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

Full Document:  

Act current to 2022-11-16 and last amended on 2022-10-18. Previous Versions

PART IIncome Tax (continued)

DIVISION FSpecial Rules Applicable in Certain Circumstances (continued)

Financial Institutions (continued)

Communal Organizations

Marginal note:Communal organizations

  •  (1) Where a congregation, or one or more business agencies of the congregation, carries on one or more businesses for purposes that include supporting or sustaining the congregation’s members or the members of any other congregation, the following rules apply:

    • (a) a trust is deemed to be created on the day that is the later of

      • (i) December 31, 1976, and

      • (ii) the day the congregation came into existence;

    • (b) the trust is deemed to have been continuously in existence from the day determined under paragraph (a);

    • (c) the property of the congregation is deemed to be the property of the trust;

    • (d) the property of each business agency of the congregation in a calendar year is deemed to be property of the trust throughout the portion of the year throughout which the trust exists;

    • (e) where the congregation is a corporation, the corporation is deemed to be the trustee having control of the trust property;

    • (f) where the congregation is not a corporation, its council, committee of leaders, executive committee, administrative committee, officers or other group charged with its management are deemed to be the trustees having control of the trust property;

    • (g) the congregation is deemed to act and to have always acted as agent for the trust in all matters relating to its businesses and other activities;

    • (h) each business agency of the congregation in a calendar year is deemed to have acted as agent for the trust in all matters in the year relating to its businesses and other activities;

    • (i) the members of the congregation are deemed to be the beneficiaries under the trust;

    • (j) tax under this Part is payable by the trust on its taxable income for each taxation year;

    • (k) in computing the income of the trust for any taxation year,

      • (i) subject to paragraph (l), no deduction may be made in respect of salaries, wages or benefits of any kind provided to the members of the congregation, and

      • (ii) no deduction may be made under subsection 104(6), except to the extent that any portion of the trust’s income (determined without reference to that subsection) is allocated to the members of the congregation in accordance with subsection (2);

    • (l) for the purpose of applying section 20.01 to the trust,

      • (i) each member of the congregation is deemed to be a member of the trust’s household, and

      • (ii) section 20.01 shall be read without reference to paragraphs 20.01(2)(b) and (c) and subsection 20.01(3); and

    • (m) where the congregation or one of the business agencies is a corporation, section 15.1 shall, except for the purposes of paragraphs 15.1(2)(a) and (c) (other than subparagraphs 15.1(2)(c)(i) and (ii)), apply as if this subsection were read without reference to paragraphs (c), (d), (g) and (h).

  • Marginal note:Election in respect of income

    (2) If the trust referred to in subsection (1) in respect of a congregation so elects in respect of a taxation year in writing filed with the Minister on or before the trust’s filing-due date for the year and all the congregation’s participating members are specified in the election in accordance with subsection (5), the following rules apply:

    • (a) for the purposes of subsections 104(6) and (13), the amount payable in the year to a particular participating member of the congregation out of the income of the trust (determined without reference to subsection 104(6)) is the amount determined by the formula

      0.8 (A × B/C) + D + (0.2A - E)/F

      where

      A
      is the taxable income of the trust for the year (determined without reference to subsection 104(6) and specified future tax consequences for the year),
      B
      is
      • (i) where the particular member is identified in the election as a person to whom this subparagraph applies (in this subsection referred to as a “designated member”), 1, and

      • (ii) in any other case, 0.5,

      C
      is the total of
      • (i) the number of designated members of the congregation, and

      • (ii) 1/2 of the number of other participating members of the congregation in respect of the year,

      D
      is the amount, if any, that is specified in the election as an additional allocation under this subsection to the particular member,
      E
      is the total of all amounts each of which is an amount specified in the election as an additional allocation under this subsection to a participating member of the congregation in respect of the year, and
      F
      is the number of participating members of the congregation in respect of the year;
    • (b) the designated member of each family at the end of the year is deemed to have supported the other members of the family during the year and the other members of the family are deemed to have been wholly dependent on the designated member for support during the year;

    • (c) the taxable income for the year of each member of the congregation shall be computed without reference to subsection 110(2); and

    • (d) if the trust earns income from a business in the year, then the portion of the amount payable in the year to a particular participating member of the congregation out of the income of the trust under paragraph (a) that can reasonably be considered to relate to that income from a business is deemed to be income from a business carried on by the particular member.

  • Marginal note:Refusal to accept election

    (3) An election under subsection (2) in respect of a congregation for a particular taxation year is not binding on the Minister unless all taxes, interest and penalties payable under this Part, as a consequence of the application of subsection (2) to the congregation for preceding taxation years, are paid at or before the end of the particular year.

  • Marginal note:Election in respect of gifts

    (3.1) For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by a trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,

    • (a) the trust is deemed not to have made the gift; and

    • (b) each participating member of the congregation is deemed to have made, in the year, such a gift the eligible amount of which is the amount determined by the formula

      A × B/C

      where

      A
      is the eligible amount of the gift made by the trust,
      B
      is the amount determined for the year in respect of the member under paragraph(2)(a) as a consequence of an election under subsection (2) by the trust, and
      C
      is the total of all amounts each of which is an amount determined for the year in respect of a participating member of the congregation under paragraph (2)(a) as a consequence of an election under subsection (2) by the trust.
  • Marginal note:Definitions

    (4) For the purposes of this section,

    adult

    adult means an individual who, before the time at which the term is applied, has attained the age of eighteen years or is married or in a common-law partnership; (adulte)

    business agency

    business agency, of a congregation at any time in a particular calendar year, means a corporation, trust or other person, where the congregation owned all the shares of the capital stock of the corporation (except directors’ qualifying shares) or every interest in the trust or other person, as the case may be, throughout the portion of the particular calendar year throughout which both the congregation and the corporation, trust or other person, as the case may be, were in existence; (agence commerciale)

    congregation

    congregation means a community, society or body of individuals, whether or not incorporated,

    • (a) the members of which live and work together,

    • (b) that adheres to the practices and beliefs of, and operates according to the principles of, the religious organization of which it is a constituent part,

    • (c) that does not permit any of its members to own any property in their own right, and

    • (d) that requires its members to devote their working lives to the activities of the congregation; (congrégation)

    family

    family means,

    • (a) in the case of an adult who is unmarried and who is not in a common-law partnership, that person and the person’s children who are not adults, not married and not in a common-law partnership, and

    • (b) in the case of an adult who is married or in a common-law partnership, that person and the person’s spouse or common-law partner and the children of either or both of them who are not adults, not married and not in a common-law partnership

    but does not include an individual who is included in any other family or who is not a member of the congregation in which the family is included; (famille)

    member of a congregation

    member of a congregation means

    • (a) an adult, living with the members of the congregation, who conforms to the practices of the religious organization of which the congregation is a constituent part whether or not that person has been formally accepted into the organization, and

    • (b) a child who is unmarried and not in a common-law partnership, other than an adult, of an adult referred to in paragraph (a), if the child lives with the members of the congregation; (membre d’une congrégation)

    participating member

    participating member, of a congregation in respect of a taxation year, means an individual who, at the end of the year, is an adult who is a member of the congregation; (membre participant)

    religious organization

    religious organization means an organization, other than a registered charity, of which a congregation is a constituent part, that adheres to beliefs, evidenced by the religious and philosophical tenets of the organization, that include a belief in the existence of a supreme being. (organisme religieux)

    total charitable gifts

    total charitable gifts has the meaning assigned by subsection 118.1(1); (total des dons de bienfaisance)

    total Crown gifts

    total Crown gifts[Repealed, 2014, c. 39, s. 48]

    total cultural gifts

    total cultural gifts has the meaning assigned by subsection 118.1(1); (total des dons de biens culturels)

    total ecological gifts

    total ecological gifts has the same meaning as in subsection 118.1(1). (total des dons de biens écosensibles)

  • Marginal note:Specification of family members

    (5) For the purpose of applying subsection (2) to a particular election by the trust referred to in subsection (1) in respect of a congregation for a particular taxation year,

    • (a) subject to paragraph (b), a participating member of the congregation is considered to have been specified in the particular election in accordance with this subsection only if the member is identified in the particular election and

      • (i) where the member’s family includes only one adult at the end of the particular year, the member is identified in the particular election as a person to whom subparagraph (i) of the description of B in subsection (2) (in this subsection referred to as the “relevant subparagraph”) applies, and

      • (ii) in any other case, only one of the adults in the member’s family is identified in the particular election as a person to whom the relevant subparagraph applies; and

    • (b) an individual is considered not to have been specified in the particular election in accordance with this subsection if

      • (i) the individual is one of two individuals who were married to each other, or in a common-law partnership, at the end of a preceding taxation year of the trust and at the end of the particular year,

      • (ii) one of those individuals was

        • (A) where the preceding year ended before 1998, specified in an election under subsection (2) by the trust for the preceding year, and

        • (B) in any other case, identified in an election under subsection (2) by the trust for the preceding year as a person to whom the relevant subparagraph applied, and

      • (iii) the other individual is identified in the particular election as a person to whom the relevant subparagraph applies.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 143
  • 1994, c. 7, Sch. II, s. 116, c. 21, s. 67
  • 2000, c. 12, ss. 134, 142, c. 19, s. 41
  • 2001, c. 17, s. 245, 263(E)
  • 2013, c. 34, s. 291
  • 2014, c. 39, s. 48
  • 2019, c. 29, s. 25

Marginal note:Definitions

  •  (1) The definitions in this subsection apply in this section.

    amateur athlete

    amateur athlete at any time means an individual (other than a trust) who is, at that time,

    • (a) a member of a registered Canadian amateur athletic association;

    • (b) eligible to compete, in an international sporting event sanctioned by an international sports federation, as a Canadian national team member; and

    • (c) not a professional athlete. (athlète amateur)

    professional athlete

    professional athlete means an individual who receives income that is compensation for, or is otherwise attributable to, the individual’s activities as a player or athlete in a professional sport. (athlète professionnel)

    qualifying performance income

    qualifying performance income of an individual means income that

    • (a) is received by the individual in a taxation year in which

      • (i) the individual was, at any time, an amateur athlete, and

      • (ii) the individual was not, at any time, a professional athlete;

    • (b) may reasonably be considered to be in connection with the individual’s participation as an amateur athlete in one or more international sporting events referred to in the definition amateur athlete; and

    • (c) is endorsement income, prize money, or income from public appearances or speeches. (revenu de performance admissible)

    third party

    third party in respect of an arrangement described in paragraph (1.1)(b) means a person who deals at arm’s length with the amateur athlete in respect of the arrangement. (tiers)

  • Marginal note:Where subsection (1.2) applies

    (1.1) Subsection (1.2) applies where, at any time,

    • (a) a national sport organization that is a registered Canadian amateur athletic association receives an amount for the benefit of an individual under an arrangement made under rules of an international sport federation that require amounts to be held, controlled and administered by the organization in order to preserve the eligibility of the individual to compete in a sporting event sanctioned by the federation; or

    • (b) an individual enters into an arrangement that

      • (i) is an account with an issuer described in paragraph (b) of the definition qualifying arrangement in subsection 146.2(1), or that would be so described if that definition applied at that time,

      • (ii) provides that no amount may be deposited, credited or added to the account, other than an amount that is qualifying performance income of the individual or that is interest or other income in respect of the property deposited, credited or added to the account,

      • (iii) provides that a third party is a mandatory signatory on any payment from the account, and

      • (iv) is not a registered retirement savings plan or a TFSA.

  • Marginal note:Amateur athletes’ reserve funds

    (1.2) If this subsection applies in respect of an arrangement referred to in subsection (1.1),

    • (a) a trust (in this section referred to as the “amateur athlete trust”) is deemed

      • (i) to be created on the day on which the first amount referred to in paragraph (1.1)(a) or (b) is received by the sport organization or by the issuer, as the case may be, in respect of the arrangement, and

      • (ii) to exist until subsection (3) or (4) applies in respect of the trust;

    • (b) all property held under the arrangement is deemed to be the property of the amateur athlete trust and not property of any other person;

    • (c) if, at any time, the sport organization or the issuer, as the case may be, receives an amount under the arrangement and the amount would, in the absence of this subsection, be included in computing the income of the individual in respect of the arrangement for the taxation year that includes that time, the amount is deemed to be income of the amateur athlete trust for that taxation year and not to be income of the individual;

    • (d) if, at any time, the sport organization or the issuer, as the case may be, pays or transfers an amount under the arrangement to or for the benefit of the individual, the amount is deemed to be an amount distributed at that time to the individual by the amateur athlete trust;

    • (e) the individual is deemed to be the beneficiary under the amateur athlete trust;

    • (f) the sport organization or the third party, as the case may be, in respect of the arrangement is deemed to be the trustee of the amateur athlete trust; and

    • (g) no tax is payable under this Part by the amateur athlete trust on its taxable income for any taxation year.

  • Marginal note:Amounts included in beneficiary’s income

    (2) In computing the income for a taxation year of the beneficiary under an amateur athlete trust, there shall be included the total of all amounts distributed in the year to the beneficiary by the trust.

  • Marginal note:Termination of amateur athlete trust

    (3) Where an amateur athlete trust holds property on behalf of a beneficiary who has not competed in an international sporting event as a Canadian national team member for a period of 8 years that ends in a particular taxation year and that begins in the year that is the later of

    • (a) where the beneficiary has competed in such an event, the year in which the beneficiary last so competed, and

    • (b) the year in which the trust was created,

    the trust shall be deemed to have distributed, at the end of the particular taxation year to the beneficiary, an amount equal to

    • (c) if the trust is liable to pay tax under Part XII.2 in respect of the particular year, 60% of the fair market value of all property held by it at that time, and

    • (d) in any other case, the fair market value of all property held by it at that time.

  • Marginal note:Death of beneficiary

    (4) Where an amateur athlete trust holds property on behalf of a beneficiary who dies in a year, the trust shall be deemed to have distributed, immediately before the death, to the beneficiary, an amount equal to

    • (a) if the trust is liable to pay tax under Part XII.2 in respect of the year, 60% of the fair market value of all property held by it at that time; and

    • (b) in any other case, the fair market value of all property held by it at that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1994, c. 7, Sch. VIII, s. 81
  • 2009, c. 2, s. 50
  • 2014, c. 39, s. 49
  • 2016, c. 7, s. 62
 
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