Income Tax Act

Marginal note:Inadequate considerations

• 69 (1) Except as expressly otherwise provided in this Act,

  • (a) where a taxpayer has acquired anything from a person with whom the taxpayer was not dealing at arm’s length at an amount in excess of the fair market value thereof at the time the taxpayer so acquired it, the taxpayer shall be deemed to have acquired it at that fair market value;

  • (b) where a taxpayer has disposed of anything

    • (i) to a person with whom the taxpayer was not dealing at arm’s length for no proceeds or for proceeds less than the fair market value thereof at the time the taxpayer so disposed of it,

    • (ii) to any person by way of gift, or

    • (iii) to a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property;

    the taxpayer shall be deemed to have received proceeds of disposition therefor equal to that fair market value; and

  • (c) where a taxpayer acquires a property by way of gift, bequest or inheritance or because of a disposition that does not result in a change in the beneficial ownership of the property, the taxpayer is deemed to acquire the property at its fair market value.

• Marginal note:Idem, where s. 70(3) applies

  (1.1) Where a taxpayer has acquired property that is a right or thing to which subsection 70(3) applies, the following rules apply:

  • (a) paragraph 69(1)(c) is not applicable to that property; and

  • (b) the taxpayer shall be deemed to have acquired the property at a cost equal to the total of

    • (i) such part, if any, of the cost thereof to the taxpayer who has died as had not been deducted by the taxpayer in computing the taxpayer’s income for any year, and

    • (ii) any expenditures made or incurred by the taxpayer to acquire the property.

• Marginal note:Idem

  (1.2) Where, at any time,

  • (a) a taxpayer disposed of property for proceeds of disposition (determined without reference to this subsection) equal to or greater than the fair market value at that time of the property, and

  • (b) there existed at that time an agreement under which a person with whom the taxpayer was not dealing at arm’s length agreed to pay as rent, royalty or other payment for the use of or the right to use the property an amount less than the amount that would have been reasonable in the circumstances if the taxpayer and the person had been dealing at arm’s length at the time the agreement was entered into,

  the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of

  • (c) those proceeds determined without reference to this subsection, and

  • (d) the fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement.

• (2) and (3) [Repealed, 1998, c. 19, s. 107]

• Marginal note:Shareholder appropriations

  (4) Where at any time property of a corporation has been appropriated in any manner whatever to or for the benefit of a shareholder of the corporation for no consideration or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have increased the corporation’s income or reduced a loss of the corporation, the corporation shall be deemed to have disposed of the property, and to have received proceeds of disposition therefor equal to its fair market value, at that time.

• Marginal note:Idem

  (5) Where in a taxation year of a corporation property of the corporation has been appropriated in any manner whatever to, or for the benefit of, a shareholder, on the winding-up of the corporation, the following rules apply:

  • (a) the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds equal to its fair market value at that time;

  • (b) the shareholder shall be deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;

  • (c) subsections 52(1) and (2) do not apply for the purposes of determining the cost to the shareholder of the property; and

  • (d) subsections 13(21.2), 18(15) and 40(3.4) and (3.6) do not apply in respect of any property disposed of on the winding-up.

  • (e) [Repealed, 1998, c. 19, s. 107]

• (6) to (10) [Repealed, 2003, c. 28, s. 8]

• Marginal note:Deemed proceeds of disposition

  (11) Where, at any particular time as part of a series of transactions or events, a taxpayer disposes of property for proceeds of disposition that are less than its fair market value and it can reasonably be considered that one of the main purposes of the series is

  • (a) to obtain the benefit of

    • (i) any deduction (other than a deduction under subsection 110.6(2.1) in respect of a capital gain from a disposition of a share acquired by the taxpayer in an acquisition to which subsection 85(3) or 98(3) applied) in computing income, taxable income, taxable income earned in Canada or tax payable under this Act, or

    • (ii) any balance of undeducted outlays, expenses or other amounts

    available to a person (other than a person that would be affiliated with the taxpayer immediately before the series began, if section 251.1 were read without reference to the definition controlled in subsection 251.1(3)) in respect of a subsequent disposition of the property or property substituted for the property, or

  • (b) to obtain the benefit of an exemption available to any person from tax payable under this Act on any income arising on a subsequent disposition of the property or property substituted for the property,

  notwithstanding any other provision of this Act, where the subsequent disposition occurs, or arrangements for the subsequent disposition are made, before the day that is 3 years after the particular time, the taxpayer is deemed to have disposed of the property at the particular time for proceeds of disposition equal to its fair market value at the particular time.

• Marginal note:Reassessments

  (12) Notwithstanding subsections 152(4) to 152(5), the Minister may at any time make any assessments or reassessments of the tax, interest and penalties payable by the taxpayer that are necessary to give effect to subsection 69(11).

• (12.1) and (12.2) [Repealed, 1998, c. 19, s. 107]

• Marginal note:Amalgamation or merger

  (13) Where there is an amalgamation or merger of a corporation with one or more other corporations to form one corporate entity (in this subsection referred to as the “new corporation”), each property of the corporation that becomes property of the new corporation as a result of the amalgamation or merger is deemed, for the purpose of determining whether subsection 69(11) applies to the amalgamation or merger, to have been disposed of by the corporation immediately before the amalgamation or merger for proceeds equal to

  • (a) in the case of a Canadian resource property or a foreign resource property, nil; and

  • (b) in the case of any other property, the cost amount to the corporation of the property immediately before the amalgamation or merger.

• Marginal note:New taxpayer

  (14) For the purpose of subsection 69(11), where a taxpayer is incorporated or otherwise comes into existence at a particular time during a series of transactions or events, the taxpayer is deemed

  • (a) to have existed at the time that was immediately before the series began; and

  • (b) to have been affiliated at that time with every person with whom the taxpayer is affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) at the particular time.