Income Tax Act

Version of section 97 from 2017-01-01 to 2017-11-20:

Marginal note:Contribution of property to partnership
  •  (1) Where at any time after 1971 a partnership has acquired property from a taxpayer who was, immediately after that time, a member of the partnership, the partnership shall be deemed to have acquired the property at an amount equal to its fair market value at that time and the taxpayer shall be deemed to have disposed of the property for proceeds equal to that fair market value.

  • Marginal note:Rules if election by partners

    (2) Notwithstanding any other provision of this Act other than subsections (3) and 13(21.2), where a taxpayer at any time disposes of any property that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),

    • (a) the provisions of paragraphs 85(1)(a) to 85(1)(f) apply to the disposition as if

      • (i) the reference therein to “corporation’s cost” were read as a reference to “partnership’s cost”,

      • (ii) the references therein to “other than any shares of the capital stock of the corporation or a right to receive any such shares” and to “other than shares of the capital stock of the corporation or a right to receive any such shares” were read as references to “other than an interest in the partnership”,

      • (iii) the references therein to “shareholder of the corporation” were read as references to “member of the partnership”,

      • (iv) the references therein to “the corporation” were read as references to “all the other members of the partnership”, and

      • (v) the references therein to “to the corporation” were read as references to “to the partnership”;

    • (b) in computing, at any time after the disposition, the adjusted cost base to the taxpayer of the taxpayer’s interest in the partnership immediately after the disposition,

      • (i) there shall be added the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the fair market value, at the time of the disposition, of the consideration (other than an interest in the partnership) received by the taxpayer for the property, and

      • (ii) there shall be deducted the amount, if any, by which the fair market value, at the time of the disposition, of the consideration (other than an interest in the partnership) received by the taxpayer for the property so disposed of by the taxpayer exceeds the fair market value of the property at the time of the disposition; and

    • (c) where the property so disposed of by the taxpayer to the partnership is taxable Canadian property of the taxpayer, the interest in the partnership received by the taxpayer as consideration for the property is deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer.

  • Marginal note:Election not available — section 88

    (3) Subsection (2) does not apply to a disposition of a property by a taxpayer to a particular partnership if

    • (a) as part of a transaction or event or series of transactions or events that includes the disposition

      • (i) control of a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) is acquired by another taxable Canadian corporation (in this paragraph referred to as the “parent”),

      • (ii) the subsidiary is wound up under subsection 88(1) or amalgamated with one or more other corporations under subsection 87(11), and

      • (iii) the parent makes a designation under paragraph 88(1)(d) in respect of an interest in a partnership;

    • (b) the disposition occurs after the acquisition of control of the subsidiary;

    • (c) the property

      • (i) is referred to in clauses (A) to (C) of the description of B in subparagraph 88(1)(d)(ii.1), or

      • (ii) is an interest in a partnership that holds, directly or indirectly through one or more partnerships, property referred to in clauses (A) to (C) of the description of B in subparagraph 88(1)(d)(ii.1); and

    • (d) the subsidiary is the taxpayer or has, before the disposition of the property, directly or indirectly in any manner whatever, an interest in the taxpayer.

  • (3.1) [Repealed, 1998, c. 19, s. 124]

  • Marginal note:Where capital cost to partner exceeds proceeds of disposition

    (4) Where subsection 97(2) has been applicable in respect of the acquisition of any depreciable property by a partnership from a taxpayer who was, immediately after the taxpayer disposed of the property, a member of the partnership and the capital cost to the taxpayer of the property exceeds the taxpayer’s proceeds of the disposition, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)

    • (a) the capital cost to the partnership of the property shall be deemed to be the amount that was the capital cost thereof to the taxpayer; and

    • (b) the excess shall be deemed to have been allowed to the partnership in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the partnership of the property.

  • Marginal note:Acquisition of certain tools — capital cost and deemed depreciation

    (5) If subsection (2) has applied in respect of the acquisition at any particular time of any depreciable property by a partnership from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individ­ual’s proceeds of disposition of the property,

    • (a) the capital cost to the partnership of the property is deemed to be equal to the individual’s original cost; and

    • (b) the amount by which the individual’s original cost exceeds the individual’s proceeds of disposition in respect of the property is deemed to have been deducted by the partnership under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that particular time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 97;
  • 1995, c. 21, s. 34;
  • 1998, c. 19, s. 124;
  • 2002, c. 9, s. 32;
  • 2007, c. 2, s. 14;
  • 2010, c. 12, s. 9;
  • 2012, c. 31, s. 21;
  • 2016, c. 12, s. 33.
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