Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))
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Act current to 2012-05-02 and last amended on 2012-01-01. Previous Versions
Income Tax Act
R.S.C., 1985, c. 1 (5th Supp.)
An Act respecting income taxes
SHORT TITLE
Marginal note:Short Title
1. This Act may be cited as the Income Tax Act.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S.C. 1952, c. 148, s. 1.
PART I
INCOME TAX
Division A
Liability for Tax
Marginal note:Tax payable by persons resident in Canada
2. (1) An 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.
Marginal note:Taxable income
(2) The 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.
Marginal note:Tax payable by non-resident persons
(3) Where a person who is not taxable under subsection 2(1) for a taxation year
(a) was employed in Canada,
(b) carried on a business in Canada, or
(c) disposed 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. 1970-71-72, c. 63, s. 1 “2”;
- 1984, c. 1, s.1;
- 1985, c. 45, s. 1.
Division B
Computation of Income
Basic Rules
Marginal note:Income for taxation year
3. The 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:
(a) 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,
(b) determine the amount, if any, by which
(i) the total of
(A) all of the taxpayer’s taxable capital gains for the year from dispositions of property other than listed personal property, and
(B) the taxpayer’s taxable net gain for the year from dispositions of listed personal property,
exceeds
(ii) the 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,
(c) 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), and
(d) determine 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,
(e) 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, and
(f) in 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. R.S., 1985, c. 1 (5th Supp.), s. 3;
- 1994, c. 7, Sch. II, s. 1.
Marginal note:Income or loss from a source or from sources in a place
4. (1) For the purposes of this Act,
(a) 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; and
(b) where 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.
Marginal note:Idem
(2) Subject 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.
Marginal note:Deductions applicable
(3) In applying subsection 4(1) for the purposes of subsections 104(22) and 104(22.1) and sections 115 and 126,
(a) 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), shall apply either wholly or in part to a particular source or to sources in a particular place; and
(b) any 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.
(4) [Repealed, 1996, c. 21, s. 2(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Subdivision a
Income or Loss from an Office or Employment
Basic Rules
Marginal note:Income from office or employment
5. (1) Subject 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.
Marginal note:Loss from office or employment
(2) A 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. 1970-71-72, c. 63, s. 1“5”.
Inclusions
Marginal note:Amounts to be included as income from office or employment
6. (1) There 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 applicable
Marginal note:Value of benefits
(a) the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment, except any benefit
(i) derived 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 private health services plan, a registered pension plan or a supplementary unemployment benefit plan,
(ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust,
(iii) that was a benefit in respect of the use of an automobile,
(iv) derived from counselling services in respect of
(A) the 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, or
(B) the re-employment or retirement of the taxpayer, or
(v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection 6(11);
Marginal note:Personal or living expenses
(b) all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except
(i) travel, personal or living expense allowances
(A) expressly fixed in an Act of Parliament, or
(B) paid 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,
(ii) travel and separation allowances received under service regulations as a member of the Canadian Forces,
(iii) representation or other special allowances received in respect of a period of absence from Canada as a person described in paragraph 250(1)(b), 250(1)(c), 250(1)(d) or (d.1),
(iv) 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,
(v) 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,
(v.1) allowances for board and lodging of the taxpayer, to a maximum total of $300 for each month of the year, if
(A) the 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,
(B) 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,
(C) the employer is a registered charity or a non-profit organization described in paragraph 149(1)(l), and
(D) the allowance is reasonably attribut- able to the cost to the taxpayer of living away from the place where the employee would, but for the employment, ordinarily reside,
(vi) 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,
(vii) 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 from
(A) the municipality where the employer’s establishment at which the employee ordinarily worked or to which the employee ordinarily reported was located, and
(B) the metropolitan area, if there is one, where that establishment was located,
in the performance of the duties of the employee’s office or employment,
(vii.1) 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,
(viii) [Repealed, 1999, c. 22, s. 2(1)]
(ix) 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 if
(A) a 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, and
(B) the 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 6(1)(b)(v), 6(1)(b)(vi) and 6(1)(b)(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 allowance
(x) where 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, or
(xi) where 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);
Marginal note:Director’s or other fees
(c) director’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;
Marginal note:Allocations, etc., under profit sharing plan
(d) amounts 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;
Marginal note:Standby charge for automobile
(e) where the taxpayer’s employer or a person related to the employer made an automobile available to the taxpayer, or to a person related to the taxpayer, in the year, the amount, if any, by which
(i) an 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 available
exceeds
(ii) the 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 to the employer or the person related to the employer by the taxpayer or the person related to the taxpayer for the use of the automobile;
(e.1) [Repealed, 1997, c. 10, s. 267(1)]
Marginal note:Employment insurance benefits
(f) the 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 to
(i) a sickness or accident insurance plan,
(ii) a disability insurance plan,
(iii) an income maintenance insurance plan, or
(iii.1) a 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 which
(iv) the total of all such amounts received by the taxpayer pursuant to the plan before the end of the year and
(A) where 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, and
(B) in any other case, after 1971,
exceeds
(v) the total of the contributions made by the taxpayer under the plan before the end of the year and
(A) where there was a preceding taxation year described in clause (iv)(A), after the last such year, and
(B) in any other case, after 1967;
Marginal note:Canadian Forces members and veterans income replacement benefits
(f.1) the total of all amounts received by the taxpayer in the year on account of an earnings loss benefit, a supplementary retirement benefit or a permanent impairment allowance payable to the taxpayer under Part 2 of the Canadian Forces Members and Veterans Re-establishment and Compensation Act;
Marginal note:Employee benefit plan benefits
(g) the 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 is
(i) a 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,
(ii) 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,
(iii) a superannuation or pension benefit attributable to services rendered by a person in a period throughout which the person was not resident in Canada, or
(iv) a designated employee benefit (as defined in subsection 144.1(1));
Marginal note:Employee trust
(h) amounts allocated to the taxpayer for the year by a trustee under an employee trust;
Marginal note:Salary deferral arrangement payments
(i) the 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 which
(i) the 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 years
exceeds
(ii) the total of
(A) all deferred amounts received by any person in preceding taxation years out of or under the arrangement, and
(B) all 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;
Marginal note:Reimbursements and awards
(j) amounts 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 received
(i) are otherwise included in computing the income of the taxpayer for the year, or
(ii) are 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;
Marginal note:Automobile operating expense benefit
(k) where
(i) an amount is determined under subparagraph 6(1)(e)(i) in respect of an automobile in computing the taxpayer’s income for the year,
(ii) 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 related to the taxpayer are paid or payable by the taxpayer’s employer or a person related to the taxpayer’s employer (each of whom is in this paragraph referred to as the “payor”), and
(iii) the 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 formula
A - B
where
- A
- is
(iv) where 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, and
(v) in 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), and
- B
- is 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; and
Marginal note:Idem
(l) the value of a benefit in respect of the operation of an automobile (other than a benefit to which paragraph 6(1)(k) applies or would apply but for subparagraph 6(1)(k)(iii)) received or enjoyed by the taxpayer in the year in respect of, in the course of or because of, the taxpayer’s office or employment.
Marginal note:Parking cost
(1.1) For 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.
Marginal note:Reasonable standby charge
(2) For the purposes of paragraph 6(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 related to the taxpayer by the employer of the taxpayer or by a person related to the employer (both of whom are in this subsection referred to as the “employer”) shall be deemed to be the amount determined by the formula
A/B × [2% × (C × D) + 2/3 × (E - F)]
where
- A
- is
(a) the 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, if
(i) the taxpayer is required by the employer to use the automobile in connection with or in the course of the office or employment, and
(ii) the distance travelled by the automobile in the total available days is primarily in connection with or in the course of the office or employment, and
(b) 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, in any other case;
- B
- is 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;
- C
- is the cost of the automobile to the employer where the employer owns the vehicle at any time in the year;
- D
- is 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;
- E
- is 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; and
- F
- is 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 against
(a) loss of, or damage to, the automobile, or
(b) liability resulting from the use or operation of the automobile.
Marginal note:Automobile salesperson
(2.1) Where in a taxation year
(a) a taxpayer was employed principally in selling or leasing automobiles,
(b) 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, and
(c) the 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 if
(d) the reference in the formula in subsection 6(2) to “2%” were read as a reference to “1 1/2%”, and
(e) the cost to the employer of the automobile were the greater of
(i) the quotient obtained by dividing
(A) the 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 business
by
(B) the number of automobiles described in clause 6(2.1)(e)(i)(A), and
(ii) the quotient obtained by dividing
(A) the 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 business
by
(B) the number of automobiles described in clause 6(2.1)(e)(ii)(A).
(2.2) [Repealed, 1994, c. 21, s. 2(5)]
Marginal note:Payments by employer to employee
(3) An amount received by one person from another
(a) during a period while the payee was an officer of, or in the employment of, the payer, or
(b) on 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 received
(c) as consideration or partial consideration for accepting the office or entering into the contract of employment,
(d) as remuneration or partial remuneration for services as an officer or under the contract of employment, or
(e) in 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.
Marginal note:Group term life insurance
(4) Where 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.
(5) [Repealed, 1995, c. 3, s. 1(3)]
Marginal note:Employment at special work site or remote location
(6) Notwithstanding 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,
(a) the taxpayer’s board and lodging for a period at
(i) a 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 residence
(A) that was, throughout the period, available for the taxpayer’s occupancy and not rented by the taxpayer to any other person, and
(B) to which, by reason of distance, the taxpayer could not reasonably be expected to have returned daily from the special work site, or
(ii) a 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; or
(b) transportation between
(i) the principal place of residence and the special work site referred to in subparagraph 6(6)(a)(i), or
(ii) the 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.
Marginal note:Cost of property or service
(7) To 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.
Marginal note:GST rebates re costs of property or service
(8) If
(a) an 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, or
(b) an 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 amount
(c) to 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, and
(d) to 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.
Marginal note:Amount in respect of interest on employee debt
(9) Where 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.
Marginal note:Contributions to an employee benefit plan
(10) For the purposes of subparagraph 6(1)(g)(ii),
(a) 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; and
(b) where 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 of
(i) the amount, if any, by which
(A) the 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 trust
exceeds
(B) the 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, and
(ii) the 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 that
(A) the amount determined under subparagraph 6(10)(b)(i) in respect of the individual
is of
(B) the 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 trust
exceeds
(iii) the 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 plan
shall be deemed to be the return of an amount contributed to the plan by the individual.
Marginal note:Salary deferral arrangement
(11) Where 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.
Marginal note:Idem
(12) Where 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.
Marginal note:Application
(13) Subsection 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 amount
(a) was in respect of services rendered by an employee who
(i) was not resident in Canada at the time the services were rendered, or
(ii) was 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; and
(b) cannot 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.
Marginal note:Part of plan or arrangement
(14) Where 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,
(a) that arrangement shall be deemed to be a separate arrangement independent of other parts of the plan of which it is a part; and
(b) where 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 which
(i) the 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 time
exceeds
(ii) the total of
(A) all 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, and
(B) all 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.
Marginal note:Forgiveness of employee debt
(15) For the purpose of paragraph 6(1)(a),
(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; and
(b) the value of that benefit shall be deemed to be the forgiven amount at that time in respect of the obligation.
Marginal note:Forgiven amount
(15.1) For 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) if
(a) the obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor;
(b) no amount included in computing income because of the obligation being settled or extinguished at that time were taken into account;
(c) 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; and
(d) section 80 were read without reference to paragraphs (2)(b) and (q) of that section.
Marginal note:Disability-related employment benefits
(16) Notwithstanding 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,
(a) 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; or
(b) an 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.
Marginal note:Definitions
(17) The definitions in this subsection apply in this subsection and subsection 6(18).
“disability policy”
« police d’assurance-invalidité »
“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.
“employer”
« employeur »
“employer” of an individual includes a former employer of the individual.
“top-up disability payment”
« paiement compensatoire pour invalidité »
“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 insqurer that was obligated to make payments to the individual under a disability policy where
(a) the 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, or
(b) the following conditions are satisfied:
(i) 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, and
(ii) the 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.
Marginal note:Group disability benefits — insolvent insurer
(18) Where an employer of an individual makes a top-up disability payment in respect of the individual,
(a) the payment is, for the purpose of paragraph 6(1)(a), deemed not to be a benefit received or enjoyed by the individual;
(b) 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; and
(c) if 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.
Marginal note:Benefit re housing loss
(19) For 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.
Marginal note:Benefit re eligible housing loss
(20) For 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 which
(a) one 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 $15,000
exceeds
(b) the 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.
Marginal note:Housing loss
(21) In this section, “housing loss” at any time in respect of a residence of a taxpayer means the amount, if any, by which the greater of
(a) the 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, and
(b) the highest fair market value of the residence within the six-month period that ends at that time exceeds
(c) if 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 of
(i) the proceeds of disposition of the residence, and
(ii) the fair market value of the residence at that time, and
(d) in any other case, the fair market value of the residence at that time.
Marginal note:Eligible housing loss
(22) In 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.
Marginal note:Employer-provided housing subsidies
(23) For 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. 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.
Marginal note:Agreement to issue securities to employees
7. (1) Subject 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),
(a) if the employee has acquired securities under the agreement, a benefit equal to the amount, if any, by which
(i) the value of the securities at the time the employee acquired them
exceeds the total of
(ii) the amount paid or to be paid to the particular qualifying person by the employee for the securities, and
(iii) the 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 employee acquired the securities, by the employee because of the employee’s employment;
(b) 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 which
(i) the value of the consideration for the disposition
exceeds
(ii) the amount, if any, paid by the employee to acquire those rights
shall 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;
(b.1) 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 which
(i) the value of the consideration for the disposition
exceeds
(ii) the amount, if any, paid by the employee to acquire those rights
is 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;
(c) 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 which
(i) the value of the securities at the time the person acquired them
exceeds the total of
(ii) the amount paid or to be paid to the particular qualifying person by the person for the securities, and
(iii) the 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;
(d) 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 which
(i) the value of the consideration for the disposition
exceeds
(ii) the amount, if any, paid by the employee to acquire those rights
shall 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; and
(d.1) 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 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 which
(i) the value of the consideration for the disposition
exceeds
(ii) the amount, if any, paid by the employee to acquire those rights
is 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; and
(e) if 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 which
(i) the value of the right immediately after the death
exceeds
(ii) the amount, if any, paid by the employee to acquire the right
shall 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.
Marginal note:Employee stock options
(1.1) Where 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 with
(a) the corporation,
(b) the Canadian-controlled private corporation, the share of the capital stock of which has been agreed to be sold by the corporation, and
(c) the 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”.
Marginal note:Non-arm’s length relationship with trusts
(1.11) For the purposes of this section, a mutual fund trust is deemed not to deal at arm’s length with a corporation only if the trust controls the corporation.
Marginal note:Order of disposition of securities
(1.3) For 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,
(a) 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; and
(b) if 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.
Marginal note:Disposition of newly-acquired security
(1.31) Where a taxpayer acquires, at a particular time, a particular security under an agreement referred to in subsection (1) 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 if
(a) no 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;
(b) 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; and
(c) the taxpayer has not so identified the particular security, in accordance with this subsection, in connection with the disposition of any other security.
Marginal note:Exchange of options
(1.4) Where
(a) a 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),
(b) 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 is
(i) the particular person,
(ii) a qualifying person with which the particular person does not deal at arm’s length immediately after the disposition,
(iii) a corporation formed on the amalgamation or merger of the particular person and one or more other corporations,
(iv) a mutual fund trust to which the particular person has transferred property in circumstances to which subsection 132.2(1) applied,
(v) a qualifying person with which the corporation referred to in subparagraph (iii) does not deal at arm’s length immediately after the disposition, or
(vi) if 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 entity
to 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), and
(c) the amount, if any, by which
(i) the total value of the new securities immediately after the disposition
exceeds
(ii) the total amount payable by the taxpayer to acquire the new securities under the new option
does not exceed the amount, if any, by which
(iii) the total value of the old securities immediately before the disposition
exceeds
(iv) the amount payable by the taxpayer to acquire the old securities under the exchanged option,
for the purposes of this section,
(d) 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,
(e) the new option is deemed to be the same option as, and a continuation of, the exchanged option, and
(f) if 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.
Marginal note:Rules where securities exchanged
(1.5) For the purposes of this section and paragraphs 110(1)(d) to (d.1), where
(a) a 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”),
(b) 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”) of
(i) the particular qualifying person,
(ii) a qualifying person with which the particular qualifying person does not deal at arm’s length immediately after the disposition or exchange,
(iii) a corporation formed on the amalgamation or merger of the particular qualifying person and one or more other corporations,
(iv) a mutual fund trust to which the particular qualifying person has transferred property in circumstances to which subsection 132.2(1) applied, or
(v) a qualifying person with which the corporation referred to in subparagraph (iii) does not deal at arm’s length immediately after the disposition or exchange, and
(c) the 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:
(d) the taxpayer is deemed not to have disposed of or exchanged the exchanged securities and not to have acquired the new securities,
(e) 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,
(f) 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, and
(g) where the exchanged securities were issued under an agreement, the new securities are deemed to have been issued under that agreement.
Marginal note:Emigrant
(1.6) For 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).
Marginal note:Rights ceasing to be exercisable
(1.7) For 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,
(a) 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; and
(b) for 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 which
(i) the amount paid by the taxpayer to acquire those rights (determined without reference to this subsection)
exceeds
(ii) the total of all amounts each of which is an amount received by the taxpayer before the particular time in respect of the cessation.
Marginal note:Securities held by trustee
(2) If 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),
(a) to have acquired the security at the time the trust began to so hold it; and
(b) to 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.
Marginal note:Special provision
(3) If 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,
(a) except as provided by this section, the employee is deemed to have neither received nor enjoyed any benefit under or because of the agreement; and
(b) the 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.
Marginal note:Application of s. (1)
(4) 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.
Marginal note:Non-application of this section
(5) This 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.
Marginal note:Sale to trustee for employees
(6) If 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,
(a) for the purposes of this section (other than subsection (2)) and paragraphs 110(1)(d) to (d.1),
(i) 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,
(ii) 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, and
(iii) any 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; and
(b) subsection (2) does not apply in respect of securities held by the trustee under the arrangement.
Marginal note:Definitions
(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.1), (1.2), (1.5), (1.6) and (2.1).
“qualifying person”
« personne admissible »
“qualifying person” means a corporation or a mutual fund trust.
“security”
« titre »
“security” of a qualifying person means
(a) if the person is a corporation, a share of the capital stock of the corporation; and
(b) if the person is a mutual fund trust, a unit of the trust.
(8) to (15) [Repealed, 2010, c. 25, s. 3]
Marginal note:Prescribed form for deferral
(16) Where, 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. 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.
Deductions
Marginal note:Deductions allowed
8. (1) In 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
(a) [Repealed, 2001, c. 17, s. 3(1)]
Marginal note:Legal expenses of employee
(b) amounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect or establish a right to salary or wages owed to the taxpayer by the employer or former employer of the taxpayer;
Marginal note:Clergy residence
(c) where, in the year, the taxpayer
(i) is a member of the clergy or of a religious order or a regular minister of a religious denomination, and
(ii) is
(A) in charge of a diocese, parish or congregation,
(B) ministering to a diocese, parish or congregation, or
(C) engaged 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 to
(iii) the 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, or
(iv) rent 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 of
(A) the greater of
(I) $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), and
(II) one-third of the taxpayer’s remuneration for the year from the office or employment, and
(B) the amount, if any, by which
(I) the rent paid or the fair rental value of the residence or living accommodation, including utilities
exceeds
(II) the 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;
Marginal note:Teachers’ exchange fund contribution
(d) a 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;
Marginal note:Expenses of railway employees
(e) amounts disbursed by the taxpayer in the year for meals and lodging while employed by a railway company
(i) away from the taxpayer’s ordinary place of residence as a relieving telegrapher or station agent or on maintenance and repair work, or
(ii) away 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;
Marginal note:Sales expenses
(f) where the taxpayer was employed in the year in connection with the selling of property or negotiating of contracts for the taxpayer’s employer, and
(i) under the contract of employment was required to pay the taxpayer’s own expenses,
(ii) was ordinarily required to carry on the duties of the employment away from the employer’s place of business,
(iii) 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, and
(iv) was 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 not
(v) outlays, losses or replacements of capital or payments on account of capital, except as described in paragraph 8(1)(j),
(vi) 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, or
(vii) amounts 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);
Marginal note:Transport employee’s expenses
(g) where 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,
(i) 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, and
(ii) while 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;
Marginal note:Travel expenses
(h) where the taxpayer, in the year,
(i) 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, and
(ii) was 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 taxpayer
(iii) received 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, or
(iv) claims a deduction for the year under paragraph 8(1)(e), 8(1)(f) or 8(1)(g);
Marginal note:Motor vehicle travel expenses
(h.1) where the taxpayer, in the year,
(i) 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, and
(ii) was 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 taxpayer
(iii) received 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, or
(iv) claims a deduction for the year under paragraph 8(1)(f);
Marginal note:Dues and other expenses of performing duties
(i) amounts paid by the taxpayer in the year as
(i) annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,
(ii) 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,
(iii) 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,
(iv) annual dues to maintain membership in a trade union as defined
(A) by section 3 of the Canada Labour Code, or
(B) in 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,
(v) 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,
(vi) 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, and
(vii) dues 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;
Marginal note:Motor vehicle and aircraft costs
(j) where 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,
(i) 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 is
(A) a motor vehicle that is used, or
(B) an aircraft that is required for use
in the performance of the duties of the taxpayer’s office or employment, and
(ii) such part, if any, of the capital cost to the taxpayer of
(A) a motor vehicle that is used, or
(B) an aircraft that is required for use
in the performance of the duties of the office or employment as is allowed by regulation;
Marginal note:C.P.P. contributions and U.I.A. premiums
(l.1) any amount payable by the taxpayer in the year
(i) as an employer’s premium under the employment Insurance Act, or
(ii) as 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;
Marginal note:Employee’s registered pension plan contributions
(m) the 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;
Marginal note:Employee RCA contributions
(m.2) an 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 where
(i) the plan is a retirement compensation arrangement,
(ii) 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, and
(iii) either
(A) the 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, or
(B) the 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;
(C) [Repealed, 1994, c. 21, s. 4(2)]
Marginal note:Salary reimbursement
(n) an 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 that
(i) the amount so paid to the taxpayer for the period was included in computing the taxpayer’s income from an office or employment, and
(ii) the 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;
Marginal note:Reimbursement of disability payments
(n.1) where,
(i) 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), and
(ii) the reimbursement payment is made
(A) in the year, other than within the first 60 days of the year if the deferred payment was received in the immediately preceding taxation year, or
(B) within 60 days after the end of the year, if the deferred payment was received in the year,
an amount equal to the lesser of
(iii) the amount included under paragraph 6(1)(f) in respect of the deferred payment in computing the individual’s income for any taxation year, and
(iv) the amount of the reimbursement payment;
Marginal note:Forfeited amounts
(o) where 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 of
(i) all such deferred amounts received by any person in that year or preceding taxation years out of or under the arrangement,
(ii) all such deferred amounts receivable by any person in subsequent taxation years out of or under the arrangement, and
(iii) all amounts deducted under this paragraph in computing the taxpayer’s income for preceding taxation years in respect of deferred amounts under the arrangement;
Marginal note:Idem
(o.1) an amount that is deductible in computing the taxpayer’s income for the year because of subsection 144(9);
Marginal note:Musical instrument costs
(p) where 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 of
(i) amounts 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, and
(ii) such part, if any, of the capital cost to the taxpayer of the instrument as is allowed by regulation;
Marginal note:Artists’ employment expenses
(q) where the taxpayer’s income for the year from the office or employment includes income from an artistic activity
(i) that was the creation by the taxpayer of, but did not include the reproduction of, paintings, prints, etchings, drawings, sculptures or similar works of art,
(ii) that was the composition by the taxpayer of a dramatic, musical or literary work,
(iii) that was the performance by the taxpayer of a dramatic or musical work as an actor, dancer, singer or musician, or
(iv) in respect of which the taxpayer was a member of a professional artists’ association that is certified by the Minister of Canadian Heritage,
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 which
(v) the 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),
exceeds
(vi) the 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;
Marginal note:Apprentice mechanics’ tool costs
(r) if 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 of
(i) the taxpayer’s income for the taxation year computed without reference to this paragraph, and
(ii) the amount determined by the formula
(A - B) + C
where
- A
- 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,
- B
- is the lesser of
(A) the value of A for the taxation year in respect of the taxpayer, and
(B) the greater of
(I) the amount that is the total of $500 and the amount determined for the taxation year for B in subsection 118(10), and
(II) 5% of the total of
1. the 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, and
2. the 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, and
- C
- is 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; and
Marginal note:Deduction — tradesperson’s tools
(s) if the taxpayer is employed as a tradesperson at any time in the taxation year, the lesser of $500 and the amount determined by the formula
A - $1,000
where
- A
- is the lesser of
(i) the total of all amounts each of which is the cost of an eligible tool acquired by the taxpayer in the year, and
(ii) the total of
(A) the 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, and
(B) the 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.
Marginal note:General limitation
(2) Except 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.
Marginal note:Meals
(4) An 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.
Marginal note:Dues not deductible
(5) Notwithstanding 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, levied
(a) for or under a superannuation fund or plan;
(b) 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; or
(c) for 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.
Marginal note:Apprentice mechanics
(6) For the purpose of paragraph (1)(r),
(a) a taxpayer is an eligible apprentice mechanic in a taxation year if, at any time in the taxation year, the taxpayer
(i) is 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, and
(ii) is employed as an apprentice mechanic;
(b) an eligible tool is a tool (including ancillary equipment) that
(i) is acquired by a taxpayer for use in connection with the taxpayer’s employment as an eligible apprentice mechanic,
(ii) has not been used for any purpose before it is acquired by the taxpayer,
(iii) 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, and
(iv) is, 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; and
(c) a 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.
Marginal note:Eligible tool of tradesperson
(6.1) For the purposes of paragraph (1)(s), an eligible tool of a taxpayer is a tool (including ancillary equipment) that
(a) is acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer’s employment as a tradesperson;
(b) has not been used for any purpose before it is acquired by the taxpayer;
(c) 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; and
(d) is, 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.
Marginal note:Cost of tool
(7) Except 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 formula
K - (K × L/M)
where
- K
- is the cost to the taxpayer of the tool determined without reference to this subsection;
- L
- is
(a) if 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,
(b) 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, or
(c) if the tool is a tool to which both paragraphs (1)(r) and (s) apply in the taxation year, the amount that is the total of
(i) 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, and
(ii) the amount determined under paragraph (1)(s) to be deductible by the taxpayer in the taxation year; and
- M
- is the amount that is
(a) if 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,
(b) 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, and
(c) if 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.
Marginal note:Presumption
(9) Notwithstanding 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.
Marginal note:Certificate of employer
(10) An 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 a prescribed form, signed by the taxpayer’s employer certifying that the conditions set out in the applicable provision were met in the year in respect of the taxpayer, is filed with the taxpayer’s return of income for the year.
Marginal note:Goods and services tax
(11) For 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.
Marginal note:Forfeiture of securities by employee
(12) If, in a taxation year,
(a) an employee is deemed by subsection 7(2) to have disposed of a security (as defined in subsection 7(7)) held by a trust,
(b) the trust disposed of the security to the person that issued the security,
(c) the disposition occurred as a result of the employee not meeting the conditions necessary for title to the security to vest in the employee, and
(d) the 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:
(e) there may be deducted in computing the employee’s income for the year from employment the amount, if any, by which
(i) the 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 security
exceeds
(ii) any 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, and
(f) notwithstanding 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.
Marginal note:Work space in home
(13) Notwithstanding paragraphs 8(1)(f) and 8(1)(i),
(a) 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 either
(i) the place where the individual principally performs the duties of the office or employment, or
(ii) used 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;
(b) 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; and
(c) any 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Subdivision b
Income or Loss from a Business or Property
Basic Rules
Marginal note:Income
9. (1) Subject 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.
Marginal note:Loss
(2) Subject 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.
Marginal note:Gains and losses not included
(3) In 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. 1970-71-72, c. 63, s. 1“9”;
- 1984, c. 1, s. 4;
- 1986, c. 6, s. 4.
Marginal note:Valuation of inventory
10. (1) For 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.
Marginal note:Adventures in the nature of trade
(1.01) For 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.
Marginal note:Certain expenses included in cost
(1.1) For 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 is
(a) described 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 is
(i) a person or partnership with whom the taxpayer does not deal at arm’s length,
(ii) if the taxpayer is a corporation, a person or partnership that is a specified shareholder of the taxpayer, or
(iii) if the taxpayer is a partnership, a person or partnership whose share of any income or loss of the taxpayer is 10% or more; and
(b) not 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).
Marginal note:Continuation of valuation
(2) Notwithstanding 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.
Marginal note:Methods of valuation to be the same
(2.1) Where 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.
Marginal note:Incorrect valuation
(3) Where 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.
Marginal note:Fair market value
(4) For 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 is
(a) work 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; and
(b) advertising 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.
Marginal note:Inventory
(5) Without restricting the generality of this section,
(a) 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;
(b) 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); and
(c) property 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.
Marginal note:Artistic endeavour
(6) Notwithstanding 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.
Marginal note:Value in later years
(7) Where 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 endeavour”
(8) For 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.
Marginal note:Transition
(9) Where, 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.
Marginal note:Acquisition of control
(10) Notwithstanding subsection 10(1.01), property described in an inventory of a corporation’s business that is an adventure or concern in the nature of trade at the end of the corporation’s taxation year that ends immediately before the time at which control of the corporation is acquired by a person or group of persons shall be valued at the cost at which the corporation 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 corporation acquired the property is, subject to a subsequent application of this subsection, deemed to be that lower amount.
Marginal note:Acquisition of control
(11) For the purposes of subsections 88(1.1) and 111(5), a corporation’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 corporation.
Marginal note:Removing property from inventory
(12) If 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 deemed
(a) to have disposed of the property immediately before that time for proceeds of disposition equal to its fair market value at that time; and
(b) to 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.
Marginal note:Adding property to inventory
(13) If 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.
Marginal note:Work in progress
(14) For the purposes of subsections (12) and (13), property that is included in the inventory of a business includes property that would be so included if paragraph 34(a) did not apply.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Proprietor of business
11. (1) Subject to sections 34.1 and 34.2, where 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.
Marginal note:Reference to “taxation year”
(2) 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. R.S., 1985, c. 1 (5th Supp.), s. 11;
- 1994, c. 21, s. 5;
- 1996, c. 21, s. 3.
Inclusions
Marginal note:Income inclusions
12. (1) There 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 applicable
Marginal note:Services, etc., to be rendered
(a) any amount received by the taxpayer in the year in the course of a business
(i) that 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, or
(ii) under 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;
Marginal note:Amounts receivable
(b) any 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 of
(i) the day on which the account in respect of the services was rendered, and
(ii) the 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;
Marginal note:Interest
(c) subject 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;
Marginal note:Reserve for doubtful debts
(d) any amount deducted under paragraph 20(1)(l) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;
Marginal note:Reserve for guarantees, etc.
(d.1) any amount deducted under paragraph 20(1)(l.1) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;
Marginal note:Reserves for certain goods and services, etc.
(e) any amount
(i) deducted 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), or
(ii) deducted under paragraph 20(1)(n),
in computing the taxpayer’s income from a business for the immediately preceding year;
Marginal note:Negative reserves
(e.1) where the taxpayer is an insurer, the amount prescribed in respect of the insurer for the year;
Marginal note:Insurance proceeds expended
(f) such 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 taxpayer
(i) within the year, and
(ii) within a reasonable time after the damage,
on repairing the damage;
Marginal note:Payments based on production or use
(g) any 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;
Marginal note:Proceeds of disposition of right to receive production
(g.1) any proceeds of disposition to which subsection 18.1(6) applies;
Marginal note:Previous reserve for quadrennial survey
(h) any amount deducted as a reserve under paragraph 20(1)(o) in computing the taxpayer’s income for the immediately preceding year;
Marginal note:Bad debts recovered
(i) any 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;
Marginal note:Bad debts recovered
(i.1) where 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 formula
A × B/C
where
- A
- is 1/2 of the amount so received,
- B
- is the amount that was deducted under subsection 20(4.2) in respect of the debt, and
- C
- is 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;
Marginal note:Dividends from resident corporations
(j) any amount required by subdivision h to be included in computing the taxpayer’s income for the year in respect of a dividend paid by a corporation resident in Canada on a share of its capital stock;
Marginal note:Dividends from other corporations
(k) any amount required by subdivision i to be included in computing the taxpayer’s income for the year in respect of a dividend paid by a corporation not resident in Canada on a share of its capital stock or in respect of a share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer;
Marginal note:Partnership income
(l) any amount that is, by virtue of subdivision j, income of the taxpayer for the year from a business or property;
Marginal note:Benefits from trusts
(m) any amount required by subdivision k or subsection 132.1(1) to be included in computing the taxpayer’s income for the year, except
(i) any amount deemed by that subdivision to be a taxable capital gain of the taxpayer, and
(ii) any amount paid or payable to the taxpayer out of or under an RCA trust (within the meaning assigned by subsection 207.5(1));
Marginal note:Employees profit sharing plan
(n) any amount received by the taxpayer in the year out of or under
(i) an employees profit sharing plan, or
(ii) an employee trust
established for the benefit of employees of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length;
Marginal note:Employee benefit plan
(n.1) the 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 amounts
(i) so contributed by the taxpayer to the plan, or
(ii) included in computing the taxpayer’s income for any preceding taxation year by virtue of this paragraph
exceeds the total of all amounts
(iii) deducted 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, or
(iv) received 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));
Marginal note:Forfeited salary deferral amounts
(n.2) where 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;
Marginal note:Retirement compensation arrangement
(n.3) the 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 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;
(o) [Repealed, 2003, c. 28, s. 1(2)]
Marginal note:Foreign oil and gas production taxes
(o.1) the 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);
Marginal note:Certain payments to farmers
(p) any 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;
Marginal note:Employment tax deduction
(q) any 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;
Marginal note:Inventory adjustment
(r) the 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;
Marginal note:Reinsurance commission
(s) the total of all amounts each of which is the maximum amount that an insurer may claim in the year in respect of a reserve for a reinsurance commission for a policy as allowed by regulations made under paragraph 20(7)(c) in respect of a risk the reinsurance of which is assumed by the taxpayer;
Marginal note:Investment tax credit
(t) the amount deducted under subsection 127(5) or 127(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) 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);
Marginal note:Home insulation or energy conversion grants
(u) the 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;
Marginal note:Research and development deductions
(v) the 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);
Marginal note:S. 80.4(1) benefit
(w) where 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;
Marginal note:Inducement, reimbursement, etc.
(x) 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, from
(i) a person or partnership (in this paragraph referred to as the “payer”) who pays the particular amount
(A) in the course of earning income from a business or property,
(B) 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, or
(C) in 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), or
(ii) a government, municipality or other public authority,
where the particular amount can reasonably be considered to have been received
(iii) as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or
(iv) as 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 of
(A) an amount included in, or deducted as, the cost of property, or
(B) an outlay or expense,
to the extent that the particular amount
(v) was 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,
(vi) 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,
(vii) 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, and
(viii) 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 or the taxpayer’s business or property;
Marginal note:Fuel tax rebates
(x.1) the total of all amounts each of which is
(i) a fuel tax rebate received in the year by the taxpayer under subsection 68.4(3) of the Excise Tax Act, or
(ii) the amount determined by the formula
10(A - B) - C
where
- A
- is 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,
- B
- is 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, and
- C
- is 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;
Marginal note:Crown charge rebates
(x.2) the total of all amounts each of which is an amount that
(i) was 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 of
(A) the acquisition, development or ownership of a Canadian resource property, or
(B) the production in Canada from a mineral resource, a natural accumulation of petroleum or natural gas, or an oil or a gas well, and
(ii) was not otherwise included in computing the taxpayer’s income for the year or a preceding taxation year;
Marginal note:Automobile provided to partner
(y) where 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;
Marginal note:Amateur athlete trust payments
(z) any 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;
Marginal note:Qualifying environmental trusts
(z.1) the 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;
Marginal note:Dispositions of interests in qualifying environmental trusts
(z.2) the 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;
Marginal note:Debt forgiveness
(z.3) any amount required because of subsection 80(13) or 80(17) to be included in computing the taxpayer’s income for the year;
Marginal note:Eligible funeral arrangements
(z.4) any amount required because of subsection 148.1(3) to be included in computing the taxpayer’s income for the year;
Marginal note:TFSA amounts
(z.5) any amount required by subsection 146.2(9) or section 207.061 to be included in computing the taxpayer’s income for the year; and
Marginal note:Refunds
(z.6) any 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.
Marginal note:Interpretation
(2) Paragraphs 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.
Marginal note:Receipt of inducement, reimbursement, etc.
(2.1) 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.
Marginal note:Deemed outlay or expense
(2.2) Where
(a) in 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, and
(b) the 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 which
(c) the amount of the outlay or expense
exceeds
(d) the 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.
Marginal note:Interest income
(3) Subject to subsection 12(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 small business bond, a small business development bond, 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.
Marginal note:Interest from investment contract
(4) Subject to subsection 12(4.1), where in a taxation year a taxpayer (other than a taxpayer to whom subsection 12(3) applies) holds an interest 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.
Marginal note:Impaired debt obligations
(4.1) Paragraph 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.
Marginal note:Deemed accrual
(9) For the purposes of subsections 12(3), 12(4) and 12(11) and 20(14) and 20(21), where a taxpayer acquires an interest in a prescribed debt obligation, an amount determined in prescribed manner shall be deemed to accrue to the taxpayer as interest on the obligation in each taxation year during which the taxpayer holds the interest in the obligation.
Marginal note:Exclusion of proceeds of disposition
(9.1) Where a taxpayer disposes of an interest 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, such portion of the proceeds of disposition received by the taxpayer as can reasonably be considered to represent a recovery of the cost to the taxpayer of the interest in the debt obligation shall, notwithstanding any other provision of this Act, not be included in computing the income of the taxpayer, 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.
Marginal note:Income from R.H.O.S.P
(10.1) Notwithstanding 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.
Marginal note:NISA receipts
(10.2) There 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 formula
A - B
where
- A
- is an amount paid at a particular time in the year out of the taxpayer’s NISA Fund No. 2; and
- B
- is the amount, if any, by which
(a) the total of all amounts each of which is
(i) deemed by subsection (10.4) or 104(5.1) or (14.1) to have been paid out of the taxpayer’s NISA Fund No. 2 before the particular time, or
(ii) deemed 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,
exceeds
(b) the 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.
Marginal note:Amount credited or added not included in income
(10.3) Notwithstanding 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.
Marginal note:Acquisition of control — corporate NISA Fund No. 2
(10.4) For 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.
Marginal note:Definitions
(11) In this section,
“anniversary day”
« jour anniversaire »
“anniversary day” of an investment contract means
(a) the day that is one year after the day immediately preceding the date of issue of the contract,
(b) the day that occurs at every successive one year interval from the day determined under paragraph (a), and
(c) the day on which the contract was disposed of;
“investment contract”
« contrat de placement »
“investment contract”, in relation to a taxpayer, means any debt obligation other than
(a) a 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,
(b) 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,
(c) 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,
(d) a foreign retirement arrangement,
(d.1) a TFSA,
(e) an income bond,
(f) an income debenture,
(g) a small business development bond,
(h) a small business bond,
(i) an obligation in respect of which the taxpayer has (otherwise than because of subsection 12(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 the obligation, the income accrued thereon for such intervals,
(j) an obligation in respect of a net income stabilization account,
(k) an indexed debt obligation, and
(l) a prescribed contract.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Cash bonus on Canada Savings Bonds
12.1 Notwithstanding 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. 1974-75-76, c. 26, s. 5;
- 1986, c. 6, s. 7.
Marginal note:Amount to be included
12.2 (1) Where in a taxation year a taxpayer holds an interest, last acquired after 1989, in a life insurance policy that is not
(a) an exempt policy,
(b) a prescribed annuity contract, and
(c) a 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.
(3) [Repealed, 1994, c. 7, Sch. II, s. 8(2)]
Marginal note:Idem
(5) Where 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 which
(a) the 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)
exceeds
(b) the 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).
Marginal note:Deemed acquisition of interest in annuity
(8) For 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.
Marginal note:Riders
(10) For 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 unless
(a) the policy is an exempt policy last acquired after December 1, 1982 or an annuity contract; or
(b) the only additional life insurance provided by the rider is an accidental death benefit.
Marginal note:Definitions
(11) In this section and paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,
“anniversary day”
« jour anniversaire »
“anniversary day” of a life insurance policy means
(a) the day that is one year after the day immediately preceding the day on which the policy was issued, and
(b) each day that occurs at each successive one-year interval after the day determined under paragraph (a).
“exempt policy”
« police exonérée »
“exempt policy” has the meaning prescribed by regulation.
Marginal note:Application of ss. 138(12) and 148(9)
(12) The definitions in subsections 138(12) and 148(9) apply to this section.
Marginal note:Application of s. 148(10)
(13) Subsection 148(10) applies to this section.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 12.2;
- 1994, c. 7, Sch. II, s. 8;
- 1998, c. 19, s. 72.
Marginal note:Transition inclusion re unpaid claims reserve
12.3 Where an amount has been deducted under subsection 20(26) in computing the income of an insurer for its taxation year that includes February 23, 1994, there shall be included in computing the insurer’s income for that taxation year and each subsequent taxation year that begins before 2004, the prescribed portion for the year of the amount so deducted.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 12.3;
- 1995, c. 3, s. 3.
Marginal note:Bad debt inclusion
12.4 Where, 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 which
(a) the 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 year
exceeds
(b the 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. 1988, c. 55, s. 5.
Marginal note:Definitions
12.5 (1) The definitions in this section apply for the purposes of this section and section 20.4.
“base year”
« année de base »
“base year” of an insurer means the insurer’s taxation year that immediately precedes its transition year.
“insurance business”
« entreprise d’assurance »
“insurance business” of an insurer, is an insurance business carried on by the insurer, other than a life insurance business.
“reserve transition amount”
« montant transitoire »
“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 formula
A – B
where
- A
- is 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 if
(a) the 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, and
(b) section 1400 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year; and
- B
- is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year.
“transition year”
« année transitoire »
“transition year” of an insurer means the insurer’s first taxation year that begins after September 2006.
Marginal note:Transition year income inclusion
(2) There 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.
Marginal note:Transition year income deduction reversal
(3) If 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 formula
A × B/1825
where
- A
- is the amount deducted under subsection 20.4(2) in computing the insurer’s income for the transition year from that insurance business; and
- B
- is 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.
Marginal note:Winding-up
(4) If 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,
(a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of
(i) any 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,
(ii) 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, and
(iii) any 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; and
(b) the 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.
Marginal note:Amalgamations
(5) If 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 of
(a) any 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;
(b) 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; and
(c) any 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.
Marginal note:Application of subsection (7)
(6) 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”) and
(a) subsection 138(11.5) or (11.94) applies to the transfer; or
(b) subsection 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.
Marginal note:Transfer of insurance business
(7) If this subsection applies in respect of the transfer, at any time, of property
(a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of
(i) any 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,
(ii) 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,
(iii) 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; and
(b) in 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.
Marginal note:Ceasing to carry on business
(8) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (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 formula
A – B
where
- A
- is the amount deducted under subsection 20.4(2) in computing the insurer’s income from the discontinued business for its transition year; and
- B
- is 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.
Marginal note:Ceasing to exist
(9) If 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 of
(a) the time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, and
(b) the 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. 2009, c. 2, s. 5.
Marginal note:Recaptured depreciation
13. (1) Where, at the end of a taxation year, the total of the amounts determined for E to J in the definition “undepreciated capital cost” in subsection 13(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 in that definition in respect thereof, the excess shall be included in computing the taxpayer’s income for the year.
Marginal note:Idem
(2) Notwithstanding 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, 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.
Marginal note:“Taxation year”, “year” and “income” of individual
(3) Where 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,
(a) 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”; and
(b) a reference in subsection 13(1) to “the income” shall be read as a reference to “the income from the business”.
Marginal note:Exchanges of property
(4) Where 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 either
(a) property 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), or
(b) a 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,
(c) 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 of
(i) the 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, and
(ii) the amount that has been used by the taxpayer to acquire
(A) where the former property is referred to in paragraph 13(4)(a), before the end of the second taxation year following the initial year, or
(B) in any other case, before the end of the first taxation year following 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, and
(d) the 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 of
(i) the time the replacement property was acquired by the taxpayer, and
(ii) the time the former property was disposed of by the taxpayer.
Marginal note:Replacement for a former property
(4.1) For 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 if
(a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
(a.1) 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;
(b) 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;
(c) where the former property was a taxable Canadian property of the taxpayer, the particular depreciable property is a taxable Canadian property of the taxpayer; and
(d) where 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.
Marginal note:Reclassification of property
(5) Where 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 class
(a) the value of A in the definition “undepreciated capital cost” in subsection 13(21) shall be determined as if each of those depreciable properties were
(i) properties of the new class acquired before the subsequent time, and
(ii) never included in the old class; and
(b) there 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 of
(i) the amount determined by the formula
A - B
where
- A
- is the total of all amounts each of which is the capital cost to the taxpayer of each of those depreciable properties, and
- B
- is the undepreciated capital cost to the taxpayer of depreciable property of the old class at the transfer time, and
(ii) the 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 if
(A) the property had been the only property included in a separate prescribed class, and
(B) the 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.
Marginal note:Rules applicable
(5.1) Where 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:
(a) 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 which
(i) the capital cost immediately before that time of the leasehold interest
exceeds
(ii) the 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;
(b) 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); and
(c) the 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.
Marginal note:Idem
(5.2) Where, at any time, a taxpayer has acquired a capital property that is depreciable property or real 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 depreciable property or real 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:
(a) the property shall be deemed to have been acquired by the taxpayer at that time at a cost equal to the lesser of
(i) the fair market value of the property at that time determined without reference to any option with respect to that property, and
(ii) the 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;
(b) 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; and
(c) where 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.
Marginal note:Idem
(5.3) Where, 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 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 depreciable property or real 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 shall be deemed to be an excess referred to in subsection 13(1) in respect of the taxpayer for the year.
Marginal note:Idem
(5.4) Where, 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:
(a) an amount equal to the lesser of
(i) the 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, and
(ii) the amount, if any, by which the fair market value of the property at the earlier of
(A) the 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, and
(B) the time of the disposition
exceeds the capital cost to the taxpayer of the property immediately before that time
shall 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; and
(b) the 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.
Marginal note:Lease cancellation payment
(5.5) For 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.
Marginal note:Misclassified property
(6) Where, 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.
Marginal note:Rules applicable
(7) Subject 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),
(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;
(b) 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 of
(i) the fair market value of the property at that later time, and
(ii) the total of
(A) the 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), and
(B) 1/2 of the amount, if any, by which
(I) the fair market value of the property at that later time
exceeds the total of
(II) the cost to the taxpayer of the property as determined under clause 13(7)(b)(ii)(A), and
(III) twice 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);
(c) 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;
(d) 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,
(i) 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 of
(A) the proportion of the lesser of
(I) its fair market value at that time, and
(II) its 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, and
(B) 1/2 of the amount, if any, by which
(I) the amount deemed under subparagraph 45(1)(c)(ii) to be the taxpayer’s proceeds of disposition of the property in respect of the change
exceeds the total of
(II) that 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, and
(III) twice 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), and
(ii) if 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;
(e) 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,
(i) 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 of
(A) the cost or capital cost, as the case may be, of the property to the transferor immediately before the particular time, and
(B) 1/2 of the amount, if any, by which
(I) the transferor’s proceeds of disposition of the property
exceed the total of
(II) the cost or capital cost, as the case may be, to the transferor immediately before the particular time,
(III) 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), and
(IV) the 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 time
and 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,
(ii) 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 of
(A) the cost or capital cost, as the case may be, of the property to the transferor immediately before the particular time, and
(B) 1/2 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 time
and 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, and
(iii) where 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;
(e.1) 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;
(f) where a corporation 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 corporation of the property at the time of the reacquisition is deemed to be the amount that is equal to the total of
(i) the capital cost to the corporation of the property at the time of the disposition, and
(ii) 1/2 of the amount, if any, by which the corporation’s proceeds of disposition of the property exceed the capital cost to the corporation of the property at the time of the disposition;
(g) 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; and
(h) 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 of
(i) the fair market value of the vehicle at that time,
(ii) the amount that immediately before that time was the cost amount to that person of the vehicle, and
(iii) $20,000 or such other amount as is prescribed.
Marginal note:Deemed capital cost of certain property
(7.1) For 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 127(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 than
(a) an amount described in paragraph 37(1)(d),
(b) an amount deducted as an allowance under section 65, or
(b.1) an amount included in income by virtue of paragraph 12(1)(u) or 56(1)(s),
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 of
(c) the capital cost of the property to the taxpayer, determined without reference to this subsection, subsection 13(7.4) and section 80, and
(d) such 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 time
exceeds the total of
(e) where the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5) or 127(6) by the taxpayer for a taxation year ending before the particular time,
(f) the amount of assistance the taxpayer has received or is entitled, before the particular time, to receive, and
(g) all 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.
Marginal note:Receipt of public assistance
(7.2) For 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.
Marginal note:Control of corporations by one trustee
(7.3) For 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 that
(a) the 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, and
(b) the 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.
Marginal note:Deemed capital cost
(7.4) Notwithstanding 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 of
(a) the capital cost of the property to the taxpayer otherwise determined, applying the provisions of subsection 13(7.1), where necessary, and
(b) such 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 property
exceeds the amount elected by the taxpayer under this subsection, but in no case shall the amount elected under this subsection exceed the least of
(c) the amount so received by the taxpayer,
(d) the capital cost of the property to the taxpayer otherwise determined, and
(e) where the taxpayer has disposed of the property before the year, nil.
Marginal note:Deemed capital cost
(7.5) For the purposes of this Act,
(a) 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 payment
(i) the 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, and
(ii) the 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;
(b) where
(i) at 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, and
(ii) the 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;
(c) where a taxpayer acquires an intangible property as a consequence of making a payment to which paragraph 13(7.5)(a) applies or incurring a cost to which paragraph 13(7.5)(b) applies,
(i) the property referred to in paragraph 13(7.5)(a) or 13(7.5)(b) is deemed to include the intangible property, and
(ii) the portion of the capital cost referred to in paragraph 13(7.5)(a) or 13(7.5)(b) that applies to the intangible property is deemed to be the amount determined by the formula
A × B/C
where
- A
- is the lesser of the amount of the payment made or cost incurred and the amount determined for C,
- B
- is the fair market value of the intangible property at the time the payment was made or the cost was incurred, and
- C
- is the fair market value at the time the payment was made or the cost was incurred of all intangible properties acquired as a consequence of making the payment or incurring the cost; and
(d) any 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 cost
(i) is deemed to have been acquired for the purpose for which the payment was made or the cost was incurred, and
(ii) is deemed to be owned by the taxpayer at any subsequent time that the taxpayer benefits from the property.
Marginal note:Disposition after ceasing business
(8) Notwithstanding 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 income”
(9) In 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”.
Marginal note:Deemed capital cost
(10) For the purposes of this Act, where a taxpayer has, after December 3, 1970 and before April 1, 1972, acquired prescribed property
(a) for use in a prescribed manufacturing or processing business carried on by the taxpayer, and
(b) that 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.
Marginal note:Deduction in respect of property used in performance of duties
(11) Any 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).
Marginal note:Application of para. 20(1)(cc)
(12) 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 taxpayer
(a) for the year, or
(b) for the year in which the property was acquired,
whichever is the later.
Marginal note:Deduction under Canadian Vessel Construction Assistance Act
(13) Where 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.
Marginal note:Conversion cost
(14) For 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.
Marginal note:Where s. (1) and subdivision c do not apply
(15) Where 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,
(a) subsection 13(1) and subdivision c do not apply to the proceeds of disposition
(i) if 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, or
(ii) if the appropriate minister certified that the taxpayer had, on satisfactory terms, deposited
(A) on 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, or
(B) on 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; and
(b) if 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
(i) the taxpayer elected to have the vessel constituted a prescribed class, or
(ii) where 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.
Marginal note:Election concerning vessel
(16) Where 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.
Marginal note:Separate prescribed class concerning vessel
(17) Where 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.
Marginal note:Reassessments
(18) Notwithstanding any other provision of this Act, where a taxpayer has
(a) used an amount as described in paragraph 13(4)(c), or
(b) made 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).
Marginal note:Ascertainment of certain property
(18.1) For the purpose of determining whether property meets the criteria set out in the Regulations in respect of prescribed energy conservation property, the Technical Guide to Class 43.1, as amended from time to time and published by the Department of Natural Resources, shall apply conclusively with respect to engineering and scientific matters.
Marginal note:Disposition of deposit
(19) All 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 1975
(a) that 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, and
(b) in 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.
Marginal note:Idem
(20) Notwithstanding 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,
(a) to acquire a vessel described in paragraphs 13(19)(a) and 13(19)(b), or
(b) to 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.
Marginal note:Definitions
(21) In this section,
“appropriate minister”
« ministre compétent »
“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;
“conversion”
« conversion »
“conversion”, in respect of a vessel, means a conversion or major alteration in Canada by a taxpayer;
“conversion cost”
« frais de conversion »
“conversion cost”, in respect of a vessel, means the cost of a conversion;
“depreciable property”
« bien amortissable »
“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;
- “disposition of property”
“disposition of property”[Repealed, 2001, c. 17, s. 6(5)]
“proceeds of disposition”
« produit de disposition »
“proceeds of disposition” of property includes
(a) the sale price of property that has been sold,
(b) compensation for property unlawfully taken,
(c) compensation for property destroyed and any amount payable under a policy of insurance in respect of loss or destruction of property,
(d) 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,
(e) compensation for property injuriously affected, whether lawfully or unlawfully or under statutory authority or otherwise,
(f) 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,
(g) 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, and
(h) any amount included because of section 79 in computing a taxpayer’s proceeds of disposition of the property;
“timber resource property”
« avoir forestier »
“timber resource property” of a taxpayer means
(a) a right or licence to cut or remove timber from a limit or area in Canada (in this definition referred to as an “original right”) if
(i) that 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, and
(ii) at the time of the acquisition of the original right
(A) the 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, or
(B) in 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, or
(b) any 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 regarded
(i) as an extension or renewal of or as one of a series of extensions or renewals of an original right of the taxpayer, or
(ii) as 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;
“total depreciation”
« amortissement total »
“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;
“undepreciated capital cost”
« fraction non amortie du coût en capital »
“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)
where
- A
- is 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,
- B
- is 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,
- C
- is 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,
- D
- is 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.1
- is 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,
- E
- is the total depreciation allowed to the taxpayer for property of the class before that time,
- E.1
- is 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),
- F
- is 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 of
(a) the 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, and
(b) the capital cost to the taxpayer of the property,
- G
- is 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,
- H
- is, 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,
- I
- is the total of all amounts deducted under subsection 127(5) or 127(6), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayers tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,
- J
- is 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, and
- K
- is 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;
“vessel”
« navire »
“vessel” means a vessel as defined in the Canada Shipping Act.
Marginal note:Disposition of building
(21.1) Notwithstanding 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,
(a) 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 of
(i) the amount, if any, by which
(A) the total of the fair market value of the building at the particular time and the fair market value of the land immediately before its disposition
exceeds
(B) the 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, and
(ii) the greater of
(A) the fair market value of the building at the particular time, and
(B) the 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 which
(iii) the total of the proceeds of disposition of the building and of the land determined without reference to this subsection and subsection 13(21.2)
exceeds
(iv) the 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; and
(b) where 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 of
(i) the proceeds of disposition of the building determined without reference to this subsection and subsection 13(21.2), and
(ii) 1/2 of the amount by which the greater of
(A) the cost amount to the taxpayer of the building, and
(B) the fair market value of the building
immediately before its disposition exceeds the proceeds of disposition referred to in subparagraph 13(21.1)(b)(i).
Marginal note:Loss on certain transfers
(21.2) Where
(a) a 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 of a particular prescribed class of the transferor,
(b) the lesser of
(i) the capital cost to the transferor of the transferred property, and
(ii) the proportion of the undepreciated capital cost to the transferor of all property of the particular class immediately before that time that
(A) the fair market value of the transferred property at that time
is of
(B) the fair market value of all property of the particular class immediately before that time
exceeds the amount that would otherwise be the transferor’s proceeds of disposition of the transferred property at the particular time, and
(c) on 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:
(d) sections 85 and 97 do not apply to the disposition,
(e) 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,
(i) 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,
(ii) 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,
(iii) 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,
(A) 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),
(B) 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,
(C) 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,
(D) that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation, or
(E) at which the winding-up of the transferor begins (other than a winding-up to which subsection 88(1) applies), where the transferor is a corporation, and
(iv) the 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,
(f) 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), and
(g) for 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,
(i) 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, and
(ii) the 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.
Marginal note:Deduction for insurer
(22) For the purposes of E in the definition “undepreciated capital cost” in subsection 13(21), an insurer shall be deemed to have been allowed a deduction for depreciation for property of a prescribed class under paragraph 20(1)(a) in computing income for taxation years before its 1977 taxation year equal to the total of
(a) the amount determined, immediately after the end of its 1976 taxation year, for E in that definition, with respect to property of the particular prescribed class of the insurer (determined without reference to this subsection),
(b) the lesser of
(i) the amount of its 1975-76 excess capital cost allowance with respect to property of the particular prescribed class of the insurer, and
(ii) that proportion of the amount, if any, by which its 1975 branch accounting election deficiency exceeds the amount determined under subparagraph 138(4.1)(d)(ii) that
(A) the amount of its 1975-76 excess capital cost allowance with respect to property of the particular prescribed class of the insurer
is of
(B) the total of all its 1975-76 excess capital cost allowances with respect to properties of a prescribed class of the insurer, and
(c) the lesser of
(i) the amount, if any, by which
(A) the undepreciated capital cost of property of the particular prescribed class of the insurer immediately after the end of its 1976 taxation year (determined without reference to this subsection),
exceeds
(B) the amount determined under paragraph 13(22)(b) in respect of property of the particular prescribed class of the insurer, and
(ii) that proportion of the amount, if any, by which its 1975 branch accounting election deficiency exceeds the total of
(A) the amount determined under subparagraph 138(4.1)(d)(ii),
(B) the total of all amounts determined under paragraph 13(22)(b) with respect to property of a prescribed class of the insurer,
(C) the total described in subclause 138(4.1)(a)(ii)(B)(IV),
(D) the amount determined under subparagraph 138(4.1)(b)(ii), and
(E) the amount determined under subparagraph 138(4.1)(a)(ii)
that
(F) the undepreciated capital cost of property of the particular prescribed class of the insurer immediately after the end of its 1976 taxation year (determined without reference to this subsection),
is of
(G) the total of all amounts each of which is the undepreciated capital cost of property of a prescribed class of the insurer immediately after the end of its 1976 taxation year (determined without reference to this subsection).
Marginal note:Deduction for life insurer
(23) For the purposes of E in the definition “undepreciated capital cost” in subsection 13(21), a life insurer shall be deemed to have been allowed a deduction for depreciation for property of a prescribed class under paragraph 20(1)(a) in computing income for taxation years before its 1978 taxation year equal to the total of
(a) the amount determined immediately after the end of its 1977 taxation year for E in that definition, with respect to property of the particular prescribed class of the insurer (determined without reference to this subsection), and
(b) the amount, if any, by which
(i) the total of all maximum amounts the insurer was entitled to claim with respect to property of the particular prescribed class of the insurer in taxation years ending before 1978 and after 1968
exceeds
(ii) the amount determined under paragraph 13(23)(a).
Marginal note:Application of s. 138(12)
(23.1) The definitions in subsection 138(12) apply to this section.
Marginal note:Acquisition of control
(24) Where control of a corporation has been acquired at any time by a person or group of persons and, within the 12-month period that ended immediately before that time, the corporation or a partnership of which it was a majority interest partner acquired depreciable property (other than property that was owned by the corporation or partnership or by a person that would, if section 251.1 were read without reference to the definition “controlled” in subsection 251.1(2), be affiliated with the corporation throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the corporation or partnership) that was not used, or acquired for use, by the corporation or partnership in a business that was carried on by it immediately before the 12-month period began,
(a) for the purposes of the description of A in the definition “undepreciated capital cost” in subsection 13(21) and of sections 127 and 127.1, the property is, subject to paragraph 13(24)(b), deemed not to have been acquired by the corporation or partnership before that time and to have been acquired by it immediately after that time; and
(b) where the property was disposed of by it before that time and was not reacquired by it before that time, for the purpose of the description of A in that definition, the property is deemed to have been acquired by the corporation or partnership immediately before the property was disposed of.
Marginal note:Early change of control
(25) For the purpose of subsection 13(24), where a corporation referred to in that subsection was incorporated or otherwise formed in the 12-month period referred to in that subsection, the corporation is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was incorporated or otherwise formed,
(a) in existence; and
(b) affiliated 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 incorporated or otherwise formed and ended immediately before its control is acquired.
Marginal note:Restriction on deduction before available for use
(26) In 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.
Marginal note:Interpretation — available for use
(27) For 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 of
(a) the time the property is first used by the taxpayer for the purpose of earning income,
(b) 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,
(c) the time that is immediately before the disposition of the property by the taxpayer,
(d) the time the property
(i) is 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, and
(ii) is 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,
(e) 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,
(f) in the case of property acquired by
(i) a corporation a class of shares of the capital stock of which is listed on a designated stock exchange,
(ii) 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, or
(iii) a 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,
(g) 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,
(h) 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,
(i) 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,
(j) 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, and
(k) where 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.
Marginal note:Idem
(28) For 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 of
(a) the time all or substantially all of the building is first used by the taxpayer for the purpose for which it was acquired,
(b) the time the construction of the building is complete,
(c) 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,
(d) the time that is immediately before the disposition of the property by the taxpayer, and
(e) where 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.
Marginal note:Idem
(29) For 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 taxpayer
(a) the property can reasonably be considered to be part of the project, and
(b) the 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 which
(c) the 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))
exceeds
(d) the 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 year
shall be considered to have become available for use immediately before the end of the inclusion year.
Marginal note:Transfers of property
(30) Notwithstanding 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, where
(a) the property was acquired
(i) from 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, or
(ii) in 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); and
(b) before 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.
Marginal note:Idem
(31) For 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”)
(a) 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)), or
(b) in 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.
Marginal note:Leased property
(32) Where 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 which
(a) the 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 year
exceeds
(b) the 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.
Marginal note:Consideration given for depreciable property
(33) For 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.
Marginal note:Deductible expenses
(34) Notwithstanding paragraph 1102(1)(a) of the Regulations, for taxation years that end after 1987 and before December 6, 1996, the classes of property prescribed for the purpose of paragraph 20(1)(a) are deemed to include property of a taxpayer that, if the Act were read without reference to sections 66 to 66.4, would be included in one of the classes.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Eligible capital property — inclusion in income from business
14. (1) Where, at the end of a taxation year, the total of all amounts each of which is an amount determined, in respect of a business of a taxpayer, for E in the definition “cumulative eligible capital” in subsection (5) (in this section referred to as an “eligible capital amount”) or for F in that definition exceeds the total of all amounts determined for A to D in that definition in respect of the business (which excess is in this subsection referred to as “the excess”), there shall be included in computing the taxpayer’s income from the business for the year the total of
(a) the amount, if any, that is the lesser of
(i) the excess, and
(ii) the amount determined for F in the definition “cumulative eligible capital” in subsection (5) at the end of the year in respect of the business, and
(b) the amount, if any, determined by the formula
2/3 × (A - B - C - D)
where
- A
- is the excess,
- B
- is the amount determined for F in the definition “cumulative eligible capital” in subsection (5) at the end of the year in respect of the business,
- C
- is 1/2 of the amount determined for Q in the definition “cumulative eligible capital” in subsection (5) at the end of the year in respect of the business, and
- D
- is the amount claimed by the taxpayer, not exceeding the taxpayer’s exempt gains balance for the year in respect of the business.
Marginal note:Election re capital gain
(1.01) A taxpayer may, in the taxpayer’s return of income for a taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply to a disposition made at any time in the year of an eligible capital property in respect of a business, if the taxpayer’s actual proceeds of the disposition exceed the taxpayer’s eligible capital expenditure in respect of the acquisition of the property, that eligible capital expenditure can be determined and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil:
(a) for the purpose of subsection (5) other than the description of A in the definition “cumulative eligible capital”, the proceeds of disposition of the property are deemed to be equal to the amount of that eligible capital expenditure;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to the amount of that eligible capital expenditure, for proceeds of disposition equal to the actual proceeds; and
(c) if the eligible capital property is
(i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and
(ii) a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.
Marginal note:Election re property acquired with pre-1972 outlays or expenditures
(1.02) If at any time in a taxation year a taxpayer has disposed of an eligible capital property in respect of which an outlay or expenditure to acquire the property was made before 1972 (which outlay or expenditure would have been an eligible capital expenditure if it had been made or incurred as a result of a transaction that occurred after 1971), the taxpayer’s actual proceeds of the disposition exceed the total of those outlays or expenditures, that total can be determined, subsection 21(1) of the Income Tax Application Rules applies in respect of the disposition and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil, the taxpayer may, in the taxpayer’s return of income for the taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply:
(a) for the purpose of subsection (5) other than the description of A in the definition “cumulative eligible capital”, the proceeds of disposition of the property are deemed to be nil;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to nil, for proceeds of disposition equal to the amount determined, in respect of the disposition, under subsection 21(1) of the Income Tax Application Rules; and
(c) if the eligible capital property is
(i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and
(ii) a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.
Marginal note:Non-application of subsections (1.01) and (1.02)
(1.03) Subsections (1.01) and (1.02) do not apply to a disposition by a taxpayer of a property
(a) that is goodwill; or
(b) that was acquired by the taxpayer
(i) in circumstances where an election was made under subsection 85(1) or (2) and the amount agreed on in that election in respect of the property was less than the fair market value of the property at the time it was so acquired, and
(ii) from a person or partnership with whom the taxpayer did not deal at arm’s length and for whom the eligible capital expenditure in respect of the acquisition of the property cannot be determined.
Marginal note:Deemed taxable capital gain
(1.1) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer’s income for a particular taxation year from a business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified farm property to the extent of the lesser of
(a) the amount included under paragraph (1)(b) in computing the taxpayer’s income for the particular year from the business, and
(b) the amount determined by the formula
A - B
where
- A
- is the amount by which the total of
(i) 3/4 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in a preceding taxation year that began after 1987 and ended before February 28, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer,
(ii) 2/3 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, and
(iii) 1/2 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after October 17, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer
exceeds the total of
(iv) 3/4 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in a preceding taxation year that began after 1987 and ended before February 28, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A),
(v) 2/3 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and
(vi) 1/2 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after October 17, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and
- B
- is the total of all amounts each of which is
(i) that portion of an amount deemed by subparagraph 14(1)(a)(v) (as it applied in respect of the business to fiscal periods that began after 1987 and ended before February 23, 1994) to be a taxable capital gain of the taxpayer that can reasonably be attributed to a disposition of a qualified farm property of the taxpayer, or
(ii) an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of qualified farm property of the taxpayer.
Marginal note:Deemed capital gain
(1.2) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer’s income for a particular taxation year from a fishing business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified fishing property to the extent of the lesser of
(a) the amount included under paragraph (1)(b) in computing the taxpayer’s income for the particular year from the fishing business, and
(b) the amount determined by the formula
A - B
where
- A
- is the amount by which
(i) ½ of the total of all amounts each of which is the taxpayer’s proceeds from a disposition on or after May 2, 2006 and in the particular taxation year or a preceding taxation year of eligible capital property (referred to in this subsection as a “disposed property”) that was at the time of the disposition a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer exceeds the total of
(ii) ½ of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the fishing business that was made or incurred in respect of a disposed property, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition of a disposed property, and
- B
- is the total of all amounts each of which is an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of qualified fishing property of the taxpayer.
Marginal note:Amount deemed payable
(2) Where any amount is, by any provision of this Act, deemed to be a taxpayer’s proceeds of disposition of any property disposed of by the taxpayer at any time, for the purposes of this section, that amount shall be deemed to have become payable to the taxpayer at that time.
Marginal note:Acquisition of eligible capital property
(3) Notwithstanding any other provision of this Act, where at any particular time a person or partnership (in this subsection referred to as the “taxpayer”) has, directly or indirectly, in any manner whatever, acquired an eligible capital property in respect of a business from a person or partnership with which the taxpayer did not deal at arm’s length (in this subsection referred to as the “transferor”) and the property was an eligible capital property of the transferor (other than property acquired by the taxpayer as a consequence of the death of the transferor), the eligible capital expenditure of the taxpayer in respect of the business is, in respect of that acquisition, deemed to be equal to 4/3 of the amount, if any, by which
(a) the amount determined for E in the definition “cumulative eligible capital” in subsection (5) in respect of the disposition of the property by the transferor
exceeds the total of
(b) the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that ended before February 28, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time,
(b.1) 9/8 of the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that ended after February 27, 2000 and before October 18, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time, and
(b.2) 3/2 of the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that end after October 17, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time,
except that, where the taxpayer disposes of the property after the particular time, the amount of the eligible capital expenditure deemed by this subsection to be made by the taxpayer in respect of the property shall be determined at any time after the disposition as if the total of the amounts determined under paragraphs (b), (b.1) and (b.2) in respect of the disposition were the lesser of
(c) the amount otherwise so determined, and
(d) the amount, if any, by which
(i) the amount determined under paragraph 14(3)(a) in respect of the disposition of the property by the transferor
exceeds
(ii) the amount determined for E in the definition “cumulative eligible capital” in subsection 14(5) in respect of the disposition of the property by the taxpayer.
Marginal note:References to “taxation year” or “year”
(4) Where a taxpayer is an individual and the taxpayer’s income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, for greater certainty a reference in this section to a “taxation year” or “year” shall be read as a reference to a “fiscal period” or “period”.
Marginal note:Definitions
(5) In this section,
“adjustment time”
« moment du rajustement »
“adjustment time” of a taxpayer in respect of a business is
(a) in the case of a corporation formed as a result of an amalgamation occurring after June 30, 1988, the time immediately before the amalgamation,
(b) in the case of any other corporation, the time immediately after the commencement of its first taxation year commencing after June 30, 1988, and
(c) for any other taxpayer, the time immediately after the commencement of the taxpayer’s first fiscal period commencing after 1987 in respect of the business;
“cumulative eligible capital”
« montant cumulatif des immobilisations admissibles »
“cumulative eligible capital” of a taxpayer at any time in respect of a business of the taxpayer means the amount determined by the formula
(A + B + C + D + D.1) - (E + F)
where
- A
- is 3/4 of the total of all eligible capital expenditures in respect of the business made or incurred by the taxpayer before that time and after the taxpayer’s adjustment time,
- B
- is the total of
(a) 3/2 of all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended before that time and after October 17, 2000,
(b) 9/8 of all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended
(i) before that time, and
(ii) after February 27, 2000 and before October 18, 2000,
(c) all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended
(i) before the earlier of that time and February 28, 2000, and
(ii) after the taxpayer’s adjustment time,
(d) all amounts each of which is the amount that would have been included under subparagraph (1)(a)(v) (as that subparagraph applied for taxation years that ended before February 28, 2000) in computing the taxpayer’s income from the business, if the amount determined for D in that subparagraph for the year were nil, for taxation years that ended
(i) before the earlier of that time and February 28, 2000, and
(ii) after February 22, 1994, and
(e) all taxable capital gains included, because of the application of subparagraph (1)(a)(v) (as that subparagraph applied for taxation years that ended before February 28, 2000) to the taxpayer in respect of the business, in computing the taxpayer’s income for taxation years that began before February 23, 1994,
- C
- is 3/2 of the amount, if any, of the taxpayer’s cumulative eligible capital in respect of the business at the taxpayer’s adjustment time,
- D
- is the amount, if any, by which
(a) the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time
exceeds
(b) the total of all amounts included under subsection 14(1) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time,
- D.1
- is where the amount determined by B exceeds zero, 1/2 of the amount determined for Q in respect of the business
- E
- is the total of all amounts each of which is ¾ of the amount, if any, by which
(a) an amount that the taxpayer has or may become entitled to receive, after the taxpayer’s adjustment time and before that time, on account of capital in respect of the business carried on or formerly carried on by the taxpayer, other than an amount that
(i) is 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,
(ii) reduces the cost or capital cost of a property or the amount of an outlay or expense, or
(iii) is included in computing any gain or loss of the taxpayer from a disposition of a capital property
exceeds
(b) all outlays and expenses that were not otherwise deductible in computing the taxpayer’s income and were made or incurred by the taxpayer for the purpose of obtaining the amount described by paragraph (a), and
- F
- is the amount determined by the formula
(P + P.1 + Q) - R
where
- P
- is the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before that time and after the taxpayer’s adjustment time,
- P.1
- is the total of all amounts each of which is an amount by which the cumulative eligible capital of the taxpayer in respect of the business is required to be reduced at or before that time because of subsection 80(7);
- Q
- is the amount, if any, by which
(a) the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time
exceeds
(b) the total of all amounts included under subsection 14(1) in computing the taxpayer’s income for taxation years ending before the taxpayer’s adjustment time, and
- R
- is the total of all amounts included, in computing the taxpayer’s income from the business for taxation years that ended before that time and after the taxpayer’s adjustment time, under subparagraph (1)(a)(iv) in respect of taxation years that ended before February 28, 2000 and under paragraph (1)(a) in respect of taxation years that end after February 27, 2000;
“eligible capital expenditure”
« dépense en capital admissible »
“eligible capital expenditure” of a taxpayer in respect of a business means the portion of any outlay or expense made or incurred by the taxpayer, as a result of a transaction occurring after 1971, on account of capital for the purpose of gaining or producing income from the business, other than any such outlay or expense
(a) in respect of which any amount is or would be, but for any provision of this Act limiting the quantum of any deduction, deductible (otherwise than under paragraph 20(1)(b)) in computing the taxpayer’s income from the business, or in respect of which any amount is, by virtue of any provision of this Act other than paragraph 18(1)(b), not deductible in computing that income,
(b) made or incurred for the purpose of gaining or producing income that is exempt income, or
(c) that is the cost of, or any part of the cost of,
(i) tangible property of the taxpayer,
(ii) intangible property that is depreciable property of the taxpayer,
(iii) property in respect of which any deduction (otherwise than under paragraph 20(1)(b)) is permitted in computing the taxpayer’s income from the business or would be so permitted if the taxpayer’s income from the business were sufficient for the purpose, or
(iv) an interest in, or right to acquire, any property described in any of subparagraphs (i) to (iii)
but for greater certainty and without restricting the generality of the foregoing, does not include any portion of
(d) any amount paid or payable to any creditor of the taxpayer as, on account or in lieu of payment of any debt or as or on account of the redemption, cancellation or purchase of any bond or debenture,
(e) where the taxpayer is a corporation, any amount paid or payable to a person as a shareholder of the corporation, or
(f) any amount that is the cost of, or any part of the cost of,
(i) an interest in a trust,
(ii) an interest in a partnership,
(iii) a share, bond, debenture, mortgage, hypothecary claim, note, bill or other similar property, or
(iv) an interest in, or right to acquire, any property described in any of subparagraphs (f)(i) to (iii).
“exempt gains balance”
« solde des gains exonérés »
“exempt gains balance” of an individual in respect of a business of the individual for a taxation year means the amount determined by the formula
A - B
where
- A
- is the lesser of
(a) the amount by which
(i) the amount that would have been the individual’s taxable capital gain determined under paragraph 110.6(19)(b) in respect of the business if
(A) the amount designated in an election under subsection 110.6(19) in respect of the business were equal to the fair market value at the end of February 22, 1994 of all the eligible capital property owned by the elector at that time in respect of the business, and
(B) this Act were read without reference to subsection 110.6(20)
exceeds
(ii) the amount determined by the formula
0.75(C - 1.1D)
where
- C
- is the amount designated in the election that was made under subsection 110.6(19) in respect of the business, and
- D
- is the fair market value at the end of February 22, 1994 of the property referred to in clause 14(5)(a)(i)(A), and
(b) the individual’s taxable capital gain determined under paragraph 110.6(19)(b) in respect of the business, and
- B
- is the total of all amounts each of which is the amount determined for D in subparagraph (1)(a)(v) in respect of the business for a preceding taxation year that ended before February 28, 2000 or the amount determined for D in paragraph (1)(b) for a preceding taxation year that ended after February 27, 2000.
Marginal note:Exchange of property
(6) Where in a taxation year (in this subsection referred to as the “initial year”) a taxpayer disposes of an eligible capital property (in this section referred to as the taxpayer’s “former property”) and the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquires an eligible capital property that is a replacement property for the taxpayer’s former property, such amount, not exceeding the amount that would otherwise be included in the amount determined for E in the definition “cumulative eligible capital” in subsection 14(5) (if the description of E in that definition were read without reference to “3/4 of”) in respect of a business, as has been used by the taxpayer before the end of the first taxation year after the initial year to acquire the replacement property
(a) shall, subject to paragraph 14(6)(b), not be included in the amount determined for E in that definition for the purpose of determining the cumulative eligible capital of the taxpayer in respect of the business; and
(b) shall, to the extent of 3/4 thereof, be included in the amount determined for E in that definition for the purpose of determining the cumulative eligible capital of the taxpayer in respect of the business at a time that is the later of
(i) the time the replacement property was acquired by the taxpayer, and
(ii) the time the former property was disposed of by the taxpayer.
Marginal note:Replacement property
(7) For the purposes of subsection 14(6), a particular eligible capital property of a taxpayer is a replacement property for a former property of the taxpayer if
(a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
(a.1) it was acquired by the taxpayer for a use that is the same as or similar to the use to which the taxpayer put the former property;
(b) it was acquired for the purpose of gaining or producing income from the same or a similar business as that in which the former property was used; and
(c) where the former property was used by the taxpayer in a business carried on in Canada, the particular property was acquired for use by the taxpayer in a business carried on by the taxpayer in Canada.
Marginal note:Deemed residence in Canada
(8) Where an individual was resident in Canada at any time in a particular taxation year and throughout
(a) the preceding taxation year, or
(b) the following taxation year,
for the purpose of paragraph 14(1)(a), the individual shall be deemed to have been resident in Canada throughout the particular year.
Marginal note:Effect of election under subsection 110.6(19)
(9) Where an individual elects under subsection 110.6(19) in respect of a business, the individual shall be deemed to have received proceeds of a disposition on February 23, 1994 of eligible capital property in respect of the business equal to the amount determined by the formula
(A - B)4/3
where
- A
- is the amount determined in respect of the business under subparagraph (a)(ii) of the description of A in the definition “exempt gains balance” in subsection 14(5), and
- B
- is the amount determined in respect of the business under subparagraph (a)(i) of the description of A in the definition “exempt gains balance” in subsection 14(5).
Marginal note:Deemed eligible capital expenditure
(10) For the purposes of this Act, where a taxpayer received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, property the cost of which is an eligible capital expenditure of the taxpayer in respect of a business, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, that eligible capital expenditure shall at any time be deemed to be the amount, if any, by which the total of
(a) that eligible capital expenditure, determined without reference to this subsection, and
(b) such part, if any, of the assistance as the taxpayer repaid before
(i) the taxpayer ceased to carry on the business, and
(ii) that time
under a legal obligation to pay all or any part of the assistance
exceeds
(c) the amount of the assistance the taxpayer received or is entitled to receive before the earlier of that time and the time the taxpayer ceases to carry on the business.
Marginal note:Receipt of public assistance
(11) For the purpose of subsection 14(10), where at any time a taxpayer who is a beneficiary under a trust or a member of a partnership 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 can reasonably be considered to be in respect of, or for the acquisition of, property the cost of which was an eligible capital expenditure 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 such property.
Marginal note:Loss on certain transfers
(12) Where
(a) a corporation, trust or partnership (in this subsection referred to as the “transferor”) disposes at any time in a taxation year of a particular eligible capital property in respect of a business of the transferor in respect of which it would, but for this subsection, be permitted a deduction under paragraph 24(1)(a) as a consequence of the disposition, and
(b) during the period that begins 30 days before and ends 30 days after the disposition, the transferor or a person affiliated with the transferor acquires a property (in this subsection referred to as the “substituted property”) that is, or is identical to, the particular property and, at the end of that period, a person or partnership that is either the transferor or a person or partnership affiliated with the transferor owns the substituted property,
the transferor is deemed, for the purposes of this section and sections 20 and 24, to continue to own eligible capital property in respect of the business, and not to have ceased to carry on the business, until the time that is immediately before the first time, after the disposition,
(c) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns
(i) the substituted property, or
(ii) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,
(d) at which the substituted property is not eligible capital property in respect of a business carried on by the transferor or a person affiliated with the transferor,
(e) 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,
(f) that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation, or
(g) at which the winding-up of the transferor begins (other than a winding-up to which subsection 88(1) applies), where the transferor is a corporation.
Marginal note:Deemed identical property
(13) For the purpose of subsection 14(12),
(a) 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; and
(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, immediately before the partnership would, but for this paragraph, have ceased to exist, was a member of the partnership is deemed to remain a member of the partnership, until the time that is immediately after the first time described in paragraphs 14(12)(c) to 14(12)(g).
Marginal note:Ceasing to use property in Canadian business
(14) If at a particular 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 the particular time, a property that was immediately before the particular time eligible capital property of the taxpayer (other than a property that was disposed of by the taxpayer at the particular time), the taxpayer is deemed to have disposed of the property immediately before the particular time for proceeds of disposition equal to the amount determined by the formula
A - B
where
- A
- is the fair market value of the property immediately before the particular time, and
- B
- is
(a) where at a previous time before the particular time the taxpayer ceased to use the property in connection with a business or part of a business carried on by the taxpayer outside Canada and began to use it in connection with a business or part of a business carried on by the taxpayer in Canada, the amount, if any, by which the fair market value of the property at the previous time exceeded its cost to the taxpayer at the previous time, and
(b) in any other case, nil.
Marginal note:Beginning to use property in Canadian business
(15) If at a particular time a non-resident taxpayer ceases to use, in connection with a business or part of a business carried on by the taxpayer outside Canada immediately before the particular time, and begins to use, in connection with a business or part of a business carried on by the taxpayer in Canada, a property that is an eligible capital property of the taxpayer, the taxpayer is deemed to have disposed of the property immediately before the particular time and to have reacquired the property at the particular time for consideration equal to the lesser of the cost to the taxpayer of the property immediately before the particular time and its fair market value immediately before the particular time.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Benefit conferred on shareholder
15. (1) Where at any time in a taxation year a benefit is conferred on a shareholder, or on a person in contemplation of the person becoming a shareholder, by a corporation otherwise than by
(a) the reduction of the paid-up capital, the redemption, cancellation or acquisition by the corporation of shares of its capital stock or on the winding-up, discontinuance or reorganization of its business, or otherwise by way of a transaction to which section 88 applies,
(b) the payment of a dividend or a stock dividend,
(c) 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 purpose of this paragraph,
(i) where
(A) the voting rights attached to a particular class of common shares of the capital stock of a corporation differ from the voting rights attached to another class of common shares of the capital stock of the corporation, and
(B) there 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,
the shares of the particular class shall be deemed to be property that is identical to the shares of the other class, and
(ii) rights are not considered identical if the cost of acquiring the rights differs, or
(d) an action described in paragraph 84(1)(c.1), 84(1)(c.2) or 84(1)(c.3),
the amount or value thereof shall, except to the extent that it is deemed by section 84 to be a dividend, be included in computing the income of the shareholder for the year.
Marginal note:Conferring of benefit
(1.1) Notwithstanding 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.
Marginal note:Forgiveness of shareholder debt
(1.2) For 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.
Marginal note:Forgiven amount
(1.21) For 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) if
(a) the obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor;
(b) 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;
(c) the definition “forgiven amount” in subsection 80(1) were read without reference to paragraphs (f) and (h) of the description B in that definition; and
(d) section 80 were read without reference to paragraphs (2)(b) and (q) of that section.
Marginal note:Cost of property or service
(1.3) To 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.
(1.4) [Repealed, 1997, c. 10, s. 269(1)]
Marginal note:Shareholder debt
(2) Where 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) is
(a) a shareholder of a particular corporation,
(b) connected with a shareholder of a particular corporation, or
(c) a member of a partnership, or a beneficiary of a trust, that is a shareholder of a particular corporation
and the person or partnership has in a taxation year received a loan from or has become indebted to 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.
Marginal note:Persons connected with a shareholder
(2.1) For the purposes of subsection 15(2), a person is connected with a shareholder of a particular corporation if that person does not deal at arm’s length with the shareholder and if that person is a person other than
(a) a foreign affiliate of the particular corporation; or
(b) a foreign affiliate of a person resident in Canada with which the particular corporation does not deal at arm’s length.
Marginal note:When s. 15(2) not to apply — non-resident persons
(2.2) Subsection 15(2) does not apply to indebtedness between non-resident persons.
Marginal note:When s. 15(2) not to apply — ordinary lending business
(2.3) Subsection 15(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 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.
Marginal note:When s. 15(2) not to apply — certain employees
(2.4) Subsection 15(2) does not apply to a loan made or a debt that arose
(a) in respect of an individual who is an employee of the lender or creditor but not a specified employee of the lender or creditor,
(b) 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,
(c) 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, or
(d) in 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,
where
(e) it 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, and
(f) at 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.
Marginal note:When s. 15(2) not to apply — certain trusts
(2.5) Subsection 15(2) does not apply to a loan made or a debt that arose in respect of a trust where
(a) the lender or creditor is a private corporation;
(b) the corporation is the settlor and sole beneficiary of the trust;
(c) 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; and
(d) at 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.
Marginal note:When s. 15(2) not to apply — repayment within one year
(2.6) Subsection 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.
Marginal note:Employee of partnership
(2.7) For 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.
Marginal note:Interest or dividend on income bond or debenture
(3) An 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.
Marginal note:Idem, where corporation not resident
(4) An 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.
Marginal note:Automobile benefit
(5) For the purposes of subsection 15(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), 6(1.1), 6(2) and 6(7) apply, with such modifications as the circumstances require, and as though the references therein to “the employer of the taxpayer”, “the taxpayer’s employer” and “the employer” were read as “the corporation”.
Marginal note:Application of ss. (1), (2) and (5)
(7) 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.
(8) [Repealed, 1998, c. 19, s. 75(3)]
Marginal note:Deemed benefit to shareholder by corporation
(9) Where 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. 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.
Marginal note:Interest on small business development bonds
15.1 (1) Any amount received by a taxpayer as or on account of interest on a small business development bond shall, except for the purposes of Part IV, be deemed to have been received as a taxable dividend.
Marginal note:Rules for small business development bonds
(2) Where a corporation (in this section referred to as the “issuer”) has issued an obligation that is at any time a small business development bond, notwithstanding any other provision of this Act,
(a) in computing the issuer’s income for a taxation year, no deduction shall be made in respect of any amount paid or payable (depending on the method regularly followed in computing the issuer’s income) as or on account of interest on the obligation in respect of a period that includes that time;
(b) except for the purpose of subsection 129(1), to the extent that any amount paid by the issuer as or on account of interest on the obligation is not allowed as a deduction because of paragraph 15.1(2)(a), it shall, when paid, be deemed to have been paid as a taxable dividend; and
(c) except for the purposes of paragraph 125(1)(b), the issuer’s taxable income for any taxation year that includes a period throughout which the obligation was a small business development bond but
(i) the issuer was not an eligible small business corporation, or
(ii) all or substantially all of the proceeds from the issue of the obligation cannot reasonably be regarded as having been used by the issuer or a corporation with which it was not dealing at arm’s length in the financing of an active business carried on in Canada immediately before the obligation was issued
shall be deemed to be an amount equal to the total of
(iii) the amount paid or payable (depending on the method regularly followed in computing the issuer’s income) as or on account of interest on the obligation in respect of that period, and
(iv) the issuer’s taxable income otherwise determined for the year.
Marginal note:Definitions
(3) In this section,
“eligible small business corporation”
« société admissible exploitant une petite entreprise »
“eligible small business corporation” at any time means a taxable Canadian corporation that at that time is
(a) a small business corporation, or
(b) a cooperative corporation (within the meaning assigned by subsection 136(2)) all or substantially all of the assets of which are used in an active business carried on by it in Canada;
“joint election”
« choix conjoint »
“joint election” means an election that is made in prescribed form, containing prescribed information, jointly by the issuer of an obligation and the person who is the holder of the obligation at the time of the election, that is filed with the Minister by the holder, and in which the holder and the issuer elect that this section apply to the obligation;
- “majority interest partner”
“majority interest partner”[Repealed, 1998, c. 19, s. 76(1)]
- “property used for specified purposes”
“property used for specified purposes”[Repealed, 1994, c. 7, Sch. VIII, s. 6(1)]
“qualifying debt obligation”
« créance admissible »
“qualifying debt obligation” of a corporation at a particular time means an obligation that is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,
(a) the principal amount of which is not less than $10,000 or more than $500,000,
(b) that is issued for a term of not more than 5 years and, except in the event of a failure or default under the terms or conditions of the obligation, not less than one year, and
(c) that was issued not more than 5 years before the particular time,
if the obligation is issued by the corporation
(d) as part of a proposal to, or an arrangement with, its creditors that has been approved by a court under the Bankruptcy and Insolvency Act,
(e) at a time when all or substantially all of its assets are under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or
(f) at a time when, because of financial difficulty, the corporation is in default, or could reasonably be expected to default, on a debt held by a person with whom the corporation was dealing at arm’s length and the obligation is issued, in whole or in part, directly or indirectly in exchange or substitution for that debt;
“small business development bond”
« obligation pour le développement de la petite entreprise »
“small business development bond” at any time means
(a) an obligation that is at that time a qualifying debt obligation issued after 1981 and before 1988 by a Canadian-controlled private corporation in respect of which a joint election was made within 90 days after the later of its issue date and March 30, 1983,
(b) an obligation that is at that time a qualifying debt obligation issued after February 25, 1992 by a Canadian-controlled private corporation in respect of which a joint election was made within 90 days after its issue date, or
(c) an obligation that is at that time a qualifying debt obligation issued by a Canadian-controlled private corporation if
(i) it is reasonable to consider that the corporation and the holder of the obligation intended that this section apply to the obligation, having regard to such factors as may be relevant, including the rate of interest stipulated under the terms of the obligation and the manner in which the corporation and the holder have treated the obligation for the purposes of this Act, and
(ii) the holder files with the Minister a joint election in respect of the obligation within 90 days after the date of notification by the Minister that a joint election in respect of the obligation has not been filed.
- “specified property”
“specified property”[Repealed, 1994, c. 7, Sch. VIII, s. 6(1)]
Marginal note:Money borrowed
(4) Notwithstanding any other provision of this Act, an amount paid or payable by a taxpayer pursuant to a legal obligation to pay interest on borrowed money used for the purpose of acquiring a small business development bond shall be deemed to be an amount paid or payable, as the case may be, on borrowed money used for the purpose of earning income from a business or property.
Marginal note:False declaration
(5) Where the Minister establishes that an issuer has knowingly or under circumstances amounting to gross negligence made a false declaration in a joint election in respect of an obligation, the reference in subparagraph 15.1(2)(c)(iii) to “the amount paid or payable” shall in respect of the obligation be read as a reference to “3 times the amount paid or payable”.
Marginal note:Disqualification
(6) Where at a particular time an issuer makes a joint election in respect of an obligation and
(a) the issuer or any other corporation associated at the time the obligation was issued with the issuer,
(b) an individual who controls or is a member of a related group that controls the issuer, or
(c) a partnership any member of which, who is a majority interest partner of the partnership, controls, or is a member of a related group that controls, the issuer
had at or before the particular time made a joint election in respect of any small business development bond or small business bond, as the case may be, for the purposes of this section, the issuer shall be deemed not to be an eligible small business corporation in respect of the obligation.
Marginal note:Exception
(7) Subsection 15.1(6) does not apply in respect of an obligation issued at any time where the issue price of the obligation does not exceed the amount, if any, by which
(a) $500,000
exceeds
(b) the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of
(i) another obligation that is a small business development bond issued by
(A) the issuer, or
(B) a corporation associated with the issuer, or
(ii) a small business bond issued by
(A) an individual who controls, or is a member of a related group that controls, the issuer, or
(B) a partnership any member of which, who is a majority interest partner of the partnership, controls, or is a member of a related group that controls, the issuer.
(8) to (12) [Repealed, 1994, c. 7, Sch. VIII, s. 6(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts R.S., 1985, c. 1 (5th Supp.), s. 15.1;
- 1994, c. 7, Sch. V, s. 90, Sch. VIII, s. 6, c. 8, s. 1;
- 1998, c. 19, s. 76;
- 2001, c. 17, s. 198.
Marginal note:Interest on small business bond
15.2 (1) Any amount received by a taxpayer as or on account of interest on a small business bond shall, except for the purposes of Part IV, be deemed to have been received as a taxable dividend from a taxable Canadian corporation.
Marginal note:Rules for small business bonds
(2) Where an individual or a partnership (in this section referred to as the “issuer”) has issued an obligation that is at any time a small business bond, notwithstanding any other provision of this Act,
(a) in computing the issuer’s income for a taxation year, no deduction shall be made in respect of any amount paid or payable (depending on the method regularly followed in computing the issuer’s income) as or on account of interest on the bond in respect of a period that includes that time; and
(b) for any taxation year that includes a period throughout which the obligation was a small business bond but
(i) the issuer was not an eligible issuer, or
(ii) all or substantially all of the proceeds from the issue of the obligation were not used by the issuer in the financing of an active business carried on by the issuer in Canada immediately before the time of the issue of the obligation,
there shall be added to the tax otherwise payable under this Part by the issuer for that taxation year an amount equal to 29% of the amount of interest paid or payable (depending on the method regularly followed in computing the issuer’s income) in respect of the bond for that period.
Marginal note:Definitions
(3) In this section,
“eligible issuer”
« émetteur admissible »
“eligible issuer” at any time means
(a) an individual (other than a trust) who is resident in Canada and who
(i) has not made a joint election before that time in respect of a small business bond,
(ii) is not a majority interest partner of a partnership that has made a joint election before that time in respect of a small business bond, and
(iii) neither controls nor is a member of a related group that controls
(A) a corporation that has made a joint election before that time in respect of a small business development bond, or
(B) a corporation that is associated with a corporation referred to in clause (A), or
(b) a partnership
(i) each member of which is an individual (other than a trust) who is resident in Canada,
(ii) each majority interest partner, if any, of which is an eligible issuer, and
(iii) that has not made a joint election before that time in respect of a small business bond;
“joint election”
« choix conjoint »
“joint election” means an election that is made in prescribed form, containing prescribed information, jointly by the issuer of an obligation and the person who is the holder of the obligation at the time of the election, that is filed with the Minister by the holder and in which the holder and the issuer elect that the provisions of this section apply to that obligation;
- “majority interest partner”
“majority interest partner”[Repealed, 1998, c. 19, s. 77(1)]
“qualifying debt obligation”
« créance admissible »
“qualifying debt obligation” of an issuer at a particular time means an obligation that is a bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,
(a) the principal amount of which is not less than $10,000 or more than $500,000,
(b) that is issued for a term of not more than 5 years and, except in the event of a failure or default under the terms or conditions of the obligation, not less than one year, and
(c) that was issued not more than 5 years before the particular time,if the obligation is issued
(d) as part of a proposal to, or an arrangement with, the issuer’s creditors that has been approved by a court under the Bankruptcy and Insolvency Act,
(e) at a time when all or substantially all of the issuer’s assets are under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or
(f) at a time when, because of financial difficulty, the issuer is in default, or could reasonably be expected to default, on a debt incurred in the course of the issuer’s business and held by a person with whom the issuer was dealing at arm’s length or, where the issuer is a partnership, by a person with whom each member of the partnership was dealing at arm’s length, and it is issued, in whole or in part, directly or indirectly in exchange or substitution for that debt,
and the funds from the issue of the obligation are used in Canada in a business of the issuer carried on immediately before the time of issue;
“small business bond”
« obligation pour la petite entreprise »
“small business bond” at any time means
(a) an obligation that is at that time a qualifying debt obligation, issued by an individual or a partnership, in respect of which a joint election was made within 90 days after its issue date, or
(b) an obligation that is at that time a qualifying debt obligation issued by an individual or a partnership if
(i) it is reasonable to consider that the issuer and the holder of the obligation intended that this section apply to the obligation, having regard to such factors as may be relevant, including the rate of interest stipulated under the terms of the obligation and the manner in which the issuer and the holder have treated the obligation for the purposes of this Act, and
(ii) the holder files with the Minister a joint election in respect of the obligation within 90 days after the date of notification by the Minister that a joint election in respect of the obligation has not been filed under paragraph (a).
Marginal note:Status of interest
(4) Notwithstanding any other provision of this Act, an amount paid or payable by a taxpayer pursuant to a legal obligation to pay interest on borrowed money used for the purpose of acquiring a small business bond shall be deemed to be an amount paid or payable, as the case may be, on borrowed money used for the purpose of earning income from a business or property.
Marginal note:False declaration
(5) Where the Minister establishes that an issuer has knowingly or under circumstances amounting to gross negligence made a false declaration in a joint election in respect of an obligation, the reference in paragraph 15.2(2)(b) to “29%” shall, in respect of the obligation, be read as a reference to “87%”.
Marginal note:Partnerships
(6) For the purpose of paragraph 15.2(2)(b), in the case of an issuer that is a partnership, the expression “tax otherwise payable under this Part by the issuer” shall be read as a reference to the “tax otherwise payable under this Part by each member of the partnership” and each member shall add to that member’s tax otherwise payable under this Part for the taxation year that includes the period described in paragraph 15.2(2)(b) the amount that can reasonably be regarded as that member’s share of the amount determined under that paragraph with respect to the partnership.
Marginal note:Deemed eligible issuer
(7) Where, but for subparagraphs (a)(i), (ii) and (iii) and (b)(ii) of the definition “eligible issuer” in subsection 15.2(3), an individual or a partnership would be an “eligible issuer”, the individual or partnership shall be deemed to be an eligible issuer in respect of a small business bond at any time where the issue price of the bond does not exceed the amount, if any, by which
(a) $500,000
exceeds
(b) where the issuer is an individual, the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of
(i) another obligation that is a small business bond issued by
(A) the individual, or
(B) a partnership of which the individual is a majority interest partner, or
(ii) a small business development bond issued by
(A) a corporation that is controlled by the individual or by a related group of which the individual is a member, or
(B) a corporation that is associated with a corporation referred to in clause (A), or
(c) where the issuer is a partnership, the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of
(i) another obligation that is a small business bond issued by
(A) the partnership,
(B) an individual who is a majority interest partner of the partnership, or
(C) a partnership of which the individual referred to in clause (B) is a majority interest partner, or
(ii) a small business development bond issued by
(A) a corporation that is controlled by the individual referred to in clause (B) or by a related group of which the individual is a member, or
(B) a corporation that is associated with a corporation referred to in clause (A).
(8) and (9) [Repealed, 1994, c. 7, Sch. VIII, s. 6(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 15.2;
- 1994, c. 7, Sch. V, s. 90, Sch. VIII, s. 6, c. 8, s. 2;
- 1998, c. 19, s. 77;
- 2001, c. 17, s. 199.
Marginal note:Income and capital combined
16. (1) Where, 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:
(a) 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; and
(b) the 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.
Marginal note:Obligation issued at discount
(2) Where, 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,
(a) the obligation was issued for an amount that is less than the principal amount of the obligation,
(b) the interest stipulated to be payable on the obligation, expressed in terms of an annual rate on
(i) the principal amount thereof, if no amount is payable on account of the principal amount before the maturity of the obligation, or
(ii) the amount outstanding from time to time as or on account of the principal amount thereof, in any other case,
is less than 5%, and
(c) 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 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.
Marginal note:Obligation issued at discount
(3) Where, 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,
(a) the obligation was issued for an amount that is less than the principal amount of the obligation, and
(b) 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 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 on
(i) the principal amount of the obligation, if no amount is payable on account of the principal amount before the maturity of the obligation, or
(ii) the 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 obligation
(c) who is resident in Canada,
(d) 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, and
(e) of whom the obligation is a capital property,
for the taxation year in which the owner acquired the obligation.
Marginal note:Where s. (1) does not apply
(4) Subsection 16(1) does not apply to any amount received by a taxpayer in a taxation year
(a) as an annuity payment; or
(b) in satisfaction of the taxpayer’s rights under an annuity contract.
Marginal note:Idem
(5) Subsection 16(1) does not apply in any case where subsection 16(2) or 16(3) applies.
Marginal note:Indexed debt obligations
(6) Subject to subsection 16(7) and for the purposes of this Act, where at any time in a taxpayer’s taxation year
(a) an interest in an indexed debt obligation is held by the taxpayer,
(i) 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, and
(ii) an 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;
(b) an indexed debt obligation is an obligation of the taxpayer,
(i) 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, and
(ii) 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; and
(c) the 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.
Marginal note:Impaired indexed debt obligations
(7) Paragraph 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. 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.
Marginal note:Leasing properties
16.1 (1) Where a taxpayer (in this section referred to as the “lessee”) leases tangible property (other than prescribed property) 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:
(a) 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;
(b) 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;
(c) 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;
(d) 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 effect
(i) at the earlier of
(A) the time, if any, before the particular time, at which the lessee last entered into an agreement to lease the property, and
(B) the particular time, or
(ii) where 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;
(e) 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;
(f) 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 which
(i) the total of
(A) the amount referred to in paragraph 16.1(1)(c), and
(B) all amounts received or receivable by the lessee in respect of the cancellation or assignment of the lease or the sublease of the property
exceeds
(ii) the total of
(A) all 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, and
(B) all 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;
(g) 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;
(h) 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; and
(i) where 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.
Marginal note:Assignments and subleases
(2) Subject 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”),
(a) 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; and
(b) if 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 if
(i) the assignee leased the property at the particular time from the owner of the property for a term of more than one year, and
(ii) the 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.
Marginal note:Idem
(3) Subject 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).
Marginal note:Amalgamations and windings-up
(4) Notwithstanding 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 lease
(a) by reason of an amalgamation (within the meaning assigned by subsection 87(1)), or
(b) in 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.
Marginal note:Replacement property
(5) For 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.
Marginal note:Additional property
(6) For the purposes of subsection 16.1(1), where at any particular time
(a) an 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,
(b) the lessor and the lessee of the original property have jointly elected under subsection 16.1(1) in respect of the original property, and
(c) as 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:
(d) the lessee shall be deemed to have leased the additional property from the lessor at the particular time,
(e) the term of the lease of the additional property shall be deemed to be greater than one year,
(f) the lessor and the lessee shall be deemed to have jointly elected under subsection 16.1(1) in respect of the additional property,
(g) 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,
(h) the additional property shall be deemed not to be prescribed property, and
(i) the 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.
Marginal note:Renegotiation of lease
(7) For the purposes of subsection 16.1(1), where at any time
(a) a lease (in this subsection referred to as the “original lease”) of property is renegotiated in the course of a bona fide renegotiation, and
(b) as 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. R.S., 1985, c. 1 (5th Supp.), s. 16.1;
- 1994, c. 7, Sch. II, s. 12;
- 1999, c. 22, s. 7.
Marginal note:Amount owing by non-resident
17. (1) Where, at any time in a taxation year of a corporation resident in Canada, a non-resident person owes an amount to the corporation, that amount has been or remains outstanding for more than a year and the total determined under paragraph (b) for the year 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 owing, the corporation shall include an amount in computing its income for the year equal to the amount, if any, by which
(a) 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 the prescribed rate for the period in the year during which the amount was owing
exceeds
(b) the total of all amounts each of which is
(i) an 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 amount owing,
(ii) 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 year and that can reasonably be attributed to interest on the amount owing for the period in the year during which the amount was owing, or
(iii) an amount that is included in computing the corporation’s income for the year or a subsequent year under subsection 91(1) and that can reasonably be attributed to interest on the amount owing for the period in the year during which the amount was owing.
Marginal note:Anti-avoidance rule — indirect loan
(2) For the purpose of this section and subject to subsection (3), where
(a) a non-resident person owes an amount at any time to a particular person or partnership (other than a corporation resident in Canada), and
(b) it is reasonable to conclude that the particular person or partnership entered into the transaction under which the amount became owing or the particular person or partnership permitted the amount owing to remain outstanding because
(i) a corporation resident in Canada made a loan or transfer of property, or
(ii) the 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 owing to the particular person or partnership.
Marginal note:Exception to anti-avoidance rule — indirect loan
(3) Subsection (2) does not apply to an amount owing at any time by a non-resident person to a particular person or partnership where
(a) at 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; or
(b) at that time,
(i) 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,
(ii) 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, and
(iii) if 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.
Marginal note:Anti-avoidance rule — loan through partnership
(4) For 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 that
(a) the fair market value of the member’s interest in the partnership at that time
is of
(b) the fair market value of all interests in the partnership at that time.
Marginal note:Anti-avoidance rule — loan through trust
(5) For 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,
(a) 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 that
(i) the fair market value of the beneficiary’s interest in the trust at that time
is of
(ii) the fair market value of all the beneficial interests in the trust at that time; and
(b) in 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.
Marginal note:Anti-avoidance rule — loan to partnership
(6) For 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 that
(a) the fair market value of the member’s interest in the particular partnership at that time
is of
(b) the fair market value of all interests in the particular partnership at that time.
Marginal note:Exception
(7) Subsection (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).
Marginal note:Exception
(8) Subsection (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 owing
(a) arose 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,
(i) for the purpose of earning
(A) income from an active business, as defined in subsection 95(1), of the affiliate, or
(B) income that was included in computing the income from an active business of the affiliate under subsection 95(2), or
(ii) for 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; or
(b) arose 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.
Marginal note:Borrowed money
(8.1) Subsection (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 borrowings
(a) to repay money (referred to in this subsection and in subsection (8.2) as “previous borrowings”) previously borrowed from any person or partnership, if
(i) the previous borrowings became owing after the last time at which the affiliate became a controlled foreign affiliate of the particular corporation, and
(ii) the previous borrowings were, at all times after they became owing, used for a purpose described in subparagraph (8)(a)(i) or (ii); or
(b) to 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, if
(i) the 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,
(ii) the unpaid purchase price is in respect of the property, and
(iii) throughout 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).
Marginal note:Deemed use
(8.2) To 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.
Marginal note:Exception
(9) Subsection (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
(a) the corporation is not related to the non-resident person throughout the period in the year during which the amount owing is outstanding;
(b) 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; and
(c) the 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.
Marginal note:Determination of whether related and controlled foreign affiliate status
(10) For 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,
(a) 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 that
(i) the fair market value of the member’s interest in the partnership at that time
is of
(ii) the fair market value of all interests in the partnership at that time; and
(b) each 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 that
(i) the fair market value of the beneficiary’s interest in the trust at that time
is of
(ii) the fair market value of all the beneficial interests in the trust at that time.
Marginal note:Determination of whether related
(11) For 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.
Marginal note:Determination of whether persons related
(11.1) For 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.
Marginal note:Back-to-back loans
(11.2) For 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”)
(a) 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; and
(b) the 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).
Marginal note:Determination of whether persons related
(11.3) For 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,
(a) all of those persons would at that time be controlled foreign affiliates of the corporation resident in Canada; and
(b) because 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).
Marginal note:Determination of controlled foreign affiliate status
(12) For 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.
Marginal note:Extended definition of controlled foreign affiliate
(13) For 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.
Marginal note:Anti-avoidance rule — where rights or shares issued, acquired or disposed of to avoid tax
(14) For the purpose of this section,
(a) 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; and
(b) where 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.
Marginal note:Definitions
(15) The definitions in this subsection apply in this section.
“controlled foreign affiliate”
« société étrangère affiliée contrôlée »
“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 and
(a) subparagraph (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,”; and
(b) subparagraph (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;”.
“exempt loan or transfer”
« prêt ou transfert de biens exclu »
“exempt loan or transfer” means
(a) a 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;
(b) 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;
(c) a dividend paid by a corporation resident in Canada on shares of a class of its capital stock; and
(d) a 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).
“non-discretionary trust”
« fiducie non discrétionnaire »
“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.
“settlor”
« auteur »
“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) a loan made by the person or partnership to the trust at a reasonable rate of interest; or
(b) a transfer made by the person or partnership to the trust for fair market value consideration.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 17;
- 1999, c. 22, s. 8;
- 2001, c. 17, s. 8;
- 2007, c. 35, s. 10.
Deductions
Marginal note:General limitations
18. (1) In computing the income of a taxpayer from a business or property no deduction shall be made in respect of
Marginal note:General limitation
(a) an 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;
Marginal note:Capital outlay or loss
(b) an 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;
Marginal note:Limitation re exempt income
(c) an 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;
Marginal note:Annual value of property
(d) the annual value of property except rent for property leased by the taxpayer for use in the taxpayer’s business;
Marginal note:Reserves, etc.
(e) 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;
Marginal note:Unpaid claims under insurance policies
(e.1) an 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;
Marginal note:Payments on discounted bonds
(f) an 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;
Marginal note:Payments on income bonds
(g) an 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 1930
(i) to afford relief to the debtor from financial difficulties, and
(ii) in place of or as an amendment to bonds or debentures that at the end of 1930 provided unconditionally for a fixed rate of interest;
Marginal note:Personal and living expenses
(h) personal 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;
Marginal note:Limitation re employer’s contribution under supplementary unemployment benefit plan
(i) an amount paid by an employer to a trustee under a supplementary unemployment benefit plan except as permitted by section 145;
Marginal note:Limitation re employer’s contribution under deferred profit sharing plan
(j) an amount paid by an employer to a trustee under a deferred profit sharing plan except as expressly permitted by section 147;
Marginal note:Limitation re employer’s contribution under profit sharing plan
(k) an amount paid by an employer to a trustee under a profit sharing plan that is not
(i) an employees profit sharing plan,
(ii) a deferred profit sharing plan, or
(iii) a registered pension plan;
Marginal note:Use of recreational facilities and club dues
(l) an outlay or expense made or incurred by the taxpayer after 1971,
(i) 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, or
(ii) as 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;
(l.1) [Repealed, 2003, c. 28, s. 2(1)]
Marginal note:Limitation re employee stock option expenses
(m) an amount in respect of which an election was made by or on behalf of the taxpayer under subsection 110(1.1);
Marginal note:Political contributions
(n) a political contribution;
Marginal note:Employee benefit plan contributions
(o) an amount paid or payable as a contribution to an employee benefit plan;
Marginal note:Salary deferral arrangement
(o.1) except 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;
Marginal note:Retirement compensation arrangement
(o.2) except as expressly permitted by paragraph 20(1)(r), contributions made under a retirement compensation arrangement;
Marginal note:Employee life and health trust
(o.3) except as expressly permitted by paragraph 20(1)(s), contributions to an employee life and health trust;
Marginal note:Limitation re personal services business expenses
(p) an 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 than
(i) the salary, wages or other remuneration paid in the year to an incorporated employee of the corporation,
(ii) the cost to the corporation of any benefit or allowance provided to an incorporated employee in the year,
(iii) 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, and
(iv) any 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 rendered
that would, if the income of the corporation were from a business other than a personal services business, be deductible in computing its income;
Marginal note:Limitation re cancellation of lease
(q) an 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);
Marginal note:Certain automobile expenses
(r) an 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;
Marginal note:Loans or lending assets
(s) any 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;
Marginal note:Payments under different acts
(t) any amount paid or payable
(i) under this Act (other than tax paid or payable under Part XII.2 or Part XII.6),
(ii) as interest under Part IX of the Excise Tax Act, or
(iii) as interest under the Air Travellers Security Charge Act;
Marginal note:Fees — individual saving plans
(u) any amount paid or payable by the taxpayer for services in respect of a retirement savings plan, retirement income fund or TFSA under or of which the taxpayer is the annuitant or holder; and
Marginal note:Interest — authorized foreign bank
(v) where 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.
Marginal note:Limit on certain interest and property tax
(2) Notwithstanding 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,
(a) interest on debt relating to the acquisition of land, or
(b) property 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,
(c) 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, or
(d) held 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 of
(e) the 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, and
(f) in 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 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.
Marginal note:Where taxpayer member of partnership
(2.1) Where 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,
(a) the partnership has disposed of all or any portion of the land, or
(b) the taxpayer has disposed of all or any portion of the taxpayer’s interest in the partnership
to 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 amount
(c) that was, by virtue of subsection 18(2), not deductible in computing the income of the taxpayer for any previous taxation year,
(d) that was not deductible in computing the income of any other taxpayer for any taxation year,
(e) that was not included in computing the adjusted cost base to the taxpayer of any property, and
(f) that was not deductible under this subsection in computing the income of the taxpayer for any previous taxation year
as is reasonable having regard to the portion of the land or interest in the partnership, as the case may be, so disposed of.
Marginal note:Base level deduction
(2.2) For 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.
Marginal note:Associated corporations
(2.3) Notwithstanding 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.
Marginal note:Failure to file agreement
(2.4) If 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).
Marginal note:Special rules for base level deduction
(2.5) Notwithstanding any other provision of this section,
(a) 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); and
(b) where 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.
Marginal note:Definitions
(3) In subsection 18(2),
“interest on debt relating to the acquisition of land”
« intérêts sur une dette concernant l’acquisition d’un fonds de terre »
“interest on debt relating to the acquisition of land” includes
(a) interest 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, and
(b) interest 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,
(i) another person with whom the taxpayer does not deal at arm’s length,
(ii) a corporation of which the taxpayer is a specified shareholder, or
(iii) a 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;
“land”
« 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, include
(a) any property that is a building or other structure affixed to land,
(b) the land subjacent to any property described in paragraph (a), or
(c) such 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).
Marginal note:Costs relating to construction of building or ownership of land
(3.1) Notwithstanding any other provision of this Act, in computing a taxpayer’s income for a taxation year,
(a) 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 land
(i) that is subjacent to the building, or
(ii) that
(A) is immediately contiguous to the land subjacent to the building,
(B) is used, or is intended to be used, for a parking area, driveway, yard, garden or any other similar use, and
(C) is necessary for the use or intended use of the building; and
(b) the 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.
Marginal note:Included costs
(3.2) For the purposes of subsection 18(3.1), costs relating to the construction, renovation or alteration of a building or to the ownership of land include
(a) interest 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; and
(b) interest 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,
(i) another person with whom the taxpayer does not deal at arm’s length,
(ii) a corporation of which the taxpayer is a specified shareholder, or
(iii) a 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.
Marginal note:Completion
(3.3) For 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.
Marginal note:Where s. (3.1) does not apply
(3.4) Subsection 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 by
(a) 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 property owned by it to or for a person with whom the corporation is dealing at arm’s length, or
(b) a partnership
(i) each member of which is a corporation described in paragraph 18(3.4)(a), and
(ii) the 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 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%.
Marginal note:Idem
(3.5) Subsection 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,
(a) where the construction, renovation or alteration of the building was in progress on November 12, 1981,
(b) where the installation of the footings or other base support of the building commenced after November 12, 1981 and before 1982,
(c) 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, or
(d) if, 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).
Marginal note:Undue delay
(3.6) For 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.
Marginal note:Commencement of footings
(3.7) For 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.
Marginal note:Limitation re deduction of interest by certain corporations
(4) Notwithstanding any other provision of this Act, in computing the income for a taxation year of a corporation resident in Canada from a business or property, no deduction shall be made in respect of that proportion of any amount otherwise deductible in computing its income for the year in respect of interest paid or payable by it on outstanding debts to specified non-residents that
(a) the amount, if any, by which
(i) the 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 corporation’s outstanding debts to specified non-residents,
exceeds
(ii) two times the total of
(A) the 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,
(B) the average of all amounts each of which is the corporation’s contributed surplus 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, and
(C) the 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,
is of
(b) the amount determined under subparagraph 18(4)(a)(i) in respect of the corporation for the year.
Marginal note:Definitions
(5) Notwithstanding any other provision of this Act (other than subsection 18(5.1)), in this subsection and subsections 18(4) to 18(6),
“outstanding debts to specified non-residents”
« dettes impayées envers des non-résidents déterminés »
“outstanding debts to specified non-residents” of a corporation at any particular time in a taxation year means
(a) the 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 amount
(i) that was payable by the corporation to a person who was, at any time in the year,
(A) a specified non-resident shareholder of the corporation, or
(B) a non-resident person, or a non-resident-owned investment corporation, who was not dealing at arm’s length with a specified shareholder of the corporation, and
(ii) on which any amount in respect of interest paid or payable by the corporation is or would be, but for subsection 18(4), deductible in computing the corporation’s income for the year,
but does not include
(b) an amount outstanding at the particular time as or on account of a debt or other obligation to pay an amount to
(i) a 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, or
(ii) an authorized foreign bank, if the bank uses or holds the obligation at the particular time in its Canadian banking business;
“specified non-resident shareholder”
« actionnaire 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;
“specified shareholder”
« actionnaire 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, owns
(a) shares 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, or
(b) shares 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 contingently
(c) to, or to acquire, shares in a corporation or to control the voting rights of shares in a corporation, or
(d) to 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.
Marginal note:Person deemed not to be specified shareholder
(5.1) For the purposes of subsections 18(4) to 18(6), where
(a) a particular person would, but for this subsection, be a specified shareholder of a corporation at any time,
(b) 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, and
(c) the purpose for which the particular person became a specified shareholder 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 shall be deemed not to be a specified shareholder of the corporation at that time.
Marginal note:Loans made on condition
(6) Where any loan (in this subsection referred to as the “first loan”) has been made
(a) by a specified non-resident shareholder of a corporation, or
(b) by a non-resident person, or a non-resident-owned investment corporation, who was not dealing at arm’s length with a specified shareholder of a corporation,
to another person on condition that a loan (in this subsection referred to as the “second loan”) be made by any person to a particular corporation resident in Canada, for the purposes of subsections 18(4) and 18(5), the lesser of
(c) the amount of the first loan, and
(d) the amount of the second loan
shall be deemed to be a debt incurred by the particular corporation to the person who made the first loan.
(8) [Repealed, 2001, c. 17, s. 9(5)]
Marginal note:Limitation respecting prepaid expenses
(9) Notwithstanding any other provision of this Act,
(a) 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 incurred
(i) as consideration for services to be rendered after the end of the year,
(ii) 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,
(iii) as consideration for insurance in respect of a period after the end of the year, other than
(A) where the taxpayer is an insurer, consideration for reinsurance, and
(B) consideration 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, or
(iv) subject 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);
(b) 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;
(c) 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 deemed
(i) not to be a qualified expenditure made by the taxpayer in the year, and
(ii) to be a qualified expenditure made by the taxpayer in the subsequent year to which the expenditure can reasonably be considered to relate;
(d) 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) that
(i) is made by the taxpayer to a person or partnership with which the taxpayer deals at arm’s length, and
(ii) is not an expenditure described in subparagraph 37(1)(a)(i);
(e) for 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 deemed
(i) not to be made or incurred by the taxpayer in the year, and
(ii) to be made or incurred by the taxpayer in the subsequent taxation year to which the expenditure can reasonably be considered to relate; and
(f) for the purpose of the definition “eligible child care space expenditure” in subsection 127(9), the portion of an expenditure (other than for the acquisition of depreciable property) that is made or incurred by a taxpayer in a taxation year and that would, but for paragraph (a), have been deductible under this Act in computing the taxpayer’s income for the year, is deemed
(i) not to be made or incurred by the taxpayer in the year, and
(ii) to be made or incurred by the taxpayer in the subsequent taxation year to which the expenditure can reasonably be considered to relate.
Marginal note:Group term life insurance
(9.01) Where
(a) a 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,
(b) the insurance is for the remainder of the individual’s lifetime, and
(c) no 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,
(d) 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 of
(i) the amount determined by the formula
A - B
and
(ii) 1/3 of the amount determined by the formula
(A × C)/365
where
- A
- is 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,
- B
- is the total amount deductible in respect of the premium in computing the taxpayer’s income for preceding taxation years, and
- C
- is the number of days in the year, and
(e) where the individual died in the year, the amount determined under subparagraph 18(9.01)(d)(i).
Marginal note:Application of subsection (9) to insurers
(9.02) For the purpose of subsection (9), an outlay or expense made or incurred by an insurer on account of the acquisition of an insurance policy (other than 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) is deemed to be an expense incurred as consideration for services rendered consistently throughout the period of coverage of the policy.
Marginal note:Penalties, bonuses and rate-reduction payments
(9.1) Subject to subsection 142.4(10), where at any time a payment, other than a payment that
(a) can 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, or
(b) 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,
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”)
(c) as consideration for a reduction in the rate of interest payable by the taxpayer on the debt obligation, or
(d) as 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,
(e) 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, and
(f) for 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,
(i) in the case of a reduction described in paragraph 18(9.1)(c), on the debt obligation, and
(ii) in the case of a repayment described in paragraph 18(9.1)(d),
(A) 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, and
(B) where 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.
Marginal note:Interest on debt obligations
(9.2) For 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 of
(a) the 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 which
(i) the amount outstanding at the particular time on account of the principal amount of the debt obligation
exceeds the total of
(ii) all 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), and
(iii) the amount, if any, by which
(A) the 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)
exceeds
(B) the 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, and
(b) the amount, if any, by which
(i) the 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)
exceeds
(ii) the 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.
Marginal note:Interest on debt obligations
(9.3) Where 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 of
(a) all 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, and
(b) all 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 of
(c) all 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, and
(d) the 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:
(e) 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 which
(i) the principal amount at that time of the debt obligation
exceeds
(ii) the excess amount, and
(f) the 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)).
Marginal note:Idem
(9.4) Where an amount is paid at any time by a person or partnership in respect of a debt obligation of a borrower
(a) as, 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, or
(b) as 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.
Marginal note:Idem
(9.5) Where 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 for
(a) a reduction in the amount of interest that would otherwise be payable on the debt obligation in respect of a subsequent period, or
(b) a 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.
Marginal note:Idem
(9.6) Where the liability in respect of a debt obligation of a person or partnership is assumed by a borrower at any time,
(a) 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, and
(b) the 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 deemed
(c) to have been in existence throughout the particular period, and
(d) to have had, throughout the particular period, taxation years ending on the day of the year on which its first taxation year ended.
Marginal note:Idem
(9.7) Where 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, discounted
(a) for the particular period beginning at the particular time and ending at the end of the subsequent period or part thereof, and
(b) at 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 shall
(c) for 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, and
(d) be deemed to be a payment described in paragraph 18(9.1)(d) in respect of the debt obligation.
Marginal note:Idem
(9.8) Nothing in any of subsections 18(9.2) to 18(9.7) shall be construed as providing that
(a) the 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 exceed
(b) the 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.
Marginal note:Employee benefit plan
(10) Paragraph 18(1)(o) does not apply in respect of a contribution to an employee benefit plan
(a) to the extent that the contribution
(i) is 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, and
(ii) cannot 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;
(b) the custodian of which is non-resident, to the extent that the contribution
(i) is in respect of an employee who is non-resident at the time the contribution is made, and
(ii) cannot 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; or
(c) the 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 where
(i) the employee was resident in Canada throughout no more than 60 of the 72 calendar months ending with the particular month, and
(ii) the 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.
Marginal note:Limitation
(11) Notwithstanding 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 of
(a) making 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;
(b) 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;
(c) making a contribution to a registered pension plan or a deferred profit sharing plan after November 12, 1981, other than
(i) a 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, or
(ii) a contribution deductible under paragraph 20(1)(q) or 20(1)(y) in computing the taxpayer’s income;
(d) 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;
(e) 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;
(f) making a contribution to a net income stabilization account;
(g) [Repealed, 2011, c. 24, s. 2]
(h) making a contribution into a registered education savings plan;
(i) making a contribution to a registered disability savings plan; or
(j) making a contribution under a TFSA,
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.
Marginal note:Work space in home
(12) Notwithstanding any other provision of this Act, in computing an individual’s income from a business for a taxation year,
(a) 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 either
(i) the individual’s principal place of business, or
(ii) used 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;
(b) where the conditions set out in subparagraph 18(12)(a)(i) or 18(12)(a)(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 sections 34.1 and 34.2; and
(c) any 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.
Marginal note:When s. (15) applies to money lenders
(13) Subsection 18(15) applies, subject to subsection 142.6(7), when
(a) a taxpayer (in this subsection and subsection 18(15) referred to as the “transferor”) disposes of a particular property;
(b) the disposition is not described in any of paragraphs (c) to (g) of the definition “superficial loss” in section 54;
(c) the transferor is not an insurer;
(d) 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;
(e) the particular property is a share, or a loan, bond, debenture, mortgage, hypothecary claim, note, agreement for sale or any other indebtedness;
(f) the particular property was, immediately before the disposition, not a capital property of the transferor;
(g) 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; and
(h) at the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.
Marginal note:When s. (15) applies to adventurers in trade
(14) Subsection 18(15) applies where
(a) a person (in this subsection and subsection 18(15) referred to as the “transferor”) disposes of a particular property;
(b) the particular property is described in an inventory of a business that is an adventure or concern in the nature of trade;
(c) the disposition is not a disposition that is deemed to have occurred by section 70, subsection 104(4), section 128.1, paragraph 132.2(1)(f) or subsection 1 38(11.3) or 149(10);
(d) 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; and
(e) at the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.
Marginal note:Loss on certain properties
(15) If this subsection applies because of subsection 18(13) or 18(14) to a disposition of a particular property,
(a) the transferor’s loss, if any, from the disposition is deemed to be nil, and
(b) the amount of the transferor’s loss, if any, from the disposition (determined without reference to 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,
(i) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns
(A) the substituted property, or
(B) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,
(ii) at which the 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,
(iii) that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation, or
(iv) at which the winding-up of the transferor begins (other than a winding-up to which subsection 88(1) applies), where the transferor is a corporation,
and 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).
Marginal note:Deemed identical property
(16) For 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Definitions
18.1 (1) The definitions in this subsection apply in this section.
“matchable expenditure”
« dépense à rattacher »
“matchable expenditure” of a taxpayer means the amount of an expenditure that is made by the taxpayer to
(a) acquire a right to receive production,
(b) 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, or
(c) preserve 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.
“right to receive production”
« droit aux produits »
“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.
“tax benefit”
« avantage fiscal »
“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.
“tax shelter”
« abri fiscal »
“tax shelter” means a property that would be a tax shelter (as defined in subsection 237.1(1)) if
(a) the 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; and
(b) subsections 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.
“taxpayer”
« contribuable »
“taxpayer” includes a partnership.
Marginal note:Limitation on the deductibility of matchable expenditure
(2) In 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).
Marginal note:Deduction of matchable expenditure
(3) If 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.
Marginal note:Amount of deduction
(4) For 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 of
(a) the total of
(i) the lesser of
(A) 1/5 of the matchable expenditure, and
(B) the amount determined by the formula
(A/B) × C
where
- A
- is 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,
- B
- is 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, and
- C
- is the amount of the matchable expenditure, and
(ii) the 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,
(b) the total of
(i) all 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, and
(ii) the 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, and
(c) the amount, if any, by which
(i) the 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 year
exceeds
(ii) the 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.
Marginal note:Special rules
(5) For the purpose of this section,
(a) 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;
(b) 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;
(c) 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; and
(d) where 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.
Marginal note:Proceeds of disposition considered income
(6) Where 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.
Marginal note:Arm’s length disposition
(7) Subject 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.
Marginal note:Non-arm’s length disposition
(8) Subsection 18.1(10) applies where
(a) a 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);
(b) 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; and
(c) at 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.
Marginal note:Special case
(9) Subsection 18.1(10) applies where
(a) a 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); and
(b) during 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).
Marginal note:Amount of deduction if non-arm’s length disposition
(10) Where 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,
(a) 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; and
(b) the 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,
(i) 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,
(ii) that is immediately before control of the taxpayer is acquired by a person or group of persons, if the taxpayer is a corporation,
(iii) 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,
(iv) 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 owns
(A) the substituted property, or
(B) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period began, or
(v) if 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).
Marginal note:Partnerships
(11) For 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).
Marginal note:Identical property
(12) For 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.
Marginal note:Application of section 143.2
(13) For 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).
Marginal note:Debt obligations
(14) Where 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,
(a) 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; and
(b) notwithstanding 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.
Marginal note:Non-applicability of section 18.1
(15) Subject to subsections (1) and (14), this section does not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if
(a) no portion of the expenditure can reasonably be considered to have been paid to another taxpayer, or to a person with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer and
(i) the taxpayer’s expenditure cannot reasonably be considered to relate to a tax shelter or tax shelter investment (within the meaning assigned by subsection 143.2(1)) and none of the main purposes for making the expenditure is that the taxpayer, or a person with whom the taxpayer does not deal at arm’s length, obtain a tax benefit, or
(ii) before the end of the taxation year in which the 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 such an 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 exceeds 80% of the expenditure; or
(b) the 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 (in this paragraph referred to as the “reinsurer”) and both the reinsurer and the person to whom the expenditure is made or is to be made are insurers subject to the supervision of
(i) the Superintendent of Financial Institutions, in the case of an insurer that is required by law to report to the Superintendent of Financial Institutions, or
(ii) in any other case, the Superintendent of Insurance or other similar officer or authority of the province under whose laws the insurer is incorporated.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1998, c. 19, s. 80;
- 2001, c. 17, ss. 10, 202(E).
18.2 [Repealed, 2009, c. 2, s. 6]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 2007, c. 35, s. 12;
- 2009, c. 2, s. 6.
Marginal note:Limitation re advertising expense — newspapers
19. (1) In 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 unless
(a) the issue is a Canadian issue of a Canadian newspaper; or
(b) the issue is an issue of a newspaper that would be a Canadian issue of a Canadian newspaper except that
(i) its 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, or
(ii) it 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.
Marginal note:Where s. (1) does not apply
(3) Subsection 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.
Marginal note:Definitions
(5) In this section,
“Canadian issue”
« édition canadienne »
“Canadian issue” of a newspaper means an issue, including a special issue,
(a) the type of which, other than the type for advertisements or features, is set in Canada,
(b) all of which, exclusive of any comics supplement, is printed in Canada,
(c) that is edited in Canada by individuals resident in Canada, and
(d) that is published in Canada;
“Canadian newspaper”
« journal canadien »
“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) a Canadian citizen,
(b) a partnership
(i) in which interests representing in value at least 3/4 of the total value of the partnership property are beneficially owned by, and
(ii) at 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,
(c) an association or society of which at least 3/4 of the members are Canadian citizens,
(d) Her Majesty in right of Canada or a province, or a municipality in Canada, or
(e) a corporation
(i) that is incorporated under the laws of Canada or a province,
(ii) of which the chairperson or other presiding officer and at least 3/4 of the directors or other similar officers are Canadian citizens, and
(iii) that, if it is a corporation having share capital, is
(A) a 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, or
(B) a 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 that
(C) the fair market value of the shares of the capital stock of the holding corporation owned at that time by the shareholder
is of
(D) the 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 that
(E) the member’s share of the income or loss of the partnership from any source for its fiscal period that includes that time
is of
(F) the 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;
- “substantially the same”
“substantially the same”[Repealed, 2001, c. 17, s. 11(2)]
“United States”
« États-Unis »
“United States” means
(a) the United States of America, but does not include Puerto Rico, the Virgin Islands, Guam or any other United States possession or territory, and
(b) any 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.
Marginal note:Interpretation
(5.1) In this section, each of the following is deemed to be a Canadian citizen:
(a) 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;
(b) a trust described in paragraph 149(1)(r) or (x), the annuitant in respect of which is a Canadian citizen;
(c) 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;
(d) 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); and
(e) a person, association or society described in paragraph (c) or (d) of the definition “Canadian newspaper” in subsection (5).
Marginal note:Trust property
(6) Where 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.
Marginal note:Grace period
(7) A 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.
Marginal note:Non-Canadian newspaper
(8) Where 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. 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.
Marginal note:Definitions
19.01 (1) The definitions in this subsection apply in this section.
“advertisement directed at the Canadian market”
« annonce destinée au marché canadien »
“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.
“original editorial content”
« contenu rédactionnel original »
“original editorial content” in respect of an issue of a periodical means non-advertising content
(a) the 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; or
(b) that is created for the Canadian market and has not been published in any other edition of that issue of the periodical published outside Canada.
“periodical”
« périodique »
“periodical” has the meaning assigned by section 2 of the Foreign Publishers Advertising Services Act.
Marginal note:Limitation re advertising expenses — periodicals
(2) Subject 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.
Marginal note:100% deduction
(3) A 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 if
(a) the original editorial content in the issue is 80% or more of the total non-advertising content in the issue; and
(b) the outlay or expense would, but for subsection (2), be deductible in computing the taxpayer’s income.
Marginal note:50% deduction
(4) A 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 if
(a) the original editorial content in the issue is less than 80% of the total non-advertising content in the issue; and
(b) the outlay or expense would, but for subsection (2), be deductible in computing the taxpayer’s income.
Marginal note:Application
(5) For the purposes of subsections (3) and (4),
(a) 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; and
(b) the Minister may obtain the advice of the Department of Canadian Heritage for the purpose of
(i) determining the result obtained under paragraph (a), and
(ii) interpreting any expression defined in this section that is defined in the Foreign Publishers Advertising Services Act.
Marginal note:Editions of issues
(6) For the purposes of this section,
(a) where an issue of a periodical is published in several versions, each version is an edition of that issue; and
(b) where 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. 2001, c. 17, s. 12.
Marginal note:Limitation re advertising expense on broadcasting undertaking
19.1 (1) Subject 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.
Marginal note:Exception
(2) In 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 to
(a) a written agreement entered into on or before January 23, 1975; or
(b) a 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.
Marginal note:Definitions
(4) In this section,
“foreign broadcasting undertaking”
« entreprise étrangère de radiodiffusion »
“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;
“network”
« réseau »
“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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1974-75-76, c. 106, s. 3;
- 1977-78, c. 1, s. 13;
- 1985, c. 45, s. 126(F).
Marginal note:Deductions permitted in computing income from business or property
20. (1) Notwithstanding 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 thereto
Marginal note:Capital cost of property
(a) such 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;
Marginal note:Cumulative eligible capital amount
(b) such amount as the taxpayer claims in respect of a business, not exceeding 7% of the taxpayer’s cumulative eligible capital in respect of the business at the end of the year except that, where the year is less than 12 months, the amount allowed as a deduction under this paragraph shall not exceed that proportion of the maximum amount otherwise allowable that the number of days in the taxation year is of 365;
Marginal note:Interest
(c) an 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 on
(i) borrowed 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),
(ii) 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),
(iii) an amount paid to the taxpayer under
(A) an 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, or
(B) the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, or
(iv) borrowed 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;
Marginal note:Compound interest
(d) an 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;
Marginal note:Expenses re financing
(e) such 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 year
(i) in 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,
(ii) 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),
(ii.1) 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), or
(ii.2) in 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 is
(A) in respect of a borrowing described in subparagraph 20(1)(e)(ii), or
(B) in 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 of
(iii) that proportion of 20% of the expense that the number of days in the year is of 365 and
(iv) the 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,
(iv.1) “excluded amount” means
(A) an amount paid or payable as or on account of the principal amount of a debt obligation or interest in respect of a debt obligation,
(B) an amount that is contingent or dependent on the use of, or production from, property, or
(C) an 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,
(v) 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), and
(vi) where a partnership has ceased to exist at any particular time in a fiscal period of the partnership,
(A) no amount may be deducted by the partnership under this paragraph in computing its income for the period, and
(B) there may be deducted for a taxation year ending at or after that time by any person or partnership that was a member of the partnership immediately before that 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 immediately before that time is of the fair market value of all the interests in the partnership immediately before that time;
Marginal note:Annual fees, etc.
(e.1) 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 taxpayer
(i) for 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),
(ii) 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), or
(iii) for 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 is
(A) in respect of a borrowing described in subparagraph 20(1)(e.1)(i), or
(B) in 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.
Marginal note:Premiums on life insurance used as collateral
(e.2) such portion of the lesser of
(i) the premiums payable by the taxpayer under a life insurance policy (other than an annuity contract) in respect of the year, where
(A) an interest in the policy is assigned to a restricted financial institution in the course of a borrowing from the institution,
(B) 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, and
(C) the assignment referred to in clause 20(1)(e.2)(i)(A) is required by the institution as collateral for the borrowing
and
(ii) the net cost of pure insurance in respect of the year, as determined in accordance with the regulations, in respect of the interest in the policy referred to in clause 20(1)(e.2)(i)(A),
as 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;
Marginal note:Discount on certain obligations
(f) an 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,
(i) 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 on
(A) the principal amount of the obligation, if no amount is payable on account of the principal amount before the maturity of the obligation, or
(B) the 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, and
(ii) in 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;
Marginal note:Share transfer and other fees
(g) where the taxpayer is a corporation,
(i) 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,
(ii) 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, and
(iii) an 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;
Marginal note:Repayment of loan by shareholder
(j) such 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;
Marginal note:Doubtful or impaired debts
(l) a reserve determined as the total of
(i) a 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, and
(ii) where 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 are
(A) impaired loans or lending assets that are specified debt obligations (as defined in that subsection) of the taxpayer, or
(B) impaired 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 money
equal to the total of
(C) the percentage (not exceeding 100%) that the taxpayer claims of the prescribed reserve amount for the taxpayer for the year, and
(D) in 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 of
(I) the 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, and
(II) the amount determined by the formula
0.9M - N
where
- M
- is 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, and
- N
- is the total of all amounts each of which is the specified reserve adjustment for a loan (other than an income bond, an income debenture, a small business bond or small business development bond) for the year or a preceding taxation year;
Marginal note:Reserve for guarantees, etc.
(l.1) 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 of
(i) a 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, and
(ii) 90% 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;
Marginal note:Reserve in respect of certain goods and services
(m) subject 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 of
(i) goods that it is reasonably anticipated will have to be delivered after the end of the year,
(ii) services that it is reasonably anticipated will have to be rendered after the end of the year,
(iii) periods for which rent or other amounts for the possession or use of land or chattels have been paid in advance, or
(iv) repayments 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;
Marginal note:Manufacturer’s warranty reserve
(m.1) where 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 warranty
(i) entered into by the taxpayer with a person with whom the taxpayer was dealing at arm’s length, and
(ii) under 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;
Marginal note:Repayment of amount previously included in income
(m.2) a 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;
Marginal note:Reserve for unpaid amounts
(n) where 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 property, all or part of the amount was, at the time of the sale, not due until at least 2 years after that time, a reasonable amount as a reserve in respect of such part of the amount as can reasonably be regarded as a portion of the profit from the sale;
Marginal note:Reserve for quadrennial survey
(o) such 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;
Marginal note:Bad debts
(p) the total of
(i) all 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, and
(ii) all 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,
(A) 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, or
(B) where 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;
Marginal note:Employer’s contributions to registered pension plan
(q) such amount in respect of employer contributions to registered pension plans as is permitted by subsection 147.2(1);
Marginal note:Employer’s contributions under retirement compensation arrangement
(r) amounts 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;
Marginal note:Employer’s contributions under employee life and health trust
(s) such 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);
Marginal note:Patronage dividends
(u) such amounts in respect of payments made by the taxpayer pursuant to allocations in proportion to patronage as are permitted by section 135;
Marginal note:Mining taxes
(v) such amount as is allowed by regulation in respect of taxes on income for the year from mining operations;
(v.1) [Repealed, 2003, c. 28, s. 3(1)]
Marginal note:Employer’s contributions under profit sharing plan
(w) an 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;
Marginal note:Employer’s contributions under registered supplementary unemployment benefit plan
(x) an amount paid by the taxpayer to a trustee under a registered supplementary unemployment benefit plan as permitted by section 145;
Marginal note:Employer’s contributions under deferred profit sharing plan
(y) an amount paid by the taxpayer to a trustee under a deferred profit sharing plan as permitted by subsection 147(8);
Marginal note:Cancellation of lease
(z) the 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 that
(i) the 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 year
is of
(ii) the 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;
Marginal note:Idem
(z.1) 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, in any case where
(i) the 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, and
(ii) no 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;
Marginal note:Landscaping of grounds
(aa) an 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;
Marginal note:Fees paid to investment counsel
(bb) an amount other than a commission paid by the taxpayer in the year to a person
(i) for advice as to the advisability of purchasing or selling a specific share or security of the taxpayer, or
(ii) for services in respect of the administration or management of shares or securities of the taxpayer,
if that person’s principal business
(iii) is advising others as to the advisability of purchasing or selling specific shares or securities, or
(iv) includes the provision of services in respect of the administration or management of shares or securities;
Marginal note:Expenses of representation
(cc) an 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,
(i) to the government of a country, province or state or to a municipal or public body performing a function of government in Canada, or
(ii) to 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 trade-mark relating to the business carried on by the taxpayer;
Marginal note:Investigation of site
(dd) an 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;
Marginal note:Utilities service connection
(ee) an 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 paid
(i) to acquire property of the taxpayer, or
(ii) as consideration for the goods or services for the supply of which the service connection was undertaken or made;
Marginal note:Payments by farmers
(ff) an 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;
(gg) [Repealed, 1994, c. 7, Sch. VIII, s. 157(1)]
Marginal note:Repayments of inducements, etc.
(hh) an amount repaid by the taxpayer in the year pursuant to a legal obligation to repay all or part of a particular amount
(i) included under paragraph 12(1)(x) in computing the taxpayer’s income for the year or a preceding taxation year, or
(ii) that is, by reason of subparagraph 12(1)(x)(vi) or subsection 12(2.2), not included under paragraph 12(1)(x) in computing the taxpayer’s income for the year or a preceding taxation year, where the particular amount relates to an outlay or expense (other than an outlay or expense that is in respect of the cost of property of the taxpayer or that is or would be, if amounts deductible by the taxpayer were not limited by reason of paragraph 66(4)(b), subsection 66.1(2), subparagraph 66.2(2)(a)(ii), the words “30% of” in clause 66.21(4)(a)(ii)(B), clause 66.21(4)(a)(ii)(C) or (D) or subparagraph 66.4(2)(a)(ii), deductible under section 66, 66.1, 66.2, 66.21 or 66.4) that would, if the particular amount had not been received, have been deductible in computing the taxpayer’s income for the year or a preceding taxation year;
Marginal note:Repayment of obligation
(hh.1) 3/4 of any amount (other than an amount to which paragraph 14(10)(b) applies in respect of the taxpayer) repaid by the taxpayer in the year under a legal obligation to repay all or part of an amount to which paragraph 14(10)(c) applies in respect of the taxpayer;
Marginal note:Inventory adjustment
(ii) the amount required by paragraph 12(1)(r) to be included in computing the taxpayer’s income for the immediately preceding taxation year;
Marginal note:Reinsurance commission
(jj) the amount required by paragraph 12(1)(s) to be included in computing the taxpayer’s income for the immediately preceding taxation year;
Marginal note:Exploration and development grants
(kk) the amount of any assistance or benefit received by the taxpayer in the year as a deduction from or reimbursement of an expense that is a tax (other than the goods and services tax) or royalty to the extent that
(i) the tax or royalty is, by reason of the receipt of the amount by the taxpayer, not deductible in computing the taxpayer’s income for a taxation year, and
(ii) the deduction or reimbursement was included by the taxpayer in the amount determined for J in the 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);
Marginal note:Repayment of interest
(ll) such part of any amount payable by the taxpayer because of a provision of this Act, or of an Act of a province that imposes a tax similar to the tax imposed under this Act, as was paid in the year and as can reasonably be considered to be a repayment of interest that was included in computing the taxpayer’s income for the year or a preceding taxation year;
Marginal note:Cost of substances injected in reservoir
(mm) the portion claimed by the taxpayer of an amount that is an outlay or expense made or incurred by the taxpayer before the end of the year that is a cost to the taxpayer of any substance injected before that time into a natural reservoir to assist in the recovery of petroleum, natural gas or related hydrocarbons to the extent that that portion was not
(i) otherwise deducted in computing the taxpayer’s income for the year, or
(ii) deducted in computing the taxpayer’s income for any preceding taxation year,
except that where the year is less than 51 weeks, the amount that may be claimed under this paragraph by the taxpayer for the year shall not exceed the greater of
(iii) that proportion of the maximum amount that may otherwise be claimed under this paragraph by the taxpayer for the year that the number of days in the year is of 365, and
(iv) the amount of such outlay or expense that was made or incurred by the taxpayer in the year and not otherwise deducted in computing the taxpayer’s income for the year;
Marginal note:Part XII.6 tax
(nn) the tax, if any, under Part XII.6 paid in the year or payable in respect of the year by the taxpayer (depending on the method regularly followed by the taxpayer in computing the taxpayer’s income);
Marginal note:Recapture of investment tax credits — child care space amount
(nn.1) total of all amounts (other than an amount in respect of a disposition of a depreciable property) added because of subsection 127(27.1) or (28.1) to the taxpayer’s tax otherwise payable under this Part for any preceding taxation year;
Marginal note:Salary deferral arrangement
(oo) any deferred amount under a salary deferral arrangement in respect of another person to the extent that it was
(i) included under paragraph 6(1)(a) as a benefit in computing the income of the other person for the taxation year of the other person that ends in the taxpayer’s taxation year, and
(ii) in respect of services rendered to the taxpayer;
Marginal note:Idem
(pp) any amount under a salary deferral arrangement in respect of another person (other than an arrangement established primarily for the benefit of one or more non-resident employees in respect of services to be rendered outside Canada) to the extent that it was
(i) included under paragraph 6(1)(i) in computing the income of the other person for the taxation year of the other person that ends in the taxpayer’s taxation year, and
(ii) in respect of services rendered to the taxpayer;
Marginal note:Disability-related modifications to buildings
(qq) an amount paid by the taxpayer in the year for prescribed renovations or alterations to a building used by the taxpayer primarily for the purpose of gaining or producing income from the building or from a business that are made to enable individuals who have a mobility impairment to gain access to the building or to be mobile within it;
Marginal note:Disability-related equipment
(rr) an amount paid by the taxpayer in the year for any prescribed disability-specific device or equipment;
Marginal note:Qualifying environmental trusts
(ss) a contribution made in the year by the taxpayer to a qualifying environmental trust under which the taxpayer is a beneficiary;
Marginal note:Acquisition of interests in qualifying environmental trusts
(tt) the consideration paid by the taxpayer in the year for the acquisition from another person or partnership of all or part of the taxpayer’s interest as a beneficiary under a qualifying environmental trust, other than consideration that is the assumption of a reclamation obligation in respect of the trust;
Marginal note:Debt forgiveness
(uu) any amount deducted in computing the taxpayer’s income for the year because of paragraph 80(15)(a) or subsection 80.01(10);
Marginal note:Countervailing or anti-dumping duty
(vv) an amount paid in the year by the taxpayer as or on account of an existing or proposed countervailing or anti-dumping duty in respect of property (other than depreciable property); and
Marginal note:Split income
(ww) where the taxpayer is a specified individual in relation to the year, the individual’s split income for the year.
Marginal note:Application of s. 13(21)
(1.1) The definitions in subsection 13(21) apply to any regulations made under paragraph 20(1)(a).
Marginal note:Application of s. 12.2(11)
(1.2) The definitions in subsection 12.2(11) apply to paragraph 20(1)(c).
Marginal note:Borrowed money
(2) For the purposes of paragraph 20(1)(c), where a person has borrowed money in consideration of a promise by the person to pay a larger amount and to pay interest on the larger amount,
(a) the larger amount shall be deemed to be the amount borrowed; and
(b) where the amount actually borrowed has been used in whole or in part for the purpose of earning income from a business or property, the proportion of the larger amount that the amount actually so used is of the amount actually borrowed shall be deemed to be the amount so used.
Marginal note:Limitation of expression “interest”
(2.1) For the purposes of paragraphs 20(1)(c) and 20(1)(d), “interest” does not include an amount that is paid after the taxpayer’s 1977 taxation year or payable in respect of a period after the taxpayer’s 1977 taxation year, depending on the method regularly followed by the taxpayer in computing the taxpayer’s income, in respect of interest on a policy loan made by an insurer except to the extent that the amount of that interest is verified by the insurer in prescribed form and within the prescribed time to be
(a) interest paid in the year on that loan; and
(b) interest (other than interest that would, but for paragraph 20(2.2)(b), be interest on money borrowed before 1978 to acquire a life insurance policy or on an amount payable for property acquired before 1978 that is an interest in a life insurance policy) that is not added to the adjusted cost basis (within the meaning given that expression in subsection 148(9)) to the taxpayer of the taxpayer’s interest in the policy.
Marginal note:Limitation of expression “life insurance policy”
(2.2) For the purposes of paragraphs 20(1)(c) and 20(1)(d), a “life insurance policy” does not include a policy
(a) that is or is issued pursuant to a registered pension plan, a registered retirement savings plan, an income-averaging annuity contract or a deferred profit sharing plan;
(b) that was an annuity contract issued before 1978 that provided for annuity payments to commence not later than the day on which the policyholder attains 75 years of age; or
(c) that is an annuity contract all of the insurer’s reserves for which vary in amount depending on the fair market value of a specified group of properties.
Marginal note:Sectoral reserve
(2.3) For the purpose of clause 20(1)(l)(ii)(D), a sectoral reserve is a reserve or an allowance for impairment for a loan that is determined on a sector-by-sector basis (including a geographic sector, an industrial sector or a sector of any other nature) and not on a property-by-property basis.
Marginal note:Specified Percentage
(2.4) For the purpose of clause 20(1)(l)(ii)(D), a taxpayer’s specified percentage for a taxation year is
(a) where the taxpayer has a prescribed reserve amount for the year, the percentage that is the percentage of the prescribed reserve amount of the taxpayer for the year claimed by the taxpayer under clause 20(1)(l)(ii)(C) for the year, and
(b) in any other case, 100%.
Marginal note:Borrowed money
(3) For greater certainty, if a taxpayer uses borrowed money to repay money previously borrowed, or to pay an amount payable for property described in subparagraph (1)(c)(ii) previously acquired (which previously borrowed money or amount payable in respect of previously acquired property is, in this subsection, referred to as the “previous indebtedness”), subject to subsection 20.1(6), for the purposes of paragraphs (1)(c), (e) and (e.1), subsections 20.1(1) and (2), section 21 and subparagraph 95(2)(a)(ii), and for the purpose of paragraph 20(1)(k) of 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.
Marginal note:Bad debts from dispositions of depreciable property
(4) Where 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 or a passenger vehicle having a cost to the taxpayer in excess of $20,000 or such other amount as may be prescribed) of the taxpayer of a prescribed class is established by the taxpayer to have become a bad debt in a taxation year, there may be deducted in computing the taxpayer’s income for the year the lesser of
(a) the amount so owing to the taxpayer, and
(b) the amount, if any, by which the capital cost to the taxpayer of that property exceeds the total of the amounts, if any, realized by the taxpayer on account of the proceeds of disposition.
Marginal note:Idem
(4.1) Where an amount that is owing to a taxpayer as or on account of the proceeds of disposition of a timber resource property of the taxpayer is established by the taxpayer to have become a bad debt in a taxation year, the amount so owing to the taxpayer may be deducted in computing the taxpayer’s income for the year.
Marginal note:Bad debts re eligible capital property
(4.2) Where, in respect of one or more dispositions of eligible capital property by a taxpayer, an amount that is described in paragraph (a) of the description of E in the definition “cumulative eligible capital” in subsection 14(5) in respect of the taxpayer is established by the taxpayer to have become a bad debt in a taxation year, there shall be deducted in computing the taxpayer’s income for the year the amount determined by the formula
(A + B) - (C + D + E + F + G + H)
where
- A
- is the lesser of
(a) 1/2 of the total of all amounts each of which is such an amount that was so established to have become a bad debt in the year or a preceding taxation year, and
(b) the amount that is
(i) where the year ended after February 27, 2000, the amount, if any, that would be the total of all amounts determined by the formula in paragraph 14(1)(b) (if that formula were read without reference to the description of D) for the year, or for a preceding taxation year that ended after February 27, 2000, and
(ii) where the year ended before February 28, 2000, nil;
- B
- is the amount, if any, by which
(a) 3/4 of the total of all amounts each of which is such an amount that was so established to be a bad debt in the year or a preceding taxation year
exceeds the total of
(b) 3/2 of the amount by which
(i) the value of A
exceeds
(ii) the amount included in the value of A because of subparagraph (b)(i) of the description of A in respect of taxation years that ended after February 27, 2000 and before October 18, 2000, and
(c) 9/8 of the amount included in the value of A because of subparagraph (b)(i) of the description of A in respect of taxation years that ended after February 27, 2000 and before October 18, 2000;
- C
- is the total of all amounts each of which is an amount determined under subsection 14(1) or (1.1) for the year, or a preceding taxation year, that ends after October 17, 2000 and in respect of which a deduction can reasonably be considered to have been claimed under section 110.6 by the taxpayer;
- D
- is the total of all amounts each of which is an amount determined under subsection 14(1) or (1.1) for the year, or a preceding taxation year, that ended after February 27, 2000 and before October 18, 2000 and in respect of which a deduction can reasonably be considered to have been claimed under section 110.6 by the taxpayer;
- E
- is the total of all amounts each of which is an amount determined under subsection 14(1) or (1.1) for a preceding taxation year that ended before February 28, 2000 and in respect of which a deduction can reasonably be considered to have been claimed under section 110.6 by the taxpayer;
- F
- is the total of
(a) 2/3 of the total of all amounts each of which is the value determined in respect of the taxpayer for D in the formula in paragraph 14(1)(b) for the year, or a preceding taxation year, that ends after October 17, 2000, and
(b) 8/9 of the total of all amounts each of which is the value determined in respect of the taxpayer for D in the formula in paragraph 14(1)(b) for the year, or a preceding taxation year, that ended after February 27, 2000 and before October 18, 2000;
- G
- is the total of all amounts each of which is the value determined in respect of the taxpayer for D in the formula in subparagraph 14(1)(a)(v) (as that subparagraph applied for taxation years that ended before February 28, 2000) for a preceding taxation year; and
- H
- is the total of all amounts deducted by the taxpayer under this subsection for preceding taxation years.
Marginal note:Deemed allowable capital loss
(4.3) Where, in respect of one or more dispositions of eligible capital property by a taxpayer, an amount that is described in paragraph (a) of the description of E in the definition “cumulative eligible capital” in subsection 14(5) in respect of the taxpayer is established by the taxpayer to have become a bad debt in a taxation year, the taxpayer is deemed to have an allowable capital loss from a disposition of capital property in the year equal to the lesser of
(a) the total of the value determined for A and 2/3 of the value determined for B in the formula in subsection (4.2) in respect of the taxpayer for the year; and
(b) the total of all amounts each of which is
(i) the value determined for C or paragraph (a) of the description of F in the formula in subsection (4.2) in respect of the taxpayer for the year,
(ii) 3/4 of the value determined for D or paragraph (b) of the description of F in the formula in subsection (4.2) in respect of the taxpayer for the year, or
(iii) 2/3 of the value determined for E or G in the formula in subsection (4.2) in respect of the taxpayer for the year.
Marginal note:Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition
(5) Where depreciable property, other than a timber resource property, of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for the sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year an amount equal to the lesser of
(a) the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim, and
(b) the amount determined under paragraph 20(5)(a) less the amount, if any, by which the proceeds of disposition of the depreciable property exceed the capital cost to the taxpayer of that property.
Marginal note:Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition
(5.1) Where a timber resource property of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm’s length, and the proceeds of disposition include an agreement for sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm’s length, there may be deducted in computing the income of the taxpayer for the subsequent year the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim.
Marginal note:Special reserves
(6) Where an amount is deductible in computing income for a taxation year under paragraph 20(1)(m) as a reserve in respect of
(a) articles of food or drink that it is reasonably anticipated will have to be delivered after the end of the year, or
(b) transportation that it is reasonably anticipated will have to be provided after the end of the year,
there shall be substituted for the amount determined under that paragraph an amount not exceeding the total of amounts included in computing the taxpayer’s income from the business for the year that were received or receivable (depending on the method regularly followed by the taxpayer in computing the taxpayer’s profit) in the year in respect of
(c) articles of food or drink not delivered before the end of the year, or
(d) transportation not provided before the end of the year, as the case may be.
Marginal note:Where para. (1)(m) does not apply
(7) Paragraph 20(1)(m) does not apply to allow a deduction
(a) as a reserve in respect of guarantees, indemnities or warranties;
(b) in computing the income of a taxpayer for a taxation year from a business in any case where the taxpayer’s income for the year from that business is computed in accordance with the method authorized by subsection 28(1); or
(c) as a reserve in respect of insurance, except that in computing an insurer’s income for a taxation year from an insurance business, other than a life insurance business, carried on by it, there may be deducted as a policy reserve any amount that the insurer claims not exceeding the amount prescribed in respect of the insurer for the year.
Marginal note:No deduction in respect of property in certain circumstances
(8) Paragraph 20(1)(n) does not apply to allow a deduction in computing the income of a taxpayer for a taxation year from a business in respect of a property sold in the course of the business if
(a) the taxpayer, at the end of the year or at any time in the immediately following taxation year,
(i) was exempt from tax under any provision of this Part, or
(ii) was not resident in Canada and did not carry on the business in Canada; or
(b) the sale occurred more than 36 months before the end of the year.
Marginal note:Application of para. (1)(cc)
(9) In lieu of making any deduction of an amount permitted by paragraph 20(1)(cc) in computing a taxpayer’s income for a taxation year from a business, the taxpayer may, if the taxpayer so elects in prescribed manner, make a deduction of 1/10 of that amount in computing the taxpayer’s income for that taxation year and a like deduction in computing the taxpayer’s income for each of the 9 immediately following taxation years.
Marginal note:Convention expenses
(10) Notwithstanding paragraph 18(1)(b), there may be deducted in computing a taxpayer’s income for a taxation year from a business an amount paid by the taxpayer in the year as or on account of expenses incurred by the taxpayer in attending, in connection with the business, not more than two conventions held during the year by a business or professional organization at a location that may reasonably be regarded as consistent with the territorial scope of that organization.
Marginal note:Foreign taxes on income from property exceeding 15%
(11) In computing the income of an individual from a property other than real property for a taxation year after 1975 that is income from a source outside Canada, there may be deducted the amount, if any, by which,
(a) such part of any income or profits tax paid by the taxpayer to the government of a country other than Canada for the year as may reasonably be regarded as having been paid in respect of an amount that has been included in computing the taxpayer’s income for the year from the property,
exceeds
(b) 15% of the amount referred to in paragraph 20(11)(a).
Marginal note:Foreign non-business income tax
(12) In computing a taxpayer’s income for a taxation year from a business or property, there may be deducted such amount as the taxpayer claims not exceeding 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 such tax, or part thereof, that can reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.
Marginal note:Foreign tax where no economic profit
(12.1) In computing a taxpayer’s income for a taxation year from a business, there may be deducted the amount that the taxpayer claims not exceeding the lesser of
(a) the amount of foreign tax (within the meaning assigned by subsection 126(4.1)) that
(i) is in respect of a property used in the business for a period of ownership by the taxpayer or in respect of a related transaction (as defined in subsection 126(7)),
(ii) is paid by the taxpayer for the year,
(iii) is, because of subsection 126(4.1), not included in computing the taxpayer’s business-income tax or non-business-income tax, and
(iv) where the taxpayer is a corporation, is not an amount that can reasonably be regarded as having been paid in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer, and
(b) the portion of the taxpayer’s income for the year from the business that is attributable to the property for the period or to a related transaction (as defined in subsection 126(7)).
Marginal note:Dividend on share from foreign affiliate of taxpayer
(13) In computing the income for a taxation year of a taxpayer resident in Canada, there may be deducted such amount in respect of a dividend received by the taxpayer in the year on a share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer as is provided by subdivision i.
Marginal note:Accrued bond interest
(14) Where, by virtue of an assignment or other transfer of a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, the transferee has become entitled to an amount of interest that accrued on the debt obligation for a period commencing before the time of transfer and ending at that time that is not payable until after that time, that amount
(a) shall be included as interest in computing the transferor’s income for the transferor’s taxation year in which the transfer occurred, except to the extent that it was otherwise included in computing the transferor’s income for the year or a preceding taxation year; and
(b) may be deducted in computing the transferee’s income for a taxation year to the extent that the amount was included as interest in computing the transferee’s income for the year.
Marginal note:Interest on debt obligation
(14.1) Where a person who has issued a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, is obligated to pay an amount that is stipulated to be interest on that debt obligation in respect of a period before its issue (in this subsection referred to as the “unearned interest amount”) and it is reasonable to consider that the person to whom the debt obligation was issued paid to the issuer consideration for the debt obligation that included an amount in respect of the unearned interest amount,
(a) for the purposes of subsection 20(14) and section 12, the issue of the debt obligation shall be deemed to be an assignment of the debt obligation from the issuer, as transferor, to the person to whom the obligation was issued, as transferee, and an amount equal to the unearned interest amount shall be deemed to be interest that accrued on the obligation for a period commencing before the issue and ending at the time of issue; and
(b) notwithstanding paragraph 20(14.1)(a) or any other provision of this Act, no amount that can reasonably be considered to be an amount in respect of the unearned interest amount shall be deducted or included in computing the income of the issuer.
(15) [Repealed, 2003, c. 28, s. 3(2)]
Marginal note:Terminal loss
(16) Notwithstanding paragraphs 18(1)(a), 18(1)(b) and 18(1)(h), where at the end of a taxation year,
(a) the total of all amounts used to determine A to D 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 J in that definition in respect of that property, and
(b) the taxpayer no longer owns any property of that class,
in computing the taxpayer’s income for the year
(c) there shall be deducted the amount of the excess determined under paragraph 20(16)(a), and
(d) no amount shall be deducted for the year under paragraph 20(1)(a) in respect of property of that class.
Marginal note:Idem
(16.1) Subsection 20(16) does not apply in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or such other amount as is prescribed.
Marginal note:Reference to “taxation year” and “year” of individual
(16.2) Where a taxpayer is an individual and the taxpayer’s income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, if depreciable property acquired for the purpose of gaining or producing income from the business has been disposed of, each reference in subsections 20(16) and 20(16.1) to a “taxation year” and “year” shall, for greater certainty, be read as a reference to a “fiscal period”.
Marginal note:Disposition after ceasing business
(16.3) Where a taxpayer, after ceasing to carry on a business, has disposed of depreciable property of the taxpayer of a prescribed class that was acquired by the taxpayer for the purpose of gaining or producing income from the business and that was not subsequently used by the taxpayer for some other purpose, in applying subsection 20(16) or 20(16.1), each reference in that subsection to a “taxation year” and “year” shall, notwithstanding anything in subsection 20(16.2), not be read as a reference to a “fiscal period”.
Marginal note:Reduction of inventory allowance deduction
(17) Notwithstanding paragraph 20(1)(gg) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, the deduction allowed under that paragraph to a taxpayer for a taxation year shall be reduced by 3% of that proportion of the lesser of
(a) the cost amount to the taxpayer of the taxpayer’s qualifying inventory that was disposed of during the year by the taxpayer in a specified transaction to a person with whom the taxpayer was not dealing at arm’s length, and
(b) the cost amount to the taxpayer of the taxpayer’s qualifying inventory at the beginning of the year,
that the number of days in the year and after the date of disposition is of 365.
Marginal note:Definitions
(18) For the purposes of this subsection and subsection 20(17),
“qualifying inventory”
« biens à porter à l’inventaire admissibles »
“qualifying inventory” means tangible property described in subparagraphs 20(1)(gg)(i) and (ii) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, other than real property or an interest therein or property of a taxpayer that becomes property of a new corporation by virtue of an amalgamation or merger;
“specified transaction”
« opération désignée »
“specified transaction” means
(a) a distribution by a corporation of qualifying inventory on or in the course of its winding-up,
(b) a disposition by a taxpayer of all or a substantial part of the taxpayer’s qualifying inventory, or
(c) a disposition at a particular time of qualifying inventory by a taxpayer one of the principal purposes of which was to permit a person with whom the taxpayer does not deal at arm’s length to obtain a deduction in respect thereof under paragraph 20(1)(gg) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, for that person’s first taxation year commencing after the particular time,
but does not include any such distribution or disposition by a taxpayer to another person during a taxation year of that other person that ends at least 11 months after the commencement of the taxation year of the taxpayer during which the distribution or disposition occurs.
Marginal note:Annuity contract
(19) Where a taxpayer has in a particular taxation year received a payment under an annuity contract in respect of which an amount was by virtue of subsection 12(3) included in computing the taxpayer’s income for a taxation year commencing before 1983, there may be deducted in computing the taxpayer’s income for the particular year such amount, if any, as is allowed by regulation.
Marginal note:Life insurance policy
(20) Where in a taxation year a taxpayer disposes of an interest in a life insurance policy that is not an annuity contract (otherwise than as a consequence of a death) or of an interest in an annuity contract (other than a prescribed annuity contract), there may be deducted in computing the taxpayer’s income for the year an amount equal to the lesser of
(a) the total of all amounts in respect of the interest in the policy that were included under section 12.2 of this Act or paragraph 56(1)(d.1) of 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, and
(b) the amount, if any, by which the adjusted cost basis (within the meaning assigned by section 148) to the taxpayer of that interest immediately before the disposition exceeds the proceeds of the disposition (within the meaning assigned by section 148) of the interest that the policyholder, a beneficiary or an assignee became entitled to receive.
Marginal note:Debt obligation
(21) Where a taxpayer has in a particular taxation year disposed of a property that is an interest in a debt obligation for consideration equal to its fair market value at the time of disposition, there may be deducted in computing the taxpayer’s income for the particular year the amount, if any, by which
(a) the total of all amounts each of which is an amount that was included in computing the taxpayer’s income for the particular year or a preceding taxation year as interest in respect of that property
exceeds the total of all amounts each of which is
(b) the portion of an amount that was received or became receivable by the taxpayer in the particular year or a preceding taxation year that can reasonably be considered to be in respect of an amount described in paragraph 20(21)(a) and that was not repaid by the taxpayer to the issuer of the debt obligation because of an adjustment in respect of interest received before the time of disposition by the taxpayer, or
(c) an amount in respect of that property that was deductible by the taxpayer by virtue of paragraph 20(14)(b) in computing the taxpayer’s income for the particular year or a preceding taxation year.
Marginal note:Deduction for negative reserves
(22) In computing an insurer’s income for a taxation year, there may be deducted the amount included under paragraph 12(1)(e.1) in computing the insurer’s income for the preceding taxation year.
Marginal note:Amounts paid for undertaking future obligations
(24) Where an amount is included under paragraph 12(1)(a) in computing a taxpayer’s income for a taxation year in respect of an undertaking to which that paragraph applies and the taxpayer paid a reasonable amount in a particular taxation year to another person as consideration for the assumption by that other person of the taxpayer’s obligations in respect of the undertaking, if the taxpayer and the other person jointly so elect,
(a) the payment may be deducted in computing the taxpayer’s income for the particular year and no amount is deductible under paragraph 20(1)(m) or 20(1)(m.1) in computing the taxpayer’s income for that or any subsequent taxation year in respect of the undertaking; and
(b) where the amount was received by the other person in the course of business, it shall be deemed to be an amount described in paragraph 12(1)(a).
Marginal note:Manner of election
(25) An election under subsection 20(24) shall be made by notifying the Minister in writing on or before the earlier of the days on or before which either the payer or the recipient is required to file a return of income pursuant to section 150 for the taxation year in which the payment to which the election relates was made.
Marginal note:Transition deduction re unpaid claims reserve
(26) An insurer may deduct, in computing its income for its taxation year that includes February 23, 1994, such amount as the insurer claims not exceeding the amount prescribed to be the insurer’s unpaid claims reserve adjustment.
Marginal note:Loans, etc., acquired in ordinary course of business
(27) For the purposes of computing a deduction under paragraph 20(1)(l), 20(1)(l.1) or 20(1)(p) from the income for a taxation year of a taxpayer who was an insurer or whose ordinary business included the lending of money, a loan or lending asset or an instrument or commitment described in paragraph 20(1)(l.1) acquired from a person with whom the taxpayer did not deal at arm’s length for an amount equal to its fair market value shall be deemed to have been acquired by the taxpayer in the ordinary course of the taxpayer’s business of insurance or the lending of money where
(a) the person from whom the loan or lending asset or instrument or commitment was acquired carried on the business of insurance or the lending of money; and
(b) the loan or lending asset was made or acquired or the instrument or commitment was issued, made or assumed by the person in the ordinary course of the person’s business of insurance or the lending of money.
Marginal note:Application of ss. 13(21) and 138(12)
(27.1) The definitions in subsections 13(21) and 138(12) apply to this section.
Marginal note:Deduction before available for use
(28) In computing a taxpayer’s income from a business or property for a taxation year ending before the time a building or a part thereof acquired after 1989 by the taxpayer becomes available for use by the taxpayer, there may be deducted an amount not exceeding the amount by which the lesser of
(a) the amount that would be deductible under paragraph 20(1)(a) for the year in respect of the building if subsection 13(26) did not apply, and
(b) the taxpayer’s income for the year from renting the building, computed without reference to this subsection and before deducting any amount in respect of the building under paragraph 20(1)(a)
exceeds
(c) the amount deductible under paragraph 20(1)(a) for the year in respect of the building, computed without reference to this subsection,
and any amount so deducted shall be deemed to be an amount deducted by the taxpayer under paragraph 20(1)(a) in computing the taxpayer’s income for the year.
Marginal note:Idem
(29) Where, because of subsection 18(3.1), a deduction would, but for this subsection, not be allowed to a taxpayer in respect of an outlay or expense in respect of a building, or part thereof, and the outlay or expense would, but for that subsection and without reference to this subsection, be deductible in computing the taxpayer’s income for a taxation year, there may be deducted in respect of such outlays and expenses in computing the taxpayer’s income for the year an amount equal to the lesser of
(a) the total of all such outlays or expenses, and
(b) the taxpayer’s income for the year from renting the building or the part thereof computed without reference to subsection 20(28) and this subsection.
Marginal note:Specified reserve adjustment
(30) For the purpose of the description of N in subclause 20(1)(l)(ii)(D)(II), the specified reserve adjustment for a loan of a taxpayer for a taxation year is the amount determined by the formula
0.1(A × B × C/365)
where
- A
- is 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;
- B
- is the effective interest rate on the loan for the year determined in accordance with generally accepted accounting principles; and
- C
- is 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. 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.
Marginal note:PHSP premiums
20.01 (1) Notwithstanding paragraphs 18(1)(a) and (h) and subject to subsection (2), there may be deducted in computing an individual’s income for a taxation year from a business carried on by the individual and in which the individual is actively engaged on a regular and continuous basis, directly or as a member of a partnership, an amount payable by the individual or partnership in respect of the year as a premium, contribution or other consideration under a private health services plan in respect of the individual, the individual’s spouse or common-law partner or any person who is a member of the individual’s household if
(a) in the year or in the preceding taxation year
(i) the total of all amounts each of which is the individual’s income from such a business for a fiscal period that ends in the year exceeds 50% of the individual’s income for the year, or
(ii) the individual’s income for the year does not exceed the total of $10,000 and the total referred to in subparagraph (i) in respect of the individual for the year,
on the assumption that the individual’s income from each business is computed without reference to this subsection and the individual’s income is computed without reference to this subsection and subdivision e; and
(b) the amount is payable under a contract between the individual or partnership and
(i) a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or the business of offering to the public its services as trustee,
(ii) a person or partnership engaged in the business of offering to the public its services as an administrator of private health services plans, or
(iii) a person the taxable income of which is exempt under section 149 and that is a business or professional organization of which the individual is a member or a trade union of which the individual or a majority of the individual’s employees are members.
Marginal note:Limit
(2) For the purpose of calculating the amount deductible under subsection (1) in computing an individual’s income for a taxation year from a particular business,
(a) no amount may be deducted to the extent that
(i) it is deducted under this section in computing another individual’s income for any taxation year, or
(ii) it is included in calculating a deduction under section 118.2 in computing an individual’s tax payable under this Part for any taxation year;
(b) where an amount payable under a private health services plan relates to a period in the year throughout which
(i) each of one or more persons
(A) is employed on a full-time basis (other than on a temporary or seasonal basis) in the particular business or in another business carried on by
(I) the individual (otherwise than as a member of a partnership),
(II) a partnership of which the individual is a majority interest partner, or
(III) a corporation affiliated with the individual, and
(B) has accumulated not less than three months of service in that employment since the person last became so employed, and
(ii) the total number of persons employed in a business described in clause (i)(A), with whom the individual deals at arm’s length and to whom coverage is extended under the plan, is not less than 50% of the total number of persons each of whom is a person
(A) who carries on the particular business or is employed in a business described in clause (i)(A), and
(B) to whom coverage is extended under the plan,
the amount so deductible in relation to the period shall not exceed the individual’s cost of equivalent coverage under the plan in respect of each employed person who deals at arm’s length with the individual and who is described in subparagraph (i) in relation to the period;
(c) subject to paragraph (d), where an amount payable under a private health services plan relates to a particular period in the year, other than a period described in paragraph (b), the amount so deductible in relation to the particular period shall not exceed the amount determined by the formula
(A/365) × (B + C)
where
- A
- is the number of days in the year that are included in the particular period,
- B
- is the product obtained when $1,500 is multiplied by the number of persons each of whom is covered under the plan, and
(i) is the individual or the individual’s spouse or common-law partner, or
(ii) is a member of the individual’s household and has attained the age of 18 years before the beginning of the particular period, and
- C
- is 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; and
(d) where an amount payable under a private health services plan relates to a particular period in the year (other than a period described in paragraph (b)) and one or more persons with whom the individual deals at arm’s length are described in subparagraph (b)(i) in relation to the particular period, the amount so deductible in relation to the particular period shall not exceed the lesser of the amount determined under the formula set out in paragraph (c) and the individual’s cost of equivalent coverage in respect of any such person in relation to the particular period.
Marginal note:Equivalent coverage
(3) For the purpose of subsection (2), an amount payable in respect of an individual under a private health services plan in relation to a period does not exceed the individual’s cost of equivalent coverage under the plan in respect of another person in relation to the period to the extent that, in relation to the period, the amount does not exceed the product obtained when
(a) the amount that would be the individual’s cost of coverage under the plan if the benefits and coverage in respect of the individual, the individual’s spouse or common-law partner and the members of the individual’s household were identical to the benefits and coverage made available in respect of the other person, the other person’s spouse or common-law partner and the members of the other person’s household
is multiplied by
(b) the percentage of the cost of coverage under the plan in respect of the other person that is payable by the individual or a partnership of which the individual is a member.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1999, c. 22, s. 10;
- 2000, c. 12, s. 142.
Marginal note:Borrowed money used to earn income from property
20.1 (1) Where
(a) at any time after 1993 borrowed money ceases to be used by a taxpayer for the purpose of earning income from a capital property (other than real property or depreciable property), and
(b) the amount of the borrowed money that was so used by the taxpayer immediately before that time exceeds the total of
(i) where the taxpayer disposed of the property at that time for an amount of consideration that is not less than the fair market value of the property at that time, the amount of the borrowed money used to acquire the consideration,
(ii) where the taxpayer disposed of the property at that time and subparagraph 20.1(1)(b)(i) does not apply, the amount of the borrowed money that, if the taxpayer had received as consideration an amount of money equal to the amount by which the fair market value of the property at that time exceeds the amount included in the total by reason of subparagraph 20.1(1)(b)(iii), would be considered to be used to acquire the consideration,
(iii) where the taxpayer disposed of the property at that time for consideration that includes a reduction in the amount of the borrowed money, the amount of the reduction, and
(iv) where the taxpayer did not dispose of the property at that time, the amount of the borrowed money that, if the taxpayer had disposed of the property at that time and received as consideration an amount of money equal to the fair market value of the property at that time, would be considered to be used to acquire the consideration,
an amount of the borrowed money equal to the excess shall, to the extent that the amount is outstanding after that time, be deemed to be used by the taxpayer for the purpose of earning income from the property.
Marginal note:Borrowed money used to earn income from business
(2) Where at any particular time after 1993 a taxpayer ceases to carry on a business and, as a consequence, borrowed money ceases to be used by the taxpayer for the purpose of earning income from the business, the following rules apply:
(a) where, at any time (in this paragraph referred to as the “time of disposition”) at or after the particular time, the taxpayer disposes of property that was last used by the taxpayer in the business, an amount of the borrowed money equal to the lesser of
(i) the fair market value of the property at the time of disposition, and
(ii) the amount of the borrowed money outstanding at the time of disposition that is not deemed by this paragraph to have been used before the time of disposition to acquire any other property
shall be deemed to have been used by the taxpayer immediately before the time of disposition to acquire the property;
(b) subject to paragraph 20.1(2)(a), the borrowed money shall, after the particular time, be deemed not to have been used to acquire property that was used by the taxpayer in the business;
(c) the portion of the borrowed money outstanding at any time after the particular time that is not deemed by paragraph 20.1(2)(a) to have been used before that subsequent time to acquire property shall be deemed to be used by the taxpayer at that subsequent time for the purpose of earning income from the business; and
(d) the business shall be deemed to have fiscal periods after the particular time that coincide with the taxation years of the taxpayer, except that the first such fiscal period shall be deemed to begin at the end of the business’s last fiscal period that began before the particular time.
Marginal note:Deemed dispositions
(3) For the purpose of paragraph 20.1(2)(a),
(a) where a property was used by a taxpayer in a business that the taxpayer has ceased to carry on, the taxpayer shall be deemed to dispose of the property at the time at which the taxpayer begins to use the property in another business or for any other purpose;
(b) where a taxpayer, who has at any time ceased to carry on a business, regularly used a property in part in the business and in part for some other purpose,
(i) the taxpayer shall be deemed to have disposed of the property at that time, and
(ii) the fair market value of the property at that time shall be deemed to equal the proportion of the fair market value of the property at that time that the use regularly made of the property in the business was of the whole use regularly made of the property; and
(c) where the taxpayer is a trust, subsections 104(4) to 104(5.2) do not apply.
Marginal note:Amount payable for property
(4) Where an amount is payable by a taxpayer for property, the amount shall be deemed, for the purposes of this section and, where subsection 20.1(2) applies with respect to the amount, for the purposes of this Act, to be payable in respect of borrowed money used by the taxpayer to acquire the property.
Marginal note:Interest in partnership
(5) For the purposes of this section, where borrowed money that has been used to acquire an interest in a partnership is, as a consequence, considered to be used at any time for the purpose of earning income from a business or property of the partnership, the borrowed money shall be deemed to be used at that time for the purpose of earning income from property that is the interest in the partnership and not to be used for the purpose of earning income from the business or property of the partnership.
Marginal note:Refinancings
(6) Where at any time a taxpayer uses borrowed money to repay money previously borrowed that was deemed by paragraph 20.1(2)(c) immediately before that time to be used for the purpose of earning income from a business,
(a) paragraphs 20.1(2)(a) to 20.1(2)(c) apply with respect to the borrowed money; and
(b) subsection 20(3) does not apply with respect to the borrowed money.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1994, c. 21, s. 13.
Marginal note:Interest — authorized foreign bank — interpretation
20.2 (1) The following definitions apply in this section.
“branch advance”
« avance de succursale »
“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.
“branch financial statements”
« états financiers 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,
(a) that form part of the bank’s annual report for the year filed with the Superintendent of Financial Institutions as required under section 601 of the Bank Act, and accepted by the Superintendent, and
(b) if no filing is so required for the taxation year, that are prepared in a manner consistent with the statements in the annual report or reports so filed and accepted for the period or periods in which the taxation year falls,
except if the Minister demonstrates that the statements are not prepared in accordance with generally-accepted accounting principles in Canada as modified by any specifications applicable to the bank made by the Superintendent of Financial Institutions under subsection 308(4) of 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.
“calculation period”
« période de calcul »
“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,
(a) none of which is longer than 31 days;
(b) the first of which commences at the beginning of the year and the last of which ends at the end of the year; and
(c) that are, unless the Minister otherwise agrees in writing, consistent with the calculation periods designated for the bank’s preceding taxation year.
Marginal note:Formula elements
(2) The following descriptions apply for the purposes of the formulae in subsection (3) for any calculation period in a taxation year of an authorized foreign bank:
- A
- is the amount of the bank’s assets at the end of the period;
- BA
- is the amount of the bank’s branch advances at the end of the period;
- IBA
- is 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;
- IL
- is 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; and
- L
- is the amount of the bank’s liabilities to other persons and partnerships at the end of the period.
Marginal note:Interest deduction
(3) In computing the income of an authorized foreign bank from its Canadian banking business for a taxation year, there may be deducted on account of interest for each calculation period of the bank for the year,
(a) where the total amount at the end of the period of its liabilities to other persons and partnerships and branch advances is 95% or more of the amount of its assets at that time, an amount not exceeding
(i) if the amount of liabilities to other persons and partnerships at that time is less than 95% of the amount of its assets at that time, the amount determined by the formula
IL + IBA × (0.95 × A - L)/BA
and
(ii) if the amount of those liabilities at that time is greater than or equal to 95% of the amount of its assets at that time, the amount determined by the formula
IL × (0.95 × A)/L
and
(b) in any other case, the total of
(i) the amount determined by the formula
IL + IBA
and
(ii) the product of
(A) the amount claimed by the bank, in its return of income for the year, not exceeding the amount determined by the formula
(0.95 × A) - (L + BA)
and
(B) the average, based on daily observations, of the Bank of Canada bank rate for the period.
Marginal note:Branch amounts
(4) Only amounts that are in respect of an authorized foreign bank’s Canadian banking business, and that are recorded in the books of account of the business in a manner consistent with the manner in which they are required to be treated for the purposes of the branch financial statements, shall be used to determine
(a) the amounts in subsection (2); and
(b) the amounts in subsection (3) of an authorized foreign bank’s assets, liabilities to other persons and partnerships, and branch advances.
Marginal note:Notional interest
(5) For the purposes of the description of IBA in subsection (2), a reasonable amount on account of notional interest for a calculation period in respect of a branch advance is the amount that would be payable on account of interest for the period by a notional borrower, having regard to the duration of the advance, the currency in which repayment is required and all other terms, as adjusted by paragraph (c), of the advance, if
(a) the borrower were a person that dealt at arm’s length with the bank, that carried on the bank’s Canadian banking business and that had the same credit-worthiness and borrowing capacity as the bank;
(b) the advance were a loan by the bank to the borrower; and
(c) any of the terms of the advance (excluding the rate of interest, but including the structure of the interest calculation, such as whether the rate is fixed or floating and the choice of any reference rate referred to) that are not terms that would be made between the bank as lender and the borrower, having regard to all the circumstances, including the nature of the Canadian banking business, the use of the advanced funds in the business and normal risk management practices for banks, were instead terms that would be agreed to by the bank and the borrower.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 2001, c. 17, s. 14.
Marginal note:Weak currency debt — interpretation
20.3 (1) The definitions in this subsection apply in this section.
“exchange date”
« date de l’échange »
“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 taxpayer
(a) in respect of borrowed money that is denominated in the final currency, the day that the debt is incurred or assumed by the taxpayer; and
(b) in respect of borrowed money that is not denominated in the final currency, or in respect of the acquisition of property, the day on which the taxpayer uses the borrowed money or the acquired property, directly or indirectly, to acquire funds that are, or to settle an obligation that is, denominated in the final currency.
“hedge”
« opération de couverture »
“hedge” in respect of a debt of a taxpayer that is at any time a weak currency debt means any agreement made by the taxpayer
(a) that can reasonably be regarded as having been made by the taxpayer primarily to reduce the taxpayer’s risk, with respect to payments of principal or interest in respect of the debt, of fluctuations in the value of the weak currency; and
(b) that is identified by the taxpayer as a hedge in respect of the debt in a designation in prescribed form filed with the Minister on or before the 30th day after the day the taxpayer enters into the agreement.
“weak currency debt”
« dette en devise faible »
“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, where
(a) any of the following applies, namely,
(i) the borrowed money is denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, is used for the purpose of earning income from a business or property and is not used to acquire funds in a currency other than the final currency,
(ii) the borrowed money or the acquired property is used, directly or indirectly, to acquire funds that are denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, that are used for the purpose of earning income from a business or property and that are not used to acquire funds in a currency other than the final currency,
(iii) the borrowed money or the acquired property is used, directly or indirectly, to settle an obligation that is denominated in a currency (in this section referred to as the “final currency”) other than the weak currency, that is incurred or assumed for the purpose of earning income from a business or property and that is not incurred or assumed to acquire funds in a currency other than the final currency, or
(iv) the borrowed money or the acquired property is used, directly or indirectly, to settle another debt of the taxpayer that is at any time a weak currency debt in respect of which the final currency (which is deemed to be the final currency in respect of the particular debt) is a currency other than the currency of the particular debt;
(b) the amount of the particular debt (together with any other debt that would, but for this paragraph, be at any time a weak currency debt, and that can reasonably be regarded as having been incurred or assumed by the taxpayer as part of a series of transactions that includes the incurring or assumption of the particular debt) exceeds $500,000; and
(c) either of the following applies, namely,
(i) if the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt is determined under a formula based on the value from time to time of a reference rate (other than a reference rate the value of which is established or materially influenced by the taxpayer), the interest rate at the commitment time, as determined under the formula as though interest were then payable, exceeds by more than two percentage points the rate at which interest would have been payable at the commitment time in the final currency if
(A) the taxpayer had, at the commitment time, instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating) with those modifications that the difference in currency requires, and
(B) interest on the equivalent amount of debt referred to in clause (A) was payable at the commitment time, or
(ii) in any other case, the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt exceeds by more than two percentage points the rate at which interest would have been payable at the particular time in the final currency if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating), with those modifications that the difference in currency requires.
Marginal note:Interest and gain
(2) Notwithstanding any other provision of this Act, the following rules apply in respect of a particular debt of a taxpayer (other than a corporation described in one or more of paragraphs (a), (b), (c) and (e) of the definition “specified financial institution” in subsection 248(1)) that is at any time a weak currency debt:
(a) no deduction on account of interest that accrues on the debt for any period that begins after the day that is the later of June 30, 2000 and the exchange date during which it is a weak currency debt shall exceed the amount of interest that would, if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt, the principal and interest in respect of which were denominated in the final currency, on the same terms as the particular debt (excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating) have accrued on the equivalent debt during that period, with those modifications that the difference in currency requires;
(b) the amount, if any, of the taxpayer’s gain or loss (in this section referred to as a “foreign exchange gain or loss”) for a taxation year on the settlement or extinguishment of the debt that arises because of the fluctuation in the value of any currency shall be included or deducted, as the case may be, in computing the taxpayer’s income for the year from the business or the property to which the debt relates; and
(c) the amount of any interest on the debt that was, because of this subsection, not deductible is deemed, for the purpose of computing the taxpayer’s foreign exchange gain or loss on the settlement or extinguishment of the debt, to be an amount paid by the taxpayer to settle or extinguish the debt.
Marginal note:Hedges
(3) In applying subsection (2) in circumstances where a taxpayer has entered into a hedge in respect of a debt of the taxpayer that is at any time a weak currency debt, the amount paid or payable in the weak currency for a taxation year on account of interest on the debt, or paid in the weak currency in the year on account of the debt’s principal, shall be decreased by the amount of any foreign exchange gain, or increased by the amount of any foreign exchange loss, on the hedge in respect of the amount so paid or payable.
Marginal note:Repayment of principal
(4) If the amount (expressed in the weak currency) outstanding on account of principal in respect of a debt of the taxpayer that is at any time a weak currency debt is reduced before maturity (whether by repayment or otherwise), the amount (expressed in the weak currency) of the reduction is deemed, except for the purposes of determining the rate of interest that would have been charged on an equivalent loan in the final currency and applying paragraph (b) of the 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. 2001, c. 17, s. 14.
Marginal note:Definitions
20.4 (1) The definitions in section 12.5 apply for the purposes of this section.
Marginal note:Transition year income deduction
(2) There shall be deducted in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year the absolute value of the negative amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.
Marginal note:Transition year income inclusion reversal
(3) If an amount has been included under subsection 12.5(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be deducted in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula
A × B/1825
where
- A
- is the amount included under subsection 12.5(2) in computing the insurer’s income for the transition year from that insurance business; and
- B
- is 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.
Marginal note:Ceasing to carry on business
(4) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections 12.5(4) to (6) apply, there shall be deducted in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula
A – B
where
- A
- is any amount included under subsection 12.5(2) in computing the insurer’s income from the discontinued business for its transition year; and
- B
- is 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. 2009, c. 2, s. 8.
Marginal note:Cost of borrowed money
21. (1) Where in a taxation year a taxpayer has acquired depreciable property, if the taxpayer elects under this subsection in the taxpayer’s return of income under this Part for the year,
(a) in computing the taxpayer’s income for the year and for such of the 3 immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for any such year in respect of borrowed money used to acquire the depreciable property or the amount payable for the depreciable property; and
(b) the amount or the part of the amount, as the case may be, described in paragraph 21(1)(a) shall be added to the capital cost to the taxpayer of the depreciable property so acquired by the taxpayer.
Marginal note:Borrowed money used for exploration or development
(2) Where in a taxation year a taxpayer has used borrowed money for the purpose of exploration, development or the acquisition of property and the expenses incurred by the taxpayer in respect of those activities are Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year,
(a) in computing the taxpayer’s income for the year and for such of the three immediately preceding taxation years as the taxpayer had, paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the taxpayer’s election that, but for that election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for any such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be; and
(b) the amount or the part of the amount, as the case may be, described in paragraph (a) is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the year.
Marginal note:Borrowing for depreciable property
(3) In computing the income of a taxpayer for a particular taxation year, where the taxpayer
(a) in any preceding taxation year
(i) made an election under subsection 21(1) in respect of borrowed money used to acquire depreciable property or an amount payable for depreciable property acquired by the taxpayer, or
(ii) was, by virtue of subsection 18(3.1), required to include an amount in respect of the construction of a depreciable property in computing the capital cost to the taxpayer of the depreciable property, and
(b) in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for an election under this subsection in respect thereof, would have been deductible in computing the taxpayer’s income (other than exempt income) for each such year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer,
if an election under this subsection is made in the taxpayer’s return of income under this Part for the particular year, paragraphs 20(1)(c), 20(1)(d), 20(1)(e) and 20(1)(e.1) do not apply to the amount or to the part of the amount specified in the election that, but for an election under this subsection in respect thereof, would be deductible in computing the taxpayer’s income (other than exempt income) for the particular year in respect of the borrowed money used to acquire the depreciable property or the amount payable for the depreciable property acquired by the taxpayer, and the amount or part of the amount, as the case may be, shall be added to the capital cost to the taxpayer of the depreciable property.
Marginal note:Borrowing for exploration, etc.
(4) In computing the income of a taxpayer for a particular taxation year, where the taxpayer
(a) in any preceding taxation year made an election under subsection 21(2) in respect of borrowed money used for the purpose of exploration, development or acquisition of property,
(b) in each taxation year, if any, after that preceding taxation year and before the particular year, made an election under this subsection covering the total amount that, but for that election, would have been deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for each such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be, and
(c) so elects in the taxpayer’s return of income for the particular year,
the following rules apply:
(d) paragraphs 20(1)(c), (d), (e) and (e.1) do not apply to the amount or to the part of the amount specified in the election that, but for the election, would be deductible in computing the taxpayer’s income (other than exempt income or income that is exempt from tax under this Part) for the particular year in respect of the borrowed money used for the exploration, development or acquisition of property, and
(e) the amount or part of the amount, as the case may be, is deemed to be Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses, Canadian oil and gas property expenses, foreign resource expenses in respect of a country, or foreign exploration and development expenses, as the case may be, incurred by the taxpayer in the particular year.
Marginal note:Reassessments
(5) Notwithstanding any other provision of this Act, where a taxpayer has made an election in accordance with the provisions of subsection 21(1) or 21(2), such reassessments of tax, interest or penalties shall be made as are necessary to give effect thereto.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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
Marginal note:Sale of accounts receivable
22. (1) Where a person who has been carrying on a business has, in a taxation year, sold all or substantially all the property used in carrying on the business, including the debts that have been or will be included in computing the person’s income for that year or a previous year and that are still outstanding, and including the debts arising from loans made in the ordinary course of the person’s business if part of the person’s ordinary business was the lending of money and that are still outstanding, to a purchaser who proposes to continue the business which the vendor has been carrying on, if the vendor and the purchaser have executed jointly an election in prescribed form to have this section apply, the following rules are applicable:
(a) there may be deducted in computing the vendor’s income for the taxation year an amount equal to the difference between the face value of the debts so sold (other than debts in respect of which the vendor has made deductions under paragraph 20(1)(p)), and the consideration paid by the purchaser to the vendor for the debts so sold;
(b) an amount equal to the difference described in paragraph 22(1)(a) shall be included in computing the purchaser’s income for the taxation year;
(c) the debts so sold shall be deemed, for the purposes of paragraphs 20(1)(l) and 20(1)(p), to have been included in computing the purchaser’s income for the taxation year or a previous year but no deduction may be made by the purchaser under paragraph 20(1)(p) in respect of a debt in respect of which the vendor has previously made a deduction; and
(d) each amount deducted by the vendor in computing income for a previous year under paragraph 20(1)(p) in respect of any of the debts so sold shall be deemed, for the purpose of paragraph 12(1)(i), to have been so deducted by the purchaser.
Marginal note:Statement by vendor and purchaser
(2) An election executed for the purposes of subsection 22(1) shall contain a statement by the vendor and the purchaser jointly as to the consideration paid for the debts sold by the vendor to the purchaser and that statement shall, subject to subsection 69(1), as against the Minister, be binding on the vendor and the purchaser in so far as it may be relevant in respect of any matter arising under this Act.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1“22”;
- 1974-75-76, c. 26, s. 10.
Marginal note:Sale of inventory
23. (1) Where, on or after disposing of or ceasing to carry on a business or a part of a business, a taxpayer has sold all or any part of the property that was included in the inventory of the business, the property so sold shall, for the purposes of this Part, be deemed to have been sold by the taxpayer in the course of carrying on the business.
Marginal note:Reference to property in inventory
(3) A reference in this section to property that was included in the inventory of a business shall be deemed to include a reference to property that would have been so included if the income from the business had not been computed in accordance with the method authorized by subsection 28(1) or paragraph 34(a).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1“23”;
- 1974-75-76, c. 26, s. 11;
- 1985, c. 45, s. 13.
Marginal note:Ceasing to carry on business
24. (1) Notwithstanding paragraph 18(1)(b), where at any time after a taxpayer ceases to carry on a business the taxpayer no longer owns any property that was eligible capital property in respect of the business and that has value, in computing the taxpayer’s income for taxation years ending after that time,
(a) there shall be deducted, for the first such taxation year, the amount of the taxpayer’s cumulative eligible capital in respect of the business at that time;
(b) no amount may be deducted under paragraph 20(1)(b) in respect of the business;
(c) for the purposes of determining the value of P in the definition “cumulative eligible capital” in subsection 14(5), the amount deducted by the taxpayer under paragraph 24(1)(a) shall be deemed to be an amount deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for the taxation year that included that time; and
(d) for the purposes of subsection 14(1), section 14 shall be read without reference to subsection 14(4).
Marginal note:Business carried on by spouse or common-law partner or controlled corporation
(2) Notwithstanding subsection 24(1), where at any time an individual ceases to carry on a business and thereafter 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 that was eligible capital property in respect of the business owned by the individual before that time and that had value at that time,
(a) in computing the individual’s income for the individual’s first taxation year ending after that time, subsection 24(1) shall be read without reference to paragraph 24(1)(a) and the reference in paragraph 24(1)(c) to “the amount deducted by the taxpayer under paragraph (a)” shall be read as a reference to “an amount equal to the taxpayer’s cumulative eligible capital in respect of the business immediately before that time”;
(b) in computing the cumulative eligible capital of the spouse or common-law partner or the corporation, as the case may be, in respect of the business, the spouse or common-law partner or corporation shall be deemed to have acquired an eligible capital property and to have made an eligible capital expenditure at that time at a cost equal to 4/3 of the total of
(i) the cumulative eligible capital of the taxpayer in respect of the business immediately before that time, and
(ii) the amount, if any, determined for F in the definition “cumulative eligible capital” in subsection 14(5) in respect of the business of the individual at that time;
(c) for the purposes of determining the cumulative eligible capital in respect of the business of the spouse or common-law partner or corporation after that time, an amount equal to the amount determined under subparagraph 24(2)(b)(ii) shall be added to the amount otherwise determined in respect thereof for P in the definition “cumulative eligible capital” in subsection 14(5); and
(d) for the purpose of determining after that time the amount required to be included under paragraph 14(1)(b) in computing the income of the spouse, the common-law partner or the corporation in respect of any subsequent disposition of property of the business, there shall be added to the amount otherwise determined for Q in the definition “cumulative eligible capital” in subsection 14(5) the amount, if any, determined for Q in that definition in respect of the business of the individual immediately before the individual ceased to carry on business.
Marginal note:Where partnership has ceased to exist
(3) Notwithstanding subsection 24(1), where at any time a partnership ceases to exist in circumstances to which neither subsection 98(3) nor subsection 98(5) applies, there may be deducted, in computing the income for the first taxation year beginning after that time of a taxpayer who was a member of the partnership immediately before that time, an amount determined by the formula
A × B/C
where
- A
- is the amount that would, had the partnership continued to exist, have been deductible under subsection 24(1) in computing its income;
- B
- is the fair market value of the taxpayer’s interest in the partnership immediately before that time; and
- C
- is the fair market value of all interests in the partnership immediately before that time.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
24.1 [Repealed, 1996, c. 21, s. 6(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 24.1;
- 1996, c. 21, s. 6.
Marginal note:Fiscal period of business disposed of by individual
25. (1) Where an individual was the proprietor of a business and disposed of it during a fiscal period of the business, the fiscal period may, if the individual so elects and subsection 249.1(4) does not apply in respect of the business, be deemed to have ended at the time it would have ended if the individual had not disposed of the business during the fiscal period.
Marginal note:Election
(2) An election under subsection 25(1) is not valid unless the individual, at the time when the fiscal period of the business would, if the election were valid, be deemed to have ended, is resident in Canada.
Marginal note:Dispositions in the extended fiscal period
(3) Where subsection 25(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,
(a) section 13 shall be read without reference to subsection 13(8); and
(b) section 24 shall be read without reference to paragraph 24(1)(d).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 25;
- 1996, c. 21, s. 7.
Special Cases
Marginal note:Banks — inclusions in income
26. (1) There shall be included in computing the income of a bank for its first taxation year that commences after June 17, 1987 and ends after 1987 the total of
(a) the total of the specific provisions of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, as at the end of its immediately preceding taxation year,
(b) the total of the general provisions of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, as at the end of its immediately preceding taxation year,
(c) the amount, if any, by which
(i) the amount of the special provision for losses on trans-border claims of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, that was deductible by the bank under subsection 26(2) in computing its income for its immediately preceding taxation year
exceeds
(ii) that part of the amount determined under subparagraph 26(1)(c)(i) that was a realized loss of the bank for that immediately preceding taxation year, and
(d) the amount, if any, of the tax allowable appropriations account of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, at the end of its immediately preceding taxation year.
Marginal note:Banks — deductions from income
(2) In computing the income for a taxation year of a bank, there may be deducted an amount not exceeding the total of
(a) that part of the total of the amounts of the five-year average loan loss experiences of the bank, as determined, or as would be determined if such a determination were required, under the Minister’s rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(b) that part of the total of the amounts transferred by the bank to its tax allowable appropriations account, as permitted under the Minister’s rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(c) that part of the amount, if any, by which
(i) the amount of the special provision for losses on trans-border claims, as determined, or as would be determined if such a determination were required, under the Minister’s rules, that was deductible by the bank under this subsection in computing its income for its last taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987
exceeds
(ii) that part of the amount determined under subparagraph 26(2)(c)(i) that was a realized loss of the bank for that last taxation year
that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year,
(d) where the tax allowable appropriations account of the bank at the end of its last taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987, as determined, or as would be determined if such a determination were required, under the Minister’s rules, is a negative amount, that part of such amount expressed as a positive number that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, and
(e) that part of the total of the amounts calculated in respect of the bank for the purposes of the Minister’s rules, or that would be calculated for the purposes of those rules if such a calculation were required, under Procedure 8 of the Procedures for the Determination of the Provision for Loan Losses as set out in Appendix 1 of those rules, for all taxation years before its first taxation year that commences after June 17, 1987 and ends after 1987 that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year.
Marginal note:Write-offs and recoveries
(3) In computing the income of a bank, the following rules apply:
(a) any amount that was recorded by the bank as a realized loss or a write-off of an asset that was included by the bank in the calculation of an amount deductible under the Minister’s rules, or would have been included in the calculation of such an amount if such a calculation had been required, for any taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987, shall, for the purposes of paragraph 12(1)(i) and section 12.4, be deemed to have been deducted by the bank under paragraph 20(1)(p) in computing its income for the year for which it was so recorded; and
(b) any amount that was recorded by the bank as a recovery of a realized loss or a write-off of an asset that was included by the bank in the calculation of an amount deductible under the Minister’s rules, or would have been included in the calculation of such an amount if such a calculation had been required, for any taxation year before its first taxation year that commences after June 17, 1987 and ends after 1987 shall, for the purposes of section 12.4, be deemed to have been included by the bank under paragraph 12(1)(i) in computing its income for the year for which it was so recorded.
Definition of “Minister’s rules”
(4) For 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 R.S., 1985, c. 1 (5th Supp.), s. 26;
- 1994, c. 7, Sch. III, s. 14(F).
Marginal note:Application of Part I to Crown corporation
27. (1) This Part applies to a federal Crown corporation as if
(a) any income or loss from a business carried on by the corporation as agent of Her Majesty, or from a property of Her Majesty administered by the corporation, were an income or loss of the corporation from the business or the property, as the case may be; and
(b) any property, obligation or debt of any kind whatever held, administered, entered into or incurred by the corporation as agent of Her Majesty were a property, obligation or debt, as the case may be, of the corporation.
Marginal note:Presumption
(2) Notwithstanding any other provision of this Act, a prescribed federal Crown corporation and any corporation controlled by such a corporation are each deemed not to be a private corporation and paragraphs 149(1)(d) to (d.4) do not apply to those corporations.
Marginal note:Transfers of land for disposition
(3) Where land of Her Majesty has been transferred to a prescribed federal Crown corporation for purposes of disposition, the acquisition of the property by the corporation and any disposition thereof shall be deemed not to have been in the course of the business carried on by the corporation.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 27;
- 1998, c. 19, s. 82;
- 2001, c. 17, s. 17.
Marginal note:Farming or fishing business
28. (1) For the purpose of computing the income of a taxpayer for a taxation year from a farming or fishing business, the income from the business for that year may, if the taxpayer so elects, be computed in accordance with a method (in this section referred to as the “cash method”) whereby the income therefrom for that year shall be deemed to be an amount equal to the total of
(a) all amounts that
(i) were received in the year, or are deemed by this Act to have been received in the year, in the course of carrying on the business, and
(ii) were in payment of or on account of an amount that would, if the income from the business were not computed in accordance with the cash method, be included in computing income therefrom for that or any other year, and
(b) with respect to a farming business, such amount, if any, as is specified by the taxpayer in respect of the business in the taxpayer’s return of income under this Part for the year, not exceeding the amount, if any, by which
(i) the fair market value at the end of the year of inventory owned by the taxpayer in connection with the business at that time
exceeds
(ii) the amount determined under paragraph 28(1)(c) for the year,
(c) with respect to a farming business, the amount, if any, that is the lesser of
(i) the taxpayer’s loss from the business for the year computed without reference to this paragraph and to paragraph 28(1)(b), and
(ii) the value of inventory purchased by the taxpayer that was owned by the taxpayer in connection with the business at the end of the year, and
(d) the total of all amounts each of which is an amount included in computing the taxpayer’s income for the year from the business because of subsection 13(1), 14(1), 80(13) or 80.3(3) or 80.3(5),
minus the total of
(e) all amounts, other than amounts described in section 30, that
(i) were paid in the year, or are deemed by this Act to have been paid in the year, in the course of carrying on the business,
(ii) in the case of amounts paid, or deemed by this Act to have been paid, for inventory, were in payment of or on account of an amount that would be deductible in computing the income from the business for the year or any other taxation year if that income were not computed in accordance with the cash method, and
(iii) in any other case, were in payment of or on account of an amount that would be deductible in computing the income from the business for a preceding taxation year, the year or the following taxation year if that income were not computed in accordance with the cash method,
(e.1) all amounts, other than amounts described in section 30, that
(i) would be deductible in computing the income from the business for the year if that income were not computed in accordance with the cash method,
(ii) are not deductible in computing the income from the business for any other taxation year, and
(iii) were paid in a preceding taxation year in the course of carrying on the business,
(f) the total of all amounts each of which is the amount, if any, included under paragraph 28(1)(b) or 28(1)(c) in computing the taxpayer’s income from the business for the immediately preceding taxation year, and
(g) the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)(a), 20(1)(b) or 20(1)(uu), subsection 20(16) or 24(1), section 30 or subsection 80.3(2) or 80.3(4) in respect of the business,
except that paragraphs 28(1)(b) and 28(1)(c) do not apply in computing the income of the taxpayer for the taxation year in which the taxpayer dies.
Marginal note:Acquisition of inventory
(1.1) Where at any time, and in circumstances where paragraph 69(1)(a) or 69(1)(c) applies, a taxpayer acquires inventory that is owned by the taxpayer in connection with a farming business the income from which is computed in accordance with the cash method, for the purposes of this section an amount equal to the cost to the taxpayer of the inventory shall be deemed
(a) to have been paid by the taxpayer at that time and in the course of carrying on that business, and
(b) to be the only amount so paid for the inventory by the taxpayer,
and the taxpayer shall be deemed to have purchased the inventory at the time it was so acquired.
Marginal note:Valuation of inventory
(1.2) For the purpose of paragraph 28(1)(c) and notwithstanding section 10, inventory of a taxpayer shall be valued at any time at the lesser of the total amount paid by the taxpayer at or before that time to acquire it (in this section referred to as its “cash cost”) and its fair market value, except that an animal (in this section referred to as a “specified animal”) that is a horse or, where the taxpayer has so elected in respect thereof for the taxation year that includes that time or for any preceding taxation year, is a bovine animal registered under the Animal Pedigree Act, shall be valued
(a) at any time in the taxation year in which it is acquired, at such amount as is designated by the taxpayer not exceeding its cash cost to the taxpayer and not less than 70% of its cash cost to the taxpayer; and
(b) at any time in a subsequent taxation year, at such amount as is designated by the taxpayer not exceeding its cash cost to the taxpayer and not less than 70% of the total of
(i) its value determined under this subsection at the end of the preceding taxation year, and
(ii) the total amount paid on account of the purchase price of the animal during the year.
Marginal note:Short fiscal period
(1.3) For each taxation year that is less than 51 weeks, the reference in subsection 28(1.2) to “70” shall be read as a reference to the number determined by the formula
100 - (30 × A/365)
where
- A
- is the number of days in the taxation year.
Marginal note:Where joint farming or fishing business
(2) Subsection 28(1) does not apply for the purpose of computing the income of a taxpayer for a taxation year from a farming or fishing business carried on by the taxpayer jointly with one or more other persons, unless each of the other persons by whom the business is jointly carried on has elected to have his or her income from the business for that year computed in accordance with the cash method.
Marginal note:Concurrence of Minister
(3) Where a taxpayer has filed a return of income under this Part for a taxation year wherein the taxpayer’s income for that year from a farming or fishing business has been computed in accordance with the cash method, income from the business for each subsequent taxation year shall, subject to the other provisions of this Part, be computed in accordance with that method unless the taxpayer, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, adopts some other method.
Marginal note:Non-resident
(4) Notwithstanding subsections 28(1) and 28(5), where at the end of a taxation year a taxpayer who carried on a business the income from which was computed in accordance with the cash method is non-resident and does not carry on that business in Canada, an amount equal to the total of all amounts each of which is the fair market value of an amount outstanding during the year as or on account of a debt owing to the taxpayer that arose in the course of carrying on the business and that would have been included in computing the taxpayer’s income for the year if the amount had been received by the taxpayer in the year, shall (to the extent that the amount was not otherwise included in computing the taxpayer’s income for the year or a preceding taxation year) be included in computing the taxpayer’s income from the business
(a) for the year, if the taxpayer was non-resident throughout the year; and
(b) for the part of the year throughout which the taxpayer was resident in Canada, if the taxpayer was resident in Canada at any time in the year.
(4.1) [Repealed, 2001, c. 17, s. 18(2)]
Marginal note:Accounts receivable
(5) There shall be included in computing the income of a taxpayer for a taxation year such part of an amount received by the taxpayer in the year, on or after disposing of or ceasing to carry on a business or a part of a business, for, on account or in lieu of payment of, or in satisfaction of debts owing to the taxpayer that arose in the course of carrying on the business as would have been included in computing the income of the taxpayer for the year had the amount so received been received by the taxpayer in the course of carrying on the business.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Disposition of animal of basic herd class
29. (1) Where a taxpayer has a basic herd of a class of animals and disposes of an animal of that class in the course of carrying on a farming business in a taxation year, if the taxpayer so elects in the taxpayer’s return of income under this Part for the year the following rules apply:
(a) there shall be deducted in computing the taxpayer’s basic herd of that class at the end of the year such number as is designated by the taxpayer in the taxpayer’s election, not exceeding the least of
(i) the number of animals of that class so disposed of by the taxpayer in that year,
(ii) 1/10 of the taxpayer’s basic herd of that class on December 31, 1971, and
(iii) the taxpayer’s basic herd of that class of animal at the end of the immediately preceding taxation year; and
(b) there shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained when
(i) the number determined under paragraph 29(1)(a) in respect of the taxpayer’s basic herd of that class for the year
is multiplied by
(ii) the quotient obtained when the fair market value on December 31, 1971 of the taxpayer’s animals of that class on that day is divided by the number of the taxpayer’s animals of that class on that day.
Marginal note:Reduction in basic herd
(2) Where a taxpayer carries on a farming business in a taxation year and the taxpayer’s basic herd of any class at the end of the immediately preceding year, minus the deduction, if any, required by paragraph 29(1)(a) to be made in computing the taxpayer’s basic herd of that class at the end of the year, exceeds the number of animals of that class owned by the taxpayer at the end of the year,
(a) there shall be deducted in computing the taxpayer’s basic herd of that class at the end of the year the number of animals comprising the excess; and
(b) there shall be deducted in computing the taxpayer’s income from the farming business for the taxation year the product obtained when
(i) the number of animals comprising the excess
is multiplied by
(ii) the quotient obtained when the fair market value on December 31, 1971 of the taxpayer’s animals of that class on that day is divided by the number of the taxpayer’s animals of that class on that day.
Marginal note:Interpretation
(3) For the purposes of this section,
(a) a taxpayer’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;
(b) “class of animals” means animals of a particular species, namely, cattle, horses, sheep or swine, that are
(i) purebred animals of that species for which a certificate of registration has been issued by a person recognized by breeders in Canada of purebred animals of that species to be the registrar of the breed to which such animals belong, or issued by the Canadian Livestock Records Corporation, or
(ii) animals of that species other than purebred animals described in subparagraph 29(3)(b)(i),
each of which descriptions in subparagraphs 29(3)(b)(i) and 29(3)(b)(ii) shall be deemed to be of separate classes, except that where the number of the taxpayer’s animals described in subparagraph 29(3)(b)(i) or 29(3)(b)(ii), as the case may be, of a particular species is not greater than 10% of the total number of the taxpayer’s animals of that species that would otherwise be of two separate classes by virtue of this paragraph, the taxpayer’s animals described in subparagraphs 29(3)(b)(i) and 29(3)(b)(ii) of that species shall be deemed to be of a single class; and
(c) in determining the number of animals of any class on hand at any time, an animal shall not be included if it was acquired for a feeder operation, and an animal shall be included only if its actual age is not less than,
(i) in the case of cattle, 2 years,
(ii) in the case of horses, 3 years, and
(iii) in the case of sheep or swine, one year,
except that 2 animals of a class under the age specified in subparagraph 29(3)(c)(i), 29(3)(c)(ii) or 29(3)(c)(iii), as the case may be, shall be counted as one animal of the age so specified.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1 “29”;
- 1985, c. 45, s. 126(F).
Marginal note:Improving land for farming
30. Notwithstanding 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. 1970-71-72, c. 63, s. 1“30”;
- 1988, c. 55, s. 15.
Marginal note:Loss from farming where chief source of income not farming
31. (1) Where 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, 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 shall be deemed to be the total of
(a) the lesser of
(i) the amount by which the total of the taxpayer’s losses for the year, determined without reference to this section and before making any deduction under section 37 or 37.1, from all farming businesses carried on by the taxpayer exceeds the total of the taxpayer’s incomes for the year, so determined from all such businesses, and
(ii) $2,500 plus the lesser of
(A) 1/2 of the amount by which the amount determined under subparagraph 31(1)(a)(i) exceeds $2,500, and
(B) $6,250, and
(b) the amount, if any, by which
(i) the amount that would be determined under subparagraph 31(1)(a)(i) if it were read as though the words “and before making any deduction under section 37 or 37.1” were deleted,
exceeds
(ii) the amount determined under subparagraph 31(1)(a)(i).
Marginal note:Restricted farm loss
(1.1) For the purposes of this Act, a taxpayer’s “restricted farm loss” for a taxation year is the amount, if any, by which
(a) the amount determined under subparagraph 31(1)(a)(i) in respect of the taxpayer for the year
exceeds
(b) the total of the amount determined under subparagraph 31(1)(a)(ii) in respect of the taxpayer for the year and all amounts each of which is an amount by which the taxpayer’s restricted farm loss for the year is required to be reduced because of section 80.
Marginal note:Determination by Minister
(2) For the purpose of this section, the Minister may determine that 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 31;
- 1995, c. 21, s. 8.
Marginal note:Insurance agents and brokers
32. (1) In computing a taxpayer’s income for a taxation year from the taxpayer’s business as an insurance agent or broker, no amount may be deducted under paragraph 20(1)(m) for the year in respect of unearned commissions from the business, but in computing the taxpayer’s income for the year from the business there may be deducted, as a reserve in respect of such commissions, an amount equal to the lesser of
(a) the total of all amounts each of which is that proportion of an amount that has been included in computing the taxpayer’s income for the year or a preceding taxation year as a commission in respect of an insurance contract (other than a life insurance contract) that
(i) the number of days in the period provided for in the insurance contract that are after the end of the taxation year
is of
(ii) the number of days in that period, and
(b) the total of all amounts each of which is the amount that would, but for this subsection, be deductible under paragraph 20(1)(m) for the year in respect of a commission referred to in paragraph 32(1)(a).
Marginal note:Reserve to be included
(2) There shall be included as income of a taxpayer for a taxation year from a business as an insurance agent or broker, the amount deducted under subsection 32(1) in computing the taxpayer’s income therefrom for the immediately preceding year.
Marginal note:Additional reserve
(3) In computing a taxpayer’s income for a taxation year ending after 1990 from a business carried on by the taxpayer throughout the year as an insurance agent or broker, there may be deducted as an additional reserve an amount not exceeding
(a) where the year ends in 1991, 90%,
(b) where the year ends in 1992, 80%,
(c) where the year ends in 1993, 70%,
(d) where the year ends in 1994, 60%,
(e) where the year ends in 1995, 50%,
(f) where the year ends in 1996, 40%,
(g) where the year ends in 1997, 30%,
(h) where the year ends in 1998, 20%,
(i) where the year ends in 1999, 10%, and
(j) where the year ends after 1999, 0%
of the amount, if any, by which
(k) the reserve that was deducted by the taxpayer under subsection 32(1) for the taxpayer’s last taxation year ending before 1991
exceeds
(l) the amount deductible by the taxpayer under subsection 32(1) for the taxpayer’s first taxation year ending after 1990,
and any amount so deducted by the taxpayer for a taxation year shall be deemed for the purposes of subsection 32(2) to have been deducted for that year under subsection 32(1).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 32;
- 1994, c. 7, Sch. II, s. 19.
Marginal note:Employee benefit plan deductions
32.1 (1) Where a taxpayer has made contributions to an employee benefit plan in respect of the taxpayer’s employees or former employees, the taxpayer may deduct in computing the taxpayer’s income for a taxation year
(a) such portion of an amount allocated to the taxpayer for the year under subsection 32.1(2) by the custodian of the plan as does not exceed the amount, if any, by which
(i) the total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding year
exceeds the total of all amounts each of which is
(ii) an amount in respect of the plan deducted by the taxpayer in computing the taxpayer’s income for a preceding year, or
(iii) an amount received by the taxpayer in the year or a preceding year that was a return of amounts contributed by the taxpayer to the plan; and
(b) where at the end of the year all of the obligations of the plan to the taxpayer’s employees and former employees have been satisfied and no property of the plan will thereafter be paid to or otherwise be available for the benefit of the taxpayer, the amount, if any, by which
(i) the total of all amounts each of which is a contribution by the taxpayer to the plan for the year or a preceding year
exceeds the total of all amounts each of which is
(ii) an amount in respect of the plan deducted by the taxpayer in computing the taxpayer’s income for a preceding year, or, by virtue of paragraph 32.1(1)(a), for the year, or
(iii) an amount received by the taxpayer in the year or a preceding year that was a return of amounts contributed by the taxpayer to the plan.
Marginal note:Allocation
(2) Every custodian of an employee benefit plan shall each year allocate to persons who have made contributions to the plan in respect of their employees or former employees the amount, if any, by which the total of
(a) all payments made in the year out of or under the plan to or for the benefit of their employees or former employees (other than the portion thereof that, by virtue of subparagraph 6(1)(g)(ii), is not required to be included in computing the income of a taxpayer), and
(b) all payments made in the year out of or under the plan to the heirs or the legal representatives of their employees or former employees
exceeds the income of the plan for the year.
Marginal note:Income of employee benefit plan
(3) For the purposes of subsection 32.1(2), the income of an employee benefit plan for a year
(a) in the case of a plan that is a trust, is the amount that would be its income for the year if section 104 were read without reference to subsections 104(4) to 104(24); and
(b) in any other case, is the total of all amounts each of which is the amount, if any, by which a payment under the plan by the custodian thereof in the year exceeds
(i) in the case of an annuity, that part of the payment determined in prescribed manner to have been a return of capital, and
(ii) in any other case, that part of the payment that could, but for paragraph 6(1)(g), reasonably be regarded as being a payment of a capital nature.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1980-81-82-83, c. 48, s. 14, c. 140, s. 15.
Marginal note:International banking centres — definitions
33.1 (1) In this section,
“eligible deposit”
« dépôt admissible »
“eligible deposit”, at any particular time, means a debt owing at the particular time by a taxpayer that is a prescribed financial institution as or on account of an amount deposited with the taxpayer by
(a) a non-resident person with whom the taxpayer is dealing at arm’s length at the particular time, where
(i) at the particular time, the deposit is recorded in the books of account of an international banking centre business of the taxpayer,
(ii) at the particular time, the taxpayer is not obligated, either immediately or in the future and either absolutely or contingently, to repay any portion of the debt to a person other than a non-resident person, and
(iii) before the deposit was recorded in the books of account of the international banking centre business, the taxpayer made reasonable inquiries and had no reasonable cause to believe that any portion of the amount was deposited on behalf of, for the benefit of or as a condition of any transaction with, a person (other than a non-resident person with whom the taxpayer was dealing at arm’s length), or
(b) another prescribed financial institution with whom the taxpayer is dealing at arm’s length at the particular time, where
(i) at or before the time at which the deposit was made, the prescribed financial institution provided written notice to the taxpayer that the deposit was being made from deposits recorded in the books of account of an international banking centre business of that prescribed financial institution, and
(ii) a reasonable rate of interest is paid or payable by the taxpayer in respect of the deposit;
“eligible loan”
« prêt admissible »
“eligible loan”, at any particular time, means
(a) a loan or deposit (in this paragraph referred to as a “loan”) made by a taxpayer that is a prescribed financial institution to a non-resident person (in this paragraph referred to as the “borrower”) with whom the taxpayer is dealing at arm’s length at the particular time, where
(i) at the particular time, neither a person other than a non-resident person nor a person with whom the taxpayer is not dealing at arm’s length is obligated to the taxpayer, either immediately or in the future and either absolutely or contingently, to pay to the taxpayer any amount in respect of the loan,
(ii) the loan was recorded in the books of account of an international banking centre business of the taxpayer throughout the period commencing with the later of
(A) the time at which the loan was made, and
(B) the earliest of
(I) the time at which the loan was first recorded in the books of account of a branch or office of the taxpayer located in Canada,
(II) the end of the first taxation year in respect of which the taxpayer has made any designation under subsection 33.1(3), and
(III) the end of 1992
and ending at the particular time,
(iii) in the case of a loan made before the end of the first taxation year in respect of which the taxpayer has made any designation under subsection 33.1(3) (other than a loan recorded in the books of account of an international banking centre business of the taxpayer at the time at which the loan was made) or a loan made to a foreign bank, the taxpayer made reasonable inquiries before the loan was recorded in the books of account of the international banking centre business and had no reasonable cause to believe that the borrower had used or would use any proceeds of the loan, directly or indirectly, for the purpose of
(A) earning income in Canada, or
(B) making a loan to a person other than a non-resident person, and
(iv) in the case of any other loan, the taxpayer, before the loan was recorded in the books of account of the international banking centre business,
(A) obtained a statement signed by or on behalf of the borrower that the borrower would not use any proceeds of the loan, directly or indirectly, for a purpose described in subparagraph 33.1(1) eligible loan (a)(iii), and
(B) had no reasonable cause to believe that the borrower would use any proceeds of the loan, directly or indirectly, for a purpose described in subparagraph (iii),
(b) a loan acquired by a taxpayer that is a prescribed financial institution from a foreign bank with which the taxpayer is not dealing at arm’s length at the time the loan was acquired, where the conditions described in subparagraphs (i) to (iii) are met at the particular time, or
(c) a deposit made by a taxpayer that is a prescribed financial institution with another prescribed financial institution with whom the taxpayer is dealing at arm’s length at the particular time where, at or before the time at which the deposit was made, the taxpayer provided written notice to the prescribed financial institution that the deposit was being made from deposits recorded in the books of account of an international banking centre business of the taxpayer;
“foreign bank”
« banque étrangère »
“foreign bank” has the meaning assigned by the definition “foreign bank” in section 2 of the Bank Act (read without reference to paragraph (g)), except that an authorized foreign bank is not considered to be a foreign bank in respect of its Canadian banking business;
“non-resident person”
« personne non-résidente »
“non-resident person” at any time, with respect to a taxpayer, includes a person that the taxpayer, based on reasonable inquiries, believes at that time to be a person not resident in Canada.
Marginal note:Interpretation
(2) For the purposes of this section,
(a) a partnership shall be deemed to be a person;
(b) where a member of a partnership and a person do not deal with each other at arm’s length, the partnership and the person shall be deemed not to deal with each other at arm’s length;
(c) a partnership is a non-resident person only where all of its members are non-resident non-resident persons; and
(d) a deposit made by or to a non-resident person or a loan made to a non-resident person does not include a deposit made by or to, or a loan made to, as the case may be, a fixed place of business in Canada of the non-resident person.
Marginal note:Designation and exemption
(3) Where a taxpayer that was, throughout a taxation year, a prescribed financial institution has designated in respect of the year, by filing a prescribed form with the Minister on or before the day that is 90 days after the commencement of the year, a branch or office of the taxpayer in the metropolitan area of Montreal in the Province of Quebec or in the metropolitan area of Vancouver in the Province of British Columbia as a branch or office in which an international banking centre business of the taxpayer is to be carried on and has not revoked that designation by filing a prescribed form with the Minister on or before that day, in computing the income of the taxpayer for the year no amount shall be added or deducted in respect of the taxpayer’s income or loss, as the case may be, for the year from the international banking centre business.
Marginal note:Income or loss from an international banking centre business
(4) Subject to subsection 33.1(5), the amount of a taxpayer’s income or loss, as the case may be, for a taxation year from an international banking centre business shall be determined on the assumption that
(a) the international banking centre business was a separate business carried on by the taxpayer the only income or loss of which was derived from eligible loans for the period in the year during which they were recorded in the books of account of the business; and
(b) the only amount payable for the year by the taxpayer in respect of interest on money borrowed for the purpose of earning income from the business was equal to the total of
(i) the total of all amounts each of which is the interest payable by the taxpayer in respect of an eligible deposit for the period in the year during which it was recorded in the books of account of the business, and
(ii) the amount equal to that proportion of
(A) the total of all amounts each of which is the amount determined in respect of a day in the year equal to the amount, if any, by which
(I) 96% of the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible loan recorded in the books of account of the business at the end of the day
exceeds
(II) the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible deposit recorded in the books of account of the business at the end of the day
that
(B) the total determined under subparagraph 33.1(4)(b)(i)
is of
(C) the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible deposit recorded in the books of account of the business at the end of a day in the year.
Marginal note:Restriction
(5) A taxpayer’s income for a taxation year from an international banking centre business shall not exceed that proportion of that income determined in accordance with subsection 33.1(4) that
(a) the total of all amounts each of which is an amount determined in respect of a day in the year equal to the lesser of
(i) 96% of the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible loan recorded in the books of account of the business at the end of the day, and
(ii) the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible deposit recorded in the books of account of the business at the end of the day
is of
(b) 96% of the total of all amounts each of which is the amount outstanding on account of the principal amount of an eligible loan recorded in the books of account of the business at the end of a day in the year.
Marginal note:Election
(6) For the purposes of subsections (4) and (5), where a taxpayer so elects in the taxpayer’s return of income for a taxation year or in a prescribed form filed with the Minister within 90 days after the day of sending of a notice of assessment for the year or a notification that no tax is payable for the year, an eligible deposit recorded in the books of account of an international banking centre business of the taxpayer at the end of a day in the year is deemed not to have been recorded at any time in the day in the books of account of that business and is deemed to have been recorded throughout that day in the books of account of another international banking centre business of the taxpayer designated by the taxpayer in the election.
Marginal note:Election restriction
(7) A taxpayer may elect, as provided in subsection 33.1(6), only in respect of eligible deposits recorded in the books of account of an international banking centre business at the end of a day to the extent that the total of those deposits exceeds 96% of the total of all amounts outstanding on account of the principal amounts of eligible loans recorded in the books of account of the business at the end of the day.
Marginal note:Limitation
(8) In computing the income of a taxpayer for a taxation year, an amount paid or payable by the taxpayer on a deposit for the period in the year during which it was an eligible deposit shall, notwithstanding any other provision of this Act, be deductible only in computing the income or loss of the taxpayer from an international banking centre business.
Marginal note:Exception
(9) Where less than 90% of the revenue of a taxpayer for a taxation year from loans or deposits for the period in the year during which they were recorded in the books of account of an international banking centre business was derived from eligible loans in respect of which employees of the taxpayer actively participated in the solicitation, negotiation, analysis or management thereof while employed at a branch or office designated under subsection 33.1(3) as a branch or office in which an international banking centre business of the taxpayer is to be carried on, the amount, if any, of the taxpayer’s income for the year from the international banking centre business shall, notwithstanding subsection 33.1(3), be included in computing the taxpayer’s income for the year.
Marginal note:No deduction permitted
(10) Notwithstanding any other provision of this Act, in computing the income of a taxpayer no deduction shall be made in respect of any amount paid or payable in respect of indebtedness of the taxpayer to any person where, under an arrangement of which the taxpayer was aware or ought to have been aware at the time the indebtedness was incurred by the taxpayer, any portion of the indebtedness may reasonably be regarded as having been provided directly or indirectly from proceeds of a loan recorded in the books of account of an international banking centre business of a prescribed financial institution and any person has, in respect of that loan, signed a statement described in subparagraph (a)(iv) of the definition “eligible loan” in subsection 33.1(1).
Marginal note:Application
(11) For greater certainty,
(a) where at any time a loan or deposit of a taxpayer ceases to be an eligible loan otherwise than by virtue of its disposition to another person, the taxpayer shall be deemed to have disposed of the loan or deposit in the course of carrying on an international banking centre business and to have received proceeds of disposition therefor equal to the fair market value of the loan or deposit at that time and to have reacquired the loan or deposit immediately after that time at a cost equal to its fair market value at that time;
(b) a taxpayer’s loss for a taxation year from an international banking centre business shall not be included in determining the taxpayer’s non-capital loss for the year; and
(c) the amount, if any, by which
(i) the amount that would be a taxpayer’s income for a taxation year from an international banking centre business if this section were read without reference to subsection 33.1(5)
exceeds
(ii) the taxpayer’s income for the year from the international banking centre business
shall be added in computing the income of the taxpayer for the year.
Marginal note:Return
(12) Every taxpayer that has, in respect of a taxation year, designated a branch or office under subsection 33.1(3) as a branch or office in which an international banking centre business of the taxpayer is to be carried on shall, within six months after the end of the year, file with the Minister a return in prescribed form containing prescribed information.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Professional business
34. In computing the income of a taxpayer for a taxation year from a business that is the professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, the following rules apply:
(a) where the taxpayer so elects in the taxpayer’s return of income under this Part for the year, there shall not be included any amount in respect of work in progress at the end of the year; and
(b) where the taxpayer has made an election under this section, paragraph 34(a) shall apply in computing the taxpayer’s income from the business for all subsequent taxation years unless the taxpayer, with the concurrence of the Minister and on such terms and conditions as are specified by the Minister, revokes the election to have that paragraph apply.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1“34”;
- 1973-74, c. 14, s. 8;
- 1980-81-82-83, c. 140, s. 16;
- 1985, c. 45, s. 13.
Marginal note:Additional Business Income
34.1 (1) Where
(a) an individual (other than a testamentary trust) carries on a business in a taxation year,
(b) a fiscal period of the business begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and
(c) the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,
there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula
(A - B) × C/D
where
- A
- is the total of the individual’s income from the business for the fiscal periods of the business that end in the year,
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,
- C
- is the number of days on which the individual carries on the business that are both in the year and in the particular period, and
- D
- is 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.
Marginal note:Additional income election
(2) Where
(a) an individual (other than a testamentary trust) begins carrying on a business in a taxation year and not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and
(b) the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,
there shall be included in computing the individual’s income for the year from the business the lesser of
(c) the amount designated in the individual’s return of income for the year, and
(d) the amount determined by the formula
(A - B) × C/D
where
- A
- is the individual’s income from the business for the particular period,
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,
- C
- is the number of days on which the individual carries on the business that are both in the year and in the particular period, and
- D
- is the number of days on which the individual carries on the business that are in the particular period.
Marginal note:Deduction
(3) There shall be deducted in computing an individual’s income for a taxation year from a business the amount, if any, included under subsection 34.1(1) or 34.1(2) in computing the individual’s income for the preceding taxation year from the business.
Marginal note:Deemed December 31, 1995 income
(4) For the purpose of section 34.2, where
(a) at the end of 1994 an individual carried on a particular business no fiscal period of which ended at that time, and
(b) an amount is included under subsection 34.1(1) in computing the individual’s income for the 1995 taxation year in respect of
(i) the particular business, or
(ii) another business that would, if subsection 34.2(3) applied for the purpose of this subparagraph, be included in the particular business,
subject to subsection 34.1(7), the December 31, 1995 income of the individual in respect of the particular business or the other business, as the case may be, is deemed to be the amount that would have been so included if the descriptions of A and B in subsection 34.1(1) were read as follows:
- “A
- is the total of the individual’s income from the business for the fiscal periods of the business that end in the year (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the year,”.
Marginal note:Deemed December 31, 1995 income
(5) For the purpose of section 34.2, where
(a) at the end of 1994 an individual carried on a particular business no fiscal period of which ended at that time, and
(b) an amount is included under subsection 34.1(2) in computing the individual’s income for the 1995 taxation year in respect of another business that would, if subsection 34.2(3) applied for the purpose of this paragraph, be included in the particular business,
the December 31, 1995 income of the individual in respect of the other business is deemed to be the amount that would have been so included if the descriptions of A and B in paragraph 34.1(2)(d) were read as follows:
- “A
- is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,”.
Marginal note:Deemed December 31, 1995 income
(6) For the purpose of section 34.2, where
(a) at the end of 1995 an individual carries on a business as a member of a partnership no fiscal period of which ended at the end of 1994,
(b) the business was carried on by a professional corporation as a member of the partnership at the end of 1994,
(c) the professional corporation transferred its interest in the partnership to the individual before the end of 1995,
(d) the individual is a practising member of the professional body under the authority of which the professional corporation practised the profession,
(e) the individual was a specified shareholder of the professional corporation immediately before the transfer,
(f) the professional corporation does not have a share of the income or loss of the partnership for the first fiscal period of the partnership that ends after the end of 1995, and
(g) an amount is included under subsection 34.1(2) in computing the individual’s income for the 1995 taxation year in respect of the business,
the December 31, 1995 income of the individual in respect of the business is deemed to be the amount that would have been so included if the descriptions of A and B in paragraph 34.1(2)(d) were read as follows:
- “A
- is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,”
and, for the purpose of computing the values of C and D in paragraph 34.1(2)(d), the individual is deemed to carry on the business on the days on which the corporation carried on the business.
Marginal note:Maximum December 31, 1995 income
(7) Where an amount was included under subsection 34.1(1) in computing an individual’s income for the 1995 taxation year from a business and
(a) the individual’s December 31, 1995 income otherwise determined under subsection 34.1(4) in respect of the business for the purpose of section 34.2
exceeds
(b) the amount that would be described under paragraph 34.1(7)(a) if the descriptions of A, B and D in subsection 34.1(1) were read as follows:
- “A
- is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
- B
- is the lesser of
(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,
- D
- is the number of days on which the individual carries on the business that are in the particular period.”,
for the purpose of applying subsection 34.2(4) to the 1996 and subsequent taxation years, the December 31, 1995 income of the individual in respect of the business is deemed to be the amount determined under paragraph 34.1(7)(b).
Marginal note:No additional income inclusion
(8) Subsections 34.1(1) and 34.1(2) do not apply in computing an individual’s income for a taxation year from a business where
(a) the individual dies or otherwise ceases to carry on the business in the year; or
(b) the individual becomes a bankrupt in the calendar year in which the taxation year ends.
Marginal note:Death of partner or proprietor
(9) Where
(a) an individual carries on a business in a taxation year,
(b) the individual dies in the year and after the end of a fiscal period of the business that ends in the year,
(c) another fiscal period of the business ends because of the individual’s death (in this subsection referred to as the “short period”), and
(d) the individual’s legal representative
(i) elects that this subsection apply in computing the individual’s income for the year, or
(ii) files a separate return of income under subsection 150(4) in respect of the individual’s business,
notwithstanding subsection 34.1(8), there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula
(A - B) × C/D
where
- A
- is 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,
- B
- is the lesser of
(i) the total of all amounts, each of which is an amount included in the value of A in respect of the business that is deemed to be a taxable capital gain for the purpose of section 110.6, and
(ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,
- C
- is the number of days in the short period, and
- D
- is 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. 1996, c. 21, s. 8;
- 1998, c. 19, s. 84.
Marginal note:Definitions
34.2 (1) The definitions in this subsection apply in this section.
“adjusted stub period accrual”
« montant comptabilisé ajusté pour la période tampon »
“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
(a) if paragraph (b) does not apply, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
- A
- is 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),
- B
- is 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,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in fiscal periods of the partnership that end in the year,
- E
- is 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, and
- F
- is 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; and
(b) if a fiscal period of the partnership ends in the corporation’s taxation year and the year is the first taxation year in which the fiscal period of the partnership is aligned with the fiscal period of one or more other partnerships under a multi-tier alignment (in this paragraph referred to as the “eligible fiscal period”),
(i) where a fiscal period of the partnership ends in the year and before the eligible fiscal period, the amount determined by the formula
[(A – B) × C/D] – (E + F)
where
- A
- is 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),
- B
- is 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,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in the first fiscal period of the partnership that ends in the year,
- E
- is 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, and
- F
- is 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, and
(ii) where the eligible fiscal period of the partnership is the first fiscal period of the partnership that ends in the corporation’s taxation year, the amount determined by the formula
(A – B – C) × D/E – (F + G)
where
- A
- is 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),
- B
- is 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,
- C
- is the corporation’s eligible alignment income for the eligible fiscal period,
- D
- is the number of days that are in both the year and the particular period,
- E
- is the number of days that are in the eligible fiscal period that ends in the year,
- F
- is 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, and
- G
- is 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.
“eligible alignment income”
« revenu d’alignement admissible »
“eligible alignment income”, of a corporation, means
(a) if a partnership is subject to a single-tier alignment, the first aligned fiscal period of the partnership ends in the first taxation year of the corporation ending after March 22, 2011 (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period,
(i) where the eligible fiscal period is preceded by another fiscal period of the partnership that ends in the corporation’s first taxation year that ends after March 22, 2011 and the corporation is a member of the partnership at the end of that preceding fiscal period, the amount determined by the formula
A – B – C
where
- A
- is 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),
- B
- is 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, and
- C
- is, 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, or
(ii) where the eligible fiscal period is the first fiscal period of the partnership that ends in the corporation’s first taxation year ending after March 22, 2011, nil; and
(b) if a partnership is subject to a multi-tier alignment, the first aligned fiscal period of the partnership ends in the taxation year of the corporation (in this paragraph referred to as the “eligible fiscal period”) and the corporation is a member of the partnership at the end of the eligible fiscal period, the amount determined by the formula
A – B – C
where
- A
- is 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
(i) for which a deduction is available under section 112 or 113, or
(ii) that would be included in computing the income of the corporation for the year if there were no multi-tier alignment,
- B
- is 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, and
- C
- is, 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.
“multi-tier alignment”
« alignement pour paliers multiples »
“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.
“qualified resource expense”
« dépense admissible relative à des ressources »
“qualified resource expense”, of a corporation for a taxation year in respect of a fiscal period of a partnership that begins in the year and ends after the year, means an expense incurred by the partnership in the portion of the fiscal period that is in the year and that is described in any of the following definitions:
(a) “Canadian exploration expense” in subsection 66.1(6);
(b) “Canadian development expense” in subsection 66.2(5);
(c) “foreign resource expense” in subsection 66.21(1); and
(d) “Canadian oil and gas property expense” in subsection 66.4(5).
“qualifying transitional income”
« revenu admissible à l’allègement »
“qualifying transitional income”, of a corporation that is a member of a partnership on March 22, 2011, means the amount that is the total of the following amounts, computed in accordance with subsection (15),
(a) the corporation’s eligible alignment income in respect of the partnership, and
(b) the corporation’s adjusted stub period accrual in respect of the partnership for
(i) if there is a multi-tier alignment in respect of the partnership, the corporation’s taxation year during which ends the fiscal period of the partnership that is aligned with the fiscal period of one or more other partnerships under the multi-tier alignment, or
(ii) in any other case, the corporation’s first taxation year that ends after March 22, 2011.
“significant interest”
« participation importante »
“significant interest”, of a corporation in a partnership at any time, means a membership interest of the corporation in the partnership if the corporation, or the corporation together with one or more persons or partnerships related to or affiliated with the corporation, is entitled at that time to more than 10% of
(a) the income or loss of the partnership; or
(b) the assets (net of liabilities) of the partnership if it were to cease to exist.
“single-tier alignment”
« alignement pour palier unique »
“single-tier alignment”, in respect of a partnership, means the ending of a fiscal period of the partnership under subsection 249.1(8).
“specified percentage”
« pourcentage déterminé »
“specified percentage”, of a corporation for a particular taxation year in respect of a partnership, means
(a) if the first taxation year for which the corporation has qualifying transitional income ends in 2011 and the particular year ends in
(i) 2011, 100%,
(ii) 2012, 85%,
(iii) 2013, 65%,
(iv) 2014, 45%,
(v) 2015, 25%, and
(vi) 2016, 0%;
(b) if the first taxation year for which the corporation has qualifying transitional income ends in 2012 and the particular year ends in
(i) 2012, 100%,
(ii) 2013, 85%,
(iii) 2014, 65%,
(iv) 2015, 45%,
(v) 2016, 25%, and
(vi) 2017, 0%; and
(c) if the first taxation year for which the corporation has qualifying transitional income ends in 2013 and the particular year ends in
(i) 2013, 85%,
(ii) 2014, 65%,
(iii) 2015, 45%,
(iv) 2016, 25%, and
(v) 2017, 0%.
Marginal note:Income inclusion — adjusted stub period accrual
(2) Subject to subsections (5) and (9), a corporation (other than a professional corporation) shall include in computing its income for a taxation year its adjusted stub period accrual in respect of a partnership if
(a) the corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the year;
(b) another fiscal period of the partnership begins in the year and ends after the year; and
(c) at the end of the year, the corporation is entitled to a share of an income, loss, taxable capital gain or allowable capital loss of the partnership for the fiscal period referred to in paragraph (b).
Marginal note:Income inclusion — new partner designation
(3) Subject to subsection (5), if a corporation (other than a professional corporation) becomes a member of a partnership during a fiscal period of the partnership (in this subsection referred to as the “particular period”) that begins in the corporation’s taxation year and ends after the taxation year but on or before the filing-due date for the taxation year and the corporation has a significant interest in the partnership at the end of the particular period, the corporation may include in computing its income for the taxation year the lesser of
(a) the amount, if any, designated by the corporation in its return of income for the taxation year, and
(b) the amount determined by the formula
A × B/C
where
- A
- is 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),
- B
- is the number of days that are both in the corporation’s taxation year and the particular period, and
- C
- is the number of days in the particular period.
Marginal note:Deduction in following year
(4) A corporation may deduct in computing its income for a taxation year each amount that was included in computing its income in respect of a partnership for the immediately preceding taxation year under subsection (2) or (3).
Marginal note:Character of amounts
(5) For the purposes of this Act, the following rules apply:
(a) in computing the income of a corporation for a taxation year,
(i) an adjusted stub period accrual included under subsection (2) in respect of a partnership for the year is deemed to be income and taxable capital gains having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for all fiscal periods of the partnership ending in the year,
(ii) an amount included under subsection (3) in respect of a partnership for the year is deemed to be income and taxable capital gains having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for the particular period referred to in that subsection,
(iii) an amount deductible under subsection (4) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the income and taxable capital gains included in the corporation’s income for the immediately preceding taxation year under subsection (2) or (3) in respect of the partnership,
(iv) an amount deductible as a reserve under subsection (11) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the qualifying transitional income in respect of the partnership for the year, and
(v) an amount included in income under subsection (12) in respect of the partnership for the year is deemed to have the same character and to be in the same proportions as the amount deducted under subsection (11) for the immediately preceding taxation year; and
(b) a corporation is deemed to have realized at the end of a taxation year an allowable capital loss equal to the amount determined by the formula
A – (B – C)
where
- A
- is the amount deductible by the corporation under subsection (4) for the year in respect of taxable capital gains of a partnership,
- B
- is the amount that is the total of
(i) all taxable capital gains allocated by the partnership to the corporation for the year,
(ii) the amount included in the corporation’s income under subsection (2) for the year in respect of taxable capital gains of the partnership, and
(iii) the amount included in the corporation’s income under subsection (12) for the year in respect of taxable capital gains of the partnership, and
- C
- is the amount, if any, that is the lesser of
(i) the amount that is the total of all allowable capital losses allocated by the partnership to the corporation for the year, and
(ii) the amount determined under subparagraph (i) of the description of B.
Marginal note:Designation — qualified resource expense
(6) A corporation may designate an amount for a taxation year in respect of a qualified resource expense under the definition “adjusted stub period accrual” in subsection (1) subject to the following rules:
(a) the corporation cannot designate an amount for the year in respect of a qualified resource expense in respect of a partnership except to the extent the corporation obtains from the partnership, before the corporation’s filing-due date for the year, information in writing identifying the corporation’s qualified resource expenses described
(i) in paragraph (h) of the 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,
(ii) 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,
(iii) 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, and
(iv) in 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; and
(b) the amount designated for the year by the corporation is not to exceed the maximum amount that would be deductible by the corporation under any of sections 66.1, 66.2, 66.21 and 66.4 in computing its income for the year if
(i) the amounts referred to in paragraph (a) in respect of the partnership were the only amounts relevant in determining the maximum amount, and
(ii) the fiscal period of the partnership that begins in the year and ends after the year had ended at the end of the year and each qualified resource expense were deemed under subsection 66(18) to be incurred by the corporation at the end of the year.
Marginal note:No additional income — bankrupt
(7) Subsections (2) and (3) do not apply in computing a corporation’s income for a taxation year in respect of a partnership if the corporation becomes a bankrupt in the year.
Marginal note:Foreign affiliates
(8) This section does not apply for the purposes of computing, for a taxation year of a foreign affiliate of a corporation resident in Canada,
(a) the foreign accrual property income of the affiliate in respect of the corporation; and
(b) except to the extent that the context otherwise requires, the exempt surplus or exempt deficit 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.
Marginal note:Special case — multi-tier alignment
(9) If a corporation is a member of a partnership subject to a multi-tier alignment, subsection (2) does not apply to the corporation in respect of the partnership for taxation years preceding the taxation year that includes the end of the first aligned fiscal period of the partnership under the multi-tier alignment.
Marginal note:Designations
(10) Once a corporation makes a designation in calculating its adjusted stub period accrual in respect of a partnership for a taxation year under any of the description of E or F of paragraph (a), the description of E or F of subparagraph (b)(i) and the description of F or G of subparagraph (b)(ii) of the definition “adjusted stub period accrual” in subsection (1), the designation cannot be amended or revoked.
Marginal note:Transitional reserve
(11) A corporation that has qualifying transitional income in respect of a partnership for a particular taxation year may deduct in computing its income, as a reserve, for the particular year such amount as the corporation claims not exceeding the least of
(a) the specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership,
(b) if, for the immediately preceding taxation year, an amount was deductible under this subsection in computing the corporation’s income in respect of the partnership, the amount that is the total of
(i) the amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, and
(ii) the amount by which the corporation’s qualifying transitional income in respect of the partnership is increased in the particular year because of the application of subsections (16) and (17), and
(c) the corporation’s income for the particular year computed before deducting any amount under this subsection in respect of the partnership or under sections 61.3 and 61.4.
Marginal note:Inclusion of prior year reserve
(12) A corporation shall include in computing its income in respect of a partnership for a taxation year the amount, if any, deducted by it under subsection (11) in respect of the partnership for its immediately preceding taxation year.
Marginal note:No reserve
(13) No deduction shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnership
(a) unless,
(i) in the case of a corporation that is a member of a partnership in respect of which there is a multi-tier alignment, the corporation has been a member of the partnership continuously since before March 22, 2011 to the end of the year,
(ii) in the case of a corporation that is a member of a partnership in respect of which there is no multi-tier alignment, the corporation is a member of the partnership
(A) at the end of the partnership’s fiscal period that begins before March 22, 2011 and ends in the year of the corporation that includes March 22, 2011,
(B) at the end of the partnership’s fiscal period commencing immediately after the fiscal period referred to in clause (A) and continues to be a member until after the end of the year of the corporation that includes March 22, 2011, and
(C) continuously since before March 22, 2011 until the end of the year;
(b) if at the end of the year or at any time in the following taxation year,
(i) the corporation’s income is exempt from tax under this Part, or
(ii) the corporation is non-resident and the partnership does not carry on business through a permanent establishment (as defined for the purpose of subsection 16.1(1)) in Canada; or
(c) if the year ends immediately before another taxation year
(i) at the beginning of which the partnership no longer principally carries on the activities to which the reserve relates,
(ii) in which the corporation becomes a bankrupt, or
(iii) in which the corporation is dissolved or wound up (other than in circumstances to which subsection 88(1) applies).
Marginal note:Deemed partner
(14) A corporation that cannot deduct 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 the partnership continuously until the end of the taxation year if
(a) the corporation disposed of its interest to another corporation related to, or affiliated with, the corporation at the time of the disposition; and
(b) a corporation related to, or affiliated with, the corporation has the partnership interest referred to in paragraph (a) at the end of the taxation year.
Marginal note:Computing qualifying transitional income — special rules
(15) For the purposes of determining a corporation’s qualifying transitional income, the income or loss, as the case may be, of a partnership for a fiscal period shall be computed as if
(a) the partnership had deducted for the period the maximum amount deductible in respect of any expense, reserve, allowance or other amount;
(b) this Act were read without reference to paragraph 28(1)(b); and
(c) the partnership had made an election under paragraph 34(a).
Marginal note:Qualifying transition income adjustment — conditions for application
(16) Subsection (17) applies for a particular taxation year of a corporation and for each subsequent taxation year for which the corporation may deduct an amount under subsection (11) in respect of a partnership if the particular year is the first taxation year
(a) that is after the taxation year in which the corporation has, or would have if the partnership had income, an adjusted stub period accrual that is included in the corporation’s qualifying transitional income in respect of the partnership by reason of paragraph (b) of the definition “qualifying transitional income” in subsection (1); and
(b) in which ends the fiscal period of the partnership that began in the taxation year referred to in paragraph (a).
Marginal note:Adjustment of qualifying transitional income
(17) If this subsection applies in respect of a partnership for a taxation year of a corporation, the adjusted stub period accrual included in the corporation’s qualifying transitional income in respect of the partnership for the year is computed as if
(a) the descriptions in paragraph (a) and subparagraph (b)(i) of the definition “adjusted stub period accrual” in subsection (1) read as follows:
- A
- is 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),
- B
- is 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,
- C
- is the number of days that are in both the year and the particular period,
- D
- is the number of days in the particular period,
- E
- is 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, and
- F
- is nil; and
(b) the descriptions in subparagraph (b)(ii) of the definition “adjusted stub period accrual” in subsection (1) read as follows:
- A
- is 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),
- B
- 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 particular period,
- C
- is the corporation’s eligible alignment income for the eligible fiscal period,
- D
- is the number of days that are in both the year and the particular period,
- E
- is the number of days in the particular period,
- F
- is 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, and
- G
- is nil.
Marginal note:Anti-avoidance
(18) If it is reasonable to conclude that one of the main reasons a corporation is a member of a partnership in a taxation year is to avoid the application of subsection (13), the corporation is deemed not to be a member of the partnership for the purposes of that subsection.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1996, c. 21, s. 8;
- 1998, c. 19, s. 85;
- 2011, c. 24, s. 3.
Marginal note:Definitions
34.3 (1) The definitions in this subsection and in subsection 34.2(1) apply in this section.
“actual stub period accrual”
« montant comptabilisé réel pour la période tampon »
“actual stub period accrual”, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C/D – E
where
- A
- is 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);
- B
- is 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);
- C
- is the number of days that are in both the base year and the fiscal period;
- D
- is the number of days in the fiscal period; and
- E
- is 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.
“base year”
« année de base »
“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.
“income shortfall adjustment”
« rajustement pour revenu insuffisant »
“income shortfall adjustment”, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula
(A – B) × C × D
where
- A
- is the amount that is the lesser of
(a) the actual stub period accrual in respect of the qualifying partnership, and
(b) the amount that would be the corporation’s adjusted stub period accrual for the base year in respect of the qualifying partnership if the value of F in paragraph (a) of the definition “adjusted stub period accrual” in subsection 34.2(1) were nil;
- B
- is the amount included under subsection 34.2(2) in computing the corporation’s income for the base year in respect of the qualifying partnership;
- C
- is the number of days in the period that
(a) begins on the day after the day on which the base year ends, and
(b) ends on the day on which the taxation year ends; and
- D
- is 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.
“qualifying partnership”
« société de personnes admissible »
“qualifying partnership”, in respect of a corporation for a particular taxation year, means a partnership
(a) a fiscal period of which began in a preceding taxation year and ends in the particular taxation year; and
(b) in respect of which the corporation was required to calculate an adjusted stub period accrual for the preceding taxation year.
Marginal note:Application of subsection (3)
(2) Subsection (3) applies to a corporation for a taxation year if
(a) the corporation has designated an amount for the purpose of the description of F in paragraph (a) of the 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; and
(b) where the corporation has qualifying transitional income, the taxation year is after the first taxation year of the corporation to which subsection 34.2(17) applies.
Marginal note:Income shortfall adjustment — inclusion
(3) If this subsection applies to a corporation for a taxation year, the corporation shall include in computing its income for the taxation year the amount determined by the formula
A + 0.50 × (A – B)
where
- A
- is 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; and
- B
- is 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. 2011, c. 24, s. 3.
Marginal note:Prospectors and grubstakers
35. (1) Where a share of the capital stock of a corporation
(a) is received in a taxation year by an individual as consideration for the disposition by the individual to the corporation of a mining property or interest therein acquired by the individual as a result of the individual’s efforts as a prospector, either alone or with others, or
(b) is received in a taxation year
(i) by a person who has, either under an arrangement with a prospector made before the prospecting, exploration or development work or as an employer of a prospector, advanced money for, or paid part or all of, the expenses of prospecting or exploring for minerals or of developing a property for minerals, and
(ii) as consideration for the disposition by the person referred to in subparagraph 35(1)(b)(i) to the corporation of a mining property or interest therein acquired under the arrangement under which that person made the advance or paid the expenses, or if the prospector was the person’s employee, acquired by the person through the employee’s efforts,
the following rules apply:
(c) notwithstanding any other provision of this Act, no amount in respect of the receipt of the share shall be included
(i) in computing the income for the year of the individual or person, as the case may be, except as provided in paragraph 35(1)(d), or
(ii) in computing at any time the amount to be determined for F in the definition “cumulative Canadian development expense” in subsection 66.2(5) in respect of the individual or person, as the case may be,
(d) in the case of an individual or partnership (other than a partnership each member of which is a taxable Canadian corporation), an amount in respect of the receipt of the share equal to the lesser of its fair market value at the time of acquisition and its fair market value at the time of disposition or exchange of the share shall be included in computing the income of the individual or partnership, as the case may be, for the year in which the share is disposed of or exchanged,
(e) notwithstanding subdivision c, in computing the cost to the individual, person or partnership, as the case may be, of the share, no amount shall be included in respect of the disposition of the mining property or the interest therein, as the case may be,
(f) notwithstanding sections 66 and 66.2, in computing the cost to the corporation of the mining property or the interest therein, as the case may be, no amount shall be included in respect of the share, and
(g) for the purpose of paragraph 35(1)(d), an individual or partnership shall be deemed to have disposed of or exchanged shares that are identical properties in the order in which they were acquired.
Marginal note:Definitions
(2) In this section,
“mining property”
« bien minier »
“mining property” means
(a) a right, licence or privilege to prospect, explore, drill or mine for minerals in a mineral resource in Canada, or
(b) real property in Canada (other than depreciable property) the principal value of which depends on its mineral resource content;
“prospector”
« prospecteur »
“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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 35;
- 2001, c. 17, s. 20.
Marginal note:Railway companies
36. Where any amount in respect of an expenditure incurred by a taxpayer on or in respect of the repair, replacement, alteration or renovation of depreciable property of the taxpayer of a prescribed class is, under a uniform classification and system of accounts and returns prescribed by the National Transportation Agency pursuant to the Railway Act, required to be entered in the books of the taxpayer otherwise than as an expense,
(a) no deduction may be made in respect of that expenditure in computing the income of the taxpayer for a taxation year; and
(b) for the purposes of section 13 and regulations made under paragraph 20(1)(a), the taxpayer shall be deemed to have acquired, at the time the expenditure was incurred, depreciable property of a class prescribed by regulation at a capital cost equal to that amount.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1“36”;
- 1976-77, c. 4, s. 8;
- 1987, c. 34, s. 368.
Marginal note:Scientific research and experimental development
37. (1) Where a taxpayer carried on a business in Canada in a taxation year, there may be deducted in computing the taxpayer’s income from the business for the year such amount as the taxpayer claims not exceeding the amount, if any, by which the total of
(a) the total of all amounts each of which is an expenditure of a current nature made by the taxpayer in the year or in a preceding taxation year ending after 1973
(i) on scientific research and experimental development carried on in Canada, directly undertaken by or on behalf of the taxpayer, and related to a business of the taxpayer,
(i.1) by payments to a corporation resident in Canada to be used for scientific research and experimental development carried on in Canada that is related to a business of the taxpayer, but only where the taxpayer is entitled to exploit the results of that scientific research and experimental development,
(ii) by payments to
(A) an approved association that undertakes scientific research and experimental development,
(B) an approved university, college, research institute or other similar institution,
(C) a corporation resident in Canada and exempt from tax under paragraph 149(1)(j), or
(D) [Repealed, 1996, c. 21, s. 9(4)]
(E) an approved organization that makes payments to an association, institution or corporation described in any of clauses A to (C)
to be used for scientific research and experimental development carried on in Canada that is related to a business of the taxpayer, but only where the taxpayer is entitled to exploit the results of that scientific research and experimental development, or
(iii) where the taxpayer is a corporation, by payments to a corporation resident in Canada and exempt from tax because of paragraph 149(1)(j), for scientific research and experimental development that is basic research or applied research carried on in Canada
(A) the primary purpose of which is the use of results therefrom by the taxpayer in conjunction with other scientific research and experimental development activities undertaken or to be undertaken by or on behalf of the taxpayer that relate to a business of the taxpayer, and
(B) that has the technological potential for application to other businesses of a type unrelated to that carried on by the taxpayer, and
(b) the lesser of
(i) the total of all amounts each of which is an expenditure of a capital nature made by the taxpayer (in respect of property acquired that would be depreciable property of the taxpayer if this section were not applicable in respect of the property, other than land or a leasehold interest in land) in the year or in a preceding taxation year ending after 1958 on scientific research and experimental development carried on in Canada, directly undertaken by or on behalf of the taxpayer, and related to a business of the taxpayer, and
(ii) the undepreciated capital cost to the taxpayer of the property so acquired as of the end of the taxation year (before making any deduction under this paragraph in computing the income of the taxpayer for the taxation year),
(c) the total of all amounts each of which is an expenditure made by the taxpayer in the year or in a preceding taxation year ending after 1973 by way of repayment of amounts described in paragraph 37(1)(d),
(c.1) all amounts included by virtue of paragraph 12(1)(v), in computing the taxpayer’s income for any previous taxation year,
(c.2) all amounts added because of subsection 127(27), (29) or (34) to the taxpayer’s tax otherwise payable under this Part for any preceding taxation year, and
(c.3) in the case of a partnership, all amounts each of which is an excess referred to in subsection 127(30) in respect of the partnership for any preceding fiscal period,
exceeds the total of
(d) the total of all amounts each of which is the amount of any government assistance or non-government assistance (within the meanings assigned to those expressions by subsection 127(9)) in respect of an expenditure described in paragraph 37(1)(a) or 37(1)(b) that, at the taxpayer’s filing-due date for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive,
(d.1) the total of all amounts each of which is the super-allowance benefit amount (within the meaning assigned by subsection 127(9)) for the year or for a preceding taxation year in respect of the taxpayer in respect of a province,
(e) that part of the total of all amounts each of which is an amount deducted under subsection 127(5) in computing the tax payable under this Part by the taxpayer for a preceding taxation year where the amount can reasonably be attributed to
(i) a prescribed proxy amount for a preceding taxation year,
(ii) an expenditure of a current nature incurred in a preceding taxation year that was a qualified expenditure incurred in that preceding year in respect of scientific research and experimental development for the purposes of section 127, or
(iii) an amount included because of paragraph 127(13)(e) in the taxpayer’s SR&ED qualified expenditure pool at the end of a preceding taxation year within the meaning assigned by subsection 127(9),
(f) the total of all amounts each of which is an amount deducted under this subsection in computing the taxpayer’s income for a preceding taxation year, except amounts described in subsection 37(6),
(f.1) the total of all amounts each of which is the lesser of
(i) the amount deducted under section 61.3 in computing the taxpayer’s income for a preceding taxation year, and
(ii) the amount, if any, by which the amount that was deductible under this subsection in computing the taxpayer’s income for that preceding year exceeds the amount claimed under this subsection in computing the taxpayer’s income for that preceding year,
(g) the total of all amounts each of which is an amount equal to twice the amount claimed under subparagraph 194(2)(a)(ii) by the taxpayer for the year or any preceding taxation year, and
(h) where the taxpayer is a corporation control of which has been acquired by a person or group of persons before the end of the year, the amount determined for the year under subsection 37(6.1) with respect to the corporation.
Marginal note:Business of related corporations
(1.1) Notwithstanding paragraph 37(8)(c), for the purposes of subsection 37(1), where a taxpayer is a corporation, scientific research and experimental development, related to a business carried on by another corporation to which the taxpayer is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)) and in which that other corporation is actively engaged, at the time at which an expenditure or payment in respect of the scientific research and experimental development is made by the taxpayer, shall be considered to be related to a business of the taxpayer at that time.
Marginal note:Deemed time of capital expenditure
(1.2) For the purposes of paragraph 37(1)(b), an expenditure made by a taxpayer in respect of property shall be deemed not to have been made before the property is considered to have become available for use by the taxpayer.
Marginal note:SR&ED in the exclusive economic zone
(1.3) For the purposes of this section and section 127 of this Act and Part XXIX of the Income Tax Regulations, an expenditure is deemed to have been made by a taxpayer in Canada if the expenditure is
(a) made by the taxpayer in the course of a business carried on by the taxpayer in Canada; and
(b) made for the prosecution of scientific research and experimental development in the exclusive economic zone of Canada, within the meaning of the Oceans Act, or in the airspace above that zone or the seabed or subsoil below that zone.
Marginal note:Salary or wages for SR&ED outside Canada
(1.4) For the purposes of this section, section 127 and Part XXIX of 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.
Marginal note:Salary or wages outside Canada — limit determined
(1.5) The amount of a taxpayer’s expenditure for a taxation year determined under this subsection is the lesser of
(a) the amount that is the total of all expenditures each of which is an expenditure made by the taxpayer, in the taxation year and after February 25, 2008, in respect of an expense incurred in the taxation year for salary or wages paid to the taxpayer’s employee who was resident in Canada at the time the expense was incurred in respect of scientific research and experimental development,
(i) that was carried on outside Canada,
(ii) that was directly undertaken by the taxpayer,
(iii) that related to a business of the taxpayer, and
(iv) that was solely in support of scientific research and experimental development carried on in Canada by the taxpayer, and
(b) the amount that is 10 per cent of the total of all expenditures, made by the taxpayer in the year, each of which would, if this Act were read without reference to subsection (1.4), be an expenditure made in respect of an expense incurred in the year for salary or wages paid to an employee in respect of scientific research and experimental development that was carried on in Canada, that was directly undertaken by the taxpayer and that related to a business of the taxpayer.
Marginal note:Research outside Canada
(2) In computing the income of a taxpayer for a taxation year from a business of the taxpayer, there may be deducted expenditures of a current nature made by the taxpayer in the year
(a) on scientific research and experimental development carried on outside Canada, directly undertaken by or on behalf of the taxpayer, and related to the business (except to the extent that subsection (1.4) deems the expenditures to have been made in Canada); or
(b) by payments to an approved association, university, college, research institute or other similar institution to be used for scientific research and experimental development carried on outside Canada related to the business provided that the taxpayer is entitled to exploit the results of that scientific research and experimental development.
Marginal note:Minister may obtain advice
(3) The Minister may obtain the advice of the Department of Industry, the National Research Council of Canada, the Defence Research Board or any other agency or department of the Government of Canada carrying on activities in the field of scientific research as to whether any particular activity constitutes scientific research and experimental development.
Marginal note:Where no deduction allowed under section
(4) No deduction may be made under this section in respect of an expenditure made to acquire rights in, or arising out of, scientific research and experimental development.
Marginal note:Where no deduction allowed under ss. 110.1 and 118.1
(5) Where, in respect of an expenditure on scientific research and experimental development made by a taxpayer in a taxation year, an amount is otherwise deductible under this section and under section 110.1 or 118.1, no deduction may be made in respect of the expenditure under section 110.1 or 118.1 in computing the taxable income of, or the tax payable by, the taxpayer for any taxation year.
Marginal note:Expenditures of a capital nature
(6) An amount claimed under subsection 37(1) that may reasonably be considered to be in respect of a property described in paragraph 37(1)(b) shall, for the purpose of section 13, be 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 shall be deemed to be of a separate prescribed class.
Marginal note:Amount referred to in para. (1)(h)
(6.1) Where a taxpayer is a corporation control of which was last acquired by a person or group of persons at any time (in this subsection referred to as “that time”) before the end of a taxation year of the corporation, the amount determined for the purposes of paragraph 37(1)(h) for the year with respect to the corporation in respect of a business is the amount, if any, by which
(a) the amount, if any, by which
(i) the total of all amounts each of which is
(A) an expenditure described in paragraph 37(1)(a) or 37(1)(c) that was made by the corporation before that time,
(B) the lesser of the amounts determined in respect of the corporation under subparagraphs 37(1)(b)(i) and 37(1)(b)(ii) immediately before that time, or
(C) an amount determined in respect of the corporation under paragraph 37(1)(c.1) for its taxation year ending immediately before that time
exceeds the total of all amounts each of which is
(ii) the total of all amounts determined in respect of the corporation under paragraphs 37(1)(d) to 37(1)(g) for its taxation year ending immediately before that time, or
(iii) the amount deducted by virtue of subsection 37(1) in computing the corporation’s income for its taxation year ending immediately before that time
exceeds
(b) the total of
(i) where the business to which the amounts described in clause (a)(i)(A), (B) or (C) may reasonably be considered to have been related was carried on by the corporation for profit or with a reasonable expectation of profit throughout the year, the total of
(A) the corporation’s income for the year from the business before making any deduction under subsection 37(1), and
(B) where properties were sold, leased, rented or developed, or services were rendered, in the course of carrying on the business before that time, the corporation’s income for the year, before making any deduction under subsection 37(1), from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services, and
(ii) the total of all amounts each of which is an amount determined in respect of a preceding taxation year of the corporation that ended after that time equal to the lesser of
(A) the amount determined under subparagraph 37(6.1)(b)(i) with respect to the corporation in respect of the business for that preceding year, and
(B) the amount in respect of the business deducted by virtue of subsection 37(1) in computing the corporation’s income for that preceding year.
Marginal note:Definitions
(7) In this section,
“approved”
« agréé »
“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;
- “scientific research and experimental development”
“scientific research and experimental development”[Repealed, 1996, c. 21, s. 9(8)]
Marginal note:Interpretation
(8) In this section,
(a) references to expenditures on or in respect of scientific research and experimental development
(i) where the references occur in subsection 37(2), include only
(A) expenditures each of which was an expenditure incurred for and all or substantially all of which was attributable to the prosecution of scientific research and experimental development, and
(B) expenditures of a current nature that were directly attributable, as determined by regulation, to the prosecution of scientific research and experimental development, and
(ii) where the references occur other than in subsection 37(2), include only
(A) expenditures incurred by a taxpayer in a taxation year (other than a taxation year for which the taxpayer has elected under clause (B)), each of which is
(I) an expenditure of a current nature all or substantially all of which was attributable to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development in Canada,
(II) an expenditure of a current nature directly attributable, as determined by regulation, to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development in Canada, or
(III) an expenditure of a capital nature that at the time it was incurred was for the provision of premises, facilities or equipment, where at that time it was intended
1. that it would be used during all or substantially all of its operating time in its expected useful life for, or
2. that all or substantially all of its value would be consumed in,
the prosecution of scientific research and experimental development in Canada, and
(B) where a taxpayer has elected in prescribed form and in accordance with subsection 37(10) for a taxation year, expenditures incurred by the taxpayer in the year each of which is
(I) an expenditure of a current nature for, and all or substantially all of which was attributable to, the lease of premises, facilities or equipment for the prosecution of scientific research and experimental development in Canada, other than an expenditure in respect of general purpose office equipment or furniture,
(II) an expenditure in respect of the prosecution of scientific research and experimental development in Canada directly undertaken on behalf of the taxpayer,
(III) an expenditure described in subclause (A)(III), other than an expenditure in respect of general purpose office equipment or furniture,
(IV) that portion of an expenditure made in respect of an expense incurred in the year for salary or wages of an employee who is directly engaged in scientific research and experimental development in Canada that can reasonably be considered to relate to such work having regard to the time spent by the employee thereon, and, for this purpose, where that portion is all or substantially all of the expenditure, that portion shall be deemed to be the amount of the expenditure,
(V) the cost of materials consumed in the prosecution of scientific research and experimental development in Canada, or
(VI) 1/2 of any other expenditure of a current nature in respect of the lease of premises, facilities or equipment used primarily for the prosecution of scientific research and experimental development in Canada, other than an expenditure in respect of general purpose office equipment or furniture;
(b) for greater certainty, references to scientific research and experimental development related to a business include any scientific research and experimental development that may lead to or facilitate an extension of that business;
(c) except in the case of a taxpayer who derives all or substantially all of the taxpayer’s revenue from the prosecution of scientific research and experimental development (including the sale of rights arising out of scientific research and experimental development carried on by the taxpayer), the prosecution of scientific research and experimental development shall not be considered to be a business of the taxpayer to which scientific research and experimental development is related; and
(d) notwithstanding paragraph 37(8)(a), references to expenditures on or in respect of scientific research and experimental development shall not include
(i) any capital expenditure made in respect of the acquisition of a building, other than a prescribed special-purpose building, including a leasehold interest therein,
(ii) any outlay or expense made or incurred for the use of, or the right to use, a building other than a prescribed special-purpose building, and
(iii) payments made by a taxpayer to
(A) a corporation resident in Canada and exempt from tax under paragraph 149(1)(j), an approved research institute or an approved association, with which the taxpayer does not deal at arm’s length,
(B) a corporation other than a corporation referred to in clause (A), or
(C) an approved university, college or organization
to be used for scientific research and experimental development
(D) in the case of such a payment to a person described in clause (A) or (B), to the extent that the amount of the payment may reasonably be considered to have been made to enable the recipient to acquire a building or a leasehold interest in a building or to pay an amount in respect of the rental expense in respect of a building, and
(E) in the case of a payment to a person described in clause (C), to the extent that the amount of the payment may reasonably be considered to have been made to enable the recipient to acquire a building, or a leasehold interest in a building, in which the taxpayer has, or may reasonably be expected to acquire, an interest.
Marginal note:Salary or wages
(9) An expenditure of a taxpayer
(a) does not include, for the purposes of clauses (8)(a)(ii)(A) and (B), remuneration based on profits or a bonus, where the remuneration or bonus, as the case may be, is in respect of a specified employee of the taxpayer, and
(b) includes, for the purpose of paragraph (1.5)(a), an amount paid in respect of an expense incurred for salary or wages paid to an employee only if the taxpayer reasonably believes that the salary or wages is not subject to an income or profits tax imposed, because of the employee’s presence or activity in a country other than Canada, by a government of that other country.
Marginal note:Limitation re specified employees
(9.1) For the purposes of clauses (8)(a)(ii)(A) and (B), expenditures incurred by a taxpayer in a taxation year do not include expenses incurred in the year in respect of salary or wages of a specified employee of the taxpayer to the extent that those expenses exceed the amount determined by the formula
A × B/365
where
- A
- is 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; and
- B
- is the number of days in the taxation year on which the employee is a specified employee of the taxpayer.
Marginal note:Associated corporations
(9.2) Where
(a) in a taxation year of a corporation that ends in a calendar year, the corporation employs an individual who is a specified employee of the corporation,
(b) the corporation is associated with another corporation (in this subsection and subsection 37(9.3) referred to as the “associated corporation”) in a taxation year of the associated corporation that ends in the calendar year, and
(c) the individual is a specified employee of the associated corporation in the taxation year of the associated corporation that ends in the calendar year,
for the purposes of clauses (8)(a)(ii)(A) and (B), the expenditures incurred by the corporation in its taxation year or years that end in the calendar year and by each associated corporation in its taxation year or years that end in the calendar year do not include expenses incurred in those taxation years in respect of salary or wages of the specified employee unless the corporation and all of the associated corporations have filed with the Minister an agreement referred to in subsection 37(9.3) in respect of those years.
Marginal note:Agreement among associated corporations
(9.3) Where all of the members of a group of associated corporations of which an individual is a specified employee file, in respect of their taxation years that end in a particular calendar year, an agreement with the Minister in which they allocate an amount in respect of the individual to one or more of them for those years and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed the amount determined by the formula
A × B/365
where
- A
- is 5 times the Year’s Maximum Pensionable Earnings (as determined under section 18 of the Canada Pension Plan) for the particular calendar year, and
- B
- is 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.
Marginal note:Filing
(9.4) An agreement referred to in subsection 37(9.3) is deemed not to have been filed by a taxpayer unless
(a) it is in prescribed form; and
(b) where the taxpayer is a corporation, it is accompanied by
(i) where its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(ii) where its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made.
Marginal note:Deemed corporation
(9.5) For the purposes of subsections 37(9.2) and 37(9.3) and this subsection, each
(a) individual related to a particular corporation,
(b) partnership of which a majority interest partner is
(i) an individual related to a particular corporation, or
(ii) a corporation associated with a particular corporation, and
(c) limited partnership of which a member whose liability as a member is not limited is
(i) an individual related to a particular corporation, or
(ii) a corporation associated with a particular corporation,
is deemed to be a corporation associated with the particularcorporation.
Marginal note:Time for election
(10) Any election made under clause (8)(a)(ii)(B) for a taxation year by a taxpayer shall be filed by the taxpayer on the day on which the taxpayer first files a prescribed form referred to in subsection 37(11) for the year.
Marginal note:Filing requirement
(11) Subject to subsection 37(12), no amount in respect of an expenditure that would be incurred by a taxpayer in a taxation year that begins after 1995 if this Act were read without reference to subsection 78(4) may be deducted under subsection 37(1) unless the taxpayer files with the Minister a prescribed form containing prescribed information in respect of the expenditure on or before the day that is 12 months after the taxpayer’s filing-due date for the year.
Marginal note:Misclassified expenditures
(12) If a taxpayer has not filed a prescribed form in respect of an expenditure in accordance with subsection 37(11), for the purposes of this Act, the expenditure is deemed not to be an expenditure on or in respect of scientific research and experimental development.
Marginal note:Non-arm’s length contract — linked work
(13) For the purposes of this section and sections 127 and 127.1, where
(a) work is performed by a taxpayer for a person or partnership at a time when the person or partnership does not deal at arm’s length with the taxpayer, and
(b) the work would be scientific research and experimental development if it were performed by the person or partnership,
the work is deemed to be scientific research and experimental development.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
37.1 [Repealed, 1998, c. 19, s. 87(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 37.1;
- 1998, c. 19, s. 87.
37.2 [Repealed, 1998, c. 19, s. 87(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 37.2;
- 1998, c. 19, s. 87.
37.3 [Repealed, 1998, c. 19, s. 87(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 37.3;
- 1998, c. 19, s. 87.
Subdivision c
Taxable Capital Gains and Allowable Capital Losses
Marginal note:Taxable capital gain and allowable capital loss
38. For the purposes of this Act,
(a) subject to paragraphs (a.1) to (a.3), a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is ½ of the taxpayer’s capital gain for the year from the disposition of the property;
(a.1) a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if
(i) the disposition is the making of a gift to a qualified donee of a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)) or a prescribed debt obligation,
(ii) the disposition is deemed by section 70 to have occurred and the taxpayer is deemed by subsection 118.1(5) to have made a gift described in subparagraph (i) of the property, or
(iii) the disposition is the exchange, for a security described in subparagraph (i), of a share of the capital stock of a corporation, which share included, at the time it was issued and at the time of the disposition, a condition allowing the holder to exchange it for the security, and the taxpayer
(A) receives no consideration on the exchange other than the security, and
(B) makes a gift of the security to a qualified donee not more than 30 days after the exchange;
(a.2) a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if
(i) the disposition is the making of a gift to a qualified donee (other than a private foundation) of a property described, in respect of the taxpayer, in paragraph 110.1(1)(d) or in the definition “total ecological gifts” in subsection 118.1(1), or
(ii) the disposition is deemed by section 70 to have occurred and the taxpayer is deemed by subsection 118.1(5) to have made a gift described in subparagraph (i) of the property;
(a.3) a taxpayer’s taxable capital gain for a taxation year, from the disposition of an interest in a partnership (other than a prescribed interest in a partnership) that would be an exchange described in subparagraph (a.1)(iii) if the interest were a share in the capital stock of a corporation, is equal to the lesser of
(i) that taxable capital gain determined without reference to this paragraph, and
(ii) ½ of the amount, if any, by which
(A) the total of
(I) the cost to the taxpayer of the partnership interest, and
(II) each amount required by subparagraph 53(1)(e)(iv) or (x) to be added in determining the taxpayer’s adjusted cost base of the partnership interest,
exceeds
(B) the adjusted cost base to the taxpayer of the partnership interest (determined without reference to subparagraphs 53(2)(c)(iv) and (v));
(b) a taxpayer’s allowable capital loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s capital loss for the year from the disposition of that property; and
(c) a taxpayer’s allowable business investment loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s business investment loss for the year from the disposition of that property.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Tax-deferred transaction — flow-through shares
38.1 If a taxpayer acquires a property (in this section referred to as the “acquired property”) that is included in a flow-through share class of property in the course of a transaction or series of transactions to which any of section 51, subsections 73(1), 85(1) and (2) and 85.1(1), sections 86 and 87 and subsections 88(1) and 98(3) apply
(a) if the transfer of the acquired property is part of a gifting arrangement (within the meaning assigned by section 237.1) or of a transaction or series of transactions to which subsection 98(3) applies, or the transferor is a person with whom the taxpayer was, at the time of the acquisition, not dealing at arm’s length, there shall be added, at the time of the transfer, to the taxpayer’s exemption threshold in respect of the flow-through share class of property, and deducted from the transferor’s exemption threshold in respect of the flow-through share class of property, the amount determined by the formula
A × B
where
- A
- is 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, and
- B
- is 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; and
(b) if the transferor receives particular shares of the capital stock of the taxpayer as consideration for the acquired property and those particular shares are listed on a designated stock exchange or are shares of a mutual fund corporation, then for the purposes of this section and subsection 40(12)
(i) the particular shares are deemed to be flow-through shares of the transferor, and
(ii) there shall be added to the transferor’s exemption threshold in respect of the flow-through share class of property that includes the particular shares the amount that is determined under paragraph (a) or that would be so determined if paragraph (a) applied to the taxpayer.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 2011, c. 24, s. 4.
Marginal note:Meaning of capital gain and capital loss
39. (1) For the purposes of this Act,
(a) a taxpayer’s capital gain for a taxation year from the disposition of any property is the taxpayer’s gain for the year determined under this subdivision (to the extent of the amount thereof that would not, if section 3 were read without reference to the expression “other than a taxable capital gain from the disposition of a property” in paragraph 3(a) and without reference to paragraph 3(b), be included in computing the taxpayer’s income for the year or any other taxation year) from the disposition of any property of the taxpayer other than
(i) eligible capital property,
(i.1) an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act and that has been disposed of,
(A) in the case of a gift to which subsection 118.1(5) applies, 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, and
(B) in any other case, at any time,
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,
(ii) a Canadian resource property,
(ii.1) a foreign resource property,
(ii.2) a property if the disposition is a disposition to which subsection 142.4(4) or (5) or 142.5(1) applies,
(iii) an insurance policy, including a life insurance policy, except for that part of a life insurance policy in respect of which a policyholder is deemed by paragraph 138.1(1)(e) to have an interest in a related segregated fund trust,
(iv) a timber resource property; or
(v) an interest of a beneficiary under a qualifying environmental trust;
(b) a taxpayer’s capital loss for a taxation year from the disposition of any property is the taxpayer’s loss for the year determined under this subdivision (to the extent of the amount thereof that would not, if section 3 were read in the manner described in paragraph (a) of this subsection and without reference to the expression “or the taxpayer’s allowable business investment loss for the year” in paragraph 3(d), be deductible in computing the taxpayer’s income for the year or any other taxation year) from the disposition of any property of the taxpayer other than
(i) depreciable property, or
(ii) property described in any of subparagraphs 39(1)(a)(i), (ii) to (iii) and (v); and
(c) a taxpayer’s business investment loss for a taxation year from the disposition of any property is the amount, if any, by which the taxpayer’s capital loss for the year from a disposition after 1977
(i) to which subsection 50(1) applies, or
(ii) to a person with whom the taxpayer was dealing at arm’s length
of any property that is
(iii) a share of the capital stock of a small business corporation, or
(iv) a debt owing to the taxpayer by a Canadian-controlled private corporation (other than, where the taxpayer is a corporation, a debt owing to it by a corporation with which it does not deal at arm’s length) that is
(A) a small business corporation,
(B) a bankrupt (within the meaning assigned by subsection 128(3)) that was a small business corporation at the time it last became a bankrupt, or
(C) a corporation referred to in section 6 of the Winding-up Act that was insolvent (within the meaning of that Act) and was a small business corporation at the time a winding-up order under that Act was made in respect of the corporation,
exceeds the total of
(v) in the case of a share referred to in subparagraph 39(1)(c)(iii), the amount, if any, of the increase after 1977 by virtue of the application of subsection 85(4) in the adjusted cost base to the taxpayer of the share or of any share (in this subparagraph referred to as a “replaced share”) for which the share or a replaced share was substituted or exchanged,
(vi) in the case of a share referred to in subparagraph 39(1)(c)(iii) that was issued before 1972 or a share (in this subparagraph and subparagraph 39(1)(c)(vii) referred to as a “substituted share”) that was substituted or exchanged for such a share or for a substituted share, the total of all amounts each of which is an amount received after 1971 and before or on the disposition of the share or an amount receivable at the time of such a disposition by
(A) the taxpayer,
(B) where the taxpayer is an individual, the taxpayer’s spouse or common-law partner, or
(C) a trust of which the taxpayer or the taxpayer’s spouse or common-law partner was a beneficiary
as a taxable dividend on the share or on any other share in respect of which it is a substituted share, except that this subparagraph shall not apply in respect of a share or substituted share that was acquired after 1971 from a person with whom the taxpayer was dealing at arm’s length,
(vii) in the case of a share to which subparagraph 39(1)(c)(vi) applies and where the taxpayer is a trust referred to in paragraph 104(4)(a), the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition by the settlor (within the meaning assigned by subsection 108(1)) or by the settlor’s spouse as a taxable dividend on the share or on any other share in respect of which it is a substituted share, and
(viii) the amount determined in respect of the taxpayer under subsection 39(9) or 39(10), as the case may be.
Marginal note:Capital gains and losses in respect of foreign currencies
(2) Notwithstanding subsection 39(1), where, by virtue of any fluctuation after 1971 in the value of the currency or currencies of one or more countries other than Canada relative to Canadian currency, a taxpayer has made a gain or sustained a loss in a taxation year, the following rules apply:
(a) the amount, if any, by which
(i) the total of all such gains made by the taxpayer in the year (to the extent of the amounts thereof that would not, if section 3 were read in the manner described in paragraph (1)(a) of this section, be included in computing the taxpayer’s income for the year or any other taxation year)
exceeds
(ii) the total of all such losses sustained by the taxpayer in the year (to the extent of the amounts thereof that would not, if section 3 were read in the manner described in paragraph (1)(a) of this section, be deductible in computing the taxpayer’s income for the year or any other taxation year), and
(iii) if the taxpayer is an individual, $200,
shall be deemed to be a capital gain of the taxpayer for the year from the disposition of currency of a country other than Canada, the amount of which capital gain is the amount determined under this paragraph; and
(b) the amount, if any, by which
(i) the total determined under subparagraph 39(2)(a)(ii),
exceeds
(ii) the total determined under subparagraph 39(2)(a)(i), and
(iii) if the taxpayer is an individual, $200,
shall be deemed to be a capital loss of the taxpayer for the year from the disposition of currency of a country other than Canada, the amount of which capital loss is the amount determined under this paragraph.
Marginal note:Gain in respect of purchase of bonds, etc., by issuer
(3) Where a taxpayer has issued any bond, debenture or similar obligation and has at any subsequent time in a taxation year and after 1971 purchased the obligation in the open market, in the manner in which any such obligation would normally be purchased in the open market by any member of the public,
(a) the amount, if any, by which the amount for which the obligation was issued by the taxpayer exceeds the purchase price paid or agreed to be paid by the taxpayer for the obligation shall be deemed to be a capital gain of the taxpayer for the taxation year from the disposition of a capital property, and
(b) the amount, if any, by which the purchase price paid or agreed to be paid by the taxpayer for the obligation exceeds the greater of the principal amount of the obligation and the amount for which it was issued by the taxpayer shall be deemed to be a capital loss of the taxpayer for the taxation year from the disposition of a capital property,
to the extent that the amount determined under paragraph 39(3)(a) or 39(3)(b) would not, if section 3 were read in the manner described in paragraph 39(1)(a) and this Act were read without reference to subsections 80(12) and 80(13), be included or be deductible, as the case may be, in computing the taxpayer’s income for the year or any other taxation year.
Marginal note:Election concerning disposition of Canadian securities
(4) Except as provided in subsection 39(5), where a Canadian security has been disposed of by a taxpayer in a taxation year and the taxpayer so elects in prescribed form in the taxpayer’s return of income under this Part for that year,
(a) every Canadian security owned by the taxpayer in that year or any subsequent taxation year shall be deemed to have been a capital property owned by the taxpayer in those years; and
(b) every disposition by the taxpayer of any such Canadian security shall be deemed to be a disposition by the taxpayer of a capital property.
Marginal note:Members of partnerships
(4.1) For the purpose of determining the income of a taxpayer who is a member of a partnership, subsections 39(4) and 39(5) apply as if
(a) every Canadian security owned by the partnership were owned by the taxpayer; and
(b) every Canadian security disposed of by the partnership in a fiscal period of the partnership were disposed of by the taxpayer at the end of that fiscal period.
Marginal note:Exception
(5) An election under subsection 39(4) does not apply to a disposition of a Canadian security by a taxpayer (other than a mutual fund corporation or a mutual fund trust) who at the time of the disposition is
(a) a trader or dealer in securities,
(b) a financial institution (as defined in subsection 142.2(1)),
(c) to (e) [Repealed, 1995, c. 21, s. 49(3)]
(f) a corporation whose principal business is the lending of money or the purchasing of debt obligations or a combination thereof, or
(g) a non-resident,
or any combination thereof.
Definition of “Canadian security”
(6) For 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.
Marginal note:Unused share-purchase tax credit
(7) The amount of any unused share-purchase tax credit of a taxpayer for a particular taxation year, to the extent that it was not deducted from the taxpayer’s tax otherwise payable under this Part for the immediately preceding taxation year, shall be deemed to be a capital loss of the taxpayer from a disposition of property for the year immediately following the particular taxation year.
Marginal note:Unused scientific research and experimental development tax credit
(8) The amount of any unused scientific research and experimental development tax credit of a taxpayer for a particular taxation year, to the extent that it was not deducted from the taxpayer’s tax otherwise payable under this Part for the immediately preceding taxation year, shall be deemed to be a capital loss of the taxpayer from a disposition of property for the year immediately following the particular taxation year, except that where the taxpayer is an individual the capital loss shall be deemed to be 147% of that amount.
Marginal note:Deduction from business investment loss
(9) In computing the business investment loss of a taxpayer who is an individual (other than a trust) for a taxation year from the disposition of a particular property, there shall be deducted an amount equal to the lesser of
(a) the amount that would be the taxpayer’s business investment loss for the year from the disposition of that particular property if paragraph 39(1)(c) were read without reference to subparagraph 39(1)(c)(viii), and
(b) the amount, if any, by which the total of
(i) the total of all amounts each of which is twice the amount deducted by the taxpayer under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that
(A) ended before 1988, or
(B) begins after October 17, 2000,
(i.1) the total of all amounts each of which is
(A) 3/2 of the amount deducted under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that
(I) ended after 1987 and before 1990, or
(II) began after February 27, 2000 and ended before October 18, 2000, or
(B) the amount determined by multiplying the reciprocal of the fraction in paragraph 38(a) that applies to the taxpayer for each of the taxpayer’s taxation years that includes February 28, 2000 or October 18, 2000 by the amount deducted under section 110.6 in computing the taxpayer’s taxable income for that year, and
(i.2) the total of all amounts each of which is 4/3 of the amount deducted under section 110.6 in computing the taxpayer’s taxable income for a preceding taxation year that ended after 1989 and before February 28, 2000
exceeds
(ii) the total of all amounts each of which is an amount deducted by the taxpayer under paragraph 39(1)(c) by virtue of subparagraph 39(1)(c)(viii) in computing the taxpayer’s business investment loss
(A) from the disposition of property in taxation years preceding the year, or
(B) from the disposition of property other than the particular property in the year,
except that, where a particular amount was included under subparagraph 14(1)(a)(v) in the taxpayer’s income for a taxation year that ended after 1987 and before 1990, the reference in subparagraph 39(9)(b)(i.1) to “3/2” shall, in respect of that portion of any amount deducted under section 110.6 in respect of the particular amount, be read as “4/3”.
Marginal note:Idem, of a trust
(10) In computing the business investment loss of a trust for a taxation year from the disposition of a particular property, there shall be deducted an amount equal to the lesser of
(a) the amount that would be the trust’s business investment loss for the year from the disposition of that particular property if paragraph 39(1)(c) were read without reference to subparagraph 39(1)(c)(viii), and
(b) the amount, if any, by which the total of
(i) the total of all amounts each of which is twice the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that
(A) ended before 1988, or
(B) begins after October 17, 2000,
(i.1) the total of all amounts each of which is
(A) 3/2 of the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that
(I) ended after 1987 and before 1990, or
(II) began after February 27, 2000 and ended before October 18, 2000, or
(B) the amount determined by multiplying the reciprocal of the fraction in paragraph 38(a) that applies to the trust for each of the trust’s taxation years that includes February 28, 2000 or October 18, 2000 by the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for that year, and
(i.2) the total of all amounts each of which is 4/3 of the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income for a preceding taxation year that ended after 1989 and before February 28, 2000
exceeds
(ii) the total of all amounts each of which is an amount deducted by the trust under paragraph 39(1)(c) by virtue of subparagraph 39(1)(c)(viii) in computing its business investment loss
(A) from the disposition of property in taxation years preceding the year, or
(B) from the disposition of property other than the particular property in the year,
except that, where a particular amount was included under subparagraph 14(1)(a)(v) in the trust’s income for a taxation year that ended after 1987 and before 1990, the reference in subparagraph 39(10)(b)(i.1) to “3/2” shall, in respect of that portion of any amount deducted under section 110.6 in respect of the particular amount, be read as “4/3”.
Marginal note:Recovery of bad debt
(11) Where an amount is received in a taxation year on account of a debt (in this subsection referred to as the “recovered amount”) in respect of which a deduction for bad debts had been made under subsection 20(4.2) in computing a taxpayer’s income for a preceding taxation year, the amount, if any, by which 1/2 of the recovered amount exceeds the amount determined under paragraph 12(1)(i.1) in respect of the recovered amount is deemed to be a taxable capital gain of the taxpayer from a disposition of capital property in the year.
Marginal note:Guarantees
(12) For the purpose of paragraph 39(1)(c), where
(a) an amount was paid by a taxpayer in respect of a debt of a corporation under an arrangement under which the taxpayer guaranteed the debt,
(b) the amount was paid to a person with whom the taxpayer was dealing at arm’s length, and
(c) the corporation was a small business corporation
(i) at the time the debt was incurred, and
(ii) at any time in the 12 months before the time an amount first became payable by the taxpayer under the arrangement in respect of a debt of the corporation,
that part of the amount that is owing to the taxpayer by the corporation shall be deemed to be a debt owing to the taxpayer by a small business corporation.
Marginal note:Repayment of assistance
(13) The total of all amounts paid by a taxpayer in a taxation year each of which is
(a) such part of any assistance described in subparagraph 53(2)(k)(i) in respect of, or for the acquisition of, a capital property (other than depreciable property) by the taxpayer that was repaid by the taxpayer in the year where the repayment is made after the disposition of the property by the taxpayer and under an obligation to repay all or any part of that assistance, or
(b) an amount repaid by the taxpayer in the year in respect of a capital property (other than depreciable property) acquired by the taxpayer that is repaid after the disposition thereof by the taxpayer and that would have been an amount described in subparagraph 53(2)(s)(ii) had the repayment been made before the disposition of the property,
shall be deemed to be a capital loss of the taxpayer for the year from the disposition of property by the taxpayer in the year and, for the purpose of section 110.6, that property shall be deemed to have been disposed of by the taxpayer in the year.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Definitions
39.1 (1) In this section,
“exempt capital gains balance”
« solde des gains en capital exonérés »
“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 formula
A - B - C - F
where
- A
- is
(a) if 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, and
(b) in any other case, the lesser of
(i) 4/3 of the total of the taxable capital gains that resulted from elections made under subsection 110.6(19) in respect of the individual’s interests in or shares of the capital stock of the entity, and
(ii) the amount that would be determined under subparagraph (i) if
(A) the amount designated in the election in respect of each interest or share were equal to the amount determined by the formula
D - E
where
- D
- is the fair market value of the interest or share at the end of February 22, 1994, and
- E
- is 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, and
(B) this Act were read without reference to subsection 110.6(20),
- B
- is 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,
- C
- is
(a) if 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 of
(i) 3/2 of the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section), for a preceding taxation year that began after February 27, 2000 and ended before October 18, 2000 that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(ii) 4/3 of the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section), for a preceding taxation year that ended before February 28, 2000 and that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(iii) the amount claimed by the individual under subparagraph 104(21.4)(a)(ii) or (21.7)(b)(ii) for a preceding taxation year, and
(iv) twice the total of all amounts each of which is the amount by which the individual’s taxable capital gain (determined without reference to this section) for a preceding taxation year that began after October 17, 2000 and that resulted from a designation made under subsection 104(21) by the trust, was reduced under subsection (3),
(b) if the entity is a partnership, the total of
(i) 3/2 of the total of
(A) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that began after February 27, 2000 and ended before October 18, 2000, was reduced under subsection (4), and
(B) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that began after February 27, 2000 and ended before October 18, 2000, was reduced under subsection (5),
(ii) 4/3 of the total of
(A) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that ended before February 28, 2000 and in a preceding taxation year was reduced under subsection (4), and
(B) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that ended before February 28, 2000 and in a preceding taxation year, was reduced under subsection (5),
(iii) the product obtained when the reciprocal of the fraction in paragraph 38(a) that applies to the partnership for its fiscal period that includes February 28, 2000 or October 17, 2000 is multiplied by the total of
(A) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that includes February 28, 2000 or October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (4), and
(B) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that includes February 28, 2000 or October 17, 2000 and ended in a preceding taxation year was reduced under subsection (5), and
(iv) twice the total of
(A) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains (determined without reference to this section), for its fiscal period that began after October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (4), and
(B) the total of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business (determined without reference to this section), for its fiscal period that began after October 17, 2000 and ended in a preceding taxation year, was reduced under subsection (5), and
(c) in any other case, the total of all amounts each of which is the amount by which the total of the individual’s capital gains otherwise determined under subsection 130.1(4) or 131(1), subsections 138.1(3) and 138.1(4) or subsection 144(4), as the case may be, for a preceding taxation year in respect of the entity was reduced under subsection 39.1(6); and
- F
- is
(a) if 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, and
(b) in any other case, nil;
“flow-through entity”
« entité intermédiaire »
“flow-through entity” means
(a) an investment corporation,
(b) a mortgage investment corporation,
(c) a mutual fund corporation,
(d) a mutual fund trust,
(e) a partnership,
(f) a related segregated fund trust for the purpose of section 138.1,
(g) a trust governed by an employees profit sharing plan,
(h) a trust maintained primarily for the benefit of employees of a corporation or 2 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 shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm’s length therewith,
(i) a trust established exclusively for the benefit of one or more persons each of whom was, at the time the trust was created, either a person from whom the trust received property or a creditor of that person, where one of the main purposes of the trust is to secure the payments required to be made by or on behalf of that person to such creditor, and
(j) a trust all or substantially all of the properties of which consist of shares of the capital stock of a corporation, where the trust was established pursuant to an agreement between 2 or more shareholders of the corporation and one of the main purposes of the trust is to provide for the exercise of voting rights in respect of those shares pursuant to that agreement.
Marginal note:Reduction of capital gain
(2) Where at any time after February 22, 1994 an individual disposes of an interest in or a share of the capital stock of a flow-through entity, the individual’s capital gain, if any, otherwise determined for a taxation year from the disposition shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula
A - B - C
where
- A
- is the exempt capital gains balance of the individual for the year in respect of the entity,
- B
- is
(a) if the entity made a designation under subsection 104(21) in respect of the individual for the year, twice the amount, if any, claimed under subsection 39.1(3) by the individual for the year in respect of the entity,
(b) if the entity is a partnership, twice the total of
(i) the amount, if any, claimed under subsection 39.1(4) by the individual for the year in respect of the entity, and
(ii) the amount, if any, claimed under subsection 39.1(5) by the individual for the year in respect of the entity, and
(c) in any other case, the amount, if any, claimed under subsection 39.1(6) by the individual for the year in respect of the entity, and
- C
- is 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.
Marginal note:Reduction of taxable capital gain
(3) The taxable capital gain otherwise determined under subsection 104(21) of an individual for a taxation year as a result of a designation made under that subsection by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding 1/2 of the individual’s exempt capital gains balance for the year in respect of the entity.
Marginal note:Reduction in share of partnership’s taxable capital gains
(4) An individual’s share otherwise determined for a taxation year of a taxable capital gain of a partnership from the disposition of a property (other than property acquired by the partnership after February 22, 1994 in a transfer to which subsection 97(2) applied) for its fiscal period that ends after February 22, 1994 and in the year shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula
A - B
where
- A
- is 1/2 of the individual’s exempt capital gains balance for the year in respect of the partnership, and
- B
- is 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.
Marginal note:Reduction in share of partnership’s income from a business
(5) An individual’s share otherwise determined for a taxation year of the income of a partnership from a business for the partnership’s fiscal period that ends in the year and the individual’s share of the partnership’s taxable capital gain, if any, arising under paragraph 14(1)(b) shall be reduced by such amount as the individual claims, not exceeding the lesser of
(a) the amount, if any, by which 1/2 of the individual’s exempt capital gains balance for the year in respect of the partnership exceeds the total of
(i) the amount, if any, claimed under subsection (4) by the individual for the year in respect of the partnership, and
(ii) all amounts, if any, claimed under this subsection by the individual for the year in respect of other businesses of the partnership, and
(b) the amount determined by the formula
A × (B/C)
where
- A
- is the amount included under paragraph 14(1)(b) in computing the income of the partnership from the business for the fiscal period,
- B
- is the amount that would otherwise be the individual’s share of the partnership’s income from the business for the fiscal period, and
- C
- is the partnership’s income from the business for the fiscal period.
Marginal note:Reduction of capital gains
(6) The total capital gains otherwise determined under subsection 130.1(4) or 131(1), subsections 138.1(3) and 138.1(4) or subsection 144(4), as the case may be, of an individual for a taxation year as a result of one or more elections, allocations or designations made after February 22, 1994 by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding the individual’s exempt capital gains balance for the year in respect of the entity.
Marginal note:Nil exempt capital gains balance
(7) Notwithstanding subsection 39.1(1), where at any time an individual ceases to be a member or shareholder of, or a beneficiary under, a flow-through entity, the exempt capital gains balance of the individual in respect of the entity for each taxation year that begins after that time is deemed to be nil.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1995, c. 3, s. 11;
- 1998, c. 19, s. 88;
- 2001, c. 17, s. 24.
Marginal note:General rules
40. (1) Except as otherwise expressly provided in this Part
(a) a taxpayer’s gain for a taxation year from the disposition of any property is the amount, if any, by which
(i) if the property was disposed of in the year, the amount, if any, by which the taxpayer’s proceeds of disposition exceed the total of the adjusted cost base to the taxpayer of the property immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, or
(ii) if the property was disposed of before the year, the amount, if any, claimed by the taxpayer under subparagraph 40(1)(a)(iii) in computing the taxpayer’s gain for the immediately preceding year from the disposition of the property,
exceeds
(iii) subject to subsection 40(1.1), such amount as the taxpayer may claim
(A) in the case of an individual (other than a trust) in prescribed form filed with the taxpayer’s return of income under this Part for the year, and
(B) in any other case, in the taxpayer’s return of income under this Part for the year,
as a deduction, not exceeding the lesser of
(C) a reasonable amount as a reserve in respect of such of the proceeds of disposition of the property that are payable to the taxpayer after the end of the year as can reasonably be regarded as a portion of the amount determined under subparagraph 40(1)(a)(i) in respect of the property, and
(D) an amount equal to the product obtained when 1/5 of the amount determined under subparagraph 40(1)(a)(i) in respect of the property is multiplied by the amount, if any, by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property; and
(b) a taxpayer’s loss for a taxation year from the disposition of any property is,
(i) if the property was disposed of in the year, the amount, if any, by which the total of the adjusted cost base to the taxpayer of the property immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, exceeds the taxpayer’s proceeds of disposition of the property, and
(ii) in any other case, nil.
Marginal note:Gift of non-qualifying security
(1.01) A taxpayer’s gain for a particular taxation year from a disposition of a non-qualifying security of the taxpayer (as defined in subsection 118.1(18)) that is the making of a gift (other than an excepted gift, within the meaning assigned by subsection 118.1(19)) to a qualified donee (as defined in subsection 149.1(1)) is the amount, if any, by which
(a) where the disposition occurred in the particular year, the amount, if any, by which the taxpayer’s proceeds of disposition exceed the total of the adjusted cost base to the taxpayer of the security immediately before the disposition and any outlays and expenses to the extent they were made or incurred by the taxpayer for the purpose of making the disposition, and
(b) where the disposition occurred in the 60-month period that ends at the beginning of the particular year, the amount, if any, deducted under paragraph 40(1.01)(c) in computing the taxpayer’s gain for the preceding taxation year from the disposition of the security
exceeds
(c) the amount that the taxpayer claims in prescribed form filed with the taxpayer’s return of income for the particular year, where the taxpayer is not deemed by subsection 118.1(13) to have made a gift of property before the end of the particular year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of the particular year.
Marginal note:Reserve — property disposed of to a child
(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a property, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if,
(a) the property was disposed of by the taxpayer to the taxpayer’s child,
(b) that child was resident in Canada immediately before the disposition, and
(c) the property was immediately before the disposition,
(i) any land in Canada or depreciable property in Canada of a prescribed class that was used by the taxpayer, the spouse or common-law partner of the taxpayer, a child or a parent of the taxpayer in a farming or fishing business carried on in Canada,
(ii) a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)),
(iii) a qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)), or
(iv) a share of the capital stock of a family fishing corporation of the taxpayer or an interest in a family fishing partnership (such a share or an interest having the meaning assigned by subsection 70(10)).
Marginal note:Limitations
(2) Notwithstanding subsection 40(1),
(a) subparagraph 40(1)(a)(iii) does not apply to permit a taxpayer to claim any amount under that subparagraph in computing a gain for a taxation year if
(i) the taxpayer, at the end of the year or at any time in the immediately following year, was not resident in Canada or was exempt from tax under any provision of this Part, or
(ii) the purchaser of the property sold is a corporation that, immediately after the sale,
(A) was controlled, directly or indirectly, in any manner whatever, by the taxpayer,
(B) was controlled, directly or indirectly, in any manner whatever, by a person or group of persons by whom the taxpayer was controlled, directly or indirectly, in any manner whatever, or
(C) controlled the taxpayer, directly or indirectly, in any manner whatever, where the taxpayer is a corporation;
(b) where the taxpayer is an individual, the taxpayer’s gain for a taxation year from the disposition of a property that was the taxpayer’s principal residence at any time after the date (in this section referred to as the “acquisition date”) that is the later of December 31, 1971 and the day on which the taxpayer last acquired or reacquired it, as the case may be, is the amount determined by the formula
A - (A × B/C) - D
where
- A
- is 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,
- B
- is one plus 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,
- C
- is 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, and
- D
- is
(i) where the acquisition date is before February 23, 1994 and the taxpayer or a spouse or common-law partner of the taxpayer elected under subsection 110.6(19) in respect of the property or an interest therein that was owned, immediately before the disposition, by the taxpayer, 4/3 of the lesser of
(A) the total of all amounts each of which is the taxable capital gain of the taxpayer or of a spouse of the taxpayer that would have resulted from an election by the taxpayer or spouse under subsection 110.6(19) in respect of the property or interest if
(I) this Act were read without reference to subsection 110.6(20), and
(II) the amount designated in the election were equal to the amount, if any, by which the fair market value of the property or interest at the end of February 22, 1994 exceeds the amount determined by the formula
E - 1.1F
where
- E
- is the amount designated in the election that was made in respect of the property or interest, and
- F
- is the fair market value of the property or interest at the end of February 22, 1994, and
(B) the total of all amounts each of which is the taxable capital gain of the taxpayer or of a spouse of the taxpayer that would have resulted from an election that was made under subsection 110.6(19) in respect of the property or interest if the property were the principal residence of neither the taxpayer nor the spouse for each particular taxation year unless the property was designated, in a return of income for the taxation year that includes February 22, 1994 or for a preceding taxation year, to be the principal residence of either of them for the particular taxation year, and
(ii) in any other case, zero;
(c) where the taxpayer is an individual, the taxpayer’s gain for a taxation year from the disposition of land used in a farming business carried on by the taxpayer that includes property that was at any time the taxpayer’s principal residence is
(i) the taxpayer’s gain for the year, otherwise determined, from the disposition of the portion of the land that does not include the property that was the taxpayer’s principal residence, plus the taxpayer’s gain for the year, if any, determined under paragraph 40(2)(b) from the disposition of the property that was the taxpayer’s principal residence, or
(ii) if the taxpayer so elects in prescribed manner in respect of the land, the taxpayer’s gain for the year from the disposition of the land including the property that was the taxpayer’s principal residence, determined without regard to paragraph 40(2)(b) or subparagraph (i) of this paragraph, less the total of
(A) $1,000, and
(B) $1,000 for each taxation year ending after the acquisition date for which the property was the taxpayer’s principal residence and during which the taxpayer was resident in Canada;
(d) where the taxpayer is a corporation, its loss for a taxation year from the disposition of a bond or debenture is its loss therefrom for the year otherwise determined, less the total of such amounts received by it as, on account or in lieu of payment of, or in satisfaction of interest thereon as were, by virtue of paragraph 81(1)(m), not included in computing its income;
(e) [Repealed, 1998, c. 19, s. 89(1)]
(e.1) a taxpayer’s loss, if any, from the disposition at any time to a particular person or partnership of an obligation that was, immediately after that time, payable by another person or partnership to the particular person or partnership is nil where the taxpayer, the particular person or partnership and the other person or partnership are related to each other at that time or would be related to each other at that time if paragraph 80(2)(j) applied for the purpose of this paragraph;
(e.2) 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 shall, where 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, be deemed to be the amount determined by the formula
A - (B - C)/B
where
- A
- is 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,
- B
- is the total fair market value of all the consideration given by the person or partnership for the settlement or extinguishment of the particular obligation, and
- C
- is the total fair market value of the other obligations;
(f) a taxpayer’s gain or loss from the disposition of
(i) a chance to win a prize or bet, or
(ii) a right to receive an amount as a prize or as winnings on a bet,
in connection with a lottery scheme or a pool system of betting referred to in section 205 of the Criminal Code is nil;
(g) a taxpayer’s loss, if any, from the disposition of a property, to the extent that it is
(i) a superficial loss,
(ii) a loss from the disposition of a debt or other right to receive an amount, unless the debt or right, as the case may be, was acquired by the taxpayer for the purpose of gaining or producing income from a business or property (other than exempt income) or as consideration for the disposition of capital property to a person with whom the taxpayer was dealing at arm’s length,
(iii) a loss from the disposition of any personal-use property of the taxpayer (other than listed personal property or a debt referred to in subsection 50(2)), or
(iv) a loss from the disposition of property to
(A) a trust governed by a deferred profit sharing plan, an employees profit sharing plan, a registered disability savings plan, a registered retirement income fund or a TFSA under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary, or
(B) a trust governed by a registered retirement savings plan under which the taxpayer or the taxpayer’s spouse or common-law partner is an annuitant or becomes, within 60 days after the end of the taxation year, an annuitant,
is nil;
(h) where the taxpayer is a corporation, its loss otherwise determined from the disposition at any time in a taxation year of shares of the capital stock of a corporation (in this paragraph referred to as the “controlled corporation”) that was controlled, directly or indirectly in any manner whatever, by it at any time in the year, is its loss therefrom otherwise determined less the amount, if any, by which
(i) all amounts added under paragraph 53(1)(f.1) to the cost to a corporation, other than the controlled corporation, of property disposed of to that corporation by the controlled corporation that were added to the cost of the property during the period while the controlled corporation was controlled by the taxpayer and that can reasonably be attributed to losses on the property that accrued during the period while the controlled corporation was controlled by the taxpayer,
exceeds
(ii) all amounts by which losses have been reduced by virtue of this paragraph in respect of dispositions before that time of shares of the capital stock of the controlled corporation; and
(i) where at a particular time a taxpayer has disposed of a share of the capital stock of a corporation that was at any time a prescribed venture capital corporation or a prescribed labour-sponsored venture capital corporation or a share of the capital stock of a taxable Canadian corporation that was held in a prescribed stock savings plan or of a property substituted for such a share, the taxpayer’s loss from the disposition thereof shall be deemed to be the amount, if any, by which
(i) the loss otherwise determined
exceeds
(ii) the amount, if any, by which
(A) the amount of prescribed assistance that the taxpayer (or a person with whom the taxpayer was not dealing at arm’s length) received or is entitled to receive in respect of the share
exceeds
(B) the total of all amounts determined under subparagraph 40(2)(i)(i) in respect of any disposition of the share or of the property substituted for the share before the particular time by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length.
Marginal note:Deemed gain where amounts to be deducted from adjusted cost base exceed cost plus amounts to be added to adjusted cost base
(3) Where
(a) the total of all amounts required by subsection 53(2) (except paragraph 53(2)(c)) to be deducted in computing the adjusted cost base to a taxpayer of any property at any time in a taxation year
exceeds
(b) the total of
(i) the cost to the taxpayer of the property determined for the purpose of computing the adjusted cost base to the taxpayer of that property at that time, and
(ii) all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the property in computing the adjusted cost base to the taxpayer of that property at that time,
the following rules apply:
(c) subject to paragraph 93(1)(b), the amount of the excess shall be deemed to be a gain of the taxpayer for the year from a disposition at that time of the property,
(d) for the purposes of section 93, the definition “foreign accrual property income” in subsection 95(1) and section 110.6, the property shall be deemed to have been disposed of by the taxpayer in the year, and
(e) for the purposes of section 93, the amount of the excess shall be deemed to be proceeds of disposition of the property to the taxpayer.
Marginal note:Deemed gain for certain partners
(3.1) Where, at the end of a fiscal period of a partnership, a member of the partnership is a limited partner of the partnership, or is a member of the partnership who was a specified member of the partnership at all times since becoming a member, except where the member’s partnership interest was held by the member on February 22, 1994 and is an excluded interest at the end of the fiscal period,
(a) the amount determined under subsection 40(3.11) is deemed to be a gain from the disposition, at the end of the fiscal period, of the member’s interest in the partnership; and
(b) for the purpose of section 110.6, the interest is deemed to have been disposed of by the member at that time.
Marginal note:Amount of gain
(3.11) For the purpose of subsection 40(3.1), the amount determined at any time under this subsection in respect of a member’s interest in a partnership is the amount determined by the formula
A - B
where
- A
- is the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the member of the interest in the partnership at that time, and
- B
- is the total of
(a) the cost to the member of the interest determined for the purpose of computing the adjusted cost base to the member of the interest at that time, and
(b) all amounts required by subsection 53(1) to be added to the cost to the member of the interest in computing the adjusted cost base to the member of the interest at that time.
Marginal note:Deemed loss for certain partners
(3.12) Where a corporation, an individual (other than a trust) or a testamentary trust (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 shall be deemed to have a loss from the disposition at that time of the member’s interest in the partnership equal to the amount that the taxpayer elects in the taxpayer’s return of income under this Part for the taxation year that includes that time, not exceeding the lesser of
(a) the amount, if any, by which
(i) the total of all amounts each of which was an amount deemed by subsection 40(3.1) to be a gain of the taxpayer from a disposition of the interest before that time
exceeds
(ii) the total of all amounts each of which was an amount deemed by this subsection to be a loss of the taxpayer from a disposition of the interest before that time, and
(b) the adjusted cost base to the taxpayer of the interest at that time.
Marginal note:Artificial transactions
(3.13) For the purpose of applying section 53 at any time to a member of a partnership who would be a member described in subsection (3.1) of the partnership if the fiscal period of the partnership that includes that time ended at that time, where at any time after February 21, 1994 the member of the partnership makes a contribution of capital to the partnership and
(a) the partnership or a person or partnership with whom the partnership does not deal at arm’s length
(i) makes a loan to the member or to a person with whom the member does not deal at arm’s length, or
(ii) pays an amount as, on account of, in lieu of payment of or in satisfaction of, a distribution of the member’s share of the partnership profits or partnership capital, or
(b) the member or a person with whom the member does not deal at arm’s length becomes indebted to the partnership or a person or partnership with whom the partnership does not deal at arm’s length,
and it is established, by subsequent events or otherwise, that the loan, payment or indebtedness, as the case may be, was made or arose as part of a series of contributions and such loans, payments or other transactions, the contribution of capital shall be deemed not to have been made.
Marginal note:Specified member of a partnership
(3.131) Where it can reasonably be considered that one of the main reasons that a member of a partnership was not a specified member of the partnership at all times since becoming a member of the partnership is to avoid the application of subsection 40(3.1) to the member’s interest in the partnership, the member is deemed for the purpose of that subsection to have been a specified member of the partnership at all times since becoming a member of the partnership.
Marginal note:Limited partner
(3.14) For the purpose of subsection 40(3.1), a member of a partnership at a particular time is a limited partner of the partnership at that time if, at that time or within 3 years after that time,
(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions or misconduct that another member of the partnership or an employee, agent or representative of the partnership commits in the course of the partnership business while the partnership is a limited liability partnership);
(b) the member or a person not dealing at arm’s length with the member is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount or to obtain a benefit that would be described in paragraph 96(2.2)(d) if that paragraph were read without reference to subparagraphs 40(3.14)(b)(ii) and 40(3.14)(b)(vi);
(c) one of the reasons for the existence of the member who owns the interest
(i) can reasonably be considered to be to limit the liability of any person with respect to that interest, and
(ii) cannot reasonably be considered to be to permit any person who has an interest in the member to carry on the person’s business (other than an investment business) in the most effective manner; or
(d) there is an agreement or other arrangement for the disposition of an interest in the partnership and one of the main reasons for the agreement or arrangement can reasonably be considered to be to attempt to avoid the application of this subsection to the member.
Marginal note:Excluded interest
(3.15) For the purpose of subsection 40(3.1), an excluded interest in a partnership at any time means an interest in a partnership that actively carries on a business that was carried on by it throughout the period beginning February 22, 1994 and ending at that time, or that earns income from a property that was owned by it throughout that period, unless in that period there was a substantial contribution of capital to the partnership or a substantial increase in the indebtedness of the partnership.
Marginal note:Amounts considered not to be substantial
(3.16) For the purpose of subsection 40(3.15), an amount will be considered not to be substantial where
(a) the amount
(i) was raised pursuant to the terms of a written agreement entered into by a partnership before February 22, 1994 to issue an interest in the partnership and was expended on expenditures contemplated by the agreement before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production),
(ii) was raised pursuant to the terms of a written agreement (other than an agreement referred to in subparagraph 40(3.16)(a)(i)) entered into by a partnership before February 22, 1994 and was expended on expenditures contemplated by the agreement before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production),
(iii) was used by the partnership before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production) to make an expenditure required to be made pursuant to the terms of a written agreement entered into by the partnership before February 22, 1994, or
(iv) was used to repay a loan, debt or contribution of capital that had been received or incurred in respect of any such expenditure;
(b) the amount was raised before 1995 pursuant to the terms of a prospectus, preliminary prospectus, offering memorandum or registration statement filed before February 22, 1994 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of a province and, where required by law, accepted for filing by the public authority, and expended before 1995 (or before March 2, 1995 in the case of amounts expended to acquire a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii), or an interest in one or more partnerships all or substantially all of the property of which is such a film production) on expenditures contemplated by the document that was filed before February 22, 1994;
(c) the amount was raised before 1995 pursuant to the terms of an offering memorandum distributed as part of an offering of securities where
(i) the memorandum contained a complete or substantially complete description of the securities contemplated in the offering as well as the terms and conditions of the offering,
(ii) the memorandum was distributed before February 22, 1994,
(iii) solicitations in respect of the sale of the securities contemplated by the memorandum were made before February 22, 1994,
(iv) the sale of the securities was substantially in accordance with the memorandum, and
(v) the funds are expended in accordance with the memorandum before 1995 (except that the funds may be expended before March 2, 1995 in the case of a partnership all or substantially all of the property of which is a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) the principal photography of which or, in the case of such a production that is a television series, one episode of the series, commences before 1995 and the production is completed before March 2, 1995, or an interest in one or more partnerships all or substantially all of the property of which is such a film production); or
(d) the amount was used for an activity that was carried on by the partnership on February 22, 1994 but not for a significant expansion of the activity nor for the acquisition or production of a film production.
Marginal note:Whether carrying on business before February 22, 1994
(3.17) For the purpose of subsection 40(3.15), a partnership in respect of which paragraph 40(3.16)(a), 40(3.16)(b) or 40(3.16)(c) applies shall be considered to have actively carried on the business, or earned income from the property, contemplated in the document referred to in that paragraph throughout the period beginning February 22, 1994 and ending on the earlier of the closing date, if any, stipulated in the document and January 1, 1995.
Marginal note:Deemed partner
(3.18) For the purpose of subsection 40(3.1), a member of a partnership who acquired an interest in the partnership after February 22, 1994 shall be deemed to have held the interest on February 22, 1994 where the member acquired the interest
(a) in circumstances in which
(i) paragraph 70(6)(d.1) applied,
(ii) where the member is an individual, the member’s spouse or common-law partner held the partnership interest on February 22, 1994,
(iii) where the member is a trust, the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
(iv) the partnership interest was, immediately before the death of the spouse or common-law partner or the taxpayer, as the case may be, an excluded interest;
(b) in circumstances in which
(i) paragraph 70(9.2)(c) applied,
(ii) the member’s parent held the partnership interest on February 22, 1994, and
(iii) the partnership interest was, immediately before the parent’s death, an excluded interest;
(c) in circumstances in which
(i) paragraph 70(9.3)(e) applied,
(ii) the trust referred to in subsection 70(9.3) or the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
(iii) the partnership interest was, immediately before the death of the spouse or common-law partner referred to in subsection 70(9.3), an excluded interest; or
(d) before 1995 pursuant to a document referred to in subparagraph 40(3.16)(a)(i) or paragraph 40(3.16)(b) or 40(3.16)(c).
Marginal note:Non-application of subsection (3)
(3.19) Subsection 40(3) does not apply in any case where subsection 40(3.1) applies.
Marginal note:Non-application of subsection (3.1)
(3.2) Subsection 40(3.1) does not apply in any case where paragraph 98(1)(c) or 98.1(1)(c) applies.
Marginal note:Deemed capital gain under section 180.01
(3.21) If, in respect of a taxation year, a taxpayer has made an election under subsection 180.01(1), the amount deemed to be a capital gain under paragraph 180.01(2)(b) is deemed to be a gain from the disposition of property for the taxation year.
Marginal note:When subsection (3.4) applies
(3.3) Subsection 40(3.4) applies when
(a) a corporation, trust or partnership (in this subsection and subsection 40(3.4) referred to as the “transferor”) disposes of a particular capital property (other than depreciable property of a prescribed class) otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition “superficial loss” in section 54;
(b) during the period that begins 30 days before and ends 30 days after the disposition, the transferor or a person affiliated with the transferor acquires a property (in this subsection and subsection 40(3.4) referred to as the “substituted property”) that is, or is identical to, the particular property; and
(c) at the end of the period, the transferor or a person affiliated with the transferor owns the substituted property.
Marginal note:Loss on certain properties
(3.4) If this subsection applies because of subsection 40(3.3) to a disposition of a particular property,
(a) the transferor’s loss, if any, from the disposition is deemed to be nil, and
(b) the amount of the transferor’s loss, if any, from the disposition (determined without reference to paragraph 40(2)(g) and this subsection) is deemed to be a loss of the transferor from a disposition of the particular property at the time that is immediately before the first time, after the disposition,
(i) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns
(A) the substituted property, or
(B) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,
(ii) at which the property would, if it were owned by the transferor, be deemed by section 128.1 or subsection 149(10) to have been disposed of by the transferor,
(iii) that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation,
(iv) at which the transferor or a person affiliated with the transferor is deemed by section 50 to have disposed of the property, where the substituted property is a debt or a share of the capital stock of a corporation, or
(v) at which the winding-up of the transferor begins (other than a winding-up to which subsection 88(1) applies), where the transferor is a corporation,
and for the purpose of paragraph 40(3.4)(b), where a partnership otherwise ceases to exist at any time after the disposition, the partnership is deemed not to have ceased to exist, and each person who was a member of the partnership immediately before the partnership would, but for this subsection, have ceased to exist is deemed to remain a member of the partnership, until the time that is immediately after the first time described in subparagraphs 40(3.4)(b)(i) to 40(3.4)(b)(v).
Marginal note:Deemed identical property
(3.5) For the purposes of subsections 40(3.3) and 40(3.4),
(a) right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property;
(b) a share of the capital stock of a corporation that is acquired in exchange for another share in a transaction to which section 51, 85.1, 86 or 87 applies is deemed to be a property that is identical to the other share;
(b.1) a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 2013, deemed to be a property that is identical to equity in the SIFT wind-up entity;
(c) where subsections 40(3.3) and 40(3.4) apply to the disposition by a transferor of a share of the capital stock of a corporation, and after the disposition the corporation is merged with one or more other corporations, otherwise than in a transaction in respect of which paragraph 40(3.5)(b) applies to the share, or is wound up in a winding-up to which subsection 88(1) applies, the corporation formed on the merger or the parent (within the meaning assigned by subsection 88(1)), as the case may be, is deemed to own the share while it is affiliated with the transferor; and
(d) where subsections 40(3.3) and 40(3.4) apply to the disposition by a transferor of a share of the capital stock of a corporation, and after the disposition the share is redeemed, acquired or cancelled by the corporation, otherwise than in a transaction in respect of which paragraph 40(3.5)(b) or 40(3.5)(c) applies to the share, the transferor is deemed to own the share while the corporation is affiliated with the transferor.
Marginal note:Loss on shares
(3.6) Where 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 as defined in subsection 80(1)),
(a) the taxpayer’s loss, if any, from the disposition is deemed to be nil; and
(b) in computing the adjusted cost base to the taxpayer after that time of a share of a class of the capital stock of the corporation owned by the taxpayer immediately after the disposition, there shall be added the proportion of the amount of the taxpayer’s loss from the disposition (determined without reference to paragraph 40(2)(g) and this subsection) that
(i) the fair market value, immediately after the disposition, of the share
is of
(ii) the fair market value, immediately after the disposition, of all shares of the capital stock of the corporation owned by the taxpayer.
Marginal note:Exception — estate loss carried back
(3.61) If, in the course of administering the estate of a deceased taxpayer, the taxpayer’s legal representative elects in accordance with subsection 164(6) to treat all or any portion of the estate’s capital loss (determined without reference to subsections (3.4) and (3.6)) from the disposition of a share of the capital stock of a corporation as a capital loss of the deceased taxpayer from the disposition of the share, subsections (3.4) and (3.6) apply to the estate in respect of the loss only to the extent that the amount of the loss exceeds the portion of the loss to which the election applies.
Marginal note:Losses of non-resident
(3.7) If an individual disposes of a property at any time after having ceased to be resident in Canada, for the purposes of applying subsections 100(4), 107(1) and 112(3) to (3.32) and (7) in computing the individual’s loss from the disposition,
(a) the individual is deemed to be a corporation in respect of dividends received by the individual, or deemed under Part XIII to have been paid to the individual, at a particular time that is after the time at which the individual last acquired the property and at which the individual was non-resident; and
(b) an amount on account of
(i) each taxable dividend received by the individual at a particular time described in paragraph (a), and
(ii) each amount deemed under Part XIII to have been paid to the individual at a particular time described in paragraph (a), as a dividend from a corporation resident in Canada, to the extent that the amount can reasonably be considered to relate to the property,
is deemed to be a taxable dividend that was received by the individual and that was deductible under section 112 in computing the individual’s taxable income or taxable income earned in Canada for the taxation year that includes that particular time.
Marginal note:Disposal of principal residence to spouse or trust for spouse
(4) Where a taxpayer has, after 1971, disposed of property to an individual in circumstances to which subsection 70(6) or 73(1) applied, for the purposes of computing the individual’s gain from the disposition of the property under paragraph 40(2)(b) or 40(2)(c), as the case may be,
(a) the individual shall be deemed to have owned the property throughout the period during which the taxpayer owned it;
(b) the property shall be deemed to have been the individual’s principal residence
(i) in any case where subsection 70(6) is applicable, for any taxation year for which it would, if the taxpayer had designated it in prescribed manner to have been the taxpayer’s principal residence for that year, have been the taxpayer’s principal residence, and
(ii) in any case where subsection 73(1) is applicable, for any taxation year for which it was the taxpayer’s principal residence; and
(c) where the individual is a trust, the trust shall be deemed to have been resident in Canada during each taxation year during which the taxpayer was resident in Canada.
(5) [Repealed, 1994, Sch. VIII, c. 7, s. 12(1)]
Marginal note:Special rule concerning principal residence
(6) Where a property was owned by a taxpayer, whether jointly with another person or otherwise, at the end of 1981 and continuously thereafter until disposed of by the taxpayer, the amount of the gain determined under paragraph 40(2)(b) in respect of the disposition shall not exceed the amount, if any, by which the total of
(a) the 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, and
(b) the taxpayer’s gain calculated in accordance with paragraph 40(2)(b) on the assumption that that paragraph applies and that
(i) the taxpayer acquired the property on January 1, 1982 at a cost equal to its proceeds of disposition as determined under paragraph 40(6)(a), and
(ii) the description of B in paragraph 40(2)(b) is read without reference to “one plus”
exceeds
(c) the 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.
Marginal note:Property in satisfaction of interest in trust
(7) Where 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.
Marginal note:Effect of election under subsection 110.6(19)
(7.1) 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).
Marginal note:Application of s. 70(10)
(8) The definitions in subsection 70(10) apply to this section.
Marginal note:Additions to taxable Canadian property
(9) If a non-resident person disposes of a taxable Canadian 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 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 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 formula
A × B/C
where
- A
- is the amount of the gain or loss determined without reference to this subsection;
- B
- is 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; and
- C
- is 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.
Marginal note:Application
(10) Subsection (11) applies in computing at any particular time a corporation’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 corporation, 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 corporation realized a capital loss or gain in respect of the foreign currency debt because of subsection 111(12).
Marginal note:Gain or loss on foreign currency debt
(11) If 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 formula
A + B – C
where
- A
- is
(a) if the corporation 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, or
(b) if the corporation 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);
- B
- is the total of all amounts each of which is that portion of the amount of a capital loss realized by the corporation at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable to
(a) the relevant part of the foreign currency debt at the particular time, or
(b) the forgiven amount, if any, (within the meaning assigned by subsection 80(1)) in respect of the foreign currency debt at the particular time; and
- C
- is the total of all amounts each of which is that portion of the amount of a gain realized by the corporation at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable to
(a) the relevant part of the foreign currency debt at the particular time, or
(b) the forgiven amount, if any, (within the meaning assigned by subsection 80(1)) in respect of the foreign currency debt at the particular time.
Marginal note:Donated flow-through shares
(12) If 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 of
(a) the taxpayer’s exemption threshold at that time in respect of the flow-through share class of property, and
(b) the total of all amounts each of which is a capital gain from the actual disposition (for greater certainty, calculated without reference to this subsection).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Taxable net gain from disposition of listed personal property
41. (1) For 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.
Marginal note:Determination of net gain
(2) A taxpayer’s net gain for a taxation year from dispositions of listed personal property is an amount determined as follows:
(a) 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, and
(b) deduct 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 paragraph
(i) an 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,
(ii) 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, and
(iii) no 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 loss”
(3) In 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. R.S., 1985, c. 1 (5th Supp.), s. 41;
- 2001, c. 17, s. 26.
Marginal note:Dispositions subject to warranty
42. In computing a taxpayer’s proceeds of disposition of any property for the purposes of this subdivision, there shall be included all amounts received or receivable by the taxpayer as consideration for warranties, covenants or other conditional or contingent obligations given or incurred by the taxpayer in respect of the disposition, and in computing the taxpayer’s income for the taxation year in which the property was disposed of and for each subsequent taxation year, any outlay or expense made or incurred by the taxpayer in any such year pursuant to or by reason of any such obligation shall be deemed to be a loss of the taxpayer for that year from a disposition of a capital property and for the purposes of section 110.6, that capital property shall be deemed to have been disposed of by the taxpayer in that year.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1“42”;
- 1985, c. 45, s. 16;
- 1988, c. 55, s. 23.
Marginal note:General rule for part dispositions
43. (1) For 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.
Marginal note:Ecological gifts
(2) For the purposes of subsection (1) and section 53, where at any time a taxpayer disposes of a servitude, covenant or easement to which land is subject in circumstances where subsection 110.1(5) or 118.1(12) applies,
(a) 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 servitude, covenant or easement, as the case may be, is deemed to be equal to the amount determined by the formula
A × B/C
where
- A
- is the adjusted cost base to the taxpayer of the land immediately before the disposition,
- B
- is the amount determined under subsection 110.1(5) or 118.1(12) in respect of the disposition, and
- C
- is the fair market value of the land immediately before the disposition; and
(b) for 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).
Marginal note:Payments out of trust income, etc.
(3) 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. R.S., 1985, c. 1 (5th Supp.), s. 43;
- 2001, c. 17, s. 27.
Marginal note:Life estates in real property
43.1 (1) Notwithstanding 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 deemed
(a) to 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; and
(b) to 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).
Marginal note:Idem
(2) Where, as a result of an individual’s death, a life estate to which subsection 43.1(1) applied is terminated,
(a) 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; and
(b) where 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 of
(i) the adjusted cost base of the life estate in the property immediately before the death, and
(ii) the 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. 1994, c. 6, Sch. VIII, s. 13, c. 21, s. 16;
- 2011, c. 24, s. 6.
Marginal note:Exchanges of property
44. (1) Where 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 either
(a) property 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, or
(b) a property that was, immediately before the disposition, a former business property of the taxpayer,
and the taxpayer has
(c) where the former property is described in paragraph 44(1)(a), before the end of the second taxation year following the initial year, and
(d) in any other case, before the end of the first taxation year following 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,
(e) 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 which
(i) where the particular year is the initial year, the lesser of
(A) the amount, if any, by which the proceeds of disposition of the former property exceed
(I) in 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, and
(II) in 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, and
(B) the 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, or
(ii) where 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,
exceeds
(iii) subject to subsection 44(1.1), such amount as the taxpayer claims,
(A) in the case of an individual (other than a trust), in prescribed form filed with the taxpayer’s return of income under this Part for the particular year, and
(B) in any other case, in the taxpayer’s return of income under this Part for the particular year,
as a deduction, not exceeding the lesser of
(C) a reasonable amount as a reserve in respect of such of the proceeds of disposition of the 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, and
(D) an 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, and
(f) the 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 be
(i) the 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,
minus
(ii) the 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).
Marginal note:Reserve — property disposed of to a child
(1.1) In 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.
Marginal note:Time of disposition and of receipt of proceeds
(2) For 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 of
(a) the day the taxpayer has agreed to an amount as full compensation to the taxpayer for the property lost, destroyed, taken or sold,
(b) 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,
(c) 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,
(d) the time at which the taxpayer is deemed by section 70 or paragraph 128.1(4)(b) to have disposed of the property, and
(e) where 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.
Marginal note:Where s. 70(3) does not apply
(3) Subsection 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.
Marginal note:Deemed election
(4) Where a former property of a taxpayer was a depreciable property of the taxpayer
(a) if 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); and
(b) if 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).
Marginal note:Replacement property
(5) For the purposes of this section, a particular capital property of a taxpayer is a replacement property for a former property of the taxpayer, if
(a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
(a.1) 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;
(b) 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;
(c) where the former property was a taxable Canadian property of the taxpayer, the particular capital property is a taxable Canadian property of the taxpayer; and
(d) where 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.
Marginal note:Deemed proceeds of disposition
(6) Where 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 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 which
(a) the proceeds of disposition of one such part determined without regard to this subsection
exceed
(b) the adjusted cost base to the taxpayer of that part
shall, 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.
Marginal note:Where subpara. (1)(e)(iii) does not apply
(7) Subparagraph 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 where
(a) the taxpayer, at the end of the year or at any time in the immediately following year, was not resident in Canada or was exempt from tax under any provision of this Part; or
(b) the person to whom the former property of the taxpayer was disposed of was a corporation that, immediately after the disposition,
(i) was controlled, directly or indirectly in any manner whatever, by the taxpayer,
(ii) was controlled, directly or indirectly in any manner whatever, by a person or group of persons by whom the taxpayer was controlled, directly or indirectly in any manner whatever, or
(iii) controlled the taxpayer, directly or indirectly in any manner whatever, where the taxpayer is a corporation.
Marginal note:Application of s. 70(10)
(8) The definitions in subsection 70(10) apply to this section.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Definitions
44.1 (1) The definitions in this subsection apply in this section.
“ACB reduction”
« réduction du prix de base rajusté »
“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 formula
D × (E/F)
where
- D
- is the permitted deferral of the individual in respect of the qualifying disposition;
- E
- is the cost to the individual of the replacement share; and
- F
- is the cost to the individual of all the replacement shares of the individual in respect of the qualifying disposition.
“active business corporation”
« société exploitant activement une entreprise »
“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 are
(a) assets used principally in an active business carried on by the corporation or by an active business corporation that is related to the corporation;
(b) shares issued by or debt owing by other active business corporations that are related to the corporation; or
(c) a combination of assets described in paragraphs (a) and (b).
“carrying value”
« valeur comptable »
“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.
“common share”
« action ordinaire »
“common share” means a share prescribed for the purpose of paragraph 110(1)(d).
“eligible pooling arrangement”
« arrangement admissible de mis en commun »
“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 for
(a) the transfer of funds or other property by the individual to the investment manager for the purpose of making investments on behalf of the individual;
(b) 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; and
(c) the 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.
“eligible small business corporation”
« société admissible exploitant une petite entreprise »
“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 are
(a) assets 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;
(b) shares issued by or debt owing by other eligible small business corporations that are related to the corporation; or
(c) a combination of assets described in paragraphs (a) and (b).
“eligible small business corporation share”
« action déterminée de petite entreprise »
“eligible small business corporation share” of an individual means a common share issued by a corporation to the individual if
(a) at the time the share was issued, the corporation was an eligible small business corporation; and
(b) immediately 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.
“permitted deferral”
« montant de report autorisé »
“permitted deferral” of an individual in respect of a qualifying disposition of the individual means the amount determined by the formula
(G/H) × I
where
- G
- is 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;
- H
- is the individual’s proceeds of disposition from the qualifying disposition; and
- I
- is the individual’s capital gain from the qualifying disposition.
- “qualifying cost”
“qualifying cost”[Repealed, 2003, c. 15, s. 70(1)]
“qualifying disposition”
« disposition admissible »
“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 was
(a) an eligible small business corporation share of the individual;
(b) throughout the period during which the individual owned the share, a common share of an active business corporation; and
(c) throughout the 185-day period that ended immediately before the disposition of the share, owned by the individual.
- “qualifying portion of a capital gain”
“qualifying portion of a capital gain”[Repealed, 2003, c. 15, s. 70(1)]
- “qualifying portion of the proceeds of disposition”
“qualifying portion of the proceeds of disposition”[Repealed, 2003, c. 15, s. 70(1)]
“replacement share”
« action remplacement »
“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 is
(a) acquired by the individual in the year or within 120 days after the end of the year; and
(b) designated by the individual in the individual’s return of income for the year to be a replacement share in respect of the qualifying disposition.
Marginal note:Capital gain deferral
(2) Where an individual has made a qualifying disposition in a taxation year,
(a) 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;
(b) 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; and
(c) where 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.
Marginal note:Special rule — re eligible pooling arrangements
(3) Except 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.
Marginal note:Special rule — re acquisitions on death
(4) For 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, if
(a) where 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; or
(b) where 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.
Marginal note:Special rule — re breakdown of relationships
(5) For 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.
Marginal note:Special rule — re eligible small business corporation share exchanges
(6) For the purpose of this section, where an individual receives shares of the capital stock of a 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 of shares issued 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 if
(a) paragraph 85(1)(h) or subsection 85.1(3) or 87(4) applied to the individual in respect of the new shares; and
(b) the 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.
Marginal note:Special rule — re active business corporation share exchanges
(7) For the purpose of this section, where an individual receives common shares of the capital stock of a corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition of common shares 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, if
(a) paragraph 85(1)(h) or subsection 85.1(3) or 87(4) applied to the individual in respect of the new shares;
(b) 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; and
(c) the disposition of the exchanged shares was a qualifying disposition of the individual.
Marginal note:Special rule — re carrying on an active business
(8) For 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 corporation
(a) issued 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;
(b) 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; or
(c) accumulated 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.
Marginal note:Special rule — re qualifying disposition
(9) A 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 Canada
(a) at 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; or
(b) in any other case, for at least 730 days in the period referred to in paragraph (a).
Marginal note:Special rule — re exceptions
(10) For 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) a professional corporation;
(b) a specified financial institution;
(c) a corporation the principal business of which is the leasing, rental, development or sale, or any combination of those activities, of real property owned by it; or
(d) a corporation more than 50 per cent of the fair market value of the property of which (net of debts incurred to acquire the property) is attributable to real property.
Marginal note:Determination rule
(11) In 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.
Marginal note:Anti-avoidance rule
(12) The 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 where
(a) the 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 which
(i) shares 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, or
(ii) the 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;
(b) the new shares (or shares for which the new shares are substituted property) were issued by the corporation that issued the old shares or were issued by a corporation that, at or immediately after the time of issue of those shares, was a corporation that was not dealing at arm’s length with the corporation that issued the old shares; and
(c) it 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 2001, c. 17, s. 29;
- 2003, c. 15, s. 70;
- 2010, c. 12, s. 2.
Marginal note:Property with more than one use
45. (1) For the purposes of this subdivision the following rules apply:
(a) where a taxpayer,
(i) having acquired property for some other purpose, has commenced at a later time to use it for the purpose of gaining or producing income, or
(ii) having 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 have
(iii) disposed of it at that later time for proceeds equal to its fair market value at that later time, and
(iv) immediately thereafter reacquired it at a cost equal to that fair market value;
(b) 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;
(c) 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,
(i) if the use regularly made of the property for those other purposes has increased, the taxpayer shall be deemed to have
(A) disposed 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, and
(B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(i)(A), and
(ii) if the use regularly made of the property for those other purposes has decreased, the taxpayer shall be deemed to have
(A) disposed 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, and
(B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(ii)(A); and
(d) in 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”.
Marginal note:Election where change of use
(2) For the purposes of this subdivision and section 13, where subparagraph 45(1)(a)(i) or paragraph 13(7)(b) would otherwise apply to any property of a taxpayer for a taxation year and the taxpayer so elects in respect of the property in the taxpayer’s return of income for the year under this Part, the taxpayer shall be deemed not to have begun to use the property for the purpose of gaining or producing income except that, if in the taxpayer’s return of income under this Part for a subsequent taxation year the taxpayer rescinds the election in respect of the property, the taxpayer shall be deemed to have begun so to use the property on the first day of that subsequent year.
Marginal note:Election concerning principal residence
(3) Where at any time a property that was acquired by a taxpayer for the purpose of gaining or producing income ceases to be used for that purpose and becomes the principal residence of the taxpayer, subsection 45(1) 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 of
(a) the day that is 90 days after a demand by the Minister for an election under this subsection is sent to the taxpayer, and
(b) the taxpayer’s filing-due date for the taxation year in which the property is actually disposed of by the taxpayer.
Marginal note:Where election cannot be made
(4) Notwithstanding 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. 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. 30.
Marginal note:Personal-use property
46. (1) Where 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 subdivision
(a) the 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; and
(b) the 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.
Marginal note:Where part only of property disposed of
(2) Where 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 subdivision
(a) the adjusted cost base to the taxpayer, immediately before the disposition, of the part so disposed of shall be deemed to be the greater of
(i) the adjusted cost base to the taxpayer at that time of that part otherwise determined, and
(ii) that 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; and
(b) the proceeds of disposition of the part so disposed of shall be deemed to be the greater of
(i) the proceeds of disposition of that part otherwise determined, and
(ii) the amount determined under subparagraph 46(2)(a)(ii).
Marginal note:Properties ordinarily disposed of as a set
(3) For 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,
(a) 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, and
(b) had, 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.
Marginal note:Decrease in value of personal-use property of corporation, etc.
(4) 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) 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, or
(b) a 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.
Marginal note:Excluded property
(5) For 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. R.S., 1985, c. 1 (5th Supp.), s. 46;
- 2001, c. 17, s. 31.
Marginal note:Identical properties
47. (1) Where 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,
(a) 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;
(b) the taxpayer shall be deemed to have acquired the identical property at the particular time at a cost equal to the quotient obtained when
(i) the 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 properties
is divided by
(ii) the number of the identical properties owned by the taxpayer immediately after the particular time;
(c) 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 formula
A/B
where
- A
- is 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, and
- B
- is 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; and
(d) there 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.
Marginal note:Where identical properties are bonds, etc.
(2) 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:
“(ii) 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.”
Marginal note:Securities acquired by employee
(3) For 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 if
(a) the security is acquired in circumstances to which any of subsections 7(1.1), (1.5) or (8) or 147(10.1) applies; or
(b) the 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. R.S., 1985, c. 1 (5th Supp.), s. 47;
- 1995, c. 21, s 13;
- 2001, c. 17, s. 32.
Indexed Security Investment Plans
Marginal note:Application of s. 47.1 of R.S.C., 1952, c. 148
47.1 (26.1) Words 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).
Marginal note:Capital losses in 1986
(27) Notwithstanding 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.
Marginal note:Transition for 1986
(28) Where a taxpayer was a participant under a Plan on January 1, 1986, the following rules apply:
(a) 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 formula
A × B/C
where
- A
- is 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”,
- B
- is the fair market value of the security on that date, and
- C
- is the fair market value of all indexed securities owned under the Plan by the taxpayer on that date;
(b) 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;
(c) 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;
(d) 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; and
(e) for 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. 1984, c. 1, s. 17;
- 1985, c. 45, ss. 19, 126(F);
- 1986, c. 6, s. 20, c. 55, s. 7.
48. [Repealed, 1994, c. 21, s. 19(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 48;
- 1994, c. 21, s. 19.
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 designated stock exchange, and
(b) the 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),
(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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Granting of options
49. (1) Subject to subsections 49(3) and 49(3.1), for the purposes of this subdivision, the granting of an option, other than
(a) an option to acquire or to dispose of a principal residence,
(b) an option granted by a corporation to acquire shares of its capital stock or bonds or debentures to be issued by it, or
(c) an 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.
Marginal note:Where option expires
(2) Where at any time an option described in paragraph 49(1)(b) (other than an option to acquire shares of the capital stock of a 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) that has been granted by a corporation after 1971 expires,
(a) the corporation shall be 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
(b) the adjusted cost base to the corporation of that capital property immediately before that time shall be deemed to be nil.
Marginal note:Idem
(2.1) Where at any time an option referred to in paragraph 49(1)(c) expires,
(a) the trust shall be 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
(b) the adjusted cost base to the trust of that capital property immediately before that time shall be deemed to be nil.
Marginal note:Where option to acquire exercised
(3) Where 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 included
(a) in computing the vendor’s proceeds of disposition of the property, the consideration received by the vendor for the option; and
(b) in computing the cost to the purchaser of the property,
(i) 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, and
(ii) in any other case, the adjusted cost base to the purchaser of the option.
Marginal note:Option to acquire specified property exercised
(3.01) Where at any time a taxpayer exercises an option to acquire a specified property,
(a) 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; and
(b) the 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.
Marginal note:Where option to dispose exercised
(3.1) Where 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 deducted
(a) in computing the vendor’s proceeds of disposition of the property, the adjusted cost base to the vendor of the option; and
(b) in computing the cost to the purchaser of the property, the consideration received by the purchaser for the option.
Marginal note:Option granted before February 23, 1994
(3.2) Where 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.
Marginal note:Reassessment where option exercised in subsequent year
(4) Where
(a) an 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”),
(b) the taxpayer has filed a return of the taxpayer’s income for the initial year as required by section 150, and
(c) on 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.
Marginal note:Idem
(5) Where 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,
(a) 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;
(b) 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; and
(c) subsection 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. 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.
Marginal note:No disposition where obligation satisfied
49.1 For 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. 2000, c. 19, s. 3.
Marginal note:Debts established to be bad debts and shares of bankrupt corporation
50. (1) For the purposes of this subdivision, where
(a) a 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, or
(b) a 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 and
(i) the corporation has during the year become a bankrupt (within the meaning of subsection 128(3)),
(ii) the corporation is a corporation referred to in section 6 of the Winding-up 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, or
(iii) at the end of the year,
(A) the corporation is insolvent,
(B) neither the corporation nor a corporation controlled by it carries on business,
(C) the fair market value of the share is nil, and
(D) it is reasonable to expect that the corporation will be dissolved or wound up and will not commence to carry on business
and 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.
Marginal note:Idem
(1.1) Where
(a) a 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, and
(b) the 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.
Marginal note:Where debt a personal-use property
(2) Where 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,
(a) 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 which
(i) its adjusted cost base to the taxpayer immediately before the end of the year
exceeds
(ii) the 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; and
(b) the 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).
Marginal note:Disposal of R.H.O.S.P. properties
(3) Each 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. R.S., 1985, c. 1 (5th Supp.), s. 50;
- 1994, c. 7, Sch. II, s. 28;
- 1995, c. 21, s. 15.
Marginal note:Convertible property
51. (1) Where a share of the capital stock of a corporation is acquired by a taxpayer from the corporation in exchange for
(a) a capital property of the taxpayer that is another share of the corporation (in this section referred to as a “convertible property”), or
(b) a 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,
(c) except for the purpose of subsection 20(21), the exchange shall be deemed not to be a disposition of the convertible property,
(d) 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 formula
A × B/C
where
- A
- is the adjusted cost base to the taxpayer of the convertible property immediately before the exchange,
- B
- is the fair market value, immediately after the exchange, of all the shares of the particular class acquired by the taxpayer on the exchange, and
- C
- is the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange,
(d.1) 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 formula
A × B/C
where
- A
- is 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,
- B
- is the fair market value, immediately after the exchange, of that share, and
- C
- is the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange,
(d.2) 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,
(e) 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, and
(f) where 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.
Marginal note:Idem
(2) Notwithstanding subsection 51(1), where
(a) shares 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,
(b) the fair market value of the convertible property immediately before the exchange exceeds the fair market value of the shares immediately after the exchange, and
(c) 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:
(d) the taxpayer shall be deemed to have disposed of the convertible property for proceeds of disposition equal to the lesser of
(i) the total of its adjusted cost base to the taxpayer immediately before the exchange and the gift portion, and
(ii) the fair market value of the convertible property immediately before the exchange,
(e) the taxpayer’s capital loss from the disposition of the convertible property shall be deemed to be nil, and
(f) the 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 of
(i) the adjusted cost base to the taxpayer of the convertible property immediately before the exchange, and
(ii) the 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,
that
(iii) the fair market value, immediately after the exchange, of all the shares of the particular class acquired by the taxpayer on the exchange
is of
(iv) the fair market value, immediately after the exchange, of all the shares acquired by the taxpayer on the exchange.
Marginal note:Computation of paid-up capital
(3) Where 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 exchange
(a) there shall be deducted the amount determined by the formula
(A - B) × C/A
where
- A
- is 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,
- B
- is the paid-up capital immediately before the exchange in respect of the old shares, and
- C
- is 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; and
(b) there shall be added an amount equal to the lesser of
(i) the amount, if any, by which
(A) the 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 time
exceeds
(B) the total that would be determined under clause 51(3)(b)(i)(A) if this Act were read without reference to paragraph 51(3)(a), and
(ii) the 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.
Marginal note:Application
(4) Subsections 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. 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.
Marginal note:Conversion of debt obligation
51.1 Where
(a) a 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”),
(b) the terms of the convertible obligation conferred on the holder the right to make the exchange, and
(c) the 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. 1995, c. 21, s. 50.
Marginal note:Cost of certain property the value of which included in income
52. (1) Where
(a) a taxpayer acquired property after 1971 (other than 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), and
(b) an amount in respect of its value was
(i) included, otherwise than under section 7, in computing
(A) the 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, or
(B) the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, or
(ii) for 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,
for the purposes of this subdivision, the amount so included shall be added in computing the cost to the taxpayer of the property, except to the extent that the amount was otherwise added to the cost or included in computing the adjusted cost base to the taxpayer of the property.
(1.1) [Repealed, 2001, c. 17, s. 35(1)]
Marginal note:Cost of property received as dividend in kind
(2) Where 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 that 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 fore proceeds equal to that fair market value.
Marginal note:Cost of stock dividend
(3) Where 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 of
(a) where the stock dividend is a dividend, the amount of the stock dividend,
(a.1) where the stock dividend is not a dividend, nil, and
(b) where an amount is included in the shareholder’s income in respect of the stock dividend under subsection 15(1.1), the amount so included.
Marginal note:Cost of property acquired as prize
(4) Where 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.
(6) [Repealed, 2001, c. 17, s. 35(2)]
Marginal note:Cost of shares of subsidiary
(7) Notwithstanding 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.
Marginal note:Cost of shares of immigrant corporation
(8) Notwithstanding 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. 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.
Marginal note:Adjustments to cost base
53. (1) In 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:
(a) 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;
(b) where the property is a share of the capital stock of a corporation resident in Canada, the amount of any dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time;
(b.1) 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;
(c) 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 that
(i) the amount that may reasonably be regarded as the increase in the fair market value, as a result of the contribution, of the share
is of
(ii) the 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;
(d) where the property is a share of the capital stock of a foreign affiliate of the taxpayer, any amount required by paragraph 92(1)(a) to be added in computing the adjusted cost base to the taxpayer of the share;
(d.01) 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;
(d.1) where the property is a capital interest of the taxpayer in a trust to which paragraph 94(1)(d) applies, any amount required by paragraph 94(5)(a) to be added in computing the adjusted cost base to the taxpayer of the interest;
(d.2) 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;
(d.3) 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;
(e) where the property is an interest in a partnership,
(i) 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 to
(A) paragraphs 38(a.1) and (a.2) 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),
(A.1) paragraph 18(1)(l.1),
(A.2) the description of C in the formula in paragraph 14(1)(b), and
(B) paragraph (i), paragraphs 12(1)(o) and 12(1)(z.5), 18(1)(m), 20(1)(v.1) and 29(1)(b) and 29(2)(b), section 55, subsections 69(6) and 69(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,
(ii) 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,
(iii) the taxpayer’s share of the amount, if any, by which
(A) any 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
(B) the adjusted cost basis (within the meaning assigned by subsection 148(9)) of the policy to the partnership immediately before that person’s death,
(iv) 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,
(v) 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),
(vi) 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,
(vii) 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,
(vii.1) 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,
(viii) 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,
(ix) the amount, if any, by which
(A) the 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 Canada
exceeds
(B) the 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,
(x) any amount required by section 97 to be added before that time in computing the adjusted cost base to the taxpayer of the interest,
(xi) 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,
(xii) 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, and
(xiii) any amount required by subsection 127(30) to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time;
(xiv) [Repealed, 2009, c. 2, s. 11]
(f) 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 which
(i) the 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 property
exceeds
(ii) where 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;
(f.1) 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 that
(i) paragraph 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, and
(ii) the 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;
(f.11) 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 that
(i) paragraph 53(1)(f.1) does not apply to increase the adjusted cost base to the taxpayer of the property,
(ii) 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, and
(iii) the 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;
(f.12) 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;
(f.2) 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;
(g) 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;
(g.1) 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;
(h) 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 pay
(i) interest on debt relating to the acquisition of land (within the meaning assigned by subsection 18(3)), or
(ii) property 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 municipality
to the extent that the amount was, because of subsection 18(2),
(iii) not deductible in computing the taxpayer’s income from the land or from a business for any taxation year beginning before that time, or
(iv) not 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);
(i) 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 loss
(i) was not, by virtue of section 31, deductible in computing the taxpayer’s income for that year,
(ii) 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,
(iii) did not exceed the total of
(A) taxes (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, and
(B) interest, 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, and
(iv) did not exceed the remainder obtained when
(A) the 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 from
(B) the 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;
(j) 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;
(k) 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;
(l) where the property is an interest in a related segregated fund trust referred to in section 138.1,
(i) 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,
(ii) each amount required by subparagraph 138.1(1)(g)(ii) to be added before that time in respect of that interest,
(iii) 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, and
(iv) each 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;
(m) where the property is an offshore investment fund property (within the meaning assigned by subsection 94.1(1)),
(i) 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, or
(ii) where 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;
(n) 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);
(o) 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;
(p) 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 formula
A × B/C
where
- A
- is 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,
- B
- is the fair market value at that time of the property, and
- C
- is the fair market value at that time of all the taxpayer’s interests in or shares of the capital stock of the entity;
(q) 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, and
(r) where 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) of the definition “flow-through entity” in subsection 39.1(1) and immediately after that time the taxpayer disposed of all of the taxpayer’s interests in, and shares of the capital stock of, the entity, the amount determined by the formula
A × B/C
where
- A
- is 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 is
(i) the 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, or
(ii) twice 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,
- B
- is the fair market value at that time of the property, and
- C
- is the fair market value at that time of all the taxpayer’s interests in, and shares of the capital stock of, the entity.
Marginal note:Deemed contribution of capital
(1.1) For the purposes of paragraph 53(1)(c), where there has been a disposition of property before May 7, 1974 and
(a) the taxpayer and the corporation referred to in that paragraph have made an election under section 85 in respect of that property, and
(b) the 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 which
(c) the amount that the taxpayer and the corporation have agreed on in the election
exceeds
(d) the fair market value at the time of the disposition of any consideration received by the taxpayer for the property so disposed of.
Marginal note:Amounts to be deducted
(2) In 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:
(a) where the property is a share of the capital stock of a corporation resident in Canada,
(i) 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),
(ii) 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,
(iii) 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,
(iv) 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, and
(v) any amount required by paragraph 44.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share;
(b) where the property is a share of the capital stock of a corporation not resident in Canada,
(i) any amount required by paragraph 80.1(4)(d) or section 92 to be deducted in computing the adjusted cost base to the taxpayer of the share, and
(ii) 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;
(b.1) where the property is a capital interest of the taxpayer in a trust to which paragraph 94(1)(d) applies, any amount required by paragraph 94(5)(b) to be deducted in computing the adjusted cost base to the taxpayer of the interest;
(b.2) where the property is property of a corporation control of which was acquired by a person or group of persons 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;
(c) where the property is an interest in a partnership,
(i) 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 to
(A) the fractions set out in subsection 14(5), paragraph 38(b) and in the formula in paragraph 14(1)(b),
(A.1) paragraph 18(1)(l.1),
(A.2) the description of C in the formula in paragraph 14(1)(b),
(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, and
(C) subsections 100(4) and 112(3.1), and subsection 112(4.2) as it read in its application to dispositions of property that occurred before April 27, 1995,
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,
(i.1) 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,
(i.2) 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,
(i.3) 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,
(i.4) 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),
(A) 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), and
(B) where 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),
(ii) 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 of
(A) amounts 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,
(B) the Canadian exploration and development expenses and foreign resource pool expenses, if any, incurred by the partnership in the fiscal period,
(C) the Canadian exploration expense, if any, incurred by the partnership in the fiscal period,
(D) the Canadian development expense, if any, incurred by the partnership in the fiscal period, and
(E) the Canadian oil and gas property expense, if any, incurred by the partnership in the fiscal period,
(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been a gift made, or by subsection 127(4.2) to have been an amount contributed, 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,
(iv) any amount required by section 97 to be deducted before that time in computing the adjusted cost base to the taxpayer of the interest,
(v) 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,
(vi) 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),
(vii) 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,
(viii) 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,
(ix) 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),
(x) 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,
(xi) 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, and
(xii) 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;
(xiii) [Repealed, 2009, c. 2, s. 11]
(d) 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;
(e) where the property is a share, or an interest in or a right 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 of
(i) paragraph (e) of the definition “Canadian exploration and development expenses” in subsection 66(15), a Canadian exploration and development expense,
(ii) paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), a Canadian exploration expense,
(iii) paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5), a Canadian development expense, or
(iv) paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), a Canadian oil and gas property expense
incurred by the taxpayer;
(f) where the property was received by the taxpayer as consideration for any payment or loan
(i) made 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, and
(ii) described 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’s
(iii) Canadian exploration and development expenses,
(iv) Canadian exploration expense,
(v) Canadian development expense, or
(vi) Canadian oil and gas property expense,
as the case may be;
(f.1) 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’s
(i) Canadian exploration and development expenses,
(ii) Canadian exploration expense,
(iii) Canadian development expense, or
(iv) Canadian oil and gas property expense,
as the case may be;
(f.2) 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;
(g) 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;
(g.1) 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);
(h) 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)),
(i) 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,
(i.1) 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 thereof
(A) that 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),
(A.1) that was deemed by subsection 104(16) to be a dividend received by the taxpayer, or
(B) where the trust was resident in Canada throughout its taxation year in which the amount became payable
(I) that is equal to the amount designated by the trust under subsection 104(21) in respect of the taxpayer,
(II) that was designated by the trust under subsection 104(20) in respect of the taxpayer, or
(III) that is an assessable distribution (as defined in subsection 218.3(1)) to the taxpayer,
(ii) 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),
(iii) 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,
(iv) 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, and
(v) an 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);
(i) 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 was
(i) a Canadian resource property,
(iii) an income interest in a trust resident in Canada,
(iv) taxable Canadian property, or
(v) a timber resource property
was not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by which
(vi) the fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)
exceeds
(vii) the 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;
(j) 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 was
(i) a Canadian resource property,
(iii) an income interest in a trust resident in Canada,
(iv) taxable Canadian property, or
(v) a timber resource property
was not less than 50% of the fair market value of all the trust property, that proportion of the amount, if any, by which
(vi) the fair market value at the purchase time of such of the trust properties as were properties described in any of subparagraphs (i) to (v)
exceeds
(vii) the 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;
(k) where the property was acquired by the taxpayer after 1971, the amount, if any, by which the total of
(i) the 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 than
(A) an amount described in paragraph 37(1)(d),
(B) an amount deducted as an allowance under section 65,
(C) 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, or
(D) an amount included in income by virtue of paragraph 12(1)(u) or 56(1)(s), and
(ii) all 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;
(l) 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;
(l.1) where the property is an indexed debt obligation,
(i) 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, and
(ii) the 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;
(m) 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;
(n) 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;
(o) 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;
(p) 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;
(q) where the property is an interest in a related segregated fund trust referred to in section 138.1,
(i) 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, and
(ii) each 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;
(s) the amount, if any, by which
(i) the amount elected by the taxpayer before that time under subsection 53(2.1)
exceeds
(ii) any 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;
(t) 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;
(u) 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; and
(v) 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.
Marginal note:Election
(2.1) For 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 of
(a) the adjusted cost base, determined without reference to paragraph 53(2)(s), at the time the property was acquired,
(b) the amount so received by the taxpayer, and
(c) where the taxpayer has disposed of the property before the year, nil.
(3) [Repealed, 2001, c. 17, s. 36(13)]
Marginal note:Recomputation of adjusted cost base on transfers and deemed dispositions
(4) Where 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), (2.1)(a), (4)(d) or (5)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,
(a) 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 which
(i) the 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,
exceeds
(ii) the 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); and
(b) the 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.
Marginal note:Recomputation of adjusted cost base on other transfer
(5) Where
(a) at 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”),
(b) 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,
(c) 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, and
(d) the proceeds of the disposition are not determined under any of the provisions referred to in subsection 53(4),
the following rules apply:
(e) there shall be deducted after that time in computing the adjusted cost base to the transferee of the property the amount, if any, by which
(i) the 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 time
exceeds
(ii) the 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), and
(f) the 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.
Marginal note:Recomputation of adjusted cost base on amalgamation
(6) Where 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,
(a) 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; and
(b) the 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. 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.
Marginal note:Definitions
54. In this subdivision,
“adjusted cost base”
« prix de base rajusté »
“adjusted cost base” to a taxpayer of any property at any time means, except as otherwise provided,
(a) where the property is depreciable property of the taxpayer, the capital cost to the taxpayer of the property as of that time, and
(b) in any other case, the cost to the taxpayer of the property adjusted, as of that time, in accordance with section 53,
except that
(c) for 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, and
(d) in no case shall the adjusted cost base to a taxpayer of any property at any time be less than nil;
“capital property”
« immobilisations »
“capital property” of a taxpayer means
(a) any depreciable property of the taxpayer, and
(b) any 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;
- “disposition”
“disposition”[Repealed, 2001, c. 17, s. 37(1)]
“eligible capital property”
« immobilisation admissible »
“eligible capital property” of a taxpayer means any property, a part of the consideration for the disposition of which would, if the taxpayer disposed of the property, be an eligible capital amount in respect of a business;
“exemption threshold”
« seuil d’exonération »
“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 formula
A – B
where
- A
- is the total of
(a) the 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, and
(b) the 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, if
(i) the taxpayer
(A) acquired 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), or
(B) made a contribution of capital to the partnership on or after August 16, 2011,
(ii) 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, and
(iii) at 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, and
- B
- is the total, if any, of all amounts, each of which is the lesser of
(a) the 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 is
(i) before the particular time, and
(ii) after 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, and
(b) the exemption threshold of the taxpayer in respect of the flow-though share class of property immediately before that earlier time;
“flow-through share class of property”
« catégorie de biens constituée d’actions accréditives »
“flow-through share class of property” means a group of properties,
(a) in respect of a class of shares of the capital stock of a corporation, each of which is
(i) a 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,
(ii) 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, or
(iii) a property that is an identical property of a property described in subparagraph (i) or (ii), or
(b) each 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;
“fresh-start date”
« date de nouveau départ »
“fresh-start date”, of a taxpayer at a particular time in respect of a flow-through share class of property, means
(a) in the case of a partnership interest that is included in the flow-through share class of property, the day that is the later of
(i) August 16, 2011, and
(ii) the last day, if any, before the particular time, on which the taxpayer held an interest in the partnership, and
(b) in the case of any other property that is included in the flow-though share class of property, the day that is the later of
(i) March 22, 2011, and
(ii) the 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;
“listed personal property”
« biens meubles déterminés »
“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, any
(a) print, etching, drawing, painting, sculpture, or other similar work of art,
(b) jewellery,
(c) rare folio, rare manuscript, or rare book,
(d) stamp, or
(e) coin;
“personal-use property”
« biens à usage personnel »
“personal-use property” of a taxpayer includes
(a) property 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 is
(i) the taxpayer,
(ii) a person related to the taxpayer, or
(iii) where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary,
(b) any debt owing to the taxpayer in respect of the disposition of property that was the taxpayer’s personal-use property, and
(c) any 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;
“principal residence”
« résidence principale »
“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, if
(a) where 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,
(a.1) 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, or
(b) where the taxpayer is a personal trust or an individual other than a trust, the taxpayer
(i) elected 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, or
(ii) elected 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 year
(c) where 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 year
(i) where the year is before 1982, by the taxpayer, or
(ii) where the year is after 1981,
(A) by the taxpayer,
(B) 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),
(C) 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), or
(D) where 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’s
(I) mother or father, or
(II) brother 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,
(c.1) where the taxpayer is a personal trust, unless
(i) the particular property was designated by the trust in prescribed form and manner to be the taxpayer’s principal residence for the year,
(ii) 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,
(A) is beneficially interested in the trust, and
(B) except 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,
(iii) no corporation (other than a registered charity) or partnership is beneficially interested in the trust at any time in the year, and
(iv) no 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’s
(A) mother or father, or
(B) brother 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, or
(d) because 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,
(e) 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, and
(f) 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;
“proceeds of disposition”
« produit de disposition »
“proceeds of disposition” of property includes,
(a) the sale price of property that has been sold,
(b) compensation for property unlawfully taken,
(c) compensation for property destroyed, and any amount payable under a policy of insurance in respect of loss or destruction of property,
(d) 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,
(e) compensation for property injuriously affected, whether lawfully or unlawfully or under statutory authority or otherwise,
(f) 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,
(g) 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,
(h) any amount included in computing a taxpayer’s proceeds of disposition of the property because of section 79, and
(i) in 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 include
(j) any amount that would otherwise be proceeds of disposition of a share to the extent that the amount is deemed by subsection 84(2) or 84(3) to be a dividend received and is not deemed by paragraph 55(2)(a) or subparagraph 88(2)(b)(ii) not to be a dividend, or
(k) any 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) or 212.2(2) to be a dividend paid to the taxpayer;
“specified property”
« bien déterminé »
“specified property” of a taxpayer is capital property of the taxpayer that is
(a) a share,
(b) a capital interest in a trust,
(c) an interest in a partnership, or
(d) an option to acquire specified property of the taxpayer;
“superficial loss”
« perte apparente »
“superficial loss” of a taxpayer means the taxpayer’s loss from the disposition of a particular property where
(a) during 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, and
(b) at 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 was
(c) a disposition deemed to have been made by paragraph 33.1(11)(a), 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(1)(f), subsection 138(11.3) or 142.5(2), section 142.6, or any of subsections 144(4.1) and (4.2) and 149(10),
(d) the expiry of an option,
(e) a disposition to which paragraph 40(2)(e.1) applies,
(f) a disposition by a corporation the control of which was acquired by a person or group of persons within 30 days after the disposition,
(g) 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, or
(h) a disposition to which subsection 40(3.4) or 69(5) applies,
and, for the purpose of this definition,
(i) 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, and
(j) 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Exception to principal residence rules
54.1 (1) A taxation year in which a taxpayer does not ordinarily inhabit the taxpayer’s property as a consequence of the relocation of the taxpayer’s or the taxpayer’s spouse’s or common-law partner’s place of employment while the taxpayer, 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 spouse is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definition “principal residence” in section 54 if
(a) the 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; or
(b) the taxpayer dies during the term of the taxpayer’s or the spouse’s or common-law partner’s employment by that employer.
Definition of “property”
(2) In this section, “property”, in relation to a taxpayer, means a housing unit
(a) owned by the taxpayer,
(b) in respect of which the taxpayer has a leasehold interest, or
(c) in 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 corporation
whether 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. R.S., 1985, c. 1 (5th Supp.), s. 54.1;
- 2000, c. 12, s. 142;
- 2001, c. 17, s. 238(E).
Marginal note:Certain shares deemed to be capital property
54.2 Where 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. 1988, c. 55, s. 32.
Marginal note:Definitions
55. (1) In this section,
“distribution”
« attribution »
“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 formula
A × B/C
where
- A
- is the fair market value, immediately before the transfer, of all property of that type owned at that time by the distributing corporation,
- B
- is 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, and
- C
- is the fair market value, immediately before the transfer, of all the issued shares of the capital stock of the distributing corporation;
“permitted acquisition”
« acquisition autorisée »
“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) a distribution, or
(b) a permitted exchange or permitted redemption in relation to a distribution by another distributing corporation;
“permitted exchange”
« échange autorisé »
“permitted exchange”, in relation to a distribution by a distributing corporation, means
(a) an 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, and
(b) an 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 where
(i) no 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 either
(ii) the 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, or
(iii) the 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) + D
where
- A
- is 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),
- B
- is 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,
- C
- is 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, and
- D
- is 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;
“permitted redemption”
« rachat autorisé »
“permitted redemption” , in relation to a distribution by a distributing corporation, means
(a) a 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,
(b) 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, and
(c) a 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 is
(i) a 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, or
(ii) a 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);
“safe-income determination time”
« moment de détermination du revenu protégé »
“safe-income determination time” for a transaction or event or a series of transactions or events means the time that is the earlier of
(a) the 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, and
(b) the time that is immediately before the earliest time that a dividend is paid as part of the transaction, event or series;
“specified class”
« catégorie exclue »
“specified class” means a class of shares of the capital stock of a distributing corporation where
(a) the 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,
(b) 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, and
(c) under 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 (excluding any premium for early redemption) an amount greater than the total of the fair market value of the consideration for which theshares were issued and the amount of any unpaid dividends thereon.
“specified corporation”
« société déterminée »
“specified corporation” in relation to a distribution means a distributing corporation
(a) that is a public corporation or a specified wholly-owned corporation of a public corporation,
(b) 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,
(c) 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), and
(d) no 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)
(e) 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, and
(f) 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;
“specified wholly-owned corporation”
« filiale à cent pour cent 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 by
(a) the public corporation,
(b) a specified wholly-owned corporation of the public corporation, or
(c) any combination of corporations described in paragraph (a) or (b).
Marginal note:Deemed proceeds or capital gain
(2) Where a corporation resident in Canada has received a taxable dividend in respect of which it is entitled to a deduction under subsection 112(1) or 112(2) or 138(6) as part of a transaction or event or a series of transactions or events, one of the purposes of which (or, in the case of a dividend under subsection 84(3), one of the results of which) was 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 and that could reasonably be considered to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction, event or series, notwithstanding any other section 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 to a corporation where the payment is part of the series)
(a) shall be deemed not to be a dividend received by the corporation;
(b) where a corporation has disposed of the share, shall be deemed to be proceeds of disposition of the share except to the extent that it is otherwise included in computing such proceeds; and
(c) where a corporation has not disposed of the share, shall be deemed to be a gain of the corporation for the year in which the dividend was received from the disposition of a capital property.
Marginal note:Application
(3) Subsection 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”)
(a) if, as part of a transaction or event or a series of transactions or events as a part of which the dividend was received, there was not at any particular time
(i) a disposition of property, other than
(A) money disposed of on the payment of a dividend or on a reduction of the paid-up capital of a share, and
(B) property 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,
(ii) 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,
(iii) a disposition, to a person or partnership who was an unrelated person immediately before the particular time, of
(A) shares 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”), or
(B) property more than 10% of the fair market value of which was, at any time during the course of the series, derived from shares of the capital stock of the dividend payer,
(iv) after the time the dividend was received, a disposition, to a person or partnership that was an unrelated person immediately before the particular time, of
(A) shares of the capital stock of the dividend recipient, or
(B) property more than 10% of the fair market value of which was, at any time during the course of the series, derived from shares of the capital stock of the dividend recipient, and
(v) a 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; or
(b) if the dividend was received
(i) in the course of a reorganization in which
(A) a distributing corporation made a distribution to one or more transferee corporations, and
(B) the 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, and
(ii) on a permitted redemption in relation to the distribution or on the winding-up of the distributing corporation.
Marginal note:Interpretation for par. (3)(a)
(3.01) For the purposes of paragraph 55(3)(a),
(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;
(b) 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;
(c) 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;
(d) proceeds of disposition shall be determined without reference to “paragraph 55(2)(a) or” in paragraph (j) of the definition “proceeds of disposition” in section 54; and
(e) 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.
Marginal note:Distribution by a specified corporation
(3.02) For 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
(a) “each type of property” shall be read as “property”; and
(b) “property of that type” shall be read as “property”.
Marginal note:Where paragraph (3)(b) not applicable
(3.1) Notwithstanding 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) where
(a) in contemplation of and before a distribution 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 of
(i) an amalgamation of corporations each of which was related to the distributing corporation,
(ii) an amalgamation of a predecessor corporation of the distributing corporation and one or more corporations controlled by that predecessor corporation,
(iii) a reorganization in which a dividend was received to which subsection 55(2) would, but for paragraph 55(3)(b), apply, or
(iv) a disposition of property by
(A) the 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,
(B) 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, or
(C) the 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,
(b) the dividend was received as part of a series of transactions or events in which
(i) a person or partnership (referred to in this subparagraph as the “vendor”) disposed of property and
(A) the property is
(I) a 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, or
(II) property 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),
(B) the vendor was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, and
(C) the 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,
(ii) 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, or
(iii) in 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) by
(A) a 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,
(B) a person or any member of a group of persons who acquired control of the distributing corporation as part of the series,
(C) 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), or
(D) a 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,
(c) 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 that
(i) was 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 than
(A) as a result of a disposition in the ordinary course of business,
(B) on a permitted acquisition in relation to a distribution, or
(C) as a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, and
(ii) is 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)
(A) that was received by the transferee corporation on the distribution,
(B) 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), or
(C) to 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 attributable
is 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, or
(d) the 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 that
(i) was 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 than
(A) as a result of a disposition in the ordinary course of business,
(B) on a permitted acquisition in relation to a distribution, or
(C) as a result of an amalgamation of 2 or more corporations that were related to each other immediately before the amalgamation, and
(ii) is 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)
(A) that was owned by the distributing corporation immediately before the distribution and not disposed of by it on the distribution,
(B) 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), or
(C) to 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 attributable
is 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.
Marginal note:Interpretation of paragraph (3.1)(b)
(3.2) For the purpose of paragraph 55(3.1)(b),
(a) 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”;
(b) 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;
(c) 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 unless
(i) the 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, or
(ii) immediately after the reorganization in the course of which the distribution was made, the particular person was related to the distributing corporation;
(d) 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;
(e) 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;
(f) 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;
(g) 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 of
(i) the incorporation of the corporation, or
(ii) the acquisition by an individual of one or more shares for the sole purpose of qualifying as a director of the corporation; and
(h) each corporation that is a shareholder and specified shareholder of a distributing corporation at any time during the course of a series of transactions or events, a part of which includes a distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.
Interpretation of “specified shareholder” changed
(3.3) In 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”.
Marginal note:Avoidance of subsection (2)
(4) 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.
Marginal note:Applicable rules
(5) For the purposes of this section,
(a) 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;
(b) 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 of
(i) its 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,
(ii) the amount, if any, by which
(A) the 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 period
exceeds
(B) the 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,
(iii) 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,
(iv) the amount, if any, by which
(A) 1/2 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,
exceeds
(B) where 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 formula
V + W
where
- V
- is 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, and
- W
- is 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, and
(C) in any other case, nil, and
(v) the amount, if any, by which
(A) 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 ends after October 17, 2000,
exceeds
(B) where 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 formula
X + Y
where
- X
- is 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, and
- Y
- is 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, and
(C) in any other case, nil;
(c) 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;
(d) the income earned or realized by a corporation for a period ending at a time when it was a foreign affiliate of another corporation shall be deemed to be the total of the amount, if any, that would have been deductible by that other corporation at that time by virtue of paragraph 113(1)(a) and the amount, if any, that would have been deductible by that other corporation at that time by virtue of paragraph 113(1)(b) if that other corporation
(i) owned all of the shares of the capital stock of the foreign affiliate immediately before that time,
(ii) had disposed at that time of all of the shares referred to in subparagraph 55(5)(d)(i) for proceeds of disposition equal to their fair market value at that time, and
(iii) had made an election under subsection 93(1) in respect of the full amount of the proceeds of disposition referred to in subparagraph 55(5)(d)(ii);
(e) 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,
(i) 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,
(ii) 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,
(iii) 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, and
(iv) this Act shall be read without reference to subsection 251(3) and paragraph 251(5)(b); and
(f) where a corporation has received a dividend any portion of which is a taxable dividend,
(i) the corporation may designate in its return of income under this Part for the taxation year during which the dividend was received any portion of the taxable dividend to be a separate taxable dividend, and
(ii) the amount, if any, by which the portion of the dividend that is a taxable dividend exceeds the portion designated under subparagraph 55(5)(f)(i) shall be deemed to be a separate taxable dividend.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Subdivision d
Other Sources of Income
Marginal note:Amounts to be included in income for year
56. (1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
Marginal note:Pension benefits, unemployment insurance benefits, etc.
(a) any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(i) a superannuation or pension benefit including, without limiting the generality of the foregoing,
(A) 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,
(B) the amount of any benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act,
(C) the amount of any payment out of or under a specified pension plan, and
(C.1) the 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 including
(D) the 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),
(E) 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, and
(F) 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,
(ii) 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,
(iii) a death benefit,
(iv) a benefit under the Unemployment Insurance Act, other than a payment relating to a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act, or a benefit under Part I, VIII or VIII.1 of the Employment Insurance Act,
(v) 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, or
(vi) except to the extent otherwise required to be included in computing the taxpayer’s income, a prescribed benefit under a government assistance program;
(vii) [Repealed, 1994, c. 21, s. 25(1)]
Marginal note:Benefits under CPP/QPP
(a.1) where 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;
Marginal note:Pension income reallocation
(a.2) where 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;
Marginal note:Support
(b) the total of all amounts each of which is an amount determined by the formula
A - (B + C)
where
- A
- is 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,
- B
- is 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, and
- C
- is 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;
(c) [Repealed, 1997, c. 25, s. 8(1)]
(c.1) [Repealed, 1994, c. 7, Sch. VIII, s. 17(2)]
Marginal note:Reimbursement of support payments
(c.2) an 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;
Marginal note:Annuity payments
(d) any amount received by the taxpayer in the year as an annuity payment other than an amount
(i) otherwise required to be included in computing the taxpayer’s income for the year,
(ii) 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), or
(iii) received out of or under an annuity contract issued or effected as a TFSA;
Marginal note:Idem
(d.2) any amount received out of or under, or as proceeds of disposition of, an annuity the payment for which was
(i) deductible 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,
(ii) made in circumstances to which subsection 146(21) applied, or
(iii) made 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;
Marginal note:Disposition of income-averaging annuity contract
(e) any 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;
Marginal note:Idem
(f) any 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;
Marginal note:Supplementary unemployment benefit plan
(g) amounts received by the taxpayer in the year from a trustee under a supplementary unemployment benefit plan as provided by section 145;
Marginal note:Registered retirement savings plan, etc.
(h) 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;
Marginal note:Home buyers’ plan
(h.1) amounts required by section 146.01 to be included in computing the taxpayer’s income for the year;
Marginal note:Lifelong learning plan
(h.2) amounts required by section 146.02 to be included in computing the taxpayer’s income for the year;
Marginal note:Deferred profit sharing plan
(i) amounts received by the taxpayer in the year under a deferred profit sharing plan as provided by section 147;
Marginal note:Life insurance policy proceeds
(j) any amount required by subsection 148(1) or 148(1.1) to be included in computing the taxpayer’s income for the year;
Marginal note:Certain tools of an employee, re proceeds
(k) all 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;
Marginal note:Legal expenses
(l) amounts received by the taxpayer in the year as
(i) legal 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,
(ii) reimbursement of costs incurred in relation to a decision of the Canada Employment and Immigration Commission, the Canada Employment and Insurance Commission, a board of referees or an umpire under the Unemployment Insurance Act or the Employment Insurance Act, or
(iii) 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;
Marginal note:Idem
(l.1) amounts 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;
(m) [Repealed, 1996, c. 23, s. 172]
Marginal note:Scholarships, bursaries, etc.
(n) the amount, if any, by which
(i) the 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,
exceeds
(ii) the taxpayer’s scholarship exemption for the year computed under subsection (3);
(iii) [Repealed, 2001, c. 17, s. 39(1)]
Marginal note:Apprenticeship incentive grant
(n.1) amounts received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Social Development;
Marginal note:Research grants
(o) the 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 than
(i) personal 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,
(ii) expenses in respect of which the taxpayer has been reimbursed, or
(iii) expenses that are otherwise deductible in computing the taxpayer’s income for the year;
Marginal note:Refund of scholarships, bursaries and research grants
(p) amounts as described in paragraph 60(q) received by the taxpayer in the year from an individual;
Marginal note:Education savings plan payments
(q) amounts 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;
Marginal note:Registered disability savings plan payments
(q.1) amounts 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;
Marginal note:Financial assistance
(r) amounts received in the year by the taxpayer as
(i) earnings supplements provided under a project sponsored by a government or government agency in Canada to encourage individuals to obtain or keep employment,
(ii) financial assistance under a program established by the Canada Employment Insurance Commission under Part II of the Employment Insurance Act,
(iii) financial assistance under a program that is
(A) established by a government or government agency in Canada or by an organization,
(B) similar to a program established under Part II of that Act, and
(C) 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,
(iv) 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, or
(v) amounts received by the taxpayer in the year under the Wage Earner Protection Program Act in respect of wages (within the meaning of that Act);
Marginal note:Grants under prescribed programs
(s) the amount of any grant received in the year under a prescribed program of the Government of Canada relating to home insulation or energy conversion by
(i) the 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, or
(ii) the 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 year
to 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;
Marginal note:Registered retirement income fund
(t) amounts 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;
Marginal note:Social assistance payments
(u) a social assistance payment made on the basis of a means, needs or income test and received in the year by
(i) the 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, or
(ii) the 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;
Marginal note:Workers’ compensation
(v) compensation received under an employees’ or workers’ compensation law of Canada or a province in respect of an injury, a disability or death;
Marginal note:Salary deferral arrangement
(w) the 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;
Marginal note:Retirement compensation arrangement
(x) any 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;
Marginal note:Idem
(y) any 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;
Marginal note:Idem
(z) the 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 required
(i) under paragraph 12(1)(n.3) to be included in computing the taxpayer’s income for a taxation year, or
(ii) under 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;
Marginal note:Value of benefits
(z.1) the 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; and
Marginal note:Employee life and health trust
(z.2) the 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.
Marginal note:Application of s. 12.2(11)
(1.1) The definitions in subsection 12.2(11) apply to paragraph 56(1)(d).
Marginal note:Indirect payments
(2) A 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.
Marginal note:Exemption for scholarships, fellowships, bursaries and prizes
(3) For the purpose of subparagraph (1)(n)(ii), a taxpayer’s scholarship exemption for a taxation year is the total of
(a) the 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 enrolment
(i) in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year, for the immediately preceding taxation year or for the following taxation year, or
(ii) in an elementary or secondary school educational program,
(b) the total of all amounts each of which is the lesser of
(i) the 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, and
(ii) the 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 than
(A) personal 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),
(B) expenses for which the taxpayer is entitled to be reimbursed, and
(C) expenses that are otherwise deductible in computing the taxpayer’s income, and
(c) the 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).
Marginal note:Limitations of scholarship exemption
(3.1) For the purpose of determining the total in paragraph (3)(a) for a taxation year,
(a) 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; and
(b) if an award is received in connection with an educational program in respect of which the taxpayer may deduct an amount by reason of paragraph (b) of the description of B in subsection 118.6(2) for the taxation year, for the immediately preceding taxation year or for 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.
Marginal note:Transfer of rights to income
(4) Where 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.
Marginal note:Interest free or low interest loans
(4.1) Where
(a) a 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 to
(i) another individual (in this subsection referred to as the “creditor”) who
(A) does not deal at arm’s length with the particular individual, and
(B) is not a trust, or
(ii) a trust (in this subsection referred to as the “creditor trust”) to which another individual (in this subsection referred to as the “original transferor”) who
(A) does not deal at arm’s length with the particular individual,
(B) was resident in Canada at any time in the period during which the loan or indebtedness is outstanding, and
(C) is not a trust,
has directly or indirectly by means of a trust or by any means whatever, transferred property, and
(b) it 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 from
(i) the loaned property,
(ii) 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, or
(iii) property 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:
(c) 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,
(i) 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 that
(A) section 74.1 applies or would, but for subsection 74.5(3), apply, or
(B) subsection 75(2) applies
to that income, and
(ii) where 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 that
(A) subparagraph 56(4.1)(c)(i) applies,
(B) section 74.1 applies or would, but for subsection 74.5(3), apply, or
(C) subsection 75(2) applies (otherwise than because of paragraph 56(4.1)(d))
to that income; and
(d) where 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.
Marginal note:Exception
(4.2) Notwithstanding any other provision of this Act, subsection 56(4.1) does not apply to any income derived in a particular taxation year where
(a) interest was charged on the loan or indebtedness at a rate equal to or greater than the lesser of
(i) the prescribed rate of interest in effect at the time the loan was made or the indebtedness arose, and
(ii) the 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;
(b) 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; and
(c) the 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.
Marginal note:Repayment of existing indebtedness
(4.3) For 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.
Marginal note:Exception for split income
(5) Subsections (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.
Marginal note:Child care benefit
(6) There 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 by
(a) the taxpayer, if
(i) the 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, or
(ii) the 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;
(b) 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; or
(c) an individual who makes a designation under subsection (6.1) in respect of the taxpayer for the taxation year.
Marginal note:Designation
(6.1) If, 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 of
(a) if 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; or
(b) in 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.
(7) [Repealed, 1994, c. 7, Sch. VII, s. 1(1)]
Marginal note:CPP/QPP and UCCB amounts for previous years
(8) Notwithstanding subsections (1) and (6), if
(a) one or more amounts are 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 Universal Child Care Benefit Act, the Canada Pension Plan or a provincial pension plan as defined in section 3 of the Canada Pension Plan, and
(b) a 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 year”
(9) For 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.
Marginal note:Severability of retirement compensation arrangement
(10) Where 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,
(a) 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; and
(b) subject 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.
Marginal note:Disposition of property by RCA trust
(11) For 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 arrangement
(a) disposes 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,
(b) acquires property from a person for consideration greater than the fair market value of the property at the time of the acquisition, or
(c) permits 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.
(12) [Repealed, 1997, c. 25, s. 8(3)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Support
56.1 (1) For 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 thereof
(a) when payable, is deemed to be payable to and receivable by the taxpayer; and
(b) when paid, is deemed to have been paid to and received by the taxpayer.
Marginal note:Agreement
(2) For the purposes of section 56, this section and subsection 118(5), the amount determined by the formula
A - B
where
- A
- is 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 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, where the taxpayer is
(a) the person’s spouse or common-law partner or former spouse or common-law partner, or
(b) where 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,
and
- B
- is the amount, if any, by which
(a) the 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 improvement
exceeds
(b) the 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.
Marginal note:Prior payments
(3) For 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,
(a) the amount is deemed to have been received thereunder; and
(b) the 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.
Marginal note:Definitions
(4) The definitions in this subsection apply in this section and section 56.
“child support amount”
« pension alimentaire pour enfants »
“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.
“commencement day”
« date d’exécution »
“commencement day” at any time of an agreement or order means
(a) where the agreement or order is made after April 1997, the day it is made; and
(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the 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,
(ii) 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,
(iii) 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, and
(iv) the 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.
“support amount”
« pension alimentaire »
“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, and
(a) the 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; or
(b) the 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Reserve claimed for debt forgiveness
56.2 There 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. 1995, c. 21, s. 19.
Marginal note:Reserve claimed for debt forgiveness
56.3 There 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. 1995, c. 21, s. 19.
Marginal note:Certain superannuation or pension benefits
57. (1) Notwithstanding 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 thereof
(a) that 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, or
(b) that 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.
Marginal note:Exception
(2) This 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.
Marginal note:Limitation
(3) Where 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.
Marginal note:Certain payments from pension plan
(4) Where 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.
Marginal note:Payments to widow, etc., of contributor
(5) Where, 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. 1970-71-72, c. 63, s. 1 “57”;
- 1977-78, c. 1, s. 101(F);
- 1990, c. 35, s. 29.
Marginal note:Government annuities and like annuities
58. (1) In 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 of
(a) the 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
(b) $5,000.
Marginal note:Annuities before 1940
(2) In 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 of
(a) the 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
(b) $1,200.
Marginal note:Limitation
(3) Where 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),
(a) if the amount deductible under subsection 58(1) is $1,200 or more, he may not make a deduction under subsection 58(2); and
(b) if 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.
Marginal note:Capital element
(4) The 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.
Marginal note:Spouses or common-law partners
(5) Where 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.
Marginal note:Pension benefits
(6) This section does not apply to superannuation or pension benefits received out of or under a registered pension plan.
Marginal note:Enlargement of annuity
(7) For 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. R.S., 1985, c. 1 (5th Supp.), s. 58;
- 1994, c. 7, Sch. VIII, s. 19(E);
- 2000, c. 12, s. 142.
Marginal note:Consideration for foreign resource property
59. (1) Where 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 which
(a) the portion of the taxpayer’s proceeds of disposition from the disposition of the property that becomes receivable in the year
exceeds
(b) the total of
(i) all 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, and
(ii) where 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.
Marginal note:Partnerships
(1.1) Where 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.
Marginal note:Deduction under former s. 64 in preceding year
(2) There 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.
Marginal note:Recovery of exploration and development expenses
(3.2) There shall be included in computing a taxpayer’s income for a taxation year
(a) any amount referred to in paragraph 66(12.4)(b);
(b) any amount referred to in subsection 66.1(1);
(c) any amount referred to in subsection 66.2(1);
(c.1) any amount referred to in subsection 66.21(3);
(d) any amount referred to in subparagraph 66(10.4)(b)(ii); and
(e) any amount referred to in paragraph 66(10.4)(c).
Marginal note:Amounts to be included in income
(3.3) There shall be included in computing a taxpayer’s income for a taxation year
(a) 33 1/3% of the total of all amounts, each of which is the stated percentage of
(i) an 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),
(ii) 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, or
(iii) 30% 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 receivable
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 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;
(b) 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 of
(i) the proceeds of disposition of the property, and
(ii) the 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);
(c) 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 of
(i) the proceeds of disposition of the property, and
(ii) the 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);
(d) 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 of
(i) the proceeds of disposition of the property, and
(ii) the 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);
(e) 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; and
(f) 33 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.
Marginal note:Definitions
(3.4) For the purposes of this subsection and subsection 59(3.3),
“specified predecessor”
« prédécesseur déterminé »
“specified predecessor” of a taxpayer means a person who is a predecessor of
(a) the taxpayer, or
(b) a person who is a specified predecessor of the taxpayer;
“stated percentage”
« pourcentage indiqué »
“stated percentage” means
(a) in respect of an amount described in paragraph 59(3.3)(a) or 59(3.3)(f) that became receivable by a taxpayer,
(i) 100% where the amount became receivable before July, 1988,
(ii) 50% where the amount became receivable after June, 1988 and before 1990, and
(iii) 0% where the amount became receivable after 1989, and
(b) in respect of the disposition described in paragraph 59(3.3)(b) of a depreciable property of a taxpayer,
(i) 100% where the property was disposed of before July, 1988,
(ii) 50% where the property was disposed of after June, 1988 and before 1990, and
(iii) 0% where the property was disposed of after 1989;
“successor corporation”
« société remplaçante »
“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.
Marginal note:Variation of stated percentage
(3.5) Notwithstanding the definition “stated percentage” in subsection 59(3.4), where
(a) an amount became receivable by a taxpayer within 60 days after the end of 1989 in respect of a disposition of property or services, and
(b) the 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 disposition”
(5) In this section, “proceeds of disposition” has the meaning assigned by section 54.
Marginal note:Definitions in regulations under s. 65
(6) In 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. R.S., 1985, c. 1 (5th Supp.), s. 59;
- 2001, c. 17, s. 40.
Marginal note:Involuntary disposition of resource property
59.1 Where 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,
(a) 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,
(i) 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,
(ii) the amount required to be included in computing the taxpayer’s income for the particular year by virtue of paragraph 59(3.2)(c), and
(iii) the taxpayer’s income for the particular year determined without reference to this section;
(b) the amount, if any, by which
(i) the amount deducted under paragraph 59.1(a
exceeds
(ii) the 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; and
(c) any 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. R.S., 1985, c. 1 (5th Supp.), s. 59.1;
- 1994, c. 7, Sch. II, s. 33.
Subdivision e
Deductions in Computing Income
Marginal note:Other deductions
60. There may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicable
Marginal note:Capital element of annuity payments
(a) the 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,
(i) 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, and
(ii) if 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;
Marginal note:Support
(b) the total of all amounts each of which is an amount determined by the formula
A - (B + C)
where
- A
- is 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,
- B
- is 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, and
- C
- is 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;
Marginal note:Pension income reallocation
(c) where 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;
(c.1) [Repealed, 1994, c. 7, Sch. VIII, s. 20(2)]
Marginal note:Repayment of support payments
(c.2) an 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;
Marginal note:Interest on death duties
(d) an amount equal to annual interest accruing within the taxation year in respect of succession duties, inheritance taxes or estate taxes;
Marginal note:CPP/QPP contributions on self-employed earnings
(e) 1/2 of the lesser of
(i) the 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 the Canada Pension Plan or under a provincial pension plan within the meaning assigned by section 3 of that Act, and
(ii) the maximum amount of such contributions payable by the taxpayer for the year under the plan;
Marginal note:Premium or payment under RRSP or RRIF
(i) any amount that is deductible under section 146 or 146.3 or subsection 147.3(13.1) in computing the income of the taxpayer for the year;
Marginal note:Transfer of superannuation benefits
(j) such part of the total of all amounts each of which is
(i) a 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), or
(ii) an 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),
as
(iii) is designated by the taxpayer in the taxpayer’s return of income under this Part for the year, and
(iv) does 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
(A) as 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, or
(B) 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,
to the extent that the amount was not deducted in computing the taxpayer’s income for a preceding taxation year;
Marginal note:Transfer of surplus
(j.01) such 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) as
(i) is designated by the taxpayer in the taxpayer’s return of income under this Part for the year, and
(ii) does 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 year
(A) as 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, or
(B) 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 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;
Marginal note:Payment to registered pension plan
(j.02) an amount equal to the lesser of
(i) the total of
(A) all 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, and
(B) all amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan as
(I) a 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, or
(II) interest 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, and
(ii) the 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);
Marginal note:Repayments of pre-1990 pension benefits
(j.03) an amount equal to the lesser of
(i) the 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 as
(A) a 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, or
(B) interest in respect of a repayment referred to in clause 60(j.03)(i)(A), and
(ii) the 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;
Marginal note:Repayments of post-1989 pension benefits
(j.04) the total of all amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan as
(i) a repayment under a prescribed statutory provision of an amount received from the plan that
(A) was included under subsection 56(1) in computing the taxpayer’s income for a taxation year ending after 1989, and
(B) can reasonably be considered not to have been designated by the taxpayer for the purpose of paragraph 60(j.2), or
(ii) interest 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;
Marginal note:Transfer of retiring allowances
(j.1) such 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) as
(i) is designated by the taxpayer in the taxpayer’s return of income under this Part for the year,
(ii) does not exceed the amount, if any, by which the total of
(A) $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
(B) $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 payment
exceeds the total of
(C) all amounts deducted under this paragraph in respect of amounts paid before the year in respect of the retiree
(I) by the employer or a person related to the employer, or
(II) under a retirement compensation arrangement to which the employer or a person related to the employer has contributed,
(C.1) all other amounts deducted under this paragraph for the year in respect of amounts paid in the year in respect of the retiree
(I) by a person related to the employer, or
(II) under a retirement compensation arrangement to which a person related to the employer has contributed, and
(D) all 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, and
(iii) does 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 designated
(A) as 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, or
(B) as 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 year
and for the purposes of this paragraph, “person related to the employer” includes
(iv) any person whose business was acquired or continued by the employer, and
(v) a previous employer of the retiree whose service therewith is recognized in determining the retiree’s pension benefits;
Marginal note:Transfer to spousal RRSP
(j.2) for 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 as
(i) is designated by the taxpayer in the taxpayer’s return of income under this Part for the year, and
(ii) does not exceed the least of
(A) $6,000,
(B) 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, and
(C) the 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;
Marginal note:Transfer of refund of premiums under RRSP
(l) the 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)
(i) as a premium under a registered retirement savings plan under which the taxpayer is the annuitant,
(ii) 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 annuity
(A) under which the taxpayer is the annuitant
(I) for 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, or
(II) for 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, or
(B) under which the taxpayer, or a trust under which the taxpayer is the sole person beneficially interested in amounts payable under the annuity, 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 acquired
that does not provide for any payment thereunder except
(C) the single payment by or on behalf of the taxpayer,
(D) annual or more frequent periodic payments
(I) beginning not later than one year after the date of the payment referred to in clause 60(l(ii)(C), and
(II) each 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), and
(E) payments in full or partial commutation of the annuity and, where the commutation is partial,
(I) equal annual or more frequent periodic payments thereafter, or
(II) annual 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);
or
(iii) to a carrier as consideration for a registered retirement income fund under which the taxpayer is the annuitant
where that total
(iv) is designated by the taxpayer in the taxpayer’s return of income under this Part for the year,
(v) does not exceed the total of
(A) 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 under which the taxpayer’s spouse or common-law partner was the annuitant,
(B) 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,
(B.01) 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 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,
(B.1) the least of
(I) the 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,
(II) 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 as
1. 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 registered pension plan or a specified pension plan,
2. a refund of premiums out of or under a registered retirement savings plan, or
3. a 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, and
(III) the 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 which
1. the total of all designated benefits of the taxpayer for the year in respect of registered retirement income funds
exceeds
2. the 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), and
(B.2) all 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,
(C) 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), and
(D) the amount, if any, by which
(I) the 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 year
exceeds
(II) the 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, and
(vi) was not deducted in computing the taxpayer’s income for a preceding taxation year;
(m) such amount in respect of payments to a registered disability savings plan as is permitted under section 60.02;
Marginal note:Succession duties applicable to certain property
(m.1) that 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, that
(i) such 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 of
(ii) the 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);
Marginal note:Repayment of pension or benefits
(n) any amount paid by the taxpayer in the year as a repayment (otherwise than because of Part VII of the Unemployment Insurance Act, chapter U-1 of the Revised Statutes of Canada, 1985, or of Part VII of the Employment Insurance 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,
(i) a pension described in clause 56(1)(a)(i)(A),
(ii) a benefit described in clause 56(1)(a)(i)(B),
(iii) an amount described in subparagraph 56(1)(a)(ii),
(iv) a benefit described in subparagraph 56(1)(a)(iv),
(v) a benefit described in subparagraph 56(1)(a)(vi), and
(vi) an amount described in paragraph 56(1)(r);
Marginal note:Legal Expenses
(o) amounts 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,
(i) 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,
(ii) a decision of the Canada Employment and Immigration Commission, the Canada Employment and Insurance Commission, a board of referees or an umpire under the Unemployment Insurance Act or the Employment Insurance Act,
(iii) an assessment of any income tax deductible by the taxpayer under section 126 or any interest or penalty with respect thereto, or
(iv) an assessment or a decision made under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act;
Marginal note:Idem
(o.1) the amount, if any, by which the lesser of
(i) the 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 of
(A) 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 the employment of the taxpayer or a deceased individual of whom the taxpayer was a dependant, relation or legal representative, or
(B) a retiring allowance of the taxpayer or a deceased individual of whom the taxpayer was a dependant, relation or legal representative, and
(ii) the amount, if any, by which the total of all amounts each of which is
(A) an amount described in clause 60(o.1)(i)(A) or 60(o.1)(i)(B)
(I) that is received after 1985,
(II) in respect of which legal expenses described in subparagraph 60(o.1)(i) were paid, and
(III) that is included in computing the income of the taxpayer for the year or a preceding taxation year, or
(B) an 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),
exceeds
(iii) the 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;
Marginal note:Repayment of apprenticeship incentive grant
(p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program of an amount that was included because of paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;
Marginal note:Refund of income payments
(q) where 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”) if
(i) the amount has been included in computing the income of the taxpayer in 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,
(ii) at the time the amount was paid by the payer to the taxpayer a condition was stipulated for the taxpayer to fulfil,
(iii) 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,
(iv) 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, and
(v) the amount was paid to the taxpayer for the purpose of enabling the taxpayer to further the taxpayer’s education;
Marginal note:Amounts included under s. 146.2(6)
(r) where an amount has been included in computing the income of the taxpayer by virtue of subsection 146.2(6) 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) for any of the taxpayer’s three immediately preceding taxation years, the taxpayer may deduct the lesser of
(i) the amount that had been so included in computing the taxpayer’s income, and
(ii) the total of all amounts used by the taxpayer to acquire in the year the taxpayer’s owner-occupied home (within the meaning assigned by paragraph 146.2(1)(f) 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),
except that no amount may be deducted by the taxpayer for the year under this paragraph if an amount has been deducted
(iii) under subsection 146.2(6.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 (as it read in its application to taxation years before 1986) in computing the taxpayer’s income for any taxation year ending before 1986, or
(iv) under this paragraph for any preceding taxation year ending after 1985;
Marginal note:Repayment of policy loan
(s) the 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 which
(i) the 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 policy
exceeds
(ii) the 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;
Marginal note:RCA distributions
(t) where 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 of
(i) the total of all amounts in respect of the particular arrangement so required to be included in computing the taxpayer’s income for the year, and
(ii) the amount, if any, by which the total of all amounts each of which is
(A) an 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,
(A.1) 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,
(B) 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, or
(C) an 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 is
(D) an 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, or
(E) an 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;
Marginal note:RCA dispositions
(u) where 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 of
(i) the total of all amounts in respect of the particular arrangement so required to be included in computing the taxpayer’s income for the year, and
(ii) the amount, if any, by which the total of all amounts each of which is
(A) an 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,
(A.1) 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, or
(B) 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
exceeds the total of all amounts each of which is
(C) an 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,
(D) an amount deducted under this paragraph in respect of the particular arrangement in computing the taxpayer’s income for a preceding taxation year, or
(E) an 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;
(v) [Repealed, 2011, c. 24, s. 11]
Marginal note:UI and EI benefit repayment
(v.1) any benefit repayment payable by the taxpayer under Part VII of the Unemployment Insurance Act or 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;
Marginal note:Tax under Part I.2
(w) the amount of the taxpayer’s tax payable under Part I.2 for the year;
Marginal note:Repayment under Canada Education Savings Act
(x) the 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;
Marginal note:Repayment of UCCB
(y) the 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; and
Marginal note:Repayment under the Canada Disability Savings Act
(z) the 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Application of subpara. 60(c.1)(i)
60.001 In the application of subparagraph 60(c.1)(i) in respect of amounts received pursuant to orders made after December 11, 1979 under the laws of Ontario, the references in that subparagraph to “February 10, 1988” and “February 11, 1988” shall be read as references to “December 11, 1979” and “December 12, 1979”, respectively.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1988, c. 55, s. 37.
Marginal note:Eligible amount
60.01 For the purpose of paragraph 60(j), the amount, if any, by which
(a) the 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)
exceeds
(b) the 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. 1994, c. 7, Sch. II, s. 35, Sch. VIII, s. 21;
- 2000, c. 12, s. 142;
- 2001, c. 17, s. 239(F).
Marginal note:Definitions
60.02 (1) The definitions in this subsection apply in this section and section 146.4,
“eligible individual”
« particulier admissible »
“eligible individual” means a child or grandchild of a deceased annuitant under a registered retirement savings plan or registered retirement income fund, or of a deceased member of 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.
“eligible proceeds”
« produit 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) a refund of premiums (as defined in subsection 146(1));
(b) an eligible amount under subsection 146.3(6.11); or
(c) a 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 registered pension plan or a specified pension plan.
“specified RDSP payment”
« paiement de REEI déterminé »
“specified RDSP payment” in respect of an eligible individual means a payment that
(a) is made to a registered disability savings plan under which the eligible individual is the beneficiary;
(b) complies with the conditions set out in paragraphs 146.4(4)(f) to (h);
(c) is made after June 2011; and
(d) 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.
“transitional eligible proceeds”
« produit admissible transitoire »
“transitional eligible proceeds” of a taxpayer means
(a) any 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 under
(i) a registered retirement savings plan or registered retirement income fund, or
(ii) a 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); or
(b) an 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”) if
(i) the 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”,
(ii) the RRSP withdrawal is included in computing the taxpayer’s income for the year of the withdrawal, and
(iii) the RRSP withdrawal does not exceed the amount deducted under subparagraph (i).
Marginal note:Rollover to RDSP on death
(2) There may be deducted in computing the income for a taxation year of a taxpayer who is an eligible individual an amount that
(a) does not exceed the lesser of
(i) the 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; and
(ii) the total amount of eligible proceeds that is included in computing the taxpayer’s income in the year; and
(b) was not deducted in computing the taxpayer’s income for a preceding taxation year.
Marginal note:Application of subsections (4) and (5)
(3) Subsections (4) and (5) do not apply unless
(a) a 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;
(b) the taxpayer was, immediately before the taxpayer’s death, the parent or grandparent of an eligible individual;
(c) transitional eligible proceeds were received from the plan or fund by
(i) an eligible individual in respect of the taxpayer,
(ii) a person who was the spouse or common-law partner of the taxpayer immediately before the taxpayer’s death, or
(iii) a 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; and
(d) the transitional eligible proceeds were included in computing the income of a person for a taxation year.
Marginal note:Transitional rule
(4) There 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 of
(a) the total specified RDSP payments made by the taxpayer before 2012, and
(b) the amount of transitional eligible proceeds included in computing the taxpayer’s income for the year.
Marginal note:Transitional rule — deceased taxpayer
(5) There 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 of
(a) the total specified RDSP payments made before 2012 by an individual described in subparagraph (3)(c)(iii), and
(b) the 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).
Marginal note:Limitation
(6) The 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. 1990, c. 35, s. 5;
- 2010, c. 25, s. 11;
- 2011, c. 24, s. 12.
Marginal note:Additions to clause 60(l)(v)(B.2) for 2008
60.021 (1) In 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:
(B.2) the total of all amounts each of which is
(I) the 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,
(II) 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, or
(III) the 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,
Marginal note:Meaning of eligible RRIF withdrawal amount
(2) A 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 is
(a) except where paragraph (b) applies, the amount determined by the formula
A – B
where
- A
- is the lesser of
(i) the 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), and
(ii) the amount that would, in the absence of subsection 146.3(1.1), be the minimum amount under the fund for the taxation year, and
- B
- is the minimum amount under the fund for the taxation year; and
(b) if the taxpayer attained 70 years of age in 2007, nil.
Marginal note:Meaning of eligible variable benefit withdrawal amount
(3) A 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 formula
A – B – C
where
- A
- is the lesser of
(a) the 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, and
(b) the 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;
- B
- is the minimum amount for the account for the taxation year; and
- C
- is the total of all contributions made by the taxpayer under the provision and designated for the purposes of subsection 8506(10) of the Regulations.
Marginal note:Expressions used in this section
(4) For the purposes of this section,
(a) the term “money purchase provision” has the meaning assigned by subsection 147.1(1);
(b) the term “retirement benefit” has the meaning assigned by subsection 8500(1) of the Regulations; and
(c) the 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. 2009, c. 2, s. 15.
Marginal note:Definitions
60.03 (1) The following definitions apply in this section.
“eligible pension income”
« revenu de pension déterminé »
“eligible pension income” has the same meaning as in subsection 118(7).
“joint election”
« choix conjoint »
“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.
“pensioner”
« pensionné »
“pensioner” for a taxation year means an individual who
(a) receives eligible pension income in the taxation year; and
(b) is resident in Canada,
(i) if the individual dies in the taxation year, at the time that is immediately before the individual’s death, or
(ii) in any other case, at the end of the calendar year in which the taxation year ends.
“pension income”
« revenu de pension »
“pension income” has the meaning assigned by section 118.
“pension transferee”
« cessionnaire »
“pension transferee” for a taxation year means an individual who
(a) is resident in Canada,
(i) if the individual dies in the taxation year, at the time that is immediately before the individual’s death, or
(ii) in any other case, at the end of the calendar year in which the taxation year ends; and
(b) at 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.
“qualified pension income”
« revenu de pension admissible »
“qualified pension income” has the meaning assigned by section 118.
“split-pension amount”
« montant de pension fractionné »
“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/C
where
- A
- is the eligible pension income of the pensioner for the taxation year;
- B
- is 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; and
- C
- is the number of months in the pensioner’s taxation year.
Marginal note:Effect of pension income split
(2) For the purpose of subsection 118(3), if a pensioner and a pension transferee have made a joint election in a taxation year,
(a) the pensioner is deemed not to have received the portion of the pensioner’s pension income or qualified pension income, 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; and
(b) the pension transferee is deemed to have received the split-pension amount
(i) as pension income, to the extent that the split-pension amount was pension income to the pensioner, and
(ii) as qualified pension income, to the extent that the split-pension amount was qualified pension income to the pensioner.
Marginal note:Limitation
(3) A pensioner may file only one joint election for a particular taxation year.
Marginal note:False declaration
(4) A 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. 2007, c. 29, s. 5.
Marginal note:Support
60.1 (1) For 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 thereof
(a) when payable, is deemed to be payable to and receivable by that person; and
(b) when paid, is deemed to have been paid to and received by that person.
Marginal note:Agreement
(2) For the purposes of section 60, this section and subsection 118(5), the amount determined by the formula
A - B
where
- A
- is 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 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, where the person is
(a) the taxpayer’s spouse or common-law partner or former spouse or common-law partner, or
(b) where 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,
and
- B
- is the amount, if any, by which
(a) the 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 improvement
exceeds
(b) the 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.
Marginal note:Prior payments
(3) For 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,
(a) the amount is deemed to have been paid thereunder; and
(b) the 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.
Marginal note:Definitions
(4) The 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. 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.
Marginal note:Application of subpara. 60.1(1)(a)(ii)
60.11 In the application of subparagraph 60.1(1)(a)(ii) in respect of amounts paid pursuant to orders made after May 6, 1974 under the laws of Ontario, the reference in that subparagraph to “February 10, 1988” shall be read as a reference to “May 6, 1974”.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1988, c. 55, s. 38.
Marginal note:Refund of undeducted past service AVCs
60.2 (1) There may be deducted in computing a taxpayer’s income for a taxation year an amount equal to the total of
(a) where 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; and
(b) the least of
(i) $3,500,
(ii) 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, and
(iii) the balance of the annuitized voluntary contributions of the taxpayer at the end of the year.
Definition of “balance of the annuitized voluntary contributions”
(2) For 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 which
(a) such 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 been
(i) used 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, or
(ii) transferred 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 transfer
exceeds
(b) the total of all amounts each of which is
(i) an amount deducted under paragraph 60.2(1)(b) in computing the taxpayer’s income for a preceding taxation year, or
(ii) an 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. 1990, c. 35, s. 6.
Marginal note:Payment made as consideration for income-averaging annuity
61. (1) In computing the income for a taxation year of an individual resident in Canada, there may be deducted an amount equal to the lesser of
(a) such amount as the individual may claim, not exceeding the total of amounts each of which is a single payment
(i) made 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, and
(ii) in respect of which no amount has been deducted in computing the individual’s income for the immediately preceding taxation year, and
(b) the amount, if any, by which the total of
(i) the 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,
(ii) 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,
(iii) the individual’s income for the year from the production of a literary, dramatic, musical or artistic work,
(iv) 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, and
(iv.1) the 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,
exceeds
(v) the 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.
Marginal note:Idem
(2) For 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:
(a) any single payment received by the individual in the year
(i) out of or under a superannuation or pension fund or plan
(A) on the death, withdrawal or retirement from employment of an employee or former employee,
(B) 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, or
(C) to 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,
(ii) on retirement as an employee in recognition of long service and not made out of or under a superannuation fund or plan,
(iii) 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, or
(iv) pursuant 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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;
(f) any amount deemed by section 7 to be a benefit received by the individual in the year by virtue of the individual’s employment;
(g) 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;
(h) 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;
(i) a payment made in the year to an individual by virtue of paragraph 51(2)(b) of the Judges Act;
(j) 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; and
(k) where 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 not
(i) become employed in the business that had been carried on by the partnership,
(ii) carry on a business that is a profession, or
(iii) become a member of a partnership that carries on a business that is a profession.
Marginal note:Definitions
(4) In this section,
“annual annuity amount”
« montant annuel de la rente »
“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;
“income-averaging annuity contract”
« contrat de rente à versements invariables »
“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 which
(a) in 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,
(i) 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 of
(A) 15, and
(B) 85 minus the age of the individual at the time the annuity payments commence, or
(ii) an annuity to the individual for a guaranteed term described in subparagraph (i), or
(b) in 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 1983
and under which no payments are provided except the single payment by the individual and,
(c) 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, or
(d) in respect of a contract referred to in paragraph (b), payments described therein to the individual;
“qualifying payment”
« paiement admissible »
“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).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Where income-averaging annuity contract ceases to be such
61.1 (1) Where 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.
Marginal note:Where annuitant dies and payments continued
(2) Where 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. 1976-77, c. 4, s. 19.
Marginal note:Reserve for debt forgiveness for resident individuals
61.2 There 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 formula
A + B - 0.2(C - $40,000)
where
- A
- is the amount, if any, by which
(a) the 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)
exceeds
(b) the total of all amounts deducted because of paragraph 80(15)(a) in computing the individual’s income for the year,
- B
- is the amount, if any, included under section 56.2 in computing the individual’s income for the year, and
- C
- is 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. 1995, c. 21, s. 20;
- 2000, c. 19, s. 8.
Marginal note:Deduction for insolvency with respect to resident corporations
61.3 (1) There 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 of
(a) the amount, if any, by which
(i) the 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)
exceeds
(ii) the total of all amounts deducted because of paragraph 80(15)(a) in computing the corporation’s income for the year, and
(b) the amount determined by the formula
A - 2(B - C - D - E)
where
- A
- is the amount determined under paragraph 61.3(1)(a) in respect of the corporation for the year,
- B
- is the total of
(i) the fair market value of the assets of the corporation at the end of the year,
(ii) 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, and
(iii) all 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 length
(A) as a dividend (other than a stock dividend),
(B) on a reduction of paid-up capital in respect of any class of shares of its capital stock,
(C) on a redemption, acquisition or cancellation of its shares, or
(D) as 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,
- C
- is 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,
(i) the equity and consolidation methods of accounting shall not be used, and
(ii) subject to subparagraph 61.3(1)(b)(i) and except as otherwise provided in this description, the total liabilities of the corporation shall
(A) where the corporation is not an insurance corporation 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 that balance sheet,
(B) where the corporation is a bank 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,
(C) 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, and
(D) in 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,
- D
- is 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, and
- E
- is 50% of the amount, if any, by which
(i) the amount that would be the corporation’s income for the year if that amount were determined without reference to this section and section 61.4
exceeds
(ii) the amount determined under paragraph 61.3(1)(a) in respect of the corporation for the year.
Marginal note:Reserve for insolvency with respect to non-resident corporations
(2) There 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 of
(a) the amount, if any, by which
(i) the 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)
exceeds
(ii) the 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, and
(b) the amount determined by the formula
A - 2(B - C - D - E)
where
- A
- is the amount determined under paragraph 61.3(2)(a) in respect of the corporation for the year,
- B
- is the total of
(i) the fair market value of the assets of the corporation at the end of the year,
(ii) 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, and
(iii) all 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 length
(A) as a dividend (other than a stock dividend),
(B) on a reduction of paid-up capital in respect of any class of shares of its capital stock,
(C) on a redemption, acquisition or cancellation of its shares, or
(D) as 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,
- C
- is 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),
- D
- is 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, and
- E
- is 50% of the amount, if any, by which
(i) the 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 61.4
exceeds
(ii) the amount determined under paragraph 61.3(2)(a) in respect of the corporation for the year.
Marginal note:Anti-avoidance
(3) Subsections 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. 1995, c. 21, s. 20;
- 1998, c. 19, s. 101.
Marginal note:Reserve for debt forgiveness for corporations and others
61.4 There 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 of
(a) the amount determined by the formula
A - B
where
- A
- is the amount, if any, by which
(i) the 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 of
(ii) all 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, and
(iii) all amounts deducted under section 61.3 in computing the taxpayer’s income for the year or a preceding taxation year, and
- B
- is the amount, if any, by which the amount determined for A in respect of the taxpayer for the year exceeds the total of
(i) the 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, and
(ii) the amount, if any, included under section 56.3 in computing the taxpayer’s income for the year,
(b) the total of
(i) 4/5 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,
(ii) 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),
(iii) 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), and
(iv) 1/5 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), and
(c) where 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. 1995, c. 21, s. 20.
Marginal note:Moving expenses
62. (1) There 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 that
(a) they were not paid on the taxpayer’s behalf in respect of, in the course of or because of, the taxpayer’s office or employment;
(b) they were not deductible because of this section in computing the taxpayer’s income for the preceding taxation year;
(c) the total of those amounts does not exceed
(i) in 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, and
(ii) in 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); and
(d) all reimbursements and allowances received by the taxpayer in respect of those expenses are included in computing the taxpayer’s income.
Marginal note:Moving expenses of students
(2) There 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 (b) of that definition were read as “either or both”.
Definition of “moving expenses”
(3) In subsection 62(1), “moving expenses” includes any expense incurred as or on account of
(a) travel 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,
(b) the cost to the taxpayer of transporting or storing household effects in the course of moving from the old residence to the new residence,
(c) 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,
(d) the cost to the taxpayer of cancelling the lease by virtue of which the taxpayer was the lessee of the old residence,
(e) the taxpayer’s selling costs in respect of the sale of the old residence,
(f) 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,
(g) 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 period
(i) throughout 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, and
(ii) in which reasonable efforts are made to sell the old residence, and
(h) the 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. 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.
Marginal note:Child care expenses
63. (1) Subject 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,
(a) 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, or
(b) by the taxpayer or a supporting person of the child for the year, in any other case,
to the extent that
(c) the amount is not included in computing the amount deductible under this subsection by an individual (other than the taxpayer), and
(d) the 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 which
(e) the lesser of
(i) 2/3 of the taxpayer’s earned income for the year, and
(ii) the 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 year
exceeds
(f) the 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.
Marginal note:Income exceeding income of supporting person
(2) Where 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 of
(a) the amount that would, but for this subsection, be deductible by the taxpayer for the year under subsection 63(1), and
(b) the amount determined by the formula
A × C
where
- A
- is 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, and
- B
- [Repealed, 2001, c. 17, s. 42(4)]
- C
- is the total of
(i) the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person was
(A) 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 than 10 hours per week on courses or work in the program,
(B) a person certified by a medical doctor to be a person who
(I) was 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, or
(II) was 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,
(C) a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, or
(D) a 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, and
(ii) the 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.
Marginal note:Taxpayer and supporting person with equal incomes
(2.1) For 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.
Marginal note:Expenses while at school
(2.2) There 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, where
(a) the 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 than
(i) 10 hours per week on courses or work in the program, or
(ii) 12 hours per month on courses in the program;
(b) 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); and
(c) a 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.
Marginal note:Amount deductible
(2.3) For the purpose of subsection 63(2.2), the amount determined in respect of a taxpayer for a taxation year is the least of
(a) the 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,
(b) 2/3 of the taxpayer’s income for the year computed without reference to this section and paragraphs 60(v.1) and 60(w,
(c) the amount determined by the formula
A × C
where
- A
- is 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, and
- B
- [Repealed, 2001, c. 17, s. 42(6)]
- C
- is
(i) if there is a supporting person of an eligible child of the taxpayer for the year,
(A) 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), and
(B) the 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), and
(ii) in any other case,
(A) 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), and
(B) the 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),
(d) 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, and
(e) where 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.
Marginal note:Definitions
(3) In this section,
“annual child care expense amount”
« montant annuel de frais de garde d’enfants »
“annual child care expense amount”, in respect of an eligible child of a taxpayer for a taxation year, means
(a) $10,000, where 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, and
(b) where the child is not a person referred to in paragraph (a),
(i) $7,000, where the child is under 7 years of age at the end of the year, and
(ii) $4,000, in any other case;
“child care expense”
« 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 provided
(a) to 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,
(i) to perform the duties of an office or employment,
(ii) to carry on a business either alone or as a partner actively engaged in the business,
(iii) [Repealed, 1996, c. 23, s. 173(1)]
(iv) to carry on research or any similar work in respect of which the taxpayer or supporting person received a grant, or
(v) to 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 than
(A) 10 hours per week on courses or work in the program, or
(B) 12 hours per month on courses in the program, and
(b) by a resident of Canada other than a person
(i) who is the father or the mother of the child,
(ii) who is a supporting person of the child or is under 18 years of age and related to the taxpayer, or
(iii) in 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 that
(c) any 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, and
(d) for 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;
“earned income”
« revenu gagné »
“earned income” of a taxpayer means the total of
(a) all salaries, wages and other remuneration, including gratuities, received by the taxpayer in respect of in the course of, or because of, offices and employments,
(b) 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,
(c) 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, and
(d) all 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;
“eligible child”
« enfant admissible »
“eligible child” of a taxpayer for a taxation year means
(a) a child of the taxpayer or of the taxpayer’s spouse or common-law partner, or
(b) a 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 used under paragraph (c) of the description of B in subsection 118(1) for the year
if at any time during the year, the child
(c) is under 16 years of age, or
(d) is dependent on the taxpayer or on the taxpayer’s spouse or common-law partner and has a mental or physical infirmity;
“periodic child care expense amount”
« montant périodique de frais de garde d’enfants »
“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;
“supporting person”
« personne assumant les frais d’entretien »
“supporting person” of an eligible child of a taxpayer for a taxation year means a person, other than the taxpayer, who is
(a) a parent of the child,
(b) the taxpayer’s spouse or common-law partner, or
(c) an individual who deducted an amount under section 118 for the year in respect of the child
if 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.
Marginal note:Commuter’s child care expense
(4) Where 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 if
(a) the definition “child care expense” in subsection 248(1) were read without reference to the words “in Canada”, and
(b) the 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. 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.
Marginal note:Disability supports deduction
64. If 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 of
(a) the amount determined by the formula
A - B
where
- A
- is the total of all amounts each of which is an amount paid by the taxpayer in the year and that
(i) was paid to enable the taxpayer
(A) to perform the duties of an office or employment,
(B) to carry on a business either alone or as a partner actively engaged in the business,
(C) to attend a designated educational institution or a secondary school at which the taxpayer is enrolled in an educational program, or
(D) to carry on research or any similar work in respect of which the taxpayer received a grant,
(ii) was paid
(A) where 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,
(B) 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,
(C) 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,
(D) 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,
(E) 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,
(F) 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,
(G) 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,
(H) 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,
(I) 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,
(J) 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,
(K) 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,
(L) 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,
(M) 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,
(N) 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,
(O) 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,
(P) 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, and
(Q) where 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,
(iii) 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, and
(iv) is not included in computing a deduction under section 118.2 for any taxpayer for any taxation year, and
- B
- is 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, and
(b) the total of
(i) the total of all amounts each of which is
(A) an 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, or
(B) the taxpayer’s income for the year from a business carried on either alone or as a partner actively engaged in the business, and
(ii) where 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
(A) $15,000,
(B) $375 times the number of weeks in the year during which the taxpayer is in attendance at the institution or school, and
(C) the 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. 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.
Marginal note:Individuals absent from Canada
64.1 In 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:
(a) the definition “child care expense” in subsection 63(3), and section 64, shall be read without reference to the words “in Canada”;
(b) 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; and
(c) paragraph (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. R.S., 1985, c. 1 (5th Supp.), s. 64.1;
- 1999, c. 22, s. 19.
Marginal note:Allowance for oil or gas well, mine or timber limit
65. (1) There may be deducted in computing a taxpayer’s income for a taxation year such amount as an allowance, if any, in respect of
(a) a natural accumulation of petroleum or natural gas, oil or gas well, mineral resource or timber limit,
(b) 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,
(c) the processing of iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent, or
(d) the processing of tar sands from a mineral resource to any stage that is not beyond the crude oil stage or its equivalent
as is allowed to the taxpayer by regulation.
Marginal note:Regulations
(2) For 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,
(a) there may be allowed to the taxpayer by that regulation an amount in respect of any or all
(i) natural accumulations of petroleum or natural gas, oil or gas wells or mineral resources in which the taxpayer has any interest, or
(ii) processing operations described in any of paragraphs 65(1)(b), (c) and (d) that are carried on by the taxpayer; and
(b) notwithstanding 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.
Marginal note:Lessee’s share of allowance
(3) Where 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. 1970-71-72, c. 63, s. 1“65”;
- 1973-74, c. 30, s. 6;
- 1985, c. 45, s. 27;
- 1986, c. 6, s. 31.
Marginal note:Exploration and development expenses of principal-business corporations
66. (1) A principal-business corporation may deduct, in computing its income for a taxation year, the lesser of
(a) the 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, and
(b) of 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.
Marginal note:Expenses of special product corporations
(2) A 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.
Marginal note:Expenses of other taxpayers
(3) A 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.
Marginal note:Foreign exploration and development expenses
(4) A taxpayer who is resident throughout a taxation year in Canada may deduct, in computing the taxpayer’s income for that taxation year, the lesser of
(a) the amount, if any, by which
(i) the total of the foreign exploration and development expenses incurred by the taxpayer
(A) before the end of the year,
(B) at a time at which the taxpayer was resident in Canada, and
(C) where 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 of
(ii) such of the expenses described in subparagraph 66(4)(a)(i) as were deductible in computing the taxpayer’s income for a preceding taxation year, and
(iii) all 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, and
(b) of that total, the greater of
(i) the 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, and
(ii) the total of
(A) the 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 to
(I) the production of petroleum or natural gas from natural accumulations outside Canada or from oil or gas wells outside Canada, or
(II) the production of minerals from mines outside Canada,
(B) 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), and
(C) all 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 which
(I) the amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of the disposition
exceeds
(II) the 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 that
1. can reasonably be considered to be in respect of the foreign resource property, and
2. cannot reasonably be considered to have reduced the amount otherwise determined under clause (A) or (B) in respect of the taxpayer for the year.
Marginal note:Country-by-country FEDE allocations
(4.1) For 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.
Marginal note:Method of allocation
(4.2) For 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 is
(a) reasonable having regard to all the circumstances, including the level and timing of
(i) the taxpayer’s specified foreign exploration and development expenses in respect of the country, and
(ii) the profits or gains to which those expenses relate; and
(b) not inconsistent with the allocation made under subsection (4.1) for the preceding taxation year.
Marginal note:FEDE deductions where change of individual’s residence
(4.3) Where at any time in a taxation year an individual becomes or ceases to be resident in Canada,
(a) 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; and
(b) for the purpose of applying subsection (4), subsection (13.1) does not apply to the individual for the year.
Marginal note:Dealers
(5) Subsections (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.
(10) to (10.3) [Repealed, 1997, c. 25, s. 13(1)]
Marginal note:Idem
(10.4) Where 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:
(a) where the taxpayer receives as consideration for the payment or loan property that is capital property to the taxpayer,
(i) 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,
(ii) 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)), and
(iii) the 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;
(b) where the taxpayer receives as consideration for the payment or loan property that is not capital property to the taxpayer,
(i) 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, and
(ii) there 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); and
(c) where 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.
Marginal note:Acquisition of control
(11) Where 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,
(a) 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;
(b) 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;
(c) 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;
(d) 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; and
(e) the 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.
Marginal note:Control
(11.3) For 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.
Marginal note:Change of control
(11.4) Where,
(a) at any time, control of a corporation has been acquired by a person or group of persons,
(b) within the 12-month period that ended immediately before that time, the corporation or a partnership of which it was a majority interest partner acquired a Canadian resource property or a foreign resource property (other than a property that was owned by the corporation or partnership or 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 corporation throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the corporation or partnership), and
(c) immediately before the twelve month period commenced, the corporation was not a principal-business corporation and the partnership, if it were a corporation, would not be 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 corporation or partnership before that time and is deemed to have been acquired by it at that time, except that, where 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 corporation or partnership immediately before it disposed of the property.
Marginal note:Early change of control
(11.5) For the purpose of subsection 66(11.4), where the corporation referred to in that subsection was incorporated or otherwise formed in the 12-month period referred to in that subsection, the corporation is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was incorporated or otherwise formed,
(a) in existence; and
(b) affiliated 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 incorporated or otherwise formed and ended immediately before its control was acquired.
Marginal note:Computation of exploration and development expenses
(12) In computing a taxpayer’s Canadian exploration and development expenses,
(a) there shall be deducted any amount paid to the taxpayer before May 7, 1974
(i) and 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, or
(ii) pursuant 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; and
(b) there 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.
Marginal note:Limitations of Canadian exploration and development expenses
(12.1) Except as expressly otherwise provided in this Act,
(a) where 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 therein or a right thereto) 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; and
(b) where 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 therein or a right thereto) 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.
Marginal note:Unitized oil or gas field in Canada
(12.2) Where, 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:
(a) 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; and
(b) there 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.
Marginal note:Idem
(12.3) Where, 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:
(a) 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; and
(b) there 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.
Marginal note:Limitation of FEDE
(12.4) Where, 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:
(a) in computing the taxpayer’s foreign exploration and development expenses at that time, there shall be deducted the amount receivable by the taxpayer;
(b) 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 of
(i) 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, and
(ii) the 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 primarily
(A) specified foreign exploration and development expenses in respect of a country, or
(B) foreign resource expenses in respect of a country; and
(c) where 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.
Marginal note:Limitations of foreign resource expenses
(12.41) Where 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.
Marginal note:Partnerships
(12.42) For 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,
(a) 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; and
(b) the amount deemed by paragraph (a) to be an amount receivable by the member is deemed to be an amount
(i) that is described in subsection (12.4) in respect of the member, and
(ii) that has the same attributes for the member as it did for the particular partnership.
Marginal note:Unitized oil or gas field in Canada
(12.5) Where, 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:
(a) 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; and
(b) there 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.
Marginal note:Canadian exploration expenses to flow-through shareholder
(12.6) Where 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 exploration 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 of
(a) the 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 paragraph 66(12.6)(b) or 66(12.6)(b.1)),
(b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,
(b.1) all specified expenses each of which is a cost of, or for the use of, seismic data
(i) that 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,
(ii) in respect of which a right to use had been acquired by any other person before the cost was incurred, or
(iii) all or substantially all of which resulted from work performed more than one year before the cost was incurred, and
(c) the 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 case
(d) exceeding 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, or
(e) exceeding 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 share
(i) on the date on which the renunciation is made, and
(ii) effective on or before the effective date of the renunciation.
Marginal note:Flow-through share rules for first $1 million of Canadian development expenses
(12.601) Where
(a) a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation,
(a.1) the corporation’s taxable capital amount at the time the consideration was given was not more than $15,000,000, and
(b) during the period beginning on the later of December 3, 1992 and the particular day the agreement was entered into and ending on the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses 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 66(12.601)(a) to 66(12.601)(e)” in that paragraph were read as “paragraphs 66(12.601)(a) and 66(12.601)(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 of
(c) the 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)),
(d) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation, and
(e) all 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.
Marginal note:Taxable capital amount
(12.6011) For the purpose of subsection 66(12.601), a particular corporation’s taxable capital amount at any time is the total of
(a) its taxable capital employed in Canada for its last taxation year that ended more than 30 days before that time, and
(b) the 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.
Marginal note:Taxable capital employed in Canada
(12.6012) For 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 that
(a) was not associated with the particular corporation at the particular time; and
(b) was 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.
Marginal note:Amalgamations and mergers
(12.6013) For 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.
Marginal note:Idem
(12.602) A corporation shall be deemed not to have renounced any particular amount under subsection 66(12.601) in respect of a share where
(a) the 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;
(b) the particular amount exceeds the amount, if any, by which
(i) the 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,
exceeds
(ii) the total of all amounts renounced under subsection 66(12.601) by the corporation in respect of any other share
(A) on the day on which the renunciation is made, and
(B) effective on or before the effective date of the renunciation; or
(c) the 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 of
(i) Canadian development expenses incurred by the corporation in that calendar year, or
(ii) Canadian development expenses incurred in that calendar year by another corporation associated with the corporation at the time the other corporation incurred such expenses
exceeds $1,000,000.
Marginal note:Effect of renunciation
(12.61) Subject 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,
(a) 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; and
(b) the 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.
Marginal note:Canadian development expenses to flow-through shareholder
(12.62) Where 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 of
(a) the 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 paragraph 66(12.62)(b) or 66(12.62)(b.1)),
(b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,
(b.1) 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), and
(c) the 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 case
(d) exceeding 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, or
(e) exceeding 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 share
(i) on the date on which the renunciation is made, and
(ii) effective on or before the effective date of the renunciation.
Marginal note:Effect of renunciation
(12.63) Subject to subsections 66(12.691) to 66(12.702), where under subsection 66(12.62) a corporation renounces an amount to a person,
(a) 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; and
(b) the 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.
(12.64) and (12.65) [Repealed, 1997, c. 25, s. 13(15)]
Marginal note:Expenses in the first 60 days of year
(12.66) Where
(a) a 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,
(a.1) the agreement was made in the preceding calendar year,
(b) the expenses
(i) are 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),
(ii) would be described in paragraph (h) of the definition “Canadian exploration expense” in subsection 66.1(6) if the words “paragraphs (a) to (d) and (f) to (g.1)” were read as “paragraphs (a), (d), (f) and (g.1)”, or
(iii) would 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)”,
(c) before the end of that preceding year the person paid the consideration in money for the share to be issued,
(d) the corporation and the person deal with each other at arm’s length throughout the particular year, and
(e) in 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 66(12.6) or for the purposes of subsection 66(12.601) and paragraph 66(12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of the year.
Marginal note:Restrictions on renunciation
(12.67) A corporation shall be deemed
(a) not 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;
(b) 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;
(c) 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); and
(d) not 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.
Marginal note:Prohibited relationship
(12.671) For 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 relationship
(a) with 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;
(b) with the shareholder corporation if, immediately before the particular agreement was entered into, the shareholder corporation was related to the particular corporation; or
(c) with 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 of
(i) the particular corporation, or
(ii) any other corporation that, at any time
(A) after the particular agreement was entered into, and
(B) before 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.
Marginal note:Filing selling instruments
(12.68) A 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 of
(a) the month in which the agreement to issue the shares is entered into, and
(b) the 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.
Marginal note:Filing re partners
(12.69) Where, 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.
Marginal note:Consequences of failure to file
(12.6901) Where 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.
Marginal note:Filing re assistance
(12.691) Where 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:
(a) 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;
(b) 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; and
(c) where 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.
Marginal note:Filing re renunciation
(12.7) Where 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.
Marginal note:Consequences of failure to file
(12.7001) Where 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.
Marginal note:Filing re assistance
(12.701) Where 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.
Marginal note:Consequences of failure to file
(12.702) Where 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.
Marginal note:Restriction on renunciation
(12.71) A 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.
(12.72) [Repealed, 1997, c. 25, s. 13(23)]
Marginal note:Reductions in renunciations
(12.73) Where 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,
(a) the corporation shall file a statement with the Minister in prescribed form where
(i) the Minister sends a notice in writing to the corporation demanding the statement, or
(ii) the 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;
(b) 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;
(c) 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;
(d) 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; and
(e) where a corporation fails in the statement 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.
Marginal note:Late filed forms
(12.74) A 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 if
(a) it is filed
(i) on or before the day that is 90 days after the particular day, or
(ii) after 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; and
(b) the 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.
Marginal note:Late renunciation
(12.741) Where 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 if
(a) the corporation purports to renounce the amount
(i) on or before the day that is 90 days after the end of that period, or
(ii) after 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; and
(b) the corporation pays to the Receiver General a penalty in respect of the renunciation not more than 90 days after the renunciation.
Marginal note:Penalty
(12.75) For 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 and
(a) where 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
(i) $100, and
(ii) 1/4 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;
(b) 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
(i) $100, and
(ii) 1/4 of 1% of the assistance reported in the document; and
(c) where the penalty is in respect of a renunciation referred to in subsection 66(12.741), the greater of
(i) $100, and
(ii) 1/4 of 1% of the amount of the renunciation.
Marginal note:Limitation
(13) Where 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.
Marginal note:Short taxation year
(13.1) Where 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), paragraph 66.2(2)(c), 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 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.
Marginal note:Amounts deemed deductible under this subdivision
(14) For 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.
Marginal note:Designation respecting Canadian exploration expense
(14.1) A 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 of
(a) its prescribed Canadian exploration expense for the year, and
(b) its 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.
Marginal note:Designation respecting cumulative Canadian development expense
(14.2) A 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
(a) where a deduction has been made under subsection 66.2(2) in computing its income for the year, the lesser of
(i) 30% of its prescribed Canadian development expense for the year, and
(ii) the 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, or
(b) where a deduction has not been made under subsection 66.2(2) in computing its income for the year, the lesser of
(i) 30% of its prescribed Canadian development expense for the year, and
(ii) 30% 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 expense”
(14.3) For 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.
Marginal note:Special cases
(14.4) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable
(a) to 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, or
(b) to 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 if
(c) it is filed with the Minister in prescribed form, and
(d) the 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.
Marginal note:Penalty for late designation
(14.5) For 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 of
(a) an amount determined by the formula
0.0025 × A × B
where
- A
- is
(i) in the case of a late-filed designation, the amount designated therein, and
(ii) in 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, and
- B
- is 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, and
(b) an 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).
Marginal note:Deduction of carved-out income
(14.6) A 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).
Marginal note:Definitions
(15) In this section,
“agreed portion”
« partie convenue »
“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 exceeding
(a) the 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,
minus
(b) the 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;
“assistance”
« montant à titre d’aide »
“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;
“Canadian exploration and development expenses”
« frais d’exploration et d’aménagement au Canada »
“Canadian exploration and development expenses” incurred by a taxpayer means any expense incurred before May 7, 1974 that is
(a) any 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,
(b) any prospecting, exploration or development expense incurred by the taxpayer after 1971 in searching for minerals in Canada,
(c) the cost to the taxpayer of any Canadian resource property acquired by the taxpayer after 1971,
(d) 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,
(e) 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 of
(i) drilling 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,
(ii) prospecting, exploration or development activities in searching for minerals in Canada, or
(iii) acquiring a Canadian resource property, and
(f) any annual payment made by the taxpayer for the preservation of a Canadian resource property,
but, for greater certainty, does not include
(g) any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (e), or
(h) any 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;
“Canadian resource property”
« avoir minier canadien »
“Canadian resource property” of a taxpayer means any property of the taxpayer that is
(a) any right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in Canada,
(b) any right, licence or privilege to
(i) store underground petroleum, natural gas or related hydrocarbons in Canada, or
(ii) prospect, explore, drill or mine for minerals in a mineral resource in Canada other than a bituminous sands deposit or an oil shale deposit,
(c) 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),
(d) 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,
(e) 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,
(f) 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,
(g) 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, or
(h) an 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;
“drilling or exploration expense”
« frais d’exploration ou de forage »
“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 of
(a) drilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well,
(b) drilling for water or gas for injection into a petroleum or natural gas formation, or
(c) drilling or converting a well for the injection of water or gas to assist in the recovery of petroleum or natural gas from another well;
“expense”
« dépenses »
“expense”, incurred before a particular time by a taxpayer,
(a) 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,
but
(b) for greater certainty, does not include any amount paid or payable
(i) as consideration for services to be rendered after that time, or
(ii) as, on account or in lieu of payment of, or in satisfaction of, rent in respect of a period after that time;
“flow-through share”
« action accréditive »
“flow-through share” means a share (other than a prescribed share) of the capital stock of a principal-business corporation that is issued to a person under an agreement in writing entered into between the person and the corporation after February 1986, under which the corporation agrees for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances in which section 51, 85, 85.1, 86 or 87 applies
(a) to incur, 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, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share is to be issued, and
(b) to renounce, before March of the first calendar year that begins after that period, in prescribed form to the person in respect of the share, an amount in respect of the Canadian exploration Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share,
and includes a right of a person to have such a share issued to that person and any interest acquired in such a share by a person pursuant to such an agreement;
“foreign exploration and development expenses”
« frais d’exploration et d’aménagement à l’étranger »
“foreign exploration and development expenses” incurred by a taxpayer means
(a) any 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,
(b) 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 of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other method, or
(iv) trenching, digging test pits and preliminary sampling,
(c) the cost to the taxpayer of any foreign resource property acquired by him,
(d) 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, and
(e) any annual payment made by the taxpayer for the preservation of a foreign resource property;
but does not include
(f) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class,
(g) 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,
(h) 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,
(i) 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,
(j) 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,
(k) foreign resource expenses in respect of a country, or
(l) an expenditure made after February 27, 2000 by the taxpayer unless the expenditure was made
(i) pursuant to an agreement in writing made by the taxpayer before February 28, 2000,
(ii) for the acquisition of foreign resource property by the taxpayer, or
(iii) for the purpose of
(A) enhancing 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, or
(B) assisting in evaluating whether a foreign resource property is to be acquired by the taxpayer;
“foreign resource property”
« avoir minier 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”;
“joint exploration corporation”
« société d’exploration en commun »
“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;
“original owner”
« propriétaire obligé »
“original owner” of a Canadian resource property or a foreign resource property means a person
(a) who 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, and
(b) who 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;
“outlay”
« dépenses »
“outlay”, made before a particular time by a taxpayer, has the meaning assigned to the expression “expense” by this subsection;
“predecessor owner”
« propriétaire antérieur »
“predecessor owner” of a Canadian resource property or a foreign resource property means a corporation
(a) that 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,
(b) 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, and
(c) that 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;
“principal-business corporation”
« société exploitant une entreprise principale »
“principal-business corporation” means a corporation the principal business of which is any of, or a combination of,
(a) the production, refining or marketing of petroleum, petroleum products or natural gas,
(a.1) exploring or drilling for petroleum or natural gas,
(b) mining or exploring for minerals,
(c) the processing of mineral ores for the purpose of recovering metals or minerals from the ores,
(d) 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,
(e) the fabrication of metals,
(f) the operation of a pipeline for the transmission of oil or gas,
(f.1) the production or marketing of calcium chloride, gypsum, kaolin, sodium chloride or potash,
(g) the manufacturing of products, where the manufacturing involves the processing of calcium chloride, gypsum, kaolin, sodium chloride or potash,
(h) 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, and
(i) the 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)),
“production”
« production »
“production” from a Canadian resource property or a foreign resource property means
(a) petroleum, natural gas and related hydrocarbons produced from the property,
(b) 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,
(d) iron ore produced from the property processed to any stage that is not beyond the pellet stage or its equivalent,
(e) tar sands produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, and
(f) any 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;
“reserve amount”
« provision »
“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 formula
A - B
where
- A
- is the total of all amounts that are
(a) required by subsection 59(2) to be included in computing the corporation’s income for the year, and
(b) in 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, and
- B
- is 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;
“selling instrument”
« avis d’émission »
“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;
“shareholder corporation”
« société actionnaire »
“shareholder corporation” of a joint exploration corporation means a corporation that for the period in respect of which the expression is being applied
(a) was a shareholder of the joint exploration corporation, and
(b) made 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;
“specified foreign exploration and development expense”
« frais d’exploration et d’aménagement à l’étranger déterminés »
“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 is
(a) a 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,
(a.1) 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 of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other methods, or
(iv) trenching, digging test pits and preliminary sampling,
(b) 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,
(c) the cost to the taxpayer of the taxpayer’s foreign resource property in respect of that country,
(d) 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,
(e) 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, or
(f) subject 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.
Marginal note:Other definitions
(15.1) The definitions in subsections 66.1(6), 66.2(5), 66.21(1), 66.4(5) and 66.5(2) apply in this section.
Marginal note:Partnerships
(16) For 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.
Marginal note:Non-arm’s length partnerships
(17) For the purpose of paragraph (12.66)(d), a partnership and a corporation are, at all times in a calendar year,
(a) deemed not to deal with each other at arm’s length, if
(i) an expense is deemed by subsection (12.61) to be incurred by the partnership,
(ii) the expense would, if this Act were read without reference to paragraph (12.61)(b), be incurred in the calendar year by the corporation, and
(iii) a 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; and
(b) deemed to deal with each other at arm’s length, in any other case.
Marginal note:Members of partnerships
(18) For 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) 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.
Marginal note:Renunciation by corporate partner, etc.
(19) 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 if
(a) the 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”; and
(b) the 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”.
Marginal note:Specified amount
(20) For the purpose of subsection 66(19), a specified amount in respect of a corporation is an amount that represents
(a) all 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; or
(b) all or part of an amount renounced to the corporation under subsection 66(12.6), 66(12.601) or 66(12.62).
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Amount to be included in income
66.1 (1) There 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 which
(a) the 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 year
exceeds the total of
(b) all 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, and
(c) the total determined under subparagraph 66.7(12.1)(a)(i) in respect of the taxpayer for the year.
Marginal note:Deduction for certain principal-business corporations
(2) In 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 of
(a) the total of
(i) the 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), and
(ii) the amount, if any, by which
(A) the total determined under subparagraph 66.7(12.1)(a)(i) in respect of the corporation for the year
exceeds
(B) the 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, and
(b) the amount, if any, by which
(i) the amount that would be its income for the year if no deduction (other than a prescribed deduction) were allowed under this subsection or section 65
exceeds
(ii) the 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.
Marginal note:Expenses of other taxpayer
(3) In 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 of
(a) the 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), and
(b) the amount, if any, by which
(i) the total determined under subparagraph 66.7(12.1)(a)(i) in respect of the taxpayer for the year
exceeds
(ii) the 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.
Marginal note:Definitions
(6) In this section,
“bitumen mine development project”
« projet de mise en valeur d’une mine de bitume »
“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;
“bitumen upgrading development project”
« projet de valorisation du 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;
“Canadian exploration expense”
« frais d’exploration au Canada »
“Canadian exploration expense” of a taxpayer means any expense incurred after May 6, 1974 that is
(a) any expense including a geological, geophysical or geochemical 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,
(b) 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, including
(i) clearing, removing overburden and stripping, and
(ii) sinking a shaft or constructing an adit or other underground entry,
(c) 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,
(i) incurred by the taxpayer in the year, or
(ii) incurred 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 and
(iii) it 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, or
(iv) it is reasonable to expect that the well will not come into production in commercial quantities within twelve months of its completion,
(d) 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 if
(i) the drilling or completing of the well resulted in the discovery that a natural underground reservoir contains petroleum or natural gas, where
(A) before the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas, and
(B) the discovery occurred at any time before six months after the end of the year,
(ii) 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,
(iii) 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, or
(iv) there 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 that
(A) the 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, and
(B) the 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,
(e) any expense deemed by subsection 66.1(9) to be a Canadian exploration expense incurred by the taxpayer,
(f) 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 any expense incurred in the course of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other methods, or
(iv) trenching, digging test pits and preliminary sampling,
but not including
(v) any Canadian development expense,
(v.1) 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, or
(vi) any 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,
(g) any expense incurred by the taxpayer after November 16, 1978 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,
(g.1) any Canadian renewable and conservation expense incurred by the taxpayer,
(g.2) any expense incurred by the taxpayer after March 21, 2011, that is
(i) a specified oil sands mine development expense, or
(ii) an eligible oil sands mine development expense,
(h) 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.1) incurred by a partnership in a fiscal period thereof, if at the end of the period the taxpayer is a member of the partnership, or
(i) any 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 such shares or right thereto,
but for greater certainty, shall not include
(j) any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (i),
(k) any expense described in paragraph (i) incurred by any other taxpayer to the extent that the expense was,
(i) by virtue of that paragraph, a Canadian exploration expense of that other taxpayer,
(ii) by virtue of paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5), a Canadian development expense of that other taxpayer, or
(iii) by 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,
(k.1) 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,
(k.2) [Repealed, 2011, c. 24, s. 14]
(l) 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,
(m) 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,
(n) 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, or
(o) the 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);
“Canadian renewable and conservation expense”
« frais liés aux énergies renouvelables et à l’économie d’énergie au Canada »
“Canadian renewable and conservation expense” has the meaning assigned by regulation, and for the purpose of determining whether an outlay or expense meets the criteria set out in the Regulations in respect of Canadian renewable and conservation expenses, the Technical Guide to Canadian Renewable and Conservation Expenses, as amended from time to time and published by the Department of Natural Resources, shall apply conclusively with respect to engineering and scientific matters;
“completion”
« achèvement »
“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;
“cumulative Canadian exploration expense”
« frais cumulatifs d’exploration au Canada »
“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)
where
- A
- is the total of all Canadian exploration expenses made or incurred by the taxpayer before that time,
- B
- is the total of all amounts required by subsection 66.1(1) to be included in computing the amount referred to in paragraph 59(3.2)(b) for the taxpayer’s taxation years ending before that time,
- C
- is 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,
- D
- is 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,
- E
- is 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.1
- is 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,
- F
- is 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,
- G
- is 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),
- H
- is the total of all amounts paid to the taxpayer after May 6, 1974 and before May 25, 1976
(a) under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, or
(b) pursuant 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,
- I
- is 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,
- J
- is 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.1
- is 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,
- K
- is 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,
- L
- is 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 or a flow-through mining expenditure (each expenditure within the meaning assigned by subsection 127(9)) made in a preceding taxation year, and
- M
- is 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;
“designated asset”
« bien désigné »
“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,
(a) in the case of a bitumen mine development project,
(i) a crusher,
(ii) a froth treatment plant,
(iii) a primary separation unit,
(iv) a steam generation plant,
(v) a cogeneration plant, or
(vi) a water treatment plant, or
(b) in the case of a bitumen upgrading development project,
(i) a gasifier unit,
(ii) a vacuum distillation unit,
(iii) a hydrocracker unit,
(iv) a hydrotreater unit,
(v) a hydroprocessor unit, or
(vi) a coker;
“eligible oil sands mine development expense”
« frais d’aménagement admissibles relatifs à une mine de sables bitumineux »
“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 formula
A × B
where
- A
- is 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 “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, and
- B
- is
(a) 100% if the expense is incurred before 2013,
(b) 80% if the expense is incurred in 2013,
(c) 60% if the expense is incurred in 2014, and
(d) 30% if the expense is incurred in 2015;
“oil sands mine development project”
« projet de mise en valeur d’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;
“preliminary work activity”
« travaux préliminaires »
“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:
(a) obtaining permits or regulatory approvals,
(b) performing design or engineering work,
(c) conducting feasibility studies,
(d) conducting environmental assessments, and
(e) entering into contracts;
“restricted expense”
« frais spécifiés »
“restricted expense” of a taxpayer means an expense
(a) incurred by the taxpayer before April, 1987,
(b) 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,
(c) that was renounced by the taxpayer under subsection 66(10.2), 66(12.601) or 66(12.62),
(d) in respect of which an amount referred to in subsection 66(12.3) becomes receivable by the taxpayer,
(e) deemed to be a Canadian exploration expense of the taxpayer or any other taxpayer by virtue of subsection 66.1(9), or
(f) where 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;
“specified oil sands mine development expense”
« frais d’aménagement déterminés relatifs à une mine de sables bitumineux »
“specified oil sands mine development expense”, of a taxpayer, means an expense that
(a) would be a Canadian exploration expense described in paragraph (g) of the definition “Canadian exploration expense” if that paragraph were read without reference to “other than a bituminous sands deposit or an oil shale deposit”,
(b) is incurred by the taxpayer after March 21, 2011 and before 2015, and
(c) is incurred by the taxpayer to achieve completion of a specified oil sands mine development project of the taxpayer;
“specified oil sands mine development project”
« projet déterminé de mise en valeur d’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 which
(a) one or more designated assets was, before March 22, 2011,
(i) acquired by the taxpayer, or
(ii) in the process of being constructed, fabricated or installed, by or on behalf of the taxpayer, and
(b) the 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 of
(i) the level that was the demonstrated intention of the taxpayer as of March 21, 2011 to produce from the oil sands mine development project, and
(ii) the maximum level of output associated with the design capacity, as of March 21, 2011, of the designated asset referred to in paragraph (a);
“specified purpose”
« fin admise »
“specified purpose” means
(a) the 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,
(b) the burning of natural gas and related hydrocarbons to protect the environment, and
(c) prescribed purposes.
Marginal note:Application of ss. 66(15), 66.2(5) and 66.4(5)
(6.1) The definitions in subsections 66(15), 66.2(5) and 66.4(5) apply to this section.
Marginal note:Share of partner
(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 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.
(8) [Repealed, 1997, c. 25, s. 14(6)]
Marginal note:Canadian development expenses for preceding years
(9) Where at any time in a taxpayer’s taxation year
(a) the 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,
(b) 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, or
(c) an oil or gas well that has never produced, otherwise than for specified purposes, is abandoned,
the amount, if any, by which the total of
(d) all 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,
(e) 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, and
(f) all Canadian development expenses (other than expenses referred to in paragraph 66.1(9)(d) or 66.1(9)(e) and restricted 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,
exceeds
(g) any 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.
Marginal note:Certificate ceasing to be valid
(10) A 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 where
(a) the 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; or
(b) in 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. 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.
Marginal note:Amount to be included in income
66.2 (1) There 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 of
(a) all 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, and
(b) the amount that is designated by the taxpayer for the year under subsection 66(14.2)
exceeds the total of
(c) all 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, and
(d) the total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the year.
Marginal note:Deduction for cumulative Canadian development expenses
(2) A taxpayer may deduct, in computing the taxpayer’s income for a taxation year, such amount as the taxpayer may claim not exceeding the total of
(a) the lesser of
(i) the total of
(A) the taxpayer’s cumulative Canadian development expense at the end of the year, and
(B) the amount, if any, by which
(I) the total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the year
exceeds
(II) the 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, and
(ii) the 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),
(b) the lesser of
(i) the 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), and
(ii) the amount, if any, by which the total of all amounts each of which is
(A) an 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, any interest therein or right thereto, acquired by the taxpayer under circumstances described in paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) or paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), or
(B) an 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)
exceeds
(C) the 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), and
(c) 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).
Marginal note:Definitions
(5) In this section,
“Canadian development expense”
« frais d’aménagement au Canada »
“Canadian development expense” of a taxpayer means any cost or expense incurred after May 6, 1974 that is
(a) any expense incurred by the taxpayer in
(i) drilling or converting a well in Canada for the disposal of waste liquids from an oil or gas well,
(ii) 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,
(iii) 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,
(iv) drilling for water or gas in Canada for injection into a petroleum or natural gas formation, or
(v) drilling 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,
(b) 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,
(c) 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, including
(i) clearing, removing overburden and stripping, and
(ii) sinking a mine shaft, constructing an adit or other underground entry,
(c.1) 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,
(d) any expense (other than an amount included in the capital cost of depreciable property) incurred by the taxpayer after 1987
(i) in 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, or
(ii) in extending any such shaft, haulage way or work,
(e) 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 such 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),
(f) 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, or
(g) any 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 such shares or right thereto,
but for greater certainty, shall not include
(h) any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by (g),
(i) any expense described in paragraph (g) incurred by any other taxpayer to the extent that the expense was,
(i) by virtue of that paragraph, a Canadian development expense of that other taxpayer,
(ii) by virtue of paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), a Canadian exploration expense of that other taxpayer, or
(iii) by 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,
(i.1) 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,
(j) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class, or
(k) the 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);
“cumulative Canadian development expense”
« frais cumulatifs 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)
where
- A
- is the total of all Canadian development expenses made or incurred by the taxpayer before that time,
- B
- is the total of all amounts required by virtue of subsection 66.2(1) to be included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,
- C
- is 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,
- D
- is 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.1
- is 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,
- E
- is 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,
- F
- is 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 which
(a) the 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 Part
exceeds
(b) the amount, if any, by which
(i) the 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) if
(A) amounts that became receivable at or after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(4)(a) were read without reference to “30% of”, and
(D) no reduction under subsection 80(8) at or after the relevant time were taken into account
exceeds the total of
(ii) all 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) if
(A) amounts that became receivable after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(4)(a) were read without reference to “30% of”,
(D) amounts described in subparagraph 66.7(4)(a)(iii) that became receivable at the relevant time were not taken into account, and
(E) no reduction under subsection 80(8) at or after the relevant time were taken into account, and
(iii) such portion of the amount otherwise determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description,
- G
- is 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),
- H
- is 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),
- I
- is 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),
- J
- is 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
- K
- is the total of all amounts paid to the taxpayer after May 6, 1974 and before May 25, 1976
(a) under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, or
(b) pursuant 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,
- L
- is 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 of
(a) the 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, if
(i) that paragraph were read without reference to “30% of”,
(ii) 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, and
(iii) each 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,
(b) 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 which
(i) where 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, and
(ii) in any other case, the amount determined at the particular time under subparagraph 66.7(5)(a)(i) in respect of the original disposition
exceeds
(iii) the 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, and
(c) where
(i) after 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), and
(ii) the 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,
nil
- M
- is 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.1
- is 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,
- N
- is 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, and
- O
- is 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.
Marginal note:Application of ss. 66(15), 66.1(6) and 66.4(5)
(5.1) The definitions in subsections 66(15), 66.1(6) and 66.4(5) apply to this section.
Marginal note:Share of partner
(6) Except 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.
Marginal note:Exception
(7) Where 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.
Marginal note:Presumption
(8) Where 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. 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.
Marginal note:Definitions
66.21 (1) The definitions in this subsection apply in this section.
“adjusted cumulative foreign resource expense”
« frais cumulatifs rajustés relatifs à des ressources à l’étranger »
“adjusted cumulative foreign resource expense” of a taxpayer, in respect of a country, at the end of a taxation year means the total of
(a) the cumulative foreign resource expense of the taxpayer, in respect of that country, at the end of the year; and
(b) the amount, if any, by which
(i) the total determined under paragraph 66.7(13.2)(a) in respect of that country and the taxpayer for the year
exceeds
(ii) the amount that would, but for paragraph (3)(c), be determined under subsection (3) in respect of that country and the taxpayer for the year.
“cumulative foreign resource expense”
« frais cumulatifs 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 + B + C + D) - (E + F + G + H + I + J)
where
- A
- is the total of all foreign resource expenses, in respect of that country, made or incurred by the taxpayer
(a) before the particular time, and
(b) at a time (in this definition referred to as a “resident time”)
(i) at which the taxpayer was resident in Canada, and
(ii) where 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;
- B
- is the total of all amounts required to be 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;
- C
- is 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;
- D
- is 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;
- E
- is 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;
- F
- is 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 which
(a) the 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 time
exceeds
(b) the amount, if any, by which
(i) the 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) if
(A) amounts that became receivable at or after the relevant time were not taken into account,
(B) paragraph 66.7(2.3)(a) were read without reference to “30% of”, and
(C) no reduction under subsection 80(8) at or after the relevant time were taken into account
exceeds the total of
(ii) all 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) if
(A) amounts that became receivable after the relevant time were not taken into account,
(B) paragraph 66.7(2.3)(a) were read without reference to “30% of”, and
(C) no reduction under subsection 80(8) at or after the relevant time were taken into account, and
(iii) the portion of the amount otherwise determined under this paragraph that was otherwise applied to reduce the amount otherwise determined under this description;
- G
- is 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;
- H
- is 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;
- I
- is 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; and
- J
- is 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.
“foreign resource expense”
« frais relatifs à des ressources à l’étranger »
“foreign resource expense” of a taxpayer, in respect of a country other than Canada, means
(a) any 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,
(b) 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 of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other methods, or
(iv) trenching, digging test pits and preliminary sampling,
(c) the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country,
(d) any annual payment made by the taxpayer for the preservation of a foreign resource property in respect of that country, and
(e) subject 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 partnership
but does not include
(f) an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class,
(g) 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,
(h) 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,
(i) 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,
(j) an expenditure incurred by the taxpayer, unless the expenditure was made
(i) for the acquisition of foreign resource property by the taxpayer, or
(ii) for the purpose of
(A) enhancing 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, or
(B) assisting in evaluating whether a foreign resource property is to be acquired by the taxpayer, or
(k) the taxpayer’s share of any cost or expenditure referred to in any of paragraphs (f) to (j) that is incurred by a partnership.
“foreign resource income”
« revenu provenant de 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 of
(a) that part of the taxpayer’s income for the year, determined without reference to subsections (4) and 66(4), that is reasonably attributable to
(i) the 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, or
(ii) the production of minerals from mines in that country;
(b) 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); and
(c) all 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 which
(i) the amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of that disposition
exceeds
(ii) the 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 that
(A) can reasonably be considered to be in respect of the foreign resource property, and
(B) cannot reasonably be considered to have reduced the amount otherwise determined under paragraph (a) or (b) in respect of the taxpayer for the year.
“foreign resource loss”
« perte résultant 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.
“global foreign resource limit”
« limite globale des frais relatifs à des ressources à l’étranger »
“global foreign resource limit” of a taxpayer for a taxation year means the amount that is the lesser of
(a) the amount, if any, by which
(i) the amount determined under subparagraph 66(4)(b)(ii) in respect of the taxpayer for the year
exceeds the total of
(ii) the 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), and
(iii) the amount deducted for the year under subsection 66(4) in computing the taxpayer’s income for the year; and
(b) the amount, if any, by which
(i) 30% 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 country
exceeds
(ii) the total described in subparagraph (a)(ii).
Marginal note:Application of subsection 66(15)
(2) The definitions in subsection 66(15) apply in this section.
Marginal note:Amount to be included in income
(3) For 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 which
(a) the 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 country
exceeds the total of
(b) the 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, and
(c) the total determined under paragraph 66.7(13.2)(a) for the year in respect of the taxpayer and the country.
Marginal note:Deduction for cumulative foreign resource expense
(4) In 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 of
(a) the greater of
(i) 10% 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, and
(ii) the least of
(A) if the taxpayer ceased to be resident in Canada immediately after the end of the year, the particular amount,
(B) if clause (A) does not apply, 30% of the particular amount,
(C) 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, and
(D) the amount, if any, by which
(I) the total of all amounts each of which is the taxpayer’s foreign resource income for the year in respect of a country
exceeds the total of
(II) all amounts each of which is the taxpayer’s foreign resource loss for the year in respect of a country, and
(III) the amount deducted under subsection 66(4) in computing the taxpayer’s income for the year, and
(b) the lesser of
(i) the amount, if any, by which the particular amount exceeds the amount determined for the year under paragraph (a) in respect of the taxpayer, and
(ii) that 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.
Marginal note:Individual changing residence
(5) Where at any time in a taxation year an individual becomes or ceases to be resident in Canada,
(a) 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; and
(b) for 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. 2001, c. 17, s. 47.
Marginal note:Exploration and development shares
66.3 (1) Any 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)
(a) shall, if acquired before November 13, 1981, be deemed
(i) not to be a capital property of the taxpayer,
(ii) subject to subsection 142.6(3), to be inventory of the taxpayer, and
(iii) to have been acquired by the taxpayer at a cost to the taxpayer of nil; and
(b) shall, if acquired after November 12, 1981, be deemed to have been acquired by the taxpayer at a cost to the taxpayer of nil.
Marginal note:Deductions from paid-up capital
(2) Where, 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 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 share
(a) there shall be deducted the amount, if any, by which
(i) the 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 class
exceeds
(ii) the amount, if any, by which
(A) the 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 share
exceeds
(B) 50% 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; and
(b) there shall be added an amount equal to the lesser of
(i) the amount, if any, by which
(A) the 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 time
exceeds
(B) the total that would be determined under clause (A) if this Act were read without reference to paragraph 66.3(2)(a), and
(ii) the 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.
Marginal note:Cost of flow-through shares
(3) Any 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.
Marginal note:Paid-up capital
(4) Where, 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 share
(a) there shall be deducted the amount, if any, by which
(i) the 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 class
exceeds
(ii) the amount, if any, by which
(A) the total amount of consideration received by the corporation in respect of the share
exceeds
(B) 50% 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; and
(b) there shall be added an amount equal to the lesser of
(i) the amount, if any, by which
(A) the 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 time
exceeds
(B) the total that would be determined under clause (A) if this Act were read without reference to paragraph 66.3(4)(a), and
(ii) the 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. R.S., 1985, c. 1 (5th Supp.), s. 66.3;
- 1994, c. 8, s. 7;
- 1995, c. 21, s. 51.
Marginal note:Recovery of costs
66.4 (1) For 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 which
(a) the 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 year
exceeds the total of
(b) all 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, and
(c) the total determined under subparagraph 66.7(12.1)(c)(i) in respect of the taxpayer for the year.
Marginal note:Deduction for cumulative Canadian oil and gas property expense
(2) A taxpayer may deduct, in computing the taxpayer’s income for a taxation year, such amount as the taxpayer may claim not exceeding the total of
(a) the lesser of
(i) the total of
(A) the taxpayer’s cumulative Canadian oil and gas property expense at the end of the year, and
(B) the amount, if any, by which
(I) the total determined under subparagraph 66.7(12.1)(c)(i) in respect of the taxpayer for the year
exceeds
(II) the 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, and
(ii) the amount, if any, by which the total of all amounts each of which is
(A) an 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, any interest therein or right thereto acquired by the taxpayer under circumstances described in paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), or
(B) an 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)
exceeds
(C) the 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); and
(b) 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).
Marginal note:Definitions
(5) In this section,
“Canadian oil and gas property expense”
« frais à l’égard de biens canadiens relatifs au pétrole et au gaz »
“Canadian oil and gas property expense” of a taxpayer means any cost or expense incurred after December 11, 1979 that is
(a) 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 (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15), or any right to or interest in such 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,
(b) 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, or
(c) any 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 such shares or right thereto,
but for greater certainty, shall not include
(d) any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (c), or
(e) any expense described in paragraph (c) incurred by any other taxpayer to the extent that the expense was,
(i) by virtue of that paragraph, a Canadian oil and gas property expense of that other taxpayer,
(ii) by virtue of paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), a Canadian exploration expense of that other taxpayer, or
(iii) by 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);
“cumulative Canadian oil and gas property expense”
« frais cumulatifs 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)
where
- A
- is the total of all Canadian oil and gas property expenses made or incurred by the taxpayer before that time,
- B
- is the total of all amounts determined under subsection 66.4(1) in respect of the taxpayer for taxation years ending before that time,
- C
- is 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,
- D
- is 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.1
- is 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,
- E
- is 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,
- F
- is 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 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 which
(a) the 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 Part
exceeds the total of
(b) the amount, if any, by which
(i) the 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) if
(A) amounts that became receivable at or after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(5)(a) were read without reference to “10% of”, and
(D) no reduction under subsection 80(8) at or after the relevant time were taken into account
exceeds the total of
(ii) all 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)) if
(A) amounts that became receivable after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(5)(a) were read without reference to “10% of”, and
(D) no reduction under subsection 80(8) at or after the relevant time were taken into account, and
(iii) such portion of the amount determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description, and
(c) the amount, if any, by which
(i) the 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) if
(A) amounts that became receivable at or after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(4)(a) were read without reference to “30% of”, and
(D) no reduction under subsection 80(8) at or after the relevant time were taken into account
exceeds the total of
(ii) all 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)) if
(A) amounts that became receivable after the relevant time were not taken into account,
(B) 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,
(C) paragraph 66.7(4)(a) were read without reference to “30% of”,
(D) amounts described in subparagraph 66.7(4)(a)(ii) that became receivable at the relevant time were not taken into account, and
(E) no reduction under subsection 80(8) at or after the relevant time were taken into account, and
(iii) such portion of the amount otherwise determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description,
- G
- is 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),
- H
- is 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,
- I
- is 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.1
- is 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, and
- J
- is 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;
“proceeds of disposition”
« produit de disposition »
“proceeds of disposition” has the meaning assigned by section 54.
Marginal note:Application of ss. 66(15) and 66.1(6)
(5.1) The definitions in subsections 66(15) and 66.1(6) apply to this section.
Marginal note:Share of partner
(6) Except 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.
Marginal note:Exception
(7) Where 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. 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.
Marginal note:Deduction from income
66.5 (1) In 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 account”
(2) In this section, “cumulative offset account” of a corporation at any time means the amount, if any, by which
(a) the 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,
exceeds
(b) the total of all amounts deducted under subsection 66.5(1) in computing its income for taxation years ending before that time.
Marginal note:Change of control
(3) Where 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 which
(a) the 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 time
exceeds
(b) the 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. 1986, c. 2, s. 19, c. 58, s. 9;
- 1987, c. 46, s. 22.
Marginal note:Acquisition from tax-exempt
66.6 Where 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. R.S., 1985, c. 1 (5th Supp.), s. 66.6;
- 1998, c. 19, s. 105.
Marginal note:Successor of Canadian exploration and development expenses
66.7 (1) Subject 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 of
(a) the 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, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that may reasonably be regarded as attributable to
(A) the 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 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 66.7(3)(b)(i)(A) or paragraph 66.7(10)(g) for a preceding taxation year,
(B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, or
(C) production 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 of
(ii) all 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, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(1)(b)(i).
Marginal note:Successor of foreign exploration and development expenses
(2) Subject 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 of
(a) the amount, if any, by which
(i) the 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 year
exceeds
(ii) the 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, and
(b) the amount, if any, by which the total of
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) the 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 the particular property, or
(B) production from the particular property,
computed as if no deduction were allowed under sections 65 to 66.5 and this section, and
(ii) the lesser of
(A) the 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, and
(B) the 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 property
exceeds the total of
(iii) all other amounts deducted under this subsection for the year that can reasonably be regarded as attributable to
(A) the part of its income for the year described in subparagraph 66.7(2)(b)(i) in respect of the particular property, or
(B) a 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), and
(iv) all 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.
Marginal note:Country-by-country successor FEDE allocations
(2.1) For 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.
Marginal note:Method of allocation
(2.2) For 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 is
(a) reasonable having regard to all the circumstances, including the level and timing of
(i) the taxpayer’s specified foreign exploration and development expenses in respect of the country, and
(ii) the profits or gains to which those expenses relate; and
(b) not inconsistent with the allocation made under subsection (2.1) for the preceding taxation year.
Marginal note:Successor of foreign resource expenses
(2.3) Subject 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 of
(a) 30% of the amount, if any, by which
(i) the 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 been
(A) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(B) otherwise deducted in computing the income of the successor for the year, or
(C) deducted by the successor in computing its income for any preceding taxation year
exceeds the total of
(ii) all 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 that
(A) 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 foreign resource expense” in subsection 66.21(1) at the end of the year, and
(B) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant resource property”) that is
(I) the particular property, or
(II) another 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, and
(iii) all 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, and
(b) the amount, if any, by which the total of
(i) the 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, and
(ii) unless the amount determined under subparagraph (i) is nil by reason of the exception provided under that subparagraph, the lesser of
(A) the 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, and
(B) the 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 property
exceeds the total of
(iii) all 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 to
(A) the part of its income for the year described in subparagraph (i) in respect of the particular property, or
(B) a 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), and
(iv) all 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.
Marginal note:Successor of Canadian exploration expense
(3) Subject 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 of
(a) the amount, if any, by which
(i) the total of
(A) the cumulative Canadian exploration expense of the original owner determined immediately after the disposition of the particular property by the original owner, and
(B) all 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 not
(C) deducted 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,
(D) otherwise deducted in computing the successor’s income for the year,
(E) deducted in computing the successor’s income for a preceding taxation year, or
(F) designated by the original owner pursuant to subsection 66(14.1) for any taxation year,
exceeds
(ii) the 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, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that may reasonably be regarded as attributable to
(A) the 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 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 66.7(1)(b)(i)(A) or paragraph 66.7(10)(g) for a preceding taxation year,
(B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, or
(C) production 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 of
(ii) all 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, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(3)(b)(i).
Marginal note:Successor of Canadian development expense
(4) Subject 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 of
(a) 30% of the amount, if any, by which
(i) the amount, if any, by which
(A) the 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 been
(I) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(I.1) otherwise deducted in computing the income of the successor for the year,
(II) deducted by the successor in computing its income for any preceding taxation year, or
(III) designated by the original owner pursuant to subsection 66(14.2) for any taxation year,
(B) 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 of
(ii) 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 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 that
(A) 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 development expense” in subsection 66.2(5) at the end of the year, and
(B) can 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,
(iii) 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 that
(A) is 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,
(B) 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, and
(C) can 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, and
(iv) 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, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or
(B) production 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 of
(ii) all 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, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(4)(b)(i).
Marginal note:Successor of Canadian oil and gas property expense
(5) Subject 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 of
(a) 10% of the amount, if any, by which
(i) the 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 been
(A) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(A.1) otherwise deducted in computing the income of the successor for the year, or
(B) deducted by the successor in computing its income for any preceding taxation year
exceeds the total of
(ii) the 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 that
(A) 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, and
(B) can 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, and
(iii) the 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, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or
(B) production 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 of
(ii) all 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, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(5)(b)(i).
Marginal note:Where s. 29(25) of ITAR and ss. (1) to (5) do not apply
(6) Subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) do not apply
(a) in 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; or
(b) to 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.
Marginal note:Application of s. 29(25) of ITAR and ss. (1), (3), (4) and (5)
(7) 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 property
(a) where 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;
(b) 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;
(c) 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;
(d) 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; and
(e) where 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.
Marginal note:Application of subsections (2) and (2.3)
(8) Subsections (2) and (2.3) apply only to a corporation that has acquired a particular foreign resource property
(a) where 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;
(b) 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;
(c) 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;
(d) 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; and
(e) where 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.
Marginal note:Canadian development expense becoming Canadian exploration expense
(9) Where
(a) a corporation acquires a Canadian resource property,
(b) subsection 66.7(4) applies in respect of the acquisition, and
(c) the 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:
(d) subsection 66.1(9) does not apply in respect of the Canadian development expense incurred in respect of the well by the original owner,
(e) an amount equal to the lesser of
(i) the 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, and
(ii) the 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 time
shall 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), and
(f) the 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).
Marginal note:Change of control
(10) Where at any time after November 12, 1981
(a) control of a corporation has been acquired by a person or group of persons, or
(b) a 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:
(c) 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,
(c.1) 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,
(d) 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,
(e) 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,
(f) the original owner is deemed to have been resident in Canada before that time while the corporation was resident in Canada,
(g) where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,
(i) a parent corporation (within the meaning assigned by subsection 87(1.4)), or
(ii) a 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 to
(iii) the production from Canadian resource properties owned by the transferor immediately before that time, and
(iv) the 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),
(v) 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, and
(vi) not 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,
(h) where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,
(i) a parent corporation (within the meaning assigned by subsection 87(1.4)), or
(ii) a 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 to
(iii) the production from foreign resource properties owned by the transferor immediately before that time, and
(iv) the 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,
(v) 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, and
(vi) for 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,
(i) 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, and
(j) where 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 time
(i) for 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, and
(ii) for 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 of
(A) its 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, and
(B) an 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.
Marginal note:Idem
(11) Where, at any time,
(a) control of a taxpayer that is a corporation has been acquired by a person or group of persons, or
(b) a 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.
Marginal note:Reduction of Canadian resource expenses
(12) Where 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,
(a) 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;
(b) 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;
(b.1) 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 of
(i) the amount deducted under paragraph 66.7(12)(b) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(a) in respect of the original owner for the year
exceeds
(B) the 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;
(b.2) 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;
(c) 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;
(c.1) 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 of
(i) the amount deducted under paragraph 66.7(12)(c) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(b) in respect of the original owner for the year
exceeds
(B) the 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;
(c.2) 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;
(d) 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;
(d.1) 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 of
(i) the amount deducted under paragraph 66.7(12)(d) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(c) in respect of the original owner for the year
exceeds
(B) the 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;
(d.2) 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; and
(e) the 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.
Marginal note:Specified amount
(12.1) Where 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,
(a) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(b) in respect of a disposition in the year by the original owner
exceeds
(B) the 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), and
(ii) the total of
(A) the amount claimed under subsection 66.1(2) or 66.1(3) by the original owner for the year, and
(B) the 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 year
is 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);
(b) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(c) in respect of a disposition in the year by the original owner
exceeds
(B) the 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), and
(ii) the total of
(A) the amount claimed under subsection 66.2(2) by the original owner for the year, and
(B) the 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 year
is 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); and
(c) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(d) in respect of a disposition in the year by the original owner
exceeds
(B) the 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), and
(ii) the total of
(A) the amount claimed under subsection 66.4(2) by the original owner for the year, and
(B) the 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 year
is 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).
Marginal note:Reduction of foreign resource expenses
(13) Where 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.
Marginal note:Reduction of foreign resource expenses
(13.1) Where 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,
(a) 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; and
(b) for 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 of
(i) the amount deducted under paragraph (a) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under subsection (13.2) in respect of the original owner and the country for the year
exceeds
(B) the 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.
Marginal note:Specified amount — foreign resource expenses
(13.2) Where 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 of
(a) the total of all amounts each of which is the amount, if any, by which
(i) an 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 country
exceeds
(ii) the 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), and
(b) the total of
(i) the amount claimed under subsection 66.21(4) by the original owner in respect of the country for the year, and
(ii) the 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.
Marginal note:Disposal of Canadian resource properties
(14) Where 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,
(a) 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 of
(i) determining an amount deductible under subsection 66.7(1) or 66.7(3) for the year,
(ii) 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, and
(iii) determining 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); and
(b) where 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.
Marginal note:Disposal of foreign resource properties
(15) Where 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.
Marginal note:Disposal of foreign resource properties — subsection (2.3)
(15.1) 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,
(a) 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 of
(i) 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 (2.3) for the year, and
(ii) determining the value of F in the definition “cumulative foreign resource expense” in subsection 66.21(1); and
(b) where 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.
Marginal note:Non-successor acquisitions
(16) Where at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) apply, every person who was an original owner or predecessor owner of the property by reason of having disposed of the property before that time shall, 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, be deemed after that time not to be an original owner or predecessor owner of the property by reason of having disposed of the property before that time.
Marginal note:Restriction on deductions
(17) Where 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.
Marginal note:Application of interpretation provisions
(18) The 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. 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.
Marginal note:Resource expenses of limited partner
66.8 (1) Where a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the following rules apply:
(a) determine the amount, if any, by which
(i) the total of all amounts each of which is the taxpayer’s share of
(A) the Canadian oil and gas property expenses (in this subsection referred to as “property expenses”),
(B) the Canadian development expenses (in this subsection referred to as “development expenses”),
(C) the Canadian exploration expenses (in this subsection referred to as “exploration expenses”),
(D) the foreign resource expenses in respect of a country (in this subsection referred to as “country-specific foreign expenses”), or
(E) the 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 subsection
exceeds
(ii) the amount, if any, by which
(A) the taxpayer’s at-risk amount at the end of the fiscal period in respect of the partnership
exceeds
(B) the total of
(I) the amount required by subsection 127(8) in respect of the partnership to be added in computing the investment tax credit of the taxpayer in respect of the fiscal period, and
(II) the taxpayer’s share of any losses of the partnership for the fiscal period from a farming business;
(b) the amount determined under paragraph 66.8(1)(a) shall be applied
(i) first to reduce the taxpayer’s share of property expenses,
(ii) if any remains unapplied, then to reduce the taxpayer’s share of development expenses,
(iii) if any remains unapplied, then to reduce the taxpayer’s share of exploration expenses,
(iv) 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, and
(v) if any remains unapplied, then to reduce the taxpayer’s share of global foreign expenses; and
incurred by the partnership in the fiscal period; and
(c) for 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.
Marginal note:Expenses in following fiscal period
(2) For 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.
Marginal note:Interpretation
(3) In this section,
(a) the expressions “at-risk amount” of a taxpayer in respect of a partnership and “limited partner” of a partnership have the meanings assigned by subsections 96(2.2) and (2.4), respectively, except that, with respect to the definition “limited partner”, the definition “exempt interest” in subsection 96(2.5) shall be read as though the reference therein to
(i) “February 25, 1986” were a reference to “June 17, 1987”,
(ii) “February 26, 1986” were a reference to “June 18, 1987”,
(iii) “January 1, 1987” were a reference to “January 1, 1988”,
(iv) “June 12, 1986” were a reference to “June 18, 1987”, and
(v) “prospectus, preliminary prospectus or registration statement” were read as “prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence”;
(b) 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; and
(c) a 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. R.S., 1985, c. 1 (5th Supp.), s. 66.8;
- 1994, c. 7, Sch. VIII, s. 26;
- 2001, c. 17, s. 50.
Subdivision f
Rules Relating to Computation of Income
Marginal note:General limitation re expenses
67. In 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. 1970-71-72, c. 63, s. 1“67”.
Marginal note:Expenses for food, etc.
67.1 (1) 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 of
(a) the amount actually paid or payable in respect thereof, and
(b) an amount in respect thereof that would be reasonable in the circumstances.
Marginal note:Expenses for food and beverages of long-haul truck drivers
(1.1) An amount paid or payable by a long-haul truck driver in respect of the consumption of food or beverages by the 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 of
(a) the amount so paid or payable, and
(b) a reasonable amount in the circumstances.
Marginal note:Exceptions
(2) Subsection 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 amount
(a) is 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;
(b) relates to a fund-raising event the primary purpose of which is to benefit a registered charity;
(c) 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;
(d) 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);
(e) is an amount that
(i) is not paid or payable in respect of a conference, convention, seminar or similar event,
(ii) 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, and
(iii) is paid or payable in respect of the taxpayer’s duties performed at a work site in Canada that is
(A) outside any urban area, 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, and
(B) at least 30 kilometres from the nearest point on the boundary of the nearest such urban area;
(e.1) is an amount that
(i) is not paid or payable in respect of entertainment or of a conference, convention, seminar or similar event,
(ii) 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,
(iii) 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, and
(iv) is 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; or
(f) is 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.
Marginal note:Fees for convention, etc.
(3) 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.
Marginal note:Interpretation
(4) For the purposes of this section,
(a) 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; and
(b) “entertainment” includes amusement and recreation.
Marginal note:Definitions
(5) The following definitions apply for the purpose of this section.
“eligible travel period”
« période de déplacement admissible »
“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.
“long-haul truck”
« grand routier »
“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.
“long-haul truck driver”
« conducteur de 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.
“specified percentage”
« pourcentage déterminé »
“specified percentage” in respect of an amount paid or payable is
(a) 60 per cent, if the amount is paid or becomes payable on or after March 19, 2007 and before 2008;
(b) 65 per cent, if the amount is paid or becomes payable in 2008;
(c) 70 per cent, if the amount is paid or becomes payable in 2009;
(d) 75 per cent, if the amount is paid or becomes payable in 2010; and
(e) 80 per cent, if the amount is paid or becomes payable after 2010.
“specified place”
« endroit 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Interest on money borrowed for passenger vehicle
67.2 For the purposes of this Act, where 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 on an amount paid or payable for the acquisition of such a vehicle, in computing the person’s income for a taxation year, the amount of interest so paid or payable shall be deemed to be the lesser of the actual amount paid or payable and the amount determined by the formula
A/30 × B
where
- A
- is $250 or such other amount as may be prescribed; and
- B
- is 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. R.S., 1985, c. 1 (5th Supp.), s. 67.2;
- 1994, c. 7, Sch. II, s. 44.
Marginal note:Limitation re cost of leasing passenger vehicle
67.3 Notwithstanding any other section of this Act, where
(a) in 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, and
(b) in 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 of
(c) the amount determined by the formula
(A × B)/30 - C - D - E
where
- A
- is $600 or such other amount as is prescribed,
- B
- is 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,
- C
- is 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,
- D
- is 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 were
(i) payable on the refundable amounts at the prescribed rate, and
(ii) computed for the period before the end of the year during which the refundable amounts were outstanding, and
- E
- is the total of all reimbursements that became receivable before the end of the year by the taxpayer in respect of the lease, and
(d) the amount determined by the formula
(A × B)/0.85C - D - E
where
- A
- is 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),
- B
- is $20,000 or such other amount as is prescribed,
- C
- is the greater of $23,529 (or such other amount as is prescribed) and the manufacturer’s list price for the vehicle,
- D
- is 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 were
(i) payable on the refundable amounts at the prescribed rate, and
(ii) computed for the period in the year during which the refundable amounts are outstanding, and
- E
- is 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. R.S., 1985, c. 1 (5th Supp.), s. 67.3;
- 1994, c. 7, Sch. II, s. 45.
Marginal note:More than one owner or lessor
67.4 Where 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. 1988, c. 55, s. 46.
Marginal note:Non-deductibility of illegal payments
67.5 (1) In 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.
Marginal note:Reassessments
(2) Notwithstanding subsections 152(4) to 152(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 67.5(1) for any taxation year.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1994, c. 7, Sch. II, s. 46;
- 1998, c. 34, s. 10.
Marginal note:Non-deductibility of fines and penalties
67.6 In 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. 2005, c. 19, s. 16.
Marginal note:Allocation of amounts in consideration for disposition of property
68. Where 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 or as being in part consideration for the provision of particular services by a taxpayer,
(a) 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; and
(b) 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.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 1970-71-72, c. 63, s. 1 “68”;
- 1988, c. 55, s. 47.
Marginal note:Inadequate considerations
69. (1) Except as expressly otherwise provided in this Act,
(a) 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;
(b) where a taxpayer has disposed of anything
(i) to 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,
(ii) to any person by way of gift inter vivos, or
(iii) to a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property; and
the taxpayer shall be deemed to have received proceeds of disposition therefor equal to that fair market value; and
(c) where 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.
Marginal note:Idem, where s. 70(3) applies
(1.1) Where a taxpayer has acquired property that is a right or thing to which subsection 70(3) applies, the following rules apply:
(a) paragraph 69(1)(c) is not applicable to that property; and
(b) the taxpayer shall be deemed to have acquired the property at a cost equal to the total of
(i) such 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, and
(ii) any expenditures made or incurred by the taxpayer to acquire the property.
Marginal note:Idem
(1.2) Where, at any time,
(a) 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, and
(b) there 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 of
(c) those proceeds determined without reference to this subsection, and
(d) the fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement.
(2) and (3) [Repealed, 1998, c. 19, s. 107(1)]
Marginal note:Shareholder appropriations
(4) Where 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.
Marginal note:Idem
(5) Where 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:
(a) 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;
(b) the shareholder shall be deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;
(c) subsections 52(1) and (2) do not apply for the purposes of determining the cost to the shareholder of the property; and
(d) subsections 13(21.2), 14(12), 18(15) and 40(3.4) and 40(3.6) do not apply in respect of any property disposed of on the winding-up.
(e) [Repealed, 1998, c. 19, s. 107(3)]
(6) to (10) [Repealed, 2003, c. 28, s. 8(2)]
Marginal note:Deemed proceeds of disposition
(11) Where, 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 is
(a) to obtain the benefit of
(i) any 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, or
(ii) any balance of undeducted outlays, expenses or other amounts
available 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, or
(b) to 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.
Marginal note:Reassessments
(12) Notwithstanding 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).
(12.1) and (12.2) [Repealed, 1998, c. 19, s. 107(4)]
Marginal note:Amalgamation or merger
(13) Where 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 to
(a) in the case of a Canadian resource property or a foreign resource property, nil; and
(b) in the case of any other property, the cost amount to the corporation of the property immediately before the amalgamation or merger.
Marginal note:New taxpayer
(14) For 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 deemed
(a) to have existed at the time that was immediately before the series began; and
(b) to 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. 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.
Marginal note:Death of a taxpayer
70. (1) In computing the income of a taxpayer for the taxation year in which the taxpayer died,
(a) 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; and
(b) paragraph 12(1)(t) shall be read as follows:
“12(1)(t) 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);”
Marginal note:Amounts receivable
(2) If 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 if
(a) the taxpayer were another person;
(b) that other person’s only income for the year were the value of the rights or things; and
(c) subject 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.
Marginal note:Rights or things transferred to beneficiaries
(3) Where 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,
(a) subsection 70(2) is not applicable to that right or thing; and
(b) an 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.
Marginal note:Exception
(3.1) For 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), eligible capital property, land included in the inventory of a business, a Canadian resource property or a foreign resource property.
Marginal note:Revocation of election
(4) An 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.
Marginal note:Capital property of a deceased taxpayer
(5) Where in a taxation year a taxpayer dies,
(a) 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;
(b) 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;
(c) 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),
(i) 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, and
(ii) the 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; and
(d) where 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),
(i) 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),
(A) its capital cost to the person shall be deemed to be the amount that was its capital cost to the taxpayer, and
(B) the 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, and
(ii) where 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).
Marginal note:Eligible capital property of deceased
(5.1) Notwithstanding subsection 24(1), where at any time a taxpayer dies and any person (in this subsection referred to as the beneficiary), as a consequence of the taxpayer’s death, acquires an eligible capital property of the taxpayer in respect of a business carried on by the taxpayer immediately before that time (otherwise than by way of a distribution of property by a trust that claimed a deduction under paragraph 20(1)(b) in respect of the property or in circumstances to which subsection 24(2) applies),
(a) the taxpayer shall be deemed to have disposed of the property, immediately before the taxpayer’s death, for proceeds equal to 4/3 of that proportion of the cumulative eligible capital of the taxpayer in respect of the business that the fair market value immediately before that time of the property is of the fair market value immediately before that time of all of the eligible capital property of the taxpayer in respect of the business;
(b) subject to paragraph 70(5.1)(c), the beneficiary shall be deemed to have acquired a capital property at the time of the taxpayer’s death at a cost equal to the proceeds referred to in paragraph 70(5.1)(a);
(c) where the beneficiary continues to carry on the business previously carried on by the taxpayer, the beneficiary shall be deemed to have, at the time of the taxpayer’s death, acquired an eligible capital property and made an eligible capital expenditure at a cost equal to the total of
(i) the proceeds referred to in paragraph 70(5.1)(a), and
(ii) 4/3 of that proportion of the amount, if any, determined for F in the definition “cumulative eligible capital” in subsection 14(5) in respect of the business of the taxpayer at that time 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 eligible capital property of the taxpayer in respect of the business,
and for the purposes of determining at any time the beneficiary’s cumulative eligible capital in respect of the business, an amount equal to 3/4 of the amount determined under subparagraph 70(5.1)(c)(ii) shall be added to the amount otherwise determined, in respect of the business, for P in the definition “cumulative eligible capital” in subsection 14(5); and
(d) for the purpose of determining, after that time, the amount required by paragraph 14(1)(b) to be included in computing the income of the beneficiary in respect of any subsequent disposition of the property of the business, there shall be added to the amount determined for Q in the definition “cumulative eligible capital” in subsection 14(5) the amount determined by the formula
A × B/C
where
- A
- is the amount, if any, determined for Q in that definition in respect of the business of the taxpayer immediately before that time,
- B
- is the fair market value immediately before that time of the particular property, and
- C
- is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business.
Marginal note:Resource properties and land inventories of a deceased taxpayer
(5.2) Where in a taxation year a taxpayer dies,
(a) the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of each Canadian resource property and foreign resource property of the taxpayer and received proceeds of disposition for that property equal to its fair market value immediately before the death;
(a.1) subject to subparagraph (b)(ii), any particular person who as a consequence of the taxpayer’s death acquires any property that is deemed by paragraph (a) to have been disposed of by the taxpayer is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death;
(b) notwithstanding paragraph 70(5.2)(a), where the taxpayer was resident in Canada immediately before the taxpayer’s death, any Canadian resource property or foreign resource property of the taxpayer that 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 70(6)(a) or a trust described in paragraph 70(6)(b) and it can be shown within the period ending 36 months after the death 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 vested indefeasibly in the spouse or common-law partner or trust, as the case may be,
(i) the taxpayer shall be deemed to have, immediately before the death, disposed of the property and received proceeds of disposition therefor equal to such amount as is specified by the taxpayer’s legal representative in the return of income of the taxpayer filed under paragraph 150(1)(b), not exceeding its fair market value immediately before the death, and
(ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired the property at the time of the death at a cost equal to the amount determined in respect of the disposition under subparagraph (i);
(c) the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of each property that was land included in the inventory of a business of the taxpayer and received proceeds of disposition for that property equal to its fair market value immediately before the death;
(c.1) subject to subparagraph (d)(ii), any particular person who as a consequence of the taxpayer’s death acquires any property that is deemed by paragraph (c) to have been disposed of by the taxpayer is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death; and
(d) notwithstanding paragraph 70(5.2)(c), where the taxpayer was resident in Canada immediately before the taxpayer’s death, any property that is land included in the inventory of a business of the taxpayer 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 70(6)(a) or a trust described in paragraph 70(6)(b) and 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 vested indefeasibly in the spouse or common-law partner or trust, as the case may be,
(i) the taxpayer shall be deemed to have, immediately before the death, disposed of the land and received proceeds of disposition therefor equal to its cost amount to the taxpayer immediately before the death, and
(ii) 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.
Marginal note:Fair market value
(5.3) For 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.
Marginal note:NISA on death
(5.4) Where 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.
Marginal note:Where transfer or distribution to spouse or spouse trust
(6) Where 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 to
(a) the taxpayer’s spouse or common-law partner who was resident in Canada immediately before the taxpayer’s death, or
(b) a 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 which
(i) the 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, and
(ii) 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,
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:
(c) paragraphs 70(5)(a) and 70(5)(b) do not apply in respect of the property,
(d) 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 to
(i) where 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, and
(ii) in 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,
(d.1) where the property is an interest in a partnership (other than an interest in a partnership to which subsection 100(3) applies),
(i) 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,
(ii) 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, and
(iii) each 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; and
(e) where 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)”.
Marginal note:Transfer or distribution of NISA to spouse or trust
(6.1) Where 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 to
(a) the taxpayer’s spouse or common-law partner, or
(b) a trust, created by the taxpayer’s will, under which
(i) the 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, and
(ii) 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,
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.
Marginal note:Election
(6.2) Subsection 70(6) or 70(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 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year in which the taxpayer died, to have subsection 70(5) or 70(5.4), as the case may be, apply.
Marginal note:Special rules applicable in respect of trust for benefit of spouse
(7) Where 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,
(a) 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:
“150(1)(d) in the case of any other person, by the person’s legal representative within 18 months after the person’s death; or;” and
(b) where 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,
(i) subsection 70(6) does not apply in respect of the properties so listed, and
(ii) notwithstanding 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,
(iii) 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 that
(A) the amount, if any, by which the fair market value of that property immediately after the taxpayer’s death exceeds the listed value excess,
is of
(B) the fair market value of that property immediately after the taxpayer’s death, and
(iv) the cost to the trust of that property is
(A) where 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 of
(I) its adjusted cost base to the taxpayer immediately before the taxpayer’s death, and
(II) the amount determined under subparagraph 70(7)(b)(iii) to be the taxpayer’s capital gain from the disposition of that property, or
(B) where 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 which
(I) its adjusted cost base to the taxpayer immediately before the taxpayer’s death
exceeds
(II) the amount determined under subparagraph 70(7)(b)(iii) to be the taxpayer’s capital loss from the disposition of that property.
Marginal note:Meaning of certain expressions in s. (7)
(8) In subsection 70(7),
(a) 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;
(b) “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 than
(i) any 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, or
(ii) any debt secured by a mortgage or hypothec on property owned by the taxpayer immediately before the taxpayer’s death; and
(c) “testamentary debt”, in respect of a taxpayer who has died, means
(i) any 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, and
(ii) any 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.
Marginal note:When subsection (9.01) applies
(9) Subsection (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 if
(a) the property was, before the death of the taxpayer, used principally in a fishing or farming business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child 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);
(b) the child of the taxpayer was resident in Canada immediately before the day on which the taxpayer died; and
(c) as 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.
Marginal note:Transfer of farming and fishing property to child
(9.01) If, 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:
(a) 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,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the taxpayer of the property, and
2. 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, and
(II) where 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,
(iii) 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), and
(iv) where 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; and
(b) where 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,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where 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 of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the 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, and
(II) where 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 of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,
(iii) 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),
(iv) 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,
(v) except for the purpose of this subparagraph,
(A) 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, and
(B) where 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, and
(vi) except for the purpose of this subparagraph,
(A) 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, and
(B) where 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.
Marginal note:When subsection (9.11) applies
(9.1) Subsection (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 if
(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor;
(b) 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);
(c) 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 fishing or farming business carried on in Canada;
(d) the child of the settlor is, immediately before the beneficiary’s death, resident in Canada; and
(e) as 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.
Marginal note:Transfer of farming and fishing property from trust to settlor’s children
(9.11) If, 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:
(a) 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,
(i) subsections 104(4) and (5) and section 69 do not apply to the trust and the child in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition, proceeds of disposition in respect of that disposition equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the trust of the property, and
2. 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, and
(II) where 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, and
(iii) 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);
(b) 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,
(i) subsections 104(4) and (5) do not apply to the trust in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to
(I) where 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 of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the 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, and
(II) where 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 of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the trust of the property immediately before the time of the disposition of the property,
(iii) 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),
(iv) except for the purpose of this subparagraph,
(A) 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, and
(B) where 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, and
(v) except for the purpose of this subparagraph,
(A) 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, and
(B) where 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;
(c) 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)),
(i) 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, and
(ii) the 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; and
(d) where 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,
(i) 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),
(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, and
(B) the 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, and
(ii) where 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).
Marginal note:When subsection (9.21) applies
(9.2) Subsection (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 if
(a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the day on which taxpayer died; and
(c) as 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.
Marginal note:Transfer of family farm and fishing corporations and partnerships
(9.21) If, 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:
(a) 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,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, or a share of the capital stock of a family farm corporation of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received 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, and
(B) 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 that disposition determined under clause (A), and
(iii) where 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),
(A) 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,
(B) 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, and
(C) each 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; and
(b) where 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,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received, 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 of
1. the fair market value of the property immediately before the taxpayer’s death, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition,
(B) 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),
(C) 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, and
(D) except 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, and
(iii) where 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,
(A) 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,
(B) 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, and
(C) each 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.
Marginal note:When subsection (9.31) applies
(9.3) Subsection (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 if
(a) the 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 corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;
(b) 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);
(c) the property is, immediately before the beneficiary’s death,
(i) 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 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 corporation”, in subsection (10) were read without the words “in which the person or a spouse, common-law partner, child or parent of the person 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)”,
(ii) a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family 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 fishing corporation” in subsection (10) were read without reference to 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
(iii) a partnership interest in a partnership that carried on the business of farming or fishing in Canada in which it used all or substantially all of the property;
(d) the child of the settlor was, immediately before that beneficiary’s death, resident in Canada; and
(e) as 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.
Marginal note:Transfer of family farm or fishing corporation or family farm or fishing partnership from trust to children of settlor
(9.31) If, 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:
(a) 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
(i) section 69 and subsection 104(4) do not apply to the trust and the child in respect of the property,
(ii) where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)(c)(i) or (ii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received 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, and
(B) the 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), and
(iii) where 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),
(A) 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,
(B) 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, and
(C) each 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; and
(b) where 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 property
(i) subsection 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,
(ii) subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share of the capital stock of a corporation described in subparagraph (9.3)(c)(i) or (ii) or a partnership interest described in subparagraph (9.3)(c)(iii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received, 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 of
1. the fair market value of the property immediately before the beneficiary’s death, and
2. the adjusted cost base to the trust of the property immediately before the beneficiary’s death, and
(B) 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 that disposition of the property determined under clause (A),
(iii) 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,
(A) 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,
(B) 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, and
(C) each 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,
(iv) 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, and
(v) except 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.
Marginal note:Transfer to a parent
(9.6) Subsection (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” if
(a) the 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;
(b) as a consequence of the death of the taxpayer the property is transferred to a parent of the taxpayer; and
(c) the 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.
Marginal note:Leased farm and fishing property
(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)(b), subsection 73(3) and paragraph (d) of the definitions “qualified farm property” and “qualified 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 fishing or farming business, as the case may be, carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a fishing or farming business in Canada, by
(a) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation, or a share of the capital stock of a family farm corporation, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; or
(b) a partnership, a partnership interest of which is an interest in a family fishing partnership, or an interest in a family farm partnership, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.
Marginal note:Definitions
(10) In this section,
“child”
« enfant »
“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 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;
“interest in a family farm partnership”
« participation dans une société de personnes agricole familiale »
“interest in a family farm 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 to
(a) property that has been used principally in the course of carrying on a farming 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), by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family farm partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
“interest in a family fishing partnership”
« participation dans une société de personnes de pêche familiale »
“interest in a family 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 to
(a) property that has been used principally in the course of carrying on a 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, by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
“share of the capital stock of a family farm corporation”
« action du capital-actions d’une société agricole familiale »
“share of the capital stock of a family farm corporation” of a person at a particular time means a share of the capital stock of a corporation owned by the person at that time where, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to
(a) property that has been used by
(i) the corporation or any other corporation, a share of the capital stock of which was a share of the capital stock of a family farm corporation of the person or of a spouse, common-law partner, child or parent of the person,
(i.1) a corporation controlled by a corporation referred to in subparagraph (i),
(ii) the person,
(iii) a spouse, common-law partner, child or parent of the person, or
(iv) a partnership, an interest in which was an interest in a family farm partnership of the person or of a spouse, common-law partner, child or parent of the person,
principally in the course of carrying on a farming business in Canada in which the person or a spouse, common-law partner, child or parent of the person 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),
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (c), or
(c) properties described in paragraph (a) or (b).
“share of the capital stock of a family fishing corporation”
« action du capital-actions d’une société de pêche familiale »
“share of the capital stock of a family 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 to
(a) property that has been used principally in the course of carrying on a 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, by
(i) the corporation,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a corporation controlled by a corporation described in subparagraph (i) or (ii),
(iv) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(v) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
Marginal note:Application of s. 138(12)
(11) The definitions in subsection 138(12) apply to this section.
Marginal note:Value of NISA
(12) For the purpose of the definition “share of the capital stock of a family farm corporation” in subsection 10, the fair market value of a net income stabilization account shall be deemed to be nil.
Marginal note:Capital cost of certain depreciable property
(13) For 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)),
(a) the capital cost to a taxpayer of depreciable property of a prescribed class disposed of immediately before the taxpayer’s death, or
(b) the 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 to
(c) the expression “the lesser of” in paragraph 13(7)(b) and clause (d)(i)(A) thereof, and
(d) subparagraph 13(7)(b)(ii), subclause 13(7)(d)(i)(A)(II), clause 13(7)(d)(i)(B) and paragraph (e) thereof.
Marginal note:Order of disposal of depreciable property
(14) Where 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. 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.
Marginal note:Reserves, etc., for year of death
72. (1) Where in a taxation year a taxpayer has died,
(a) 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;
(b) 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;
(c) 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;
(d) 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; and
(e) subsection 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.
Marginal note:Election by legal representative and transferee re reserves
(2) Where 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,
(a) 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,
(i) notwithstanding subsection 72(1), be deducted in computing the taxpayer’s income for the taxation year in which the taxpayer died,
(ii) be included in computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer, and
(iii) be deemed to be
(A) an 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,
(B) 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,
(C) an amount that by virtue of subsection 59(1) has been included in computing the transferee’s income for a preceding taxation year, or
(D) for 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;
(b) 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,
(i) notwithstanding paragraph 72(1)(c), be deemed to have been so claimed, and
(ii) for 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 been
(A) proceeds of the disposition of capital property disposed of by the transferee in that first taxation year, and
(B) the 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); and
(c) notwithstanding 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,
(i) 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,
(ii) 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, and
(iii) the amount of the transferee’s deduction under section 64 as a reserve in respect of the disposition of the property
shall 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. 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.
Marginal note:Inter vivos transfers by individuals
73. (1) For 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 deemed
(a) to have been disposed of at that time by the individual for proceeds equal to,
(i) 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, and
(ii) in any other case, the adjusted cost base to the individual of the particular property immediately before that time; and
(b) to have been acquired at that time by the transferee for an amount equal to those proceeds.
Marginal note:Qualifying transfers
(1.01) Subject to subsection (1.02), property is transferred by an individual in circumstances to which this subsection applies where it is transferred to
(a) the individual’s spouse or common-law partner;
(b) a former spouse or common-law partner of the individual in settlement of rights arising out of their marriage or common-law partnership; or
(c) a trust created by the individual under which
(i) the 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,
(ii) 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, or
(iii) either
(A) the 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, or
(B) the 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.
Marginal note:Exception for transfers
(1.02) Subsection (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 where
(a) the trust was created after 1999;
(b) either
(i) the individual had attained 65 years of age at the time the trust was created, or
(ii) the 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; and
(c) in 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).
Marginal note:Interpretation
(1.1) For 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,
(a) 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 property
(i) is acquired or is deemed to have been acquired by the particular transferee,
(ii) is deemed or declared to be property of, or is awarded to, the particular transferee, or
(iii) has vested in the particular transferee; and
(b) the property was or would, but for those laws, have been a capital property of the individual referred to in subsection (1).
Marginal note:Capital cost and amount deemed allowed to spouse, etc., or trust
(2) Where a transferee is deemed by subsection 73(1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph 73(1)(e) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)
(a) the capital cost to the transferee of the particular property shall be deemed to be the amount that was the capital cost to the taxpayer thereof; and
(b) the excess shall be 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 thereof.
Marginal note:When subsection (3.1) applies
(3) Subsection (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, where
(a) the property was, immediately before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the transfer; and
(c) the property has been used principally in a fishing or farming 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).
Marginal note:Inter vivos transfer of farm or fishing property to child
(3.1) If, 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:
(a) 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 to
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the lesser of
(I) the capital cost to the taxpayer of the property, and
(II) 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, or
(iii) if 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;
(b) 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,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the land immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the land immediately before the time of the transfer, or
(iii) if 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;
(c) where, immediately before the transfer, the property was eligible capital property, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the amount determined by the formula
4/3 (A × B/C)
where
- A
- is the taxpayer’s cumulative eligible capital in respect of the business,
- B
- is the fair market value of the property immediately before the transfer, and
- C
- is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, or
(iii) if 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;
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property;
(e) 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 under
(i) where the property is depreciable property of the taxpayer, paragraph (a), and
(ii) where the property is land of the taxpayer, paragraph (b);
(f) if the property was, immediately before the transfer, an eligible capital property of the taxpayer in respect of a business, the child is deemed to have acquired
(i) where the child does not continue to carry on the business, a capital property, immediately after the transfer, at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (c),
(ii) where the child continues to carry on the business, an eligible capital property and to have made an eligible capital expenditure at a cost equal to the total of
(A) the taxpayer’s proceeds of disposition referred to in paragraph (c), and
(B) 4/3 of the amount determined by the formula
(A × B/C) - D
where
- A
- is the amount, if any, determined for F in the definition “cumulative eligible capital” in subsection 14(5) in respect of the business immediately before the transfer,
- B
- is the fair market value of the property immediately before the transfer,
- C
- is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, and
- D
- is the amount, if any, included under paragraph 14(1)(a) in computing the taxpayer’s income as a result of the disposition, and
(iii) for the purpose of determining at any subsequent time the child’s cumulative eligible capital in respect of the business, an amount equal to ¾ of the amount determined under subparagraph (ii) is to be added to the amount otherwise determined for P in the definition “cumulative eligible capital” in subsection 14(5);
(g) for the purpose of determining, in respect of any disposition of the property, after the time of the transfer, the amount deemed to be the child’s taxable capital gain, and the amount to be included in computing the child’s income, there shall be added to the amount otherwise determined for Q in respect of the business in the definition “cumulative eligible capital” in subsection 14(5), the amount determined by the formula,
A × B/C
where
- A
- is the amount, if any, determined for Q in that definition in respect of the business immediately before the time of the transfer,
- B
- is the fair market value, immediately before that time, of the transferred property , and
- C
- is the fair market value immediately before that time of all the taxpayer’s eligible capital property in respect of the business; and
(h) 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),
(i) 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, and
(ii) the 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 the child acquired the property.
Marginal note:When subsection (4.1) applies
(4) Subsection (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 if
(a) the child was resident in Canada immediately before the transfer; and
(b) the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer (within the meaning assigned by subsection 70(10)).
Marginal note:Inter vivos transfer of family farm or fishing corporations and partnerships
(4.1) If, 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,
(a) subject to paragraph (c), where the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm 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,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the property immediately before the time of the transfer, or
(iii) if 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;
(b) subject to paragraph (c), where the property is, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm 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);
(c) where the property is, immediately before the transfer, an interest in a family fishing partnership of the taxpayer, or an interest in a family farm 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,
(i) 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,
(ii) 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, and
(iii) each 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; and
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property.
Marginal note:Disposition of a NISA
(5) Where 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,
(a) 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 if
(i) the 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, and
(ii) the 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; and
(b) where 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.
Marginal note:Application of s. 70(10)
(6) The definitions in subsection 70(10) apply to this section.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Transfers and loans to spouse or common-law partner
74.1 (1) If 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.
Marginal note:Transfers and loans to minors
(2) If 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 who
(a) does not deal with the individual at arm’s length, or
(b) is 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.
Marginal note:Repayment of existing indebtedness
(3) For 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 used
(a) to repay, in whole or in part, borrowed money with which other property was acquired, or
(b) to 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. 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.
Marginal note:Gain or loss deemed that of lender or transferor
74.2 (1) Where 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:
(a) the amount, if any, by which
(i) the 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 partner
exceeds
(ii) the 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 therefor
shall be deemed to be a taxable capital gain of the individual for the year from the disposition of property other than listed personal property;
(b) 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;
(c) the amount, if any, by which
(i) the 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 therefor
exceeds
(ii) the 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;
(d) 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; and
(e) any 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.
Marginal note:Deemed gain or loss
(2) Where 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,
(a) 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; and
(b) for 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.
Marginal note:Election for subsection (1) to apply
(3) Subsection (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.
Marginal note:Application of subsection (3)
(4) 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 of
(a) interest 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; or
(b) any penalty payable under this Act.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Transfers or loans to a trust
74.3 (1) Where 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:
(a) 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 of
(i) the 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, and
(ii) that 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) that
(A) the amount determined under subparagraph 74.3(1)(a)(i) in respect of the designated person for the year
is of
(B) the 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; and
(b) for the purposes of section 74.2, an amount equal to the lesser of
(i) the amount that was designated under subsection 104(21) in respect of the designated person in the trust’s return of income for the year, and
(ii) the amount, if any, by which
(A) the 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 therefor
exceeds
(B) the 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 person”
(2) In 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. 1986, c. 6, s. 38, c. 55, s. 18.
Marginal note:Definitions
74.4 (1) In this section,
“designated person”
« personne désignée »
“designated person”, in respect of an individual, has the meaning assigned by subsection 74.5(5);
“excluded consideration”
« contrepartie exclue »
“excluded consideration”, at any time, means consideration received by an individual that is
(a) indebtedness,
(b) a share of the capital stock of a corporation, or
(c) a right to receive indebtedness or a share of the capital stock of a corporation.
Marginal note:Transfers and loans to corporations
(2) 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 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 which
(a) the 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”,
(b) the individual was resident in Canada, and
(c) the 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 which
(d) the 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 periods
exceeds the total of
(e) any 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),
(f) 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, and
(g) where 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 that
(i) can reasonably be considered to be part of the benefit sought to be conferred, and
(ii) are included in computing the designated person’s split income for any taxation year.
Marginal note:Outstanding amount
(3) For the purposes of subsection 74.4(2), the outstanding amount of a transferred property or loan at a particular time is
(a) in 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 of
(i) the 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, and
(ii) the 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;
(b) in the case of a loan of money or property to a corporation, the amount, if any, by which
(i) the principal amount of the loan of money at the time the loan was made, or
(ii) the 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).
Marginal note:Benefit not granted to a designated person
(4) For 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, where
(a) the only interest that the designated person has in the corporation is a beneficial interest in shares of the corporation held by a trust;
(b) 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; and
(c) the 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. 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.
Marginal note:Transfers for fair market consideration
74.5 (1) Notwithstanding 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 if
(a) at 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;
(b) where the consideration received by the transferor included indebtedness,
(i) interest was charged on the indebtedness at a rate equal to or greater than the lesser of
(A) the prescribed rate that was in effect at the time the indebtedness was incurred, and
(B) the 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,
(ii) 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, and
(iii) the 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; and
(c) where 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.
Marginal note:Loans for value
(2) Notwithstanding 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 if
(a) interest was charged on the loan at a rate equal to or greater than the lesser of
(i) the prescribed rate that was in effect at the time the loan was made, and
(ii) the 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;
(b) 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; and
(c) the 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.
Marginal note:Spouses or common-law partners living apart
(3) Notwithstanding 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,
(a) 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; and
(b) section 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.
Marginal note:Idem
(4) No 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 person”
(5) For the purposes of this section, “designated person”, in respect of an individual, means a person
(a) who is the spouse or common-law partner of the individual; or
(b) who is under 18 years of age and who
(i) does not deal with the individual at arm’s length, or
(ii) is the niece or nephew of the individual.
Marginal note:Back to back loans and transfers
(6) Where an individual has lent or transferred property
(a) to 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, or
(b) to 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:
(c) 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, and
(d) for 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.
Marginal note:Guarantees
(7) Where 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:
(a) 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; and
(b) for 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 person”
(8) For the purposes of subsections 74.5(6) and (7), “specified person”, with respect to an individual, means
(a) a designated person in respect of the individual; or
(b) a 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.
Marginal note:Transfers or loans to a trust
(9) Where 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.
(10) [Repealed, 1994, c. 7, Sch. VIII, s. 30(1)]
Marginal note:Artificial transactions
(11) Notwithstanding 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.
Marginal note:Where ss. 74.1 to 74.3 do not apply
(12) Sections 74.1, 74.2 and 74.3 do not apply in respect of a transfer by an individual of property
(a) as 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;
(a.1) [Repealed, 2011, c. 24, s. 17]
(a.2) as a payment of a contribution under a registered disability savings plan;
(b) 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 who
(i) does not deal with the individual at arm’s length, or
(ii) is 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; or
(c) to the individual’s spouse or common-law partner,
(i) while the property, or property substituted for it, is held under a TFSA of which the spouse or common-law partner is the holder, and
(ii) to 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)).
Marginal note:Exception from attribution rules
(13) Subsections 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. 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. 17.
Marginal note:Trusts
75. (2) Where, by a trust created in any manner whatever since 1934, property is held on condition
(a) that it or property substituted therefor may
(i) revert 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”), or
(ii) pass to persons to be determined by the person at a time subsequent to the creation of the trust, or
(b) that, 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.
Marginal note:Exceptions
(3) Subsection 75(2) does not apply to property held in a taxation year
(a) by a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing 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;
(b) by an employee life and health trust, an employee trust, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1), or a trust described in paragraph 149(1)(y);
(c) by a trust that
(i) is not resident in Canada,
(ii) is resident in a country under the laws of which an income tax is imposed,
(iii) is exempt under the laws referred to in subparagraph 75(3)(c)(ii) from the payment of income tax to the government of the country of which the trust is a resident, and
(iv) was established principally in connection with, or the principal purpose of which is to administer or provide benefits under, one or more superannuation, pension or retirement funds or plans or any funds or plans established to provide employee benefits;
(c.1) by a qualifying environmental trust; or
(d) by a prescribed trust.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. 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.
Marginal note:Gain or loss deemed that of transferor
75.1 (1) Where
(a) subsection 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,
(b) the transfer was made at less than the fair market value of the transferred property immediately before the time of the transfer, and
(c) in 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:
(d) the amount, if any, by which
(i) the total of the transferee’s taxable capital gains for the year from dispositions of transferred property
exceeds
(ii) the 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,
(e) 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, and
(f) any 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 “child”
(2) For 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. R.S., 1985, c. 1 (5th Supp.), s. 75.1;
- 1994, c. 7, Sch. II, s. 54.
Marginal note:Security in satisfaction of income debt
76. (1) Where 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.
Marginal note:Idem
(2) Where 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.
Marginal note:Section enacted for greater certainty
(3) This 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.
Marginal note:Debt deemed not to be income debt
(4) Where 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.
Marginal note:Definitions of certain expressions
(5) In subsection 76(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 and rapeseed produced in the designated area defined by the Canadian Wheat Board Act.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 76;
- 1994, c. 7, Sch. II, s. 55.
Marginal note:Non-resident moving debt from Canadian business
76.1 (1) If 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.
Marginal note:Non-resident assuming debt
(2) If 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. 2001, c. 17, s. 56.
77. [Repealed, 1995, c. 21, s. 52(1)]
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 77;
- 1995, c. 21, s. 52.
Marginal note:Unpaid amounts
78. (1) Where 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, either
(a) the 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, or
(b) where 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:
(i) 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, and
(ii) that 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.
Marginal note:Idem
(2) Where 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.
Marginal note:Late filing
(3) Where, 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.
Marginal note:Unpaid remuneration and other amounts
(4) Where 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.
Marginal note:Where s. (1) does not apply
(5) Subsection 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. R.S., 1985, c. 1 (5th Supp.), s. 78;
- 1994, c. 7, Sch. II, s. 56.
Marginal note:Definitions
79. (1) In this section,
“creditor”
« créancier »
“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;
“debt”
« dette »
“debt” includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement;
“person”
« personne »
“person” includes a partnership;
“property”
« bien »
“property” does not include
(a) money, or
(b) indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country;
“specified amount”
« montant déterminé »
“specified amount” at any time of a debt owed or assumed by a person means
(a) the unpaid principal amount of the debt at that time, and
(b) unpaid interest accrued to that time on the debt.
Marginal note:Surrender of property
(2) For 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.
Marginal note:Proceeds of disposition for debtor
(3) Where 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/H
where
- A
- is 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;
- B
- is 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;
- C
- is 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), where
(a) any property surrendered at that time by the debtor to the creditor was security for
(i) the particular debt, and
(ii) another debt that is owed by the debtor immediately before that time to the creditor, and
(b) the other debt is subordinate to the particular debt in respect of that property;
- D
- is
(a) where 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 of
(i) the 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, and
(ii) the 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, and
(b) in any other case, nil;
- E
- is
(a) where 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, and
(b) in any other case, nil;
- F
- is the total of all amounts each of which is the lesser of
(a) the 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, and
(b) the total of
(i) all 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,
(ii) all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,
(iii) 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,
(iv) where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and
(v) the lesser of
(A) the unpaid interest accrued to that time on the particular debt, and
(B) the total of
(I) the 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, and
(II) such 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;
- G
- is the fair market value at that time of the particular property; and
- H
- is the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.
Marginal note:Subsequent payment by debtor
(4) An 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 which
(a) subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;
(b) paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure;
(c) 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; or
(d) paragraph 20(1)(hh) applies, in any other case.
Marginal note:Subsequent application with respect to employee or shareholder debt
(5) Any 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.
Marginal note:Surrender of property not payment or repayment by debtor
(6) Where 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.
Marginal note:Foreign exchange
(7) Where 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. 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.
Marginal note:Definitions
79.1 (1) In this section,
“creditor”
« créancier »
“creditor” has the meaning assigned by subsection 79(1);
“debt”
« dette »
“debt” has the meaning assigned by subsection 79(1);
“person”
« personne »
“person” has the meaning assigned by subsection 79(1);
“property”
« bien »
“property” has the meaning assigned by subsection 79(1);
“specified amount”
« montant déterminé »
“specified amount” has the meaning assigned by subsection 79(1);
“specified cost”
« coût déterminé »
“specified cost” to a person of a debt owing to the person means
(a) where the debt is capital property of the person, the adjusted cost base to the person of the debt, and
(b) in any other case, the amount, if any, by which
(i) the cost amount to the person of the debt
exceeds
(ii) such 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.
Marginal note:Seizure of property
(2) Subject 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 where
(a) the beneficial ownership of the property is acquired or reacquired at that time by the person; and
(b) the 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.
Marginal note:Exception
(2.1) For the purpose of this section, foreign resource property is deemed not to be seized at any time from
(a) an individual or a corporation, if the individual or corporation is non-resident at that time; or
(b) a partnership (other than a partnership each member of which is resident in Canada at that time).
Marginal note:Creditor’s capital gains reserves
(3) Where 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.
Marginal note:Creditor’s inventory reserves
(4) Where 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.
Marginal note:Adjustment where disposition and reacquisition of capital property in same year
(5) Where 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 of
(a) the 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, and
(b) the cost amount to the creditor of the property immediately before the previous time.
Marginal note:Cost of seized properties for creditor
(6) Where 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 of
(a) that proportion of the total specified costs immediately before that time to the creditor of those debts that
(i) the fair market value of the particular property immediately before that time
is of
(ii) the fair market value of all properties immediately before that time that were seized by the creditor at that time in respect of those debts, and
(b) all 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 in the particular property, except to the extent the outlay or expense
(i) was included in the cost to the creditor of property other than the particular property,
(ii) 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, or
(iii) was deductible in computing the creditor’s income for the year or a preceding taxation year
exceeds
(c) the 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 ga