Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2016-05-12 and last amended on 2015-12-31. Previous Versions

Marginal note:Adjusted taxable income determined
  •  (1) Subject to subsection 127.52(2), an individual’s adjusted taxable income for a taxation year is the amount that would be the individual’s taxable income for the year or the individual’s taxable income earned in Canada for the year, as the case may be, if it were computed on the assumption that

    • (a) [Repealed, 1999, c. 22, s. 50(2)]

    • (b) the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a rental or leasing property (other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible and the amount, if any, by which the total of

      • (i) the total of all amounts each of which is the individual’s income for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and

      • (ii) the amount, if any, by which

        • (A) the total of all amounts each of which is the individual’s taxable capital gain for the year from the disposition of a rental or leasing property owned by the individual or by a partnership

        exceeds

        • (B) the total of all amounts each of which is the individual’s allowable capital loss for the year from the disposition of a rental or leasing property owned by the individual or by a partnership

        exceeds the total of all amounts each of which is the individual’s loss for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership (other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);

    • (c) the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a film property referred to in paragraph 127.52(1)(w) of Class 10 of Schedule II to the Income Tax Regulations (other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible by the individual for the year and the amount, if any, by which the total of

      • (i) the total of all amounts each of which is the individual’s income for the year from the renting or leasing of a film property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and

      • (ii) the amount, if any, by which

        • (A) the total of all amounts each of which is the individual’s taxable capital gain for the year from the disposition of such a film property owned by the individual or by a partnership

        exceeds

        • (B) the total of all amounts each of which is the individual’s allowable capital loss for the year from the disposition of such a film property owned by the individual or by a partnership

        exceeds the total of all amounts each of which is the individual’s loss for the year from such a film property owned by the individual or by a partnership (other than amounts included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);

    • (c.1) if, during a partnership’s fiscal period that ends in the year (other than a fiscal period that ends because of subsection 99(1)), the individual’s interest in the partnership is an interest for which an identification number is required to be, or has been, obtained under section 237.1,

      • (i) the individual’s share of allowable capital losses of the partnership for the fiscal period were the lesser of

        • (A) the total of all amounts each of which is the individual’s

          • (I) share of a taxable capital gain for the fiscal period from the disposition of property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

          • (II) taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year, and

        • (B) the individual’s share of allowable capital losses of the partnership for the fiscal period,

      • (ii) the individual’s share of each loss from a business of the partnership for the fiscal period were the lesser of

        • (A) the individual’s share of the loss, and

        • (B) the amount, if any, by which

          • (I) the total of all amounts each of which is the individual’s

            1. share of a taxable capital gain for the fiscal period from the disposition of property used by the partnership in the business (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

            2. taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year

            exceeds

          • (II) the total of all amounts each of which is the individual’s share of an allowable capital loss for the fiscal period, and

      • (iii) the individual’s share of losses from property of the partnership for the fiscal period were the lesser of

        • (A) the total of

          • (I) the individual’s share of incomes for the fiscal period from properties of the partnership, and

          • (II) the amount, if any, by which the total of all amounts each of which is the individual’s

            1. share of a taxable capital gain for the fiscal period from the disposition of property held by the partnership for the purpose of earning income from property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

            2. taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year,

            exceeds the total of all amounts each of which is the individual’s share of an allowable capital loss for the fiscal period, and

        • (B) the individual’s share of losses from property of the partnership for the fiscal period;

    • (c.2) where, during a fiscal period of a partnership that ends in the year (other than a fiscal period that ends because of the application of subsection 99(1)),

      • (i) the individual 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 of the partnership, or

      • (ii) the partnership owns a rental or leasing property or a film property and the individual is a member of the partnership,

      the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of the individual’s acquisition of the partnership interest were the lesser of

      • (iii) the total of all amounts otherwise so deductible, and

      • (iv) the total of all amounts each of which is the individual’s share of any income of the partnership for the fiscal period, determined in accordance with subsection 96(1);

    • (c.3) the total of all amounts each of which is an amount deductible in computing the individual’s income for the year in respect of a property for which an identification number is required to be, or has been, obtained under section 237.1 (other than an amount to which any of paragraphs 127.52(1)(b) to 127.52(1)(c.2) applies) were nil;

    • (d) except in respect of dispositions of property occurring before 1986 or to which section 79 applies,

      • (i) the references to the fraction applicable to the individual for the year in each of paragraphs 38(a), (b) and (c) and section 41 were read as a reference to “4/5”, other than in the case of a capital gain from a disposition that is the making of a gift of property to a qualified donee, and

      • (ii) each amount that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula

        4/5(A × 1/B)

        where

        A 
        is the amount so deemed to be a taxable capital gain for the year of the individual, and
        B 
        is the fraction in paragraph 38(a) applicable to the trust for the particular year of the trust for which the designation is made;
      • (iii) [Repealed, 2013, c. 34, s. 271]

    • (e) the total of all amounts deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of the Income Tax Application Rules in computing the individual’s income for the year were the lesser of the amounts otherwise so deductible by the individual for the year and the total of

      • (i) the individual’s income for the year from royalties in respect of, and such part of the individual’s income, other than royalties, for the year as may reasonably be considered as attributable to, the production of petroleum, natural gas and minerals, determined before deducting those amounts,

      • (i.1) the individual’s income for the year from property, or from the business of selling the product of property, described in Class 43.1 or 43.2 in Schedule II to the Income Tax Regulations, determined before deducting those amounts, and

      • (ii) all amounts included in computing the individual’s income for the year under section 59;

    • (e.1) the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a property that is a flow-through share (if the individual is the person to whom the share was issued under an agreement referred to in the definition flow-through share in subsection 66(15)), a Canadian resource property or a foreign resource property were the lesser of the total of the amounts otherwise so determined for the year and the amount, if any, by which

      • (i) the total of all amounts each of which is an amount described in subparagraph 127.52(1)(e)(i) or 127.52(1)(e)(ii), determined without reference to paragraphs 20(1)(c) to 20(1)(f),

      exceeds

      • (ii) the total of all amounts each of which is an amount deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of the Income Tax Application Rules in computing the individual’s income for the year;

    • (f) subsection 82(1) were read without reference to paragraph 82(1)(b);

    • (g) the total of all amounts deductible under section 104 in computing the income of a trust for the year were equal to the total of

      • (i) the total of all amounts otherwise deductible under that section, and

      • (ii) the total of all amounts each of which is 3/5 of

        • (A) an amount designated by the trust under subsection 104(21) for the year, or

        • (B) that portion of a net taxable capital gain of the trust that may reasonably be considered to

          • (I) be part of an amount included, by virtue of subsection 104(13) or section 105, in computing the income for the year of a non-resident beneficiary of the trust, or

          • (II) have been paid in the year by a trust governed by an employee benefit plan to a beneficiary thereunder;

    • (h) the only amounts deductible under sections 110 to 110.7 in computing the individual’s taxable income for the year or taxable income earned in Canada for the year, as the case may be, were

      • (i) the amounts deducted under any of subsections 110(2), 110.6(2) and (2.1) and 110.7(1),

      • (ii) the amount deducted under paragraph 110(1)(d), not exceeding the total of

        • (A) the amount deducted under paragraph 110(1)(d.01), and

        • (B) 2/5 of the amount, if any, by which

          • (I) the amount deducted under paragraph 110(1)(d)

          exceeds

          • (II) the amount determined under clause (A),

      • (iii) the amount deducted under paragraph 110(1)(d.01),

      • (iv) 2/5 of the amounts deducted under any of paragraphs 110(1)(d.1) to (d.3),

      • (v) the amount that would be deductible under paragraph 110(1)(f) if paragraph (d) were applicable in computing the individual’s income for the year, and

      • (vi) the amount deducted under paragraph 110(1)(g);

    • (h.1) the formula in paragraph 110.6(21)(a) were read as

      A - B

    • (i) in computing the individual’s taxable income for the year or the individual’s taxable income earned in Canada for the year, as the case may be, the only amounts deductible under

      • (i) paragraphs 111(1)(a), 111(1)(c), 111(1)(d) and 111(1)(e) were the lesser of

        • (A) the amount deducted under those paragraphs for the year, and

        • (B) the total of all amounts that would be deductible under those paragraphs for the year if

          • (I) paragraphs (b), (c) and (e) of this subsection, as they read in respect of taxation years that began after 1985 and before 1995, applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any of those years,

          • (II) paragraphs (b) to (c.3), (e) and (e.1) of this subsection, as they read in respect of taxation years that began after 1994 and ended before 2012, applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any of those years, and

          • (III) paragraphs (b) to (c.3), (e) and (e.1) of this subsection applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any taxation year that ends after 2011, and

      • (ii) paragraph 111(1)(b) were the lesser of

        • (A) the total of all amounts each of which is an amount that can reasonably be considered to be the amount that the individual would have deducted under paragraph 111(1)(b) had paragraph (d) of this subsection been applicable in computing the amount deductible under paragraph 111(1)(b), and

        • (B) the total of all amounts that would be deductible under that paragraph for the year if

          • (I) paragraph (d) of this subsection applied in computing the individual’s net capital loss for any taxation year that began before 1995,

          • (II) paragraphs (c.1) and (d) of this subsection, as they read in respect of taxation years that began after 1994 and ended before 2012, applied in computing the individual’s net capital loss for any of those years, and

          • (III) paragraphs (c.1) and (d) of this subsection applied in computing the individual’s net capital loss for any taxation year that ends after 2011; and

    • (j) the Income Tax Application Rules were read without reference to section 40 of that Act.

  • Marginal note:Partnerships

    (2) For the purposes of subsection 127.52(1) and this subsection, any amount deductible under a provision of this Act in computing the income or loss of a partnership for a fiscal period is, to the extent of a member’s share of the partnership’s income or loss, deemed to be deductible by the member under that provision in computing the member’s income for the taxation year in which the fiscal period ends.

  • Marginal note:Specified member of a partnership

    (2.1) 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 this section to the member’s interest in the partnership, the member is deemed for the purpose of this section to have been a specified member of the partnership at all times since becoming a member of the partnership.

  • Marginal note:Definitions

    (3) For the purposes of this section,

    film property

    production cinématographique

    film property means a property described in paragraph (n) of Class 12, or paragraph (w) of Class 10, of Schedule II to the Income Tax Regulations; (production cinématographique)

    limited partner

    commanditaire

    limited partner has the meaning that would be assigned by subsection 96(2.4) if that subsection were read without reference to “if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection 127.52(2.5)) at that time and”; (commanditaire)

    rental or leasing property

    bien de location

    rental or leasing property means a property that is a rental property or a leasing property for the purpose of section 1100 of the Income Tax Regulations. (bien de location)

    residential property

    residential property[Repealed, 1998, c. 19, s. 150(8)]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 127.52;
  • 1994, c. 7, Sch. II, s. 106, Sch. VIII, s. 70;
  • 1998, c. 19, ss. 35, 150;
  • 1999, c. 22, s. 50;
  • 2001, c. 17, s. 119;
  • 2002, c. 9, s. 40;
  • 2006, c. 4, s. 75.1;
  • 2007, c. 2, ss. 34.1, 50;
  • 2013, c. 34, s. 271, c. 40, s. 60;
  • 2014, c. 39, s. 44.
 
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