Income Tax Act

Marginal note:Definitions

• 237.1 (1) In this section,

  gifting arrangement

  gifting arrangement means any arrangement under which it may reasonably be considered, having regard to statements or representations made or proposed to be made in connection with the arrangement, that if a person were to enter into the arrangement, the person would

  • (a) make a gift to a qualified donee, or a contribution referred to in subsection 127(4.1), of property acquired by the person under the arrangement; or

  • (b) incur a limited-recourse debt, determined under subsection 143.2(6.1), that can reasonably be considered to relate to a gift to a qualified donee or a monetary contribution referred to in subsection 127(4.1); (arrangement de don)

  person

  person includes a partnership; (personne)

  promoter

  promoter in respect of a tax shelter means a person who in the course of a business

  • (a) sells or issues, or promotes the sale, issuance or acquisition of, the tax shelter,

  • (b) acts as an agent or adviser in respect of the sale or issuance, or the promotion of the sale, issuance or acquisition, of the tax shelter, or

  • (c) accepts, whether as a principal or agent, consideration in respect of the tax shelter,

  and more than one person may be a tax shelter promoter in respect of the same tax shelter; (promoteur)

  tax shelter

  tax shelter means

  • (a) a gifting arrangement described by paragraph (b) of the definition gifting arrangement; and

  • (b) a gifting arrangement described by paragraph (a) of the definition gifting arrangement, or a property (including any right to income) other than a flow-through share or a prescribed property, in respect of which it can reasonably be considered, having regard to statements or representations made or proposed to be made in connection with the gifting arrangement or the property, that, if a person were to enter into the gifting arrangement or acquire an interest in the property, at the end of a particular taxation year that ends within four years after the day on which the gifting arrangement is entered into or the interest is acquired,

    • (i) the total of all amounts each of which is

      • (A) an amount, or a loss in the case of a partnership interest, represented to be deductible in computing the person’s income for the particular year or any preceding taxation year in respect of the gifting arrangement or the interest in the property (including, if the property is a right to income, an amount or loss in respect of that right that is stated or represented to be so deductible), or

      • (B) any other amount stated or represented to be deemed under this Act to be paid on account of the person’s tax payable, or to be deductible in computing the person’s income, taxable income or tax payable under this Act, for the particular year or any preceding taxation year in respect of the gifting arrangement or the interest in the property, other than an amount so stated or represented that is included in computing a loss described in clause (A),

    would equal or exceed

    • (ii) the amount, if any, by which

      • (A) the cost to the person of the property acquired under the gifting arrangement, or of the interest in the property at the end of the particular year, determined without reference to section 143.2,

      would exceed

      • (B) the total of all amounts each of which is the amount of any prescribed benefit that is expected to be received or enjoyed, directly or indirectly, in respect of the property acquired under the gifting arrangement, or of the interest in the property, by the person or another person with whom the person does not deal at arm’s length. (abri fiscal)

• Marginal note:Application

  (2) A promoter in respect of a tax shelter shall apply to the Minister in prescribed form for an identification number for the tax shelter unless an identification number therefor has previously been applied for.

• Marginal note:Identification

  (3) On receipt of an application under subsection 237.1(2) for an identification number for a tax shelter, together with prescribed information and an undertaking satisfactory to the Minister that books and records in respect of the tax shelter will be kept and retained at a place in Canada that is satisfactory to the Minister, the Minister shall issue an identification number for the tax shelter.

• Marginal note:Sales prohibited

  (4) A person may, at any time, whether as a principal or an agent, sell or issue, or accept consideration in respect of, a tax shelter only if

  • (a) the Minister has issued before that time an identification number for the tax shelter; and

  • (b) that time is during the calendar year designated by the Minister as being applicable to the identification number.

• Marginal note:Providing tax shelter number

  (5) Every promoter in respect of a tax shelter shall

  • (a) make reasonable efforts to ensure that all persons who acquire or otherwise invest in the tax shelter are provided with the identification number issued by the Minister for the tax shelter;

  • (b) prominently display on the upper right-hand corner of any statement of earnings prepared by or on behalf of the promoter in respect of the tax shelter the identification number issued for the tax shelter; and

  • (c) on every written statement made after 1995 by the promoter that refers either directly or indirectly and either expressly or impliedly to the issuance by the Canada Revenue Agency of an identification number for the tax shelter, as well as on the copies of the portion of the information return to be forwarded pursuant to subsection 237.1(7.3), prominently display

    • (i) where the statement or return is wholly or partly in English, the following:

      “ ‘The identification number issued for this tax shelter shall be included in any income tax return filed by the investor. Issuance of the identification number is for administrative purposes only and does not in any way confirm the entitlement of an investor to claim any tax benefits associated with the tax shelter.’ ”

    • (ii) where the statement or return is wholly or partly in French, the following:

      “ ‘Le numéro d’inscription attribué à cet abri fiscal doit figurer dans toute déclaration d’impôt sur le revenu produite par l’investisseur. L’attribution de ce numéro n’est qu’une formalité administrative et ne confirme aucunement le droit de l’investisseur aux avantages fiscaux découlant de cet abri fiscal.’ ”

    and

    • (iii) where the statement includes neither English nor French, the following:

      “ ‘The identification number issued for this tax shelter shall be included in any income tax return filed by the investor. Issuance of the identification number is for administrative purposes only and does not in any way confirm the entitlement of an investor to claim any tax benefits associated with the tax shelter.’ ”

      “ ‘Le numéro d’inscription attribué à cet abri fiscal doit figurer dans toute déclaration d’impôt sur le revenu produite par l’investisseur. L’attribution de ce numéro n’est qu’une formalité administrative et ne confirme aucunement le droit de l’investisseur aux avantages fiscaux découlant de cet abri fiscal.’ ”

• Marginal note:Deductions and claims disallowed

  (6) No amount may be deducted or claimed by a person in respect of a tax shelter unless the person files with the Minister a prescribed form containing prescribed information, including the identification number for the tax shelter.

• Marginal note:Deductions and claims disallowed

  (6.1) No amount may be deducted or claimed by any person for any taxation year in respect of a tax shelter of the person where any person is liable to a penalty under subsection 237.1(7.4) or 162(9) in respect of the tax shelter or interest on the penalty and

  • (a) the penalty or interest has not been paid; or

  • (b) the penalty and interest have been paid, but an amount on account of the penalty or interest has been repaid under subsection 164(1.1) or applied under subsection 164(2).

• Marginal note:Assessments

  (6.2) Notwithstanding subsections 152(4) to 152(5), such assessments, determinations and redeterminations may be made as are necessary to give effect to subsection 237.1(6.1).

• Marginal note:Information return

  (7) Every promoter in respect of a tax shelter who accepts consideration in respect of the tax shelter or who acts as a principal or agent in respect of the tax shelter in a calendar year shall, in prescribed form and manner, file an information return for the year containing

  • (a) the name, address and the business number, Social Insurance Number or trust account number of each person who so acquires or otherwise invests in the tax shelter in the year,

  • (b) the amount paid by each of those persons in respect of the tax shelter, and

  • (c) such other information as is required by the prescribed form

  unless an information return in respect of the tax shelter has previously been filed.

• Marginal note:Time for filing return

  (7.1) An information return required under subsection 237.1(7) to be filed in respect of the acquisition of an interest in a tax shelter in a calendar year shall be filed with the Minister on or before the last day of February of the following calendar year.

• Marginal note:Time for filing — special case

  (7.2) Notwithstanding subsection 237.1(7.1), where a person is required under subsection 237.1(7) to file an information return in respect of a business or activity and the person discontinues that business or activity, the return shall be filed on or before the earlier of

  • (a) the day referred to in subsection 237.1(7.1); and

  • (b) the day that is 30 days after the day of the discontinuance.

• Marginal note:Copies to be provided

  (7.3) Every person required to file a return under subsection 237.1(7) shall, on or before the day on or before which the return is required to be filed with the Minister, forward to each person to whom the return relates 2 copies of the portion of the return relating to that person.

• Marginal note:Penalty

  (7.4) Every person who files false or misleading information with the Minister in respect of an application under subsection 237.1(2) or, whether as a principal or as an agent, sells, issues or accepts consideration in respect of a tax shelter before the Minister has issued an identification number for the tax shelter is liable to a penalty equal to the greater of

  • (a) $500, and

  • (b) 25% of the greater of

    • (i) the total of all amounts each of which is the consideration received or receivable from a person in respect of the tax shelter before the correct information is filed with the Minister or the identification number is issued, as the case may be, and

    • (ii) the total of all amounts each of which is an amount stated or represented to be the value of property that a particular person who acquires or otherwise invests in the tax shelter could donate to a qualified donee, if the tax shelter is a gifting arrangement and consideration has been received or is receivable from the particular person in respect of the tax shelter before the correct information is filed with the Minister or the identification number is issued, as the case may be.

• Marginal note:Penalty

  (7.5) Every person who is required under subsection (7) to file an information return and who fails to comply with a demand under section 233 to file the return, or to report in the return information required under paragraph (7)(a) or (b), is liable to a penalty equal to 25% of the greater of

  • (a) the total of all amounts each of which is the consideration received or receivable by the person in respect of the tax shelter from a particular person in respect of whom information required under paragraph (7)(a) or (b) had not been reported at or before the time that the demand was issued or the return was filed, as the case may be, and

  • (b) if the tax shelter is a gifting arrangement, the total of all amounts each of which is an amount stated or represented to be the value of property that the particular person could donate to a qualified donee.

• Marginal note:Application of ss. 231 to 231.3

  (8) Without restricting the generality of sections 231 to 231.3, where an application under subsection 237.1(2) with respect to a tax shelter has been made, notwithstanding that a return of income has not been filed by any taxpayer under section 150 for the taxation year of the taxpayer in which an amount is claimed as a deduction in respect of the tax shelter, sections 231 to 231.3 apply, with such modifications as the circumstances require, for the purpose of permitting the Minister to verify or ascertain any information in respect of the tax shelter.