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

Full Document:  

Act current to 2024-02-06 and last amended on 2024-01-22. Previous Versions

PART IIncome Tax (continued)

DIVISION BComputation of Income (continued)

SUBDIVISION CTaxable Capital Gains and Allowable Capital Losses (continued)

Marginal note:Taxable net gain from disposition of listed personal property

  •  (1) For the purposes of this Part, a taxpayer’s taxable net gain for a taxation year from dispositions of listed personal property is 1/2 of the amount determined under subsection 41(2) to be the taxpayer’s net gain for the year from dispositions of such property.

  • Marginal note:Determination of net gain

    (2) A taxpayer’s net gain for a taxation year from dispositions of listed personal property is an amount determined as follows:

    • (a) determine the amount, if any, by which the total of the taxpayer’s gains for the year from the disposition of listed personal property, other than property described in subparagraph 39(1)(a)(i.1), exceeds the total of the taxpayer’s losses for the year from dispositions of listed personal property, and

    • (b) deduct from the amount determined under paragraph 41(2)(a) such portion as the taxpayer may claim of the taxpayer’s listed-personal-property losses for the 7 taxation years immediately preceding and the 3 taxation years immediately following the taxation year, except that for the purposes of this paragraph

      • (i) an amount in respect of a listed-personal-property loss is deductible for a taxation year only to the extent that it exceeds the total of amounts deducted under this paragraph in respect of that loss for preceding taxation years,

      • (ii) no amount is deductible in respect of the listed-personal-property loss of any year until the deductible listed-personal-property losses for previous years have been deducted, and

      • (iii) no amount is deductible in respect of listed-personal-property losses from the amount determined under paragraph 41(2)(a) for a taxation year except to the extent of the amount so determined for the year,

    and the remainder determined under paragraph 41(2)(b) is the taxpayer’s net gain for the year from dispositions of listed personal property.

  • Definition of listed-personal-property loss

    (3) In this section, listed-personal-property loss of a taxpayer for a taxation year means the amount, if any, by which the total of the taxpayer’s losses for the year from dispositions of listed personal property exceeds the total of the taxpayer’s gains for the year from dispositions of listed personal property, other than property described in subparagraph 39(1)(a)(i.1).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 41
  • 2001, c. 17, s. 26

Marginal note:Dispositions subject to warranty

  •  (1) For the purposes of this Subdivision,

    • (a) an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,

      • (i) if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and

      • (ii) in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and

    • (b) an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,

      • (i) if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and

      • (ii) in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.

  • Meaning of specified date

    (2) In subsection (1), specified date means,

    • (a) if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and

    • (b) in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 42
  • 2013, c. 34, s. 184

Marginal note:General rule for part dispositions

  •  (1) For the purpose of computing a taxpayer’s gain or loss for a taxation year from the disposition of part of a property, the adjusted cost base to the taxpayer, immediately before the disposition, of that part is the portion of the adjusted cost base to the taxpayer at that time of the whole property that can reasonably be regarded as attributable to that part.

  • Marginal note:Ecological gifts

    (2) For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real or personal servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,

    • (a) the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or servitude, as the case may be, is deemed to be equal to the amount determined by the formula

      A × B/C

      where

      A
      is the adjusted cost base to the taxpayer of the land immediately before the disposition,
      B
      is the amount determined under subsection 110.1(5) or 118.1(12) in respect of the disposition, and
      C
      is the fair market value of the land immediately before the disposition; and
    • (b) for greater certainty, the cost to the taxpayer of the land shall be reduced at the time of the disposition by the amount determined under paragraph (a).

  • Marginal note:Payments out of trust income, etc.

    (3) Notwithstanding subsection (1), where part of a capital interest of a taxpayer in a trust would, but for paragraph (h) or (i) of the definition disposition in subsection 248(1), be disposed of solely because of the satisfaction of a right to enforce payment of an amount by the trust, no part of the adjusted cost base to the taxpayer of the taxpayer’s capital interest in the trust shall be allocated to that part of the capital interest.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 43
  • 2001, c. 17, s. 27
  • 2013, c. 34, s. 185
  • 2017, c. 33, s. 11

Marginal note:Life estates in real property

  •  (1) Notwithstanding any other provision of this Act, if at any time a taxpayer disposes of a remainder interest in real property (except as a result of a transaction to which subsection 73(3) would otherwise apply or by way of a gift to a qualified donee) to a person or partnership and retains a life estate or an estate pur autre vie (in this section referred to as the “life estate”) in the property, the taxpayer is deemed

    • (a) to have disposed at that time of the life estate in the property for proceeds of disposition equal to its fair market value at that time; and

    • (b) to have reacquired the life estate immediately after that time at a cost equal to the proceeds of disposition referred to in paragraph 43.1(1)(a).

  • Marginal note:Idem

    (2) Where, as a result of an individual’s death, a life estate to which subsection 43.1(1) applied is terminated,

    • (a) the holder of the life estate immediately before the death shall be deemed to have disposed of the life estate immediately before the death for proceeds of disposition equal to the adjusted cost base to that person of the life estate immediately before the death; and

    • (b) where a person who is the holder of the remainder interest in the real property immediately before the death was not dealing at arm’s length with the holder of the life estate, there shall, after the death, be added in computing the adjusted cost base to that person of the real property an amount equal to the lesser of

      • (i) the adjusted cost base of the life estate in the property immediately before the death, and

      • (ii) the amount, if any, by which the fair market value of the real property immediately after the death exceeds the adjusted cost base to that person of the remainder interest immediately before the death.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1994, c. 7, Sch. VIII, s. 13, c. 21, s. 16
  • 2011, c. 24, s. 6
  • 2013, c. 34, s. 103(F)

Marginal note:Exchanges of property

  •  (1) Where at any time in a taxation year (in this subsection referred to as the “initial year”) an amount has become receivable by a taxpayer as proceeds of disposition of a capital property that is not a share of the capital stock of a corporation (which capital property is in this section referred to as the taxpayer’s “former property”) that is either

    • (a) property the proceeds of disposition of which are described in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54, or

    • (b) a property that was, immediately before the disposition, a former business property of the taxpayer,

    and the taxpayer has

    • (c) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, and

    • (d) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,

    acquired a capital property that is a replacement property for the taxpayer’s former property and the replacement property has not been disposed of by the taxpayer before the time the taxpayer disposed of the taxpayer’s former property, notwithstanding subsection 40(1), if the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquired the replacement property,

    • (e) the gain for a particular taxation year from the disposition of the taxpayer’s former property shall be deemed to be the amount, if any, by which

      • (i) where the particular year is the initial year, the lesser of

        • (A) the amount, if any, by which the proceeds of disposition of the former property exceed

          • (I) in the case of depreciable property, the lesser of the proceeds of disposition of the former property computed without reference to subsection 44(6) and the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and

          • (II) in any other case, the total of its adjusted cost base to the taxpayer immediately before the disposition and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and

        • (B) the amount, if any, by which the proceeds of disposition of the former property exceed the total of the cost to the taxpayer, or in the case of depreciable property, the capital cost to the taxpayer, determined without reference to paragraph (f), of the taxpayer’s replacement property and any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, or

      • (ii) where the particular year is subsequent to the initial year, the amount, if any, claimed by the taxpayer under subparagraph 44(1)(e)(iii) in computing the taxpayer’s gain for the immediately preceding year from the disposition of the former property,

      exceeds

      • (iii) subject to subsection 44(1.1), such amount as the taxpayer claims,

        • (A) in the case of an individual (other than a trust), in prescribed form filed with the taxpayer’s return of income under this Part for the particular year, and

        • (B) in any other case, in the taxpayer’s return of income under this Part for the particular year,

        as a deduction, not exceeding the lesser of

        • (C) a reasonable amount as a reserve in respect of such of the proceeds of disposition of the former property that are payable to the taxpayer after the end of the particular year as can reasonably be regarded as a portion of the amount determined under subparagraph 44(1)(e)(i) in respect of the property, and

        • (D) an amount equal to the product obtained when 1/5 of the amount determined under subparagraph 44(1)(e)(i) in respect of the property is multiplied by the amount, if any, by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property, and

    • (f) the cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer, of the taxpayer’s replacement property at any time after the time the taxpayer disposed of the taxpayer’s former property, shall be deemed to be

      • (i) the cost to the taxpayer or, in the case of depreciable property, the capital cost to the taxpayer of the taxpayer’s replacement property otherwise determined,

      minus

      • (ii) the amount, if any, by which the amount determined under clause 44(1)(e)(i)(A) exceeds the amount determined under clause 44(1)(e)(i)(B).

  • Marginal note:Reserve — property disposed of to a child

    (1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(e)(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.

  • Marginal note:Time of disposition and of receipt of proceeds

    (2) For the purposes of this Act, the time at which a taxpayer has disposed of a property for which there are proceeds of disposition as described in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54, and the time at which an amount, in respect of those proceeds of disposition has become receivable by the taxpayer shall be deemed to be the earliest of

    • (a) the day the taxpayer has agreed to an amount as full compensation to the taxpayer for the property lost, destroyed, taken or sold,

    • (b) where a claim, suit, appeal or other proceeding has been taken before one or more tribunals or courts of competent jurisdiction, the day on which the taxpayer’s compensation for the property is finally determined by those tribunals or courts,

    • (c) where a claim, suit, appeal or other proceeding referred to in paragraph 44(2)(b) has not been taken before a tribunal or court of competent jurisdiction within two years of the loss, destruction or taking of the property, the day that is two years following the day of the loss, destruction or taking,

    • (d) the time at which the taxpayer is deemed by section 70 or paragraph 128.1(4)(b) to have disposed of the property, and

    • (e) where the taxpayer is a corporation other than a subsidiary corporation referred to in subsection 88(1), the time immediately before the winding-up of the corporation,

    and the taxpayer shall be deemed to have owned the property continuously until the time so determined.

  • Marginal note:Where s. 70(3) does not apply

    (3) Subsection 70(3) does not apply to compensation referred to in paragraph (b), (c) or (d) of the definition proceeds of disposition in subsection 13(21) or paragraph (b), (c) or (d) of the definition proceeds of disposition in section 54 that has been transferred or distributed to beneficiaries or other persons beneficially interested in an estate or trust.

  • Marginal note:Deemed election

    (4) Where a former property of a taxpayer was a depreciable property of the taxpayer

    • (a) if the taxpayer has elected in respect of that property under subsection 44(1), the taxpayer shall be deemed to have elected in respect thereof under subsection 13(4); and

    • (b) if the taxpayer has elected in respect of that property under subsection 13(4), the taxpayer shall be deemed to have elected in respect thereof under subsection 44(1).

  • Marginal note:Replacement property

    (5) For the purposes of this section, a particular capital property of a taxpayer is a replacement property for a former property of the taxpayer, if

    • (a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;

    • (a.1) it was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for a use that is the same as or similar to the use to which the taxpayer or a person related to the taxpayer put the former property;

    • (b) where the former property was used by the taxpayer or a person related to the taxpayer for the purpose of gaining or producing income from a business, the particular capital property was acquired for the purpose of gaining or producing income from that or a similar business or for use by a person related to the taxpayer for such a purpose;

    • (c) where the former property was a taxable Canadian property of the taxpayer, the particular capital property is a taxable Canadian property of the taxpayer; and

    • (d) where the former property was a taxable Canadian property (other than treaty-protected property) of the taxpayer, the particular capital property is a taxable Canadian property (other than treaty-protected property) of the taxpayer.

  • Marginal note:Deemed proceeds of disposition

    (6) If a taxpayer has disposed of property that was a former business property and was in part a building and in part the land (or an interest, or for civil law a right, therein) subjacent to, or immediately contiguous to and necessary for the use of, the building, for the purposes of this Subdivision, the amount if any, by which

    • (a) the proceeds of disposition of one such part determined without regard to this subsection

    exceed

    • (b) the adjusted cost base to the taxpayer of that part

    shall, to the extent that the taxpayer so elects in the taxpayer’s return of income under this Part for the year in which the taxpayer acquired a replacement property for the former business property, be deemed not to be proceeds of disposition of that part and to be proceeds of disposition of the other part.

  • Marginal note:Where subpara. (1)(e)(iii) does not apply

    (7) Subparagraph 44(1)(e)(iii) does not apply to permit a taxpayer to claim any amount under that subparagraph in computing a gain for a taxation year where

    • (a) the taxpayer, at the end of the year or at any time in the immediately following year, was not resident in Canada or was exempt from tax under any provision of this Part;

    • (b) the person to whom the former property of the taxpayer was disposed of was a corporation that, immediately after the disposition,

      • (i) was controlled, directly or indirectly in any manner whatever, by the taxpayer,

      • (ii) was controlled, directly or indirectly in any manner whatever, by a person or group of persons by whom the taxpayer was controlled, directly or indirectly in any manner whatever, or

      • (iii) controlled the taxpayer, directly or indirectly in any manner whatever, where the taxpayer is a corporation; or

    • (c) the former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority-interest partner.

  • Marginal note:Application of s. 70(10)

    (8) The definitions in subsection 70(10) apply to this section.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 44
  • 1994, c. 7, Sch. II, s. 24, c. 21, s. 17
  • 1995, c. 21, s. 12
  • 1998, c. 19, s. 90
  • 1999, c. 22, s. 12
  • 2001, c. 17, s. 28
  • 2007, c. 2, s. 5
  • 2013, c. 34, ss. 104, 186, c. 40, s. 20(E)
  • 2023, c. 26, s. 9(F)
 

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