Resource property and land inventoryIf in a taxation year a taxpayer dies,the taxpayer is deemedto have disposed, at the time that is immediately before the taxpayer’s death, of eachCanadian resource property of the taxpayer,foreign resource property of the taxpayer, andproperty that was land included in the inventory of a business of the taxpayer, andsubject to paragraph (c), to have received at that time proceeds of disposition for each such property equal to its fair market value at that time;any person who, as a consequence of the taxpayer’s death, acquires a property that is deemed by paragraph (a) to have been disposed of by the taxpayer is, subject to paragraph (c), deemed to have acquired the property at the time of the death at a cost equal to its fair market value at the time that is immediately before the death; andwhere the taxpayer was resident in Canada at the time that is immediately before the taxpayer’s death, a particular property described in clause (a)(i)(A), (B) or (C) is, on or after the death and as a consequence of the death, transferred or distributed to a spouse or common-law partner of the taxpayer described in paragraph (6)(a) or a trust described in paragraph (6)(b), and it can be shown within the period that ends 36 months after the death (or, where written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances) that the particular property has, within that period, vested indefeasibly in the spouse, common-law partner or trust, as the case may be,the taxpayer is deemed to have received, at the time that is immediately before the taxpayer’s death, proceeds of disposition of the particular property equal toif the particular property is Canadian resource property of the taxpayer or foreign resource property of the taxpayer, the amount specified by the taxpayer’s legal representative in the taxpayer’s return of income filed under paragraph 150(1)(b), not exceeding its fair market value at that time, andif the particular property was land included in the inventory of a business of the taxpayer, its cost amount to the taxpayer at that time, andthe spouse, common-law partner or trust, as the case may be, is deemed to have acquired at the time of the death the particular property at a cost equal to the amount determined under subparagraph (i) in respect of the disposition of it under paragraph (a).Fair market valueFor the purposes of subsections (5) and 104(4) and section 128.1, the fair market value at any time of any property deemed to have been disposed of at that time as a consequence of a particular individual’s death or as a consequence of the particular individual becoming or ceasing to be resident in Canada shall be determined as though the fair market value at that time of any life insurance policy, under which the particular individual (or any other individual not dealing at arm’s length with the particular individual at that time or at the time the policy was issued) was a person whose life was insured, were the cash surrender value (as defined in subsection 148(9)) of the policy immediately before the particular individual died or became or ceased to be resident in Canada, as the case may be.Fair market valueFor the purposes of subsections (5) and 104(4), the fair market value at any time of any property deemed to have been disposed of at that time as a consequence of a particular individual’s death is to be determined as though the fair market value at that time of any annuity contract were the total of all amounts each of which is the amount of a premium paid on or before that time under the contract ifthe contract is, in respect of an LIA policy, a contract referred to in subparagraph (b)(ii) of the definition LIA policy in subsection 248(1); andthe particular individual is the individual, in respect of the LIA policy, referred to in that subparagraph.NISA on deathWhere a taxpayer who dies has at the time of death a net income stabilization account, all amounts held for or on behalf of the taxpayer in the taxpayer’s NISA Fund No. 2 shall be deemed to have been paid out of that fund to the taxpayer immediately before that time.Where transfer or distribution to spouse or spouse trustWhere any property of a taxpayer who was resident in Canada immediately before the taxpayer’s death that is a property to which subsection 70(5) would otherwise apply is, as a consequence of the death, transferred or distributed tothe taxpayer’s spouse or common-law partner who was resident in Canada immediately before the taxpayer’s death, ora trust, created by the taxpayer’s will, that was resident in Canada immediately after the time the property vested indefeasibly in the trust and under whichthe taxpayer’s spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s or common-law partner’s death, andno person except the spouse or common-law partner may, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust,if it can be shown, within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the taxpayer’s legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances, that the property has become vested indefeasibly in the spouse or common-law partner or trust, as the case may be, the following rules apply:paragraphs 70(5)(a) and 70(5)(b) do not apply in respect of the property,subject to paragraph 70(6)(d.1), the taxpayer shall be deemed to have, immediately before the taxpayer’s death, disposed of the property and received proceeds of disposition therefor equal towhere the property was depreciable property of a prescribed class, the lesser of the capital cost and the cost amount to the taxpayer of the property immediately before the death, andin any other case, its adjusted cost base to the taxpayer immediately before the death,and the spouse or common-law partner or trust, as the case may be, shall be deemed to have acquired the property at the time of the death at a cost equal to those proceeds,where the property is an interest in a partnership (other than an interest in a partnership to which subsection 100(3) applies),the taxpayer shall, except for the purposes of paragraph 98(5)(g), be deemed not to have disposed of the property as a consequence of the taxpayer’s death,the spouse or common-law partner or the trust, as the case may be, shall be deemed to have acquired the property at the time of the death at a cost equal to its cost to the taxpayer, andeach amount added or deducted in computing the adjusted cost base to the taxpayer of the property shall be deemed to be required by subsection 53(1) or 53(2) to be added or deducted, as the case may be, in computing the adjusted cost base to the spouse or common-law partner or the trust, as the case may be, of the property; andwhere the property was depreciable property of the taxpayer of a prescribed class, paragraph (5)(c) applies as if the references therein to “paragraph 70(6)(a)” and to “paragraph 70(6)(b)” were read as references to “paragraph 70(6)(d)”.Transfer or distribution of NISA to spouse or trustWhere a property that is a net income stabilization account of a taxpayer is, on or after the taxpayer’s death and as a consequence thereof, transferred or distributed tothe taxpayer’s spouse or common-law partner, ora trust, created by the taxpayer’s will, under whichthe taxpayer’s spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s or common-law partner’s death, andno person except the spouse or common-law partner may, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust,subsections 70(5.4) and 73(5) do not apply in respect of the taxpayer’s NISA Fund No. 2 if it can be shown, within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the taxpayer’s legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances, that the property has vested indefeasibly in the spouse or common-law partner or trust, as the case may be.ElectionSubsection (5.1), (6) or (6.1) does not apply to any property of a deceased taxpayer in respect of which the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part (other than a return of income filed under subsection (2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year in which the taxpayer died, to have subsection (5) or (5.4), as the case may be, apply.Special rules applicable in respect of trust for benefit of spouseWhere a trust created by a taxpayer’s will would, but for the payment of, or provision for payment of, any particular testamentary debts in respect of the taxpayer, be a trust to which subsection 70(6) or 70(6.1) applies,for the purpose of determining the day on or before which a return (in this subsection referred to as the “taxpayer’s return”) of the taxpayer’s income for the taxation year in which the taxpayer died is required to be filed by the taxpayer’s legal representatives, subsection 150(1) shall be read without reference to paragraph 150(1)(b) and as if paragraph 150(1)(d) read as follows:in the case of any other person, by the person’s legal representative within 18 months after the person’s death; or;” andwhere the taxpayer’s legal representative so elects in the taxpayer’s return (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) and lists therein one or more properties (other than a net income stabilization account) that were, on or after the taxpayer’s death and as a consequence thereof, transferred or distributed to the trust, the total fair market value of which properties immediately after the taxpayer’s death was not less than the total of the non-qualifying debts in respect of the taxpayer,subsection 70(6) does not apply in respect of the properties so listed, andnotwithstanding the payment of, or provision for payment of, any such particular testamentary debts, the trust shall be deemed to be a trust described in subsection 70(6),except that, where the fair market value, immediately after the taxpayer’s death, of all of the properties so listed exceeds the total of the non-qualifying debts in respect of the taxpayer (the amount of which excess is referred to in this subsection as the “listed value excess”) and the taxpayer’s legal representative designates in the taxpayer’s return one property so listed (other than money) that is capital property other than depreciable property,the amount of the taxpayer’s capital gain or capital loss, as the case may be, from the disposition of that property deemed by subsection 70(5) to have been made by the taxpayer is that proportion of that capital gain or capital loss otherwise determined thatthe amount, if any, by which the fair market value of that property immediately after the taxpayer’s death exceeds the listed value excess,is ofthe fair market value of that property immediately after the taxpayer’s death, andthe cost to the trust of that property iswhere the taxpayer has a capital gain from the disposition of that property deemed by subsection 70(5) to have been made by the taxpayer, the total ofits adjusted cost base to the taxpayer immediately before the taxpayer’s death, andthe amount determined under subparagraph 70(7)(b)(iii) to be the taxpayer’s capital gain from the disposition of that property, orwhere the taxpayer has a capital loss from the disposition of that property deemed by subsection 70(5) to have been made by the taxpayer, the amount by whichits adjusted cost base to the taxpayer immediately before the taxpayer’s deathexceedsthe amount determined under subparagraph 70(7)(b)(iii) to be the taxpayer’s capital loss from the disposition of that property.Meaning of certain expressions in s. (7)In subsection 70(7),the fair market value at any time of any property subject to a mortgage or hypothec is the amount, if any, by which the fair market value at that time of the property otherwise determined exceeds the amount outstanding at that time of the debt secured by the mortgage or hypothec, as the case may be;non-qualifying debt in respect of a taxpayer who has died and by whose will any trust has been created that would, but for the payment of, or provision for payment of, any particular testamentary debts in respect of the taxpayer, be a trust described in subsection 70(6), means any such particular testamentary debt in respect of the taxpayer other thanany estate, legacy, succession or inheritance duty payable, in consequence of the taxpayer’s death, in respect of any property of, or interest in, the trust, orany debt secured by a mortgage or hypothec on property owned by the taxpayer immediately before the taxpayer’s death; andtestamentary debt, in respect of a taxpayer who has died, meansany debt owing by the taxpayer, or any other obligation of the taxpayer to pay an amount, that was outstanding immediately before the taxpayer’s death, andany amount payable (other than any amount payable to any person as a beneficiary of the taxpayer’s estate) by the taxpayer’s estate in consequence of the taxpayer’s death,including any income or profits tax payable by or in respect of the taxpayer for the taxation year in which the taxpayer died or for any previous taxation year, and any estate, legacy, succession or inheritance duty payable in consequence of the taxpayer’s death.When subsection (9.01) appliesSubsection (9.01) applies to a taxpayer and a child of the taxpayer in respect of land in Canada or depreciable property in Canada of a prescribed class of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply ifthe property was, before the death of the taxpayer, used principally in a farming or fishing business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);the child of the taxpayer was resident in Canada immediately before the day on which the taxpayer died; andas a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.Transfer of farming and fishing property to childIf, because of subsection (9), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:where the taxpayer’s legal representative does not elect in the taxpayer’s return of income under this Part for the year in which the taxpayer died, to have paragraph (b) apply to the taxpayer and the child in respect of the property,paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,the taxpayer is deemed to havedisposed of the property immediately before the taxpayer’s death, andreceived, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal towhere the property was depreciable property of a prescribed class, the lesser ofthe capital cost to the taxpayer of the property, andthe amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, andwhere the property is land (other than land to which subclause (I) applies), the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii), andwhere the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer and the child in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(a)(ii)” and “subparagraph (9.01)(a)(iii)”, respectively; andwhere the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,the taxpayer is deemed to havedisposed of the property immediately before the taxpayer’s death, andreceived, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal towhere the property was depreciable property of a prescribed class, the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the time of the disposition of the property, andthe lesser of the capital cost to the taxpayer of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, andwhere the property is land (other than land to which subclause (I) applies), the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the time of the disposition of the property, andthe adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),where the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(b)(ii)” and “subparagraph (9.01)(b)(iii)”, respectively,except for the purpose of this subparagraph,where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I), exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andwhere the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andexcept for the purpose of this subparagraph,where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, andwhere the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.When subsection (9.11) appliesSubsection (9.11) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) or (5) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor ifthe property (or property for which the property was substituted) was transferred to the trust by the settlor;subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);the property is, immediately before the beneficiary’s death, land or a depreciable property of a prescribed class of the trust that was used in a farming or fishing business carried on in Canada;the child of the settlor is, immediately before the beneficiary’s death, resident in Canada; andas a consequence of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child of the settlor within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.Transfer of farming and fishing property from trust to settlor’s childrenIf, because of subsection (9.1), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was the spouse or common-law partner of the settlor, the following rules apply:where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the property,subsections 104(4) and (5) and section 69 do not apply to the trust and the child in respect of the property,the trust is deemed to havedisposed of the property immediately before the beneficiary’s death, andreceived, at the time of the disposition, proceeds of disposition in respect of that disposition equal towhere the property was depreciable property of a prescribed class, the lesser ofthe capital cost to the trust of the property, andthe amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, andwhere the property is land (other than land to which subclause (I) applies), the adjusted cost base to the trust of the property immediately before the time of the disposition of the property, andthe child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii);where the trust elects, in the trust’s return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property,subsections 104(4) and (5) do not apply to the trust in respect of the property,the trust is deemed to havedisposed of the property immediately before the beneficiary’s death, andreceived, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal towhere the property was depreciable property of a prescribed class, the amount that the trust designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the time of the disposition of the property, andthe lesser of the capital cost to the trust of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, andwhere the property is land (other than land to which subclause (I) applies), the amount that the trust designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the time of the disposition of the property, andthe adjusted cost base to the trust of the property immediately before the time of the disposition of the property,the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),except for the purpose of this subparagraph,where the amount designated by the trust under subclause (ii)(B)(I) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andwhere the amount designated by the trust under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andexcept for the purpose of this subparagraph,where the amount designated by the trust under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, andwhere the amount designated by the trust under subclause (ii)(B)(II), is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts;where paragraph (a) or (b) (each of which is referred to in this subsection as the “relevant provision”) applied to the trust in respect of a property that was depreciable property of a prescribed class (other than where the trust’s proceeds of disposition of the property under the relevant provision are redetermined under subsection 13(21.1)),the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, andthe amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount determined under the relevant provision to be the cost of the property to the child, immediately after the time of the disposition, is, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property; andwhere the relevant provision applied to the trust in respect of a property and the trust’s proceeds of disposition in respect of the disposition of the property determined under the relevant provision are redetermined under subsection 13(21.1), notwithstanding the relevant provision,where the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, andthe amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1) is deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property, andwhere the property is land, the cost to the child of the property is deemed to be the amount that was the trust’s proceeds of disposition as redetermined under subsection 13(21.1).When subsection (9.21) appliesSubsection (9.21) applies to a taxpayer and a child of the taxpayer in respect of a property of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply to the taxpayer and the child ifthe property was, immediately before the death of the taxpayer, 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;the child of the taxpayer was resident in Canada immediately before the day on which taxpayer died; andas a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.Transfer of family farm and fishing corporations and partnershipsIf, because of subsection (9.2), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:where the taxpayer’s legal representative does not elect, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have paragraph (b) apply to the taxpayer in respect of the property,paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family farm or fishing corporation of the taxpayer,the taxpayer is deemed to havedisposed of the property immediately before the taxpayer’s death, andreceived proceeds of disposition in respect of that disposition equal to the adjusted cost base to the taxpayer, immediately before the time of that disposition, of the property, andthe child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of that disposition determined under clause (A), andwhere the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies),the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the time of the taxpayer’s death, andeach amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the time of the taxpayer’s death, the adjusted cost base to the child of the property; andwhere the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, 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,the taxpayer is deemed to havedisposed of the property immediately before the taxpayer’s death, andreceived, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to the amount that the taxpayer’s legal representative designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the taxpayer’s death, andthe adjusted cost base to the taxpayer of the property immediately before the time of the disposition,the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under clause (A),except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) exceeds the greater of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andexcept for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) is less than the lesser of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, andwhere the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies), and the taxpayer’s legal representative further elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this subparagraph apply to the taxpayer in respect of the property,the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the death of the taxpayer, andeach amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the taxpayer’s death, the adjusted cost base to the child of the property.When subsection (9.31) appliesSubsection (9.31) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor of the trust ifthe property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm or fishing corporation of the settlor or an interest in a family farm or fishing partnership of the settlor;subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);the property is, immediately before the beneficiary’s death,a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary’s death, be a share of the capital stock of a family farm or fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition share of the capital stock of a family farm or fishing corporation in subsection (10) were read without the words “in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”, or[Repealed, 2014, c. 39, s. 13]a partnership interest in a partnership that carried on in Canada a farming or fishing business in which it used all or substantially all of the property;the child of the settlor was, immediately before that beneficiary’s death, resident in Canada; andas a consequence of that beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.Transfer of family farm or fishing corporation or family farm or fishing partnership from trust to children of settlorIf, because of subsection (9.3), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was a spouse or common-law partner of the settlor of the trust, the following rules apply:where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the propertysection 69 and subsection 104(4) do not apply to the trust and the child in respect of the property,where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)(c)(i),the trust is deemed to havedisposed of the property immediately before the beneficiary’s death, andreceived proceeds of disposition in respect of that disposition equal to the adjusted cost base to the trust of the property immediately before the time of that disposition, andthe child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A), andwhere the property is, immediately before the beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies),the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the interest immediately before the time that is immediately before the time of the beneficiary’s death, andeach amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the trust, immediately before the beneficiary’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property; andwhere the trust elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the propertysubsection 104(4) does not apply to the trust in respect of the property and section 69 does not apply to the trust or the child in respect of the transfer of the property,subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)(c)(i) or a partnership interest described in subparagraph (9.3)(c)(iii),the trust is deemed to havedisposed of the property immediately before the beneficiary’s death, andreceived, at the time of the disposition of property, proceeds of disposition in respect of the disposition of the property equal to the amount that the trust designates, which must not be greater than the greater of nor less than the lesser ofthe fair market value of the property immediately before the beneficiary’s death, andthe adjusted cost base to the trust of the property immediately before the beneficiary’s death, andthe child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A),where the property is, immediately before that beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies), and the trust further elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this subparagraph apply to the trust in respect of the property,the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the property immediately before the time that is immediately before the beneficiary’s death, andeach amount required by subsection 53(1) or (2) to be added or deducted in computing, immediately before the beneficiary’s death, the adjusted cost base to the trust of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property,except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, andexcept for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.Transfer to a parentSubsection (9.01) or (9.21), as the case may be, applies in respect of a transfer of a property as if the references in those subsections to “child” were read as references to “parent” ifthe property was acquired by a taxpayer in circumstances where any of subsections (9.01), (9.11), (9.21), (9.31) and 73(3.1) and (4.1) applied in respect of the acquisition;as a consequence of the death of the taxpayer the property is transferred to a parent of the taxpayer; andthe taxpayer’s legal representative has elected, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, that this subsection apply in respect of the transfer.Leased farm or fishing propertyFor the purposes of subsections (9) and 73(3) and paragraph (d) of the definition qualified farm or fishing property in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a farming or fishing business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a farming or fishing business in Canada, bya corporation, a share of the capital stock of which is a share of the capital stock of a family farm or fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; ora partnership, a partnership interest in which is an interest in a family farm or fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.DefinitionsIn this section,child of a taxpayer includesa child of the taxpayer’s child,a child of the taxpayer’s child’s child,a person who was a child of the taxpayer immediately before the death of the person’s spouse or common-law partner, anda person who, at any time before the person attained the age of 19 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control; (enfant)interest in a family farm or fishing partnership, of an individual at any time, means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable toproperty that has been used principally in the course of carrying on a farming or fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), bythe partnership,a corporation, a share of the capital stock of which was a share of the capital stock of a family farm or fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, orthe individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d),partnership interests or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d), orproperties described in any of paragraphs (a) to (c); (participation dans une société de personnes agricole ou de pêche familiale)interest in a family farm partnership[Repealed, 2014, c. 39, s. 13]interest in a family fishing partnership[Repealed, 2014, c. 39, s. 13]share of the capital stock of a family farm corporation[Repealed, 2014, c. 39, s. 13]share of the capital stock of a family farm or fishing corporation, of an individual at any time, means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable toproperty that has been used principally in the course of carrying on a farming or fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), bythe corporation,a corporation, a share of the capital stock of which was a share of the capital stock of a family farm or fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,a corporation controlled by a corporation described in subparagraph (i) or (ii),a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, orthe individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d),partnership interests or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d), orproperties described in any of paragraphs (a) to (c). (action du capital-actions d’une société agricole ou de pêche familiale)share of the capital stock of a family fishing corporation[Repealed, 2014, c. 39, s. 13]Application of s. 138(12)The definitions in subsection 138(12) apply to this section.Value of NISAFor the purpose of the definition share of the capital stock of a family farm or fishing corporation in subsection (10), the fair market value of a net income stabilization account is deemed to be nil.Capital cost of certain depreciable propertyFor the purposes of this section and, where a provision of this section (other than this subsection) applies, for the purposes of sections 13 and 20 (but not for the purposes of any regulation made for the purpose of paragraph 20(1)(a)),the capital cost to a taxpayer of depreciable property of a prescribed class disposed of immediately before the taxpayer’s death, orthe capital cost to a trust, to which subsection 70(9.1) applies, of depreciable property of a prescribed class disposed of immediately before the death of the spouse or common-law partner described in that subsection,shall, in respect of property that was not disposed of by the taxpayer or the trust before that time, be the amount that it would be if subsection 13(7) were read without reference tothe expression “the lesser of” in paragraph 13(7)(b) and clause (d)(i)(A) thereof, andsubparagraph 13(7)(b)(ii), subclause 13(7)(d)(i)(A)(II), clause 13(7)(d)(i)(B) and paragraph (e) thereof.Order of disposal of depreciable propertyWhere 2 or more depreciable properties of a prescribed class are disposed of at the same time as a consequence of a taxpayer’s death, this section and paragraph (a) of the definition cost amount in subsection 248(1) apply as if each property so disposed of were separately disposed of in the order designated by the taxpayer’s legal representative or, in the case of a trust described in subsection 70(9.1), by the trust and, where the taxpayer’s legal representative or the trust, as the case may be, does not designate an order, in the order designated by the Minister.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 70; 1994, c. 7, Sch. II, s. 48, Sch. VIII, s. 28, c. 21, s. 33; 1995, c. 3, s. 18; 1996, c. 21, s. 14; 1998, c. 19, s. 108; 2000, c. 12, s. 142; 2001, c. 17, ss. 52, 208(E); 2002, c. 9, s. 27; 2007, c. 2, s. 10; 2010, c. 25, s. 13; 2013, c. 34, s. 209, c. 40, s. 34; 2014, c. 39, s. 13; 2016, c. 12, s. 20
Reserves, etc., for year of deathWhere in a taxation year a taxpayer has died,paragraph 20(1)(n) does not apply to allow, in computing the income of the taxpayer for the year from a business, the deduction of any amount as a reserve in respect of property sold in the course of the business;no amount is deductible under subsection 32(1) as a reserve in respect of unearned commissions in computing the taxpayer’s income for the year;no amount may be claimed under subparagraph 40(1)(a)(iii), paragraph 40(1.01)(c) or subparagraph 44(1)(e)(iii) in computing any gain of the taxpayer for the year;subsection 64(1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property; andsubsection 64(1.1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property.Election by legal representative and transferee re reservesWhere property of a taxpayer that is a right to receive any amount has, on or after the death of the taxpayer and as a consequence thereof, been transferred or distributed to the taxpayer’s spouse or common-law partner described in paragraph 70(6)(a) or to a trust described in paragraph 70(6)(b) (in this subsection referred to as the “transferee”), if the taxpayer was resident in Canada immediately before the taxpayer’s death and the taxpayer’s legal representative and the transferee have executed jointly an election in respect of the property in prescribed form,any amount in respect of the property that would, but for paragraph 72(1)(a), (b), (d) or (e), as the case may be, have been deductible as a reserve in computing the taxpayer’s income for the taxation year in which the taxpayer died shall,notwithstanding subsection 72(1), be deducted in computing the taxpayer’s income for the taxation year in which the taxpayer died,be included in computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer, andbe deemed to bean amount that has been included in computing the transferee’s income from a business for a previous year in respect of property sold in the course of the business,an amount that has been included in computing the transferee’s income for a previous year as a commission in respect of an insurance contract, other than a life insurance contract,an amount that by virtue of subsection 59(1) has been included in computing the transferee’s income for a preceding taxation year, orfor the purposes of subsection 64(1.1), an amount that by virtue of paragraph 59(3.2)(c) has been included in computing the transferee’s income for a preceding taxation year and to be an amount deducted by the transferee pursuant to paragraph 64(1.1)(a) in computing the transferee’s income for the transferee’s last taxation year ending before the death,as the case may be;any amount in respect of the property that could, but for paragraph 72(1)(c), have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the amount of any gain of the taxpayer for the year shall,notwithstanding paragraph 72(1)(c), be deemed to have been so claimed, andfor the purpose of computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer and any subsequent taxation year, be deemed to have beenproceeds of the disposition of capital property disposed of by the transferee in that first taxation year, andthe amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of the capital property referred to in clause (A); andnotwithstanding paragraphs 72(2)(a) (b), where any property had been disposed of by the taxpayer, in computing the income of the transferee for any taxation year ending after the death of the taxpayer,the amount of the transferee’s deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business,the amount of the transferee’s claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property, andthe amount of the transferee’s deduction under section 64 as a reserve in respect of the disposition of the propertyshall be computed as if the transferee were the taxpayer who had disposed of the property and as if the property were disposed of by the transferee at the time it was disposed of by the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 72; 1994, c. 7, Sch. II, s. 49; 1998, c. 19, s. 12; 2000, c. 12, s. 142; 2013, c. 34, s. 210(F)
Inter vivos transfers by individualsFor the purposes of this Part, where at any time any particular capital property of an individual (other than a trust) has been transferred in circumstances to which subsection (1.01) applies and both the individual and the transferee are resident in Canada at that time, unless the individual elects in the individual’s return of income under this Part for the taxation year in which the property was transferred that the provisions of this subsection not apply, the particular property is deemedto have been disposed of at that time by the individual for proceeds equal to,where the particular property is depreciable property of a prescribed class, that proportion of the undepreciated capital cost to the individual immediately before that time of all property of that class that the fair market value immediately before that time of the particular property is of the fair market value immediately before that time of all of that property of that class, andin any other case, the adjusted cost base to the individual of the particular property immediately before that time; andto have been acquired at that time by the transferee for an amount equal to those proceeds.Qualifying transfersSubject to subsection (1.02), property is transferred by an individual in circumstances to which this subsection applies where it is transferred tothe individual’s spouse or common-law partner;a former spouse or common-law partner of the individual in settlement of rights arising out of their marriage or common-law partnership; ora trust created by the individual under whichthe individual’s spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner may, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust,the individual is entitled to receive all of the income of the trust that arises before the individual’s death and no person except the individual may, before the individual’s death, receive or otherwise obtain the use of any of the income or capital of the trust, oreitherthe individual or the individual’s spouse is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the spouse and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, orthe individual or the individual’s common-law partner is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the common-law partner and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust.Exception for transfersSubsection (1.01) applies to a transfer of property by an individual to a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii) or (iii) only wherethe trust was created after 1999;eitherthe individual had attained 65 years of age at the time the trust was created, orthe transfer does not result in a change in beneficial ownership of the property and there is immediately after the transfer no absolute or contingent right of a person (other than the individual) or partnership as a beneficiary (determined with reference to subsection 104(1.1)) under the trust; andin the case of a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii), the trust does not make an election under subparagraph 104(4)(a)(ii.1).InterpretationFor greater certainty, a property is, for the purposes of subsections (1) and (1.01), deemed to be property of the individual referred to in subsection (1) that has been transferred to a particular transferee where,under the laws of a province or because of a decree, order or judgment of a competent tribunal made in accordance with those laws, the propertyis acquired or is deemed to have been acquired by the particular transferee,is deemed or declared to be property of, or is awarded to, the particular transferee, orhas vested in the particular transferee; andthe property was or would, but for those laws, have been a capital property of the individual referred to in subsection (1).Capital cost and amount deemed allowed to spouse, etc., or trustIf a transferee is deemed by subsection (1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph (1)(b) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, in applying sections 13 and 20 and any regulations made under paragraph 20(1)(a)the capital cost to the transferee of the particular property is deemed to be the amount that was the capital cost to the taxpayer of the particular property; andthe excess is deemed to have been allowed to the transferee in respect of the particular property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition of the particular property.When subsection (3.1) appliesSubsection (3.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, by the taxpayer to the child, wherethe property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer;the child of the taxpayer was resident in Canada immediately before the transfer; andthe property has been used principally in a farming or fishing business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).Inter vivos transfer of farm or fishing property to childIf, because of subsection (3), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property transferred by the taxpayer to the child of the taxpayer, the following rules apply:where, immediately before the transfer, the property was depreciable property of a prescribed class, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal toin any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater ofthe fair market value of the property immediately before the time of the transfer, andthe lesser ofthe capital cost to the taxpayer of the property, andthe amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, orif the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;where the property transferred was land, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater ofthe fair market value of the land immediately before the time of the transfer, andthe adjusted cost base to the taxpayer of the land immediately before the time of the transfer, orif the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;[Repealed, 2016, c. 12, s. 21]subsection 69(1) does not apply to the taxpayer and the child in respect of the property;the child is deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined underwhere the property is depreciable property of the taxpayer, paragraph (a), andwhere the property is land of the taxpayer, paragraph (b); and[Repealed, 2016, c. 12, s. 21]where the property is depreciable property of a prescribed class of the taxpayer and the capital cost to the taxpayer of the property exceeds the cost to the child of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),the capital cost to the child of the property is deemed to be the amount that was the capital cost to the taxpayer of the property immediately before the transfer, andthe excess is deemed to have been allowed to the child in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property.When subsection (4.1) appliesSubsection (4.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, to the child ifthe child was resident in Canada immediately before the transfer; andthe property was, immediately before the transfer, 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 (as defined in subsection 70(10)).Inter vivos transfer of family farm or fishing corporations and partnershipsIf, because of subsection (4), this subsection applies to the taxpayer and the taxpayer’s child in respect of the transfer of the property by the taxpayer to the child,subject to paragraph (c), where the property was, immediately before the transfer, 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, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater ofthe fair market value of the property immediately before the time of the transfer, andthe adjusted cost base to the taxpayer of the property immediately before the time of the transfer, orif the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;subject to paragraph (c), where the property is, immediately before the transfer, 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, the child is deemed to have acquired the property for an amount equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (a);where the property is, immediately before the transfer, an interest in a family farm or fishing partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer’s return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property at the time of the transfer,the child is deemed to have acquired the property at the time of the transfer at a cost equal to the cost to the taxpayer of the interest immediately before the transfer, andeach amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the transfer, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing at any time at or after the time of the transfer, the adjusted cost base to the child of the property; andsubsection 69(1) does not apply to the taxpayer and the child in respect of the property.Disposition of a NISAWhere at any time a taxpayer disposes of an interest in the taxpayer’s NISA Fund No. 2, an amount equal to the balance in the fund so disposed of shall be deemed to have been paid out of the fund at that time to the taxpayer except that,where the interest is disposed of to the taxpayer’s spouse or common-law partner, former spouse or common-law partner or an individual referred to in paragraph 73(1)(d) (as it applies to transfers of property that occurred before 1993) in settlement of rights arising out of their marriage or common-law partnership, on or after the breakdown of the marriage or common-law partnership, that amount shall not be deemed to have been paid to the taxpayer ifthe disposition is made under a decree, order or judgment of a competent tribunal or, in the case of a spouse or common-law partner or former spouse or common-law partner, a written separation agreement, andthe taxpayer elects in the taxpayer’s return of income under this Part for the taxation year in which the property was disposed of to have this paragraph apply to the disposition; andwhere the interest is disposed of to a taxable Canadian corporation in a transaction in respect of which an election is made under section 85, an amount equal to the proceeds of disposition in respect of that interest shall be deemed to be paid, at that time, to the taxpayer out of the taxpayer’s NISA Fund No. 2.Application of s. 70(10)The definitions in subsection 70(10) apply to this section.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 73; 1994, c. 7, Sch. II, s. 50, Sch. VIII, s. 29, c. 21, s. 34; 1995, c. 3, s. 19; 2000, c. 12, s. 142; 2001, c. 17, s. 53; 2002, c. 9, s. 28; 2007, c. 2, s. 11; 2013, c. 34, s. 211; 2014, c. 39, s. 14; 2016, c. 12, s. 21
Transfers and loans to spouse or common-law partnerIf an individual has transferred or lent property (otherwise than by an assignment of any portion of a retirement pension under section 65.1 of the Canada Pension Plan or a comparable provision of a provincial pension plan as defined in section 3 of that Act), either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person who is the individual’s spouse or common-law partner or who has since become the individual’s spouse or common-law partner, any income or loss, as the case may be, of that person for a taxation year from the property or from property substituted therefor, that relates to the period in the year throughout which the individual is resident in Canada and that person is the individual’s spouse or common-law partner, is deemed to be income or a loss, as the case may be, of the individual for the year and not of that person.Transfers and loans to minorsIf an individual has transferred or lent property, either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person who was under 18 years of age (other than an amount received in respect of that person either as a consequence of the operation of subsection 122.61(1) or under section 4 of the Universal Child Care Benefit Act) and whodoes not deal with the individual at arm’s length, oris the niece or nephew of the individual,any income or loss, as the case may be, of that person for a taxation year from the property or from property substituted for that property, that relates to the period in the taxation year throughout which the individual is resident in Canada, is deemed to be income or a loss, as the case may be, of the individual and not of that person unless that person has, before the end of the taxation year, attained the age of 18 years.Repayment of existing indebtednessFor the purposes of subsections 74.1(1) and (2), where, at any time, an individual has lent or transferred property (in this subsection referred to as the “lent or transferred property”) either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person, and the lent or transferred property or property substituted therefor is usedto repay, in whole or in part, borrowed money with which other property was acquired, orto reduce an amount payable for other property,there shall be included in computing the income from the lent or transferred property, or from property substituted therefor, that is so used, that proportion of the income or loss, as the case may be, derived after that time from the other property or from property substituted therefor that the fair market value at that time of the lent or transferred property, or property substituted therefor, that is so used is of the cost to that person of the other property at the time of its acquisition, but for greater certainty nothing in this subsection shall affect the application of subsections 74.1(1) and (2) to any income or loss derived from the other property or from property substituted therefor.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 74.1; 1994, c. 7, Sch. VII, s. 4; 2000, c. 12, s. 142; 2007, c. 2, s. 12; 2011, c. 24, s. 16
Gain or loss deemed that of lender or transferorWhere an individual has lent or transferred property (in this section referred to as “lent or transferred property”), either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person (in this subsection referred to as the “recipient”) who is the individual’s spouse or common-law partner or who has since become the individual’s spouse or common-law partner, the following rules apply for the purposes of computing the income of the individual and the recipient for a taxation year:the amount, if any, by whichthe total of the recipient’s taxable capital gains for the year from dispositions of property (other than listed personal property) that is lent or transferred property or property substituted therefor occurring in the period (in this subsection referred to as the “attribution period”) throughout which the individual is resident in Canada and the recipient is the individual’s spouse or common-law partnerexceedsthe total of the recipient’s allowable capital losses for the year from dispositions occurring in the attribution period of property (other than listed personal property) that is lent or transferred property or property substituted thereforshall be deemed to be a taxable capital gain of the individual for the year from the disposition of property other than listed personal property;the amount, if any, by which the total determined under subparagraph 74.2(1)(a)(ii) exceeds the total determined under subparagraph 74.2(1)(a)(i) shall be deemed to be an allowable capital loss of the individual for the year from the disposition of property other than listed personal property;the amount, if any, by whichthe amount that the total of the recipient’s gains for the year from dispositions occurring in the attribution period of listed personal property that is lent or transferred property or property substituted therefor would be if the recipient had at no time owned listed personal property other than listed personal property that was lent or transferred property or property substituted thereforexceedsthe amount that the total of the recipient’s losses for the year from dispositions of listed personal property that is lent or transferred property or property substituted therefor would be if the recipient had at no time owned listed personal property other than listed personal property that was lent or transferred property or property substituted therefor,shall be deemed to be a gain of the individual for the year from the disposition of listed personal property;the amount, if any, by which the total determined under subparagraph 74.2(1)(c)(ii) exceeds the total determined under subparagraph 74.2(1)(c)(i) shall be deemed to be a loss of the individual for the year from the disposition of listed personal property; andany taxable capital gain or allowable capital loss or any gain or loss taken into account in computing an amount described in paragraph 74.2(1)(a), 74.2(1)(b), 74.2(1)(c) or 74.2(1)(d) shall, except for the purposes of those paragraphs and to the extent that the amount so described is deemed by virtue of this subsection to be a taxable capital gain or an allowable capital loss or a gain or loss of the individual, be deemed not to be a taxable capital gain or an allowable capital loss or a gain or loss, as the case may be, of the recipient.Deemed gain or lossWhere an amount is deemed by subsection 74.2(1) or 75(2) or section 75.1 of this Act, or subsection 74(2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, to be a taxable capital gain or an allowable capital loss of an individual for a taxation year,for the purposes of sections 3 and 111, as they apply for the purposes of section 110.6, such portion of the gain or loss as may reasonably be considered to relate to the disposition of a property by another person in the year shall be deemed to arise from the disposition of that property by the individual in the year; andfor the purposes of section 110.6, that property shall be deemed to have been disposed of by the individual on the day on which it was disposed of by the other person.Election for subsection (1) to applySubsection (1) does not apply to a disposition at any particular time (in this subsection referred to as the “emigration disposition”) under paragraph 128.1(4)(b), by a taxpayer who is a recipient referred to in subsection (1), unless the recipient and the individual referred to in that subsection, in their returns of income for the taxation year that includes the first time, after the particular time, at which the recipient disposes of the property, jointly elect that subsection (1) apply to the emigration disposition.Application of subsection (3)For the purpose of applying subsection (3) and notwithstanding subsections 152(4) to (5), any assessment of tax payable under this Act by the recipient or the individual referred to in subsection (1) shall be made that is necessary to take an election under subsection (3) into account except that no such assessment shall affect the computation ofinterest payable under this Act to or by a taxpayer in respect of any period that is before the taxpayer’s filing-due date for the taxation year that includes the first time, after the particular time referred to in subsection (3), at which the recipient disposes of the property referred to in that subsection; orany penalty payable under this Act.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 74.2; 1994, c. 7, Sch. II, s. 51; 1995, c. 3, s. 20; 2000, c. 12, s. 142; 2001, c. 17, s. 54
Transfers or loans to a trustWhere an individual has lent or transferred property (in this section referred to as “lent or transferred property”), either directly or indirectly, by means of a trust or by any other means whatever, to a trust in which another individual who is at any time a designated person in respect of the individual is beneficially interested at any time, the following rules apply:for the purposes of section 74.1, the income of the designated person for a taxation year from the lent or transferred property shall be deemed to be an amount equal to the lesser ofthe amount in respect of the trust that was included by virtue of paragraph 12(1)(m) in computing the income for the year of the designated person, andthat proportion of the amount that would be the income of the trust for the year from the lent or transferred property or from property substituted therefor if no deduction were made under subsection 104(6) or (12) thatthe amount determined under subparagraph 74.3(1)(a)(i) in respect of the designated person for the yearis ofthe total of all amounts each of which is an amount determined under subparagraph 74.3(1)(a)(i) for the year in respect of the designated person or any other person who is throughout the year a designated person in respect of the individual; andfor the purposes of section 74.2, an amount equal to the lesser ofthe amount that was designated under subsection 104(21) in respect of the designated person in the trust’s return of income for the year, andthe amount, if any, by whichthe total of all amounts each of which is a taxable capital gain for the year from the disposition by the trust of the lent or transferred property or property substituted thereforexceedsthe total of all amounts each of which is an allowable capital loss for the year from the disposition by the trust of the lent or transferred property or property substituted therefor,shall be deemed to be a taxable capital gain of the designated person for the year from the disposition of property (other than listed personal property) that is lent or transferred property.Definition of designated personIn this section, designated person, in respect of an individual, has the meaning assigned by subsection 74.5(5).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1986, c. 6, s. 38, c. 55, s. 18
DefinitionsIn this section,designated person, in respect of an individual, has the meaning assigned by subsection 74.5(5); (personne désignée)excluded consideration, at any time, means consideration received by an individual that isindebtedness,a share of the capital stock of a corporation, ora right to receive indebtedness or a share of the capital stock of a corporation. (contrepartie exclue)Transfers and loans to corporationsWhere an individual has transferred or lent property, either directly or indirectly, by means of a trust or by any other means whatever, to a corporation and one of the main purposes of the transfer or loan may reasonably be considered to be to reduce the income of the individual and to benefit, either directly or indirectly, by means of a trust or by any other means whatever, a person who is a designated person in respect of the individual, in computing the income of the individual for any taxation year that includes a period after the loan or transfer throughout whichthe person is a designated person in respect of the individual and would have been a specified shareholder of the corporation if the definition specified shareholder in subsection 248(1) were read without reference to paragraphs (a) and (d) of that definition and if the reference therein to “any other corporation that is related to the corporation” were read as a reference to “any other corporation (other than a small business corporation) that is related to the corporation”,the individual was resident in Canada, andthe corporation was not a small business corporation,the individual shall be deemed to have received as interest in the year the amount, if any, by whichthe amount that would be interest on the outstanding amount of the loan or transfer of the property for such periods in the year if the interest were computed thereon at the prescribed rate of interest for such periodsexceeds the total ofany interest received in the year by the individual in respect of the transfer or loan (other than amounts deemed by this subsection to be interest),all amounts included in the individual’s income for the taxation year pursuant to subsection 82(1) or 90(1) in respect of taxable dividends received (other than dividends deemed by section 84 to have been received) by the individual in the year on shares that were received from the corporation as consideration for the transfer or as repayment for the loan that were excluded consideration at the time the dividends were received or on shares substituted therefor that were excluded consideration at that time, andwhere the designated person is a specified individual in relation to the year, the amount required to be included in computing the designated person’s income for the year in respect of all taxable dividends received by the designated person thatcan reasonably be considered to be part of the benefit sought to be conferred, andare included in computing the designated person’s split income for any taxation year.Outstanding amountFor the purposes of subsection 74.4(2), the outstanding amount of a transferred property or loan at a particular time isin the case of a transfer of property to a corporation, the amount, if any, by which the fair market value of the property at the time of the transfer exceeds the total ofthe fair market value, at the time of the transfer, of the consideration (other than consideration that is excluded consideration at the particular time) received by the transferor for the property, andthe fair market value, at the time of receipt, of any consideration (other than consideration that is excluded consideration at the particular time) received by the transferor at or before the particular time from the corporation or from a person with whom the transferor deals at arm’s length, in exchange for excluded consideration previously received by the transferor as consideration for the property or for excluded consideration substituted for such consideration;in the case of a loan of money or property to a corporation, the amount, if any, by whichthe principal amount of the loan of money at the time the loan was made, orthe fair market value of the property lent at the time the loan was made,as the case may be, exceeds the fair market value, at the time the repayment is received by the lender, of any repayment of the loan (other than a repayment that is excluded consideration at the particular time).Benefit not granted to a designated personFor the purposes of subsection 74.4(2), one of the main purposes of a transfer or loan by an individual to a corporation shall not be considered to be to benefit, either directly or indirectly, a designated person in respect of the individual, wherethe only interest that the designated person has in the corporation is a beneficial interest in shares of the corporation held by a trust;by the terms of the trust, the designated person may not receive or otherwise obtain the use of any of the income or capital of the trust while being a designated person in respect of the individual; andthe designated person has not received or otherwise obtained the use of any of the income or capital of the trust, and no deduction has been made by the trust in computing its income under subsection 104(6) or (12) in respect of amounts paid or payable to, or included in the income of, that person while being a designated person in respect of the individual.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 74.4; 1994, c. 7, Sch. II, s. 52; 2000, c. 19, s. 10; 2007, c. 2, s. 43.1
Transfers for fair market considerationNotwithstanding any other provision of this Act, subsections 74.1(1) and (2) and section 74.2 do not apply to any income, gain or loss derived in a particular taxation year from transferred property or from property substituted therefor ifat the time of the transfer the fair market value of the transferred property did not exceed the fair market value of the property received by the transferor as consideration for the transferred property;where the consideration received by the transferor included indebtedness,interest was charged on the indebtedness at a rate equal to or greater than the lesser ofthe prescribed rate that was in effect at the time the indebtedness was incurred, andthe rate that would, having regard to all the circumstances, have been agreed on, at the time the indebtedness was incurred, between parties dealing with each other at arm’s length,the amount of interest that was payable in respect of the particular year in respect of the indebtedness was paid not later than 30 days after the end of the particular year, andthe amount of interest that was payable in respect of each taxation year preceding the particular year in respect of the indebtedness was paid not later than 30 days after the end of each such taxation year; andwhere the property was transferred to or for the benefit of the transferor’s spouse or common-law partner, the transferor elected in the transferor’s return of income under this Part for the taxation year in which the property was transferred not to have the provisions of subsection 73(1) apply.Loans for valueNotwithstanding any other provision of this Act, subsections 74.1(1) and (2) and section 74.2 do not apply to any income, gain or loss derived in a particular taxation year from lent property or from property substituted therefor ifinterest was charged on the loan at a rate equal to or greater than the lesser ofthe prescribed rate that was in effect at the time the loan was made, andthe rate that would, having regard to all the circumstances, have been agreed on, at the time the loan was made, between parties dealing with each other at arm’s length;the amount of interest that was payable in respect of the particular year in respect of the loan was paid not later than 30 days after the end of the particular year; andthe amount of interest that was payable in respect of each taxation year preceding the particular year in respect of the loan was paid not later than 30 days after the end of each such taxation year.Spouses or common-law partners living apartNotwithstanding subsection 74.1(1) and section 74.2, where an individual has lent or transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person who is the individual’s spouse or common-law partner or who has since become the individual’s spouse or common-law partner,subsection 74.1(1) does not apply with respect to any income or loss from the property, or property substituted therefor, that relates to the period throughout which the individual is living separate and apart from that person by reason of a breakdown of their marriage or common-law partnership; andsection 74.2 does not apply to a disposition of the property, or property substituted therefor, occurring at any time while the individual is living separate and apart from that person because of a breakdown of their marriage or common-law partnership, if an election completed jointly with that person not to have that section apply is filed with the individual’s return of income under this Part for the taxation year that includes that time or for any preceding taxation year.IdemNo amount shall be included in computing the income of an individual under subsection 74.4(2) in respect of a designated person in respect of the individual who is the spouse or common-law partner of the individual for any period throughout which the individual is living separate and apart from the designated person by reason of a breakdown of their marriage or common-law partnership.Definition of designated personFor the purposes of this section, designated person, in respect of an individual, means a personwho is the spouse or common-law partner of the individual; orwho is under 18 years of age and whodoes not deal with the individual at arm’s length, oris the niece or nephew of the individual.Back to back loans and transfersWhere an individual has lent or transferred propertyto another person and that property, or property substituted therefor, is lent or transferred by any person (in this subsection referred to as a “third party”) directly or indirectly to or for the benefit of a specified person with respect to the individual, orto another person on condition that property be lent or transferred by any person (in this subsection referred to as a “third party”) directly or indirectly to or for the benefit of a specified person with respect to the individual,the following rules apply:for the purposes of sections 74.1, 74.2, 74.3 and 74.4, the property lent or transferred by the third party shall be deemed to have been lent or transferred, as the case may be, by the individual to or for the benefit of the specified person, andfor the purposes of subsection 74.5(1), the consideration received by the third party for the transfer of the property shall be deemed to have been received by the individual.GuaranteesWhere an individual is obligated, either absolutely or contingently, to effect any undertaking including any guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of a loan made by any person (in this subsection referred to as the “third party”) directly or indirectly to or for the benefit of a specified person with respect to the individual or the payment, in whole or in part, of any interest payable in respect of the loan, the following rules apply:for the purposes of sections 74.1, 74.2, 74.3 and 74.4, the property lent by the third party shall be deemed to have been lent by the individual to or for the benefit of the specified person; andfor the purposes of paragraphs 74.5(2)(b) and (c), the amount of interest that is paid in respect of the loan shall be deemed not to include any amount paid by the individual to the third party as interest on the loan.Definition of specified personFor the purposes of subsections 74.5(6) and (7), specified person, with respect to an individual, meansa designated person in respect of the individual; ora corporation, other than a small business corporation, of which a designated person in respect of the individual would have been a specified shareholder if the definition specified shareholder in subsection 248(1) were read without reference to paragraphs (a) and (d) of that definition.Transfers or loans to a trustWhere a taxpayer has lent or transferred property, either directly or indirectly, by means of a trust or by any other means whatever, to a trust in which another taxpayer is beneficially interested, the taxpayer shall, for the purposes of this section and sections 74.1 to 74.4, be deemed to have lent or transferred the property, as the case may be, to or for the benefit of the other taxpayer.[Repealed, 1994, c. 7, Sch. VIII, s. 30]Artificial transactionsNotwithstanding any other provision of this Act, sections 74.1 to 74.4 do not apply to a transfer or loan of property where it may reasonably be concluded that one of the main reasons for the transfer or loan was to reduce the amount of tax that would, but for this subsection, be payable under this Part on the income and gains derived from the property or from property substituted therefor.Where ss. 74.1 to 74.3 do not applySections 74.1, 74.2 and 74.3 do not apply in respect of a transfer by an individual of propertyas a payment of a premium under a registered retirement savings plan under which the individual’s spouse or common-law partner is, immediately after the transfer, the annuitant (within the meaning of subsection 146(1)) to the extent that the premium is deductible in computing the income of the individual for a taxation year;[Repealed, 2011, c. 24, s. 17]as a payment of a contribution under a registered disability savings plan;as or on account of an amount paid by the individual to another individual who is the individual’s spouse or common-law partner or a person who was under 18 years of age in a taxation year and whodoes not deal with the individual at arm’s length, oris the niece or nephew of the individual,that is deductible in computing the individual’s income for the year and is required to be included in computing the income of the other individual;to the individual’s spouse or common-law partner,while the property, or property substituted for it, is held under a TFSA of which the spouse or common-law partner is the holder, andto the extent that the spouse or common-law partner does not, at the time of the contribution of the property under the TFSA, have an excess TFSA amount (as defined in subsection 207.01(1)); oras a payment of a contribution under a FHSA.Exception from attribution rulesSubsections 74.1(1) and (2), 74.3(1) and 75(2) of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, do not apply to any amount that is included in computing a specified individual’s split income for a taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 74.5; 1994, c. 7, Sch. II, s. 53, Sch. VIII, s. 30; 2000, c. 12, s. 142, c. 19, s. 11; 2007, c. 35, s. 106; 2008, c. 28, s. 6; 2011, c. 24, s. 172022, c. 19, s. 9
TrustsIf a trust, that is resident in Canada and that was created in any manner whatever since 1934, holds property on conditionthat it or property substituted therefor mayrevert to the person from whom the property or property for which it was substituted was directly or indirectly received (in this subsection referred to as “the person”), orpass to persons to be determined by the person at a time subsequent to the creation of the trust, orthat, during the existence of the person, the property shall not be disposed of except with the person’s consent or in accordance with the person’s direction,any income or loss from the property or from property substituted for the property, and any taxable capital gain or allowable capital loss from the disposition of the property or of property substituted for the property, shall, during the existence of the person while the person is resident in Canada, be deemed to be income or a loss, as the case may be, or a taxable capital gain or allowable capital loss, as the case may be, of the person.ExceptionsSubsection 75(2) does not apply to property held in a taxation yearby a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a FHSA, a pooled registered pension plan, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan, a retirement compensation arrangement or a TFSA;by an employee life and health trust, an employee trust, a private foundation that is a registered charity, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described by paragraph (a.1) of the definition trust in subsection 108(1), or a trust described by paragraph 149(1)(y);by a qualifying environmental trust; or[Repealed, 2013, c. 40, s. 35]by a trust ifthe trust acquired the property, or other property for which the property is a substitute, from a particular individual,the particular individual acquired the property or the other property, as the case may be, in respect of another individual as a consequence of the operation of subsection 122.61(1) or under section 4 of the Universal Child Care Benefit Act, andthe trust has no beneficiaries (as defined in subsection 108(1)) who may for any reason receive directly from the trust any of the income or capital of the trust other than individuals in respect of whom the particular individual acquired property as a consequence of the operation of a provision described in subparagraph (ii).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 75; 1995, c. 3, s. 21; 1998, c. 19, s. 13; 2001, c. 17, s. 55; 2007, c. 35, s. 107; 2008, c. 28, s. 7; 2010, c. 25, s. 14; 2012, c. 31, s. 15; 2013, c. 34, ss. 5, 212, c. 40, s. 35; 2017, c. 33, s. 212022, c. 19, s. 10
Gain or loss deemed that of transferorWheresubsection 73(3) or (4) applied to the transfer of property (in this subsection referred to as “transferred property”) by a taxpayer to a child of the taxpayer,the transfer was made at less than the fair market value of the transferred property immediately before the time of the transfer, andin a taxation year, the transferee disposed of the transferred property and did not, before the end of that year, attain the age of 18 years,the following rules apply:the amount, if any, by whichthe total of the transferee’s taxable capital gains for the year from dispositions of transferred propertyexceedsthe total of the transferee’s allowable capital losses for the year from dispositions of transferred property,shall during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be a taxable capital gain of the transferor for the year from the disposition of property,the amount, if any, by which the total determined under subparagraph 75.1(1)(d)(ii) exceeds the total determined under subparagraph 75.1(1)(d)(i) shall, during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be an allowable capital loss of the transferor for the year from the disposition of property, andany taxable capital gain or allowable capital loss taken into account in computing an amount described in paragraph 75.1(1)(d) or the amount described in paragraph 75.1(1)(e) shall, except for the purposes of those paragraphs, to the extent that the amount so described is deemed by virtue of this subsection to be a taxable capital gain or an allowable capital loss of the transferor, be deemed not to be a taxable capital gain or an allowable capital loss, as the case may be, of the transferee.Definition of childFor the purposes of this section, child of a taxpayer includes a child of the taxpayer’s child and a child of the taxpayer’s child’s child.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 75.1; 1994, c. 7, Sch. II, s. 54
Rules applicable with respect to “qualifying trust annuity”If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer’s income,any amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; andif the taxpayer dies after 2005an amount equal to the fair market value of the annuity at the time of the taxpayer’s death is deemed to have been received, immediately before the taxpayer’s death, by the taxpayer out of or under the annuity, andfor the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer’s death) of the taxpayer’s interest in the trust that is the annuitant under the annuity.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 34, s. 213
Security in satisfaction of income debtWhere a person receives a security or other right or a certificate of indebtedness or other evidence of indebtedness wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt that is then payable, the amount of which debt would be included in computing the person’s income if it were paid, the value of the security, right or indebtedness or the applicable portion thereof shall, notwithstanding the form or legal effect of the transaction, be included in computing the person’s income for the taxation year in which it is received.IdemWhere a security or other right or a certificate of indebtedness or other evidence of indebtedness is received by a person wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt before the debt is payable, but is not itself payable or redeemable before the day on which the debt is payable, it shall, for the purpose of subsection 76(1), be deemed to be received by the person holding it at that time when the debt becomes payable.Section enacted for greater certaintyThis section is enacted for greater certainty and shall not be construed as limiting the generality of the other provisions of this Part by which amounts are required to be included in computing income.Debt deemed not to be income debtWhere a cash purchase ticket or other form of settlement prescribed pursuant to the Canada Grain Act or by the Minister is issued to a taxpayer in respect of grain delivered in a taxation year of a taxpayer to a primary elevator or process elevator and the ticket or other form of settlement entitles the holder thereof to payment by the operator of the elevator of the purchase price, without interest, stated in the ticket for the grain at a date that is after the end of that taxation year, the amount of the purchase price stated in the ticket or other form of settlement shall, notwithstanding any other provision of this section, be included in computing the income of the taxpayer to whom the ticket or other form of settlement was issued for the taxpayer’s taxation year immediately following the taxation year in which the grain was delivered and not for the taxation year in which the grain was delivered.Definitions of certain expressionsIn subsection (4), the expressions cash purchase ticket, operator, primary elevator and process elevator have the meanings assigned by the Canada Grain Act, and grain means wheat, oats, barley, rye, flaxseed, rapeseed and canola produced in Canada.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 76; 1994, c. 7, Sch. II, s. 55; 2012, c. 19, s. 2
Non-resident moving debt from Canadian businessIf at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency ceases to be an obligation of the taxpayer in respect of a business or part of a business carried on by the taxpayer in Canada immediately before that time (other than an obligation in respect of which the taxpayer ceased to be indebted at that time), for the purpose of determining the amount of any income, loss, capital gain or capital loss due to the fluctuation in the value of the foreign currency relative to Canadian currency, the taxpayer is deemed to have settled the debt obligation immediately before that time at the amount outstanding on account of its principal amount.Non-resident assuming debtIf at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency becomes an obligation of the taxpayer in respect of a business or part of a business that the taxpayer carries on in Canada after that time (other than an obligation in respect of which the taxpayer became indebted at that time), the amount of any income, loss, capital gain or capital loss in respect of the obligation due to the fluctuation in the value of the foreign currency relative to Canadian currency shall be determined based on the amount of the obligation in Canadian currency at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 56
[Repealed, 1995, c. 21, s. 52][NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 77; 1995, c. 21, s. 52
Unpaid amountsWhere an amount in respect of a deductible outlay or expense that was owing by a taxpayer to a person with whom the taxpayer was not dealing at arm’s length at the time the outlay or expense was incurred and at the end of the second taxation year following the taxation year in which the outlay or expense was incurred, is unpaid at the end of that second taxation year, eitherthe amount so unpaid shall be included in computing the taxpayer’s income for the third taxation year following the taxation year in which the outlay or expense was incurred, orwhere the taxpayer and that person have filed an agreement in prescribed form on or before the day on or before which the taxpayer is required by section 150 to file the taxpayer’s return of income for the third succeeding taxation year, for the purposes of this Act the following rules apply:the amount so unpaid shall be deemed to have been paid by the taxpayer and received by that person on the first day of that third taxation year, and section 153, except subsection 153(3), is applicable to the extent that it would apply if that amount were being paid to that person by the taxpayer, andthat person shall be deemed to have made a loan to the taxpayer on the first day of that third taxation year in an amount equal to the amount so unpaid minus the amount, if any, deducted or withheld therefrom by the taxpayer on account of that person’s tax for that third taxation year.IdemWhere an amount in respect of a deductible outlay or expense that was owing by a taxpayer that is a corporation to a person with whom the taxpayer was not dealing at arm’s length is unpaid at the time when the taxpayer is wound up, and the taxpayer is wound up before the end of the second taxation year following the taxation year in which the outlay or expense was incurred, the amount so unpaid shall be included in computing the taxpayer’s income for the taxation year in which it was wound up.Late filingWhere, in respect of an amount described in subsection 78(1) that was owing by a taxpayer to a person, an agreement in a form prescribed for the purposes of this section is filed after the day on or before which the agreement is required to be filed for the purposes of paragraph 78(1)(b), both paragraphs 78(1)(a) and (b) apply in respect of the said amount, except that paragraph 78(1)(a) shall be read and construed as requiring 25% only of the said amount to be included in computing the taxpayer’s income.Unpaid remuneration and other amountsWhere an amount in respect of a taxpayer’s expense that is a superannuation or pension benefit, a retiring allowance, salary, wages or other remuneration (other than reasonable vacation or holiday pay or a deferred amount under a salary deferral arrangement) in respect of an office or employment is unpaid on the day that is 180 days after the end of the taxation year in which the expense was incurred, for the purposes of this Act other than this subsection, the amount shall be deemed not to have been incurred as an expense in the year and shall be deemed to be incurred as an expense in the taxation year in which the amount is paid.Where s. (1) does not applySubsection 78(1) does not apply in any case where subsection (4) applies.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 78; 1994, c. 7, Sch. II, s. 56
DefinitionsIn this section,creditor of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property; (créancier)debt includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement; (dette)person includes a partnership; (personne)property does not includemoney, orindebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country; (bien)specified amount at any time of a debt owed or assumed by a person meansthe unpaid principal amount of the debt at that time, andunpaid interest accrued to that time on the debt. (montant déterminé)Surrender of propertyFor the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person’s failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.Proceeds of disposition for debtorWhere a particular property is surrendered at any time by a person (in this subsection referred to as the “debtor”) to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula(A + B + C + D + E - F) × G/HwhereAis the total of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;Bis the total of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person (other than the creditor), to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;Cis the total of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person (other than a specified amount included in the amount determined for A or B as a consequence of properties being surrendered at that time by the debtor to the creditor), whereany property surrendered at that time by the debtor to the creditor was security forthe particular debt, andanother debt that is owed by the debtor immediately before that time to the creditor, andthe other debt is subordinate to the particular debt in respect of that property;Diswhere a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser ofthe amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, andthe amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, andin any other case, nil;Eiswhere the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, andin any other case, nil;Fis the total of all amounts each of which is the lesser ofthe portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor’s proceeds of disposition of the particular property, andthe total ofall amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, andthe lesser ofthe unpaid interest accrued to that time on the particular debt, andthe total ofthe amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, andsuch portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;Gis the fair market value at that time of the particular property; andHis the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.Subsequent payment by debtorAn amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to whichsubsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;the description of E in the definition cumulative Canadian exploration expense in subsection 66.1(6), the description of D in the definition cumulative Canadian development expense in subsection 66.2(5) or the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; orparagraph 20(1)(hh) applies, in any other case.Subsequent application with respect to employee or shareholder debtAny amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person’s income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection 79(4) applies.Surrender of property not payment or repayment by debtorWhere a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection 79(3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person’s income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.Foreign exchangeWhere a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection 79(3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 79; 1994, c. 7, Sch. II, s. 57; 1995, c. 21, s. 26; 1998, c. 19, s. 109; 2001, c. 17, s. 209; 2016, c. 12, s. 22
DefinitionsIn this section,creditor has the meaning assigned by subsection 79(1); (créancier)debt has the meaning assigned by subsection 79(1); (dette)person has the meaning assigned by subsection 79(1); (personne)property has the meaning assigned by subsection 79(1); (bien)specified amount has the meaning assigned by subsection 79(1); (montant déterminé)specified cost to a person of a debt owing to the person meanswhere the debt is capital property of the person, the adjusted cost base to the person of the debt, andin any other case, the amount, if any, by whichthe cost amount to the person of the debtexceedssuch portion of that cost amount as would be deductible in computing the person’s income (otherwise than in respect of the principal amount of the debt) if the debt were established by the person to have become a bad debt or to have become uncollectable. (coût déterminé)Seizure of propertySubject to subsection (2.1) and for the purpose of this section, a property is seized at any time by a person in respect of a debt wherethe beneficial ownership of the property is acquired or reacquired at that time by the person; andthe acquisition or reacquisition of the property is in consequence of another person’s failure to pay to the person all or part of the specified amount of the debt.ExceptionFor the purpose of this section, foreign resource property is deemed not to be seized at any time froman individual or a corporation, if the individual or corporation is non-resident at that time; ora partnership (other than a partnership each member of which is resident in Canada at that time).Creditor’s capital gains reservesWhere a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount claimed by the creditor under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the creditor’s gain for the preceding taxation year from any disposition before the particular year of the property shall be deemed to be the amount, if any, by which the amount so claimed exceeds the total of all amounts each of which is an amount determined under paragraph 79.1(6)(a) or 79.1(6)(b) in respect of the seizure.Creditor’s inventory reservesWhere a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount deducted under paragraph 20(1)(n) in computing the income of the creditor for the preceding taxation year in respect of any disposition of the property before the particular year shall be deemed to be the amount, if any, by which the amount so deducted exceeds the total of all amounts each of which is an amount determined under paragraph 79.1(6)(a) or 79.1(6)(b) in respect of the seizure.Adjustment where disposition and reacquisition of capital property in same yearWhere a property is seized at any time in a taxation year by a creditor in respect of one or more debts and the property was capital property of the creditor that was disposed of by the creditor at a previous time in the year, the proceeds of disposition of the property to the creditor at the previous time shall be deemed to be the lesser of the amount of the proceeds (determined without reference to this subsection) and the amount that is the greater ofthe amount, if any, by which the amount of such proceeds (determined without reference to this subsection) exceeds such portion of the proceeds as is represented by the specified amounts of those debts immediately before that time, andthe cost amount to the creditor of the property immediately before the previous time.Cost of seized properties for creditorWhere a particular property is seized at any time in a taxation year by a creditor in respect of one or more debts, the cost to the creditor of the particular property shall be deemed to be the amount, if any, by which the total ofthat proportion of the total specified costs immediately before that time to the creditor of those debts thatthe fair market value of the particular property immediately before that timeis ofthe fair market value of all properties immediately before that time that were seized by the creditor at that time in respect of those debts, andall amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor’s interest, or for civil law the creditor’s right, in the particular property, except to the extent the outlay or expensewas included in the cost to the creditor of property other than the particular property,was included before that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor, orwas deductible in computing the creditor’s income for the year or a preceding taxation yearexceedsthe amount, if any, claimed or deducted under paragraph 20(1)(n) or subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in respect of the particular property in computing the creditor’s income or capital gain for the preceding taxation year or the amount by which the proceeds of disposition of the creditor of the particular property are reduced because of subsection 79.1(5) in respect of a disposition of the particular property by the creditor occurring before that time and in the year.Treatment of debtWhere a property is seized at any time in a taxation year by a creditor in respect of a particular debt,the creditor shall be deemed to have disposed of the particular debt at that time;the amount received on account of the particular debt as a consequence of the seizure shall be deemedto be received at that time, andto be equal towhere the particular debt is capital property, the adjusted cost base to the creditor of the particular debt, andin any other case, the cost amount to the creditor of the particular debt;where any portion of the particular debt is outstanding immediately after that time, the creditor shall be deemed to have reacquired that portion immediately after that time at a cost equal towhere the particular debt is capital property, nil, andin any other case, the amount, if any, by whichthe cost amount to the creditor of the particular debtexceedsthe specified cost to the creditor of the particular debt; andwhere no portion of the particular debt is outstanding immediately after that time and the particular debt is not capital property, the creditor may deduct as a bad debt in computing the creditor’s income for the year the amount described in subparagraph 79.1(7)(c)(ii) in respect of the seizure.Claims for debtsWhere a property is seized at any time in a taxation year by a creditor in respect of a debt, no amount in respect of the debtis deductible in computing the creditor’s income for the year or a subsequent taxation year as a bad, doubtful or impaired debt; orshall be included after that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor as a bad, doubtful or impaired debt.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 26; 1998, c. 19, s. 110; 2001, c. 17, s. 57; 2013, c. 34, s. 117
DefinitionsIn this section,commercial debt obligation issued by a debtor means a debt obligation issued by the debtorwhere interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, orif interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation,an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Act were read without reference to paragraph 18(1)(g), subsections 18(2), (3.1) and (4) and 18.2(2) and section 21; (créance commerciale)commercial obligation issued by a debtor meansa commercial debt obligation issued by the debtor, ora distress preferred share issued by the debtor; (dette commerciale)debtor includes any corporation that has issued a distress preferred share and any partnership; (débiteur)directed person at any time in respect of a debtor meansa taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time, ora taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time bythe debtor,the debtor and one or more persons related to the debtor, ora person or group of persons by which the debtor is controlled at that time; (personne désignée)distress preferred share issued by a corporation means, at any time, a share issued after February 21, 1994 (other than a share issued pursuant to an agreement in writing entered into on or before that date) by the corporation that is a share described in paragraph (e) of the definition term preferred share in subsection 248(1) that would be a term preferred share at that time if that definition were read without reference to paragraphs (e) and (f); (action privilégiée de renflouement)eligible Canadian partnership at any time means a Canadian partnership none of the members of which is, at that time,a non-resident owned investment corporation,a person exempt, because of subsection 149(1), from tax under this Part on all or part of the person’s taxable income,a partnership, other than an eligible Canadian partnership, ora trust, other than a trust in which no non-resident person and no person described in paragraph (a), (b) or (c) is beneficially interested; (société de personnes canadienne admissible)excluded obligation means an obligation issued by a debtor wherethe proceeds from the issue of the obligationwere included in computing the debtor’s income or, but for the expression “other than a prescribed amount” in paragraph 12(1)(x), would have been so included,were deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, orwere deducted in computing the capital cost or cost amount to the debtor of any property of the debtor,an amount paid by the debtor in satisfaction of the entire principal amount of the obligation would be included in the amount determined under paragraph 28(1)(e) or section 30 in respect of the debtor,section 78 applies to the obligation, orthe principal amount of the obligation would, if this Act were read without reference to sections 79 and 80 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; (dette exclue)excluded property means property of a non-resident debtor that is treaty-protected property or that is not taxable Canadian property; (bien exclu)excluded security issued by a corporation to a person as consideration for the settlement of a debt meansa distress preferred share issued by the corporation to the person, ora share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange in Canada and the terms for the conversion to the share were not established or substantially modified after the later of February 22, 1994 and the time that the bond, debenture or note was issued; (valeur mobilière exclue)forgiven amount at any time in respect of a commercial obligation issued by a debtor is the amount determined by the formulaA - BwhereAis the lesser of the amount for which the obligation was issued and the principal amount of the obligation, andBis the total ofthe amount, if any, paid at that time in satisfaction of the principal amount of the obligation,the amount, if any, included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because of the settlement of the obligation at that time,the amount, if any, deducted at that time under paragraph 18(9.3)(f) in computing the forgiven amount in respect of the obligation,the capital gain, if any, of the debtor resulting from the application of subsection 39(3) to the purchase at that time of the obligation by the debtor,such portion of the principal amount of the obligation as relates to an amount renounced under subsection 66(10), 66(10.1), 66(10.2) or 66(10.3) by the debtor,any portion of the principal amount of the obligation that is included in the amount determined for A, B, C or in subsection 79(3) in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year,the total of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by subsection 80.01(8) or 80.01(9) to have been settled,such portion of the principal amount of the obligation as can reasonably be considered to have been included under section 80.4 in computing the debtor’s income for a taxation year that includes that time or for a preceding taxation year,where the debtor is a bankrupt at that time, the principal amount of the obligation,such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation,where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in those activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation, andthe amount, if any, given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation; (montant remis)person includes a partnership; (personne)relevant loss balance, at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a particular taxation year, issubject to paragraph (b), the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time ifthe debtor had sufficient incomes from all sources and sufficient taxable capital gains,subsections (3) and (4) did not apply to reduce such loss at or after that time, andparagraph 111(4)(a) and subsection 111(5) did not apply to the debtor, andnil if the debtor is a taxpayer that was at a previous time subject to a loss restriction event and the particular year ended before the previous time, unlessthe obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, orall or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which subparagraph (i) or this subparagraph would apply if the other obligation were still outstanding; (solde de pertes applicable)successor pool at any time for a commercial obligation and in respect of an amount determined in relation to a debtor means the portion of that amount that would be deductible under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, in computing the debtor’s income for the taxation year that includes that time, ifthe debtor had sufficient incomes from all sources,subsection (8) did not apply to reduce the amount so determined at that time,the year ended immediately after that time, andparagraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively,except that the successor pool at that time for the obligation is deemed to be nil unlessthe obligation was issued by the debtor before, and not in contemplation of, the event described in paragraph (8)(a) that gives rise to the deductibility under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, of all or part of that amount in computing the debtor’s income, orall or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph (e) or this paragraph would apply if the other obligation were still outstanding; (compte de société remplaçante)unrecognized loss, at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property, is the amount that would, but for subparagraph 40(2)(g)(ii), be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that if the debtor is a taxpayer that is subject to a loss restriction event before the particular time and after the time of the disposition, the unrecognized loss at the particular time in respect of the obligation is nil unlessthe obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, orall or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph 80(1)(a) or this paragraph would apply if the other obligation were still outstanding. (perte non constatée)Application of debt forgiveness rulesFor the purposes of this section,an obligation issued by a debtor is settled at any time where the obligation is settled or extinguished at that time (otherwise than by way of a bequest or inheritance or as consideration for the issue of a share described in paragraph (b) of the definition excluded security in subsection 80(1));an amount of interest payable by a debtor in respect of an obligation issued by the debtor shall be deemed to be an obligation issued by the debtor thathas a principal amount, andwas issued by the debtor for an amount,equal to the portion of the amount of such interest that was deductible or would, but for subsection 18(2) or 18(3.1) or section 21, have been deductible in computing the debtor’s income for a taxation year;subsections (3) to (5) and (8) to (13) apply in numerical order to the forgiven amount in respect of a commercial obligation;the applicable fraction of the unapplied portion of a forgiven amount at any time in respect of an obligation issued by the debtor is in respect of a loss for any other taxation year, the fraction required to be used under section 38 for that year;where an applicable fraction (as determined under paragraph 80(2)(d)) of the unapplied portion of a forgiven amount is applied under subsection 80(4) to reduce at any time a loss for a taxation year, the portion of the forgiven amount so applied shall, except for the purpose of reducing the loss, be deemed to be the quotient obtained when the amount of the reduction is divided by the applicable fraction;[Repealed, 2016, c. 12, s. 23]where a corporation issues a share (other than an excluded security) to a person as consideration for the settlement of a debt issued by the corporation and payable to the person, the amount paid in satisfaction of the debt because of the issue of the share is deemed to be equal to the fair market value of the share at the time it was issued;where a debt issued by a corporation and payable to a person is settled at any time, the amount, if any, that can reasonably be considered to be the increase, as a consequence of the settlement of the debt, in the fair market value of shares of the capital stock of the corporation owned by the person (other than any shares acquired by the person as consideration for the settlement of the debt) is deemed to be an amount paid at that time in satisfaction of the debt;where any part of the consideration given by a debtor to another person for the settlement at any time of a particular commercial debt obligation issued by the debtor and payable to the other person consists of a new commercial debt obligation issued by the debtor to the other personan amount equal to the principal amount of the new obligation shall be deemed to be paid by the debtor at that time, because of the issue of the new obligation, in satisfaction of the principal amount of the particular obligation, andthe new obligation shall be deemed to have been issued for an amount equal to the amount, if any, by whichthe principal amount of the new obligationexceedsthe amount, if any, by which the principal amount of the new obligation exceeds the amount for which the particular obligation was issued;where 2 or more commercial obligations issued by a debtor are settled at the same time, those obligations shall be treated as if they were settled at different times in the order designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the debtor’s taxation year that includes that time or, if the debtor does not so designate any such order, in the order designated by the Minister;for the purpose of determining, at any time, whether 2 persons are related to each other or whether any person is controlled by any other person, it shall be assumed thateach partnership and each trust is a corporation having a capital stock of a single class of voting shares divided into 100 issued shares,each member of a partnership and each beneficiary under a trust owned at that time the number of issued shares of that class that is equal to the proportion of 100 thatthe fair market value at that time of the member’s interest in the partnership or the beneficiary’s interest in the trust, as the case may beis ofthe fair market value at that time of all members’ interests in the partnership or all beneficiaries’ interests in the trust, as the case may be, andwhere a beneficiary’s share of the income or capital of a trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the fair market value at any time of the beneficiary’s interest in the trust is equal towhere the beneficiary is not entitled to receive or otherwise obtain the use of any of the income or capital of the trust before the death after that time of one or more other beneficiaries under the trust, nil, andin any other case, the total fair market value at that time of all beneficiaries’ interests under the trust;where an obligation is denominated in a currency (other than Canadian currency), the forgiven amount at any time in respect of the obligation shall be determined with reference to the relative value of that currency and Canadian currency at the time the obligation was issued;where an amount is paid in satisfaction of the principal amount of a particular commercial obligation issued by a debtor and, as a consequence of the payment, the debtor is legally obliged to pay that amount to another person, the obligation to pay that amount to the other person shall be deemed to be a commercial obligation that was issued by the debtor at the same time and in the same circumstances as the particular obligation;for greater certainty, the amount that can be applied under this section to reduce another amount may not exceed that other amount;except for the purposes of this paragraph, wherea commercial debt obligation issued by a debtor is settled at any time,the debtor is at that time a member of a partnership, andthe obligation was, under the agreement governing the obligation, treated immediately before that time as a debt owed by the partnership,the obligation shall be considered to have been issued by the partnership and not by the debtor;notwithstanding paragraph (n), if a commercial debt obligation, for which a particular person is liable with one or more other persons, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the obligation that can reasonably be considered to be the particular person’s share of the obligation shall be considered to have been issued by the particular person and settled at that time and not at any subsequent time;a commercial debt obligation issued by an individual that is outstanding at the time of the individual’s death and settled at a subsequent time shall, if the estate of the individual was liable for the obligation immediately before the subsequent time, be deemed to have been issued by the estate at the same time and in the same circumstances as the obligation was issued by the individual; andwhere a commercial debt obligation issued by an individual would, but for this paragraph, be settled at any time in the period ending 6 months after the death of an individual (or within such longer period as is acceptable to the Minister and the estate of the individual) and the estate of the individual was liable immediately before that time for the obligationthe obligation shall be deemed to have been settled at the beginning of the day on which the individual died and not at that time,any amount paid at that time by the estate in satisfaction of the principal amount of the obligation shall be deemed to have been paid at the beginning of the day on which the individual died,any amount given by the estate at or before that time to another person as consideration for assumption by the other person of the obligation shall be deemed to have been given at the beginning of the day on which the individual died, andparagraph 80(2)(b) shall not apply in respect of the settlement to interest that accrues within that period,except that this paragraph does not apply in circumstances in which any amount is because of the settlement included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person or in which section 79 applies in respect of the obligation.Reductions of non-capital lossesWhere a commercial obligation issued by a debtor is settled at any time, the forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applieddoes not exceed the amount (in subsection 80(4) referred to as the debtor’s “ordinary non-capital loss at that time for the year”) that would be the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year if the description of E in the definition non-capital loss in subsection 111(8) were read without reference to the expression “the taxpayer’s allowable business investment loss for the year”, anddoes not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year;the debtor’s farm loss for each taxation year that ended before that time, to the extent that the amount so applieddoes not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s farm loss for the year, anddoes not, because of this subsection, reduce the debtor’s farm loss for a preceding taxation year; andthe debtor’s restricted farm loss for each taxation year that ended before that time, to the extent that the amount so applieddoes not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s restricted farm loss for the year, anddoes not, because of this subsection, reduce the debtor’s restricted farm loss for a preceding taxation year.Reductions of capital lossesWhere a commercial obligation issued by a debtor is settled at any time, the applicable fraction of the remaining unapplied portion of a forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applieddoes not exceed the amount, if any, by whichthe relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the yearexceedsthe debtor’s ordinary non-capital loss (within the meaning assigned by subparagraph 80(3)(a)(i)) at that time for the year, anddoes not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year; andthe debtor’s net capital loss for each taxation year that ended before that time, to the extent that the amount so applieddoes not exceed the relevant loss balance at that time for the obligation and in respect of the debtor’s net capital loss for the year, anddoes not, because of this subsection, reduce the debtor’s net capital loss for a preceding taxation year.Reductions with respect to depreciable propertyWhere a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied, in such manner as is designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time, to reduce immediately after that time the following amounts:the capital cost to the debtor of a depreciable property that is owned by the debtor immediately after that time; andthe undepreciated capital cost to the debtor of depreciable property of a prescribed class immediately after that time.Restriction with respect to depreciable propertyWhere a commercial obligation issued by a debtor is settled at any time,an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent thatthe undepreciated capital cost to the debtor of depreciable property of that class at that timeexceedsthe total of all other reductions immediately after that time to that undepreciated capital cost; andan amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property (other than a depreciable property of a prescribed class) only to the extent thatthe capital cost to the debtor of the property at that timeexceedsthe amount that was allowed to the debtor before that time under Part XVII of the Income Tax Regulations in respect of the property.[Repealed, 2016, c. 12, s. 23]Reductions of resource expendituresWhere a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the following amounts:where the debtor is a corporation resident in Canada throughout that year, each particular amount that would be determined in respect of the debtor under paragraph 66.7(2)(a), (2.3)(a), (3)(a), (4)(a) or (5)(a) if paragraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively, as a consequence of the acquisition of control of the debtor by a person or group of persons, the debtor ceasing to be exempt from tax under this Part on its taxable income or the acquisition of properties by the debtor by way of an amalgamation or merger, where the amount so applied does not exceed the successor pool immediately after that time for the obligation and in respect of the particular amount;the cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)) of the debtor;the cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)) of the debtor;the cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)) of the debtor;the total determined under paragraph 66(4)(a) in respect of the debtor, wherethe debtor is resident in Canada throughout that year, andthe amount so applied does not exceed such portion of the total of the debtor’s foreign exploration and development expenses (within the meaning assigned by subsection 66(15)) as were incurred by the debtor before that time and would be deductible under subsection 66(4) in computing the debtor’s income for that year if the debtor had sufficient income described in subparagraph 66(4)(b)(ii) and if that year ended at that time; andthe cumulative foreign resource expense (within the meaning assigned by subsection 66.21(1)) of the debtor in respect of a country.Reductions of adjusted cost bases of capital propertiesIf a commercial obligation issued by a debtor is settled at any time and amounts have been designated under subsections (5) and (8) to the maximum extent permitted in respect of the settlement, subject to subsection (18)the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties (other than shares of the capital stock of corporations of which the debtor is a specified shareholder at that time, debts issued by corporations of which the debtor is a specified shareholder at that time, interests in partnerships that are related to the debtor at that time, depreciable property that is not of a prescribed class, personal-use properties and excluded properties) that are owned by the debtor immediately after that time;an amount may be applied under this subsection to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent thatthe capital cost immediately after that time to the debtor of the property (determined without reference to the settlement of the obligation at that time)exceedsits capital cost immediately after that time to the debtor for the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) (determined without reference to the settlement of the obligation at that time); andfor the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), no amount shall be considered to have been applied under this subsection.Reduction of adjusted cost bases of certain shares and debtsIf a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties, owned by the debtor immediately after that time, that are shares of the capital stock of corporations of which the debtor is a specified shareholder at that time and debts issued by corporations of which the debtor is a specified shareholder at that time (other than shares of the capital stock of corporations related to the debtor at that time, debts issued by corporations related to the debtor at that time and excluded properties).Reduction of adjusted cost bases of certain shares, debts and partnership interestsIf a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor ofshares and debts that are capital properties (other than excluded properties and properties the adjusted cost bases of which are reduced at that time under subsection 80(9) or 80(10)) of the debtor immediately after that time; andinterests in partnerships that are related to the debtor at that time that are capital properties (other than excluded properties) of the debtor immediately after that time.Capital gain where current year capital lossIf a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement,the debtor shall be deemed to have a capital gain for the year from the disposition of capital property (or, where the debtor is non-resident at the end of the year, taxable Canadian property), equal to the lesser ofthe remaining unapplied portion of the forgiven amount at that time in respect of the obligation, andthe amount, if any, by which the total ofall of the debtor’s capital losses from the dispositions of properties (other than listed personal properties and excluded properties), andtwice the amount that would, because of subsection 88(1.2), be deductible under paragraph 111(1)(b) in computing the debtor’s taxable income for the year, if the debtor had sufficient income and taxable capital gains for the year,exceeds the total ofall of the debtor’s capital gains for the year from the dispositions of such properties (determined without reference to this subsection), andall amounts each of which is an amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to other commercial obligations settled before that time; andthe forgiven amount at that time in respect of the obligation shall be considered to have been applied under this subsection to the extent of the amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to the settlement of the obligation at that time.Income inclusionWhere a commercial obligation issued by a debtor is settled at any time in a taxation year, there shall be added, in computing the debtor’s income for the year from the source in connection with which the obligation was issued, the amount determined by the formula(A + B - C - D) × EwhereAis the remaining unapplied portion of the forgiven amount at that time in respect of the obligation,Bis the lesser ofthe total of all amounts designated under subsection 80(11) by the debtor in respect of the settlement of the obligation at that time, andthe residual balance at that time in respect of the settlement of the obligation,Cis the total of all amounts each of which is an amount specified in an agreement filed under section 80.04 in respect of the settlement of the obligation at that time,Disif the debtor has designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, the amount, if any, by whichthe total of all amounts each of which is an unrecognized loss at that time, in respect of the obligation, from the disposition of a propertyexceedstwice the total of all amounts each of which is an amount by which the amount determined before that time under this subsection in respect of a settlement of an obligation issued by the debtor has been reduced because of an amount determined under this paragraph, andin any other case, nil, andEiswhere the debtor is a partnership, 1, andin any other case, 1/2.Residual balanceFor the purpose of subsection 80(13), the residual balance at any time in a taxation year in respect of the settlement of a particular commercial obligation issued by a debtor is the amount, if any, by whichthe gross tax attributes of directed persons at that time in respect of the debtorexceeds the total ofthe value of A in subsection 80(13) in respect of the settlement of the particular obligation at that time,all amounts each of which isthe amount, if any, by which the value of A in subsection 80(13) in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor exceeds the value of C in that subsection in respect of the settlement,the value of A in subsection 80(13) in respect of a settlement of a commercial obligation that is deemed by paragraph 80.04(4)(e) to have been issued by a directed person in respect of the debtor because of the filing of an agreement under section 80.04 in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor, orthe amount specified in an agreement (other than an agreement with a directed person in respect of the debtor) filed under section 80.04 in respect of the settlement before that time and in the year of a commercial obligation issued by the debtor, andall amounts each of which is an amount in respect of a settlement at a particular time before that time and in the year of a commercial obligation issued by the debtor equal to the least ofthe total of all amounts designated under subsection 80(11) in respect of the settlement,the residual balance of the debtor at the particular time, andthe amount, if any, by which the sum of the values of A and B in subsection 80(13) in respect of the settlement exceeds the value of C in that subsection in respect of the settlement.Gross tax attributesThe gross tax attributes of directed persons at any time in respect of a debtor means the total of all amounts each of which is an amount that would be applied under any of subsections 80(3) to 80(10) and 80(12) in respect of a settlement of a separate commercial obligation (in this subsection referred to as a “notional obligation”) issued by directed persons at that time in respect of the debtor if the following assumptions were made:a notional obligation was issued immediately before that time by each of those directed persons and was settled at that time;the forgiven amount at that time in respect of each of those notional obligations was equal to the total of all amounts each of which is a forgiven amount at or before that time and in the year in respect of a commercial obligation issued by the debtor;amounts were designated under subsections (5), (8), (9) and (10) by each of those directed persons to the maximum extent permitted in respect of the settlement of each of those notional obligations; andno amounts were designated under subsection 80(11) by any of those directed persons in respect of the settlement of any of the notional obligations.Members of partnershipsWhere a commercial debt obligation issued by a partnership (in this subsection referred to as the “partnership obligation”) is settled at any time in a fiscal period of the partnership that ends in a taxation year of a member of the partnership,the member may deduct, in computing the member’s income for the year, such amount as the member claims not exceeding the relevant limit in respect of the partnership obligation;for the purpose of paragraph (a), the relevant limit in respect of the partnership obligation is the amount that would be included in computing the member’s income for the year as a consequence of the application of subsection (13) and section 96 to the settlement of the partnership obligation if the partnership had designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of each obligation settled in that fiscal period and if income arising from the application of subsection (13) were from a source of income separate from any other sources of partnership income; andfor the purposes of this section and section 80.04,the member shall be deemed to have issued a commercial debt obligation that was settled at the end of that fiscal period,the amount deducted under paragraph 80(15)(a) in respect of the partnership obligation in computing the member’s income shall be treated as if it were the forgiven amount at the end of that fiscal period in respect of the obligation referred to in subparagraph 80(15)(c)(i),subject to subparagraph 80(15)(c)(iv), the obligation referred to in subparagraph 80(15)(c)(i) shall be deemed to have been issued at the same time at which, and in the same circumstances in which, the partnership obligation was issued,if the member is a taxpayer that was subject to a loss restriction event at a particular time that is before the end of that fiscal period and before the taxpayer became a member of the partnership, and the partnership obligation was issued before the particular time,subject to the application of this subparagraph to the taxpayer after the particular time and before the end of that fiscal period, the obligation referred to in subparagraph (i) is deemed to have been issued by the member after the particular time, andsubparagraph (b)(ii) of the definition relevant loss balance in subsection (1), paragraph (f) of the definition successor pool in that subsection and paragraph (b) of the definition unrecognized loss in that subsection do not apply in respect of the loss restriction event, andthe source in connection with which the obligation referred to in subparagraph 80(15)(c)(i) was issued shall be deemed to be the source in connection with which the partnership obligation was issued.Designations by MinisterWhere a commercial obligation issued by a debtor is settled at any time in a taxation year and, as a consequence of the settlement an amount would, but for this subsection, be deducted under section 61.2 or 61.3 in computing the debtor’s income for the year and the debtor has not designated amounts under subsections 80(5) to 80(11) to the maximum extent possible in respect of the settlement,the Minister may designate amounts under subsections 80(5) to 80(11) to the extent that the debtor would have been permitted to designate those amounts; andthe amounts designated by the Minister shall, except for the purpose of this subsection, be deemed to have been designated by the debtor as required by subsections 80(5) to 80(11).[Repealed, 1998, c. 19, s. 111]Partnership designationsWhere a commercial obligation issued by a partnership is settled at any time after December 20, 1994, the amount designated under subsection 80(9), 80(10) or 80(11) in respect of the settlement by the partnership to reduce the adjusted cost base of a capital property acquired shall not exceed the amount, if any, by which the adjusted cost base at that time to the partnership of the property exceeds the fair market value at that time of the property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 80; 1994, c. 7, Sch. II, s. 58; 1995, c. 21, s. 27; 1998, c. 19, s. 111; 1999, c. 22, s. 21; 2001, c. 17, s. 58; 2007, c. 35, s. 21; 2013, c. 34, s. 118, c. 40, s. 36; 2016, c. 12, s. 232023, c. 26, s. 152024, c. 15, s. 15
DefinitionsIn this section,commercial debt obligation has the meaning assigned by subsection 80(1); (créance commerciale)commercial obligation has the meaning assigned by subsection 80(1); (dette commerciale)debtor has the meaning assigned by subsection 80(1); (débiteur)distress preferred share has the meaning assigned by subsection 80(1); (action privilégiée de renflouement)forgiven amount has the meaning assigned by subsection 80(1) except that, where an amount would be included in computing a person’s income under paragraph 6(1)(a) or subsection 15(1) as a consequence of the settlement of an obligation if the obligation were settled without any payment being made in satisfaction of its principal amount, forgiven amount in respect of that obligation has the meaning assigned by subsection 6(15.1) or 15(1.21), as the case may be; (montant remis)person has the meaning assigned by subsection 80(1); (personne)specified cost at any time to a person of an obligation means,where the obligation is capital property of the person at that time, the adjusted cost base at that time to the person of the obligation, andin any other case, the cost amount to the person of the obligation. (coût déterminé)ApplicationFor the purposes of this section,paragraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply; anda person has a significant interest in a corporation at any time if the person owned at that timeshares of the capital stock of the corporation that would give the person 25% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, orshares of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all the issued shares of the capital stock of the corporationand, for the purposes of this paragraph, a person shall be deemed to own at any time each share of the capital stock of a corporation that is owned, otherwise than because of this paragraph, at that time by another person with whom the person does not deal at arm’s length.Deemed settlement on amalgamationWhere a commercial obligation or another obligation (in this subsection referred to as the “indebtedness”) of a debtor that is a corporation to pay an amount to another corporation (in this subsection referred to as the “creditor”) is settled on an amalgamation of the debtor and the creditor, the indebtedness shall be deemed to have been settled immediately before the time that is immediately before the amalgamation by a payment made by the debtor and received by the creditor of an amount equal to the amount that would have been the creditor’s cost amount of the indebtedness at that time ifthe definition cost amount in subsection 248(1) were read without reference to paragraph (e) of that definition; andthat cost amount included amounts added in computing the creditor’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent those amounts have not been deducted in computing the creditor’s income as bad debts in respect of that unpaid interest.Deemed settlement on winding-upWhere there is a winding-up of a subsidiary to which the rules in subsection 88(1) apply anda debt or other obligation (in this subsection referred to as the “subsidiary’s obligation”) of the subsidiary to pay an amount to the parent, ora debt or other obligation (in this subsection referred to as the “parent’s obligation”) of the parent to pay an amount to the subsidiaryis, as a consequence of the winding-up, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary’s obligation or the parent’s obligation, as the case may be,where that payment is less than the amount that would have been the cost amount to the parent or subsidiary of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definition cost amount in subsection 248(1) were read without reference to paragraph (e) of that definition and the parent so elects in a prescribed form on or before the day on or before which the parent is required to file a return of income pursuant to section 150 for the taxation year that includes the particular time, the amount paid at that time in satisfaction of the principal amount of the subsidiary’s obligation or the parent’s obligation shall be deemed to be equal to the amount that would be the cost amount to the parent or the subsidiary, as the case may be, of the subsidiary’s obligation or the parent’s obligation immediately before the particular time ifthe definition cost amount in subsection 248(1) were read without reference to paragraph (e) of that definition, andthat cost amount included amounts added in computing the parent’s income or the subsidiary’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the parent or the subsidiary has not deducted any amounts as bad debts in respect of that unpaid interest, andfor the purposes of applying section 80 to the subsidiary’s obligation, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the subsidiary’s obligation is settled as a consequence of the distribution, the subsidiary’s obligation shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.Deemed settlement on winding-upWhere there is a winding-up of a subsidiary to which the rules in subsection 88(1) apply and, as a consequence of the winding-up, a distress preferred share issued by the subsidiary and owned by the parent (or a distress preferred share issued by the parent and owned by the subsidiary) is settled at any time without any payment of an amount or by the payment of an amount that is less than the principal amount of the share,where the payment was less than the adjusted cost base of the share to the parent or the subsidiary, as the case may be, immediately before that time, for the purposes of applying the provisions of this Act to the issuer of the share, the amount paid at that time in satisfaction of the principal amount of the share shall be deemed to be equal to its adjusted cost base to the parent or to the subsidiary, as the case may be; andfor the purposes of applying section 80 to the share, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the share is settled as a consequence of the distribution, the share shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.Deemed settlement on SIFT trust wind-up eventIf a trust that is a SIFT wind-up entity is the only beneficiary under another trust (in this subsection referred to as the “subsidiary trust”), and a capital property that is a debt or other obligation (in this subsection referred to as the “subsidiary trust’s obligation”) of the subsidiary trust to pay an amount to the SIFT wind-up entity is, as a consequence of a distribution from the subsidiary trust that is a SIFT trust wind-up event, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary trust’s obligationparagraph (b) applies ifthe payment is less than the amount that would have been the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time, andthe SIFT wind-up entity elects, in prescribed form on or before the SIFT wind-up entity’s filing-due date for the taxation year that includes the particular time, to have paragraph (b) apply;if this paragraph applies, the amount paid at the particular time in satisfaction of the principal amount of the subsidiary trust’s obligation is deemed to be equal to the amount that would be the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time if that adjusted cost base included amounts added in computing the SIFT wind-up entity’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the SIFT wind-up entity has not deducted any amounts as bad debts in respect of that unpaid interest; andfor the purposes of applying section 80 to the subsidiary trust’s obligation, the subsidiary trust’s obligation is deemed to have been settled immediately before the time that is immediately before the distribution.Specified obligation in relation to debt parkingFor the purpose of subsection (7), an obligation issued by a debtor is, at a particular time, a specified obligation of the debtor whereat any previous time (other than a time before the last time, if any, the obligation became a parked obligation before the particular time),a person who owned the obligationdealt at arm’s length with the debtor, andwhere the debtor is a corporation, did not have a significant interest in the debtor, orthe obligation was acquired by the holder of the obligation from another person who was, at the time of that acquisition, not related to the holder or related to the holder only because of paragraph 251(5)(b); orthe obligation is deemed by subsection 50(1) to be reacquired at the particular time.Parked obligationFor the purposes of this subsection and subsections (6), (8) and (10),an obligation issued by a debtor is a “parked obligation” at any time where at that timethe obligation is a specified obligation of the debtor, andthe holder of the obligationdoes not deal at arm’s length with the debtor, orwhere the debtor is a corporation and the holder acquired the obligation after July 12, 1994 (otherwise than pursuant to an agreement in writing entered into on or before July 12, 1994), has a significant interest in the debtor; andan obligation that is, at any time, acquired or reacquired in circumstances to which subparagraph (6)(a)(ii) or paragraph (6)(b) applies shall, if the obligation is a parked obligation immediately after that time, be deemed to have become a parked obligation at that time.Deemed settlement after debt parkingWhere at any particular time after February 21, 1994 a commercial debt obligation that was issued by a debtor becomes a parked obligation (otherwise than pursuant to an agreement in writing entered into before February 22, 1994) and the specified cost at the particular time to the holder of the obligation is less than 80% of the principal amount of the obligation, for the purpose of applying the provisions of this Act to the debtorthe obligation shall be deemed to have been settled at the particular time; andthe forgiven amount at the particular time in respect of the obligation shall be determined as if the debtor had paid an amount at the particular time in satisfaction of the principal amount of the obligation equal to that specified cost.Statute-barred debtWhere at any particular time after February 21, 1994 a commercial debt obligation issued by a debtor that is payable to a person (other than a person with whom the debtor is related at the particular time) becomes unenforceable in a court of competent jurisdiction because of a statutory limitation period and the obligation would, but for this subsection, not have been settled or extinguished at the particular time, for the purpose of applying the provisions of this Act to the debtor, the obligation shall be deemed to have been settled at the particular time.Subsequent payments in satisfaction of debtWhere a commercial debt obligation issued by a debtor is first deemed by subsection (8) or (9) to have been settled at a particular time, at a subsequent time a payment is made by the debtor of an amount in satisfaction of the principal amount of the obligation and it cannot reasonably be considered that one of the reasons the obligation became a parked obligation or became unenforceable, as the case may be, before the subsequent time was to have this subsection apply to the payment, in computing the debtor’s income for the taxation year (in this subsection referred to as the “subsequent year”) that includes the subsequent time from the source in connection with which the obligation was issued, there may be deducted the amount determined by the formula0.5(A - B) - CwhereAis the amount of the payment,Bis the amount, if any, by whichthe principal amount of the obligationexceeds the total ofall amounts each of which is a forgiven amount at any timein the period that began at the particular time and ended immediately before the subsequent time, andat which a particular portion of the obligation is deemed by subsection (8) or (9) to be settledin respect of the particular portion, andall amounts paid in satisfaction of the principal amount of the obligation in the period that began at the particular time and ended immediately before the subsequent time, andCis the amount, if any, by which the total ofall amounts deducted under section 61.3 in computing the debtor’s income for the subsequent year or a preceding taxation year,all amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was exempt from tax under this Part on its taxable income, andall amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was non-resident (other than any of those amounts added in computing the debtor’s taxable income or taxable income earned in Canada)exceeds the total ofthe amount, if any, deducted because of paragraph 37(1)(f.1) in determining the balance determined under subsection 37(1) in respect of the debtor immediately after the subsequent year, andall amounts by which the amount deductible under this subsection in respect of a payment made by the debtor before the subsequent time in computing the debtor’s income for the subsequent year or a preceding year has been reduced because of this description.Foreign currency gains and lossesWhere an obligation issued by a debtor is denominated in a currency (other than the Canadian currency) and the obligation is deemed by subsection (8) or (9) to have been settled, those subsections do not apply for the purpose of determining any gain or loss of the debtor on the settlement that is attributable to a fluctuation in the value of the currency relative to the value of Canadian currency.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 27; 2001, c. 17, s. 59; 2009, c. 2, s. 17
DefinitionsIn this section, commercial debt obligation, commercial obligation, distress preferred share and person have the meanings assigned by subsection 80(1).General rules for distress preferred sharesFor the purpose of applying the provisions of this Act to an issuer of a distress preferred share,the principal amount, at any time, of the share shall be deemed to be the amount (determined at that time) for which the share was issued;the amount for which the share was issued shall, at any time, be deemed to be the amount, if any, by which the total ofthe amount for which the share was issued, determined without reference to this paragraph, andall amounts by which the paid-up capital in respect of the share increased after the share was issued and before that timeexceedsthe total of all amounts each of which is an amount paid before that time on a reduction of the paid-up capital in respect of the share, except to the extent that the amount is deemed by section 84 to have been paid as a dividend;the share shall be deemed to be settled at such time as it is redeemed, acquired or cancelled by the issuer; anda payment in satisfaction of the principal amount of the share is any payment made on a reduction of the paid-up capital in respect of the share to the extent that the payment would be proceeds of disposition of the share within the meaning that would be assigned by the definition proceeds of disposition in section 54 if that definition were read without reference to paragraph (j).Substitution of distress preferred share for debtWhere any part of the consideration given by a corporation to another person for the settlement or extinguishment at any time of a commercial debt obligation that was issued by the corporation and owned immediately before that time by the other person consists of a distress preferred share issued by the corporation to the other person,for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the obligation because of the issue of that share shall be deemed to be equal to the lesser ofthe principal amount of the obligation, andthe amount by which the paid-up capital in respect of the class of shares that include that share increases because of the issue of that share; andfor the purpose of subparagraph (2)(b)(i), the amount for which the share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.Substitution of commercial debt obligation for distress preferred shareWhere any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of a commercial debt obligation issued by the corporation to the other person, for the purposes of section 80the amount paid at that time in satisfaction of the principal amount of the share because of the issue of that obligation shall be deemed to be equal to the principal amount of the obligation; andthe amount for which the obligation was issued shall be deemed to be equal to its principal amount.Substitution of distress preferred share for other distress preferred shareWhere any part of the consideration given by a corporation to another person for the settlement at any time of a particular distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another distress preferred share issued by the corporation to the other person, for the purposes of section 80the amount paid at that time in satisfaction of the principal amount of the particular share because of the issue of the other share shall be deemed to be equal to the amount by which the paid-up capital in respect of the class of shares that includes the other share increases because of the issue of the other share; andfor the purpose of subparagraph (2)(b)(i), the amount for which the other share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.Substitution of non-commercial obligation for distress preferred shareWhere any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another share (other than a distress preferred share) or an obligation (other than a commercial obligation) issued by the corporation to the other person, for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the distress preferred share because of the issue of the other share or obligation shall be deemed to be equal to the fair market value of the other share or obligation, as the case may be, at that time.Deemed settlement on expiry of termWhere at any time a distress preferred share becomes a share that is not a distress preferred share, for the purposes of section 80the share shall be deemed to have been settled immediately before that time; anda payment equal to the fair market value of the share at that time shall be deemed to have been made immediately before that time in satisfaction of the principal amount of the share.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 27
DefinitionsIn this section, commercial debt obligation, commercial obligation, distress preferred share, forgiven amount and person have the meanings assigned by subsection 80(1).Deferred recognition of debtor’s gain on settlement of debtWhere at any time in a taxation year a person (in this subsection referred to as the “transferor”) surrenders a particular capital property (other than a distress preferred share) that is a share, a capital interest in a trust or an interest in a partnership, the person shall be deemed to have a capital gain from the disposition at that time of another capital property (or, where the particular property is a taxable Canadian property, another taxable Canadian property) equal to the amount, if any, by whichthe total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the transferor of the particular property immediately before that timeexceeds the total ofthe amount that would be the transferor’s capital gain for the year from the disposition of the particular property if this Act were read without reference to subsection 100(2), andwhere, at the end of the year, the transferor is resident in Canada or is a non-resident person who carries on business in Canada through a fixed place of business, the amount designated under subsection (7) by the transferor in respect of the disposition, at that time or immediately after that time, of the particular property.Surrender of capital propertyFor the purpose of subsection (2), a person shall be considered to have surrendered a property at any time only wherein the case of a share of the capital stock of a particular corporation,the person is a corporation that disposed of the share at that time and the proceeds of disposition of the share are determined under paragraph 88(1)(b), orthe person is a corporation that owned the share at that time and, immediately after that time, amalgamates or merges with the particular corporation;in the case of a capital interest in a trust, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 107(2)(c); andin the case of an interest in a partnership, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 98(3)(a) or (5)(a).[Repealed, 1998, c. 19, s. 112]Alternative treatmentWhere at any time in a taxation year a person disposes of a property, for the purposes of subsection (2) and section 80the person may designate an amount in a prescribed form filed with the person’s return of income under this Part for the year; andwhere an amount is designated by the person under paragraph (a) in respect of the disposition,the person shall be deemed to have issued a commercial debt obligation at that time that is settled immediately after that time,the lesser of the amount so designated and the amount that would, but for this subsection, be a capital gain determined in respect of the disposition because of subsection (2) shall be treated as if it were the forgiven amount at the time of the settlement in respect of the obligation referred to in subparagraph (i),the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business, if any, carried on by the person at the end of the year, andwhere the person does not carry on a business at the end of the year, the person shall be deemed to carry on an active business at the end of the year and the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business deemed by this subparagraph to be carried on.Lifetime capital gains exemptionIf, as a consequence of the disposition at any time by an individual of a property that is a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual (as defined in subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purposes of section 110.6, the other property is deemed to be a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual, as the case may be.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 27; 1998, c. 19, s. 112; 2014, c. 39, s. 15; 2017, c. 33, s. 22(E)
DefinitionsIn this section, commercial debt obligation, commercial obligation, debtor, directed person, eligible Canadian partnership, forgiven amount and person have the meanings assigned by subsection 80(1).Eligible transfereeFor the purpose of this section, an eligible transferee of a debtor at any time is a directed person at that time in respect of the debtor or a taxable Canadian corporation or eligible Canadian partnership related (otherwise than because of a right referred to in paragraph 251(5)(b)) at that time to the debtor.ApplicationParagraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply for the purpose of this section.Agreement respecting transfer of forgiven amountWherea particular commercial obligation (other than an obligation deemed by paragraph (e) to have been issued) issued by a debtor is settled at a particular time,amounts have been designated by the debtor under subsections 80(5) to 80(10) to the maximum extent permitted in respect of the settlement of the particular obligation at the particular time,the debtor and an eligible transferee of the debtor at the particular time file under this section an agreement between them in respect of that settlement, andan amount is specified in that agreementthe following rules apply:except for the purposes of subsection 80(11), the transferee shall be deemed to have issued a commercial debt obligation that was settled at the particular time,the specified amount shall be deemed to be the forgiven amount at the particular time in respect of the obligation referred to in paragraph (e),subject to paragraph (h), the obligation referred to in paragraph (e) shall be deemed to have been issued at the same time (in paragraph (h) referred to as the “time of issue”) at which, and in the same circumstances in which, the particular obligation was issued,if the transferee is a taxpayer that is subject to a loss restriction event after the time of issue and the transferee and the debtor were, if the transferee is a corporation, not related to each other  —  or, if the transferee is a trust, not affiliated with each other  —  immediately before the loss restriction event,the obligation referred to in paragraph (e) is deemed to have been issued after the loss restriction event, andsubparagraph (b)(ii) of the definition relevant loss balance in subsection 80(1), paragraph (f) of the definition successor pool in that subsection and paragraph (b) of the definition unrecognized loss in that subsection do not apply in respect of the loss restriction event,the source in connection with which the obligation referred to in paragraph (e) was issued shall be deemed to be the source in connection with which the particular obligation was issued, andfor the purposes of sections 61.3 and 61.4, the amount included under subsection 80(13) in computing the income of the eligible transferee in respect of the settlement of the obligation referred to in paragraph (e) or deducted under paragraph 80(15)(a) in respect of such income shall be deemed to be nil.Consideration for agreementFor the purposes of this Part, where property is acquired at any time by an eligible transferee as consideration for entering into an agreement with a debtor that is filed under this sectionwhere the property was owned by the debtor immediately before that time,the debtor shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, andno amount may be deducted in computing the debtor’s income as a consequence of the transfer of the property, except any amount arising as a consequence of the application of subparagraph (i);the cost at which the property was acquired by the eligible transferee at that time shall be deemed to be equal to the fair market value of the property at that time; andthe eligible transferee shall not be required to add an amount in computing income solely because of the acquisition at that time of the property;[Repealed, 1998, c. 19, s. 113(1)]No benefit conferredFor the purposes of this Part, where a debtor and an eligible transferee enter into an agreement that is filed under this section, no benefit shall be considered to have been conferred on the debtor as a consequence of the agreement.Manner of filing agreementSubject to subsection (7), a particular agreement between a debtor and an eligible transferee in respect of an obligation issued by the debtor that was settled at any time shall be deemed not to have been filed under this sectionwhere it is not filed with the Minister in a prescribed formon or before the later ofthe day on or before which the debtor’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time (or would be required to be filed if tax under this Part were payable by the debtor for the year), andthe day on or before which the transferee’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time, oron or before the later ofthe expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, andif the debtor is an individual (other than a trust) or a graduated rate estate, the day that is one year after the taxpayer’s filing-due date for the year;where it is not accompanied by,where the debtor is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,where the debtor is a corporation and 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,where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, andwhere the transferee is a corporation and 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; orif an agreement amending the particular agreement has been filed in accordance with this section, except where subsection (8) applies to the particular agreement.Filing by partnershipFor the purpose of subsection (6), where an obligation is settled at any time in a fiscal period of a partnership, it shall be assumed thatthe partnership is required to file a return of income under this Part for the fiscal period on or before the latest day on or before which any member of the partnership during the fiscal period is required to file a return of income under this Part for the taxation year in which that fiscal period ends (or would be required to file such a return of income if tax under this Part were payable by the member for that year); andthe partnership may serve a notice of objection described in subparagraph (6)(a)(ii) within each period within which any member of the partnership during the fiscal period may serve a notice of objection to tax payable under this Part for a taxation year in which that fiscal period ends.Related corporationsWhere at any time a corporation becomes related to another corporation and it can reasonably be considered that the main purpose of the corporation becoming related to the other corporation is to enable the corporations to file an agreement under this section, the amount specified in the agreement shall be deemed to be nil for the purpose of the description of C in subsection 80(13).Assessment of taxpayers in respect of agreementThe Minister shall, notwithstanding subsections 152(4) to 152(5), assess or reassess the tax, interest and penalties payable under this Act by any taxpayer in order to take into account an agreement filed under this section.Liability of debtorWithout affecting the liability of any person under any other provision of this Act, where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at any time, the debtor is, to the extent of 30% of the amount specified in the agreement, liable to paywhere the transferee is a corporation, all taxes payable under this Act by it for taxation years that end in the period that begins at that time and ends 4 calendar years after that time;where the transferee is a partnership, the total of all amounts each of which is the tax payable under this Act by a person for a taxation yearthat begins or ends in that period, andthat includes the end of a fiscal period of the partnership during which the person was a member of the partnership; andinterest and penalties in respect of such taxes.Joint and several, or solidary, liabilityIf taxes, interest and penalties are payable under this Act by a person for a taxation year and those taxes, interest and penalties are payable by a debtor because of subsection (10), the debtor and the person are jointly and severally, or solidarily, liable to pay those amounts.Assessments in respect of liabilityWhere a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at a particular time,where the debtor is an individual or a corporation, the Minister may at any subsequent time assess the debtor in respect of taxes, interest and penalties for which the debtor is liable because of subsection (10); andwhere the debtor is a partnership, the Minister may at any subsequent time assess any person who has been a member of the partnership in respect of taxes, interest and penalties for which the partnership is liable because of subsection (10), to the extent that those amounts relate to taxation years of the transferee (or, where the transferee is another partnership, members of the other partnership) that end at or afterwhere the person was not a member of the partnership at the particular time, the first subsequent time the person becomes a member of the partnership, andin any other case, the particular time.Application of Division IThe provisions of Division I apply to an assessment under subsection (12) as though it had been made under section 152.Partnership membersFor the purposes of paragraphs (10)(b) and (12)(b) and this subsection, where at any time a member of a particular partnership is another partnership, each member of the other partnership shall be deemed to be a member of the particular partnership at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 21, s. 27; 1998, c. 19, s. 113; 2013, c. 34, ss. 119(E), 214, c. 40, s. 37; 2014, c. 39, s. 16
Expropriation assets acquired as compensation for, or as consideration for sale of, foreign property taken by or sold to foreign issuerWhere in a taxation year ending coincidentally with or after December 31, 1971 a taxpayer resident in Canada has acquired any bonds, debentures, mortgages, hypothecary claims, notes or similar obligations (in this section referred to as “expropriation assets”) issued by the government of a country other than Canada or issued by a person resident in a country other than Canada and guaranteed by the government of that country,as compensation forshares owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer that carried on business in that country, orall or substantially all of the property used by the taxpayer in carrying on business in that country,(which shares or property, as the case may be, are referred to in this section as “foreign property”), taken, after June 18, 1971, from the taxpayer by the issuer under the authority of a law of that country, oras consideration for the sale of foreign property sold, after June 18, 1971, by the taxpayer to the issuer, ifthe sale was, by a law of that country, expressly required to be made, orthe sale was made after notice or other manifestation of an intention to take the foreign property,if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the expropriation assets so acquired by the taxpayer, the following rule applies, namely, an amount in respect of each such expropriation asset, equal tothe principal amount of the asset, orwhere the taxpayer has designated in the taxpayer’s election an amount in respect of the asset that is less than the principal amount thereof, the amount so designated,shall be deemed to bethe cost to the taxpayer of the asset, andfor the purpose of computing the taxpayer’s proceeds of disposition of the foreign property so taken or sold, the amount received by the taxpayer by virtue of the taxpayer’s acquisition of the asset,except that in no case may the taxpayer designate an amount in respect of any expropriation asset so that the taxpayer’s proceeds of disposition of the foreign property so taken or sold (computed having regard to the provisions of paragraph 80.1(1)(f)) are less than the cost amount to the taxpayer of the foreign property immediately before it was so taken or sold.Election re interest received or to be received on expropriation assets acquired by taxpayerWhere a taxpayer has elected in prescribed form and within prescribed time in respect of all amounts (each of which is referred to in this section as an “interest amount”) received or to be received by the taxpayer as or on account of interest on all expropriation assets acquired by the taxpayer as compensation for, or as consideration for the sale of, foreign property taken by or sold to any particular issuer as described in subsection 80.1(1), the following rules apply in respect of each such asset so acquired by the taxpayer:in computing the taxpayer’s income for a taxation year from the asset, there may be deducted, in respect of each interest amount received by the taxpayer in the year on the asset, the lesser of the interest amount and the total ofthe amount required by paragraph 80.1(2)(b) to be added, by virtue of the receipt by the taxpayer of the interest amount, in computing the adjusted cost base to the taxpayer of the asset, andthe greater ofthe adjusted cost base to the taxpayer of the asset immediately before the interest amount was so received by the taxpayer, andthe adjusted principal amount to the taxpayer of the asset immediately before the interest amount was so received by the taxpayer,and there shall be included, in respect of each amount (in this paragraph referred to as a “capital amount”) received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,any proceeds of disposition of the asset, orthe principal amount of the asset,the amount, if any, by which the capital amount exceeds the greater of the adjusted cost base to the taxpayer of the asset immediately before the capital amount was received by the taxpayer and its adjusted principal amount to the taxpayer at that time;in computing, at any particular time, the adjusted cost base to the taxpayer of the asset, there shall be added, in respect of each interest amount received by the taxpayer on the asset before the particular time, an amount equal to the lesser ofany income or profits tax paid by the taxpayer to the government of a country other than Canada in respect of the interest amount, andthat proportion of the tax referred to in subparagraph 80.1(2)(b)(i) that the adjusted cost base to the taxpayer of the asset immediately before the interest amount was received by the taxpayer is of the amount, if any, by which the interest amount exceeds the tax referred to in that subparagraph,and there shall be deductedeach interest amount received by the taxpayer on the asset before the particular time, andeach amount received by the taxpayer before the particular time on account of the principal amount of the asset;the receipt by the taxpayer of an amount described in subparagraph 80.1(2)(b)(iv) in respect of the asset shall be deemed not to be a partial disposition thereof; andfor the purposes of section 126, notwithstanding the definition non-business-income tax in subsection 126(7), the non-business-income tax paid by a taxpayer does not include any tax, or any portion thereof, the amount of which is required by paragraph 80.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the asset.Where interest amount and capital amount received at same timeFor the purposes of subsection 80.1(2), where an interest amount on an expropriation asset and a capital amount with respect to that asset are received by a taxpayer at the same time, the interest amount shall be deemed to have been received by the taxpayer immediately before the capital amount.Assets acquired from foreign affiliate of taxpayer as dividend in kind or as benefit to shareholderWhere a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate as a dividend payable in kind, or as a benefit received from the foreign affiliate that would otherwise be required by subsection 15(1) to be included in computing the income of the taxpayer, if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all assets so acquired by the taxpayer from the foreign affiliate, the following rules apply in respect of each asset so acquired by the taxpayer:an amount equal tothe principal amount of the asset, orwhere the taxpayer has designated in the taxpayer’s election an amount in respect of the asset that is less than the principal amount thereof, the amount so designated,shall be deemed to be,notwithstanding subsection 52(2), the cost to the taxpayer of the asset, andthe amount of the dividend or benefit, as the case may be, received by the taxpayer by virtue of the acquisition by the taxpayer of the asset;where the asset was so acquired as such a benefit and the taxpayer has designated in the election a class of shares as described in this paragraph in respect of the asset, the amount of the benefit shall be deemedto have been received by the taxpayer as a dividend from the foreign affiliate in respect of such class of shares of the capital stock thereof as the taxpayer has designated in the election, andnot to be an amount required by subsection 15(1) to be included in computing the taxpayer’s income;in computing the taxable income of the taxpayer for the taxation year in which the taxpayer acquired the asset, there may be deducted from the taxpayer’s income for the year the amount, if any, by which the amount received by the taxpayer as a dividend by virtue of the acquisition by the taxpayer of the asset exceeds the total of amounts deductible in respect of the dividend under sections 91 and 113 in computing the taxpayer’s income or taxable income, as the case may be, for the year;there shall be deducted in computing the adjusted cost base to the taxpayer of each share of the capital stock of the foreign affiliate that is a share of a class in respect of which an amount was received by the taxpayer as a dividend by virtue of the acquisition by the taxpayer of the asset, the quotient obtained by dividing the amount, if any, deducted by the taxpayer under paragraph (c) in respect of the dividend by the number of shares of that class owned by the taxpayer immediately before that amount was received by the taxpayer as a dividend;any capital loss of the taxpayer from the disposition, after the time when the asset was so acquired by the taxpayer, of a share of the capital stock of the foreign affiliate shall be deemed to be nil; andwhere the taxpayer has so elected in prescribed form and within prescribed time, subsection (2) applies as if the asset were an expropriation asset acquired by the taxpayer as compensation for foreign property taken by a particular issuer as described in subsection (1).Assets acquired from foreign affiliate of taxpayer as consideration for settlement, etc., of debtWhere a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate as consideration for the settlement or extinguishment of a capital property of the taxpayer that was a debt payable by the foreign affiliate to the taxpayer or any other obligation of the foreign affiliate to pay an amount to the taxpayer (which debt or other obligation is referred to in this subsection as the “obligation”), if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the assets so acquired by the taxpayer from the foreign affiliate, the following rules apply in respect of each such asset so acquired by the taxpayer:paragraph 80.1(4)(a) applies in respect of the asset as if subparagraph 80.1(4)(a)(iv) were read as follows:the taxpayer’s proceeds of the disposition of the obligation settled or extinguished by virtue of the acquisition by the taxpayer of the asset;”;where the taxpayer has designated in the taxpayer’s election a class of shares as described in this paragraph in respect of the asset,the amount, if any, by which the cost to the taxpayer of the asset (computed having regard to paragraph (a) and paragraph (4)(a)) exceeds the amount of the obligation settled or extinguished by virtue of the acquisition by the taxpayer of the asset shall be deemed to have been received by the taxpayer as a dividend from the foreign affiliate in respect of such class of shares of the capital stock thereof as the taxpayer has designated in the election, andthe taxpayer’s gain, if any, from the disposition of the obligation shall be deemed to be nil;the taxpayer’s loss, if any, from the disposition of the obligation shall be deemed to be nil; andparagraphs (4)(c) to (f) apply in respect of the asset.Assets acquired from foreign affiliate of taxpayer on winding-up, etc.Where a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate,on the winding-up, discontinuance or reorganization of the business of the foreign affiliate, oras consideration for the redemption, cancellation or acquisition by the foreign affiliate of shares of its capital stock,if the taxpayer has so elected, in prescribed form and within prescribed time,in respect of all of the assets so acquired by the taxpayer from the foreign affiliate, subsection (1) applies in respect of each such asset, orin respect of all amounts received or to be received by the taxpayer as or on account of interest on all of the assets so acquired by the taxpayer from the foreign affiliate, subsection (2) applies in respect of each such asset,as if the assets were expropriation assets acquired by the taxpayer as consideration for the sale of foreign property that consisted of shares of the capital stock of the foreign affiliate owned by the taxpayer immediately before the assets were so acquired and that was sold to a particular issuer as described in subsection (1).Definition of adjusted principal amountIn this section, adjusted principal amount to a taxpayer of an expropriation asset at any particular time means the amount, if any, by whichthe total of the principal amount of the asset and, in respect of each interest amount received by the taxpayer on the asset before the particular time, the lesser of the tax referred to in subparagraph (2)(b)(i) in respect of that interest amount and the proportion determined under subparagraph (2)(b)(ii) in respect thereof,exceedsthe total of each amount received by the taxpayer before the particular time as an interest amount on the asset and each amount received by the taxpayer before the particular time as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the asset.Currency in which adjusted principal amount to be computed or expressedFor the purposes of this section, the adjusted principal amount, at any particular time, of an expropriation asset or of any asset assumed for the purposes of this section to be an expropriation asset shall be computed in the currency in which the principal amount of the asset is, under the terms thereof, payable, except that for greater certainty, for the purposes of paragraph (2)(a), the adjusted principal amount at any particular time of such an asset is its adjusted principal amount at that time computed as provided in this subsection but expressed in Canadian currency.Election in respect of two or more expropriation assets acquired by taxpayerFor the purposes of Subdivision C and subsection (2), and in applying subsections (7) and (8) for those purposes, where two or more expropriation assets that wereissued by the government of a country other than Canada, orissued by a person resident in a country other than Canada and guaranteed by the government of that countryat the same time, or as compensation for, or consideration for the sale of, the same foreign property, have been acquired by a taxpayer and the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the expropriation assets that were so issued or guaranteed by the government of that country and acquired by the taxpayer before the making of the election, all of those expropriation assets shall be considered to be a single expropriation asset that was issued or guaranteed by the government of that country and acquired by the taxpayer.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 80.1; 2001, c. 17, s. 210
ApplicationSubsections (2) to (13) apply ifin a taxation year, a taxpayer, under the terms of a contract, pays to a person (referred to in this section as the “recipient”) an amount (referred to in this section as the “specified amount”) that may reasonably be considered to be received by the recipient as a reimbursement of, or a contribution or an allowance in respect of, an amount (referred to in this section as the “original amount”)that was described by paragraph 18(1)(m) and was paid or payable by the recipient, orthat was, in respect of the recipient, an amount described by paragraph 12(1)(o);the original amount is paid or became payable or receivable in a taxation year or fiscal period of the recipient that begins before 2007; andthe taxpayer is resident in Canada or carries on business in Canada when the specified amount is paid.Rules relating to time of paymentIf the specified amount is paid in a taxation year of the taxpayer that begins before 2008, the eligible portion of the specified amount, referred to in subsection (11), is deemed to be a payment described by paragraph 18(1)(m). If, however, the specified amount is paid in a taxation year of the taxpayer that begins after 2007, the specified amount is deemed, for the purpose of applying this section to the taxpayer, to be nil.Applying paragraph 18(1)(m)For the purpose of applying paragraph 18(1)(m) for the taxpayer’s taxation year in which the specified amount was paid, the amount to which that paragraph applies is to be determined for that taxation yearif the taxpayer was in existence at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), as if the specified amount were paid by the taxpayer at that time; andin any other case, as ifthe taxpayer were in existence and had a calendar taxation year at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), andthe specified amount were paid by the taxpayer at that time.Exception for certain partnership reimbursementsSubsection (3) does not apply to a specified amount paid by a taxpayer ifthe recipient is a partnership;the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), in a particular fiscal period of the partnership;the taxpayer is a member of the partnership at the end of the particular fiscal period; andthe taxpayer paid the specified amount before the end of the taxation year of the taxpayer in which that particular fiscal period ends.Specified amount deemed to be paid at end of taxation yearA specified amount paid by the taxpayer to a partnership is deemed to have been paid on the last day of a particular taxation year of the taxpayer, and not at the time it was paid, ifthe taxpayer paid an amount to the partnership in the particular taxation year (referred to in this subsection as the “initial payment”);the initial payment was paid before September 17, 2004;the initial payment is an amount to which subsection (3) did not apply because of subsection (4);the taxpayer’s share of the original amount in respect of the initial payment is greater than the initial payment;the specified amount is equal to or less than the difference between the taxpayer’s share of the original amount in respect of the initial payment and the initial payment;the taxpayer elects in the taxpayer’s return of income for the taxpayer’s taxation year that includes the time at which the specified amount would, if this Act were read without reference to this subsection, have been paid, to have this subsection apply to the specified amount; andthe specified amount is paid before 2006.Inclusion in recipient’s incomeThe recipient shall include in computing the recipient’s income for the taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the eligible portion of the specified amount exceeds the portion of the original amount that was included in computing the income of the recipient for the taxation year or fiscal period because of paragraph 12(1)(o) or that was not deductible in computing the income of the recipient for the taxation year or fiscal period because of paragraph 18(1)(m).Interpretation — portion of the original amountFor the purpose of subsection (6), the portion of the original amount that was included in computing the income of the recipient or that was not deductible in computing the income of the recipient is the amount that would be included in computing the income of the recipient under paragraph 12(1)(o) or that would not be deductible in computing the income of the recipient under paragraph 18(1)(m), if the original amount were equal to the eligible portion of the specified amount.Inclusion in recipient’s incomeThe recipient shall include, in computing the recipient’s income for its taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.Deduction by taxpayerSubject to paragraphs 18(1)(a) and (b), the taxpayer may deduct in computing the taxpayer’s income for the taxpayer’s taxation year in which the specified amount was paid, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.Specified amount deemed not to be payable or receivableExcept for the purposes of this section and subparagraph 53(1)(e)(iv.1),the taxpayer is deemed not to have paid, and not to have been obligated to pay, the specified amount; andthe recipient is deemed not to have received, and not to have been entitled to receive, the specified amount.Eligible portion of a specified amountThe eligible portion of a specified amount isan amount equal to the specified amount ifthe specified amount was paid before September 17, 2004,the original amount is a tax imposed under a provincial law on the production ofpetroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada if the petroleum, natural gas or related hydrocarbons are not, before extraction, owned by the Crown in right of Canada or a province, ormetals, minerals or coal from a mineral resource located in Canada if the metals, minerals or coal are not, before extraction, owned by the Crown in right of Canada or a province,the specified amount does not exceed the taxpayer’s share of the original amount, orthe original amount is a prescribed amount; andthe taxpayer’s share of the original amount, in any other case.Taxpayer’s share of original amountA taxpayer’s share of an original amount in respect of a specified amount paid by the taxpayer to a recipient in respect of a property is the amount that may reasonably be considered to be the taxpayer’s share of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property, which share may not exceed the total ofthat proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property that the taxpayer’s share of production from the property payable to the taxpayer as a royalty, which royalty is computed without reference to the costs of exploration or production, is of the total production from the property, andthat proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property (other than those amounts which the recipient has received or is entitled to receive as a reimbursement, contribution or allowance in respect of a royalty described in paragraph (a)) that the taxpayer’s share of the income from the property is of the total income from the property.Reduction in original amount for Part XII of the regulationsFor the purpose of applying Part XII of the Income Tax Regulations, an original amount in respect of which a specified amount is received is deemed, for the taxation year in which the original amount was paid or became payable or receivable, not to include an amount equal to the eligible portion of the specified amount.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 80.2; 2003, c. 28, s. 9; 2013, c. 34, s. 215
DefinitionsIn this section,breeding animals means deer, elk and other similar grazing ungulates, bovine cattle, bison, goats, sheep and horses that are over 12 months of age and are kept for breeding; (animaux reproducteurs)breeding bees means bees that are not used principally to pollinate plants in greenhouses and larvae of those bees; (abeilles reproductrices)breeding bee stock, of a taxpayer at any time, means a reasonable estimate of the quantity of a taxpayer’s breeding bees held at that time in the course of carrying on a farming business using a unit of measurement that is accepted as an industry standard; (stock d’abeilles reproductrices)breeding herd of a taxpayer at any time means the number determined by the formulaA - (B - C)whereAis the total number of the taxpayer’s breeding animals held in the course of carrying on a farming business at that time,Bis the total number of the taxpayer’s breeding animals held in the business at that time that are female bovine cattle that have not given birth to calves, andCis the lesser of the number determined as the value of B and one-half the total number of the taxpayer’s breeding animals held in the business at that time that are female bovine cattle that have given birth to calves. (troupeau reproducteur)Income deferral from the destruction of livestockWhere a particular amount in respect of the forced destruction of livestock under statutory authority in a taxation year of a taxpayer is included in computing the income of the taxpayer for the year from a farming business, there may be deducted in computing that income such amount as the taxpayer claims not exceeding the particular amount.Inclusion of deferred amountThe amount deducted under subsection (2) in computing the income of a taxpayer from a farming business for a taxation year shall be deemed to be income of the taxpayer from the business for the taxpayer’s immediately following taxation year.Income deferral for regions of drought, flood or excessive moistureIf in a taxation year a taxpayer carries on a farming business in a region that is at any time in the year a prescribed drought region or a prescribed region of flood or excessive moisture and the taxpayer’s breeding herd at the end of the year in respect of the business does not exceed 85% of the taxpayer’s breeding herd at the beginning of the year in respect of the business, there may be deducted in computing the taxpayer’s income from the business for the year the amount that the taxpayer claims, not exceeding the amount, if any, determined by the formula(A - B) × CwhereAis the amount by whichthe total of all amounts included in computing the taxpayer’s income for the year from the business in respect of the sale of breeding animals in the yearexceedsthe total of all amounts deducted under paragraph 20(1)(n) in computing the taxpayer’s income from the business for the year in respect of an amount referred to in paragraph (a) of this description;Bis the total of all amounts deducted in computing the taxpayer’s income from the business for the year in respect of the acquisition of breeding animals; andCis30% where the taxpayer’s breeding herd at the end of the year in respect of the business exceeds 70% of the taxpayer’s breeding herd at the beginning of the year in respect of the business, and90% where the taxpayer’s breeding herd at the end of the year in respect of the business does not exceed 70% of the taxpayer’s breeding herd at the beginning of the year in respect of the business.Income deferralIf in a taxation year a taxpayer carries on a farming business in a region that is at any time in the year a prescribed drought region or a prescribed region of flood or excessive moisture and the taxpayer’s breeding bee stock at the end of the year in respect of the business does not exceed 85% of the taxpayer’s breeding bee stock at the beginning of the year in respect of the business, there may be deducted in computing the taxpayer’s income from the business for the year the amount that the taxpayer claims, not exceeding the amount, if any, determined by the formula(A – B) × CwhereAis the amount by whichthe total of all amounts included in computing the taxpayer’s income from the business for the year in respect of the sale of breeding bees in the yearexceedsthe total of all amounts deducted under paragraph 20(1)(n) in computing the taxpayer’s income from the business for the year in respect of an amount referred to in paragraph (a);Bis the total of all amounts deducted in computing the taxpayer’s income from the business for the year in respect of the acquisition of breeding bees; andCis30% if the taxpayer’s breeding bee stock in respect of the business at the end of the year exceeds 70% of the taxpayer’s breeding bee stock in respect of the business at the beginning of the year, and90% if the taxpayer’s breeding bee stock in respect of the business at the end of the year does not exceed 70% of the taxpayer’s breeding bee stock in respect of the business at the beginning of the year.Inclusion of deferred amountAn amount deducted under subsection (4) or (4.1) in computing the income of a taxpayer for a particular taxation year from a farming business carried on in a region prescribed under those subsections may, to the extent that the taxpayer so elects, be included in computing the taxpayer’s income from the business for a taxation year ending after the particular taxation year, and is, except to the extent that the amount has been included under this subsection in computing the taxpayer’s income from the business for a preceding taxation year after the particular year, deemed to be income of the taxpayer from the business for the taxation year of the taxpayer that is the earliest ofthe first taxation year beginning after the end of the period or series of continuous periods, as the case may be, for which the region is prescribed under those subsections,the first taxation year, following the particular taxation year, at the end of which the taxpayer isnon-resident, andnot carrying on business through a fixed place of business in Canada, andthe taxation year in which the taxpayer dies.Subsections (2), (4) and (4.1) not applicableSubsections (2), (4) and (4.1) do not apply to a taxpayer in respect of a farming business for a taxation yearin which the taxpayer died; orwhere at the end of the year the taxpayer is non-resident and not carrying on the business through a fixed place of business in Canada.Measuring breeding bee stockIn applying subsection (4.1) in respect of a taxation year, the unit of measurement used for estimating the quantity of a taxpayer’s breeding bee stock held in the course of carrying on a farming business at the end of the year is to be the same as that used for the beginning of the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 80.3; 1994, c. 7, Sch. II, s. 59, Sch. VIII, s. 31; 2009, c. 31, s. 2; 2014, c. 39, s. 17
LoansWhere a person or partnership receives a loan or otherwise incurs a debt because of or as a consequence of a previous, the current or an intended office or employment of an individual, or because of the services performed or to be performed by a corporation carrying on a personal services business, the individual or corporation, as the case may be, shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which the total ofall interest on all such loans and debts computed at the prescribed rate on each such loan and debt for the period in the year during which it was outstanding, andthe total of all amounts each of which is an amount of interest that was paid or payable in respect of the year on such a loan or debt bya person or partnership (in this paragraph referred to as the “employer”) that employed or intended to employ the individual,a person (other than the debtor) related to the employer, ora person or partnership to or for whom or which the services were or were to be provided or performed by the corporation or a person (other than the debtor) who does not deal at arm’s length with that person or any member of that partnership,exceeds the total ofthe amount of interest for the year paid on all such loans and debts not later than 30 days after the end of the year, andany portion of the total determined in respect of the year under paragraph 80.4(1)(b) that is reimbursed in the year or within 30 days after the end of the year by the debtor to the person or entity who made the payment referred to in that paragraph.InterpretationA loan or debt is deemed to have been received or incurred because of an individual’s office or employment, or because of services performed by a corporation that carries on a personal services business, as the case may be, if it is reasonable to conclude that, but for an individual’s previous, current or intended office or employment, or the services performed or to be performed by the corporation,the terms of the loan or debt would have been different; orthe loan would not have been received or the debt would not have been incurred.IdemWhere a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) wasa shareholder of a corporation,connected with a shareholder of a corporation, ora member of a partnership, or a beneficiary of a trust, that was a shareholder of a corporation,and by virtue of that shareholding that person or partnership received a loan from, or otherwise incurred a debt to, that corporation, any other corporation related thereto or a partnership of which that corporation or any corporation related thereto was a member, the person or partnership shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by whichall interest on all such loans and debts computed at the prescribed rate on each such loan and debt for the period in the year during which it was outstandingexceedsthe total ofthe amount of interest for the year paid on all such loans and debts (other than loans deemed to have been made under subsection 15(2.17)) not later than 30 days after the end of the year, andthe specified interest amounts, for the year, in respect of all such loans that are deemed to have been made under subsection 15(2.17).Where ss. (1) and (2) do not applySubsections 80.4(1) and (2) do not apply in respect of any loan or debt, or any part thereof,on which the rate of interest was equal to or greater than the rate that would, having regard to all the circumstances (including the terms and conditions of the loan or debt), have been agreed on, at the time the loan was received or the debt was incurred, between parties dealing with each other at arm’s length ifnone of the parties received the loan or incurred the debt by virtue of an office or employment or by virtue of the shareholding of a person or partnership, andthe ordinary business of the creditor included the lending of money,except where an amount is paid or payable in any taxation year to the creditor in respect of interest on the loan or debt by a party other than the debtor,that was included in computing the income of a person or partnership under this Part; orthat satisfies the conditions set out in subsection 15(2.51) and is repaid within 15 years after the qualifying business transfer referred to in that subsection.Interest on loans for home purchase or relocationFor the purpose of computing the benefit under subsection (1) in a taxation year in respect of a home purchase loan or a home relocation loan, the amount of interest determined under paragraph (1)(a) shall not exceed the amount of interest that would have been determined thereunder if it had been computed at the prescribed rate in effect at the time the loan was received or the debt was incurred, as the case may be.IdemWhere an individual has, before November 13, 1981,received a housing loan, ormade arrangements in writing in respect of a home purchase loan that would, if the loan were made before 1982, have been a housing loan,for the purpose of computing the amount of interest referred to in paragraph 80.4(1)(a) on the loan, the amount of the loan may be reducedfor the 1982 taxation year, by the amount, if any, by which $40,000 exceeds the total ofall amounts claimed as a reduction under this subsection for the year by the individual’s spouse or common-law partner with whom the individual resided in the year, andall amounts claimed as a reduction under this subsection for the year by the individual on all other loans, andfor the 1983 taxation year, by the amount, if any, by which $20,000 exceeds the total ofall amounts claimed as a reduction under this subsection for the year by the individual’s spouse or common-law partner with whom the individual resided in the year, andall amounts claimed as a reduction under this subsection for the year by the individual on all other loans.Deemed new home purchase loansFor the purposes of this section, other than paragraph 80.4(3)(a) and subsection 80.4(5), where a home purchase loan or a home relocation loan of an individual has a term for repayment exceeding five years, the balance outstanding on the loan on the date that is five years from the day the loan was received or was last deemed by this subsection to have been received shall be deemed to be a new home purchase loan received by the individual on that date.DefinitionsIn this section,home purchase loan means that portion of any loan received or debt otherwise incurred by an individual in the circumstances described in subsection 80.4(1) that is used to acquire, or to repay a loan or debt that was received or incurred to acquire, a dwelling, or a share of the capital stock of a cooperative housing corporation acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the corporation, where the dwelling is for the habitation ofthe individual by virtue of whose office or employment the loan is received or the debt is incurred,a specified shareholder of the corporation by virtue of whose services the loan is received or the debt is incurred, ora person related to a person described in paragraph (a) or (b),or that is used to repay a home purchase loan; (prêt consenti pour l’achat d’une maison)prescribed rate of interest means6% per annum before 1978,8% per annum for 1978, andfor any year, or part thereof, after 1978, such rate of interest as is prescribed therefor except that, for the purpose of computing the benefit under subsection 80.4(1) in a taxation year on a home purchase loan received after November 12, 1981 and before 1982, the prescribed rate of interest at the time the loan was received shall be deemed to be 16% per annum; (taux prescrit)specified interest amount, for a year, in respect of a loan (referred to in this definition as the deemed loan) deemed to have been made under subsection 15(2.17) by an ultimate funder (as defined in subsection 15(2.192)), means the amount determined by the formulaA × (B/C)whereAis the amount of interest for the year paid not later than 30 days after the end of the year on all debts — owing by one or more funders (as defined in subsection 15(2.192), but excluding any funders that are ultimate funders as defined in subsection 15(2.192)) under one or more funding arrangements (as defined in subsection 15(2.192)) to the ultimate funder — that gave rise to the deemed loan;Bis the average amount outstanding for the year in respect of the deemed loan; andCis the total of all amounts each of which is the average amount outstanding in the year as or on account of an amount owing under a debt described in A. (montant d’intérêts déterminé)Meaning of connectedFor the purposes of subsection (2), a person or partnership is connected with a shareholder of a corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person isa foreign affiliate of the corporation; ora foreign affiliate of a person resident in Canada with which the corporation does not deal at arm’s length.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 80.4; 1994, c. 7, Sch. II, s. 60, Sch. VIII, s. 32; 1999, c. 22, s. 22; 2000, c. 12, s. 142; 2013, c. 34, s. 216; 2016, c. 12, s. 24; 2017, c. 20, s. 52024, c. 15, s. 16
Deemed interestWhere a benefit is deemed by section 80.4 to have been received in a taxation year byan individual or corporation under subsection 80.4(1), ora person or partnership under subsection 80.4(2),the amount of the benefit shall, for the purposes of subparagraph 8(1)(j)(i) and paragraph 20(1)(c), be deemed to be interest paid in, and payable in respect of, the year by the debtor pursuant to a legal obligation to pay interest on borrowed money.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1980-81-82-83, c. 140, s. 45; 1984, c. 1, s. 36
Synthetic dispositionIf a synthetic disposition arrangement is entered into in respect of a property owned by a taxpayer and the synthetic disposition period of the arrangement is one year or more, the taxpayer is deemedto have disposed of the property immediately before the beginning of the synthetic disposition period for proceeds equal to its fair market value at the beginning of the synthetic disposition period; andto have reacquired the property at the beginning of the synthetic disposition period at a cost equal to that fair market value.ExceptionSubsection (1) does not apply in respect of a property owned by a taxpayer ifthe disposition referred to in subsection (1) would not result in the realization of a capital gain or income;the property is a mark-to-market property (as defined in subsection 142.2(1)) of the taxpayer;the synthetic disposition arrangement referred to in subsection (1) is a lease of tangible property or, for civil law, corporeal property;the arrangement is an exchange of property to which subsection 51(1) applies; orthe property is disposed of as part of the arrangement, within one year after the day on which the synthetic disposition period of the arrangement begins.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 40, s. 38
Amounts Not Included in Computing Income
Amounts not included in incomeThere shall not be included in computing the income of a taxpayer for a taxation year,Statutory exemptionsan amount that is declared to be exempt from income tax by any other enactment of Parliament, other than an amount received or receivable by an individual that is exempt by virtue of a provision contained in a tax convention or agreement with another country that has the force of law in Canada;War Savings Certificatean amount received under a War Savings Certificate issued by His Majesty in right of Canada or under a similar savings certificate issued by His Majesty in right of Newfoundland before April 1, 1949;Ship or aircraft of non-residentsthe income for the year of a non-resident person earned in Canada from international shipping or from the operation of aircraft in international traffic, if the country in which the person is resident grants substantially similar relief for the year to persons resident in Canada;Ship of resident corporationsthe income for the year of a corporation resident in Canada (if this Act were read without reference to subsection 250(4)) earned from international shipping, if that corporation satisfies the conditions set out in paragraphs 250(6)(a) and (b);Service pension, allowance or compensationa pension payment, an allowance or compensation that is received under or is subject to the Pension Act,the Civilian War-related Benefits Act or the War Veterans Allowance Act, an amount received under the Gallantry Awards Order or compensation received under the regulations made under section 9 of the Aeronautics Act;Canadian Forces members and veterans amountsthe total of all amounts received or enjoyed by the taxpayer or the taxpayer’s spouse or common-law partner or survivor (as defined in subsection 146.2(1)) in the year on account ofa Canadian Forces income support benefit payable to the taxpayer under Part 2 of the Veterans Well-being Act,pain and suffering compensation, additional pain and suffering compensation or a critical injury benefit, disability award, death benefit, clothing allowance or detention benefit payable to the taxpayer under Part 3 of the Veterans Well-being Act,a caregiver recognition benefit payable to the taxpayer under Part 3.1 of the Veterans Well-being Act,an amount payable to the taxpayer under subsection 132(1) of the Veterans Well-being Act,a benefit provided under the Veterans Health Care Regulations,a benefit provided in respect of Rehabilitation Services and Vocational Assistance under Part 2 of the Veterans Well-being Act,a benefit provided to a member of the Canadian Forces under the Compensation and Benefit Instructions for the Canadian Forces that isa home modifications benefit,a home modifications move benefit,a vehicle modifications benefit,a home assistance benefit,an attendant care benefit,a caregiver benefit,a spousal education upgrade benefit,a funeral and burial expenses benefit, ora next of kin travel benefit, ora benefit provided by the Department of National Defence as an education expense reimbursement for ill and injured members;War pensionsa pension payment received on account of disability or death arising out of a war from a country that was an ally of Canada at the time of the war, if that country grants substantially similar relief for the year to a person receiving a pension referred to in paragraph 81(1)(d);Halifax disaster pensions, grants or allowancesa pension payment, a grant or an allowance in respect of death or injury sustained in the explosion in Halifax in 1917 and received from the Halifax Relief Commission the incorporation of which was confirmed by An Act respecting the Halifax Relief Commission, chapter 24 of the Statutes of Canada, 1918, or received pursuant to the Halifax Relief Commission Pension Continuation Act, chapter 88 of the Statutes of Canada, 1974-75-76;Compensation by Federal Republic of Germanya payment made by the Federal Republic of Germany or by a public body performing a function of government within that country as compensation to a victim of National Socialist persecution, where no tax is payable in respect of that payment under a law of the Federal Republic of Germany that imposes an income tax;Income from personal injury award propertythe income for the year from any property acquired by or on behalf of a person as an award of, or pursuant to an action for, damages in respect of physical or mental injury to that person, or from any property substituted therefor and any taxable capital gain for the year from the disposition of any such property,where the income was income from the property, if the income was earned in respect of a period before the end of the taxation year in which the person attained the age of 21 years, andin any other case, if the person was less than 21 years of age during any part of the year;Income from income exempt under para. (g.1)any income for the year from any income that is by virtue of this paragraph or paragraph 81(1)(g.1) not required to be included in computing the taxpayer’s income (other than any income attributable to any period after the end of the taxation year in which the person on whose behalf the income was earned attained the age of 21 years);Certain government funded truststhe amount that, but for this paragraph, would be the income of the taxpayer for the year ifthe taxpayer is a trust established underthe 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces,the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada,the Indian Residential Schools Settlement Agreement entered into by Her Majesty in right of Canada on May 8, 2006,the Settlement Agreement entered into by Her Majesty in Right of Canada on September 15, 2021 in respect of the class action relating to long-term drinking water quality for impacted First Nations,the Settlement Agreement entered into by His Majesty in right of Canada on January 18, 2023 in respect of the class action relating to the attendance of day scholars at residential schools, orthe Settlement Agreement entered into by His Majesty in right of Canada, dated effective as of April 19, 2023, in respect of the class actions relating to the First Nations Child and Family Services, Jordan’s Principle and Trout Class, andthe only contributions made to the taxpayer before the end of the year are those provided for under the relevant Agreement described in subparagraph (i);Relief for increased heating expensesan amount received pursuant to the Order Authorizing Ex Gratia Payments for Increased Heating Expenses;Energy cost reliefan amount received pursuant to Part 1 of the Energy Costs Assistance Measures Act;Ontario Electricity Support Programan amount of rate assistance received under section 79.2 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch B, as amended from time to time;Social assistancewhere the taxpayer is an individual (other than a trust), a social assistance payment (other than a prescribed payment) ordinarily made on the basis of a means, needs or income test under a program provided for by an Act of Parliament, a law of a province or a law of an Indigenous governing body (as defined in section 2 of the Children’s Special Allowances Act), to the extent that it is received directly or indirectly by the taxpayer for the benefit of another individual (other than the taxpayer’s spouse or common-law partner or a person who is related to the taxpayer or to the taxpayer’s spouse or common-law partner), ifno family allowance under the Family Allowances Act or any similar allowance under a law of a province that provides for payment of an allowance similar to the family allowance provided under that Act is payable in respect of the other individual for the period in respect of which the social assistance payment is made, andthe other individual resides in the taxpayer’s principal place of residence, or the taxpayer’s principal place of residence is maintained for use as the residence of that other individual, throughout the period referred to in subparagraph 81(1)(h)(i);Social assistance for informal care programsif the taxpayer is an individual (other than a trust), a social assistance payment ordinarily made on the basis of a means, needs or income test provided for under a program of the Government of Canada, the government of a province or of an Indigenous governing body (as defined in section 2 of the Children’s Special Allowances Act), to the extent that it is received directly or indirectly by the taxpayer for the benefit of a particular individual, ifpayments to recipients under the program are made for the care and upbringing, on a temporary basis, of another individual in need of protection,the particular individual is a child of the taxpayer because of paragraph 252(1)(b) (or would be a child of the taxpayer because of that paragraph if the taxpayer did not receive payments under the program), andno special allowance under the Children’s Special Allowances Act is payable in respect of the particular individual for the period in respect of which the social assistance payment is made;R.C.M.P. pension or compensationa pension payment or compensation received under section 5, 31 or 45 of the Royal Canadian Mounted Police Pension Continuation Act, chapter R-10 of the Revised Statutes of Canada, 1970, or section 32 or 33 of the Royal Canadian Mounted Police Superannuation Act, in respect of an injury, disability or death;Memorial grantan amount received under the Memorial Grant Program for First Responders established under the authority of the Department of Public Safety and Emergency Preparedness Act in respect of individuals who die in the course of, or as a result of, their duties or as a result of an occupational illness or psychological impairment;Employees profit sharing plana payment or part of a payment from an employees profit sharing plan that section 144 provides is not to be included;Prospectingan amount in respect of the receipt of a share that section 35 provides is not to be included;Interest on certain obligationsinterest that accrued to, became receivable or was received by, a corporation resident in Canada (in this paragraph referred to as the “parent corporation”) on a bond, debenture, bill, note, mortgage or similar obligation received by it as consideration for the disposition by it, before June 18, 1971, ofa business carried on by it in a country other than Canada, orall of the shares of a corporation that carried on a business in a country other than Canada, and such of the debts and other obligations of that corporation as were, immediately before the disposition, owing to the parent corporation,ifthe business was of a public utility or public service nature,the business or the property described in subparagraph 81(1)(m)(ii), as the case may be, was disposed of to a person or persons resident in that country, andthe obligation received by the parent corporation was issued by or guaranteed by the government of that country or any agent thereof;Governor Generalincome from the office of Governor General of Canada, other than salary under the Governor General’s Act;[Repealed, 1998, c. 19, s. 14(1)]Provincial indemnitiesan amount paid to an individual as an indemnity under a prescribed provision of the law of a province;Foreign retirement arrangementsan amount that is credited or added to a deposit or account governed by a foreign retirement arrangement as interest or other income in respect of the deposit or account, where the amount would, but for this paragraph, be included in the taxpayer’s income solely because of that crediting or adding;Salary deferral leave plansan amount paid to the taxpayer in the year under an arrangement described in paragraph 6801(a) of the Income Tax Regulations to the extent that the amount may reasonably be considered to be attributable to amounts thatwere included in the taxpayer’s income for a preceding taxation year and were income, interest or other additional amounts, described in subparagraph 6801(a)(iv) of the Income Tax Regulations, andwere re-contributed by the taxpayer under the arrangement in a preceding taxation year; orDental benefitsan amount received under the Dental Benefit Act.[Repealed, 2017, c. 20, s. 6]Travel expensesThere shall not be included in computing an individual’s income for a taxation year an amount (not in excess of a reasonable amount) received by the individual from an employer with whom the individual was dealing at arm’s length as an allowance for, or reimbursement of, travel expenses incurred by the individual in the year in respect of the individual’s part-time employment in the year with the employer (other than expenses incurred in the performance of the duties of the individual’s part-time employment) ifthroughout the period in which the expenses were incurred,the individual had other employment or was carrying on a business, orwhere the employer is a designated educational institution (within the meaning assigned by subsection 118.6(1)), the duties of the individual’s part-time employment were the provision in Canada of a service to the employer in the individual’s capacity as a professor or teacher; andthe duties of the individual’s part-time employment were performed at a location not less than 80 kilometres from,where subparagraph (a)(i) applies, both the individual’s ordinary place of residence and the place of the other employment or business referred to in that subparagraph, andwhere subparagraph (a)(ii) applies, the individual’s ordinary place of residence.Payments for volunteer servicesWherean individual was employed or otherwise engaged in a taxation year by a government, municipality or public authority (in this subsection referred to as “the employer”) and received in the year from the employer one or more amounts for the performance, as a volunteer, of the individual’s duties asan ambulance technician,a firefighter, ora person who assists in the search or rescue of individuals or in other emergency situations, andif the Minister so demands, the employer has certified in writing thatthe individual was in the year a person described in paragraph (a), andthe individual was at no time in the year employed or otherwise engaged by the employer, otherwise than as a volunteer, in connection with the performance of any of the duties referred to in paragraph (a) or of similar duties,there shall not be included in computing the individual’s income derived from the performance of those duties the lesser of $1,000 and the total of those amounts, unless the individual makes a claim under section 118.06 or 118.07 for the year.ElectionWhere a taxpayer or a person described in paragraph 81(1)(g.1) has acquired capital property under the circumstances described in that paragraph, the taxpayer or the person may, in the return of income of the taxpayer for the taxation year in which the taxpayer attains the age of 21 years, elect to treat any such capital property held by the taxpayer or person as having been disposed of on the day immediately preceding the day on which the taxpayer attained the age of 21 years for proceeds of disposition equal to the fair market value of the property on that day and the person or taxpayer making the election shall be deemed to have reacquired that property immediately thereafter at a cost equal to those proceeds.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 81; 1994, c. 7, Sch. II, s. 61, Sch IV, s. 15, Sch, VIII, s. 33; 1995, c. 18, s. 88; 1998, c. 19, s. 14; 1999, c. 10, s. 44; 2000, c. 12, s. 142, c. 19, s. 12; 2001, c. 17, s. 60; 2005, c. 21, s. 102, c. 49, s. 5; 2011, c. 24, s. 18; 2012, c. 19, s. 3; 2013, c. 34, s. 217; 2014, c. 20, s. 4, c. 39, s. 18; 2015, c. 36, s. 3; 2016, c. 7, s. 8; 2017, c. 20, s. 6; 2018, c. 12, s. 52019, c. 29, s. 92022, c. 10, s. 42022, c. 10, s. 1792022, c. 14, s. 42023, c. 26, s. 162024, c. 17, s. 17
Corporations Resident in Canada and their Shareholders
Taxable dividends receivedIn computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:the amount, if any, by whichthe total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,exceedsif the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend (other than an eligible dividend);the amount, if any, by whichthe total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,exceedsif the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as an eligible dividend;if the taxpayer is an individual, other than a trust that is a registered charity, the total ofthe product of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year multiplied byfor the 2018 taxation year, 16%, andfor taxation years after 2018, 15%, andthe product of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year multiplied byfor taxation years that end after 2005 and before 2010, 45%,for the 2010 taxation year, 44%,for the 2011 taxation year, 41%, andfor taxation years that end after 2011, 38%;all taxable dividends received by the taxpayer in the taxation year, from corporations resident in Canada, under dividend rental arrangements of the taxpayer;all taxable dividends (other than taxable dividends described in paragraph (c)) received by the taxpayer in the taxation year from corporations resident in Canada that are not taxable Canadian corporations; andif the taxpayer is a trust, all amounts each of which is all or part of a taxable dividend (other than a taxable dividend described in paragraph (c) or (d)) that was received by the trust in the taxation year on a share of the capital stock of a taxable Canadian corporation and that can reasonably be considered to have been included in computing the income of a beneficiary under the trust who was non-resident at the end of the taxation year.Limitation as to paragraph (1)(c)An amount shall be included in the amounts described in paragraph (1)(c) in respect of a taxable dividend received at any time as part of a dividend rental arrangement only if that dividend was received on a share acquired before that time and after April, 1989.Certain dividends received by taxpayerWhere by reason of subsection 56(4) or 56(4.1) or sections 74.1 to 75 of this Act or section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, there is included in computing a taxpayer’s income for a taxation year a dividend received by another person, for the purposes of this Act, the dividend shall be deemed to have been received by the taxpayer.Dividends received by spouse or common-law partnerWhere the amount that would, but for this subsection, be deductible under subsection 118(1) by reason of paragraph 118(1)(a) in computing a taxpayer’s tax payable under this Part for a taxation year that is less than the amount that would be so deductible if no amount were required by subsection (1) to be included in computing the income for the year of the taxpayer’s spouse or common-law partner and the taxpayer so elects in the taxpayer’s return of income for the year under this Part, all amounts described in paragraph (1)(a) or (a.1) received in the year from taxable Canadian corporations by the taxpayer’s spouse or common-law partner are deemed to have been so received by that taxpayer and not by the spouse or common-law partner.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 82; 1998, c. 19, s. 114; 2000, c. 12, s. 142; 2007, c. 2, s. 44; 2008, c. 28, s. 8; 2013, c. 33, s, 5, c. 34, s. 218; 2015, c. 36, s. 4; 2016, c. 7, s. 9; 2018, c. 12, s. 6
Qualifying dividendsWhere a qualifying dividend has been paid by a public corporation to shareholders of a series of tax-deferred preferred shares of a class of the capital stock of the corporation that were outstanding on March 31, 1977, the following rules apply:no part of the qualifying dividend shall be included in computing the income of any shareholder of the corporation by virtue of this Subdivision; andin computing the adjusted cost base to any shareholder of the corporation of any tax-deferred preferred share of the corporation owned by the shareholder, there shall be deducted in respect of the qualifying dividend an amount as provided by subparagraph 53(2)(a)(i).Capital dividendWhere at any particular time after 1971 a dividend becomes payable by a private corporation to shareholders of any class of shares of its capital stock and the corporation so elects in respect of the full amount of the dividend, in prescribed manner and prescribed form and at or before the particular time or the first day on which any part of the dividend was paid if that day is earlier than the particular time, the following rules apply:the dividend shall be deemed to be a capital dividend to the extent of the corporation’s capital dividend account immediately before the particular time; andno part of the dividend shall be included in computing the income of any shareholder of the corporation.IdemNotwithstanding subsection 83(2), where a dividend that, but for this subsection, would be a capital dividend is paid on a share of the capital stock of a corporation and the share (or another share for which the share was substituted) was acquired by its holder in a transaction or as part of a series of transactions one of the main purposes of which was to receive the dividend,the dividend shall, for the purposes of this Act (other than for the purposes of Part III and computing the capital dividend account of the corporation), be deemed to be received by the shareholder and paid by the corporation as a taxable dividend and not as a capital dividend; andparagraph 83(2)(b) does not apply in respect of the dividend.Where s. (2.1) does not applySubsection 83(2.1) does not apply in respect of a particular dividend, in respect of which an election is made under subsection 83(2), paid on a share of the capital stock of a particular corporation to an individual where it is reasonable to consider that all or substantially all of the capital dividend account of the particular corporation immediately before the particular dividend became payable consisted of amounts other than any amountadded to that capital dividend account under paragraph (b) of the definition capital dividend account in subsection 89(1) in respect of a dividend received on a share of the capital stock of another corporation, which share (or another share for which the share was substituted) was acquired by the particular corporation in a transaction or as part of a series of transactions one of the main purposes of which was that the particular corporation receive the dividend, but not in respect of a dividend where it is reasonable to consider that the purpose of paying the dividend was to distribute an amount that was received by the other corporation and included in computing the other corporation’s capital dividend account by reason of paragraph (d) of that definition;added to that capital dividend account under paragraph 87(2)(z.1) as a result of an amalgamation or winding-up or a series of transactions including the amalgamation or winding-up that would not have been so added had the amalgamation or winding-up occurred or the series of transactions been commenced after 4:00 p.m. Eastern Daylight Saving Time, September 25, 1987;added to that capital dividend account at a time when the particular corporation was controlled, directly or indirectly, in any manner whatever, by one or more non-resident persons; orin respect of a capital gain from a disposition of a property by the particular corporation or another corporation that may reasonably be considered as having accrued while the property (or another property for which it was substituted) was a property of a corporation that was controlled, directly or indirectly, in any manner whatever, by one or more non-resident persons.IdemSubsection 83(2.1) does not apply in respect of a dividend, in respect of which an election is made under subsection 83(2), paid on a share of the capital stock of a corporation where it is reasonable to consider that the purpose of paying the dividend was to distribute an amount that was received by the corporation and included in computing its capital dividend account by reason of paragraph (d) of the definition capital dividend account in subsection 89(1).IdemSubsection 83(2.1) does not apply in respect of a particular dividend, in respect of which an election is made under subsection 83(2), paid on a share of the capital stock of a particular corporation to a corporation (in this subsection referred to as the “related corporation”) related (otherwise than by reason of a right referred to in paragraph 251(5)(b)) to the particular corporation where it is reasonable to consider that all or substantially all of the capital dividend account of the particular corporation immediately before the particular dividend became payable consisted of amounts other than any amountadded to that capital dividend account under paragraph (b) of the definition capital dividend account in subsection 89(1) in respect of a dividend received on a share of the capital stock of another corporation if it is reasonable to consider that any portion of the capital dividend account of that other corporation immediately before that dividend became payable consisted of amounts added to that account under paragraph 87(2)(z.1) or paragraph (b) of that definition as a result of a transaction or a series of transactions that would not have been so added had the transaction occurred or the series of transactions been commenced after 4:00 p.m. Eastern Daylight Saving Time, September 25, 1987;that represented the capital dividend account of a corporation before it became related to the related corporation;added to the capital dividend account of the particular corporation at a time when that corporation was controlled, directly or indirectly, in any manner whatever, by one or more non-resident persons;in respect of a capital gain from a disposition of a property by the particular corporation or another corporation that may reasonably be considered as having accrued while the property (or another property for which it was substituted) was a property of a corporation that was controlled, directly or indirectly, in any manner whatever, by one or more non-resident persons; orin respect of a capital gain from a disposition of a property (or another property for which it was substituted) that may reasonably be considered as having accrued while the property or the other property was a property of a person that was not related to the related corporation.Late filed electionsWhere at any particular time after 1974 a dividend has become payable by a corporation to shareholders of any class of shares of its capital stock, and subsection 83(1) or (2) would have applied to the dividend except that the election referred to therein was not made on or before the day on or before which the election was required by that subsection to be made, the election shall be deemed to have been made at the particular time or on the first day on which any part of the dividend was paid, whichever is the earlier, ifthe election is made in prescribed manner and prescribed form;an estimate of the penalty in respect of that election is paid by the corporation when that election is made; andthe directors or other person or persons legally entitled to administer the affairs of the corporation have, before the time the election is made, authorized the election to be made.Request for electionThe Minister may at any time, by written request served personally or by registered mail, request that an election referred to in subsection 83(3) be made by a taxpayer, and where the taxpayer on whom such a request is served does not comply therewith within 90 days of service thereof on the taxpayer, subsection 83(3) does not apply to such an election made by the taxpayer.Penalty for late filed electionFor the purposes of this section, the penalty in respect of an election referred to in paragraph 83(3)(a) is an amount equal to the lesser of1% per annum of the amount of the dividend referred to in the election for each month or part of a month during the period commencing with the time that the dividend became payable, or the first day on which any part of the dividend was paid if that day is earlier, and ending with the day on which that election was made, andthe product obtained when $500 is multiplied by the proportion that the number of months or parts of months during the period referred to in paragraph 83(4)(a) bears to 12.Unpaid balance of penaltyThe Minister shall, with all due dispatch, examine each election referred to in paragraph 83(3)(a), assess the penalty payable and send a notice of assessment to the corporation and the corporation shall pay, forthwith to the Receiver General, the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.Definition of qualifying dividendFor the purposes of subsection 83(1), qualifying dividend means a dividend on shares of a series of a class of the capital stock of a public corporation that is prescribed to be a tax-deferred preferred series that became payable by the corporation after 1978 and not later thanwhere the terms as at March 31, 1977 of the shares of that series entitled the holder of such a share to exchange it after a particular date for a share or shares of another series or class of preferred shares of the capital stock of the corporation, that particular date,where the terms as at March 31, 1977 of the shares of that series required the corporation to offer to purchase at a time not later than a particular date all of the shares of that series from all of the holders of those shares, that particular date, andin any other case, October 1, 1991,whichever is applicable in respect of that series of shares, except that a dividend on shares of such a series that would otherwise be a qualifying dividend shall be deemed not to be a qualifying dividend ifat the time that the dividend became payable, the terms of the shares of that series differ from the terms as at March 31, 1977 of the shares of that series, orafter March 31, 1977 the corporation issued additional shares of that series.Amalgamation where there are tax-deferred preferred sharesFor the purposes of this section, where, after March 31, 1977, there has been an amalgamation within the meaning of section 87 and one or more of the predecessor corporations had a series of shares outstanding on March 31, 1977 that was prescribed to be a tax-deferred preferred series, the following rules apply:the series of shares of the capital stock of the predecessor corporation that was prescribed to be a tax-deferred preferred series shall be deemed to have been continued in existence in the form of the new shares; andthe new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1 “83”; 1973-74, c. 14, s. 24; 1974-75-76, c. 26, s. 46; 1976-77, c. 4, s. 32; 1977-78, c. 1, s. 37, c. 32, s. 17; 1980-81-82-83, c. 48, s. 115, c. 140, s. 47; 1985, c. 45, s. 126(F); 1986, c. 6, s. 42; 1988, c. 55, s. 55
Deemed dividendWhere a corporation resident in Canada has at any time after 1971 increased the paid-up capital in respect of the shares of any particular class of its capital stock, otherwise than bypayment of a stock dividend,a transaction by whichthe value of its assets less its liabilities has been increased, orits liabilities less the value of its assets have been decreased,by an amount not less than the amount of the increase in the paid-up capital in respect of the shares of the particular class,a transaction by which the paid-up capital in respect of the shares of all other classes of its capital stock has been reduced by an amount not less than the amount of the increase in the paid-up capital in respect of the shares of the particular class,if the corporation is an insurance corporation, any action by which it converts contributed surplus related to its insurance business (other than any portion of that contributed surplus that arose at a time when it was non-resident, or that arose in connection with a disposition to which subsection 212.1(1.1) applies or an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) into paid-up capital in respect of the shares of its capital stock,if the corporation is a bank, any action by which it converts any of its contributed surplus that arose on the issuance of shares of its capital stock (other than any portion of that contributed surplus that arose at a time when it was non-resident, or that arose in connection with a disposition to which subsection 212.1(1.1) applies or an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) into paid-up capital in respect of shares of its capital stock, orif the corporation is neither an insurance corporation nor a bank, any action by which it converts into paid-up capital in respect of a class of shares of its capital stock any of its contributed surplus that arose after March 31, 1977 (other than any portion of that contributed surplus that arose at a time when it was non-resident, or that arose in connection with a disposition to which subsection 212.1(1.1) applies or an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies)on the issuance of shares of that class or shares of another class for which the shares of that class were substituted (other than an issuance to which section 51, 66.3, 84.1, 85, 85.1, 86 or 87 or subsection 192(4.1) or 194(4.1) applied),on the acquisition of property by the corporation from a person who at the time of the acquisition held any of the issued shares of that class or shares of another class for which shares of that class were substituted for no consideration or for consideration that did not include shares of the capital stock of the corporation, oras a result of any action by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the action,the corporation shall be deemed to have paid at that time a dividend on the issued shares of the particular class equal to the amount, if any, by which the amount of the increase in the paid-up capital exceeds the total ofthe amount, if any, of the increase referred to in subparagraph 84(1)(b)(i) or the decrease referred to in subparagraph 84(1)(b)(ii), as the case may be,the amount, if any, of the reduction referred to in paragraph 84(1)(c), andthe amount, if any, of the increase in the paid-up capital that resulted from a conversion referred to in paragraph 84(1)(c.1), (c.2) or (c.3),and a dividend shall be deemed to have been received at that time by each person who held any of the issued shares of the particular class immediately after that time equal to that proportion of the dividend so deemed to have been paid by the corporation that the number of the shares of the particular class held by the person immediately after that time is of the number of the issued shares of that class outstanding immediately after that time.Distribution on winding-up, etc.Where funds or property of a corporation resident in Canada have at any time after March 31, 1977 been distributed or otherwise appropriated in any manner whatever to or for the benefit of the shareholders of any class of shares in its capital stock, on the winding-up, discontinuance or reorganization of its business, the corporation shall be deemed to have paid at that time a dividend on the shares of that class equal to the amount, if any, by whichthe amount or value of the funds or property distributed or appropriated, as the case may be,exceedsthe amount, if any, by which the paid-up capital in respect of the shares of that class is reduced on the distribution or appropriation, as the case may be,and a dividend shall be deemed to have been received at that time by each person who held any of the issued shares at that time equal to that proportion of the amount of the excess that the number of the shares of that class held by the person immediately before that time is of the number of the issued shares of that class outstanding immediately before that time.Redemption, etc.Where at any time after December 31, 1977 a corporation resident in Canada has redeemed, acquired or cancelled in any manner whatever (otherwise than by way of a transaction described in subsection 84(2)) any of the shares of any class of its capital stock,the corporation shall be deemed to have paid at that time a dividend on a separate class of shares comprising the shares so redeemed, acquired or cancelled equal to the amount, if any, by which the amount paid by the corporation on the redemption, acquisition or cancellation, as the case may be, of those shares exceeds the paid-up capital in respect of those shares immediately before that time; anda dividend shall be deemed to have been received at that time by each person who held any of the shares of that separate class at that time equal to that portion of the amount of the excess determined under paragraph 84(3)(a) that the number of those shares held by the person immediately before that time is of the total number of shares of that separate class that the corporation has redeemed, acquired or cancelled, at that time.Reduction of paid-up capitalWhere at any time after March 31, 1977 a corporation resident in Canada has reduced the paid-up capital in respect of any class of shares of its capital stock otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or a transaction described in subsection 84(2) or (4.1),the corporation shall be deemed to have paid at that time a dividend on shares of that class equal to the amount, if any, by which the amount paid by it on the reduction of the paid-up capital, exceeds the amount by which the paid-up capital in respect of that class of shares of the corporation has been so reduced; anda dividend shall be deemed to have been received at that time by each person who held any of the issued shares at that time equal to that proportion of the amount of the excess referred to in paragraph 84(4)(a) that the number of the shares of that class held by the person immediately before that time is of the number of the issued shares of that class outstanding immediately before that time.Deemed dividend on reduction of paid-up capitalAny amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unlessthe amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurredoutside the ordinary course of the business of the corporation, or of the person or partnership that realized the proceeds, andwithin the period that commenced 24 months before the payment; andno amount that may reasonably be considered to be derived from those proceeds was paid by the public corporation on a previous reduction of the paid-up capital in respect of any class of shares of its capital stock.Deemed dividend on term preferred shareWhere, at any time after November 16, 1978, the paid-up capital in respect of a term preferred share owned by a shareholder that isa specified financial institution, ora partnership or trust of which a specified financial institution or a person related to such an institution was a member or a beneficiary,was reduced otherwise than by way of a redemption, acquisition or cancellation of the share or of a transaction described in subsection 84(2) or (4.1), the amount received by the shareholder on the reduction of the paid-up capital in respect of the share shall be deemed to be a dividend received by the shareholder at that time unless the share was not acquired in the ordinary course of the business carried on by the shareholder.Deemed dividend on guaranteed shareWhere at any time after 1987 the paid-up capital in respect of a share of the capital stock of a particular corporation ownedby a shareholder that is another corporation to which subsection 112(2.2) or (2.4) would, if the particular corporation were a taxable Canadian corporation, apply to deny the deduction under subsection 112(1) or (2) or 138(6) of a dividend received on the share, orby a partnership or trust of which the other corporation is a member or beneficiary, as the case may be,was reduced otherwise than by way of a redemption, acquisition or cancellation of the share or of a transaction described in subsection 84(2) or (4.1), the amount received by the shareholder on the reduction of the paid-up capital in respect of the share shall be deemed to be a dividend received by the shareholder at that time.Amount distributed or paid where a shareWherethe amount of property distributed by a corporation or otherwise appropriated to or for the benefit of its shareholders as described in paragraph 84(2)(a), orthe amount paid by a corporation as described in paragraph 84(3)(a) or (4)(a),includes a share of the capital stock of the corporation, for the purposes of subsections 84(2) to (4) the following rules apply:in computing the amount referred to in paragraph 84(5)(a) at any time, the share shall be valued at an amount equal to its paid-up capital at that time, andin computing the amount referred to in paragraph 84(5)(b) at any time, the share shall be valued at an amount equal to the amount by which the paid-up capital in respect of the class of shares to which it belongs has increased by virtue of its issue.Where s. (2) or (3) does not applySubsection 84(2) or (3), as the case may be, is not applicablein respect of any transaction or event, to the extent that subsection 84(1) is applicable in respect of that transaction or event; andin respect of any purchase by a corporation of any of its shares in the open market, if the corporation acquired those shares in the manner in which shares would normally be purchased by any member of the public in the open market.When dividend payableA dividend that is deemed by this section or section 84.1, 128.1 or 212.1 to have been paid at a particular time is deemed, for the purposes of this Subdivision and sections 131 and 133, to have become payable at that time.Where s. (3) does not applySubsection 84(3) does not apply to deem a dividend to have been received by a shareholder of a public corporation where the shareholder is an individual resident in Canada who deals at arm’s length with the corporation and the shares redeemed, acquired or cancelled are prescribed shares of the capital stock of the corporation.Shares disposed of on redemptions, etc.For greater certainty it is declared that where a shareholder of a corporation has disposed of a share of the capital stock of the corporation as a result of the redemption, acquisition or cancellation of the share by the corporation, the shareholder shall, for the purposes of this Act, be deemed to have disposed of the share to the corporation.Reduction of contributed surplusFor the purpose of paragraph 84(1)(c.3), there shall be deducted in determining at any time a corporation’s contributed surplus that arose after March 31, 1977 in any manner described in that paragraph the lesser ofthe amount, if any, by which the amount of a dividend paid by the corporation at or before that time and after March 31, 1977 and when it was a public corporation exceeded its retained earnings immediately before the payment of the dividend, andthe amount of its contributed surplus immediately before the payment of the dividend referred to in paragraph 84(10)(a) that arose after March 31, 1977.Computation of contributed surplusFor the purpose of subparagraph 84(1)(c.3)(ii), where the property acquired by the corporation (in this subsection referred to as the “acquiring corporation”) consists of shares (in this subsection referred to as the “subject shares”) of any class of the capital stock of another corporation resident in Canada (in this subsection referred to as the “subject corporation”) and, immediately after the acquisition of the subject shares, the subject corporation would be connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to “payer corporation” and “particular corporation” were read as “subject corporation” and “acquiring corporation”, respectively) with the acquiring corporation, the contributed surplus of the acquiring corporation that arose on the acquisition of the subject shares shall be deemed to be the lesser ofthe amount added to the contributed surplus of the acquiring corporation on the acquisition of the subject shares, andthe amount, if any, by which the paid-up capital in respect of the subject shares at the time of the acquisition exceeded the fair market value of any consideration given by the acquiring corporation for the subject shares.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 84; 1994, c. 7, Sch. II, s. 62, c. 21, s. 35; 1999, c. 22, s. 23, c. 31, s. 135(F); 2012, c. 31, s. 16; 2013, c. 34, s. 219; 2016, c. 12, s. 25; 2018, c. 27, s. 5
Non-arm’s length sale of sharesWhere after May 22, 1985 a taxpayer resident in Canada (other than a corporation) disposes of shares that are capital property of the taxpayer (in this section referred to as the “subject shares”) of any class of the capital stock of a corporation resident in Canada (in this section referred to as the “subject corporation”) to another corporation (in this section referred to as the “purchaser corporation”) with which the taxpayer does not deal at arm’s length and, immediately after the disposition, the subject corporation would be connected (within the meaning assigned by subsection 186(4) if the references therein to “payer corporation” and to “particular corporation” were read as “subject corporation” and “purchaser corporation” respectively) with the purchaser corporation,where shares (in this section referred to as the “new shares”) of the purchaser corporation have been issued as consideration for the subject shares, in computing the paid-up capital, at any particular time after the issue of the new shares, in respect of any particular class of shares of the capital stock of the purchaser corporation, there shall be deducted an amount determined by the formula(A - B) × C/AwhereAis the increase, if any, determined without reference to this section as it applies to the acquisition of the subject shares, in the paid-up capital in respect of all shares of the capital stock of the purchaser corporation as a result of the issue of the new shares,Bis the amount, if any, by which the greater ofthe paid-up capital, immediately before the disposition, in respect of the subject shares, andsubject to paragraphs 84.1(2)(a) and 84.1(2)(a.1), the adjusted cost base to the taxpayer, immediately before the disposition, of the subject shares,exceeds the fair market value, immediately after the disposition, of any consideration (other than the new shares) received by the taxpayer from the purchaser corporation for the subject shares, andCis the increase, if any, determined without reference to this section as it applies to the acquisition of the subject shares, in the paid-up capital in respect of the particular class of shares as a result of the issue of the new shares; andfor the purposes of this Act, a dividend shall be deemed to be paid to the taxpayer by the purchaser corporation and received by the taxpayer from the purchaser corporation at the time of the disposition in an amount determined by the formula(A + D) - (E + F)whereAis the increase, if any, determined without reference to this section as it applies to the acquisition of the subject shares, in the paid-up capital in respect of all shares of the capital stock of the purchaser corporation as a result of the issue of the new shares,Dis the fair market value, immediately after the disposition, of any consideration (other than the new shares) received by the taxpayer from the purchaser corporation for the subject shares,Eis the greater ofthe paid-up capital, immediately before the disposition, in respect of the subject shares, andsubject to paragraphs 84.1(2)(a) and 84.1(2)(a.1), the adjusted cost base to the taxpayer, immediately before the disposition, of the subject shares, andFis the total of all amounts each of which is an amount required to be deducted by the purchaser corporation under paragraph 84.1(1)(a) in computing the paid-up capital in respect of any class of shares of its capital stock by virtue of the acquisition of the subject shares.IdemFor the purposes of this section,where a share disposed of by a taxpayer was acquired by the taxpayer before 1972, the adjusted cost base to the taxpayer of the share at any time shall be deemed to be the total ofthe amount that would be its adjusted cost base to the taxpayer if the Income Tax Application Rules were read without reference to subsections 26(3) and (7) of that Act, andthe total of all amounts each of which is an amount received by the taxpayer after 1971 and before that time as a dividend on the share and in respect of which the corporation that paid the dividend has made an election under subsection 83(1);where a share disposed of by a taxpayer was acquired by the taxpayer after 1971 from a person with whom the taxpayer was not dealing at arm’s length, was a share substituted for such a share or was a share substituted for a share owned by the taxpayer at the end of 1971, the adjusted cost base to the taxpayer of the share at any time shall be deemed to be the amount, if any, by which its adjusted cost base to the taxpayer, otherwise determined, exceeds the total ofwhere the share or a share for which the share was substituted was owned at the end of 1971 by the taxpayer or a person with whom the taxpayer did not deal at arm’s length, the amount in respect of that share equal to the amount, if any, by whichthe fair market value of the share or the share for which it was substituted, as the case may be, on valuation day (within the meaning assigned by section 24 of the Income Tax Application Rules)exceeds the total ofthe actual cost (within the meaning assigned by subsection 26(13) of that Act) of the share or the share for which it was substituted, as the case may be, on January 1, 1972, to the taxpayer or the person with whom the taxpayer did not deal at arm’s length, andthe total of all amounts each of which is an amount received by the taxpayer or the person with whom the taxpayer did not deal at arm’s length after 1971 and before that time as a dividend on the share or the share for which it was substituted and in respect of which the corporation that paid the dividend has made an election under subsection 83(1), andthe total of all amounts each of which is an amount determined after 1984 under subparagraph 40(1)(a)(i) in respect of a previous disposition of the share or a share for which the share was substituted (or such lesser amount as is established by the taxpayer to be the amount in respect of which a deduction under section 110.6 was claimed) by the taxpayer or an individual with whom the taxpayer did not deal at arm’s length;[Repealed, 1998, c. 19, s. 115(1)]in respect of any disposition described in subsection 84.1(1) by a taxpayer of shares of the capital stock of a subject corporation to a purchaser corporation, the taxpayer shall, for greater certainty, be deemed not to deal at arm’s length with the purchaser corporation if the taxpayerwas, immediately before the disposition, one of a group of fewer than 6 persons that controlled the subject corporation, andwas, immediately after the disposition, one of a group of fewer than 6 persons that controlled the purchaser corporation, each member of which was a member of the group referred to in subparagraph 84.1(2)(b)(i);[Repealed, 1998, c. 19, s. 115(2)]a trust and a beneficiary of the trust or a person related to a beneficiary of the trust shall be deemed not to deal with each other at arm’s length; andnotwithstanding any other paragraph in this subsection, if this paragraph applies because of subsection (2.31) or (2.32) to a disposition of subject shares by a taxpayer to a purchaser corporation, the taxpayer and the purchaser corporation are deemed to deal with each other at arm’s length at the time of the disposition of the subject shares.Rules for par. 84.1(2)(a.1)For the purpose of paragraph 84.1(2)(a.1),where at any time a corporation issues a share of its capital stock to a taxpayer, the taxpayer and the corporation are deemed not to be dealing with each other at arm’s length at that time;where a taxpayer is deemed by paragraph 110.6(19)(a) to have reacquired a share, the taxpayer is deemed to have acquired the share at the beginning of February 23, 1994 from a person with whom the taxpayer was not dealing at arm’s length; andwhere a share owned by a particular person, or a share substituted for that share, has by one or more transactions or events between persons not dealing at arm’s length become vested in another person, the particular person and the other person are deemed at all times not to be dealing at arm’s length with each other whether or not the particular person and the other person coexisted.IdemFor the purposes of subparagraph 84.1(2)(a.1)(ii), where the taxpayer or an individual with whom the taxpayer did not deal at arm’s length (in this subsection referred to as the “transferor”) disposes of a share in a taxation year and claims an amount under subparagraph 40(1)(a)(iii) in computing the gain for the year from the disposition, the amount in respect of which a deduction under section 110.6 was claimed in respect of the transferor’s gain from the disposition shall be deemed to be equal to the lesser ofthe total ofthe amount claimed under subparagraph 40(1)(a)(iii) by the transferor for the year in respect of the disposition, andtwice the amount deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition, andtwice the maximum amount that could have been deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition ifno amount had been claimed by the transferor under subparagraph 40(1)(a)(iii) in computing the gain for the year from the disposition, andall amounts deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of taxable capital gains from dispositions of property to which this subsection does not apply were deducted before determining the maximum amount that could have been deducted under section 110.6 in respect of the taxable capital gain from the disposition,and for the purposes of subparagraph 84.1(2.1)(b)(ii), 1/2 of the total of all amounts determined under this subsection for the year in respect of other property disposed of before the disposition of the share shall be deemed to have been deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition of property to which this subsection does not apply,and, for the purposes of this subsection, where more than one share to which this subsection applies is disposed of in the year, each such share shall be deemed to have been separately disposed of in the order designated by the taxpayer in the taxpayer’s return of income under this Part for the year.Rules for par. 84.1(2)(b)For the purpose of paragraph 84.1(2)(b),in determining whether or not a taxpayer referred to in that paragraph was a member of a group of fewer than 6 persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time bythe taxpayer’s child (as defined in subsection 70(10)), who is under 18 years of age, or the taxpayer’s spouse or common-law partner,a trust of which the taxpayer, a person described in subparagraph 84.1(2.2)(a)(i) or a corporation described in subparagraph 84.1(2.2)(a)(iii), is a beneficiary, ora corporation controlled by the taxpayer, by a person described in subparagraph 84.1(2.2)(a)(i) or 84.1(2.2)(a)(ii) or by any combination of those persons or trustsare deemed to be owned at that time by the taxpayer and not by the person who actually owned the shares at that time;a group of persons in respect of a corporation means any 2 or more persons each of whom owns shares of the capital stock of the corporation;a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation is considered to be controlled by that group of persons; anda corporation may be controlled by a person or a particular group of persons even though the corporation is also controlled or deemed to be controlled by another person or group of persons.Rules for subsections (2.31) and (2.32)For the purposes of this subsection and subsections (2.31) and (2.32),a child of a taxpayer has the same meaning as in subsection 70(10) and also includesa niece or nephew of the taxpayer,a niece or nephew of the taxpayer’s spouse or common-law partner,a spouse or common-law partner of a niece or nephew referred to in subparagraph (i) or (ii), anda child of a niece or nephew referred to in subparagraph (i) or (ii);in applying subparagraphs (2.31)(c)(iii) and (2.32)(c)(iii), if the relevant group entity is a partnership,the partnership is deemed to be a corporation (in this paragraph referred to as the “deemed corporation”),the deemed corporation is deemed to have a capital stock of a single class of shares, with a total of 100 issued and outstanding shares,each member (in this paragraph referred to as a “deemed shareholder”) of the partnership is deemed to be a shareholder of the deemed corporation,each deemed shareholder of the deemed corporation is deemed to hold a number of shares in the capital stock of the deemed corporation determined by the formulaA × 100whereAis equal tothe deemed shareholder’s specified proportion for the last fiscal period of the deemed corporation, orif the deemed shareholder does not have a specified proportion described in clause (A), the proportion that is the fair market value of the deemed shareholder’s interest in the deemed corporation at that time relative to the fair market value of all interests in the deemed corporation at that time, andthe deemed corporation’s fiscal period is deemed to be its taxation year;own, directly or indirectly, in respect of a property, meansdirect ownership of the property, andan ownership interest or, for civil law, a right in the shares of a corporation, an interest in a partnership or an interest in a trust that has a direct or indirect interest or, for civil law, a right, in the property, except that for the purposes of paragraphs (2.31)(d) and (e) and (2.32)(d) and (e), this subparagraph does not apply as a look-through rule for an interest, or for civil law, a right in non-voting preferred shares or debt ofthe purchaser corporation (within the meaning of subsections (2.31) and (2.32)),the subject corporation (within the meaning of subsections (2.31) and (2.32)), orany relevant group entity (within the meaning of subsections (2.31) and (2.32));if a person or partnership’s share of the accumulating income or capital of a trust in respect of which the person or partnership has an interest as a beneficiary depends on the exercise by a person (in this paragraph referred to as a “trustee”) of, or the failure by any trustee to exercise, a discretionary power, that trustee is deemed to have fully exercised the power, or to have failed to exercise the power, as the case may be;if one or more children referred to insubparagraph (2.31)(f)(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.31)(f) and (g) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.31)(f)(i) are included in the disposition, orsubparagraph (2.32)(g)(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.32)(g) and (h) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.32)(g)(i) are included in the disposition; andif one or more children referred to insubparagraph (2.31)(f)(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.31)(f) and (g) are deemedto be met as of the time of the disposition, andto continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition, orsubparagraph (2.32)(g)(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation, or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.32)(g) and (h) are deemedto be met as of the time of the disposition, andto continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition;if a child, or each of the children, referred to insubparagraph (2.31)(f)(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.31)(f) and (g) are deemed to be met as of the time of the death or mental or physical impairment, orsubparagraph (2.32)(g)(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.32)(g) and (h) are deemed to be met as of the time of the death or mental or physical impairment;if a business of a subject corporation or a relevant group entity has ceased to be carried on due to the disposition of all of the assets that were used to carry on the business in order to satisfy debts owed to creditors of the corporation or of the entity, the conditions set out in respect of the business in subparagraphs (2.31)(f)(ii) and (iii) and (2.31)(g)(i) or (2.32)(g)(ii) and (iii) and (2.32)(h)(i), as applicable, are deemed to be met as of the time of the disposition; andin applying paragraphs (2.31)(g) and (2.32)(h), management refers to the direction or supervision of business activities but does not include the provision of advice.Immediate intergenerational business transferParagraph (2)(e) applies at the time of a disposition of subject shares (in this subsection referred to as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) under paragraph (2)(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);at the disposition time,the taxpayer is an individual (other than a trust),the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.3)(a), in this subsection referred to as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, andthe subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1));at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — control, directly or indirectly in any manner whatever,the subject corporation,the purchaser corporation, orany other person or partnership (in this subsection referred to as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);at all times after the disposition time, the taxpayer does not – either alone or together with a spouse or common law partner of the taxpayer – own, directly or indirectly,50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, orany equity interest (other than non-voting preferred shares) in any relevant group entity;subject to subsection (2.3), from the disposition time until 36 months after that time,the child or group of children, as the case may be, controls the purchaser corporation,the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.4(1.1)(a)) in a relevant business of the subject corporation or a relevant group entity, andeach relevant business of the subject corporation and any relevant group entity is carried on as an active business;subject to subsection (2.3), within 36 months after the disposition time or such greater period as is reasonable in the circumstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps totransfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (f)(ii), andpermanently cease to manage each relevant business of the subject corporation and any relevant group entity; andthe taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,jointly elect, in prescribed form, for paragraph (2)(e) to apply in respect of the disposition of the subject shares, andfile the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.Gradual intergenerational business transferParagraph (2)(e) applies at the time of a disposition of subject shares (referred to in this subsection as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) pursuant to paragraph (2)(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);at the disposition time,the taxpayer is an individual (other than a trust),the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.3)(a), and referred to in this subsection as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, andthe subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1));at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — controlthe subject corporation,the purchaser corporation, orany person or partnership (referred to in this subsection as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition in subparagraph (b)(iii);at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — own, directly or indirectly,50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, orany equity interest (other than non-voting preferred shares) in any relevant group entity;within 10 years after the disposition time (referred to in this subsection as the “final sale time”) and at all times after the final sale time, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,in the case of a disposition of subject shares that are, at the disposition time, shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation, and any relevant group entity with a fair market value that exceeds 50% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time, orin the case of a disposition of subject shares that are, at the disposition time, qualified small business corporation shares as those terms are defined in subsection 110.6(1) (other than subject shares described in subparagraph (i)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation and any relevant group entity with a fair market value that exceeds 30% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time;subject to subsection (2.3), from the disposition time until the later of 60 months after the disposition time and the final sale time,the child or group of children, as the case may be, controls the purchaser corporation,the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.4(1.1)(a)) in a relevant business of the subject corporation or a relevant group entity, andany relevant business of the subject corporation and any relevant group entity is carried on as an active business;subject to subsection (2.3), within 60 months of the disposition time or such greater period as is reasonable in the circumstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps totransfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (g)(ii), andpermanently cease to manage each relevant business of the subject corporation and any relevant group entity; andthe taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,jointly elect, in prescribed form, for paragraph (2)(e) to apply in respect of the disposition of the subject shares, andfile the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.Addition to paid-up capitalIn computing the paid-up capital at any time after May 22, 1985 in respect of any class of shares of the capital stock of a corporation, there shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the class paid after May 22, 1985 and before that time by the corporationexceedsthe total of such dividends that would be determined under subparagraph 84.1(3)(a)(i) if this Act were read without reference to paragraph 84.1(1)(a), andthe total of all amounts required by paragraph 84.1(1)(a) to be deducted in computing the paid-up capital in respect of that class of shares after May 22, 1985 and before that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 84.1; 1994, c. 7, Sch. II, s. 63, Sch. VIII, s. 34; 1998, c. 19, s. 115; 2000, c. 12, s. 142; 2001, c. 17, s. 612021, c. 21, s. 22024, c. 15, s. 17
Computation of paid-up capital in respect of particular class of sharesIn computing the paid-up capital in respect of any particular class of shares of the capital stock of a corporation at any particular time after March 31, 1977,there shall be deducted that proportion of the amount, if any, by which the paid-up capital in respect of all of the issued shares of the capital stock of the corporation on April 1, 1977, determined without reference to this section, exceeds the greater ofthe amount that the paid-up capital limit of the corporation would have been on March 31, 1977 if paragraph 89(1)(d) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read at that date, were read without reference to clause 89(1)(d)(iv.1)(F) of that Act and without reference to all subparagraphs of paragraph 89(1)(d) of that Act except subparagraphs 89(1)(d)(iv.1) and (vii) of that Act, andthe paid-up capital limit of the corporation on March 31, 1977,that the paid-up capital on April 1, 1977, determined without reference to this section, in respect of the particular class of shares is of the paid-up capital on April 1, 1977, determined without reference to this section, in respect of all of the issued and outstanding shares of the capital stock of the corporation; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3) or 84(4) to be a dividend on shares of the particular class paid by the corporation after March 31, 1977 and before the particular timeexceedsthe total that would be determined under clause 84.2(1)(b)(i)(A) if this Act were read without reference to paragraph 84.2(1)(a), andthe amount required by paragraph 84.2(1)(a) to be deducted in computing the paid-up capital of shares of the particular class.Debt deficiencyIn computing, after March 31, 1977, the adjusted cost base to an individual of a debt that was owing to the individual by a corporation on March 31, 1977, there shall be deducted the amount of any dividend that would have been deemed to have been received by the individual on that day if the corporation had paid the debt in full on that day.IdemWhere, after March 31, 1977 and before 1979, any debt referred to in subsection 84.2(2) owing by a corporation and held by an individual on March 31, 1977 and continuously after that date until conversion, is converted into shares of a particular class of the capital stock of the corporation,subsection 84.2(2) shall not apply in respect of the debt; andin computing the paid-up capital in respect of the shares of the particular class at any particular time after the conversion,there shall be deducted the amount by which the adjusted cost base to the taxpayer of the debt would, but for paragraph 84.2(3)(a), have been reduced by virtue of subsection 84.2(2), andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the corporation after the conversion and before the particular time,exceedsthe total that would be determined under subclause 84.2(3)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 84.2(3)(b)(i), andthe amount required by subparagraph 84.2(3)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1974-75-76, c. 26, s. 47; 1977-78, c. 1, s. 39, c. 32, s. 20
Transfer of property to corporation by shareholdersWhere a taxpayer has, in a taxation year, disposed of any of the taxpayer’s property that was eligible property to a taxable Canadian corporation for consideration that includes shares of the capital stock of the corporation, if the taxpayer and the corporation have jointly elected in prescribed form and in accordance with subsection 85(6), the following rules apply:the amount that the taxpayer and the corporation have agreed on in their election in respect of the property shall be deemed to be the taxpayer’s proceeds of disposition of the property and the corporation’s cost of the property;subject to paragraph 85(1)(c), where the amount that the taxpayer and the corporation have agreed on in their election in respect of the property is less than the fair market value, at the time of the disposition, of the consideration therefor (other than any shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer, the amount so agreed on shall, irrespective of the amount actually so agreed on by them, be deemed to be an amount equal to that fair market value;where the amount that the taxpayer and the corporation have agreed on in their election in respect of the property is greater than the fair market value, at the time of the disposition, of the property so disposed of, the amount so agreed on shall, irrespective of the amount actually so agreed on, be deemed to be an amount equal to that fair market value;where the property was inventory, capital property (other than depreciable property of a prescribed class), a NISA Fund No. 2 or a property that is eligible property because of paragraph 85(1.1)(g) or 85(1.1)(g.1), and the amount that the taxpayer and corporation have agreed on in their election in respect of the property is less than the lesser ofthe fair market value of the property at the time of the disposition, andthe cost amount to the taxpayer of the property at the time of the disposition,the amount so agreed on shall, irrespective of the amount actually so agreed on by them, be deemed to be an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and 85(1)(c.1)(ii);subject to paragraphs 85(1)(b) and 85(1)(c) and notwithstanding paragraph 85(1)(c.1), where the taxpayer carries on a farming business the income from which is computed in accordance with the cash method and the property was inventory owned in connection with that business immediately before the particular time the property was disposed of to the corporation,the amount that the taxpayer and the corporation agreed on in their election in respect of inventory purchased by the taxpayer shall be deemed to be equal to the amount determined by the formula(A × B/C) + DwhereAis the amount that would be included because of paragraph 28(1)(c) in computing the taxpayer’s income for the taxpayer’s last taxation year beginning before the particular time if that year had ended immediately before the particular time,Bis the value (determined in accordance with subsection 28(1.2)) to the taxpayer immediately before the particular time of the purchased inventory in respect of which the election is made,Cis the value (determined in accordance with subsection 28(1.2)) of all of the inventory purchased by the taxpayer that was owned by the taxpayer in connection with that business immediately before the particular time, andDis such additional amount as the taxpayer and the corporation designate in respect of the property,for the purpose of subparagraph 28(1)(a)(i), the disposition of the property and the receipt of proceeds of disposition therefor shall be deemed to have occurred at the particular time and in the course of carrying on the business, andwhere the property is owned by the corporation in connection with a farming business and the income from that business is computed in accordance with the cash method, for the purposes of section 28,an amount equal to the cost to the corporation of the property shall be deemed to have been paid by the corporation, andthe corporation shall be deemed to have purchased the property for an amount equal to that cost,at the particular time and in the course of carrying on that business;[Repealed, 2016, c. 12, s. 26]where the property was depreciable property of a prescribed class of the taxpayer and the amount that, but for this paragraph, would be the proceeds of disposition thereof is less than the least ofthe undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition,the cost to the taxpayer of the property, andthe fair market value of the property at the time of the disposition,the amount agreed on by the taxpayer and the corporation in their election in respect of the property shall, irrespective of the amount actually so agreed on by them, be deemed to be the least of the amounts described in subparagraphs 85(1)(e)(i) to 85(1)(e)(iii);where two or more properties, each of which is a property described in paragraph (e), are disposed of at the same time, paragraph (e) applies as if each property so disposed of had been separately disposed of in the order designated by the taxpayer before the time referred to in subsection (6) for the filing of an election in respect of those properties or, if the taxpayer does not so designate any such order, in the order designated by the Minister;where the fair market value of the property immediately before the disposition exceeds the greater ofthe fair market value, immediately after the disposition, of the consideration received by the taxpayer for the property disposed of by the taxpayer, andthe amount that the taxpayer and the corporation have agreed on in their election in respect of the property, determined without reference to this paragraph,and it is reasonable to regard any part of the excess as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer (other than a corporation that was a wholly owned corporation of the taxpayer immediately after the disposition), the amount that the taxpayer and the corporation agreed on in their election in respect of the property shall, regardless of the amount actually so agreed on by them, be deemed (except for the purposes of paragraphs 85(1)(g) and 85(1)(h)) to be an amount equal to the total of the amount referred to in subparagraph 85(1)(e.2)(ii) and that part of the excess;where, under any of paragraphs (c.1) and (e), the amount that the taxpayer and the corporation have agreed on in their election in respect of the property (in this paragraph referred to as the elected amount) would be deemed to be an amount that is greater or less than the amount that would be deemed, subject to paragraph (c), to be the elected amount under paragraph (b), the elected amount is deemed to be the greater ofthe amount deemed by paragraph (c.1) or (e), as the case may be, to be the elected amount, andthe amount deemed by paragraph 85(1)(b) to be the elected amount;wherethe property is depreciable property of a prescribed class of the taxpayer and is a passenger vehicle the cost to the taxpayer of which was more than $20,000 or such other amount as may be prescribed, andthe taxpayer and the corporation do not deal at arm’s length,the amount that the taxpayer and the corporation have agreed on in their election in respect of the property shall be deemed to be an amount equal to the undepreciated capital cost to the taxpayer of the class immediately before the disposition, except that, for the purposes of subsection 6(2), the cost to the corporation of the vehicle shall be deemed to be an amount equal to its fair market value immediately before the disposition;if the property is depreciable property of a prescribed class of the taxpayer that is a zero-emission passenger vehicle to which paragraph 13(7)(i) applies and the taxpayer and the corporation do not deal at arm’s length,the amount that the taxpayer and the corporation have agreed on in their election in respect of the vehicle is deemed to be an amount equal to the cost amount to the taxpayer of the vehicle immediately before the disposition, andfor the purposes of subsection 6(2), the cost to the corporation of the vehicle is deemed to be an amount equal to its fair market value immediately before the disposition;the cost to the taxpayer of any particular property (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer as consideration for the disposition shall be deemed to be an amount equal to the lesser ofthe fair market value of the particular property at the time of the disposition, andthat proportion of the fair market value, at the time of the disposition, of the property disposed of by the taxpayer to the corporation thatthe amount determined under subparagraph 85(1)(f)(i)is ofthe fair market value, at the time of the disposition, of all properties (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer as consideration for the disposition;the cost to the taxpayer of any preferred shares of any class of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition shall be deemed to be the lesser of the fair market value of those shares immediately after the disposition and that proportion of the amount, if any, by which the proceeds of the disposition exceed the fair market value of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer for the disposition, thatthe fair market value, immediately after the disposition, of those preferred shares of that class,is ofthe fair market value, immediately after the disposition, of all preferred shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition;the cost to the taxpayer of any common shares of any class of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition shall be deemed to be that proportion of the amount, if any, by which the proceeds of the disposition exceed the total of the fair market value, at the time of the disposition, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer for the disposition and the cost to the taxpayer of all preferred shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition, thatthe fair market value, immediately after the disposition, of those common shares of that class,is ofthe fair market value, immediately after the disposition, of all common shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition; andwhere the property so disposed of is taxable Canadian property of the taxpayer, all of the shares of the capital stock of the Canadian corporation received by the taxpayer as consideration for the property are deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer.Definition of eligible propertyFor the purposes of subsection 85(1), eligible property meansa capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person);a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident insurer if that property and the property received as consideration for that property are designated insurance property for the year;a Canadian resource property;a foreign resource property;[Repealed, 2016, c. 12, s. 26]an inventory (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable);a property that is a security or debt obligation used by the taxpayer in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money, other thana capital property,inventory, orwhere the taxpayer is a financial institution in the year, a mark-to-market property for the year;where the taxpayer is a financial institution in the year, a specified debt obligation (other than a mark-to-market property of the taxpayer for the year);a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person (other than a non-resident insurer) and used in the year in a business carried on in Canada by that person; ora NISA Fund No. 2, if that property is owned by an individual.ExceptionNotwithstanding subsection (1.1), a foreign resource property, or an interest in a partnership that derives all or part of its value from one or more foreign resource properties, is not an eligible property of a taxpayer in respect of a disposition by the taxpayer to a corporation wherethe taxpayer and the corporation do not deal with each other at arm’s length; andit is reasonable to conclude that one of the purposes of the disposition, or a series of transactions or events of which the disposition is a part, is to increase the extent to which any person may claim a deduction under section 126.Eligible derivativesNotwithstanding subsection (1.1), an eligible derivative (as defined in subsection 10.1(5)) of a taxpayer to which subsection 10.1(6) applies is not an eligible property of the taxpayer in respect of a disposition by the taxpayer to a corporation.Application of subsection (1)Subsection 85(1) does not apply to a disposition by a taxpayer to a corporation of a property referred to in paragraph 85(1.1)(h) unlessimmediately after the disposition, the corporation is controlled by the taxpayer, a person or persons related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the taxpayer or the taxpayer and a person or persons so related to the taxpayer;the disposition is part of a transaction or series of transactions in which all or substantially all of the property used in the business referred to in paragraph 85(1.1)(h) is disposed of by the taxpayer to the corporation; andthe disposition is not part of a series of transactions that result in control of the corporation being acquired by a person or group of persons after the time that is immediately after the disposition.Meaning of wholly owned corporationFor the purposes of this subsection and paragraph 85(1)(e.2), wholly owned corporation of a taxpayer means a corporation all the issued and outstanding shares of the capital stock of which (except directors’ qualifying shares) belong tothe taxpayer;a corporation that is a wholly owned corporation of the taxpayer; orany combination of persons described in paragraph 85(1.3)(a) or 85(1.3)(b).DefinitionsFor the purpose of subsection 85(1.1), financial institution, mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1).Transfer of property to corporation from partnershipWherea partnership has disposed, to a taxable Canadian corporation for consideration that includes shares of the corporation’s capital stock, of any partnership property (other than an eligible derivative, as defined in subsection 10.1(5), of the partnership if subsection 10.1(6) applies to the partnership) that wasa capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, if the partnership was not a Canadian partnership at the time of the disposition),a property described in any of paragraphs 85(1.1)(c) to 85(1.1)(f), ora property that would be described in paragraph 85(1.1)(g) or 85(1.1)(g.1) if the references in those paragraphs to “taxpayer” were read as “partnership”, andthe corporation and all the members of the partnership have jointly so elected, in prescribed form and within the time referred to in subsection 85(6),paragraphs 85(1)(a) to 85(1)(i) are applicable, with such modifications as the circumstances require, in respect of the disposition as if the partnership were a taxpayer resident in Canada who had disposed of the property to the corporation.Computing paid-up capitalWhere subsection 85(1) or 85(2) applies to a disposition of property (other than a disposition of property to which section 84.1 or 212.1 applies) to a corporation by a person or partnership (in this subsection referred to as the “taxpayer”),in computing the paid-up capital in respect of any particular class of shares of the capital stock of the corporation at the time of, and at any time after, the issue of shares of the capital stock of the corporation in consideration for the disposition of the property, there shall be deducted an amount determined by the formula(A - B) × C/AwhereAis the increase, if any, determined without reference to this section as it applies to the disposition of the property, in the paid-up capital in respect of all the shares of the capital stock of the corporation as a result of the acquisition by the corporation of the property,Bis the amount, if any, by which the corporation’s cost of the property, immediately after the acquisition, determined under subsection 85(1) or 85(2), as the case may be, exceeds the fair market value, immediately after the acquisition, of any consideration (other than shares of the capital stock of the corporation) received by the taxpayer from the corporation for the property, andCis the increase, if any, determined without reference to this section as it applies to the disposition of the property, in the paid-up capital in respect of the particular class of shares as a result of the acquisition by the corporation of the property; andin computing the paid-up capital, at any time after November 21, 1985, in respect of any class of shares of the capital stock of a corporation, there shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid after November 21, 1985 and before that time by the corporationexceedsthe total of such dividends that would be determined under clause 85(2.1)(b)(i)(A) if this Act were read without reference to paragraph 85(2.1)(a), andthe total of all amounts required by paragraph 85(2.1)(a) to be deducted in computing the paid-up capital in respect of that class of shares after November 21, 1985 and before that time.Where partnership wound upWhere,in respect of any disposition of partnership property of a partnership to a corporation, subsection 85(2) applies,the affairs of the partnership were wound up within 60 days after the disposition, andimmediately before the winding-up there was no partnership property other than money or property received from the corporation as consideration for the disposition,the following rules apply:the cost to any member of the partnership of any property (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to be the fair market value of the property at the time of the winding-up,the cost to any member of the partnership of any preferred shares of any class of the capital stock of the corporation receivable by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to bewhere any common shares of the capital stock of the corporation were also receivable by the member as consideration for the disposition of the interest, the lesser ofthe fair market value, immediately after the winding-up, of the preferred shares of that class so receivable by the member, andthat proportion of the amount, if any, by which the adjusted cost base to the member of the member’s partnership interest immediately before the winding-up exceeds the total of the fair market value, at the time of the winding-up, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member for the disposition of the interest, thatthe fair market value, immediately after the winding-up, of the preferred shares of that class so receivable by the member,is ofthe fair market value, immediately after the winding-up, of all preferred shares of the capital stock of the corporation receivable by the member as consideration for the disposition, andin any other case, the amount determined under clause 85(3)(e)(i)(B),the cost to any member of the partnership of any common shares of any class of the capital stock of the corporation receivable by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to be that proportion of the amount, if any, by which the adjusted cost base to the member of the member’s partnership interest immediately before the winding-up exceeds the total of the fair market value, at the time of the winding-up, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member for the disposition of the interest and the cost to the member of all preferred shares of the capital stock of the corporation receivable by the member as consideration for the disposition of the interest, thatthe fair market value, immediately after the winding-up, of the common shares of that class so receivable by the member,is ofthe fair market value, immediately after the winding-up, of all common shares of the capital stock of the corporation so receivable by the member as consideration for the disposition,the proceeds of disposition of the partnership interest of any member of the partnership shall be deemed to be the cost to the member of all shares and property receivable or received by the member as consideration for the disposition of the interest plus the amount of any money received by the member as consideration for the disposition, andwhere the partnership has distributed partnership property referred to in paragraph 85(3)(c) to a member of the partnership, the partnership shall be deemed to have disposed of that property for proceeds equal to the cost amount to the partnership of the property immediately before its distribution.[Repealed, 1998, c. 19, s. 116]Rules on transfers of depreciable propertyWhere subsection 85(1) or 85(2) has applied to a disposition at any time of depreciable property to a person (in this subsection referred to as the “transferee”) and the capital cost to the transferor of the property exceeds the transferor’s proceeds of disposition of the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),the capital cost to the transferee of the property is deemed to be the amount that was its capital cost to the transferor; andthe excess is deemed to have been deducted by the transferee under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that time.Acquisition of certain tools — capital cost and deemed depreciationIf subsection (1) has applied in respect of the acquisition at any particular time of any depreciable property by a corporation from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individ­ual’s proceeds of disposition of the property,the capital cost to the corporation of the property is deemed to be equal to the individual’s original cost; andthe amount by which the individual’s original cost exceeds the individual’s proceeds of disposition in respect of the property is deemed to have been deducted by the corporation under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that particular time.Time for electionAny election under subsection 85(1) or 85(2) shall be made on or before the day that is the earliest of the days on or before which any taxpayer making the election is required to file a return of income pursuant to section 150 for the taxation year in which the transaction to which the election relates occurred.Late filed electionWhere the election referred to in subsection 85(6) was not made on or before the day on or before which the election was required by that subsection to be made and that day is after May 6, 1974, the election shall be deemed to have been made on that day if, on or before the day that is 3 years after that day,the election is made in prescribed form; andan estimate of the penalty in respect of that election is paid by the taxpayer or the partnership, as the case may be, when that election is made.Special casesWhere, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitableto permit an election under subsection 85(1) or 85(2) to be made after the day that is 3 years after the day on or before which the election was required by subsection 85(6) to be made, orto permit an election made under subsection 85(1) or 85(2) to be amended,the election or amended election shall be deemed to have been made on the day on or before which the election was so required to be made ifthe election or amended election is made in prescribed form, andan estimate of the penalty in respect of the election or amended election is paid by the taxpayer or partnership, as the case may be, when the election or amended election is made,and where this subsection applies to the amendment of an election, that election shall be deemed not to have been effective.Penalty for late filed electionFor the purposes of this section, the penalty in respect of an election or an amended election referred to in paragraph 85(7)(a) or 85(7.1)(c) is an amount equal to the lesser of1/4 of 1% of the amount, if any, by whichthe fair market value of the property in respect of which that election or amended election was made, at the time the property was disposed of,exceedsthe amount agreed on in the election or amended election by the taxpayer or partnership, as the case may be, and the corporation,for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 85(6) to be made and ending on the day the election or amended election is made, andan amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 85(8)(a).Unpaid balance of penaltyThe Minister shall, with all due dispatch, examine each election and amended election referred to in paragraph 85(7)(a) or 85(7.1)(c), assess the penalty payable and send a notice of assessment to the taxpayer or partnership, as the case may be, and the taxpayer or partnership, as the case may be, shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 85; 1994, c. 7, Sch. II, s. 64, Sch. VIII, s. 35, c. 21, s. 36; 1995, c. 3, s. 22, c. 21, ss. 28, 53; 1997, c. 25, s. 17; 1998, c. 19, s. 116; 2001, c. 17, s. 62; 2002, c. 9, s. 29; 2007, c. 2, s. 13, c. 35, s. 22; 2010, c. 12, s. 6; 2013, c. 34, ss. 120, 220; 2016, c. 12, s. 26; 2017, c. 33, s. 232019, c. 29, s. 10
Share for share exchangeWhere shares of any particular class of the capital stock of a Canadian corporation (in this section referred to as the “purchaser”) are issued to a taxpayer (in this section referred to as the “vendor”) by the purchaser in exchange for a capital property of the vendor that is shares of any particular class of the capital stock (in this section referred to as the “exchanged shares”) of another corporation that is a taxable Canadian corporation (in this section referred to as the “acquired corporation”), subject to subsection 85.1(2),except where the vendor has, in the vendor’s return of income for the taxation year in which the exchange occurred, included in computing the vendor’s income for that year any portion of the gain or loss, otherwise determined, from the disposition of the exchanged shares, the vendor shall be deemedto have disposed of the exchanged shares for proceeds of disposition equal to the adjusted cost base to the vendor of those shares immediately before the exchange, andto have acquired the shares of the purchaser at a cost to the vendor equal to the adjusted cost base to the vendor of the exchanged shares immediately before the exchange,and where the exchanged shares were taxable Canadian property of the vendor, the shares of the purchaser so acquired by the vendor are deemed to be, at any time that is within 60 months after the exchange, taxable Canadian property of the vendor; andthe cost to the purchaser of each exchanged share, at any time up to and including the time the purchaser disposed of the share, shall be deemed to be the lesser ofits fair market value immediately before the exchange, andits paid-up capital immediately before the exchange.Where s. (1) does not applySubsection 85.1(1) does not apply wherethe vendor and purchaser were, immediately before the exchange, not dealing with each other at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) that is a right of the purchaser to acquire the exchanged shares);the vendor or persons with whom the vendor did not deal at arm’s length, or the vendor together with persons with whom the vendor did not deal at arm’s length,controlled the purchaser, orbeneficially owned shares of the capital stock of the purchaser having a fair market value of more than 50% of the fair market value of all of the outstanding shares of the capital stock of the purchaser,immediately after the exchange;the vendor and the purchaser have filed an election under subsection 85(1) or 85(2) with respect to the exchanged shares;consideration other than shares of the particular class of the capital stock of the purchaser was received by the vendor for the exchanged shares, notwithstanding that the vendor may have disposed of shares of the capital stock of the acquired corporation (other than the exchanged shares) to the purchaser for consideration other than shares of one class of the capital stock of the purchaser; orthe vendoris a foreign affiliate of a taxpayer resident in Canada at the end of the taxation year of the vendor in which the exchange occurred, andhas included any portion of the gain or loss, otherwise determined, from the disposition of the exchanged shares in computing its foreign accrual property income for the taxation year of the vendor in which the exchange occurred.Computation of paid-up capitalWhere, at any time, a purchaser has issued shares of its capital stock as a result of an exchange to which subsection 85.1(1) applied, in computing the paid-up capital in respect of any particular class of shares of its capital stock at any particular time after that timethere shall be deducted that proportion of the amount, if any, by whichthe increase, if any, as a result of the issue, in the paid-up capital in respect of all the shares of the capital stock of the purchaser, computed without reference to this subsection as it applies to the issue,exceedsthe paid-up capital in respect of all the exchanged shares received as a result of the exchangethatthe increase, if any, as a result of the issue, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the issue,is ofthe amount, if any, determined in subparagraph 85.1(2.1)(a)(i) in respect of the issue; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the purchaser before the particular timeexceedsthe total that would be determined under clause 85.1(2.1)(b)(i)(A) if this Act were read without reference to paragraph 85.1(2.1)(a), andthe total of all amounts required by paragraph 85.1(2.1)(a) to be deducted in respect of that particular class of shares before the particular time.Issuance deemed made to vendorFor the purposes of subsection (1), if a purchaser issues shares of a class of its capital stock (in this subsection referred to as “purchaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged shares that trade on a designated stock exchange to the purchaser solely for purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.Disposition of shares of foreign affiliateWhere a taxpayer has disposed of capital property that was shares of the capital stock of a foreign affiliate of the taxpayer to any corporation that was, immediately following the disposition, a foreign affiliate of the taxpayer (in this subsection referred to as the “acquiring affiliate”) for consideration including shares of the capital stock of the acquiring affiliate,the cost to the taxpayer of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the taxpayer as consideration for the disposition shall be deemed to be the fair market value of the property at the time of the disposition;the cost to the taxpayer of any shares of any class of the capital stock of the acquiring affiliate receivable by the taxpayer as consideration for the disposition shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the shares disposed of exceeds the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate) thatthe fair market value, immediately after the disposition, of those shares of the acquiring affiliate of that classis ofthe fair market value, immediately after the disposition, of all shares of the capital stock of the acquiring affiliate receivable by the taxpayer as consideration for the disposition;the taxpayer’s proceeds of disposition of the shares shall be deemed to be an amount equal to the cost to the taxpayer of all shares and other property receivable by the taxpayer from the acquiring affiliate as consideration for the disposition; andthe cost to the acquiring affiliate of the shares acquired from the taxpayer shall be deemed to be an amount equal to the taxpayer’s proceeds of disposition referred to in paragraph 85.1(3)(c).ExceptionSubsection (3) does not apply in respect of a disposition at any time by a taxpayer of a share of the capital stock of a particular foreign affiliate of the taxpayer to another foreign affiliate of the taxpayer ifbothall or substantially all of the property of the particular affiliate was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the particular affiliate, andthe disposition is part of a transaction or event or a series of transactions or events for the purpose of disposing of the share to a person or partnership that, immediately after the transaction, event or series, was a person or partnership (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length; orthe adjusted cost base to the taxpayer of the share at that time is greater than the amount that would, in the absence of subsection (3), be the taxpayer’s proceeds of disposition of the share in respect of the disposition.Foreign share for foreign share exchangeSubject to subsections (3) and (6) and 95(2), where a corporation resident in a country other than Canada (in this section referred to as the “foreign purchaser”) issues shares of its capital stock (in this section referred to as the “issued foreign shares”) to a vendor in exchange for shares of the capital stock of another corporation resident in a country other than Canada (in this section referred to as the “exchanged foreign shares”) that were immediately before the exchange capital property of the vendor, except where the vendor has, in the vendor’s return of income for the taxation year in which the exchange occurred, included in computing the vendor’s income for that year any portion of the gain or loss, otherwise determined, from the disposition of the exchanged foreign shares, the vendor is deemedto have disposed of the exchanged foreign shares for proceeds of disposition equal to the adjusted cost base to the vendor of those shares immediately before the exchange, andto have acquired the issued foreign shares at a cost to the vendor equal to the adjusted cost base to the vendor of the exchanged foreign shares immediately before the exchange,and where the exchanged foreign shares were taxable Canadian property of the vendor, the issued foreign shares so acquired by the vendor are deemed to be, at any time that is within 60 months after the exchange, taxable Canadian property of the vendor.Where subsection (5) does not applySubsection (5) does not apply wherethe vendor and foreign purchaser were, immediately before the exchange, not dealing with each other at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) that is a right of the foreign purchaser to acquire the exchanged foreign shares);immediately after the exchange the vendor, persons with whom the vendor did not deal at arm’s length or the vendor together with persons with whom the vendor did not deal at arm’s lengthcontrolled the foreign purchaser, orbeneficially owned shares of the capital stock of the foreign purchaser having a fair market value of more than 50% of the fair market value of all of the outstanding shares of the capital stock of the foreign purchaser;consideration other than issued foreign shares was received by the vendor for the exchanged foreign shares, notwithstanding that the vendor may have disposed of shares of the capital stock of the other corporation referred to in subsection (5) (other than the exchanged foreign shares) to the foreign purchaser for consideration other than shares of the capital stock of the foreign purchaser;the vendoris a foreign affiliate of a taxpayer resident in Canada at the end of the taxation year of the vendor in which the exchange occurred, andhas included any portion of the gain or loss, otherwise determined, from the disposition of the exchanged foreign shares in computing its foreign accrual property income for the taxation year of the vendor in which the exchange occurred; orthe vendor is a foreign affiliate of a taxpayer resident in Canada at the end of the taxation year of the vendor in which the exchange occurred and the exchanged foreign shares are excluded property (within the meaning assigned by subsection 95(1)) of the vendor.Issuance deemed made to vendorFor the purposes of subsection (5), if a foreign purchaser issues shares of a class of its capital stock (in this subsection referred to as foreign purchaser shares) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged foreign shares that trade on a designated stock exchange to the purchaser solely for foreign purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.Application of subsection (8)Subsection (8) applies in respect of the disposition before 2013 by a taxpayer of SIFT wind-up entity equity (referred to in subsection (8) as the “particular unit”) to a taxable Canadian corporation ifthe disposition occurs during a period (referred to in this subsection and subsection (8) as the “exchange period”) of no more than 60 days at the end of which all of the equity in the SIFT wind-up entity is owned by the corporation;the taxpayer receives no consideration for the disposition other than a share (referred to in this subsection and subsection (8) as the “exchange share”) of the capital stock of the corporation that is issued during the exchange period to the taxpayer by the corporation;neither of subsections 85(1) and (2) applies to the disposition; andall of the exchange shares issued to holders of equity in the SIFT wind-up entity are shares of a single class of the capital stock of the corporation.Rollover on SIFT unit for share exchangeIf this subsection applies in respect of a disposition by a taxpayer of a particular unit of a SIFT wind-up entity to a corporation for consideration that is an exchange share, the following rules apply:the taxpayer’s proceeds of disposition of the particular unit, and cost of the exchange share, are deemed to be equal to the cost amount to the taxpayer of the particular unit immediately before the disposition;if the particular unit was immediately before the disposition taxable Canadian property of the taxpayer, the exchange share is deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer;if the exchange share’s fair market value immediately after the disposition exceeds the particular unit’s fair market value at the time of the disposition, the excess is deemed to be an amount that section 15 requires to be included in computing the taxpayer’s income for the taxpayer’s taxation year in which the disposition occurs;if the particular unit’s fair market value at the time of the disposition exceeds the exchange share’s fair market value immediately after the disposition, and it is reasonable to regard any part of the excess as a benefit that the taxpayer desired to have conferred on a person, or partnership, with whom the taxpayer does not deal at arm’s length, the excess is deemed to be an amount that section 15 requires to be included in computing the taxpayer’s income for the taxpayer’s taxation year in which the disposition occurs;the cost to the corporation of the particular unit is deemed to be the lesser ofthe fair market value of the particular unit immediately before the disposition, andthe amount determined for B in the formula in paragraph (f) in respect of the particular unit; andin computing the paid-up capital in respect of each class of shares of the capital stock of the corporation at any time after the disposition there shall be deducted the amount determined by the formula(A – B) × C/AwhereAis the increase, if any, as a result of the disposition, in the paid-up capital in respect of all the shares of the capital stock of the corporation, computed without reference to this paragraph as it applies to the disposition,Bis the amount determined by the formulaD – EwhereDisunless subparagraph (ii) applies, the total of all amounts each of which isif the SIFT wind-up entity is a trust, the fair market value of property received by the SIFT wind-up entity on the issuance of the particular unit, orif the SIFT wind-up entity is a partnership,an amount that has at any time been added, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(1)(e)(iv) or (x), oran amount that would at any time have been added, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(1)(e)(i) if subsection 96(1) were read without reference to its paragraph (d) and the partnership deducted all amounts otherwise deductible because of that paragraph, andif the SIFT wind-up entity has on or after the end of the exchange period issued a unit, nil, andEis the total of all amounts each of whichif the SIFT wind-up entity is a trust, has become payable by the SIFT wind-up entity, in respect of the particular unit, to any holder of the unit on or before the disposition, other than an amount that has become payable out of its income (determined without reference to subsection 104(6)) or capital gains, andif the SIFT wind-up entity is a partnership,has at any time been deducted, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(2)(c)(iv) or (v), orwould have at any time been deducted, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(2)(c)(i) if subsection 96(1) were read without reference to its paragraph (d) and the partnership deducted all amounts otherwise deductible because of that paragraph, andCis the increase, if any, as a result of the disposition, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 85.1; 1994, c. 7, Sch. VIII, s. 36, c. 21, s. 37; 2001, c. 17, s. 63; 2009, c. 2, s. 18; 2010, c. 12, s. 7; 2013, c. 34, ss. 63, 221
Exchange of shares by a shareholder in course of reorganization of capitalWhere, at a particular time after May 6, 1974, in the course of a reorganization of the capital of a corporation, a taxpayer has disposed of capital property that was all the shares of any particular class of the capital stock of the corporation that were owned by the taxpayer at the particular time (in this section referred to as the “old shares”), and property is receivable from the corporation therefor that includes other shares of the capital stock of the corporation (in this section referred to as the “new shares”), the following rules apply:the cost to the taxpayer of any property (other than new shares) receivable by the taxpayer for the old shares shall be deemed to be its fair market value at the time of the disposition;the cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the fair market value at that time of the consideration receivable for the old shares (other than new shares) thatthe fair market value, immediately after the disposition, of those new shares of that class,is ofthe fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares; andthe taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the cost to the taxpayer of all new shares and other property receivable by the taxpayer for the old shares.IdemNotwithstanding paragraphs 86(1)(b) and 86(1)(c), where a taxpayer has disposed of old shares in circumstances described in subsection 86(1) and the fair market value of the old shares immediately before the disposition exceeds the total ofthe cost to the taxpayer of the property (other than new shares) receivable by the taxpayer for the old shares as determined under paragraph 86(1)(a), andthe fair market value of the new shares, immediately after the disposition,and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer, the following rules apply:the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser ofthe total of the cost to the taxpayer of the property as determined under paragraph 86(1)(a) and the gift portionandthe fair market value of the old shares immediately before the disposition,the taxpayer’s capital loss from the disposition of the old shares shall be deemed to be nil, andthe cost to the taxpayer of any new shares of any class of the capital stock of the corporation receivable by the taxpayer for the old shares shall be deemed to be that proportion of the amount, if any, by which the total of the adjusted cost bases to the taxpayer, immediately before the disposition, of the old shares exceeds the total determined under subparagraph 86(2)(c)(i) thatthe fair market value, immediately after the disposition, of the new shares of that class,is ofthe fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares.Computation of paid-up capitalWhere subsection 86(1) applies to a disposition of shares of the capital stock of a corporation (in this subsection referred to as the “exchange”), in computing the paid-up capital in respect of a particular class of shares of the capital stock of the corporation at any particular time that is the time of, or any time after, the exchange,there shall be deducted the amount determined by the formula(A - B) × C/AwhereAis the total of all amounts each of which is the increase, if any, as a result of the exchange, in the paid-up capital in respect of a class of shares of the capital stock of the corporation, computed without reference to this subsection as it applies to the exchange,Bis the amount, if any, by which the paid-up capital in respect of the old shares exceeds the fair market value of the consideration (other than shares of the capital stock of the corporation) given by the corporation for the old shares on the exchange, andCis the increase, if any, as a result of the exchange, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the exchange; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular timeexceedsthe total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), andthe total of all amounts required by paragraph 86(2.1)(a) to be deducted in respect of that particular class of shares before the particular time.ApplicationSubsections 86(1) and 86(2) do not apply in any case where subsection 85(1) or 85(2) applies.Computation of adjusted cost baseWhere a taxpayer has disposed of old shares in circumstances described in subsection 86(1),there shall be deducted after the disposition in computing the adjusted cost base to the taxpayer of each new share the amount determined by the formulaA × B/CwhereAis the amount, if any, by whichthe total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the taxpayer of the old shares immediately before the dispositionexceedsthe amount that would be the taxpayer’s capital gain for the taxation year that includes the time of the disposition from the disposition of the old shares if paragraph 40(1)(a) were read without reference to subparagraph (iii) of that paragraph,Bis the fair market value of the new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares, andCis the total of all amounts each of which is the fair market value of a new share at the time it was acquired by the taxpayer in consideration for the disposition of the old shares; andthe amount determined under paragraph 86(4)(a) in respect of the acquisition shall be added in computing the adjusted cost base to the taxpayer of the new share after the disposition.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 86; 1994, c. 21, s. 38; 1995, c. 21, s. 29
Foreign Spin-offs
Eligible distribution not included in incomeNotwithstanding any other provision of this Part,the amount of an eligible distribution received by a taxpayer shall not be included in computing the income of the taxpayer; andsubsection 52(2) does not apply to the eligible distribution received by the taxpayer.Eligible distributionFor the purpose of this section, a distribution by a particular corporation that is received by a taxpayer is an eligible distribution ifthe distribution is with respect to all of the taxpayer’s common shares of the capital stock of the particular corporation (in this section referred to as the “original shares”);the distribution consists solely of common shares of the capital stock of another corporation that were owned by the particular corporation immediately before their distribution to the taxpayer (in this section referred to as the “spin-off shares”);in the case of a distribution that is not prescribed,at the time of the distribution, both corporations are resident in the United States and were never resident in Canada,at the time of the distribution, the shares of the class that includes the original shares are widely held andare actively traded on a designated stock exchange in the United States, orare required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, andunder the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;in the case of a distribution that is prescribed,at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada,at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange,under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, andthe distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances;before the end of the sixth month following the day on which the particular corporation first distributes a spin-off share in respect of the distribution, the particular corporation provides to the Minister information satisfactory to the Minister establishingthat, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada,the date of the distribution,the type and fair market value of each property distributed to residents of Canada,the name and address of each resident of Canada that received property with respect to the distribution,in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution,in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, andsuch other matters that are required, in prescribed form; andthe taxpayer elects in writing filed with the taxpayer’s return of income for the taxation year in which the distribution occurs that this section apply to the distribution and provides information satisfactory to the Ministerof the number, cost amount (determined without reference to this section) and fair market value of the taxpayer’s original shares immediately before the distribution,of the number, and fair market value, of the taxpayer’s original shares and the spin-off shares immediately after the distribution of the spin-off shares to the taxpayer,except where the election is filed with the taxpayer’s return of income for the year in which the distribution occurs, concerning the amount of the distribution, the manner in which the distribution was reported by the taxpayer and the details of any subsequent disposition of original shares or spin-off shares for the purpose of determining any gains or losses from those dispositions, andof such other matters that are required, in prescribed form.Cost adjustmentsWhere a spin-off share is distributed by a corporation to a taxpayer pursuant to an eligible distribution with respect to an original share of the taxpayer,there shall be deducted for the purpose of computing the cost amount to the taxpayer of the original share at any time the amount determined by the formulaA × (B/C)whereAis the cost amount, determined without reference to this section, to the taxpayer of the original share at the time that is immediately before the distribution or, if the original share is disposed of by the taxpayer, before the distribution, at the time that is immediately before its disposition,Bis the fair market value of the spin-off share immediately after its distribution to the taxpayer, andCis the total ofthe fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, andthe fair market value of the spin-off share immediately after its distribution to the taxpayer; andthe cost to the taxpayer of the spin-off share is the amount by which the cost amount of the taxpayer’s original share was reduced as a result of paragraph (a).InventoryFor the purpose of calculating the value of the property described in an inventory of a taxpayer’s business,an eligible distribution to the taxpayer of a spin-off share that is included in the inventory is deemed not to be an acquisition of property in the fiscal period of the business in which the distribution occurs; andfor greater certainty, the value of the spin-off share is to be included in computing the value of the inventory at the end of that fiscal period.ReassessmentsNotwithstanding subsections 152(4) to (5), the Minister may make at any time such assessments, reassessments, determinations and redeterminations that are necessary where information is obtained that the conditions in subparagraph (2)(c)(iii) or (d)(iii) are not, or are no longer, satisfied.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 64; 2005, c. 30, s. 3; 2007, c. 35, s. 68; 2013, c. 34, s. 222
AmalgamationsIn this section, an amalgamation means a merger of two or more corporations each of which was, immediately before the merger, a taxable Canadian corporation (each of which corporations is referred to in this section as a “predecessor corporation”) to form one corporate entity (in this section referred to as the “new corporation”) in such a manner thatall of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger becomes property of the new corporation by virtue of the merger,all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger become liabilities of the new corporation by virtue of the merger, andall of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of that property by the other corporation or as a result of the distribution of that property to the other corporation on the winding-up of the corporation.Shares deemed to have been received by virtue of mergerFor the purposes of paragraph 87(1)(c) and the Income Tax Application Rules, where there is a merger ofa corporation and one or more of its subsidiary wholly-owned corporations, ortwo or more corporations each of which is a subsidiary wholly-owned corporation of the same corporationany shares of the capital stock of a predecessor corporation owned by a shareholder (except any predecessor corporation) immediately before the merger that were not cancelled on the merger shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger as consideration for the disposition of the shares of the capital stock of the predecessor corporations.New corporation continuation of a predecessorWhere there has been an amalgamation of corporations described in paragraph (1.1)(a) or of two or more corporations each of which is a subsidiary wholly-owned corporation of the same person, the new corporation is, for the purposes of section 29 of the Income Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection does not affect the determination of any predecessor corporation’s fiscal period, taxable income or tax payable.Definition of subsidiary wholly-owned corporationNotwithstanding subsection 248(1), for the purposes of this subsection and subsections 87(1.1), 87(1.2) and 87(2.11), subsidiary wholly-owned corporation of a person (in this subsection referred to as the “parent”) means a corporation all the issued and outstanding shares of the capital stock of which belong tothe parent;a corporation that is a subsidiary wholly-owned corporation of the parent; orany combination of persons each of which is a person described in paragraph 87(1.4)(a) or 87(1.4)(b).DefinitionsFor the purpose of this section, financial institution, mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1).Rules applicableWhere there has been an amalgamation of two or more corporations after 1971 the following rules applyTaxation yearfor the purposes of this Act, the corporate entity formed as a result of the amalgamation shall be deemed to be a new corporation the first taxation year of which shall be deemed to have commenced at the time of the amalgamation, and a taxation year of a predecessor corporation that would otherwise have ended after the amalgamation shall be deemed to have ended immediately before the amalgamation;Inventoryfor the purpose of computing the income of the new corporation, where the property described in the inventory, if any, of the new corporation at the beginning of its first taxation year includes property that was described in the inventory of a predecessor corporation at the end of the taxation year of the predecessor corporation that ended immediately before the amalgamation (which taxation year of a predecessor corporation is referred to in this section as its “last taxation year”), the property so included shall be deemed to have been acquired by the new corporation at the beginning of its first taxation year for an amount determined in accordance with section 10 as the value thereof for the purpose of computing the income of the predecessor corporation for its last taxation year, except that where the income of the predecessor corporation for its last taxation year from a farming business was computed in accordance with the cash method, the amount so determined in respect of inventory owned in connection with that business shall be deemed to be the total of all amounts each of which is an amount included because of paragraph 28(1)(b) or 28(1)(c) in computing that income for that year and, where the income of the new corporation from a farming business is computed in accordance with the cash method, for the purpose of section 28,an amount equal to that total shall be deemed to have been paid by the new corporation, andthe new corporation shall be deemed to have purchased the property for an amount equal to that total,in its first taxation year and in the course of carrying on that business;Method adopted for computing incomein computing the income of the new corporation for a taxation year from a business or propertythere shall be included any amount received or receivable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been received or receivable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been included in computing the income of the predecessor corporation for that year, andthere may be deducted any amount paid or payable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been paid or payable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been deductible in computing the income of the predecessor corporation for that year;Depreciable propertyfor the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),where depreciable property of a prescribed class has been acquired by the new corporation from a predecessor corporation, the capital cost of the property to the new corporation shall be deemed to be the amount that was the capital cost of the property to the predecessor corporation, andin determining the undepreciated capital cost to the new corporation of depreciable property of a prescribed class at any time,there shall be added to the capital cost to the new corporation of depreciable property of the class acquired before that time the cost amount, immediately before the amalgamation, to a predecessor corporation of each property included in that class by the new corporation,there shall be subtracted from the capital cost to the new corporation of depreciable property of that class acquired before that time the capital cost to the new corporation of property of that class acquired by virtue of the amalgamation,a reference in subparagraph 13(5)(b)(ii) to amounts that would have been deducted in respect of property in computing a taxpayer’s income shall be construed as including a reference to amounts that would have been deducted in respect of that property in computing a predecessor corporation’s income, andwhere depreciable property that is deemed by subsection 37(6) to be a separate prescribed class has been acquired by the new corporation from a predecessor corporation, the property shall continue to be deemed to be of that same separate prescribed class;Depreciable property acquired from predecessor corporationfor the purposes of this Act, where depreciable property (other than property of a prescribed class) has been acquired by the new corporation from a predecessor corporation, the new corporation shall be deemed to have acquired the property before 1972 at an actual cost equal to the actual cost of the property to the predecessor corporation, and the new corporation shall be deemed to have been allowed the total of all amounts allowed to the predecessor corporation in respect of the property, under regulations made under paragraph 20(1)(a), in computing the income of the predecessor corporation;Capital propertysubject to paragraph 87(2)(e.4) and subsection 142.6(5), where a capital property (other than depreciable property or an interest in a partnership) has been acquired by the new corporation from a predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the adjusted cost base of the property to the predecessor corporation immediately before the amalgamation;Partnership interestwhere a partnership interest that is capital property has been acquired from a predecessor corporation to which the new corporation was related, for the purposes of this Act, the cost of that partnership interest to the new corporation shall be deemed to be the amount that was the cost of that interest to the predecessor corporation and, in respect of that partnership interest, the new corporation shall be deemed to be the same corporation as and a continuation of the predecessor corporation;Security or debt obligationsubject to paragraphs 87(2)(e.3) and 87(2)(e.4) and subsection 142.6(5), where a property that is a security or debt obligation (other than a capital property or an inventory) of a predecessor corporation used by it in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money in the taxation year ending immediately before the amalgamation has been acquired by the new corporation from the predecessor corporation, the cost of the property to the new corporation shall be deemed to be the amount that was the cost amount of the property to the predecessor corporation immediately before the amalgamation;Financial institutions — specified debt obligationwhere the new corporation is a financial institution in its first taxation year, it shall be deemed, in respect of a specified debt obligation (other than a mark-to-market property) acquired from a predecessor corporation that was a financial institution in its last taxation year, to be the same corporation as, and a continuation of, the predecessor corporation;Financial institutions — mark-to-market propertywherethe new corporation is a financial institution in its first taxation year and a property acquired by the new corporation from a predecessor corporation is a mark-to-market property of the new corporation for the year, ora predecessor corporation was a financial institution in its last taxation year and a property acquired by the new corporation from the predecessor corporation was a mark-to-market property of the predecessor corporation for the year,the cost of the property to the new corporation shall be deemed to be the amount that was the fair market value of the property immediately before the amalgamation;if subsection 10.1(6) applied to a predecessor corporation in its last taxation year, each eligible derivative (as defined in subsection 10.1(5)) of the predecessor corporation immediately before the end of its last taxation year is deemed to have been reacquired, or reissued or renewed, as the case may be, by the new corporation at its fair market value immediately before the amalgamation;for the purposes of subsection 10.1(7), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Financial institutions — mark-to-market propertyfor the purposes of subsections 112(5) to 112(5.2) and 112(5.4) and the definition mark-to-market property in subsection 142.2(1), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;[Repealed, 2016, c. 12, s. 27][Repealed, 1994, c. 7, Sch. VIII, s. 37]Reservesfor the purpose of computing the income of the new corporation for a taxation year,any amount that has been deducted as a reserve in computing the income of a predecessor corporation for its last taxation year shall be deemed to have been deducted as a reserve in computing the income of the new corporation for a taxation year immediately preceding its first taxation year, andany amount deducted under paragraph 20(1)(p) in computing the income of a predecessor corporation for its last taxation year or a previous taxation year shall be deemed to have been deducted under that paragraph in computing the income of the new corporation for a taxation year immediately preceding its first taxation year;Continuationfor the purposes of sections 12.4 and 26, subsection 97(3) and section 256.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Financial institution rulesfor the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;for the purposes of applying subsections 13(21.2), 18(15) and 40(3.4) to any property that was disposed of by a predecessor corporation before the amalgamation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Superficial losses — capital propertyfor the purpose of applying paragraph 40(3.5)(c) in respect of any share that was acquired by a predecessor corporation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Patronage dividendsfor the purposes of section 135, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;COVID-19 – emergency subsidiesfor the purposes of section 125.7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation unless it is reasonable to consider that one of the main purposes of the amalgamation is to cause the new corporation to qualify for the deemed overpayment under any of subsections 125.7(2) to (2.2) or to increase the amount of that deemed overpayment;COVID-19 — automobile benefitsfor the purposes of subsections 6(2.2) and (2.3), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;COVID-19 — air quality improvement tax creditfor the purposes of section 127.43, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Debtsfor the purpose of computing a deduction from the income of the new corporation for a taxation year under paragraph 20(1)(l), 20(1)(l.1) or 20(1)(p)any debt owing to a predecessor corporation that was included in computing the income of the predecessor corporation for its last taxation year or a preceding taxation year,where a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any loan or lending asset made or acquired by the predecessor corporation in the ordinary course of its business of insurance or the lending of money, orwhere a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any instrument or commitment described in paragraph 20(1)(l.1) that was issued, made or assumed by the predecessor corporation in the ordinary course of its business of insurance or the lending of money,and that by reason of the amalgamation, has been acquired by the new corporation, shall be deemed to be a debt owing to the new corporation that was included in computing its income for a preceding taxation year, a loan or lending asset made or acquired or an instrument or commitment that was issued, made or assumed by the new corporation in a preceding taxation year in the ordinary course of its business of insurance or the lending of money, as the case may be;Debtsfor the purposes of section 61.4, the description of F in subsection 79(3), the definition forgiven amount in subsection 80(1), subsection 80.03(7) and section 80.04, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Special reservefor the purpose of computing a deduction from the income of the new corporation for a taxation year under paragraph 20(1)(n), any amount included in computing the income of a predecessor corporation from a business for its last taxation year or a previous taxation year in respect of property sold in the course of the business shall be deemed to have been included in computing the income of the new corporation from the business for a previous year in respect of that property;Special reservesfor the purposes of paragraphs 20(1)(m), 20(1)(m.1) and 20(1)(m.2), subsection 20(24) and section 34.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Inventory adjustmentfor the purposes of paragraph 20(1)(ii), an amount required by paragraph 12(1)(r) to be included in computing the income of a predecessor corporation for its last taxation year shall be deemed to be an amount required by paragraph 12(1)(r) to be included in computing the income of the new corporation for a taxation year immediately preceding its first taxation year;Prepaid expenses and matchable expendituresfor the purposes of subsections 18(9) and 18(9.01), section 18.1 and paragraph 20(1)(mm), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Employee benefit plans, etc.for the purposes of paragraphs 12(1)(n.1) to (n.3) and 20(1)(r), (s), (oo) and (pp), section 32.1, paragraph 104(13)(b), subsections 144.1(4) to (7) and Part X1.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Accrual rulesfor the purposes of subsections 12(3) and 12(9), section 12.2, subsection 20(19) and the definition adjusted cost basis in subsection 148(9) of this Act, and subsections 12(5) and (6) and paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Cancellation of leasefor the purposes of paragraphs 20(1)(z) and 20(1)(z.1), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Continuing corporationfor the purposes of paragraphs 12(1)(t) and (x), subsections 12(2.2) and 13(7.1), (7.4) and (24), paragraphs 13(27)(b) and (28)(c), subsections 13(29) and 18(9.1), paragraphs 20(1)(e), (e.1), (v) and (hh), sections 20.1 and 32, paragraph 37(1)(c), subsection 39(13), subparagraphs 53(2)(c)(vi) and (h)(ii), paragraph 53(2)(s), subsections 53(2.1), 66(11.4), 66.7(11) and 84.1(2.31) and (2.32), section 110.61, subsection 127(10.2), section 139.1, subsection 152(4.3), the determination of D in the definition undepreciated capital cost in subsection 13(21), the determination of L in the definition cumulative Canadian exploration expense in subsection 66.1(6) and the definition qualifying business transfer in subsection 248(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Certain transfers and loansfor the purposes of sections 74.4 and 74.5, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;[Repealed, 2013, c. 33, s. 6]Part I.3 taxfor the purpose of determining the amount deductible by the new corporation for any taxation year under section 125.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Part I.3 and Part VI taxfor the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any corporation for any taxation year that ends before the amalgamation;Subsection 125(5.1) and 157.1(1)for the purposes of subsection 125(5.1) and the definition eligible corporation in subsection 157.1(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Mining reclamation trustsfor the purposes of paragraphs 12(1)(z.1) and 12(1)(z.2) and 20(1)(ss) and 20(1)(tt) and sections 107.3 and 127.41, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Film or video productionsfor the purposes of sections 125.4 and 125.5, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Non-resident entitiesfor the purposes of sections 94 to 94.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Journalism organizationsfor the purposes of section 125.6, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Continuing corporationfor the purposes of subsection 110(0.1), paragraph 110(1)(e) and subsection 110(1.31), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Certain payments to employeesfor the purpose of subsection 6(3), any amount received by a person from the new corporation that would, if received by the person from a predecessor corporation, be deemed for the purpose of section 5 to be remuneration for that person’s services rendered as an officer or during a period of employment, shall be deemed for the purposes of section 5 to be remuneration for services so rendered by the person;Scientific research and experimental developmentfor the purposes of section 37 and Part VIII, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Idemfor the purposes of this paragraph, paragraph 87(2)(l.2) and section 37.1,the base period for a particular taxation year of a new corporation that has fewer than 3 preceding taxation years shall be deemed to be the periodcommencing on the day thatis the earliest of all days each of which is a day immediately before the commencement of a taxation year of a predecessor corporation in respect of the new corporation that ended after 1976, andis in the 3 year period ending on the day immediately before the commencement of the particular year, andending immediately before the first day of the particular taxation year,where subparagraph 87(2)(l.1)(i) applies,in determining the qualified expenditures made by the new corporation in its base period, there shall be included the total of all amounts each of which is the qualified expenditure made by a predecessor corporation in a taxation year that commenced in the base period of the new corporation, andin determining the total of the amounts paid to the new corporation by persons referred to in subparagraphs (b)(i) to (iii) of the definition expenditure base in subsection 37.1(5) in its base period, there shall be included the total of all such amounts paid to a predecessor corporation by a person referred to in those subparagraphs in a taxation year that commenced in the base period of the new corporation,the capital cost to the new corporation of any property that was a research property of a predecessor corporation acquired by it from the predecessor corporation shall be deemed to be the capital cost thereof to the predecessor corporation and the property shall be deemed to be a research property of the new corporation, andeach amount determined in respect of the new corporation under subparagraph 37.1(3)(b)(i) or 37.1(3)(b)(iii), as the case may be, shall be deemed to be the total of the amount otherwise determined and the total of amounts each of which is the amount determined under subparagraph 37.1(3)(b)(i) or 37.1(3)(b)(iii), as the case may be, in respect of a predecessor corporation;Definition of predecessor corporationfor the purposes of this paragraph and paragraph 87(2)(l.1), predecessor corporation includes any corporation in respect of which a predecessor corporation was a new corporation;Forgiven amountfor the purposes of section 61.3, the definition unrecognized loss in subsection 80(1) and subsection 80.01(10), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Replacement propertywhere before the amalgamation property of a predecessor corporation was unlawfully taken, lost, destroyed or taken under statutory authority, or was a former business property of the predecessor corporation, for the purposes of applying sections 13 and 44 and the definition former business property in subsection 248(1) to the new corporation in respect of the property and any replacement property acquired therefor, the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation;Subsection 13(4.2) electionfor the purposes of subsection 13(4.3) and paragraph 20(16.1)(b), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Contingent amount — section 143.4for the purposes of section 143.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Reservesfor the purpose of computing the income of the new corporation for a taxation year, any amount claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing a predecessor corporation’s gain for its last taxation year from the disposition of any property shall be deemedto have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in computing the new corporation’s gain for a taxation year immediately preceding its first taxation year from the disposition of that property by it before its first taxation year, andto be the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of that property;Gift of non-qualifying securityfor the purpose of computing the new corporation’s gain under subsection 40(1.01) for any taxation year from the disposition of a property, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Gift of predecessor’s propertyfor the purpose of computing the fair market value of property under subsection 248(35), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Outlays made pursuant to warrantyfor the purpose of section 42, any outlay or expense made or incurred by the new corporation in a taxation year, pursuant to or by virtue of an obligation described in that section incurred by a predecessor corporation, that would, if the outlay or expense had been made or incurred by the predecessor corporation in that year, have been deemed to be a loss of the predecessor corporation for that year from the disposition of a capital property shall be deemed to be a loss of the new corporation for that year from the disposition of a capital property;Expiration of options previously grantedfor the purpose of subsection 49(2),any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,any person to whom the option was granted who was not dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm’s length at the time that the option was granted, andany person to whom the option was granted who was dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm’s length at the time that the option was granted;Consideration for resource property dispositionfor the purpose of computing a deduction from the income of the new corporation for a taxation year under section 64 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, any amount that has been included in computing the income of a predecessor corporation for its last taxation year or a previous taxation year by reason of subsection 59(1) or paragraph 59(3.2)(c) of this Act, of subsection 59(3) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or of subsection 83A(5ba) or (5c) of that Act as it read in its application to a taxation year before the 1972 taxation year, shall be deemed to have been included in computing the income of the new corporation for a previous year by virtue thereof;Registered plansfor the purposes of sections 147, 147.1 and 147.2 and any regulations made under subsection 147.1(18), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Employees profit sharing planan election made under subsection 144(10) by a predecessor corporation is deemed to be an election made by the new corporation;Tax deferred cooperative sharesfor the purpose of section 135.1, if the new corporation is, at the beginning of its first taxation year, an agricultural cooperative corporation (within the meaning assigned by subsection 135.1(1)),the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation that was an agricultural cooperative corporation at the end of the predecessor corporation’s last taxation year, andif, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition tax deferred cooperative share in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the “old share”) that was, at the end of the predecessor corporation’s last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange;Deemed SIFT wind-up corporationif a predecessor corporation was a SIFT wind-up corporation immediately before the amalgamation, the new corporation is deemed to be a SIFT wind-up corporation;Pre-1972 capital surplus on handfor the purpose of subsection 88(2.1), any capital property owned by a predecessor corporation on December 31, 1971 that was acquired by the new corporation by virtue of the amalgamation shall be deemed to have been acquired by the new corporation before 1972 at an actual cost to it equal to the actual cost of the property to the predecessor corporation;Shares of foreign affiliatewhere one or more shares of the capital stock of a foreign affiliate of a predecessor corporation have, by virtue of the amalgamation, been acquired by the new corporation and as a result of the acquisition the affiliate has become a foreign affiliate of the new corporation,for the purposes of subsection 91(5) and paragraph 92(1)(b), any amount required by section 92 to be added or deducted, as the case may be, in computing the adjusted cost base of any such share to the predecessor corporation before the amalgamation shall be deemed to have been so required to be added or deducted, as the case may be, in computing the adjusted cost base of the share to the new corporation, andfor the purposes of subsections 93(2.01), (2.11), (2.21) and (2.31), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;Giftsfor the purposes of section 110.1, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation with respect to gifts;Taxable dividendsfor the purposes of subsections 112(3) to 112(4.22),any taxable dividend received on a share that was deductible from the predecessor corporation’s income for a taxation year under section 112 or subsection 138(6) is deemed to be a taxable dividend received on the share by the new corporation that was deductible from the new corporation’s income under section 112 or subsection 138(6), as the case may be,any dividend (other than a taxable dividend) received on a share by the predecessor corporation is deemed to have been received on the share by the new corporation, anda share acquired by the new corporation from a predecessor corporation is deemed to have been owned by the new corporation throughout any period of time throughout which it was owned by a predecessor corporation;Contributed surplusfor the purposes of subsections 84(1) and 84(10), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;[Repealed, 1998, c. 19, s. 117]Foreign tax carryoverfor the purposes of determining the new corporation’s unused foreign tax credit (within the meaning of subsection 126(7)) in respect of a country for any taxation year and determining the extent to which subsection 126(2.3) applies to reduce the amount that may be claimed by the new corporation under paragraph 126(2)(a) in respect of an unused foreign tax credit in respect of a country for a taxation year, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph shall in no respect affect the determination ofthe fiscal period of the new corporation or any of its predecessor corporations, orthe tax payable under this Act by any predecessor corporation;Capital dividend accountfor the purposes of computing the capital dividend account of the new corporation, it shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, other than a predecessor corporation to which subsection 83(2.1) would, if a dividend were paid immediately before the amalgamation and an election were made under subsection 83(2) in respect of the full amount of that dividend, apply to deem any portion of the dividend to be paid by the predecessor corporation as a taxable dividend;Application of Parts III and III.1for the purposes of Parts III and III.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Refundable dividend tax on handif the new corporation was a private corporation immediately after the amalgamation, the following rules apply:for the purpose of computing the eligible refundable dividend tax on hand and non-eligible refundable dividend tax on hand (as defined in subsection 129(4)) of the new corporation at the end of its first taxation year there shall be added to the total determined under those definitions in respect of the new corporation for the yearin respect of the new corporation’s eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the total of all amounts each of which is the portion, if any, of its dividend refund for its last taxation year from its eligible refundable dividend tax on hand determined under subparagraph 129(1)(a)(i) or clause 129(1)(a)(ii)(B), andin respect of the new corporation’s non-eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the non-eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the portion, if any, of its dividend refund for its last taxation year from its non-eligible refundable dividend tax on hand determined under clause 129(1)(a)(ii)(A), andno amount shall be added under this paragraph in respect of a predecessor corporationthat was not a private corporation at the end of its last taxation year, orwhere subsection 129(1.2) would have applied to deem a dividend paid by the predecessor corporation immediately before the amalgamation not to be a taxable dividend for the purpose of subsection 129(1);Mutual fund and investment corporationswhere the new corporation is a mutual fund corporation or an investment corporation, there shall be added tothe amount determined under each of paragraphs (a) and (b) of the definition capital gains dividend account in subsection 131(6), andthe values of A and B in the definition refundable capital gains tax on hand in that subsectionin respect of the new corporation at any time the amounts so determined and the values of those factors immediately before the amalgamation in respect of each predecessor corporation that was, immediately before the amalgamation, a mutual fund corporation or an investment corporation;Flow-through entitieswhere a predecessor corporation was, immediately before the amalgamation, an investment corporation, a mortgage investment corporation or a mutual fund corporation and the new corporation is an investment corporation, a mortgage investment corporation or a mutual fund corporation, as the case may be, for the purpose of section 39.1, the new corporation is deemed to be the same corporation as, and a continuation of, the predecessor corporation;Non-resident-owned investment corporationin the case of a new corporation that is a non-resident-owned investment corporation,for the purpose of computing its allowable refundable tax on hand (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had allowable refundable tax on hand immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition allowable refundable tax on hand in subsection 133(9),for the purpose of computing its capital gains dividend account (within the meaning assigned by subsection 133(8)) at any time, where a predecessor corporation had an amount in its capital gains dividend account immediately before the amalgamation, that amount shall be added to the amount determined under paragraph (a) of the description of A in the definition capital gains dividend account in subsection 133(8), andfor the purpose of computing its cumulative taxable income (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had cumulative taxable income immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition cumulative taxable income in subsection 133(9);Public corporationwhere a predecessor corporation was a public corporation immediately before the amalgamation, the new corporation shall be deemed to have been a public corporation at the commencement of its first taxation year;Interest on certain obligationsfor the purposes of paragraph 81(1)(m), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Disposition of shares of controlled corporationfor the purposes of paragraph 40(2)(h),where a corporation was controlled, directly or indirectly in any manner whatever, by a predecessor corporation immediately before the amalgamation and has, by reason of the amalgamation, become controlled, directly or indirectly in any manner whatever, by the new corporation, the new corporation shall be deemed to have acquired control of the corporation so controlled at the time control thereof was acquired by the predecessor corporation, andwhere a predecessor corporation was immediately before the amalgamation controlled, directly or indirectly in any manner whatever, by a corporation that, immediately after the amalgamation, controlled, directly or indirectly in any manner whatever, the new corporation, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Para. 20(1)(n) and subpara. 40(1)(a)(iii) amountsnotwithstanding any other provision of this Act, where any property was disposed of by a predecessor corporation, the new corporation shall, in computingthe amount of any deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business, andthe amount of its claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property,be deemed to be the same corporation as, and a continuation of, the predecessor corporation;[Repealed, 2013, c. 34, s. 223]Refundable Part VII tax on handfor the purpose of computing the refundable Part VII tax on hand of the new corporation at the end of any taxation year, there shall be added to the total determined under paragraph 192(3)(a) the total of all amounts each of which is the amount, if any, by whicha predecessor corporation’s refundable Part VII tax on hand at the end of its last taxation yearexceedsthe predecessor corporation’s Part VII refund for its last taxation year;[Repealed, 2019, c. 29, s. 11]Refundable investment tax credit and balance-due dayfor the purpose of applying the definition qualifying corporation in subsection 127.1(2), and subparagraph (d)(i) of the definition balance-due day in subsection 248(1), to any corporation, the new corporation is deemed to have hada particular taxation year thatwhere it was associated with another corporation in the new corporation’s first taxation year, ended in the calendar year that precedes the calendar year in which that first year ends, andwhere clause 87(2)(oo.1)(i)(A) does not apply, immediately precedes that first year,taxable income for the particular year (determined before taking into consideration the specified future tax consequences for the particular year) equal to the total of all amounts each of which is a predecessor corporation’s taxable income for its taxation year that ended immediately before the amalgamation (determined before taking into consideration the specified future tax consequences for that year),a business limit for the particular year equal to the total of all amounts each of which is a predecessor corporation’s business limit for its taxation year that ended immediately before the amalgamation, anda qualifying income limit for the particular year equal to the total of all amounts each of which is a predecessor corporation’s qualifying income limit for its taxation year that ended immediately before the amalgamation;Cumulative offset account computationfor the purpose of computing the cumulative offset account (within the meaning assigned by subsection 66.5(2)) of the new corporation at any time, there shall be added to the total otherwise determined under paragraph 66.5(2)(a) the total of all amounts each of which is the amount, if any, by whicha predecessor corporation’s cumulative offset account at the end of its last taxation yearexceedsthe amount deducted under subsection 66.5(1) in computing the predecessor corporation’s income for its last taxation year;Continuation of corporationfor the purpose of computing the new corporation’s investment tax credit at the end of any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any predecessor corporation;Continuation of corporationfor the purposes of sections 127.44, 127.45, 127.48 and 127.49 and Part XII.7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;Tax on taxable preferred sharesfor the purposes of subsections 112(2.9), 191(4), and 191.1(2) and 191.1(4), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Transferred liability for Part VI.1 taxfor the purposes of section 191.3, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Livestock — inclusion of deferred amountfor the purposes of subsections 80.3(3) and 80.3(5), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;Fuel tax rebatesfor the purposes of paragraph 12(1)(x.1), the description of D.1 in the definition non-capital loss in subsection 111(8), and subsections 111(10) and 111(11), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;General rate income poolif the new corporation is a Canadian-controlled private corporation or a deposit insurance corporation in its first taxation year, in computing its general rate income pool at the end of that first taxation year there shall be added the total of all amounts determined under subsection 89(5) in respect of the corporation for that first taxation year;Low rate income poolif the new corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation in its first taxation year, there shall be added in computing its low rate income pool at any time in that first taxation year the total of all amounts determined under subsection 89(9) in respect of the corporation for that first taxation year; andfor the purposes of Part VI.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation.Application of s. 37.1(5)The definitions in subsection 37.1(5) apply to subsection 87(2).Non-capital losses, etc., of predecessor corporationsWhere there has been an amalgamation of two or more corporations, for the purposes only ofdetermining the new corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be, for any taxation year,determining, for any taxation year, the new corporation’s absorbed capacity, excess capacity and transferred capacity in determining its cumulative unused excess capacity for a taxation year, anddetermining the extent to which subsections 111(3) to (5.4) and paragraph 149(10)(c) apply to restrict the deductibility by the new corporation of any non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be,the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection shall in no respect affect the determination ofthe fiscal period of the new corporation or any of its predecessors,the income of the new corporation (other than as a result of an amount of interest and financing expenses being deductible by the new corporation because of paragraph (a.1)) or any of its predecessors, orthe taxable income of, or the tax payable under this Act by, any predecessor corporation.Vertical amalgamationsWhere a new corporation is formed by the amalgamation of a particular corporation and one or more of its subsidiary wholly-owned corporations, the new corporation is deemed to be the same corporation as, and a continuation of, the particular corporation for the purposes of applying sections 111 and 126, subsections 127(5) to 127(26) and 181.1(4) to 181.1(7), Part IV and subsections 190.1(3) to 190.1(6) in respect of the particular corporation.Adjusted taxable income — non-capital lossesWhere there has been an amalgamation of two or more corporations, for the purpose of determining the amount for paragraph (h) in the description of B in the definition adjusted taxable income in subsection 18.2(1) in respect of an amount deducted by the new corporation under paragraph 111(1)(a) in computing its taxable income for a taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, a particular predecessor corporation if it may reasonably be considered thatthe amount deducted is in respect of all or any portion of a non-capital loss for another taxation year; andthe non-capital loss or the portion of the non-capital loss, as the case may be, is a non-capital loss of the particular predecessor corporation for the other taxation year.Amalgamation of insurersWhere there has been an amalgamation and one or more of the predecessor corporations was an insurer, the new corporation is, notwithstanding subsection (2), deemed, for the purposes of paragraphs 12(1)(d), (e), (e.1), (i) and (s), subsection 12.5(8), paragraphs 20(1)(l), (l.1), (p) and (jj) and 20(7)(c), subsections 20(22) and 20.4(4), sections 138, 138.1, 140, 142 and 148 and Part XII.3, to be the same corporation as, and a continuation of, each of those predecessor corporations.Quebec credit unionsFor the purpose of applying this section to an amalgamation governed by section 689 of An Act respecting financial services cooperatives, R.S.Q., c. C-67.3, an investment deposit of a credit union is deemed to be a share of a separate class of the capital stock of a predecessor corporation in respect of the amalgamation the adjusted cost base and paid up capital of which to the credit union is equal to the adjusted cost base to the credit union of the investment deposit immediately before the amalgamation ifimmediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act, R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; andon the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.Computation of paid-up capitalSubject to subsection 87(3.1), where there is an amalgamation or a merger of 2 or more Canadian corporations, in computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this subsection, in respect of all the shares of the capital stock of the new corporation immediately after the amalgamation or merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share (except a share held by any other predecessor corporation) of the capital stock of a predecessor corporation immediately before the amalgamation or merger, thatthe paid-up capital, determined without reference to this subsection, of the particular class of shares of the capital stock of the new corporation immediately after the amalgamation or mergeris ofthe paid-up capital, determined without reference to this subsection, in respect of all of the issued and outstanding shares of the capital stock of the new corporation immediately after the amalgamation or merger; andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the new corporation before the particular timeexceedsthe total that would be determined under clause 87(3)(b)(i)(A) if this Act were read without reference to paragraph 87(3)(a), andthe amount required by paragraph 87(3)(a) to be deducted in computing the paid-up capital of shares of the particular class.Election for non-application of subsection (3)Where,there is an amalgamation of 2 or more corporations,all of the issued shares, immediately before the amalgamation, of each class of shares (other than a class of shares all of the issued shares of which were cancelled on the amalgamation) of the capital stock of each predecessor corporation (in this subsection referred to as the “exchanged class”) are converted into all of the issued shares, immediately after the amalgamation, of a separate class of shares of the capital stock of the new corporation (in this subsection referred to as the “substituted class”),immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, andthe new corporation elects in its return of income filed in accordance with section 150 for its first taxation year to have the provisions of this subsection apply,for the purpose of computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,subsection 87(3) does not apply in respect of the amalgamation, andeach substituted class shall be deemed to be the same as, and a continuation of, the exchanged class from which it was converted.Shares of predecessor corporationWhere there has been an amalgamation of two or more corporations after May 6, 1974, each shareholder (except any predecessor corporation) who, immediately before the amalgamation, owned shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”) that were capital property to the shareholder and who received no consideration for the disposition of those shares on the amalgamation, other than shares of the capital stock of the new corporation (in this subsection referred to as the “new shares”), shall be deemedto have disposed of the old shares for proceeds equal to the total of the adjusted cost bases to the shareholder of those shares immediately before the amalgamation, andto have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) thatthe fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder,is ofthe fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply:the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser ofthe total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, andthe fair market value of the old shares immediately before the amalgamation,the shareholder’s capital loss from the disposition of the old shares shall be deemed to be nil, andthe cost to the shareholder of any new shares of any class of the capital stock of the new corporation acquired by the shareholder on the amalgamation shall be deemed to be that proportion of the lesser ofthe total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, andthe total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old sharesthatthe fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholderis ofthe fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder.Exchanged sharesFor the purposes of the definition term preferred share in subsection 248(1), where there has been an amalgamation of two or more corporations after November 16, 1978 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued in consideration for the disposition of a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share,the new share shall be deemed to have been issued at the time the exchanged share was issued;if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; andthe new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.IdemWhere there has been an amalgamation or merger of two or more corporations after November 27, 1986 and a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new share”) was issued to a shareholder in consideration for the disposition of a share by that shareholder of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged share”) and the terms and conditions of the new share were the same as, or substantially the same as, the terms and conditions of the exchanged share, for the purposes of applying the provisions of this subsection, subsections 112(2.2) and 112(2.4), Parts IV.1 and VI.1, section 258 and the definitions grandfathered share, short-term preferred share, taxable preferred share and taxable RFI share in subsection 248(1) to the new share, the following rules apply:the new share shall be deemed to have been issued at the time the exchanged share was issued;where the exchanged share was a share described in paragraph (a), (b), (c) or (d) of the definition grandfathered share in subsection 248(1), the new share shall be deemed to be the same share as the exchanged share for the purposes of that definition;the new share shall be deemed to have been acquired by the shareholder at the time the exchanged share was acquired by the shareholder;the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;an election made under subsection 191.2(1) by a predecessor corporation with respect to the class of shares of its capital stock to which the exchanged share belonged shall be deemed to be an election made by the new corporation with respect to the class of shares of its capital stock to which the new share belongs; andwhere the terms or conditions of the exchanged share or an agreement in respect of the exchanged share specify an amount in respect of the exchanged share for the purposes of subsection 191(4) and an amount equal to the amount so specified in respect of the exchanged share is specified in respect of the new share for the purposes of subsection 191(4),for the purposes of subparagraphs 191(4)(d)(i) and 191(4)(e)(i), the new share shall be deemed to have been issued for the same consideration as that for which the exchanged share was issued and to have been issued for the purpose for which the exchanged share was issued,for the purposes of subparagraphs 191(4)(d)(ii) and 191(4)(e)(ii), the new share shall be deemed to be the same share as the exchanged share and to have been issued for the purpose for which the exchanged share was issued, andwhere the shareholder received no consideration for the disposition of the exchanged share other than the new share, for the purposes of subsection 191(4),in the case of an exchanged share to which subsection 191(4) applies because of paragraph 191(4)(a), the new share shall be deemed to have been issued for consideration having a fair market value equal to the consideration for which the exchanged share was issued, andin the case of an exchanged share to which subsection 191(4) applies because of an event described in paragraph 191(4)(b) or 191(4)(c), the consideration for which the new share was issued shall be deemed to have a fair market value equal to the fair market value of the exchanged share immediately before the time that event occurred.Exchanged rightsWhere there has been an amalgamation or merger of two or more corporations after June 18, 1987 and a right listed on a designated stock exchange to acquire a share of any class of the capital stock of the new corporation (in this subsection referred to as the “new right”) was acquired by a shareholder in consideration for the disposition of a right described in paragraph (d) of the definition grandfathered share in subsection 248(1) to acquire a share of any class of the capital stock of a predecessor corporation (in this subsection referred to as the “exchanged right”), the new right shall be deemed to be the same right as the exchanged right for the purposes of paragraph (d) of the definition grandfathered share in subsection 248(1) where the terms and conditions of the new right were the same as, or substantially the same as, the terms and conditions of the exchanged right and the terms and conditions of the share receivable on an exercise of the new right were the same as, or substantially the same as, the terms and conditions of the share that would have been received on an exercise of the exchanged right.Flow-through sharesWherethere is an amalgamation of two or more corporations each of which is a principal-business corporation (within the meaning assigned by subsection 66(15)) or a corporation that at no time carried on business,a predecessor corporation entered into an agreement with a person at a particular time for consideration given by the person to the predecessor corporation,for the consideration under the agreementa share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, ora right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, andthe new corporationissues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, oris, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,for the purposes of subsection 66(12.66) and Part XII.6 and for the purposes of renouncing an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses that would, but for the renunciation, be incurred by the new corporation after the amalgamation,the person shall be deemed to have given the consideration under the agreement to the new corporation for the issue of the new share,the agreement shall be deemed to have been entered into between the new corporation and the person at the particular time,the new share shall be deemed to be a flow-through share of the new corporation, andthe new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation.Options to acquire shares of predecessor corporationWhere there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who immediately before the amalgamation owned a capital property that was an option to acquire shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old option”) and who received no consideration for the disposition of that option on the amalgamation, other than an option to acquire shares of the capital stock of the new corporation (in this subsection referred to as the “new option”), shall be deemedto have disposed of the old option for proceeds equal to the adjusted cost base to the taxpayer of that option immediately before the amalgamation, andto have acquired the new option at a cost to the taxpayer equal to the proceeds described in paragraph 87(5)(a),and where the old option was taxable Canadian property of the taxpayer, the new option is deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the taxpayer.Adjusted cost base of optionWhere the cost to a taxpayer of a new option is determined at any time under subsection 87(5),there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the new option the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the old option; andthe amount determined under paragraph 87(5.1)(a) shall be added after that time in computing the adjusted cost base to the taxpayer of the new option.Obligations of predecessor corporationNotwithstanding subsection (7), where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who, immediately before the amalgamation, owned a capital property that was a bond, debenture, mortgage, hypothecary claim, note or other similar obligation of a predecessor corporation (in this subsection referred to as the “old property”) and who received no consideration for the disposition of the old property on the amalgamation other than a bond, debenture, mortgage, hypothecary claim, note or other similar obligation respectively, of the new corporation (in this subsection referred to as the “new property”) is, if the amount payable to the holder of the new property on its maturity is the same as the amount that would have been payable to the holder of the old property on its maturity, deemedto have disposed of the old property for proceeds equal to the adjusted cost base to the taxpayer of that property immediately before the amalgamation; andto have acquired the new property at a cost to the taxpayer equal to the proceeds described in paragraph 87(6)(a).Adjusted cost baseWhere the cost to a taxpayer of a particular property that is a bond, debenture or note is determined at any time under subsection 87(6) and the terms of the bond, debenture or note conferred upon the holder the right to exchange that bond, debenture or note for shares,there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the bond, debenture or note the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the property for which the particular property was exchanged at that time; andthe amount determined under paragraph 87(6.1)(a) in respect of the particular property shall be added after that time in computing the adjusted cost base to the taxpayer of the particular property.IdemWhere there has been an amalgamation of two or more corporations after May 6, 1974 anda debt or other obligation of a predecessor corporation that was outstanding immediately before the amalgamation became a debt or other obligation of the new corporation on the amalgamation, andthe amount payable by the new corporation on the maturity of the debt or other obligation, as the case may be, is the same as the amount that would have been payable by the predecessor corporation on its maturity,the provisions of this Actshall not apply in respect of the transfer of the debt or other obligation to the new corporation, andshall apply as if the new corporation had incurred or issued the debt or other obligation at the time it was incurred or issued by the predecessor corporation under the agreement made on the day on which the predecessor corporation made an agreement under which the debt or other obligation was issued,except that, for the purposes of the definition income bond or income debenture in subsection 248(1), paragraph 87(7)(d) shall not apply to any debt or other obligation of the new corporation unless the terms and conditions thereof immediately after the amalgamation are the same as, or substantially the same as, the terms and conditions of the debt or obligation that was an income bond or income debenture of the predecessor corporation immediately before the amalgamation.Foreign mergerSubject to subsection 95(2), where there has been a foreign merger in which a taxpayer’s shares or options to acquire shares of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares or options to acquire shares of the capital stock of the new foreign corporation or the foreign parent corporation, unless the taxpayer elects in the taxpayer’s return of income for the taxation year in which the foreign merger took place not to have this subsection apply, subsections (4) and (5) apply to the taxpayer as if the references in those subsections to“amalgamation” were read as “foreign merger”;“predecessor corporation” were read as “predecessor foreign corporation”; and“new corporation” were read as “new foreign corporation or the foreign parent corporation”.Definition of foreign mergerFor the purposes of this section, foreign merger means a merger or combination of two or more corporations each of which was, immediately before the merger or combination, resident in a country other than Canada (each of which is in this section referred to as a “predecessor foreign corporation”) to form one corporate entity resident in a country other than Canada (in this section referred to as the “new foreign corporation”) in such a manner that, and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation,all or substantially all the property (except amounts receivable from any predecessor foreign corporation or shares of the capital stock of any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination becomes property of the new foreign corporation as a consequence of the merger or combination;all or substantially all the liabilities (except amounts payable to any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination become liabilities of the new foreign corporation as a consequence of the merger or combination; andall or substantially all of the shares of the capital stock of the predecessor foreign corporations (except any shares or options owned by any predecessor foreign corporation) are exchanged for or become, because of the merger or combination,shares of the capital stock of the new foreign corporation, orif, immediately after the merger, the new foreign corporation was controlled by another corporation (in this section referred to as the “foreign parent corporation”) that was resident in a country other than Canada, shares of the capital stock of the foreign parent corporation.Absorptive mergersFor the purposes of the definition foreign merger in subsection (8.1), if there is a merger or combination, otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation, of two or more non-resident corporations (each of which is referred to in this subsection as a “predecessor foreign corporation”), as a result of which one or more predecessor foreign corporations ceases to exist and, immediately after the merger or combination, another predecessor foreign corporation (referred to in this subsection as the “survivor corporation”) owns properties (except amounts receivable from, or shares of the capital stock of, any predecessor foreign corporation) representing all or substantially all of the fair market value of all such properties owned by each predecessor foreign corporation immediately before the merger or combination, thenthe merger or combination is deemed to be a merger or combination of the predecessor foreign corporations to form one non-resident corporation;the survivor corporation is deemed to be the non-resident corporation so formed;all of the properties of the survivor corporation immediately before the merger or combination that are properties of the survivor corporation immediately after the merger or combination are deemed to become properties of the survivor corporation as a consequence of the merger or combination;all of the liabilities of the survivor corporation immediately before the merger or combination that are liabilities of the survivor corporation immediately after the merger or combination are deemed to become liabilities of the survivor corporation as a consequence of the merger or combination;all of the shares of the capital stock of the survivor corporation that were outstanding immediately before the merger or combination that are shares of the capital stock of the survivor corporation immediately after the merger or combination are deemed to become shares of the capital stock of the survivor corporation as a consequence of the merger or combination; andall of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.Anti-avoidanceSubsection (8) does not apply in respect of a taxpayer’s shares of the capital stock of a predecessor foreign corporation that are exchanged for or become, on a foreign merger, shares of the capital stock of the new foreign corporation or the foreign parent corporation, ifthe new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; andthe foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, toa person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length immediately after the transaction, event or series, ora partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).Taxable Canadian property — conditions for rolloverSubsection (8.5) applies at any time ifthere is at that time a foreign merger of two or more predecessor foreign corporations (within the meaning assigned by subsection (8.1), if that subsection and subsection (8.2) were read without reference to the expression “otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation”) that were, immediately before that time,resident in the same country, andrelated to each other (determined without reference to paragraph 251(5)(b));because of the foreign merger,a predecessor foreign corporation (referred to in this subsection and subsection (8.5) as the “disposing predecessor foreign corporation”) disposes of a property (referred to in this subsection and subsection (8.5) as the “subject property”) that is, at that time,a taxable Canadian property (other than treaty-protected property) of the disposing predecessor foreign corporation, andany of the following:a share of the capital stock of a corporation,an interest in a partnership, andan interest in a trust, andthe subject property becomes property of a corporation that is a new foreign corporation for the purposes of subsection (8.1);no shareholder (except any predecessor foreign corporation) that owned shares of the capital stock of a predecessor foreign corporation immediately before the foreign merger received consideration for the disposition of those shares on the foreign merger, other than shares of the capital stock of the new foreign corporation;if the subject property is a share of the capital stock of a corporation or an interest in a trust, the corporation or trust is not, at any time in the 24-month period beginning at that time, as part of a transaction or event, or series of transactions or events including the foreign merger, subject to a loss restriction event; andthe new foreign corporation and the disposing predecessor foreign corporation jointly elect in writing under this paragraph in respect of the foreign merger and file the election with the Minister on or before the filing-due date of the disposing predecessor foreign corporation (or the date that would be its filing-due date, if subsection (8.5) did not apply in respect of the disposition of the subject property) for the taxation year that includes that time.Foreign merger — taxable Canadian property rolloverIf this subsection applies at any time,if the subject property is an interest in a partnership,the disposing predecessor foreign corporation is deemed not to dispose of the subject property (other than for the purposes of subsection (8.4)), andthe new foreign corporation is deemedto have acquired the subject property at a cost equal to the cost of the subject property to the disposing predecessor foreign corporation, andto be the same corporation as, and a continuation of, the disposing predecessor foreign corporation in respect of the subject property; andif the subject property is a share of the capital stock of a corporation or an interest in a trust,the subject property is deemed to have been disposed of at that time by the disposing predecessor foreign corporation to the new foreign corporation (that is referred to in subparagraph (8.4)(b)(ii)) for proceeds of disposition equal to the adjusted cost base of the subject property to the disposing predecessor foreign corporation immediately before that time, andthe cost of the subject property to the new foreign corporation is deemed to be the amount that is deemed by subparagraph (i) to be the proceeds of disposition of the subject property.Rules applicable in respect of certain mergersWhere there has been a merger of two or more taxable Canadian corporations to form a new corporation that was controlled, immediately after the merger, by a taxable Canadian corporation (in this subsection referred to as the “parent”) and, on the merger, shares of the capital stock of the parent (in this subsection referred to as “parent shares”) were issued by the parent to persons who were, immediately before the merger, shareholders of a predecessor corporation, the following rules apply:for the purposes of paragraph 87(1)(c), subsection 87(4) and the Income Tax Application Rules, any parent shares received by a shareholder of a predecessor corporation shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger;for the purposes of subsections 87(4.1) and 87(4.2), a parent share issued to a shareholder in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation shall be deemed to be a share of a class of the capital stock of the new corporation that was issued in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation by that shareholder;for the purposes of subsection 87(4.3), a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the parent shall be deemed to be a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the new corporation;for the purpose of paragraph (4.4)(d)each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, andany obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;for the purpose of applying subsection 87(5) in respect of the merger, the reference in that subsection to “the new corporation” shall be read as a reference to “the parent”;for the purpose of paragraph 87(9)(c), any shares of the new corporation acquired by the parent on the merger shall be deemed to be new shares;for the purpose of applying subsection 87(10) in respect of the merger,the reference in paragraph 87(10)(b) to “the new corporation” shall be read as a reference to “the new corporation or the parent, within the meaning assigned by subsection 87(9)”, andthe references in paragraphs 87(10)(c) and 87(10)(f) to “the new corporation” shall be read as references to “the public corporation described in paragraph 87(9)(b)”.in computing, at any particular time, the paid-up capital in respect of any particular class of shares of the capital stock of the parent that included parent shares immediately after the mergerthere shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this paragraph, in respect of all the shares of the capital stock of the parent immediately after the merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share of the capital stock of the parent or a predecessor corporation (other than any share of a predecessor corporation owned by the parent or by another predecessor corporation and any share of a predecessor corporation owned by a shareholder other than the parent or another predecessor corporation that was not exchanged on the merger for parent shares) immediately before the merger thatthe paid-up capital, determined without reference to this paragraph, in respect of that particular class of shares of the capital stock of the parent immediately after the mergeris ofthe paid-up capital, determined without reference to this paragraph, in respect of all the issued and outstanding shares of the classes of the capital stock of the parent that included parent shares immediately after the merger, andthere shall be added an amount equal to the lesser ofthe amount, if any, by whichthe total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the parent before the particular timeexceedsthe total that would be determined under subclause 87(9)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 87(9)(b)(i), andthe amount required by subparagraph 87(9)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class; andnotwithstanding paragraph 87(4)(b), the parent shall be deemed to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost equal to the total ofthe amount otherwise determined under paragraph 87(4)(b) to be the cost of those shares, andin any case where the parent owned, immediately after the merger, all the issued shares of the capital stock of the new corporation, such portion ofthe amount, if any, by whichthe amount by which the total of the money on hand of the new corporation and all amounts each of which is the cost amount to the new corporation of a property owned by it, immediately after the merger, exceeds the total of all amounts each of which is the amount of any debt owing by the new corporation, or of any other obligation of the new corporation to pay any amount, that was outstanding immediately after the merger,exceedsthe total of the adjusted cost bases to the parent of all shares of the capital stock of each predecessor corporation beneficially owned by it immediately before the mergeras is designated by the parent in respect of the shares of that particular class in its return of income under this Part for its taxation year in which the merger occurred, except thatin no case shall the amount so designated in respect of the shares of a particular class exceed the amount, if any, by which the total fair market value, immediately after the merger, of the shares of that particular class issued by virtue of the merger exceeds the cost of those shares to the parent determined without reference to this paragraph, andin no case shall the total of the amounts so designated in respect of the shares of each class of the capital stock of the new corporation exceed the amount determined under clause 87(9)(c)(ii)(A).Share deemed listedWherea new corporation is formed as a result of an amalgamation,the new corporation is a public corporation,the new corporation issues a share (in this subsection referred to as the “new share”) of its capital stock,the new share is issued in exchange for a share (in this subsection referred to as the “old share”) of the capital stock of a predecessor corporation,immediately before the amalgamation, the old share was listed on a designated stock exchange, andthe new share is redeemed, acquired or cancelled by the new corporation within 60 days after the amalgamation,the new share is deemed, for the purposes of subsection 116(6), the definitions qualified investment in subsections 146(1), 146.1(1), 146.3(1) and 146.4(1), in section 204 and in subsection 207.01(1), and the definition taxable Canadian property in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.Vertical amalgamationsWhere at any time there is an amalgamation of a corporation (in this subsection referred to as the “parent”) and one or more other corporations (each of which in this subsection is referred to as the “subsidiary”) each of which is a subsidiary wholly-owned corporation of the parent,the shares of the subsidiary are deemed to have been disposed of by the parent immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and 88(1.7) applied, with any modifications that the circumstances require, to the amalgamation; andthe cost to the new corporation of each capital property of the subsidiary acquired on the amalgamation is deemed to be the amount that would have been the cost to the parent of the property if the property had been distributed at that time to the parent on a winding-up of the subsidiary and subsections 88(1) and 88(1.7) had applied to the winding-up.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 87; 1994, c. 7, Sch. II, s. 65, Sch. VI, s. 3, Sch. VIII, s. 37, c. 8, s. 9, c. 21, s. 39; 1995, c. 3, s. 23, c. 21, ss. 30, 54; 1996, c. 21, s. 15; 1997, c. 25, s. 18, c. 26, s. 83; 1998, c. 19, s. 15, 117; 1999, c. 22, s. 24; 2000, c. 19, s. 13; 2001, c. 17, ss. 65, 211; 2002, c. 9, s. 30; 2006, c. 4, s. 55; 2007, c. 2, s. 45, c. 35, ss. 68, 108; 2008, c. 28, s. 9; 2009, c. 2, s. 19; 2010, c. 12, s. 8, c. 25, s. 15; 2012, c. 31, s. 17; 2013, c. 33, s. 6, c. 34, ss. 6, 64, 223, c. 40, s. 39; 2014, c. 39, s. 19; 2016, c. 12, s. 27; 2017, c. 33, s. 24; 2018, c. 12, s. 72019, c. 29, s. 112020, c. 11, s. 12020, c. 13, s. 12021, c. 23, s. 132022, c. 5, s. 22022, c. 19, s. 112023, c. 26, s. 172024, c. 15, s. 182024, c. 17, s. 182024, c. 17, s. 80
Winding-upWhere a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) has been wound up after May 6, 1974 and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another taxable Canadian corporation (in this subsection referred to as the “parent”) and all of the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by persons with whom the parent was dealing at arm’s length, notwithstanding any other provision of this Act other than subsection 69(11), the following rules apply:subject to paragraphs 88(1)(a.1) and 88(1)(a.3), each property (other than an interest in a partnership) of the subsidiary that was distributed to the parent on the winding-up shall be deemed to have been disposed of by the subsidiary for proceeds equal toin the case of a Canadian resource property, a foreign resource property or a right to receive production (as defined in subsection 18.1(1)) to which a matchable expenditure (as defined in subsection 18.1(1)) relates, nil, and[Repealed, 1994, c. 7, Sch. VIII, s. 38]in the case of any other property, the cost amount to the subsidiary of the property immediately before the winding-up;each property of the subsidiary that was distributed to the parent on the winding-up shall, for the purpose of paragraph 88(2.1)(b) or 88(2.1)(e), be deemed not to have been disposed of;each interest of the subsidiary in a partnership that was distributed to the parent on the winding-up shall, except for the purpose of paragraph 98(5)(g), be deemed not to have been disposed of by the subsidiary;wherethe subsidiary was a financial institution in its taxation year in which its assets were distributed to the parent on the winding up, andthe parent was a financial institution in its taxation year in which it received the assets of the subsidiary on the winding up,each specified debt obligation (other than a mark-to-market property) of the subsidiary that was distributed to the parent on the winding-up shall, except for the purpose of subsection 69(11), be deemed not to have been disposed of, and for the purpose of this paragraph, financial institution, mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1);the shares of the capital stock of the subsidiary owned by the parent immediately before the winding-up shall be deemed to have been disposed of by the parent on the winding-up for proceeds equal to the greater ofthe lesser of the paid-up capital in respect of those shares immediately before the winding-up and the amount determined under subparagraph 88(1)(d)(i), andthe total of all amounts each of which is an amount in respect of any share of the capital stock of the subsidiary so disposed of by the parent on the winding-up, equal to the adjusted cost base to the parent of the share immediately before the winding-up;subject to paragraph 87(2)(e.3) (as modified by paragraph 88(1)(e.2)), and notwithstanding paragraph 87(2)(e.1) (as modified by paragraph 88(1)(e.2)), the cost to the parent of each property of the subsidiary distributed to the parent on the winding-up shall be deemed to bein the case of a property that is an interest in a partnership, the amount that but for this paragraph would be the cost to the parent of the property, andin any other case, the amount, if any, by whichthe amount that would, but for subsection 69(11), be deemed by paragraph 88(1)(a) to be the proceeds of disposition of the propertyexceedsany reduction of the cost amount to the subsidiary of the property made because of section 80 on the winding-up,plus where the property was a capital property (other than an ineligible property) of the subsidiary at the time that the parent last acquired control of the subsidiary and was owned by the subsidiary thereafter without interruption until such time as it was distributed to the parent on the winding-up, the amount determined under paragraph 88(1)(d) in respect of the property and, for the purposes of this paragraph, ineligible property meansdepreciable property,property transferred to the parent on the winding-up where the transfer is part of a distribution (within the meaning assigned by subsection 55(1)) made in the course of a reorganization in which a dividend was received to which subsection 55(2) would, but for paragraph 55(3)(b), apply,property acquired by the subsidiary from the parent or from any person or partnership that was not (otherwise than because of a right referred to in paragraph 251(5)(b)) dealing at arm’s length with the parent, or any other property acquired by the subsidiary in substitution for it, where the acquisition was part of the series of transactions or events in which the parent last acquired control of the subsidiary, andproperty distributed to the parent on the winding-up where, as part of the series of transactions or events that includes the winding-up,the parent acquired control of the subsidiary, andany property distributed to the parent on the winding-up or any other property acquired by any person in substitution therefor is acquired bya particular person (other than a specified person) that, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, was a specified shareholder of the subsidiary,2 or more persons (other than specified persons), if a particular person would have been, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, a specified shareholder of the subsidiary if all the shares that were then owned by those 2 or more persons were owned at that time by the particular person, ora corporation (other than a specified person or the subsidiary)of which a particular person referred to in subclause 88(1)(c)(vi)(B)(I) is, at any time during the course of the series and after control of the subsidiary was last acquired by the parent, a specified shareholder, orof which a particular person would be, at any time during the course of the series and after control of the subsidiary was last acquired by the parent, a specified shareholder if all the shares then owned by persons (other than specified persons) referred to in subclause 88(1)(c)(vi)(B)(II) and acquired by those persons as part of the series were owned at that time by the particular person;[Repealed, 2016, c. 12, s. 28]for the purposes of this paragraph and subparagraph 88(1)(c)(vi),specified person, at any time, meansthe parent,each person who would be related to the parent at that time ifthis Act were read without reference to paragraph 251(5)(b), andeach person who is the child of a deceased individual were related to each brother or sister of the individual and to each child of a deceased brother or sister of the individual, andif the time is before the incorporation of the parent, each person who is described in clause (B) throughout the period that begins at the time the parent is incorporated and ends at the time that is immediately before the beginning of the winding-up,a person described in clause (i)(B) or (C) is deemed not to be a specified person if it can reasonably be considered that one of the main purposes of one or more transactions or events is to cause the person to be a specified person so as to prevent a property that is distributed to the parent on the winding-up from being an ineligible property for the purposes of paragraph (c),where at any time a property is owned or acquired by a partnership or a trust,the partnership or the trust, as the case may be, shall be deemed to be a person that is a corporation having one class of issued shares, which shares have full voting rights under all circumstances,each member of the partnership or beneficiary under the trust, as the case may be, shall be deemed to own at that time the proportion of the number of issued shares of the capital stock of the corporation thatthe fair market value at that time of that member’s interest in the partnership or that beneficiary’s interest in the trust, as the case may be,is ofthe fair market value at that time of all the members’ interests in the partnership or beneficiaries’ interests in the trust, as the case may be, andthe property shall be deemed to have been owned or acquired at that time by the corporation,in determining whether a person is a specified shareholder of a corporation,the reference in the definition specified shareholder in subsection 248(1) to “the issued shares of any class of the capital stock of the corporation or of any other corporation that is related to the corporation” shall be read as “the issued shares of any class (other than a specified class) of the capital stock of the corporation or of any other corporation that is related to the corporation and that has a significant direct or indirect interest in any issued shares of the capital stock of the corporation”,a corporation controlled by another corporation is, at any time, deemed not to own any shares of the capital stock of the other corporation if, at that time, the corporation does not have a direct or an indirect interest in any of the shares of the capital stock of the other corporation,the definition specified shareholder in subsection 248(1) is to be read without reference to its paragraph (a) in respect of any share of the capital stock of the subsidiary that the person would, but for this clause, be deemed to own solely because the person has a right described in paragraph 251(5)(b) to acquire shares of the capital stock of a corporation thatis controlled by the subsidiary, anddoes not have a direct or an indirect interest in any of the shares of the capital stock of the subsidiary, anda corporation is deemed not to be a specified shareholder of itself, andproperty that is distributed to the parent on the winding-up is deemed not to be acquired by a person if the person acquired the property before the acquisition of control referred to in clause (c)(vi)(A) and the property is not owned by the person at any time after that acquisition of control;for the purpose of clause 88(1)(c)(vi)(B), property acquired by any person in substitution for particular property or properties distributed to the parent on the winding-up includesproperty (other than a specified property) owned by the person at any time after the acquisition of control referred to in clause (c)(vi)(A) more than 10% of the fair market value of which is, at that time, attributable to the particular property or properties, andproperty owned by the person at any time after the acquisition of control referred to in clause 88(1)(c)(vi)(A) the fair market value of which is, at that time, determinable primarily by reference to the fair market value of, or to any proceeds from a disposition of, the particular property or propertiesbut does not includemoney,property that was not owned by the person at any time after the acquisition of control referred to in clause 88(1)(c)(vi)(A),property described in subparagraph 88(1)(c.3)(i) if the only reason the property is described in that subparagraph is because a specified property described in any of subparagraphs 88(1)(c.4)(i) to 88(1)(c.4)(iv) was received as consideration for the acquisition of a share of the capital stock of the subsidiary in the circumstances described in subparagraphs 88(1)(c.4)(i) to 88(1)(c.4)(iv),a share of the capital stock of the subsidiary or a debt owing by it, if the share or debt, as the case may be, was owned by the parent immediately before the winding-up, ora share of the capital stock of a corporation or a debt owing by a corporation, if the fair market value of the share or debt, as the case may be, was not, at any time after the beginning of the winding-up, wholly or partly attributable to property distributed to the parent on the winding-up;for the purposes of subparagraphs 88(1)(c.3)(i) and 88(1)(c.3)(v), a specified property isa share of the capital stock of the parent that wasreceived as consideration for the acquisition of a share of the capital stock of the subsidiary by the parent or by a corporation that was a specified subsidiary corporation of the parent immediately before the acquisition, orissued for consideration that consists solely of money,an indebtedness that was issuedby the parent as consideration for the acquisition of a share of the capital stock of the subsidiary by the parent, orfor consideration that consists solely of money,a share of the capital stock of a taxable Canadian corporation that was received as consideration for the acquisition of a share of the capital stock of the subsidiary by the taxable Canadian corporation or by the parent where the parent was a specified subsidiary corporation of the taxable Canadian corporation immediately before the acquisition,an indebtedness of a taxable Canadian corporation that was issued by it as consideration for the acquisition of a share of the capital stock of the subsidiary by the taxable Canadian corporation or by the parent where the parent was a specified subsidiary corporation of the taxable Canadian corporation immediately before the acquisition, andif the subsidiary was formed on the amalgamation of two or more predecessor corporations at least one of which was a subsidiary wholly-owned corporation of the parent,a share of the capital stock of the subsidiary that was issued on the amalgamation and that is, before the beginning of the winding-up,redeemed, acquired or cancelled by the subsidiary for consideration that consists solely of money or shares of the capital stock of the parent, or of any combination of the two, orexchanged for shares of the capital stock of the parent, ora share of the capital stock of the parent issued on the amalgamation in exchange for a share of the capital stock of a predecessor corporation;[Repealed, 2013, c. 40, s. 40]for the purpose of paragraph 88(1)(c.4), a corporation is a specified subsidiary corporation of another corporation, at any time, where the other corporation holds, at that time, shares of the corporationthat give the shareholder 90% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, andhaving a fair market value of 90% or more of the fair market value of all the issued shares of the capital stock of the corporation;for the purpose of paragraph 88(1)(c.3) and notwithstanding subsection 256(9), where control of a corporation is acquired by way of articles of arrangement, that control is deemed to have been acquired at the end of the day on which the arrangement becomes effective;for the purpose of subparagraph 88(1)(c)(iii), a leasehold interest in a depreciable property and an option to acquire a depreciable property are depreciable properties;for the purpose of clause (c.2)(iii)(A), a specified class of the capital stock of a corporation is a class of shares of the capital stock of the corporation wherethe paid-up capital in respect of the class was not, at any time, less than the fair market value of the consideration for which the shares of that class then outstanding were issued,the shares are non-voting in respect of the election of the board of directors of the corporation, except in the event of a failure or default under the terms or conditions of the shares,under neither the terms and conditions of the shares nor any agreement in respect of the shares are the shares convertible into or exchangeable for shares other than shares of a specified class of the capital stock of the corporation, andunder neither the terms and conditions of the shares nor any agreement in respect of the shares is any holder of the shares entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (excluding any premium for early redemption) greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares;for the purposes of paragraph (c.4), a reference to a share of the capital stock of a corporation includes a right to acquire a share of the capital stock of the corporation;the amount determined under this paragraph in respect of each property of the subsidiary distributed to the parent on the winding-up is such portion of the amount, if any, by which the total determined under subparagraph 88(1)(b)(ii) exceeds the total ofthe amount, if any, by whichthe total of all amounts each of which is an amount in respect of any property owned by the subsidiary immediately before the winding-up, equal to the cost amount to the subsidiary of the property immediately before the winding-up, plus the amount of any money of the subsidiary on hand immediately before the winding-up,exceeds the total ofall amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the winding-up, andthe amount of any reserve (other than a reserve referred to in paragraph 20(1)(n), subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) of this Act or in subsection 64(1) or (1.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as those two provisions read immediately before November 3, 1981) deducted in computing the subsidiary’s income for its taxation year during which its assets were distributed to the parent on the winding-up, andthe total of all amounts each of which is an amount in respect of any share of the capital stock of the subsidiary disposed of by the parent on the winding-up or in contemplation of the winding-up, equal to the total of all amounts received by the parent or by a corporation with which the parent was not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) in respect of the subsidiary) in respect oftaxable dividends on the share or on any share (in this subparagraph referred to as a “replaced share”) for which the share or a replaced share was substituted or exchanged to the extent that the amounts thereof were deductible from the recipient’s income for any taxation year by virtue of section 112 or subsection 138(6) and were not amounts on which the recipient was required to pay tax under Part VII of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on March 31, 1977, orcapital dividends and life insurance capital dividends on the share or on any share (in this subparagraph referred to as a “replaced share”) for which a share or a replaced share was substituted or exchanged,as is designated by the parent in respect of that capital property in its return of income under this Part for its taxation year in which the subsidiary was so wound up, except thatthe amount designated in respect of any such capital property may not exceed the amount determined by the formulaA – (B + C)whereAis the fair market value of the property at the time the parent last acquired control of the subsidiary,Bis the greater of the cost amount to the subsidiary of the property at the time the parent last acquired control of the subsidiary and the cost amount to the subsidiary of the property immediately before the winding-up, andCis the prescribed amount, andfor the purpose of calculating the amount in subparagraph (ii) in respect of an interest of the subsidiary in a partnership, the fair market value of the interest at the time the parent last acquired control of the subsidiary is deemed to be the amount determined by the formulaA – BwhereAis the fair market value (determined without reference to this subparagraph) of the interest at that time, andBis the portion of the amount by which the fair market value (determined without reference to this subparagraph) of the interest at that time exceeds its cost amount at that time as may reasonably be regarded as being attributable at that time to the total of all amounts each of which isin the case of a depreciable property held directly by the partnership or held indirectly by the partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of the property exceeds its cost amount,in the case of a Canadian resource property or a foreign resource property held directly by the partnership or held indirectly by the partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of the property, orin the case of a property that is not a capital property, a Canadian resource property or a foreign resource property and that is held directly by the partnership or held indirectly through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of the property exceeds its cost amount, andin no case shall the total of amounts so designated in respect of all such capital properties exceed the amount, if any, by which the total determined under subparagraph 88(1)(b)(ii) exceeds the total of the amounts determined under subparagraphs 88(1)(d)(i) and 88(1)(d)(i.1),subsection 84(2) and section 21 of the Income Tax Application Rules do not apply to the winding-up of the subsidiary, and subsection 13(21.2) does not apply to the winding-up of the subsidiary with respect to property acquired by the parent on the winding-up;in determining, for the purposes of this paragraph and paragraphs 88(1)(c) and 88(1)(d), the time at which a person or group of persons (in this paragraph and paragraph 88(1)(d.3) referred to as the “acquirer”) last acquired control of the subsidiary, where control of the subsidiary was acquired from another person or group of persons (in this paragraph referred to as the “vendor”) with whom the acquirer was not (otherwise than solely because of a right referred to in paragraph 251(5)(b)) dealing at arm’s length, the acquirer is deemed to have last acquired control of the subsidiary at the earlier ofthe time at which the vendor last acquired control (within the meaning that would be assigned by subsection 186(2) if the reference in that subsection to “another corporation” were read as “a person” and the references in that subsection to “the other corporation” were read as “the person”) of the subsidiary, andthe time at which the vendor was deemed for the purpose of this paragraph to have last acquired control of the subsidiary;for the purposes of paragraphs 88(1)(c), 88(1)(d) and 88(1)(d.2), where at any time control of a corporation is last acquired by an acquirer because of an acquisition of shares of the capital stock of the corporation as a consequence of the death of an individual, the acquirer is deemed to have last acquired control of the corporation immediately after the death from a person who dealt at arm’s length with the acquirer;for the purposes of the description of A in subparagraph (d)(ii.1), the fair market value of an interest in a particular partnership held by the subsidiary at the time the parent last acquired control of the subsidiary is deemed not to include the amount that is the total of each amount that is the fair market value of a property that would otherwise be included in the fair market value of the interest, ifas part of the transaction or event or series of transactions or events in which control of the subsidiary is last acquired by the parent and on or before the acquisition of control,the subsidiary disposes of the property to the particular partnership or any other partnership and subsection 97(2) applies to the disposition, orwhere the property is an interest in a partnership, the subsidiary acquires the interest in the particular partnership or any other partnership from a person or partnership with whom the subsidiary does not deal at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)) and section 85 applies in respect of the acquisition of the interest, andat the time of the acquisition of control, the particular partnership holds directly, or indirectly through one or more other partnerships, property described in clauses (A) to (C) of the description of B in subparagraph (d)(ii.1);the subsidiary may, for the purposes of computing its income for its taxation year during which its assets were transferred to, and its obligations were assumed by, the parent on the winding-up, claim any reserve that would have been allowed under this Part if its assets had not been transferred to, or its obligations had not been assumed by, the parent on the winding-up and notwithstanding any other provision of this Part, no amount shall be included in respect of any reserve so claimed in computing the income of the subsidiary for its taxation year, if any, following the year in which its assets were transferred to or its obligations were assumed by the parent;paragraphs 87(2)(c), (d.1), (e.1), (e.3), (e.42), (g) to (l), (l.21) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (xx), subsection 87(6) and, subject to section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to“amalgamation” were read as “winding-up”,“predecessor corporation” were read as “subsidiary”,“new corporation” were read as “parent”,“its first taxation year” were read as “its taxation year during which it received the assets of the subsidiary on the winding-up”,“its last taxation year” were read as “its taxation year during which its assets were distributed to the parent on the winding-up”,“predecessor corporation’s gain” were read as “subsidiary’s gain”,“predecessor corporation’s income” were read as “subsidiary’s income”,“new corporation’s income” were read as “parent’s income”,“subsection 89(5)” and “subsection 89(9)” were read as “subsection 89(6)” and “subsection 89(10)”, respectively,“any predecessor private corporation” were read as “the subsidiary (if it was a private corporation at the time of the winding-up)”,[Repealed, 1994, c. 7, Sch. II, s. 66]“two or more corporations” were read as “a subsidiary”,[Repealed, 1998, c. 19, s. 118]“the life insurance capital dividend account of any predecessor corporation immediately before the amalgamation” were read as “the life insurance capital dividend account of the subsidiary at the time the subsidiary was wound-up”,“predecessor corporation’s refundable Part VII tax on hand” were read as “subsidiary’s refundable Part VII tax on hand”,“predecessor corporation’s Part VII refund” were read as “subsidiary’s Part VII refund”,“predecessor corporation’s refundable Part VIII tax on hand” were read as “subsidiary’s refundable Part VIII tax on hand”,“predecessor corporation’s Part VIII refund” were read as “subsidiary’s Part VIII refund”, and“predecessor corporation’s cumulative offset account” were read as “subsidiary’s cumulative offset account”;for the purpose of computing the parent’s investment tax credit at the end of any particular taxation year ending after the subsidiary was wound up,property acquired or expenditures made by the subsidiary or an amount included in the investment tax credit of the subsidiary by virtue of paragraph (b) of the definition investment tax credit in subsection 127(9) in a taxation year (in this paragraph referred to as the “expenditure year”) shall be deemed to have been acquired, made or included, as the case may be, by the parent in its taxation year in which the expenditure year of the subsidiary ended, andthere shall be added to the amounts otherwise determined for the purposes of paragraphs (f) to (k) of the definition investment tax credit in subsection 127(9) in respect of the parent for the particular yearthe amounts that would have been determined in respect of the subsidiary for the purposes of paragraph (f) of the definition investment tax credit in subsection 127(9) for its taxation year in which it was wound up if the reference therein to “a preceding taxation year” were read as a reference to “the year or a preceding taxation year”,the amounts determined in respect of the subsidiary for the purposes of paragraphs (g) to (i) and (k) of the definition investment tax credit in subsection 127(9) for its taxation year in which it was wound up, andthe amount determined in respect of the subsidiary for the purposes of paragraph (j) of the definition investment tax credit in subsection 127(9) for its taxation year in which it was wound up except that, for the purpose of the calculation in this clause, where control of the subsidiary has been acquired by a person or group of persons (each of whom is referred to in this clause as the “purchaser”) at any time (in this clause referred to as “that time”) before the end of the taxation year in which the subsidiary was wound up, there may be added to the amount determined under subparagraph 127(9.1)(d)(i) in respect of the subsidiary the amount, if any, by which that proportion of the amount that, but for subsections 127(3) and 127(5) and sections 126, 127.2 and 127.3, would be the parent’s tax payable under this Part for the particular year, that,where the subsidiary carried on a particular business in the course of which a property was acquired, or an expenditure was made, before that time in respect of which an amount was included in computing the subsidiary’s investment tax credit for its taxation year in which it was wound up, and the parent carried on the particular business throughout the particular year, the amount, if any, by which the total of all amounts each of which is the parent’s income for the particular year from the particular business, or the parent’s income for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development of properties or the rendering of services similar to the properties sold, leased, rented or developed, or the services rendered, as the case may be, by the subsidiary in carrying on the particular business before that time, exceeds the total of the amounts, if any, deducted for the particular year under paragraph 111(1)(a) or 111(1)(d) by the parent in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of the particular businessis of the greater ofthe amount determined under subclause 88(1)(e.3)(ii)(C)(I), andthe parent’s taxable income for the particular yearexceeds the amount, if any, calculated under subparagraph 127(9.1)(d)(i) in respect of the particular business or the other business, as the case may be, in respect of the parent at the end of the particular yearto the extent that those amounts determined in respect of the subsidiary may reasonably be considered to have been included in computing the parent’s investment tax credit at the end of the particular year by virtue of subparagraph 88(1)(e.3)(i);for the purposes of sections 127.44, 127.45, 127.48 and 127.49 and Part XII.7, at the end of any particular taxation year ending after the subsidiary was wound up, the parent is deemed to be the same corporation as, and a continuation of the subsidiary;and, for the purposes of the definitions first term shared-use-equipment and second term shared-use-equipment in subsection 127(9), the parent shall be deemed to be the same corporation as, and a continuation of, the subsidiary;for the purpose of computing the parent’s employment tax credit at the end of any particular taxation year ending after the subsidiary was wound up,the subsidiary’s taxpayer employment credits for any taxation year (in this paragraph referred to as the “employment year”) and any amounts required to be added by virtue of subsection 127(15) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in computing the subsidiary’s employment tax credit at the end of the employment year shall be deemed to be taxpayer employment credits of the parent for, and amounts required to be added by virtue of that subsection in computing the parent’s employment tax credit at the end of, its taxation year in which the employment year of the subsidiary ended, andthere shall be added to the amounts otherwise determined under paragraphs 127(16)(c) and (d) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of the parent for the particular taxation year, the amounts that would have been determined under those paragraphs in respect of the subsidiary for its taxation year in which it was wound-up if the reference in paragraph 127(16)(c) of that Act to “the five immediately preceding taxation years” were read as a reference to “that taxation year or the five immediately preceding taxation years” to the extent that those amounts determined in respect of the subsidiary may reasonably be considered to be in respect of a taxpayer employment credit or an amount required to be added by virtue of subsection 127(15) of that Act that is included in computing the parent’s employment tax credit at the end of the particular year by virtue of subparagraph 88(1)(e.4)(i);[Repealed, 1996, c. 21, s. 16]if a subsidiary has made a gift in a taxation year (in this section referred to as the “gift year”), for the purposes of computing the amount deductible under section 110.1 by the parent for its taxation years that end after the subsidiary was wound up, the parent is deemed to have made a gift, in each of its taxation years in which a gift year of the subsidiary ended, equal to the amount, if any, by which the total of all amounts, each of which is the amount of a gift or, in the case of a gift made after December 20, 2002, the eligible amount of the gift, made by the subsidiary in the gift year exceeds the total of all amounts deducted under section 110.1 by the subsidiary in respect of those gifts;the parent is deemed for the purpose of section 110.1 to have made any gift deemed by subsection 118.1(13) to have been made by the subsidiary after the subsidiary ceased to exist;for the purposes ofdetermining the amount deductible by the parent under subsection 126(2) for any taxation year commencing after the commencement of the winding-up, anddetermining the extent to which subsection 126(2.3) applies to reduce the amount that may be claimed by the parent under paragraph 126(2)(a),any unused foreign tax credit (within the meaning of subsection 126(7)) of the subsidiary in respect of a country for a particular taxation year (in this section referred to as the “foreign tax year”), to the extent that it exceeds the total of all amounts each of which is claimed in respect thereof under paragraph 126(2)(a) in computing the tax payable by the subsidiary under this Part for any taxation year, shall be deemed to be an unused foreign tax credit of the parent for its taxation year in which the subsidiary’s foreign tax year ended;[Repealed, 2019, c. 29, s. 12]for the purpose of applying the definition qualifying corporation in subsection 127.1(2), and subparagraph (d)(i) of the definition balance-due day in subsection 248(1), to any corporation (other than the subsidiary)where the parent is associated with another corporation in a taxation year (in this paragraph referred to as the “current year”) of the parent that begins after the parent received an asset of the subsidiary on the winding-up and ends in a calendar year,the parent’s taxable income for its last taxation year that ended in the preceding calendar year (determined before taking into consideration the specified future tax consequences for that last year) is deemed to be the total ofits taxable income for that last year (determined before applying this paragraph to the winding-up and before taking into consideration the specified future tax consequences for that last year), andthe total of the subsidiary’s taxable incomes for its taxation years that ended in that preceding calendar year (determined without reference to subparagraph 88(1)(e.9)(iii) and before taking into consideration the specified future tax consequences for those years),the parent’s business limit for that last year is deemed to be the total ofits business limit (determined before applying this paragraph to the winding-up) for that last year, andthe total of the subsidiary’s business limits (determined without reference to subparagraph 88(1)(e.9)(iii)) for its taxation years that ended in that preceding calendar year, andthe parent’s qualifying income limit for that last year is deemed to be the total ofits qualifying income limit (determined before applying this paragraph to the winding-up) for that last year, andthe total of the subsidiary’s qualifying income limits (determined without reference to subparagraph (iii)) for its taxation years that ended in that preceding calendar year,where the parent received an asset of the subsidiary on the winding-up before the current year and subparagraph 88(1)(e.9)(i) does not apply,the parent’s taxable income for its immediately preceding taxation year (determined before taking into consideration the specified future tax consequences for that preceding year) is deemed to be the total ofits taxable income for that preceding taxation year (determined before applying this paragraph to the winding-up and before taking into consideration the specified future tax consequences for that preceding taxation year), andthe total of the subsidiary’s taxable incomes for the subsidiary’s taxation years that end in the calendar year in which that preceding taxation year ended (determined before taking into consideration the specified future tax consequences for those years),the parent’s business limit for that preceding taxation year is deemed to be the total ofits business limit (determined before applying this paragraph to the winding-up) for that preceding taxation year, andthe total of the subsidiary’s business limits (determined without reference to subparagraph 88(1)(e.9)(iii)) for the subsidiary’s taxation years that end in the calendar year in which that preceding taxation year ended, andthe parent’s qualifying income limit for that preceding taxation year is deemed to be the total ofits qualifying income limit (determined before applying this paragraph to the winding-up) for that preceding taxation year, andthe total of the subsidiary’s qualifying income limits (determined without reference to subparagraph (iii)) for the subsidiary’s taxation years that end in the calendar year in which that preceding taxation year ended, andwhere the parent and the subsidiary are associated with each other in the current year, the subsidiary’s taxable income, the subsidiary’s business limit and the subsidiary’s qualifying income limit for each taxation year that ends after the first time that the parent receives an asset of the subsidiary on the winding-up are deemed to be nil;where property that was depreciable property of a prescribed class of the subsidiary has been distributed to the parent on the winding-up and the capital cost to the subsidiary of the property exceeds the amount deemed by paragraph 88(1)(a) to be the subsidiary’s proceeds of disposition of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),notwithstanding paragraph 88(1)(c), the capital cost to the parent of the property shall be deemed to be the amount that was the capital cost of the property to the subsidiary, andthe excess shall be deemed to have been allowed to the parent in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the parent of the property;where the subsidiary was an insurance corporation,for the purposes of paragraphs 12(1)(d), (e), (e.1), (i) and (s), subsection 12.5(8), paragraphs 20(1)(l), (l.1), (p) and (jj) and 20(7)(c), subsections 20(22) and 20.4(4), sections 138, 138.1, 140, 142 and 148 and Part XII.3, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary, andfor the purpose of determining the amount of the gross investment revenue required to be included under subsection 138(9) in the income of the subsidiary and the parent and the amount of gains and losses of the subsidiary and the parent from property used by them in the year or held by them in the year in the course of carrying on an insurance business in Canadathe subsidiary and the parent shall, in addition to their normal taxation years, be deemed to have had a taxation year ending immediately before the time when the property of the subsidiary was transferred to, and the obligations of the subsidiary were assumed by, the parent on the winding-up, andfor the taxation years of the subsidiary and the parent following the time referred to in clause 88(1)(g)(ii)(A), the property transferred to, and the obligations assumed by, the parent on the winding-up shall be deemed to have been transferred or assumed, as the case may be, on the last day of the taxation year ending immediately before that time and the parent shall be deemed to be the same corporation as and a continuation of the subsidiary with respect to that property, those obligations and the insurance businesses carried on by the subsidiary;for the purposes of subsections 112(5) to 112(5.2) and 112(5.4) and the definition mark-to-market property in subsection 142.2(1), the parent shall be deemed, in respect of each property distributed to it on the winding-up, to be the same corporation as, and a continuation of, the subsidiary;for the purpose of subsection 142.5(2), the subsidiary’s taxation year in which its assets were distributed to the parent on the winding-up shall be deemed to have ended immediately before the time when the assets were distributed; andfor the purposes of subsection 10.1(6), the subsidiary’s taxation year in which an eligible derivative (as defined in subsection 10.1(5)) was distributed to, or assumed by, the parent on the winding-up is deemed to have ended immediately before the time when the eligible derivative was distributed or assumed.Non-capital losses, etc., of subsidiaryWhere a Canadian corporation (in this subsection and subsection (1.11) referred to as the “subsidiary”) has been wound up and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another Canadian corporation (in this subsection and subsection (1.11) referred to as the “parent”) and all the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by a person or persons with whom the parent was dealing at arm’s length, for the purpose of computing the taxable income of the parent under this Part and the tax payable under Part IV by the parent for any taxation year commencing after the commencement of the winding-up, such portion of any non-capital loss, restricted farm loss, farm loss or limited partnership loss of the subsidiary as may reasonably be regarded as its loss from carrying on a particular business (in this subsection referred to as the “subsidiary’s loss business”) and any other portion of any non-capital loss or limited partnership loss of the subsidiary as may reasonably be regarded as being derived from any other source or being in respect of a claim made under section 110.5 for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s loss year”), and the portion of the restricted interest and financing expense of the subsidiary for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s expense year”) that may reasonably be regarded as an expense or loss incurred by the subsidiary in the course of carrying on a particular business (in this subsection referred to as the “subsidiary’s expense business”) and any other portion of the restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in respect of any other source, to the extent that itwas not deducted in computing the taxable income of the subsidiary for any taxation year of the subsidiary, andwould have been deductible in computing the taxable income of the subsidiary for any taxation year beginning after the commencement of the winding-up, on the assumption that it had such a taxation year and that it had sufficient income for that year,shall, for the purposes of this subsection, paragraphs 111(1)(a), (a.1), (c), (d) and (e), subsection 111(3) and Part IV,in the case of such portion of any non-capital loss, restricted farm loss, farm loss or limited partnership loss of the subsidiary as may reasonably be regarded as its loss from carrying on the subsidiary’s loss business, be deemed, for the taxation year of the parent in which the subsidiary’s loss year ended, to be a non-capital loss, restricted farm loss, farm loss or limited partnership loss, respectively, of the parent from carrying on the subsidiary’s loss business, that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up,in the case of any other portion of any non-capital loss or limited partnership loss of the subsidiary as may reasonably be regarded as being derived from any other source, be deemed, for the taxation year of the parent in which the subsidiary’s loss year ended, to be a non-capital loss or a limited partnership loss, respectively, of the parent that was derived from the source from which the subsidiary derived the loss and that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up,in the case of any other portion of any non-capital loss of the subsidiary as may reasonably be regarded as being in respect of a claim made under section 110.5, be deemed, for the taxation year of the parent in which the subsidiary’s loss year ended, to be a non-capital loss of the parent in respect of a claim made under section 110.5 that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up,in the case of the portion of any restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in carrying on the subsidiary’s expense business, be deemed, for the taxation year of the parent in which the subsidiary’s expense year ended, to be a restricted interest and financing expense of the parent from carrying on the subsidiary’s expense business that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up, andin the case of any other portion of any restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in respect of any other source, be deemed, for the taxation year of the parent in which the subsidiary’s expense year ended, to be a restricted interest and financing expense of the parent that was incurred in respect of that other source and that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up,except thatif control of the parent has been acquired by a person or group of persons at any time after the commencement of the winding-up, or control of the subsidiary has been acquired by a person or group of persons at any time whatever, no amount in respect of the subsidiary’s non-capital loss, farm loss or restricted interest and financing expense for a taxation year ending before that time is deductible in computing the taxable income of the parent for a particular taxation year ending after that time, except that such portion of the subsidiary’s non-capital loss or farm loss as may reasonably be regarded as its loss from carrying on a business, or restricted interest and financing expense as may reasonably be regarded as being the subsidiary’s expense or loss incurred in the course of carrying on a business and, where a business was carried on by the subsidiary in that year, such portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing its taxable income for the year, is deductible onlyif that business is carried on by the subsidiary or the parent for profit or with a reasonable expectation of profit throughout the particular year, andto the extent of the total of the parent’s income for the particular year from that business and, where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, from any other business substantially all of 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 servicesand for the purpose of this paragraph, where this subsection applied to the winding-up of another corporation in respect of which the subsidiary was the parent and this paragraph applied in respect of losses and restricted interest and financing expenses of that other corporation, the subsidiary shall be deemed to be the same corporation as, and a continuation of, that other corporation with respect to those losses and restricted interest and financing expenses,any portion of a loss of the subsidiary that would otherwise be deemed by paragraph 88(1.1)(c), 88(1.1)(d) or 88(1.1)(d.1) to be a loss of the parent for a particular taxation year beginning after the commencement of the winding-up shall be deemed, for the purpose of computing the parent’s taxable income for taxation years beginning after the commencement of the winding-up, to be such a loss of the parent for its immediately preceding taxation year and not for the particular year, where the parent so elects in its return of income under this Part for the particular year, andany portion of a restricted interest and financing expense of the subsidiary that would otherwise be deemed by paragraph (d.2) or (d.3) to be a restricted interest and financing expense of the parent for a particular taxation year beginning after the commencement of the winding-up shall be deemed, for the purpose of computing the parent’s taxable income for taxation years beginning after the commencement of the winding-up, to be a restricted interest and financing expense of the parent for its immediately preceding taxation year and not for the particular year, where the parent so elects in its return of income under this Part for the particular year.Cumulative unused excess capacity of subsidiaryIf a subsidiary has been wound up in the circumstances described in subsection (1.1), for the purpose of computing the cumulative unused excess capacity of the parent for any taxation year of the parent that commenced after the commencement of the winding up, the absorbed capacity, the excess capacity and any transferred capacity, of the subsidiary for any particular taxation year are deemed to be an amount of absorbed capacity, an amount of excess capacity and an amount of transferred capacity, respectively, of the parent for the taxation year of the parent in which the subsidiary’s particular taxation year ended.Adjusted taxable income — non-capital losses of subsidiaryIf paragraph (1.1)(c), (d) or (d.1) deems a particular portion of a non-capital loss for a taxation year (referred to in this paragraph as the “subsidiary loss year”) of a subsidiary that has been wound up to be the parent’s non-capital loss for a taxation year (referred to in this paragraph as the “parent loss year”) and the parent deducts an amount in respect of the parent’s non-capital loss under paragraph 111(1)(a) in computing taxable income for a particular taxation year, for the purpose of determining the amount included under paragraph (h) of the description of B in the definition adjusted taxable income in subsection 18.2(1) in respect of the parent’s non-capital loss in computing the parent’s adjusted taxable income for the particular taxation year, any amount of the subsidiary for the subsidiary loss year that is referred to in the description of W or X in the definition adjusted taxable income in subsection 18.2(1) and that relates to the source from which the particular portion is derived (and any amount deemed by this subsection to be an amount of the subsidiary for the subsidiary loss year relating to the source) is deemed to be an amount of the parent relating to the source for the parent loss year.Net capital losses of subsidiaryWhere the winding-up of a Canadian corporation (in this subsection referred to as the “subsidiary”) commenced after March 31, 1977 and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another Canadian corporation (in this subsection referred to as the “parent”) and all the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by persons with whom the parent was dealing at arm’s length, for the purposes of computing the taxable income of the parent for any taxation year commencing after the commencement of the winding-up, any net capital loss of the subsidiary for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s loss year”), to the extent that itwas not deducted in computing the taxable income of the subsidiary for any taxation year of the subsidiary, andwould have been deductible in computing the taxable income of the subsidiary for any taxation year beginning after the commencement of the winding-up, on the assumption that it had such a taxation year and that it had sufficient income and taxable capital gains for that year,shall, for the purposes of this subsection, paragraph 111(1)(b) and subsection 111(3), be deemed to be a net capital loss of the parent for its taxation year in which the particular taxation year of the subsidiary ended, except thatwhere at any time control of the parent or subsidiary has been acquired by a person or group of persons, no amount in respect of the subsidiary’s net capital loss for a taxation year ending before that time is deductible in computing the parent’s taxable income for a taxation year ending after that time, andany portion of a net capital loss of the subsidiary that would otherwise be deemed by this subsection to be a loss of the parent for a particular taxation year beginning after the commencement of the winding-up shall be deemed, for the purposes of computing its taxable income for taxation years beginning after the commencement of the winding-up, to be a net capital loss of the parent for its immediately preceding taxation year and not for the particular year, where the parent so elects in its return of income under this Part for the particular year.Computation of income and tax of parentFor the purpose of paragraphs 88(1)(e.3), 88(1)(e.6) and 88(1)(e.7), subsections 88(1.1) and 88(1.2), section 110.1, subsections 111(1) and 111(3) and Part IV, where a parent corporation has been incorporated or otherwise formed after the end of an expenditure year, gift year, foreign tax year or loss year, as the case may be, of a subsidiary of the parent, for the purpose of computing the taxable income of, and the tax payable under this Part and Part IV by, the parent for any taxation year,it shall be deemed to have been in existence during the particular period beginning immediately before the end of the subsidiary’s first expenditure year, gift year, foreign tax year or loss year, as the case may be, and ending immediately after it was incorporated or otherwise formed;it shall be deemed to have had, throughout the particular period, fiscal periods ending on the day of the year on which its first fiscal period ended; andit shall be deemed to have been controlled, throughout the particular period, by the person or persons who controlled it immediately after it was incorporated or otherwise formed.Qualified expenditure of subsidiaryFor the purposes of this subsection and section 37.1, where the rules in subsection 88(1) applied to the winding-up of a subsidiary, for the purpose of computing the income of its parent for any taxation year commencing after the subsidiary has been wound up, the following rules apply:where the parent’s base period consists of fewer than three taxation years, its base period shall be determined on the assumption that it had taxation years in each of the calendar years preceding the year in which it was incorporated, each of which commenced on the same day of the year as the day of its incorporation;the qualified expenditure made by the parent in a particular taxation year in its base period shall be deemed to be the total of the amount thereof otherwise determined and the qualified expenditure made by the subsidiary in its taxation year ending in the same calendar year as the particular year;the total of the amounts paid to the parent by persons referred to in subparagraphs (b)(i) to (iii) of the definition expenditure base in subsection 37.1(5) in a particular taxation year in its base period shall be deemed to be the total otherwise determined and all those amounts paid to the subsidiary by a person referred to in those subparagraphs in the subsidiary’s taxation year ending in the same calendar year as the particular year; andthere shall be added to the total of the amounts otherwise determined in respect of the parent under subparagraphs 37.1(3)(b)(i) and 37.1(3)(b)(iii) respectively, the total of the amounts determined under those subparagraphs in respect of the subsidiary.Application of s. 37.1(5)The definitions in subsection 37.1(5) apply to subsection 88(1.4).Parent continuation of subsidiaryFor the purposes of section 29 of the Income Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, where the rules in subsection (1) applied to the winding-up of a subsidiary, its parent is deemed to be the same corporation as, and a continuation of, the subsidiary.IdemWhere a corporation that carries on a farming business and computes its income from that business in accordance with the cash method is wound up in circumstances to which subsection 88(1) applies and, at the time that is immediately before the winding-up of the corporation, owned inventory that was used in connection with that business,for the purposes of subparagraph 88(1)(a)(iii), the cost amount to the corporation at that time of property purchased by it that is included in that inventory shall be deemed to be the amount determined by the formula(A × B/C) + DwhereAis the amount, if any, that would be included under paragraph 28(1)(c) in computing the corporation’s income for its last taxation year beginning before that time if that year had ended at that time,Bis the value (determined in accordance with subsection 28(1.2)) to the corporation at that time of the purchased inventory that is distributed to the parent on the winding-up,Cis the value (determined in accordance with subsection 28(1.2)) of all of the inventory purchased by the corporation that was owned by it in connection with that business at that time, andDis the lesser ofsuch additional amount as the corporation designates in respect of the property, andthe amount, if any, by which the fair market value of the property at that time exceeds the amount determined for A in respect of the property;for the purpose of subparagraph 28(1)(a)(i), the disposition of the inventory and the receipt of the proceeds of disposition therefor shall be deemed to have occurred at that time and in the course of carrying on the business; andwhere the parent carries on a farming business and computes its income therefrom in accordance with the cash method, for the purposes of section 28,an amount equal to the cost to the parent of the inventory shall be deemed to have been paid by it, andthe parent shall be deemed to have purchased the inventory for an amount equal to that cost,in the course of carrying on that business and at the time it acquired the inventory.InterpretationFor the purposes of paragraphs 88(1)(c) and 88(1)(d), where a parent of a subsidiary did not deal at arm’s length with another person (other than a corporation the control of which was acquired by the parent from a person with whom the parent dealt at arm’s length) at any time before the winding-up of the subsidiary, the parent and the other person are deemed never to have dealt with each other at arm’s length, whether or not the parent and the other person coexisted.Application of subsection (1.9)Subsection (1.9) applies ifa corporation has made a designation (referred to in this subsection and subsection (1.9) as the “initial designation”) under paragraph (1)(d) in respect of a share of the capital stock of a foreign affiliate of the corporation, or an interest in a partnership that, based on the assumptions contained in paragraph 96(1)(c), owns a share of the capital stock of a foreign affiliate of the corporation, on or before the filing-due date for its return of income under this Part for the taxation year in which a disposition of the share or the partnership interest, as the case may be, occurred in the course of a winding-up referred to in subsection (1) or an amalgamation referred to in subsection 87(11);the corporation made reasonable efforts to determine the foreign affiliate’s tax-free surplus balance (within the meaning assigned by subsection 5905(5.5) of the Income Tax Regulations), in respect of the corporation, that was relevant in the computation of the maximum amount available under subparagraph (1)(d)(ii) to be designated in respect of that disposition; andthe corporation amends the initial designation on or before the day that is 10 years after the filing-due date referred to in paragraph (a).Amended designationIf this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the initial designation to be amended, the amended designation under paragraph (1.8)(c) is deemed to have been made on the day on which the initial designation was made and the initial designation is deemed not to have been made.Winding-up of Canadian corporationWhere a Canadian corporation (other than a subsidiary to the winding-up of which the rules in subsection 88(1) applied) has been wound up after 1978 and, at a particular time in the course of the winding-up, all or substantially all of the property owned by the corporation immediately before that time was distributed to the shareholders of the corporation,for the purposes of computing the corporation’scapital dividend account,capital gains dividend account (within the meaning assigned by subsection 131(6), where the corporation is an investment corporation,capital gains dividend account (within the meaning assigned by section 133), andpre-1972 capital surplus on hand,at the time (in this paragraph referred to as the “time of computation”) immediately before the particular time,the taxation year of the corporation that otherwise would have included the particular time shall be deemed to have ended immediately before the time of computation, and a new taxation year shall be deemed to have commenced at that time, andeach property of the corporation that was so distributed at the particular time shall be deemed to have been disposed of by the corporation immediately before the end of the taxation year so deemed to have ended for proceeds equal to the fair market value of the property immediately before the particular time,[Repealed, 1994, c. 7, Sch. II, s. 66]where the corporation is, by virtue of subsection 84(2), deemed to have paid at the particular time a dividend (in this paragraph referred to as the “winding-up dividend”) on shares of any class of its capital stock, the following rules apply:such portion of the winding-up dividend as does not exceed the corporation’s capital dividend account immediately before that time or capital gains dividend account immediately before that time, as the case may be, shall be deemed, for the purposes of an election in respect thereof under subsection 83(2), 131(1) (as that subsection applies for the purposes of section 130) or 133(7.1), as the case may be, and where the corporation has so elected, for all other purposes, to be the full amount of a separate dividend,the portion of the winding-up dividend equal to the lesser of the corporation’s pre-1972 capital surplus on hand immediately before that time and the amount by which the winding-up dividend exceedsthe portion thereof in respect of which the corporation has made an election under subsection 83(2), orthe portion thereof in respect of which the corporation has made an election under subsection 133(7.1),as the case may be, shall be deemed not to be a dividend,notwithstanding the definition taxable dividend in subsection 89(1), the winding-up dividend, to the extent that it exceeds the total of the portion thereof deemed by subparagraph 88(2)(b)(i) to be a separate dividend for all purposes and the portion deemed by subparagraph 88(2)(b)(ii) not to be a dividend, shall be deemed to be a separate dividend that is a taxable dividend, andeach person who held any of the issued shares of that class at the particular time shall be deemed to have received that proportion of any separate dividend determined under subparagraph 88(2)(b)(i) or 88(2)(b)(iii) that the number of shares of that class held by the person immediately before the particular time is of the number of issued shares of that class outstanding immediately before that time, andfor the purpose of computing the income of the corporation for its taxation year that includes the particular time, paragraph 12(1)(t) shall be read as follows:the amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3) or 127.49(6) in computing the taxpayer’s tax payable for the year or a preceding taxation year to the extent that it was not included under this paragraph in computing the taxpayer’s income for a preceding taxation year or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e) or subparagraph 53(2)(c)(vi) to (c)(vi.4) or (h)(ii) or the amount determined for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);”.Definition of pre-1972 capital surplus on handFor the purposes of subsection 88(2), pre-1972 capital surplus on hand of a particular corporation at a particular time means the amount, if any, by which the total ofthe corporation’s 1971 capital surplus on hand on December 31, 1978 within the meaning of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on that date,the total of all amounts each of which is an amount in respect of a capital property of the corporation owned by it on December 31, 1971 and disposed of by it after 1978 and before the particular time, equal to the amount, if any, by which the lesser of its fair market value on valuation day (within the meaning assigned by section 24 of the Income Tax Application Rules) and the corporation’s proceeds of disposition of that capital property exceeds its actual cost to the corporation determined without reference to the Income Tax Application Rules other than subsections 26(15), (17) and (21) to (27) of that Act,where before the particular time a subsidiary (to the winding-up of which the rules in subsection 88(1) applied) of the particular corporation has been wound up after 1978, an amount equal to the pre-1972 capital surplus on hand of the subsidiary immediately before the commencement of the winding-up, andwhere the particular corporation is a new corporation formed as a result of an amalgamation (within the meaning of section 87) after 1978 and before the particular time, the total of all amounts each of which is an amount in respect of a predecessor corporation, equal to the predecessor corporation’s pre-1972 capital surplus on hand immediately before the amalgamationexceedsthe total of all amounts each of which is an amount in respect of a capital property (other than depreciable property) of the corporation owned by it on December 31, 1971 and disposed of by it after 1978 and before the particular time equal to the amount, if any, by which its actual cost to the corporation determined without reference to the Income Tax Application Rules, other than subsections 26(15), (17) and (21) to (27) of that Act, exceeds the greater of the fair market value of the property on valuation day (within the meaning assigned by section 24 of that Act) and the corporation’s proceeds of disposition of the property.Determination of pre-1972 capital surplus on handFor the purposes of determining the pre-1972 capital surplus on hand of any corporation at a particular time after 1978, the following rules apply:an amount referred to in paragraphs 88(2.1)(b) and 88(2.1)(e) in respect of the corporation shall be deemed to be nil, where the property disposed of isa share of the capital stock of a subsidiary, within the meaning of subsection 88(1), that was disposed of on the winding-up of the subsidiary where that winding-up commenced after 1978,a share of the capital stock of another Canadian corporation that was controlled, within the meaning assigned by subsection 186(2), by the corporation immediately before the disposition and that was disposed of by the corporation after 1978 to a person with whom the corporation was not dealing at arm’s length immediately after the disposition, other than by a disposition referred to in paragraph 88(2.2)(b), orsubject to subsection 26(21) of the Income Tax Application Rules, a share of the capital stock of a particular corporation that was disposed of by the corporation after 1978, on an amalgamation, within the meaning assigned by subsection 87(1), where the corporation controlled, within the meaning assigned by subsection 186(2), both the particular corporation immediately before the amalgamation and the new corporation immediately after the amalgamation; andwhere another corporation that is a Canadian corporation owned a capital property on December 31, 1971 and subsequently disposed of it to the corporation in a transaction to which section 85 applied, the other corporation shall be deemed not to have disposed of that property in the transaction and the corporation shall be deemed to have owned that property on December 31, 1971 and to have acquired it at an actual cost equal to the actual cost of that property to the other corporation.Actual cost of certain depreciable propertyFor the purpose of subsection 88(2.1), the actual cost of the depreciable property that was acquired by a corporation before the commencement of its 1949 taxation year that is capital property referred to in that subsection shall be deemed to be the capital cost of that property to the corporation (within the meaning assigned by section 144 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1971 taxation year).Liquidation and dissolution of foreign affiliateNotwithstanding subsection 69(5), if at any time a taxpayer receives a property (referred to in this subsection as the “distributed property”) from a foreign affiliate (referred to in this subsection as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution,subject to subsections (3.3) and (3.5), the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the relevant cost base (within the meaning assigned by subsection 95(4)) to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, ifthe liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, orthe distributed property is a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the disposing affiliate;if paragraph (a) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the distributed property’s fair market value at that time;the distributed property is deemed to have been acquired, at that time, by the taxpayer at a cost equal to the amount determined under paragraph (a) or (b) to be the disposing affiliate’s proceeds of disposition of the distributed property;each share (referred to in paragraph (e) and subsections (3.3) and (3.4) as a “disposed share”) of a class of the capital stock of the disposing affiliate that is disposed of by the taxpayer on the liquidation and dissolution is deemed to be disposed of for proceeds of disposition equal to the amount determined by the formulaA/BwhereAis the total of all amounts each of which is the net distribution amount in respect of a distribution of distributed property made, at any time, in respect of the class, andBis the total number of issued and outstanding shares of the class that are owned by the taxpayer during the liquidation and dissolution; andif the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, any loss of the taxpayer in respect of the disposition of a disposed share is deemed to be nil.Qualifying liquidation and dissolutionFor the purposes of subsections (3), (3.3) and (3.5), a qualifying liquidation and dissolution of a foreign affiliate (referred to in this subsection as the “disposing affiliate”) of a taxpayer means a liquidation and dissolution of the disposing affiliate in respect of which the taxpayer elects in accordance with prescribed rules andthe taxpayer owns not less than 90% of the issued and outstanding shares of each class of the capital stock of the disposing affiliate throughout the liquidation and dissolution; orboththe percentage determined by the following formula is greater than or equal to 90%:A/BwhereAis the amount, if any, by whichthe total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate to the taxpayer in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliateexceedsthe total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer in consideration for a property referred to in clause (A), andBis the amount, if any, by whichthe total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate to a shareholder of the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliateexceedsthe total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by a shareholder of the disposing affiliate in consideration for a property referred to in clause (A), andat the time of each distribution of property by the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate, the taxpayer holds shares of that capital stock that would, if an annual general meeting of the shareholders of the disposing affiliate were held at that time, entitle it to 90% or more of the votes that could be cast under all circumstances at the meeting.Net distribution amountFor the purposes of the description of A in paragraph (3)(d), net distribution amount in respect of a distribution of distributed property means the amount determined by the formulaA – BwhereAis the cost to the taxpayer of the distributed property as determined under paragraph (3)(c), andBis the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer in consideration for the distribution of the distributed property.Suppression electionFor the purposes of paragraph (3)(a), if the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate and the taxpayer would, in the absence of this subsection and, for greater certainty, after taking into account any election under subsection 93(1), realize a capital gain (the amount of which is referred to in subsection (3.4) as the “capital gain amount”) from the disposition of a disposed share, the taxpayer may elect, in accordance with prescribed rules, that distributed property that was, immediately before the disposition, capital property of the disposing affiliate be deemed to have been disposed of by the disposing affiliate to the taxpayer for proceeds of disposition equal to the amount claimed (referred to in subsection (3.4) as the “claimed amount”) by the taxpayer in the election.Conditions for subsection (3.3) electionAn election under subsection (3.3) in respect of distributed property disposed of in the course of the liquidation and dissolution is not valid unlessthe claimed amount in respect of each distributed property does not exceed the amount that would, in the absence of subsection (3.3), be determined under paragraph (3)(a) in respect of the distributed property; andthe amount determined by the following formula does not exceed the total of all amounts each of which is the capital gain amount in respect of a disposed share:A – BwhereAis the total of all amounts that would, in the absence of subsection (3.3), be determined under paragraph (3)(a) to be the proceeds of disposition of a distributed property in respect of which an election under subsection (3.3) is made by the taxpayer, andBis the total of all amounts each of which is the claimed amount in respect of a distributed property referred to in the description of A.Taxable Canadian propertyFor the purposes of paragraph (3)(a), the distributed property is deemed to have been disposed of by the disposing affiliate to the taxpayer for proceeds of disposition equal to the adjusted cost base of the distributed property to the disposing affiliate immediately before the time of its disposition, ifthe liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate;the distributed property is, at the time of its disposition, taxable Canadian property (other than treaty-protected property) of the disposing affiliate that is a share of the capital stock of a corporation resident in Canada; andthe taxpayer and the disposing affiliate have jointly elected in accordance with prescribed rules.Amalgamation deemed not to be acquisition of controlFor the purposes of paragraphs (1)(c), (c.2), (d) and (d.2) and, for greater certainty, paragraphs (c.3) to (c.8) and (d.3),subject to paragraph 88(4)(c), control of any corporation shall be deemed not to have been acquired because of an amalgamation;any corporation formed as a result of an amalgamation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation; andin the case of an amalgamation described in subsection 87(9), control of a predecessor corporation that was not controlled by the parent before the amalgamation shall be deemed to have been acquired by the parent immediately before the amalgamation.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 88; 1994, c. 7, Sch. II, s. 66, Sch. VI, s. 4, Sch. VIII, s. 38, c. 8, s. 10, c. 21, s. 40; 1995, c. 3, s. 24, c. 21, ss. 31, 55; 1996, c. 21, s. 16; 1997, c. 25, s. 19; 1998, c. 19, ss. 16, 118; 2001, c. 17, s. 66; 2002, c. 9, s. 31; 2007, c. 2, s. 46; 2009, c. 2, s. 20; 2012, c. 31, s. 18; 2013, c. 34, ss. 30, 65, 224, c. 40, s. 40; 2016, c. 12, s. 28; 2017, c. 33, s. 252019, c. 29, s. 122022, c. 19, s. 122024, c. 15, s. 192024, c. 17, s. 192024, c. 17, s. 80
ApplicationSubsection (2) applies to a trust’s distribution of property to a taxpayer ifthe distribution is a SIFT trust wind-up event;the trust isa SIFT wind-up entity whose only beneficiary, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, is a taxable Canadian corporation, ora trust whose only beneficiary, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, is another trust described by subparagraph (i);where the trust is a SIFT wind-up entity, the distribution occurs no more than 60 days after the earlier ofthe first SIFT trust wind-up event of the trust, andthe first distribution to the trust that is a SIFT trust wind-up event of another trust; andif the property is shares of the capital stock of a taxable Canadian corporation,the property was not acquired by the trust on a distribution to which subsection 107(3.1) applies, andthe trust elects in writing, filed with the Minister on or before the trust’s filing-due date for its taxation year that includes the time of the distribution, that this section apply to the distribution.SIFT trust wind-up eventIf this subsection applies to a trust’s distribution of property to a taxpayer, subsections 88(1) to (1.7), and section 87 and paragraphs 256(7)(a) to (e) as they apply for the purposes of those subsections, apply, with any modifications that the circumstances require, as ifthe trust were a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) that is not a private corporation;where the taxpayer is a SIFT wind-up entity, the taxpayer were a taxable Canadian corporation that is not a private corporation;the distribution were a winding-up of the subsidiary;the taxpayer’s interest as a beneficiary under the trust were shares of a single class of shares of the capital stock of the subsidiary owned by the taxpayer;paragraph 88(1)(b) deemed the taxpayer’s proceeds of disposition of the shares described in paragraph (d) and owned by the taxpayer immediately before the distribution to be equal to the adjusted cost base to the taxpayer of the taxpayer’s interest as a beneficiary under the trust immediately before the distribution;each trust, a majority-interest beneficiary (in this subsection, within the meaning assigned by section 251.1) of which is another trust that is by operation of this subsection treated as if it were a corporation, were a corporation; andexcept for the purposes of subsections 88(1.1) and (1.2), the taxpayer last acquired control of the subsidiary and of each corporation (including a trust that is by operation of this subsection treated as if it were a corporation) controlled by the subsidiary at the time, if any, at which the taxpayer last became a majority-interest beneficiary of the trust.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 88.1; 1994, c. 21, s. 41; 2009, c. 2, s. 21
DefinitionsIn this Subdivision,adjusted taxable income of a corporation for a taxation year is the amount determined by the formulaA – B – CwhereAisunless paragraph (b) applies, the corporation’s taxable income for the taxation year, andif the corporation is a deposit insurance corporation in the taxation year, nil,Bis the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for the taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for the taxation year, andCisif the corporation is a Canadian-controlled private corporation in the taxation year, the lesser of the corporation’s aggregate investment income for the taxation year and the corporation’s taxable income for the taxation year, andin any other case, nil; (revenu imposable rajusté)Canadian corporation at any time means a corporation that is resident in Canada at that time and wasincorporated in Canada, orresident in Canada throughout the period that began on June 18, 1971 and that ends at that time,and for greater certainty, a corporation formed at any particular time by the amalgamation or merger of, or by a plan of arrangement or other corporate reorganization in respect of, 2 or more corporations (otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of the property by the other corporation or as a result of the distribution of the property to the other corporation on the winding-up of the corporation) is a Canadian corporation because of paragraph (a) only ifthat reorganization took place under the laws of Canada or a province, andeach of those corporations was, immediately before the particular time, a Canadian corporation; (société canadienne)capital dividend account of a corporation at any particular time means the amount, if any, by which the total ofthe amount, if any, by which the total ofthe total of all amounts each of which is the amount if any, by whichthe amount of the corporation’s capital gain — computed without reference to subclause 52(3)(a)(ii)(A)(II) and subparagraph 53(1)(b)(ii) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as the period)exceeds the total ofthe portion of the capital gain referred to in clause (A) that is the corporation’s taxable capital gain,the corporation’s taxable capital gain from a disposition in the period under subsection 40(12), andthe portion of the amount, if any, by which the amount determined under clause (A) exceeds the amount determined under clause (B) from the disposition by it of a property that can reasonably be regarded as having accrued while the property, or a property for which it was substituted,except in the case of a disposition of a designated property, was a property of a corporation (other than a private corporation, an investment corporation, a mortgage investment corporation or a mutual fund corporation),where, after November 26, 1987, the property became a property of a Canadian-controlled private corporation (otherwise than by reason of a change in the residence of one or more shareholders of the corporation), was a property of a corporation controlled directly or indirectly in any manner whatever by one or more non-resident persons, orwhere, after November 26, 1987, the property became a property of a private corporation that was not exempt from tax under this Part on its taxable income, was a property of a corporation exempt from tax under this Part on its taxable income, andall amounts each of which is an amount in respect of a distribution made, in the period and after September 15, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser ofthe amount, if any, by whichthe amount of the distributionexceedsthe amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains, andthe amount determined by the formulaA × BwhereAis the fraction or whole number determined when 1 is subtracted from the reciprocal of the fraction under paragraph 38(a) applicable to the trust for the year, andBis the amount referred to in subclause (A)(II),exceedsthe total of all amounts each of which is the amount, if any, by whichthe amount of the corporation’s capital loss — computed without reference to subclause 52(3)(a)(ii)(A)(II) and subparagraph 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(3.12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the periodexceeds the total ofthe part of the capital loss referred to in clause (A) that is the corporation’s allowable capital loss, andthe portion of the amount, if any, by which the amount determined under clause (A) exceeds the amount determined under clause (B) from the disposition by it of a property that can reasonably be regarded as having accrued while the property, or a property for which it was substituted,except in the case of a disposition of a designated property, was a property of a corporation (other than a private corporation, an investment corporation, a mortgage investment corporation or a mutual fund corporation),where, after November 26, 1987, the property became a property of a Canadian-controlled private corporation (otherwise than by reason of a change in the residence of one or more shareholders of the corporation), was a property of a corporation controlled directly or indirectly in any manner whatever by one or more non-resident persons, orwhere, after November 26, 1987, the property became a property of a private corporation that was not exempt from tax under this Part on its taxable income, was a property of a corporation exempt from tax under this Part on its taxable income,all amounts each of which is an amount in respect of a dividend received by the corporation on a share of the capital stock of another corporation in the period, which amount was, by virtue of subsection 83(2), not included in computing the income of the corporation,the total of all amounts each of which is an amount required to have been included under this paragraph as it read in its application to a taxation year that ended before February 28, 2000,the amount, if any, by which1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)(b) (as it read before 2017) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,exceedswhere the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formulaV + WwhereVis 1/2 of the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andWis 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andin any other case, nil,the amount, if any, by whichthe total of all amounts each of which is an amount required by paragraph 14(1)(b) (as it read before 2017) or subparagraph 13(38)(d)(iii) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,exceedswhere the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after October 17, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formulaX + YwhereXis the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andYis 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, andin any other case, nil,the amount, if any, by which the total ofall amounts each of which is the proceeds of a life insurance policy of which the corporation was a beneficiary on or before June 28, 1982 received by the corporation in the period and after 1971 in consequence of the death of any person, andall amounts each of which is the proceeds of a life insurance policy (other than an LIA policy) of which the corporation was not a beneficiary on or before June 28, 1982 received by the corporation in the period and after May 23, 1985 in consequence of the death of any personexceeds the total of all amounts each of which isthe adjusted cost basis (in this paragraph as defined in subsection 148(9)), immediately before the death, ofif the death occurs before March 22, 2016, a policy referred to in subparagraph (i) or (ii) to the corporation, andif the death occurs after March 21, 2016, a policyholder’s interest in a policy referred to in subparagraph (i) or (ii),if the policy is a 10/8 policy immediately before the death and the death occurs after 2013, the amount outstanding, immediately before the death, of the borrowing that is described in subparagraph (a)(i) of the definition 10/8 policy in subsection 248(1) in respect of the policy,if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the total ofthe amount, if any, by which the fair market value of consideration given in respect of the disposition exceeds the total ofthe greater of the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, andthe amount by which the paid-up capital of any class of the capital stock of a corporation resulting from the disposition is reduced at the beginning of March 22, 2016 because of the application of paragraphs 148(7)(c) and (f) in respect of the disposition, andif the paid-up capital in respect of a class of shares of the capital stock of a corporation was increased before March 22, 2016 as described in subparagraph 148(7)(f)(iii) in respect of the disposition, the amount, if any, by which the total reduction in the paid-up capital in respect of that class — not exceeding the amount of that increase — after that increase and before March 22, 2016 (except to the extent that the amount of the reduction was deemed by subsection 84(4) or (4.1) to be a dividend received by a taxpayer) exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, orif the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formulaA − BwhereAis the amount, if any, by which the lesser of the adjusted cost basis to the policyholder of the interest immediately before the disposition and the fair market value of consideration given in respect of the disposition exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, andBis the absolute value of the negative amount, if any, that would be, in the absence of section 257, the adjusted cost basis, immediately before the death, of the interest in the policy,the amount of the corporation’s life insurance capital dividend account immediately before May 24, 1985, andall amounts each of which is an amount in respect of a distribution made, in the period and before September 16, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser ofthe amount, if any, by whichthe amount of the distributionexceedsthe amount designated under subsection 104(21) by the trust (other than a designation to which subsection 104(21.4), as it read in its application to the corporation’s last taxation year that began before November 2011, applied) in respect of the net taxable capital gains of the trust attributable to those capital gains, andthe amount determined by the formulaA × BwhereAis the fraction or whole number determined when 1 is subtracted from the reciprocal of the fraction under paragraph 38(a) applicable to the trust for the year, andBis the amount referred to in clause (i) (B), andall amounts each of which is an amount in respect of a distribution made by a trust to the corporation in the period in respect of a dividend (other than a taxable dividend) paid on a share of the capital stock of another corporation resident in Canada to the trust during a taxation year of the trust throughout which the trust was resident in Canada equal to the lesser ofthe amount of the distribution, andthe amount designated under subsection 104(20) by the trust in respect of the corporation in respect of that dividend,exceeds the total of all capital dividends that became payable by the corporation after the commencement of the period and before the particular time; (compte de dividendes en capital)designated property meansany property of a private corporation that last became a private corporation before November 13, 1981 and that was acquired by itbefore November 13, 1981, orafter November 12, 1981 pursuant to an agreement in writing entered into on or before that date,any property of a private corporation that was acquired by it from another private corporation with which the private corporation was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b)) at the time the property was acquired, where the property was a designated property of the other private corporation,a share acquired by a private corporation in a transaction to which section 51, subsection 85(1) or section 85.1, 86 or 87 applied in exchange for another share that was a designated property of the corporation, ora replacement property (within the meaning assigned by section 44) for a designated property disposed of by virtue of an event referred to in paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54; (bien désigné)eligible dividend meansan amount that is equal to the portion of a taxable dividend that is received by a person resident in Canada, paid by a corporation resident in Canada and designated under subsection (14) to be an eligible dividend, andin respect of a person resident in Canada, an amount that is deemed by subsection 96(1.11) or 104(16) to be a taxable dividend that is received by the person; (dividende déterminé)excessive eligible dividend designation, made by a corporation in respect of an eligible dividend paid by the corporation at any time in a taxation year, meansunless paragraph (c) applies to the dividend, if the corporation is in the taxation year a Canadian-controlled private corporation or a deposit insurance corporation, the amount, if any, determined by the formula(A - B) × C/AwhereAis the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in the taxation year,Bis the greater of nil and the corporation’s general rate income pool at the end of the taxation year, andCis the amount of the eligible dividend,unless paragraph (c) applies to the dividend, if the corporation is not a corporation described in paragraph (a), the amount, if any, determined by the formulaA × B/CwhereAis the lesser ofthe total of all amounts each of which is an eligible dividend paid by the corporation at that time, andthe corporation’s low rate income pool at that time,Bis the amount of the eligible dividend, andCis the amount determined under subparagraph (i) of the description of A, andan amount equal to the amount of the eligible dividend, if it is reasonable to consider that the eligible dividend was paid in a transaction, or as part of a series of transactions, one of the main purposes of which was to artificially maintain or increase the corporation’s general rate income pool, or to artificially maintain or decrease the corporation’s low rate income pool; (désignation excessive de dividende déterminé)general rate factor of a corporation for a taxation year is the total ofthat proportion of 0.68 that the number of days in the taxation year that are before 2010 is of the number of days in the taxation year,that proportion of 0.69 that the number of days in the taxation year that are in 2010 is of the number of days in the taxation year,that proportion of 0.70 that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, andthat proportion of 0.72 that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year; (facteur du taux géneral)general rate income pool at the end of a particular taxation year, of a taxable Canadian corporation that is a Canadian-controlled private corporation or a deposit insurance corporation in the particular taxation year, is the positive or negative amount determined by the formulaA – BwhereAis the positive or negative amount that would, before taking into consideration the specified future tax consequences for the particular taxation year, be determined by the formulaC + D + E + F – GwhereCis the corporation’s general rate income pool at the end of its preceding taxation year,Dis the amount, if any, that is the product of the corporation’s general rate factor for the particular taxation year multiplied by its adjusted taxable income for the particular taxation year,Eis the total of all amounts each of which isan eligible dividend received by the corporation in the particular taxation year, oran amount deductible under section 113 in computing the taxable income of the corporation for the particular taxation year,Fis the total of all amounts determined under subsections (4) to (6) in respect of the corporation for the particular taxation year, andGisunless paragraph (b) applies, the amount, if any, by whichthe total of all amounts each of which is the amount of an eligible dividend paid by the corporation in its preceding taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, orif subsection (4) applies to the corporation in the particular taxation year, nil, andB is the amount determined by the formulaH × (I – J)whereH is the corporation’s general rate factor for the particular taxation year,I is the total of the corporation’s full rate taxable incomes (as would be defined in the definition full rate taxable income in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for the corporation’s preceding three taxation years, determined without taking into consideration the specified future tax consequences, for those preceding taxation years, that arise in respect of the particular taxation year, andJ is the total of the corporation’s full rate taxable incomes (as would be defined in the definition full rate taxable income in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for those preceding taxation years; (compte de revenu à taux général)low rate income pool, at any particular time in a particular taxation year, of a corporation (in this definition referred to as the “non-CCPC”) that is resident in Canada and is in the particular taxation year neither a Canadian-controlled private corporation nor a deposit insurance corporation, is the amount determined by the formula(A + B + C + D + E + F) - (G + H)whereAis the non-CCPC’s low rate income pool at the end of its preceding taxation year,Bis the total of all amounts each of which is an amount deductible under section 112 in computing the non-CCPC’s taxable income for the year in respect of a taxable dividend (other than an eligible dividend) that became payable, in the particular taxation year but before the particular time, to the non-CCPC by a corporation resident in Canada,Cis the total of all amounts determined under subsections (8) to (10) in respect of the non-CCPC for the particular taxation year,Disif the non-CCPC was a substantive CCPC at any time in its preceding taxation year or would, but for paragraph (d) of the definition Canadian-controlled private corporation in subsection 125(7), be a Canadian-controlled private corporation in its preceding taxation year, 80% of its aggregate investment income for its preceding taxation year, andin any other case, nil,Eisif the non-CCPC was not a Canadian-controlled private corporation in its preceding taxation year, 80% of the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for that preceding taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for that preceding taxation year, andin any other case, nil,Fisif the non-CCPC was an investment corporation in its preceding taxation year, four times the amount, if any, deducted by it under subsection 130(1) for its preceding taxation year, andin any other case, nil,Gis the total of all amounts each of which is a taxable dividend (other than an eligible dividend, a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1) or a taxable dividend deductible by the non-CCPC under subsection 130.1(1) in computing its income for the particular taxation year or for its preceding taxation year) that became payable by the non-CCPCin the particular taxation year but before the particular time, orin the preceding taxation year, but only to the extent of the lesser ofthe amount included under the description of D in the particular taxation year, andthe portion of the taxable dividend that did not reduce the non-CCPC’s low rate income pool in the preceding taxation year, andHis the total of all amounts each of which is an excessive eligible dividend designation made by the non-CCPC in the particular taxation year but before the particular time; (compte de revenu à taux réduit)paid-up capital at any particular time means,in respect of a share of any class of the capital stock of a corporation, an amount equal to the paid-up capital at that time, in respect of the class of shares of the capital stock of the corporation to which that share belongs, divided by the number of issued shares of that class outstanding at that time,in respect of a class of shares of the capital stock of a corporation,where the particular time is before May 7, 1974, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act,where the particular time is after May 6, 1974, and before April 1, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed in accordance with the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on March 31, 1977, andif the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 148(7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,except that, where the corporation is a cooperative corporation (within the meaning assigned by subsection 136(2)) or a credit union and the statute by or under which it was incorporated does not provide for paid-up capital in respect of a class of shares, the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act, shall be deemed to be the amount, if any, by whichthe total of the amounts received by the corporation in respect of shares of that class issued and outstanding at that timeexceedsthe total of all amounts each of which is an amount or part thereof described in subparagraph (iv) repaid by the corporation to persons who held any of the issued shares of that class before that time, andin respect of all the shares of the capital stock of a corporation, an amount equal to the total of all amounts each of which is an amount equal to the paid-up capital in respect of any class of shares of the capital stock of the corporation at the particular time; (capital versé)private corporation at any particular time means a corporation that, at the particular time, is resident in Canada, is not a public corporation and is not controlled by one or more public corporations (other than prescribed venture capital corporations) or prescribed federal Crown corporations or by any combination thereof and, for greater certainty, for the purposes of determining at any particular time when a corporation last became a private corporation,a corporation that was a private corporation at the commencement of its 1972 taxation year and thereafter without interruption until the particular time shall be deemed to have last become a private corporation at the end of its 1971 taxation year, anda corporation incorporated after 1971 that was a private corporation at the time of its incorporation and thereafter without interruption until the particular time shall be deemed to have last become a private corporation immediately before the time of its incorporation; (société privée)public corporation at any particular time meansa corporation that is resident in Canada at the particular time if at that time a class of shares of the capital stock of the corporation is listed on a designated stock exchange in Canada,a corporation (other than a prescribed labour-sponsored venture capital corporation) that is resident in Canada at the particular time if at any time after June 18, 1971 andbefore the particular time, it elected in prescribed manner to be a public corporation, and at the time of the election it complied with prescribed conditions relating to the number of its shareholders, the dispersal of ownership of its shares and the public trading of its shares, orbefore the day that is 30 days before the day that includes the particular time it was, by notice in writing to the corporation, designated by the Minister to be a public corporation and at the time it was so designated it complied with the conditions referred to in subparagraph (i),unless after the election or designation, as the case may be, was made and before the particular time, it ceased to be a public corporation because of an election or designation under paragraph (c), ora corporation (other than a prescribed labour-sponsored venture capital corporation) that is resident in Canada at the particular time if, at any time after June 18, 1971 and before the particular time it was a public corporation, unless after the time it last became a public corporation andbefore the particular time, it elected in prescribed manner not to be a public corporation, and at the time it so elected it complied with prescribed conditions relating to the number of its shareholders, the dispersal of ownership of its shares and the public trading of its shares, orbefore the day that is 30 days before the day that includes the particular time, it was, by notice in writing to the corporation, designated by the Minister not to be a public corporation and at the time it was so designated it complied with the conditions referred to in subparagraph (i),and where a corporation has, on or before its filing-due date for its first taxation year, become a public corporation, it is, if it so elects in its return of income for the year, deemed to have been a public corporation from the beginning of the year until the time when it so became a public corporation; (société publique)taxable Canadian corporation means a corporation that, at the time the expression is relevant,was a Canadian corporation, andwas not, by reason of a statutory provision, exempt from tax under this Part; (société canadienne imposable)taxable dividend means a dividend other thana dividend in respect of which the corporation paying the dividend has elected in accordance with subsection 83(1) as it read prior to 1979 or in accordance with subsection 83(2), anda qualifying dividend paid by a public corporation to shareholders of a prescribed class of tax-deferred preferred shares of the corporation within the meaning of subsection 83(1). (dividende imposable)Application of s. 138(12)The definitions in subsection 138(12) apply to this section.Capital dividend account where control acquiredWhere at any particular time after March 31, 1977 a corporation that was, at a previous time, a private corporation controlled directly or indirectly in any manner whatever by one or more non-resident persons becomes a Canadian-controlled private corporation (otherwise than by reason of a change in the residence of one or more of its shareholders), in computing the corporation’s capital dividend account at and after the particular time there shall be deducted the amount of the corporation’s capital dividend account immediately before the particular time.Capital dividend account of tax-exempt corporationWhere at any particular time after November 26, 1987 a corporation ceases to be exempt from tax under this Part on its taxable income, in computing the corporation’s capital dividend account at and after the particular time there shall be deducted the amount of the corporation’s capital dividend account (computed without reference to this subsection) immediately after the particular time.Where corporation is beneficiaryFor the purposes of this section,where a corporation was a beneficiary under a life insurance policy on June 28, 1982, it shall be deemed not to have been a beneficiary under such a policy on or before June 28, 1982 where at any time after December 1, 1982 a prescribed premium has been paid under the policy or there has been a prescribed increase in any benefit on death under the policy; andwhere a corporation becomes a beneficiary under a life insurance policy by virtue of an amalgamation or a winding-up to which subsection 87(1) or 88(1) applies, it shall be deemed to have been a beneficiary under the policy throughout the period during which its predecessor or subsidiary, as the case may be, was a beneficiary under the policy.Simultaneous dividendsWhere a dividend becomes payable at the same time on more than one class of shares of the capital stock of a corporation, for the purposes of sections 83, 84 and 88, the dividend on any such class of shares shall be deemed to become payable at a different time than the dividend on the other class or classes of shares and to become payable in the order designatedby the corporation on or before the day on or before which its return of income for its taxation year in which such dividends become payable is required to be filed; orin any other case, by the Minister.GRIP addition — becoming CCPCIf, in a particular taxation year, a corporation is a Canadian-controlled private corporation or a deposit insurance corporation but was, in its preceding taxation year, a corporation resident in Canada other than a Canadian-controlled private corporation or a deposit insurance corporation, there may be included in computing the corporation’s general rate income pool at the end of the particular taxation year, the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;Bis the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;Cis the amount, if any, by whichthe total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for that preceding taxation year;Dis the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;Eis the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;Fis the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;Gis the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year; andHis the corporation’s low rate income pool immediately before the end of its preceding taxation year.GRIP addition — post-amalgama­tionIf a Canadian-controlled private corporation or a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of an amalgamation (within the meaning assigned by subsection 87(1)), there shall be included in computing the new corporation’s general rate income pool at the end of its first taxation year the total of all amounts each of which isin respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined in respect of the predecessor corporation by the formulaA - BwhereAis the predecessor corporation’s general rate income pool at the end of its last taxation year, andBis the amount, if any, by whichthe total of all amounts each of which is an eligible dividend paid by the predecessor corporation in its last taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the predecessor corporation in its last taxation year; orin respect of a predecessor corporation (in this paragraph referred to as the “non-CCPC predecessor”) that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), not a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the non-CCPC predecessor of a property immediately before the end of its last taxation year,Bis the amount of any money of the non-CCPC predecessor on hand immediately before the end of its last taxation year,Cis the amount, if any, by whichthe total of all amounts that, if the non-CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the non-CCPC predecessor’s taxable income for its last taxation year,Dis the total of all amounts each of which is the amount of any debt owing by the non-CCPC predecessor, or of any other obligation of the non-CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,Eis the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the non-CCPC predecessor,Fis the total of all amounts each of which is a reserve deducted in computing the non-CCPC predecessor’s income for its last taxation year,Gis the non-CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, andHis the non-CCPC predecessor’s low rate income pool immediately before the end of its last taxation year.GRIP addition — post-winding-upIf subsection 88(1) applies to the winding-up of a subsidiary into a parent (within the meanings assigned by that subsection) that is a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the parent’s general rate income pool at the end of its taxation year that immediately follows the taxation year during which it receives the assets of the subsidiary on the winding-upif the subsidiary was, in its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined by the formulaA - BwhereAis the subsidiary’s general rate income pool at the end of its last taxation year, andBis the amount, if any, by whichthe total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year; andin any other case, the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”),Bis the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,Cis the amount, if any, by whichthe total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,Dis the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,Eis the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,Fis the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,Gis the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, andHis the subsidiary’s low rate income pool immediately before the end of its last taxation year.GRIP addition for 2006If a corporation was (or, but for an election under subsection (11), would have been), throughout its first taxation year that includes any part of January 1, 2006, a Canadian-controlled private corporation, its general rate income pool at the end of its immediately preceding taxation year is deemed to be the greater of nil and the amount determined by the formulaA - BwhereAis the total of63% of the total of all amounts each of which is the corporation’s full rate taxable income (as defined in subsection 123.4(1)), for a taxation year of the corporation that ended after 2000 and before 2004, determined before taking into consideration the specified future tax consequences for that taxation year,63% of the total of all amounts each of which is the corporation’s full rate taxable income (as would be defined in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) and (ii)), for a taxation year of the corporation that ended after 2003 and before 2006, determined before taking into consideration the specified future tax consequences for that taxation year, andall amounts each of which was deductible under subsection 112(1) in computing the corporation’s taxable income for a taxation year of the corporation (in this paragraph referred to as the “particular corporation”) that ended after 2000 and before 2006, and is in respect of a dividend received from a corporation (in this paragraph referred to as the “payer corporation”) that was, at the time it paid the dividend, connected (within the meaning assigned by subsection 186(4)) with the particular corporation, to the extent that it is reasonable to consider, having regard to all the circumstances (including but not limited to other shareholders having received dividends from the payer corporation), that the dividend was attributable to an amount that is, or if this subsection applied to the payer corporation would be, described in this paragraph or in paragraph (a) or (b) in respect of the payer corporation; andBis the total of all amounts each of which is a taxable dividend paid by the corporation in those taxation years.LRIP addition — ceasing to be CCPCIf, in a particular taxation year, a corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation but was, in its preceding taxation year, a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the corporation’s low rate income pool at any time in the particular taxation year the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;Bis the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;Cis the amount, if any, by whichthe total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for its preceding taxation year;Dis the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;Eis the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;Fis the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;Gisif the corporation is not a private corporation in the particular taxation year, the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year, andin any other case, nil; andHis the positive or negative amount determined by the formulaI - JwhereIis the corporation’s general rate income pool at the end of its preceding taxation year, andJis the amount, if any, by whichthe total of all amounts each of which is an eligible dividend paid by the corporation in its preceding taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year.LRIP addition — amalgamationIf a corporation that is resident in Canada and that is neither a Canadian-controlled private corporation nor a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of the amalgamation or merger of two or more corporations one or more of which is a taxable Canadian corporation, there shall be included in computing the new corporation’s low rate income pool at any time in its first taxation year the total of all amounts each of which isin respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the predecessor corporation’s low rate income pool at the end of that taxation year; andin respect of a predecessor corporation (in this paragraph referred to as the “CCPC predecessor”) that was, throughout its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the CCPC predecessor of a property immediately before the end of its last taxation year,Bis the amount of any money of the CCPC predecessor on hand immediately before the end of its last taxation year,Cis the amount, if any, by whichthe total of all amounts that, if the CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the CCPC predecessor’s taxable income for its last taxation year,Dis the total of all amounts each of which is the amount of any debt owing by the CCPC predecessor, or of any other obligation of the CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,Eis the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the CCPC predecessor,Fis the total of all amounts each of which is a reserve deducted in computing the CCPC predecessor’s income for its last taxation year,Gisif the new corporation is not a private corporation in its first taxation year, the CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, andin any other case, nil, andHis the positive or negative amount determined by the formulaI - JwhereIis the CCPC predecessor’s general rate income pool at the end of its last taxation year, andJis the amount, if any, by whichthe total of all amounts each of which is an eligible dividend paid by the CCPC predecessor in its last taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the CCPC predecessor in its last taxation year.LRIP addition — winding-upIf, in a particular taxation year, a corporation (in this subsection referred to as the “parent”) is neither a Canadian-controlled private corporation nor a deposit insurance corporation and in the particular taxation year all or substantially all of the assets of another corporation (in this subsection referred to as the “subsidiary”) were distributed to the parent on a dissolution or winding-up of the subsidiary, there shall be included in computing the parent’s low rate income pool at any time in the particular taxation year that is at or after the end of the subsidiary’s taxation year (in this subsection referred to as the subsidiary’s “last taxation year”) during which its assets were distributed to the parent on the winding-up,if the subsidiary was, in its last taxation year, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the subsidiary’s low rate income pool immediately before the end of that taxation year; andin any other case, the amount determined by the formulaA + B + C - D - E - F - G - HwhereAis the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its last taxation year,Bis the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,Cis the amount, if any, by whichthe total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation yearexceedsthe total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,Dis the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,Eis the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,Fis the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,Gisif the parent is not a private corporation in the particular taxation year, the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, andin any other case, nil, andHis the positive or negative amount determined by the formulaI - JwhereIis the subsidiary’s general rate income pool at the end of its last taxation year, andJis the amount, if any, by whichthe total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation yearexceedsthe total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year.Election: non-CCPCSubject to subsection (12), a corporation that files with the Minister on or before its filing-due date for a particular taxation year an election in prescribed form to have this subsection apply is deemed for the purposes described in paragraph (d) of the definition Canadian-controlled private corporation in subsection 125(7) not to be a Canadian-controlled private corporation at any time in or after the particular taxation year.Revoking electionIf a corporation files with the Minister on or before its filing-due date for a particular taxation year a notice in prescribed form revoking, as of the end of the particular taxation year, an election described in subsection (11), the election ceases to apply to the corporation at the end of the particular taxation year.Repeated elections — consent requiredIf a corporation has, under subsection (12), revoked an election, any subsequent election under subsection (11) or subsequent revocation under subsection (12) is invalid unlessthe Minister consents in writing to the subsequent election or the subsequent revocation, as the case may be; andthe corporation complies with any conditions imposed by the Minister.Dividend designationA corporation designates a portion of a dividend it pays at any time to be an eligible dividend by notifying in writing at that time each person or partnership to whom the dividend is paid that the portion of the dividend is an eligible dividend.Late designationIf, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit a designation under subsection (14) to be made before the day that is three years after the day on which the designation was required to be made, the designation is deemed to have been made at the time the designation was required to be made.Late designation — transitional ERDTOHIf, as a consequence of the application of subparagraph (a)(iii) of the definition eligible refundable dividend tax on hand in subsection 129(4), in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit a designation under subsection (14) to be made before the day that is six years after the day on which the designation was required to be made, the designation is deemed to have been made at the time the designation was required to be made.Meaning of expression deposit insurance corporationFor the purposes of paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions excessive eligible dividend designation, general rate income pool, and low rate income pool in subsection (1) and subsections (4) to (6) and (8) to (10), a corporation is a deposit insurance corporation if it would be a deposit insurance corporation as defined in the definition deposit insurance corporation in subsection 137.1(5) were that definition read without reference to its paragraph (b) and were this Act read without reference to subsection 137.1(5.1).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 89; 1994, c. 7, Sch. II, s. 67, c. 21, s. 42; 1998, c. 19, ss. 17, 119; 2000, c. 19, s. 14; 2001, c. 17, s. 67; 2007, c. 2, s. 47, c. 29, s. 6, c. 35, s. 23; 2009, c. 2, s. 22; 2011, c. 24, s. 19; 2012, c. 19, s. 4, c. 31, s. 19; 2013, c. 34, s. 225, c. 40, s. 41; 2016, c. 7, s. 10, c. 12, s. 29; 2017, c. 20, s. 7, c. 33, s. 262024, c. 15, s. 202024, c. 17, s. 20
Shareholders of Corporations Not Resident in Canada
Dividend from non-resident corporationIn computing the income for a taxation year of a taxpayer resident in Canada, there is to be included any amount received by the taxpayer at any time in the year as, on account or in lieu of payment of, or in satisfaction of, a dividend on a share owned by the taxpayer of the capital stock of a non-resident corporation.Dividend from foreign affiliateFor the purposes of this Act, an amount is deemed to be a dividend paid or received, as the case may be, at any time on a share of a class of the capital stock of a non-resident corporation that is a foreign affiliate of a taxpayer if the amount is the share’s portion of a pro rata distribution (other than a distribution made in the course of a liquidation and dissolution of the corporation, on a redemption, acquisition or cancellation of the share by the corporation, or on a qualifying return of capital in respect of the share) made at that time by the corporation in respect of all the shares of that class.Qualifying return of capitalFor the purposes of subsection (2), a distribution made at any time by a foreign affiliate of a taxpayer in respect of a share of the capital stock of the affiliate that is a reduction of the paid-up capital of the affiliate in respect of the share and that would, in the absence of this subsection, be deemed under subsection (2) to be a dividend paid or received, at that time, on the share is a qualifying return of capital, at that time, in respect of the share if an election is made under this subsection, in respect of the distribution and in accordance with prescribed rules,by the taxpayer, where there is no person or partnership that meets the conditions in subparagraphs (b)(i) and (ii); orjointly by the taxpayer and each person or partnership that is, at that time,a connected person or partnership in respect of the taxpayer, anda person or partnership of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition equity percentage in subsection 95(4) were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”.Connected person or partnershipFor the purposes of subsection (3), a connected person or partnership in respect of a taxpayer, at any time, isa person that is, at that time, related to the taxpayer, anda partnership a member of which is, at that time,the taxpayer, ora person that is related to the taxpayer.ExclusionNo amount paid or received at any time is, for the purposes of this Act, a dividend paid or received on a share of the capital stock of a non-resident corporation that is a foreign affiliate of a taxpayer unless it is so deemed under this Part.Loan from foreign affiliateExcept where subsection 15(2) applies, if a person or partnership receives at any time a loan from, or becomes at that time indebted to, a creditor that is at that time a foreign affiliate (referred to in subsections (9), (11) and (15) as the “creditor affiliate”) of a taxpayer resident in Canada or that is at that time a partnership (referred to in subsections (9), (11) and (15) as the “creditor partnership”) of which such an affiliate is a member and the person or partnership is at that time a specified debtor in respect of the taxpayer, then the specified amount in respect of the loan or indebtedness is to be included in computing the income of the taxpayer for the taxpayer’s taxation year that includes that time.Upstream loan continuity — reorganizationsSubsection (6.11) applies at any time ifimmediately before that time, a person or partnership (referred to in this subsection and subsection (6.11) as the “original debtor”) owes an amount in respect of a loan or indebtedness (referred to in this subsection and subsection (6.11) as the “pre-transaction loan”) to another person or partnership (referred to in this subsection and subsection (6.11) as the “original creditor”);the pre-transaction loan was, at the time it was made or entered into, a loan or indebtedness that is described in subsection (6); andin the course of an amalgamation, a merger, a winding-up or a liquidation and dissolution,the amount owing in respect of the pre-transaction loan becomes owing at that time by another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan payable” and the “new debtor”, respectively),the amount owing in respect of the pre-transaction loan becomes owing at that time to another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan receivable” and the “new creditor”, respectively), orthe taxpayer in respect of which the original debtor was a specified debtor at the time referred to in paragraph (b)ceases to exist, ormerges with one or more corporations to form one corporate entity (referred to in subsection (6.11) as the “new corporation”).Upstream loan continuity — reorganizationsIf this subsection applies at any time, for the purposes of subsections (6) and (7) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04),if the condition in subparagraph (6.1)(c)(i) is met,the post-transaction loan payable is deemed to be the same loan or indebtedness as the pre-transaction loan, andthe new debtor is deemed to be same debtor as, and a continuation of, the original debtor;if the condition in subparagraph (6.1)(c)(ii) is met,the post-transaction loan receivable is deemed to be the same loan or indebtedness as the pre-transaction loan, andthe new creditor is deemed to be same creditor as, and a continuation of, the original creditor;if the condition in clause (6.1)(c)(iii)(A) is met,subject to subparagraph (ii), each entity that held an equity interest in the taxpayer immediately before the winding-up (referred to in this paragraph as a “successor entity”) is deemed to be the same entity as, and a continuation of, the taxpayer, andfor the purposes of applying subsection (13) and the description of A in subsection (14), an amount is deemed, in respect of a loan or indebtedness, to have been included under subsection (6) in computing the income of each successor entity equal toif the taxpayer is a partnership, the amount that may reasonably be considered to be the successor entity’s share (determined in a manner consistent with the determination of the successor entity’s share of the income of the partnership under subsection 96(1) for the taxpayer’s final fiscal period) of the specified amount that was required to be included in computing the income of the taxpayer under subsection (6) in respect of the loan or indebtedness, andin any other case, the proportion of the specified amount included in computing the taxpayer’s income under subsection (6), in respect of the loan or indebtedness, that the fair market value of the successor entity’s equity interest in the taxpayer, immediately before the distribution of the taxpayer’s assets on the winding-up, is of the total fair market value of all equity interests in the taxpayer at that time; andif the condition in clause (6.1)(c)(iii)(B) is met, the new corporation is deemed to be the same corporation as, and a continuation of, the taxpayer.Back-to-back loansFor the purposes of this subsection and subsections (6), (8) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a loan to another person or partnership (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another person or partnership (in this subsection referred to as the “initial lender”)the loan made by the intermediate lender to the intended borrower is deemed, at that time, to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) under the same terms and conditions and at the same time as it was made by the intermediate lender; andthe loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to the intended borrower are deemed not to have been made to the extent of the amount of the loan deemed to have been made under paragraph (a).Exceptions to subsection (6)Subsection (6) does not apply toa loan or indebtedness that is repaid, other than as part of a series of loans or other transactions and repayments, within two years of the day the loan was made or the indebtedness arose;indebtedness that arose in the ordinary course of the business of the creditor or a loan made in the ordinary course of the creditor’s ordinary business of lending money (other than a business of lending money if, at any time during which the loan is outstanding, less than 90% of the aggregate outstanding amount of the loans of the business is owing by borrowers that deal at arm’s length with the creditor) if, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the indebtedness or loan within a reasonable time;a loan that was made, or indebtedness that arose, in the ordinary course of carrying on a life insurance business outside Canada ifthe loan or indebtedness is owed by the taxpayer or by a subsidiary wholly-owned corporation of the taxpayer,the taxpayer, or the subsidiary wholly-owned corporation, as the case may be, is a life insurance corporation resident in Canada,the loan or indebtedness directly relates to a business of the taxpayer, or of the subsidiary wholly-owned corporation, that is carried on outside Canada, andthe interest on the loan or indebtedness is, or would be if it were otherwise income from property, included in the active business income of the creditor, or if the creditor is a partnership, a member of the partnership, under clause 95(2)(a)(ii)(A); andsubject to subsection (8.1), an upstream deposit owing to an eligible bank affiliate.Interpretation — partnershipsFor the purposes of paragraph (8)(b), a borrower shall be considered to deal at arm’s length with a creditor only iffor greater certainty, the borrower and the creditor deal with each other at arm’s length;where either the borrower or the creditor is a partnership and the other party is not, each member of the partnership deals at arm’s length with the other party; andwhere both the borrower and the creditor are partnerships, the borrower and each member of the borrower deal at arm’s length with the creditor and each member of the creditor.Upstream deposit  — eligible bank affiliateFor the purposes of this section, if a taxpayer is an eligible Canadian bank and an eligible bank affiliate of the taxpayer is owed, at any time in a particular taxation year of the affiliate or the immediately preceding taxation year, an upstream deposit,the affiliate is deemed to make a loan to the taxpayer immediately before the end of the particular year equal to the amount determined by the following formula, where all amounts referred to in the formula are to be determined using Canadian currency:A – B – CwhereAis 90% of the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of the upstream deposits owing to the affiliate,Bis the lesser ofthe amount, if any, by which the affiliate’s excess liquidity for the particular year exceeds the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of eligible Canadian indebtedness owing to the affiliate, andthe amount determined for A, andCis the amount, if any, by which the amount determined for A for the immediately preceding year exceeds the amount determined for B for the immediately preceding year; andif the formula in paragraph (a) would, in the absence of section 257, result in a negative amount for the particular year,the taxpayer is deemed to repay immediately before the end of the particular year — in an amount equal to the absolute value of the negative amount and in the order in which they arose — loans made by the affiliate under paragraph (a) in a prior taxation year and not previously repaid, andthe repayment is deemed to not be part of a series of loans or other transactions and repayments.Corporations: deduction for amounts included under subsection (6) or (12)There may be deducted in computing the income for a taxation year of a corporation resident in Canada a particular amount, in respect of a specified amount included under subsection (6), or an amount included under subsection (12), in computing the corporation’s income for the taxation year in respect of a particular loan or indebtedness, ifthe corporation demonstrates that the particular amount is the total of all amounts (not to exceed the amount so included) each of which would — if the specified amount in respect of the particular loan or indebtedness were, at the time (referred to in subparagraph (i) and subsection (11) as the “lending time”) the particular loan was made or the particular indebtedness was incurred, instead paid by the creditor affiliate, or the creditor partnership, as the case may be, to the corporation directly as part of one dividend, or indirectly as part of one or more dividends and, if applicable, partnership distributions — reasonably be considered to have been deductible, in respect of the payment, for the corporation’s taxation year in which the specified amount was included in its income under subsection (6), in computingthe taxable income of the corporation under any ofparagraph 113(1)(a), in respect of the exempt surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation,paragraph 113(1)(a.1), in respect of the hybrid surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, if the amount of that hybrid surplus is less than or equal to the amount determined by the formula[A × (B – 0.5)] + (C × 0.5)whereAis the affiliate’s hybrid underlying tax in respect of the corporation at the lending time,Bis the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1)) for the corporation’s taxation year that includes the lending time, andCis the affiliate’s hybrid surplus in respect of the corporation at the lending time,paragraph 113(1)(b), in respect of the taxable surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, andparagraph 113(1)(d), in respect of the pre-acquisition surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation to the extent of the adjusted cost base to the corporation, at the lending time, of the shares of the capital stock of the affiliate, and except if the specified debtor isa non-resident person with which the corporation does not deal at arm’s length, ora partnership any member of which is a person described in subclause (I), orthe income of the corporation under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the corporation, unless the specified debtor is a person or partnership described in subclause (i)(D)(I) or (II);that exempt surplus, hybrid surplus, taxable surplus, or adjusted cost base is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; andthat adjusted cost base is not relevant in determining the taxability of any other distribution made during the period in which the particular loan or indebtedness is outstanding.Corporate partners: application of subsection (9)In applying subsection (9) to a corporation resident in Canada that is a member of a partnership at the end of a fiscal period of the partnership,each amount that may reasonably be considered to be the corporation’s share (determined in a manner consistent with the determination of the corporation’s share of the income of the partnership under subsection 96(1)) of each specified amount that is required to be included in computing the income of the partnership for that fiscal period under subsection (6), in respect of a particular loan or indebtedness, is deemed to be a specified amount in respect of the particular loan or indebtedness that was included in the corporation’s income, for its taxation year that includes the last day of that fiscal period, under subsection (6);subparagraph (9)(a)(i) is to be read without reference to its clause (D);subparagraph (9)(a)(ii) is to be read as follows:the income of the partnership, referred to in subsection (10), under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the partnership, to the extent of the amount that may reasonably be considered to be the corporation’s share of that deduction (determined in a manner consistent with the determination of the corporation’s share of the income of the partnership under subsection 96(1));paragraph (9)(b) is to be read as follows:that exempt surplus, hybrid surplus, or taxable surplus is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; andsubsection (9) is to be read without reference to its paragraph (c).Downstream surplusFor the purposes of subparagraph (9)(a)(i), the amounts of exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of the creditor affiliate, or of each foreign affiliate of the corporation that is a member of the creditor partnership, as the case may be, in respect of the corporation, at the lending time are deemed to be the amounts that would be determined, at the lending time, under subparagraph 5902(1)(a)(i) of the Income Tax Regulations if that subparagraph were applicable at the lending time and the references in that subparagraph to “the dividend time” were references to the lending time.Add-back for subsection (9) deductionThere is to be included in computing the income of a corporation resident in Canada for a particular taxation year any amount deducted by the corporation under subsection (9) in computing the corporation’s income for the taxation year that immediately precedes the particular year.No double deductionA corporation may not claim a deduction for a taxation year under subsection (9) in respect of the same portion of the specified amount in respect of a loan or indebtedness for which a deduction is claimed for that year or a preceding year by the corporation, or by a partnership of which the corporation is a member, under subsection (14).Repayment of loanThere may be deducted in computing the income of a taxpayer for a particular taxation year the amount determined by the formulaA × B/CwhereAis the specified amount, in respect of a loan or indebtedness, that is included under subsection (6) in computing the taxpayer’s income for a preceding taxation year,Bis the portion of the loan or indebtedness that was repaid in the particular year, to the extent it is established, by subsequent events or otherwise, that the repayment was not part of a series of loans or other transactions and repayments, andCis the amount, in respect of the loan or indebtedness, that is referred to in the description of A in the definition specified amount in subsection (15).DefinitionsThe following definitions apply in this section.eligible bank affiliate has the same meaning as in subsection 95(2.43). (filiale bancaire admissible)eligible Canadian bank has the same meaning as in subsection 95(2.43). (banque canadienne admissible)eligible Canadian indebtedness has the same meaning as in subsection 95(2.43). (dettes canadiennes admissibles)excess liquidity has the same meaning as in subsection 95(2.43). (liquidités excédentaires)specified amount, in respect of a loan or indebtedness that is required by subsection (6) to be included in computing the income of a taxpayer for a taxation year, means the amount determined by the formulaA × (B – C)whereAis the amount of the loan or indebtedness, andBis, in the case ofa creditor affiliate of the taxpayer, the percentage that is or would be, if the taxpayer referred to in subsection (6) were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage (in this definition determined without reference to subsection 5908(1) of the Income Tax Regulations) in respect of the creditor affiliate at the time (referred to in this definition as the “determination time”) referred to in subsection (6), ora creditor partnership of which a foreign affiliate of the taxpayer is a member, the total of each percentage determined, in respect of a member (referred to in this paragraph as a “member affiliate”) of the creditor partnership that is a foreign affiliate of the taxpayer, by the formulaD × E/FwhereDis the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of a particular member affiliate at the determination time,Eis the fair market value, at the determination time, of the particular member affiliate’s direct or indirect interest in the creditor partnership, andFis the fair market value, at the determination time, of all interests in the creditor partnership, andCis,if the debtor under the loan or indebtedness isanother foreign affiliate of the taxpayer, the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of the other affiliate at the determination time, ora partnership (referred to in this paragraph as the “borrower partnership”) of which one or more other foreign affiliates of the taxpayer are members, the total of each percentage that is determined by the following formula in respect of each such memberG × H/IwhereGis the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of a particular member of the borrower partnership at the determination time,His the fair market value, at the determination time, of the particular member’s direct or indirect interest in the borrower partnership, andIis the fair market value, at the determination time, of all interests in the borrower partnership, andin any other case, nil. (montant déterminé)specified debtor, in respect of a taxpayer resident in Canada, at any time, meansthe taxpayer;a person with which the taxpayer does not, at that time, deal at arm’s length, other thana non-resident corporation that is at that time a controlled foreign affiliate, within the meaning assigned by section 17, of the taxpayer, ora non-resident corporation (other than a corporation that is described in subparagraph (i)) that is, at that time, a foreign affiliate of the taxpayer, if each share of the capital stock of the affiliate is owned at that time by any ofthe taxpayer,persons resident in Canada,non-resident persons that deal at arm’s length with the taxpayer,persons described in subparagraph (i),partnerships, each member of which is described in any of clauses (A) to (F), anda corporation each shareholder of which is described in any of clauses (A) to (F);a partnership a member of which is at that time a person or partnership that is a specified debtor in respect of the taxpayer because of paragraph (a) or (b); andif the taxpayer is a partnership,any member of the partnership that is a corporation resident in Canada if the creditor affiliate, or member of the creditor partnership, as the case may be, is, at that time, a foreign affiliate of the corporation,a person with which a corporation referred to in subparagraph (i) does not, at that time, deal at arm’s length, other than a controlled foreign affiliate, within the meaning assigned by section 17, of the partnership or of a member of the partnership that owns, directly or indirectly, an interest in the partnership representing at least 90% of the fair market value of all such interests, ora partnership a member of which is at that time a person that is a specified debtor in respect of the taxpayer because of subparagraph (i) or (ii). (débiteur déterminé)upstream deposit has the same meaning as in subsection 95(2.43). (dépôt en amont)[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 90; 2013, c. 34, s. 66; 2014, c. 39, s. 20; 2017, c. 33, s. 272023, c. 26, s. 18
Amounts to be included in respect of share of foreign affiliateIn computing the income for a taxation year of a taxpayer resident in Canada, there shall be included, in respect of each share owned by the taxpayer of the capital stock of a controlled foreign affiliate of the taxpayer, as income from the share, the percentage of the foreign accrual property income of any controlled foreign affiliate of the taxpayer, for each taxation year of the affiliate ending in the taxation year of the taxpayer, equal to that share’s participating percentage in respect of the affiliate, determined at the end of each such taxation year of the affiliate.Conditions for application of subsection (1.2)Subsection (1.2) applies at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada ifan amount would be included under subsection (1) in computing the income of the taxpayer, in respect of a share of the particular affiliate or another foreign affiliate of the taxpayer that has an equity percentage (as defined in subsection 95(4)) in the particular affiliate, for the taxation year of the particular affiliate (determined without reference to subsection (1.2)) that includes the particular time (referred to in this subsection and subsection (1.3) as the “ordinary taxation year” of the particular affiliate), if the ordinary taxation year of the particular affiliate ended at the particular time;immediately after the particular time, there isan acquisition of control of the taxpayer, ora triggering event that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate;if subparagraph (b)(i) applies, all or a portion of an amount described in paragraph 95(2)(f) that accrued to the particular affiliate during the portion of the ordinary taxation year of the particular affiliate before the particular time is excluded in computing the income of another taxpayer because paragraph 95(2)(f.1) applies as a result of the taxpayer being, at a time before the acquisition of control, a designated acquired corporation of the other taxpayer; andif subparagraph (b)(ii) applies, none of the following is the case:the change referred to in that subparagraphis a decrease, andis equal to the total of all amounts each of which is the increase — that can reasonably be considered to result from the triggering event — in the aggregate participating percentage of another taxpayer, in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, if the other taxpayeris a person resident in Canada, other than a person that is — or a trust, any of the beneficiaries under which is — by reason of a statutory provision, exempt from tax under this Part, andis related to the taxpayer,if the triggering event results from a winding-up of the taxpayer to which subsection 88(1) applies, at the particular time, andin any other case, immediately after the particular time,the triggering event is on an amalgamation as defined in subsection 87(1),the triggering event is an excluded acquisition or disposition, in respect of the ordinary taxation year of the particular affiliate, andif one or more triggering events — all of which are described in subparagraph (b)(ii) and in respect of which none of the conditions in subparagraphs (i) to (iii) are satisfied — occur in the ordinary taxation year of the particular affiliate, the percentage determined by the following formula is not greater than 5%:A — BwhereAis the total of all amounts each of which is the decrease — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, andBis the total of all amounts each of which is the increase — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate.Deemed year-endIf this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this section, sections 18.2 and 92 and clause 95(2)(f.11)(ii)(D),in respect of the particular taxpayer and each connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this section as the “stub-period end time”) that is immediately before the particular time;if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the particular taxpayer or the connected person or connected partnership, as the case may be, to begin immediately after the particular time; andin determining the foreign accrual property income of the affiliate for the taxation year referred to in paragraph (a) in respect of the particular taxpayer or a connected person or connected partnership, in respect of the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.DefinitionsThe following definitions apply in this subsection and subsections (1.1) and (1.2).aggregate participating percentage, of a taxpayer in respect of a foreign affiliate of the taxpayer for a taxation year of the affiliate, means the total of all amounts, each of which is the participating percentage, in respect of the affiliate, of a share of the capital stock of a corporation that is owned by the taxpayer at the end of the taxation year. (pourcentage de participation total)connected person, in respect of a particular taxpayer, means a person that — at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer — is resident in Canada anddoes not deal at arm’s length with the particular taxpayer; ordeals at arm’s length with the particular taxpayer, ifthe foreign affiliate is a foreign affiliate of the person at the particular time, andthe aggregate participating percentage of the person in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). (personne rattachée)connected partnership, in respect of a particular taxpayer, means a partnership if, at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer, the particular taxpayer or a connected person in respect of the particular taxpayer is, directly or indirectly through one or more partnerships, a member of the partnership; orif paragraph (a) does not apply,the foreign affiliate is a foreign affiliate of the partnership at the particular time, andthe aggregate participating percentage of the partnership in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). (société de personnes rattachée)excluded acquisition or disposition, in respect of a taxation year of a foreign affiliate of a taxpayer, means an acquisition or disposition of an equity interest in a corporation, partnership or trust that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the affiliate for the taxation year of the affiliate, ifthe change is less than 1%; andit cannot reasonably be considered that one of the main reasons the acquisition or disposition occurs as a separate acquisition or disposition from one or more other acquisitions or dispositions is to avoid the application of subsection (1.2). (acquisition ou disposition exclue)triggering event meansan acquisition or disposition of an equity interest in a corporation, partnership or trust;a change in the terms or conditions of a share of the capital stock of a corporation or the rights as a member of a partnership or as a beneficiary under a trust; anda disposition or change of a right referred to in paragraph 95(6)(a). (événement déclencheur)Election for application of subsection (1.2)If the conditions in subsection (1.1) are not met at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada, subsection (1.2) applies in respect of the particular affiliate at that time ifthe conditions in paragraph (1.1)(a) are met in respect of the particular affiliate at the particular time;immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an equity percentage (as defined in subsection 95(4)) in the particular affiliate bythe taxpayer, ora controlled foreign affiliate of the taxpayer; andthe taxpayer and all specified corporations jointly elect in writing to apply subsection (1.2) in respect of the disposition and file the election with the Minister on or before the day that is the earliest filing-due date for all taxpayers making the election in respect of the taxation year in which the transaction to which the election relates occurred, and for this purpose, a specified corporation means a corporation that at or immediately after the particular time meets the following conditions:the corporation is resident in Canada,the corporation does not deal at arm’s length with the taxpayer, andthe particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.[Repealed, 2017, c. 33, s. 28]Reserve where foreign exchange restrictionWhere an amount in respect of a share has been included in computing the income of a taxpayer for a taxation year by virtue of subsection 91(1) or 91(3) and the Minister is satisfied that, by reason of the operation of monetary or exchange restrictions of a country other than Canada, the inclusion of the whole amount with no deduction for a reserve in respect thereof would impose undue hardship on the taxpayer, there may be deducted in computing the taxpayer’s income for the year such amount as a reserve in respect of the amount so included as the Minister deems reasonable in the circumstances.Reserve for preceding year to be includedIn computing the income of a taxpayer for a taxation year, there shall be included each amount in respect of a share that was deducted by virtue of subsection 91(2) in computing the taxpayer’s income for the immediately preceding year.Amounts deductible in respect of foreign taxesWhere, by virtue of subsection 91(1), an amount in respect of a share has been included in computing the income of a taxpayer for a taxation year or for any of the 5 immediately preceding taxation years (in this subsection referred to as the “income amount”), there may be deducted in computing the taxpayer’s income for the year the lesser ofthe product obtained whenthe portion of the foreign accrual tax applicable to the income amount that was not deductible under this subsection in any previous yearis multiplied bythe taxpayer’s relevant tax factor for the year, andthe amount, if any, by which the income amount exceeds the total of the amounts in respect of that share deductible under this subsection in any of the 5 immediately preceding taxation years in respect of the income amount.Denial of foreign accrual taxFor the purposes of the definition foreign accrual tax in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the “affiliate year”) of the particular affiliate that ends in the taxation year of the taxpayer,a specified owner in respect of the taxpayer is considered,under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, orunder the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; orwhere the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member’s direct or indirect share of that income for the purposes of this Act.Specified ownerFor the purposes of subsections (4.1) and (4.5), a specified owner, at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,a partnership of which the taxpayer is a member;a foreign affiliate of the taxpayer;a partnership a member of which is a foreign affiliate of the taxpayer; ora person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).Pertinent person or partnershipFor the purposes of this subsection and subsection (4.1), a pertinent person or partnership, at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,another foreign affiliate of the taxpayerin which the particular affiliate has an equity percentage, orthat has an equity percentage in the particular affiliate;a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; ora person or partnership referred to in any of subparagraphs (4.4)(b)(i) to (iii).Series of transactionsFor the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the taxpayer or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, thenif the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:the related person,each foreign affiliate of the related person, andeach partnership a member of which is a person referred to in subparagraph (i) or (ii); andthe following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:the funding affiliate or the funding partnership,a non-resident corporationin which the funding affiliate has an equity percentage, orthat has an equity percentage in the funding affiliate, anda partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).Exception — hybrid entitiesFor the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner or the corporation is not treated as a corporation under the relevant foreign tax law.Exceptions — partnershipsFor the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:a difference between the relevant foreign tax law and this Act in the manner ofcomputing the income of the partnership, orallocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;the treatment of the partnership as a corporation under the relevant foreign tax law; orthe fact that the member is not treated as a corporation under the relevant foreign tax law.Deemed ownershipFor the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.Amounts deductible in respect of dividends receivedWhere in a taxation year a taxpayer resident in Canada has received a dividend on a share of the capital stock of a corporation that was at any time a controlled foreign affiliate of the taxpayer, there may be deducted, in respect of such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate, in computing the taxpayer’s income for the year, the lesser ofthe amount by which that portion of the dividend exceeds the amount, if any, deductible in respect thereof under paragraph 113(1)(b), andthe amount, if any, by whichthe total of all amounts required by paragraph 92(1)(a) to be added in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayerexceedsthe total of all amounts required by paragraph 92(1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer.[Repealed, 2009, c. 2, s. 23]IdemWhere a share of the capital stock of a foreign affiliate of a taxpayer that is a taxable Canadian corporation is acquired by the taxpayer from another corporation resident in Canada with which the taxpayer is not dealing at arm’s length, for the purpose of subsection 91(5), any amount required by section 92 to be added or deducted, as the case may be, in computing the adjusted cost base to the other corporation of the share shall be deemed to have been so required to be added or deducted, as the case may be, in computing the adjusted cost base to the taxpayer of the share.Shares acquired from a partnershipFor the purpose of subsection (5), where a taxpayer resident in Canada acquires a share of the capital stock of a corporation that is immediately after the acquisition a foreign affiliate of the taxpayer from a partnership of which the taxpayer, or a corporation resident in Canada with which the taxpayer was not dealing at arm’s length at the time the share was acquired, was a member (each such person referred to in this subsection as the “member”) at any time during any fiscal period of the partnership that began before the acquisition,that portion of any amount required by subsection 92(1) to be added to the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount included in the income of the member because of subsection 96(1) in respect of the amount that was included in the income of the partnership because of subsection (1) or (3) in respect of the foreign affiliate and added to that adjusted cost base, andthat portion of any amount required by subsection 92(1) to be deducted from the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount by which the income of the member from the partnership under subsection 96(1) was reduced because of the amount deducted in computing the income of the partnership under subsection (2), (4) or (5) and deducted from that adjusted cost baseis deemed to be an amount required by subsection 92(1) to be added or deducted, as the case may be, in computing the adjusted cost base to the taxpayer of the share.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 91; 1994, c. 7, Sch. II, s. 68; 2001, c. 17, s. 68; 2007, c. 35, s. 24; 2009, c. 2, s. 23; 2013, c. 34, s. 226; 2017, c. 33, s. 282024, c. 15, s. 21
Adjusted cost base of share of foreign affiliateIn computing, at any time in a taxation year, the adjusted cost base to a taxpayer resident in Canada of any share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer,there shall be added in respect of that share any amount included in respect of that share under subsection 91(1) or (3) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been required to have been so included in computing the taxpayer’s income but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952), except that, if the amount so included is greater than it otherwise would have been because of the application of clause 95(2)(f.11)(ii)(D), the amount added under this paragraph shall be the amount that would have been so included in the absence of that clause; andthere shall be deducted in respect of that shareany amount deducted by the taxpayer under subsection 91(2) or (4), andany dividend received by the taxpayer before that time, to the extent of the amount deducted by the taxpayer, in respect of the dividend, under subsection 91(5)in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952).Adjustment for prescribed amountThe prescribed amount shall be added in computing the adjusted cost base of a share of the capital stock of a foreign affiliate of a corporation resident in Canada toanother foreign affiliate of the corporation; ora partnership of which another foreign affiliate of the corporation is a member.Adjustment re adjusted cost baseThere is to be added in computing the adjusted cost base to a taxpayer of a share of the capital stock of a foreign affiliate of the taxpayer any amount required by paragraph 93(4)(b) to be so added.Deduction in computing adjusted cost baseIn computing, at any time in a taxation year,the adjusted cost base to a corporation resident in Canada (in this subsection referred to as an “owner”) of any share of the capital stock of a foreign affiliate of the corporation, orthe adjusted cost base to a foreign affiliate (in this subsection referred to as an “owner”) of a person resident in Canada of any share of the capital stock of another foreign affiliate of that person,there shall be deducted, in respect of any dividend received on the share before that time by the owner of the share, an amount equal to the amount, if any, by whichsuch portion of the amount of the dividend so received as was deductible by virtue of paragraph 113(1)(d) from the income of the owner for the year in computing the owner’s taxable income for the year or as would have been so deductible if the owner had been a corporation resident in Canada,exceedssuch portion of any income or profits tax paid by the owner to the government of a country other than Canada as may reasonably be regarded as having been paid in respect of the portion described in paragraph 92(2)(c).IdemIn computing, at any time in a taxation year, the adjusted cost base to a corporation resident in Canada of any share of the capital stock of a foreign affiliate of the corporation, there shall be deducted an amount in respect of any dividend received on the share by the corporation before that time equal to such portion of the amount so received as was deducted under subsection 113(2) from the income of the corporation for the year or any preceding year in computing its taxable income.Disposition of a partnership interestWhere a corporation resident in Canada or a foreign affiliate of a corporation resident in Canada has at any time disposed of all or a portion of an interest in a partnership of which it was a member, there shall be added, in computing the proceeds of disposition of that interest, the amount determined by the formula(A - B) × (C/D)whereAis the amount, if any, by whichthe total of all amounts each of which is an amount that was deductible under paragraph 113(1)(d) by the member from its income in computing its taxable income for any taxation year of the member that began before that time in respect of any portion of a dividend received by the partnership, or would have been so deductible if the member were a corporation resident in Canada,exceedsthe total of all amounts each of which is the portion of any income or profits tax paid by the partnership or the member of the partnership to a government of a country other than Canada that can reasonably be considered as having been paid in respect of the member’s share of the dividend described in paragraph (a);Bis the total ofthe total of all amounts each of which was an amount added under this subsection in computing the member’s proceeds of a disposition before that time of another interest in the partnership, andthe total of all amounts each of which was an amount deemed by subsection (5) to be a gain of the member from a disposition before that time of a share by the partnership;Cis the adjusted cost base, immediately before that time, of the portion of the member’s interest in the partnership disposed of by the member at that time; andDis the adjusted cost base, immediately before that time, of the member’s interest in the partnership immediately before that time.Deemed gain from the disposition of a shareWhere a partnership has, at any time in a fiscal period of the partnership at the end of which a corporation resident in Canada or a foreign affiliate of a corporation resident in Canada was a member, disposed of a share of the capital stock of a corporation, the amount determined under subsection (6) in respect of such a member is deemed to be a gain of the member from the disposition of the share by the partnership for the member’s taxation year in which the fiscal period of the partnership ends.FormulaThe amount determined for the purposes of subsection (5) is the amount determined by the formulaA - BwhereAis the amount, if any, by whichthe total of all amounts each of which is an amount that was deductible under paragraph 113(1)(d) by the member from its income in computing its taxable income for a taxation year in respect of any portion of a dividend received by the partnership on the share in a fiscal period of the partnership that began before the time referred to in subsection (5) and ends in the member’s taxation year, or would have been so deductible if the member were a corporation resident in Canada,exceedsthe total of all amounts each of which is the portion of any income or profits tax paid by the partnership or the member to a government of a country other than Canada that can reasonably be considered as having been paid in respect of the member’s share of the dividend described in paragraph (a); andBis the total of all amounts each of which is an amount that was added under subsection (4) in computing the member’s proceeds of a disposition before the time referred to in subsection (5) of an interest in the partnership.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 92; 2001, c. 17, s. 69; 2007, c. 35, s. 25; 2009, c. 2, s. 24; 2013, c. 34, ss. 31, 672024, c. 15, s. 22
Election re disposition of share of foreign affiliateFor the purposes of this Act, if a corporation resident in Canada elects, in accordance with prescribed rules, in respect of any share of the capital stock of a particular foreign affiliate of the corporation that is disposed of, at any time, by the corporation (referred to in this subsection as the “disposing corporation”) or by another foreign affiliate (referred to in this subsection as the “disposing affiliate”) of the corporation,the amount (referred to in this subsection as the “elected amount”) designated by the corporation in its election not exceeding the amount that would, in the absence of this subsection, be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share, is deemedto have been a dividend received on the share from the particular affiliate by the disposing corporation or disposing affiliate, as the case may be, immediately before that time, andnot to have been received by the disposing corporation or disposing affiliate, as the case may be, as proceeds of disposition in respect of the disposition of the share; andif subsection 40(3) applies to the disposing corporation or disposing affiliate, as the case may be, in respect of the share, the amount deemed by that subsection to be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share is, except for the purposes of paragraph 53(1)(a), deemed to be equal to the amount, if any, by whichthe amount deemed by that subsection to be the gain from the disposition of the share determined without reference to this paragraphexceedsthe elected amount.Application of subsection (1.11)Subsection (1.11) applies ifa particular foreign affiliate of a corporation resident in Canada disposes at any time of a share (referred to in this paragraph and subsection (1.11) as the “disposed share”) of the capital stock of another foreign affiliate of the corporation and the particular affiliate would, in the absence of subsections (1) and (1.11), have a capital gain from the disposition of the disposed share; ora corporation resident in Canada would, in the absence of subsections (1) and (1.11), be deemed under subsection 40(3), because of an election under subsection 90(3) or subparagraph 5901(2)(b)(i) of the Income Tax Regulations, to have realized a gain from a disposition at any time of a share (referred to in subsection (1.11) as the “disposed share”) of the capital stock of a foreign affiliate of the corporation.Deemed electionIf this subsection applies, the corporation resident in Canada referred to in subsection (1.1) is deemedto have made an election, at the time referred to in subsection (1.1), under subsection (1) in respect of the disposition of the disposed share; andto have designated, in the election, the prescribed amount in respect of the disposition of the disposed share.Disposition of shares of a foreign affiliate held by a partnershipWhere a particular corporation resident in Canada or a foreign affiliate of the particular corporation (each of which is referred to in this subsection as the “disposing corporation”) would, but for this subsection, have a taxable capital gain from a disposition by a partnership, at any time, of shares of a class of the capital stock of a foreign affiliate of the particular corporation and the particular corporation so elects in prescribed manner in respect of the disposition,twicethe amount designated by the particular corporation (which amount shall not exceed the amount that is equal to the proportion of the taxable capital gain of the partnership that the number of shares of that class of the capital stock of the foreign affiliate, determined as the amount, if any, by which the number of those shares that were deemed to have been owned by the disposing corporation for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that were deemed to have been owned for those purposes by the disposing corporation immediately after the disposition, is of the number of those shares of the foreign affiliate that were owned by the partnership immediately before the disposition), orif subsection (1.3) applies, the prescribed amountin respect of those shares is deemed to have been a dividend received immediately before that time on the number of those shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purpose of subsection 93.1(1) immediately before the disposition exceeds the number of those shares of the foreign affiliate that the disposing corporation was deemed to own for the purposes of subsection 93.1 (1) immediately after the disposition;notwithstanding section 96, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount, if any, by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount designated by the particular corporation in respect of the shares;for the purpose of any regulation made under this subsection, the disposing corporation is deemed to have disposed of the number of those shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that the disposing corporation was deemed to own for those purposes immediately after the disposition;for the purposes of section 113 in respect of the dividend referred to in paragraph (a), the disposing corporation is deemed to have owned the shares on which that dividend was received; andwhere the disposing corporation has a taxable capital gain from the partnership because of the application of subsection 40(3) to the partnership in respect of those shares, for the purposes of this subsection, the shares are deemed to have been disposed of by the partnership.Deemed electionWhere a foreign affiliate of a particular corporation resident in Canada has a gain from the disposition by a partnership at any time of shares of a class of the capital stock of a foreign affiliate of the particular corporation that are excluded property, the particular corporation is deemed to have made an election under subsection (1.2) in respect of the number of shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that the disposing corporation was deemed to own for those purposes immediately after the disposition.Application of subsection (2.01)Subsection (2.01) applies ifa particular corporation (referred to in subparagraph (2.01)(b)(ii) as the “vendor”, as the context requires) resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.01) as the “disposition time”) of a share (referred to in subsection (2.01) as the “affiliate share”) of the capital stock of a foreign affiliate of the particular corporation; ora foreign affiliate (referred to in subparagraph (2.01)(b)(ii) as the “vendor”) of a particular corporation resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.01) as the “disposition time”) of a share (referred to in subsection (2.01) as the “affiliate share”) of the capital stock of another foreign affiliate of the particular corporation that is not excluded property.Loss limitation on disposition of share of foreign affiliateIf this subsection applies, the amount of the particular loss referred to in paragraph (2)(a) or (b) is deemed to be the greater ofthe amount determined by the formulaA – (B – C)whereAis the amount of the particular loss determined without reference to this section,Bis the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, bythe particular corporation referred to in subsection (2),another corporation that is related to the particular corporation,a foreign affiliate of the particular corporation, ora foreign affiliate of another corporation that is related to the particular corporation, andCis the total ofthe total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate share or a share for which the affiliate share was substituted, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, andthe total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, andthe lesser ofthe portion of the particular loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, andthe amount determined in respect of the vendor that isif the particular loss is a capital loss, the amount of a gain (other than a specified gain) thatwas made within 30 days before or after the disposition time by the vendor and thatis deemed under subsection 39(2) to be a capital gain of the vendor for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, andis in respect of the settlement or extinguishment of a foreign currency debt that was issued or incurred by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor and that was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation and can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, oris a capital gain realized within 30 days before or after the disposition time by the vendor under an agreement thatwas entered into by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share, orin any other case, the amount of a gain (other than a specified gain or a capital gain) that was realized within 30 days before or after the disposition time by the vendor that is included in computing the income of the vendor for the taxation year that includes the time the gain was realized andthat is in respect of the settlement or extinguishment of a foreign currency debt thatwas issued or incurred by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor,was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, andcan reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, orunder an agreement thatwas entered into by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.Specified gainFor the purposes of clauses (2.01)(b)(ii)(A) and (B), a specified gain means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in sub-subclause (2.01)(b)(ii)(A)(I)2 or subclause (2.01)(b)(ii)(B)(I), as the case may be, or that arises under a particular agreement referred to in subclause (2.01)(b)(ii)(A)(II) or (B)(II), if the particular corporation, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.Application of subsection (2.11)Subsection (2.11) applies ifa particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.11) as the “disposition time”) by a partnership (referred to in subsections (2.11) and (2.12) as the “disposing partnership”) of a share (referred to in subsection (2.11) as the “affiliate share”) of the capital stock of a foreign affiliate of the particular corporation; ora foreign affiliate of a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.11) as the “disposition time”) by a partnership (referred to in subsections (2.11) and (2.12) as the “disposing partnership”) of a share (referred to in subsection (2.11) as the “affiliate share”) of the capital stock of another foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the share immediately before the disposition time.Loss limitation on disposition of foreign affiliate share by a partnershipIf this subsection applies, the amount of the particular allowable capital loss referred to in paragraph (2.1)(a) or (b) is deemed to be the greater ofthe amount determined by the formulaA – (B – C)whereAis the amount of the particular allowable capital loss determined without reference to this section,Bis ½ of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, bythe particular corporation referred to in subsection (2.1),another corporation that is related to the particular corporation,a foreign affiliate of the particular corporation, ora foreign affiliate of another corporation that is related to the particular corporation, andCis the total ofthe total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, andthe total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, andthe lesser ofthe portion of the particular allowable capital loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and½ of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.1)(b)) of the particular corporation, that is the amount of a gain (other than a specified gain) thatwas made within 30 days before or after the disposition time by the disposing partnership to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be, and thatis deemed under subsection 39(2) to be a capital gain of the disposing partnership for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, andis in respect of the settlement or extinguishment of a foreign currency debt thatwas issued or incurred by the disposing partnership within 30 days before or after the acquisition of the affiliate share by the disposing partnership,was, at all times at which it was a debt obligation of the disposing partnership, owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, andcan reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, oris a capital gain (to the extent that the capital gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) realized within 30 days before or after the disposition time by the disposing partnership under an agreement thatwas entered into by the disposing partnership, within 30 days before or after the acquisition of the affiliate share by the disposing partnership, with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the disposing partnership for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.Specified gainFor the purposes of subparagraph (2.11)(b)(ii), a specified gain means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in subclause (2.11)(b)(ii)(A)(II), or that arises under a particular agreement referred to in clause (2.11)(b)(ii)(B), if the disposing partnership, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.Application of subsection (2.21)Subsection (2.21) applies ifa particular corporation (referred to in subparagraph (2.21)(b)(ii) as the “vendor”, as the context requires) resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.21) as the “disposition time”) of an interest (referred to in subsection (2.21) as the “partnership interest”) in a partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.21) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation; ora foreign affiliate (referred to in subparagraph (2.21)(b)(ii) as the “vendor”) of a particular corporation resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.21) as the “disposition time”) of an interest (referred to in subsection (2.21) as the “partnership interest”) in a partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.21) as the “affiliate shares”) of the capital stock of another foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the shares immediately before the disposition time.Loss limitation on disposition of partnership that has foreign affiliate sharesIf this subsection applies, the amount of the particular loss referred to in paragraph (2.2)(a) or (b) is deemed to be the greater ofthe amount determined by the formulaA – (B – C)whereAis the amount of the particular loss determined without reference to this section,Bis the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on affiliate shares or on shares for which affiliate shares were substituted, bythe particular corporation referred to in subsection (2.2),another corporation that is related to the particular corporation,a foreign affiliate of the particular corporation, ora foreign affiliate of another corporation that is related to the particular corporation, andCis the total ofthe total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B, andthe total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, andthe lesser ofthe portion of the particular loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, andthe amount determined in respect of the vendor that isif the particular loss is a capital loss, the amount of a gain (other than a specified gain) thatwas made within 30 days before or after the disposition time by the vendor and thatis deemed under subsection 39(2) to be a capital gain of the vendor for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, andis in respect of the settlement or extinguishment of a foreign currency debt that was issued or incurred by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor and that was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation and can reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, oris a capital gain realized within 30 days before or after the disposition time by the vendor under an agreement thatwas entered into by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest, orin any other case, the amount of a gain (other than a specified gain or a capital gain) that was realized within 30 days before or after the disposition time by the vendor that is included in computing the income of the vendor for the taxation year that includes the time the gain was realized andthat is in respect of the settlement or extinguishment of a foreign currency debt thatwas issued or incurred by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor,was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, andcan reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, orunder an agreement thatwas entered into by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest.Specified gainFor the purposes of clauses (2.21)(b)(ii)(A) and (B), a specified gain means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in sub-subclause (2.21)(b)(ii)(A)(I)2 or subclause (2.21)(b)(ii)(B)(I), as the case may be, or that arises under a particular agreement referred to in subclause (2.21)(b)(ii)(A)(II) or (B)(II), if the particular corporation, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.Application of subsection (2.31)Subsection (2.31) applies ifa particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.31) as the “disposition time”) by a particular partnership of an interest (referred to in subsection (2.31) as the “partnership interest”) in another partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.31) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation; ora foreign affiliate of a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.31) as the “disposition time”) by a particular partnership of an interest (referred to in subsection (2.31) as the “partnership interest”) in another partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.31) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the shares immediately before the disposition time.Loss limitation on disposition by a partnership of an indirect interest in foreign affiliate sharesIf this subsection applies, the amount of the particular allowable capital loss referred to in paragraph (2.3)(a) or (b) is deemed to be the greater ofthe amount determined by the formulaA – (B – C)whereAis the amount of the particular allowable capital loss determined without reference to this section,Bis ½ of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate shares or on shares for which the affiliate shares were substituted, bythe particular corporation referred to in subsection (2.3),another corporation that is related to the particular corporation,a foreign affiliate of the particular corporation, ora foreign affiliate of another corporation that is related to the particular corporation, andCis the total ofthe total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, andthe total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B, andthe lesser ofthe portion of the particular allowable capital loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and½ of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)), of the particular corporation, that is the amount of a gain (other than a specified gain) thatwas made within 30 days before or after the disposition time by the particular partnership to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be, and thatis deemed under subsection 39(2) to be a capital gain of the particular partnership for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, andis in respect of the settlement or extinguishment of a foreign currency debt thatwas issued or incurred by the particular partnership within 30 days before or after the acquisition of the partnership interest by the particular partnership,was, at all times at which it was a debt obligation of the particular partnership, owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, andcan reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, oris a capital gain (to the extent that the capital gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) realized within 30 days before or after the disposition time by the particular partnership under an agreement thatwas entered into by the particular partnership, within 30 days before or after the acquisition of the partnership interest by the particular partnership, with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,provides for the purchase, sale or exchange of currency, andcan reasonably be considered to have been entered into by the particular partnership for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest.Specified gainFor the purposes of subparagraph (2.31)(b)(ii), a specified gain means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in subclause (2.31)(b)(ii)(A)(II), or that arises under a particular agreement referred to in clause (2.31)(b)(ii)(B), if the particular partnership, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.Exempt dividendsFor the purposes of subsections (2.01), (2.11), (2.21) and (2.31),a dividend received by a corporation resident in Canada is an exempt dividend to the extent of the amount in respect of the dividend that is deductible from the income of the corporation for the purpose of computing the taxable income of the corporation because of any of paragraphs 113(1)(a) to (c); anda dividend received by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation is an exempt dividend to the extent of the amount, if any, by which the portion of the dividend that was not prescribed to have been paid out of the pre-acquisition surplus of the other affiliate exceeds the total of such portion of the income or profits tax that can reasonably be considered to have been paid in respect of that portion of the dividend by the particular affiliate or by a partnership in which the particular affiliate had, at the time of the payment of the income or profits tax, a partnership interest, either directly or indirectly; andthe prescribed amount is deemed to be an amount that is received, at the adjustment time referred to in subsection 5905(7.7) of the Income Tax Regulations, by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation and that is in respect of an exempt dividend on a share of the capital stock of the other affiliate.Loss on disposition of shares of foreign affiliateIf a taxpayer resident in Canada or a foreign affiliate (which taxpayer or foreign affiliate is referred to in this subsection as the “transferee”) of the taxpayer has acquired shares of the capital stock of one or more foreign affiliates (each referred to in this subsection as an “acquired affiliate”) of the taxpayer on a disposition of shares (such shares disposed of being referred to in this subsection as the “disposed shares”) of the capital stock of any other foreign affiliate of the taxpayer (other than, where the transferee is a foreign affiliate of the taxpayer, a disposition of shares that are, immediately before the acquisition, excluded property of the transferee or a disposition to which subsection 40(3.4) applies), the following rules apply:the capital loss, if any, of the transferee from the disposition, is deemed to be nil; andin computing the adjusted cost base to the transferee of a share of a particular class of the capital stock of an acquired affiliate that is owned by the transferee immediately after the disposition, there is to be added the amount determined by the formula[(A – B) × C/D]/EwhereAis the total of all amounts each of which is the cost amount to the transferee, immediately before the disposition, of a disposed share,Bis the total ofthe total of all amounts each of which is the proceeds of disposition of a disposed share, andthe total of all amounts in respect of the computation of losses of the transferee from the dispositions of the disposed shares, each of which is, in respect of the disposition of a disposed share, the amount by which the amount for A in the formula in paragraph (2.01)(a) exceeds the amount determined by that formula,Cis the fair market value, immediately after the disposition, of all shares of the particular class owned, immediately after the disposition, by the transferee,Dis the fair market value, immediately after the disposition, of all shares owned, immediately after the disposition, by the transferee of the capital stock of all acquired affiliates, andEis the number of shares of the particular class that are owned by the transferee immediately after the disposition.Late filed electionsWhere the election referred to in subsection 93(1) was not made on or before the day on or before which the election was required by that subsection to be made, the election shall be deemed to have been made on that day if, on or before the day that is 3 years after that day,the election is made in prescribed manner; andan estimate of the penalty in respect of that election is paid by the corporation when that election is made.Special casesWhere, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitableto permit an election under subsection 93(1) to be made after the day that is 3 years after the day on or before which the election was required by that subsection to be made, orto permit an election made under subsection 93(1) to be amended,the election or amended election shall be deemed to have been made on the day on or before which the election was so required to be made ifthe election or amended election is made in prescribed form, andan estimate of the penalty in respect of the election or amended election is paid by the corporation when the election or amended election is made,and where this subsection applies to the amendment of an election, that election shall be deemed not to have been effective.Amended electionAn election (referred to in this subsection as the “amended election”) by a taxpayer under subsection (1) in respect of a disposition of shares of the capital stock of a foreign affiliate of the taxpayer is deemed to have been made on the day on or before which the election was required to be made and any previous election (referred to in this subsection as the “old election”) under subsection (1) in respect of that disposition is deemed not to have been made ifthe taxpayer has not elected under section 51 of the Technical Tax Amendments Act, 2012;the taxpayer made the old election on or before December 18, 2009;in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the old election to be amended; andthe amended election is made in prescribed form on or before December 31, 2013.Penalty for late filed electionFor the purposes of this section, the penalty in respect of an election or amended election referred to in paragraph 93(5)(a) or 93(5.1)(c) is an amount equal to the lesser of1/4 of 1% of the amount designated in the election or amended election for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 93(1) to be made and ending on the day the election is made, andan amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 93(6)(a).Unpaid balance of penaltyThe Minister shall, with all due dispatch, examine each election and amended election referred to in paragraph 93(5)(a) or 93(5.1)(c), assess the penalty payable and send a notice of assessment to the corporation, and the corporation shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 93; 1994, c. 7, Sch. II, s. 69; 1998, c. 19, s. 120; 2001, c. 17, s. 70; 2013, c. 34, ss. 32, 68
Shares held by partnershipFor the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of a specified provision, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares thatthe fair market value of the member’s interest in the partnership at that timeis ofthe fair market value of all members’ interests in the partnership at that time.Specified provisions for subsection (1)For the purposes of subsection (1), the specified provisions aresubsections (2), (5), 20(12) and 39(2.1), sections 90, 93, 93.3 and 113, paragraphs 128.1(1)(c.3) and (d), section 212.3, subsection 219.1(2) and section 233.4;section 95 to the extent that section is applied for the purposes of the provisions referred to in paragraph (a);any regulations made for the purposes of the provisions referred to in paragraph (a); andparagraph 95(2)(g.04), subsections 95(2.2) and (8) to (12) and section 126.Where dividends received by a partnershipWhere, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a foreign affiliate of a corporation resident in Canada (in this subsection referred to as “affiliate shares”) are owned by a partnership and at that time the affiliate pays a dividend on affiliate shares to the partnership (in this subsection referred to as the “partnership dividend”),for the purposes of sections 93 and 113 and any regulations made for the purposes of those sections, each member of the partnership (other than another partnership) is deemed to have received the proportion of the partnership dividend thatthe fair market value of the member’s interest held, directly or indirectly through one or more other partnerships, in the partnership at that timeis ofthe fair market value of all the interests in the partnership held directly by members of the partnership at that time;for the purposes of sections 93 and 113 and any regulations made for the purposes of those sections, the proportion of the partnership dividend deemed by paragraph (a) to have been received by a member of the partnership at that time is deemed to have been received by the member in equal proportions on each affiliate share that is property of the partnership at that time;for the purpose of applying section 113, in respect of the dividend referred to in paragraph (a), each affiliate share referred to in paragraph (b) is deemed to be owned by each member of the partnership; andnotwithstanding paragraphs (a) to (c),where the corporation resident in Canada is a member of the partnership, the amount deductible by it under section 113 in respect of the dividend referred to in paragraph (a) shall not exceed the portion of the amount of the dividend included in its income pursuant to subsection 96(1), andwhere another foreign affiliate of the corporation resident in Canada is a member of the partnership, the amount included in that other affiliate’s income in respect of the dividend referred to in paragraph (a) shall not exceed the amount that would be included in its income pursuant to subsection 96(1) in respect of the partnership dividend received by the partnership if the value for H in the definition foreign accrual property income in subsection 95(1) were nil and this Act were read without reference to this subsection.Tiered partnershipsA person or partnership that is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership, and the person or partnership is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the person or partnership’s direct and indirect rights to that income or capital, for the purposes of applyingexcept to the extent that the context otherwise requires, a provision of this Subdivision;any of paragraphs 13(21.2)(a), 14(12)(a), 18(13)(a), 40(2)(e.1), (e.3) and (g) and (3.3)(a); andsubsections 39(2.1), 40(3.6) and 87(8.3).Partnership deemed to be corporationFor the purpose of applying clause 95(2)(a)(ii)(D) in respect of an amount paid or payable by a partnership to a foreign affiliate, of a taxpayer, that is a member of the partnership or to another foreign affiliate of the taxpayer,if, at any time, all the members (in this subsection referred to as “member affiliates”) of the partnership are foreign affiliates of the taxpayer,the partnership is deemed to be, at that time in respect of the taxpayer and the member affiliates, a non-resident corporation without share capital, andall the membership interests in the partnership are deemed to be, at that time, equity interests in the corporation held by the member affiliates; andif, at any time, all the member affiliates are resident in a particular country and the partnership does not carry on business outside the particular country, the partnership is deemed to be, at that time, resident in the particular country.Computing FAPI in respect of partnershipFor the purpose of applying a relevant provision in respect of a foreign affiliate of a taxpayer resident in Canada, if at any time the taxpayer is a partnership of which a particular corporation resident in Canada, or a foreign affiliate of the particular corporation, is a member and if, based on the relevant assumptions, the particular corporation and the taxpayer would be related, thena non-resident corporation that is, at that time, a foreign affiliate of the particular corporation is deemed to be, at that time, a foreign affiliate of the taxpayer; andthe taxpayer is deemed to have, at that time, a qualifying interest in respect of that foreign affiliate if the particular corporation has, at that time, a qualifying interest in respect of the non-resident corporation.Relevant provisions and assumptionsFor the purposes of subsection (5),the relevant provisions areparagraph (b) of the description of A in the definition foreign accrual property income in subsection 95(1),in determining whether a property of a foreign affiliate of a taxpayer is excluded property of the affiliate, the description of B in the definition foreign accrual property income in subsection 95(1),paragraphs 95(2)(a) and (g), andsubsections 95(2.2) and (2.21); andthe relevant assumptions are thatthe partnership is a non-resident corporation having capital stock of a single class divided into 100 issued shares that each have full voting rights, andeach member of the partnership (other than another partnership) owns, at any time, the proportion of the issued shares of that class thatthe fair market value of the member’s interest held, directly or indirectly through one or more partnerships, in the partnership at that timeis ofthe fair market value of all the interests in the partnership held directly by members of the partnership at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 71; 2012, c. 31, s. 20; 2013, c. 34, ss. 69, 427; 2014, c. 39, s. 21; 2018, c. 27, s. 6
DefinitionsThe definitions in this subsection apply in this section.equity interest, in a non-resident corporation without share capital, means any right, whether absolute or contingent, conferred by the non-resident corporation to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, revenue or income of the non-resident corporation, but does not include a right as creditor.  (participation)non-resident corporation without share capital means a non-resident corporation that, determined without reference to this section, does not have capital divided into shares. (société non-résidente sans capital-actions)Non-resident corporation without share capitalFor the purposes of this Act,equity interests in a non-resident corporation without share capital that have identical rights and obligations, determined without reference to proportionate differences in all of those rights and obligations, are deemed to be shares of a separate class of the capital stock of the corporation;the corporation is deemed to have 100 issued and outstanding shares of each class of its capital stock;each person or partnership that holds, at any time, an equity interest in a particular class of the capital stock of the corporation is deemed to own, at that time, that number of shares of the particular class that is equal to the proportion of 100 thatthe fair market value, at that time, of all the equity interests of the particular class held by the person or partnershipis ofthe fair market value, at that time, of all the equity interests of the particular class; andshares of a particular class of the capital stock of the corporation are deemed to have rights and obligations that are the same as those of the corresponding equity interests.Non-resident corporation without share capitalFor the purposes of section 51, subsection 85.1(3), section 86 and paragraph 95(2)(c),subject to paragraph (b), if at any time a taxpayer resident in Canada or a foreign affiliate of the taxpayer (in this subsection referred to as the “vendor”) disposes of capital property that is shares of the capital stock of a foreign affiliate of the taxpayer, or a debt obligation owing to the taxpayer by the affiliate, to — or exchanges the shares or debt for shares of the capital stock of — a non-resident corporation without share capital, that is immediately after that time a foreign affiliate of the taxpayer, in a manner that increases the fair market value of a class of shares of the capital stock of the non-resident corporation, the non-resident corporation is deemed to have issued, and the vendor is deemed to have received, new shares of the class as consideration in respect of the disposition or exchange; andif the taxpayer elects under this paragraph and files the election in writing with the Minister on or before its filing-due date for the taxation year that includes the day on which the disposition or exchange occurs, paragraph (a) does not apply to the disposition or exchange.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2014, c. 39, s. 22
Definition of specified trustIn this section, specified trust, at any time, means a trust in respect of which the following apply at that time:in the absence of subsection (3), the trust would be described in paragraph (h) of the definition exempt foreign trust in subsection 94(1);the trust is resident in Australia or India (in this section referred to as the “specified jurisdiction”);the interest of each beneficiary under the trust is described by reference to units of the trust; andthe liability of each beneficiary under the trust is limited by the operation of any law governing the trust.Conditions for subsection (3)Subsection (3) applies at any time to a taxpayer resident in Canada in respect of a trust ifa non-resident corporation is at that time beneficially interested in the trust;the non-resident corporation is at that time a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest;the trust is at that time a specified trust;the total fair market value at that time of all fixed interests (in this section as defined in subsection 94(1)) of a class in the trust held by the non-resident corporation, or persons or partnerships that do not deal at arm’s length with the non-resident corporation, is at least 10% of the total fair market value at that time of all fixed interests of the class; andunless the non-resident corporation first acquires a beneficial interest in the trust at that time or the non-resident corporation first becomes a foreign affiliate of the taxpayer at that time, immediately before that time (referred to in this paragraph as the “preceding time”) subsection (3) appliedto the taxpayer in respect of the trust, orto a corporation resident in Canada, that at the preceding time did not deal at arm’s length with the taxpayer, in respect of the trust.Specified trustsIf this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:the trust is deemed to be a non-resident corporation that is resident in the specified jurisdiction and not to be a trust;each particular class of fixed interests in the trust is deemed to be a separate class of 100 issued shares, of the capital stock of the non-resident corporation, that have the same attributes as the interests of the particular class;each beneficiary under the trust is deemed to hold the number of shares of each separate class described in paragraph (b) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class;the non-resident corporation is deemed to be controlled by the taxpayer resident in Canada  — a foreign affiliate of which is referred to in paragraph (2)(b) and is beneficially interested in the trust  —  that has the greatest equity percentage in the non-resident corporation;a particular foreign affiliate of the taxpayer in which the taxpayer has a direct equity percentage (as defined in subsection 95(4)) at a particular time, and that is not a controlled foreign affiliate of the taxpayer at that time, is deemed to be a controlled foreign affiliate of the taxpayer at that time if, at that time,the particular affiliate has an equity percentage (as defined in subsection 95(4)) in the foreign affiliate referred to in paragraph (2)(b), orthe particular affiliate is the foreign affiliate referred to in paragraph (2)(b); andsection 94.2 does not apply to the taxpayer in respect of the trust.Specified purposesFor the purposes of subsection (3), the specified purposes arethe determination, in respect of an interest in a specified trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;the filing obligations of the taxpayer under section 233.4; andif the taxpayer is a corporation resident in Canada, the application of section 212.3 in respect of an investment (as defined in subsection 212.3(10)) by the taxpayer.MergersFor the purposes of this section,if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; andif there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2014, c. 39, s. 222023, c. 26, s. 19
DefinitionsThe following definitions apply in this section and section 94.2.arm’s length transfer, at any time by a person or partnership (referred to in this definition as the “transferor”) means a transfer or loan (which transfer or loan is referred to in this definition as the “transfer”) of property (other than restricted property) that is made at that time (referred to in this definition as the “transfer time”) by the transferor to a particular person or partnership (referred to in this definition as the “recipient”) ifit is reasonable to conclude that none of the reasons (determined by reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a non-resident trust; andthe transfer isa payment of interest, of a dividend, of rent, of a royalty or of any other return on investment, or any substitute for such a return on investment, in respect of a particular property held by the recipient, if the amount of the payment is not more than the amount that the transferor would have paid if the transferor dealt at arm’s length with the recipient,a payment made by a corporation on a reduction of the paid-up capital in respect of shares of a class of its capital stock held by the recipient, if the amount of the payment is not more than the lesser of the amount of the reduction in the paid-up capital and the consideration for which the shares were issued,a transfer in exchange for which the recipient transfers or loans property to the transferor, or becomes obligated to transfer or loan property to the transferor, and for which it is reasonable to concludehaving regard only to the transfer and the exchange, that the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, andthat the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,a transfer made in satisfaction of an obligation referred to in subparagraph (iii) and for which it is reasonable to concludehaving regard only to the transfer and the obligation, that the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, andthat the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,a payment of an amount owing by the transferor under a written agreement the terms and conditions of which, when entered into, were terms and conditions that, having regard only to the amount owing and the agreement, would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient of the payment,a payment made before 2002 to a trust, to a corporation controlled by a trust or to a partnership of which a trust is a majority-interest partner in repayment of or otherwise in respect of a loan made by a trust, corporation or partnership to the transferor, ora payment made after 2001 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority-interest partner, in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor and eitherthe payment is made before 2011 and they would have been willing to enter into the particular loan if they dealt at arm’s length with each other, orthe payment is made before 2005 in accordance with fixed repayment terms agreed to before June 23, 2000. (transfert sans lien de dépendance)beneficiary under a trust includesa person or partnership that is beneficially interested in the trust; anda person or partnership that would be beneficially interested in the trust if the reference in subparagraph 248(25)(b)(ii) to“any arrangement in respect of the particular trust” were read as a reference to “any arrangement (including, for greater certainty, the terms or conditions of a share, or any arrangement in respect of a share, of the capital stock of a corporation that is beneficially interested in the particular trust) in respect of the particular trust”, and“the particular person or partnership might” were read as a reference to “the particular person or partnership becomes (or could become on the exercise of any discretion by any person or partnership), directly or indirectly, entitled to any amount derived, directly or indirectly, from the income or capital of the particular trust or might”. (bénéficiaire)closely held corporation at any time means a corporation, other than a corporation in respect of whichthere is at least one class of shares of its capital stock that includes shares prescribed for the purpose of paragraph 110(1)(d);it is reasonable to conclude that at that time, in respect of each class of shares described in paragraph (a), shares of the class are held by at least 150 shareholders each of whom holds shares of the class that have a total fair market value of at least $500; andit is reasonable to conclude that at that time in no case does a particular shareholder (or particular shareholder together with any other shareholder with whom the particular shareholder does not deal at arm’s length) hold shares of the corporationthat would give the particular shareholder (or the particular shareholder together with those other shareholders referred to in this paragraph) 10% or more of the votes that could be cast under any circumstance at an annual meeting of shareholders of the corporation if the meeting were held at that time, orthat have a fair market value of 10% or more of the fair market value of all of the issued and outstanding shares of the corporation. (société à peu d’actionnaires)connected contributor, to a trust at a particular time, means a contributor to the trust at the particular time, other than a person all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the person. (contribuant rattaché)contribution to a trust by a particular person or partnership meansa transfer or loan (other than an arm’s length transfer) of property to the trust by the particular person or partnership;if a particular transfer or loan (other than an arm’s length transfer) of property is made by the particular person or partnership as part of a series of transactions that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the particular transfer or loan; andif the particular person or partnership becomes obligated to make a particular transfer or loan (other than a transfer or loan that would, if it were made, be an arm’s length transfer) of property as part of a series of transactions that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the obligation. (apport)contributor to a trust at any time means a person (other than an exempt person but including a person that has ceased to exist) that, at or before that time, has made a contribution to the trust. (contribuant)electing contributor at any time in respect of a trust means a resident contributor, to the trust, who has elected to have subsection (16) apply in respect of the contributor and the trust for a taxation year of the contributor that includes that time or that ends before that time and for all subsequent taxation years, if the election was in writing filed with the Minister on or before the contributor’s filing-due date for the first taxation year of the contributor for which the election was to take effect (referred to in this definition as the “initial year”); andthe election included both the trust’s account number as assigned by the Minister and evidence that the contributor notified, no later than 30 days after the end of the trust’s taxation year that ends in the initial year, the trust that the election would be made. (contribuant déterminé)electing trust in respect of a trust’s particular taxation year means the trust, if the trustholds at any time in the particular taxation year, or in a prior taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income, property that is at that time part of its non-resident portion;elects to have paragraph (3)(f) apply to it forits first taxation yearthroughout which it is deemed by subsection (3) to be resident in Canada for the purpose of computing its income, andin which it holds property that is at a time in the year part of its non-resident portion, andall of its taxation years that end after its taxation year described in subparagraph (i); andfiles the election described in paragraph (b) in writing filed with the Minister with the trust’s return of income for its taxation year described in subparagraph (b)(i). (fiducie déterminée)exempt amount in respect of a trust’s particular taxation year means an amount that ispaid or credited (in this definition within the meaning assigned by Part XIII) by the trust before 2004;paid or credited by the trust and referred to in paragraph 104(7.01)(b) in respect of the trust for the particular taxation year; orpaid in the particular taxation year (or within 60 days after the end of the particular taxation year) by the trust directly to a beneficiary (determined without reference to subsection 248(25)) under the trust ifthe beneficiary is a natural person none of whose interests as a beneficiary under the trust was ever acquired for consideration,the amount is described in subparagraph 212(1)(c)(i) and is not included in computing an exempt amount in respect of any other taxation year of the trust,the trust was created before October 30, 2003, andno contribution has been made to the trust on or after July 18, 2005. (somme exclue)exempt foreign trust at a particular time meansa non-resident trust ifeach beneficiary under the trust at the particular time isan individual who, at the time that the trust was created, was, because of mental or physical infirmity, dependent on an individual who is a contributor to the trust or on an individual related to such a contributor (which beneficiary is referred to in this paragraph as an “infirm beneficiary”), ora person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,at the particular time there is at least one infirm beneficiary who suffers from a mental or physical infirmity that causes the beneficiary to be dependent on a person,each infirm beneficiary is, at all times that the infirm beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident, andeach contribution to the trust made at or before the particular time can reasonably be considered to have been, at the time that the contribution was made, made to provide for the maintenance of an infirm beneficiary during the expected period of the beneficiary’s infirmity;a non-resident trust ifthe trust was created as a consequence of the breakdown of a marriage or common-law partnership of two particular individuals to provide for the maintenance of a beneficiary under the trust who was, during that marriage or common-law partnership,a child of both of those particular individuals (which beneficiary is referred to in this paragraph as a “child beneficiary”), orone of those particular individuals (which beneficiary is referred to in this paragraph as the “adult beneficiary”),each beneficiary under the trust at the particular time isa child beneficiary under 21 years of age,a child beneficiary under 31 years of age who is enrolled at any time in the trust’s taxation year that includes the particular time at an educational institution that is described in subclause (iv)(B)(I) or (II),the adult beneficiary, ora person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,each beneficiary described in any of clauses (ii)(A) to (C) is, at all times that the beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident, andeach contribution to the trust, at the time that the contribution was made, wasan amount paid by the particular individual other than the adult beneficiary that would be a support amount as defined in subsection 56.1(4) if it had been paid by that particular individual directly to the adult beneficiary, ormade by one of those particular individuals or a person related to one of those particular individuals to provide for the maintenance of a child beneficiary while the child was either under 21 years of age or was under 31 years of age and enrolled at an educational institution located outside Canada that isa university, college or other educational institution that provides courses at a post-secondary school level, oran educational institution that provides courses designed to furnish a person with skills for, or improve a person’s skills in, an occupation;a non-resident trust ifat the particular time the trust is an agency of the United Nations,at the particular time the trust owns and administers a university described in subparagraph (a)(iv) of the definition qualified donee in subsection 149.1(1),at any time in the trust’s taxation year that includes the particular time or at any time in the preceding calendar year Her Majesty in right of Canada has made a gift to the trust, orthe trust is established under the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992, or any protocol to it that has been ratified by the Government of Canada;a non-resident trustthat throughout the particular period that began at the time it was created and ends at the particular time would be non-resident if this Act were read without reference to subsection (1) as that subsection read in its application to taxation years that include December 31, 2000,that was created exclusively for charitable purposes and has been operated throughout the particular period exclusively for charitable purposes,if the particular time is more than 24 months after the day on which the trust was created, in respect of which, there are at the particular time at least 20 persons (other than trusts) each of whom at the particular timeis a contributor to the trust,exists, anddeals at arm’s length with at least 19 other contributors to the trust,the income of which (determined in accordance with the laws described in subparagraph (v)) for each of its taxation years that ends at or before the particular time would, if the income were not distributed and the laws described in subparagraph (v) did not apply, be subject to an income or profits tax in the country in which it was resident in each of those taxation years, andthat was, for each of its taxation years that ends at or before the particular time, exempt under the laws of the country in which it was resident from the payment of income or profits tax to the government of that country in recognition of the charitable purposes for which the trust is operated;a non-resident trust that throughout the trust’s taxation year that includes the particular time is a trust governed by an employees profit sharing plan, a retirement compensation arrangement or a foreign retirement arrangement;a non-resident trust ifthroughout the particular period that began when it was created and ends at the particular time it has been operated exclusively for the purpose of administering or providing employee benefits in respect of employees or former employees, andthroughout the trust’s taxation year that includes the particular timethe trust is a trust governed by an employee benefit plan or is a trust described in paragraph (a.1) of the definition trust in subsection 108(1),the trust is maintained for the benefit of natural persons the majority of whom are non-resident, andno benefits are provided under the trust other than benefits in respect of qualifying services;a non-resident trust (other than a prescribed trust or a trust described in paragraph (a.1) of the definition trust in subsection 108(1)) that throughout the particular period that began when it was created and ends at the particular timehas been resident in a particular country (other than Canada) the laws of which have, throughout the particular period,imposed an income or profits tax, andexempted the trust from the payment of all income tax, and all profits tax, to the government of that particular country in recognition of the purposes for which the trust is operated, andhas been operated exclusively for the purpose of administering or providing superannuation or pension benefits that are primarily in respect of services rendered in the particular country by natural persons who were non-resident at the time those services were rendered;a non-resident trust (other than a trust that elects, in writing filed with the Minister on or before the trust’s filing-due date for the trust’s taxation year that includes the particular time, not to be an exempt foreign trust under this paragraph for the taxation year in which the election is made and for each subsequent taxation year), if at the particular timethe only beneficiaries who may for any reason receive, at or after the particular time and directly from the trust, any of the income or capital of the trust are beneficiaries that hold fixed interests in the trust, andany of the following applies:there are at least 150 beneficiaries described in subparagraph (i) under the trust each of whose fixed interests in the trust have at the particular time a total fair market value of at least $500,all fixed interests in the trust are listed on a designated stock exchange and in the 30 days immediately preceding the particular time fixed interests in the trust were traded on a designated stock exchange on at least 10 days,each outstanding fixed interest in the trustwas issued by the trust in exchange for consideration that was not less than 90% of the interest’s proportionate share of the net asset value of the trust’s property at the time of its issuance, orwas acquired in exchange for consideration equal to the fair market value of the interest at the time of its acquisition, orthe trust is governed bya Roth IRA, within the meaning of section 408A of the Internal Revenue Code of the United States, ora plan or arrangement that was created after September 21, 2007, that is subject to that Code and that the Minister agrees is substantially similar to a Roth IRA; ora trust that is at the particular time a prescribed trust. (fiducie étrangère exempte)exempt person at any time means Her Majesty in right of Canada or a province;a person whose taxable income for the taxation year that includes that time is exempt from tax under this Part because of subsection 149(1);a trust resident in Canada or a Canadian corporationthat was established by or arises under an Act of Parliament or of the legislature of a province, andthe principal activities of which at that time are to administer, manage or invest the monies of one or more pension funds or plans established under an Act of Parliament or of the legislature of a province;a trust or corporation established by or arising by reason of an Act of Parliament or the legislature of a province in connection with a scheme or program for the compensation of workers injured in an accident arising out of or in the course of their employment;a trust resident in Canada all the beneficiaries under which are at that time exempt persons;a Canadian corporation all the shares, or rights to shares, of which are held at that time by exempt persons;a Canadian corporation without share capital all the property of which is held at that time exclusively for the benefit of exempt persons;a partnership all the members of which are at that time exempt persons; anda trust or corporation that is at that time a mutual fund. (personne exemptée)exempt service means a service rendered at any time by a person or partnership (referred to in this definition as the “service provider”) to, for or on behalf of, another person or partnership (referred to in this definition as the “recipient”) ifthe recipient is a trust and the service relates to the administration of the trust; orthe following conditions apply in respect of the service, namely,the service is rendered in the service provider’s capacity at that time as an employee or agent of the recipient,in exchange for the service, the recipient transfers or loans property or becomes obligated to transfer or loan property, andit is reasonable to concludehaving regard only to the service and the exchange, that the service provider would be willing to carry out the service if the service provider were dealing at arm’s length with the recipient, andthat the terms, conditions and circumstances under which the service is provided would be acceptable to the service provider if the service provider were dealing at arm’s length with the recipient. (service exempté)fixed interest at any time of a person or partnership in a trust means an interest of the person or partnership as a beneficiary (in this definition, determined without reference to subsection 248(25)) under the trust provided that no amount of the income or capital of the trust to be distributed at any time in respect of any interest in the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, any discretionary power, other than a power in respect of which it is reasonable to conclude thatthe power is consistent with normal commercial practice;the power is consistent with terms that would be acceptable to the beneficiaries under the trust if the beneficiaries were dealing with each other at arm’s length; andthe exercise of, or failure to exercise, the power will not materially affect the value of an interest as a beneficiary under the trust relative to the value of other such interests under the trust. (participation fixe)joint contributor at any time in respect of a contribution to a trust means, if more than one contributor has made the contribution, each of those contributors that is at that time a resident contributor to the trust. (contribuant conjoint)mutual fund at a particular time means a mutual fund trust or mutual fund corporation (referred to in this definition as the “fund”), but does not include a fund in respect of which statements or representations have been made at or before the particular time — by the fund, or by a promoter or other representative of the fund, in respect of the acquisition or offering of an interest in the fund — that the taxes, if any, under this Part on the income, profit or gains for any particular year — in respect of property that is held by the fund and that is, or derives its value from, an interest in a trust — are less than, or are expected to be less than, the tax that would have been applicable under this Part if the income, profits or gains from the property had been earned directly by a person who acquires an interest in the fund. (fonds commun de placement)non-resident portion of a trust at any time means all property held by the trust to the extent that it is not at that time part of the resident portion of the trust. (partie non-résidente)non-resident time of a person in respect of a contribution to a trust and a particular time means a time (referred to in this definition as the “contribution time”) at which the person made a contribution to a trust that is before the particular time and at which the person was non-resident (or, if the person is not in existence at the contribution time, the person was non-resident throughout the 18 months before ceasing to exist), if the person was non-resident or not in existence throughout the period that began 60 months before the contribution time (or, if the person is an individual and the trust arose on and as a consequence of the death of the individual, 18 months before the contribution time) and ends at the earlier ofthe time that is 60 months after the contribution time, andthe particular time. (moment de non-résidence)promoter of a trust or corporation at any time means a person or partnership that at or before that time establishes, organizes or substantially reorganizes the undertakings of the trust or corporation, as the case may be; andfor the purposes of the definition mutual fund in this subsection, a person or partnership described by paragraph (a) and a person or partnership who in the course of a businesssells or issues, or promotes the sale, issuance or acquisition of, an interest in a mutual fund corporation or mutual fund trust,acts as an agent or advisor in respect of the sale or issuance, or the promotion of the sale, issuance or acquisition of, an interest in a mutual fund corporation or mutual fund trust, oraccepts, whether as a principal or agent, consideration in respect of an interest in a mutual fund corporation or mutual fund trust. (promoteur)qualifying services means services that are rendered to an employer by an employee of the employer, which employee was non-resident throughout the period during which the services were rendered;rendered to an employer by an employee of the employer, other than services that wererendered primarily in Canada,rendered primarily in connection with a business carried on by the employer in Canada, ora combination of services described in subparagraphs (i) and (ii);rendered in a particular calendar month to an employer by an employee of the employer, which employeewas resident in Canada throughout no more than 60 months during the 72-month period that ends at the end of the particular month, andbecame a member of, or a beneficiary under, the plan or trust under which benefits in respect of the services may be provided (or a similar plan or trust for which the plan or the trust was substituted) before the end of the calendar month following the month in which the employee became resident in Canada; orany combination of services that are qualifying services determined without reference to this paragraph. (services admissibles)resident beneficiary under a trust at any time means a person (other than a person that is at that time a successor beneficiary under the trust or an exempt person) that is, at that time, a beneficiary under the trust if, at that time, the person is resident in Canada; andthere is a connected contributor to the trust. (bénéficiaire résident)resident contributor, to a trust at any time, means a person that is, at that time, resident in Canada and a contributor to the trust, but — if the trust was created before 1960 by a person who was non-resident when the trust was created — does not include an individual (other than a trust) who has not, after 1959, made a contribution to the trust. (contribuant résident)resident portion of a trust at a particular time means all of the trust’s property that isproperty in respect of which a contribution has been made at or before the particular time to the trust by a contributor that is at the particular time a resident contributor, or if there is at the particular time a resident beneficiary under the trust a connected contributor, to the trust and, for the purposes of this paragraph,if a property is held by a contributor in common or in partnership immediately before the property is contributed to the trust, it is contributed by the contributor only to the extent that the contributor so held the property, andif the contribution is a transfer described by any of paragraphs (2)(a), (c), (d) or (f), the property in respect of which the contribution has been made is deemed to bein respect of a transfer under paragraph (2)(a), propertyif clause (2)(a)(ii)(A) applies, the fair market value of which has increased because of a transfer or loan described by subparagraph (2)(a)(i), orif clause (2)(a)(ii)(B) applies, that would not otherwise be included in the resident portion of the trust, that is selected by the trust (or, failing which, is selected by the Minister) and that has a fair market value at least equal to the absolute value of a decrease in a liability or potential liability of the trust that arose because of a transfer or loan described by subparagraph (2)(a)(i),in respect of a transfer under paragraph (2)(c), property described by subparagraph (2)(c)(ii),in respect of a transfer under paragraph (2)(d), property acquired as a result of any undertaking including a guarantee, covenant or agreement given by a person or partnership other than the trust to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by the trust as described by paragraph (2)(d), andin respect of a transfer under paragraph (2)(f), property selected by the trust (or, failing which, is selected by the Minister) that has a fair market value at least equal to the fair market value of property deemed to be transferred to the trust as described by paragraph (2)(f);property that is acquired, at or before the particular time, by way of indebtedness incurred by the trust (referred to in this paragraph as the “subject property”), ifall or part of the indebtedness is secured on property (other than the subject property) that is held in the trust’s resident portion,it was reasonable to conclude, at the time that the indebtedness was incurred, that the indebtedness would be repaid with recourse to any property (other than the subject property) held at any time in the trust’s resident portion, ora person resident in Canada or partnership of which a person resident in Canada is a member has become obligated, either absolutely or contingently, to effect any undertaking including a guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of the indebtedness, or provided any other financial assistance in respect of the indebtedness;property to the extent that it is derived, directly or indirectly, in any manner whatever, from property described by any of paragraphs (a), (b) and (d), and, without limiting the generality of the foregoing, including property derived from the income (computed without reference to paragraph (16)(f) and subsections 104(6) and (12)) of the trust for a taxation year of the trust that ends at or before the particular time and property in respect of which an amount would be described at the particular time in respect of the trust by the definition capital dividend account in subsection 89(1) if the trust were at the particular time a corporation; andproperty to the extent that it is at the particular time substituted for a property described by any of paragraphs (a) to (c). (partie résidente)restricted property of a person or partnership means property that the person or partnership holds and that isa share (or a right to acquire a share) of the capital stock of a closely held corporation if the share or right, or a property for which the share or right was substituted, was at any time acquired by the person or partnership as part of a transaction or series of transactions under whicha specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for, as consideration for or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, ora share (other than a specified share) of the capital stock of a closely held corporation becomes a specified share of the capital stock of the corporation;an indebtedness or other obligation, or a right to acquire an indebtedness or other obligation, of a closely held corporation ifthe indebtedness, obligation or right, or property for which the indebtedness, obligation or right was substituted, became property of the person or partnership as part of a transaction or series of transactions under whicha specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for, as consideration for or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, ora share (other than a specified share) of a closely held corporation becomes a specified share of the capital stock of the corporation, andthe amount of any payment under the indebtedness, obligation or right (whether the right to the amount is immediate or future, absolute or contingent or conditional on or subject to the exercise of any discretion by any person or partnership) is, directly or indirectly, determined primarily by one or more of the following criteria:the fair market value of, production from or use of any of the property of the closely held corporation,gains or profits from the disposition of any of the property of the closely held corporation,income, profits, revenue or cash flow of the closely held corporation, orany other criterion similar to a criterion referred to in any of clauses (A) to (C); andpropertythat the person or partnership acquired as part of a series of transactions described in paragraph (a) or (b) in respect of another property, andthe fair market value of which is derived in whole or in part, directly or indirectly, from that other property. (bien d’exception)specified party in respect of a particular person at any time meansthe particular person’s spouse or common-law partner at that time;a corporation that at that timeis a controlled foreign affiliate of the particular person or their spouse or common-law partner, orwould be a controlled foreign affiliate of a partnership, of which the particular person is a majority-interest partner, if the partnership were a person resident in Canada at that time;a person, or a partnership of which the particular person is a majority-interest partner, for which it is reasonable to conclude that the benefit referred to in subparagraph (8)(a)(iv) was conferredin contemplation of the person becoming after that time a corporation described by paragraph (b), orto avoid or minimize a liability that arose, or that would otherwise have arisen, under this Part with respect to the particular person; ora corporation in which the particular person, or partnership of which the particular person is a majority-interest partner, is a shareholder ifthe corporation is at or before that time a beneficiary under a trust, andthe particular person or the partnership is a beneficiary under the trust solely because of the application of paragraph (b) of the definition beneficiary in this subsection to the particular person or the partnership in respect of the corporation. (tiers déterminé)specified share means a share of the capital stock of a corporation other than a share that is a prescribed share for the purpose of paragraph 110(1)(d). (action déterminée)specified time in respect of a trust for a taxation year of the trust meansif the trust exists at the end of the taxation year, the time that is the end of that taxation year; andin any other case, the time in that taxation year that is immediately before the time at which the trust ceases to exist. (moment déterminé)successor beneficiary at any time under a trust means a person that is a beneficiary under the trust solely because of a right of the person to receive any of the trust’s income or capital, if under that right the person may so receive that income or capital only on or after the death after that time of an individual who, at that time, is alive andis a contributor to the trust;is related to (in this definition including an uncle, aunt, niece or nephew of) a contributor to the trust; orwould have been related to a contributor to the trust if every individual who was alive before that time were alive at that time. (bénéficiaire remplaçant)transaction includes an arrangement or event. (opération)trust includes, for greater certainty, an estate. (fiducie)Rules of applicationIn this section and section 94.2,a person or partnership is deemed to have transferred, at any time, a property to a trust ifat that time the person or partnership transfers or loans property (other than by way of an arm’s length transfer) to another person or partnership, andbecause of that transfer or loanthe fair market value of one or more properties held by the trust increases at that time, ora liability or potential liability of the trust decreases at that time;the fair market value, at any time, of a property deemed by paragraph (a) to be transferred at that time by a person or partnership is deemed to be the amount of the absolute value of the increase or decrease, as the case may be, referred to in subparagraph (a)(ii) in respect of the property, and if that time is after August 27, 2010, and the property that the person or partnership transfers or loans at that time is restricted property of the person or partnership, the property deemed by paragraph (a) to be transferred at that time to a trust is deemed to be restricted property transferred at that time to the trust;a person or partnership is deemed to have transferred, at any time, property to a trust ifat that time the person or partnership transfers restricted property, or loans property other than by way of an arm’s length transfer, to another person (referred to in this paragraph and paragraph (c.1) as the “intermediary”),at or after that time, the trust holds property (other than property described by paragraph (14)(b)) the fair market value of which is derived in whole or in part, directly or indirectly, from property held by the intermediary, andit is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Part;the fair market value, at any time, of a property deemed by paragraph (c) to be transferred at that time by a person or partnership is deemed to be the fair market value of the property referred to in subparagraph (c)(i), and if that time is after October 24, 2012 and the property that the person or partnership transfers or loans to the intermediary is restricted property of the intermediary, the property deemed by paragraph (c) to be transferred at that time by the person or partnership to a trust is deemed to be restricted property transferred at that time to the trust throughout the period in which the intermediary holds the restricted property;if, at any time, a particular person or partnership becomes obligated, either absolutely or contingently, to effect any undertaking including a guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by another person or partnership, or has provided any other financial assistance to another person or partnership,the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, andthe property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the guarantee or other financial assistance is deemed to have been transferred to the particular person or partnership in exchange for the property deemed by subparagraph (i) to have been transferred;the fair market value at any time of a property deemed by subparagraph (d)(i) to have been transferred at that time to another person or partnership is deemed to be the amount at that time of the loan or indebtedness incurred by the other person or partnership to which the property relates;if, at any time after June 22, 2000, a particular person or partnership renders any service (other than an exempt service) to, for or on behalf of another person or partnership,the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, andthe property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the service is deemed to have been transferred to the particular person or partnership in exchange for the property deemed by subparagraph (i) to have been transferred;each of the following acquisitions of property by a particular person or partnership is deemed to be a transfer of the property, at the time of the acquisition of the property, to the particular person or partnership from the person or partnership from which the property was acquired, namely, the acquisition by the particular person or partnership ofa share of a corporation from the corporation,an interest as a beneficiary under a trust (otherwise than from a beneficiary under the trust),an interest in a partnership (otherwise than from a member of the partnership),a debt owing by a person or partnership from the person or partnership, anda right (granted after June 22, 2000, by the person or partnership from which the right was acquired) to acquire or to be loaned property;the fair market value at any time of a property deemed by subparagraph (f)(i) to have been transferred at that time is deemed to be the fair market value at that time of the service to which the property relates;a person or partnership that at any time becomes obligated to do an act that would, if done, constitute the transfer or loan of a property to another person or partnership is deemed to have become obligated at that time to transfer or loan, as the case may be, property to that other person or partnership;in applying at any time the definition non-resident time in subsection (1), if a trust acquires property of an individual as a consequence of the death of the individual and the individual was immediately before death resident in Canada, the individual is deemed to have transferred the property to the trust immediately before the individual’s death;a transfer or loan of property at any time is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (referred to in this paragraph as the “specified person”) ifthe particular person or partnership transfers or loans property at that time to another person or partnership,the transfer or loan is made at the direction, or with the acquiescence, of the specified person, andit is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize the liability, of any person or partnership, under this Part that arose, or that would otherwise have arisen, because of the application of this section;a transfer or loan of property made at any time on or after November 9, 2006, is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (referred to in this paragraph as the “specified person”) ifthe particular person or partnership transfers or loans property at that time to another person or partnership, anda purpose or effect of the transfer or loan may reasonably be considered to be to provide benefits in respect of services rendered by a person as an employee of the specified person (whether the provision of the benefits is because of a right that is immediate or future, absolute or contingent, or conditional on or subject to the exercise of any discretion by any person or partnership);a transfer or loan of property at any time is deemed to be made at that time jointly by a corporation and a person or partnership (referred to in this paragraph as the “specified person”) ifthe corporation transfers or loans property at that time to another person or partnership,the transfer or loan is made at the direction, or with the acquiescence, of the specified person,that time is not, or would not be if the transfer or loan were a contribution of the specified person,a non-resident time of the specified person, orif the specified person is a partnership, a non-resident time of one or more members of the partnership, andeitherthe corporation is, at that time, a controlled foreign affiliate of the specified person, or would at that time be a controlled foreign affiliate of the specified person if the specified person were at that time resident in Canada, orit is reasonable to conclude that the transfer or loan was made in contemplation of the corporation becoming after that time a corporation described in clause (A);a particular person or partnership is deemed to have transferred, at a particular time, a particular property or particular part of it, as the case may be, to a corporation described in subparagraph (i) or a second person or partnership described in subparagraph (ii) ifthe particular property is a share of the capital stock of a corporation held at the particular time by the particular person or partnership, and as consideration for the disposition at or before the particular time of the share, the particular person or partnership received at the particular time (or became entitled at the particular time to receive) from the corporation a share of the capital stock of the corporation, orthe particular property (or property for which the particular property is substituted) was acquired, before the particular time, from the second person or partnership by any person or partnership, in circumstances that are described by any of subparagraphs (g)(i) to (v) (or would be so described if it applied at the time of that acquisition) and at the particular time,the terms or conditions of the particular property change,the second person or partnership redeems, acquires or cancels the particular property or the particular part of it,if the particular property is a debt owing by the second person or partnership, the debt or the particular part of it is settled or cancelled, orif the particular property is a right to acquire or to be loaned property, the particular person or partnership exercises the right;a contribution made at any time by a particular trust to another trust is deemed to have been made at that time jointly by the particular trust and by each person or partnership that is at that time a contributor to the particular trust;a contribution made at any time by a particular partnership to a trust is deemed to have been made at that time jointly by the particular partnership and by each person or partnership that is at that time a member of the particular partnership;subject to paragraph (q) and subsection (9), the amount of a contribution to a trust at the time it was made is deemed to be the fair market value, at that time, of the property that was the subject of the contribution;a person or partnership that at any time acquires a fixed interest in a trust (or a right, issued by the trust, to acquire a fixed interest in the trust) from another person or partnership (other than from the trust that issued the interest or the right) is deemed to have made at that time a contribution to the trust and the amount of the contribution is deemed to be equal to the fair market value at that time of the interest or right, as the case may be;a particular person or partnership that has acquired a fixed interest in a trust as a consequence of making a contribution to the trust — or that has made a contribution to the trust as a consequence of having acquired a fixed interest in the trust or a right described in paragraph (q) — is, for the purpose of applying this section at any time after the time that the particular person or partnership transfers the fixed interest or the right, as the case may be, to another person or partnership (which transfer is referred to in this paragraph as the “sale”), deemed not to have made the contribution in respect of the fixed interest, or right, that is the subject of the sale ifin exchange for the sale, the other person or partnership transfers or loans, or becomes obligated to transfer or loan, property (which property is referred to in subparagraph (ii) as the “consideration”) to the particular person or partnership, andit is reasonable to concludehaving regard only to the sale and the consideration that the particular person or partnership would be willing to make the sale if the particular person or partnership were dealing at arm’s length with the other person or partnership, andthat the terms and conditions made or imposed in respect of the exchange would be acceptable to the particular person or partnership if the particular person or partnership were dealing at arm’s length with the other person or partnership;a transfer to a trust by a particular person or partnership is deemed not to be, at a particular time, a contribution to the trust ifthe particular person or partnership has transferred, at or before the particular time and in the ordinary course of business of the particular person or partnership, property to the trust,the transfer is not an arm’s length transfer, but would be an arm’s length transfer if the definition arm’s length transfer in subsection (1) were read without reference to paragraph (a) and subparagraphs (b)(i), (ii) and (iv) to (vii) of that definition,it is reasonable to conclude that the particular person or partnership was the only person or partnership that acquired, in respect of the transfer, an interest as a beneficiary under the trust,the particular person or partnership was required, under the securities law of a country or of a political subdivision of the country in respect of the issuance by the trust of interests as a beneficiary under the trust, to acquire an interest because of the particular person or partnership’s status at the time of the transfer as a manager or promoter of the trust,at the particular time the trust is not an exempt foreign trust, but would be at that time an exempt foreign trust if it had not made an election under paragraph (h) of the definition exempt foreign trust in subsection (1), andthe particular time is before the earliest ofthe first time at which the trust becomes an exempt foreign trust,the first time at which the particular person or partnership ceases to be a manager or promoter of the trust, andthe time that is 24 months after the first time at which the total fair market value of consideration received by the trust in exchange for interests as a beneficiary (other than the particular person or partnership’s interest referred to in subparagraph (iii)) under the trust is greater than $500,000;a transfer, by a Canadian corporation of particular property, that is at a particular time a contribution by the Canadian corporation to a trust, is deemed not to be, after the particular time, a contribution by the Canadian corporation to the trust ifthe trust acquired the property before the particular time from the Canadian corporation in circumstances described in subparagraph (g)(i) or (iv),as a result of a transfer (which transfer is referred to in this paragraph as the “sale”) at the particular time by any person or partnership (referred to in this paragraph as the “seller”) to another person or partnership (referred to in this paragraph as the “buyer”) the trustno longer holds any property that is shares of the capital stock of, or debt issued by, the Canadian corporation, andno longer holds any property that is property the fair market value of which is derived in whole or in part, directly or indirectly, from shares of the capital stock of, or debt issued by, the Canadian corporation,the buyer deals at arm’s length immediately before the particular time with the Canadian corporation, the trust and the seller,in exchange for the sale, the buyer transfers or becomes obligated to transfer property (which property is referred to in this paragraph as the “consideration”) to the seller, andit is reasonable to concludehaving regard only to the sale and the consideration that the seller would be willing to make the sale if the seller were dealing at arm’s length with the buyer,that the terms and conditions made or imposed in respect of the exchange would be acceptable to the seller if the seller were dealing at arm’s length with the buyer, andthat the value of the consideration is not, at or after the particular time, determined in whole or in part, directly or indirectly, by reference to shares of the capital stock of, or debt issued by, the Canadian corporation;a transfer, before October 11, 2002, to a personal trust by an individual (other than a trust) of particular property is deemed not to be a contribution of the particular property by the individual to the trust ifthe individual identifies the trust in prescribed form filed with the Minister on or before the individual’s filing-due date for the individual’s 2003 taxation year (or a later date that is acceptable to the Minister), andthe Minister is satisfied thatthe individual (and any person or partnership not dealing at any time at arm’s length with the individual) has never loaned or transferred, directly or indirectly, restricted property to the trust,in respect of each contribution (determined without reference to this paragraph) made before October 11, 2002, by the individual to the trust, none of the reasons (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the contribution was to permit or facilitate, directly or indirectly, the conferral at any time of a benefit (for greater certainty, including an interest as a beneficiary under the trust) onthe individual,a descendant of the individual, orany person or partnership with whom the individual or descendant does not, at any time, deal at arm’s length, andthe total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made before October 11, 2002, by the individual to the trust does not exceed the greater of1% of the total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made to the trust before October 11, 2002, and$500; anda loan made by a particular specified financial institution to a trust is deemed not to be a contribution to the trust ifthe loan is made on terms and conditions that would have been agreed to by persons dealing at arm’s length, andthe loan is made by the specified financial institution in the ordinary course of the business carried on by it.Liabilities of non-resident trusts and othersIf at a specified time in a trust’s particular taxation year (other than a trust that is, at that time, an exempt foreign trust) the trust is non-resident (determined without reference to this subsection) and, at that time, there is a resident contributor to the trust or a resident beneficiary under the trust,the trust is deemed to be resident in Canada throughout the particular taxation year for the purposes ofsection 2,computing the trust’s income for the particular taxation year,applying subsections 104(13.1) to (28) and 107(2.1), in respect of the trust and a beneficiary under the trust,applying clause 53(2)(h)(i.1)(B), the definition non-resident entity in subsection 94.1(2), subsection 107(2.002) and section 115, in respect of a beneficiary under the trust,paragraph (c) and subsection 111(9),determining an obligation of the trust to file a return under section 233.3 or 233.4,determining the rights and obligations of the trust under Divisions I and J,determining the liability of the trust for tax under Part I, and under Part XIII on amounts paid or credited (in this paragraph having the meaning assigned by Part XIII) to the trust,applying Part XIII in respect of an amount (other than an exempt amount) paid or credited by the trust to any person, anddetermining whether a foreign affiliate of a taxpayer (other than the trust) is a controlled foreign affiliate of the taxpayer;no deduction shall be made under subsection 20(11) by the trust in computing its income for the particular taxation year, and for the purposes of applying subsection 20(12) and section 126 to the trust for the particular taxation yearin determining the non-business-income tax (in this paragraph as defined by subsection 126(7)) paid by the trust for the particular taxation year, paragraph (b) of the definition non-business-income tax does not apply, andif, at that specified time, the trust is resident in a country other than Canada,the trust’s income for the particular taxation year (other than income — not including dividends or interest — from sources in Canada) is deemed to be from sources in that country and not to be from any other source, andthe business-income tax (in this paragraph as defined by subsection 126(7)), and the non-business-income tax, paid by the trust for the particular taxation year are deemed to have been paid by the trust to the government of that country and not to any other government;if the trust was non-resident throughout its taxation year (referred to in this paragraph as the “preceding year”) immediately preceding the particular taxation year, the trust is deemed to haveimmediately before the end of the preceding year, disposed of each property (other than property described in any of subparagraphs 128.1(1)(b)(i) to (iv)) held by the trust at that time for proceeds of disposition equal to its fair market value at that time, andat the beginning of the particular taxation year, acquired each of those properties so disposed of at a cost equal to its proceeds of disposition;each person that at any time in the particular taxation year is a resident contributor to the trust (other than an electing contributor in respect of the trust at the specified time) or a resident beneficiary under the trusthas jointly and severally, or solidarily, with the trust and with each other such person, the rights and obligations of the trust in respect of the particular taxation year under Divisions I and J, andis subject to Part XV in respect of those rights and obligations;each person that at any time in the particular taxation year is a beneficiary under the trust and was a person from whom an amount would be recoverable at the end of the trust’s 2006 taxation year under subsection (2) (as it read in its application to taxation years that end before 2007) in respect of the trust if the person had received before the trust’s 2007 taxation year amounts described under paragraph (2)(a) or (b) in respect of the trust (as those paragraphs read in their application to taxation years that end before 2007)has, to the extent of the person’s recovery limit for the year, jointly and severally, or solidarily, with the trust and with each other such person, the rights and obligations of the trust in respect of the taxation years, of the trust, that end before 2007 under Divisions I and J, andis, to the extent of the person’s recovery limit for the year, subject to Part XV in respect of those rights and obligations;if the trust (referred to in this paragraph as the “particular trust”) is an electing trust in respect of the particular taxation year,an inter vivos trust (in this paragraph referred to as the “non-resident portion trust”) is deemed for the purposes of this Act (other than for the purposes of subsection 104(2))to be created at the first time at which the particular trust exists in its first taxation year in respect of which the particular trust is an electing trust, andto continue in existence until the earliest ofthe time at which the particular trust ceases to be resident in Canada because of subsection (5) or (5.1),the time at which the particular trust ceases to exist, andthe time at which the particular trust becomes resident in Canada otherwise than because of this subsection,all of the particular trust’s property that is part of the particular trust’s non-resident portion is deemed to be the property of the non-resident portion trust and not to be, except for the purposes of this paragraph and the definition electing trust in subsection (1), the particular trust’s property,the terms and conditions of, and rights and obligations of beneficiaries under, the particular trust (determined by reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) are deemed to be the terms and conditions of, and rights and obligations of beneficiaries under, the non-resident portion trust,for greater certaintythe trustees of the particular trust are deemed to be the trustees of the non-resident portion trust,the beneficiaries under the particular trust are deemed to be the beneficiaries under the non-resident portion trust, andthe non-resident portion trust is deemed not to have a resident contributor or connected contributor to it,the non-resident portion trust is deemed to be, without affecting the liability of its trustees for their own income tax, in respect of its property an individual,if all or part of a property becomes at a particular time part of the particular trust’s non-resident portion and immediately before that time the property or that part, as the case may be, was part of its resident portion, the particular trust is deemed to have transferred at the particular time the property or that part, as the case may be, to the non-resident portion trust,if all or part of a property becomes at a particular time part of the particular trust’s resident portion and immediately before that time the property or that part, as the case may be, was part of its non-resident portion, the non-resident portion trust is deemed to have transferred at the particular time the property or that part, as the case may be, to the particular trust,the particular trust and the non-resident portion trust are deemed at all times to be affiliated with each other and to not deal with each other at arm’s length,the particular trusthas jointly and severally, or solidarily, with the non-resident portion trust, the rights and obligations of the non-resident portion trust in respect of any taxation year under Divisions I and J, andis subject to Part XV in respect of those rights and obligations, andif the non-resident portion trust ceases to exist at a particular time (for greater certainty, as determined by clause (i)(B))the non-resident portion trust is deemed, at the time (referred to in this subparagraph as the “disposition time”) that is immediately before the time that is immediately before the particular time, to havein the case of each property of the non-resident portion trust that is property described in any of subparagraphs 128.1(1)(b)(i) to (iv), disposed of the property for proceeds of disposition equal to the cost amount to it of the property at the disposition time, andin the case of each other property of the non-resident portion trust, disposed of the property for proceeds of disposition equal to its fair market value of the property at the disposition time,the particular trust is deemed to have acquired, at the time that is immediately before the particular time, each property described in subclause (A)(I) or (II) at a cost equal to the proceeds determined under that subclause in respect of the property, andeach person or partnership that is at the time immediately before the particular time a beneficiary under the non-resident portion trust is deemedat the disposition time to have disposed of the beneficiary’s interest as a beneficiary under the non-resident portion trust for proceeds equal to the beneficiary’s cost amount in the interest at the disposition time, andat the disposition time, to have ceased to be, other than for purposes of this clause, a beneficiary under the non-resident portion trust; andif a person deducts or withholds any amount (referred to in this paragraph as the “withholding amount”) as required by section 215 from a particular amount paid or credited or deemed to have been paid or credited to the trust, and the particular amount has been included in the trust’s income for the particular taxation year, the withholding amount is deemed to have been paid on account of the trust’s tax under this Part for the particular taxation year.Excluded provisionsFor greater certainty, paragraph (3)(a) does not deem a trust to be resident in Canada for the purposes ofthe definitions arm’s length transfer and exempt foreign trust in subsection (1);subsections (8.1) and (8.2), paragraph (14)(a), subsections 70(6) and 73(1), the definition Canadian partnership in subsection 102(1), paragraph 107.4(1)(c), the definition qualified disability trust in subsection 122(3), paragraph (a) of the definition mutual fund trust in subsection 132(6), the definition eligible trust in subsection 135.2(1) and subparagraph (b)(i) of the definition investment fund in subsection 251.2(1);determining the liability of a person (other than the trust) that would arise under section 215;determining whether, in applying subsection 128.1(1), the trust becomes resident in Canada at a particular time;determining whether, in applying subsection 128.1(4), the trust ceases to be resident in Canada at a particular time;subparagraph (f)(i) of the definition disposition in subsection 248(1);determining whether subsection 107(5) applies to a distribution on or after July 18, 2005, of property to the trust; anddetermining whether subsection 75(2) applies.Deemed cessation of residence — loss of resident contributor or resident beneficiaryA trust is deemed to cease to be resident in Canada at the earliest time at which there is neither a resident contributor to the trust nor a resident beneficiary under the trust in a taxation year (determined without reference to subsection 128.1(4)) of the trustthat immediately follows a taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income; andat a specified time in which the trustis non-resident,is not an exempt foreign trust, andhas no resident contributor to it or resident beneficiary under it.Deemed cessation of residence — becoming an exempt foreign trustA trust is deemed to cease to be resident in Canada at the earliest time at which the trust becomes an exempt foreign trust in a taxation year (determined without reference to subsection 128.1(4)) of the trustthat immediately follows a taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income; andat a specified time in whichthere is a resident contributor to the trust or a resident beneficiary under the trust, andthe trust is an exempt foreign trust.Administrative relief — changes in statusIf a trust is deemed by subsection (5) or (5.1) to cease to be resident in Canada at a particular time, the following rules apply to the trust in respect of the particular taxation year that is, as a result of that cessation of residence, deemed by subparagraph 128.1(4)(a)(i) to end immediately before the particular time:the trust’s return of income for the particular taxation year is deemed to be filed with the Minister on a timely basis if it is filed with the Minister within 90 days from the end of the trust’s taxation year that is deemed by subparagraph 128.1(4)(a)(i) to start at the particular time; andan amount that is included in the trust’s income (determined without reference to subsections 104(6) and (12)) for the particular taxation year but that became payable (determined without regard to this paragraph) by the trust in the period after the particular taxation year and before the end of the trust’s taxation year that is deemed by subparagraph 128.1(4)(a)(i) to start at the particular time, is deemed to have become payable by the trust immediately before the end of the particular taxation year and not at any other time.Ceasing to be an exempt foreign trustIf at a specified time in a trust’s taxation year it is an exempt foreign trust, at a particular time in the immediately following taxation year (determined without reference to this subsection) the trust ceases to be an exempt foreign trust (otherwise than because of becoming resident in Canada), and at the particular time there is a resident contributor to, or resident beneficiary under, the trust,the trust’s taxation year (determined without reference to this subsection) that includes the particular time is deemed to have ended immediately before the particular time and a new taxation year of the trust is deemed to begin at the particular time; andfor the purpose of determining the trust’s fiscal period after the particular time, the trust is deemed not to have established a fiscal period before the particular time.Limit to amount recoverableThe maximum amount recoverable under the provisions referred to in paragraph (3)(d) at any particular time from a person in respect of a trust (other than a person that is deemed, under subsection (12) or (13), to be a contributor or a resident contributor to the trust) and a particular taxation year of the trust is the person’s recovery limit at the particular time in respect of the trust and the particular year ifeitherthe person is liable under a provision referred to in paragraph (3)(d) in respect of the trust and the particular year solely because the person was a resident beneficiary under the trust at a specified time in respect of the trust in the particular year, orat a specified time in respect of the trust in the particular year, the total of all amounts each of which is the amount, at the time it was made, of a contribution to the trust made before the specified time by the person or by another person or partnership not dealing at arm’s length with the person, is not more than the greater of$10,000, and10% of the total of all amounts each of which was the amount, at the time it was made, of a contribution made to the trust before the specified time;except if the total determined in subparagraph (a)(ii) in respect of the person and all persons or partnerships not dealing at arm’s length with the person is $10,000 or less, the person has filed on a timely basis under section 233.2 all information returns required to be filed by the person before the particular time in respect of the trust (or on any later day that is acceptable to the Minister); andit is reasonable to conclude that for each transaction that occurred before the end of the particular year at the direction of, or with the acquiescence of, the personnone of the purposes of the transaction was to enable the person to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust, andthe transaction was not part of a series of transactions any of the purposes of which was to enable the person to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust.Recovery limitThe recovery limit referred to in paragraph (3)(e) and subsection (7) at a particular time of a particular person in respect of a trust and a particular taxation year of the trust is the amount, if any, by which the greater ofthe total of all amounts each of which isan amount received or receivable after 2000 and before the particular timeby the particular person on the disposition of all or part of the person’s interest as a beneficiary under the trust, orby a person or partnership (that was, when the amount became receivable, a specified party in respect of the particular person) on the disposition of all or part of the specified party’s interest as a beneficiary under the trust,an amount (other than an amount described in subparagraph (i)) made payable by the trust after 2000 and before the particular time tothe particular person because of the interest of the particular person as a beneficiary under the trust, ora person or partnership (that was, when the amount became payable, a specified party in respect of the particular person) because of the interest of the specified party as a beneficiary under the trust,an amount received after August 27, 2010, by the particular person, or a person or partnership (that was, when the amount was received, a specified party in respect of the particular person), as a loan from the trust to the extent that the amount has not been repaid,an amount (other than an amount described in any of subparagraphs (i) to (iii)) that is the fair market value of a benefit received or enjoyed, after 2000 and before the particular time, from or under the trust bythe particular person, ora person or partnership that was, when the benefit was received or enjoyed, a specified party in respect of the particular person, orthe maximum amount that would be recoverable from the particular person at the end of the trust’s 2006 taxation year under subsection (2) (as it read in its application to taxation years that end before 2007) if the trust had tax payable under this Part at the end of the trust’s 2006 taxation year and that tax payable exceeded the total of the amounts described in respect of the particular person under paragraphs (2)(a) and (b) (as they read in their application to taxation years that end before 2007), except to the extent that the amount so recoverable is in respect of an amount that is included in the particular person’s recovery limit because of subparagraph (i) or (ii), andthe total of all amounts each of which is the amount, when made, of a contribution to the trust before the particular time by the particular person,exceeds the total of all amounts each of which isan amount recovered before the particular time from the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that end before 2007),an amount (other than an amount in respect of which this paragraph has applied in respect of any other person) recovered before the particular time from a specified party in respect of the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that end before 2007), orthe amount, if any, by which the particular person’s tax payable under this Part for any taxation year in which an amount described in any of subparagraphs (a)(i) to (iv) was paid, became payable, was received, became receivable or was enjoyed by the particular person exceeds the amount that would have been the particular person’s tax payable under this Part for that taxation year if no such amount were paid, became payable, were received, became receivable or were enjoyed by the particular person in that taxation year.Application of subsection (8.2)Subsection (8.2) applies at any time to a particular person, and to a particular property, in respect of a non-resident trust, if at that timethe particular person is resident in Canada; andthe trust holds the particular property on condition that the particular property or property substituted for the particular propertymayrevert to the particular person, orpass to one or more persons or partnerships to be determined by the particular person, orshall not be disposed of by the trust during the existence of the particular person, except with the particular person’s consent or in accordance with the particular person’s direction.Deemed transfer of restricted propertyIf this subsection applies at any time to a particular person, and to a particular property, in respect of a non-resident trust, then in applying this section in respect of the trust for a taxation year of the trust that includes that timeevery transfer or loan made at or before that time by the particular person (or by a trust or partnership of which the particular person was a beneficiary or member, as the case may be) of the particular property, of another property for which the particular property is a substitute, or of property from which the particular property derives, or the other property derived, its value in whole or in part, directly or indirectly, is deemed to be a transfer or loan, as the case may be, by the particular personthat is not an arm’s length transfer, andthat is, for the purposes of paragraph (2)(c) and subsection (9), a transfer or loan of restricted property; andparagraph (2)(c) is to be read without reference to subparagraph (2)(c)(iii) in its application to each transfer and loan described in paragraph (a).Determination of contribution amount — restricted propertyIf a person or partnership contributes at any time restricted property to a trust, the amount of the contribution at that time is deemed, for the purposes of this section, to be the greater ofthe amount, determined without reference to this subsection, of the contribution at that time, andthe amount that is the greatest fair market value of the restricted property, or property substituted for it, in the period that begins immediately after that time and ends at the end of the third calendar year that ends after that time.Contributor — resident in Canada within 60 months after contributionIn applying this section at each specified time, in respect of a trust’s taxation year, that is before the particular time at which a contributor to the trust becomes resident in Canada within 60 months after making a contribution to the trust, the contribution is deemed to have been made at a time other than a non-resident time of the contributor ifin applying the definition non-resident time in subsection (1) at each of those specified times, the contribution was made at a non-resident time of the contributor; andin applying the definition non-resident time in subsection (1) immediately after the particular time, the contribution is made at a time other than a non-resident time of the contributor.Application of subsections (12) and (13)Subsections (12) and (13) apply to a trust or a person in respect of a trust ifat any time property of a trust (referred to in this subsection and subsections (12) and (13) as the “original trust”) is transferred or loaned, directly or indirectly, in any manner, to another trust (referred to in this subsection and subsections (12) and (13) as the “transferee trust”);the original trustis deemed to be resident in Canada immediately before that time because of paragraph (3)(a),would be deemed to be resident in Canada immediately before that time because of paragraph (3)(a) if this section, as it read in its application to the 2013 taxation year, were read without reference to paragraph (a) of the definition connected contributor in subsection (1) and paragraph (a) of the definition resident contributor in that subsection,was deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that end before 2007, orwould have been deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that end before 2007 if that subsection were read in that application without reference to subclause (b)(i)(A)(III) of that subsection; andit is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Part that arose, or that would otherwise have arisen, because of the application of this section (or the application of this section as it read in its application to taxation years that end before 2007).Deemed resident contributorThe original trust described in subsection (11) (including a trust that has ceased to exist) is deemed to be, at and after the time of the transfer or loan referred to in that subsection, a resident contributor to the transferee trust for the purpose of applying this section in respect of the transferee trust.Deemed contributorA person (including any person that has ceased to exist) that is, at the time of the transfer or loan referred to in subsection (11), a contributor to the original trust, is deemed to be at and after that timea contributor to the transferee trust; anda connected contributor to the transferee trust, if at that time the person is a connected contributor to the original trust.Restricted property — exceptionA particular property that is, or will be, at any time held, loaned or transferred, as the case may be, by a particular person or partnership is not restricted property held, loaned or transferred, as the case may be, at that time by the particular person or partnership ifthe following conditions are met:the particular property (and property, if any, for which it is, or is to be, substituted) was not, and will not be, at any time acquired, held, loaned or transferred by the particular person or partnership (or any person or partnership with whom the particular person or partnership does not at any time deal at arm’s length) in whole or in part for the purpose of permitting any change in the value of the property of a corporation (that is, at any time, a closely held corporation) to accrue directly or indirectly in any manner whatever to the value of property held by a non-resident trust,the Minister is satisfied that the particular property (and property, if any, for which it is, or is to be, substituted) is described by subparagraph (i), andthe particular property is identified in prescribed form, containing prescribed information, filed, by or on behalf of the particular person or partnership, with the Minister on or beforein the case of a person, the particular person’s filing-due date for the particular person’s taxation year that includes that time,in the case of a partnership, the day on or before which a return is required by section 229 of the Income Tax Regulations to be filed in respect of the fiscal period of the particular partnership or would be required to be so filed if that section applied to the partnership, oranother date that is acceptable to the Minister; orat that timethe particular property isa share of the capital stock of a corporation,a fixed interest in a trust, oran interest, as a member of a partnership, under which, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited,there are at least 150 persons each of whom holds at that time property that at that timeis identical to the particular property, andhas a total fair market value of at least $500,the total of all amounts each of which is the fair market value, at that time, of the particular property (or of identical property that is held, at that time, by the particular person or partnership or a person or partnership with whom the particular person or partnership does not deal at arm’s length) does not exceed 10% of the total of all amounts each of which is the fair market value, at that time, of the particular property or of identical property held by any person or partnership,property that is identical to the particular property can normally be acquired by and sold by members of the public in the open market, andthe particular property, or identical property, is listed on a designated stock exchange.Anti-avoidanceIn applying this section,if it can reasonably be considered that one of the main reasons that a person or partnershipis at any time a shareholder of a corporation is to cause the condition in paragraph (b) of the definition closely held corporation in subsection (1) to be satisfied in respect of the corporation, the condition is deemed not to have been satisfied at that time in respect of the corporation,holds at any time an interest in a trust is to cause the condition in clause (h)(ii)(A) of the definition exempt foreign trust in subsection (1) to be satisfied in respect of the trust, the condition is deemed not to have been satisfied at that time in respect of the trust, andholds at any time a property is to cause the condition described in subparagraph (14)(b)(ii) to be satisfied in respect of the property or an identical property held by any person, the condition is deemed not to have been satisfied at that time in respect of the property or the identical property;if at any time at or before a specified time in a trust’s taxation year, a resident contributor to the trust contributes to the trust property that is restricted property of the trust, or property for which restricted property of the trust is substituted, and the trust is at that specified time an exempt foreign trust by reason of paragraph (f) of the definition exempt foreign trust in subsection (1), the amount of the trust’s income for the taxation year from the restricted property, and the amount of any taxable capital gain from the disposition in the taxation year by the trust of the restricted property, shall be included in computing the income of the resident contributor for its taxation year in which that taxation year of the trust ends and not in computing the income of the trust for that taxation year of the trust; andif at a specified time in a trust’s taxation year it is an exempt foreign trust by reason of paragraph (h) of the definition exempt foreign trust in subsection (1), at a time immediately before a particular time in the immediately following taxation year (determined without reference to subsection (6)) there is a resident contributor to, or resident beneficiary under, the trust, at the time that is immediately before the particular time a beneficiary holds a fixed interest in the trust, and at the particular time the interest ceases to be a fixed interest in the trust,the trust is deemed, other than for purposes of subsection (6), not to be an exempt foreign trust at any time in the trust’s taxation year (referred to in this paragraph as its “assessment year”) that ends (for greater certainty as determined under paragraph (6)(a)) at the time that is immediately before the particular time,the trust shall include in computing its income for its assessment year an amount equal to the amount determined by the formulaA – B – CwhereAis the amount by which the total of all amounts each of which is the fair market value of a property held by the trust at the end of its assessment year exceeds the total of all amounts each of which is the principal amount outstanding at the end of its assessment year of a liability of the trust,Bis the amount by which the total of all amounts each of which is the fair market value of a property held by the trust at the earliest time at which there is a resident contributor to, or resident beneficiary under, the trust and at which the trust is an exempt foreign trust (referred to in this paragraph as the “initial time”) exceeds the total of all amounts each of which is the principal amount outstanding at the initial time of a liability of the trust, andCis the total of all amounts each of which is the amount of a contribution made to the trust in the period that begins at the initial time and ends at the end of its assessment year (in this paragraph referred to as the “interest gross-up period”), andif the trust is liable for tax for its assessment year, then throughout the period that begins at the trust’s balance-due day for each taxation year that ends in the interest gross-up period and ends at the balance-due day for its assessment year, the trust is (in addition to any excess otherwise determined in respect of the trust under that subsection) deemed to have an excess for the purposes of subsection 161(1) equal to the amount determined by the formulaA/B × 42.92%whereAis the amount determined under subparagraph (ii) in respect of the trust for the particular taxation year, andBis the number of the trust’s taxation years that end in the interest gross-up period.Attribution to electing contributorsIf at a specified time in respect of a trust for a taxation year of the trust (referred to in this subsection as the “trust’s year”), there is an electing contributor in respect of the trust, the following rules apply:the electing contributor is required to include in computing their income for their taxation year (referred to in this subsection as the “contributor’s year”) in which the trust’s year ends, the amount determined by the formulaA/B × (C – D)whereAis the total of all amounts each of which isif at or before the specified time the electing contributor has made a contribution to the trust and is not a joint contributor in respect of the trust and the contribution, the amount of the contribution, orif at or before the specified time the electing contributor has made a contribution to the trust and is a joint contributor in respect of the trust and the contribution, the amount obtained when the amount of the contribution is divided by the number of joint contributors in respect of the contribution,Bis the total of all amounts each of which is the amount that would be determined under A for each resident contributor, or connected contributor, to the trust at the specified time if all of those contributors were electing contributors in respect of the trust,Cis the trust’s income, computed without reference to paragraph (f), for the trust’s year, andDis the amount deducted by the trust under section 111 in computing its taxable income for the trust’s year;subject to paragraph (c), the amount, if any, required by paragraph (a) to be included in the electing contributor’s income for the contributor’s year is deemed to be income from property from a source in Canada;for the purposes of this paragraph, paragraph (d) and section 126, an amount in respect of the trust’s income for the trust’s year from a source in a country other than Canada is deemed to be income of the electing contributor for the contributor’s year from that source ifthe amount is designated by the trust, in respect of the electing contributor, in the trust’s return of income under this Part for the trust’s year,the amount may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that because of paragraph (a) was included in computing the income of the electing contributor for the contributor’s year, andthe total of all amounts designated by the trust, under this paragraph or subsection 104(22) in respect of that source, in the trust’s return of income under this Part for the trust’s year is not greater than the trust’s income for the trust’s year from that source;for the purposes of this paragraph and section 126, the electing contributor is deemed to have paid as business-income tax (in this subsection as defined by subsection 126(7)) or non-business-income tax (in this subsection as defined by subsection 126(7)), as the case may be, for the contributor’s year in respect of a source the amount determined by the formulaA × B/CwhereAis the amount that, in the absence of subparagraph (e)(i), would be the business-income tax or non-business-income tax, as the case may be, paid by the trust in respect of that source for the trust’s year,Bis the total of all amounts each of which is an amount designated under paragraph (c) in respect of that source by the trust in respect of the electing contributor in the trust’s return of income under this Part for the trust’s year, andCis the trust’s income for the trust’s year from that source;in applying subsection 20(12) and section 126 in respect of the trust’s year there shall be deductedin computing the trust’s income from a source for the trust’s year the total of all amounts each of which is an amount deemed by paragraph (c) to be income from that source of the electing contributor for the contributor’s year, andin computing the business-income tax or non-business-income tax paid by the trust for the trust’s year in respect of a source the total of all amounts in respect of that source each of which is an amount deemed by paragraph (d) to be paid by the electing contributor as business-income tax or non-business-income tax, as the case may be, in respect of that source;in computing the trust’s income for the trust’s year there may be deducted the amount that does not exceed the amount included by reason of paragraph (a) in the electing contributor’s income for the contributor’s year; andif before the specified time the electing contributor made a contribution to the trust as part of a series of transactions in which another person made the same contribution, in applying paragraphs (a) to (f) in respect of the electing contributor and the other person, the other person is deemed not to be a joint contributor in respect of the contribution if it can reasonably be considered that one of the main purposes of the series was to obtain the benefit of any deduction in computing income, taxable income or tax payable under this Act or any balance of undeducted outlays, expenses or other amounts available to the other person or any exemption available to the other person from tax payable under this Act.Liability for joint contributionIf, at or before a specified time in a trust’s taxation year (referred to in this subsection as the “trust’s year”), there is an electing contributor in respect of the trust who is a joint contributor in respect of a contribution to the trust,each person who is a joint contributor in respect of the contributionhas, in respect of the contribution, jointly and severally, or solidarily, the rights and obligations under Divisions I and J of each other person (referred to in this subsection as the “specified person”) who is, at or before the specified time, a joint contributor in respect of that contribution, for the specified person’s taxation year in which the trust’s year ends, andis subject to Part XV in respect of those rights and obligations; andthe maximum amount recoverable under the provisions referred to in paragraph (a) at a particular time from the person in respect of the contribution and a taxation year, of another person who is the specified person, in which the trust’s year ends is the amount determined by the formulaA – B – CwhereAis the total of the amounts payable by the specified person under this Part for the specified person’s taxation year in which the trust’s year ends,Bis the amount that would be determined for A if the total of the amounts payable by the specified person under this Part for the particular specified person’s taxation year in which the trust’s year ends were computed without reference to the contribution, andCis the amount recovered before the particular time from the specified person, and any other joint contributor in respect of the trust and the contribution, in connection with the liability of the specified person in respect of the contribution.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 94; 1994, c. 7, Sch. II, s. 70, Sch. VIII, s. 39; 1997, c. 25, s. 20; 2001, c. 17, s. 72; 2013, c. 34, s. 7, c. 40, s. 42; 2014, c. 39, s. 23; 2016, c. 7, s. 11, c. 12, s. 30; 2017, c. 33, s. 29
Offshore investment fund propertyIf in a taxation year a taxpayer holds or has an interest in property (referred to in this section as an “offshore investment fund property”)that is a share of the capital stock of, an interest in, or a debt of, a non-resident entity (other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity) or an interest in or a right or option to acquire such a share, interest or debt, andthat may reasonably be considered to derive its value, directly or indirectly, primarily from portfolio investments of that or any other non-resident entity inshares of the capital stock of one or more corporations,indebtedness or annuities,interests in one or more corporations, trusts, partnerships, organizations, funds or entities,commodities,real estate,Canadian or foreign resource properties,currency of a country other than Canada,rights or options to acquire or dispose of any of the foregoing, orany combination of the foregoing,and it may reasonably be concluded, having regard to all the circumstances, includingthe nature, organization and operation of any non-resident entity and the form of, and the terms and conditions governing, the taxpayer’s interest in, or connection with, any non-resident entity,the extent to which any income, profits and gains that may reasonably be considered to be earned or accrued, whether directly or indirectly, for the benefit of any non-resident entity are subject to an income or profits tax that is significantly less than the income tax that would be applicable to such income, profits and gains if they were earned directly by the taxpayer, andthe extent to which the income, profits and gains of any non-resident entity for any fiscal period are distributed in that or the immediately following fiscal period,that one of the main reasons for the taxpayer acquiring, holding or having the interest in such property was to derive a benefit from portfolio investments in assets described in any of subparagraphs 94.1(1)(b)(i) to 94.1(1)(b)(ix) in such a manner that the taxes, if any, on the income, profits and gains from such assets for any particular year are significantly less than the tax that would have been applicable under this Part if the income, profits and gains had been earned directly by the taxpayer, there shall be included in computing the taxpayer’s income for the year the amount, if any, by whichthe total of all amounts each of which is the product obtained whenthe designated cost to the taxpayer of the offshore investment fund property at the end of a month in the yearis multiplied by1/12 of the total ofthe prescribed rate of interest for the period that includes that month, andtwo per centexceedsthe taxpayer’s income for the year (other than a capital gain) from the offshore investment fund property determined without reference to this subsection.DefinitionsIn this section,designated cost to a taxpayer at any time in a taxation year of an offshore investment fund property that the taxpayer holds or has an interest in means the amount determined by the formulaA + B + C + DwhereAis the cost amount to the taxpayer of the property at that time (determined without reference to paragraphs 53(1)(m) and 53(1)(q), subparagraph 53(2)(c)(i.3), paragraphs 53(2)(g) and 53(2)(g.1) and section 143.2),Bis, where an additional amount has been made available by a person to another person after 1984 and before that time, whether by way of gift, loan, payment for a share, transfer of property at less than its fair market value or otherwise, in circumstances such that it may reasonably be concluded that one of the main reasons for so making the additional amount available to the other person was to increase the value of the property, the total of all amounts each of which is the amount, if any, by which such an additional amount exceeds any increase in the cost amount to the taxpayer of the property by virtue of that additional amount,Cis the total of all amounts each of which is an amount included in respect of the offshore investment fund property by virtue of this section in computing the taxpayer’s income for a preceding taxation year, andDiswhere the taxpayer has held or has had the interest in the property at all times since the end of 1984, the amount, if any, by which the fair market value of the property at the end of 1984 exceeds the cost amount to the taxpayer of the property at the end of 1984, orin any other case, the total ofthe amount, if any, by which the fair market value of the property at the particular time the taxpayer acquired the property exceeds the cost amount to the taxpayer of the property at the particular time, andthe amount, if any, by whichthe total of all amounts each of which is an amount that would have been included in respect of the property because of this section in computing the taxpayer’s income for a taxation year that began before June 20, 1996 if the cost to the taxpayer of the property were equal to the fair market value of the property at the particular timeexceedsthe total of all amounts each of which is an amount that was included in respect of the property because of this section in computing the taxpayer’s income for a taxation year that began before June 20, 1996,except that the designated cost of an offshore investment fund property that is a prescribed offshore investment fund property is nil; (coût désigné)non-resident entity at any time meansa corporation that is at that time non-resident,a partnership, organization, fund or entity that is at that time non-resident or is not at that time situated in Canada, oran exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition exempt foreign trust in subsection 94(1)). (entité non-résidente)InterpretationWhere subsection 94.1(1) is applied with respect to an offshore investment fund property that washeld by the taxpayer on February 15, 1984,received as a stock dividend in respect of a share of the capital stock of a non-resident entity held by the taxpayer on February 15, 1984,received as a stock dividend in respect of a share of the capital stock of a non-resident entity that the taxpayer had previously received as described in paragraph 94.1(3)(b), orsubstituted for a property held by the taxpayer on February 15, 1984 pursuant to an arrangement that existed on that date,the reference to “1984” in the descriptions of B and in the definition designated cost in subsection 94.1(2) shall be read as a reference to “1985”.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 94.1; 1998, c. 19, s. 121; 2013, c. 34, s. 8
Investments in non-resident commercial trustsSubsection (2) applies to a beneficiary under a trust, and to any particular person of which any such beneficiary is a controlled foreign affiliate, at any time ifthe trust is at that time an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition exempt foreign trust in subsection 94(1));eitherthe total fair market value at that time of all fixed interests of a particular class in the trust held by the beneficiary, persons or partnerships not dealing at arm’s length with the beneficiary, or persons or partnerships that acquired their interests in the trust in exchange for consideration given to the trust by the beneficiary, is at least 10% of the total fair market value at that time of all fixed interests of the particular class, orthe beneficiary or the particular person has at or before that time contributed restricted property to the trust; andthe beneficiary is at that time aresident beneficiary,mutual fund,controlled foreign affiliate of the particular person, orpartnership of which a person described in any of subparagraphs (i) to (iii) is a member.Deemed corporationIf this subsection applies at any time to a beneficiary under, or a particular person in respect of, a trust, then for the purposes of applying this section, section 18.2, subsections 91(1) to (4), paragraph 94.1(1)(a), section 95, the definition restricted interest and financing expense in subsection 111(8) and section 233.4 to the beneficiary under, and, if applicable, to the particular person in respect of, the trustthe trust is deemed to be at that time a non-resident corporationcontrolled by each of the beneficiary and the particular person, andhaving, for each particular class of fixed interests in the trust, a separate class of capital stock of 100 issued shares that have the same attributes as the interests of the particular class; andeach beneficiary under the trust is deemed to hold at that time the number of shares of each separate class described in subparagraph (a)(ii) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class.Relief from double taxFor the purposes of applying subsection 91(1) to the beneficiary, and, if applicable, to the particular person, to whom subsection (2) appliesthere may be deducted in computing the foreign accrual property income of the trust referred to in paragraph (2)(a) (in this subsection referred to as the “entity”) for a particular taxation year of the entity the amount that would, in the absence of this paragraph, be the portion of the entity’s foreign accrual property income that would reasonably be considered to have been if this Part were applicable to all beneficiaries of the entity, included under subsection 104(13) in computing the income of any beneficiary of the entity for the taxation year in which the particular taxation year of the entity ends; andsubsection 5904(2) of the Income Tax Regulations is to be read without reference to its paragraph (a) in determining the distribution entitlement of all the shares of a class of the capital stock of the entity at the end of the particular taxation year.Request for informationIf the Minister sends a written request, served personally or by registered mail, to a taxpayer requesting additional information for the purpose of enabling the Minister to determine the fair market value of interests in a trust for the purpose of determining the application of subsections (1) to (3) for a taxation year to the taxpayer, and information that may reasonably be considered to be sufficient to make the determination is not received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request, then in applying this section for the taxation year to the taxpayer the fair market value of those interests is deemed to be the fair market value as reasonably determined by the Minister based on the information received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request and any other information the Minister considers reasonable.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2013, c. 34, s. 9; 2014, c. 39, s. 242024, c. 15, s. 23
Definitions for this SubdivisionIn this Subdivision,active business of a foreign affiliate of a taxpayer means any business carried on by the foreign affiliate other thanan investment business carried on by the foreign affiliate,a business that is deemed by subsection (2) to be a business other than an active business carried on by the foreign affiliate, ora non-qualifying business of the foreign affiliate; (entreprise exploitée activement)antecedent corporation of a particular corporation meansa predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed,a predecessor corporation (within the meaning of subsection 87(1)) of the corporation (referred to in this definition as the “first amalco”) that was formed on an amalgamation of the predecessor corporation and another corporation, whereshares of the capital stock of the predecessor corporation that were not owned by the other corporation, or by a corporation of which the other corporation is a subsidiary wholly-owned corporation, were exchanged on the amalgamation for shares of the capital stock of the first amalco that were, during the series of transactions or events that includes the amalgamation, redeemed, acquired or cancelled by the first amalco for money,the first amalco was a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed, andthe amalgamation referred to in subparagraph (i) occurred in a series of transactions or events that included the amalgamation referred to in subparagraph (ii),a corporation that was wound-up into the particular corporation in a winding-up to which subsection 88(1) applied, oran antecedent corporation of an antecedent corporation of the particular corporation; (société antécédente)calculating currency for a taxation year of a foreign affiliate of a taxpayer meansthe currency of the country in which the foreign affiliate is resident at the end of the taxation year, orany currency that the taxpayer demonstrates to be reasonable in the circumstances; (monnaie de calcul)controlled foreign affiliate, at any time, of a taxpayer resident in Canada, meansa foreign affiliate of the taxpayer that is, at that time, controlled by the taxpayer, ora foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer ownedall of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without reference to the existence of or the absence of any relationship, connection or action in concert between those persons), whoare resident in Canada,are not the taxpayer or a person described in subparagraph (ii), andown, at that time, shares of the capital stock of the foreign affiliate, andall of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder; (société étrangère affiliée contrôlée)designated acquired corporation of a taxpayer means a particular antecedent corporation of the taxpayer if the taxpayer or another antecedent corporation of the taxpayer acquired control ofthe particular antecedent corporation, ora corporation (referred to in this definition as a “successor corporation”) of which the particular antecedent corporation is an antecedent corporation, andimmediately before the acquisition of control or a series of transactions or events that includes the acquisition of control, the taxpayer, the other antecedent corporation or a corporation resident in Canada of which the taxpayer or the other antecedent corporation is a subsidiary wholly-owned corporation, as the case may be, dealt at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)) with the particular antecedent corporation or the successor corporation, as the case may be; (société acquise désignée)designated liquidation and dissolution, of a foreign affiliate (referred to in this definition as the “disposing affiliate”) of a taxpayer, means a liquidation and dissolution of the disposing affiliate in respect of whichthe taxpayer had, immediately before the time of the earliest distribution of property by the disposing affiliate in the course of the liquidation and dissolution, a surplus entitlement percentage in respect of the disposing affiliate of not less than 90%,boththe percentage determined by the following formula is greater than or equal to 90%:A/BwhereAis the amount, if any, by whichthe total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, in the course of the liquidation and dissolution to one particular shareholder of the disposing affiliate that was, immediately before the time of the distribution, a foreign affiliate of the taxpayerexceedsthe total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the particular shareholder in consideration for a property referred to in clause (A), andBis the amount, if any, by whichthe total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, to a shareholder of the disposing affiliate in the course of the liquidation and dissolutionexceedsthe total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by a shareholder of the disposing affiliate in consideration for a property referred to in clause (A), andat the time of each distribution of property by the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate, the particular shareholder holds shares of that capital stock that would, if an annual general meeting of the shareholders of the disposing affiliate were held at that time, entitle it to 90% or more of the votes that could be cast under all circumstances at the meeting, orone particular shareholder of the disposing affiliate that was, throughout the liquidation and dissolution, a foreign affiliate of the taxpayer owns not less than 90% of the issued shares of each class of the capital stock of the disposing affiliate throughout the liquidation and dissolution; (liquidation et dissolution désignées)eligible trust, at any time, means a trust, other than a trustcreated or maintained for charitable purposes,governed by an employee benefit plan,described in paragraph (a.1) of the definition trust in subsection 108(1),governed by a salary deferral arrangement,operated for the purpose of administering or providing superannuation, pension, retirement or employee benefits, orwhere the amount of income or capital that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power; (fiducie admissible)entity includes an association, a corporation, a fund, a natural person, a joint venture, an organization, a partnership, a syndicate and a trust; (entité)excluded property, at a particular time, of a foreign affiliate of a taxpayer means any property of the foreign affiliate that isused or held by the foreign affiliate principally for the purpose of gaining or producing income from an active business carried on by it,shares of the capital stock of another foreign affiliate of the taxpayer where all or substantially all of the fair market value of the property of the other foreign affiliate is attributable to property, of that other foreign affiliate, that is excluded property,property all or substantially all of the income from which is, or would be, if there were income from the property, income from an active business (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph (2)(a) if that paragraph were read without reference to subparagraph (v)), orproperty arising under or as a result of an agreement thatprovides for the purchase, sale or exchange of currency, andeithercan reasonably be considered to have been made by the affiliate to reduce its risk, with respect to an amount that was receivable under an agreement that relates to the sale of excluded property or with respect to an amount that was receivable and was a property described in paragraph (c), of fluctuations in the value of the currency in which the amount receivable was denominated, orcan reasonably be considered to have been made by the affiliate to reduce its risk, with respect to any of the following amounts, of fluctuations in the value of the currency in which that amount was denominated:an amount that was payable under an agreement that relates to the purchase of property that (at all times between the time of the acquisition of the property and the particular time) is excluded property of the affiliate,an amount of indebtedness, to the extent that the proceeds derived from the issuance or incurring of the indebtedness can reasonably be considered to have been used to acquire property that (at all times between the time of the acquisition of that property and the particular time) is excluded property of the affiliate, oran amount of indebtedness, to the extent that the proceeds derived from the issuance or incurring of the indebtedness can reasonably be considered to have been used to repay the outstanding balance ofan amount that, immediately before the time of that repayment, is described by subclause (I),an amount of indebtedness of the affiliate that, immediately before the time of that repayment, is described by subclause (II), oran amount of indebtedness of the affiliate that, immediately before the time of that repayment, is described by this subclause,and, for the purposes of the definitions foreign affiliate in this subsection and direct equity percentage in subsection 95(4) as they apply to this definition, where at any time a foreign affiliate of a taxpayer has an interest in a partnership,the partnership shall be deemed to be a non-resident corporation having capital stock of a single class divided into 100 issued shares, andthe affiliate shall be deemed to own at that time that proportion of the issued shares of that class thatthe fair market value of the affiliate’s interest in the partnership at that timeis ofthe fair market value of all interests in the partnership at that time; (bien exclu)exempt trust, at a particular time in respect of a taxpayer resident in Canada, means a trust that, at that time, is a trust under which the interest of each beneficiary under the trust is, at all times that the interest exists during the trust’s taxation year that includes the particular time, a specified fixed interest of the beneficiary in the trust, if at the particular timethe trust is an eligible trust,there are at least 150 beneficiaries each of whom holds a specified fixed interest, in the trust, that has a fair market value of at least $500, andthe total of all amounts each of which is the fair market value of an interest as a beneficiary under the trust held by a specified purchaser in respect of the taxpayer is not more than 10% of the total fair market value of all interests as a beneficiary under the trust; (fiducie exonérée)foreign accrual property income of a foreign affiliate of a taxpayer, for any taxation year of the affiliate, means the amount determined by the formula(A + A.1 + A.2 + B + C) – (D + E + F + F.1 + G + H)whereAis the amount that would, if section 80 did not apply to the affiliate for the year or a preceding taxation year, be the total of all amounts, each of which is the affiliate’s income for the year from property, the affiliate’s income for the year from a business other than an active business or the affiliate’s income for the year from a non-qualifying business of the affiliate, in each case that amount being determined as if each amount described in clause (2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business, other thaninterest that would, by virtue of paragraph 81(1)(m), not be included in computing the income of the affiliate if it were resident in Canada,a dividend from another foreign affiliate of the taxpayer, except for any portion of the dividend that would be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada,a taxable dividend to the extent that the amount thereof would, if the dividend were received by the taxpayer, be deductible by the taxpayer under section 112, orany amount included because of subsection 80.4(2) in the affiliate’s income in respect of indebtedness to another corporation that is a foreign affiliate of the taxpayer or of a person resident in Canada with whom the taxpayer does not deal at arm’s length,A.1is twice the total of all amounts included in computing the affiliate’s income from property or businesses (other than active businesses) for the year because of subsection 80(13),A.2is the amount determined for G in respect of the affiliate for the preceding taxation year,Bis the total of all amounts each of which is the portion of the affiliate’s income (to the extent that the income is not included under the description of A) for the year, or of the affiliate’s taxable capital gain for the year that can reasonably be considered to have accrued after its 1975 taxation year, from a disposition of propertythat is not, at the time of disposition, excluded property of the affiliate, orthat is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c), (d) and (d.1), subparagraph (2)(e)(i) and paragraph 88(3)(a) applies to the disposition,Cis, where the affiliate is a controlled foreign affiliate of the taxpayer, the amount that would be required to be included in computing its income for the year ifsubsection 94.1(1) were applicable in computing that income,the words “earned directly by the taxpayer” in that subsection were replaced by the words “earned by the person resident in Canada in respect of whom the taxpayer is a foreign affiliate”,the words “other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity” in paragraph 94.1(1)(a) were replaced by the words “other than a prescribed non-resident entity or a controlled foreign affiliate of a person resident in Canada of whom the taxpayer is a controlled foreign affiliate”, andthe words “other than a capital gain” in paragraph 94.1(1)(g) were replaced by the words “other than any income that would not be included in the taxpayer’s foreign accrual property income for the year if the value of C in the definition foreign accrual property income in subsection 95(1) were nil and other than a capital gain”,Dis the total of all amounts, each of which is the affiliate’s loss for the year from property, the affiliate’s loss for the year from a business other than an active business of the affiliate or the affiliate’s loss for the year from a non-qualifying business of the affiliate, in each case that amount being determined as if there were not included in the affiliate’s income any amount described in any of paragraphs (a) to (d) of the description of A and as if each amount described in clause (2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business,Eis the lesser ofthe amount of the affiliate’s allowable capital losses for the year from dispositions of property (other than excluded property and property in respect of which an election is made by the taxpayer under subsection 88(3.3)) that can reasonably be considered to have accrued after its 1975 taxation year, andthe total of all amounts each of which is the portion of a taxable capital gain of the affiliate that is included in the amount determined for B in respect of the affiliate for the year,Fis the prescribed amount for the year,F.1is the lesser ofthe prescribed amount for the year, andthe amount, if any, by whichthe total of all amounts each of which is the portion of a taxable capital gain of the affiliate that is included in the amount determined for B in respect of the affiliate for the yearexceedsthe amount determined for E in respect of the affiliate for the year,Gis the amount, if any, by whichthe total of amounts determined for A.1 and A.2 in respect of the affiliate for the yearexceedsthe total of all amounts determined for D to F.1 in respect of the affiliate for the year, andHisif the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that would be, if the reference in subsection 93.1(1) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, a foreign affiliate of the taxpayer for the purposes of sections 93 and 113 at that particular time, then the portion of the amount of that dividend thatis included in the value determined for A in respect of the affiliate for the year and that would be, if the reference in subsection 93.1(2) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, deemed by paragraph 93.1(2)(a) to have been received by the affiliate for the purposes of sections 93 and 113, andwould not be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada, andin any other case, nil; (revenu étranger accumulé, tiré de biens)foreign accrual tax applicable to any amount included under subsection 91(1) in computing a taxpayer’s income for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),the portion of any income or profits tax that may reasonably be regarded as applicable to that amount and that is paid bythe particular affiliate,another foreign affiliate (in paragraph (b) referred to as the “shareholder affiliate”) of the taxpayer wherethe other affiliate has an equity percentage in the particular affiliate,the income or profits tax is paid to a country other than Canada, andthe other affiliate, and not the particular affiliate, is liable for that tax under the laws of that country, oranother foreign affiliate of the taxpayer in respect of a dividend received, directly or indirectly, from the particular affiliate, if that other affiliate has an equity percentage in the particular affiliate, andany amount prescribed in respect of the particular affiliate or the shareholder affiliate, as the case may be, to be foreign accrual tax applicable to that amount; (impôt étranger accumulé)foreign affiliate, at any time, of a taxpayer resident in Canada means a non-resident corporation in which, at that time,the taxpayer’s equity percentage is not less than 1%, andthe total of the equity percentages in the corporation of the taxpayer and of each person related to the taxpayer (where each such equity percentage is determined as if the determinations under paragraph (b) of the definition equity percentage in subsection 95(4) were made without reference to the equity percentage of any person in the taxpayer or in any person related to the taxpayer) is not less than 10%,except that a corporation is not a foreign affiliate of a non-resident-owned investment corporation; (société étrangère affiliée)foreign bank means an entity that would be a foreign bank within the meaning assigned by the definition of that expression in section 2 of the Bank Act ifthat definition were read without reference to the portion thereof after paragraph (g) thereof, andthe entity had not been exempt under section 12 of that Act from being a foreign bank; (banque étrangère)income from an active business of a foreign affiliate of a taxpayer for a taxation year includes the foreign affiliate’s income for the taxation year that pertains to or is incident to that active business but does not includethe foreign affiliate’s income from property for the taxation year,the foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate, orthe foreign affiliate’s income from a non-qualifying business of the foreign affiliate for the taxation year; (revenu provenant d’une entreprise exploitée activement)income from a non-qualifying business of a foreign affiliate of a taxpayer resident in Canada for a taxation year includes the foreign affiliate’s income for the taxation year that pertains to or is incident to that non-qualifying business, but does not includethe foreign affiliate’s income from property for the taxation year, orthe foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate; (revenu provenant d’une entreprise non admissible)income from property of a foreign affiliate of a taxpayer for a taxation year includes the foreign affiliate’s income for the taxation year from an investment business and the foreign affiliate’s income for the taxation year from an adventure or concern in the nature of trade, but does not include the foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate, orthe foreign affiliate’s income for the taxation year that pertains to or is incident toan active business of the foreign affiliate, ora non-qualifying business of the foreign affiliate; (revenu de biens)investment business of a foreign affiliate of a taxpayer means a business carried on by the foreign affiliate in a taxation year (other than a business deemed by subsection (2) to be a business other than an active business carried on by the foreign affiliate and other than a non-qualifying business of the foreign affiliate) the principal purpose of which is to derive income from property (including interest, dividends, rents, royalties or any similar returns or substitutes for such interest, dividends, rents, royalties or returns), income from the insurance or reinsurance of risks, income from the factoring of trade accounts receivable, or profits from the disposition of investment property, unless it is established by the taxpayer or the foreign affiliate that, throughout the period in the taxation year during which the business was carried on by the foreign affiliate,the business (other than any business conducted principally with persons with whom the affiliate does not deal at arm’s length) isa business carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the lawsof each country in which the business is carried on through a permanent establishment in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,of the country in which the business is principally carried on, orif the affiliate is related to a non-resident corporation, of the country under whose laws that non-resident corporation is governed and any of exists, was (unless that non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, orthe development of real property or immovables for sale, the lending of money, the leasing or licensing of property or the insurance or reinsurance of risks,eitherthe affiliate (otherwise than as a member of a partnership) carries on the business (the affiliate being, in respect of those times, in that period of the year, that it so carries on the business, referred to in paragraph (c) as the “operator”), orthe affiliate carries on the business as a qualifying member of a partnership (the partnership being, in respect of those times, in that period of the year, that the affiliate so carries on the business, referred to in paragraph (c) as the “operator”), andthe operator employsmore than five employees full time in the active conduct of the business, orthe equivalent of more than five employees full time in the active conduct of the business taking into consideration onlythe services provided by employees of the operator, andthe services provided outside Canada to the operator by any one or more persons each of whom is, during the time at which the services were performed by the person, an employee ofa corporation related to the affiliate (otherwise than because of a right referred to in paragraph 251(5)(b)),in the case where the operator is the affiliate,a corporation (referred to in this subparagraph as a “providing shareholder”) that is a qualifying shareholder of the affiliate,a designated corporation in respect of the affiliate, ora designated partnership in respect of the affiliate, andin the case where the operator is the partnership described in subparagraph (b)(ii),any person (referred to in this subparagraph as a “providing member”) who is a qualifying member of that partnership,a designated corporation in respect of the affiliate, ora designated partnership in respect of the affiliate,if the corporations referred to in subclause (B)(I) and the designated corporations, designated partnerships, providing shareholders or providing members referred to in subclauses (B)(II) and (III) receive compensation from the operator for the services provided to the operator by those employees the value of which is not less than the cost to those corporations, partnerships, shareholders or members of the compensation paid or accruing to the benefit of those employees that performed the services during the time at which the services were performed by those employees; (entreprise de placement)investment property of a foreign affiliate of a taxpayer includesa share of the capital stock of a corporation other than a share of another foreign affiliate of the taxpayer that is excluded property of the affiliate,an interest in a partnership other than an interest in a partnership that is excluded property of the affiliate,an interest in a trust other than an interest in a trust that is excluded property of the affiliate,indebtedness or annuities,commodities or commodities futures purchased or sold, directly or indirectly in any manner whatever, on a commodities or commodities futures exchange (except commodities manufactured, produced, grown, extracted or processed by the affiliate or a person to whom the affiliate is related (otherwise than because of a right referred to in paragraph 251(5)(b)) or commodities futures in respect of such commodities),currency,real property or immovables,Canadian and foreign resource properties,interests in funds or entities other than corporations, partnerships and trusts, andinterests in, or for civil law rights in, or options in respect of, property that is included in any of paragraphs (a) to (i); (bien de placement)lease obligation of a person includes an obligation under an agreement that authorizes the use of or the production or reproduction of property including information or any other thing; (obligation découlant d’un bail)lending of money by a person (for the purpose of this definition referred to as the “lender”) includesthe acquisition by the lender of trade accounts receivable (other than trade accounts receivable owing by a person with whom the lender does not deal at arm’s length) from another person or the acquisition by the lender of any interest in any such accounts receivable,the acquisition by the lender of loans made by and lending assets (other than loans or lending assets owing by a person with whom the lender does not deal at arm’s length) of another person or the acquisition by the lender of any interest in such a loan or lending asset,the acquisition by the lender of a foreign resource property (other than a foreign resource property that is a rental or royalty payable by a person with whom the lender does not deal at arm’s length) of another person, andthe sale by the lender of loans or lending assets (other than loans or lending assets owing by a person with whom the lender does not deal at arm’s length) or the sale by the lender of any interest in such loans or lending assets;and for the purpose of this definition, the definition lending asset in subsection 248(1) shall be read without the words “but does not include a prescribed property”; (prêt d’argent)licensing of property includes authorizing the use of or the production or reproduction of property including information or any other thing; (concession d’une licence sur un bien)non-qualifying business of a foreign affiliate of a taxpayer at any time means a business carried on by the foreign affiliate through a permanent establishment in a jurisdiction that, at the end of the foreign affiliate’s taxation year that includes that time, is a non-qualifying country, other thanan investment business of the foreign affiliate, ora business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate; (entreprise non admissible)non-qualifying country, at any time, means a country or other jurisdictionwith which Canada neither has a tax treaty at that time nor has, before that time, signed an agreement that will, on coming into effect, be a tax treaty,for which, if the time is after February 2014, the Convention on Mutual Administrative Assistance in Tax Matters — concluded at Strasbourg on January 25, 1988, as amended from time to time by a protocol, or other international instrument, as ratified by Canada — is at that time not in force and does not have effect,with which Canada does not have a comprehensive tax information exchange agreement that is in force and has effect at that time, andwith which Canada has, more than 60 months before that time, eitherbegun negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction), orsought, by written invitation, to enter into negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction); (pays non admissible)participating percentage of a particular share owned by a taxpayer of the capital stock of a corporation in respect of any foreign affiliate of the taxpayer that was, at the end of its taxation year, a controlled foreign affiliate of the taxpayer iswhere the foreign accrual property income of the affiliate for that year is $5,000 or less, nil, andwhere the foreign accrual property income of the affiliate for that year exceeds $5,000,the percentage that would be the taxpayer’s equity percentage in the affiliate at the end of that taxation year on the assumption that the taxpayer owned no shares other than the particular share (but in no case shall that assumption be made for the purpose of determining whether or not a corporation is a foreign affiliate of the taxpayer) ifthe affiliate and each corporation that is relevant to the determination of the taxpayer’s equity percentage in the affiliate have, at that time, only one class of issued shares, andno foreign affiliate (referred to in this clause as the “upper-tier affiliate”) of the taxpayer that is relevant to the determination of the taxpayer’s equity percentage in the affiliate has, at that time, an equity percentage in a foreign affiliate (including, for greater certainty, the affiliate) of the taxpayer that has an equity percentage in the upper-tier affiliate, andin any other case, the percentage determined in prescribed manner; (pourcentage de participation)permanent establishment has the meaning assigned by regulation; (établissement stable)relevant tax factor, of a person or partnership for a taxation year, means in the case of a corporation, or of a partnership all the members of which, other than non-resident persons, are corporations, the quotient obtained by the formula1/(A – B)whereAis the percentage set out in paragraph 123(1)(a), andBisin the case of a corporation, the percentage that is the corporation’s general rate reduction percentage (as defined by section 123.4) for the taxation year, andin the case of a partnership, the percentage that would be determined under subparagraph (i) in respect of the partnership if the partnership were a corporation whose taxation year is the partnership’s fiscal period, andin any other case, 1.9; (facteur fiscal approprié)specified fixed interest, at any time, of an entity in a trust, means an interest of the entity as a beneficiary under the trust ifthe interest includes, at that time, rights of the entity as a beneficiary under the trust to receive, at or after that time and directly from the trust, income and capital of the trust,the interest was issued by the trust, at or before that time, to an entity, in exchange for consideration and the fair market value, at the time at which the interest was issued, of that consideration was equal to the fair market value, at the time at which it was issued, of the interest,the only manner in which any part of the interest may cease to be the entity’s is by way of a disposition (determined without reference to paragraph (i) of the definition disposition in subsection 248(1) and paragraph 248(8)(c)) by the entity of that part, andno amount of income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power; (participation fixe désignée)specified person or partnership, in respect of a taxpayer, at any time means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that timea person (other than a partnership) that is resident in Canada and does not, at that time, deal at arm’s length with the taxpayer,a specified predecessor corporation of the taxpayer or of a specified person or partnership in respect of the taxpayer,a foreign affiliate ofthe taxpayer,a person that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (a) or (b), ora partnership that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (d), ora partnership a member of which is at that time a specified person or partnership in respect of the taxpayer under this definition; (personne ou société de personnes déterminée)specified predecessor corporation of a particular corporation meansan antecedent corporation of the particular corporation,a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation by which the particular corporation was formed, ora specified predecessor corporation of a specified predecessor corporation of the particular corporation; (société remplacée déterminée)specified purchaser, at any time, in respect of a particular taxpayer resident in Canada, means an entity that is, at that time,the particular taxpayer,an entity resident in Canada with which the particular taxpayer does not deal at arm’s length,a foreign affiliate of an entity described in any of paragraphs (a) and (b) and (d) to (f),a trust (other than an exempt trust) in which an entity described in any of paragraphs (a) to (c) and (e) and (f) is beneficially interested,a partnership of which an entity described in any of paragraphs (a) to (d) and (f) is a member, oran entity (other than an entity described in any of paragraphs (a) to (e)) with which an entity described in any of paragraphs (a) to (e) does not deal at arm’s length; (acheteur déterminé)surplus entitlement percentage, at any time, of a taxpayer in respect of a foreign affiliate has the meaning assigned by regulation; (pourcentage de droit au surplus)taxable Canadian business, at any time, of a foreign affiliate of a taxpayer resident in Canada or of a partnership of which a foreign affiliate of a taxpayer resident in Canada is a member (which foreign affiliate or partnership is referred to in this definition as the “operator”), means a business the income from whichis, or would be if there were income from the business for the operator’s taxation year or fiscal period that includes that time, included in computing the foreign affiliate’s taxable income earned in Canada for a taxation year under subparagraph 115(1)(a)(ii), andis not, or would not be if there were income from the business for the operator’s taxation year or fiscal period that includes that time, exempt, because of a tax treaty with a country, from tax under this Part; (entreprise canadienne imposable)taxation year in relation to a foreign affiliate of a taxpayer means the period for which the accounts of the foreign affiliate have been ordinarily made up, but no such period may exceed 53 weeks; (année d’imposition)trust company includes a corporation that is resident in Canada and that is a loan company as defined in subsection 2(1) of the Canadian Payments Act. (société de fiducie)British Virgin IslandsFor the purposes of paragraph (b) of the definition non-qualifying country in subsection (1), the British Overseas Territory of the British Virgin Islands is deemed to have a comprehensive tax information exchange agreement with Canada that is in force and has effect after 2013 and before March 11, 2014.Determination of certain components of foreign accrual property incomeFor the purposes of this Subdivision,in computing the income or loss from an active business for a taxation year of a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or that is a controlled foreign affiliate of the taxpayer throughout the year, there shall be included any income or loss of the particular foreign affiliate for the year from sources in a country other than Canada that would otherwise be income or loss from property of the particular foreign affiliate for the year to the extent thatthe income or lossis derived by the particular foreign affiliate from activities of the particular foreign affiliate, or of a particular partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the particular partnership that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada byanother foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year,a life insurance corporation that is resident in Canada throughout the year and that isthe taxpayer,a person who controls the taxpayer,a person controlled by the taxpayer, ora person controlled by a person who controls the taxpayer,the particular foreign affiliate or a partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the partnership, ora partnership of which another foreign affiliate of the taxpayer, in respect of which the taxpayer has a qualifying interest throughout the year, is a member, to the extent that the activities occur while the other affiliate is a qualifying member of the partnership, andif any of subclauses (A)(I), (II) and (IV) applies, would be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada, ofthat other foreign affiliate referred to in subclause (A)(I) or (IV), if the income were earned by it, orthe life insurance corporation referred to in subclause (A)(II), if that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it,the income or loss is derived from amounts that were paid or payable, directly or indirectly, to the particular foreign affiliate or a partnership of which the particular foreign affiliate was a memberby a life insurance corporation that is resident in Canada and that is the taxpayer, a person who controls the taxpayer, a person controlled by the taxpayer or a person controlled by a person who controls the taxpayer, to the extent that those amounts that were paid or payable were for expenditures that are deductible in a taxation year of the life insurance corporation by the life insurance corporation in computing its income or loss for a taxation year from carrying on its life insurance business outside Canada and are not deductible in computing its income or loss for a taxation year from carrying on its life insurance business in Canada,byanother foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, to the extent that those amounts that were paid or payable are for expenditures that were deductible by that other foreign affiliate in computing the amounts prescribed to be its earnings or loss for a taxation year from an active business (other than an active business carried on in Canada), ora partnership of which another foreign affiliate of the taxpayer (in respect of which other foreign affiliate the taxpayer has a qualifying interest throughout the year) is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which that other foreign affiliate was a member of the partnership, to the extent that those amounts that were paid or payable are for expenditures that are deductible by the partnership in computing that other foreign affiliate’s share of any income or loss of the partnership, for a fiscal period, that is included in computing the amounts prescribed to be that other foreign affiliate’s earnings or loss for a taxation year from an active business (other than an active business carried on in Canada),by a partnership of which the particular foreign affiliate is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which the particular foreign affiliate was a member of the partnership, to the extent that those amounts that were paid or payable are for expenditures that are deductible by the partnership in computing the particular foreign affiliate’s share of any income or loss of the partnership, for a fiscal period, that is included in computing the amounts prescribed to be the particular foreign affiliate’s earnings or loss for a taxation year from an active business (other than an active business carried on in Canada), orby another foreign affiliate (referred to in this clause as the “second affiliate”) of the taxpayer — in respect of which the taxpayer has a qualifying interest throughout the year — to the extent that the amounts are paid or payable by the second affiliate, in respect of any particular period in the year, under a legal obligation to pay interest in respect ofborrowed money used for the purpose of earning income from property, oran amount payable for property acquired for the purpose of gaining or producing income from propertywherethe property is, throughout the particular period, excluded property of the second affiliate that is shares of the capital stock of a corporation (referred to in this clause as the “third affiliate”) which is, throughout the particular period, a foreign affiliate (other than the particular foreign affiliate) of the taxpayer in respect of which the taxpayer has a qualifying interest, andin respect of each of the second affiliate and the third affiliate, for each of their taxation years (each of which is referred to in this subclause as a “relevant taxation year”) that end in the year, eitherthat affiliate is subject to income taxation in a country other than Canada in that relevant taxation year, orthe members or shareholders of that affiliate (which, for the purposes of this sub-subclause, includes a person that has, directly or indirectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in a country other than Canada on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends,[Repealed, 2014, c. 39, s. 25]the income or loss is derived by the particular foreign affiliate from the factoring of trade accounts receivable acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year to the extent that the accounts receivable arose in the course of an active business carried on in a country other than Canada by that other foreign affiliate,the income or loss is derived by the particular foreign affiliate from loans or lending assets acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, to the extent that the loans or lending assets arose in the course of an active business carried on in a country other than Canada by that other foreign affiliate,the income or loss is derived by the particular foreign affiliate from the disposition of excluded property that is not capital property, orthe income or loss is derived by the particular foreign affiliate under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the particular foreign affiliate to reduceits risk — with respect to an amount that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated, orits risk — with respect to an amount that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated;in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from the sale of property (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the performance of services as an agent in relation to a purchase or sale of property) whereit is reasonable to conclude that the cost to any person of the property (other than property that is designated property) is relevant in computing the income from a business carried on by the taxpayer or by a person resident in Canada with whom the taxpayer does not deal at arm’s length or is relevant in computing the income from a business carried on in Canada by a non-resident person with whom the taxpayer does not deal at arm’s length, andthe property was notmanufactured, produced, grown, extracted or processed in the countryunder whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, andin which the affiliate’s business is principally carried on,an interest in real property, or a real right in an immovable, located in, or a foreign resource property in respect of, the countryunder whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, andin which the affiliate’s business is principally carried on, oran indebtedness, or a lease obligation, of a person resident in Canada or in respect of a business carried on in Canada, that was purchased and sold by the affiliate on its own account,unless more than 90% of the gross revenue of the affiliate for the year from the sale of property (other than a property the income from the sale of which is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (i)) to persons with whom the affiliate deals at arm’s length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm’s length for sale to persons with whom the affiliate deals at arm’s length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,the sale of such property shall be deemed to be a separate business, other than an active business, carried on by the affiliate, andany income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayerthere shall be included the income of the affiliate for the year from the insurance of specified Canadian risks (which, for the purposes of this paragraph, includes income for the year from the reinsurance of specified Canadian risks), unless more than 90% of the gross premium revenue of the affiliate for the year from the insurance of risks (net of reinsurance ceded) was in respect of the insurance of risks (other than specified Canadian risks) of persons with whom the affiliate deals at arm’s length,if subparagraph (i) applies to include income of the affiliate from the insurance of specified Canadian risks,the insurance of those risks is deemed to be a separate business, other than an active business, carried on by the affiliate, andany income of the affiliate that pertains to or is incident to that business is deemed to be income from a business other than an active business,there shall be included the income of the affiliate for the year in respect of the ceding of specified Canadian risks — except to the extent that the income is included because of subparagraph (i) or (ii) — which, for the purposes of this paragraph, includesincome of the affiliate from services in respect of the ceding of specified Canadian risks, andexcept to the extent the amount is included under clause (A), the amount, if any, by which the fair market value of the consideration provided in respect of the ceding of the specified Canadian risks exceeds the affiliate’s cost in respect of those specified Canadian risks, andif subparagraph (iii) applies to include income of the affiliate in respect of the ceding of specified Canadian risks,the ceding of those risks is deemed to be a separate business, other than an active business, carried on by the affiliate, andany income of the affiliate that pertains to or is incident to that business is deemed to be income from a business other than an active business;for the purposes of paragraph (a.2), one or more risks insured by a foreign affiliate of a taxpayer that, if this Act were read without reference to this paragraph, would not be specified Canadian risks (in this paragraph referred to as the foreign policy pool) are deemed to be specified Canadian risks ifthe affiliate, or a person or partnership that does not deal at arm’s length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,the affiliate’s risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the tracked policy pool), which criteria arethe fair market value of the tracked policy pool,the revenue, income, loss or cash flow from the tracked policy pool, orany other similar criteria, and10% or more of the tracked policy pool consists of specified Canadian risks;if the conditions in paragraph (a.21) are satisfied in respect of a foreign affiliate of a taxpayer, or a foreign affiliate of another taxpayer if that other taxpayer does not deal at arm’s length with the taxpayer, and a particular foreign affiliate of the taxpayer, or a partnership of which the particular affiliate is a member, has entered into one or more agreements or arrangements described in that paragraph,activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate to the extent that those activities can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph (a.21)(ii), andany income of the particular affiliate from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;for the purposes of paragraphs (a.2), (a.21) and (a.24), specified Canadian risk means a risk in respect ofa person resident in Canada,a property situated in Canada, ora business carried on in Canada;for the purposes of paragraph (a.2),a risk is deemed to be a specified Canadian risk of a particular foreign affiliate of a taxpayer ifas part of a transaction or series of transactions, the particular affiliate insured or reinsured the risk,the risk would not be a specified Canadian risk if this Act were read without reference to this paragraph, andit can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid the application of any of paragraphs (a.2) to (a.22), andif the particular affiliate — or a foreign affiliate of another taxpayer, if that other taxpayer or affiliate, or a partnership of which that other taxpayer or affiliate is a member, does not deal at arm’s length with the particular affiliate — enters into one or more agreements or arrangements in respect of the risk,activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate or other affiliate, as the case may be, andany income of the particular affiliate or other affiliate, as the case may be, from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year derived directly or indirectly from indebtedness and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account, but does not include excluded income)of persons resident in Canada, orin respect of businesses carried on in Canadaunless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations (other than excluded revenue or revenue that is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm’s length and, where this paragraph applies to include income of the affiliate for the year in the income of the affiliate from a business other than an active business,those activities carried out to earn such income shall be deemed to be a separate business, other than an active business, carried on by the affiliate, andany income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active business;in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer there shall be included (to the extent not included under paragraph 95(2)(a.3) in such income of the affiliate for the year) that proportion of the income of the affiliate for the year derived directly or indirectly from indebtedness and lease obligations (which, for the purposes of this paragraph, includes the income of the affiliate for the year from the purchase and sale of indebtedness and lease obligations on its own account) in respect of a business carried on outside Canada by a partnership (any portion of the income or loss of which for fiscal periods of the partnership that end in the year is included or would, if the partnership had an income or loss for such fiscal periods, be included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm’s length) thatthe total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the year that are included directly or indirectly in computing the income or loss of the taxpayer or a person resident in Canada with whom the taxpayer does not deal at arm’s lengthis ofthe total of all amounts each of which is the income or loss of the partnership for fiscal periods of the partnership that end in the yearunless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm’s length (other than indebtedness and lease obligations of a partnership described in this paragraph) and where this paragraph applies to include a proportion of the income of the affiliate for the year in the income of the affiliate from a business other than an active businessthose activities carried out to earn such income of the affiliate for the year shall be deemed to be a separate business, other than an active business, carried on by the affiliate, andany income of the affiliate that pertains to or is incident to that business shall be deemed to be income from a business other than an active businessand for the purpose of this paragraph, where the income or loss of a partnership for a fiscal period that ends in the year is nil, the proportion of the income of the affiliate that is to be included in the income of the affiliate for the year from a business other than an active business shall be determined as if the partnership had income of $1,000,000 for that fiscal period;the provision, by a foreign affiliate of a taxpayer, of services or of an undertaking to provide servicesis deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the amounts paid or payable in consideration for those services or for the undertaking to provide servicesare deductible, or can reasonably be considered to relate to amounts that are deductible, in computing the income from a business carried on in Canada, byany taxpayer of whom the affiliate is a foreign affiliate, oranother taxpayer who does not deal at arm’s length withthe affiliate, orany taxpayer of whom the affiliate is a foreign affiliate, orare deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the foreign accrual property income of a foreign affiliate ofany taxpayer of whom the affiliate is a foreign affiliate, oranother taxpayer who does not deal at arm’s length withthe affiliate, orany taxpayer of whom the affiliate is a foreign affiliate, andis deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the services are, or are to be, performed byany taxpayer of whom the affiliate is a foreign affiliate,a relevant person who does not deal at arm’s length withthe affiliate, orany taxpayer of whom the affiliate is a foreign affiliate,a partnership any member of which is a person described in clause (A) or (B), ora partnership in which any person or partnership described in any of clauses (A) to (C) has, directly or indirectly, a partnership interest;if a foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of a taxpayer has, at any time, disposed of capital property (other than property the adjusted cost base of which, at that time, is greater than the amount that would, in the absence of this paragraph, be the disposing affiliate’s proceeds of disposition of the property in respect of the disposition) that was shares (referred to in this paragraph as the “shares disposed of”) of the capital stock of another foreign affiliate of the taxpayer to any other corporation that was, immediately after that time, a foreign affiliate (referred to in this paragraph as the “acquiring affiliate”) of the taxpayer for consideration that includes shares of the capital stock of the acquiring affiliate,the cost to the disposing affiliate of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the disposing affiliate as consideration for the disposition is deemed to be the fair market value of the property at that time,the cost to the disposing affiliate of each share of a class of the capital stock of the acquiring affiliate that is receivable by the disposing affiliate as consideration for the disposition is deemed to be the amount determined by the formula(A – B) × C/DwhereAis the total of all amounts each of which is the relevant cost base to the disposing affiliate at that time, in respect of the taxpayer, of a share disposed of,Bis the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate),Cis the fair market value, immediately after that time, of the share, andDis the fair market value, immediately after that time, of all shares of the capital stock of the acquiring affiliate receivable by the disposing affiliate as consideration for the disposition,the disposing affiliate’s proceeds of disposition of the shares are deemed to be an amount equal to the cost to it of all shares and other property receivable by it from the acquiring affiliate as consideration for the disposition, andthe cost to the acquiring affiliate of the shares acquired from the disposing affiliate is deemed to be an amount equal to the disposing affiliate’s proceeds of disposition referred to in subparagraph (iii);where there has been a foreign merger in which the shares owned by a foreign affiliate of a taxpayer of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares of the capital stock of the new foreign corporation or the foreign parent corporation, subsection 87(4) applies to the foreign affiliate as if the references in that subsection to“amalgamation” were read as “foreign merger”,“predecessor corporation” were read as “predecessor foreign corporation”,“new corporation” were read as “new foreign corporation or the foreign parent corporation”, and“adjusted cost bases” were read as “relevant cost bases, in respect of the taxpayer,”;if there has been a foreign merger of two or more predecessor foreign corporations to form a new foreign corporation that is, immediately after the merger, a foreign affiliate of a taxpayer and one or more of the predecessor foreign corporations (each being referred to in this paragraph as a “foreign affiliate predecessor”) was, immediately before the merger, a foreign affiliate of the taxpayer,each property of the new foreign corporation that was a property of a foreign affiliate predecessor immediately before the merger is deemed to have beendisposed of by the foreign affiliate predecessor immediately before the merger for proceeds of disposition equal to the relevant cost base of the property to the foreign affiliate predecessor, in respect of the taxpayer, at that time, andacquired by the new foreign corporation, at that time, at a cost equal to the amount determined under clause (A),the new foreign corporation is deemed to be the same corporation as, and a continuation of, each foreign affiliate predecessor for the purposes of applyingthis subsection and the definition foreign accrual property income in subsection (1) with respect to any disposition by the new foreign corporation of any property to which subparagraph (i) applied,subsections 13(21.2), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the merger, by a foreign affiliate predecessor, andparagraph 40(3.5)(c) in respect of any share that was deemed under that paragraph to be owned, at any time before the merger, by a foreign affiliate predecessor, andfor the purposes of the description of A.2 in the definition foreign accrual property income in subsection (1), the total of all amounts each of which is the amount determined for G in respect of a foreign affiliate predecessor for its last taxation year that ends on or before the time of the merger is deemed to be the amount determined for G in respect of the new foreign corporation for its taxation year that immediately precedes its first taxation year;notwithstanding subsection 69(5), if at any time a foreign affiliate (referred to in this paragraph as the “shareholder affiliate”) of a taxpayer receives a property (referred to in this paragraph as the “distributed property”) from another foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution,the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the relevant cost base to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, ifthe liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate, orthe distributed property is a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property of the disposing affiliate,if subparagraph (i) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the distributed property’s fair market value at that time,the distributed property is deemed to have been acquired, at that time, by the shareholder affiliate at a cost equal to the amount determined under subparagraph (i) or (ii) to be the disposing affiliate’s proceeds of disposition of the distributed property,each share of a class of the capital stock of the disposing affiliate that is disposed of by the shareholder affiliate on the liquidation and dissolution of the disposing affiliate is deemed to be disposed of for proceeds of disposition equal toif the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliatewhere the amount that would, if clause (B) applied, be determined under that clause in respect of the share is greater than or equal to the adjusted cost base of the share to the shareholder affiliate immediately before the disposition, that adjusted cost base, orwhere the adjusted cost base of the share to the shareholder affiliate immediately before the disposition exceeds the amount that would, if clause (B) applied, be determined under that clause in respect of the shareif the share is not excluded property of the shareholder affiliate, that adjusted cost base, andin any other case, the amount that would be determined under clause (B), andin any other case, the amount determined by the formula(A – B)/CwhereAis the total of all amounts each of which is the cost to the shareholder affiliate of a distributed property, as determined under subparagraph (iii), received, at any time, in respect of the class,Bis the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the shareholder affiliate in consideration for the distribution of a distributed property referred to in the description of A, andCis the total number of issued and outstanding shares of the class that are owned by the shareholder affiliate during the liquidation and dissolution, andif the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate,the shareholder affiliate is deemed to be the same corporation as, and a continuation of, the disposing affiliate for the purposes of applyingthis subsection and the definition foreign accrual property income in subsection (1) with respect to any disposition by the shareholder affiliate of any property to which clause (i)(A) applied,subsections 13(21.2), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the liquidation and dissolution, by the disposing affiliate, andparagraph 40(3.5)(c) in respect of any share that was deemed under that paragraph to be owned, at any time before the liquidation and dissolution, by the disposing affiliate, andfor the purposes of the description of A.2 in the definition foreign accrual property income in subsection (1), the amount, if any, determined for G in respect of the disposing affiliate for its first taxation year that ends after the beginning of the liquidation and dissolution is to be added to the amount otherwise determined for G in respect of the shareholder affiliate for its taxation year that immediately precedes its taxation year that includes the time at which the liquidation and dissolution began;[Repealed, 2013, c. 34, s. 70]except as otherwise provided in this Subdivision and except to the extent that the context otherwise requires, a foreign affiliate of a taxpayer is deemed to be at all times resident in Canada for the purposes of determining, in respect of the taxpayer for a taxation year of the foreign affiliate, each amount that is the foreign affiliate’scapital gain, capital loss, taxable capital gain or allowable capital loss from a disposition of a property, orincome or loss from a property, from a business other than an active business or from a non-qualifying business;in computing an amount described in paragraph (f) in respect of a property or a business, there is not to be included any portion of that amount that can reasonably be considered to have accrued, in respect of the property (including for the purposes of this paragraph any property for which the property was substituted) or the business, while no person or partnership that held the property or carried on the business was a specified person or partnership in respect of the taxpayer referred to in paragraph (f);in determining an amount described in paragraph (f) for a taxation year of a foreign affiliate of a taxpayer,if the amount is described in subparagraph (f)(i), this Act is to beread without reference to section 26 of the Income Tax Application Rules, andapplied as if, in respect of any debt obligation owing by the foreign affiliate or a partnership of which the foreign affiliate is a member (which foreign affiliate or partnership is referred to in this clause as the “debtor”), each capital gain or loss of the debtor that is deemed to arise under subsection 39(2) or (3) in respect of the debt obligation were from a disposition of property that was held by the debtor throughout the period during which the debt obligation was owed by the debtor and, for greater certainty, at the time of the disposition,if the amount is described in subparagraph (f)(ii),this Act is to be read without reference to subsections 17(1), 18(4), 18.2(2) and 18.4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,if the foreign affiliate has, in the taxation year, disposed of a foreign resource property in respect of a country, it is deemed to have designated, in respect of the disposition and in accordance with subparagraph 59(1)(b)(ii) for the taxation year, the amount, if any, by whichthe amount determined under paragraph 59(1)(a) in respect of the dispositionexceedsthe amount determined under subparagraph 59(1)(b)(i) in respect of the disposition,this Act is to be applied as if, in respect of any debt obligation owing by the foreign affiliate or a partnership of which the foreign affiliate is a member (which foreign affiliate or partnership is referred to in this clause as the “debtor”), each amount of income or loss of the debtor — from a property, from a business other than an active business or from a non-qualifying business — in respect of the debt obligation were from such a property that was held, or such a business that was carried on, as the case may be, by the debtor throughout the period during which the debt obligation was owed by the debtor and at the time at which the debt obligation was settled or extinguished,if the foreign affiliate is a controlled foreign affiliate of the taxpayer at the end of the taxation year, and the taxpayer is not an excluded entity (as defined in subsection 18.2(1)) for its taxation year (referred to in this clause as the “taxpayer year”) in which the taxation year ends,notwithstanding any other provision of this Act, no deduction shall be made in respect of any amount that is included in the affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year, to the extent of the proportion of that amount that is determined by the first formula in subsection 18.2(2) in respect of the taxpayer for the taxpayer year, andan amount is to be included, in determining the amount described in subparagraph (f)(ii) for the taxation year, that is equal to the amount that would be included under paragraph 12(1)(l.2) in determining the amount described in subparagraph (f)(ii) for the taxation year ifclause (A) were read without regard to its reference to subsection 18.2(2), andthe proportion that applied for the purposes of subparagraph (ii) of the description of B in paragraph 12(1)(l.2) were the proportion that is determined by the first formula in subsection 18.2(2) in respect of the taxpayer for the taxpayer year,notwithstanding any other provision of this Act, no deduction shall be made in respect of one or more amounts (each referred to in this clause as an “elected amount”) ifthe elected amount would, in the absence of this clause, clause (D) and subsection 18.2(19),be included in the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year, andbe deductible in determining the amount described in subparagraph (f)(ii),the total of the elected amounts is equal to the lesser of the following amounts (determined without regard to this clause, clause (D) and subsection 18.2(19)):the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) for the taxation year, andthe foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year,the taxpayer files with the Minister, in respect of the elected amounts, an election in writing in prescribed manner under this clause,the election specifieseach of the elected amounts,the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) (determined without regard to this clause and subsection 18.2(19)) for the taxation year,the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year,the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) (determined without regard to this clause, clause (D) and subsection 18.2(19)) for the taxation year, andthe foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) or foreign accrual property income, as the case may be, for the taxation year, andthe election is filed on or before the filing-due date of the taxpayer for its taxation year in which the taxation year ends, andthe following rules apply for the purposes of applying subsection 12.7(3) and the related provisions of section 18.4 in respect of a payment of which the foreign affiliate, or a partnership of which the foreign affiliate is a member, is a recipient:the definitions in subsection 18.4(1) apply for the purposes of this clause,subsection 12.7(3) is deemed not to apply in respect of the payment ifthe foreign affiliate’s income or loss derived from the payment is included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year, orin the case of a payment that subsection 18.4(9) deems to be made to the foreign affiliate or the partnership by a particular entity in respect of a notional interest expense on a particular debt, any income or loss that were derived by the foreign affiliate from the payment would, based on the relevant assumptions in respect of the payment, be included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year,for the purposes of sub-subclause (II)2, the relevant assumptions in respect of the payment arethe payment is an amount of interest paid by the particular entity to the foreign affiliate or the partnership, as the case may be, under a legal obligation to pay interest on the particular debt in the taxation year of the foreign affiliate or the partnership in which an amount in respect of the payment would, in the absence of subclause (II), be included under subsection 12.7(3) in the income of the foreign affiliate or partnership, andany amount that is deductible, in respect of the notional interest expense, is an amount deductible in respect of an expenditure for which the payment was made, andthe definition Canadian ordinary income in subsection 18.4(1) is to be read as ifits subparagraph (a)(ii) read as follows:the amount is described in paragraph (b) or (c) of the description of A in the definition foreign accrual property income in subsection 95(1), or”, andthe description of D in its paragraph (b) read as follows:is the total of all amounts, each of which is an amount, in respect of the payment, that is included in the description of H in the definition foreign accrual property income in subsection 95(1) in computing the foreign accrual property income of a member of the partnership for a taxation year; or”;a foreign affiliate of a taxpayer shall determine each of the following amounts using its calculating currency for a taxation year:subject to paragraph (f.13), each capital gain, capital loss, taxable capital gain and allowable capital loss (other than a gain or loss in respect of a debt referred to in subparagraph (i)(i) or (ii)) of the foreign affiliate for the taxation year from the disposition, at any time, of a property that, at that time, was an excluded property of the foreign affiliate,its income or loss for the taxation year from each active business carried on by it in the taxation year in a country, andits income or loss that is included in computing its income or loss from an active business for the taxation year because of paragraph (a);where the calculating currency of a foreign affiliate of a taxpayer is a currency other than Canadian currency, the foreign affiliate shall determine the amount included in computing its foreign accrual property income, in respect of the taxpayer for a taxation year of the foreign affiliate, attributable to its capital gain or taxable capital gain, from the disposition of an excluded property in the taxation year, in Canadian currency by converting the amount of the capital gain, or taxable capital gain, otherwise determined under subparagraph (f.12)(i) using its calculating currency for the taxation year into Canadian currency using the rate of exchange quoted by the Bank of Canada on the day on which the disposition was made, or another rate of exchange that is acceptable to the Minister;a foreign affiliate of a taxpayer is to determine using Canadian currency each amount of its income, loss, capital gain, capital loss, taxable capital gain or allowable capital loss for a taxation year, other than an amount to which paragraph (f.12), (f.13) or (f.15) applies;for the purposes of applying subparagraph (f)(i), the references in subsection 39(2) to “Canadian currency” are to be read as “the taxpayer’s calculating currency”in respect of a debt obligation owing by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member, that is a debt referred to in subparagraph (i)(i) or (ii), andin respect of an agreement described in subparagraph (i)(iii) entered into by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member;income earned, a loss incurred or a capital gain or capital loss realized, as the case may be, in a taxation year by a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the taxation year or a particular foreign affiliate of a taxpayer that is a controlled foreign affiliate of the taxpayer throughout the taxation year, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, is deemed to be nil if it is earned, incurred or realized in reference to any of the following sources:a debt obligation that was owing toanother foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year (which other foreign affiliate is referred to in this paragraph as a “qualified foreign affiliate”) by the particular affiliate, orthe particular affiliate by a qualified foreign affiliate,the redemption, acquisition or cancellation of, or a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of, a share of the capital stock of a qualified foreign affiliate by the qualified foreign affiliate, orthe disposition to a qualified foreign affiliate of a share of the capital stock of another qualified foreign affiliate;any income, loss, capital gain or capital loss, derived by a foreign affiliate of a taxpayer under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the foreign affiliate to reduce its risk (with respect to any source, any particular income, gain or loss determined in reference to which is deemed by paragraph (g) to be nil) of fluctuations in the value of currency, is, to the extent of the absolute value of the particular income, gain or loss, deemed to be nil;[Repealed, 2013, c. 34, s. 70]if at any time a particular foreign affiliate referred to in paragraph (g) is a member of a partnership or a qualified foreign affiliate referred to in that paragraph is a member of a partnership,in applying this paragraph, where a debt obligation is owing at that time by a debtor to the partnership of which the particular foreign affiliate is a member, the debt obligation is deemed to be owing at that time by the debtor to the particular foreign affiliate in the proportion that the particular foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,in applying this paragraph, where a debt obligation is owing at that time to a creditor by the partnership of which the particular foreign affiliate is a member, the debt obligation is deemed to be owing at that time to the creditor by the particular foreign affiliate in the proportion that the particular foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,in applying paragraph (g) and this paragraph, where a debt obligation is owing at that time by a debtor to the partnership of which the qualified foreign affiliate is a member, the debt obligation is deemed to be owing at that time by the debtor to the qualified foreign affiliate in the proportion that the qualified foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,in applying paragraph (g) and this paragraph, where a debt obligation is owing at that time to a creditor by the partnership of which the qualified foreign affiliate is a member, the debt obligation is deemed to be owing at that time to the creditor by the qualified foreign affiliate in the proportion that the qualified foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation, andin computing the particular foreign affiliate’s income or loss from a partnership, any income earned, loss incurred or capital gain or capital loss realized, as the case may be, by the partnership — in respect of the portion of a debt obligation owing to or owing by the partnership that is deemed by any of subparagraphs (i) to (iv) to be a debt obligation owing to or owing by the particular foreign affiliate (referred to in this subparagraph as the “allocated debt obligation”) — because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, that is attributable to the allocated debt obligation is deemed to be nil to the extent that paragraph (g) would, if the rules in subparagraphs (i) to (iv) were applied, have applied to the particular foreign affiliate, to deem to be nil the income earned, loss incurred or capital gain or capital loss realized, as the case may be, by the particular foreign affiliate in respect of the allocated debt obligation, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency;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 paragraph as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this paragraph as a “creditor affiliate”) of a qualifying entity (in this paragraph within the meaning assigned by subsection 39(2.2)), or that is a partnership (referred to in this paragraph 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 creditor affiliate’s or creditor partnership’s capital gain or capital loss, as the case may be, determined in the absence of this paragraph, in respect of the repayment, is to be reducedin the case of a capital lossif the creditor is a creditor affiliate, by an amount, not exceeding the amount of that capital loss so determined, that is determined by the formulaA/BwhereAis the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment, andBis the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumptions thatthe capital loss of the creditor affiliate, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, andneither the creditor affiliate nor any other foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, andif the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the formulaA/(B × C)whereAis the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment,Bis the proportion that the amount of the capital loss of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital loss so determined, andCis the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumptions thatthe capital loss of the creditor partnership, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, andneither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, andin the case of a capital gain,if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain so determined, that is equal to the amount determined by the formulaA/BwhereAis the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment, andBis the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumption that neither the creditor affiliate nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year other than its capital gain, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness, andif the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the following formulaA/(B × C)whereAis the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment,Bis the proportion that the amount of the capital gain of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital gain so determined, andCis the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumption that neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year;in computing the foreign accrual property income of a foreign affiliate of a taxpayer the Act shall be readas if the expression “income, taxable income or taxable income earned in Canada, as the case may be” in the definition commercial debt obligation in subsection 80(1) were read as “foreign accrual property income (within the meaning assigned by subsection 95(1))”, andwithout reference to subsections 80(3) to 80(12) and 80(15) and 80.01(5) to 80.01(11) and sections 80.02 to 80.04;for the purpose of computing the foreign accrual property income of a foreign affiliate of any taxpayer resident in Canada for a taxation year of the affiliate, an election made pursuant to paragraph 86.1(2)(f) in respect of a distribution received by the affiliate in a particular taxation year of the affiliate is deemed to have been filed under that paragraph by the affiliate ifwhere there is only one taxpayer resident in Canada in respect of whom the affiliate is a controlled foreign affiliate, the election is filed by the taxpayer with the taxpayer’s return of income for the taxpayer’s taxation year in which the particular year of the affiliate ends, andwhere there is more than one taxpayer resident in Canada in respect of whom the affiliate is a controlled foreign affiliate, all of those taxpayers jointly elect in writing and each of them files the joint election with the Minister with their return of income for their taxation year in which the particular year of the affiliate ends;[Repealed, 2001, c. 17, s. 73]any income, gain or loss of a foreign affiliate of a taxpayer or of a partnership of which a foreign affiliate of a taxpayer is a member (which foreign affiliate or partnership is referred to in this paragraph as the “debtor”), for a taxation year or fiscal period of the debtor, as the case may be, is deemed to be income, a gain or a loss, as the case may be, from the disposition of an excluded property of the debtor, if the income, gain or loss isderived from the settlement or extinguishment of a debt of the debtor all or substantially all of the proceeds from whichwere used to acquire property, if at all times after the time at which the debt became debt of the debtor and before the time of that settlement or extinguishment, the property (or property substituted for the property) was property of the debtor and was, or would if the debtor were a foreign affiliate of the taxpayer be, excluded property of the debtor,were used at all times to earn income from an active business carried on by the debtor, orwere used by the debtor for a combination of the uses described in clause (A) or (B),derived from the settlement or extinguishment of a debt of the debtor all or substantially all of the proceeds from which were used to settle or extinguish a debt referred to in subparagraph (i) or in this subparagraph, orderived under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the debtor to reduce its risk, with respect to a debt referred to in subparagraph (i) or (ii), of fluctuations in the value of the currency in which the debt was denominated;the adjusted cost base to a foreign affiliate of a taxpayer of an interest in a partnership at any time shall be such amount as is prescribed by regulation; andparagraph (j.2) applies if, in a particular taxation year of a foreign affiliate of a taxpayer or in a particular fiscal period of a partnership (which foreign affiliate or partnership is referred to in this paragraph and paragraph (j.2) as the “operator” and which particular taxation year or particular fiscal period is referred to in this paragraph and paragraph (j.2) as the “specified taxation year”) a member of which is, at the end of the period, a foreign affiliate of a taxpayer,the operator carries on a business,the business includes the insuring of risks,the business is not, at any time, a taxable Canadian business,the business isan investment business,a non-qualifying business, ora business whose activities include activities deemed by paragraph (a.2) or (b) to be a separate business, other than an active business, carried on by the affiliate, andin respect of the investment business, non-qualifying business or separate business (each of these businesses being referred to in this subparagraph and paragraph (j.2) as a “foreign business”), as the case may be, the operator would, if it were a corporation carrying on the foreign business in Canada, be required by law to report to, and be subject to the supervision of, a regulatory authority that is the Superintendent of Financial Institutions or is a similar authority of a province;if this paragraph applies, in computing the operator’s income or loss from the foreign business for the specified taxation year and each subsequent taxation year or fiscal period in which the foreign business is carried on by the operatorthe operator is deemed to carry on the foreign business in Canada throughout that part of the specified taxation year, and of each of those subsequent taxation years or fiscal periods, in which the foreign business is carried on by the operator, andfor the purposes of Part XIV of the Income Tax Regulations,the operator is deemed to be required by law to report to, and to be subject to the supervision of, the regulatory authority referred to in subparagraph (j.1)(v), andif the operator is a life insurer and the foreign business is part of a life insurance business, the life insurance policies issued in the conduct of the foreign business are deemed to be life insurance policies in Canada;paragraph (k.1) applies ifin a particular taxation year of a foreign affiliate of a taxpayer or in a particular fiscal period of a partnership (which foreign affiliate or partnership is referred to in this paragraph and paragraph (k.1) as the “operator” and which particular taxation year or particular fiscal period is referred to in this paragraph and paragraph (k.1) as the “specified taxation year”) a member of which is, at the end of the period, a foreign affiliate of a taxpayer,the operator carries on a business,the business is not, at any time, a taxable Canadian business, andthe business isan investment business,a non-qualifying business,a business whose activities include activities deemed by any of paragraphs (a.1) to (b) to be a separate business, other than an active business, carried on by the affiliate, ora business the income from which is included by paragraph (l) in computing the affiliate’s income from property for the specified taxation year, andin the taxation year of the affiliate or the fiscal period of the partnership that includes the day that is immediately before the beginning of the specified taxation year,the affiliate or partnership carried on the business, or the activities so deemed to be a separate business, as the case may be,the business was not, or the activities were not, as the case may be, at any time, part of a taxable Canadian business, andthe business was not described in any of subclauses (i)(C)(I), (II) and (IV), or the activities were not described in subclause (i)(C)(III), as the case may be;if this paragraph applies, in computing the operator’s income or loss from the investment business, non-qualifying business, separate business or business described in paragraph (l) (each of these businesses being referred to in this paragraph as a “foreign business”), as the case may be, and the operator’s capital gain or capital loss from the disposition of property used or held in the course of carrying on the foreign business, for the specified taxation year and each subsequent taxation year or fiscal period in which the foreign business is carried on by the operatorthe operator is deemedto begin to carry on the foreign business in Canada at the beginning of the specified taxation year, andto carry on the foreign business in Canada throughout that part of the specified taxation year, and of each of those subsequent taxation years or fiscal periods, in which the foreign business is carried on by the operator,where, in respect of the foreign business, the operator would, if it were a corporation carrying on the foreign business in Canada, be required by law to report to, and be subject to the supervision of, a regulatory authority that is the Superintendent of Financial Institutions or a similar authority of a province,the operator is deemed to be required by law to report to, and to be subject to the supervision of, the regulatory authority, andif the operator is a life insurer and the foreign business is part of a life insurance business, the life insurance policies issued in the conduct of the foreign business are deemed to be life insurance policies in Canada, andparagraphs 138(11.91)(c) to (e) apply to the operator for the specified taxation year in respect of the foreign business as ifthe operator were the insurer referred to in subsection 138(11.91),the specified taxation year of the operator were the particular taxation year of the insurer referred to in that subsection,the foreign business of the operator were the business of the insurer referred to in that subsection, andthe reference in paragraph 138(11.91)(e) to “property owned by it at that time that is designated insurance property in respect of the business” were read as a reference to “property owned or held by it at that time that is used or held by it in the particular taxation year in the course of carrying on the insurance business”;for the purposes of paragraphs (j.1) to (k.1) and the definition taxable Canadian business in subsection (1), any portion of a business carried on by a person or partnership that is carried on in Canada is deemed to be a business that is separate from any other portion of the business carried on by the person or partnership;in computing the income from property for a taxation year of a foreign affiliate of a taxpayer there shall be included the income of the affiliate for the year from a business (other than an investment business of the affiliate) the principal purpose of which is to derive income from trading or dealing in indebtedness (which for the purpose of this paragraph includes the earning of interest on indebtedness) other thanindebtedness owing by persons with whom the affiliate deals at arm’s length who are resident in the country in which the affiliate was formed or continued and exists and is governed and in which the business is principally carried on, ortrade accounts receivable owing by persons with whom the affiliate deals at arm’s length,unless it is established by the taxpayer or the foreign affiliate that, throughout the period in the taxation year during which the business was carried on by the affiliate,the business (other than any business conducted principally with persons with whom the affiliate does not deal at arm’s length) is carried on by the affiliate as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the lawsof each country in which the business is carried on through a permanent establishment in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,of the country in which the business is principally carried on, orif the affiliate is related to a non-resident corporation, of the country under whose laws that non-resident corporation is governed and any of exists, was (unless that non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union.[Repealed, 2018, c. 27, s. 7]a taxpayer has a qualifying interest in respect of a foreign affiliate of the taxpayer at any time if, at that time, the taxpayer ownednot less than 10% of the issued and outstanding shares (having full voting rights under all circumstances) of the affiliate, andshares of the affiliate having a fair market value of not less than 10% of the fair market value of all the issued and outstanding shares of the affiliateand for the purpose of this paragraphwhere, at any time, shares of a corporation are owned or are deemed for the purposes of this paragraph to be owned by another corporation (in this paragraph referred to as the “holding corporation”), those shares shall be deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of all such shares thatthe fair market value of the shares of the holding corporation owned at that time by the shareholderis ofthe fair market value of all the issued shares of the holding corporation outstanding at that time,where, at any time, shares of a corporation are property of a partnership or are deemed for the purposes of this paragraph to be property of a partnership, those shares shall be deemed to be owned at that time by each member of the partnership in a proportion equal to the proportion of all such shares thatthe member’s share of the income or loss of the partnership for its fiscal period that includes that timeis ofthe income or loss of the partnership for its fiscal period that includes that timeand for the purpose of this subparagraph, where the income and loss of the partnership for its fiscal period that includes that time are nil, that proportion shall be computed as if the partnership had income for the period in the amount of $1,000,000, andwhere, at any time, a person is a holder of convertible property issued by the affiliate before June 23, 1994 the terms of which confer on the holder the right to exchange the convertible property for shares of the affiliate and the taxpayer elects in its return of income for its first taxation year that ends after 1994 to have the provisions of this subparagraph apply to the taxpayer in respect of all the convertible property issued by the affiliate and outstanding at that time, each holder shall, in respect of the convertible property held by it at that time, be deemed to have, immediately before that time,exchanged the convertible property for shares of the affiliate, andacquired shares of the affiliate in accordance with the terms and conditions of the convertible property;in applying paragraphs (a) and (g), paragraph (b) of the description of A in the formula in the definition foreign accrual property income in subsection (1), subsections (2.2), (2.21) and 93.1(5) and paragraph (d) of the definition exempt earnings, and paragraph (c) of the definition exempt loss, in subsection 5907(1) of the Income Tax Regulations, a non-resident corporation is deemed to be, at any time, a foreign affiliate of a particular corporation resident in Canada, and a foreign affiliate of the particular corporation in respect of which the particular corporation has a qualifying interest, if at that timethe non-resident corporation is a foreign affiliate of another corporation that is resident in Canada and that is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation, andthat other corporation has a qualifying interest in respect of the non-resident corporation;a particular person is a qualifying member of a partnership at a particular time if, at that time, the particular person is a member of the partnership andthroughout the period, in the fiscal period of the partnership that includes the particular time, during which the member was a member of the partnership, the particular person is, on a regular, continuous and substantial basisactively engaged in those activities, of the principal business of the partnership carried on in that fiscal period by the partnership, that are other than activities connected with the provision of or the acquisition of funds required for the operation of that principal business, oractively engaged in those activities, of a particular business carried on in that fiscal period by the particular person (otherwise than as a member of a partnership) that is similar to the principal business carried on in that fiscal period by the partnership, that are other than activities connected with the provision of or the acquisition of funds required for the operation of the particular business, orthroughout the period, in the fiscal period of the partnership that includes the particular time, during which the particular person was a member of the partnershipthe total of the fair market value of all partnership interests in the partnership owned by the particular person was equal to or greater than 1% of the total of the fair market value of all partnership interests in the partnership owned by all members of the partnership, andthe total of the fair market value of all partnership interests in the partnership owned by the particular person or persons (other than trusts) related to the particular person was equal to or greater than 10% of the total of the fair market value of all partnership interests in the partnership owned by all members of the partnership;a particular person is a qualifying shareholder of a corporation at any time if throughout the period, in the taxation year of the corporation that includes that time, during which the particular person was a shareholder of the corporationthe particular person owned 1% or more of the issued and outstanding shares (having full voting rights under all circumstances) of the capital stock of the corporation,the particular person, or the particular person and persons (other than trusts) related to the particular person, owned 10% or more of the issued and outstanding shares (having full voting rights under all circumstances) of the capital stock of the corporation,the total of the fair market value of all the issued and outstanding shares of the capital stock of the corporation owned by the particular person is 1% or more of the total fair market value of all the issued and outstanding shares of the capital stock of the corporation, andthe total of the fair market value of all the issued and outstanding shares of the capital stock of the corporation owned by the particular person or by persons (other than trusts) related to the particular person is 10% or more of the total fair market value of all the issued and outstanding shares of the capital stock of the corporation;in applying paragraphs (o) and (p),where interests in any partnership or shares of the capital stock of any corporation (which interests or shares are referred to in this subparagraph as “equity interests”) are, at any time, property of a particular partnership or are deemed under this paragraph to be, at any time, property of the particular partnership, the equity interests are deemed to be owned at that time by each member of the particular partnership in a proportion equal to the proportion of the equity interests thatthe fair market value, at that time, of the member’s partnership interest in the particular partnershipis ofthe fair market value, at that time, of all members’ partnership interests in the particular partnership, andwhere interests in a partnership or shares of the capital stock of a corporation (which interests or shares are referred to in this subparagraph as “equity interests”) are, at any time, property of a non-discretionary trust (within the meaning assigned by subsection 17(15)) or are deemed under this paragraph to be, at any time, property of such a non-discretionary trust, the equity interests are deemed to be owned at that time by each beneficiary under that trust in a proportion equal to that proportion of the equity interests thatthe fair market value, at that time, of the beneficiary’s beneficial interest in the trustis ofthe fair market value, at that time, of all beneficial interests in the trust;in applying paragraph (a) and in applying paragraph (d) of the definition exempt earnings, and paragraph (c) of the definition exempt loss, in subsection 5907(1) of the Regulations, a partnership is deemed to be, at any time, a partnership of which a foreign affiliate — of a particular corporation resident in Canada and in respect of which foreign affiliate the particular corporation has a qualifying interest — is a qualifying member, if at that timea particular foreign affiliate — of another corporation that is resident in Canada and that is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation — is a member of the partnership,that other corporation has a qualifying interest in respect of the particular foreign affiliate, andthe particular foreign affiliate is a qualifying member of the partnership;in applying the definition investment business in subsection (1), a particular corporation is, at any time, a designated corporation in respect of a foreign affiliate of a taxpayer, if at that timea qualifying shareholder of the foreign affiliate or a person related to such a qualifying shareholder is a qualifying shareholder of the particular corporation,the particular corporationis controlled by a qualifying shareholder of the foreign affiliate, orwould be controlled by a particular qualifying shareholder of the foreign affiliate if the particular qualifying shareholder of the foreign affiliate owned each share of the capital stock of the particular corporation that is owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate, andthe total of all amounts each of which is the fair market value of a share of the capital stock of the particular corporation owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate is greater than 50% of the total fair market value of all the issued and outstanding shares of the capital stock of the particular corporation;in applying the definition investment business in subsection (1) in respect of a business carried on by a foreign affiliate of a taxpayer in a taxation year, a particular partnership is, at any time, a designated partnership in respect of the foreign affiliate of the taxpayer, if at that timethe foreign affiliate or a person related to the foreign affiliate is a qualifying member of the particular partnership, andthe total of all amounts — each of which is the fair market value of a partnership interest in the particular partnership held by the foreign affiliate, by a person related to the foreign affiliate or (where the foreign affiliate carries on, at that time, the business as a qualifying member of another partnership) by a qualifying member of the other partnership — is greater than 50% of the total fair market value of all partnership interests in the particular partnership owned by all members of the particular partnership;[Repealed, 2013, c. 34, s. 70]in applying paragraph (p),where shares of the capital stock of any corporation (referred to in this paragraph as the “issuing corporation”) are, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”) or are deemed under this paragraph to be, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”), those shares are deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of those shares thatthe fair market value, at that time, of the shares of the capital stock of the issuing corporation that are owned by the shareholderis ofthe fair market value, at that time, of all the issued and outstanding shares of the capital stock of the issuing corporation, anda person who is deemed by subparagraph (i) to own, at any time, shares of the capital stock of a corporation is deemed to be, at that time, a shareholder of the corporation;where a foreign affiliate of a corporation resident in Canada carries on an active business in more than one country,where the business is carried on in a country other than Canada, it is deemed to carry on that business in that country only to the extent that the profit or loss from that business can reasonably be attributed to a permanent establishment situated in that country, andwhere the business is carried on in Canada, it is deemed to carry on that business in Canada only to the extent that the income from the active business is subject to tax under this Part;the loss from an active business, from a non-qualifying business or from property (as the case may be) of a foreign affiliate of a taxpayer resident in Canada for a taxation year is the amount of that loss, if any, that is computed by applying the provisions in this Subdivision with respect to the computation of income from the active business, from the non-qualifying business or from property (as the case may be) of the foreign affiliate for the taxation year with any modifications that the circumstances require;in determining — for the purpose of paragraph (a) and for the purpose of applying subsections (2.2) and (2.21) for the purpose of applying that paragraph — whether a non-resident corporation is, at any time, a foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest, where interests in any partnership or shares of the capital stock of any corporation (which interests or shares are referred to in this paragraph as “equity interests”) are, at that time, property of a particular partnership or are deemed under this paragraph to be, at any time, property of the particular partnership, the equity interests are deemed to be owned at that time by each member of the particular partnership in a proportion equal to the proportion of the equity interests thatthe fair market value, at that time, of the member’s partnership interest in the particular partnershipis ofthe fair market value, at that time, of all members’ partnership interests in the particular partnership; andwhere a particular foreign affiliate of a taxpayer — in respect of which the taxpayer has a qualifying interest or that is a controlled foreign affiliate of the taxpayer — is a member of a partnership, the particular foreign affiliate’s foreign accrual property income or loss in respect of the taxpayer for a taxation year shall not include any income or loss of the partnership to the extent that the income or lossis attributable to the foreign accrual property income or loss of a foreign affiliate of the partnership that is also a foreign affiliate of the taxpayer (referred to in this paragraph as the “second foreign affiliate”) in respect of which the taxpayer has a qualifying interest or that is a controlled foreign affiliate of the taxpayer, andis, because of paragraph (a) as applied in respect of the taxpayer, included in computing the income or loss from an active business of the second foreign affiliate for a taxation year.Rules for the definition controlled foreign affiliateIn applying paragraph (b) of the definition controlled foreign affiliate in subsection (1) and in applying this subsection,shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, another corporation are deemed to be, at that time, owned by, or property of, as the case may be, each shareholder of the other corporation in the proportion thatthe fair market value at that time of the shares of the capital stock of the other corporation that, at that time, are owned by, or are property of, the shareholderis ofthe fair market value at that time of all the issued and outstanding shares of the capital stock of the other corporation;shares of the capital stock of a corporation that are, or are deemed by this subsection to be, at any time, property of a partnership, are deemed to be, at that time, owned by, or property of, as the case may be, each member of the partnership in the proportion thatthe fair market value at that time of the member’s partnership interest in the partnershipis ofthe fair market value at that time of all partnership interests in the partnership;shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, a non-discretionary trust (within the meaning assigned by subsection 17(15)) other than an exempt trust (within the meaning assigned by subsection (1)) are deemed to be, at that time, owned by, or property of, as the case may be, each beneficiary of the trust in the proportion thatthe fair market value at that time of the beneficiary’s beneficial interest in the trustis ofthe fair market value at that time of all beneficial interests in the trust; andall of the shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, a particular trust (other than an exempt trust within the meaning assigned by subsection (1) or a non-discretionary trust within the meaning assigned by subsection 17(15)) are deemed to be, at that time, owned by, or property of, as the case may be,each beneficiary of the particular trust at that time, andeach settlor (within the meaning assigned by subsection 17(15)) in respect of the particular trust at that time.Rule against double-countingIn applying the assumption in paragraph (b) of the definition controlled foreign affiliate in subsection (1) in respect of a taxpayer resident in Canada to determine whether a foreign affiliate of the taxpayer is at any time a controlled foreign affiliate of the taxpayer, nothing in that paragraph or in subsection (2.01) is to be read or construed as requiring an interest, or for civil law a right, in a share of the capital stock of the foreign affiliate of the taxpayer owned at that time by the taxpayer to be taken into account more than once.Rule for definition investment businessFor the purposes of the definition investment business in subsection 95(1), a foreign affiliate of a taxpayer, the taxpayer and, where the taxpayer is a corporation all the issued shares of which are owned by a corporation described in subparagraph 95(2.1)(a)(i), such corporation described in subparagraph 95(2.1)(a)(i) shall be considered to be dealing with each other at arm’s length in respect of the entering into of agreements that provide for the purchase, sale or exchange of currency and the execution of such agreements wherethe taxpayer isa bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, ora subsidiary wholly-owned corporation of a corporation described in subparagraph 95(2.1)(a)(i);the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements or similar agreements;the affiliate entered into the agreements in the course of a business carried on by the affiliate, ifthe business is carried on by the affiliate principally in a country (other than Canada) and principally with persons with whom the affiliate deals at arm’s length, andthe business activities of the affiliate are regulated in that country; andthe terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealing at arm’s length.Rule for investment business definition and paragraph (2)(l)A taxpayer or a foreign affiliate of the taxpayer, as the case may be, is deemed not to have established that the conditions in subparagraph (a)(i) of the definition investment business in subsection (1), or in subparagraph (2)(l)(iii), have been satisfied throughout a period in a particular taxation year of the affiliate unlessthroughout the period the taxpayer isa particular corporation resident in Canadathat is a bank listed in Schedule I to the Bank Act, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities that is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities, andthat is not a corporation the fair market value of any share of the capital stock of which is determined primarily by reference to one or more of the fair market value of, any revenue, income or cash flow from, any profits or gains from the disposition of, or any other similar criteria in respect of, property the fair market value of which is less than 90% of the fair market value of all of the property of the corporation,a corporation resident in Canadaof whichthe particular corporation described in subparagraph (i) is a subsidiary controlled corporation, ora corporation described in this subparagraph is a subsidiary wholly-owned corporation, andthat is not a corporation the fair market value of any share of the capital stock of which is determined primarily by reference to one or more of the fair market value of, any revenue, income or cash flow from, any profits or gains from the disposition of, or any other similar criteria in respect of, property the fair market value of which is less than 90% of the fair market value of all of the property of the corporation,a corporation resident in Canada each of the shares of the capital stock of which is owned by a corporation that is described in this subparagraph or in subparagraph (i) or (ii), ora partnershipeach member of which is a corporation described in any of subparagraphs (i) to (iii), or another partnership described in this subparagraph, orin respect of which the following conditions are satisfied:the partnership is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority described in clause (a)(i)(A), andthe share of the total income or loss of the partnership of a majority-interest partner of the partnership that is either a corporation resident in Canada or a Canadian partnership — together with the share of each corporation resident in Canada that is affiliated with the majority-interest partner — is equal to all or substantially all of the total income or loss of the partnership; andeitherthroughout the period the particular corporation described in subparagraph (a)(i) has, or is deemed for certain purposes to have, $2 billion or more of equityif the particular corporation is a bank, under the Bank Act,if the particular corporation is a trust company, under the Trust and Loan Companies Act, orif the particular corporation is an insurance corporation, under the Insurance Companies Act, ormore than 50% of the total of all amounts each of which is an amount of taxable capital employed in Canada (within the meaning assigned by Part I.3) of the taxpayer — or of a corporation resident in Canada that is affiliated with the taxpayer — for the taxation year of the taxpayer or of the affiliated corporation, as the case may be, that ends in the particular year is attributable to a business carried on in Canada, the activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities.Qualifying interest throughout yearFor the purposes of paragraphs (2)(a) and (g), a non-resident corporation that is not a foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout a particular taxation year is deemed to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout that particular taxation year ifa person or partnership has, in that particular taxation year, acquired or disposed of shares of the capital stock of that non-resident corporation or of any other corporation and, because of that acquisition or disposition, that non-resident corporation becomes or ceases to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest, andat the beginning of that particular taxation year or at the end of that particular taxation year, the non-resident corporation is a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest.Controlled foreign affiliate throughout yearFor the purposes of paragraphs (2)(a) and (g), a non-resident corporation is deemed to be a controlled foreign affiliate of a taxpayer throughout a taxation year of the non-resident corporation ifin the taxation year, a person or partnership acquires or disposes of shares of the capital stock of a corporation and, because of the acquisition or disposition, the non-resident corporation becomes or ceases to be a controlled foreign affiliate of the taxpayer; andat either or both of the beginning and end of the taxation year, the non-resident corporation is a controlled foreign affiliate of the taxpayer.Rule re subsection (2.2)Subsection (2.2) does not apply for the purpose of paragraph (2)(a) in respect of any income or loss referred to in that paragraph, of a particular foreign affiliate of the taxpayer, to the extent that that income or loss can reasonably be considered to have been realized or to have accrued before the earlier ofthe time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, andthe time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of another person resident in Canada in respect of which the other person resident in Canada had a qualifying interest, wherethe taxpayer is a corporation,the taxpayer did not exist at the beginning of the taxation year,the particular affiliate became a foreign affiliate of the taxpayer in the taxation year because of a disposition, in the taxation year, of shares of the capital stock of the particular affiliate to the taxpayer by the other person resident in Canada, andthe other person resident in Canada was, immediately before that disposition, related to the taxpayer.Application of paragraph (2)(a.1)Paragraph 95(2)(a.1) does not apply to a foreign affiliate of a taxpayer in respect of a sale or exchange of property that is currency or a right to purchase, sell or exchange currency wherethe taxpayer isa bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, ora subsidiary wholly-owned corporation of a corporation described in subparagraph 95(2.3)(a)(i);the sale or exchange was made by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length, ifthe business is principally carried on in the country (other than Canada) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, orthe affiliate is a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities and the activities of the business are regulatedunder the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country,under the laws of the country (other than Canada) in which the business is principally carried on, orif the affiliate is related to a corporation, under the laws of the country under the laws of which that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union; andthe terms and conditions of the sale or exchange of such property are substantially the same as the terms and conditions of similar sales or exchanges of such property by persons dealing at arm’s length.Application of paragraphs (2)(a.1) and (a.3)Paragraphs (2)(a.1) and (a.3) do not apply to a controlled foreign affiliate (for the purposes of section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of activities carried out to earn income from a property, other than a specified property of the affiliate, ifthe affiliate sells the property, or performs services as an agent in relation to a purchase or sale of the property, and it is reasonable to conclude that the cost to any person of the property is relevant in computing the income froma business carried on by the bank or a person resident in Canada with whom the bank does not deal at arm’s length, ora business carried on in Canada by a non-resident person with whom the bank does not deal at arm’s length;the property has a readily available fair market value andis listed on a recognized stock exchange,would be a mark-to-market property (as defined in subsection 142.2(1)) of the bank if it were owned by the bank, oris a debt obligation owing by the bank that would be a mark-to-market property (as defined in subsection 142.2(1)) of the affiliate ifthe affiliate were the taxpayer referred to in that definition, andthe definition specified debt obligation in subsection 142.2(1) were read without reference to its paragraph (d);the purchase and sale of the property by the affiliate, or services performed by the affiliate as agent in respect of the purchase or sale, are madeon terms and conditions that are substantially the same as the terms and conditions of similar purchases or sales of, or services performed in respect of the purchase or sale of, such property by persons dealing at arm’s length,in the course of a businessthat regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm’s length, andthat is principally carried on through a permanent establishment in a country other than Canada, andfor the purpose of enabling the purchase or sale of the property by a particular person who deals at arm’s length with the affiliate and the bank; andthe affiliate is a foreign bank or a trader or dealer in securities and the activities of the business are regulatedunder the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country,under the laws of the country (other than Canada) in which the business is principally carried on, orif the affiliate is related to a corporation, under the laws of the country under whose laws that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all those countries are members of the European Union.Definition of specified propertyFor the purposes of subsection (2.31), specified property, of a foreign affiliate, means a property that is owned by the affiliate for more than 10 days and that isa share of the capital stock of a corporation resident in Canada;a property traded on a stock exchange located in Canada and not traded on a stock exchange located in the jurisdiction in which the affiliate is resident; ora debt obligationof a corporation resident in Canada,of a trust or partnership, units of which are traded on a stock exchange located in Canada, orof, or guaranteed by, the Government of Canada, the government of a province, an agent of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada.Application of paragraph (2)(a.3)Paragraph 95(2)(a.3) does not apply to a foreign affiliate of a taxpayer in respect of its income derived directly or indirectly from indebtedness to the extent thatthe income is derived by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the lawsof the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued and of each country in which the business is carried on through a permanent establishment in that country,of the country in which the business is principally carried on, orif the affiliate is related to a corporation, of the country under the laws of which that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, andall the following conditions are satisfied:the income is derived by the affiliate from trading or dealing in the indebtedness (which, for this purpose, consists of income from the actual trading or dealing in the indebtedness and interest earned by the affiliate during a short term holding period on indebtedness acquired by it for the purpose of the trading or dealing) directly or indirectly with persons (in this subsection referred to as “regular customers”) thatdeal at arm’s length with the affiliate, andare resident, or carry on business through a permanent establishment, in a country other than Canada,the affiliate has a substantial market presence in the country, andone or more persons that deal at arm’s length with the affiliate and are resident, or carry on business through a permanent establishment, in the countrycarry on a businessthat competes in the country with the business of the affiliate, andthe activities of which are regulated under the laws of the country or, where the country is a member of the European Union, any country that is a member of the European Union, in the same manner as are the activities of the business of the affiliate, andhave a substantial market presence in the country,and, for the purpose of this subsection, an acquisition of indebtedness from the taxpayer shall be deemed to be part of the trading or dealing in indebtedness described in paragraph 95(2.4)(b) where the indebtedness is acquired by the affiliate and sold to regular customers and the terms and conditions of the acquisition and the sale are substantially the same as the terms and conditions of similar acquisitions and sales made by the affiliate in transactions with persons with whom it deals at arm’s length.Application of paragraph (2)(a.3)Paragraph (2)(a.3) does not apply to a foreign affiliate of a taxpayer resident in Canada in respect of the foreign affiliate’s income for a taxation year derived, directly or indirectly, from indebtedness of persons resident in Canada or from indebtedness in respect of businesses carried on in Canada (referred to in this subsection as the “Canadian indebtedness”) ifthe taxpayer is, at the end of the foreign affiliate’s taxation yeara life insurance corporation resident in Canada, the business activities of which are subject by law to the supervision of the Superintendent of Financial Institutions or a similar authority of a province, ora corporation resident in Canada that is a subsidiary controlled corporation of a corporation described in subparagraph (i);the Canadian indebtedness is used or held by the foreign affiliate, throughout the period in the taxation year that that Canadian indebtedness was used or held by the foreign affiliate, in the course of carrying on a business (referred to in this subsection as the “foreign life insurance business”) that is a life insurance business carried on outside Canada (other than a business deemed by paragraph (2)(a.2) to be a separate business other than an active business), the activities of which are regulatedunder the laws of the country under whose laws the foreign affiliate is governed and any of exists, was (unless the foreign affiliate was continued in any jurisdiction) formed or organized, or was last continued, andunder the laws of the country, if any, in which the business is principally carried on;more than 90% of the gross premium revenue of the foreign affiliate for the taxation year in respect of the foreign life insurance business was derived from the insurance or reinsurance of risks (net of reinsurance ceded) in respect of personsthat were non-resident at the time at which the policies in respect of those risks were issued or effected, andthat were at that time dealing at arm’s length with the foreign affiliate, the taxpayer and all persons that were related at that time to the foreign affiliate or the taxpayer; andit is reasonable to conclude that the foreign affiliate used or held the Canadian indebtednessto fund a liability or reserve of the foreign life insurance business, oras capital that can reasonably be considered to have been required for the foreign life insurance business.Exception re paragraph (2)(a.3)If, at any time in a taxation year of a foreign affiliate of a taxpayer referred to in paragraph (2)(a.3), a life insurance corporation resident in Canada is the taxpayer referred to in paragraph (2)(a.3) or is a person who controls, or is controlled by, such a taxpayer, a particular indebtedness or a particular lease obligation of the life insurance corporation is, for the purposes of that paragraph, deemed, at that time, not to be an indebtedness or a lease obligation of a person resident in Canada, to the extent of the portion of the particular indebtedness or lease obligation that can reasonably be considered to have been issued by the life insurance corporation to the foreign affiliatein respect of the life insurance corporation’s life insurance business carried on outside Canada; andnot in respect ofthe life insurance corporation’s life insurance business carried on in Canada, orany other use.Definitions — subsections (2.43) to (2.45)The following definitions apply in this subsection and subsections (2.44) and (2.45).Canadian indebtedness means indebtedness (other than upstream deposits) owed by persons resident in Canada or in respect of businesses carried on in Canada. (dettes canadiennes)eligible bank affiliate, of an eligible Canadian bank at any time, means a foreign bank that, at that time, is a controlled foreign affiliate (for the purposes of section 17) of the eligible Canadian bank and is described in subparagraph (a)(i) of the definition investment business in subsection (1). (filiale bancaire admissible)eligible Canadian bank means a bank listed in Schedule I to the Bank Act. (banque canadienne admissible)eligible Canadian indebtedness, owing to an eligible bank affiliate of an eligible Canadian bank, means bonds, debentures, notes or similar obligations of the Government of Canada, the government of a province, an agent of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, that are owing to the affiliate, other than property in respect of which paragraph (2)(a.3) does not apply because of subsection (2.31). (dettes canadiennes admissibles)eligible currency hedge, of an eligible bank affiliate of an eligible Canadian bank, means an agreement that provides for the purchase, sale or exchange of currency and thatcan reasonably be considered to have been made by the affiliate to reduce its risk of fluctuations in the value of currency with respect to eligible Canadian indebtedness and upstream deposits owing to the affiliate; andcannot reasonably be considered to have been made by the affiliate to reduce its risk with respect to property other than eligible Canadian indebtedness and upstream deposits owing to the affiliate. (couverture de change admissible)excess liquidity, of an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate, means the amount, if any, by whichthe average of all amounts each of which is, in respect of a month that ends in the 12-month period that begins 60 days prior to the beginning of the year — or, if the affiliate was formed after the beginning of the period, in respect of a month that ends in the year — the amount of the affiliate’s relationship deposits for the month, expressed in the affiliate’s calculating currency for the year unless the context requires otherwise,exceedsthe average of all amounts each of which is, in respect of a month that ends in the period — or, if the affiliate was formed after the beginning of the period, in respect of a month that ends in the year — the amount of the affiliate’s organic assets for the month, expressed in the affiliate’s calculating currency for the year unless the context requires otherwise. (liquidités excédentaires)organic assets, of an eligible bank affiliate of an eligible Canadian bank for a month, means the total of all amounts in respect of the affiliate each of which isincluded in the amounts reported as loans in the assets section of the consolidated monthly balance sheet accepted by the Superintendent of Financial Institutions that is filed for the month by the bank, or another corporation resident in Canada that is related to the bank at the end of the month, oran amount owing to the affiliate by a person that is related to the affiliate (other than an amount described in paragraph (a))but does not include the amount of an eligible Canadian indebtedness or upstream deposit owing to the affiliate. (actif organique)qualifying indebtedness, owing to an eligible bank affiliate of an eligible Canadian bank, means an upstream deposit owing to, or an eligible Canadian indebtedness of, the affiliate, to the extent that it can reasonably be considered thatthe upstream deposit or the acquisition of eligible Canadian indebtedness, as the case may be, is funded byproperty transferred or lent by a person other than the bank or a person resident in Canada that was not, at the time of the transfer or loan, dealing at arm’s length with the bank,a repayment of all or part of an upstream deposit owing to the affiliate, orthe purchase of eligible Canadian indebtedness by the bank or a person resident in Canada that was not, at the time of the transfer or loan, dealing at arm’s length with the bank; andthe proceeds of the upstream deposit or the proceeds received by the vendor of the eligible Canadian indebtedness, as the case may be, are used for a purpose other than to fund a transfer or loan of property by the bank — or another person resident in Canada that was not, at the time of the transfer or loan, dealing at arm’s length with the bank — to the affiliate or another foreign affiliate of the bank or of the other person. (dettes déterminées)relationship deposits, of an eligible bank affiliate of an eligible Canadian bank for a month, means the total of all amounts included in the amounts reported as demand and notice deposits, and fixed-term deposits in the liabilities section of the consolidated monthly balance sheet accepted by the Superintendent of Financial Institutions that is filed for the month by the bank, or another corporation resident in Canada that is related to the bank at the end of the month, that are deposits (other than of a temporary nature) of the affiliate made by a person who at the end of the monthdeals at arm’s length with the affiliate; andis not resident in Canada. (dépôts apparentés)total specified indebtedness, owing to an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate, means the average of all amounts each of which is, in respect of a month that ends in the year, the greatest total amount at any time in the month that is the total of all amounts each of which isthe amount of an upstream deposit owing to the affiliate;the amount of an eligible Canadian indebtedness owing to the affiliate; orthe positive or negative fair market value of an eligible currency hedge of the affiliate. (dettes désignées totales)upstream deposit, owing to an eligible bank affiliate of an eligible Canadian bank, means indebtedness owing by the bank to the affiliate. (dépôt en amont)FAPI adjustment — eligible bank affiliateIf a non-resident corporation (in this subsection referred to as the “affiliate”) is, throughout a taxation year of the affiliate, an eligible bank affiliate of an eligible Canadian bank, and the bank elects in writing under this subsection, in respect of the affiliate for the year, and files the election with the Minister on or before the filing-due date of the bank for the particular taxation year of the bank in which the year ends,there is to be deducted in computing the amount determined for A in the definition foreign accrual property income in subsection (1) in respect of the affiliate for the year, the lesser ofthe amount determined, without reference to this paragraph, for A in that definition in respect of the affiliate for the year, andthe amount determined by the following formula, where each amount referred to in the formula is to be determined using Canadian currency:A – B – C – DwhereAis the total of all amounts each of which is the affiliate’s income for the year that is from a qualifying indebtedness owing to, or an eligible currency hedge of, the affiliate and that would, in the absence of this subsection, be included in computing the income of the affiliate from a business other than an active business of the affiliate,Bis the total of all amounts each of which is the affiliate’s loss for the year that is from a qualifying indebtedness owing to, or an eligible currency hedge of, the affiliate and that would, in the absence of this subsection, be deducted in computing the income of the affiliate from a business other than an active business of the affiliate,Cis the total of all amounts each of which is the amount, if any, by which an amount included in computing the amount determined for A or B in respect of an upstream deposit exceeds the amount that would be the affiliate’s income, or is less than the amount that would be the affiliate’s loss, as the case may be, for the year from the upstream deposit if the interest received or receivable by the affiliate in respect of the upstream deposit were computed at an interest rate equal to the lesser ofthe rate of interest in respect of the upstream deposit, andthe benchmark rate of interest, acceptable to the Minister, that isif the upstream deposit is denominated in a qualifying currency (as defined in subsection 261(1)), the average, for the year, of a daily interbank offered rate for loans denominated in that currency with a term to maturity of three months, orin any other case, the average, for the year, of a daily rate for Canadian dollar denominated bankers’ acceptances with a term to maturity of three months, andDis the amount determined by the formulaE × F/GwhereEis the amount, if any, by which the amount determined for A exceeds the total of the amounts determined for B and C,Fis the amount, if any, by which the total specified indebtedness owing to the affiliate for the year exceeds the affiliate’s excess liquidity for the year, andGis the total specified indebtedness owing to the affiliate for the year; andthere is to be included, in computing the income of the affiliate from an active business for the year, an amount equal to the proportion of the amount computed under the formula in subparagraph (a)(ii), computed as if each amount referred to in that formula were determined using the affiliate’s calculating currency, that the amount that is required to be deducted under paragraph (a) for the year is of the amount described in subparagraph (a)(ii).Investment business and excluded propertyIf an election is made under subsection (2.44) in respect of an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate,for the purposes of the definition investment business in subsection (1), the bank, and any other person resident in Canada that does not deal at arm’s length with the bank, are deemed to deal at arm’s length with the affiliate in respect of the making of upstream deposits, and acquisitions of Canadian indebtedness from the bank or the other person, by the affiliate in the course of a business carried on by the affiliate in the year if the affiliate’s excess liquidity for the year is at least 90% of the total specified indebtedness owing to the affiliate for the year; andfor the purposes of paragraph (b) of the definition excluded property in subsection (1),the fair market value of each upstream deposit and Canadian indebtedness owing to, and eligible currency hedge of, the affiliate is deemed to be nil,at any particular time, the lesser of the following amounts is deemed to be the fair market value of a property of the affiliate that is excluded property at that particular time:the total of all amounts each of which is the fair market value of an upstream deposit or Canadian indebtedness owing to, or an eligible currency hedge of, the affiliate, andthe amount, if any, by whichthe affiliate’s relationship deposits for the calendar month that is two months prior to the particular time (or if the affiliate was formed less than two months prior to the particular time, for the calendar month that includes the particular time)exceedsthe amount of the affiliate’s organic assets for the calendar month that is two months prior to the particular time (or if the affiliate was formed less than two months prior to the particular time, for the calendar month that includes the particular time), andthe amount, if any, by which the amount in clause (ii)(A) exceeds the amount in subparagraph (ii) is deemed to be the fair market value of a property of the eligible bank affiliate that is not excluded property at that time.Definitions for paragraph (2)(a.3)For the purpose of paragraph 95(2)(a.3),excluded income and excluded revenue for a taxation year in respect of a foreign affiliate of a taxpayer mean, respectively, income or revenue, that isderived directly or indirectly from a specified deposit with a prescribed financial institution,derived directly or indirectly from a lease obligation of a person (other than the taxpayer or a person that does not deal at arm’s length with the taxpayer) resident in Canada relating to property used by the person in the course of carrying on a business through a permanent establishment outside Canada,included in computing the affiliate’s income for the year from carrying on a business through a permanent establishment in Canada, orincluded in computing the affiliate’s income or loss from an active business for the year because of subparagraph (2)(a)(ii); (revenu exclu)indebtedness does not include obligations of a particular person under agreements with non-resident corporations providing for the purchase, sale or exchange of currency wherethe agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements, or similar agreements,the particular person is a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province,the agreements are entered into by the non-resident corporation in the course of a business conducted principally with persons with whom the non-resident corporation deals at arm’s length, ifthe business is principally carried on in the country (other than Canada) under whose laws the non-resident corporation is governed and any of exists, was (unless the non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued, orthe non-resident corporation is a foreign affiliate of the particular person, or of a person related to the particular person, andthe non-resident corporation is a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, andthe activities of the business are regulatedunder the laws of the country under whose laws the non-resident corporation is governed and any of exists, was (unless the non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued and under the laws of each country in which the business is carried on through a permanent establishment in that country,under the laws of the country (other than Canada) in which the business is principally carried, orif the affiliate is related to a corporation, under the laws of the country under the laws of which a corporation related to the non-resident corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, andthe terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealings at arm’s length; (dette)specified deposit, of a foreign affiliate of a taxpayer, means a deposit of the affiliate made with a permanent establishment in a country other than Canada of a prescribed financial institution resident in Canada if the income from the deposit is income of the affiliate for the year that would, in the absence of paragraph (2)(a.3), be income from an active business carried on by the affiliate in a country other than Canada, other than a business the principal purpose of which is to derive income from property (including any interest, dividends, rents, royalties or similar returns, or any substitutes for any of those) or profits from the disposition of investment property. (dépôt déterminé)Rule for the definition specified person or partnershipFor the purposes of paragraphs (a) to (d) of the definition specified person or partnership in subsection (1), if a person or partnership (referred to in this subsection as the “taxpayer”) is not dealing at arm’s length with another person or partnership (referred to in this subsection as the “particular person”) at a particular time, the taxpayer is deemed to have existed and not to have dealt at arm’s length with the particular person, nor with each specified predecessor corporation of the particular person, throughout the period that began when the particular person or the specified predecessor corporation, as the case may be, came into existence and that ends at the particular time.Definition of servicesFor the purposes of paragraph 95(2)(b), services includes the insurance of Canadian risks but does not includethe transportation of persons or goods;services performed in connection with the purchase or sale of goods;the transmission of electronic signals or electricity along a transmission system located outside Canada; orthe manufacturing or processing outside Canada, in accordance with the taxpayer’s specifications and under a contract between the taxpayer and the affiliate, of tangible property, or for civil law corporeal property, that is owned by the taxpayer if the property resulting from the manufacturing or processing is used or held by the taxpayer in the ordinary course of the taxpayer’s business carried on in Canada.Application of paragraph (2)(b) — eligible Canadian bankParagraph (2)(b) does not apply to a controlled foreign affiliate (for the purposes of section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of services performed in connection with the purchase or sale of a property described in paragraph (2.31)(b) ifthe services have been performed by the affiliateunder terms and conditions that are substantially the same as the terms and conditions that would have been made between persons who deal at arm’s length with each other,in the course of a businessthat regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm’s length, andthat is principally carried on through a permanent establishment in a country other than Canada, andfor the purpose of enabling the acquisition or disposition of the property by a person who, at the time of the acquisition or disposition, deals at arm’s length with the affiliate and the eligible Canadian bank; andthe affiliate is a foreign bank or a trader or dealer in securities and the activities of the business are regulatedunder the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country,under the laws of the country (other than Canada) in which the business is principally carried on, orif the affiliate is related to a corporation, under the laws of the country under whose laws that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all those countries are members of the European Union.Rules for clause (2)(b)(ii)(B)For the purposes of clause (2)(b)(ii)(B),a relevant person isa person resident in Canada, ora non-resident person if the non-resident person performs the services referred to in subparagraph (2)(b)(ii) in the course of a business (other than a treaty-protected business) carried on in Canada; andany portion of a business carried on by a non-resident person that is carried on in Canada is deemed to be a business that is separate from any other portion of the business carried on by the person.Designated property — subparagraph (2)(a.1)(i)Designated property referred to in subparagraph (2)(a.1)(i) is property that is described in the portion of paragraph (2)(a.1) that is before subparagraph (i) that isproperty that was sold to non-resident persons other than the affiliate, or sold to the affiliate for sale to non-resident persons, andthatwas — in the course of carrying on a business in Canada — manufactured, produced, grown, extracted or processed in Canada by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, orwas — in the course of a business carried on by a foreign affiliate of the taxpayer outside Canada — manufactured or processed from tangible property, or for civil law corporeal property, that, at the time of the manufacturing or processing, was owned by the taxpayer or by a person related to the taxpayer and used or held by the owner in the course of carrying on a business in Canada, if the manufacturing or processing was in accordance with the specifications of the owner of that tangible or corporeal property and under a contract between that owner and that foreign affiliate,that was acquired, in the course of carrying on a business in Canada, by a purchaser from a vendor, ifthe purchaser is the taxpayer or is a person resident in Canada with whom the taxpayer does not deal at arm’s length, andthe vendor is a personwith whom the taxpayer deals at arm’s length,who is not a foreign affiliate of the taxpayer, andwho is not a foreign affiliate of a person resident in Canada with whom the taxpayer does not deal at arm’s length, orthat was acquired by a purchaser from a vendor, ifthe purchaser is the taxpayer or is a person resident in Canada with whom the taxpayer does not deal at arm’s length,the vendor is a foreign affiliate ofthe taxpayer, ora person resident in Canada with whom the taxpayer does not deal at arm’s length, andthat property was manufactured, produced, grown, extracted or processed in the countryunder whose laws the vendor is governed and any of exists, was (unless the vendor was continued in any jurisdiction) formed or organized, or was last continued, andin which the vendor’s business is principally carried on; orproperty that is an interest in real property, or a real right in an immovable, located in, or a foreign resource property in respect of, the countryunder whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, andin which the affiliate’s business is principally carried on.Contract manufacturingFor the purposes of clause (2)(a.1)(ii)(A), property of a particular foreign affiliate of a taxpayer is deemed to have been manufactured by the particular affiliate in a particular country if the property isdeveloped and designed by the particular affiliate in the particular country in the course of an active business carried on by the particular affiliate in the particular country; andmanufactured, produced or processed outside the particular country by another foreign affiliate of the taxpayer, during a period throughout which the taxpayer has a qualifying interest in the other affiliate,under a contract between the particular affiliate and the other affiliate, andin accordance with specifications provided by the particular affiliate.DefinitionsIn this section,direct equity percentage at any time of any person in a corporation is the percentage determined by the following rules:for each class of the issued shares of the capital stock of the corporation, determine the proportion of 100 that the number of shares of that class owned by that person at that time is of the total number of issued shares of that class at that time, andselect the proportion determined under paragraph (a) for that person in respect of the corporation that is not less than any other proportion so determined for that person in respect of the corporation at that time,and the proportion selected under paragraph (b), when expressed as a percentage, is that person’s direct equity percentage in the corporation at that time; (pourcentage d’intérêt direct)eligible controlled foreign affiliate, of a taxpayer, at any time, means a foreign affiliate of the taxpayer at that time, ifthe affiliate is a controlled foreign affiliate of the taxpayer at that time and at the end of the affiliate’s taxation year that includes that time, andthe following condition is met:A ≥ 90%whereAis the total of all amounts each of which would be the participating percentage (determined at the end of the taxation year) of a share owned by the taxpayer of the capital stock of a corporation, in respect of the affiliate, ifthe definition relevant cost base were read without reference to the words “if the affiliate is an eligible controlled foreign affiliate of the taxpayer at that time,” in its subparagraph (b)(i), andthe definition participating percentage in subsection (1) were read without reference to its paragraph (a) and the portion of its paragraph (b) before subparagraph (i); (société étrangère affiliée contrôlée admissible)equity percentage at any time of a person, in any particular corporation, is the total ofthe person’s direct equity percentage at that time in the particular corporation, andall percentages each of which is the product obtained when the person’s equity percentage at that time in any corporation is multiplied by that corporation’s direct equity percentage at that time in the particular corporationexcept that for the purposes of the definition participating percentage in subsection 95(1), paragraph (b) shall be read as if the reference to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”; (pourcentage d’intérêt)relevant cost base, of a property at any time to a foreign affiliate of a taxpayer, in respect of the taxpayer, means the greater ofthe amount determined — or, if the taxpayer is not a corporation, the amount that would be determined if the taxpayer were a corporation resident in Canada — by the formulaA + B – CwhereAis the amount for which the property could be disposed of at that time that would not, in the absence of paragraph (2)(f.1), result in any amount being added to, or deducted from, any of the affiliate’sexempt earnings, exempt loss, taxable earnings and taxable loss (all within the meaning of subsection 5907(1) of the Income Tax Regulations), in respect of the taxpayer, for the taxation year of the affiliate that includes that time, andhybrid surplus and hybrid deficit, in respect of the taxpayer, at that time,Bis the amount, if any, by which any income or gain from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), andCis the amount, if any, by which any loss from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), andeitherif the affiliate is an eligible controlled foreign affiliate of the taxpayer at that time, the amount that the taxpayer elects, in accordance with prescribed rules, in respect of the property not exceeding the fair market value at that time of the property, orin any other case, nil. (prix de base approprié)Application of s. 87(8.1)In this section, the expressions foreign merger, predecessor foreign corporation, new foreign corporation and foreign parent corporation have the meanings assigned by subsection 87(8.1).Income bonds or debentures issued by foreign affiliatesFor the purposes of this Subdivision, an income bond or income debenture issued by a corporation (other than a corporation resident in Canada) shall be deemed to be a share of the capital stock of the corporation unless any interest or other similar periodic amount paid by the corporation on or in respect of the bond or debenture was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country.Where rights or shares issued, acquired or disposed of to avoid taxFor the purposes of this Subdivision (other than section 90),where any person or partnership has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares of the capital stock of a corporation or interests in a partnership andit can reasonably be considered that the principal purpose for the existence of the right is to cause 2 or more corporations to be related for the purpose of paragraph 95(2)(a), those corporations shall be deemed not to be related for that purpose, orit can reasonably be considered that the principal purpose for the existence of the right is to permit any person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, those shares or partnership interests, as the case may be, are deemed to be owned by that person or partnership; andwhere a person or partnership acquires or disposes of shares of the capital stock of a corporation or interests in a partnership, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition is to permit a person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, that acquisition or disposition is deemed not to have taken place, and where the shares or partnership interests were unissued by the corporation or partnership immediately before the acquisition, those shares or partnership interests, as the case may be, are deemed not to have been issued.Stock dividends from foreign affiliatesFor the purposes of this Subdivision and subsection 52(3), the amount of any stock dividend paid by a foreign affiliate of a corporation resident in Canada shall, in respect of the corporation, be deemed to be nil.Tracking interests — interpretationFor the purposes of subsections (9) to (12), a particular property is a tracking interest in respect of a person or partnership (referred to in this subsection as the “tracked entity”) ifall or part of the fair market value of the particular property — or of any payment or right to receive an amount in respect of the particular property — can reasonably be considered to be determined, directly or indirectly, by reference to one or more of the following criteria in respect of property or activities of the tracked entity (referred to in this subsection and subsections (9) to (11) as the “tracked property and activities”):the fair market value of property of the tracked entity,any revenue, income or cash flow from property or activities of the tracked entity,any profits or gains from the disposition of property of the tracked entity, andany similar criteria in respect of property or activities of the tracked entity; andthe tracked property and activities in respect of the particular property represent less than all of the property and activities of the tracked entity.Tracking interests — investment business definitionFor the purposes of the definition investment business in subsection (1), if, at any time in a taxation year of a foreign affiliate of a taxpayer, a person or partnership holds a tracking interest in respect of the affiliate or a partnership of which the affiliate is a member, the tracked property and activities in respect of the tracking interest are, to the extent they would not otherwise be part of an investment business of the affiliate, deemed, in respect of the taxpayer,to be a separate business carried on by the affiliate throughout the year; andnot to be part of any other business of the affiliate.Conditions for subsection (11)Subsection (11) applies in respect of a foreign affiliate of a taxpayer for a taxation year of the affiliate if, at any time in the year,the taxpayer holds a property that is a tracking interest in respect of the affiliate; andshares of a class of the capital stock of the affiliate the fair market value of which can reasonably be considered to be determined by reference to the tracked property and activities in respect of the tracking interest (referred to in subsection (11) as a “tracking class”) are held by the taxpayer or a foreign affiliate of the taxpayer.Tracking class — separate corporationIf this subsection applies in respect of a foreign affiliate (referred to in this subsection as the “actual affiliate”) of a taxpayer for a taxation year of the actual affiliate, the following rules apply for the purpose of determining the amounts, if any, to be included under subsection 91(1), and to be deducted under subsection 91(4), by the taxpayer in respect of the year and for the purpose of applying section 233.4 in respect of the year:the tracked property and activities of the actual affiliate are deemed to be property and activities of a non-resident corporation (referred to in this subsection as the “separate corporation”) that is separate from the actual affiliate and not to be property or activities of the actual affiliate;any income, losses or gains for the year in respect of the property and activities described in paragraph (a) are deemed to be income, losses or gains of the separate corporation and not of the actual affiliate;all rights and obligations of the actual affiliate in respect of the property and activities described in paragraph (a) are deemed to be rights and obligations of the separate corporation and not of the actual affiliate;the separate corporation is deemed to have, at the end of the year, 100 issued and outstanding shares of a single class (referred to in this subsection as the “single class”) of its capital stock, having full voting rights under all circumstances;each shareholder of the actual affiliate is deemed to own, at the end of the year, that number of shares of the single class that is equal to the product of 100 and the amount that would be the aggregate participating percentage (as defined in subsection 91(1.3)) of that shareholder in respect of the actual affiliate for the year ifthe actual affiliate were a controlled foreign affiliate of that shareholder at the end of the year,the only shares of the capital stock of the actual affiliate issued and outstanding at the end of the year were shares of tracking classes in respect of the tracked properties and activities, andthe only income, losses and gains of the actual affiliate for the year were those referred to in paragraph (b); andany amounts included under subsection 91(1), or deducted under subsection 91(4), by the taxpayer in respect of shares of the separate corporation are deemed to be amounts included under subsection 91(1), or deducted under subsection 91(4), as the case may be, by the taxpayer in respect of shares of tracking classes held by the taxpayer or a foreign affiliate of the taxpayer, as the case may be.Tracking interests – controlled foreign affiliateIf subsection (11) does not apply in respect of a foreign affiliate of the taxpayer for a taxation year of the affiliate, the affiliate is deemed to be a controlled foreign affiliate of the taxpayer throughout the taxation year if, at any time in the year, a tracking interest in respect of the affiliate, or a partnership of which the affiliate is a member, is held bythe taxpayer; ora person or partnership (each referred to in this paragraph as a “holder”), ifthe holder does not deal at arm’s length with the taxpayer at that time,where either the taxpayer or the holder is a partnership and the other party is not, any member of the partnership does not deal at arm’s length, at that time, with the other party, orwhere both the taxpayer and the holder are partnerships, the taxpayer or any member of the taxpayer does not deal at arm’s length, at that time, with the holder or any member of the holder.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 95; 1994, c. 7, Sch. II, s. 71, c. 21, s. 43; 1995, c. 21, ss. 32, 46, 78; 1998, c. 19, ss. 122, 305; 1999, c. 22, s. 25; 2001, c. 17, s. 73; 2007, c. 35, s. 26; 2009, c. 2, s. 25; 2013, c. 34, ss. 33, 70, 121, 227; 2014, c. 39, s. 25; 2016, c. 7, ss. 12, 62, c. 12, s. 31; 2017, c. 33, s. 30; 2018, c. 27, s. 72023, c. 26, s. 202024, c. 15, s. 242024, c. 17, s. 21
Partnerships and their Members
General RulesWhere a taxpayer is a member of a partnership, the taxpayer’s income, non-capital loss, net capital loss, restricted farm loss and farm loss, if any, for a taxation year, or the taxpayer’s taxable income earned in Canada for a taxation year, as the case may be, shall be computed as ifthe partnership were a separate person resident in Canada;the taxation year of the partnership were its fiscal period;each partnership activity (including the ownership of property) were carried on by the partnership as a separate person, and a computation were made of the amount ofeach taxable capital gain and allowable capital loss of the partnership from the disposition of property, andeach income and loss of the partnership from each other source or from sources in a particular place,for each taxation year of the partnership;each income or loss of the partnership for a taxation year were computed as ifthis Act were read without reference to sections 34.1 and 34.2, subsection 59(1), paragraph 59(3.2)(c.1) and subsections 66.1(1), 66.2(1) and 66.4(1), andno deduction were permitted under any of section 29 of the Income Tax Application Rules, subsection 65(1) and sections 66, 66.1, 66.2, 66.21 and 66.4;each gain of the partnership from the disposition of land used in a farming business of the partnership were computed as if this Act were read without reference to paragraph 53(1)(i);the amount, if any, by whichthe total of all amounts determined under paragraphs 37(1)(a) to 37(1)(c.1) in respect of the partnership at the end of the taxation yearexceedsthe total of all amounts determined under paragraphs 37(1)(d) to 37(1)(g) in respect of the partnership at the end of the yearwere deducted under subsection 37(1) by the partnership in computing its income for the year;the amount of the income of the partnership for a taxation year from any source or from sources in a particular place were the income of the taxpayer from that source or from sources in that particular place, as the case may be, for the taxation year of the taxpayer in which the partnership’s taxation year ends, to the extent of the taxpayer’s share thereof; andthe amount, if any, by whichthe loss of the partnership for a taxation year from any source or sources in a particular place,exceedsin the case of a specified member (within the meaning of the definition specified member in subsection 248(1) if that definition were read without reference to paragraph (b) thereof) of the partnership in the year, the amount, if any, deducted by the partnership by virtue of section 37 in calculating its income for the taxation year from that source or sources in the particular place, as the case may be, andin any other case, nilwere the loss of the taxpayer from that source or from sources in that particular place, as the case may be, for the taxation year of the taxpayer in which the partnership’s taxation year ends, to the extent of the taxpayer’s share thereof.Income allocation to former memberIf, at any time in a fiscal period of a partnership, a taxpayer ceases to be a member of the partnershipfor the purposes of subsection (1), sections 34.1, 101 and 103 and paragraph 249.1(1)(b), and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; andfor the purposes of the application of paragraph (2.1)(b), subsection 40(3.12) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to endimmediately before the time at which the taxpayer is deemed by subsection 70(5) to have disposed of the interest in the partnership, where the taxpayer ceased to be a member of the partnership because of the taxpayer’s death, andimmediately before the time that is immediately before the time that the taxpayer ceased to be a member of the partnership, in any other case.Allocation of share of income to retiring partnerFor the purposes of subsection 96(1) and sections 34.1, 34.2, 101, 103 and 249.1,where the principal activity of a partnership is carrying on a business in Canada and its members have entered into an agreement to allocate a share of the income or loss of the partnership from any source or from sources in a particular place, as the case may be, to any taxpayer who at any time ceased to be a member ofthe partnership, ora partnership that at any time has ceased to exist or would, but for subsection 98(1), have ceased to exist, and eitherthe members of that partnership, orthe members of another partnership in which, immediately after that time, any of the members referred to in clause 96(1.1)(a)(ii)(A) became membershave agreed to make such an allocationor to the taxpayer’s spouse, or common-law partner, estate or heirs or to any person referred to in subsection 96(1.3), the taxpayer, spouse, or common-law partner, estate, heirs or person, as the case may be, shall be deemed to be a member of the partnership; andall amounts each of which is an amount equal to the share of the income or loss referred to in this subsection allocated to a taxpayer from a partnership in respect of a particular fiscal period of the partnership shall, notwithstanding any other provision of this Act, be included in computing the taxpayer’s income for the taxation year in which that fiscal period of the partnership ends.Deemed dividend of SIFT partnershipIf a SIFT partnership is liable to tax for a taxation year under Part IX.1,paragraph (1)(f) is to be read as if the expression “the amount of the income of the partnership for a taxation year from any source or from sources in a particular place” were read as “the amount, if any, by which the income of the partnership for a taxation year from any source or from sources in a particular place exceeds, in respect of each such source, the portion of the partnership’s taxable non-portfolio earnings for the taxation year that is applicable to that source”; andthe partnership is deemed to have received a dividend in the taxation year from a taxable Canadian corporation equal to the amount by which the partnership’s taxable non-portfolio earnings for the taxation year exceeds the tax payable by the partnership for the taxation year under Part IX.1.Disposal of right to share in income, etc.Where in a taxation year a taxpayer who has a right to a share of the income or loss of a partnership under an agreement referred to in subsection 96(1.1) disposes of that right,there shall be included in computing the taxpayer’s income for the year the proceeds of the disposition; andfor greater certainty, the cost to the taxpayer of each property received by the taxpayer as consideration for the disposition is the fair market value of the property at the time of the disposition.DeductionsWhere, by virtue of subsection 96(1.1) or 96(1.2), an amount has been included in computing a taxpayer’s income for a taxation year, there may be deducted in computing the taxpayer’s income for the year the lesser ofthe amount so included in computing the taxpayer’s income for the year, andthe amount, if any, by which the cost to the taxpayer of the right to a share of the income or loss of a partnership under an agreement referred to in subsection 96(1.1) exceeds the total of all amounts in respect of that right that were deductible by virtue of this subsection in computing the taxpayer’s income for previous taxation years.Right deemed not to be capital propertyFor the purposes of this Act, a right to a share of the income or loss of a partnership under an agreement referred to in subsection 96(1.1) shall be deemed not to be capital property.Disposition by virtue of death of taxpayerWhere, at the time of a taxpayer’s death, the taxpayer has a right to a share of the income or loss of a partnership under an agreement referred to in subsection 96(1.1), subsections 70(2) to 70(4) apply.Members deemed carrying on businessIf a partnership carries on a business in Canada at any time, each taxpayer who is deemed by paragraph (1.1)(a) to be a member of the partnership at that time is deemed to carry on the business in Canada at that time for the purposes of subsection 2(3), sections 34.1 and 150 and (subject to subsection 34.2(18)) section 34.2.Gains and lossesNotwithstanding subsection (1) or section 38, if in a particular taxation year of a taxpayer, the taxpayer is a member of a partnership with a fiscal period that ends in the particular year, the amount of a taxable capital gain, allowable capital loss or allowable business investment loss of the taxpayer for the particular year determined in respect of the partnership is the amount determined by the formulaA × B/CwhereAis the amount of the taxpayer’s taxable capital gain, allowable capital loss or allowable business investment loss, as the case may be, for the particular year otherwise determined under this section in respect of the partnership;Bis the relevant fraction that applies under paragraph 38(a), (a.1), (a.2), (b) or (c) for the particular year in respect of the taxpayer; andCis the fraction that was used under section 38 for the fiscal period of the partnership.ApplicationWhere the fraction referred to in the description of C in subsection (1.7) cannot be determined by a taxpayer in respect of a fiscal period of a partnership that ended before February 28, 2000, or includes February 28, 2000 or October 17, 2000, for the purposes of subsection (1.7), the fraction is deemed to bewhere the fiscal period ended before or began before February 28, 2000, 3/4;where the fiscal period began after February 27, 2000 and before October 18, 2000, 2/3; andin any other case, 1/2.Loan of propertyFor the purposes of subsection 56(4.1) and sections 74.1 and 74.3, where an individual has transferred or lent property, either directly or indirectly, by means of a trust or by any other means whatever, to a person and the property or property substituted therefor is an interest in a partnership, the person’s share of the amount of any income or loss of the partnership for a fiscal period in which the person was a specified member of the partnership shall be deemed to be income or loss, as the case may be, from the property or substituted property.ConstructionThe provisions of this Subdivision shall be read and construed as if each of the assumptions in paragraphs 96(1)(a) to 96(1)(g) were made.Tiered partnershipsFor the purposes of this section, a taxpayer includes a partnership.Limited partnership lossesNotwithstanding subsection 96(1), where a taxpayer is, at any time in a taxation year, a limited partner of a partnership, the amount, if any, by whichthe total of all amounts each of which is the taxpayer’s share of the amount of any loss of the partnership, determined in accordance with subsection 96(1), for a fiscal period of the partnership ending in the taxation year from a business (other than a farming business) or from propertyexceedsthe amount, if any, by whichthe taxpayer’s at-risk amount in respect of the partnership at the end of the fiscal periodexceeds the total ofthe amount required by subsection 127(8), 127.44(11), 127.45(8), 127.48(12) or 127.49(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.44(1)), the clean technology investment tax credit (as defined in subsection 127.45(1)), the clean hydrogen tax credit (as defined in subsection 127.48(1)) or the CTM investment tax credit (as defined in subsection 127.49(1)) of the taxpayer for the taxation year,the taxpayer’s share of any losses of the partnership for the fiscal period from a farming business, andthe taxpayer’s share ofthe foreign resource pool expenses, if any, incurred by the partnership in the fiscal period,the Canadian exploration expense, if any, incurred by the partnership in the fiscal period,the Canadian development expense, if any, incurred by the partnership in the fiscal period, andthe Canadian oil and gas property expense, if any, incurred by the partnership in the fiscal period,shallnot be deducted in computing the taxpayer’s income for the year,not be included in computing the taxpayer’s non-capital loss for the year,if the taxpayer is not a partnership, be deemed to be the taxpayer’s limited partnership loss in respect of the partnership for the year, andif the taxpayer is a partnership, reduce the taxpayer’s share of any loss of the partnership for a fiscal period of the partnership ending in the taxation year of the taxpayer from a business (other than a farming business) or from property.Tiered partnerships — adjustmentsThe following rules apply to taxation years of a taxpayer that end after February 26, 2018:for the purpose of applying section 111, the taxpayer’s non-capital loss, or limited partnership loss in respect of a partnership, for a preceding taxation year shall be determined as if subsection (2.01) and paragraph (2.1)(f) applied in respect of taxation years that end before February 27, 2018; andin computing the adjusted cost base to the taxpayer of the taxpayer’s interest in a partnership after February 26, 2018, there shall be added an amount equal to the portion of the amount of any reduction because of paragraph (a) in a non-capital loss of the taxpayer that can reasonably be considered to relate to the amount of a loss deducted under subparagraph 53(2)(c)(i) in computing the adjusted cost base of that interest.At-risk amountFor the purposes of this section and sections 111, 127, 127.44, 127.45, 127.47, 127.48 and 127.49, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount, if any, by which the total ofthe adjusted cost base to the taxpayer of the taxpayer’s partnership interest at that time, computed in accordance with subsection 96(2.3) where applicable,where the particular time is the end of the fiscal period of the partnership, the taxpayer’s share of the income of the partnership from a source for that fiscal period computed under the method described in subparagraph 53(1)(e)(i), andwhere the particular time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(1)(e)(viii) in respect of the taxpayer for that fiscal periodexceeds the total ofall amounts each of which is an amount owing at that time to the partnership, or to a person or partnership not dealing at arm’s length with the partnership, by the taxpayer or by a person or partnership not dealing at arm’s length with the taxpayer, other than any amount deducted under subparagraph 53(2)(c)(i.3) in computing the adjusted cost base, or under section 143.2 in computing the cost, to the taxpayer of the taxpayer’s partnership interest at that time, andany amount or benefit that the taxpayer or a person not dealing at arm’s length with the taxpayer is entitled, either immediately or in the future and either absolutely or contingently, to receive or to obtain, whether by way of reimbursement, compensation, revenue guarantee, proceeds of disposition, loan or any other form of indebtedness or in any other form or manner whatever, granted or to be granted for the purpose of reducing the impact, in whole or in part, of any loss that the taxpayer may sustain because the taxpayer is a member of the partnership or holds or disposes of an interest in the partnership, except to the extent that the amount or benefit is included in the determination of the value of J in the definition cumulative Canadian exploration expense in subsection 66.1(6), of M in the definition cumulative Canadian development expense in subsection 66.2(5) or of I in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) in respect of the taxpayer, or the entitlement arisesby virtue of a contract of insurance with an insurance corporation dealing at arm’s length with each member of the partnership under which the taxpayer is insured against any claim arising as a result of a liability incurred in the ordinary course of carrying on the partnership business,[Repealed, 1996, c. 21, s. 17]as a consequence of the death of the taxpayer,[Repealed, 1998, c. 19, s. 123]in respect of an amount not included in the at-risk amount of the taxpayer determined without reference to this paragraph, orbecause of an excluded obligation (as defined in subsection 6202.1(5) of the Income Tax Regulations) in relation to a share issued to the partnership by a corporation,and, for the purposes of this subsection,where the amount or benefit to which the taxpayer or the person is entitled at any time is provided by way of an agreement or other arrangement under which the taxpayer or the person has a right, either immediately or in the future and either absolutely or contingently (otherwise than as a consequence of the death of the taxpayer), to acquire other property in exchange for all or any part of the partnership interest, for greater certainty the amount or benefit to which the taxpayer or the person is entitled under the agreement or arrangement is considered to be not less than the fair market value of the other property at that time, andwhere the amount or benefit to which the taxpayer or the person is entitled at any time is provided by way of a guarantee, security or similar indemnity or covenant in respect of any loan or other obligation of the taxpayer or the person, for greater certainty the amount or benefit to which the taxpayer or the person is entitled under the guarantee or indemnity at any particular time is considered to be not less than the total of the unpaid amount of the loan or obligation at that time and all other amounts outstanding in respect of the loan or obligation at that time.IdemFor the purposes of subsection 96(2.2), where a taxpayer has acquired the taxpayer’s partnership interest at any time from a transferor other than the partnership, the adjusted cost base to the taxpayer of that interest shall be computed as if the cost to the taxpayer of the interest were the lesser ofthe taxpayer’s cost otherwise determined, andthe greater ofthe adjusted cost base of that interest to the transferor immediately before that time, andnil,and where the adjusted cost base of the transferor cannot be determined, it shall be deemed to be equal to the total of the amounts determined in respect of the taxpayer under paragraphs 96(2.2)(c) and 96(2.2)(d) immediately after that time.Limited partnerFor the purposes of this section and sections 111, 127, 127.44, 127.45, 127.47, 127.48 and 127.49, a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.5)) at that time and if, at that time or within three years after that time,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);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 (2.2)(d) if that paragraph were read without reference to subparagraphs (ii) and (vi);one of the reasons for the existence of the member who owns the interestcan reasonably be considered to be to limit the liability of any person with respect to that interest, andcannot reasonably be considered to be to permit any person who has an interest in the member to carry on that person’s business (other than an investment business) in the most effective manner; orthere 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.Exempt interestFor the purposes of subsection 96(2.4), an exempt interest in a partnership at any time means a prescribed partnership interest or an interest in a partnership that was actively carrying on business on a regular and a continuous basis immediately before February 26, 1986 and continuously thereafter until that time or that was earning income from the rental or leasing of property immediately before February 26, 1986 and continuously thereafter until that time, where there has not after February 25, 1986 and before that time been a substantial contribution of capital to the partnership or a substantial increase in the indebtedness of the partnership and, for this purpose, an amount will not be considered to be substantial wherethe amount was used by the partnership to make an expenditure required to be made pursuant to the terms of a written agreement entered into by it before February 26, 1986, or to repay a loan, debt or contribution of capital that had been received or incurred in respect of any such expenditure,the amount was raised pursuant to the terms of a prospectus, preliminary prospectus or registration statement filed before February 26, 1986 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of any province, and, where required by law, accepted for filing by that public authority, orthe amount was used for the activity that was carried on by the partnership on February 25, 1986 but was not used for a significant expansion of the activityand, for the purposes of this subsection,a partnership in respect of which paragraph 96(2.5)(b) applies shall be considered to have been actively carrying on a business on a regular and a continuous basis immediately before February 26, 1986 and continuously thereafter until the earlier of the closing date, if any, stipulated in the document referred to in that paragraph and January 1, 1987, andan expenditure shall not be considered to have been required to be made pursuant to the terms of an agreement where the obligation to make the expenditure is conditional in any way on the consequences under this Act relating to the expenditure and the condition has not been satisfied or waived before June 12, 1986.Artificial transactionsFor the purposes of paragraph 96(2.2)(c), where at any time an amount owing by a taxpayer or a person with whom the taxpayer does not deal at arm’s length is repaid and it is established, by subsequent events or otherwise, that the repayment was made as part of a series of loans or other transactions and repayments, the amount owing shall be deemed not to have been repaid.IdemFor the purposes of paragraph 96(2.2)(a), where at any time a taxpayer makes a contribution of capital to a partnership and the partnership or a person or partnership with whom or which the partnership does not deal at arm’s length makes a loan to the taxpayer or to a person with whom the taxpayer does not deal at arm’s length or repays the contribution of capital, and it is established, by subsequent events or otherwise, that the loan or repayment, as the case may be, was made as part of a series of loans or other transactions and repayments, the contribution of capital shall be deemed not to have been made to the extent of the loan or repayment, as the case may be.Agreement or election of partnership membersIf a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 10.1(1), 13(4), (4.2) and (16), the definition excluded interest in subsection 18.2(1), subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,the agreement, designation or election is not valid unlessit was made or executed on behalf of the taxpayer and each other person who was a member of the partnership during the fiscal period, andthe taxpayer had authority to act for the partnership;unless the agreement, designation or election is invalid because of paragraph 96(3)(a), each other person who was a member of the partnership during the fiscal period shall be deemed to have made or executed the agreement, designation or election; andnotwithstanding paragraph 96(3)(a), any agreement, designation or election deemed by paragraph 96(3)(b) to have been made or executed by any person shall be deemed to be a valid agreement, designation or election made or executed by that person.ElectionAny election under subsection 97(2) or 98(3) shall be made on or before the day that is the earliest of the days on or before which any taxpayer making the election is required to file a return of income pursuant to section 150 for the taxpayer’s taxation year in which the transaction to which the election relates occurred.Late filingWhere an election referred to in subsection 96(4) was not made on or before the day on or before which the election was required by that subsection to be made and that day was after May 6, 1974, the election shall be deemed to have been made on that day if, on or before the day that is 3 years after that day,the election is made in prescribed form; andan estimate of the penalty in respect of that election is paid by the taxpayer referred to in subsection 97(2) or by the persons referred to in subsection 98(3), as the case may be, when that election is made.Special casesWhere, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitableto permit an election under subsection 97(2) or 98(3) to be made after the day that is 3 years after the day on or before which the election was required by subsection 96(4) to be made, orto permit an election made under subsection 97(2) to be amended,the election or amended election shall be deemed to have been made on the day on or before which the election was so required to be made ifthe election or amended election is made in prescribed form, andan estimate of the penalty in respect of the election or amended election is paid by the taxpayer referred to in subsection 97(2) or by the persons referred to in subsection 98(3), as the case may be, when the election or amended election is made,and where this subsection applies to the amendment of an election, that election shall be deemed not to have been effective.Penalty for late-filed electionFor the purposes of this section, the penalty in respect of an election or an amended election referred to in paragraph 96(5)(a) or 96(5.1)(c) iswhere the election or amended election is made under subsection 97(2), an amount equal to the lesser of1/4 of 1% of the amount by which the fair market value of the property disposed of by the taxpayer referred to therein at the time of disposition exceeds the amount agreed on by the taxpayer and the members of the partnership in the election or amended election, for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 96(4) to be made and ending on the day the election or amended election is made, andan amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in subparagraph 96(6)(a)(i); andwhere the election is made under subsection 98(3), an amount equal to the lesser of1/4 of 1% of the amount by whichthe total of all amounts of money and the fair market value of partnership property received by the persons referred to therein as consideration for their interests in the partnership at the time that the partnership ceased to existexceedsthe total of each such person’s proceeds of disposition of that person’s interest in the partnership as determined under paragraph 98(3)(a),for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 96(4) to be made and ending on the day the election or amended election is made, andan amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in subparagraph 96(6)(b)(i).Unpaid balance of penaltyThe Minister shall, with all due dispatch, examine each election and amended election referred to in paragraph 96(5)(a) or 96(5.1)(c), assess the penalty payable and send a notice of assessment to the taxpayer or persons, as the case may be, and the taxpayer or persons, as the case may be, shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.Foreign partnershipsFor the purposes of this Act, where at a particular time a person resident in Canada becomes a member of a partnership, or a person who is a member of a partnership becomes resident in Canada, and immediately before the particular time no member of the partnership is resident in Canada, the following rules apply for the purpose of computing the partnership’s income for fiscal periods ending after the particular time:where, at or before the particular time, the partnership held depreciable property of a prescribed class (other than taxable Canadian property),no amount shall be included in determining the amounts for any of A, C, D and F to I in the definition undepreciated capital cost in subsection 13(21) in respect of the acquisition or disposition before the particular time of the property, andwhere the property is the partnership’s property at the particular time, the property shall be deemed to have been acquired, immediately after the particular time, by the partnership at a capital cost equal to the lesser of its fair market value and its capital cost to the partnership otherwise determined;in the case of the partnership’s property that is inventory (other than inventory of a business carried on in Canada) or non-depreciable capital property (other than taxable Canadian property) of the partnership at the particular time, its cost to the partnership shall be deemed to be, immediately after the particular time, equal to the lesser of its fair market value and its cost to the partnership otherwise determined; andany loss in respect of the disposition of a property (other than inventory of a business carried on in Canada or taxable Canadian property) by the partnership before the particular time shall be deemed to be nil.[Repealed, 2016, c. 12, s. 32]Application of foreign partnership ruleFor the purposes of applying subsection (8) and this subsection,where it can reasonably be considered that one of the main reasons that a member of a partnership is resident in Canada is to avoid the application of subsection (8), the member is deemed not to be resident in Canada; andwhere at any time a particular partnership is a member of another partnership,each person or partnership that is, at that time, a member of the particular partnership is deemed to be a member of the other partnership at that time,each person or partnership that becomes a member of the particular partnership at that time is deemed to become a member of the other partnership at that time, andeach person or partnership that ceases to be a member of the particular partnership at that time is deemed to cease to be a member of the other partnership at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 96; 1994, c. 7, Sch. II, s. 72, Sch. VIII, s. 40, c. 8, s. 11, c. 21, s. 44; 1995, c. 3, s. 25, c. 21, s. 33; 1996, c. 21, s. 17; 1997, c. 25, s. 21; 1998, c. 19, s. 123; 2000, c. 12, s. 142, c. 19, s. 15; 2001, c. 17, s. 74; 2003, c. 28, s. 10; 2007, c. 29, s. 7; 2011, c. 24, s. 20; 2013, c. 34, ss. 71, 228, c. 40, s. 43; 2016, c. 12, s. 32; 2017, c. 33, s. 31; 2018, c. 27, s. 82023, c. 26, s. 212024, c. 15, s. 252024, c. 17, s. 222024, c. 17, s. 80
Contribution of property to partnershipWhere at any time after 1971 a partnership has acquired property from a taxpayer who was, immediately after that time, a member of the partnership, the partnership shall be deemed to have acquired the property at an amount equal to its fair market value at that time and the taxpayer shall be deemed to have disposed of the property for proceeds equal to that fair market value.Rules if election by partnersNotwithstanding any other provision of this Act other than subsections (3) and 13(21.2), where a taxpayer at any time disposes of any property (other than an eligible derivative, as defined in subsection 10.1(5), of the taxpayer if subsection 10.1(6) applies to the taxpayer) that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),the provisions of paragraphs 85(1)(a) to 85(1)(f) apply to the disposition as ifthe reference therein to “corporation’s cost” were read as a reference to “partnership’s cost”,the references therein to “other than any shares of the capital stock of the corporation or a right to receive any such shares” and to “other than shares of the capital stock of the corporation or a right to receive any such shares” were read as references to “other than an interest in the partnership”,the references therein to “shareholder of the corporation” were read as references to “member of the partnership”,the references therein to “the corporation” were read as references to “all the other members of the partnership”, andthe references therein to “to the corporation” were read as references to “to the partnership”;in computing, at any time after the disposition, the adjusted cost base to the taxpayer of the taxpayer’s interest in the partnership immediately after the disposition,there shall be added the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the fair market value, at the time of the disposition, of the consideration (other than an interest in the partnership) received by the taxpayer for the property, andthere shall be deducted the amount, if any, by which the fair market value, at the time of the disposition, of the consideration (other than an interest in the partnership) received by the taxpayer for the property so disposed of by the taxpayer exceeds the fair market value of the property at the time of the disposition; andwhere the property so disposed of by the taxpayer to the partnership is taxable Canadian property of the taxpayer, the interest in the partnership received by the taxpayer as consideration for the property is deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer.Election not available — section 88Subsection (2) does not apply to a disposition of a property by a taxpayer to a particular partnership ifas part of a transaction or event or series of transactions or events that includes the dispositioncontrol of a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) is acquired by another taxable Canadian corporation (in this paragraph referred to as the “parent”),the subsidiary is wound up under subsection 88(1) or amalgamated with one or more other corporations under subsection 87(11), andthe parent makes a designation under paragraph 88(1)(d) in respect of an interest in a partnership;the disposition occurs after the acquisition of control of the subsidiary;the propertyis referred to in clauses (A) to (C) of the description of B in subparagraph 88(1)(d)(ii.1), oris an interest in a partnership that holds, directly or indirectly through one or more partnerships, property referred to in clauses (A) to (C) of the description of B in subparagraph 88(1)(d)(ii.1); andthe subsidiary is the taxpayer or has, before the disposition of the property, directly or indirectly in any manner whatever, an interest in the taxpayer.[Repealed, 1998, c. 19, s. 124]Where capital cost to partner exceeds proceeds of dispositionWhere subsection 97(2) has been applicable in respect of the acquisition of any depreciable property by a partnership from a taxpayer who was, immediately after the taxpayer disposed of the property, a member of the partnership and the capital cost to the taxpayer of the property exceeds the taxpayer’s proceeds of the disposition, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)the capital cost to the partnership of the property shall be deemed to be the amount that was the capital cost thereof to the taxpayer; andthe excess shall be deemed to have been allowed to the partnership in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the partnership of the property.Acquisition of certain tools — capital cost and deemed depreciationIf subsection (2) has applied in respect of the acquisition at any particular time of any depreciable property by a partnership from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individ­ual’s proceeds of disposition of the property,the capital cost to the partnership of the property is deemed to be equal to the individual’s original cost; andthe amount by which the individual’s original cost exceeds the individual’s proceeds of disposition in respect of the property is deemed to have been deducted by the partnership under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that particular time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 97; 1995, c. 21, s. 34; 1998, c. 19, s. 124; 2002, c. 9, s. 32; 2007, c. 2, s. 14; 2010, c. 12, s. 9; 2012, c. 31, s. 21; 2016, c. 12, s. 33; 2017, c. 33, s. 32
Disposition of partnership propertyFor the purposes of this Act, where, but for this subsection, at any time after 1971 a partnership would be regarded as having ceased to exist, the following rules apply:until such time as all the partnership property and any property substituted therefor has been distributed to the persons entitled by law to receive it, the partnership shall be deemed not to have ceased to exist, and each person who was a partner shall be deemed not to have ceased to be a partner,the right of each such person to share in that property shall be deemed to be an interest in the partnership, andnotwithstanding subsection 40(3), where at the end of a fiscal period of the partnership, in respect of an interest in the partnership,the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer of the interest at that timeexceedsthe total of the cost to the taxpayer of the interest determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time and all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the interest in computing the adjusted cost base to the taxpayer of that interest at that time,the amount of the excess shall be deemed to be a gain of the taxpayer for the taxpayer’s taxation year that includes that time from a disposition at that time of that interest.Deemed proceedsSubject to subsections 98(3) and 98(5) and 85(3), where at any time after 1971 a partnership has disposed of property to a taxpayer who was, immediately before that time, a member of the partnership, the partnership shall be deemed to have disposed of the property for proceeds equal to its fair market value at that time and the taxpayer shall be deemed to have acquired the property at an amount equal to that fair market value.Rules applicable if partnership ceases to existIf at any particular time after 1971 a Canadian partnership has ceased to exist and all the partnership property has been distributed to persons who were members of the partnership immediately before that time so that immediately after that time each such person has, in each such property, an undivided interest, or for civil law an undivided right (which undivided interest or undivided right is referred to in this subsection as an “undivided interest or right”, as the case may be) that, when expressed as a percentage (referred to in this subsection as that person’s “percentage”) of all undivided interests or rights in the property, is equal to the person’s undivided interest or right, when so expressed, in each other such property, if each such person has jointly so elected in respect of the property in prescribed form and within the time referred to in subsection 96(4), the following rules apply:each such person’s proceeds of the disposition of the person’s interest in the partnership shall be deemed to be an amount equal to the greater ofthe adjusted cost base to the person, immediately before the particular time, of the person’s interest in the partnership, andthe amount of any money received by the person on the cessation of the partnership’s existence, plus the person’s percentage of the total of amounts each of which is the cost amount to the partnership of each such property immediately before its distribution;the cost to each such person of that person’s undivided interest or right in each such property is deemed to be an amount equal to the total ofthat person’s percentage of the cost amount to the partnership of the property immediately before its distribution, and[Repealed, 2016, c. 12, s. 34]where the amount determined under subparagraph (a)(i) exceeds the amount determined under subparagraph (a)(ii), the amount determined under paragraph (c) in respect of the person’s undivided interest or right in the property;the amount determined under this paragraph in respect of each such person’s undivided interest or right in each such property that was a capital property (other than depreciable property) of the partnership is such portion of the excess, if any, described in subparagraph (b)(ii) as is designated by the person in respect of the property, except thatin no case shall the amount so designated in respect of the person’s undivided interest or right in any such property exceed the amount, if any, by which the person’s percentage of the fair market value of the property immediately after its distribution exceeds the person’s percentage of the cost amount to the partnership of the property immediately before its distribution,if such property is a membership interest in a partnership (in this subparagraph referred to as the “other partnership”), the person’s percentage of the fair market value of the property immediately after its distribution to the person is deemed to be determined by the formulaA − BwhereAis the amount that is the person’s percentage of the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution,Bis the portion of the amount by which the person’s percentage of the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution exceeds the person’s percentage of the cost amount to the partnership of the property immediately before its distribution as may reasonably be regarded as being attributable to the total of all amounts each of which is immediately after the particular timein the case of depreciable property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such depreciable property exceeds its cost amount,in the case of a Canadian resource property or a foreign resource property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of such Canadian or foreign resource property, orin the case of other property that is not a capital property, a Canadian resource property or a foreign resource property and that is held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such other property exceeds its cost amount, andin no case shall the total of amounts so designated in respect of the person’s undivided interest or right in all such capital properties (other than depreciable property) exceed the excess, if any, described in subparagraph (b)(ii);if the property so distributed by the partnership was depreciable property of the partnership of a prescribed class and any such person’s percentage of the amount that was the capital cost to the partnership of that property exceeds the amount determined under paragraph (b) to be the cost to the person of the person’s undivided interest or right in the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)the capital cost to the person of the person’s undivided interest or right in the property is deemed to be the person’s percentage of the amount that was the capital cost to the partnership of the property, andthe excess is deemed to have been allowed to the person in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the person of the undivided interest or right; andthe partnership shall be deemed to have disposed of each such property for proceeds equal to the cost amount to the partnership of the property immediately before its distribution.[Repealed, 2016, c. 12, s. 34]Where s. (3) does not applySubsection 98(3) is not applicable in any case in which subsection 98(5) or 85(3) is applicable.Where partnership business carried on as sole proprietorshipWhere at any particular time after 1971 a Canadian partnership has ceased to exist and within 3 months after the particular time one, but not more than one, of the persons who were, immediately before the particular time, members of the partnership (which person is in this subsection referred to as the “proprietor”, whether an individual, a trust or a corporation) carries on alone the business that was the business of the partnership and continues to use, in the course of the business, any property that was, immediately before the particular time, partnership property and that was received by the proprietor as proceeds of disposition of the proprietor’s interest in the partnership, the following rules apply:the proprietor’s proceeds of disposition of the proprietor’s interest in the partnership shall be deemed to be an amount equal to the greater ofthe total of the adjusted cost base to the proprietor, immediately before the particular time, of the proprietor’s interest in the partnership, and the adjusted cost base to the proprietor of each other interest in the partnership deemed by paragraph 98(5)(g) to have been acquired by the proprietor at the particular time, andthe total ofthe cost amount to the partnership, immediately before the particular time, of each such property so received by the proprietor, andthe amount of any other proceeds of the disposition of the proprietor’s interest in the partnership received by the proprietor;the cost to the proprietor of each such property shall be deemed to be an amount equal to the total ofthe cost amount to the partnership of the property immediately before that time, and[Repealed, 2016, c. 12, s. 34]where the amount determined under subparagraph 98(5)(a)(i) exceeds the amount determined under subparagraph 98(5)(a)(ii), the amount determined under paragraph 98(5)(c) in respect of the property;the amount determined under this paragraph in respect of each such property so received by the proprietor that is a capital property (other than depreciable property) of the proprietor is such portion of the excess, if any, described in subparagraph 98(5)(b)(ii) as is designated by the proprietor in respect of the property, except thatin no case shall the amount so designated in respect of any such property exceed the amount, if any, by which the fair market value of the property immediately after the particular time exceeds the cost amount to the partnership of the property immediately before that time,if such property is a membership interest in a partnership (in this subparagraph referred to as the “other partnership”), the fair market value of the property immediately after the particular time is deemed to be determined by the formulaA − BwhereAis the amount that is the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution to the proprietor,Bis the portion of the amount by which the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution to the proprietor exceeds the cost amount to the partnership of the property immediately before its distribution that may reasonably be regarded as being attributable to the total of all amounts each of which is immediately after the particular timein the case of depreciable property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such depreciable property exceeds its cost amount,in the case of a Canadian resource property or a foreign resource property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of such Canadian or foreign resource property, orin the case of a property that is not a capital property, a Canadian resource property or a foreign resource property and that is held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such property exceeds its cost amount, andin no case shall the total of amounts so designated in respect of all such capital properties (other than depreciable property) exceed the excess, if any, described in subparagraph 98(5)(b)(ii);where any such property so received by the proprietor was depreciable property of a prescribed class of the partnership and the amount that was the capital cost to the partnership of that property exceeds the amount determined under paragraph 98(5)(b) to be the cost to the proprietor of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)the capital cost to the proprietor of the property shall be deemed to be the amount that was the capital cost to the partnership of the property, andthe excess shall be deemed to have been allowed to the proprietor in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the proprietor of the property;the partnership shall be deemed to have disposed of each such property for proceeds equal to the cost amount to the partnership of the property immediately before the particular time; andwhere, at the particular time, all other persons who were members of the partnership immediately before that time have disposed of their interests in the partnership to the proprietor, the proprietor shall be deemed at that time to have acquired partnership interests from those other persons and not to have acquired any property that was property of the partnership.[Repealed, 2016, c. 12, s. 34]Continuation of predecessor partnership by new partnershipWhere a Canadian partnership (in this subsection referred to as the “predecessor partnership”) has ceased to exist at any particular time after 1971 and, at or before that time, all of the property of the predecessor partnership has been transferred to another Canadian partnership (in this subsection referred to as the “new partnership”) the only members of which were members of the predecessor partnership, the new partnership shall be deemed to be a continuation of the predecessor partnership and any member’s partnership interest in the new partnership shall be deemed to be a continuation of the member’s partnership interest in the predecessor partnership.Depreciable property — leasehold interests and optionsFor the purposes of paragraphs (3)(c) and (5)(c), a leasehold interest in a depreciable property and an option to acquire a depreciable property are depreciable properties.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 98; 1994, c. 7, Sch. II, s. 73, Sch. VIII, s. 41; 1995, c. 3, s. 26; 2001, c. 17, s. 75; 2013, c. 34, s. 122; 2016, c. 12, s. 34; 2017, c. 33, s. 332023, c. 26, s. 22
Residual interest in partnershipWhere, but for this subsection, at any time after 1971 a taxpayer has ceased to be a member of a partnership of which the taxpayer was a member immediately before that time, the following rules apply:until such time as all the taxpayer’s rights (other than a right to a share of the income or loss of the partnership under an agreement referred to in subsection 96(1.1)) to receive any property of or from the partnership in satisfaction of the taxpayer’s interest in the partnership immediately before the time at which the taxpayer ceased to be a member of the partnership are satisfied in full, that interest (in this section referred to as a “residual interest”) is, subject to sections 70, 110.6 and 128.1 but notwithstanding any other section of this Act, deemed not to have been disposed of by the taxpayer and to continue to be an interest in the partnership;where all of the taxpayer’s rights described in paragraph 98.1(1)(a) are satisfied in full before the end of the fiscal period of the partnership in which the taxpayer ceased to be a member thereof, the taxpayer shall, notwithstanding paragraph 98.1(1)(a), be deemed not to have disposed of the taxpayer’s residual interest until the end of that fiscal period;notwithstanding subsection 40(3), where at the end of a fiscal period of the partnership, in respect of a residual interest in the partnership,the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer of the residual interest at that timeexceedsthe total of the cost to the taxpayer of the residual interest determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time and all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the residual interest in computing the adjusted cost base to the taxpayer of that interest at that timethe amount of the excess shall be deemed to be a gain of the taxpayer, for the taxpayer’s taxation year that includes that time, from a disposition at that time of that residual interest; andwhere a taxpayer has a residual interestby reason of paragraph (b), the taxpayer shall, except for the purposes of subsections 110.1(4) and 118.1(8), be deemed not to be a member of the partnership, andin any other case, the taxpayer shall, except for the purposes of subsection 85(3), be deemed not to be a member of the partnership.Continuation of original partnershipWhere a partnership (in this subsection referred to as the “original partnership”) has or would but for subsection 98(1) have ceased to exist at a time when a taxpayer had rights described in paragraph 98.1(1)(a) in respect of that partnership and the members of another partnership agree to satisfy all or part of those rights, that other partnership shall, for the purposes of that paragraph, be deemed to be a continuation of the original partnership.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 98.1; 1994, c. 7, Sch. II, s. 74, c. 21, s. 45; 1995, c. 3, s. 27; 1998, c. 19, s. 125; 2006, c. 9, s. 63
Transfer of interest on deathWhere by virtue of the death of an individual a taxpayer has acquired a property that was an interest in a partnership to which, immediately before the individual’s death, section 98.1 applied,the taxpayer shall be deemed to have acquired a right to receive partnership property and not to have acquired an interest in a partnership;the taxpayer shall be deemed to have acquired the right referred to in paragraph 98.2(a) at a cost equal to the amount determined to be the proceeds of disposition of the interest in the partnership to the deceased individual by virtue of paragraph 70(5)(a) or (6)(d), as the case may be; andsection 43 is not applicable to the right.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1974-75-76, c. 26, s. 63
Fiscal period of terminated partnershipSubject to subsection (2), if, at any particular time in a fiscal period of a partnership, the partnership would, if this Act were read without reference to subsection 98(1), have ceased to exist, the fiscal period is deemed to have ended immediately before the time that is immediately before that particular time.Fiscal period of terminated partnership for individual memberWhere an individual was a member of a partnership that, at any time in a fiscal period of a partnership, has or would have, but for subsection 98(1), ceased to exist, for the purposes of computing the individual’s income for a taxation year the partnership’s fiscal period may, if the individual so elects and subsection 249.1(4) does not apply in respect of the partnership, be deemed to have ended immediately before the time when the fiscal period of the partnership would have ended if the partnership had not so ceased to exist.Validity of electionAn election under subsection 99(2) is not valid unless the individual was resident in Canada at the time when the fiscal period of the partnership would, if the election were valid, be deemed to have ended.IdemAn election under subsection 99(2) is not valid if, for the individual’s taxation year in which a fiscal period of the partnership would not, if the election were valid, be deemed to have ended but in which it would otherwise have ended, the individual elects to have applicable the rules set out in the Income Tax Application Rules that apply when two or more fiscal periods of a partnership end in the same taxation year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 99; 1996, c. 21, s. 17.1; 2013, c. 34, s. 229
Disposition of interest in partnershipIf, as part of a transaction or event or series of transactions or events, a taxpayer disposes of an interest in a partnership and an interest in the partnership is acquired by a person or partnership described in any of paragraphs (1.1)(a) to (d), then notwithstanding paragraph 38(a), the taxpayer’s taxable capital gain for a taxation year from the disposition of the interest is deemed to be the total of1/2 of such portion of the taxpayer’s capital gain for the year from the disposition as may reasonably be regarded as attributable to increases in the value of any partnership property of the partnership that is capital property (other than depreciable property) held directly by the partnership or held indirectly by the partnership through one or more other partnerships, andthe whole of the remaining portion of that capital gain.Acquisition by certain persons or partnershipsSubject to subsection (1.2), subsection (1) applies in respect of a disposition of a partnership interest by a taxpayer if the interest is acquired bya person exempt from tax under section 149;a non-resident person;another partnership to the extent that the interest can reasonably be considered to be held, at the time of its acquisition by the other partnership, indirectly through one or more partnerships, by a person that isexempt from tax under section 149,a non-resident, ora trust resident in Canada (other than a mutual fund trust) ifan interest as a beneficiary (in this subsection and subsection (1.2) having the meaning assigned by subsection 108(1)) under the trust is held, directly or indirectly through one or more other partnerships, by a person that is exempt from tax under section 149 or that is a trust (other than a mutual fund trust), andthe total fair market value of the interests as beneficiaries under the trust held by persons referred to in clause (A) exceeds 10% of the fair market value of all the interests as beneficiaries under the trust; ora trust resident in Canada (other than a mutual fund trust) to the extent that the trust can reasonably be considered to have a beneficiary that isexempt from tax under section 149,a partnership, ifan interest in the partnership is held, whether directly or indirectly through one or more other partnerships, by one or more persons that are exempt from tax under section 149 or are trusts (other than mutual fund trusts), andthe total fair market value of the interests held by persons referred to in clause (A) exceeds 10% of the fair market value of all the interests in the partnership, oranother trust (other than a mutual fund trust), ifone or more beneficiaries under the other trust are a person exempt from tax under section 149, a partnership or a trust (other than a mutual fund trust), andthe total fair market value of the interests as beneficiaries under the other trust held by the beneficiaries referred to in clause (A) exceeds 10% of the fair market value of all the interests as beneficiaries under the other trust.De minimisSubsection (1) does not apply to a taxpayer’s disposition of a partnership interest to a partnership or trust described in paragraph (1.1)(c) or (d) — other than a trust under which the amount of the income or capital to be distributed at any time in respect of any interest as a beneficiary under the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, any discretionary power — if the extent to which subsection (1) would, but for this subsection, apply to the taxpayer’s disposition of the interest because of subsection (1.1) does not exceed 10% of the taxpayer’s interest.Exception — non-resident personSubsection (1) does not apply in respect of a disposition of an interest in a partnership by a taxpayer to a person referred to in paragraph (1.1)(b) ifproperty of the partnership is used, immediately before and immediately after the acquisition of the interest by the non-resident person, in carrying on business through one or more permanent establishments in Canada; andthe total fair market value of the property referred to in paragraph (a) equals at least 90% of the total fair market value of all property of the partnership.Anti-avoidance — dilutionSubsection (1.5) applies in respect of a taxpayer’s interest in a partnership ifit is reasonable to conclude that one of the purposes of a dilution, reduction or alteration of the interest was to avoid the application of subsection (1) in respect of the interest; andas part of a transaction or event or series of transactions or events that includes the dilution, reduction or alteration, there isan acquisition of an interest in the partnership by a person or partnership described in any of paragraphs (1.1)(a) to (d), oran increase in, or alteration of, an interest in the partnership held by a person or partnership described in any of paragraphs (1.1)(a) to (d).Deemed gain — dilutionIf this subsection applies in respect of a particular interest in a partnership of a taxpayer, then for the purposes of subsection (1),the taxpayer is deemed to have disposed of an interest in the partnership at the time of the dilution, reduction or alteration;the taxpayer is deemed to have a capital gain from the disposition equal to the amount by which the fair market value of the particular interest immediately before the dilution, reduction or alteration exceeds its fair market value immediately thereafter; andthe person or partnership referred to in paragraph (1.4)(b) is deemed to have acquired an interest in the partnership as part of the transaction or event or series of transactions or events that includes the disposition referred to in paragraph (a).Gain from disposition of interest in partnershipIn computing a taxpayer’s gain for a taxation year from the disposition of an interest in a partnership, there shall be included, in addition to the amount thereof determined under subsection 40(1), the amount, if any, by whichthe total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer, immediately before the disposition, of the interest in the partnership,exceedsthe total ofthe cost to the taxpayer of the interest in the partnership determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time, andall amounts required by subsection 53(1) to be added to the cost to the taxpayer of that interest in computing the adjusted cost base to the taxpayer of that interest at that time.IdemWhere, as a result of an amalgamation or merger, an interest in a partnership owned by a predecessor corporation has become property of the new corporation formed as a result of the amalgamation or merger and the predecessor corporation was not related to the new corporation, the predecessor corporation shall be deemed to have disposed of the interest in the partnership to the new corporation immediately before the amalgamation or merger for proceeds of disposition equal to the adjusted cost base to the predecessor corporation of the interest in the partnership at the time of the disposition and the new corporation shall be deemed to have acquired the interest in the partnership from the predecessor corporation immediately after that time at a cost equal to the proceeds of disposition.Transfer of interest on deathWhere by virtue of the death of an individual a taxpayer has acquired a property that was an interest in a partnership immediately before the individual’s death (other than an interest to which, immediately before the individual’s death, section 98.1 applied) and the taxpayer is not a member of the partnership and does not become a member of the partnership by reason of that acquisition,the taxpayer shall be deemed to have acquired a right to receive partnership property and not to have acquired an interest in a partnership;the taxpayer shall be deemed to have acquired the right referred to in paragraph 100(3)(a) at a cost equal to the amount determined to be the proceeds of disposition of the interest in the partnership to the deceased individual by virtue of paragraph 70(5)(a) or 70(6)(d), as the case may be; andsection 43 is not applicable to the right.Loss re interest in partnershipNotwithstanding paragraph 39(1)(b), the capital loss of a taxpayer from the disposition at any time of an interest in a partnership is deemed to be the amount of the loss otherwise determined minus the total of all amounts each of which is the amount by which the taxpayer’s share of the partnership’s loss, in respect of a share of the capital stock of a corporation that was property of a particular partnership at that time, would have been reduced under subsection 112(3.1) if the fiscal period of every partnership that includes that time had ended immediately before that time and the particular partnership had disposed of the share immediately before the end of that fiscal period for proceeds equal to its fair market value at that time.Replacement of partnership capitalA taxpayer who pays an amount at any time in a taxation year is deemed to have a capital loss from a disposition of property for the year ifthe taxpayer disposed of an interest in a partnership before that time or, because of subsection (3), acquired before that time a right to receive property of a partnership;that time is after the disposition or acquisition, as the case may be;the amount would have been described in subparagraph 53(1)(e)(iv) had the taxpayer been a member of the partnership at that time; andthe amount is paid pursuant to a legal obligation of the taxpayer to pay the amount.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 100; 1998, c. 19, s. 126; 2001, c. 17, s. 76; 2012, c. 31, s. 22; 2013, c. 34, s. 230; 2017, c. 33, s. 34
Disposition of farmland by partnershipWhere a taxpayer was a member of a partnership at the end of a taxation year of the partnership in which the partnership disposed of land used in a farming business of the partnership, there may be deducted in computing the taxpayer’s income for the taxpayer’s taxation year in which the taxation year of the partnership ended, 1/2 of the total of all amounts each of which is an amount in respect of that taxation year of the taxpayer or any preceding taxation year of the taxpayer ending after 1971, equal to the taxpayer’s loss, if any, for the year from the farming business, to the extent that the losswas, by virtue of section 31, not deductible in computing the taxpayer’s income for the year;was not deducted for the purpose of computing the taxpayer’s taxable income for the taxpayer’s taxation year in which the partnership’s taxation year in which the land was disposed of ended, or for any preceding taxation year of the taxpayer;did not exceed that proportion of the total oftaxes (other than income or profits taxes or taxes imposed by reference to the transfer of the property) paid by the partnership in its taxation year ending in the year or payable by it in respect of that taxation year to a province or a Canadian municipality in respect of the property, andinterest paid by the partnership in its taxation year ending in the year or payable by it in respect of that taxation year, pursuant to a legal obligation to pay interest on borrowed money used to acquire the property or on any amount as consideration payable for the property,(to the extent that the taxes and interest were included in computing the loss of the partnership for that taxation year from the farming business), thatthe taxpayer’s loss from the farming business for the yearis ofthe partnership’s loss from the farming business for its taxation year ending in the year; anddid not exceed the remainder obtained whenthe total of each of the taxpayer’s losses from the farming business for taxation years preceding the year (to the extent that those losses are included in computing the amount determined under this section in respect of the taxpayer)is deducted fromtwice the amount of the taxpayer’s taxable capital gain from the disposition of the land.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 101; 2001, c. 17, s. 77
Definition of Canadian partnershipIn this Subdivision, Canadian partnership means a partnership all of the members of which were, at any time in respect of which the expression is relevant, resident in Canada.Member of a partnershipIn this Subdivision, a reference to a person or a taxpayer who is a member of a particular partnership shall include a reference to another partnership that is a member of the particular partnership.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“102”; 1986, c. 55, s. 27
Agreement to share income, etc., so as to reduce or postpone tax otherwise payableWhere the members of a partnership have agreed to share, in a specified proportion, any income or loss of the partnership from any source or from sources in a particular place, as the case may be, or any other amount in respect of any activity of the partnership that is relevant to the computation of the income or taxable income of any of the members thereof, and the principal reason for the agreement may reasonably be considered to be the reduction or postponement of the tax that might otherwise have been or become payable under this Act, the share of each member of the partnership in the income or loss, as the case may be, or in that other amount, is the amount that is reasonable having regard to all the circumstances including the proportions in which the members have agreed to share profits and losses of the partnership from other sources or from sources in other places.Agreement to share income, etc., in unreasonable proportionsWhere two or more members of a partnership who are not dealing with each other at arm’s length agree to share any income or loss of the partnership or any other amount in respect of any activity of the partnership that is relevant to the computation of the income or taxable income of those members and the share of any such member of that income, loss or other amount is not reasonable in the circumstances having regard to the capital invested in or work performed for the partnership by the members thereof or such other factors as may be relevant, that share shall, notwithstanding any agreement, be deemed to be the amount that is reasonable in the circumstances.Definition of lossesFor the purposes of this section, the word losses when used in the expression “profits and losses” means losses determined without reference to other provisions of this Act.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“103”; 1980-81-82-83, c. 48, s. 53
Trusts and their Beneficiaries
Reference to trust or estateIn this Act, a reference to a trust or estate (in this Subdivision referred to as a “trust”) shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property, but, except for the purposes of this subsection, subsection (1.1), section 150, subparagraph (b)(v) of the definition disposition in subsection 248(1) and paragraph (k) of that definition, a trust is deemed not to include an arrangement under which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property unless the trust is described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1).Restricted meaning of beneficiaryNotwithstanding subsection 248(25), for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time if the person or partnership is beneficially interested in the trust at the particular time solely because ofa right that may arise as a consequence of the terms of the will or other testamentary instrument of an individual who, at the particular time, is a beneficiary under the trust;a right that may arise as a consequence of the law governing the intestacy of an individual who, at that time, is a beneficiary under the trust;a right as a shareholder under the terms of the shares of the capital stock of a corporation that, at the particular time, is a beneficiary under the trust;a right as a member of a partnership under the terms of the partnership agreement, where, at the particular time, the partnership is a beneficiary under the trust; orany combination of rights described in paragraphs (a) to (d).Taxed as individualA trust shall, for the purposes of this Act, and without affecting the liability of the trustee or legal representative for that person’s own income tax, be deemed to be in respect of the trust property an individual, but where there is more than one trust andsubstantially all of the property of the various trusts has been received from one person, andthe various trusts are conditioned so that the income thereof accrues or will ultimately accrue to the same beneficiary, or group or class of beneficiaries,such of the trustees as the Minister may designate shall, for the purposes of this Act, be deemed to be in respect of all the trusts an individual whose property is the property of all the trusts and whose income is the income of all the trusts.Deemed disposition by trustEvery trust is, at the end of each of the following days, deemed to have disposed of each property of the trust (other than exempt property) that was capital property (other than depreciable property) or land included in the inventory of a business of the trust for proceeds equal to its fair market value (determined with reference to subsection 70(5.3)) at the end of that day and to have reacquired the property immediately after that day for an amount equal to that fair market value, and for the purposes of this Act those days arewhere the trustis a trust that was created by the will of a taxpayer who died after 1971 and that, at the time it was created, was a trust,is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(c) (or, in the case of a transfer that occurred in a taxation year before 2007, (b) or (d), as those paragraphs read in their application to that taxation year) or (6)(d) applied, and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,is a trust that was created after June 17, 1971 by a taxpayer during the taxpayer’s lifetime that, at any time after 1971, was a trust, oris a trust (other than a trust the terms of which are described in clause (iv)(A) that elects in its return of income under this Part for its first taxation year that this subparagraph not apply) that was created after 1999 by a taxpayer during the taxpayer’s lifetime and that, at any time after 1999, was a trustunder whichthe taxpayer’s spouse or common-law partner was entitled to receive all of the income of the trust that arose before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner could, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust, orin the case of a trust described in subparagraph (ii.1) created by a taxpayer who had attained 65 years of age at the time the trust was created,the taxpayer was entitled to receive all of the income of the trust that arose before the taxpayer’s death and no person except the taxpayer could, before the taxpayer’s death, receive or otherwise obtain the use of any of the income or capital of the trust,the taxpayer or the taxpayer’s spouse was, in combination with the spouse or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the spouse and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, orthe taxpayer or the taxpayer’s common-law partner was, in combination with the common-law partner or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the common-law partner and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust,the day on which the death or the later death, as the case may be, occurs;where the trust is a pre-1972 spousal trust on January 1, 1993 and the spouse or common-law partner referred to in the definition pre-1972 spousal trust in subsection 108(1) in respect of the trust wasin the case of a trust created by the will of a taxpayer, alive on January 1, 1976, andin the case of a trust created by a taxpayer during the taxpayer’s lifetime, alive on May 26, 1976,the day that is the later ofthe day on which that spouse or common-law partner dies, andJanuary 1, 1993;where the trust makes a distribution to a beneficiary in respect of the beneficiary’s capital interest in the trust, it is reasonable to conclude that the distribution was financed by a liability of the trust and one of the purposes of incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of any individual, the day on which the distribution is made (determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust);where property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) has been transferred by a taxpayer after December 17, 1999 to the trust in circumstances to which subsection 73(1) applied, it is reasonable to conclude that the property was so transferred in anticipation that the taxpayer would subsequently cease to reside in Canada and the taxpayer subsequently ceases to reside in Canada, the first day after that transfer during which the taxpayer ceases to reside in Canada (determined as if a day ends for the trust immediately after each time at which the taxpayer ceases to be resident in Canada);where the trust is a trust to which property was transferred by a taxpayer who is an individual (other than a trust) in circumstances in which section 73 or subsection 107.4(3) applied, the transfer did not result in a change in beneficial ownership of that property and no person (other than the taxpayer) or partnership has any absolute or contingent right as a beneficiary under the trust (determined with reference to subsection (1.1)), the day on which the death of the taxpayer occurs;the day that is 21 years after the latest ofJanuary 1, 1972,the day on which the trust was created, andwhere applicable, the day determined under paragraph (a), (a.1) or (a.4) as those paragraphs applied from time to time after 1971; andthe day that is 21 years after any day (other than a day determined under any of paragraphs (a) to (a.4)) that is, because of this subsection, a day on which the trust is deemed to have disposed of each such property.Depreciable propertyEvery trust is, at the end of each day determined under subsection (4) in respect of the trust, deemed to have disposed of each property of the trust (other than exempt property) that was a depreciable property of a prescribed class of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately after that day at a capital cost (in this subsection referred to as the “deemed capital cost”) equal to that fair market value, except thatwhere the amount that was the capital cost to the trust of the property immediately before the end of the day (in this paragraph referred to as the “actual capital cost”) exceeds the deemed capital cost to the trust of the property, for the purpose of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) as they apply in respect of the property at any subsequent time,the capital cost to the trust of the property on its reacquisition shall be deemed to be the amount that was the actual capital cost to the trust of the property, andthe excess shall be deemed to have been allowed under paragraph 20(1)(a) to the trust in respect of the property in computing its income for taxation years that ended before the trust reacquired the property;for the purposes of this subsection, the reference to “at the end of a taxation year” in subsection 13(1) shall be read as a reference to “at the particular time a trust is deemed by subsection 104(5) to have disposed of depreciable property of a prescribed class”; andfor the purpose of computing the excess, if any, referred to in subsection 13(1) at the end of the taxation year of a trust that included a day on which the trust is deemed by this subsection to have disposed of a depreciable property of a prescribed class, any amount that, on that day, was included in the trust’s income for the year under subsection 13(1) as it reads because of paragraph 104(5)(b), shall be deemed to be an amount included under section 13 in the trust’s income for a preceding taxation year.NISA Fund No. 2Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which paragraph 70(6.1)(b) applied is deemed, at the end of the day on which the spouse or common-law partner referred to in that paragraph dies, to have been paid an amount out of the fund equal to the balance at the end of that day in the fund so transferred.Resource propertyWhere at the end of a day determined under subsection (4) in respect of a trust, the trust owns a Canadian resource property (other than an exempt property) or a foreign resource property (other than an exempt property),for the purposes of determining the amounts under subsection 59(1), paragraphs 59(3.2)(c) and (c.1), subsections 66(4) and 66.2(1), the definition cumulative Canadian development expense in subsection 66.2(5), the definition cumulative foreign resource expense in subsection 66.21(1), subsection 66.4(1) and the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), the trust is deemedto have a taxation year (in this subsection referred to as the “old taxation year”) that ended at the end of that day and a new taxation year that begins immediately after that day, andto have disposed, immediately before the end of the old taxation year, of each of those properties for proceeds that became receivable at that time equal to its fair market value at that time and to have reacquired, at the beginning of the new taxation year, each such property for an amount equal to that fair market value; andfor the particular taxation year of the trust that included that day, the trust shallinclude in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c) in respect of the old taxation year and the amount so included shall, for the purposes of the determination of B in the definition cumulative Canadian development expense in subsection 66.2(5), be deemed to have been included in computing its income for a preceding taxation year,include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c.1) in respect of the old taxation year and the amount so included is, for the purpose of determining the value of B in the definition cumulative foreign resource expense in subsection 66.21(1), deemed to have been included in computing its income for a preceding taxation year, anddeduct in computing its income for the particular taxation year the amount, if any, determined under subsection 66(4) in respect of the old taxation year and the amount so deducted shall, for the purposes of paragraph 66(4)(a), be deemed to have been deducted for a preceding taxation year.[Repealed, 2013, c. 34, s. 231]Trust transfersWhere capital property, land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust (in this subsection referred to as the “transferor trust”) to another trust (in this subsection referred to as the “transferee trust”) in circumstances in which subsection 107(2) or 107.4(3) or paragraph (f) of the definition disposition in subsection 248(1) applies,for the purposes of applying subsections 104(4) to 104(5.2) after the particular time,subject to paragraphs (b) to (b.3), the first day (in this subsection referred to as the “disposition day”) that ends at or after the particular time that would, if this section were read without reference to paragraphs (4)(a.2) and (a.3), be determined in respect of the transferee trust is deemed to be the earliest ofthe first day ending at or after the particular time that would be determined under subsection 104(4) in respect of the transferor trust without regard to the transfer and any transaction or event occurring after the particular time,the first day ending at or after the particular time that would otherwise be determined under subsection 104(4) in respect of the transferee trust without regard to any transaction or event occurring after the particular time,the first day that ends at or after the particular time, wherethe transferor trust is a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1), andthe spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time,the first day that ends at or after the particular time, wherethe transferor trust is an alter ego trust, a trust to which paragraph (4)(a.4) applies or a joint spousal or common-law partner trust, andthe taxpayer referred to in paragraph (4)(a) or (a.4), as the case may be, is alive at the particular time, andwherethe disposition day would, but for the application of this subsection to the transfer, be determined under paragraph 104(5.3)(a) in respect of the transferee trust, andthe particular time is after the day that would, but for subsection 104(5.3), be determined under paragraph 104(4)(b) in respect of the transferee trust,the first day ending at or after the particular time, andwhere the disposition day determined in respect of the transferee trust under subparagraph 104(5.8)(a)(i) is earlier than the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust, subsections 104(4) to 104(5.2) do not apply to the transferee trust on the day referred to in clause 104(5.8)(a)(i)(B) in respect of the transferee trust;paragraph (a) does not apply in respect of the transfer wherethe transferor trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1),the spouse or common-law partner referred to in paragraph (4)(a) or in the definition pre-1972 spousal trust in subsection 108(1) is alive at the particular time, andthe transferee trust is a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1);paragraph (a) does not apply in respect of the transfer wherethe transferor trust is an alter ego trust,the taxpayer referred to in paragraph (4)(a) is alive at the particular time, andthe transferee trust is an alter ego trust;paragraph (a) does not apply in respect of the transfer wherethe transferor trust is a joint spousal or common-law partner trust,either the taxpayer referred to in paragraph (4)(a), or the spouse or common-law partner referred to in that paragraph, is alive at the particular time, andthe transferee trust is a joint spousal or common-law partner trust;paragraph (a) does not apply in respect of the transfer wherethe transferor trust is a trust to which paragraph (4)(a.4) applies,the taxpayer referred to in paragraph (4)(a.4) is alive at the particular time, andthe transferee trust is a trust to which paragraph (4)(a.4) applies; andfor the purposes of subsection 104(5.3), unless a day ending before the particular time has been determined under paragraph 104(4)(a.1) or 104(4)(b) or would, but for subsection 104(5.3), have been so determined, a day determined under subparagraph 104(5.8)(a)(i) shall be deemed to be a day determined under paragraph 104(4)(a.1) or 104(4)(b), as the case may be, in respect of the transferee trust.Deduction in computing income of trustSubject to subsections (7) to (7.1), for the purposes of this Part, there may be deducted in computing the income of a trust for a taxation yearin the case of an employee trust, the amount by which the amount that would, but for this subsection, be its income for the year exceeds the amount, if any, by whichthe total of all amounts each of which is its income for the year from a businessexceedsthe total of all amounts each of which is its loss for the year from a business;in the case of a trust governed by an employee benefit plan, such part of the amount that would, but for this subsection, be its income for the year as was paid in the year to a beneficiary;where the taxable income of the trust for the year is subject to tax under this Part because of paragraph 146(4)(c) or subsection 146.3(3.1), the part of the amount that, but for this subsection, would be the income of the trust for the year that was paid in the year to a beneficiary;in the case of a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, such part of its income for the year as became payable in the year to a beneficiary;in the case of an employee life and health trust, an amount that became payable by the trust in the year as a designated employee benefit (as defined in subsection 144.1(1)); andin any other case, the amount that the trust claims not exceeding the amount, if any, determined by the formulaA – BwhereAis the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary, andBisif the trust is a trust for which a day is to be determined under paragraph (4)(a) or (a.4) by reference to a death or later death, as the case may be, that has not occurred before the beginning of the year, the total ofthe part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary (other than an individual whose death is that death or later death, as the case may be), andthe total of all amounts each of whichis included in its income (determined without reference to this subsection and subsection (12)) for the year — if the year is the year in which that death or later death, as the case may be, occurs and paragraph (13.4)(b) does not apply in respect of the trust for the year — because of the application of subsection (4), (5), (5.1) or (5.2) or 12(10.2), andis not included in the amount determined for clause (A) for the year, andif the trust is a SIFT trust for the year, the amount, if any, by whichthe amount determined for A for the trust for the yearexceedsthe amount, if any, by which the amount determined for A for the trust for the year exceeds its non-portfolio earnings for the year.Non-resident beneficiaryNo deduction may be made under subsection 104(6) in computing the income for a taxation year of a trust in respect of such part of an amount that would otherwise be its income for the year as became payable in the year to a beneficiary who was, at any time in the year, a designated beneficiary of the trust (as that expression applies for the purposes of section 210.3) unless, throughout the year, the trust was resident in Canada.Trusts deemed to be resident in CanadaIf a trust is deemed by subsection 94(3) to be resident in Canada for a taxation year for the purpose of computing the trust’s income for the year, the maximum amount deductible under subsection (6) in computing its income for the year is the amount, if any, by whichthe maximum amount that, if this Act were read without reference to this subsection, would be deductible under subsection (6) in computing its income for the year,exceedsthe total ofthe portion of the trust’s designated income for the year (within the meaning assigned by section 210) that became payable in the year to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, andall amounts each of which is determined by the formulaA × BwhereAis an amount (other than an amount described in subparagraph (i)) thatis paid or credited (having the meaning assigned by Part XIII) in the year to the trust,would, if this Act were read without reference to subparagraph 94(3)(a)(viii), paragraph 212(2)(b) and sections 216 and 217, be an amount as a consequence of the payment or crediting of which the trust would have been liable to tax under Part XIII, andbecomes payable in the year by the trust to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, andBis0.35, if the trust can establish to the satisfaction of the Minister that the non-resident beneficiary to whom the amount described in the description of A is payable is resident in a country with which Canada has a tax treaty under which the income tax that Canada may impose on the beneficiary in respect of the amount is limited, and0.6, in any other case.Limitation — amount claimed as giftNo deduction may be made under subsection (6) in computing the income for a taxation year of an estate that arose on and as a consequence of an individual’s death in respect of a payment to the extent that the payment is a gift in respect of which an amount is deducted under section 118.1 for any taxation year in computing the individual’s tax payable under this Part.Capital interest greater than income interestWhere it is reasonable to consider that one of the main purposes for the existence of any term, condition, right or other attribute of an interest in a trust (other than a personal trust) is to give a beneficiary a percentage interest in the property of the trust that is greater than the beneficiary’s percentage interest in the income of the trust, no amount may be deducted under paragraph 104(6)(b) in computing the income of the trust.Avoidance of s. (7.1)Notwithstanding any other provision of this Act, wherea taxpayer has acquired a right to or to acquire an interest in a trust, or a right to or to acquire a property of a trust, andit is reasonable to consider that one of the main purposes of the acquisition was to avoid the application of subsection 104(7.1) in respect of the trust,on a disposition of the right (other than pursuant to the exercise thereof), the interest or the property, there shall be included in computing the income of the taxpayer for the taxation year in which the disposition occurs the amount, if any, by whichthe proceeds of disposition of the right, interest or property, as the case may be,exceedthe cost amount to the taxpayer of the right, interest or property, as the case may be.[Repealed, 2013, c. 34, s. 231]Deduction of amounts included in preferred beneficiaries’ incomesThere may be deducted in computing the income of a trust for a taxation year the lesser ofthe total of all amounts designated under subsection 104(14) by the trust in respect of the year, andthe accumulating income of the trust for the year.Income of beneficiaryThere shall be included in computing the income for a particular taxation year of a beneficiary under a trust such of the following amounts as are applicable:in the case of a trust (other than a trust referred to in paragraph (a) of the definition trust in subsection 108(1)), such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as became payable in the trust’s year to the beneficiary; andin the case of a trust governed by an employee benefit plan to which the beneficiary has contributed as an employer, such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as was paid in the trust’s year to the beneficiary.Amounts deemed not paidWhere a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formulaA/B × (C - D - E)whereAis the beneficiary’s share of the income of the trust for the year computed without reference to this Act,Bis the total of all amounts each of which is a beneficiary’s share of the income of the trust for the year computed without reference to this Act,Cis the total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.2), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the year,Dis the amount deducted under subsection 104(6) in computing the income of the trust for the year, andEis equal to the amount determined by the trust for the year and used as the value of C for the purposes of the formula in subsection 104(13.2) or, if no amount is so determined, nil,the amount so designated shall be deemed, for the purposes of subsections 104(13) and 105(2), not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust.IdemWhere a trust, in its return of income under this Part for a taxation year throughout which it was resident in Canada and not exempt from tax under Part I by reason of subsection 149(1), designates an amount in respect of a beneficiary under the trust, not exceeding the amount determined by the formulaA/B × CwhereAis the amount designated by the trust for the year in respect of the beneficiary under subsection 104(21),Bis the total of all amounts each of which has been designated for the year in respect of a beneficiary of the trust under subsection 104(21), andCis the amount determined by the trust and used in computing all amounts each of which is designated by the trust for the year under this subsection, not exceeding the amount by whichthe total of all amounts each of which is an amount that, but for this subsection or subsection 104(13.1), would be included in computing the income of a beneficiary under the trust by reason of subsection 104(13) or 105(2) for the yearexceedsthe amount deducted under subsection 104(6) in computing the income of the trust for the year,the amount so designated shallfor the purposes of subsections (13) and 105(2) (except in the application of subsection (13) for the purposes of subsection (21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust; andexcept for the purposes of subsection 104(21) as it applies for the purposes of subsections 104(21.1) and 104(21.2), reduce the amount of the taxable capital gains of the beneficiary otherwise included in computing the beneficiary’s income for the year by reason of subsection 104(21).Invalid designationAny designation made under subsection (13.1) or (13.2) by a trust in its return of income under this Part for a taxation year is invalid if the trust’s taxable income for the year, determined without reference to this subsection, is greater than nil.Death of beneficiary — spousal and similar trustsIf an individual’s death occurs on a day in a particular taxation year of a trust and the death is the death or later death, as the case may be, referred to in paragraph (4)(a), (a.1) or (a.4) in respect of the trust,the particular year is deemed to end at the end of that day, a new taxation year of the trust is deemed to begin immediately after that day and, for the purpose of determining the trust’s fiscal period after the new taxation year began, the trust is deemed not to have established a fiscal period before the new taxation year began;subject to paragraph (b.1), the trust’s income (determined without reference to subsections (6) and (12)) for the particular year is, notwithstanding subsection (24), deemedto have become payable in the year to the individual, andnotto have become payable to another beneficiary, orto be included under subsection 105(2) in computing the individual’s income;paragraph (b) does not apply in respect of the trust for the particular year, unlessthe individual is resident in Canada immediately before the death,the trust is, immediately before the death, a testamentary trust thatis a post-1971 spousal or common-law partner trust, andwas created by the will of a taxpayer who died before 2017, andan election — made jointly between the trust and the legal representative administering the individual’s graduated rate estate in prescribed form — that paragraph (b) applies is filed withthe individual’s return of income under this Part for the individual’s year, andthe trust’s return of income under this Part for the particular year; andin respect of the particular yearthe references in paragraph 150(1)(c) to “year” and in subparagraph (a)(ii) of the definition balance-due day in subsection 248(1) to “taxation year” are to be read as “calendar year in which the taxation year ends”, andthe reference in subsection 204(2) of the Income Tax Regulations to “end of the taxation year” is to be read as “end of the calendar year in which the taxation year ends”.Election by trust and preferred beneficiaryWhere a trust and a preferred beneficiary under the trust for a particular taxation year of the trust jointly so elect in respect of the particular year in prescribed manner, such part of the accumulating income of the trust for the particular year as is designated in the election, not exceeding the allocable amount for the preferred beneficiary in respect of the trust for the particular year, shall be included in computing the income of the preferred beneficiary for the beneficiary’s taxation year in which the particular year ended and shall not be included in computing the income of any beneficiary of the trust for a subsequent taxation year.[Repealed, 2014, c. 39, s. 26]Allocable amount for preferred beneficiaryFor the purpose of subsection 104(14), the allocable amount for a preferred beneficiary under a trust in respect of the trust for a taxation year iswhere the trust is an alter ego trust, a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition pre-1972 spousal trust in subsection 108(1) at the end of the year and a beneficiary, referred to in paragraph (4)(a) or in that definition, is alive at the end of the year, an amount equal toif the preferred beneficiary is a beneficiary so referred to, the trust’s accumulating income for the year, andin any other case, nil;where paragraph (a) does not apply and the preferred beneficiary’s interest in the trust is not solely contingent on the death of another beneficiary who has a capital interest in the trust and who does not have an income interest in the trust, the trust’s accumulating income for the year; andin any other case, nil.SIFT deemed dividendIf an amount (in this subsection and section 122 referred to as the trust’s “non-deductible distributions amount” for the taxation year) is determined under subparagraph (ii) of the description of B in paragraph (6)(b) in respect of a SIFT trust for a taxation yeareach beneficiary under the SIFT trust to whom at any time in the taxation year an amount became payable by the trust is deemed to have received at that time a taxable dividend that was paid at that time by a taxable Canadian corporation;the amount of a dividend described in paragraph (a) as having been received by a beneficiary at any time in a taxation year is equal to the amount determined by the formulaA/B × CwhereAis the amount that became payable at that time by the SIFT trust to the beneficiary,Bis the total of all amounts, each of which became payable in the taxation year by the SIFT trust to a beneficiary under the SIFT trust, andCis the SIFT trust’s non-deductible distributions amount for the taxation year;the amount of a dividend described in paragraph (a) in respect of a beneficiary under the SIFT trust is deemed for the purpose of subsection (13) not to be an amount payable to the beneficiary; andfor the purposes of applying Part XIII in respect of each dividend described in paragraph (a), the SIFT trust is deemed to be a corporation resident in Canada that paid the dividend.Trust for minorWhere any part of the amount that, but for subsections 104(6) and 104(12), would be the income of a trust for a taxation year throughout which it was resident in Canadahas not become payable in the year,was held in trust for an individual who did not attain 21 years of age before the end of the year,the right to which vested at or before the end of the year otherwise than because of the exercise by any person of, or the failure of any person to exercise, any discretionary power, andthe right to which is not subject to any future condition (other than a condition that the individual survive to an age not exceeding 40 years),notwithstanding subsection 104(24), that part of the amount is, for the purposes of subsections 104(6) and 104(13), deemed to have become payable to the individual in the year.Designation in respect of taxable dividendsA portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation is, for the purposes of this Act other than Part XIII, deemed to be a taxable dividend on the share received by a taxpayer, in the taxpayer’s taxation year in which the particular taxation year ends, and is, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, deemed not to have been received by the trust, ifan amount equal to that portionis designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, andmay reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;the taxpayer is in the particular taxation year a beneficiary under the trust;the trust is, throughout the particular taxation year, resident in Canada; andthe total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the total of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular taxation year, on a share of the capital stock of a taxable Canadian corporation.Designation in respect of non-taxable dividendsThe portion of the total of all amounts, each of which is the amount of a dividend (other than a taxable dividend) paid on a share of the capital stock of a corporation resident in Canada to a trust during a taxation year of the trust throughout which the trust was resident in Canada, that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of an amount that became payable in the year to a particular beneficiary under the trust shall be designated by the trust in respect of the particular beneficiary in the return of the trust’s income for the year for the purposes of subclause 53(2)(h)(i.1)(B)(II), paragraphs 107(1)(c) and 107(1)(d) and subsections 112(3.1), 112(3.2), 112(3.31) and 112(4.2).Designation in respect of taxable capital gainsFor the purposes of sections 3 and 111, except as they apply for the purposes of section 110.6, and subject to paragraph 132(5.1)(b), an amount in respect of a trust’s net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular taxation year ends, from the disposition by the taxpayer of capital property ifthe amountis designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, andmay reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;the taxpayer isin the particular taxation year, a beneficiary under the trust, andresident in Canada, unless the trust is, throughout the particular taxation year, a mutual fund trust;the trust is, throughout the particular taxation year, resident in Canada; andthe total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s net taxable capital gains for the particular taxation year.Late, amended or revoked designationA trust that has filed its return of income for its taxation year that includes February 22, 1994 may subsequently designate an amount under subsection 104(21), or amend or revoke a designation made under that subsection where the designation, amendment or revocationis made solely because of an increase or decrease in the net taxable capital gains of the trust for the year that results from an election or revocation to which subsection 110.6(25), 110.6(26) or 110.6(27) applies; andis filed with the Minister, with an amended return of income for the year, when the election or revocation referred to in paragraph 104(21.01)(a) is filed with the Minister.Late, amended or revoked designationA designation, amendment or revocation under subsection 104(21.01) that affects an amount determined in respect of a beneficiary under subsection 104(21.2) may be made only where the trustdesignates an amount, or amends or revokes a designation made, under subsection 104(21.2) in respect of the beneficiary; andfiles the designation, amendment or revocation referred to in paragraph 104(21.02)(a) with the Minister when required by paragraph 104(21.01)(b).Late, amended or revoked designationWhere a trust designates an amount, or amends or revokes a designation, under subsection 104(21) or 104(21.2) in accordance with subsection 104(21.01),the designation or amended designation, as the case may be, is deemed to have been made in the trust’s return of income for the trust’s taxation year that includes February 22, 1994; andthe designation that was revoked is deemed, other than for the purposes of this subsection and subsections 104(21.01) and 104(21.02), never to have been made.[Repealed, 2013, c. 34, s. 231]Beneficiaries’ taxable capital gainWhere, for the purposes of subsection (21), a personal trust or a trust referred to in subsection 7(2) designates an amount in respect of a beneficiary in respect of its net taxable capital gains for a taxation year (in this subsection referred to as the “designation year”),the trust shall in its return of income under this Part for the designation year designate an amount in respect of its eligible taxable capital gains, if any, for the designation year in respect of the beneficiary equal to the amount determined in respect of the beneficiary under each of subparagraphs 104(21.2)(b)(i) and 104(21.2)(b)(ii); andthe beneficiary is, for the purposes of section 120.4 and for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6,deemed to have disposed of the capital property referred to in clause (ii)(A), (B) or (C) if a taxable capital gain is determined in respect of the beneficiary for the beneficiary’s taxation year in which the designation year ends under those clauses, anddeemed to have a taxable capital gain for the beneficiary’s taxation year in which the designation year endsfrom a disposition of a capital property that is qualified farm or fishing property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula(A × B × C)/(D × E)andfrom a disposition of a capital property that is a qualified small business corporation share (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula(A × B × F)/(D × E)whereAis the lesser ofthe amount determined by the formulaG - HwhereGis the total of amounts designated under subsection (21) for the designation year by the trust, andHis the total of amounts designated under subsection (13.2) for the designation year by the trust, andthe trust’s eligible taxable capital gains for the designation year,Bis the amount, if any, by which the amount designated under subsection (21) for the designation year by the trust in respect of the beneficiary exceeds the amount designated under subsection (13.2) for the year by the trust in respect of the beneficiary for the taxation year,Cis the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties of the trust,Dis the total of all amounts each of which is the amount determined for B for the designation year in respect of a beneficiary under the trust,Eis the total of the amounts determined for C and F for the designation year in respect of the beneficiary, andFis the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified small business corporation shares of the trust, other than qualified farm property, qualified fishing property or qualified farm or fishing property,I[Repealed, 2014, c. 39, s. 26][Repealed, 2014, c. 39, s. 26]and for the purposes of section 110.6, those capital properties shall be deemed to have been disposed of by the beneficiary in that taxation year of the beneficiary.Beneficiaries QFFP taxable capital gainIf clause (21.2)(b)(ii)(A) applies to deem, for the purposes of section 110.6, the beneficiary under a trust to have a taxable capital gain (referred to in this subsection as the “QFFP taxable capital gain”) from a disposition of capital property that is qualified farm or fishing property of the beneficiary, for the beneficiary’s taxation year that ends on or after April 21, 2015, and in which the designation year of the trust ends, for the purposes of subsection 110.6(2.2), the beneficiary is, if the trust complies with the requirements of subsection (21.22), deemed to have a taxable capital gain from the disposition of qualified farm or fishing property of the beneficiary on or after April 21, 2015 equal to the amount determined by the formulaA × B/CwhereAis the amount of the QFFP taxable capital gain;Bis, if the designation year of the trust ends on or after April 21, 2015, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm or fishing properties of the trust that were disposed of by the trust on or after April 21, 2015; andCis, if the designation year of the trust ends on or after April 21, 2015, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm or fishing properties.Trusts to designate amountsA trust shall determine and designate, in its return of income under this Part for a designation year of the trust, the amount that is determined under subsection (21.21) to be the beneficiary’s taxable capital gain from the disposition on or after April 21, 2015 of qualified farm or fishing property of the beneficiary.[Repealed, 2014, c. 39, s. 26]Net taxable capital gains of trust determinedFor the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, determined by the formulaA + B – C – DwhereAis the total of all amounts each of which is a taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition,Bis the total of all amounts each of which is deemed by subsection (21) to be a taxable capital gain of the trust for the year,Cis the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, andDis the amount, if any, deducted under paragraph 111(1)(b) in computing the trust’s taxable income for the year.[Repealed, 2013, c. 34, s. 231]Designation in respect of foreign source incomeFor the purposes of this subsection, subsection (22.1) and section 126, an amount in respect of a trust’s income for a particular taxation year of the trust from a source in a country other than Canada is deemed to be income of a taxpayer, for the taxation year of the taxpayer in which the particular taxation year ends, from that source ifthe amountis designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, andmay reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14), was included in computing the income for that taxation year of the taxpayer;the taxpayer is in the particular taxation year a beneficiary under the trust;the trust is, throughout the particular taxation year, resident in Canada; andthe total of all amounts each of which is an amount designated, under this subsection in respect of that source, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s income for the particular taxation year from that source.Foreign tax deemed paid by beneficiaryWhere a taxpayer is a beneficiary under a trust, for the purposes of this subsection and section 126, the taxpayer shall be deemed to have paid as business-income tax or non-business-income tax, as the case may be, for a particular taxation year in respect of a source the amount determined by the formulaA × B/CwhereAis the amount that, but for subsection 104(22.3), would be the business-income tax or non-business-income tax, as the case may be, paid by the trust in respect of the source for a taxation year (in this subsection referred to as “that year”) of the trust that ends in the particular year;Bis the amount deemed, because of a designation under subsection 104(22) for that year by the trust, to be the taxpayer’s income from the source; andCis the trust’s income for that year from the source.Recalculation of trust’s foreign source incomeFor the purpose of section 126, there shall be deducted in computing a trust’s income from a source for a taxation year the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be income of beneficiaries under the trust from that source.Recalculation of trust’s foreign taxFor the purpose of section 126, there shall be deducted in computing the business-income tax or non-business-income tax paid by a trust for a taxation year in respect of a source the total of all amounts deemed, because of designations under subsection 104(22) by the trust for the year, to be paid by beneficiaries under the trust as business-income tax or non-business-income tax, as the case may be, in respect of the source.DefinitionsFor the purposes of subsections 104(22) to 104(22.3), the expressions business-income tax and non-business-income tax have the meanings assigned by subsection 126(7).Deceased beneficiary of graduated rate estateIn the case of a trust that is a graduated rate estate,[Repealed, 2013, c. 34, s. 231]the income of a person for a taxation year from the trust shall be deemed to be the person’s benefits from or under the trust for the taxation year or years of the trust that ended in the year determined as provided by this section and section 105; andwhere an individual having income from the trust died after the end of a taxation year of the trust but before the end of the calendar year in which the taxation year ended, the individual’s income from the trust for the period commencing immediately after the end of the taxation year and ending at the time of death shall be included in computing the individual’s income for the individual’s taxation year in which the individual died unless the individual’s legal representative has elected otherwise, in which case the legal representative shall file a separate return of income for the period under this Part and pay the tax for the period under this Part as ifthe individual were another person,the period were a taxation year,that other person’s only income for the period were the individual’s income from the trust for that period, andsubject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the individual was entitled under sections 110, 118 to 118.7 and 118.9 for the period in computing the individual’s taxable income or tax payable under this Part, as the case may be, for the period.[Repealed, 2014, c. 39, s. 26]Amount payableFor the purposes of subsections (6), (7), (7.01), (13), (16) and (20), subparagraph 53(2)(h)(i.1) and subsections 94(5.2) and (8), an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled in the year to enforce payment of it.Pension benefitsIf a trust, in a taxation year in which it is resident in Canada and is the graduated rate estate of an individual, receives a superannuation or pension benefit or a benefit out of or under a foreign retirement arrangement and designates, in its return of income for the year under this Part, an amount in respect of a beneficiary under the trust equal to the portion (in this subsection referred to as the “beneficiary’s share”) of the benefit thatmay reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that, by reason of subsection 104(13), was included in computing the income for a particular taxation year of the beneficiary, andwas not designated by the trust in respect of any other beneficiary under the trust,the following rules apply:wherethe benefit is an amount described in subparagraph (a)(i) of the definition pension income in subsection 118(7), andthe beneficiary was a spouse or common-law partner of the individual,the beneficiary’s share of the benefit shall be deemed, for the purposes of subsections 118(3) and 118(7), to be a payment described in subparagraph (a)(i) of the definition pension income in subsection 118(7) that is included in computing the beneficiary’s income for the particular year,where the benefitis a single amount (as defined in subsection 147.1(1)), other than an amount that relates to an actuarial surplus, paid by a registered pension plan to the trust as a consequence of the individual’s death and the individual was, at the time of death, a spouse or common-law partner of the beneficiary, orwould be an amount included in the total determined under paragraph 60(j) in respect of the beneficiary for the taxation year of the beneficiary in which the benefit was received by the trust if the benefit had been received by the beneficiary at the time it was received by the trust,the beneficiary’s share of the benefit is, for the purposes of paragraph 60(j), an eligible amount in respect of the beneficiary for the particular year, andwhere the benefit is a single amount (as defined in subsection 147.1(1)) paid by a registered pension plan to the trust as a consequence of the individual’s death,if the beneficiary was, immediately before the death, a child or grandchild of the individual who, because of mental or physical infirmity, was financially dependent on the individual for support, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in clause 60(l)(v)(B.01), andif the beneficiary was, at the time of the death, under 18 years of age and a child or grandchild of the individual, the beneficiary’s share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary’s income for the particular year as a payment described in subclause 60(l)(v)(B.1)(II).DPSP benefitsWherea trust, in a taxation year (in this subsection referred to as the “trust year”) in which it is resident in Canada and is the graduated rate estate of an individual, receives an amount from a deferred profit sharing plan as a consequence of the individual’s death,the individual was an employee of an employer who participated in the plan on behalf of the individual, andthe amount is not part of a series of periodic payments,such portion of the amount asis included under subsection 147(10) in computing the income of the trust for the trust year,can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that was included under subsection (13) in computing the income for a particular taxation year of a beneficiary under the trust who was, at the time of the death, the individual’s spouse or common-law partner, andis designated by the trust in respect of the beneficiary in the trust’s return of income under this Part for the trust yearis, for the purposes of paragraph 60(j), an eligible amount inrespect of the beneficiary for the particular year.Death benefitIf the graduated rate estate of an individual receives an amount on or after the individual’s death in recognition of the individual’s service in an office or employment, the portion of the amount that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be paid or payable at any time to a beneficiary under the estate is deemedto be an amount received by the beneficiary at that time on or after the death in recognition of the individual’s service in an office or employment; andexcept for purposes of this subsection, not to have been received by the estate.[Repealed, 2003, c. 28, s. 11(2)]Tax under Part XII.2For the purposes of this Part, there shall be deducted in computing the income of a trust for a taxation year the tax paid by the trust for the year under Part XII.2.IdemThe amount in respect of a taxation year of a trust that is deemed under subsection 210.2(3) to have been paid by a beneficiary under the trust on account of the beneficiary’s tax under this Part shall, for the purposes of subsection 104(13), be deemed to be an amount in respect of the income of the trust for the year that has become payable by the trust to the beneficiary at the end of the year.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 104; 1994, c. 7, Sch. II, s. 75, Sch. VIII, s. 42, c. 8, s. 12, c. 21, s. 46; 1995, c. 3, s. 28; 1996, c. 21, s. 18; 1998, c. 19, s. 127; 2000, c. 12, s. 142; 2001, c. 17, s. 78; 2003, c. 15, s. 72, c. 28, s. 11; 2005, c. 19, s. 17; 2007, c. 2, s. 15, c. 29, s. 8, c. 35, s. 27; 2010, c. 25, s. 16; 2013, c. 34, ss. 10, 231; 2014, c. 39, s. 26; 2015, c. 36, s. 5; 2016, c. 12, s. 35; 2017, c. 33, s. 35; 2018, c. 12, s. 82022, c. 19, s. 13
Benefits under trustThe value of all benefits to a taxpayer during a taxation year from or under a trust, irrespective of when created, shall, subject to subsection 105(2), be included in computing the taxpayer’s income for the year except to the extent that the valueis otherwise required to be included in computing the taxpayer’s income for a taxation year; orhas been deducted under paragraph 53(2)(h) in computing the adjusted cost base of the taxpayer’s interest in the trust or would be so deducted if that paragraphapplied in respect of the taxpayer’s interest in the trust, andwere read without reference to clause 53(2)(h)(i.1)(B).Upkeep, etc.Such part of an amount paid by a trust out of income of the trust for the upkeep, maintenance or taxes of or in respect of property that, under the terms of the trust arrangement, is required to be maintained for the use of a tenant for life or a beneficiary as is reasonable in the circumstances shall be included in computing the income of the tenant for life or other beneficiary from the trust for the taxation year for which it was paid.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1970-71-72, c. 63, s. 1“105”; 1988, c. 55, s. 72
Income interest in trustWhere an amount in respect of a taxpayer’s income interest in a trust has been included in computing the taxpayer’s income for a taxation year by reason of subsection 106(2) or 104(13), except to the extent that an amount in respect of that income interest has been deducted in computing the taxpayer’s taxable income pursuant to subsection 112(1) or 138(6), there may be deducted in computing the taxpayer’s income for the year the lesser ofthe amount so included in computing the taxpayer’s income for the year, andthe amount, if any, by which the cost to the taxpayer of the income interest exceeds the total of all amounts in respect of the interest that were deductible under this subsection in computing the taxpayer’s income for previous taxation years.Cost of income interest in a trustThe cost to a taxpayer of an income interest of the taxpayer in a trust is deemed to be nil unlessany part of the interest was acquired by the taxpayer from a person who was the beneficiary in respect of the interest immediately before that acquisition; orthe cost of any part of the interest would otherwise be determined not to be nil under paragraph 128.1(1)(c) or (4)(c).Disposition by taxpayer of income interestWhere in a taxation year a taxpayer disposes of an income interest in a trust,except where subsection (3) applies to the disposition, there shall be included in computing the taxpayer’s income for the year the amount, if any, by whichthe proceeds of dispositionexceedwhere that interest includes a right to enforce payment of an amount by the trust, the amount in respect of that right that has been included in computing the taxpayer’s income for a taxation year because of subsection 104(13);any taxable capital gain or allowable capital loss of the taxpayer from the disposition shall be deemed to be nil; andfor greater certainty, the cost to the taxpayer of each property received by the taxpayer as consideration for the disposition is the fair market value of the property at the time of the disposition.Proceeds of disposition of income interestFor greater certainty, where at any time any property of a trust has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s income interest in the trust, the trust shall be deemed to have disposed of the property for proceeds of disposition equal to the fair market value of the property at that time.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 106; 2001, c. 17, s. 79; 2013, c. 34, s. 232(F)
Disposition by taxpayer of capital interestWhere a taxpayer has disposed of all or any part of the taxpayer’s capital interest in a trust,where the trust is a personal trust or a prescribed trust, for the purpose of computing the taxpayer’s capital gain, if any, from the disposition, the adjusted cost base to the taxpayer of the interest or the part of the interest, as the case may be, immediately before the disposition is, unless any part of the interest has ever been acquired for consideration and, at the time of the disposition, the trust is non-resident, deemed to be the greater ofits adjusted cost base, otherwise determined, to the taxpayer immediately before the disposition, andthe amount, if any, by whichits cost amount to the taxpayer immediately before the dispositionexceedsthe total of all amounts deducted under paragraph 53(2)(g.1) in computing its adjusted cost base to the taxpayer immediately before the disposition;[Repealed, 2001, c. 17, s. 80]where the taxpayer is not a mutual fund trust, the taxpayer’s loss from the disposition is deemed to be the amount, if any, by which the amount of that loss otherwise determined exceeds the amount, if any, by whichthe total of all amounts each of which was received or would, but for subsection 104(19), have been received by the trust on a share of the capital stock of a corporation before the disposition (and, where the trust is a unit trust, after 1987) andwhere the taxpayer is a corporation,was a taxable dividend designated under subsection 104(19) by the trust in respect of the taxpayer, to the extent of the amount of the dividend that was deductible under section 112 or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year, orwas an amount designated under subsection 104(20) by the trust in respect of the taxpayer,where the taxpayer is another trust, was an amount designated under subsection 104(19) or 104(20) by the trust in respect of the taxpayer, andwhere the taxpayer is not a corporation, trust or partnership, was an amount designated under subsection 104(20) by the trust in respect of the taxpayerexceedsthe portion of the total determined under subparagraph 107(1)(c)(i) that can reasonably be considered to have resulted in a reduction, under this paragraph, of the taxpayer’s loss otherwise determined from a previous disposition of an interest in the trust;where the taxpayer is a partnership, the share of a person (other than another partnership or a mutual fund trust) of any loss of the partnership from the disposition is deemed to be the amount, if any, by which that loss otherwise determined exceeds the amount, if any, by whichthe total of all amounts each of which is a dividend that was received or would, but for subsection 104(19), have been received by the trust on a share of the capital stock of a corporation before the disposition (and, where the trust is a unit trust, after 1987) andwhere the person is a corporation,was a taxable dividend that was designated under subsection 104(19) by the trust in respect of the taxpayer, to the extent of the amount of the dividend that was deductible under section 112 or subsection 115(1) or 138(6) in computing the person’s taxable income or taxable income earned in Canada for any taxation year, orwas a dividend designated under subsection 104(20) by the trust in respect of the taxpayer and was an amount received by the person,where the person is an individual other than a trust, was a dividend designated under subsection 104(20) by the trust in respect of the taxpayer and was an amount received by the person, andwhere the person is another trust, was a dividend designated under subsection 104(19) or 104(20) by the trust in respect of the taxpayer and was an amount received by the person (or that would have been received by the person if this Act were read without reference to subsection 104(19)),exceedsthe portion of the total determined under subparagraph 107(1)(d)(i) that can reasonably be considered to have resulted in a reduction, under this paragraph, of the person’s loss otherwise determined from a previous disposition of an interest in the trust; andif the capital interest is not a capital property of the taxpayer, notwithstanding the definition cost amount in subsection 108(1), its cost amount is deemed to be the amount, if any, by whichthe amount that would, if this Act were read without reference to this paragraph and the definition cost amount in subsection 108(1), be its cost amountexceedsthe total of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I).Cost of capital interest in a trustThe cost to a taxpayer of a capital interest of the taxpayer in a personal trust or a prescribed trust is deemed to be,where the taxpayer elected under subsection 110.6(19) in respect of the interest and the trust does not elect under that subsection in respect of any property of the trust, the taxpayer’s cost of the interest determined under paragraph 110.6(19)(a); andin any other case, nil, unlessany part of the interest was acquired by the taxpayer from a person who was the beneficiary in respect of the interest immediately before that acquisition, orthe cost of any part of the interest would otherwise be determined not to be nil under section 48 as it read in its application before 1993 or under paragraph 111(4)(e) or 128.1(1)(c) or (4)(c).Deemed fair market value — non-capital propertyFor the purpose of section 10, the fair market value at any time of a capital interest in a trust is deemed to be equal to the amount that is the total ofthe amount that would, if this Act were read without reference to this subsection, be its fair market value at that time, andthe total of all amounts, each of which is an amount that would be described, in respect of the capital interest, in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I), that has become payable to the taxpayer before that time.Distribution by personal trustSubject to subsections (2.001), (2.002) and (4) to (5), if at any time a property of a personal trust or a prescribed trust is distributed (otherwise than as a SIFT trust wind-up event) by the trust to a taxpayer who was a beneficiary under the trust and there is a resulting disposition of all or any part of the taxpayer’s capital interest in the trust,the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time;subject to subsection (2.2), the taxpayer is deemed to have acquired the property at a cost equal to the total of its cost amount to the trust immediately before that time and the specified percentage of the amount, if any, by whichthe adjusted cost base to the taxpayer of the capital interest or part of it, as the case may be, immediately before that time (determined without reference to paragraph (1)(a))exceedsthe cost amount to the taxpayer of the capital interest or part of it, as the case may be, immediately before that time;for the purpose of paragraph (b), the specified percentage is,where the property is capital property (other than depreciable property), 100%, and[Repealed, 2016, c. 12, s. 36]in any other case, 50%;the taxpayer’s proceeds of disposition of the capital interest in the trust (or of the part of it) disposed of by the taxpayer on the distribution are deemed to be equal to the amount, if any, by whichthe cost at which the taxpayer would be deemed by paragraph (b) to have acquired the property if the specified percentage referred to in that paragraph were 100%exceedsthe total of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the capital interest or the part of it;where the property so distributed was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)the capital cost to the taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, andthe excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the taxpayer of the property.[Repealed, 2010, c. 12, s. 10][Repealed, 1994, c. 7, Sch. VIII, s. 43][Repealed, 2016, c. 12, s. 36]No rollover on election by a trustWhere a trust makes a distribution of a property to a beneficiary of the trust in full or partial satisfaction of the beneficiary’s capital interest in the trust and so elects in prescribed form filed with the Minister with the trust’s return of income for its taxation year in which the distribution occurred, subsection (2) does not apply to the distribution ifthe trust is resident in Canada at the time of the distribution;the property is taxable Canadian property; orthe property is capital property used in, or property described in the inventory of, a business carried on by the trust through a permanent establishment (as defined by regulation) in Canada immediately before the time of the distribution.No rollover on election by a beneficiaryWhere a non-resident trust makes a distribution of a property (other than a property described in paragraph (2.001)(b) or (c)) to a beneficiary of the trust in full or partial satisfaction of the beneficiary’s capital interest in the trust and the beneficiary makes an election under this subsection in prescribed form filed with the Minister with the beneficiary’s return of income for the beneficiary’s taxation year in which the distribution occurred,subsection (2) does not apply to the distribution; andfor the purpose of subparagraph (1)(a)(ii), the cost amount of the interest to the beneficiary is deemed to be nil.Distribution of principal residenceWhere property that would, if a personal trust had designated the property under paragraph (c.1) of the definition principal residence in section 54, be a principal residence (within the meaning of that definition) of the trust for a taxation year, is at any time (in this subsection referred to as “that time”) distributed by the trust to a taxpayer in circumstances in which subsection (2) applies and the trust so elects in its return of income for the taxation year that includes that time,the trust shall be deemed to have disposed of the property immediately before the particular time that is immediately before that time for proceeds of disposition equal to the fair market value of the property at that time; andthe trust shall be deemed to have reacquired the property at the particular time at a cost equal to that fair market value.Other distributionsWhere at any time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Act were read without reference to paragraphs (h) and (i) of the definition disposition in subsection 248(1), be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust (which interest or part, as the case may be, is in this subsection referred to as the “former interest”) and the rules in subsections (2) and (3.1) and sections 88.1 and 132.2 do not apply in respect of the distribution,the trust is deemed to have disposed of the property for proceeds equal to its fair market value at that time;the beneficiary is deemed to have acquired the property at a cost equal to the proceeds determined under paragraph (a);unless the trust is a mutual fund trust, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount, if any, by whichthe proceeds determined under paragraph (a) (other than the portion, if any, of the proceeds that is a payment to which paragraph (h) or (i) of the definition disposition in subsection 248(1) applies)exceed the total ofwhere the property is not a Canadian resource property or foreign resource property, the amount, if any, by whichthe fair market value of the property at that timeexceeds the total ofthe cost amount to the trust of the property immediately before that time, andthe portion, if any, of the excess that would be determined under this subparagraph if this subparagraph were read without reference to this clause that represents a payment to which paragraph (h) or (i) of the definition disposition in subsection 248(1) applies, andall amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest;notwithstanding paragraphs (a) to (c), where the trust is non-resident at that time, the property is not described in paragraph (2.001)(b) or (c) and, if this Act were read without reference to this paragraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property because of the application of subsection 75(2) to the disposition at that time of the property,the trust is deemed to have disposed of the property for proceeds equal to the cost amount of the property,the beneficiary is deemed to have acquired the property at a cost equal to the fair market value of the property, andthe beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount, if any, by whichthe fair market value of the propertyexceeds the total ofthe portion, if any, of the amount of the distribution that is a payment to which paragraph (h) or (i) of the definition disposition in subsection 248(1) applies, andall amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; andwhere the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its 2003 taxation year, the trust has elected under subsection (2.11) in respect of the year and the trust so elects in respect of the distribution in prescribed form filed with the trust’s return of income for the year,this subsection shall be read without reference to paragraph (c), andthe beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under paragraph (a).Gains not distributed to beneficiariesIf a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year to have one of the following paragraphs apply, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regardif the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) to non-resident persons (including a partnership other than a Canadian partnership); andif the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars).Election — subsection (2.11)An election made under subsection (2.11) by a mutual fund trust is deemed, for the trust’s 2003 and subsequent taxation years, not to have been made ifthe election is made after December 20, 2000 and applies to any taxation year that ends before 2003; andthe proceeds of disposition of a beneficiary’s interest in the trust have been determined under paragraph (2.1)(e).Flow-through entityWhere at any time before 2005 a beneficiary under a trust described in paragraph (h), (i) or (j) of the definition flow-through entity in subsection 39.1(1) received a distribution of property from the trust in satisfaction of all or a portion of the beneficiary’s interests in the trust and the beneficiary files with the Minister on or before the beneficiary’s filing-due date for the taxation year that includes that time an election in respect of the property in prescribed form, there shall be included in the cost to the beneficiary of a particular property (other than money) received by the beneficiary as part of the distribution of property the least ofthe amount, if any, by which the beneficiary’s exempt capital gains balance (as defined in subsection 39.1(1)) in respect of the trust for the beneficiary’s taxation year that includes that time exceeds the total of all amounts each of which isan amount by which a capital gain is reduced under section 39.1 in the year because of the beneficiary’s exempt capital gains balance in respect of the trust,twice an amount by which a taxable capital gain is reduced under section 39.1 in the year because of the beneficiary’s exempt capital gains balance in respect of the trust, oran amount included in the cost to the beneficiary of another property received by the beneficiary at or before that time in the year because of this subsection,the amount by which the fair market value of the particular property at that time exceeds the adjusted cost base to the trust of the particular property immediately before that time, andthe amount designated in respect of the particular property in the election.Application of subsection (3.1)Subsection (3.1) applies to a trust’s distribution of property to a taxpayer ifthe distribution is a SIFT trust wind-up event to which section 88.1 does not apply;the property is a share and the only shares distributed on any SIFT trust wind-up event of the trust are of a single class of the capital stock of a taxable Canadian corporation; andwhere the trust is a SIFT wind-up entity, the distribution occurs no more than 60 days after the earlier ofthe first SIFT trust wind-up event of the trust, andthe first distribution to the trust that is a SIFT trust wind-up event of another trust.SIFT trust wind-up eventIf this subsection applies to a trust’s distribution of property, the following rules apply:the trust is deemed to have disposed of the property for proceeds of disposition equal to the adjusted cost base to the trust of the property immediately before the distribution;the taxpayer is deemed to have disposed of the taxpayer’s interest as a beneficiary under the trust for proceeds of disposition equal to the cost amount to the taxpayer of the interest immediately before the distribution;the taxpayer is deemed to have acquired the property at a cost equal toif, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, the taxpayer is the only beneficiary under the trust and is a SIFT wind-up entity or a taxable Canadian corporation, the adjusted cost base to the trust of the property immediately before the distribution, andin any other case, the cost amount to the taxpayer of the taxpayer’s interest as a beneficiary under the trust immediately before the distribution;if the taxpayer’s interest as a beneficiary under the trust was immediately before the disposition taxable Canadian property of the taxpayer, the property is deemed to be, at any time that is within 60 months after the distribution, taxable Canadian property of the taxpayer; andif a liability of the trust becomes as a consequence of the distribution a liability of the corporation described in paragraph (3)(b) in respect of the distribution, and the amount payable by the corporation on the maturity of the liability is the same as the amount that would have been payable by the trust on its maturity,the transfer of the liability by the trust to the corporation is deemed not to have occurred, andthe liability is deemedto have been incurred or issued by the corporation at the time at which, and under the agreement under which, it was incurred or issued by the trust, andnot to have been incurred or issued by the trust.Trusts in favour of spouse, common-law partner or selfSubsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed to a beneficiary by a trust described in paragraph 104(4)(a) wherethe beneficiary is notin the case of a post-1971 spousal or common-law partner trust, the spouse or common-law partner referred to in paragraph 104(4)(a),in the case of an alter ego trust, the taxpayer referred to in paragraph 104(4)(a), andin the case of a joint spousal or common-law partner trust, the taxpayer, spouse or common-law partner referred to in paragraph 104(4)(a); andthe distribution of the property occurs on or before the earlier ofa reacquisition, in respect of any property of the trust, that occurs immediately after the day described by paragraph 104(4)(a), andthe cessation of the trust’s existence.Where subsection 75(2) applicable to trustSubsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of any property of a particular personal trust or prescribed trust (other than an excluded property of the particular trust) by the particular trust to a taxpayer who was a beneficiary under the particular trust wherethe distribution was in satisfaction of all or any part of the taxpayer’s capital interest in the particular trust;subsection 75(2) was applicable (determined without its reference to “while the person is resident in Canada” and as if subsection 75(3) as it read before March 21, 2013 were read without reference to its paragraph (c.2)), or subsection 94(8.2) was applicable (determined without reference to paragraph 94(8.1)(a)), at a particular time in respect of any property ofthe particular trust, ora trust the property of which included a property that, through one or more dispositions to which subsection 107.4(3) applied, became a property of the particular trust, and the property was not, at any time after the particular time and before the distribution, the subject of a disposition for proceeds of disposition equal to the fair market value of the property at the time of the disposition;the taxpayer was neitherthe person (other than a trust described in subparagraph (b)(ii)) from whom the particular trust directly or indirectly received the property, or property for which the property was substituted, noran individual in respect of whom subsection 73(1) would be applicable on the transfer of capital property from the person described in subparagraph (i); andthe person described in subparagraph (c)(i) was in existence at the time the property was distributed.Distribution of property received on qualifying dispositionSubsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), ifat a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; andthe beneficiary is neither the particular partnership nor the particular corporation.Distribution to non-residentSubsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer’s capital interest in the trust.Instalment interestIf, solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust’s tax payable under this Part for the year is deemed to be the lesser ofthe trust’s tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, andthe amount that would be determined under paragraph (a) if subsection (5) did not apply to each distribution in the year of taxable Canadian property to which the rules in subsection (2) do not apply solely because of the application of subsection (5).Loss reductionNotwithstanding any other provision of this Act, where a person or partnership (in this subsection referred to as the “vendor”) has disposed of property and would, but for this subsection, have had a loss from the disposition, the vendor’s loss otherwise determined in respect of the disposition shall be reduced by such portion of that loss as may reasonably be considered to have accrued during a period in whichthe property or property for which it was substituted was held by a trust; andeitherthe trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, orneither the vendor — nor a person that would, if section 251.1 were read without reference to the definition controlled in subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 107; 1994, c. 7, Sch. II, s. 76, Sch. VIII, s. 43, c. 21, s. 47; 1995, c. 3, s. 29, c. 21, s. 35; 1998, c. 19, s. 128; 2000, c. 12, s. 142; 2001, c. 17, s. 80; 2009, c. 2, s. 26; 2010, c. 12, s. 10; 2013, c. 34, ss. 11, 233, c. 40, s. 44; 2016, c. 12, s. 36; 2017, c. 33, s. 362022, c. 19, s. 14
Distribution by certain employment-related trustsIf at any time any property of an employee life and health trust, an employee trust, a trust governed by an employee benefit plan or a trust described in paragraph (a.1) of the definition trust in subsection 108(1) has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, the following rules apply:in the case of an employee life and health trust, an employee trust or a trust described in paragraph (a.1) of the definition trust in subsection 108(1),the trust shall be deemed to have disposed of the property immediately before that time for proceeds of disposition equal to its fair market value at that time, andthe taxpayer shall be deemed to have acquired the property at a cost equal to its fair market value at that time;in the case of a trust governed by an employee benefit plan,the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time, andthe taxpayer shall be deemed to have acquired the property at a cost equal to the greater ofits fair market value at that time, andthe adjusted cost base to the taxpayer of the taxpayer’s interest or part thereof, as the case may be, immediately before that time;the taxpayer shall be deemed to have disposed of the taxpayer’s interest or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to the taxpayer of that interest or part thereof immediately before that time; andwhere the property was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),the capital cost to the taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, andthe excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the taxpayer of the property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 107.1; 2001, c. 17, s. 81; 2010, c. 25, s. 17
Distribution by a retirement compensation arrangementWhere, at any time, any property of a trust governed by a retirement compensation arrangement has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, for the purposes of this Part and Part XI.3, the following rules apply:the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its fair market value at that time;the trust shall be deemed to have paid to the taxpayer as a distribution an amount equal to that fair market value;the taxpayer shall be deemed to have acquired the property at a cost equal to that fair market value;the taxpayer shall be deemed to have disposed of the taxpayer’s interest or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to the taxpayer of that interest or part thereof immediately before that time; andwhere the property was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),the capital cost to the taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, andthe excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing the taxpayer’s income for taxation years before the acquisition by the taxpayer of the property.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 107.2; 2013, c. 34, s. 234(F)
Treatment of beneficiaries under qualifying environmental trustsWhere a taxpayer is a beneficiary under a qualifying environmental trust in a taxation year of the trust (in this subsection referred to as the “trust’s year”) that ends in a particular taxation year of the taxpayer,subject to paragraph 107.3(1)(b), the taxpayer’s income, non-capital loss and net capital loss for the particular year shall be computed as if the amount of the income or loss of the trust for the trust’s year from any source or from sources in a particular place were the income or loss of the taxpayer from that source or from sources in that particular place for the particular year, to the extent of the portion thereof that can reasonably be considered to be the taxpayer’s share of such income or loss; andif the taxpayer is non-resident at any time in the particular year and an income or loss described in paragraph 107.3(1)(a) or an amount to which paragraph 12(1)(z.1) or (z.2) applies would not otherwise be included in computing the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, notwithstanding any other provision of this Act, the income, the loss or the amount shall be attributed to the carrying on of business in Canada by the taxpayer through a fixed place of business located in the province in which the site to which the trust relates is situated.Transfers to beneficiariesWhere property of a qualifying environmental trust is transferred at any time to a beneficiary under the trust in satisfaction of all or any part of the beneficiary’s interest as a beneficiary under the trust,the trust shall be deemed to have disposed of the property at that time for proceeds of disposition equal to its fair market value at that time; andthe beneficiary shall be deemed to have acquired the property at that time at a cost equal to its fair market value at that time.Ceasing to be qualifying environmental trustIf at any time a trust ceases to be a qualifying environmental trust,for the purposes of subsections 111(5.5) and 149(10), the trust is deemed to cease at that time to be exempt from tax under this Part on its taxable income;each beneficiary under the trust immediately before that time is deemed to receive at that time from the trust an amount equal to the percentage of the fair market value of the properties of the trust immediately after that time that can reasonably be considered to be the beneficiary’s interest in the trust; andeach beneficiary under the trust is deemed to acquire immediately after that time an interest in the trust at a cost equal to the amount deemed by paragraph (b) to be received by the beneficiary from the trust.ApplicationSubsection 104(13) and sections 105 to 107 do not apply to a trust with respect to a taxation year during which it is a qualifying environmental trust.[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 3, s. 30; 1998, c. 19, s. 18; 2013, c. 40, s. 45
Qualifying dispositionIn this section, a qualifying disposition of a property means a disposition of the property before December 21, 2002 by a person or partnership, and a disposition of property after December 20, 2002 by an individual, (which person, partnership or individual is referred to in this subsection as the “contributor”) as a result of a transfer of the property to a particular trust wherethe disposition does not result in a change in the beneficial ownership of the property;the proceeds of disposition would, if this Act were read without reference to this section and sections 69 and 73, not be determined under any provision of this Act;the particular trust is resident in Canada at the time of the transfer;[Repealed, 2013, c. 34, s. 235]unless the contributor is a trust, there is immediately after the disposition no absolute or contingent right of a person or partnership (other than the contributor or, where the property was co-owned, each of the joint contributors) as a beneficiary (determined with reference to subsection 104(1.1)) under the particular trust;the contributor is not an individual (other than a trust described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1)), if the particular trust is described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1);the disposition is not part of a series of transactions or eventsthat begins after December 17, 1999 and that includes the subsequent acquisition, for consideration given to a personal trust, of a capital interest or an income interest in the trust,that begins after December 17, 1999 and that includes the disposition of all or part of a capital interest or an income interest in a personal trust, other than a disposition solely as a consequence of a distribution from a trust to a person or partnership in satisfaction of all or part of that interest, orthat begins after June 5, 2000 and that includes the transfer to the particular trust of particular property as consideration for the acquisition of a capital interest in the particular trust, if the particular property can reasonably be considered to have been received by the particular trust in order to fund a distribution (other than a distribution that is proceeds of disposition of a capital interest in the particular trust);the disposition is not, and is not part of, a transactionthat occurs after December 17, 1999, andthat includes the giving to the contributor, for the disposition, of any consideration (other than consideration that is an interest of the contributor as a beneficiary under the particular trust or that is the assumption by the particular trust of debt for which the property can, at the time of the disposition, reasonably be considered to be security);subsection 73(1) does not apply to the disposition and would not apply to the disposition ifno election had been made under that subsection, andsection 73 were read without reference to subsection 73(1.02); andif the contributor is an amateur athlete trust, a cemetery care trust, an employee life and health trust, an employee trust, a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the particular trust is the same type of trust.Application of paragraph (1)(a)For the purpose of paragraph (1)(a),except where paragraph (b) applies, where a trust (in this paragraph and subsection (2.1) referred to as the “transferor trust”), in a period that does not exceed one day, disposes of one or more properties in the period to one or more other trusts, there is deemed to be no resulting change in the beneficial ownership of those properties ifthe transferor trust receives no consideration for the disposition, andas a consequence of the disposition, the value of each beneficiary’s beneficial ownership at the beginning of the period under the transferor trust in each particular property of the transferor trust (or group of two or more properties of the transferor trust that are identical to each other) is the same as the value of the beneficiary’s beneficial ownership at the end of the period under the transferor trust and the other trust or trusts in each particular property (or in property that was immediately before the disposition included in the group of identical properties referred to above); andwhere a trust (in this paragraph referred to as the “transferor”) governed by a registered retirement savings plan or by a registered retirement income fund transfers a property to a trust (in this paragraph referred to as the “transferee”) governed by a registered retirement savings plan or by a registered retirement income fund, the transfer is deemed not to result in a change in the beneficial ownership of the property if the annuitant of the plan or fund that governs the transferor is also the annuitant of the plan or fund that governs the transferee.Fractional interestsFor the purpose of applying paragraph (2)(a) in respect of a transfer by a transferor trust of property that includes a share and money, the other trust or trusts referred to in that paragraph may receive, in lieu of a transfer of a fractional interest in a share that would otherwise be required, a disproportionate amount of money or interest in the share (the value of which does not exceed the lesser of $200 and the fair market value of the fractional interest).Tax consequences of qualifying dispositionsWhere at a particular time there is a qualifying disposition of a property by a person or partnership (in this subsection referred to as the “transferor”) to a trust (in this subsection referred to as the “transferee trust”),the transferor’s proceeds of disposition of the property are deemed to bewhere the transferor so elects in writing and files the election with the Minister on or before the transferor’s filing-due date for its taxation year that includes the particular time, or at any later time that is acceptable to the Minister, the amount specified in the election that is not less than the cost amount to the transferor of the property immediately before the particular time and not more than the fair market value of the property at the particular time, andin any other case, the cost amount to the transferor of the property immediately before the particular time;the transferee trust’s cost of the property is deemed to be the amount, if any, by whichthe proceeds determined under paragraph (a) in respect of the qualifying dispositionexceedthe amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced because of subsection 100(4), paragraph 107(1)(c) or (d) or any of subsections 112(3) to (4.2), if the proceeds determined under paragraph (a) were equal to the fair market value of the property at the particular time;[Repealed, 2005, c. 30, s. 4]if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this subsection to have acquired the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, andthe excess is deemed to have been allowed to the transferee trust in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the particular time;[Repealed, 2016, c. 12, s. 37]if, as a result of a transaction or event, the property was deemed to be taxable Canadian property of the transferor by this paragraph or any of paragraphs 44.1(2)(c), 51(1)(f), 85(1)(i) and 85.1(1)(a), subsection 85.1(5), paragraph 85.1(8)(b), subsections 87(4) and (5) and paragraphs 97(2)(c) and 107(3.1)(d), the property is also deemed to be, at any time that is within 60 months after the transaction or event, taxable Canadian property of the transferee trust;where the transferor is a related segregated fund trust (in this paragraph having the meaning assigned by section 138.1),paragraph 138.1(1)(i) does not apply in respect of a disposition of an interest in the transferor that occurs in connection with the qualifying disposition, andin computing the amount determined under paragraph 138.1(1)(i) in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a particular life insurance policy, the acquisition fee (as defined by subsection 138.1(6)) in respect of the particular policy shall be determined as if each amount determined under any of paragraphs 138.1(6)(a) to (d) in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;if the transferor is a trust to which property had been transferred by an individual (other than a trust),where subsection 73(1) applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the purposes of paragraph 104(4)(a.3) and the application of this paragraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to reside in Canada and in circumstances to which subsection 73(1) applied, andfor the purposes of paragraph (j) of the definition excluded right or interest in subsection 128.1(10) and the application of this paragraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this subsection would apply if subsection (1) were read without reference to paragraphs (1)(h) and (i), the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;if the transferor is a trust (other than a personal trust or a trust prescribed for the purposes of subsection 107(2)), the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of subsection 107(2);if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trustthe taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, andthe taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount, if any, by whichthat cost amountexceedsthe amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph (i) would be reduced because of paragraph 107(1)(c) or (d) if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formulaA × [(B - C)/B] - DwhereAis the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time,Bis the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor,Cis the fair market value at the particular time of the taxpayer’s capital interest in the transferor (determined as if the only property disposed of at the particular time were the particular property), andDis the lesser ofthe amount, if any, by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, andthe maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined could have been reduced because of paragraph 107(1)(c) or (d) if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time;where paragraph (k) applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that paragraph in respect of the qualifying disposition if the amount determined for D in that paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;where paragraphs (j) and (k) do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying dispositionwhere the transferee trust is a personal trust, at a cost equal to nil, andin any other case, at a cost equal to the excess determined under paragraph (b) in respect of the qualifying disposition; andif the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, for the purpose of subsection 106(2), the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.Fair market value of vested interest in trustWherea particular capital interest in a trust is held by a beneficiary at any time,the particular interest is vested indefeasibly at that time,the trust is not described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1), andinterests under the trust are not ordinarily disposed of for consideration that reflects the fair market value of the net assets of the trust,the fair market value of the particular interest at that time is deemed to be not less than the amount determined by the formula(A - B) × (C/D)whereAis the total fair market value at that time of all properties of the trust,Bis the total of all amounts each of which is the amount of a debt owing by the trust at that time or the amount of any other obligation of the trust to pay any amount that is outstanding at that time,Cis the fair market value at that time of the particular interest (determined without reference to this subsection), andDis the total fair market value at that time of all interests as beneficiaries under the trust (determined without reference to this subsection).[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 2001, c. 17, s. 82; 2005, c. 30, s. 4; 2007, c. 35, s. 109; 2008, c. 28, s. 10; 2009, c. 2, s. 27; 2010, c. 12, s. 11, c. 25, s. 18; 2013, c. 34, s. 235; 2014, c. 39, s. 27; 2016, c. 12, s. 37
DefinitionsIn this Subdivision,accumulating income of a trust for a taxation year means the amount that would be the income of the trust for the year if that amount were computedwithout reference to paragraphs 104(4)(a) and (a.1) and subsections 104(5.1), (5.2) and (12) and 107(4),as if the greatest amount that the trust was entitled to claim under subsection 104(6) in computing its income for the year were so claimed, andwithout reference to subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust to which paragraph 70(6.1)(b) applies and before the death of the spouse or common-law partner referred to in that paragraph; (revenu accumulé)beneficiary under a trust includes a person beneficially interested therein; (bénéficiaire)capital interest of a taxpayer in a trust means all rights of the taxpayer as a beneficiary under the trust, and after 1999 includes a right (other than a right acquired before 2000 and disposed of before March 2000) to enforce payment of an amount by the trust that arises as a consequence of any such right, but does not include an income interest in the trust; (participation au capital)cost amount to a taxpayer at any time of a capital interest or part of it, as the case may be, in a trust, means (notwithstanding subsection 248(1) and except for the purposes of subsection 107(3.1) and section 107.4 and except in respect of a capital interest in a trust that is at that time a foreign affiliate of the taxpayer),where any money or other property of the trust has been distributed by the trust to the taxpayer in satisfaction of all or part of the taxpayer’s capital interest (whether on the winding-up of the trust or otherwise), the total ofthe money so distributed, andall amounts each of which is the cost amount to the trust, immediately before the distribution, of each such other property,where that time (in this paragraph referred to as the “particular time”) is immediately before the time that is immediately before the time of the death of the taxpayer and subsection 104(4) or (5) deems the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under paragraph (b) if the taxpayer had died on a day that ended immediately before the time that is immediately before the particular time, andin any other case, the amount determined by the formula(A - B) × C/DwhereAis the total ofall money of the trust on hand immediately before that time, andall amounts each of which is the cost amount to the trust, immediately before that time, of each other property of the trust,Bis the total of all amounts each of which is the amount of any debt owing by the trust, or of any other obligation of the trust to pay any amount, that was outstanding immediately before that time,C<