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

Act current to 2016-04-12 and last amended on 2015-12-31. Previous Versions

Marginal note:Definitions
  •  (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
  •  (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
  •  (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.
 
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