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

Full Document:  

Act current to 2022-07-25 and last amended on 2022-07-01. Previous Versions

PART IIncome Tax (continued)

DIVISION BComputation of Income (continued)

SUBDIVISION BIncome or Loss from a Business or Property (continued)

Marginal note:Definitions

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

    entity

    entity has the same meaning as in subsection 122.1(1). (entité)

    equity value

    equity value has the same meaning as in subsection 122.1(1). (valeur des capitaux propres)

    real estate investment trust

    real estate investment trust has the same meaning as in subsection 122.1(1). (fiducie de placement immobilier)

    security

    security, of an entity, means

    • (a) a liability of the entity;

    • (b) if the entity is a corporation,

      • (i) a share of the capital stock of the corporation, and

      • (ii) a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation if it can reasonably be concluded that one of the reasons that a person or partnership holds the right to control is to avoid the application of subsection (3) or 12.6(3);

    • (c) if the entity is a trust, an income or a capital interest in the trust; and

    • (d) if the entity is a partnership, an interest as a member of the partnership. (titre)

    stapled security

    stapled security, of a particular entity at any time, means a particular security of the particular entity if at that time

    • (a) another security (referred to in this section as the “reference security”)

      • (i) is or may be required to be transferred together or concurrently with the particular security as a term or condition of the particular security, the reference security, or an agreement or arrangement to which the particular entity (or if the reference security is a security of another entity, the other entity) is a party, or

      • (ii) is listed or traded with the particular security on a stock exchange or other public market under a single trading symbol;

    • (b) the particular security or the reference security is listed or traded on a stock exchange or other public market; and

    • (c) any of the following applies:

      • (i) the reference security and the particular security are securities of the particular entity and the particular entity is a corporation, SIFT partnership or SIFT trust,

      • (ii) the reference security is a security of another entity, one of the particular entity or the other entity is a subsidiary of the other, and the particular entity or the other entity is a corporation, SIFT partnership or SIFT trust, or

      • (iii) the reference security is a security of another entity and the particular entity or the other entity is a real estate investment trust or a subsidiary of a real estate investment trust. (titre agrafé)

    subsidiary

    subsidiary, of a particular entity at any time, means

    • (a) an entity in which the particular entity holds at that time securities that have a total fair market value greater than 10% of the equity value of the entity; and

    • (b) an entity that at that time is a subsidiary of an entity that is a subsidiary of the particular entity. (filiale)

    transition period

    transition period, of an entity, means

    • (a) if one or more securities of the entity would have been stapled securities of the entity on October 31, 2006 and July 19, 2011 had the definition stapled security in this subsection come into force on October 31, 2006, the period that begins on July 20, 2011 and ends on the earliest of

      • (i) January 1, 2016,

      • (ii) the first day after July 20, 2011 on which any of those securities is materially altered, and

      • (iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of

        • (A) a transaction

          • (I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and

          • (II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or

        • (B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011;

    • (b) if paragraph (a) does not apply to the entity and one or more securities of the entity would have been stapled securities of the entity on July 19, 2011 had the definition stapled security in this subsection come into force on July 19, 2011, the period that begins on July 20, 2011 and ends on the earliest of

      • (i) July 20, 2012,

      • (ii) the first day after July 20, 2011 on which any of those securities is materially altered, and

      • (iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of

        • (A) a transaction

          • (I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and

          • (II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or

        • (B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011; and

    • (c) in any other case, if the entity is a subsidiary of another entity on July 20, 2011 and the other entity has a transition period, the period that begins on July 20, 2011 and ends on the earliest of

      • (i) the day on which the other entity’s transition period ends,

      • (ii) the first day after July 20, 2011 on which the entity ceases to be a subsidiary of the other entity, and

      • (iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of

        • (A) a transaction

          • (I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and

          • (II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or

        • (B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011. (période de transition)

  • Marginal note:Property representing security

    (2) For the purpose of determining whether a particular security of an entity is a stapled security, if a receipt or similar property (referred to in this subsection as the “receipt”) represents all or a portion of the particular security and the receipt would be described in paragraphs (a) and (b) of the definition stapled security in subsection (1) if it were a security of the entity, then

    • (a) the particular security is deemed to be described in those paragraphs; and

    • (b) a security that would be a reference security in respect of the receipt is deemed to be a reference security in respect of the particular security.

  • Marginal note:Amounts not deductible

    (3) Notwithstanding any other provision of this Act, in computing the income of a particular entity for a taxation year from a business or property, no deduction may be made in respect of an amount

    • (a) that is paid or payable after July 19, 2011, unless the amount is paid or payable in respect of the entity’s transition period; and

    • (b) that is

      • (i) interest paid or payable on a liability of the particular entity that is a stapled security, unless each reference security in respect of the stapled security is a liability, or

      • (ii) if a security of the particular entity, a subsidiary of the particular entity or an entity of which the particular entity is a subsidiary is a reference security in respect of a stapled security of a real estate investment trust or a subsidiary of a real estate investment trust, an amount paid or payable to

        • (A) the real estate investment trust,

        • (B) a subsidiary of the real estate investment trust, or

        • (C) any person or partnership on condition that any person or partnership pays or makes payable an amount to the real estate investment trust or a subsidiary of the real estate investment trust.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2013, c. 40, s. 10

Marginal note:Limitation re advertising expense — newspapers

  •  (1) In computing income, no deduction shall be made in respect of an otherwise deductible outlay or expense of a taxpayer for advertising space in an issue of a newspaper for an advertisement directed primarily to a market in Canada unless

    • (a) the issue is a Canadian issue of a Canadian newspaper; or

    • (b) the issue is an issue of a newspaper that would be a Canadian issue of a Canadian newspaper except that

      • (i) its type has been wholly set in the United States or has been partly set in the United States with the remainder having been set in Canada, or

      • (ii) it has been wholly printed in the United States or has been partly printed in the United States with the remainder having been printed in Canada.

  • Marginal note:Where s. (1) does not apply

    (3) Subsection 19(1) does not apply with respect to an advertisement in a special issue or edition of a newspaper that is edited in whole or in part and printed and published outside Canada if that special issue or edition is devoted to features or news related primarily to Canada and the publishers thereof publish such an issue or edition not more frequently than twice a year.

  • Marginal note:Definitions

    (5) In this section,

    Canadian issue

    Canadian issue of a newspaper means an issue, including a special issue,

    • (a) the type of which, other than the type for advertisements or features, is set in Canada,

    • (b) all of which, exclusive of any comics supplement, is printed in Canada,

    • (c) that is edited in Canada by individuals resident in Canada, and

    • (d) that is published in Canada; (édition canadienne)

    Canadian newspaper

    Canadian newspaper means a newspaper the exclusive right to produce and publish issues of which is held by one or more of the following:

    • (a) a Canadian citizen,

    • (b) a partnership

      • (i) in which interests representing in value at least 3/4 of the total value of the partnership property are beneficially owned by, and

      • (ii) at least 3/4 of each income or loss of which from any source is included in the determination of the income of,

      corporations described in paragraph (e) or Canadian citizens or any combination thereof,

    • (c) an association or society of which at least 3/4 of the members are Canadian citizens,

    • (d) Her Majesty in right of Canada or a province, or a municipality in Canada, or

    • (e) a corporation

      • (i) that is incorporated under the laws of Canada or a province,

      • (ii) of which the chairperson or other presiding officer and at least 3/4 of the directors or other similar officers are Canadian citizens, and

      • (iii) that, if it is a corporation having share capital, is

        • (A) a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a corporation controlled by citizens or subjects of a country other than Canada, or

        • (B) a corporation of which at least 3/4 of the shares having full voting rights under all circumstances, and shares having a fair market value in total of at least 3/4 of the fair market value of all of the issued shares of the corporation, are beneficially owned by Canadian citizens or by public corporations a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a public corporation controlled by citizens or subjects of a country other than Canada,

        and, for the purposes of clause (B), where shares of a class of the capital stock of a corporation are owned, or deemed by this definition to be owned, at any time by another corporation (in this definition referred to as the “holding corporation”), other than a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, each shareholder of the holding corporation shall be deemed to own at that time that proportion of the number of such shares of that class that

        • (C) the fair market value of the shares of the capital stock of the holding corporation owned at that time by the shareholder

        is of

        • (D) the fair market value of all the issued shares of the capital stock of the holding corporation outstanding at that time,

        and where at any time shares of a class of the capital stock of a corporation are owned, or are deemed by this definition to be owned, by a partnership, each member of the partnership shall be deemed to own at that time the least proportion of the number of such shares of that class that

        • (E) the member’s share of the income or loss of the partnership from any source for its fiscal period that includes that time

        is of

        • (F) the income or loss of the partnership from that source for its fiscal period that includes that time,

        and for this purpose, where the income and loss of a partnership from any source for a fiscal period are nil, the partnership shall be deemed to have had income from that source for that period in the amount of $1,000,000; (journal canadien)

    substantially the same

    substantially the same[Repealed, 2001, c. 17, s. 11(2)]

    United States

    United States means

    • (a) the United States of America, but does not include Puerto Rico, the Virgin Islands, Guam or any other United States possession or territory, and

    • (b) any areas beyond the territorial sea of the United States within which, in accordance with international law and its domestic laws, the United States may exercise rights with respect to the seabed and subsoil and the natural resources of those areas. (États-Unis)

  • Marginal note:Interpretation

    (5.1) In this section, each of the following is deemed to be a Canadian citizen:

    • (a) a trust or corporation described in paragraph 149(1)(o) or (o.1) formed in connection with a pension plan that exists for the benefit of individuals a majority of whom are Canadian citizens;

    • (b) a trust described in paragraph 149(1)(r) or (x), the annuitant in respect of which is a Canadian citizen;

    • (c) a mutual fund trust, within the meaning assigned by subsection 132(6), other than a mutual fund trust the majority of the units of which are held by citizens or subjects of a country other than Canada;

    • (d) a trust, each beneficiary of which is a person, partnership, association or society described in any of paragraphs (a) to (e) of the definition Canadian newspaper in subsection (5); and

    • (e) a person, association or society described in paragraph (c) or (d) of the definition Canadian newspaper in subsection (5).

  • Marginal note:Trust property

    (6) Where the right that is held by any person, partnership, association or society described in the definition Canadian newspaper in subsection (5) to produce and publish issues of a newspaper is held as property of a trust or estate, the newspaper is not a Canadian newspaper unless each beneficiary under the trust or estate is a person, partnership, association or society described in that definition.

  • Marginal note:Grace period

    (7) A Canadian newspaper that would, but for this subsection, cease to be a Canadian newspaper, is deemed to continue to be a Canadian newspaper until the end of the 12th month that follows the month in which it would, but for this subsection, have ceased to be a Canadian newspaper.

  • Marginal note:Non-Canadian newspaper

    (8) Where at any time one or more persons or partnerships that are not described in any of paragraphs (a) to (e) of the definition Canadian newspaper in subsection (5) have any direct or indirect influence that, if exercised, would result in control in fact of a person or partnership that holds a right to produce or publish issues of a newspaper, the newspaper is deemed not to be a Canadian newspaper at that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 19
  • 1994, c. 7, Sch. II, s. 14
  • 1995, c. 46, s. 5
  • 2001, c. 17, s. 11
  • 2007, c. 35, s. 13
 
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