Income Tax Application Rules (R.S.C., 1985, c. 2 (5th Supp.))

Marginal note:Tax deemed payable under amended Act

• 49 (1) Where, because of section 40, any tax is payable in addition to or in lieu of any amount of tax payable under Part I of the amended Act for a taxation year, that tax shall be deemed to be payable under Part I of the amended Act for that taxation year.

• Marginal note:Application of s. 13

  (2) In applying section 13 to section 40, subsection 13(1) shall be read without reference to the words “subject to this Act and unless the context otherwise requires”.

• Marginal note:Computation of tax deemed payable under amended Act

  (3) In computing, under section 40 of this Act or any of section 39 and sections 41 to 48 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, any tax that is payable in addition to or in lieu of any amount of tax payable under Part I of the amended Act by an individual for a taxation year,

  • (a) a reference to section 120 of the amended Act does not include a reference to paragraph 33(1)(a) of the former Act; and

  • (b) for the purposes of paragraph 33(1)(a) of the former Act and subsection 120(1) of the amended Act, all of the income of the individual for that or any preceding taxation year shall be deemed to have been income earned in the year in a province.

Marginal note:Status of certain corporations

• 50 (1) For the purposes of the amended Act, a corporation that was, throughout that portion of its 1972 taxation year that is in 1972, a private corporation, a Canadian-controlled private corporation or a public corporation shall be deemed to have been throughout that taxation year a private corporation, a Canadian-controlled private corporation or a public corporation, as the case may be,

• Marginal note:Election to be public corporation

  (2) For the purposes of the definition public corporation in subsection 89(1) of the amended Act, where at any particular time before 1973 a corporation elected in the manner referred to in subparagraph (b)(i) of that definition to be a public corporation and at any time after 1971 and before the time of the election the corporation complied with the conditions referred to in that subparagraph, the corporation shall,

  • (a) at such time after 1971 and before the particular time as is specified in the election to be the effective date thereof, or

  • (b) where no time described in paragraph (a) is specified in the election to be the effective date thereof, at the particular time,

  be deemed to have elected in the manner referred to in that subparagraph to be a public corporation and to have complied with the conditions referred to therein.

• Marginal note:Designation by Minister

  (3) For the purposes of the definition public corporation in subsection 89(1) of the amended Act, where at any particular time before March 22, 1972 the Minister, by notice in writing to a corporation, designated the corporation to be a public corporation or not to be a public corporation, as the case may be, and at the time of the designation the corporation complied with the conditions referred to in subparagraph (b)(i) or (c)(i) of that definition, as the case may be, the corporation shall, at such time as is specified by the Minister in the notice, be deemed

  • (a) to have been designated by the Minister, by notice in writing to the corporation, to be a public corporation or not to be a public corporation, as the case may be; and

  • (b) to have complied with the conditions referred to in subparagraph (b)(i) or (c)(i) of that definition, as the case may be.

Marginal note:Capital dividend account

• 57 (9) In computing a specified personal corporation’s capital dividend account at any time after the end of its 1972 taxation year, there shall be added to the total of the amounts described in paragraphs (a) and (b) of the definition capital dividend account in subsection 89(1) of the amended Act the total of its net capital gains (within the meaning assigned by subsection 51(3) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, as it read before October 29, 1985) for its 1972 taxation year and that proportion of the total of its incomes for that year, other than

  • (a) any taxable capital gains of the corporation for the year from dispositions of property, and

  • (b) any amounts that were, because of subsection 57(3) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, as it read before October 29, 1985 or under the provisions of subsection 67(1) of the former Act that applied because of subsection 57(12) of those Rules as it read before that date, required to be included in computing the income of the specified personal corporation for its 1972 taxation year,

  that the number of days in that portion of the 1972 taxation year that is in 1972 is of the number of days in the whole year.

• Meaning of specified personal corporation

  (11) For the purposes of this section, a corporation is a specified personal corporation if

  • (a) part of its 1972 taxation year was before and part thereof after the beginning of 1972; and

  • (b) during the whole of the period beginning on the earlier of June 18, 1971 and the beginning of its 1972 taxation year and ending at the end of its 1972 taxation year, it was a personal corporation within the meaning assigned by section 68 of the former Act.

Marginal note:Credit unions

• 58 (1) For the purpose of computing the income of a credit union for the 1972 and subsequent taxation years,

  • (a) property of the credit union that is a bond, debenture, mortgage or agreement of sale owned by it at the beginning of its 1972 taxation year shall be valued at its actual cost to the credit union,

    • (i) plus a reasonable amount in respect of the amortization of the amount by which the principal amount of the property at the time it was acquired by the credit union exceeds its actual cost to the credit union, or

    • (ii) minus a reasonable amount in respect of the amortization of the amount by which its actual cost to the credit union exceeds the principal amount of the property, at the time it was acquired by the credit union;

  • (b) property of the credit union that is a debt owing to the credit union (other than property described in paragraph (a) or a debt that became a bad debt before its 1972 taxation year) acquired by it before the beginning of its 1972 taxation year shall be valued at any time at the amount thereof outstanding at that time;

  • (c) any depreciable property acquired by the credit union in a taxation year ending before 1972 shall be deemed to have been acquired by it on the last day of its 1971 taxation year at a capital cost equal to

    • (i) in the case of any building or automotive equipment owned by it on the last day of its 1971 taxation year, the amount, if any, by which the depreciable cost to the credit union of the building or equipment, as the case may be, exceeds the product obtained when the number of full taxation years in the period beginning on the first day of the taxation year following the taxation year in which the building or equipment, as the case may be, was acquired by it and ending with the last day of its 1971 taxation year is multiplied by, in the case of a building, 2½%, and in the case of equipment 15%, of its depreciable cost (and for the purposes of this subparagraph, a capital improvement or capital addition to a building owned by a credit union shall be deemed not to be part of the building but to be a separate and distinct building acquired by it, if the cost to the credit union of the improvement or addition, as the case may be, exceeded $10,000),

    • (ii) in the case of any leasehold interest, the proportion of the capital cost thereof to the credit union (determined without regard to this subparagraph) that

      • (A) the number of months in the period beginning with the first day of the credit union’s 1972 taxation year and ending with the day on which the leasehold interest expires

      is of

      • (B) the number of months in the period beginning with the day on which the credit union acquired the leasehold interest and ending with the day on which the leasehold interest expires, and

    • (iii) in the case of any property (other than a building, automotive equipment or leasehold interest) acquired by the credit union after 1961, the amount, if any, by which the depreciable cost to the credit union of the property exceeds the product obtained when the number of full taxation years beginning with the first day of the taxation year following the taxation year in which the property was acquired by it and ending with the last day of its 1971 taxation year is multiplied by ½ the relevant percentage of the depreciable cost to the credit union of the property; and

  • (d) the undepreciated capital cost to the credit union as of the first day of its 1972 taxation year of depreciable property of a prescribed class acquired by it before that taxation year is the total of the amounts determined under paragraph (c) to be the capital costs to it as of that day of all property of that class.

• Marginal note:Exception

  (1.1) For the purpose of computing a capital gain from the disposition of depreciable property acquired by a credit union in a taxation year ending before 1972, the capital cost of the property shall be its capital cost determined without reference to paragraph (1)(c).

• Marginal note:Determination of maximum cumulative reserve at end of taxation year

  (3.2) Notwithstanding the definition maximum cumulative reserve in subsection 137(6) of the amended Act, for the purposes of section 137 of the amended Act a credit union’s maximum cumulative reserve at the end of any particular taxation year is the amount, if any, by which its maximum cumulative reserve at that time, determined under that definition without regard to this subsection, exceeds the lesser of

  • (a) its maximum cumulative reserve, determined under that definition without regard to this subsection, at the end of its 1971 taxation year, and

  • (b) the amount, if any, by which its 1971 reserve exceeds the total of the amounts deemed by subsection 58(2) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, to have been deducted by it in computing its income for its 1971 taxation year.

• Marginal note:Idem

  (3.3) Notwithstanding subsection (3.2), where at any time after May 6, 1974 there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more credit unions to form a new credit union, the maximum cumulative reserve of the new credit union shall be deemed to be the amount by which its maximum cumulative reserve, determined under the definition of that term in subsection 137(6) of the amended Act, exceeds the total of all amounts, if any, each of which is the lesser of the amounts referred to in paragraphs (3.2)(a) and (b) in respect of each of the predecessor corporations.

• Marginal note:Idem

  (3.4) Notwithstanding subsection (3.2), where a credit union (in this subsection referred to as the acquirer) has, at any time after May 6, 1974, acquired otherwise than by way of amalgamation all of substantially all of the assets of another credit union, the maximum cumulative reserve of the acquirer shall be the amount by which the acquirer’s maximum cumulative reserve, determined under the definition of that term in subsection 137(6) of the amended Act, exceeds the total of

  • (a) the lesser of the amounts determined under paragraphs (3.2)(a) and (b) in respect of the acquirer, and

  • (b) the lesser of the amounts determined under paragraphs (3.2)(a) and (b) in respect of the other credit union.

• Marginal note:Definitions

  (5) In this section,

  depreciable cost

  depreciable cost to a credit union of any property means the actual cost to it of the property or the amount at which it is deemed by subsection 13(7) of the amended Act to have acquired the property, as the case may be; (coût amortissable)

  relevant percentage

  relevant percentage in relation to a prescribed class of property is the percentage prescribed in respect of that class by any regulations made under paragraph 11(1)(a) of the former Act; (pourcentage approprié)

  1971 reserve

  1971 reserve of a credit union means the amount, if any, by which the total of all amounts each of which is

  • (a) the amount of any money of the credit union on hand at the beginning of its 1972 taxation year,

  • (b) an amount in respect of any property described in paragraph (1)(a) or (b), equal to the amount at which it is required by those paragraphs to be valued at the beginning of its 1972 taxation year,

  • (c) an amount in respect of depreciable property of a prescribed class owned by the credit union on the first day of its 1972 taxation year, equal to the amount determined under paragraph (1)(d) to be the undepreciated capital cost thereof to the credit union as of that day, or

  • (d) an amount in respect of any capital property (other than depreciable property) owned by the credit union at the beginning of its 1972 taxation year, equal to its cost to the credit union computed without reference to the provisions of section 26,

  exceeds the total of all amounts each of which is

  • (e) the amount of any debt owing by the credit union or of any other obligation of the credit union to pay an amount, that was outstanding at the beginning of its 1972 taxation year, excluding, for greater certainty, any share in the credit union of any member thereof, or

  • (f) the amount, as of the beginning of the credit union’s 1972 taxation year, of any share in the credit union of any member thereof. (réserve pour 1971)

Marginal note:Non-resident-owned investment corporation

• 59 (2) In its application to the 1972 and subsequent taxation years of a corporation, section 133 of the amended Act shall be read as if, in respect of such portion of any period described in the definition non-resident-owned investment corporation in subsection 133(8) of that Act as ended before the beginning of the corporation’s 1976 taxation year, paragraph (a) of that definition were read as follows:

  • “(a) at least 95% of the total value of its issued shares, and all of its bonds, debentures and other funded indebtedness, were

    • (i) beneficially owned by non-resident persons (other than any foreign affiliate of a taxpayer resident in Canada),

    • (ii) owned by trustees for the benefit of non-resident persons or their unborn issue, or

    • (iii) owned by a corporation, whether incorporated in Canada or elsewhere, at least 95% of the total value of the issued shares of which and all of the bonds, debentures and other funded indebtedness of which were beneficially owned by non-resident persons or owned by trustees for the benefit of non-resident persons or their unborn issue, or by two or more such corporations,”

Marginal note:Taxes payable by insurer under Part IA of former Act

60.1 For the purposes of the description of F in the definition surplus funds derived from operations in subsection 138(12) of the amended Act, the reference in that description to “this Part” shall be deemed to be a reference to “this Part and Part IA of the former Act”.

Marginal note:Registered retirement savings plans

• 61 (1) For the purposes of the definition non-qualified investment in subsection 146(1) of the amended Act, property acquired after June 18, 1971 and before 1972 by a trust governed by a registered retirement savings plan shall, if owned or held by the trust on January 1, 1972, be deemed to have been acquired by the trust on January 1, 1972.

Marginal note:Assessments

• 62 (1) Subsections 152(4) and (5) of the amended Act apply in respect of any assessment made after December 23, 1971, except that subsection 152(5) of that Act does not apply in respect of any such assessment made in consequence of a waiver filed with the Minister before December 23, 1971 in the form and within the time referred to in subsection 152(4) of that Act.

• Marginal note:Interest

  (2) Subsections 161(1) and (2), 164(3) and (4), 202(5) and 227(8) and (9) of the amended Act, subsection 183(2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and subsection 195(1) of that Act as it read in its application in respect of dividends paid or received before April 1, 1977, in so far as those subsections relate to the rate of interest payable thereunder, apply in respect of interest payable in respect of any period after December 23, 1971.

• Marginal note:Objections to assessment

  (4) Subsection 165(3) of the amended Act applies in respect of any notice of objection served on the Minister after December 23, 1971.

• Marginal note:Appeals

  (5) Division J of Part I of the amended Act applies in respect of any appeal or application instituted or made, as the case may be, after December 23, 1971.

• Marginal note:Appeals to Federal Court

  (6) Any appeal to the Federal Court instituted, within 2 years after December 23, 1971 and in accordance with Division J of Part I of the former Act and any rules made thereunder (as those rules read immediately before December 23, 1971), shall be deemed to have been instituted in the manner provided by the amended Act, and any document served on the Minister or a taxpayer in connection with an appeal so instituted in the manner provided in that Division and those rules shall be deemed to have been served in the manner provided by the amended Act.