Income Tax Application Rules (R.S.C., 1985, c. 2 (5th Supp.))

Act current to 2019-07-01 and last amended on 2017-01-01. Previous Versions

PART IIncome Tax Application Rules, 1971 (continued)

References and Continuation of Provisions (continued)

Marginal note:General depreciation provisions

  •  (1) Where the capital cost to a taxpayer of any depreciable property that was acquired by the taxpayer before 1972 was required by any provision of the old law to be determined for the purpose of computing the amount of any deduction under any such provision in respect of that property, or would have been required by any provision of the old law to be determined for that purpose if any deduction under any such provision had been claimed by the taxpayer in respect of that property, the amount of the capital cost so required to be determined or that would have been so required to be determined, as the case may be, shall be deemed, for all purposes of the amended Act, to be the capital cost to the taxpayer of that property.

  • Marginal note:Idem

    (2) Where a taxpayer acquired depreciable property before the beginning of the 1949 taxation year, for the purposes of section 13 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act an amount equal to the total of

    • (a) all deductions allowed in computing the taxpayer’s income for the purpose of the Income War Tax Act as “special depreciation”, “extra depreciation” or allowances in lieu of depreciation for property the taxpayer had at the beginning of the 1949 taxation year (except deductions allowed under subparagraph 6(1)(n)(ii) of that Act), and

    • (b) ½ of all amounts allowed to the taxpayer under subparagraph 6(1)(n)(ii) of that Act for property that the taxpayer had at the beginning of the 1949 taxation year,

    shall be deemed to have been allowed to the taxpayer under regulations made under paragraph 20(1)(a) of the amended Act in computing income for a taxation year before the 1949 taxation year.

  • Marginal note:Provisoes not applicable

    (3) The second and third provisoes to paragraph 6(1)(n) of the Income War Tax Act do not apply with respect to sales made after the beginning of the 1949 taxation year.

  • Marginal note:Reference to depreciation

    (4) Reference in this section to depreciation shall be deemed to include a reference to allowances in respect of depreciable property of a taxpayer made under paragraph 5(1)(a) of the Income War Tax Act.

  • Marginal note:Deduction deemed depreciation

    (5) An amount deducted under paragraph 5(1)(u) of the Income War Tax Act in respect of amounts of a capital nature shall, for the purpose of this section, be deemed to be depreciation taken into account in ascertaining the taxpayer’s income for the purpose of that Act or in ascertaining the taxpayer’s loss for the taxation year for which it was deducted.

Special Transitional Rules

Marginal note:Income maintenance payments

  •  (1) Notwithstanding section 9, paragraph 6(1)(f) of the amended Act does not apply in respect of amounts received by a taxpayer in a taxation year that were payable to the taxpayer in respect of the loss, in consequence of an event occurring before 1974, of all or any part of the taxpayer’s income from an office or employment, under a plan, described in that paragraph, that was established before June 19, 1971.

  • Marginal note:Effect of certain changes made in plan established before June 19, 1971

    (2) For the purposes of this section, a plan described in paragraph 6(1)(f) of the amended Act that was in existence before June 19, 1971 does not cease to be a plan established before that date solely because of changes made therein on or after that date for the purpose of ensuring that the plan qualifies as one entitling the employer of persons covered under the plan to a reduction, as provided for by subsection 50(2) of the Unemployment Insurance Act, in the amount of the employer’s premium payable under that Act in respect of insured persons covered under the plan.

Marginal note:Depreciable property

  •  (1) If the capital cost to a taxpayer of any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 and owned by the taxpayer without interruption from December 31, 1971 until such time after 1971 as the taxpayer disposed of it is less than the fair market value of the property on valuation day and less than the proceeds of disposition thereof otherwise determined,

    • (a) for the purposes of section 13 of the amended Act, subdivision c of Division B of Part I of that Act and any regulations made under paragraph 20(1)(a) of that Act, the taxpayer’s proceeds of disposition of the property shall be deemed to be an amount equal to the total of its capital cost to the taxpayer and the amount, if any, by which the proceeds of disposition thereof otherwise determined exceed the fair market value of the property on valuation day,

    • (b) where the property has, by one or more transactions or events (other than the death of a taxpayer to which subsection 70(5) of the amended Act applies) between persons not dealing at arm’s length, become vested in another taxpayer

      • (i) for the purposes of the amended Act (other than, where paragraph 13(7)(e) of that Act applies in determining the capital cost to that other taxpayer of the property, for the purposes of paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), that other taxpayer shall be deemed to have acquired the property at a capital cost equal to the proceeds deemed to have been received for the property by the person from whom that other taxpayer acquired the property, and

      • (ii) for the purposes of this subsection, that other taxpayer shall be deemed to have acquired the property before 1972 at a capital cost equal to the capital cost of the property to the taxpayer who actually owned the property at the end of 1971, and to have owned it without interruption from December 31, 1971 until such time after 1971 as that other taxpayer disposed of it, and

    • (c) where the disposition occurred because of an election under subsection 110.6(19) of the amended Act,

      • (i) for the purposes of that Act (other than paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), the taxpayer is deemed to have reacquired the property at a capital cost equal to

        • (A) where the amount designated in respect of the property in the election did not exceed 110% of the fair market value of the property at the end of February 22, 1994, the taxpayer’s proceeds of disposition determined under paragraph (a) in respect of the disposition of the property that immediately preceded the reacquisition minus the amount, if any, by which the amount designated in respect of the property in the election exceeded that fair market value, and

        • (B) in any other case, the amount otherwise determined under subsection 110.6(19) of that Act to be the cost to the taxpayer of the property immediately after the reacquisition referred to in that subsection minus the amount by which the fair market value of the property on valuation day exceeded the capital cost of the property at the time it was last acquired before 1972, and

      • (ii) for the purposes of this subsection, the taxpayer’s capital cost of the property after the reacquisition shall be deemed to be equal to the taxpayer’s capital cost of the property before the reacquisition and the taxpayer shall be considered to have owned the property without interruption from December 31, 1971 until such time after February 22, 1994 as the taxpayer disposes of it.

  • Marginal note:Where depreciable property disposed of to spouse, trust or child

    (1.1) Subsection (1) does not apply in any case where

    • (a) subsection 70(6) or 73(1) of the amended Act applies in respect of the disposition by a taxpayer of any depreciable property of a prescribed class to the spouse, common-law partner, trust or transferee, as the case may be, referred to therein, and

    • (b) subsection 70(9) of the amended Act applies in respect of the disposition by a taxpayer of any depreciable property of a prescribed class to a child referred to therein,

    except that where the spouse, common-law partner, trust, transferee or child, as the case may be, subsequently disposes of the property at any time, subsection (1) applies as if the spouse, common-law partner, trust, transferee or child, as the case may be, had acquired the property before 1972 and owned it without interruption from December 31, 1971 until that time.

  • Extended meaning of child

    (1.11) For the purposes of subsection (1.1), child of a taxpayer includes

    • (a) a child of the taxpayer’s child;

    • (b) a child of the taxpayer’s child’s child; and

    • (c) a person who, at any time before attaining the age of 21 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control.

  • Marginal note:Other transfers of depreciable property

    (1.2) Where, because of a transaction or an event in respect of which any of subsections 70(5), 85(1), (2) and (3), 87(2), section 88, subsections 97(2), 98(3) and (5) and 107(2) of the amended Act applies, a taxpayer has at any particular time after 1971 acquired any depreciable property of a prescribed class from a person who acquired the property before 1972 and owned it without interruption from December 31, 1971 until the particular time, for the purposes of subsection (1) the taxpayer shall be deemed to have acquired the property before 1972 and to have owned it without interruption from December 31, 1971 until such time after 1971 as the taxpayer disposed of it.

  • Marginal note:Transfers before 1972 not at arm’s length

    (1.3) Without restricting the generality of section 18, if any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) has been transferred before 1972 in circumstances such that subsection 20(4) of the former Act would, if that provision applied to transfers of property made in the 1972 taxation year, apply, paragraph 69(1)(b) of the amended Act does not apply to the transfer and subsection 20(4) of the former Act applies thereto.

  • Marginal note:Depreciable property received as dividend in kind

    (1.4) The capital cost to a taxpayer, as of any particular time after 1971, of any depreciable property (other than depreciable property referred to in subsection (1.3) or deemed by subparagraph (1)(b)(ii) to have been acquired by the taxpayer before 1972 or a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 as, on account of, in lieu of payment of or in satisfaction of, a dividend payable in kind (other than a stock dividend) in respect of a share owned by the taxpayer of the capital stock of a corporation, is deemed to be the fair market value of that property at the time the property was so received.

  • Marginal note:Recapture of capital cost allowances

    (2) In determining a taxpayer’s income for a taxation year from farming or fishing, subsection 13(1) of the amended Act does not apply in respect of the disposition by the taxpayer of property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 unless the taxpayer has elected to make a deduction for that or a preceding taxation year, in respect of the capital cost of property acquired by the taxpayer before 1972, under regulations made under paragraph 20(1)(a) of that Act other than a regulation providing solely for an allowance for computing income from farming or fishing.

  • Marginal note:Depreciable property of partnership of prescribed class

    (3) For the purposes of the amended Act, where a partnership had, on December 31, 1971, partnership property that was depreciable property of a prescribed class,

    • (a) the capital cost to the partnership of each property of that class shall be deemed to be an amount determined as follows:

      • (i) determine, for each person who, because of having been a member of the partnership on the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until December 31, 1971, can reasonably be regarded as having had an interest in the property of that class on December 31, 1971, the persons acquisition cost in respect of property of that class,

      • (ii) determine, for each such person, the amount that is that proportion of the person’s acquisition cost in respect of property of that class that 100% is of the person’s percentage in respect of property of that class,

      • (iii) select the amount determined under subparagraph (ii) for a person described therein that is not greater than any amount so determined for any other such person, and

      • (iv) determine that proportion of the amount selected under subparagraph (iii) (in this subsection referred to as the “capital cost of that class”) that the fair market value on December 31, 1971 of that property is of the fair market value on that day of all property of that class,

      and the amount determined under subparagraph (iv) is the capital cost to the partnership of that property;

    • (b) for the purposes of sections 13 and 20 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act, the undepreciated capital cost to the partnership of property of that class as of any time after 1971 shall be computed as though the amount, if any, by which the capital cost of that class to the partnership exceeds the undepreciated cost to the partnership of that class had been allowed to the partnership in respect of property of that class under regulations made under paragraph 20(1)(a) of the amended Act in computing income for taxation years before that time;

    • (c) in computing the income for the 1972 and subsequent taxation years of each person who was a member of the partnership on June 18, 1971 and thereafter without interruption until December 31, 1971, there may be deducted such amount as the person claims for the year, not exceeding the amount, if any, by which the total of

      • (i) the lesser of

        • (A) the amount, if any, by which the amount that was the capital cost to the person of all property of that class exceeds the percentage, equal to the person’s percentage in respect of property of that class, of the capital cost of that class to the partnership, and

        • (B) the amount that was the undepreciated capital cost to the person of property of that class as of December 31, 1971, and

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

        • (A) the undepreciated capital cost to the person of property of that class as of December 31, 1971, less the amount, if any, determined under subparagraph (i) in respect of property of that class,

        exceeds

        • (B) the percentage, equal to the person’s percentage in respect of property of that class, of the undepreciated cost to the partnership of that class,

        exceeds the total of all amounts deducted under this paragraph in computing the persons income for preceding taxation years, and, for the purposes of section 3 of the amended Act, the amount so claimed shall be deemed to be a deduction permitted by subdivision e of Division B of Part I of that Act; and

    • (d) notwithstanding paragraph (c), a person who became a member of the partnership after June 18, 1971 and who was a member of the partnership thereafter without interruption until December 31, 1971 shall be deemed to be a person described in paragraph (c) and the amount that may be claimed thereunder as a deduction in computing the person’s income for any taxation year shall not exceed 10% of the total of the amounts determined under subparagraphs (c)(i) and (ii).

  • Marginal note:Definitions

    (4) In subsection (3),

    acquisition cost

    acquisition cost of a person who was a member of a partnership on December 31, 1971 in respect of depreciable property of a prescribed class that was partnership property of the partnership on December 31, 1971 means the total of the undepreciated capital cost to the person of property of that class as of December 31, 1971 and the total depreciation allowed to the person before 1972 in respect of property of that class; (coût d’acquisition)

    percentage

    percentage of a member of a partnership in respect of any depreciable property of a prescribed class that was partnership property of the partnership on December 31, 1971 means the interest of the member of the partnership in property of that class, expressed as a percentage of the total of the interests of all members of the partnership in property of that class on that day; (pourcentage)

    undepreciated cost to the partnership

    undepreciated cost to the partnership of any class of depreciable property means an amount determined as follows:

    • (a) determine, for each person who, because of having been a member of the partnership on the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until December 31, 1971, can reasonably be regarded as having had an interest in property of that class on December 31, 1971, the amount, if any, by which the undepreciated capital cost to the person of property of that class as of December 31, 1971 exceeds the amount, if any, determined under subparagraph (3)(c)(i) for the person in respect of property of that class,

    • (b) determine, for each such person, the amount that is that proportion of the amount determined under paragraph (a) that 100% is of the person’s percentage in respect of property of that class, and

    • (c) select the amount determined under paragraph (b) for a person described therein that is not greater than any amount so determined for any other such person,

    and the amount selected under paragraph (c) is the undepreciated cost to the partnership of that class. (fraction non amortie du coût, pour la société de personnes)

  • Marginal note:Other depreciable property of partnership

    (5) For the purposes of the amended Act, where a partnership had, on December 31, 1971, any particular partnership property that was depreciable property other than depreciable property of a prescribed class,

    • (a) the cost to the partnership of the particular property shall be deemed to be the amount that would be determined under paragraph (3)(a) to be the capital cost thereof if

      • (i) the particular property constituted a prescribed class of property, and

      • (ii) the acquisition cost of each person described therein in respect of the particular property were its actual cost to the person or the amount at which the person was deemed by subsection 20(6) of the former Act to have acquired it, as the case may be;

    • (b) for the purposes of sections 13 and 20 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act, the undepreciated capital cost of property of any class as of any particular time after 1971 shall be computed as if the amount, if any, by which

      • (i) the amount determined under paragraph (a) to have been the cost to the partnership of the particular property,

      exceeds

      • (ii) the amount that would be determined under the definition undepreciated cost to the partnership in subsection (4) to be the undepreciated cost to the partnership of any class of depreciable property comprising the particular property if

        • (A) paragraph (a) of that definition were read without reference to the words “the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until”,

        • (B) the amount determined under subparagraph 3(c)(i) for any person in respect of that class were nil, and

        • (C) the undepreciated capital cost to each person described in the definition acquisition cost in subsection (4) of the particular property as of December 31, 1971 were the amount, if any, by which the amount assumed by subparagraph (a)(ii) to have been the acquisition cost of the person in respect of the property exceeds the total of all allowed to the person in respect of the property under regulations made under paragraph 11(1)(a) of the former Act in computing income for taxation years ending before 1972,

        had been allowed to the partnership in respect of the particular property under regulations made under paragraph 20(1)(a) of the amended Act in computing income for taxation years ending before the particular time; and

    • (c) in computing the income for the 1972 and subsequent taxation years of each person who was, on December 31, 1971, a member of the partnership, there may be deducted such amount as the person claims for the year, not exceeding the amount, if any, by which

      • (i) the amount by which

        • (A) the amount assumed by clause (b)(ii)(C) to have been the undepreciated capital cost to the person of the particular property as of December 31, 1971

        exceeds

        • (B) a percentage of the amount determined under subparagraph (b)(ii) in respect of the particular property, equal to the percentage that would be the person’s percentage (within the meaning assigned by subsection (4)) in respect of the particular property if that property constituted a prescribed class,

      exceeds

      • (ii) the total of all amounts deducted under this paragraph in computing the person’s income for preceding taxation years,

      and for the purposes of section 3 of the amended Act the amount so claimed shall be deemed to be a deduction permitted by subdivision e of Division B of Part I of that Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 2 (5th Supp.), s. 20
  • 1995, c. 3, s. 56
  • 1998, c. 19, s. 248
  • 2000, c. 12, s. 147
  • 2016, c. 12, s. 72
 
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