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

Marginal note:Computation of paid-up capital in respect of particular class of shares

• 84.2 (1) In computing the paid-up capital in respect of any particular class of shares of the capital stock of a corporation at any particular time after March 31, 1977,

  • (a) there shall be deducted that proportion of the amount, if any, by which the paid-up capital in respect of all of the issued shares of the capital stock of the corporation on April 1, 1977, determined without reference to this section, exceeds the greater of

    • (i) the amount that the paid-up capital limit of the corporation would have been on March 31, 1977 if paragraph 89(1)(d) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read at that date, were read without reference to clause 89(1)(d)(iv.1)(F) of that Act and without reference to all subparagraphs of paragraph 89(1)(d) of that Act except subparagraphs 89(1)(d)(iv.1) and (vii) of that Act, and

    • (ii) the paid-up capital limit of the corporation on March 31, 1977,

    that the paid-up capital on April 1, 1977, determined without reference to this section, in respect of the particular class of shares is of the paid-up capital on April 1, 1977, determined without reference to this section, in respect of all of the issued and outstanding shares of the capital stock of the corporation; and

  • (b) there shall be added an amount equal to the lesser of

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

      • (A) the total of all amounts each of which is an amount deemed by subsection 84(3) or 84(4) to be a dividend on shares of the particular class paid by the corporation after March 31, 1977 and before the particular time

      exceeds

      • (B) the total that would be determined under clause 84.2(1)(b)(i)(A) if this Act were read without reference to paragraph 84.2(1)(a), and

    • (ii) the amount required by paragraph 84.2(1)(a) to be deducted in computing the paid-up capital of shares of the particular class.

• Marginal note:Debt deficiency

  (2) In computing, after March 31, 1977, the adjusted cost base to an individual of a debt that was owing to the individual by a corporation on March 31, 1977, there shall be deducted the amount of any dividend that would have been deemed to have been received by the individual on that day if the corporation had paid the debt in full on that day.

• Marginal note:Idem

  (3) Where, after March 31, 1977 and before 1979, any debt referred to in subsection 84.2(2) owing by a corporation and held by an individual on March 31, 1977 and continuously after that date until conversion, is converted into shares of a particular class of the capital stock of the corporation,

  • (a) subsection 84.2(2) shall not apply in respect of the debt; and

  • (b) in computing the paid-up capital in respect of the shares of the particular class at any particular time after the conversion,

    • (i) there shall be deducted the amount by which the adjusted cost base to the taxpayer of the debt would, but for paragraph 84.2(3)(a), have been reduced by virtue of subsection 84.2(2), and

    • (ii) there shall be added an amount equal to the lesser of

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

        • (I) the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the corporation after the conversion and before the particular time,

        exceeds

        • (II) the total that would be determined under subclause 84.2(3)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 84.2(3)(b)(i), and

      • (B) the amount required by subparagraph 84.2(3)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class.

Marginal note:Transfer of property to corporation by shareholders

• 85 (1) Where a taxpayer has, in a taxation year, disposed of any of the taxpayer’s property that was eligible property to a taxable Canadian corporation for consideration that includes shares of the capital stock of the corporation, if the taxpayer and the corporation have jointly elected in prescribed form and in accordance with subsection 85(6), the following rules apply:

  • (a) the amount that the taxpayer and the corporation have agreed on in their election in respect of the property shall be deemed to be the taxpayer’s proceeds of disposition of the property and the corporation’s cost of the property;

  • (b) subject to paragraph 85(1)(c), where the amount that the taxpayer and the corporation have agreed on in their election in respect of the property is less than the fair market value, at the time of the disposition, of the consideration therefor (other than any shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer, the amount so agreed on shall, irrespective of the amount actually so agreed on by them, be deemed to be an amount equal to that fair market value;

  • (c) where the amount that the taxpayer and the corporation have agreed on in their election in respect of the property is greater than the fair market value, at the time of the disposition, of the property so disposed of, the amount so agreed on shall, irrespective of the amount actually so agreed on, be deemed to be an amount equal to that fair market value;

  • (c.1) where the property was inventory, capital property (other than depreciable property of a prescribed class), a NISA Fund No. 2 or a property that is eligible property because of paragraph 85(1.1)(g) or 85(1.1)(g.1), and the amount that the taxpayer and corporation have agreed on in their election in respect of the property is less than the lesser of

    • (i) the fair market value of the property at the time of the disposition, and

    • (ii) the cost amount to the taxpayer of the property at the time of the disposition,

    the amount so agreed on shall, irrespective of the amount actually so agreed on by them, be deemed to be an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and 85(1)(c.1)(ii);

  • (c.2) subject to paragraphs 85(1)(b) and 85(1)(c) and notwithstanding paragraph 85(1)(c.1), where the taxpayer carries on a farming business the income from which is computed in accordance with the cash method and the property was inventory owned in connection with that business immediately before the particular time the property was disposed of to the corporation,

    • (i) the amount that the taxpayer and the corporation agreed on in their election in respect of inventory purchased by the taxpayer shall be deemed to be equal to the amount determined by the formula

      (A × B/C) + D

      where

      A

      is the amount that would be included because of paragraph 28(1)(c) in computing the taxpayer’s income for the taxpayer’s last taxation year beginning before the particular time if that year had ended immediately before the particular time,

      B

      is the value (determined in accordance with subsection 28(1.2)) to the taxpayer immediately before the particular time of the purchased inventory in respect of which the election is made,

      C

      is the value (determined in accordance with subsection 28(1.2)) of all of the inventory purchased by the taxpayer that was owned by the taxpayer in connection with that business immediately before the particular time, and

      D

      is such additional amount as the taxpayer and the corporation designate in respect of the property,

    • (ii) for the purpose of subparagraph 28(1)(a)(i), the disposition of the property and the receipt of proceeds of disposition therefor shall be deemed to have occurred at the particular time and in the course of carrying on the business, and

    • (iii) where the property is owned by the corporation in connection with a farming business and the income from that business is computed in accordance with the cash method, for the purposes of section 28,

      • (A) an amount equal to the cost to the corporation of the property shall be deemed to have been paid by the corporation, and

      • (B) the corporation shall be deemed to have purchased the property for an amount equal to that cost,

      at the particular time and in the course of carrying on that business;

  • (d) to (d.12) [Repealed, 2016, c. 12, s. 26]

  • (e) where the property was depreciable property of a prescribed class of the taxpayer and the amount that, but for this paragraph, would be the proceeds of disposition thereof is less than the least of

    • (i) the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition,

    • (ii) the cost to the taxpayer of the property, and

    • (iii) the fair market value of the property at the time of the disposition,

    the amount agreed on by the taxpayer and the corporation in their election in respect of the property shall, irrespective of the amount actually so agreed on by them, be deemed to be the least of the amounts described in subparagraphs 85(1)(e)(i) to 85(1)(e)(iii);

  • (e.1) where two or more properties, each of which is a property described in paragraph (e), are disposed of at the same time, paragraph (e) applies as if each property so disposed of had been separately disposed of in the order designated by the taxpayer before the time referred to in subsection (6) for the filing of an election in respect of those properties or, if the taxpayer does not so designate any such order, in the order designated by the Minister;

  • (e.2) where the fair market value of the property immediately before the disposition exceeds the greater of

    • (i) the fair market value, immediately after the disposition, of the consideration received by the taxpayer for the property disposed of by the taxpayer, and

    • (ii) the amount that the taxpayer and the corporation have agreed on in their election in respect of the property, determined without reference to this paragraph,

    and it is reasonable to regard any part of the excess as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer (other than a corporation that was a wholly owned corporation of the taxpayer immediately after the disposition), the amount that the taxpayer and the corporation agreed on in their election in respect of the property shall, regardless of the amount actually so agreed on by them, be deemed (except for the purposes of paragraphs 85(1)(g) and 85(1)(h)) to be an amount equal to the total of the amount referred to in subparagraph 85(1)(e.2)(ii) and that part of the excess;

  • (e.3) where, under any of paragraphs (c.1) and (e), the amount that the taxpayer and the corporation have agreed on in their election in respect of the property (in this paragraph referred to as the elected amount) would be deemed to be an amount that is greater or less than the amount that would be deemed, subject to paragraph (c), to be the elected amount under paragraph (b), the elected amount is deemed to be the greater of

    • (i) the amount deemed by paragraph (c.1) or (e), as the case may be, to be the elected amount, and

    • (ii) the amount deemed by paragraph 85(1)(b) to be the elected amount;

  • (e.4) where

    • (i) the property is depreciable property of a prescribed class of the taxpayer and is a passenger vehicle the cost to the taxpayer of which was more than $20,000 or such other amount as may be prescribed, and

    • (ii) the taxpayer and the corporation do not deal at arm’s length,

    the amount that the taxpayer and the corporation have agreed on in their election in respect of the property shall be deemed to be an amount equal to the undepreciated capital cost to the taxpayer of the class immediately before the disposition, except that, for the purposes of subsection 6(2), the cost to the corporation of the vehicle shall be deemed to be an amount equal to its fair market value immediately before the disposition;

  • (e.5) if the property is depreciable property of a prescribed class of the taxpayer that is a zero-emission passenger vehicle to which paragraph 13(7)(i) applies and the taxpayer and the corporation do not deal at arm’s length,

    • (i) the amount that the taxpayer and the corporation have agreed on in their election in respect of the vehicle is deemed to be an amount equal to the cost amount to the taxpayer of the vehicle immediately before the disposition, and

    • (ii) for the purposes of subsection 6(2), the cost to the corporation of the vehicle is deemed to be an amount equal to its fair market value immediately before the disposition;

  • (f) the cost to the taxpayer of any particular property (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer as consideration for the disposition shall be deemed to be an amount equal to the lesser of

    • (i) the fair market value of the particular property at the time of the disposition, and

    • (ii) that proportion of the fair market value, at the time of the disposition, of the property disposed of by the taxpayer to the corporation that

      • (A) the amount determined under subparagraph 85(1)(f)(i)

      is of

      • (B) the fair market value, at the time of the disposition, of all properties (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer as consideration for the disposition;

  • (g) the cost to the taxpayer of any preferred shares of any class of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition shall be deemed to be the lesser of the fair market value of those shares immediately after the disposition and that proportion of the amount, if any, by which the proceeds of the disposition exceed the fair market value of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer for the disposition, that

    • (i) the fair market value, immediately after the disposition, of those preferred shares of that class,

    is of

    • (ii) the fair market value, immediately after the disposition, of all preferred shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition;

  • (h) the cost to the taxpayer of any common shares of any class of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition shall be deemed to be that proportion of the amount, if any, by which the proceeds of the disposition exceed the total of the fair market value, at the time of the disposition, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the taxpayer for the disposition and the cost to the taxpayer of all preferred shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition, that

    • (i) the fair market value, immediately after the disposition, of those common shares of that class,

    is of

    • (ii) the fair market value, immediately after the disposition, of all common shares of the capital stock of the corporation receivable by the taxpayer as consideration for the disposition; and

  • (i) where the property so disposed of is taxable Canadian property of the taxpayer, all of the shares of the capital stock of the Canadian corporation received by the taxpayer as consideration for the property are deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer.

• Definition of eligible property

  (1.1) For the purposes of subsection 85(1), eligible property means

  • (a) a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person);

  • (b) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident insurer if that property and the property received as consideration for that property are designated insurance property for the year;

  • (c) a Canadian resource property;

  • (d) a foreign resource property;

  • (e) [Repealed, 2016, c. 12, s. 26]

  • (f) an inventory (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable);

  • (g) a property that is a security or debt obligation used by the taxpayer in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money, other than

    • (i) a capital property,

    • (ii) inventory, or

    • (iii) where the taxpayer is a financial institution in the year, a mark-to-market property for the year;

  • (g.1) where the taxpayer is a financial institution in the year, a specified debt obligation (other than a mark-to-market property of the taxpayer for the year);

  • (h) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person (other than a non-resident insurer) and used in the year in a business carried on in Canada by that person; or

  • (i) a NISA Fund No. 2, if that property is owned by an individual.

• Marginal note:Exception

  (1.11) Notwithstanding subsection (1.1), a foreign resource property, or an interest in a partnership that derives all or part of its value from one or more foreign resource properties, is not an eligible property of a taxpayer in respect of a disposition by the taxpayer to a corporation where

  • (a) the taxpayer and the corporation do not deal with each other at arm’s length; and

  • (b) it is reasonable to conclude that one of the purposes of the disposition, or a series of transactions or events of which the disposition is a part, is to increase the extent to which any person may claim a deduction under section 126.

• Marginal note:Eligible derivatives

  (1.12) Notwithstanding subsection (1.1), an eligible derivative (as defined in subsection 10.1(5)) of a taxpayer to which subsection 10.1(6) applies is not an eligible property of the taxpayer in respect of a disposition by the taxpayer to a corporation.

• Marginal note:Application of subsection (1)

  (1.2) Subsection 85(1) does not apply to a disposition by a taxpayer to a corporation of a property referred to in paragraph 85(1.1)(h) unless

  • (a) immediately after the disposition, the corporation is controlled by the taxpayer, a person or persons related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the taxpayer or the taxpayer and a person or persons so related to the taxpayer;

  • (b) the disposition is part of a transaction or series of transactions in which all or substantially all of the property used in the business referred to in paragraph 85(1.1)(h) is disposed of by the taxpayer to the corporation; and

  • (c) the disposition is not part of a series of transactions that result in control of the corporation being acquired by a person or group of persons after the time that is immediately after the disposition.

• Meaning of wholly owned corporation

  (1.3) For the purposes of this subsection and paragraph 85(1)(e.2), wholly owned corporation of a taxpayer means a corporation all the issued and outstanding shares of the capital stock of which (except directors’ qualifying shares) belong to

  • (a) the taxpayer;

  • (b) a corporation that is a wholly owned corporation of the taxpayer; or

  • (c) any combination of persons described in paragraph 85(1.3)(a) or 85(1.3)(b).

• Marginal note:Definitions

  (1.4) For the purpose of subsection 85(1.1), financial institution, mark-to-market property and specified debt obligation have the meanings assigned by subsection 142.2(1).

• Marginal note:Transfer of property to corporation from partnership

  (2) Where

  • (a) a partnership has disposed, to a taxable Canadian corporation for consideration that includes shares of the corporation’s capital stock, of any partnership property (other than an eligible derivative, as defined in subsection 10.1(5), of the partnership if subsection 10.1(6) applies to the partnership) that was

    • (i) a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, if the partnership was not a Canadian partnership at the time of the disposition),

    • (ii) a property described in any of paragraphs 85(1.1)(c) to 85(1.1)(f), or

    • (iii) a property that would be described in paragraph 85(1.1)(g) or 85(1.1)(g.1) if the references in those paragraphs to “taxpayer” were read as “partnership”, and

  • (b) the corporation and all the members of the partnership have jointly so elected, in prescribed form and within the time referred to in subsection 85(6),

  paragraphs 85(1)(a) to 85(1)(i) are applicable, with such modifications as the circumstances require, in respect of the disposition as if the partnership were a taxpayer resident in Canada who had disposed of the property to the corporation.

• Marginal note:Computing paid-up capital

  (2.1) Where subsection 85(1) or 85(2) applies to a disposition of property (other than a disposition of property to which section 84.1 or 212.1 applies) to a corporation by a person or partnership (in this subsection referred to as the “taxpayer”),

  • (a) in computing the paid-up capital in respect of any particular class of shares of the capital stock of the corporation at the time of, and at any time after, the issue of shares of the capital stock of the corporation in consideration for the disposition of the property, there shall be deducted an amount determined by the formula

    (A - B) × C/A

    where

    A

    is the increase, if any, determined without reference to this section as it applies to the disposition of the property, in the paid-up capital in respect of all the shares of the capital stock of the corporation as a result of the acquisition by the corporation of the property,

    B

    is the amount, if any, by which the corporation’s cost of the property, immediately after the acquisition, determined under subsection 85(1) or 85(2), as the case may be, exceeds the fair market value, immediately after the acquisition, of any consideration (other than shares of the capital stock of the corporation) received by the taxpayer from the corporation for the property, and

    C

    is the increase, if any, determined without reference to this section as it applies to the disposition of the property, in the paid-up capital in respect of the particular class of shares as a result of the acquisition by the corporation of the property; and

  • (b) in computing the paid-up capital, at any time after November 21, 1985, in respect of any class of shares of the capital stock of a corporation, there shall be added an amount equal to the lesser of

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

      • (A) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid after November 21, 1985 and before that time by the corporation

      exceeds

      • (B) the total of such dividends that would be determined under clause 85(2.1)(b)(i)(A) if this Act were read without reference to paragraph 85(2.1)(a), and

    • (ii) the total of all amounts required by paragraph 85(2.1)(a) to be deducted in computing the paid-up capital in respect of that class of shares after November 21, 1985 and before that time.

• Marginal note:Where partnership wound up

  (3) Where,

  • (a) in respect of any disposition of partnership property of a partnership to a corporation, subsection 85(2) applies,

  • (b) the affairs of the partnership were wound up within 60 days after the disposition, and

  • (c) immediately before the winding-up there was no partnership property other than money or property received from the corporation as consideration for the disposition,

  the following rules apply:

  • (d) the cost to any member of the partnership of any property (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to be the fair market value of the property at the time of the winding-up,

  • (e) the cost to any member of the partnership of any preferred shares of any class of the capital stock of the corporation receivable by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to be

    • (i) where any common shares of the capital stock of the corporation were also receivable by the member as consideration for the disposition of the interest, the lesser of

      • (A) the fair market value, immediately after the winding-up, of the preferred shares of that class so receivable by the member, and

      • (B) that proportion of the amount, if any, by which the adjusted cost base to the member of the member’s partnership interest immediately before the winding-up exceeds the total of the fair market value, at the time of the winding-up, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member for the disposition of the interest, that

        • (I) the fair market value, immediately after the winding-up, of the preferred shares of that class so receivable by the member,

        is of

        • (II) the fair market value, immediately after the winding-up, of all preferred shares of the capital stock of the corporation receivable by the member as consideration for the disposition, and

    • (ii) in any other case, the amount determined under clause 85(3)(e)(i)(B),

  • (f) the cost to any member of the partnership of any common shares of any class of the capital stock of the corporation receivable by the member as consideration for the disposition of the member’s partnership interest on the winding-up shall be deemed to be that proportion of the amount, if any, by which the adjusted cost base to the member of the member’s partnership interest immediately before the winding-up exceeds the total of the fair market value, at the time of the winding-up, of the consideration (other than shares of the capital stock of the corporation or a right to receive any such shares) received by the member for the disposition of the interest and the cost to the member of all preferred shares of the capital stock of the corporation receivable by the member as consideration for the disposition of the interest, that

    • (i) the fair market value, immediately after the winding-up, of the common shares of that class so receivable by the member,

    is of

    • (ii) the fair market value, immediately after the winding-up, of all common shares of the capital stock of the corporation so receivable by the member as consideration for the disposition,

  • (g) the proceeds of disposition of the partnership interest of any member of the partnership shall be deemed to be the cost to the member of all shares and property receivable or received by the member as consideration for the disposition of the interest plus the amount of any money received by the member as consideration for the disposition, and

  • (h) where the partnership has distributed partnership property referred to in paragraph 85(3)(c) to a member of the partnership, the partnership shall be deemed to have disposed of that property for proceeds equal to the cost amount to the partnership of the property immediately before its distribution.

• (4) [Repealed, 1998, c. 19, s. 116]

• Marginal note:Rules on transfers of depreciable property

  (5) Where subsection 85(1) or 85(2) has applied to a disposition at any time of depreciable property to a person (in this subsection referred to as the “transferee”) and the capital cost to the transferor of the property exceeds the transferor’s proceeds of disposition of the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),

  • (a) the capital cost to the transferee of the property is deemed to be the amount that was its capital cost to the transferor; and

  • (b) the excess is deemed to have been deducted by the transferee under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that time.

• Marginal note:Acquisition of certain tools — capital cost and deemed depreciation

  (5.1) If subsection (1) has applied in respect of the acquisition at any particular time of any depreciable property by a corporation from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individ­ual’s proceeds of disposition of the property,

  • (a) the capital cost to the corporation of the property is deemed to be equal to the individual’s original cost; and

  • (b) the amount by which the individual’s original cost exceeds the individual’s proceeds of disposition in respect of the property is deemed to have been deducted by the corporation under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that particular time.

• Marginal note:Time for election

  (6) Any election under subsection 85(1) or 85(2) shall be made on or before the day that is the earliest of the days on or before which any taxpayer making the election is required to file a return of income pursuant to section 150 for the taxation year in which the transaction to which the election relates occurred.

• Marginal note:Late filed election

  (7) Where the election referred to in subsection 85(6) was not made on or before the day on or before which the election was required by that subsection to be made and that day is after May 6, 1974, the election shall be deemed to have been made on that day if, on or before the day that is 3 years after that day,

  • (a) the election is made in prescribed form; and

  • (b) an estimate of the penalty in respect of that election is paid by the taxpayer or the partnership, as the case may be, when that election is made.

• Marginal note:Special cases

  (7.1) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable

  • (a) to permit an election under subsection 85(1) or 85(2) to be made after the day that is 3 years after the day on or before which the election was required by subsection 85(6) to be made, or

  • (b) to permit an election made under subsection 85(1) or 85(2) to be amended,

  the election or amended election shall be deemed to have been made on the day on or before which the election was so required to be made if

  • (c) the election or amended election is made in prescribed form, and

  • (d) an estimate of the penalty in respect of the election or amended election is paid by the taxpayer or partnership, as the case may be, when the election or amended election is made,

  and where this subsection applies to the amendment of an election, that election shall be deemed not to have been effective.

• Marginal note:Penalty for late filed election

  (8) For the purposes of this section, the penalty in respect of an election or an amended election referred to in paragraph 85(7)(a) or 85(7.1)(c) is an amount equal to the lesser of

  • (a) 1/4 of 1% of the amount, if any, by which

    • (i) the fair market value of the property in respect of which that election or amended election was made, at the time the property was disposed of,

    exceeds

    • (ii) the amount agreed on in the election or amended election by the taxpayer or partnership, as the case may be, and the corporation,

    for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 85(6) to be made and ending on the day the election or amended election is made, and

  • (b) an amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 85(8)(a).

• Marginal note:Unpaid balance of penalty

  (9) The Minister shall, with all due dispatch, examine each election and amended election referred to in paragraph 85(7)(a) or 85(7.1)(c), assess the penalty payable and send a notice of assessment to the taxpayer or partnership, as the case may be, and the taxpayer or partnership, as the case may be, shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.