Income Tax Act

Version of section 34.1 from 2004-08-31 to 2013-12-11:

Marginal note:Additional Business Income
  •  (1) Where

    • (a) an individual (other than a testamentary trust) carries on a business in a taxation year,

    • (b) a fiscal period of the business begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and

    • (c) the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,

    there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula

    (A - B) × C/D

    where

    A
    is the total of the individual’s income from the business for the fiscal periods of the business that end in the year,
    B
    is the lesser of
    • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

    • (ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,

    C
    is the number of days on which the individual carries on the business that are both in the year and in the particular period, and
    D
    is the number of days on which the individual carries on the business that are in fiscal periods of the business that end in the year.
  • Marginal note:Additional income election

    (2) Where

    • (a) an individual (other than a testamentary trust) begins carrying on a business in a taxation year and not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this subsection referred to as the “particular period”), and

    • (b) the individual has elected under subsection 249.1(4) in respect of the business and the election has not been revoked,

    there shall be included in computing the individual’s income for the year from the business the lesser of

    • (c) the amount designated in the individual’s return of income for the year, and

    • (d) the amount determined by the formula

      (A - B) × C/D

      where

      A
      is the individual’s income from the business for the particular period,
      B
      is the lesser of
      • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

      • (ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,

      C
      is the number of days on which the individual carries on the business that are both in the year and in the particular period, and
      D
      is the number of days on which the individual carries on the business that are in the particular period.
  • Marginal note:Deduction

    (3) There shall be deducted in computing an individual’s income for a taxation year from a business the amount, if any, included under subsection 34.1(1) or 34.1(2) in computing the individual’s income for the preceding taxation year from the business.

  • Marginal note:Deemed December 31, 1995 income

    (4) For the purpose of section 34.2, where

    • (a) at the end of 1994 an individual carried on a particular business no fiscal period of which ended at that time, and

    • (b) an amount is included under subsection 34.1(1) in computing the individual’s income for the 1995 taxation year in respect of

      • (i) the particular business, or

      • (ii) another business that would, if subsection 34.2(3) applied for the purpose of this subparagraph, be included in the particular business,

    subject to subsection 34.1(7), the December 31, 1995 income of the individual in respect of the particular business or the other business, as the case may be, is deemed to be the amount that would have been so included if the descriptions of A and B in subsection 34.1(1) were read as follows:

    “A
    is the total of the individual’s income from the business for the fiscal periods of the business that end in the year (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
    B
    is the lesser of
    • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

    • (ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the year,”.

  • Marginal note:Deemed December 31, 1995 income

    (5) For the purpose of section 34.2, where

    • (a) at the end of 1994 an individual carried on a particular business no fiscal period of which ended at that time, and

    • (b) an amount is included under subsection 34.1(2) in computing the individual’s income for the 1995 taxation year in respect of another business that would, if subsection 34.2(3) applied for the purpose of this paragraph, be included in the particular business,

    the December 31, 1995 income of the individual in respect of the other business is deemed to be the amount that would have been so included if the descriptions of A and B in paragraph 34.1(2)(d) were read as follows:

    “A
    is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
    B
    is the lesser of
    • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

    • (ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,”.

  • Marginal note:Deemed December 31, 1995 income

    (6) For the purpose of section 34.2, where

    • (a) at the end of 1995 an individual carries on a business as a member of a partnership no fiscal period of which ended at the end of 1994,

    • (b) the business was carried on by a professional corporation as a member of the partnership at the end of 1994,

    • (c) the professional corporation transferred its interest in the partnership to the individual before the end of 1995,

    • (d) the individual is a practising member of the professional body under the authority of which the professional corporation practised the profession,

    • (e) the individual was a specified shareholder of the professional corporation immediately before the transfer,

    • (f) the professional corporation does not have a share of the income or loss of the partnership for the first fiscal period of the partnership that ends after the end of 1995, and

    • (g) an amount is included under subsection 34.1(2) in computing the individual’s income for the 1995 taxation year in respect of the business,

    the December 31, 1995 income of the individual in respect of the business is deemed to be the amount that would have been so included if the descriptions of A and B in paragraph 34.1(2)(d) were read as follows:

    “A
    is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
    B
    is the lesser of
    • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

    • (ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,”

    and, for the purpose of computing the values of C and D in paragraph 34.1(2)(d), the individual is deemed to carry on the business on the days on which the corporation carried on the business.

  • Marginal note:Maximum December 31, 1995 income

    (7) Where an amount was included under subsection 34.1(1) in computing an individual’s income for the 1995 taxation year from a business and

    • (a) the individual’s December 31, 1995 income otherwise determined under subsection 34.1(4) in respect of the business for the purpose of section 34.2

    exceeds

    • (b) the amount that would be described under paragraph 34.1(7)(a) if the descriptions of A, B and D in subsection 34.1(1) were read as follows:

      “A
      is the individual’s income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to 34.2(2)(d) applied in computing that income),
      B
      is the lesser of
      • (i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and

      • (ii) the total of the maximum amounts deductible under section 110.6 in computing the individual’s taxable income for the taxation year that includes the end of the particular period,

      D
      is the number of days on which the individual carries on the business that are in the particular period.”,

    for the purpose of applying subsection 34.2(4) to the 1996 and subsequent taxation years, the December 31, 1995 income of the individual in respect of the business is deemed to be the amount determined under paragraph 34.1(7)(b).

  • Marginal note:No additional income inclusion

    (8) Subsections 34.1(1) and 34.1(2) do not apply in computing an individual’s income for a taxation year from a business where

    • (a) the individual dies or otherwise ceases to carry on the business in the year; or

    • (b) the individual becomes a bankrupt in the calendar year in which the taxation year ends.

  • Marginal note:Death of partner or proprietor

    (9) Where

    • (a) an individual carries on a business in a taxation year,

    • (b) the individual dies in the year and after the end of a fiscal period of the business that ends in the year,

    • (c) another fiscal period of the business ends because of the individual’s death (in this subsection referred to as the “short period”), and

    • (d) the individual’s legal representative

      • (i) elects that this subsection apply in computing the individual’s income for the year, or

      • (ii) files a separate return of income under subsection 150(4) in respect of the individual’s business,

    notwithstanding subsection 34.1(8), there shall be included in computing the individual’s income for the year from the business, the amount determined by the formula

    (A - B) × C/D

    where

    A
    is the total of the individual’s income from the business for fiscal periods (other than the short period) of the business that end in the year,
    B
    is the lesser of
    • (i) the total of all amounts, each of which is an amount included in the value of A in respect of the business that is deemed to be a taxable capital gain for the purpose of section 110.6, and

    • (ii) the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for the year,

    C
    is the number of days in the short period, and
    D
    is the total number of days in fiscal periods of the business (other than the short period) that end in the year.
  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1996, c. 21, s. 8;
  • 1998, c. 19, s. 84.
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