Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2016-05-12 and last amended on 2015-12-31. Previous Versions

Marginal note:Cash bonus on Canada Savings Bonds

 Notwithstanding any other provision of this Act, where in a taxation year a taxpayer receives an amount from the Government of Canada in respect of a Canada Savings Bond as a cash bonus that the Government of Canada has undertaken to pay (other than any amount of interest, bonus or principal agreed to be paid at the time of the issue of the bond under the terms of the bond), the taxpayer shall, in computing the taxpayer’s income for the year, include as interest in respect of the Canada Savings Bond 1/2 of the cash bonus so received.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1974-75-76, c. 26, s. 5;
  • 1986, c. 6, s. 7.
Marginal note:Amount to be included
  •  (1) Where in a taxation year a taxpayer holds an interest, last acquired after 1989, in a life insurance policy that is not

    • (a) an exempt policy,

    • (b) a prescribed annuity contract, and

    • (c) a contract under which the policyholder has, under the terms and conditions of a life insurance policy that was not an annuity contract and that was last acquired before December 2, 1982, received the proceeds therefrom in the form of an annuity contract,

    on any anniversary day of the policy, there shall be included in computing the taxpayer’s income for the taxation year the amount, if any, by which the accumulating fund on that day in respect of the interest in the policy, as determined in prescribed manner, exceeds the adjusted cost basis to the taxpayer of the interest in the policy on that day.

  • (3) [Repealed, 1994, c. 7, Sch. II, s. 8(2)]

  • Marginal note:Idem

    (5) Where in a taxation year subsection 12.2(1) applies with respect to a taxpayer’s interest in an annuity contract (or would apply if the contract had an anniversary day in the year at a time when the taxpayer held the interest), there shall be included in computing the taxpayer’s income for the year the amount, if any, by which

    • (a) the total of all amounts each of which is an amount determined at the end of the year, in respect of the interest, for any of H to L in the definition adjusted cost basis in subsection 148(9)

    exceeds

    • (b) the total of all amounts each of which is an amount determined at the end of the year, in respect of the interest, for any of A to G in the definition referred to in paragraph 12.2(5)(a).

  • Marginal note:Deemed acquisition of interest in annuity

    (8) For the purposes of this section, the first premium that was not fixed before 1990 and that was paid after 1989 by or on behalf of a taxpayer under an annuity contract, other than a contract described in paragraph (1)(d) of this section, or paragraph 12.2(3)(e) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or to which subsection (1) of this section or subsection 12.2(4) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, applies (as those paragraphs and subsections, the numbers of which are those in force immediately before December 17, 1991, read in their application to life insurance policies last acquired before 1990) or to which subsection 12(3) applies, last acquired by the taxpayer before 1990 (in this subsection referred to as the “original contract”) shall be deemed to have been paid to acquire, at the time the premium was paid, an interest in a separate annuity contract issued at that time, to the extent that the amount of the premium was not fixed before 1990, and each subsequent premium paid under the original contract shall be deemed to have been paid under that separate contract to the extent that the amount of that subsequent premium was not fixed before 1990.

  • Marginal note:Riders

    (10) For the purposes of this Act, a rider added at any time after 1989 to a life insurance policy last acquired before 1990 that provides additional life insurance is deemed to be a separate life insurance policy issued at that time unless

    • (a) the policy is an exempt policy last acquired after December 1, 1982 or an annuity contract; or

    • (b) the only additional life insurance provided by the rider is an accidental death benefit.

  • Marginal note:Definitions

    (11) In this section and paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952,

    anniversary day

    jour anniversaire

    anniversary day of a life insurance policy means

    • (a) the day that is one year after the day immediately preceding the day on which the policy was issued, and

    • (b) each day that occurs at each successive one-year interval after the day determined under paragraph (a). (jour anniversaire)

    exempt policy

    police exonérée

    exempt policy has the meaning prescribed by regulation. (police exonérée)

  • Marginal note:Application of ss. 138(12) and 148(9)

    (12) The definitions in subsections 138(12) and 148(9) apply to this section.

  • Marginal note:Application of s. 148(10)

    (13) Subsection 148(10) applies to this section.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 12.2;
  • 1994, c. 7, Sch. II, s. 8;
  • 1998, c. 19, s. 72.

 [Repealed, 2013, c. 34, s. 174]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 12.3;
  • 1995, c. 3, s. 3;
  • 2013, c. 34, s. 174.
Marginal note:Bad debt inclusion

 Where, in a taxation year, a taxpayer disposes of a property that was a property described in an inventory of the taxpayer and in the year or a preceding taxation year an amount has been deducted under paragraph 20(1)(p) in computing the taxpayer’s income in respect of the property, there shall be included in computing the taxpayer’s income for the year from the business in which the property was used or held, the amount, if any, by which

  • (a) the total of all amounts deducted under paragraph 20(1)(p) by the taxpayer in respect of the property in computing the taxpayer’s income for the year or a preceding taxation year

exceeds

  • (b the total of all amounts included under paragraph 12(1)(i) by the taxpayer in respect of the property in computing the taxpayer’s income for the year or a preceding taxation year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1988, c. 55, s. 5.
Marginal note:Definitions
  •  (1) The definitions in this section apply for the purposes of this section and section 20.4.

    base year

    année de base

    base year of an insurer means the insurer’s taxation year that immediately precedes its transition year. (année de base)

    insurance business

    entreprise d’assurance

    insurance business of an insurer, is an insurance business carried on by the insurer, other than a life insurance business. (entreprise d’assurance)

    reserve transition amount

    montant transitoire

    reserve transition amount of an insurer, in respect of an insurance business carried on by it in Canada in its transition year, is the positive or negative amount determined by the formula

    A – B

    where

    A 
    is the maximum amount that the insurer would be permitted to claim under paragraph 20(7)(c) (and that would be prescribed by section 1400 of the Regulations for the purpose of paragraph 20(7)(c)) as a policy reserve for its base year in respect of its insurance policies if
    • (a) the generally accepted accounting principles that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and

    • (b) section 1400 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year; and

    B 
    is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year.

    transition year

    année transitoire

    transition year of an insurer means the insurer’s first taxation year that begins after September 2006. (année transitoire)

  • Marginal note:Transition year income inclusion

    (2) There shall be included in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year, the positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.

  • Marginal note:Transition year income deduction reversal

    (3) If an amount has been deducted under subsection 20.4(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be included in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula

    A × B/1825

    where

    A 
    is the amount deducted under subsection 20.4(2) in computing the insurer’s income for the transition year from that insurance business; and
    B 
    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.
  • Marginal note:Winding-up

    (4) If an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the incomes of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up,

    • (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of

      • (i) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year,

      • (ii) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, and

      • (iii) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business; and

    • (b) the insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (3) and 20.4(3) without reference to the start day and days after the start day.

  • Marginal note:Amalgamations

    (5) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of an insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the new corporation’s income for particular taxation years that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the insurer in respect of

    • (a) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year;

    • (b) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the day on which the amalgamation occurred; and

    • (c) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business.

  • Marginal note:Application of subsection (7)

    (6) Subsection (7) applies if, at any time, an insurer (referred to in this subsection and subsection (7) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (7) as the “transferee”) that is related to the transferor, property in respect of an insurance business carried on by the transferor in Canada (referred to in this subsection and subsection (7) as the “transferred business”) and

    • (a) subsection 138(11.5) or (11.94) applies to the transfer; or

    • (b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on an insurance business.

  • Marginal note:Transfer of insurance business

    (7) If this subsection applies in respect of the transfer, at any time, of property

    • (a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of

      • (i) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,

      • (ii) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business,

      • (iii) any amount that would — in the absence of this subsection and if the transferor existed and carried on an insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

    • (b) in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (3) or 20.4(3) to be included or deducted in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.

  • Marginal note:Ceasing to carry on business

    (8) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (4) to (6) apply, there shall be included in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

    A – B

    where

    A 
    is the amount deducted under subsection 20.4(2) in computing the insurer’s income from the discontinued business for its transition year; and
    B 
    is the total of all amounts each of which is an amount included under subsection (3) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.
  • Marginal note:Ceasing to exist

    (9) If at any time an insurer that carried on an insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (4) or (5)), for the purposes of subsections (8) and 20.4(4), the insurer is deemed to have ceased to carry on the insurance business at the earlier of

    • (a) the time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, and

    • (b) the time that is immediately before the end of the last taxation year of the insurer that ended at or before the time at which the insurer ceased to exist.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2009, c. 2, s. 5.
 
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