Income Tax Act

Version of section 38 from 2008-06-18 to 2014-12-15:

Marginal note:Taxable capital gain and allowable capital loss

 For the purposes of this Act,

  • (a) subject to paragraphs (a.1) to (a.3), a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is ½ of the taxpayer’s capital gain for the year from the disposition of the property;

  • (a.1) a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if

    • (i) the disposition is the making of a gift to a qualified donee of a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)) or a prescribed debt obligation,

    • (ii) the disposition is deemed by section 70 to have occurred and the taxpayer is deemed by subsection 118.1(5) to have made a gift described in subparagraph (i) of the property, or

    • (iii) the disposition is the exchange, for a security described in subparagraph (i), of a share of the capital stock of a corporation, which share included, at the time it was issued and at the time of the disposition, a condition allowing the holder to exchange it for the security, and the taxpayer

      • (A) receives no consideration on the exchange other than the security, and

      • (B) makes a gift of the security to a qualified donee not more than 30 days after the exchange;

  • (a.2) a taxpayer’s taxable capital gain for a taxation year from the disposition of a property is equal to zero if

    • (i) the disposition is the making of a gift to a qualified donee (other than a private foundation) of a property described, in respect of the taxpayer, in paragraph 110.1(1)(d) or in the definition total ecological gifts in subsection 118.1(1), or

    • (ii) the disposition is deemed by section 70 to have occurred and the taxpayer is deemed by subsection 118.1(5) to have made a gift described in subparagraph (i) of the property;

  • (a.3) a taxpayer’s taxable capital gain for a taxation year, from the disposition of an interest in a partnership (other than a prescribed interest in a partnership) that would be an exchange described in subparagraph (a.1)(iii) if the interest were a share in the capital stock of a corporation, is equal to the lesser of

    • (i) that taxable capital gain determined without reference to this paragraph, and

    • (ii) ½ of the amount, if any, by which

      • (A) the total of

        • (I) the cost to the taxpayer of the partnership interest, and

        • (II) each amount required by subparagraph 53(1)(e)(iv) or (x) to be added in determining the taxpayer’s adjusted cost base of the partnership interest,

      exceeds

      • (B) the adjusted cost base to the taxpayer of the partnership interest (determined without reference to subparagraphs 53(2)(c)(iv) and (v));

  • (b) a taxpayer’s allowable capital loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s capital loss for the year from the disposition of that property; and

  • (c) a taxpayer’s allowable business investment loss for a taxation year from the disposition of any property is 1/2 of the taxpayer’s business investment loss for the year from the disposition of that property.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 38;
  • 1998, c. 19, s. 6;
  • 2001, c. 17, s. 22;
  • 2002, c. 9, s. 22;
  • 2006, c. 4, s. 51;
  • 2007, c. 35, s. 15;
  • 2008, c. 28, s. 4.
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