Income Tax Act

Marginal note:Gain when small business corporation becomes public

• 48.1 (1) Where

  • (a) at any time in a taxation year an individual owns capital property that is a share of a class of the capital stock of a corporation that,

    • (i) at that time, is a small business corporation, and

    • (ii) immediately after that time, ceases to be a small business corporation because a class of its or another corporation’s shares is listed on a prescribed stock exchange, and

  • (b) the individual elects in prescribed form to have this section apply,

  the individual shall be deemed, except for the purposes of sections 7 and 35 and paragraph 110(1)(d.1),

  • (c) to have disposed of the share at that time for proceeds of disposition equal to the greater of

    • (i) the adjusted cost base to the individual of the share at that time, and

    • (ii) the lesser of the fair market value of the share at that time and such amount as is designated in the prescribed form by the individual in respect of the share, and

  • (d) to have reacquired the share immediately after that time at a cost equal to those proceeds of disposition.

• Marginal note:Time for election

  (2) An election made under subsection 48.1(1) by an individual for a taxation year shall be made on or before the individual’s filing-due date for the year.

• Marginal note:Late filed election

  (3) Where the election referred to in subsection 48.1(2) was not made on or before the day referred to therein, the election shall be deemed for the purposes of subsections 48.1(1) and 48.1(2) to have been made on that day if, on or before the day that is 2 years after that day,

  • (a) the election is made in prescribed form; and

  • (b) an estimate of the penalty in respect of that election is paid by the individual when the election is made.

• Marginal note:Penalty for late filed election

  (4) For the purposes of this section, the penalty in respect of an election referred to in paragraph 48.1(3)(a) is an amount equal to the lesser of

  • (a) 1/4 of 1% of the amount, if any, by which

    • (i) the proceeds of disposition determined under subsection 48.1(1)

    exceed

    • (ii) the amount referred to in subparagraph 48.1(1)(c)(i)

    for each month or part of a month during the period commencing on the day referred to in subsection 48.1(2) and ending on the day the election is made, and

  • (b) an amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 48.1(4)(a).

• Marginal note:Unpaid balance of penalty

  (5) The Minister shall, with all due dispatch, examine each election referred to in paragraph 48.1(3)(a), assess the penalty payable and send a notice of assessment to the individual, who shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.