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

Full Document:  

Act current to 2021-11-17 and last amended on 2021-07-01. Previous Versions

PART IIncome Tax (continued)

DIVISION BComputation of Income (continued)

SUBDIVISION CTaxable Capital Gains and Allowable Capital Losses (continued)

Marginal note:Property with more than one use

  •  (1) For the purposes of this Subdivision the following rules apply:

    • (a) where a taxpayer,

      • (i) having acquired property for some other purpose, has commenced at a later time to use it for the purpose of gaining or producing income, or

      • (ii) having acquired property for the purpose of gaining or producing income, has commenced at a later time to use it for some other purpose,

      the taxpayer shall be deemed to have

      • (iii) disposed of it at that later time for proceeds equal to its fair market value at that later time, and

      • (iv) immediately thereafter reacquired it at a cost equal to that fair market value;

    • (b) where property has, since it was acquired by a taxpayer, been regularly used in part for the purpose of gaining or producing income and in part for some other purpose, the taxpayer shall be deemed to have acquired, for that other purpose, the proportion of the property that the use regularly made of the property for that other purpose is of the whole use regularly made of the property at a cost to the taxpayer equal to the same proportion of the cost to the taxpayer of the whole property, and, if the property has, in such a case, been disposed of, the proceeds of disposition of the proportion of the property deemed to have been acquired for that other purpose shall be deemed to be the same proportion of the proceeds of disposition of the whole property;

    • (c) where, at any time after a taxpayer has acquired property, there has been a change in the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes,

      • (i) if the use regularly made of the property for those other purposes has increased, the taxpayer shall be deemed to have

        • (A) disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and

        • (B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(i)(A), and

      • (ii) if the use regularly made of the property for those other purposes has decreased, the taxpayer shall be deemed to have

        • (A) disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the decrease in use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and

        • (B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(ii)(A); and

    • (d) in applying this subsection in respect of a non-resident taxpayer, a reference to “gaining or producing income” shall be read as a reference to “gaining or producing income from a source in Canada”.

  • Marginal note:Election where change of use

    (2) For the purposes of this Subdivision and section 13, if a taxpayer elects in respect of any property of the taxpayer in the taxpayer’s return of income for a taxation year under this Part,

    • (a) if subparagraph (1)(a)(i) or paragraph 13(7)(b) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have begun to use the property for the purpose of gaining or producing income;

    • (b) if subparagraph (1)(c)(ii) or 13(7)(d)(i) would otherwise apply to the property for the taxation year, the taxpayer is deemed not to have increased the use regularly made of the property for the purpose of gaining or producing income relative to the use regularly made of the property for other purposes; and

    • (c) if the taxpayer rescinds the election in respect of the property in the taxpayer’s return of income under this Part for a subsequent taxation year,

      • (i) if paragraph (a) applied to the taxpayer in the taxation year, the taxpayer is deemed to have begun to use the property for the purpose of gaining or producing income on the first day of the subsequent taxation year, and

      • (ii) if paragraph (b) applied to the taxpayer in the taxation year, the taxpayer is deemed to have increased the use regularly made of the property for the purpose of gaining or producing income on the first day of the subsequent taxation year by the amount that would have been the increase in the taxation year if the election had not been made.

  • Marginal note:Election concerning principal residence

    (3) If at any time a property that was acquired by a taxpayer for the purpose of gaining or producing income, or that was acquired in part for that purpose, ceases in whole or in part to be used for that purpose and becomes, or becomes part of, the principal residence of the taxpayer, paragraphs (1)(a) and (c) shall not apply to deem the taxpayer to have disposed of the property at that time and to have reacquired it immediately thereafter if the taxpayer so elects by notifying the Minister in writing on or before the earlier of

    • (a) the day that is 90 days after a demand by the Minister for an election under this subsection is sent to the taxpayer, and

    • (b) the taxpayer’s filing-due date for the taxation year in which the property is actually disposed of by the taxpayer.

  • Marginal note:Where election cannot be made

    (4) Notwithstanding subsection 45(3), an election described in that subsection shall be deemed not to have been made in respect of a change in use of property if any deduction in respect of the property has been allowed for any taxation year ending after 1984 and on or before the change in use under regulations made under paragraph 20(1)(a) to the taxpayer, the taxpayer’s spouse or common-law partner or a trust under which the taxpayer or the taxpayer’s spouse or common-law partner is a beneficiary.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 45
  • 1994, c. 7, Sch. II, s. 25, c. 21, s. 18
  • 1996, c. 21, s. 10
  • 2000, c. 12, s. 142
  • 2001, c. 17, s. 30
  • 2021, c. 23, s. 6

Marginal note:Personal-use property

  •  (1) Where a taxpayer has disposed of a personal-use property (other than an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) of the taxpayer, for the purposes of this Subdivision

    • (a) the adjusted cost base to the taxpayer of the property immediately before the disposition shall be deemed to be the greater of $1,000 and the amount otherwise determined to be its adjusted cost base to the taxpayer at that time; and

    • (b) the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of $1,000 and the taxpayer’s proceeds of disposition of the property otherwise determined.

  • Marginal note:Where part only of property disposed of

    (2) Where a taxpayer has disposed of part of a personal-use property (other than a part of an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) owned by the taxpayer and has retained another part of the property, for the purposes of this Subdivision

    • (a) the adjusted cost base to the taxpayer, immediately before the disposition, of the part so disposed of shall be deemed to be the greater of

      • (i) the adjusted cost base to the taxpayer at that time of that part otherwise determined, and

      • (ii) that proportion of $1,000 that the amount determined under subparagraph 46(2)(a)(i) is of the adjusted cost base to the taxpayer at that time of the whole property; and

    • (b) the proceeds of disposition of the part so disposed of shall be deemed to be the greater of

      • (i) the proceeds of disposition of that part otherwise determined, and

      • (ii) the amount determined under subparagraph 46(2)(a)(ii).

  • Marginal note:Properties ordinarily disposed of as a set

    (3) For the purposes of this Subdivision, where a number of personal-use personal-use properties of a taxpayer that would, if the properties were disposed of, ordinarily be disposed of in one disposition as a set,

    • (a) have been disposed of by more than one disposition so that all of the properties have been acquired by one person or by a group of persons not dealing with each other at arm’s length, and

    • (b) had, immediately before the first disposition referred to in paragraph 46(3)(a), a total fair market value greater than $1,000,

    the properties shall be deemed to be a single personal-use property and each such disposition shall be deemed to be a disposition of a part of that property.

  • Marginal note:Decrease in value of personal-use property of corporation, etc.

    (4) Where it may reasonably be regarded that, by reason of a decrease in the fair market value of any personal-use property of a corporation, partnership or trust,

    • (a) a taxpayer’s gain, if any, from the disposition of a share of the capital stock of a corporation, an interest in a trust or an interest in a partnership has become a loss, or is less than it would have been if the decrease had not occurred, or

    • (b) a taxpayer’s loss, if any, from the disposition of a share or interest described in paragraph 46(4)(a) is greater than it would have been if the decrease had not occurred,

    the amount of the gain or loss, as the case may be, shall be deemed to be the amount that it would have been but for the decrease.

  • Marginal note:Excluded property

    (5) For the purpose of this section, excluded property of a taxpayer means property acquired by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, in circumstances in which it is reasonable to conclude that the acquisition of the property relates to an arrangement, plan or scheme that is promoted by another person or partnership and under which it is reasonable to conclude that the property will be the subject of a gift to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 46
  • 2001, c. 17, s. 31

Marginal note:Identical properties

  •  (1) Where at any particular time after 1971 a taxpayer who owns one property that was or two or more identical properties each of which was, as the case may be, acquired by the taxpayer after 1971, acquires one or more other properties (in this subsection referred to as “newly-acquired properties”) each of which is identical to each such previously-acquired property, for the purposes of computing, at any subsequent time, the adjusted cost base of the taxpayer of each such identical property,

    • (a) the taxpayer shall be deemed to have disposed of each such previously-acquired property immediately before the particular time for proceeds equal to its adjusted cost base to the taxpayer immediately before the particular time;

    • (b) the taxpayer shall be deemed to have acquired the identical property at the particular time at a cost equal to the quotient obtained when

      • (i) the total of the adjusted cost bases to the taxpayer immediately before the particular time of the previously-acquired properties, and the cost to the taxpayer (determined without reference to this section) of the newly-acquired properties

      is divided by

      • (ii) the number of the identical properties owned by the taxpayer immediately after the particular time;

    • (c) there shall be deducted, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property, the amount determined by the formula

      A/B

      where

      A
      is the total of all amounts deducted under paragraph 53(2)(g.1) in computing immediately before the particular time the adjusted cost base to the taxpayer of the previously-acquired properties, and
      B
      is the number of such identical properties owned by the taxpayer immediately after the particular time or, where subsection 47(2) applies, the quotient determined under that subsection in respect of the acquisition; and
    • (d) there shall be added, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property the amount determined under paragraph 47(1)(c) in respect of the identical property.

  • Marginal note:Where identical properties are bonds, etc.

    (2) For the purposes of subsection 47(1), where a group of identical properties referred to in that subsection is a group of identical bonds, debentures, bills, notes or similar obligations issued by a debtor, subparagraph 47(1)(b)(ii) shall be read as follows:

    • “(ii) the quotient obtained when the total of the principal amounts of all such identical properties owned by the taxpayer immediately after the particular time is divided by the principal amount of the identical property.”

  • Marginal note:Securities acquired by employee

    (3) For the purpose of subsection (1), a security (within the meaning assigned by subsection 7(7)) acquired by a taxpayer after February 27, 2000 is deemed not to be identical to any other security acquired by the taxpayer if

    • (a) the security is acquired in circumstances to which any of subsections 7(1.1), (1.5) or (8) or 147(10.1) applies; or

    • (b) the security is a security to which subsection 7(1.31) applies.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 47
  • 1995, c. 21, s 13
  • 2001, c. 17, s. 32
Indexed Security Investment Plans

Marginal note:Application of s. 47.1 of R.S.C., 1952, c. 148

  •  (26.1) Words and expressions used in subsections 47.1(27) and 47.1(28) have the meanings assigned to them by subsections 47.1(1) to (26) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as the latter subsections read on July 1, 1986 and in so far as they are not inconsistent with subsections 47.1(27) and 47.1(28).

  • Marginal note:Capital losses in 1986

    (27) Notwithstanding any other provision of this Act, where paragraph 47.1(10)(f) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that paragraph read on January 1, 1986, applied in respect of the termination before 1986 of an indexed security investment plan under which a taxpayer was a participant, any amount that would have been deemed under that paragraph to be a capital loss of the taxpayer from the Plan for the 1986 or a subsequent taxation year shall be deemed to be a capital loss of the taxpayer for the 1986 taxation year from the disposition of property in 1986.

  • Marginal note:Transition for 1986

    (28) Where a taxpayer was a participant under a Plan on January 1, 1986, the following rules apply:

    • (a) each indexed security owned under the Plan by the taxpayer on that date shall be deemed to have been disposed of under the Plan on that date for proceeds of disposition determined by the formula

      A × B/C

      where

      A
      is the indexing base of the Plan on that date determined as if subparagraph 47.1(3)(a)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, were read as “the fair market value of all indexed securities owned by the taxpayer under the Plan at the end of the preceding taxation year”,
      B
      is the fair market value of the security on that date, and
      C
      is the fair market value of all indexed securities owned under the Plan by the taxpayer on that date;
    • (b) each indexed security deemed under paragraph 47.1(28)(a) to have been disposed of under the Plan shall be deemed to have been reacquired outside the Plan by the taxpayer immediately after that date at a cost equal to the amount deemed under paragraph 47.1(28)(a) to be the proceeds of the disposition of that security;

    • (c) each put or call option referred to in clause 47.1(4)(a)(iv)(B) or (C) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that clause read on January 1, 1986, outstanding under the Plan on that date shall be deemed to have been closed out under the Plan on that date at a cost equal to the amount that the taxpayer would have had to pay on that date if the taxpayer had actually closed out the option on a prescribed stock exchange in Canada on that date;

    • (d) each put or call option deemed under paragraph 47.1(28)(c) to have been closed out shall be deemed to be written outside the Plan immediately after that date for proceeds equal to the amount deemed under paragraph 47.1(28)(c) to be the cost at which the option was closed out; and

    • (e) for greater certainty, the taxpayer’s indexed gain or loss, as the case may be, for the 1986 taxation year from the Plan and unindexed gain or loss, as the case may be, for that year from the Plan shall be nil.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1984, c. 1, s. 17
  • 1985, c. 45, ss. 19, 126(F)
  • 1986, c. 6, s. 20, c. 55, s. 7
 
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