Income Tax Application Rules (R.S.C., 1985, c. 2 (5th Supp.))

Marginal note:Government right

• 21 (1) If as a result of a disposition occurring after 1971 a taxpayer has or may become entitled to receive an amount (in this section referred to as the actual amount) that may reasonably be considered to be consideration received by the taxpayer for the disposition of, or for allowing the expiration of, a government right, in respect of a business carried on by the taxpayer throughout the period beginning January 1, 1972 and ending immediately after the disposition occurred, for the purposes of the amended Act the amount that the taxpayer has or may become entitled to receive is deemed to be the amount, if any, by which the actual amount exceeds the greater of

  • (a) the total of all amounts each of which is an outlay or expenditure made or incurred by the taxpayer as a result of a transaction that occurred before 1972 for the purpose of acquiring the government right, or the taxpayer’s original right in respect of the government right, to the extent that the outlay or expenditure was not otherwise deducted in computing the income of the taxpayer for any taxation year and would, if made or incurred by the taxpayer as a result of a transaction that occurred after 1971, be an eligible capital expenditure of the taxpayer; and

  • (b) the fair market value to the taxpayer on December 31, 1971 of the taxpayer’s specified right in respect of the government right, if no outlay or expenditure was made or incurred by the taxpayer for the purpose of acquiring the right or, if an outlay or expenditure was made or incurred, if that outlay or expenditure would have been an eligible capital expenditure of the taxpayer if it had been made or incurred as a result of a transaction that occurred after 1971.

• Marginal note:Idem

  (2) Where the taxpayer and the person by whom the actual amount has become payable to the taxpayer were not dealing with each other at arm’s length, for the purposes of computing the income of that person the portion of the actual amount in excess of the amount deemed by subsection (1) to be the amount that has become payable to the taxpayer shall be deemed not to have been an outlay, expense or cost, as the case may be, of that person.

• Marginal note:Idem

  (2.1) Where after 1971 a taxpayer has acquired a particular government right referred to in subsection (1)

  • (a) from a person with whom the taxpayer was not dealing at arm’s length, or

  • (b) under an agreement with a person with whom the taxpayer was not dealing at arm’s length, if under the terms of the agreement that person allowed the right to expire so that the taxpayer could acquire a substantially similar right from the authority that had issued the right to that person,

  and an actual amount subsequently becomes payable to the taxpayer as consideration for the disposition by the taxpayer of, or for the taxpayer allowing the expiration of, the particular government right or any other government right acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the particular government right, for the purpose of the amended Act, the amount that has so become payable to the taxpayer shall be deemed to be the amount that would, if that person and the taxpayer had at all times been the same person, be determined under subsection (1) to be the amount that would have become so payable to the taxpayer.

• Marginal note:Amalgamations

  (2.2) For the purposes of this section, an amalgamation (within the meaning of section 87 of the amended Act) of two or more Canadian corporations shall be deemed to be a transaction between persons not dealing at arm’s length.

• Marginal note:Definitions

  (3) In this section,

  government right

  government right of a taxpayer means a right or licence

  • (a) that enables the taxpayer to carry on a business activity in accordance with a law of Canada or of a province or Canadian municipality, to an extent to which the taxpayer would otherwise be unable to carry it on in accordance therewith,

  • (b) that was granted or issued by Her Majesty in right of Canada or a province or a Canadian municipality, or by a department, board, agency or any other body authorized by or under a law of Canada, a province or a Canadian municipality to grant or issue such a right or licence, and

  • (c) that was acquired by the taxpayer

    • (i) as a result of a transaction that occurred before 1972, or

    • (ii) at a particular time for the purpose of affecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under a government right held by the taxpayer before the particular time; (droit gouvernemental)

  original right

  original right of a taxpayer in respect of a government right means a right or licence

  • (a) described in the definition government right in this subsection, and

  • (b) acquired by the taxpayer as a result of a transaction that occurred before 1972 for a purpose other than the purpose described in subparagraph (c)(ii) of that definition,

  if the government right was acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the right or licence; (droit initial)

  specified right

  specified right of a taxpayer in respect of a government right means a right owned by a taxpayer on December 31, 1971 that was

  • (a) an original right, or

  • (b) a government right that was acquired by the taxpayer in substitution for the original right or that was one of a series of government rights acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the original right. (droit particulier)

Marginal note:Rules applicable

• 23 (3) For the purposes of computing the income of a taxpayer for a taxation year ending after 1971 from a business that is a profession,

  • (a) there may be deducted such amount as the taxpayer claims, not exceeding the lesser of

    • (i) the amount deducted under this paragraph in computing the taxpayer’s income from the business for the preceding taxation year, and

    • (ii) the taxpayer’s investment interest in the business at the end of the year;

  • (b) where the taxation year is the taxpayer’s 1972 taxation year, the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business shall be deemed to be an amount equal to the taxpayer’s 1971 receivables in respect of the business;

  • (c) there shall be included the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business; and

  • (d) there shall be included amounts received by the taxpayer in the year on account of debts in respect of the business that were established by the taxpayer to have become bad debts before the end of the 1971 fiscal period of the business.

• Marginal note:Application of para. (3)(a)

  (4) Paragraph (3)(a) does not apply to allow a deduction in computing the income of a taxpayer from a business that is a profession

  • (a) for the taxation year in which the taxpayer died; or

  • (b) for any taxation year, if,

    • (i) in the case of a taxpayer who at no time in the year was resident in Canada, the taxpayer ceased to carry on the business, or

    • (ii) in the case of any other taxpayer, the taxpayer ceased to be resident in Canada and ceased to carry on the business

    at any time in the year or the following year.

• Marginal note:Certain persons deemed to be carrying on business by means of partnership

  (4.1) For the purposes of paragraph (a) of the definition investment interest in subsection (5),

  • (a) where subsection 98(1) of the amended Act applies, the persons who are deemed not to have ceased to be members of a partnership because of that subsection shall be deemed to be carrying on business in Canada by means of that partnership; and

  • (b) a taxpayer who has a residual interest in a partnership (within the meaning assigned by section 98.1 of the amended Act) shall be deemed to be carrying on business in Canada by means of that partnership.

• Marginal note:Definitions

  (5) In this section,

  investment interest

  investment interest in a business at the end of a taxation year of a taxpayer means

  • (a) in the case of a taxpayer other than a corporation, the total of all amounts each of which is an amount in respect of a proprietorship or partnership by means of which the taxpayer carried on that business in Canada in the year, equal to,

    • (i) in respect of each such proprietorship, the amount, if any, by which

      • (A) the total of such of the amounts that were included in computing the taxpayer’s income for that or a preceding taxation year as were receivable by the taxpayer at the end of the fiscal period of the proprietorship ending in the taxation year,

      exceeds

      • (B) the amount claimed under paragraph 20(1)(l) of the amended Act as a reserve for doubtful debts in computing the taxpayer’s income from the business for the fiscal period of the proprietorship ending in the year, and

    • (ii) in respect of each such partnership, the adjusted cost base to the taxpayer of the taxpayer’s interest in the partnership immediately after the end of the fiscal period of the partnership ending in the year,

  • (b) in the case of a taxpayer that is a corporation, the lesser of

    • (i) the amount thereof that would be determined under paragraph (a) in respect of the corporation if that paragraph applied to a taxpayer that is a corporation, and

    • (ii) that proportion of its 1971 receivables in respect of the business that

      • (A) the amount, if any, by which 10 exceeds the number of its taxation years ending after 1971 and either before or coincidentally with the taxation year,

      is of

      • (B) 10; (participation aux investissements)

  1971 receivables

  1971 receivables in respect of a business of a taxpayer means the total of

  • (a) all amounts that became receivable by the taxpayer in respect of property sold or services rendered in the course of the business (within the meaning given that expression in section 34 of the amended Act) in taxation years ending before 1972 and that were not included in computing the taxpayer’s income for any such taxation year, other than debts that were established by the taxpayer to have become bad debts before the end of the 1971 fiscal period of the business, and

  • (b) the total of all amounts each of which is an amount, in respect of each partnership by means of which the taxpayer carried on that business before 1972, equal to such portion of the total that would be determined under paragraph (a) in respect of the partnership, if the references in that paragraph to “the taxpayer” were read as references to “the partnership”, as is designated by the taxpayer in the taxpayer’s return of income under Part I of the amended Act for the year to be attributable to the taxpayer, except that where the total of the portions so designated by all members of the partnership is less than the total that would be so determined under paragraph (a) in respect of the partnership, the Minister may designate the portion of that total that is attributable to the taxpayer, in which case the portion so designated by the Minister in respect of the taxpayer shall be deemed to be the portion so designated by the taxpayer. (sommes à recevoir pour 1971)

Marginal note:Definition of valuation day for capital gains and losses

24 In this Act, valuation day means

• (a) December 22, 1971, in relation to any property prescribed to be a publicly-traded share or security; and

• (b) December 31, 1971, in relation to any other property.

Marginal note:Capital gains subject to tax

• 26 (1) The provisions of subdivision c of Division B of Part I of the amended Act apply to dispositions of property made after 1971 and to transactions or events occurring after 1971 because of which any disposition of property was made or deemed to have been made in accordance with the provisions of that subdivision.

• Marginal note:Principal amount of certain obligations

  (1.1) For the purposes of subsection 39(3) and section 80 of the amended Act, the principal amount of any debt or other obligation of a taxpayer to pay an amount that was outstanding on January 1, 1972 (in this subsection referred to as an “obligation”) shall be deemed to be the lesser of

  • (a) the principal amount, otherwise determined for the purposes of the amended Act, of the obligation, and

  • (b) the fair market value, on valuation day, of the obligation,

  and in applying paragraph 39(3)(a) of the amended Act to an obligation, the reference in that paragraph to “the amount for which the obligation was issued” shall be read as a reference to “the lesser of the principal amount of the obligation and the amount for which the obligation was issued”.

• Marginal note:Cost of acquisition of capital property owned on Dec. 31, 1971

  (3) For the purpose of computing the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) that was owned by the taxpayer on December 31, 1971 and thereafter without interruption until such time as the taxpayer disposed of it, its cost to the taxpayer shall be deemed to be the amount that is neither the greatest nor the least of the following three amounts, namely,

  • (a) its actual cost to the taxpayer or, if the property was an obligation, its amortized cost to the taxpayer on January 1, 1972,

  • (b) its fair market value on valuation day, and

  • (c) the amount, if any, by which the total of

    • (i) the taxpayer’s proceeds of disposition of the property, determined without reference to subsection 13(21.1) of the amended Act,

    • (ii) all amounts required by subsection 53(2) of the amended Act to be deducted in computing its adjusted cost base to the taxpayer immediately before the disposition, and

    • (iii) all amounts described in clause (5)(c)(ii)(B) that are relevant in computing its adjusted cost base to the taxpayer immediately before the disposition,

    exceeds the total of

    • (iv) all amounts required by subsection 53(1) of the amended Act (other than paragraphs 53(1)(f.1) to (f.2)) to be added in computing its adjusted cost base to the taxpayer immediately before the disposition, and

    • (v) all amounts described in clause (5)(c)(i)(B) that are relevant in computing its adjusted cost base to the taxpayer immediately before the disposition,

  except that where two or more of the amounts determined under paragraphs (a) to (c) in respect of any property are the same amount, that amount shall be deemed to be its costs to the taxpayer.

• Marginal note:Determination of cost where property not disposed of

  (4) For the purpose of computing the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) at any particular time before the taxpayer disposed of it, where the property was owned by the taxpayer on December 31, 1971 and thereafter without interruption until the particular time, its costs to the taxpayer shall be deemed to be the amount that would be determined under subsection (3) to be its cost to the taxpayer if the taxpayer had disposed of it at the particular time and the taxpayer’s proceeds of disposition had been its fair market value at that time.

• Marginal note:Where property disposed of in transaction not at arm’s length

  (5) Where any capital property (other than depreciable property or an interest in a partnership) that was owned by a taxpayer (in this subsection referred to as the “original owner”) on June 18, 1971 has, by one or more transactions or events between persons not dealing at arm’s length, become vested in another taxpayer (in this subsection referred to as the “subsequent owner”) and the original owner has not elected under subsection (7) in respect of the property, notwithstanding the provisions of the amended Act, for the purposes of computing, at any particular time after 1971, the adjusted cost base of the property to the subsequent owner,

  • (a) the subsequent owner shall be deemed to have owned the property on June 18, 1971 and thereafter without interruption until the particular time;

  • (b) for the purposes of this section, the actual cost of the property to the subsequent owner or, if the property was an obligation, its amortized cost to the subsequent owner on January 1, 1972 shall be deemed to be the amount that was its actual cost or amortized cost, on January 1, 1972, as the case may be, to the original owner; and

  • (c) where the property became vested in the subsequent owner after 1971, there shall be added to the cost to the subsequent owner of the property (as determined under subsection (3)) the amount, if any, by which

    • (i) the total of all amounts each of which is

      • (A) a capital gain (other than any amount deemed by subsection 40(3) of the amended Act to be a capital gain) from the disposition after 1971 of the property by a person who owned the property before it so became vested in the subsequent owner,

      • (B) an amount required by subsection 53(1) of the amended Act to be added in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A),

      • (C) an amount determined under paragraph 88(1)(d) of the amended Act in computing the cost of the property to the subsequent owner or a person who owned the property before it became vested in the subsequent owner, or

      • (D) an amount by which a gain otherwise determined of a person who owned the property before it became so vested in the subsequent owner was reduced because of paragraph 40(2)(b) or (c) of the amended Act,

    exceeds

    • (ii) the total of all amounts each of which is

      • (A) a capital loss or an amount that would, but for paragraph 40(2)(e) and subsection 85(4) of the amended Act (as that Act read in its application to property disposed of on or before April 26, 1995) and paragraphs 40(2)(e.1) and (e.2) and subsection 40(3.3) of the amended Act, be a capital loss from the disposition to a corporation after 1971 of the property by a person who owned the property before it became vested in the subsequent owner, or

      • (B) an amount required by subsection 53(2) of the amended Act to be deducted in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A),

    and there shall be deducted from the cost to the subsequent owner of the property the amount, if any, by which the total determined under subparagraph (ii) exceeds the total determined under subparagraph (i).

• Marginal note:Idem

  (5.1) For the purposes of subsection (5), an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more Canadian corporations shall be deemed to be a transaction between persons not dealing at arm’s length.

• Marginal note:Transfer of capital property to a corporation

  (5.2) For the purposes of subsection (5), where a taxpayer has disposed of capital property after May 6, 1974 to a corporation in respect of which an election under section 85 of the amended Act was made, the disposition shall be deemed to be a transaction between persons not dealing at arm’s length.

• Marginal note:Reacquired property

  (6) Where a taxpayer has, at any time after June 18, 1971 and before 1972, disposed of any property owned by the taxpayer on that day and has, within 30 days after that time, reacquired the same property or acquired a substantially identical property, for the purposes of this section

  • (a) the taxpayer shall be deemed to have owned the property so reacquired or the substantially identical property so acquired, as the case may be, on June 18, 1971 and thereafter without interruption until the time the taxpayer so reacquired or acquired it as the case may be;

  • (b) where the property was property so reacquired, its actual cost or its amortized cost on January 1, 1972, as the case may be, to the taxpayer shall be determined as if the taxpayer had not so disposed of and so reacquired it; and

  • (c) where the property was substantially identical property so acquired, its actual cost or its amortized cost on January 1, 1972, as the case may be, to the taxpayer shall be deemed to be the amount that was the actual cost or the amortized cost on January 1, 1972, as the case may be, to the taxpayer of the property so disposed of by the taxpayer.

• Marginal note:Election re cost

  (7) Where, but for this subsection, the cost to an individual of any property actually owned by the individual on December 31, 1971 would be determined under subsection (3) or (4) otherwise than because of subsection (5) and the individual has so elected, in prescribed manner and not later than the day on or before which the individual is required by Part I of the amended Act to file a return of income for the first taxation year in which the individual disposes of all or any part of the property, other than

  • (a) personal-use property of the individual that was not listed personal property or real property,

  • (b) listed personal property, if the individual’s gain or loss, as the case may be, from the disposition thereof was, because of subsection 46(1) or (2) of the amended Act, nil,

  • (c) the individual’s principal residence, if the individual’s gain from the disposition thereof was, because of paragraph 40(2)(b) of the amended Act, nil,

  • (d) personal-use property of the individual that was real property (other than the individual’s principal residence), if the individual’s gain from the disposition thereof was, because of subsection 46(1) or (2) of the amended Act, nil, or

  • (e) any other property, the proceeds of disposition of which are equal to its fair market value on valuation day,

  the cost to the individual of each capital property (other than depreciable property, an interest in a partnership or any property described in any of paragraphs (a) to (e) that was disposed of by the individual before that taxation year) actually owned by the individual on December 31, 1971 shall be deemed to be its fair market value on valuation day.

• Marginal note:Identical properties

  (8) For the purposes of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) that was owned by the taxpayer on December 31, 1971 and thereafter without interruption until the particular time, if the property was one of a group of identical properties owned by the taxpayer on December 31, 1971,

  • (a) section 47 of the amended Act does not apply;

  • (b) where the property was an obligation,

    • (i) for the purpose of paragraph (3)(a), its amortized cost to the taxpayer on January 1, 1972 shall be deemed to be that proportion of the total of the amortized costs to the taxpayer on January 1, 1972 of all obligations of that group that the principal amount of the obligation is of the total of the principal amounts of all obligations of that group, and

    • (ii) for the purpose of paragraph (3)(b), its fair market value on valuation day shall be deemed to be that proportion of the fair market value on that day of all obligations of that group that the principal amount of the obligation is of the total of the principal amounts of all obligations of that group;

  • (c) where the property was not an obligation,

    • (i) for the purpose of paragraph (3)(a), its actual cost to the taxpayer shall be deemed to be the quotient obtained when the total of the actual costs to the taxpayer of all properties of that group is divided by the number of properties of that group, and

    • (ii) for the purpose of paragraph (3)(b), its fair market value on valuation day shall be deemed to be the quotient obtained when the fair market value on that day of all properties of that group is divided by the number of properties of that group;

  • (d) for the purpose of distinguishing any such property from an otherwise identical property acquired and disposed of by the taxpayer before 1972, properties acquired by the taxpayer at any time shall be deemed to have been disposed of by the taxpayer before properties acquired by the taxpayer after that time; and

  • (e) for the purposes of distinguishing any such property from an otherwise identical property acquired by the taxpayer after 1971, properties owned by the taxpayer on December 31, 1971, shall be deemed to have been disposed of by the taxpayer before properties acquired by the taxpayer at a later time.

• Marginal note:Idem

  (8.1) For the purposes of subsection (8), any property of a life insurance corporation that would, but for this subsection, be identical to any other property of the corporation shall be deemed not to be identical to that other property unless both properties are

  • (a) included in the same segregated fund of the corporation;

  • (b) non-segregated property used in the year in, or held in the course of, carrying on a life insurance business in Canada; or

  • (c) non-segregated property used in the year in, or held in the course of, carrying on an insurance business in Canada, other than a life insurance business.

• Marginal note:Idem

  (8.2) For the purposes of subsection (8), any bond, debenture, bill, note or other similar obligation issued by a debtor is identical to any other such obligation issued by that debtor if both are identical in respect of all rights (in equity or otherwise, either immediately or in the future and either absolutely or contingently) attaching thereto, except as regards the principal amount thereof.

• Marginal note:Idem

  (8.3) Where a corporation resident in Canada has, after 1971, received a stock dividend in respect of a share owned on June 18, 1971 and December 31, 1971 by it or by a corporation with which it did not deal at arm’s length of the capital stock of a foreign affiliate of that corporation and the share or shares received as the stock dividend are identical to the share in respect of which the stock dividend was received, the share or shares received as the stock dividend may, at the option of the corporation, be deemed for the purposes of subsection (5) to be capital property owned by it on June 18, 1971 and for the purposes of this subsection, paragraph (3)(c) and subsection (8) to be capital property owned by it on June 18, 1971 and December 31, 1971 and not to be property acquired by the corporation after 1971 for the purposes of paragraph (8)(e).

• Marginal note:Idem

  (8.4) Where a corporation resident in Canada has, after 1971, received a stock dividend in respect of a share acquired by it after June 18, 1971 from a person with whom it was dealing at arm’s length and owned by it on December 31, 1971 of the capital stock of a foreign affiliate of that corporation and the share or shares received as the stock dividend are identical to the share in respect of which the stock dividend was received, the share or shares received as the stock dividend may, at the option of the corporation, be deemed for the purposes of this subsection, paragraph (3)(c) and subsection (8) to be capital property owned by it on December 31, 1971 and not to be property acquired by the corporation after 1971 for the purposes of paragraph (8)(e).

• Marginal note:Amalgamation

  (8.5) For the purposes of subsections (8.3) and (8.4), where there has been an amalgamation (within the meaning of section 87 of the amended Act), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation.

• Marginal note:Cost of interest in partnership

  (9) For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time, the cost to the taxpayer of the interest shall be deemed to be the amount that is neither the greatest nor the least of the following three amounts, namely,

  • (a) its actual cost to the taxpayer as of the particular time,

  • (b) the amount determined under subsection (9.1) in respect of the interest as of the particular time, and

  • (c) the amount, if any, by which the total of the fair market value of the interest at the particular time and all amounts required by subsection 53(2) of the amended Act to be deducted in computing its adjusted cost base to the taxpayer immediately before the particular time exceeds the total of all amounts required by subsection 53(1) of the amended Act to be added in computing its adjusted cost base to the taxpayer immediately before the particular time,

  except that where two or more of the amounts determined under paragraphs (a) to (c) in respect of the interest are the same amount, that amount shall be deemed to be its cost to the taxpayer.

• Marginal note:Determination of amounts for purpose of s. (9)

  (9.1) For the purposes of subsection (9), the amount determined under this subsection in respect of a taxpayer’s interest in a partnership as of a particular time is the amount, if any, by which the total of

  • (a) the taxpayer’s share, determined at the beginning of the first fiscal period of the partnership ending after 1971, of the tax equity of the partnership at the particular time,

  • (b) such part of any contribution of capital made by the taxpayer to the partnership (otherwise than by way of loan) before 1972 and after the beginning of the partnership’s first fiscal period ending after 1971, as cannot reasonably be regarded as a gift made to, or for the benefit of, any other member of the partnership who was related to the taxpayer, and

  • (c) the amount of any consideration that became payable by the taxpayer after 1971 to any other person to acquire, after 1971, any right in respect of the partnership, the sole purpose of the acquisition of which was to increase the taxpayer’s interest in the partnership,

  exceeds the total of

  • (d) all amounts received by the taxpayer before 1972 and after the beginning of the partnership’s first fiscal period ending after 1971 as, on account of, in lieu of payment of or in satisfaction of, a distribution of the taxpayer’s share of the partnership profits or partnership capital, and

  • (e) all amounts each of which is an amount in respect of the disposition by the taxpayer after 1971 and before the particular time of a part of the taxpayer’s interest in the partnership, equal to such portion of the adjusted cost base to the taxpayer of the interest immediately before the disposition as may reasonably be regarded as attributable to the part so dispose of.

• Marginal note:Where interest acquired before 1972 and after beginning of 1st fiscal period ending after 1971

  (9.2) Where a taxpayer has, before 1972 and after the beginning of the first fiscal period of a partnership ending after 1971, acquired an interest in the partnership from another person, subsection (9.1) applies as if, for the purposes of paragraphs (a), (b) and (d) thereof, the taxpayer had had in respect of the interest, throughout the period beginning at the beginning of that fiscal period and ending at the time the taxpayer acquired the interest, the same position in relation to the partnership as the taxpayer would have had in relation thereto if, throughout that period, the taxpayer had been the owner of the interest.

• Marginal note:Amounts deemed to be required to be deducted in respect of interest in partnership

  (9.3) For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time, the lesser of

  • (a) the amount, if any, by which

    • (i) the total of all amounts in respect of the interest determined under paragraph (9.1)(d)

    exceeds

    • (ii) the total of

      • (A) the taxpayer’s share, determined at the beginning of the first fiscal period of the partnership ending after 1971, of the tax equity of the partnership at the particular time, and

      • (B) the amount in respect of the interest determined under paragraph (9.1)(b), and

  • (b) the amount, if any, by which

    • (i) the total of all amounts in respect of the interest determined as of the particular time under paragraphs 14(e) to (g)

    exceeds

    • (ii) the total of all amounts in respect of the interest determined as of the particular time under paragraphs 14(a) to (d),

  shall be deemed to be required by subsection 53(2) of the amended Act to be deducted.

• Marginal note:Application of s. 53 of amended Act in respect of interest in partnership

  (9.4) For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time,

  • (a) the reference in clause 53(1)(e)(i)(B) of the amended Act to “relating to” shall be read as a reference to “relating to section 14 or to”; and

  • (b) clause 53(2)(c)(i)(B) of the amended Act shall be read as follows:

    • “(B) paragraphs 12(1)(o) and (z.5), 18(1)(m) and 20(1)(v.1), section 31, subsection 40(2), section 55 and subsections 69(6) and (7) of this Act, 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 section 14, and”

• Marginal note:Where paragraph 128.1(1)(b) of amended Act applies

  (10) Where subsection 48(3) of the amended Act, as it read in its application before 1993, or paragraph 128.1(1)(b) of the amended Act applies for the purpose of determining the cost to a taxpayer of any property, this section does not apply for that purpose.

• Marginal note:Fair market value of publicly-traded securities

  (11) For the purposes of this section, the fair market value on valuation day of any property prescribed to be a publicly-traded share or security shall be deemed to be the greater of the amount, if any, prescribed in respect of that property and the fair market value of that property, otherwise determined, on valuation day.

• Marginal note:Fair market value of share of foreign affiliate

  (11.1) For the purposes of computing the fair market value

  • (a) on December 31, 1971, or

  • (b) at any subsequent time for the purposes of subsection (4),

  of any shares owned by a taxpayer resident in Canada of the capital stock of a foreign affiliate of the taxpayer, the fair market value at that time of any asset owned by the foreign affiliate at that time

  • (c) that was subsequently acquired by the taxpayer from the foreign affiliate

    • (i) as a dividend payable in kind,

    • (ii) as a benefit the amount of which was deemed by paragraph 80.1(4)(b) of the amended Act to have been received by the taxpayer as a dividend from the foreign affiliate, or

    • (iii) as consideration for the settlement or extinguishment of an obligation described in subsection 80.1(5) of the amended Act, and

  • (d) in respect of which subsection 80.1(4) or (5), as the case may be, of the amended Act applies because of an election described in that subsection made by the taxpayer,

  shall be deemed to be the principal amount of that asset.

• Marginal note:Idem

  (11.2) For the purposes of computing the fair market value on December 31, 1971 of any shares owned by a taxpayer resident in Canada of the capital stock of a foreign affiliate of the taxpayer, the fair market value on that day of any asset owned by the foreign affiliate on that day

  • (a) that was subsequently acquired by the taxpayer from the foreign affiliate as described in paragraph 80.1(6)(a) or (b) of the amended Act, and

  • (b) in respect of which subsection 80.1(1) of the amended Act applies because of an election described in subsection 80.1(6) of that Act made by the taxpayer,

  shall be deemed to be the principal amount of that asset,

• Marginal note:Definitions

  (12) In this section,

  amortized cost

  amortized cost to a taxpayer of any obligation on January 1, 1972 means

  • (a) the principal amount of the obligation, if its actual cost to the taxpayer was less than 100% but not less than 95% of that principal amount and the obligation was issued before November 8, 1969,

  • (b) the actual cost to the taxpayer of the obligation, if the actual cost to the taxpayer thereof was less than 105% but not less than 100% of the principal amount thereof, and

  • (c) in any other case, the actual cost to the taxpayer of the obligation, plus that proportion of the discount or minus that proportion of the premium, as the case may be, in respect thereof that

    • (i) the number of full months in the period commencing with the day the taxpayer last acquired the obligation and ending with valuation day,

    is of

    • (ii) the number of full months in the period commencing with the day the taxpayer last acquired the obligation and ending with the date of its maturity; (coût amorti)

  capital property

  capital property of a taxpayer means any depreciable property of the taxpayer, and any property (other than depreciable property) any gain or loss from the disposition of which would, if the property were disposed of after 1971, be a capital gain or a capital loss, as the case may be, of the taxpayer; (immobilisation)

  discount

  discount in respect of any obligation owned by a taxpayer means the amount, if any, by which the principal amount thereof exceeds its actual cost to the taxpayer, determined without reference to subsection (3); (escompte)

  eligible capital property

  eligible capital property of a taxpayer means any property, ½ of any amount payable to the taxpayer as consideration for the disposition of which would, if the property were disposed of after 1971, be eligible capital amount in respect of business within the meaning assigned by subsection 14(1) of the amended Act; (immobilisation admissible)

  obligation

  obligation means a bond, debenture, bill, note, mortgage, hypothecary claim or agreement of sale; (obligation)

  premium

  premium in respect of any obligation owned by a taxpayer means the amount, if any, by which its actual cost to the taxpayer determined without reference to subsection (3) exceeds the principal amount thereof; (primes)

  tax equity

  tax equity of a partnership at any particular time means the amount, if any, by which the total of all amounts each of which is

  • (a) the amount of any money of the partnership on hand at the beginning of its first fiscal period ending after 1971,

  • (b) the cost amount to the partnership, at the beginning of that fiscal period, of any partnership property other than capital property or eligible capital property,

  • (c) an amount in respect of any property (other than depreciable property) that was, at the beginning of that fiscal period, capital property of the partnership, equal to,

    • (i) where the property was disposed of before 1972, the proceeds of disposition thereof,

    • (ii) where the property was disposed of after 1971 and before the particular time, the amount determined under this section to be its cost to the partnership for the purposes of computing its adjusted cost base to the partnership immediately before it was disposed of, and

    • (iii) in any other case, the amount determined under this section to be its cost to the partnership for the purposes of computing its adjusted cost base to the partnership immediately before the particular time,

  • (d) an amount in respect of any prescribed class of depreciable property of the partnership, equal to the amount, if any, by which the total of the undepreciated capital cost to the partnership of property of that class as of January 1, 1972 exceeds the capital cost to the partnership of property of that class acquired by it after the beginning of that fiscal period and before 1972,

  • (e) an amount in respect of any other depreciable property of the partnership at the beginning of that fiscal period, equal to the amount by which

    • (i) the actual cost of the property to the partnership, or the amount at which the partnership was deemed to have acquired the property under subsection 20(6) of the former Act as it read in its application to the 1971 taxation year, as the case may be,

    exceeds

    • (ii) the total of all amounts in respect of the cost of the property that were allowed under paragraph 11(1)(a) of the former Act as it read in computing the income from the partnership of the members thereof for taxation years ending before 1972,

  • (f) an amount in respect of any property that was, at the beginning of that fiscal period, partnership property that was depreciable property, equal to

    • (i) where the property was disposed of before 1972, the proceeds of disposition thereof minus the amount, if any, by which the lesser of

      • (A) the proceeds of disposition thereof, and

      • (B) the capital cost of the property,

      exceeds

      • (C) in respect of depreciable property of a prescribed class, the undepreciable capital cost of all of the property of that class at the time of the disposition, or

      • (D) in respect of any other depreciable property, the amount that would be determined under paragraph (e) if the words “at the beginning of that fiscal period” were read as “at the time of the disposition”,

    • (ii) where the property was disposed of after 1971 and before the particular time, the amount, if any, by which the lesser of

      • (A) the proceeds of disposition thereof, and

      • (B) the fair market value of the property on valuation day,

      exceeds the capital cost to the partnership of the property, and

    • (iii) in any other case, the amount, if any, by which

      • (A) the lesser of the fair market value of the property on valuation day and its fair market value at the particular time

      exceeds

      • (B) the capital cost to the partnership of the property, or

  • (g) an amount in respect of any business carried on by the partnership in its 1971 fiscal period and thereafter without interruption until the particular time, equal to the amount, if any, by which

    • (i) 2 times the eligible capital amounts (within the meaning assigned by section 14 of the amended Act) in respect of the business (computed without reference to section 21 of this Act) that would have become payable to the partnership

    would exceed

    • (ii) the amount that would be deemed by subsection 21(1) to be the amount that had become payable to the partnership

    if the partnership had disposed of the business at the particular time for an amount equal to its fair market value at that time,

  exceeds the total of all amounts each of which is the amount of any debt owing by the partnership, or of any other obligation of the partnership to pay an amount, that was outstanding at the beginning of the partnership’s first fiscal period ending after 1971, minus such part, if any, thereof as would, if the amount had been paid by the partnership in that fiscal period, have been deductible in computing its income for that fiscal period. (masse fiscale)

• Marginal note:Meaning of actual cost

  (13) For the purposes of this section, the actual cost to a person of any property means, except as expressly otherwise provided in this section, the amount, if any, by which

  • (a) its cost to the person computed without regard to the provisions of this section

  exceeds

  • (b) such part of that cost as was deductible in computing the person’s income for any taxation year ending before 1972.

• Marginal note:Idem

  (14) For the purposes of this section, the actual cost to a taxpayer, as of any particular time after 1971, of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time means the amount, if any, by which the total of

  • (a) the cost to the taxpayer of the interest, computed as of the particular time without regard to the provisions of this section,

  • (b) the total of all amounts each of which is an amount in respect of a fiscal period of the partnership that ended before 1972, equal to the total of

    • (i) the amount that the taxpayer’s income from the partnership for the taxation year of the taxpayer in which the period ended would have been, if the former Act had been read without reference to subsection 83(5) of that Act, and

    • (ii) the taxpayer’s share, determined at the end of the period, of all profits made from dispositions in the period of capital assets that were partnership property of the partnership, to the extent that those profits were not included in computing the income or loss, as the case may be, from the partnership, of any member thereof,

  • (c) where the taxpayer had, before 1972, made a contribution of capital to the partnership otherwise than by way of loan, such part of the contribution as cannot reasonably be regarded as a gift made to, or for the benefit of, any other member of the partnership who was related to the taxpayer, and

  • (d) where, by means of the partnership, the taxpayer carried on before 1972 a business that was a profession, the amount that the taxpayer’s 1971 receivables (within the meaning assigned by subsection 23(5)) in respect of the business would have been if, before 1972, the taxpayer had carried on no businesses except by means of the partnership,

  exceeds the total of

  • (e) all amounts each of which is an amount in respect of the disposition by the taxpayer before the particular time of a part of the taxpayer’s interest in the partnership, equal to such portion of,

    • (i) where the disposition was made before 1972, the actual cost to the taxpayer of the interest, and

    • (ii) in any other case, the adjusted cost base to the taxpayer of the interest immediately before the disposition,

    as can reasonably be regarded as attributable to the part so disposed of,

  • (f) all amounts each of which is an amount in respect of a fiscal period of the partnership that ended before 1972, equal to the total of

    • (i) the amount that would have been the taxpayer’s loss from the partnership for the taxation year of the taxpayer in which the period ended if the former Act had been read without reference to subsection 83(5) of that Act,

    • (ii) the taxpayer’s share, determined the end of the period, of all losses sustained from dispositions in the period of capital assets that were partnership property of the partnership, to the extent that those losses were not included in computing the loss or income, as the case may be, from the partnership of any member thereof, and

    • (iii) the taxpayer’s share, determined at the end of the period, of such of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the partnership while the taxpayer was a member thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada as were incurred in the period and after 1948, to the extent that those expenses were not deducted in computing the taxpayer’s income from the partnership for the taxpayer’s 1971 or any preceding taxation year, and

  • (g) all amounts received by the taxpayer before 1972 as, on account of, in lieu of payment of or in satisfaction of, a distribution of the taxpayer’s share of the partnership profits or partnership capital.

• Marginal note:Idem

  (15) For the purposes of this section and subsection 88(2.1) of the amended Act, the actual cost to a taxpayer, as of any particular time after 1971, of any shares (in this subsection referred to as “new shares”) of any class of the capital stock of a new corporation formed as a result of an amalgamation of two or more corporations (within the meaning of section 85i of the former Act as it read in its application to the 1971 taxation year) that were

  • (a) owned by the taxpayer on December 31, 1971, and thereafter without interruption until the particular time, and

  • (b) acquired by the taxpayer by the conversion, because of the amalgamation, of shares of the capital stock of a predecessor corporation into shares of the capital stock of the new corporation,

  means that proportion of the actual cost to the taxpayer of any shares owned by the taxpayer that were so converted because of the amalgamation that the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the taxpayer is of the fair market value, immediately after the amalgamation, of all of the shares of the capital stock of the new corporation so acquired by the taxpayer.

• Marginal note:Idem

  (16) For the purposes of this section, the actual cost to an individual, as of any particular time after 1971, of any share of the capital stock of a corporation that was

  • (a) owned by the individual on December 31, 1971 and thereafter without interruption until the particular time, and

  • (b) acquired by the individual in a taxation year before 1972 under an agreement referred to in subsection 85a(1) of the former Act as it read in its application to that taxation year,

  means an amount equal to the greater of

  • (c) the actual cost to the individual of the share computed without regard to this subsection, and

  • (d) the fair market value of the share at the time the individual so acquired it.

• Marginal note:Idem

  (17) For the purposes of this section and subsection 88(2.1) of the amended Act, the actual cost to a taxpayer, as of any particular time after 1971, of any capital property received by the taxpayer before 1972 and owned by the taxpayer thereafter without interruption until the particular time means,

  • (a) where the property was so received as, on account of, 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 taxpayer of the capital stock of a corporation, the fair market value of that property at the time the property was so received;

  • (b) where the property so received was a share of the capital stock of a corporation received by the taxpayer as a stock dividend, the amount that, because of the receipt of the share, was deemed by subsection 81(3) of the former Act to have been received by the taxpayer as a dividend; and

  • (c) where the property was so received from a pension fund or plan, an employees profit sharing plan, a retirement savings plan, a deferred profit sharing plan or a supplementary unemployment benefit plan, the fair market value of that property at the time the property was so received.

• Marginal note:Application

  (17.1) Where a taxpayer is deemed to have acquired a property because of subsection 138(11.3) of the amended Act, this section does not apply in respect of any subsequent disposition or deemed disposition of the property.

• Marginal note:Transfer of farm land by a farmer to his child at death

  (18) Where

  • (a) a taxpayer owned, on December 31, 1971 and thereafter without interruption until the taxpayer’s death, any land referred to in subsection 70(9) of the amended Act,

  • (b) the land has, on or after the death of the taxpayer and as a consequence thereof, been transferred or distributed to a child of the taxpayer who was resident in Canada immediately before the death of the taxpayer, and

  • (c) 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 legal representative of the taxpayer within that period, within such longer period as the Minister considers reasonable in the circumstances, that the land has become vested indefeasibly in the child,

  the following rules apply:

  • (d) paragraph 70(9)(b) of the amended Act does not apply for the purpose of determining the cost to the child of the land or part thereof, as the case may be, and

  • (e) subsection (5) applies in respect of the transfer or distribution of the land to the child as if the references in that subsection to “June 18, 1971” were references to “December 31, 1971”.

• Marginal note:Inter vivos transfer of farm land by farmer to child

  (19) Where a taxpayer owned, on December 31, 1971, and thereafter without interruption until a transfer thereof by the taxpayer to the taxpayer’s child, in circumstances to which subsection 73(3) of the amended Act applies, land referred to in that subsection,

  • (a) paragraph 73(3)(d) of the amended Act does not apply for the purpose of determining the cost to the child of the land; and

  • (b) subsection (5) shall apply in respect of the transfer of the land to the child as if the references in that subsection to “June 18, 1971” were references to “December 31, 1971”.

• Extended meaning of child

  (20) For the purposes of subsections (18) and (19), child of a taxpayer includes

  • (a) a child of the taxpayer’s child;

  • (b) a child of the taxpayer’s child’s child; and

  • (c) a person who, at any time before attaining the age of 21 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.

• Marginal note:Shares received on amalgamation

  (21) Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”), and

  • (a) any shareholder (except any predecessor corporation) owned shares of the capital stock of a predecessor corporation on December 31, 1971 and thereafter without interruption until immediately before the amalgamation,

  • (b) any shares referred to in paragraph (a) were shares of one class of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”),

  • (c) no consideration was received by the shareholder for the disposition of the old shares on the amalgamation other than shares of one class of the capital stock of the new corporation (in this subsection referred to as the “new shares”), and

  • (c.1) the cost of the new shares received by the shareholder because of the amalgamation was determined otherwise than because of paragraph 87(4)(e) of the amended Act,

  notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares,

  • (d) the property that was the old shares shall be deemed not to have been disposed of by the shareholder because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new shares, and

  • (e) the property that is the new shares shall be deemed not to have been acquired by the shareholder because of the amalgamation but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the amalgamation.

• Marginal note:Options received on amalgamations

  (22) Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”) and a taxpayer has acquired an option to acquire capital property that was shares of the capital stock of the new corporation (in this subsection referred to as the “new option”) as sole consideration for the disposition on the amalgamation of an option to acquire shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old option”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the amalgamation, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new option,

  • (a) the property that was the old option shall be deemed not to have been disposed of by the taxpayer because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new option; and

  • (b) the property that is the new option shall be deemed not to have been acquired by the taxpayer because of the amalgamation but to have been in existence prior thereto in the form of the old option that was altered, in form only, because of the amalgamation.

• Marginal note:Obligations received on amalgamations

  (23) Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”) and a taxpayer has acquired a capital property that was a bond, debenture, note, mortgage, hypothecary claim or other similar obligation of the new corporation (in this subsection referred to as the “new obligation”) as sole consideration for the disposition on the amalgamation of a bond, debenture, note, mortgage, hypothecary claim or other similar obligation respectively of a predecessor corporation (in this subsection referred to as the “old obligation”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the amalgamation, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new obligation,

  • (a) the property that was the old obligation shall be deemed not to have been disposed of by the taxpayer because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new obligation; and

  • (b) the property that is the new obligation shall be deemed not to have been acquired by the taxpayer because of the amalgamation but to have been in existence prior thereto in the form of the old obligation that was altered, in form only, because of the amalgamation.

• Marginal note:Convertible properties

  (24) Where there has been an exchange to which subsection 51(1) of the amended Act applies on which a taxpayer has acquired shares of one class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for a share, bond, debenture or note of the corporation (in this subsection referred to as the “old property”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the time of the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and, where the exchange occurred after May 6, 1974, for the purposes of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares,

  • (a) the property that was the old property shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and

  • (b) the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old property that was altered, in form only, because of the exchange.

• Marginal note:Bond conversion

  (25) Where, after May 6, 1974, there has been an exchange to which section 51.1 of the amended Act applies on which a taxpayer has acquired a bond of a debtor (in this subsection referred to as the “new bond”) in exchange for another bond of the same debtor (in this subsection referred to as the “old bond”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new bond,

  • (a) the property that was the old bond shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new bond; and

  • (b) the property that is the new bond shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old bond that was altered, in form only, because of the exchange.

• Marginal note:Share for share exchange

  (26) Where, after May 6, 1974, there has been an exchange to which subsection 85.1(1) of the amended Act applies on which a taxpayer has acquired shares of any particular class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for shares of any particular class of the capital stock of another corporation (in this subsection referred to as the “old shares”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares,

  • (a) the property that was the old shares shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and

  • (b) the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the exchange.

• Marginal note:Reorganization of capital

  (27) Where, after May 6, 1974, there has been a reorganization of the capital of a corporation to which section 86 of the amended Act applies on which a taxpayer has acquired shares of a particular class of the capital stock of the corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition on the reorganization of shares of another class of the capital stock of the corporation (in this subsection referred to as the “old shares”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the reorganization and the cost to the taxpayer of the new shares was determined otherwise than because of subsection 86(2) of the amended Act, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares,

  • (a) the property that was the old shares shall be deemed not to have been disposed of by the taxpayer because of the reorganization but to have been altered, in form only, because of the reorganization and to have continued in existence in the form of the new shares; and

  • (b) the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the reorganization but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the reorganization.

• Marginal note:Idem

  (28) Where a taxpayer acquired a property (in this subsection referred to as the “first property”) in circumstances to which any of subsections (5) and (21) to (27) applied and subsequently acquires, in exchange for or in consideration for the disposition of the first property, another property in circumstances to which any of subsections (21) to (27) would apply if the taxpayer had owned the first property on December 31, 1971 and thereafter without interruption until the time of the subsequent acquisition, for the purposes of applying subsections (21) to (27) in respect of that subsequent acquisition, the taxpayer shall be deemed to have owned the first property on December 31, 1971 and thereafter without interruption until the time of the subsequent acquisition.

• Marginal note:Effect of election under subsection 110.6(19)

  (29) Where subsection 110.6(19) of the amended Act applies to a particular property, for the purposes of determining the cost and the adjusted cost base to a taxpayer of any property at any time after February 22, 1994, the particular property shall be deemed not to have been owned by any taxpayer on December 31, 1971.

• Marginal note:Additions to taxable Canadian property

  (30) Subsections (1.1) to (29) do not apply to a disposition by a non-resident person of a property

  • (a) that the person last acquired before April 27, 1995;

  • (b) that would not be a taxable Canadian property immediately before the disposition if section 115 of the amended Act were read as it applied to dispositions that occurred on April 26, 1995; and

  • (c) that would be a taxable Canadian property immediately before the disposition if section 115 of the amended Act were read as it applied to dispositions that occurred on January 1, 1996.