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

Act current to 2014-09-01 and last amended on 2014-06-27. Previous Versions

Additional Rules

Marginal note:Becoming or ceasing to be a financial institution
  •  (1) Where, at a particular time after February 22, 1994, a taxpayer becomes or ceases to be a financial institution,

    • (a) where a taxation year of the taxpayer would not, but for this paragraph, end immediately before the particular time,

      • (i) except for the purpose of subsection 132(6.1), the taxpayer’s taxation year that would otherwise have included the particular time is deemed to have ended immediately before that time and a new taxation year of the taxpayer is deemed to have begun at that time, and

      • (ii) for the purpose of determining the taxpayer’s fiscal period after the particular time, the taxpayer shall be deemed not to have established a fiscal period before that time;

    • (b) if the taxpayer becomes a financial institution, the taxpayer is deemed to have disposed, immediately before the end of its particular taxation year that ends immediately before the particular time, of each of the following properties held by the taxpayer for proceeds equal to the property’s fair market value at the time of that disposition:

      • (i) a specified debt obligation, or

      • (ii) a mark-to-market property of the taxpayer for the particular taxation year or for the taxpayer’s taxation year that includes the particular time;

    • (c) where the taxpayer ceases to be a financial institution, the taxpayer shall be deemed to have disposed, immediately before the end of its taxation year that ends immediately before the particular time, of each property held by the taxpayer that is a specified debt obligation (other than a mark-to-market property of the taxpayer for the year), for proceeds equal to its fair market value at the time of disposition; and

    • (d) the taxpayer is deemed to have reacquired, at the end of its taxation year that ends immediately before the particular time, each property deemed by paragraph (b) or (c) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property.

  • Marginal note:Ceasing to use property in Canadian business

    (1.1) If at a particular time in a taxation year a taxpayer that is a non-resident financial institution (other than a life insurance corporation) 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 is a mark-to-market property of the taxpayer for the year or a specified debt obligation, but that is not a property that was disposed of by the taxpayer at the particular time,

    • (a) the taxpayer is deemed

      • (i) to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition and to have received those proceeds at the time of disposition in the course of carrying on the business or the part of the business, as the case may be, and

      • (ii) to have reacquired the property at the particular time at a cost equal to those proceeds; and

    • (b) in determining the consequences of the disposition in subparagraph (a)(i), subsection 142.4(11) does not apply to any payment received by the taxpayer after the particular time.

  • Marginal note:Beginning to use property in a Canadian business

    (1.2) If at a particular time a taxpayer that is a non-resident financial institution (other than a life insurance corporation) begins to use, in connection with a business or part of a business carried on by the taxpayer in Canada, a property that is a mark-to-market property of the taxpayer for the year that includes the particular time or a specified debt obligation, but that is not a property that was acquired by the taxpayer at the particular time, the taxpayer is deemed

    • (a) to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition; and

    • (b) to have reacquired the property at the particular time at a cost equal to those proceeds.

  • Marginal note:Specified debt obligation marked to market

    (1.3) In applying subsection (1.1) to a taxpayer in respect of a property in a taxation year,

    • (a) the definition “mark-to-market property” in subsection 142.2(1) shall be applied as if the year ended immediately before the particular time referred to in subsection (1.1); and

    • (b) if the taxpayer does not have financial statements for the period ending immediately before the particular time referred to in subsection (1.1), references in the definition to financial statements for the year shall be read as references to the financial statements that it is reasonable to expect would have been prepared if the year had ended immediately before the particular time.

  • Marginal note:Change in status — prescribed payment card corporation share

    (1.4) If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed payment card corporation share of the taxpayer,

    • (a) the taxpayer is deemed

      • (i) to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and

      • (ii) to have acquired the property, at the particular time, at a cost equal to those proceeds; and

    • (b) subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).

  • Marginal note:Change in status — prescribed securities exchange investment

    (1.5) If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed securities exchange investment of the taxpayer,

    • (a) the taxpayer is deemed

      • (i) to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and

      • (ii) to have acquired the property, at the particular time, at a cost equal to those proceeds; and

    • (b) subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).

  • Marginal note:Change in status — significant interest

    (1.6) If, at the end of a particular taxation year of a taxpayer that is a financial institution for the taxation year, the taxpayer holds a share of the capital stock of a corporation, the taxpayer has a significant interest in that corporation at any time in the particular taxation year and the share is mark-to-market property of the taxpayer for the immediately following taxation year, the taxpayer is deemed to have,

    • (a) disposed of the share immediately before the end of the particular taxation year for proceeds of disposition equal to the fair market value, at that time, of the share; and

    • (b) acquired the share at the end of the particular taxation year at a cost equal to those proceeds.

  • Marginal note:Deemed disposition not applicable

    (2) For the purposes of this Act, the determination of when a taxpayer acquired a share shall be made without regard to a disposition or acquisition that occurred because of subsection 142.5(2) or subsection (1), (1.1), (1.2), (1.4), (1.5) or (1.6).

  • Marginal note:Property not inventory

    (3) Where a taxpayer is a financial institution in a taxation year, inventory of the taxpayer in the year does not include property that is

    • (a) a specified debt obligation (other than a mark-to-market property for the year); or

    • (b) where the year begins after October 1994, a mark-to-market property for the year.

  • Marginal note:Property that ceases to be inventory

    (4) Where a taxpayer that was a financial institution in its particular taxation year that includes February 23, 1994 held, on that day, a specified debt obligation (other than a mark-to-market property for the year) that was inventory of the taxpayer at the end of its preceding taxation year,

    • (a) the taxpayer shall be deemed to have disposed of the property at the beginning of the particular year for proceeds equal to

      • (i) where subparagraph 142.6(4)(a)(ii) does not apply, the amount at which the property was valued at the end of the preceding taxation year for the purpose of computing the taxpayer’s income for the year, and

      • (ii) where the taxpayer is a bank and the property is prescribed property for the particular year, the cost of the property to the taxpayer (determined without reference to paragraph 142.6(4)(b));

    • (b) for the purpose of determining the taxpayer’s profit or loss from the disposition, the cost of the property to the taxpayer shall be deemed to be the amount referred to in subparagraph 142.6(4)(a)(i); and

    • (c) the taxpayer shall be deemed to have reacquired the property, immediately after the beginning of the particular year, at a cost equal to the proceeds of disposition of the property.

  • Marginal note:Debt obligations acquired in rollover transactions

    (5) Where,

    • (a) on February 23, 1994, a financial institution that is a corporation held a specified debt obligation (other than a mark-to-market property for the taxation year that includes that day) that was at any particular time before that day held by another corporation, and

    • (b) between the particular time and February 23, 1994, the only transactions affecting the ownership of the property were rollover transactions,

    the financial institution shall be deemed, in respect of that obligation, to be the same corporation as, and a continuation of, the other corporation.

  • Definition of “rollover transaction”

    (6) For the purpose of subsection 142.6(5), “rollover transaction” means a transaction to which subsection 87(2), 88(1) or 138(11.5) or 138(11.94) applies, other than a transaction to which paragraph 138(11.5)(e) requires the provisions of subsection 85(1) to be applied.

  • Marginal note:Superficial loss rule not applicable

    (7) Subsection 18(13) does not apply to the disposition of a property by a taxpayer after October 30, 1994 where

    • (a) the taxpayer is a financial institution when the disposition occurs and the property is a specified debt obligation or a mark-to-market property for the taxation year in which the disposition occurs; or

    • (b) the disposition occurs because of paragraph 142.6(1)(b).

  • Marginal note:Accrued capital gains and losses election

    (8) Where a taxpayer that is a financial institution in its first taxation year that ends after February 22, 1994 so elects by notifying the Minister in writing before July 1998 or within 90 days after the day on which a notice of assessment of tax payable under this Part for the year, notification that no tax is payable under this Part for the year or notification that an election made by the taxpayer under this subsection is deemed by subsection 142.6(9) or 142.6(10) not to have been made is mailed to the taxpayer,

    • (a) each property of the taxpayer

      • (i) that was a capital property (other than a depreciable property) of the taxpayer at the end of the taxpayer’s last taxation year that ended before February 23, 1994,

      • (ii) that was a mark-to-market property for, or a specified debt obligation in, the taxpayer’s first taxation year that begins after that time,

      • (iii) that had a fair market value at that time greater than its adjusted cost base to the taxpayer at that time, and

      • (iv) that is designated by the taxpayer in the election

      is deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to, and to have been reacquired by the taxpayer immediately after that time at a cost equal to, the lesser of

      • (v) the fair market value of the property at that time, and

      • (vi) the greater of the adjusted cost base to the taxpayer of the property immediately before that time and the amount designated by the taxpayer in the election in respect of the property;

    • (b) each property of the taxpayer

      • (i) that was a capital property (other than a depreciable property) of the taxpayer at the end of the taxpayer’s last taxation year that ended before February 23, 1994,

      • (ii) that was not a mark-to-market property for, or a specified debt obligation in, the taxpayer’s first taxation year that begins after that time,

      • (iii) that had an adjusted cost base to the taxpayer at that time greater than its fair market value at that time, and

      • (iv) that is designated by the taxpayer in the election

      is deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to, and to have been reacquired by the taxpayer immediately after that time at a cost equal to, the greater of

      • (v) the fair market value of the property at that time, and

      • (vi) the lesser of the adjusted cost base to the taxpayer of the property immediately before that time and the amount designated by the taxpayer in the election in respect of the property; and

    • (c) notwithstanding subsections 152(4) to 152(5), such assessment of the taxpayer’s tax payable under this Act for the taxpayer’s last taxation year that ended before February 23, 1994 shall be made as is necessary to take the election into account.

  • Marginal note:Accrued capital gains election limit

    (9) Where a taxpayer has made an election under subsection 142.6(8) in which a property was designated under subparagraph 142.6(8)(a)(iv), the election is deemed not to have been made where

    • (a) the amount that would be the taxpayer’s taxable capital gains from dispositions of property for the taxpayer’s last taxation year that ended before February 23, 1994 if this subsection and subsection 142.6(10) did not apply

    exceeds the total of

    • (b) the amount that would be the taxpayer’s allowable capital losses for the year from dispositions of property if this subsection and subsection 142.6(10) did not apply,

    • (c) the maximum amount that would have been deductible in computing the taxpayer’s taxable income for the year in respect of the taxpayer’s net capital losses for preceding taxation years if there were sufficient taxable capital gains for the year from dispositions of property, and

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

      • (i) the amount that would be the taxpayer’s taxable capital gains for the taxpayer’s last taxation year that ended before February 23, 1994 from dispositions of property if no election were made under subsection 142.6(8)

      exceeds the total of

      • (ii) the amount that would be the taxpayer’s allowable capital losses for the year from dispositions of property if no election were made under subsection 142.6(8), and

      • (iii) the maximum amount that would have been deductible in computing the taxpayer’s taxable income for the year in respect of the taxpayer’s net capital losses for preceding taxation years if no election were made under subsection 142.6(8).

  • Marginal note:Accrued capital losses election limit

    (10) Where a taxpayer has made an election under subsection 142.6(8) in which a property was designated under subparagraph 142.6(8)(b)(iv), the election is deemed not to have been made where

    • (a) the total of the amounts determined under paragraphs 142.6(9)(b) and 142.6(9)(c) in respect of the taxpayer exceeds the amount determined under paragraph 142.6(9)(a) in respect of the taxpayer; or

    • (b) the total of all amounts each of which would, if this subsection did not apply, be the taxpayer’s allowable capital loss for the taxpayer’s last taxation year that ended before February 23, 1994 from the disposition of a property deemed to have been disposed of under paragraph 142.6(8)(b) exceeds the total of all amounts each of which is the taxpayer’s taxable capital gain for the year from the disposition of a property deemed to have been disposed of under paragraph 142.6(8)(a).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1995, c. 21, s. 58;
  • 1998, c. 19, s. 167;
  • 1999, c. 22, s. 58;
  • 2001, c. 17, s. 137;
  • 2009, c. 2, s. 49;
  • 2013, c. 34, s. 289.