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

Act current to 2016-01-25 and last amended on 2015-08-01. Previous Versions

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

    attribute trading restriction

    restriction au commerce d’attributs

    attribute trading restriction means a restriction on the use of a tax attribute arising on the application, either alone or in combination with other provisions, of any of this section, subsections 10(10) and 13(24), section 37, subsections 66(11.4) and (11.5), 66.7(10) and (11), 69(11) and 88(1.1) and (1.2), sections 111 and 127 and subsections 181.1(7), 190.1(6), 249(4) and 256(7). (restriction au commerce d’attributs)

    person

    personne

    person includes a partnership. (personne)

    specified provision

    dispositions déterminées

    specified provision means any of subsections 10(10) and 13(24), paragraph 37(1)(h), subsections 66(11.4) and (11.5), 66.7(10) and (11), 69(11) and 111(4), (5), (5.1), (5.2) and (5.3), paragraphs (j) and (k) of the definition investment tax credit in subsection 127(9), subsections 181.1(7) and 190.1(6) and any provision of similar effect. (dispositions déterminées)

  • Marginal note:Application of subsection (3)

    (2) Subsection (3) applies at a particular time in respect of a corporation if

    • (a) shares of the capital stock of the corporation held by a person, or the total of all shares of the capital stock of the corporation held by members of a group of persons, as the case may be, have at the particular time a fair market value that exceeds 75% of the fair market value of all the shares of the capital stock of the corporation;

    • (b) shares, if any, of the capital stock of the corporation held by the person, or the total of all shares, if any, of the capital stock of the corporation held by members of the group, have immediately before the particular time a fair market value that does not exceed 75% of the fair market value of all the shares of the capital stock of the corporation;

    • (c) the person or group does not control the corporation at the particular time; and

    • (d) it is reasonable to conclude that one of the main reasons that the person or group does not control the corporation is to avoid the application of one or more specified provisions.

  • Marginal note:Deemed acquisition of control

    (3) If this subsection applies at a particular time in respect of a corporation, then for the purposes of the attribute trading restrictions,

    • (a) the person or group referred to in subsection (2)

      • (i) is deemed to acquire control of the corporation, and each corporation controlled by the corporation, at the particular time, and

      • (ii) is not deemed to have control of the corporation, and each corporation controlled by the corporation, at any time after the particular time solely because this paragraph applied at the particular time; and

    • (b) during the period that the condition in paragraph (2)(a) is satisfied, each corporation referred to in paragraph (a)  —  and any corporation incorporated or otherwise formed subsequent to that time and controlled by that corporation  —  is deemed not to be related to, or affiliated with, any person to which it was related to, or affiliated with, immediately before paragraph (a) applies.

  • Marginal note:Special rules

    (4) For the purpose of applying paragraph (2)(a) in respect of a person or group of persons,

    • (a) if it is reasonable to conclude that one of the reasons that one or more transactions or events occur is to cause a person or group of persons not to hold shares having a fair market value that exceeds 75% of the fair market value of all the shares of the capital stock of a corporation, the paragraph is to be applied without reference to those transactions or events; and

    • (b) the person, or each member of the group, is deemed to have exercised each right that is held by the person or a member of the group and that is referred to in paragraph 251(5)(b) in respect of a share of the corporation referred to in paragraph (2)(a).

  • Marginal note:Deeming rules  —  if share value nil

    (5) For the purposes of subsections (2) to (4), if the fair market value of the shares of the capital stock of a corporation is nil at any time, then for the purpose of determining the fair market value of those shares, the corporation is deemed, at that time, to have assets net of liabilities equal to $100,000 and to have $100,000 of income for the taxation year that includes that time.

  • Marginal note:Deemed acquisition of control

    (6) If, at any time as part of a transaction or event or series of transactions or events, control of a particular corporation is acquired by a person or group of persons and it can reasonably be concluded that one of the main reasons for the acquisition of control is so that a specified provision does not apply to one or more corporations, the attribute trading restrictions are deemed to apply to each of those corporations as if control of each of those corporations were acquired at that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2013, c. 40, s. 94.
Marginal note:Negative amounts

 Except as specifically otherwise provided, where an amount or a number is required under this Act to be determined or calculated by or in accordance with an algebraic formula, if the amount or number when so determined or calculated would, but for this section, be a negative amount or number, it shall be deemed to be nil.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1970-71-72, c. 63, s. 1 “257”;
  • 1977-78, c. 1, s. 100, c. 22, s. 26(F);
  • 1980-81-82-83, c. 140, s. 132;
  • 1986, c. 6, s. 128.
Marginal note:Deemed dividend on term preferred share
  •  (2) Notwithstanding subsection 15(3), an amount paid or payable after 1978 as interest on or as an amount in lieu of interest in respect of

    • (a) any interest or dividend payable after November 16, 1978 on an income bond or an income debenture issued before November 17, 1978 or pursuant to an agreement in writing made before that date, or

    • (b) a dividend that became payable or in arrears after November 16, 1978 on a share of the capital stock of a corporation that is not a term preferred share by reason of having been issued before November 17, 1978 or pursuant to an agreement in writing made before that date,

    shall, for the purposes of subsections 112(2.1) and 138(6), be deemed to be a dividend received on a term preferred share.

  • Marginal note:Deemed interest on preferred shares

    (3) Subject to subsection 258(4), for the purposes of paragraphs 12(1)(c) and 12(1)(k) and sections 113 and 126, each amount that is a dividend received in a taxation year on

    • (a) a term preferred share by a specified financial institution resident in Canada from a corporation not resident in Canada, or

    • (b) any other share that

      • (i) is a grandfathered share, or

      • (ii) was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and is not deemed by subsection 112(2.22) to have been issued after that time

      by a corporation from a corporation not resident in Canada, if the dividend would have been a dividend in respect of which no deduction could have been made under subsection 112(1) or 112(2) or 138(6) because of subsection 112(2.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on June 17, 1987, if the corporation that paid the dividend were a taxable Canadian corporation

    shall be deemed to be interest received in the year and not a dividend received on a share of the capital stock of a corporation.

  • Marginal note:Exception

    (4) Subsection (3) does not apply to a dividend described in paragraph (3)(a)

    • (a) if the share on which the dividend was paid was not acquired in the ordinary course of the business carried on by the corporation; or

    • (b) to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the corporation.

  • Marginal note:Deemed interest on certain shares

    (5) For the purposes of paragraphs 12(1)(c) and 12(1)(k) and sections 113 and 126, a dividend received after June 18, 1987 and in a taxation year from a corporation not resident in Canada, other than a corporation in which the recipient had or would have, if the corporation were a taxable Canadian corporation, a substantial interest (within the meaning assigned by section 191), on a share, if the dividend would have been a dividend in respect of which no deduction could have been made under subsection 112(1) or 112(2) or 138(6) by reason of subsection 112(2.2) or 112(2.4) if the corporation that paid the dividend were a taxable Canadian corporation, shall be deemed to be interest received in the year and not a dividend received on a share of the capital stock of the payer corporation.

  • Marginal note:Exception

    (6) Subsection (5) does not apply to a dividend described in that subsection to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the recipient.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 258;
  • 1994, c. 7, Sch. VIII, s. 141;
  • 2001, c. 17, s. 195;
  • 2013, c. 34, s. 76.
 
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