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

Full Document:  

Act current to 2022-06-20 and last amended on 2022-06-09. Previous Versions

PART IIncome Tax (continued)

DIVISION HExemptions (continued)

Qualified Donees (continued)

Marginal note:Material and insignificant interests

  •  (1) In this section and section 149.1,

    • (a) a person has, at any time, a material interest in respect of a class of shares of the capital stock of a corporation if, at that time,

      • (i) the percentage of the shares of that class held by the person exceeds 0.5% of all the issued and outstanding shares of that class, or

      • (ii) the fair market value of the shares so held exceeds $100,000; and

    • (b) a private foundation has, at any time, an insignificant interest in respect of a class of shares of the capital stock of a corporation if, at that time, the percentage of shares of that class held by the private foundation does not exceed 2% of all the issued and outstanding shares of that class.

  • Marginal note:Material transaction — anti-avoidance

    (2) If a private foundation or a relevant person in respect of the private foundation has engaged in one or more transactions or series of transactions or events, a purpose of which may reasonably be considered to be to avoid the application of the definition material transaction, each of those transactions or series of transactions or events is deemed to be a material transaction.

  • Marginal note:Ownership

    (2.1) For the purposes of the definition equity percentage, and subparagraph (b)(iii) of the definition exempt shares, in subsection 149.1(1), a person who, if paragraph 251(5)(b) applied would be deemed by that paragraph to have the same position in relation to the control of a corporation as if the person owned a share, is deemed to own the share.

  • Marginal note:Net increase in excess corporate holdings percentage

    (3) The net increase in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, determined by the formula

    A - B

    where

    A
    is the excess corporate holdings percentage of the private foundation at the end of the taxation year, in respect of the class, and
    B
    is
    • (a) 0%, if

      • (i) at the beginning of the taxation year the private foundation was not both a private foundation and a registered charity, or

      • (ii) the private foundation was both a registered charity and a private foundation on March 18, 2007 and the taxation year is the first taxation year of the private foundation that begins after that date; and

    • (b) in any other case, the excess corporate holdings percentage of the private foundation in respect of the class at the end of its preceding taxation year.

  • Marginal note:Net decrease in excess corporate holdings percentage

    (4) The net decrease in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, by which the percentage determined for B in the formula in subsection (3) for the taxation year exceeds the percentage determined for A in that formula for the taxation year.

  • Marginal note:Allocation of net increase in excess corporate holdings percentage

    (5) For the purpose of the description of B in the definition divestment obligation percent-age in subsection 149.1(1), the net increase in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation, for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first to the divestment obligation percent-age of the private foundation in respect of that class for the current year, to the extent that the private foundation has in the current year acquired for consideration shares of that class;

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for its fifth subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), and

      • (ii) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of bequest;

    • (c) then to the divestment obligation percent-age of the private foundation in respect of that class for its second subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a) or (b), and

      • (ii) the total of

        • (A) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of gift, other than from a relevant person or by way of bequest, and

        • (B) the portion of the net increase in the excess corporate holdings percentage of the private foundation that is attributable to the redemption, acquisition or cancellation of any of the issued and outstanding shares of that class in the current year by the corporation; and

    • (d) then to the divestment obligation percent-age of the private foundation in respect of that class for its subsequent taxation year, to the extent of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), (b) or (c).

  • Marginal note:Minister’s discretion

    (6) Notwithstanding subsection (5), on application by a private foundation, the Minister may, if the Minister believes it would be just and equitable to do so, reallocate any portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year, that would otherwise be allocated under subsection (5) to the private foundation’s divestment obligation percentage in respect of that class for a particular taxation year, to the private foundation’s divestment obligation percentage in respect of that class for any of the ten taxation years subsequent to the particular taxation year.

  • Marginal note:Allocation of net decrease in excess corporate holdings percentage

    (7) For the purpose of the description of C in the definition divestment obligation percent-age in subsection 149.1(1), the net decrease in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first, to the divestment obligation percentage of the private foundation in respect of that class for the current year, to the extent of that divestment obligation percentage; and

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for a subsequent taxation year of the private foundation (referred to in this paragraph as the “subject year”), to the extent of the lesser of

      • (i) that portion of the net decrease in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), or under this paragraph, to the divestment obligation percentage of the private foundation in respect of that class for a taxation year of the private foundation that precedes the subject year, and

      • (ii) the amount of the divestment obligation percentage of the private foundation in respect of that class for the subject year, calculated as at the end of the current year and without reference to this subsection.

  • Marginal note:Transitional rule

    (8) If the original corporate holdings percent-age of a private foundation in respect of a class of shares of the capital stock of a corporation exceeds 20%, for the purpose of applying the definition “excess corporate holdings percent-age” in subsection 149.1(1) to

    • (a) the first taxation year of the private foundation that begins after March 18, 2007, the reference to 20% in that definition in respect of that class is to be read as the original corporate holdings percentage of the private foundation in respect of that class;

    • (b) taxation years of the private foundation that are after the taxation year referred to in paragraph (a) and that begin before March 19, 2012, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the immediately preceding taxation year, and

        • (B) the original corporate holdings percentage in respect of that class;

    • (c) taxation years of the private foundation that begin after March 18, 2012 and before March 19, 2017, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 20%;

    • (d) taxation years of the private foundation that begin after March 18, 2017 and before March 19, 2022, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 40%; and

    • (e) taxation years of the private foundation that begin after March 18, 2022 and before March 19, 2027, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 60%.

  • Marginal note:Where subsection (10) applies

    (9) Subsection (10) applies for the purposes of applying section 149.1 and subsections (8) and 188.1(3.1) to a private foundation at a particular time if, both on March 18, 2007 and at the particular time,

    • (a) the private foundation was the sole trustee of a trust, or was a majority interest beneficiary (within the meaning assigned by section 251.1) of a trust more than 50% of the trustees of which were the private foundation and one or more relevant persons in respect of the private foundation; and

    • (b) the trust held one or more shares of a class of the capital stock of a corporation.

  • Marginal note:Shares held through a trust on March 18, 2007

    (10) If this subsection applies at a particular time to a private foundation in respect of shares of a class of the capital stock of a corporation held by a trust, the private foundation is deemed to hold at the particular time that number of those shares as is determined by the formula

    A × B/C

    where

    A
    is the lesser of the number of those shares held by the trust on March 18, 2007 and the number so held at the particular time;
    B
    is the total fair market value of all interests held by the private foundation in the trust at the particular time; and
    C
    is the total fair market value of all property held by the trust at the particular time.
  • Marginal note:Discretionary trusts

    (11) For the purpose of subsection (10), if the amount of income or capital of a trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2007, c. 35, s. 47
  • 2009, c. 2, s. 56

DIVISION IReturns, Assessments, Payment and Appeals

Returns

Marginal note:Filing returns of income — general rule

  •  (1) Subject to subsection (1.1), a return of income that is in prescribed form and that contains prescribed information shall be filed with the Minister, without notice or demand for the return, for each taxation year of a taxpayer,

    • Marginal note:Corporations

      (a) in the case of a corporation, by or on behalf of the corporation within six months after the end of the year if

      • (i) at any time in the year the corporation

        • (A) is resident in Canada,

        • (B) carries on business in Canada, unless the corporation’s only revenue from carrying on business in Canada in the year consists of amounts in respect of which tax was payable by the corporation under subsection 212(5.1),

        • (C) has a taxable capital gain (otherwise than from an excluded disposition), or

        • (D) disposes of a taxable Canadian property (otherwise than in an excluded disposition), or

      • (ii) tax under this Part

        • (A) is payable by the corporation for the year, or

        • (B) would be, but for a tax treaty, payable by the corporation for the year (otherwise than in respect of a disposition of taxable Canadian property that is treaty-protected property of the corporation);

    • Marginal note:Deceased individuals

      (b) in the case of an individual who dies after October of the year and on or before the day that would be the individual’s filing due date for the year if the individual had not died, by the individual’s legal representatives on or before the day that is the later of the day on or before which the return would otherwise be required to be filed and the day that is 6 months after the day of death;

    • Marginal note:Trusts or estates

      (c) in the case of an estate or trust, within 90 days from the end of the year;

    • Marginal note:Individuals

      (d) in the case of any other person, on or before

      • (i) the following April 30 by that person or, if the person is unable for any reason to file the return, by the person’s guardian, committee or other legal representative (in this paragraph referred to as the person’s “guardian”),

      • (ii) the following June 15 by that person or, if the person is unable for any reason to file the return, by the person’s guardian where the person is

        • (A) an individual who carried on a business in the year, unless the expenditures made in the course of carrying on the business were primarily the cost or capital cost of tax shelter investments (as defined in subsection 143.2(1)), or

        • (B) at any time in the year a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6) of an individual to whom clause 150(1)(d)(ii)(A) applies, or

      • (iii) where at any time in the year the person is a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6) of an individual to whom paragraph 150(1)(b) applies for the year, on or before the day that is the later of the day on or before which the person’s return would otherwise be required to be filed and the day that is 6 months after the day of the individual’s death; or

    • Marginal note:Designated persons

      (e) in a case where no person described by paragraph 150(1)(a), 150(1)(b) or 150(1)(d) has filed the return, by such person as is required by notice in writing from the Minister to file the return, within such reasonable time as the notice specifies.

  • Marginal note:Exception

    (1.1) Subsection (1) does not apply to a taxation year of a taxpayer if

    • (a) the taxpayer is a corporation that was a registered charity throughout the year; or

    • (b) the taxpayer is an individual unless

      • (i) tax is payable under this Part by the individual for the year,

      • (ii) where the individual is resident in Canada at any time in the year, the individual has a taxable capital gain or disposes of capital property in the year,

      • (iii) where the individual is non-resident throughout the year, the individual has a taxable capital gain (otherwise than from an excluded disposition) or disposes of a taxable Canadian property (otherwise than in an excluded disposition) in the year, or

      • (iv) at the end of the year the individual’s HBP balance or LLP balance (as defined in subsection 146.01(1) or 146.02(1)) is a positive amount.

  • Marginal note:Demands for returns

    (2) Every person, whether or not the person is liable to pay tax under this Part for a taxation year and whether or not a return has been filed under subsection (1) or (3), shall, on demand sent by the Minister, file, within such reasonable time stipulated in the demand, with the Minister in prescribed form and containing prescribed information a return of the income for the taxation year designated in the demand.

  • Marginal note:Trustees, etc.

    (3) Every trustee in bankruptcy, assignee, liquidator, curator, receiver, trustee or committee and every agent or other person administering, managing, winding up, controlling or otherwise dealing with the property, business, estate or income of a person who has not filed a return for a taxation year as required by this section shall file a return in prescribed form of that person’s income for that year.

  • Marginal note:Death of partner or proprietor

    (4) Where

    • (a) subsection 34.1(9) or 34.2(8) applies in computing an individual’s income for a taxation year from a business, or

    • (b) an individual who carries on a business in a taxation year dies in the year and after the end of a fiscal period of the business that ends in the year, another fiscal period of the business (in this subsection referred to as the “short period”) ends in the year because of the individual’s death, and the individual’s legal representative elects that this subsection apply,

    the individual’s income from businesses for short periods, if any, shall not be included in computing the individual’s income for the year and the individual’s legal representative shall file an additional return of income for the year in respect of the individual as if the return were filed in respect of another person and shall pay the tax payable under this Part by that other person for the year computed as if

    • (c) the other person’s only income for the year were the amount determined by the formula

      A + B - C

      where

      A
      is the total of all amounts each of which is the individual’s income from a business for a short fiscal period,
      B
      is the total of all amounts each of which is an amount deducted under subsection 34.2(8) in computing the individual’s income for the taxation year in which the individual dies, and
      C
      is the total of all amounts each of which is an amount included under subsection 34.1(9) in computing the individual’s income for the taxation year in which the individual dies, and
    • (d) subject to sections 114.2 and 118.93, that other person were entitled to the deductions to which the individual is entitled under sections 110, 118 to 118.7 and 118.9 for the year in computing the individual’s taxable income or tax payable under this Part, as the case may be, for the year.

  • Marginal note:Excluded disposition

    (5) For the purposes of this section, a disposition of a property by a taxpayer at any time in a taxation year is an excluded disposition if

    • (a) the taxpayer is non-resident at that time;

    • (b) no tax is payable under this Part by the taxpayer for the taxation year;

    • (c) the taxpayer is, at that time, not liable to pay any amount under this Act in respect of any previous taxation year (other than an amount for which the Minister has accepted, and holds, adequate security under section 116 or 220); and

    • (d) each taxable Canadian property disposed of by the taxpayer in the taxation year is

      • (i) excluded property within the meaning assigned by subsection 116(6), or

      • (ii) a property in respect of the disposition of which the Minister has issued to the taxpayer a certificate under subsection 116(2), (4) or (5.2).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 150
  • 1994, c. 7, Sch. II, s. 124, Sch. VII, s. 14
  • 1996, c. 21, s. 38
  • 1998, c. 19, s. 180
  • 1999, c. 22, s. 63
  • 2000, c. 12, s. 142
  • 2001, c. 17, s. 147
  • 2008, c. 28, s. 28
  • 2012, c. 19, s. 8
 
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