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

Act current to 2014-12-18 and last amended on 2014-12-16. Previous Versions

Tax on Split Income

Marginal note:Definitions
  •  (1) The definitions in this subsection apply in this section.

    “excluded amount”

    « montant exclu »

    “excluded amount”, in respect of an individual for a taxation year, means an amount that is the income from, or the taxable capital gain from the disposition of, a property acquired by or for the benefit of the individual as a consequence of the death of

    • (a) a parent of the individual; or

    • (b) any person, if the individual is

      • (i) enrolled as a full-time student during the year at a post-secondary educational institution (as defined in subsection 146.1(1)), or

      • (ii) an individual 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.

    “specified individual”

    « particulier déterminé »

    “specified individual”, in relation to a taxation year, means an individual who

    • (a) had not attained the age of 17 years before the year;

    • (b) at no time in the year was non-resident; and

    • (c) has a parent who is resident in Canada at any time in the year.

    “split income”

    « revenu fractionné »

    “split income”, of a specified individual for a taxation year, means the total of all amounts (other than excluded amounts) each of which is

    • (a) an amount required to be included in computing the individual’s income for the year

      • (i) in respect of taxable dividends received by the individual in respect of shares of the capital stock of a corporation (other than shares of a class listed on a designated stock exchange or shares of the capital stock of a mutual fund corporation), or

      • (ii) because of the application of section 15 in respect of the ownership by any person of shares of the capital stock of a corporation (other than shares of a class listed on a designated stock exchange),

    • (b) a portion of an amount included because of the application of paragraph 96(1)(f) in computing the individual’s income for the year, to the extent that the portion

      • (i) is not included in an amount described in paragraph (a), and

      • (ii) can reasonably be considered to be income derived

        • (A) from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

          • (I) a person who is related to the individual at any time in the year,

          • (II) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or

          • (III) a professional corporation of which a person related to the individual is a shareholder at any time in the year, or

        • (B) from a business of, or the rental of property by, a particular partnership or trust, if a person who is related to the individual at any time in the year

          • (I) is actively engaged on a regular basis in the activities of the particular partnership or trust related to earning income from a business or the rental of property, or

          • (II) in the case of a particular partnership, has an interest in the particular partnership directly or indirectly through one or more other partnerships, or

    • (c) a portion of an amount included because of the application of subsection 104(13) or 105(2) in respect of a trust (other than a mutual fund trust or a trust that is deemed to be in existence by subsection 143(1)) in computing the individual’s income for the year, to the extent that the portion

      • (i) is not included in an amount described in paragraph (a), and

      • (ii) can reasonably be considered

        • (A) to be in respect of taxable dividends received in respect of shares of the capital stock of a corporation (other than shares of a class listed on a designated stock exchange or shares of the capital stock of a mutual fund corporation),

        • (B) to arise because of the application of section 15 in respect of the ownership by any person of shares of the capital stock of a corporation (other than shares of a class listed on a designated stock exchange),

        • (C) to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

          • (I) a person who is related to the individual at any time in the year,

          • (II) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or

          • (III) a professional corporation of which a person related to the individual is a shareholder at any time in the year, or

        • (D) to be income derived from a business of, or the rental of property by, a particular partnership or trust, if a person who is related to the individual at any time in the year is actively engaged on a regular basis in the activities of the particular partnership or trust related to earning income from a business or the rental of property.

  • Marginal note:Tax on split income

    (2) There shall be added to a specified individual’s tax payable under this Part for a taxation year 29% of the individual’s split income for the year.

  • Marginal note:Tax payable by a specified individual

    (3) Notwithstanding any other provision of this Act, where an individual is a specified individual in relation to a taxation year, the individual’s tax payable under this Part for the year shall not be less than the amount by which

    • (a) the amount added under subsection (2) to the individual’s tax payable under this Part for the year

    exceeds

    • (b) the total of all amounts each of which is an amount that

      • (i) may be deducted under section 121 or 126 in computing the individual’s tax payable under this Part for the year, and

      • (ii) can reasonably be considered to be in respect of an amount included in computing the individual’s split income for the year.

  • Marginal note:Taxable capital gain

    (4) If a specified individual would have for a taxation year, if this Act were read without reference to this section, a taxable capital gain (other than an excluded amount) from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, then the amount of that taxable capital gain is deemed not to be a taxable capital gain and twice the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.

  • Marginal note:Taxable capital gain of trust

    (5) If a specified individual would be, if this Act were read without reference to this section, required under paragraph 104(13)(a) or subsection 105(2) to include an amount in computing the specified individual’s income for a taxation year, then to the extent that the amount can reasonably be considered to be attributable to a taxable capital gain (other than an excluded amount) of a trust from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, paragraph 104(13)(a) and subsection 105(2) do not apply in respect of the amount and twice the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2000, c. 19, s. 30;
  • 2007, c. 35, s. 68;
  • 2011, c. 24, s. 36;
  • 2013, c. 34, s. 256(E);
  • 2014, c. 39, s. 37.