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

Act current to 2017-04-12 and last amended on 2017-04-01. Previous Versions

Marginal note:Mutual holding corporations

 Where at any time a mutual holding corporation (as defined in subsection 139.1(1)) in respect of an insurance corporation distributes property to a policyholder of the insurance corporation, the mutual holding corporation is deemed to have paid, and the policyholder is deemed to have received from the mutual holding corporation, at that time a dividend on shares of the capital stock of the mutual holding corporation, equal to the fair market value of the property.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2000, c. 19, s. 38.
Marginal note:Deductions in computing income
  •  (1) In computing the income for a taxation year of an insurance corporation, whether a mutual corporation or a joint stock company, from carrying on an insurance business other than a life insurance business, there may be deducted every amount credited in respect of that business for the year or a preceding taxation year to a policyholder of the corporation by way of a policy dividend, refund of premiums or refund of premium deposits if the amount was, during the year or within 12 months thereafter,

    • (a) paid or unconditionally credited to the policyholder; or

    • (b) applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the corporation.

  • Marginal note:Inclusion in computing income

    (2) There shall be included in computing the income of an insurance corporation, whether a mutual corporation or a joint stock company, from carrying on an insurance business for its first taxation year that commences after June 17, 1987 and ends after 1987 (in this subsection referred to as its “1988 taxation year”) the amount, if any, by which

    • (a) the total of all amounts each of which is an amount deducted by the corporation in computing its income for a taxation year ending before its 1988 taxation year pursuant to paragraph 140(c) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or pursuant to that paragraph by reason of subparagraph 138(3)(a)(v) of that Act as it read in respect of those taxation years in respect of amounts credited to the account of the policyholder on terms that the policyholder is entitled to payment thereof on or before the expiration or termination of the policy

    exceeds

    • (b) the total of all amounts each of which is an amount paid or unconditionally credited to a policyholder or applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the corporation before the corporation’s 1988 taxation year in respect of the amounts credited to the account of the policyholder referred to in paragraph 140(2)(a).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 140;
  • 2000, c. 19, s. 39.
Marginal note:Definitions
  •  (1) In this section, demutualization and holding corporation have the same meaning as in subsection 139.1(1).

  • Marginal note:Life insurance corporation deemed to be public corporation

    (2) Notwithstanding any other provision of this Act, a life insurance corporation that is resident in Canada is deemed to be a public corporation.

  • Marginal note:Holding corporation deemed to be public corporation

    (3) A corporation resident in Canada that is a holding corporation because of its acquisition of shares in connection with the demutualization of a life insurance corporation resident in Canada is deemed to be a public corporation at each time in the specified period of the holding corporation at which the holding corporation would have satisfied conditions prescribed under subparagraph (b)(i) of the definition public corporation in subsection 89(1) if the words “shareholders, the dispersal of ownership of its shares and the public trading of its shares” in that subparagraph were read as “shareholders and the dispersal of ownership of its shares”.

  • Marginal note:Specified period

    (4) For the purpose of subsection (3), the specified period of a corporation

    • (a) begins at the time the corporation becomes a holding corporation; and

    • (b) ends at the first time the corporation is a public corporation because of any provision of this Act other than subsection (3).

  • Marginal note:Exclusion from taxable Canadian property

    (5) For the purpose of paragraph (d) of the definition taxable Canadian property in subsection 248(1), a share of the capital stock of a corporation is deemed to be listed at any time on a designated stock exchange if

    • (a) the corporation is

      • (i) a life insurance corporation resident in Canada that has demutualized and that, at that time, would have satisfied conditions prescribed under subparagraph (b)(i) of the definition public corporation in subsection 89(1) if the words “shareholders, the dispersal of ownership of its shares and the public trading of its shares” in that subparagraph were read as “shareholders and the dispersal of ownership of its shares”, or

      • (ii) a holding corporation that is deemed by subsection (3) to be a public corporation at that time;

    • (b) no share of the capital stock of the corporation is listed on any stock exchange at that time; and

    • (c) that time is not later than six months after the time of the demutualization of

      • (i) the corporation, where the corporation is a life insurance corporation, and

      • (ii) in any other case, the life insurance corporation in respect of which the corporation is a holding corporation.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 141;
  • 2000, c. 19, s. 40;
  • 2001, c. 17, s. 135;
  • 2007, c. 35, s. 44.
Marginal note:Deemed not to be a private corporation

 Notwithstanding any other provision of this Act, an insurance corporation (other than a life insurance corporation) that would, but for this section, be a private corporation is deemed not to be a private corporation for the purposes of subsection 55(5), the definition capital dividend account in subsection 89(1) and sections 123.3 and 129.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 141.1;
  • 1998, c. 19, s. 162.

 [Repealed, 1997, c. 25, s. 40(1)]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 142;
  • 1994, c. 7, Sch. II, s. 115;
  • 1997, c. 25, s. 40.

 [Repealed, 1997, c. 25, s. 40(1)]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 142.1;
  • 1997, c. 25, s. 40.

Financial Institutions

Interpretation

Marginal note:Definitions
  •  (1) In this section and sections 142.3 to 142.7,

    excluded property

    bien exclu

    excluded property of a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is

    • (a) a share of the capital stock of a corporation if, at any time in the taxation year, the taxpayer has a significant interest in the corporation,

    • (b) a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed payment card corporation share of the taxpayer,

    • (c) if the taxpayer is an investment dealer, a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed securities exchange investment of the taxpayer,

    • (d) a share of the capital stock of a corporation if

      • (i) control of the corporation is, at any time (referred to in this paragraph as the “acquisition of control time”) that is in the 24-month period that begins immediately after the end of the year, acquired by

        • (A) the taxpayer,

        • (B) one or more persons related to the taxpayer (otherwise than by reason of a right referred to in paragraph 251(5)(b)), or

        • (C) the taxpayer and one or more persons described in clause (B), and

      • (ii) the taxpayer elects in writing to have subparagraph (i) apply and files the election with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the acquisition of control time, or

    • (e) a prescribed property; (bien exclu)

    fair value property

    bien évalué à sa juste valeur

    fair value property of a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is — or it is reasonable to expect would, if the taxpayer held the property at the end of the taxation year, be — valued (otherwise than solely because its fair value was less than its cost to the taxpayer or, if the property is a specified debt obligation, because of a default of the debtor) in accordance with generally accepted accounting principles, at its fair value (determined in accordance with those principles) in the taxpayer’s balance sheet as at the end of the taxation year; (bien évalué à sa juste valeur)

    financial institution

    institution financière

    financial institution at any time means

    • (a) a corporation that is, at that time,

      • (i) a corporation referred to in any of paragraphs (a) to (e.1) of the definition restricted financial institution in subsection 248(1),

      • (ii) an investment dealer, or

      • (iii) a corporation controlled by one or more persons or partnerships each of which is a financial institution at that time, other than a corporation the control of which was acquired by reason of the default of a debtor where it is reasonable to consider that control is being retained solely for the purpose of minimizing any losses in respect of the debtor’s default, and

    • (b) a trust or partnership more than 50% of the fair market value of all interests in which are held at that time by one or more financial institutions,

    but does not include

    • (c) a corporation that is, at that time,

      • (i) an investment corporation,

      • (ii) a mortgage investment corporation,

      • (iii) a mutual fund corporation, or

      • (iv) a deposit insurance corporation (as defined in subsection 137.1(5)),

    • (d) a trust that is a mutual fund trust at that time, nor

    • (e) a prescribed person or partnership; (institution financière)

    investment dealer

    courtier en valeurs mobilières

    investment dealer at any time means a corporation that is, at that time, a registered securities dealer; (courtier en valeurs mobilières)

    mark-to-market property

    bien évalué à la valeur du marché

    mark-to-market property of a taxpayer for a taxation year means property (other than an excluded property) held at any time in the taxation year by the taxpayer that is

    • (a) a share,

    • (b) if the taxpayer is not an investment dealer, a specified debt obligation that is a fair value property of the taxpayer for the taxation year,

    • (c) if the taxpayer is an investment dealer, a specified debt obligation, or

    • (d) a tracking property of the taxpayer that is a fair value property of the taxpayer for the taxation year; (bien évalué à la valeur du marché)

    specified debt obligation

    titre de créance déterminé

    specified debt obligation of a taxpayer means the interest held by the taxpayer in

    • (a) a loan, bond, debenture, mortgage, hypothecary claim, note, agreement of sale or any other similar indebtedness, or

    • (b) a debt obligation, where the taxpayer purchased the interest,

    other than an interest in

    • (c) an income bond, an income debenture, a small business development bond, a small business bond or a prescribed property, or

    • (d) an instrument issued by or made with a person to whom the taxpayer is related or with whom the taxpayer does not otherwise deal at arm’s length, or in which the taxpayer has a significant interest. (titre de créance déterminé)

    tracking property

    bien à évaluer

    tracking property of a taxpayer means property of the taxpayer the fair market value of which is determined primarily by reference to one or more criteria in respect of property (referred to in this definition as “tracked property”) that, if owned by the taxpayer, would be mark-to-market property of the taxpayer, which criteria are

    • (a) the fair market value of the tracked property,

    • (b) the profits or gains from the disposition of the tracked property,

    • (c) the revenue, income or cash flow from the tracked property, or

    • (d) any other similar criteria in respect of the tracked property; (bien à évaluer)

  • Marginal note:Significant interest

    (2) For the purposes of the definitions excluded property and specified debt obligation in subsection (1) and subsection 142.6(1.6), a taxpayer has a significant interest in a corporation at any time if

    • (a) the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the corporation at that time; or

    • (b) the taxpayer holds, at that time,

      • (i) shares of the corporation that give the taxpayer 10% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, and

      • (ii) shares of the corporation having a fair market value of 10% or more of the fair market value of all the issued shares of the corporation.

  • Marginal note:Rules re significant interest

    (3) For the purpose of determining under subsection 142.2(2) whether a taxpayer has a significant interest in a corporation at any time,

    • (a) the taxpayer shall be deemed to hold each share that is held at that time by a person or partnership to whom the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b));

    • (b) a share of the corporation acquired by the taxpayer by reason of the default of a debtor shall be disregarded where it is reasonable to consider that the share is being retained for the purpose of minimizing any losses in respect of the debtor’s default; and

    • (c) a share of the corporation that is prescribed in respect of the taxpayer shall be disregarded.

  • Extension of meaning of related

    (4) For the purposes of this subsection and subsections (2) and (3), in determining if, at a particular time, a person or partnership is related to another person or partnership, the rules in section 251 are to be applied as if,

    • (a) a partnership (other than a partnership in respect of which any amount of the income or capital of the partnership that any entity may receive directly from the partnership at any time as a member of the partnership depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each member of the partnership owned, at the particular time, that proportion of the issued shares of that class that

      • (i) the fair market value of the member’s interest in the partnership at the particular time

      is of

      • (ii) the fair market value of all interests in the partnership at the particular time; and

    • (b) a trust (other than a trust in respect of which any amount of the income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each beneficiary under the trust owned, at the particular time, that proportion of the issued shares of that class that

      • (i) the fair market value of the beneficiary’s beneficial interest in the trust at the particular time

      is of

      • (ii) the fair market value at that time of all beneficial interests in the trust.

  • (5) [Repealed, 2009, c. 2, s. 46]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1995, c. 21, s. 58;
  • 1998, c. 19, s. 163;
  • 1999, c. 22, s. 57;
  • 2001, c. 17, ss. 136, 219;
  • 2009, c. 2, s. 46;
  • 2013, c. 40, s. 63.
 
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