Income Tax Act

Marginal note:Adjusted cost base of share of foreign affiliate

• 92 (1) In 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,

  • (a) 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; and

  • (b) there shall be deducted in respect of that share

    • (i) any amount deducted by the taxpayer under subsection 91(2) or (4), and

    • (ii) any 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).

• Marginal note:Adjustment for prescribed amount

  (1.1) The 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 to

  • (a) another foreign affiliate of the corporation; or

  • (b) a partnership of which another foreign affiliate of the corporation is a member.

• Marginal note:Adjustment re adjusted cost base

  (1.2) There 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.

• Marginal note:Deduction in computing adjusted cost base

  (2) In computing, at any time in a taxation year,

  • (a) 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, or

  • (b) the 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 which

  • (c) such 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,

  exceeds

  • (d) such 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).

• Marginal note:Idem

  (3) In 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.

• Marginal note:Disposition of a partnership interest

  (4) Where 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)

  where

  A

  is the amount, if any, by which

  • (a) the 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,

  exceeds

  • (b) the 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);

  B

  is the total of

  • (a) the 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, and

  • (b) the 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;

  C

  is 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; and

  D

  is the adjusted cost base, immediately before that time, of the member’s interest in the partnership immediately before that time.

• Marginal note:Deemed gain from the disposition of a share

  (5) Where 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.

• Marginal note:Formula

  (6) The amount determined for the purposes of subsection (5) is the amount determined by the formula

  A - B

  where

  A

  is the amount, if any, by which

  • (a) the 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,

  exceeds

  • (b) the 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); and

  B

  is 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.