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

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) the total of all amounts, each of which is the amount, if any, in respect of a partnership in which the corporation held a membership interest at the end of the year, either directly or indirectly through another partnership, determined by the formula

     (A – B) × C/D

    where

    A

    is the total of all amounts that would be determined under paragraphs (b) to (d) and (f) in respect of the partnership for its last fiscal period that ends at or before the end of the year if

    • (a) those paragraphs applied to partnerships in the same manner that they apply to corporations, and

    • (b) those amounts were computed without reference to amounts owing by the partnership

      • (i) to any corporation that held a membership interest in the partnership either directly or indirectly through another partnership, or

      • (ii) to any partnership in which a corporation described in subparagraph (i) held a membership interest either directly or indirectly through another partnership,

    B

    is the partnership’s deferred unrealized foreign exchange losses at the end of the period,

    C

    is the share of the partnership’s income or loss for the period to which the corporation is entitled either directly or indirectly through another partnership, and

    D

    is the partnership’s income or loss for the 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 (including, for this purpose, the amount of any provision for the redemption of preferred shares) 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 each member of which was, throughout the year,

    • (i) another corporation (other than a financial institution) that was not exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)), or

    • (ii) another partnership described in this paragraph,

  • (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 (4) and this subsection, the carrying value at the end of a taxation year of an interest of a corporation or of a partnership (each of which is referred to in this subsection as the “member”) in a particular partnership is deemed to be the member’s specified proportion, for the particular partnership’s last fiscal period that ends at or before the end of the taxation year, of the amount that would, if the particular partnership were a corporation, be the particular partnership’s investment allowance at the end of that fiscal 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.