Income Tax Act
Marginal note:Cost of certain property the value of which included in income
(a) the taxpayer acquired the property after 1971;
(b) the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;
(c) the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; and
(d) a particular amount in respect of the property’s value was
(i) included, otherwise than under section 7, in computing
(ii) for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.
(1.1) [Repealed, 2001, c. 17, s. 35(1)]
Marginal note:Cost of property received as dividend in kind
(2) Where any property has, after 1971, been received by a shareholder of a corporation at any time as, on account or in lieu of payment of, or in satisfaction of, a dividend payable in kind (other that a stock dividend) in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the property at a cost to the shareholder equal to its fair market value at that time, and the corporation shall be deemed to have disposed of the property at that time fore proceeds equal to that fair market value.
Marginal note:Cost of stock dividend
(3) Where a shareholder of a corporation has, after 1971, received a stock dividend in respect of a share owned by the shareholder of the capital stock of the corporation, the shareholder shall be deemed to have acquired the share or shares received by the shareholder as a stock dividend at a cost to the shareholder equal to the total of
(a) where the stock dividend is a dividend,
(i) in the case of a shareholder that is an individual, the amount of the stock dividend, and
(ii) in any other case, the total of all amounts each of which is
(A) the amount, if any, by which
(I) the amount that is the lesser of the amount of the stock dividend and its fair market value
(II) the amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the amount of the separate dividend would not exceed the amount of the income earned or realized by any corporation — after 1971 and before the safe-income determination time for the transaction, event or series of transactions or events as part of which the dividend is received — that could reasonably be considered to contribute to the capital gain that could be realized on a disposition at fair market value, immediately before the dividend, of the share on which the dividend is received, and
(B) the amount determined by the formula
A + B
- is the amount of the deemed gain under paragraph 55(2)(c) in respect of that stock dividend, and
- is the amount, if any, by which the amount of the reduction under paragraph 55(2.3)(b) in respect of that stock dividend to which paragraph 55(2)(a) would otherwise apply exceeds the amount determined for clause (A) in respect of that dividend;
(a.1) where the stock dividend is not a dividend, nil, and
(b) where an amount is included in the shareholder’s income in respect of the stock dividend under subsection 15(1.1), the amount so included.
Marginal note:Cost of property acquired as prize
(4) Where any property has been acquired by a taxpayer at any time after 1971 as a prize in connection with a lottery scheme, the taxpayer shall be deemed to have acquired the property at a cost to the taxpayer equal to its fair market value at that time.
(6) [Repealed, 2001, c. 17, s. 35(2)]
Marginal note:Cost of shares of subsidiary
(7) Notwithstanding any other provision of this Act, where a corporation disposes of property to another corporation in a transaction to which paragraph 219(1)(l) applies, the cost to it of any share of a particular class of the capital stock of the other corporation received by it as consideration for the property is deemed to be the lesser of the cost of the share to the corporation otherwise determined immediately after the disposition and the amount by which the paid-up capital in respect of that class increases because of the issuance of the share.
Marginal note:Cost of shares of immigrant corporation
(8) Notwithstanding any other provision of this Act, where at any time a corporation becomes resident in Canada, the cost to any shareholder who is not at that time resident in Canada of any share of the corporation’s capital stock, other than a share that was taxable Canadian property immediately before that time, is deemed to be equal to the fair market value of the share at that time.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 52;
- 1994, c. 7, Sch. II, s. 29, Sch. VIII, s. 14, c. 21, s. 21;
- 1998, c. 19, s. 93;
- 1999, c. 22, s. 13;
- 2001, c. 17, s. 35;
- 2013, c. 34, s. 189;
- 2016, c. 7, s. 2.
- Date modified: