Income Tax Act

Marginal note:Taxable capital employed in Canada

• 181.2 (1) The taxable capital employed in Canada of a corporation for a taxation year (other than a financial institution or a corporation that was throughout the year not resident in Canada) is the prescribed proportion of the corporation’s taxable capital for the year.

• Marginal note:Taxable capital

  (2) The taxable capital of a corporation (other than a financial institution) for a taxation year is the amount, if any, by which its capital for the year exceeds its investment allowance for the year.

• Marginal note:Capital

  (3) The capital of a corporation (other than a financial institution) for a taxation year is the amount, if any, by which the total of

  • (a) the amount of its capital stock (or, in the case of a corporation incorporated without share capital, the amount of its members’ contributions), retained earnings, contributed surplus and any other surpluses at the end of the year,

  • (b) the amount of its reserves for the year, except to the extent that they were deducted in computing its income for the year under Part I,

  • (b.1) the amount of its deferred unrealized foreign exchange gains at the end of the year,

  • (c) the amount of all loans and advances to the corporation at the end of the year,

  • (d) the amount of all indebtedness of the corporation at the end of the year represented by bonds, debentures, notes, mortgages, hypothecary claims, banker’s acceptances or similar obligations,

  • (e) the amount of any dividends declared but not paid by the corporation before the end of the year,

  • (f) the amount of all other indebtedness (other than any indebtedness in respect of a lease) of the corporation at the end of the year that has been outstanding for more than 365 days before the end of the year, and

  • (g) where the corporation was a member of a partnership at the end of the year, that proportion of the amount, if any, by which

    • (i) the total of all amounts (other than amounts owing to the member or to other corporations that are members of the partnership) that would be determined under this paragraph and paragraphs 181.2(3)(b) to 181.2(3)(d) and 181.2(3)(f) in respect of the partnership at the end of its last fiscal period that ends at or before the end of the year (if paragraphs 181.2(3)(b) to 181.2(3)(d) and 181.2(3)(f) applied to partnerships in the same way that they apply to corporations)

    exceeds

    • (ii) the amount of the partnership’s deferred unrealized foreign exchange losses at the end of that period

    that the member’s share of the partnership’s income or loss for that period is of the partnership’s income or loss for that period

  exceeds the total of

  • (h) the amount of its deferred tax debit balance at the end of the year,

  • (i) the amount of any deficit deducted in computing its shareholders’ equity at the end of the year,

  • (j) any amount deducted under subsection 135(1) in computing its income under Part I for the year, to the extent that the amount can reasonably be regarded as being included in the amount determined under any of paragraphs 181.2(3)(a) to 181.2(3)(g) in respect of the corporation for the year, and

  • (k) the amount of its deferred unrealized foreign exchange losses at the end of the year.

• Marginal note:Investment allowance

  (4) The investment allowance of a corporation (other than a financial institution) for a taxation year is the total of all amounts each of which is the carrying value at the end of the year of an asset of the corporation that is

  • (a) a share of another corporation,

  • (b) a loan or advance to another corporation (other than a financial institution),

  • (c) a bond, debenture, note, mortgage, hypothecary claim or similar obligation of another corporation (other than a financial institution),

  • (d) long-term debt of a financial institution,

  • (d.1) a loan or advance to, or a bond, debenture, note, mortgage, hypothecary claim or similar obligation of, a partnership all of the members of which, throughout the year, were other corporations (other than financial institutions) that were not exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)),

  • (e) an interest in a partnership, or

  • (f) a dividend payable to the corporation at the end of the year on a share of the capital stock of another corporation,

  other than a share of the capital stock of, a dividend payable by, or indebtedness of, a corporation that is exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)).

• Marginal note:Value of interest in partnership

  (5) For the purposes of subsection 181.2(4), the carrying value, at the end of a taxation year, of an interest of a corporation in a partnership shall be deemed to be an amount equal to that proportion of

  • (a) the total of all amounts each of which is the carrying value of an asset of the partnership, at the end of its last fiscal period ending at or before the end of the year, described in any of paragraphs 181.2(4)(a) to 181.2(4)(d) and 181.2(4)(f), other than an asset that is a share of the capital stock of, a dividend payable by, or indebtedness of, a corporation that is exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)),

  that

  • (b) the corporation’s share of the partnership’s income or loss for that period

  is of

  • (c) the partnership’s income or loss for that period.

• Marginal note:Loan

  (6) For the purpose of subsection 181.2(4), where a corporation made a particular loan to a trust that neither

  • (a) made any loans or advances to nor received any loans or advances from, nor

  • (b) acquired any bond, debenture, note, mortgage, hypothecary claim or similar obligation of nor issued any bond, debenture, note, mortgage, hypothecary claim or similar obligation to

  a person not related to the corporation, as part of a series of transactions in which the trust made a loan to another corporation (other than a financial institution) to which the corporation is related, the least of

  • (c) the amount of the particular loan,

  • (d) the amount of the loan from the trust to the other corporation, and

  • (e) the amount, if any, by which

    • (i) the total of all amounts each of which is the amount of a loan from the trust to any corporation

    exceeds

    • (ii) the total of all amounts each of which is the amount of a loan (other than the particular loan) from any corporation to the trust

  at any time shall be deemed to be the amount of a loan from the corporation to the other corporation at that time.