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

Full Document:  

Act current to 2022-09-22 and last amended on 2022-09-01. Previous Versions

PART XVIIInterpretation (continued)

Marginal note:Definitions

  •  (1) The following definitions apply in this section.

    attribute trading restriction

    attribute trading restriction means a restriction on the use of a tax attribute arising on the application, either alone or in combination with other provisions, of any of this section, subsections 10(10) and 13(24), section 37, subsections 66(11.4) and (11.5), 66.7(10) and (11), 69(11) and 88(1.1) and (1.2), sections 111 and 127 and subsections 181.1(7), 190.1(6), 249(4) and 256(7). (restriction au commerce d’attributs)

    person

    person includes a partnership. (personne)

    specified provision

    specified provision means any of subsections 10(10) and 13(24), paragraph 37(1)(h), subsections 66(11.4) and (11.5), 66.7(10) and (11), 69(11) and 111(4), (5), (5.1) and (5.3), paragraphs (j) and (k) of the definition investment tax credit in subsection 127(9), subsections 181.1(7) and 190.1(6) and any provision of similar effect. (dispositions déterminées)

  • Marginal note:Application of subsection (3)

    (2) Subsection (3) applies at a particular time in respect of a corporation if

    • (a) shares of the capital stock of the corporation held by a person, or the total of all shares of the capital stock of the corporation held by members of a group of persons, as the case may be, have at the particular time a fair market value that exceeds 75% of the fair market value of all the shares of the capital stock of the corporation;

    • (b) shares, if any, of the capital stock of the corporation held by the person, or the total of all shares, if any, of the capital stock of the corporation held by members of the group, have immediately before the particular time a fair market value that does not exceed 75% of the fair market value of all the shares of the capital stock of the corporation;

    • (c) the person or group does not control the corporation at the particular time; and

    • (d) it is reasonable to conclude that one of the main reasons that the person or group does not control the corporation is to avoid the application of one or more specified provisions.

  • Marginal note:Deemed acquisition of control

    (3) If this subsection applies at a particular time in respect of a corporation, then for the purposes of the attribute trading restrictions,

    • (a) the person or group referred to in subsection (2)

      • (i) is deemed to acquire control of the corporation, and each corporation controlled by the corporation, at the particular time, and

      • (ii) is not deemed to have control of the corporation, and each corporation controlled by the corporation, at any time after the particular time solely because this paragraph applied at the particular time; and

    • (b) during the period that the condition in paragraph (2)(a) is satisfied, each corporation referred to in paragraph (a) — and any corporation incorporated or otherwise formed subsequent to that time and controlled by that corporation — is deemed not to be related to, or affiliated with, any person to which it was related to, or affiliated with, immediately before paragraph (a) applies.

  • Marginal note:Special rules

    (4) For the purpose of applying paragraph (2)(a) in respect of a person or group of persons,

    • (a) if it is reasonable to conclude that one of the reasons that one or more transactions or events occur is to cause a person or group of persons not to hold shares having a fair market value that exceeds 75% of the fair market value of all the shares of the capital stock of a corporation, the paragraph is to be applied without reference to those transactions or events; and

    • (b) the person, or each member of the group, is deemed to have exercised each right that is held by the person or a member of the group and that is referred to in paragraph 251(5)(b) in respect of a share of the corporation referred to in paragraph (2)(a).

  • Marginal note:Deeming rules — if share value nil

    (5) For the purposes of subsections (2) to (4), if the fair market value of the shares of the capital stock of a corporation is nil at any time, then for the purpose of determining the fair market value of those shares, the corporation is deemed, at that time, to have assets net of liabilities equal to $100,000 and to have $100,000 of income for the taxation year that includes that time.

  • Marginal note:Deemed acquisition of control

    (6) If, at any time as part of a transaction or event or series of transactions or events, control of a particular corporation is acquired by a person or group of persons and it can reasonably be concluded that one of the main reasons for the acquisition of control is so that a specified provision does not apply to one or more corporations, the attribute trading restrictions are deemed to apply to each of those corporations as if control of each of those corporations were acquired at that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2013, c. 40, s. 94
  • 2016, c. 12, s. 68

Marginal note:Negative amounts

 Except as specifically otherwise provided, where an amount or a number is required under this Act to be determined or calculated by or in accordance with an algebraic formula, if the amount or number when so determined or calculated would, but for this section, be a negative amount or number, it shall be deemed to be nil.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1970-71-72, c. 63, s. 1 “257”
  • 1977-78, c. 1, s. 100, c. 22, s. 26(F)
  • 1980-81-82-83, c. 140, s. 132
  • 1986, c. 6, s. 128

Marginal note:Deemed dividend on term preferred share

  •  (2) Notwithstanding subsection 15(3), an amount paid or payable after 1978 as interest on or as an amount in lieu of interest in respect of

    • (a) any interest or dividend payable after November 16, 1978 on an income bond or an income debenture issued before November 17, 1978 or pursuant to an agreement in writing made before that date, or

    • (b) a dividend that became payable or in arrears after November 16, 1978 on a share of the capital stock of a corporation that is not a term preferred share by reason of having been issued before November 17, 1978 or pursuant to an agreement in writing made before that date,

    shall, for the purposes of subsections 112(2.1) and 138(6), be deemed to be a dividend received on a term preferred share.

  • Marginal note:Deemed interest on preferred shares

    (3) Subject to subsection 258(4), for the purposes of paragraphs 12(1)(c) and 12(1)(k) and sections 113 and 126, each amount that is a dividend received in a taxation year on

    • (a) a term preferred share by a specified financial institution resident in Canada from a corporation not resident in Canada, or

    • (b) any other share that

      • (i) is a grandfathered share, or

      • (ii) was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and is not deemed by subsection 112(2.22) to have been issued after that time

      by a corporation from a corporation not resident in Canada, if the dividend would have been a dividend in respect of which no deduction could have been made under subsection 112(1) or 112(2) or 138(6) because of subsection 112(2.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on June 17, 1987, if the corporation that paid the dividend were a taxable Canadian corporation

    shall be deemed to be interest received in the year and not a dividend received on a share of the capital stock of a corporation.

  • Marginal note:Exception

    (4) Subsection (3) does not apply to a dividend described in paragraph (3)(a)

    • (a) if the share on which the dividend was paid was not acquired in the ordinary course of the business carried on by the corporation; or

    • (b) to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the corporation.

  • Marginal note:Deemed interest on certain shares

    (5) For the purposes of paragraphs 12(1)(c) and 12(1)(k) and sections 113 and 126, a dividend received after June 18, 1987 and in a taxation year from a corporation not resident in Canada, other than a corporation in which the recipient had or would have, if the corporation were a taxable Canadian corporation, a substantial interest (within the meaning assigned by section 191), on a share, if the dividend would have been a dividend in respect of which no deduction could have been made under subsection 112(1) or 112(2) or 138(6) by reason of subsection 112(2.2) or 112(2.4) if the corporation that paid the dividend were a taxable Canadian corporation, shall be deemed to be interest received in the year and not a dividend received on a share of the capital stock of the payer corporation.

  • Marginal note:Exception

    (6) Subsection (5) does not apply to a dividend described in that subsection to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the recipient.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 258
  • 1994, c. 7, Sch. VIII, s. 141
  • 2001, c. 17, s. 195
  • 2013, c. 34, s. 76

Marginal note:Proportional holdings in trust property

  •  (1) For the purposes of designated provisions, if at any time a specified taxpayer acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

    • (a) the taxpayer shall be deemed not to acquire, hold or dispose of at that time, as the case may be, the particular unit;

    • (b) where the taxpayer holds the particular unit at that time, the taxpayer shall be deemed to hold at that time that proportion (referred to in this subsection as the “specified portion”) of each property (in this subsection referred to as a “relevant property”) held by the trust at that time that one (or, where the particular unit is a fraction of a whole unit, that fraction) is of the number of units of the trust outstanding at that time;

    • (c) [Repealed, 2005, c. 30, s. 18]

    • (d) where that time is the later of

      • (i) the time the trust acquires the relevant property, and

      • (ii) the time the taxpayer acquires the particular unit,

      the taxpayer shall be deemed to acquire the specified portion of a relevant property at that time;

    • (e) where that time is the time the specified portion of a relevant property is deemed by paragraph 259(1)(d) to have been acquired, the fair market value of the specified portion of the relevant property at that time shall be deemed to be the specified portion of the fair market value of the relevant property at the time of its acquisition by the trust;

    • (f) where that time is the time immediately before the time the trust disposes of a particular relevant property, the taxpayer shall be deemed to dispose of, immediately after that time, the specified portion of the particular relevant property for proceeds equal to the specified portion of the proceeds of disposition to the trust of the particular relevant property;

    • (g) where that time is the time immediately before the time the taxpayer disposes of the particular unit, the taxpayer shall be deemed to dispose of, immediately after that time, the specified portion of each relevant property for proceeds equal to the specified portion of the fair market value of that relevant property at that time; and

    • (h) where the taxpayer is deemed because of this subsection

      • (i) to have acquired a portion of a relevant property as a consequence of the acquisition of the particular unit by the taxpayer and the acquisition of the relevant property by the trust, and

      • (ii) subsequently to have disposed of the specified portion of the relevant property,

      the specified portion of the relevant property shall, for the purposes of determining the consequences under this Act of the disposition and without affecting the proceeds of disposition of the specified portion of the relevant property, be deemed to be the portion of the relevant property referred to in subparagraph 259(1)(h)(i).

  • (2) [Repealed, 2005, c. 30, s. 18]

  • Marginal note:Election

    (3) An election by a qualified trust under subsection (1) shall be made by the qualified trust filing a prescribed form with the Minister and shall apply for the period

    • (a) that begins on the later of

      • (i) the day that is 15 months before the day on which the election is filed, and

      • (ii) the day, if any, that is designated by the qualified trust in the election; and

    • (b) that ends on the earlier of

      • (i) the day on which the qualified trust files with the Minister a notice of revocation of the election, and

      • (ii) the day, if any, that is designated by the qualified trust in the notice of revocation and that is not before the day that is 15 months before the day on which the notice of revocation is filed.

  • Marginal note:Requirement to provide information

    (4) Where a qualified trust elects under subsection (1),

    • (a) it shall provide notification of the election

      • (i) within 30 days after making the election, to each person who held a unit in the qualified trust at any time in the period before the election was made and during which the election is applicable, and

      • (ii) at the time of acquisition, to each person who acquires a unit in the qualified trust at any time in the period after the election was made and during which the election is applicable; and

    • (b) if a person who holds a unit in the qualified trust at any time in the period during which the election is applicable makes a written request to the qualified trust for information that is necessary for the purpose of determining the consequences under this Act of the election for that person, the qualified trust shall provide to the person that information within 30 days after receiving the request.

  • Marginal note:Definitions

    (5) In this section,

    designated provisions

    designated provisions means sections 146 and 146.1 to 146.4 and Parts X, XI.01 and XI.1, as they apply in respect of investments that are not qualified investments for a trust, and Part X.2; (dispositions désignées)

    qualified corporation

    qualified corporation[Repealed, 2005, c. 30, s. 18]

    qualified trust

    qualified trust at any time means a trust (other than a registered investment or a trust that is prescribed to be a small business investment trust) where

    • (a) each trustee of the trust at that time is a corporation that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee or a person who is a trustee of a trust governed by a registered pension plan,

    • (b) all the interests of the beneficiaries under the trust at that time are described by reference to units of the trust all of which are at that time identical to each other,

    • (c) it has never before that time borrowed money except where the borrowing was for a term not exceeding 90 days and the borrowing was not part of a series of loans or other transactions and repayments, and

    • (d) it has never before that time accepted deposits; (fiducie admissible)

    specified taxpayer

    specified taxpayer means a taxpayer that is a registered investment or that is described in any of paragraphs 149(1)(r), (s), (u) to (u.2) and (x). (contribuable déterminé)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 259
  • 1994, c. 7, Sch. VIII, s. 142, c. 21, s. 115
  • 2005, c. 30, s. 18
  • 2008, c. 28, s. 37
  • 2009, c. 2, s. 79
  • 2011, c. 24, s. 75
  • 2017, c. 33, s. 80
 
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