Income Tax Act

Version of section 127.4 from 2017-01-01 to 2017-11-20:

Marginal note:Definitions
  •  (1) In this section,

    approved share

    approved share means a share of the capital stock of a prescribed labour-sponsored venture capital corporation, but does not include

    • (a) a share issued by a registered labour-sponsored venture capital corporation the venture capital business of which was discontinued before the time of the issue, and

    • (b) a share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of the Income Tax Regulations) of which the corporation is registered or established provides assistance in respect of the acquisition of the share; (action approuvée)

    labour-sponsored funds tax credit

    labour-sponsored funds tax credit[Repealed, 1997, c. 25, s. 37]

    net cost

    net cost to an individual of an approved share means the amount, if any, by which

    • (a) the amount of consideration paid by the individual to acquire or subscribe for the share

    exceeds

    • (b) the amount of any assistance (other than an amount included in computing a tax credit of the individual in respect of that share) provided or to be provided by a government, municipality or any public authority in respect of, or for the acquisition of, the share; (coût net)

    original acquisition

    original acquisition of a share means the first acquisition of the share, except that

    • (a) where the share is irrevocably subscribed and paid for before its first acquisition, subject to paragraphs (b) and (c), the original acquisition of the share is the first transaction whereby the share is irrevocably subscribed and paid for,

    • (b) a share is deemed never to have been acquired and never to have been irrevocably subscribed and paid for unless the first registered holder of the share is, subject to paragraph (c), the first person to either acquire or irrevocably subscribe and pay for the share, and

    • (c) for the purpose of this definition, a broker or dealer in securities acting in that capacity is deemed never to acquire or subscribe and pay for the share and never to be the registered holder of the share; (acquisition initiale)

    qualifying trust

    qualifying trust for an individual in respect of a share means

    • (a) a trust governed by a registered retirement savings plan, under which the individual is the annuitant, that is not a spousal or common-law partner plan (in this definition having the meaning assigned by subsection 146(1)) in relation to another individual,

    • (b) a trust governed by a registered retirement savings plan, under which the individual or the individual’s spouse or common-law partner is the annuitant, that is a spousal or common-law partner plan in relation to the individual or the individual’s spouse or common-law partner, if the individual and no other person claims a deduction under subsection (2) in respect of the share, or

    • (c) a trust governed by a TFSA of which the individual is the holder; (fiducie admissible)

    tax otherwise payable

    tax otherwise payable by an individual means the amount that, but for this section, would be the individual’s tax payable under this Part. (impôt payable par ailleurs)

  • Marginal note:Amalgamations or mergers

    (1.1) Subsections 204.8(2) and 204.85(3) apply for the purpose of this section.

  • Marginal note:Deduction of labour-sponsored funds tax credit

    (2) There may be deducted from the tax otherwise payable by an individual (other than a trust) for a taxation year such amount as the individual claims not exceeding the individual’s labour-sponsored funds tax credit limit for the year.

  • (3) and (4) [Repealed, 1999, c. 22, s. 49]

  • Marginal note:Labour-sponsored funds tax credit limit

    (5) For the purpose of subsection 127.4(2), an individual’s labour-sponsored funds tax credit limit for a taxation year is the lesser of

    • (a) $750, and

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

      • (i) the total of all amounts each of which is the individual’s labour-sponsored funds tax credit in respect of an original acquisition in the year or in the first 60 days of the following taxation year of an approved share

      exceeds

      • (ii) the portion of the total described in subparagraph 127.4(5)(b)(i) that was deducted under subsection 127.4(2) in computing the individual’s tax payable under this Part for the preceding taxation year.

  • Marginal note:Deemed original acquisition

    (5.1) If the Minister so directs, an original acquisition of an approved share that occurs in an individual’s taxation year (other than in the first 60 days of the year) is deemed for the purpose of this section to have occurred at the beginning of the year and not at the time it actually occurred.

  • Marginal note:Labour-sponsored funds tax credit

    (6) For the purpose of subsection (5), an individual’s labour-sponsored funds tax credit in respect of an original acquisition of an approved share is equal to the least of

    • (a) 15% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if the share is a share of a prescribed labour-sponsored venture capital corporation (other than a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation),

    • (a.1) 5% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if

      • (i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is 2016, and

      • (ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

    • (a.2) nil, if

      • (i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is after 2016, and

      • (ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

    • (b) nil, where the share was issued by a registered labour-sponsored venture capital corporation unless the information return described in paragraph 204.81(6)(c) is filed with the individual’s return of income for the taxation year for which a claim is made under subsection 127.4(2) in respect of the original acquisition of the share (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)),

    • (c) nil, where the individual dies after December 5, 1996 and before the original acquisition of the share,

    • (d) nil, where a payment in respect of the disposition of the share has been made under section 211.9, and

    • (e) nil, if the share is issued in exchange for another share of the corporation.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 127.4;
  • 1994, c. 7, Sch. II, s. 105, Sch. VIII, s. 69, c. 8, s. 17;
  • 1997, c. 25, s. 37;
  • 1999, c. 22, s. 49;
  • 2000, c. 12, s. 142, c. 19, s. 36;
  • 2009, c. 2, s. 42;
  • 2013, c. 34, s. 270, c. 40, s. 59;
  • 2016, c. 7, s. 36.
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