© Éditeur officiel du Québec
Updated to 1 April 2016
This document has official status.


chapter I-3

Taxation Act

PART I 
INCOME TAX

BOOK I 
INTERPRETATION AND RULES OF GENERAL APPLICATION

TITLE I 
INTERPRETATION
1972, c. 23.

1. In this Part and in the regulations, unless the context indicates a different meaning, the expression:

Act establishing a labour-sponsored fund means

 (a) the Act to establish Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi (chapter F-3.1.2); or

 (b) the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.) (chapter F-3.2.1);

additional voluntary contribution to a registered pension plan means a contribution that is made by a member to the plan, that is used to provide benefits under a money purchase provision, within the meaning of section 965.0.1, of the plan and that is not required as a general condition of membership in the plan;

adjusted cost base has the meaning assigned by Chapter III of Title IV of Book III;

adjustment time has the meaning assigned by section 107.1;

advocate means an advocate or a notary and, in another Canadian province, a barrister or a solicitor;

allowable business investment loss has the meaning given to it by section 231;

allowable capital loss has the meaning assigned by section 231;

alter ego trust has the meaning assigned by section 652.1;

amateur athlete trust has the meaning assigned by subparagraph a of the second paragraph of section 851.34;

amortized cost of a loan or lending asset has the meaning assigned by sections 21.26 and 21.27;

amount means money, rights or things expressed in terms of an amount of money or their value in terms of money, except that

 (a) in any case where section 187.2 or 187.3 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or any of sections 21.4.3, 21.10, 21.10.1, 740.1 to 740.3.1 and 740.5 applies to a stock dividend, the amount of the stock dividend is equal to the greater of

(i)  the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend, and

(ii)  the fair market value of the share or shares paid as a stock dividend at the time of payment;

 (b) in any other case, the amount of any stock dividend is equal to the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend;

annuity includes an amount payable on a periodic basis whether payable at intervals longer or shorter than a year, under a contract, will, trust or otherwise;

assessment includes a reassessment and an additional assessment;

aunt of a taxpayer includes the spouse of the taxpayer's uncle;

authorized foreign bank has the meaning assigned by section 2 of the Bank Act (S.C. 1991, c. 46);

automobile means a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers, but does not include

 (a) an ambulance,

 (a.1) a clearly marked emergency medical response vehicle that is used, in connection with or in the course of an individual's office or employment with an emergency medical response or ambulance service, to carry emergency medical equipment together with one or more emergency medical attendants or paramedics,

 (b) a motor vehicle acquired or leased primarily for use as a taxi, a bus used in a business of transporting passengers or a hearse used in the course of a business of arranging or managing funerals,

 (c) except for the purposes of sections 36 to 47.17, a motor vehicle acquired or leased to be sold or leased in the course of carrying on a business of selling or leasing motor vehicles or a motor vehicle used for the purpose of transporting passengers in the course of carrying on a business of arranging or managing funerals, and

 (d) a motor vehicle

(i)  of a type commonly called a van or pick-up truck or a similar vehicle

(1)  that has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income, or

(2)  the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income, or

(ii)  of a type commonly called a pick-up truck that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods, equipment or passengers in the course of gaining or producing income at one or more locations in Canada that are

(1)  described in subparagraph i or ii of paragraph a of section 42, in respect of any of the occupants of the vehicle, and

(2)  at least 30 km outside the nearest point on the boundary of the nearest population centre, as defined by the last census dictionary published by Statistics Canada before the year, that has a population of at least 40,000 individuals as determined in the last census published by Statistics Canada before the year;

balance-due day of a taxpayer for a taxation year means

 (a) where the taxpayer is a corporation, the last day of the two-month period ending after the end of the year;

 (b) where the taxpayer is a trust, the day that is 90 days after the end of the year;

 (c) where the taxpayer is a person who died in the year, or after the end of the year but on or before 30 April in the following calendar year, the later of 30 April in that calendar year and the day that is six months after the day of death;

 (d) in the case of any other person, 30 April in the following calendar year;

bank means a bank within the meaning of section 2 of the Bank Act (other than a federal credit union) or an authorized foreign bank;

bankrupt has the meaning assigned by the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3);

bankruptcy has the meaning assigned by the Bankruptcy and Insolvency Act;

benefit under a deferred profit sharing plan received by a taxpayer in a taxation year means the total of all the amounts received by the taxpayer in the year from a trustee under the plan, minus any amounts deductible under sections 883 and 884 in computing the taxpayer's income for the year;

bituminous sands means sands or other rock materials containing naturally occurring hydrocarbons, other than coal, which hydrocarbons have

 (a) a viscosity, determined in a prescribed manner, equal to or greater than 10,000 centipoise; or

 (b) a density, determined in a prescribed manner, equal to or less than 12 degrees API;

borrowed money includes the proceeds to a taxpayer from the sale of a post-dated bill drawn by the taxpayer on a bank;

brother of a taxpayer includes the brother of the taxpayer's spouse and the spouse of the taxpayer's sister;

business includes a profession, calling, trade, manufacture or undertaking of any kind whatsoever and, except for the purposes of subparagraph a of the first paragraph of section 164, section 250.4 and subparagraph i of the second paragraph of section 726.6.1, an adventure or concern in the nature of trade but does not include an office or employment;

Canada includes

 (a) the sea bed and subsoil of the submarine areas adjacent to the coasts of Canada in respect of which the Government of Canada or of a province grants a right, licence or privilege to explore for, drill for or take any minerals, petroleum, natural gas or any related hydrocarbons; and

 (b) the seas and airspace above the submarine areas referred to in paragraph a in respect of any activities carried on in connection with the exploration for or exploitation of any resource referred to in that paragraph;

Canadian banking business means the business carried on by an authorized foreign bank through an establishment in Canada, other than business conducted through a representative office registered or required to be registered under section 509 of the Bank Act;

Canadian-controlled private corporation has the meaning assigned by section 21.19;

Canadian corporation has the meaning assigned by paragraph l of section 570;

Canadian development expenses has the meaning assigned by sections 408 to 410;

Canadian exploration and development expenses has the meaning assigned by sections 364 to 366;

Canadian exploration expenses has the meaning assigned by sections 395 to 397;

Canadian oil and gas property expense has the meaning assigned by sections 418.2 to 418.4;

Canadian partnership has the meaning assigned by section 599;

Canadian resource property has the meaning assigned by section 370;

capital dividend has the meaning assigned by sections 502 to 502.0.4;

capital interest in a trust by a taxpayer has the meaning assigned by section 683;

capital property has the meaning assigned by section 249;

cash method has the meaning assigned by section 194;

cemetery care trust has the meaning assigned by section 979.19;

certified archival centre means an archival centre certified by Bibliothèque et Archives nationales du Québec and the certification of which is in force;

charity means a charitable organization or charitable foundation, within the meaning of section 985.1;

child of a taxpayer includes:

 (a) (subparagraph repealed);

 (b) a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before such person attained the age of 19 years did have, in law or in fact, the custody and control;

 (c) the spouse of a child of the taxpayer; and

 (d) a child of the taxpayer's spouse;

common share means a share the holder of which is not precluded, upon the reduction or redemption of the capital stock, from participating in the assets of the corporation beyond the amount then paid for that share plus a fixed premium and a defined rate of dividend;

compensation for the loss of financial support means a benefit payable under a public compensation plan in the form of a pension or a lump sum in lieu of a pension that is granted following the death of the victim of an accident, employment injury or bodily injury to a person who, under the terms of the public compensation plan, is the victim's surviving spouse or a person who is considered to have been the victim's dependant;

corporation incorporated in Canada includes any corporation incorporated in any region of Canada before or after it became part of Canada;

cost amount to a taxpayer of any property at any time means

 (a) in the case of depreciable property of a prescribed class, the amount that would be that proportion of the undepreciated capital cost to the taxpayer of property of that class at that time that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that has not been disposed of by the taxpayer before that time if section 99 were read without reference to paragraph d.1 thereof and if paragraph b and subparagraph i of paragraph d of that section were read as follows:

“(b) subject to section 284, where a taxpayer, having acquired property for some other purpose, begins at a particular time to use it to gain income, the taxpayer is deemed to have acquired it at that particular time at a capital cost to the taxpayer equal to the fair market value of the property at that time;”;

“i. where the proportion of the use made of the property to gain income has increased at a particular time, the taxpayer is deemed to have acquired at that time depreciable property of that class at a capital cost equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property to gain income is of the whole of the use made of it;”;

 (b) in the case of capital property, other than depreciable property, of the taxpayer, its adjusted cost base to the taxpayer at that time;

 (c) in the case of property described in an inventory of the taxpayer, its value at that time as determined for the purpose of computing the taxpayer's income;

 (c.1) where the taxpayer is a financial institution, within the meaning assigned by section 851.22.1, in its taxation year that includes that time and the property is mark-to-market property, within the meaning assigned by that section, for the year, the cost to the taxpayer of the property;

 (d) in the case of incorporeal capital property of the taxpayer in respect of a business, 4/3 of the amount that would, but for section 106.1, be the proportion of the eligible incorporeal capital amount of the taxpayer in respect of the business at that time that the fair market value, at that time, of the incorporeal capital property is of the fair market value, at that time, of the aggregate of incorporeal capital properties of the taxpayer in respect of the business;

 (d.1) where the property was a loan or lending asset, other than a net income stabilization account, a farm income stabilization account or a property in respect of which any of paragraphs b to c.1 and d.2 applies, the amortized cost of the property to the taxpayer at that time;

 (d.2) where the taxpayer is a financial institution within the meaning assigned by section 851.22.1 in its taxation year that includes that time and the property is a specified debt obligation within the meaning assigned by that section, other than a mark-to-market property within the meaning assigned by that section for the year, the tax basis, within the meaning assigned by section 851.22.7, of the property to the taxpayer at that time;

 (e) where the property was a right of the taxpayer to receive an amount, other than property that is a debt the amount of which was deducted under section 141 in computing the taxpayer's income for a taxation year that ended before that time, a net income stabilization account, a farm income stabilization account, a right in respect of which any of paragraphs b to c.1, d.1 and d.2 applies, or a right to receive production, as defined in section 158.1, to which a matchable expenditure, as defined in section 158.1, relates, the amount the taxpayer has a right to receive;

 (e.1) in the case of a policy loan, within the meaning assigned by subparagraph h of the first paragraph of section 835, of an insurer or an interest of a beneficiary under an environmental trust, an amount equal to zero;

 (f) in any other case, the cost to the taxpayer of the property as determined for the purpose of computing the taxpayer's income, except to the extent that that cost has been deducted in computing the taxpayer's income for any taxation year ending before that time;

death benefit has the meaning assigned by section 3;

deferred amount at the end of a taxation year under a salary deferral arrangement in respect of an individual has the meaning assigned by section 47.17;

deferred profit sharing plan has the meaning assigned by section 870;

depreciable property has the meaning assigned by subparagraph c of the first paragraph of section 93;

derivative forward agreement, of a taxpayer, means an agreement entered into by the taxpayer to purchase or sell a capital property if

 (a) the term of the agreement exceeds 180 days or the agreement is part of a series of agreements with a term that exceeds 180 days;

 (b) in the case of a purchase agreement, the difference between the fair market value of the property delivered on settlement, including partial settlement, of the agreement and the amount paid for the property is attributable, in whole or in part, to an underlying interest (including a value, price, rate, variable, index, event, probability or thing) other than

(i)  revenue, income or cash flow in respect of the property over the term of the agreement, changes in the fair market value of the property over the term of the agreement, or any similar criteria in respect of the property, or

(ii)  if the purchase price is denominated in the currency of a country other than Canada, changes in the value of the Canadian currency relative to that other currency; and

 (c) in the case of a sale agreement,

(i)  the difference between the sale price of the property and the fair market value of the property at the time the agreement is entered into by the taxpayer is attributable, in whole or in part, to an underlying interest (including a value, price, rate, variable, index, event, probability or thing) other than

(1)  revenue, income or cash flow in respect of the property over the term of the agreement, changes in the fair market value of the property over the term of the agreement, or any similar criteria in respect of the property, or

(2)  if the sale price is denominated in the currency of a country other than Canada, changes in the value of the Canadian currency relative to that other currency, and

(ii)  the agreement is part of an arrangement that has the effect–or would have the effect if the agreements that are part of the arrangement and that were entered into by persons or partnerships not dealing at arm's length with the taxpayer were entered into by the taxpayer instead of those non-arm's length persons or partnerships–of eliminating a majority of the taxpayer's risk of loss and opportunity for profit or gain in respect of the property for a period of more than 180 days;

designated insurance property has the meaning assigned by section 818;

designated stock exchange means a stock exchange, or that part of a stock exchange, for which a designation made or deemed to be made by the Minister of Finance of Canada under section 262 of the Income Tax Act is in effect;

development bond has the meaning assigned by section 119.2;

disposition has the meaning assigned by section 248;

dividend includes a stock dividend, other than a stock dividend that is paid to a corporation or to a mutual fund trust by a corporation that is not resident in Canada;

dividend rental arrangement of a person or a partnership means any arrangement entered into by the person or partnership where it may reasonably be considered that the main reason for the person or partnership entering into the arrangement is to enable the person or partnership to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in section 21.6.1 or an amount deemed, by reason of the first paragraph of section 119, to be received as a dividend on a share of the capital stock of a corporation, and under the arrangement another person or partnership enjoys the opportunity for profit or gain or bears the risk of loss with respect to the share in any material respect, and includes any arrangement under which

 (a) a corporation at any time receives on a particular share a taxable dividend that would, but for section 740.4.1, be deductible in computing its taxable income for the taxation year that includes that time; and

 (b) the corporation or a partnership of which it is a member is obligated to pay to another person or partnership an amount as compensation for each of the following dividends that, if paid, would be deemed under section 21.32 to have been received by that other person or partnership, as the case may be, as a taxable dividend:

(i)  the dividend referred to in paragraph a,

(ii)  a dividend on a share that is identical to the particular share, or

(iii)  a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate opportunity for gain or risk of loss as the particular share;

eligible dividend means an amount, in respect of a person resident in Canada, that is deemed to be a taxable dividend received by the person under section 603.1 or 663.4, or a portion of a taxable dividend that is paid by a corporation resident in Canada, that is received by a person resident in Canada and that

 (a) is designated, in accordance with subsection 14 of section 89 of the Income Tax Act, as an eligible dividend for the purposes of that Act; or

 (b) if the taxable dividend is included in a particular amount that is deemed to be a dividend or taxable dividend, corresponds, without exceeding the particular amount, to the portion, designated, in accordance with subsection 14 of section 89 of the Income Tax Act, as an eligible dividend for the purposes of that Act, of the amount, corresponding to the particular amount, that is deemed to be a dividend or taxable dividend for the purposes of that Act;

eligible funeral arrangement has the meaning assigned by section 979.19;

eligible incorporeal capital amount has the meaning assigned by section 107;

eligible relocation has the meaning assigned by section 349.1;

employee means any person employed or holding an office;

employee benefit plan has the meaning assigned by section 47.6;

employee life and health trust has the meaning assigned by section 869.2;

employee trust has the meaning assigned by sections 47.7 to 47.9;

employer, in relation to an employee, means the person from whom the employee receives remuneration;

employment means the position of an individual in the service of some other person, including the State, Her Majesty or a foreign state or sovereign;

environmental trust has the meaning assigned by the first paragraph of section 1129.51;

establishment has the meaning assigned to it by sections 12 to 16.2;

exempt income means property received or acquired by a person in such circumstances that it is, because of any provision of this Part, not included in computing the person's income, but does not include a dividend on a share;

farm income stabilization account means an account of a person or partnership under the Farm Income Stabilization Account program established under the Act respecting La Financière agricole du Québec (chapter L-0.1);

farming includes livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;

farm loss has the meaning assigned by section 728.2;

federal credit union has the meaning assigned by section 2 of the Bank Act;

filing-due date of a taxpayer for a taxation year means the day on or before which the taxpayer's fiscal return under this Part for the year is required to be filed or would be required to be filed if tax under this Part were payable by the taxpayer for the year;

fiscal law means a fiscal law within the meaning of the Tax Administration Act (chapter A-6.002);

fishing includes fishing for or catching shell fish, crustaceans and marine animals but does not include an office or employment under a person engaged in the business of fishing;

flow-through share has the meaning assigned by section 359.1;

foreign accrual property income has the meaning assigned by section 579;

foreign affiliate has the meaning assigned by section 571;

foreign currency means currency of a foreign country;

foreign currency debt has the meaning assigned by section 736.0.0.2;

foreign exploration and development expenses has the meaning assigned by sections 372 and 372.1;

foreign resource expense has the meaning assigned by sections 418.1.1 and 418.1.2;

foreign resource pool expenses of a taxpayer means the taxpayer's foreign resource expenses in relation to all countries and the taxpayer's foreign exploration and development expenses;

foreign resource property has the meaning assigned by section 373;

foreign retirement arrangement means a prescribed plan or arrangement;

former business property of a taxpayer means a capital property of the taxpayer that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business and that was immovable property of the taxpayer, an interest in such property or a property that is the subject of a valid election referred to in subparagraph c of the first paragraph of section 96.0.2, but does not include

 (a) immovable property owned by the taxpayer, whether jointly with another person or otherwise, and used by the taxpayer in the taxation year to which the expression “former business property” is being applied principally for the purpose of gaining or producing gross revenue that is rent, other than property either leased by the taxpayer to a person related to the taxpayer and used by that related person principally for any other purpose, or leased by the taxpayer or the related person to a lessee, in the ordinary course of a business of the taxpayer or the related person of selling goods or rendering services, under a contract by which the lessee undertakes to use the property to carry on the business of selling or promoting the sale of the goods or services of the taxpayer or the related person,

 (b) land subjacent to a property referred to in paragraph a,

 (c) land contiguous to land referred to in paragraph b that is a parking area, driveway, yard or garden or that is otherwise necessary for the use of the property referred to in paragraph a, or

 (d) a leasehold interest in any property described in paragraphs a, b and c;

goods and services tax means the tax payable under Part IX of the Excise Tax Act (R.S.C. 1985, c. E-15);

grandfather of a taxpayer includes the grandfather of the taxpayer's spouse and the spouse of the taxpayer's grandmother;

grandfathered share has the meaning assigned by sections 21.11.20 and 21.11.21;

grandmother of a taxpayer includes the grandmother of the taxpayer's spouse and the spouse of the taxpayer's grandfather;

great-aunt of a taxpayer includes the spouse of the taxpayer's great-uncle;

great-uncle of a taxpayer includes the spouse of the taxpayer's great-aunt;

gross revenue of a taxpayer for a taxation year means the aggregate of:

 (a) all amounts received or receivable in the year, depending on the method regularly followed by the taxpayer in computing the taxpayer's income, otherwise than as or on account of capital; and

 (b) all amounts, other than amounts referred to in paragraph a, included in computing the taxpayer's income from a business or property for the year by virtue of section 89, 92 or 92.1 or any of sections 92.11 to 92.19;

 (c) (paragraph replaced);

group term life insurance policy means a group life insurance policy under which the only amounts payable by the insurer are

 (a) amounts payable on the death or disability of individuals whose lives are insured because of, or in the course of, their office or employment or former office or employment, and

 (b) policy dividends or experience rating refunds;

home relocation loan means a loan made to an individual or the individual's spouse in circumstances where the individual has commenced employment at a new work location in Canada and by reason thereof has moved from the old residence in Canada at which, before the move, the individual ordinarily resided to a new residence in Canada at which, after the move, the individual ordinarily resides, if

 (a) the distance between the old residence and the new work location is at least 40 km greater than the distance between the new residence and the new work location;

 (b) the loan is used to acquire a dwelling, or a share of the capital stock of a housing cooperative acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the cooperative, where the dwelling is for the habitation of the individual and is the individual's new residence;

 (c) the loan is received in the circumstances described in section 487.1, or would have been so received if the second paragraph of section 487.1 had applied to the loan at the time it was received; and

 (d) the loan is designated by the individual to be a home relocation loan, but in no case shall more than one loan in respect of a particular move, or more than one loan at any particular time, be designated as a home relocation loan by the individual;

income-averaging annuity has the meaning assigned by sections 342 and 343;

income-averaging annuity respecting income from artistic activities in relation to an individual means, except for the purposes of Chapter VI.0.1 of Title VI of Book III, an annuity established under a contract that meets the conditions set out in section 346.0.2 and in respect of which the individual has deducted an amount in computing the individual's income under section 346.0.1;

income bond or income debenture has the meaning assigned by sections 21.12 to 21.15;

income interest in a trust by a taxpayer has the meaning assigned by section 683;

income replacement indemnity means a benefit paid under a public compensation plan to compensate a total or partial disability affecting a person's capacity to perform the duties of an office or employment or to carry on a business either alone or as a partner actively engaged in the business, or to compensate the loss of a benefit under the Employment Insurance Act (S.C. 1996, c. 23), unless, under the terms of the public compensation plan, no employer, whether required or not to pay all or part of the benefit, may be reimbursed for the expense incurred by the employer in that respect; for that purpose, a benefit computed by reference to a person's recognized earnings under the public compensation plan is deemed a benefit paid to compensate the total or partial disability affecting the person's capacity to perform the duties of an office or employment or to carry on a business either alone or as a partner actively engaged in the business;

incorporeal capital amount has the meaning assigned by section 106;

incorporeal capital property has the meaning assigned by section 250;

indexed debt obligation means a debt obligation the terms or conditions of which provide for an adjustment to an amount payable in respect of the obligation for a period during which the obligation was outstanding that is determined by reference to a change in the purchasing power of money;

individual means a person other than a corporation;

insurance corporation has the same meaning as “insurer”;

insurance policy includes a life insurance policy;

insurer means a corporation carrying on an insurance business;

international financial centre has the meaning assigned by section 6 of the Act respecting international financial centres (chapter C-8.3);

international traffic, in respect of a person not resident in Canada who carries on a transportation business, means a voyage made in the course of that business, to transport persons or goods between two places outside Canada or between Canada and a place outside Canada;

inter vivos trust means a trust other than a testamentary trust;

inventory means a description of property the cost or value of which is relevant in computing a taxpayer's income from a business for a taxation year or would have been so relevant if the income from the business had not been computed in accordance with the cash method and, with respect to a farming business, includes all of the livestock held in the course of carrying on the business;

investment corporation has the meaning assigned by Book I of Part III;

investment in a SIFT wind-up entity means

 (a) if the SIFT wind-up entity is a trust and subject to paragraph c, a capital interest (determined without reference to section 7.11.1) in the trust;

 (b) if the SIFT wind-up entity is a partnership and subject to paragraph c, an interest as a member of the partnership where, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited; and

 (c) if all of the interests described in paragraphs a and b are described by reference to units, the part of the interest represented by such a unit;

joint spousal trust has the meaning assigned by section 652.1;

law includes any Act other than an Act of the Parliament of Québec;

legal representative of a taxpayer means a trustee in bankruptcy, an assignee, a receiver, a trustee, an heir, an administrator of the property of others, or any other like person, administering, winding up, controlling or otherwise dealing in a representative or fiduciary capacity with the property that belongs or belonged to, or that is or was held for the benefit of, the taxpayer or the taxpayer's succession;

lending assets means a bond, debenture, note, hypothecary claim, mortgage, agreement of sale or any other indebtedness, or a prescribed share, but does not include a prescribed property;

life insurance business includes the business of issuing contracts in respect of which all or any part of the issuer's reserves vary depending upon the fair market value of a specified group of assets, and an annuities business, carried on by a life insurer;

life insurance corporation has the same meaning as “life insurer”;

life insurance policy has the meaning assigned by subparagraph e of the first paragraph of section 835;

life insurance policy in Canada has the meaning assigned by subparagraph e.1 of the first paragraph of section 835;

life insurer means a corporation carrying on a life insurance business other than a business referred to in the definition of “life insurance business”, even if it also carries on a business so described;

limited partnership loss in respect of the partnership has the meaning assigned by sections 613.1 and 726.4.17.11;

majority-interest partner of a particular partnership at any time means a person or partnership, in paragraphs a and b referred to as the “taxpayer”,

 (a) whose share of the particular partnership's income from all sources for the fiscal period of the particular partnership that ended before that time or, if the particular partnership's first fiscal period includes that time, for that fiscal period, would have exceeded 1/2 of the particular partnership's income from all sources for that period if the taxpayer had held throughout that fiscal period each interest in the particular partnership that the taxpayer or a person affiliated with the taxpayer held at that time; or

 (b) whose share, together with the shares of every person with whom the taxpayer is affiliated, of the total amount that would be paid to all members of the particular partnership, otherwise than as a share of any income of the particular partnership, if it were wound up at that time exceeds 1/2 of that total amount;

mineral includes ammonite gemstone, coal, calcium chloride, kaolin, bituminous sands, oil shale and silica, but does not include petroleum, natural gas or other related hydrocarbons;

mineral resource means a base or precious metal deposit, a coal deposit, a bituminous sands deposit or oil shale deposit, or a mineral deposit in respect of which the principal mineral extracted is

 (a) an industrial mineral contained in a non-bedded deposit, as certified by the Minister of Natural Resources and Wildlife;

 (b) ammonite gemstone, calcium chloride, diamond, gypsum, halite, kaolin or sylvite;

 (c) silica that is extracted from sandstone or quartzite;

mortgage investment corporation has the meaning assigned by section 1108;

motor vehicle means an automotive vehicle designed or adapted to be used on highways and streets, other than a trolleybus or a vehicle designed or adapted to be operated exclusively on rails;

municipality includes a metropolitan community and the Kativik Regional Government, established under the Act respecting Northern villages and the Kativik Regional Government (chapter V-6.1);

mutual fund corporation has the meaning assigned by Book III of Part III;

mutual fund trust has the meaning assigned by Book IV of Part III;

net capital loss has the meaning assigned by section 730;

net income stabilization account means

 (a) an account of a taxpayer under the net income stabilization account program under the Farm Income Protection Act (S.C. 1991, c. 22); or

 (b) an account of a taxpayer under the Agri-Québec program under the Act respecting La Financière agricole du Québec;

nephew of a taxpayer includes the nephew of the taxpayer's spouse;

niece of a taxpayer includes the niece of the taxpayer's spouse;

NISA Fund No. 2 means

 (a) the portion of a taxpayer's net income stabilization account, under the Farm Income Protection Act, that is described in paragraph b of subsection 2 of section 8 of that Act and that can reasonably be considered to be attributable to a program that allows the funds in the account to accumulate; or

 (b) the portion of a taxpayer's net income stabilization account, under the Act respecting La Financière agricole du Québec, that is referred to as “Fund 2” under the Agri-Québec program;

non-capital loss has the meaning assigned by section 728;

non-resident-owned investment corporation has the meaning assigned by Book V of Part III;

office means the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a minister of the State or Crown, the office of a member of a legislative assembly, a member of the Senate or House of Commons of Canada or a member of an executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity, and also includes the position of member of the board of directors of a corporation even where the individual neither performs administrative functions within the corporation nor receives stipends or a remuneration to hold that position;

oil or gas well means any well, other than an exploratory probe or a well drilled from below the surface of the earth, drilled for the purpose of producing petroleum or natural gas or of determining the existence, location, extent or quality of a natural accumulation of petroleum or natural gas, but, for the purpose of applying sections 93 to 104 and 130 and any regulations made for the purpose of paragraph a of section 130 in respect of property acquired after 6 March 1996, does not include a well for the extraction of material from a deposit of bituminous sands or oil shales;

paid-up capital has the meaning assigned by paragraph a of section 570, except for the purposes of Titles VI.1 and VI.2 of Book VII and Title V of Book IX, excluding sections 1045 to 1049;

passenger vehicle means an automobile acquired after 17 June 1987, other than an automobile acquired after that date pursuant to an obligation in writing entered into before 18 June 1987, and an automobile leased under a lease entered into, extended or renewed after 17 June 1987;

pension benefit includes any amount received under a pension plan, including, except for the purposes of section 317, any amount received under a pooled registered pension plan, and also includes any payment made to a beneficiary under the plan, or to an employer or former employer of the beneficiary in accordance with the conditions of the plan, following any change made in it or resulting from its winding-up;

person, or any word or expression descriptive of a person, includes any corporation, and any entity exempt, because of Book VIII, from tax under this Part and the legal representatives of such a person, according to the law of that part of Canada to which the context extends;

personal or living expenses includes:

 (a) the expenses of properties maintained by any person for the use or benefit of the taxpayer or any person connected with the taxpayer by blood relationship, marriage or adoption, but does not include expenses in respect of properties maintained in connection with a business carried on for profit or with a reasonable expectation of profit;

 (b) the expenses, premiums or other costs of an insurance policy, annuity contract or other like contract if the proceeds of the policy or contract are payable to or for the benefit of the taxpayer or a person connected with the taxpayer by blood relationship, marriage or adoption; and

 (c) expenses of properties maintained by a succession or trust for the benefit of the taxpayer as one of the beneficiaries;

personal services business means a services business carried on by a corporation in a taxation year where an employee who provides services on behalf of the corporation, referred to in this definition and in section 135.2 as an “incorporated employee”, or a person related to an incorporated employee is a specified shareholder of the corporation and the incorporated employee could reasonably be regarded as an employee of the person or partnership to whom or to which the services were provided but for the existence of the corporation, unless

 (a) the corporation employs in the business throughout the year more than five full-time employees; or

 (b) the amount received or receivable by the corporation in the year for the services provided is paid or payable by a corporation with which it was associated during that year;

personal trust has the meaning assigned by section 649.1;

personal-use property has the meaning assigned by section 287;

pooled registered pension plan or PRPP means a plan that has been accepted for the purposes of the Income Tax Act by the Minister of National Revenue as a PRPP and whose registration is in force;

post-1971 spousal trust has the meaning assigned by section 652.1;

precious property means a property contemplated in section 265;

preferred share means a share other than a common share;

prescribed class means a class prescribed under subparagraph e of the first paragraph of section 1086;

principal amount in relation to any obligation means the amount that, under the terms of the obligation or any agreement relating thereto, is the maximum amount or maximum aggregate amount, as the case may be, payable on account of the obligation by the issuer thereof, otherwise than as or on account of interest or as or on account of any premium payable by the issuer conditional upon the exercise by the issuer of a right to redeem the obligation before the maturity thereof;

private corporation has the meaning assigned by paragraph n of section 570;

private foundation has the meaning assigned by paragraph e of section 985.1;

private health services plan means a contract of insurance in respect of medical expenses, hospital expenses or any combination of such expenses, or a medical care insurance plan or hospital care insurance plan or both a medical care and hospital care insurance plan, to the extent that the contract or plan essentially applies to expenses described in section 752.0.11.1 and that all or substantially all of the premium or any other consideration payable for coverage provided under the contract or plan is attributable to such expenses, except any such contract or plan established by or pursuant to a law of a province that establishes a health care insurance plan that is a health care insurance plan within the meaning of section 2 of the Canada Health Act (R.S.C. 1985, c. C-6);

professional corporation means a corporation that carries on the professional practice of an accountant, dentist, advocate, physician, veterinarian or chiropractor;

profit sharing plan has the meaning assigned by section 852, except for the purposes of Title III.1 of Book V;

property means property of any kind whatever whether real or personal, corporeal or incorporeal, and also includes a share, a right of any kind whatever and the work in progress of a business that is a profession;

property of the bankrupt has the meaning assigned by the Bankruptcy and Insolvency Act;

province means a province of Canada and includes the Northwest Territories, the Yukon Territory and Nunavut;

public compensation plan means a plan established under a law of Québec or of another jurisdiction, or a regulation under such a law, that provides for the payment of benefits following an accident, employment injury, bodily injury or death or in order to prevent bodily injury, other than the Act respecting the Québec Pension Plan (chapter R-9), the Canada Pension Plan (R.S.C. 1985, c. C-8) or any other law establishing a plan equivalent to that established under the Act respecting the Québec Pension Plan;

public corporation has the meaning assigned by paragraph o of section 570;

public foundation has the meaning assigned by paragraph f of section 985.1;

qualified business, in respect of any business carried on by a taxpayer resident in Canada, means any business carried on by the taxpayer other than a specified investment business or a personal services business;

qualified donee has the meaning assigned by section 999.2;

qualifying trust annuity has the meaning assigned by section 21.43;

Québec museum means a museum situated in Québec and any other museum that is a recognized museum at the time the gift is made.

Québec sales tax means the tax payable under Title I of the Act respecting the Québec sales tax (chapter T-0.1);

recognized arts organization means an arts organization that was recognized, before 30 June 2006, by the Minister on the recommendation of the Minister of Culture and Communications and whose recognition is in force, but does not include a registered charity and an arts organization that is a registered cultural or communications organization under the second paragraph of section 985.35.12;

recognized gift with reserve of usufruct or use by a taxpayer in relation to a work of art or a cultural property described in the third paragraph of section 232, means the gift by the taxpayer of the work of art or the cultural property, other than immovable property, that meets the following conditions:

 (a) the gift is a gift inter vivos whereby the taxpayer disposes of the bare ownership of the work of art or the cultural property but retains the usufruct or right of use;

 (b) in the case of a work of art, other than cultural property described in the third paragraph of section 232, the gift is made to a Québec museum;

 (c) in the case of cultural property described in the third paragraph of section 232, the gift is made to an institution or a public authority in Canada which is, at the time of the gift, designated under subsection 2 of section 32 of the Cultural Property Export and Import Act (R.S.C. 1985, c. C-51) for general purposes or for a specified purpose related to that cultural property, to a certified archival centre or a recognized museum;

 (d) the usufruct or right of use is established only for the taxpayer and is not successive;

 (e) the usufruct or right of use is established for the lifetime of the taxpayer, where the taxpayer is an individual, or for a term not exceeding 30 years;

 (f) the taxpayer was the sole owner of the work of art or the cultural property immediately before the gift was made; and

 (g) the deed of gift provides that

(i)  the taxpayer may not dispose of the taxpayer's usufruct or right of use without the consent of the bare owner,

(ii)  the taxpayer shall keep the work of art or the cultural property in a place designated in the deed of gift and shall move it only with the consent of the bare owner and under the terms and conditions determined by the bare owner,

(iii)  the taxpayer shall keep the work of art or the cultural property insured against ordinary risks for the duration of the usufruct or right of use and undertake to inform the bare owner without delay of the deterioration or disappearance of the work of art or the cultural property,

(iv)  the bare owner may, where the work of art or the cultural property deteriorates,

(1)  decide to restore it, in which case the bare owner shall designate the person for that purpose, who will be remunerated out of the proceeds of the insurance referred to in subparagraph iii, or

(2)  decide not to restore it, in which case the bare owner may claim from the taxpayer the proceeds of the insurance referred to in subparagraph iii that the taxpayer will be required to give to the bare owner within 10 days of the receipt of the written confirmation of the decision, and

(v)  the usufruct or right of use is extinguished where the work of art or the cultural property disappears and the taxpayer may claim the proceeds of the insurance referred to in subparagraph iii;

recognized museum means a museum that is recognized by the Minister of Culture and Communications and whose recognition is in force;

recognized political education organization has the meaning assigned by section 985.36;

recognized stock exchange means

 (a) a designated stock exchange; or

 (b) a stock exchange, other than a designated stock exchange, located in Canada or in a country that is a member of the Organisation for Economic Co-operation and Development that entered into a tax agreement (within the meaning that would be assigned to that expression by this section if the Gouvernement du Québec had not entered into an agreement referred to in the definition of that expression) with the Government of Canada;

registered Canadian amateur athletic association at any time means a Canadian amateur athletic association within the meaning of section 985.23.1 that is registered as such with the Minister at that time or that is deemed to be registered in accordance with the second paragraph of section 985.23.6;

registered charity at any time means a charitable organization within the meaning of section 985.1, a private foundation or a public foundation, that is at that time registered with the Minister as a charitable organization within the meaning of that section 985.1, a private foundation or a public foundation, or that is deemed to be so registered in accordance with sections 985.5 to 985.5.2;

registered cultural or communications organization at any time means an organization that is, at that time, registered as such with the Minister in accordance with section 985.35.12;

registered disability savings plan has the meaning assigned by Title III.1 of Book VII;

registered education savings plan has the meaning assigned by Title III of Book VII;

registered museum at any time means a museum that, at that time, is registered as such with the Minister in accordance with section 985.35.2;

registered national arts service organization, at any time, means a national arts service organization that is deemed to be registered at that time by the Minister under section 985.24 and whose registration is in force;

registered pension plan means a plan accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;

registered Québec amateur athletic association at any time means a Québec amateur athletic association within the meaning of section 985.23.1 that is registered as such with the Minister at that time;

registered retirement income fund means a fund accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;

registered retirement plan means an employees' superannuation plan accepted before 1 January 1986 by the Minister for registration for the purposes of this Part in respect of its constitution and operations for the taxation year under consideration;

registered retirement savings plan means a plan accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;

registered securities dealer means a person authorized to trade in securities, in the capacity of an agent or principal, without any restriction as to the types or kinds of securities in which that person may trade by reason of the fact that the person

 (a) is registered or licensed under the laws of a province; or

 (b) meets the following conditions:

(i)  the person is registered with, or licensed by, a competent authority other than the competent authority of a province, and

(ii)  the person obtained from the Autorité des marchés financiers or from a securities commission or similar body an exemption from registration pursuant to the laws of a province;

registered supplementary unemployment benefit plan has the meaning assigned by subsection 3 of section 962;

regulation means a regulation made by the Government under this Part;

restricted farm loss has the meaning assigned by section 207;

restricted financial institution means

 (a) a bank;

 (b) a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering its services as trustee;

 (c) a savings and credit union;

 (d) an insurance corporation;

 (e) a corporation whose principal business is the lending of money to persons with whom it is dealing at arm's length or the purchasing of debt obligations issued by such persons, or a combination thereof;

 (e.1) a corporation referred to in paragraph g of the definition of “financial institution” in subsection 1 of section 181 of the Income Tax Act;

 (f) a corporation that is controlled by one or more corporations described in any of paragraphs a to e.1;

retirement compensation arrangement has the meaning assigned by section 890.1;

retirement income fund has the meaning assigned by subsection 1 of section 146.3 of the Income Tax Act;

retirement savings plan has the meaning assigned by subsection 1 of section 146 of the Income Tax Act;

retiring allowancemeans an amount, other than an amount received as a consequence of the death of an employee, a pension benefit or a benefit referred to in subparagraph d of the third paragraph of section 38, received by a taxpayer or, after the taxpayer's death, by a dependent or a relative of the taxpayer or by the legal representative of the taxpayer

 (a) on or after retirement of the taxpayer from an office or employment in recognition of the taxpayer's long service; or

 (b) in respect of the loss of an office or employment of the taxpayer, whether or not received as, on account of or in lieu of damages or pursuant to an order or judgment of a competent tribunal;

salary deferral arrangement in respect of an individual has the meaning assigned by sections 47.15 and 47.16;

salary or wages, except in section 32, means the income of a taxpayer from an office or employment as computed under Title II of Book III and includes all fees received by the taxpayer for services not rendered in the course of the taxpayer's business, but does not include pension benefits or retiring allowances;

savings and credit union has the meaning assigned by section 797;

scientific research and experimental development has the meaning assigned by subsections 2 to 4 of section 222;

self-contained domestic establishment means a dwelling-house, apartment or other similar place of residence in which a person as a general rule sleeps and eats;

servant means a person engaged in employment;

share means a share or fraction of a share of the capital stock of a corporation and includes, except for the purposes of Title VI.1 of Book VII, a share or fraction of a share of the capital of a prescribed cooperative or of a savings and credit union;

shareholder includes any person entitled to receive payment of a dividend;

short-term preferred share has the meaning assigned by sections 21.11.11 to 21.11.13;

SIFT partnership has the meaning assigned by the first paragraph of section 1129.70;

SIFT trust has the meaning assigned by the first paragraph of section 1129.70;

SIFT trust wind-up event means a distribution by a particular trust resident in Canada of property to a taxpayer in respect of which the following conditions are met:

 (a) the distribution occurs before 1 January 2013;

 (b) there is a resulting disposition of all of the taxpayer's interest as a beneficiary under the particular trust;

 (c) the particular trust is

(i)  a SIFT wind-up entity,

(ii)  a trust whose only beneficiary throughout the period (in this definition referred to as the “qualifying period”) that begins on 14 July 2008 and that ends at the time of the distribution is another trust that throughout the qualifying period

(1)  is resident in Canada, and

(2)  is a SIFT wind-up entity or a trust described in this subparagraph ii, or

(iii)  a trust whose only beneficiary at the time of distribution is another trust that throughout the qualifying period

(1)  is resident in Canada,

(2)  is a SIFT wind-up entity or a trust described in subparagraph ii, and

(3)  is a majority-interest beneficiary (within the meaning that would be assigned by section 21.0.1 if paragraphs a and b of the definition of “majority-interest beneficiary” were read as if “50%” was replaced by “25%”) of the particular trust;

 (d) the particular trust ceases to exist immediately after the distribution or immediately after the last of a series of SIFT trust wind-up events (determined without reference to this paragraph) of the particular trust that includes the distribution; and

 (e) the property was not acquired by the particular trust as a result of

(i)  a transfer or an exchange that is a qualifying exchange (within the meaning of the first paragraph of section 785.4) or a qualifying disposition (within the meaning of section 692.5) that is made after 2 February 2009 and that is from any person other than a SIFT wind-up entity, or

(ii)  the transfer or the exchange, to which Division XIII of Chapter IV of Title IV of Book III, any of Chapters IV to IX of Title IX of Book III, Chapter X of Title XII of that Book or Title I.2 of Book VI applies, of another property acquired as a result of a transfer or an exchange described in subparagraph i or this subparagraph;

SIFT wind-up corporation, in respect of a SIFT wind-up entity (in this definition referred to as a “particular entity”), means at a particular time a corporation

 (a) that, at any time that is after 13 July 2008 and before the earlier of the particular time and 1 January 2013, owns all of the investments in the particular entity, each of which is an investment in a SIFT wind-up entity, or

 (b) the shares of the capital stock of which are at or before the particular time distributed as part of a SIFT trust wind-up event of the particular entity;

SIFT wind-up entity means a trust or partnership that at any time in the period that began on 31 October 2006 and that ended on 14 July 2008 is

 (a) a SIFT trust or a trust that would be a SIFT trust but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government's 2007-2008 Budgetary Policy and to certain other budget statements (2009, chapter 5);

 (b) a SIFT partnership or a partnership that would be a SIFT partnership but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government's 2007-2008 Budgetary Policy and to certain other budget statements; or

 (c) a real estate investment trust, within the meaning of the first paragraph of section 1129.70;

sister of a taxpayer includes the sister of the taxpayer's spouse and the spouse of the taxpayer's brother;

small business bond has the meaning assigned by section 119.15;

small business corporation, at any particular time, means, subject to section 726.6.2 and on the assumption, for the purposes of this definition, that the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil, a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which is attributable to assets that are, at that time,

 (a) used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it;

 (b) shares of the capital stock of a small business corporation connected with the corporation within the meaning of the regulations;

 (c) indebtedness of a corporation described in paragraph b, or

 (d) assets described in subparagraphs a to c;

specified employee of a person means an employee of the person who is a specified shareholder of the person or who does not deal at arm's length with the person;

specified financial institution, at a particular time, means

 (a) a bank;

 (b) a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering its services as trustee;

 (c) a savings and credit union;

 (d) an insurance corporation;

 (e) a corporation whose principal business is the lending of money to persons with whom it is dealing at arm's length or the purchasing of debt obligations issued by such persons, or a combination thereof;

 (e.1) a corporation referred to in paragraph g of the definition of “financial institution” in subsection 1 of section 181 of the Income Tax Act;

 (f) a corporation that is controlled by one or more corporations referred to in any of paragraphs a to e.1 and, for the purposes of this paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm's length, or to the other corporation and persons with whom the other corporation does not deal at arm's length;

 (g) a corporation that is related to a particular corporation referred to in any of paragraphs a to f, other than a particular corporation referred to in paragraph e or e.1 the principal business of which is the factoring of trade accounts receivable that the particular corporation acquired from a related person, that arose in the course of an eligible business carried on by a person, in this paragraph referred to as the “business entity”, related at that time to the particular corporation, and that at no particular time before that time were held by a person other than a person who was related to the business entity and, for the purposes of this paragraph, where in the case of two or more corporations it may reasonably be considered, having regard to all the circumstances, that one of the main reasons for the separate existence of those corporations in a taxation year is to limit or avoid the application of any of sections 740.1, 740.2 to 740.3.1 and 845, those corporations are deemed to be related to each other and to each other corporation to which any such corporation is related;

specified individual has the meaning assigned by section 766.3.3;

specified investment business has the meaning assigned by section 771.1;

specified member of a partnership in a fiscal period or taxation year of the partnership, as the case may be, means

 (a) any member of the partnership who is a limited partner, within the meaning assigned by section 613.6, of the partnership at any time in the fiscal period or taxation year;

 (b) any member of the partnership, other than a member who is actively engaged in those activities of the partnership business that are other than the financing of the partnership business, or is carrying on a business similar to that carried on by the partnership in its taxation year, otherwise than as a member of a partnership, on a regular, continuous and substantial basis throughout that part of the fiscal period or taxation year during which the business of the partnership is ordinarily carried on and during which the member is a member of the partnership;

specified pension plan means a prescribed arrangement;

specified shareholder has the meaning assigned by sections 21.17 and 21.18;

specified tax consequence for a taxation year means

 (a) the consequence of the exclusion from the income or the deduction of an amount referred to in the first paragraph of section 1044;

 (b) the consequence of a reduction under section 359.15 of an amount purported to be renounced by a corporation after the beginning of the year to a person or partnership under section 359.2 or 359.2.1 because of the application of section 359.8, determined as if the purported renunciation would, but for section 359.15, have been effective only where the requirements in paragraphs b and c of section 359.8 and the following requirements had been satisfied:

(i)  the purported renunciation occurred in the first three months of a particular calendar year,

(ii)  the effective date of the purported renunciation was the last date of the calendar year preceding the particular calendar year,

(iii)  the corporation agreed in the calendar year preceding the particular calendar year to issue a flow-through share to a person or partnership,

(iv)  the amount does not exceed the amount by which the consideration for which the share was issued exceeds the aggregate of all other amounts purported by the corporation to have been renounced under section 359.2 or 359.2.1 in respect of that consideration, and

(v)  the form prescribed for the purpose of section 359.12 in respect of the purported renunciation is filed by the corporation with the Minister before 1 May of the particular calendar year;

 (c) the consequence of an adjustment or a reduction described in section 1042.1;

split income has the meaning assigned by section 766.3.3;

stock dividend includes any dividend, determined without reference to the definition of “dividend” in this section, paid by a corporation to the extent that it is paid by the issuance of shares of any class of the capital stock of the corporation;

subsidiary controlled corporation means a corporation more than 50% of the issued capital stock of which having full voting rights under all circumstances belongs to the corporation to which it is subsidiary;

subsidiary wholly-owned corporation means a corporation all the issued capital stock of which except directors' qualifying shares, belongs to the corporation to which it is subsidiary;

succession has the meaning assigned by section 646;

supplementary unemployment benefit plan has the meaning assigned by subsection 1 of section 962;

tar sands means a mineral extracted, otherwise than by a well, from a mineral resource that is a deposit of bituminous sands or oil shales and, for the purpose of applying sections 93 to 104 and 130 and any regulations made under paragraph a of section 130 in respect of property acquired after 6 March 1996, includes material extracted by a well from a deposit of bituminous sands or oil shales;

tax agreement with a country other than Canada at any time means an agreement for the elimination of double taxation on income, between the Government of Québec and the government of the country, which has the force of law in Québec at that time or, in the absence of such an agreement, a comprehensive agreement or convention for the elimination of double taxation on income, between the Government of Canada and the government of the country, which has the force of law in Canada at that time;

tax-agreement-protected business of a taxpayer at any time means a business in respect of which any income of the taxpayer for a period that includes that time would, because of a tax agreement with a country other than Canada, be exempt from tax under this Part;

tax-agreement-protected property of a taxpayer at any time means property any income or gain from the disposition of which by the taxpayer at that time would, because of a tax agreement with a country other than Canada, be exempt from tax under this Part;

tax-free savings account” or “TFSA at any time means an arrangement accepted as such at that time by the Minister of National Revenue for the purposes of the Income Tax Act, in accordance with subsection 5 of section 146.2 of that Act;

tax shelter has the meaning assigned by section 1079.1;

taxable Canadian corporation has the meaning assigned by paragraph m of section 570;

taxable Canadian property has the meaning assigned by Part II and, for the purposes of section 688.0.0.1, Chapter I of Title I.1 of Book VI and sections 1000 to 1003, and for the purpose of applying section 521 and subparagraph c of the second paragraph of section 614 in respect of a disposition made by a person not resident in Canada, includes

 (a) a Canadian resource property;

 (b) a timber resource property;

 (c) an income interest in a trust resident in Canada;

 (d) a right to a share of the income or loss of a partnership under an agreement referred to in section 608; and

 (e) a life insurance policy in Canada;

taxable capital gain has the meaning assigned by section 231;

taxable dividend has the meaning assigned by paragraph g of section 570;

taxable income has the meaning assigned by section 24 or 26.1, as the case may be, and in no case may the taxpayer's taxable income be less than $0;

taxable net gain from the disposition of precious property has the meaning assigned by section 265;

taxable preferred share has the meaning assigned by sections 21.11.14 to 21.11.16;

taxable Québec property has the meaning assigned by Part II and, for the purposes of sections 26 and 27, and for the purpose of applying section 521 and subparagraph c of the second paragraph of section 614 in respect of a disposition made by a person not resident in Canada, includes

 (a) a Québec resource property within the meaning of paragraph d of section 1089,

 (b) a timber resource property situated in Québec, including at any particular time an interest therein and an option in respect thereof,

 (c) an income interest in a trust resident in Québec,

 (d) a right to a share in the income or loss of a partnership having an establishment in Québec under an agreement described in section 608, and

 (e) a life insurance policy issued or subscribed by an insurer on the life of a person resident in Québec at the time of the issue or subscription;

taxation year means

 (a) in the case of a corporation, a fiscal period;

 (b) in the case of an individual, other than a testamentary trust, a calendar year; and

 (c) in the case of a testamentary trust, the particular period for which the trust's accounts are made up for purposes of assessment under this Part, which particular period,

(i)  if it begins at a time after 20 December 2006, must end at the end of the period that includes that time and for which the accounts are made up for purposes of assessment under the Income Tax Act, or

(ii)  if it includes 20 December 2006, must end at the time at which ends the period that includes that day and for which the accounts are made up for purposes of assessment under the Income Tax Act, unless the period for which the trust's accounts are made up for purposes of assessment under the Income Tax Act that includes 20 December 2006 ends more than 12 months after the time at which the particular period begins;

taxpayer includes any person whether or not liable to pay tax;

term preferred share has the meaning assigned by sections 21.5 to 21.9.4.1;

testamentary trust has the meaning assigned by section 677;

timber resource property has the meaning assigned by subparagraph d of the first paragraph of section 93;

Treasury Board means the Conseil du trésor continued under the Public Administration Act (chapter A-6.01);

trust has the meaning assigned by section 646;

uncle of a taxpayer includes the spouse of the taxpayer's aunt;

undepreciated capital cost of depreciable property of a prescribed class of a taxpayer has the meaning assigned by section 93;

undepreciable property means any property other than depreciable property;

unit trust has the meaning assigned by section 649;

written separation agreement includes an agreement by which a person agrees to make payments on a periodic basis for the maintenance of a former spouse, child or both, after the marriage has been dissolved whether the agreement was made before or after the marriage was dissolved.

1972, c. 23, s. 1; 1972, c. 26, s. 31; 1973, c. 17, s. 1; 1973, c. 18, s. 1; 1975, c. 21, s. 1; 1975, c. 22, s. 1; 1977, c. 5, s. 14; 1977, c. 26, s. 1; 1978, c. 26, s. 1; 1979, c. 18, s. 1; 1979, c. 38, s. 1; 1979, c. 81, s. 20; 1980, c. 13, s. 1; 1982, c. 5, s. 1; 1982, c. 17, s. 47; 1982, c. 56, s. 8; 1983, c. 44, s. 13; 1984, c. 15, s. 1; 1985, c. 25, s. 17; 1986, c. 15, s. 31; 1986, c. 19, s. 1; 1987, c. 21, s. 7; 1987, c. 67, s. 4; 1988, c. 4, s. 17; 1988, c. 18, s. 2; 1989, c. 5, s. 20; 1989, c. 77, s. 2; 1990, c. 59, s. 3; 1991, c. 7, s. 13; 1991, c. 25, s. 2; 1992, c. 1, s. 6; 1993, c. 16, s. 1; 1993, c. 19, s. 12; 1993, c. 64, s. 4; 1994, c. 13, s. 15; 1994, c. 22, s. 41; 1995, c. 1, s. 11; 1995, c. 49, s. 1; 1995, c. 63, s. 12; 1996, c. 39, s. 8; 1997, c. 3, s. 13; 1997, c. 14, s. 10; 1997, c. 31, s. 2; 1997, c. 85, s. 32; 1998, c. 16, s. 4; 1999, c. 83, s. 26; 1999, c. 86, s. 75; 1999, c. 89, s. 53; 2000, c. 5, s. 4; 2000, c. 8, s. 152; 2000, c. 56, s. 218; 2001, c. 7, s. 1; 2001, c. 51, s. 17; 2001, c. 53, s. 1; 2002, c. 45, s. 517; 2003, c. 2, s. 2; 2003, c. 8, s. 6; 2003, c. 9, s. 10; 2004, c. 8, s. 4; 2004, c. 21, s. 37; 2004, c. 25, s. 70; 2004, c. 37, s. 90; 2005, c. 1, s. 20; 2005, c. 23, s. 30; 2005, c. 38, s. 44; 2006, c. 3, s. 35; 2006, c. 13, s. 24; 2006, c. 36, s. 20; 2007, c. 12, s. 20; 2009, c. 5, s. 6; 2009, c. 15, s. 25; 2010, c. 5, s. 9; 2010, c. 25, s. 4; 2010, c. 31, s. 175; 2011, c. 6, s. 110; 2009, c. 24, s. 90; 2012, c. 8, s. 34; 2013, c. 10, s. 12; 2015, c. 21, s. 92; 2015, c. 24, s. 9.

1.1. In this Act and the regulations, an interest in real property includes a leasehold interest in real property but does not include an interest as security only derived by virtue of a hypothecary claim, mortgage, agreement of sale or other similar obligation.

1978, c. 26, s. 2; 1993, c. 64, s. 5; 1996, c. 39, s. 9; 2005, c. 1, s. 21.

1.2. For the purposes of this Part, other than paragraph a of section 618, the following rules apply:

 (a) if property is acquired in substitution for a particular property that is disposed of or exchanged and if subsequently, by one or more transactions, other property is acquired in substitution for that property or for property already acquired in substitution, any property so acquired is deemed to have been substituted for the particular property; and

 (b) any share received as a stock dividend on another share of the capital stock of a corporation is deemed to be property substituted for that other share.

1982, c. 5, s. 2; 1987, c. 67, s. 5; 1993, c. 19, s. 13; 1996, c. 39, s. 10; 1997, c. 3, s. 71; 1998, c. 16, s. 5; 2009, c. 15, s. 26.

1.3. For the purposes of this Part, except Title VI.1 of Book VII, where a corporation issues shares of a class of its capital stock in one or more series, a reference to the class shall be read, with the necessary modifications, as a reference to a series of the class.

1984, c. 15, s. 2; 1987, c. 21, s. 8; 1990, c. 59, s. 4; 1995, c. 63, s. 261; 1997, c. 3, s. 71.

1.4. (Repealed).

1985, c. 25, s. 18; 1988, c. 18, s. 3.

1.5. For the purposes of this Part, where there is a reference to a series of transactions or events, the series is deemed to include any related transactions or events completed in contemplation of the series.

1987, c. 67, s. 6.

1.6. Except as otherwise provided in this Part, property is considered to have become available for use for the purposes of this Part at the time at which it has, or would have if it were depreciable property, become available for use for the purposes of section 93.6.

1993, c. 16, s. 2.

1.7. In this Act and the regulations, a legal person, whether or not established for pecuniary gain, is designated by the word corporation.

1997, c. 3, s. 14.

1.8. In this Act and the regulations, “agreed proportion”, in respect of a member of a partnership for a fiscal period of the partnership, means the proportion that the member's share of the income or loss of the partnership for the partnership's fiscal period is of the partnership's income or loss for that fiscal period, on the assumption that, if the income and loss of the partnership for that fiscal period are nil, the partnership's income for that fiscal period is equal to $1,000,000.

2009, c. 5, s. 7.

TITLE II 
RULES OF GENERAL APPLICATION
1972, c. 23.

CHAPTER I 
GENERALITIES
1972, c. 23.

2. Unless the context indicates otherwise, for the purposes of this Part and the regulations, words referring to the father or mother of a taxpayer include a person whose child the taxpayer is, a person whose child the taxpayer had previously been within the meaning of paragraph b of the definition of child in section 1, or a person who is the father or mother of the taxpayer's spouse.

1972, c. 23, s. 2; 1973, c. 17, s. 2; 1994, c. 22, s. 42; 1995, c. 1, s. 12; 1997, c. 85, s. 33; 2006, c. 36, s. 21.

2.1. In this Act and the regulations, unless otherwise provided, where the ownership of a property is indeterminate owing to a matrimonial regime, the following rules apply:

 (a) where the property was, immediately before the regime was entered into, the property of one of the spouses subject to the regime, it is deemed to remain the property of that spouse; and

 (b) in other cases, the property is deemed to be the property of the spouse who administers it under the regime.

1979, c. 38, s. 2.

2.1.1. For the purposes of this Part and subject to sections 2.1, 2.1.2, 2.1.3 and 456.1, where at any time a property owned by two or more persons is the subject of a partition, the following rules apply, notwithstanding any retroactive or declaratory effect of such partition:

 (a) each such person who had an interest in the property immediately before that time is deemed not to have disposed at that time of that proportion, not exceeding 1, of the interest that the fair market value of that person's interest in the property immediately after that time is of the fair market value of that person's interest in the property immediately before that time;

 (b) each such person who has an interest in the property immediately after that time is deemed not to have acquired at that time that proportion of the interest that the fair market value of that person's interest in the property immediately before that time is of the fair market value of that person's interest in the property immediately after that time;

 (c) each such person who had an interest in the property immediately before that time is deemed to have had until that time, and to have disposed at that time of, that proportion of the person's interest to which subparagraph a does not apply;

 (d) each such person who has an interest in the property immediately after that time is deemed not to have had before that time, and to have acquired at that time, that proportion of the person's interest to which subparagraph b does not apply;

 (e) subparagraphs a to d do not apply where the interest of the person is an interest in fungible corporeal property described in that person's inventory.

For the purposes of this section, where an interest in the property is an undivided interest, the fair market value of the interest at any time is deemed to be equal to that proportion of the fair market value of the property at that time that the interest is of all the undivided interests in the property.

1993, c. 16, s. 3; 1995, c. 49, s. 2; 2005, c. 1, s. 22.

2.1.2. Where a property owned by two or more persons is the subject of a partition among such persons and, as a consequence thereof, each such person has, in the property, a new interest the fair market value of which immediately after the partition, expressed as a percentage of the fair market value of all the interests in the property immediately after the partition, is equal to the fair market value of that person's undivided interest immediately before the partition, expressed as a percentage of the fair market value of all the undivided interests in the property immediately before the partition, the following rules apply:

 (a) section 2.1.1 does not apply to the property, and

 (b) the new interest of each such person is deemed to be a continuation of that person's undivided interest in the property immediately before the partition.

For the purposes of this section, the following rules apply:

 (a) subdivisions of a building or of a parcel of land that are established in the course of, or in contemplation of, a partition and that are co-owned by the same persons who co-owned the building or the parcel of land, or by their assignees, shall be regarded as one property; and

 (b) where an interest in the property is or includes an undivided interest, the fair market value of the interest shall be determined without regard to any discount or premium that may apply to a minority or majority interest in the property.

1993, c. 16, s. 3; 2005, c. 1, s. 23.

2.1.3. For the purposes of this Part and the regulations, where, as a consequence of the laws of a province relating to spouses' interests in respect of property as a result of marriage, property is, after the death of an individual,

 (a) transferred or distributed to a person who was the individual's spouse at the time of the death, or acquired by that person, the property is deemed to have been so transferred, distributed or acquired, as the case may be, as a consequence of the death; or

 (b) transferred or distributed to the individual's succession, or acquired by the individual's succession, the property is deemed to have been so transferred, distributed or acquired, as the case may be, immediately before the time that is immediately before the death.

1995, c. 49, s. 3; 1998, c. 16, s. 251; 2009, c. 5, s. 8.

2.2. For the purposes of the definitions of “joint spousal trust” and “post-1971 spousal trust” in section 1, sections 2.1, 312.3, 312.4, 313 to 313.0.5, 336.0.2, 336.0.3, 336.0.6 to 336.4, 440 to 441.2, 454, 454.1, 456.1, 462.0.1, 462.0.2 and 651, the definition of “pre-1972 spousal trust” in section 652.1, sections 653, 656.3, 656.3.1, 656.5, 657, 660, 890.0.1 and 913, subparagraph b of the second paragraph of section 961.17, sections 965.0.9 and 965.0.11, Title VI.0.2 of Book VII, sections 971.2 and 971.3 and Divisions II.11.3, II.11.6 and II.11.7 of Chapter III.1 of Title III of Book IX, “spouse” and “former spouse” of a particular individual include another individual who is a party to an annulled or annullable marriage, as the case may be, with the particular individual.

1984, c. 15, s. 3; 1986, c. 15, s. 32; 1991, c. 25, s. 3; 1993, c. 16, s. 4; 1993, c. 19, s. 14; 1994, c. 22, s. 43; 1998, c. 16, s. 6; 2002, c. 6, s. 141; 2003, c. 2, s. 3; 2004, c. 21, s. 38; 2005, c. 38, s. 45; 2011, c. 1, s. 11; 2011, c. 34, s. 12; 2015, c. 21, s. 93.

2.2.1. In this Act and the regulations,

 (a) words referring to a spouse at any time of a taxpayer include the person of the opposite or the same sex who cohabits at that time with the taxpayer in a conjugal relationship and has so cohabited with the taxpayer throughout a 12-month period ending at that time, or would be the father or mother of a child of whom the taxpayer would be the father or mother if the definition of child in section 1 were read without reference to paragraph c thereof and section 2 were read without reference to the words “or a person who is the father or mother of the taxpayer's spouse”;

 (b) references to marriage shall be read as if a conjugal relationship between two individuals who are, because of subparagraph a or of a civil union, spouses of each other were a marriage;

 (c) provisions that apply to a person who is married apply to a person who is, because of subparagraph a or of a civil union, a spouse of a taxpayer; and

 (d) provisions that apply to a person who is unmarried do not apply to a person who is, because of subparagraph a or of a civil union, a spouse of a taxpayer;

 (e) references to a matrimonial regime include a civil union regime.

For the purposes of subparagraph a of the first paragraph, where at any time the taxpayer and the person referred to in that subparagraph cohabit in a conjugal relationship, they are deemed to be so cohabiting at any particular time after that time, unless they were not cohabiting at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship.

Subparagraph a of the first paragraph, as amended by section 14 of the Act to amend various legislative provisions concerning de facto spouses (1999, chapter 14), applies, notwithstanding section 40 of that Act, from a particular time of the taxation year 1998 or the part of the taxation year 1999 preceding 16 June, to a taxpayer and a person of the same sex that would have been the person’s spouse at that time if the Act to amend various legislative provisions concerning de facto spouses had then been in force, where the taxpayer and the person made jointly a valid election under section 144 of the Modernization of Benefits and Obligations Act (Statutes of Canada, 2000, chapter 12) for the taxation year that includes the particular time.

A copy of every document sent to the Minister of National Revenue in connection with the election referred to in the third paragraph must be filed with the Minister on or before the taxpayer’s and the person’s filing-due date for the taxation year that includes 21 October 2015.

Notwithstanding sections 1010 to 1011, the Minister shall make such assessments, reassessments or additional assessments of tax, interest and penalties and such determinations and redeterminations as are necessary for any taxation year to take into account the application of the third paragraph.

1994, c. 22, s. 44; 1995, c. 1, s. 13; 1995, c. 49, s. 4; 1999, c. 14, s. 14; 2000, c. 5, s. 5; 2001, c. 53, s. 2; 2002, c. 6, s. 142; 2015, c. 21, s. 94.

2.2.2. (Repealed).

1994, c. 22, s. 44; 2000, c. 5, s. 6.

2.3. Where a document has been issued or a contract has been entered into before 31 July 1997 purporting to create, to establish, to extinguish or to be in substitution for, a taxpayer's right to an amount or amounts, immediately or in the future, out of or under a pension plan, the following rules apply:

 (a) where the rights provided for in the document or contract are rights provided for by the pension plan or are rights to a payment or payments out of the pension plan, and the taxpayer acquired an interest under the document or contract before that date, any payment under the document or contract is deemed to be a payment out of or under the pension plan and the taxpayer is deemed not to have received, on the issuance of the document or the entering into the contract, an amount out of or under a pension plan; and

 (b) where the rights created or established by the document or contract are not rights provided for by the pension plan or rights to a payment or payments out of the pension plan, the taxpayer is deemed to have received an amount out of or under the pension plan equal to the value of the rights created or established by the document or contract when the document was issued or the contract was entered into.

1991, c. 25, s. 4; 2000, c. 5, s. 7.

3. Death benefit means the amount by which the aggregate of amounts received by a taxpayer in a taxation year upon or after the death of an employee in recognition of the employee's service in an office or employment exceeds the amount determined under section 4.

1972, c. 23, s. 3; 1982, c. 17, s. 48; 1986, c. 19, s. 2.

4. The amount which a taxpayer shall subtract from the amount determined under section 3 is,

 (a) where the taxpayer is the only person who has received an amount under section 3, the lesser of

(i)  the aggregate of all amounts so received by the taxpayer in the year, and

(ii)  the amount, if any, by which $10,000 exceeds the aggregate of all amounts received by the taxpayer in preceding taxation years upon or after the death of the employee in recognition of the employee's service in an office or employment;

 (b) in all other cases, the lesser of

(i)  the aggregate of all amounts so received by the taxpayer in the year, and

(ii)  such proportion of $10,000 as the aggregate described in subparagraph i is of the aggregate of all amounts received by all taxpayers at any time upon or after the death of the employee in recognition of the employee's service in an office or employment.

1972, c. 23, s. 4; 1986, c. 19, s. 2; 1994, c. 22, s. 45; 1997, c. 14, s. 11.

5. When in this Part, a reference is made to a taxation year by identifying it with a calendar year, this reference contemplates the taxation year which coincides with that calendar year or ends therein.

1972, c. 23, s. 5.

5.1. (Repealed).

1990, c. 59, s. 5; 1997, c. 3, s. 15; 2009, c. 15, s. 27.

5.2. (Repealed).

1990, c. 59, s. 5; 1997, c. 3, s. 71; 2009, c. 15, s. 27.

6. The reference to a taxation year ending in another year includes a reference to a taxation year the end of which coincides with that of such other year.

The reference to a fiscal period ending in a taxation year includes a reference to a fiscal period the end of which coincides with the end of that taxation year.

1972, c. 23, s. 6; 1986, c. 15, s. 33; 1996, c. 39, s. 11.

6.1. If a corporation's fiscal period referred to in the second or fourth paragraph of section 7 exceeds 365 days, otherwise than because of an election described in paragraph c of subsection 3.1 or 4 of section 249 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), and for that reason the corporation does not have a taxation year that ends in a particular calendar year, for the purposes of this Part the corporation's first taxation year ending in the calendar year that follows the particular calendar year is deemed to end on the last day of the particular calendar year.

1979, c. 18, s. 2; 1997, c. 3, s. 71; 2009, c. 5, s. 9.

6.1.1. If at a particular time a corporation becomes or ceases to be a Canadian-controlled private corporation, otherwise than because of an acquisition of control to which section 6.2 would, but for this section, apply and subsections 3.1 and 4 of section 249 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) do not apply to the corporation in respect of the change of status, the following rules apply:

 (a) the corporation's taxation year that would, but for this section, include the particular time is deemed to end immediately before that time; and

 (b) a new taxation year of the corporation is deemed to begin at the particular time and end at the time at which the corporation's taxation year (determined for the purposes of the Income Tax Act) that includes the particular time, ends.

Chapter V.2 applies in relation to an election made under subparagraph iii of paragraph c of subsection 3.1 of section 249 of the Income Tax Act.

2009, c. 5, s. 10.

6.2. For the purposes of this Part, if at a particular time control of a corporation (other than a corporation that is a foreign affiliate of a taxpayer resident in Canada and that did not carry on a business in Canada in its last taxation year beginning before the particular time) has been acquired by a person or group of persons and subsection 4 of section 249 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) does not apply to the corporation in respect of the acquisition of control, the following rules apply:

 (a) the corporation's taxation year that would, but for this subparagraph, have included the particular time is deemed to have ended immediately before that time; and

 (b) a new taxation year of the corporation is deemed to begin at the particular time and end at the time at which the corporation's taxation year (determined for the purposes of the Income Tax Act) that includes the particular time, ends.

Chapter V.2 applies in relation to an election made under paragraph c of subsection 4 of section 249 of the Income Tax Act.

1989, c. 77, s. 3; 1993, c. 16, s. 5; 1995, c. 49, s. 5; 1996, c. 39, s. 12; 1997, c. 3, s. 71; 2004, c. 8, s. 5; 2009, c. 5, s. 11.

6.3. Subject to the second paragraph, the period for which a testamentary trust's accounts are made up for purposes of assessment under this Part may not exceed 12 months and no change in the time at which that period ends may be made without the concurrence of the Minister.

However, the first paragraph does not apply in respect of a period for which a testamentary trust's accounts are made up for purposes of assessment under this Part that, in accordance with subparagraph i or ii of paragraph c of the definition of “taxation year” in section 1, ends at the time at which the period for which the testamentary trust's accounts are made up for the purposes of assessment under the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), ends.

For the purposes of paragraph c of the definition of “taxation year” in section 1, the period, including a particular day, for which a testamentary trust's accounts are made up for purposes of assessment under the Income Tax Act is deemed to end at the time at which the taxation year of the trust that includes that day is deemed to end, for the purposes of that Act.

2009, c. 5, s. 12.

6.4. If, at a particular time after 20 December 2002, the taxation year (determined for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.))) of a trust or succession is deemed to end, in accordance with paragraph b of subsection 6 of section 249 of that Act and for the purposes of that Act, immediately before the particular time, a new taxation year of the trust or succession is deemed to have begun at the particular time.

2009, c. 5, s. 12.

7. Subject to the second, third and fourth paragraphs, in this Part and the regulations, unless the context indicates otherwise, fiscal period of a business or a property of a person or partnership means the period for which the person's or partnership's accounts in respect of the business or property are made up for purposes of assessment under this Part.

A fiscal period of a business or property of a person or partnership, other than a fiscal period referred to in the third or fourth paragraph, may not end

 (a) in the case of a business or a property of a corporation, more than 53 weeks after the period began;

 (b) in any of the following cases, after the end of the calendar year in which the period began unless, in the case of a business, the business is not carried on in Canada, is a prescribed business or is carried on by a prescribed person or partnership:

(i)  a business or property of an individual, other than an individual in respect of whom any of sections 980 to 999.1 applies or other than a testamentary trust,

(i.1)  a business or property of an inter vivos trust, other than a fiscal period in respect of which subparagraph c of the first paragraph of section 1121.7, as it read in respect of the fiscal period, applies,

(ii)  a business or property of a particular partnership of which an individual, other than an individual in respect of whom any of sections 980 to 999.1 applies or other than a testamentary trust, a professional corporation, or a partnership in respect of which this subparagraph applies, would, if the fiscal period of the particular partnership ended at the end of the calendar year in which the period began, be a member in the fiscal period, or

(iii)  a business or property of a professional corporation that would, if the fiscal period ended at the end of the calendar year in which the period began, be in the fiscal period a member of a partnership in respect of which subparagraph ii applies;

 (c) in any other case, more than 12 months after the period began.

A fiscal period of a business or property of a person or partnership that consists in a period that begins at a particular time after 20 December 2006 must end at the end of the period, including that time, that is a fiscal period of the business or property for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)).

In addition, the particular fiscal period of a business or property of a person or partnership that consists in a period that includes 20 December 2006 must end at the end of the period, including that day, that is a fiscal period of the business or property for the purposes of the Income Tax Act, unless the fiscal period of the business or property (determined for the purposes of the Income Tax Act) that includes 20 December 2006, ends, in the case of a corporation, more than 53 weeks after the time at which the particular fiscal period begins and, in any other case, more than 12 months after that time.

For the purposes of the third and fourth paragraphs, a fiscal period of a corporation that, for the purposes of the Income Tax Act, includes a particular day is deemed to end at the time at which the taxation year of the corporation that includes that day is deemed to end, for the purposes of that Act.

For the purposes of this section, the activities of a person in respect of whom any of sections 980 to 999.1 applies are deemed to be a business.

1972, c. 23, s. 7; 1997, c. 3, s. 71; 1997, c. 31, s. 3; 2001, c. 53, s. 3; 2004, c. 8, s. 6; 2009, c. 5, s. 13.

7.0.1. For the purposes of subparagraph ii of subparagraph b of the second paragraph of section 7 and of section 7.0.3, a person or partnership that would not have a share of any income or loss of a partnership for a fiscal period of the partnership, if the fiscal period ended at the end of the calendar year in which it began, is deemed not to be a member of the partnership in that fiscal period.

1997, c. 31, s. 4.

7.0.2. Where a fiscal period of a business or a property of a person or partnership ends at a particular time, the subsequent fiscal period of the business or property of the person or partnership is deemed to begin immediately after that time.

1997, c. 31, s. 4.

7.0.3. Where a business is carried on, throughout the period of time that began at the beginning of a particular fiscal period referred to in the second paragraph of section 7, of the business, that includes a particular day, and ended at the end of the calendar year in which the fiscal period began, by an individual, otherwise than as a member of a partnership, or by an individual as a member of a partnership if, throughout that period of time, each member of the partnership is an individual and the partnership is not a member of another partnership, and where the individual makes, after 19 December 2006, a valid election under subsection 4 of section 249.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in respect of the fiscal period or a previous fiscal period, subparagraph b of the second paragraph of section 7 does not apply to the particular fiscal period and the particular fiscal period must end at the end of the period that includes the particular day and that is a fiscal period of the business for the purposes of the Income Tax Act.

Chapter V.2 applies in relation to an election made under subsection 4 of section 249.1 of the Income Tax Act in respect of a fiscal period referred to in the second paragraph of section 7 or in relation to an election made under this section before 20 December 2006.

1997, c. 31, s. 4; 2009, c. 5, s. 14.

7.0.4. The first paragraph of section 7.0.3 does not apply to a particular fiscal period of a business where, in a preceding fiscal period or throughout the period of time that began at the beginning of the particular fiscal period and ended at the end of the calendar year in which the particular fiscal period began, the expenditures made in the course of carrying on the business were primarily the cost or capital cost of tax shelter investments, within the meaning of section 851.38.

1997, c. 31, s. 4; 2001, c. 7, s. 2; 2009, c. 5, s. 15.

7.0.5. The first paragraph of section 7.0.3 does not apply to a fiscal period of a business carried on by an individual if the individual makes, after 19 December 2006, a valid election under subsection 6 of section 249.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) that applies in respect of the fiscal period.

Chapter V.2 applies in relation to an election made under subsection 6 of section 249.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1997, c. 31, s. 4; 2009, c. 5, s. 16.

7.0.6. For the purposes of this Part, no change in the time when a fiscal period referred to in the second paragraph of section 7 ends may be made without the concurrence of the Minister.

1997, c. 31, s. 4; 2009, c. 5, s. 17.

7.1. A transfer, distribution or acquisition of property is deemed, for the purposes of this Part, to be made as a consequence of the death of a taxpayer or of the taxpayer's spouse if it is made

 (a) under or as a consequence of the terms of the will or other testamentary instrument of the taxpayer or the taxpayer's spouse or as a consequence of the law governing the intestacy of the taxpayer or the taxpayer's spouse; or

 (b) as a consequence of a disclaimer, release or surrender by a person who was a beneficiary under the will or other testamentary instrument or on the intestacy of the taxpayer or the taxpayer's spouse.

1986, c. 19, s. 3; 1994, c. 22, s. 46; 1996, c. 39, s. 273; 1998, c. 16, s. 7; 2009, c. 5, s. 18.

7.2. A release or surrender by a person who was a beneficiary under the will or other testamentary instrument or on the intestacy of a taxpayer with respect to any property that was property of the taxpayer immediately before the taxpayer's death is deemed, for the purposes of this Part, not to be a disposition of the property by that person.

1986, c. 19, s. 3; 1994, c. 22, s. 47; 1998, c. 16, s. 8.

7.3. For the purposes of sections 7.1 and 7.2, the expression release or surrender means

 (a) a release or surrender made under the laws of a province other than Québec, that does not direct in any manner who is entitled to benefit therefrom and that is made within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the taxpayer's legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances;

 (b) a gift inter vivos made under the laws of Québec of an interest in, or right to property of, a succession that is made within the period referred to in paragraph a to the person or persons who would have benefited if the donor had made a renunciation of the succession that was not made in favour of any person.

1986, c. 19, s. 3.

7.4. In section 7.1, disclaimer means a disclaimer made under the laws of a province other than Québec and includes a renunciation of a succession made under the laws of Québec that is not made in favour of any person, but does not include any disclaimer or renunciation, as the case may be, made after the period ending 36 months after the death of the taxpayer unless written application therefor has been made to the Minister by the taxpayer's legal representative before the expiry of that period and the disclaimer or renunciation, as the case may be, is made within such longer period as the Minister considers reasonable.

1986, c. 19, s. 3; 1995, c. 49, s. 6; 1996, c. 39, s. 273.

7.4.1. In this Part and the regulations, a trust is deemed to be created by an individual's will if the trust is created by an order of a court in relation to the individual's succession made under any law of a province that provides for the relief or support of dependants of an individual.

1994, c. 22, s. 48; 1998, c. 16, s. 251.

7.4.2. For the purposes of this Part and the regulations, property is deemed not to have become vested indefeasibly in an individual other than a trust or in a trust under which the taxpayer's spouse is a beneficiary, where the trust is created by the will of the taxpayer, unless the property became so vested before the death of the individual or of the taxpayer's spouse, as the case may be.

1994, c. 22, s. 48.

7.5. Except as otherwise provided in this Part, where an amount or a number is required under this Part to be determined or calculated by or in accordance with an algebraic formula, if the amount or number when so determined or calculated would, but for this section, be a negative amount or number, it is deemed to be nil.

1989, c. 5, s. 21.

7.6. Notwithstanding any other provision of this Act, where the Minister and another person who is a party to a convention or agreement referred to in subsection 1 of section 115.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) have entered into a particular agreement with respect to the taxation of the other person in relation to matters referred to in the convention or agreement, all determinations made in accordance with the terms and conditions of the particular agreement are deemed to be in accordance with this Act.

Where rights and obligations under the particular agreement described in the first paragraph have been transferred to another person with the concurrence of the Minister, that other person is deemed, for the purposes of the first paragraph, to have entered into the particular agreement with the Minister.

1989, c. 77, s. 4; 1994, c. 22, s. 49.

7.7. For the purposes of this Part, one bond, debenture, bill, note or similar obligation issued by a person is identical to another such obligation issued by that person if both are identical in respect of all rights, either immediately or in the future and either absolutely or contingently, attaching thereto, except as regards the principal amount of the obligation.

1990, c. 59, s. 6.

7.8. For the purposes of sections 21.4.3, 21.5 to 21.11, paragraph f of section 21.11.16, sections 21.12 to 21.16, 508, where the latter section applies to a reduction of the paid-up capital in respect of a term preferred share, 508.1 and 740.7, where after 12 November 1981 a person has an interest in a trust or partnership, whether directly or indirectly through an interest in any other trust or partnership or in any manner whatever, that person is deemed to be a beneficiary of the trust or a member of the partnership, as the case may be.

1990, c. 59, s. 6; 1997, c. 3, s. 71.

7.9. For the purposes of this Part and the regulations, the following rules apply in respect of a property that is, at any time, subject to a usufruct, right of use or substitution:

 (a) the usufruct, right of use or substitution, as the case may be, is deemed to be at that time a trust or, if the usufruct, right of use or substitution, as the case may be, is created by will, a trust created by will;

 (b) the property is deemed

(i)  if the usufruct, right of use or substitution, as the case may be, arises on the death of a testator, to have been transferred to the trust on and as a consequence of the death of the testator, and not otherwise, and

(ii)  if the usufruct, right of use or substitution, as the case may be, arises otherwise, to have been transferred — at the time it first became subject to the usufruct, right of use or substitution, as the case may be — to the trust by the person who granted the usufruct, right of use or substitution; and

 (c) the property is deemed to be, throughout the period in which it is subject to the usufruct, right of use or substitution, as the case may be, held by the trust, and not otherwise.

1993, c. 16, s. 6; 1994, c. 22, s. 50; 2003, c. 9, s. 11; 2004, c. 8, s. 7; 2011, c. 1, s. 12.

7.9.1. Section 7.9 does not apply in respect of a recognized gift with reserve of usufruct or use.

2003, c. 9, s. 12; 2011, c. 1, s. 13.

7.10. For the purposes of this Part and the regulations, an arrangement (other than a partnership, a qualifying arrangement or an arrangement that is a trust determined without reference to this section) is deemed to be a trust and property subject to rights and obligations under the arrangement is, if the arrangement is deemed by this section to be a trust, deemed to be held in trust and not otherwise, if the arrangement

 (a) is established before 31 October 2003 under a written contract that is governed by the laws of Québec and provides that, for the purposes of this Part and the regulations, the arrangement must be considered to be a trust; and

 (b) creates rights and obligations that are substantially similar to the rights and obligations under a trust (determined without reference to this section and sections 7.9, 7.10.1 and 7.11).

1993, c. 16, s. 6; 2004, c. 8, s. 8; 2011, c. 1, s. 14.

7.10.1. For the purposes of section 7.10 and this section, an arrangement is a qualifying arrangement if it is

 (a) entered into with a corporation that is licensed or otherwise authorized under the laws of Canada or of a province to carry on in Canada the business of offering its services as trustee;

 (b) established under a written contract that is governed by the laws of Québec;

 (c) presented as a declaration of trust or provides that, for the purposes of this Part and the regulations, it must be considered to be a trust; and

 (d) presented as an arrangement in respect of which the corporation is to take action for the arrangement to become a registered disability savings plan, a registered education savings plan, a registered retirement income fund, a registered retirement savings plan or a TFSA.

If the arrangement is a qualifying arrangement, the following rules apply:

 (a) the arrangement is deemed to be a trust;

 (b) any property contributed at any time to the arrangement by an annuitant, a holder or a subscriber under the arrangement, as the case may be, is deemed to have been transferred, at that time, to the trust by the annuitant, holder or subscriber, as applicable; and

 (c) property subject to rights and obligations under the arrangement is deemed to be held in trust and not otherwise.

2011, c. 1, s. 15.

7.11. For the purposes of this Part and the regulations, the following rules apply:

 (a) a person who has a right, whether immediate or future and whether absolute or contingent, to receive all or any part of the income or capital in respect of property referred to in section 7.9 or 7.10 is deemed to be beneficially interested in the trust; and

 (b) a person who at any particular time and in relation to a property, has a right of ownership, a right of an emphyteutic lessee or a beneficial interest in a trust is deemed, even if the property is subject to a servitude, to have beneficial ownership of the property at that time.

1993, c. 16, s. 6; 1996, c. 39, s. 273; 2004, c. 8, s. 9; 2011, c. 1, s. 16.

7.11.0.1. Section 7.9 does not apply to a usufruct or a right of use of an immovable property when a taxpayer disposes of the bare ownership of the immovable property in the course of a gift to a qualified donee and retains, for life, the usufruct or the right of use.

2009, c. 5, s. 19; 2011, c. 1, s. 17; 2012, c. 8, s. 35.

7.11.1. For the purposes of this Part and the regulations, the following rules apply:

 (a) a person or partnership beneficially interested in a particular trust includes any person or partnership that has any right, whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretionary power by any person or partnership, as a beneficiary under a trust to receive all or any part of the income or capital of the particular trust either directly from the particular trust or indirectly through one or more trusts or partnerships;

 (b) except for the purposes of this subparagraph, a particular person or partnership is deemed to be beneficially interested in a particular trust at a particular time where

(i)  the particular person or partnership is not beneficially interested in the particular trust at the particular time,

(ii)  because of the terms or conditions of the particular trust or any agreement in respect of the particular trust at the particular time, the particular person or partnership might, because of the exercise of any discretion by any person or partnership, become beneficially interested in the particular trust at the particular time or at a later time, and

(iii)  at or before the particular time, either the particular trust has acquired property, directly or indirectly in any manner whatever, from a person or partnership described in the second paragraph, or a person or partnership described in that paragraph has given a guarantee on behalf of the particular trust or provided any other financial assistance whatever to the particular trust; and

 (c) a member of a partnership that is beneficially interested in a trust is deemed to be beneficially interested in the trust.

The person or partnership to which subparagraph iii of subparagraph b of the first paragraph refers is

 (a) the particular person or partnership;

 (b) another person with whom the particular person or partnership, or a member of the particular partnership, does not deal at arm’s length;

 (c) a person or partnership with whom the other person referred to in subparagraph b does not deal at arm’s length;

 (d) a controlled foreign affiliate of the particular person or of another person with whom the particular person or partnership, or a member of the particular partnership, does not deal at arm’s length; or

 (e) a corporation not resident in Canada that would, if the particular partnership were a corporation resident in Canada, be a controlled foreign affiliate of the particular partnership.

1994, c. 22, s. 51; 1995, c. 49, s. 7; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 9; 2001, c. 7, s. 3.

7.11.2. Without restricting the personal liabilities under this Act of the trustees of the trusts mentioned hereinafter or the application of section 656.9 or paragraph f of section 769, where a particular trust transfers property at a particular time to another trust, other than a trust governed by a registered retirement savings plan or by a registered retirement income fund, in circumstances to which subparagraph b of the second paragraph of section 248 applies, the other trust is deemed to be after that time the same trust as, and a continuation of, the particular trust.

If, as a result of a transaction or event, the property referred to in the first paragraph is deemed to be a taxable Canadian property of the particular trust because of subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 540.4, paragraph b of section 540.6, section 554, subparagraph c of the second paragraph of section 614 or paragraph d of section 688.4, the property is also deemed to be, at any time that is within 60 months after the transaction or event, a taxable Canadian property of the other trust.

2003, c. 2, s. 4; 2009, c. 5, s. 20; 2010, c. 25, s. 5; 2011, c. 6, s. 111.

7.11.3. Except for the purposes of this section, where at a particular time property is transferred to a trust in circumstances to which subparagraph g of the second paragraph of section 248 applies, the trust is deemed to act as agent or mandatary for the transferor in respect of the property throughout the period that begins at the time of the transfer and ends at the time of the first change after that time in the beneficial ownership of the property.

2003, c. 2, s. 4.

7.11.4. Where a trust issues a unit of the trust to a taxpayer directly in consideration of a right to enforce payment of an amount by the trust in respect of the taxpayer's capital interest in the trust, the cost to the taxpayer of the unit is deemed to be equal to that amount where

 (a) at the time the unit is issued, the trust is neither a personal trust nor a trust prescribed for the purposes of section 688; and

 (b) the unit meets either of the following conditions:

(i)  the unit is capital property and that amount is not proceeds of disposition of a capital interest in the trust, or

(ii)  the unit is not capital property and subparagraph i.1 of paragraph n of section 257 does not apply in respect of that amount but would so apply if that subparagraph i.1 were read without reference to subparagraphs 1 to 3 thereof.

2003, c. 2, s. 4; 2009, c. 5, s. 21.

7.11.5. Where at a particular time a taxpayer’s capital interest in a trust includes a right to enforce payment of an amount by the trust, the amount shall be added at the particular time to the cost otherwise determined to the taxpayer of the capital interest where

 (a) immediately after the particular time, the taxpayer disposes of the capital interest;

 (b) as a consequence of the disposition, the right to enforce payment of the amount is acquired by another person or partnership; and

 (c) if the right to enforce payment of the amount had been satisfied by a payment to the taxpayer by the trust, there would have been no disposition of that right for the purposes of this Part by reason of the application of subparagraph e of the second paragraph of section 248.

2003, c. 2, s. 4.

7.12. For greater certainty, it is hereby declared that, unless specifically permitted by this Part, neither the equity nor the consolidation method of accounting shall be used to determine any amount for the purposes of this Part.

1993, c. 16, s. 6.

7.13. Where a tax agreement between Québec and a particular country that has force of law in Québec provides for an income tax privilege, other than an income tax exemption, this Act and the regulations shall be applied on the assumption that they contain such provisions as are necessary for the granting of such a privilege.

1993, c. 16, s. 6.

7.14. The application of this Act and the regulations is not affected by article 77 of the Civil Code as regards the determination of whether or not a person is resident in Québec, in Canada or elsewhere.

1994, c. 22, s. 52.

7.15. All the structural units of a trade union, including each local, branch, national and international unit, are deemed to be a single employer and a single entity for the purposes of the provisions of this Part, and the regulations, relating to the determination of whether a contribution made under a plan or arrangement is a resident's contribution within the meaning of section 890.6.1.

1995, c. 49, s. 8.

7.16. Where at a particular time a person or partnership, in this section referred to as the debtor, becomes liable to repay money borrowed by the debtor or becomes liable to pay an amount, other than interest, as consideration for any property acquired by the debtor or services rendered to the debtor, or that is deductible in computing the debtor's income, for the purpose of applying this Part relating to the liability, the liability is deemed to be an obligation, issued at that time by the debtor, that has a principal amount at that time equal to the amount of the liability at that time.

1996, c. 39, s. 13; 1997, c. 3, s. 71.

7.17. For the purposes of this Part,

 (a) unless the context requires otherwise, an obligation issued by a debtor includes any part of a larger obligation that was issued by the debtor;

 (b) the principal amount of that part is deemed to be the portion of the principal amount of that larger obligation that relates to that part; and

 (c) the amount for which that part was issued is deemed to be the portion of the amount for which that larger obligation was issued that relates to that part.

1996, c. 39, s. 13.

7.18. For the purposes of this Part, where in a taxation year a person who is not resident in Canada carries on an activity, or disposes of a property, described in the second paragraph, the person is deemed to carry on business in Canada in the year in respect of the activity or disposition.

For the purposes of the first paragraph,

 (a) an activity to which that paragraph refers is an activity that consists

(i)  in producing, growing, mining, creating, manufacturing, fabricating, improving, packing, preserving or constructing, in whole or in part, anything in Canada whether or not the person exports that thing without disposing of it before exportation, or

(ii)  in soliciting orders or offering anything for sale in Canada through an agent or servant, whether the contract or transaction is to be completed inside or outside Canada or partly in and partly outside Canada; and

 (b) a property to which that paragraph refers is

(i)  Canadian resource property, except where an amount in respect of the disposition thereof is included in computing an amount determined under paragraph e of section 330 on account of an amount deducted under section 412 in computing the cumulative Canadian development expenses at the end of a taxation year or under section 418.12 on account of an amount deducted under section 418.6 in computing the cumulative Canadian oil and gas property expenses at the end of a taxation year,

(ii)  property, other than depreciable property, that is a timber resource property or an interest therein or option in respect thereof, or

(iii)  property, other than capital property, that is an immovable property situated in Canada, including an interest therein or option in respect thereof, whether or not the property is in existence.

1997, c. 14, s. 12.

7.18.1. For the purposes of subparagraph ii of paragraph b of section 649, paragraph c of section 898.1.1, sections 905.0.11, 935.22 and 965.0.21, subparagraphs i to iv of paragraph c.2 of section 998, paragraph b of sections 1117 and 1120 and any regulations made under paragraphs c.3 and c.4 of section 998 and under section 1108, where a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership

2004, c. 8, s. 10; 2009, c. 5, s. 22; 2009, c. 15, s. 28; 2015, c. 21, s. 95.

7.19. Except as otherwise provided, no provision of this Act shall be read or construed

 (a) to require the inclusion or permit the deduction, either directly or indirectly, in computing a taxpayer's income, taxable income or taxable income earned in Canada, for a taxation year or in computing a taxpayer's income or loss for a taxation year from a source in Canada or from sources in another place, of any amount to the extent that the amount has already been directly or indirectly included or deducted, as the case may be, in computing such income, taxable income, taxable income earned in Canada or loss, for the year or any preceding taxation year;

 (b) to permit the deduction, either directly or indirectly, in computing a taxpayer's taxes payable under this Act for a taxation year of any amount to the extent that the amount has already been directly or indirectly deducted in computing such taxes payable for the year or any preceding taxation year; or

 (c) to consider an amount to have been paid on account of a taxpayer's taxes payable under this Act for a taxation year to the extent that the amount has already been considered to have been paid on account of such taxes payable for the year or any preceding taxation year.

Subparagraph a of the first paragraph does not apply to prevent a taxpayer from deducting, in computing the taxpayer’s income for a taxation year, an amount the taxpayer pays in the year as a reimbursement of an amount the taxpayer deducted in computing the taxpayer’s taxable income for a preceding taxation year.

1997, c. 31, s. 5; 2005, c. 38, s. 46.

7.19.1. For the purposes of this Act, if a particular provision of the Act refers to a valid election made under the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) and the Minister of National Revenue has agreed, in giving effect to an application filed for that purpose by a person, legal representative or partnership otherwise than under a provision of the Income Tax Act that specifically provides for such an application, to allow, for the purposes of that Act, the election provided for in the provision of that Act to which the particular provision refers to be made late, amended or rescinded at any time, the following rules apply:

 (a) the election made late or the election, in its amended form, is deemed to be a valid election made at that time; and

 (b) the election, before its being amended, or the election that has been rescinded, is deemed never to have been made.

Sections 21.4.14 and 21.4.15 apply, with the necessary modifications, to this section.

2009, c. 5, s. 23.

CHAPTER I.1 
RULES RELATING TO GIFTS
2009, c. 5, s. 23.

7.20. The existence of an amount of an advantage in respect of a transfer of property does not disqualify the transfer from being a gift to a qualified donee, provided that

 (a) the amount of the advantage does not exceed 80% of the fair market value of the transferred property; or

 (b) the transferor of the property establishes to the satisfaction of the Minister that the transfer was made with the intention to make a gift.

2009, c. 5, s. 23.

7.21. The eligible amount of a gift is equal to the amount by which the fair market value of the property that is the subject of the gift exceeds the amount of the advantage, if any, in respect of the gift.

However, if a taxpayer disposes of the bare ownership of a work of art or of a cultural property described in the third paragraph of section 232 in the course of a recognized gift with reserve of usufruct or use, the eligible amount of the gift is equal to the amount by which the fair market value of the gift, determined under the rules of paragraph b of section 710.4 or 752.0.10.4.2, exceeds the amount of the advantage in respect of the gift, other than the usufruct or right of use.

2009, c. 5, s. 23.

7.22. The amount of the advantage in respect of a gift made by a taxpayer is equal to the aggregate of

 (a) the aggregate of all amounts, other than an amount referred to in paragraph b, each of which is an amount equal to the value, at the time the gift is made, of a property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm's length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy

(i)  that is consideration for the gift,

(ii)  that is in gratitude for the gift, or

(iii)  that is in any other way related to the gift; and

 (b) the limited-recourse debt, determined under section 851.41.1, in respect of the gift at the time the gift is made.

2009, c. 5, s. 23.

7.23. The cost to a taxpayer of a property, acquired by the taxpayer in circumstances where section 7.22 applies to include the value of the property in computing the amount of the advantage in respect of a gift, is equal to the fair market value of the property at the time the gift is made.

2009, c. 5, s. 23.

7.24. If at any time in a taxation year a taxpayer has paid an amount (in this section referred to as the “repaid amount”), on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse debt referred to in section 851.41.1 (in this section referred to as the “former limited-recourse debt”), in respect of a gift (in this section referred to as the “original gift”) of the taxpayer, otherwise than by way of an assignment or transfer of a guarantee, security or similar covenant, or by way of a payment in respect of which a taxpayer referred to in section 851.41.1 has incurred an indebtedness that would be a limited-recourse debt referred to in that section if that indebtedness were in respect of a gift made at the time that that indebtedness was incurred, the taxpayer is deemed, for the purposes of sections 710 to 716.0.11 and 752.0.10.1 to 752.0.10.26 and if the former limited-recourse debt is in respect of the original gift, to have made in the taxation year a gift to a qualified donee, the eligible amount of which deemed gift is equal to the amount by which the amount that would have been the eligible amount of the original gift, if the aggregate of all such repaid amounts paid at or before that time were paid immediately before the original gift was made, exceeds the aggregate of the eligible amount of the original gift and the eligible amount of all other gifts deemed under this section to have been made before that time in respect of the original gift.

2009, c. 5, s. 23; 2012, c. 8, s. 36.

7.25. For the purposes of section 7.21, paragraph c of section 422 and sections 716, 752.0.10.12 and 752.0.10.16.2, the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be equal to the lesser of the fair market value of the property otherwise determined and the cost or, in the case of a capital property, the adjusted cost base or, in the case of a life insurance policy in respect of which the taxpayer is a policyholder, the adjusted cost basis, within the meaning of sections 976 and 976.1, of the property to the taxpayer immediately before the gift is made if

 (a) the taxpayer acquired the property under a gifting arrangement that is a tax shelter as defined in section 1079.1; or

 (b) unless the gift is made as a consequence of the taxpayer's death,

(i)  the taxpayer acquired the property less than 3 years before the day that the gift is made, or

(ii)  the taxpayer acquired the property less than 10 years before the day that the gift is made and it is reasonable to conclude that, at the time the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to a qualified donee.

2009, c. 5, s. 23; 2015, c. 24, s. 10.

7.26. If a taxpayer acquired a property, otherwise than by reason of the death of an individual, that is the subject of a gift to which section 7.25 applies because of subparagraph i or ii of paragraph b of that section and the property was, at any time within the 3-year or 10-year period that ends when the gift is made, acquired by a person or partnership with whom the taxpayer does not deal at arm's length, for the purpose of applying section 7.25 to the taxpayer, the cost or, in the case of a capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made is deemed to be equal to the lowest amount that is the cost or, in the case of a capital property, the adjusted cost base, to the taxpayer or that person or partnership immediately before the property was disposed of by that person or partnership.

2009, c. 5, s. 23; 2015, c. 24, s. 11.

7.27. Section 7.25 does not apply to a gift

 (a) of a property described in an inventory;

 (b) of an immovable property situated in Canada;

 (c) of a cultural property described in the third paragraph of section 232, other than property acquired under a gifting arrangement, within the meaning assigned to that expression by the first paragraph of section 1079.1, that is a tax shelter;

 (d) of a property to which section 231.2 applies;

 (e) of a share of the capital stock of a corporation if

(i)  the share was issued by the corporation to the donor,

(ii)  immediately before the gift, the corporation was controlled by the donor, a person related to the donor or a group of persons each of whom is related to the donor, and

(iii)  section 7.25 would not have applied in respect of the consideration for which the share was issued had that consideration been donated by the donor to the qualified donee when the share was so donated;

 (f) by a corporation of a property if

(i)  the property was acquired by the corporation in circumstances to which section 518 or 529 applied,

(ii)  immediately before the gift, the shareholder from whom the corporation acquired the property controlled the corporation or was related to a person or each member of a group of persons that controlled the corporation, and

(iii)  section 7.25 would not have applied in respect of the property had the property not been transferred to the corporation and had the shareholder made the gift to the qualified donee when the corporation so made the gift;

 (g) of a property that was acquired in circumstances where any of sections 440, 444, 454, 459 and 460 applied, unless section 7.26 would have applied if this section were read without reference to this paragraph;

 (h) of a work of art to a Québec museum;

 (i) of the bare ownership of a work of art or of a cultural property described in the third paragraph of section 232;

 (j) of a musical instrument to an entity referred to in the definition of “total musical instrument gifts” in the first paragraph of section 752.0.10.1; or

 (k) of a work of public art, the fair market value of which is determined by the Minister of Culture and Communications, referred to in subparagraph i of subparagraph b of the second paragraph of section 716.0.1.1 or 752.0.10.15.1 or the second paragraph of section 716.0.1.2 or 752.0.10.15.2.

2009, c. 5, s. 23; 2011, c. 1, s. 18; 2015, c. 21, s. 96; 2015, c. 24, s. 12.

7.28. The eligible amount of a gift of a property by a taxpayer is equal to zero if it can reasonably be concluded that the gift relates to a transaction or series of transactions

 (a) one of the purposes of which is to avoid the application of section 7.25 to the gift of a property; or

 (b) that would, if this Part were read without reference to this paragraph, result in a tax benefit to which section 1079.10 applies.

2009, c. 5, s. 23.

7.29. If a taxpayer disposes of a property (in this section referred to as the “substantive gift”) that is a capital property or an incorporeal capital property of the taxpayer, to a recipient that is a qualified donee, section 7.25 would have applied in respect of the substantive gift if it had been the subject of a gift by the taxpayer to a qualified donee, and all or a part of the proceeds of disposition of the substantive gift are, or are substituted, directly or indirectly in any manner whatever, for, property that is the subject of a gift by the taxpayer to the recipient or any person not dealing at arm's length with the recipient, the following rules apply:

 (a) for the purposes of section 7.21, the fair market value of the property that is the subject of the gift made by the taxpayer is deemed to be equal to that proportion of the lesser of the fair market value of the substantive gift and the cost or, if the substantive gift is a capital property of the taxpayer, the adjusted cost base, of the substantive gift to the taxpayer immediately before the disposition to the recipient, that the fair market value otherwise determined of the property that is the subject of the gift is of the proceeds of disposition of the substantive gift;

 (b) if the substantive gift is a capital property of the taxpayer, for the purposes of subparagraph f of the first paragraph of section 93 and section 251, the sale price of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift, determined without reference to this chapter, exceeds the fair market value determined under paragraph a; and

 (c) if the substantive gift is an incorporeal capital property of the taxpayer, the amount included in computing an excess amount referred to in subparagraph b of the second paragraph of section 107 is to be reduced by the amount by which the fair market value of the property that is the subject of the gift, determined without reference to this chapter, exceeds the fair market value determined under paragraph a.

2009, c. 5, s. 23.

7.30. Section 7.20 does not apply in respect of a gift made by a registered charity to a qualified donee.

2009, c. 5, s. 23.

7.31. Despite section 7.21, the eligible amount of a gift made by a taxpayer is equal to zero if the taxpayer does not, before a receipt referred to in section 712 or 752.0.10.3 is issued in respect of the gift, inform the qualified donee or the recipient of any circumstances in respect of which any of sections 7.21, 7.25, 7.26, 7.28 and 7.29 causes the eligible amount of the gift to be less than the fair market value, determined without reference to sections 7.25, 716 and 752.0.10.12, of the property that is the subject of the gift.

2009, c. 5, s. 23.

CHAPTER II 
DEEMED RESIDENCE
1972, c. 23; 1994, c. 22, s. 53.

8. An individual is deemed to have been resident in Québec throughout a taxation year if, at any time in the year, the individual

 (a) sojourned in Québec for a period of, or periods the total of which is, 183 days or more and was ordinarily resident outside Canada;

 (b) was a member of the Canadian Forces and was resident in Québec immediately before leaving Canada on military service in a foreign country;

 (c) was an ambassador, Member of Parliament, officer, high commissioner, minister, servant or senator of Canada, or an agent-general, officer or servant of a province, and was resident in Québec immediately prior to election, employment or appointment by Canada or the province or received representation allowances in respect of the year;

 (d) performed services in a country other than Canada under a prescribed international development assistance program of the Government of Québec or Canada and was resident in Québec at any time in the six month period preceding the day on which those services commenced;

 (e) (paragraph repealed);

 (f) was a child of, and dependent for support on, an individual to whom any of paragraphs b, c and d applies and the child's income for the year did not exceed $6,650; or

 (g) was at any time in the year, under a tax agreement with one or more other countries, entitled to an exemption from an income tax otherwise payable in any of those countries in respect of income from any source, unless all or substantially all of the individual's income from all sources was not so exempt, because at that time the individual was related to or a member of the family of a particular individual, other than a trust, who was resident in Québec.

1972, c. 23, s. 8; 1972, c. 26, s. 32; 1974, c. 18, s. 1; 1977, c. 5, s. 14; 1982, c. 38, s. 11; 1986, c. 15, s. 34; 1989, c. 5, s. 22; 1993, c. 64, s. 6; 1995, c. 49, s. 9; 1998, c. 16, s. 10; 2001, c. 53, s. 4; 2003, c. 9, s. 13; 2005, c. 1, s. 24; 2006, c. 13, s. 25; 2009, c. 5, s. 24.

8.1. In determining whether an individual is, for all or part of a taxation year, a foreign researcher within the meaning of section 737.19, a foreign researcher on a postdoctoral internship within the meaning of section 737.22.0.0.1, a foreign expert within the meaning of section 737.22.0.0.5, an eligible individual within the meaning of section 737.22.0.9, a foreign professor within the meaning of section 737.22.0.5, a foreign specialist within the meaning of any of sections 737.18.6, 737.18.29, 737.22.0.1 and 737.22.0.4.1 or a foreign farm worker within the meaning of section 737.22.0.12 and in determining whether the requirement of the definition of eligible production in section 737.22.0.9 in relation to a producer's residence is satisfied, section 8 is to be read without reference to its paragraph a.

2004, c. 21, s. 39; 2006, c. 36, s. 22; 2011, c. 1, s. 19; 2013, c. 10, s. 13.

8.2. The amount referred to in paragraph f of section 8 that must be used for a taxation year subsequent to the taxation year 2007 is to be adjusted annually in such a manner that the amount used for that taxation year is equal to the total of the amount used for the preceding taxation year and the product obtained by multiplying that amount so used by the factor determined by the formula


(A/B) - 1.


In the formula in the first paragraph,

 (a) A is the overall average Québec consumer price index without alcoholic beverages and tobacco products for the 12-month period that ended on 30 September of the taxation year preceding that for which an amount is to be adjusted; and

 (b) B is the overall average Québec consumer price index without alcoholic beverages and tobacco products for the 12-month period that ended on 30 September of the taxation year immediately before the year preceding that for which the amount is to be adjusted.

If the factor determined by the formula in the first paragraph has more than four decimal places, only the first four decimal digits are retained and the fourth is increased by one unit if the fifth is greater than 4.

If the amount that results from the adjustment provided for in the first paragraph is not a multiple of $5, it must be rounded to the nearest multiple of $5 or, if it is equidistant from two such multiples, to the higher of the two.

2009, c. 5, s. 25.

9. Where, at a particular time in a taxation year, a taxpayer ceases to be an individual described in paragraph b, c or d of section 8 and the taxpayer would, but for this section, be deemed to have been resident in Québec throughout the year by reason of those paragraphs, the taxpayer is deemed to have been resident in Québec throughout the part of the year preceding that time.

The same applies to the taxpayer's spouse referred to in paragraph e of section 8 and the taxpayer's child referred to in paragraph f of that section.

1972, c. 23, s. 9; 1990, c. 59, s. 7; 1998, c. 16, s. 11.

10. Reference to a person resident in Québec or Canada also includes for the purposes of this Part a person who at the relevant time was ordinarily resident in Québec or Canada.

1972, c. 23, s. 10.

11. For the purposes of this Part a corporation is deemed to have been resident in Canada throughout a taxation year if:

 (a) it was incorporated in Canada after 26 April 1965;

 (b) it was incorporated in Canada before 9 April 1959 and at any time in the taxation year or in any preceding taxation year beginning after 1971 it was resident in Canada or carried on business in Canada and was a corporation which

(i)  was on 18 June 1971 a foreign business corporation, within the meaning of the regulations, controlled by a corporation resident in Canada, and

(ii)  throughout the 10-year period ending on 18 June 1971 carried on business in a country other than Canada, and, during those years, paid dividends to its shareholders resident in Canada on which they paid tax to the government of the other country; and

 (c) in the case of a corporation incorporated before 27 April 1965 other than a corporation to which paragraph b applies it was incorporated in Canada and at any time in the taxation year or in a preceding taxation year of the corporation ending after 26 April 1965 it was resident in Canada or carried on business in Canada.

1972, c. 23, s. 11; 1997, c. 3, s. 71.

11.1. Notwithstanding section 11, for the purposes of this Part, other than paragraph a of section 772.6.1, a corporation is deemed not to be resident in Canada at any time if it is deemed not to be resident in Canada at that time under subsection 5 of section 250 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

1986, c. 19, s. 4; 1997, c. 3, s. 71; 2004, c. 8, s. 11.

11.1.1. For the purposes of this Part, a corporation that is incorporated or otherwise formed under the laws of a country other than Canada or of a state, province or other political subdivision of such a country is deemed to be resident in that country throughout a taxation year and not to be resident in Canada at any time in the year, where

 (a) the corporation

(i)  has as its principal business in the year the operation of ships that are used primarily in transporting persons or goods in international traffic, determined on the assumption that the corporation is not resident in Canada and that, in the case of a voyage from Canada to a place outside Canada, any port or other place on the Great Lakes or St.Lawrence River is in Canada, or

(ii)  holds throughout the year shares of one or more other corporations, each of which is a subsidiary wholly-owned corporation of the corporation as defined by subsection 5 of section 544, and is deemed by this section to be resident in a country other than Canada throughout the year, and at no time in the year is the total of the cost amounts to the corporation of all those shares less than 50% of the total of the cost amounts to it of all its property;

 (b) all or substantially all of the corporation’s gross revenue for the year consists of

(i)  gross revenue from the operation of ships in transporting persons or goods in that international traffic referred to in subparagraph i of paragraph a,

(ii)  dividends from one or more other corporations each of which is a subsidiary wholly-owned corporation of the corporation as defined by subsection 5 of section 544, and is deemed by this section to be resident in a country other than Canada throughout each of its taxation years that began after 28 February 1991 and before the last time at which it paid any of those dividends, or

(iii)  a combination of amounts described in subparagraphs i and ii; and

 (c) the corporation has not been granted articles of continuance in Canada before the end of the year.

1993, c. 16, s. 7; 1997, c. 3, s. 71; 2001, c. 7, s. 4.

11.1.2. For the purposes of the provisions of this Act that apply to a trust for a taxation year only where the trust has been resident in Canada throughout the year, where a particular trust ceases at any time to exist and the particular trust was resident in Canada immediately before that time, the particular trust is deemed to be resident in Canada throughout the period that begins at that time and ends at the end of the year.

2003, c. 2, s. 5.

11.2. (Repealed).

1992, c. 57, s. 589; 1994, c. 22, s. 54.

11.3. Where a corporation is at any time, in this section referred to as the time of continuation, granted articles of continuance or similar constitutional documents, the corporation is

 (a) for the purpose of applying this Part, other than section 11, in respect of all times from the time of continuation in a particular jurisdiction until the time of continuation in a different jurisdiction, deemed to have been incorporated in the particular jurisdiction and not to have been incorporated in the other jurisdiction; and

 (b) for the purpose of applying section 11 in respect of all times from the time of continuation in a particular jurisdiction until the time of continuation in a different jurisdiction, deemed to have been incorporated in the particular jurisdiction at the time of continuation in that jurisdiction and not to have been incorporated in the other jurisdiction.

1995, c. 49, s. 10; 1997, c. 3, s. 71.

11.4. (Repealed).

1996, c. 39, s. 14; 2000, c. 5, s. 8; 2013, c. 10, s. 14.

11.5. For the purposes of this Act, unless the context indicates otherwise, the following rules apply:

 (a) a taxation year of a person not resident in Canada shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and

 (b) a person for whom income for a taxation year is determined in accordance with this Act includes a person not resident in Canada.

2003, c. 2, s. 6.

CHAPTER III 
ESTABLISHMENT
1972, c. 26, s. 33.

12. The establishment of a taxpayer means a fixed place where the taxpayer carries on the taxpayer's business or, if there is no such place, the taxpayer's principal place of business. An establishment also includes an office, a branch, a mine, an oil or gas well, a farm, a timberland, a factory, a warehouse or a workshop.

Without restricting the generality of the first paragraph, a corporation has an establishment in each province of Canada in which an immovable owned by the corporation and used principally for the purpose of earning or producing gross revenue that is rent is situated.

1972, c. 26, s. 33; 1982, c. 56, s. 9; 1993, c. 19, s. 15; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 12.

13. Where a taxpayer carries on business through an employee, agent or mandatary, established in a particular place, who has general authority to contract for the employer or mandator or who has a stock of merchandise owned by such employer or mandator from which the employee, agent or mandatary regularly fills orders which the employee, agent or mandatary receives, the taxpayer is deemed to have an establishment in that place.

However, a taxpayer is not deemed to have an establishment for the sole reason that the taxpayer has business dealings through a commission agent, a broker or other independent agent or maintains an office or warehouse solely for the purchase of merchandise; similarly, the taxpayer is not deemed to have an establishment in a place solely because of the taxpayer's control over a subsidiary carrying on business in that place.

1972, c. 26, s. 33; 1998, c. 16, s. 13; 2000, c. 39, s. 2.

14. A corporation that has an establishment in Canada under this chapter and is the owner of land in a province is deemed to have with respect to such land an establishment in that province.

1972, c. 26, s. 33; 1997, c. 3, s. 71.

15. A taxpayer using at a particular place substantial machinery or material at a particular time in a taxation year is deemed to have an establishment at that place.

1972, c. 26, s. 33.

16. An insurance corporation is deemed to have an establishment at each place where it is registered or holds a permit to carry on business.

1972, c. 26, s. 33; 1973, c. 17, s. 3; 1997, c. 3, s. 71.

16.0.1. If, but for this section, a corporation would not have an establishment, the corporation is deemed to have an establishment at the place designated in its articles as its head office.

2011, c. 1, s. 20.

16.1. Where, in a taxation year, a corporation not resident in Canada operates a mine, produces, processes, preserves, packs or builds goods or a product in whole or in part, or produces or presents a public show, it is deemed to have an establishment at the place, in Canada, where it carries on one or the other of these activities.

1979, c. 38, s. 3; 1997, c. 3, s. 71.

16.1.1. Sections 15 and 16.1 do not apply in respect of a taxpayer's activities relating to a business of the taxpayer that consists in operating a sports team that plays one or more of its matches or games, or that takes part in one or more competitions, outside Québec, or to a sports club if, in connection with its activities, one of its members plays a match or game, or takes part in a competition, outside Québec.

1995, c. 63, s. 13.

16.1.2. For the purposes of the definition of “Canadian banking business” in section 1, subparagraph a of the first paragraph of section 21.32, section 125.1, the second paragraph of section 171, section 217.15, the definition of “goodwill amount” in section 333.4, section 740, subparagraph ii of subparagraph b of the first paragraph of section 785.2 and paragraph b.1 of section 1029.8.17, if a person is not resident in Canada but is resident in a country with which a tax agreement defining “permanent establishment” has been entered into, the establishment of the person means, despite sections 12 to 16.1, the permanent establishment of the person, within the meaning assigned by the tax agreement.

1996, c. 39, s. 15; 2001, c. 53, s. 5; 2004, c. 8, s. 12; 2009, c. 5, s. 26; 2011, c. 1, s. 21; 2015, c. 21, s. 97.

16.2. For the purposes of this chapter, the word province includes

 (a) the Nova Scotia offshore area, within the meaning of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act (Statutes of Canada, 1988, chapter 28);

 (b) the Newfoundland offshore area, within the meaning of the Canada-Newfoundland Atlantic Accord Implementation Act (Statutes of Canada, 1987, chapter 3);

 (c) (paragraph repealed);

 (d) (paragraph repealed).

1993, c. 19, s. 16; 1995, c. 49, s. 11.

CHAPTER IV 
NON-ARM'S LENGTH AND RELATED PERSONS AND GROUPS
1972, c. 23.

17. In this Part a group is related when each person forming it is related to each other person of the group.

1972, c. 23, s. 12.

18. For the purposes of this Part, the following rules apply:

 (a) related persons are deemed not to deal with each other at arm's length;

 (b) a taxpayer and a personal trust, other than a trust described in any of subparagraphs a to d of the third paragraph of section 647, are deemed not to deal with each other at arm's length if the taxpayer, or any person not dealing at arm's length with the taxpayer, would be beneficially interested in the trust if section 7.11.1 were read without reference to subparagraphs b to d of the second paragraph; and

 (c) in any other case, it is a question of fact whether persons not related to each other are at a particular time dealing with each other at arm's length.

1972, c. 23, s. 13; 2003, c. 2, s. 7; 2009, c. 5, s. 27.

19.  (1) For the purposes of this Part, related persons or persons related to each other are

(a)  individuals connected by blood relationship, marriage or adoption;

(b)  a corporation and

(i)  a person who controls that corporation,

(ii)  a person who is a member of a related group that controls the corporation, or

(iii)  a person related to the person contemplated by subparagraph i or ii;

(c)  any two corporations

(i)  if they are controlled by the same person or group of persons,

(ii)  if each of them is controlled by a person and that person who controls one of the corporations is related to the person who controls the other corporation,

(iii)  if one of them is controlled by a person related to any member of a related group that controls the other,

(iv)  if one of the corporations is controlled by a person related to each member of an unrelated group that controls the other,

(v)  if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other, or

(vi)  if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other.

 (2) Two corporations related to the same corporation under subsection 1 are deemed, for the purposes of subsection 1 and section 18, to be related to each other.

 (3) Where there has been an amalgamation or merger of two or more particular corporations and the new corporation formed as a result of the amalgamation or merger would have been related to any of the particular corporations immediately before the amalgamation or merger if the new corporation were in existence at that time, and if the persons who were the shareholders of the new corporation immediately after the amalgamation or merger were the shareholders of the new corporation at that time, the new corporation and that particular corporation shall be deemed to have been related persons.

 (4) Where there has been an amalgamation or merger of two or more particular corporations each of which was related, otherwise than because of a right referred to in paragraph b of section 20, to each other immediately before the amalgamation or merger, the new corporation formed as a result of the amalgamation or merger and each of the particular corporations are deemed to have been related to each other.

1972, c. 23, s. 14; 1984, c. 15, s. 4; 1989, c. 5, s. 23; 1997, c. 3, s. 71; 2000, c. 5, s. 9.

20. For the purposes of sections 19 and 21.19,

 (a) a related group which is in a position to control a corporation is deemed to be a related group which controls it, whether or not it is part of a larger group which in fact controls the corporation;

 (b) where at any time a person has a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently,

(i)  to, or to acquire, shares of the capital stock of a corporation or to control the voting rights of such shares, the person is, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person owned the shares at that time,

(ii)  to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the corporation, the person is, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the shares were so redeemed, acquired or cancelled by the corporation at that time,

(iii)  to, or to acquire or control, voting rights in respect of shares of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person could exercise the voting rights at that time, or

(iv)  to cause the reduction of voting rights in respect of shares, owned by other shareholders, of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the voting rights were so reduced at that time; and

 (c) a shareholder of two or more corporations is, as shareholder of one of the corporations, deemed to be related to himself, herself or itself as shareholder of each of the other corporations.

1972, c. 23, s. 15; 1982, c. 5, s. 3; 1986, c. 15, s. 35; 1989, c. 5, s. 24; 1990, c. 59, s. 8; 1993, c. 16, s. 8; 1997, c. 3, s. 71; 1998, c. 16, s. 14; 2000, c. 5, s. 10.

21. For the purposes of this Part, except sections 752.0.1 to 752.0.7,

 (a) persons are connected by blood relationship if one is the child, other descendant, brother or sister of the other;

 (b) persons are connected by marriage if one is married to the other or to a person connected with the other by blood relationship or by adoption; and

 (c) persons are connected by adoption if one has been adopted, either legally or in fact, and would be connected with the other by blood relationship or by marriage if filiation by adoption were filiation by blood.

1972, c. 23, s. 16; 1974, c. 18, s. 2; 1975, c. 22, s. 2; 1982, c. 17, s. 49; 1986, c. 15, s. 36; 1989, c. 5, s. 25; 1998, c. 16, s. 15.

CHAPTER IV.1 
AFFILIATED PERSONS
2000, c. 5, s. 11.

21.0.1. In this chapter,

affiliated group of persons means a group of persons each member of which is affiliated with every other member of the group;

beneficiary, under a trust, includes a person beneficially interested in the trust;

contributor, to a trust, means a person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, if the person deals at arm’s length with the trust at that time and is not immediately after that time a majority-interest beneficiary of the trust, a loan made at a reasonable rate of interest or a transfer made for fair market value consideration;

controlled means controlled, directly or indirectly in any manner whatever;

majority-interest beneficiary, of a trust at any time, means a person whose interest as a beneficiary, at that time,

 (a) in the income of the trust has, together with the interests as a beneficiary in the income of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the income of the trust; or

 (b) in the capital of the trust has, together with the interests as a beneficiary in the capital of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the capital of the trust;

majority-interest group of beneficiaries, of a trust at any time, means a group of persons each of whom is a beneficiary under the trust at that time such that

 (a) if one person held the interests as a beneficiary under the trust of all of the members of the group, that person would be a majority-interest beneficiary of the trust; and

 (b) if any member of the group were not a member, the test described in paragraph a would not be met;

majority-interest group of partners of a partnership means a group of persons each of whom has an interest in the partnership such that

 (a) if one person held the interests of all members of the group, that person would be a majority-interest partner of the partnership; and

 (b) if any member of the group were not a member, the test described in paragraph a would not be met.

2000, c. 5, s. 11; 2005, c. 38, s. 47.

21.0.2. For the purposes of this chapter, the following rules apply:

 (a) persons are affiliated with themselves;

 (b) a person includes a partnership;

 (c) despite section 646, a trust does not include the trustee or other persons who own or control the trust property; and

 (d) for the purpose of determining whether a person is affiliated with a trust,

(i)  if the amount of income or capital of the 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,

(ii)  the interest of a person in a trust as a beneficiary is disregarded in determining whether the person deals at arm’s length with the trust if the person would, in the absence of the interest as a beneficiary, be considered to deal at arm’s length with the trust,

(iii)  a trust is not a majority-interest beneficiary of another trust unless the trust has an interest as a beneficiary in the income or capital of the other trust, and

(iv)  in determining whether a contributor to one trust is affiliated with a contributor to another trust, individuals connected by blood relationship, marriage or adoption are deemed to be affiliated with one another.

2000, c. 5, s. 11; 2005, c. 38, s. 48; 2015, c. 24, s. 13.

21.0.3. For the purposes of this Part, affiliated persons, or persons affiliated with each other, are

 (a) an individual and a spouse of the individual;

 (b) a corporation and

(i)  a person by whom the corporation is controlled,

(ii)  each member of an affiliated group of persons by which the corporation is controlled, or

(iii)  a spouse of a person described in subparagraph i or ii;

 (c) two corporations, if

(i)  each corporation is controlled by a person, and the person by whom one corporation is controlled is affiliated with the person by whom the other corporation is controlled,

(ii)  one corporation is controlled by a person, the other corporation is controlled by a group of persons, and each member of that group is affiliated with that person, or

(iii)  each corporation is controlled by a group of persons, and each member of each group is affiliated with at least one member of the other group;

 (d) a corporation and a partnership, if the corporation is controlled by a particular group of persons each member of which is affiliated with at least one member of a majority-interest group of partners of the partnership, and each member of that majority-interest group is affiliated with at least one member of the particular group of persons;

 (e) a partnership and a majority-interest partner of the partnership;

 (f) two partnerships, if

(i)  the same person is a majority-interest partner of both partnerships,

(ii)  a majority-interest partner of one partnership is affiliated with each member of a majority-interest group of partners of the other partnership, or

(iii)  each member of a majority-interest group of partners of each partnership is affiliated with at least one member of a majority-interest group of partners of the other partnership;

 (g) a person and a trust, if the person

(i)  is a majority-interest beneficiary of the trust, or

(ii)  would, but for this paragraph, be affiliated with a majority-interest beneficiary of the trust; and

 (h) two trusts, if a contributor to one of the trusts is affiliated with a contributor to the other trust and

(i)  a majority-interest beneficiary of one of the trusts is affiliated with a majority-interest beneficiary of the other trust,

(ii)  a majority-interest beneficiary of one of the trusts is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or

(iii)  each member of a majority-interest group of beneficiaries of each of the trusts is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust.

2000, c. 5, s. 11; 2005, c. 38, s. 49.

21.0.4. Where at any time two or more particular corporations amalgamate or merge to form a new corporation, the new corporation and the particular corporations are deemed to have been persons affiliated with each other where they would have been affiliated with each other immediately before that time if the new corporation had existed immediately before that time and the shareholders of the new corporation immediately after that time had been the shareholders of the new corporation immediately before that time.

2000, c. 5, s. 11.

CHAPTER V 
CONTROL OF A CORPORATION
1978, c. 26, s. 3; 1997, c. 3, s. 71.

21.1. Sections 21.2 to 21.3.1 apply in respect of the control of a corporation for the purposes of sections 6.2, 21.2 to 21.3.3, 83.0.3, 93.3.1, 93.4 and 106.4, Division X.1 of Chapter III of Title III of Book III, sections 175.9, 222 to 230.0.0.2, 237 to 238.1, 308.0.1 to 308.6, 384, 384.4, 384.5, 418.26 to 418.30 and 485 to 485.18, paragraph d of section 485.42, sections 564.2 to 564.4.2, 711.2, 727 to 737 and 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, subparagraphs d to f of the first paragraph of section 771.13, paragraph f of section 772.13, sections 776.1.5.6, 776.1.12 and 776.1.13, paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.0.3.46 and 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of “specified corporation” in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of “excluded corporation” in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 and sections 1029.8.36.166.49, 1029.8.36.166.50, 1029.8.36.171.3 and 1029.8.36.171.4.

Subject to section 21.3.7, sections 21.3.2 and 21.3.3 apply in respect of the control of a corporation for the purposes of section 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, subparagraphs d to f of the first paragraph of section 771.13, paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.0.3.46 and 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of “specified corporation” in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of “excluded corporation” in the first paragraph of section 1029.8.36.0.38 and paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83.

Sections 21.4 and 21.4.0.1 to 21.4.0.3 apply in respect of the control of a corporation for the purposes of this Part.

Section 21.4.1 applies in respect of the control of a corporation for the purposes of sections 6.2, 21.0.1 to 21.0.4, 83.0.3, 93.4, 222 to 230.0.0.2, 308.1, 384, 384.4, 384.5, 418.26 to 418.30 and 485 to 485.18, paragraph d of section 485.42, subparagraph d of the third paragraph of section 559, sections 560.1.2, 727 to 737 and 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, subparagraphs d to f of the first paragraph of section 771.13, paragraph f of section 772.13, sections 776.1.5.6, 776.1.12 and 776.1.13, paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.0.3.46 and 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of “specified corporation” in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of “excluded corporation” in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of “qualified corporation” in the first paragraph of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 and sections 1029.8.36.166.49, 1029.8.36.166.50, 1029.8.36.171.3 and 1029.8.36.171.4.

1978, c. 26, s. 3; 1980, c. 13, s. 2; 1982, c. 5, s. 4; 1984, c. 15, s. 5; 1989, c. 77, s. 5; 1993, c. 16, s. 9; 1993, c. 19, s. 17; 1996, c. 39, s. 16; 1997, c. 3, s. 71; 2000, c. 5, s. 12; 2001, c. 7, s. 5; 2003, c. 2, s. 8; 2004, c. 21, s. 40; 2005, c. 23, s. 31; 2005, c. 38, s. 50; 2006, c. 13, s. 26; 2007, c. 12, s. 21; 2009, c. 5, s. 28; 2009, c. 15, s. 29.

21.2. Where two or more corporations, each of which is referred to in this section as a predecessor corporation, have amalgamated to form one corporate entity, in this section referred to as the new corporation, the following rules apply:

 (a) control of a corporation is deemed not to have been acquired by any person or group of persons solely because of the amalgamation unless it is deemed under paragraph b or c to have been so acquired;

 (b) a person or group of persons that controls the new corporation immediately after the amalgamation and did not control a predecessor corporation immediately before the amalgamation is deemed to have acquired immediately before the amalgamation control of the predecessor corporation and of each corporation it controlled immediately before the amalgamation, unless the person or group of persons would not have acquired control of the predecessor corporation if the person or group of persons had acquired all the shares of the predecessor corporation immediately before the amalgamation; and

 (c) control of a predecessor corporation and of each corporation it controlled immediately before the amalgamation is deemed to have been acquired immediately before the amalgamation by a person or group of persons

(i)  unless the predecessor corporation was related, otherwise than because of a right referred to in paragraph b of section 20, immediately before the amalgamation to each other predecessor corporation,

(ii)  unless, if one person had immediately after the amalgamation acquired all the shares of the new corporation's capital stock that the shareholders of the predecessor corporation, or of another predecessor corporation that controlled the predecessor corporation, acquired on the amalgamation in consideration for their shares of the predecessor corporation or of the other predecessor corporation, as the case may be, the person would have acquired control of the new corporation as a result of the acquisition of those shares, or

(iii)  unless this paragraph would, but for this subparagraph, deem control of each predecessor corporation to have been acquired on the amalgamation where the amalgamation is an amalgamation of

(1)  two corporations, or

(2)  two particular corporations and one or more other corporations that would, if all the shares of each other corporation's capital stock that were held immediately before the amalgamation by the particular corporations had been held by one person, have been controlled by that person.

1978, c. 26, s. 3; 1982, c. 5, s. 5; 1984, c. 15, s. 5; 1997, c. 3, s. 71; 2000, c. 5, s. 13.

21.2.1. Subject to section 21.3, where two or more persons, in this section referred to as the transferors, dispose of shares of the capital stock of a particular corporation in exchange for shares of the capital stock of another corporation, in this section referred to as the acquiring corporation, control of the acquiring corporation and of each corporation controlled by it immediately before the exchange is deemed to have been acquired at the time of the exchange by a person or group of persons unless

 (a) the particular corporation and the acquiring corporation were related, otherwise than because of a right referred to in paragraph b of section 20, to each other immediately before the exchange; or

 (b) if all the shares of the acquiring corporation's capital stock that were acquired by the transferors on the exchange were acquired at the time of the exchange by one person, the person would not control the acquiring corporation.

2000, c. 5, s. 14.

21.2.2. Subject to section 21.3, if, at any particular time, as part of a series of transactions or events, two or more persons acquire shares of a corporation (in this section referred to as the “acquiring corporation”) in exchange for or upon a redemption or surrender of interests in, or as a consequence of a distribution from, a SIFT trust or a SIFT partnership, on the assumption that the definitions of “SIFT trust” and “SIFT partnership” in the first paragraph of section 1129.70 applied from 31 October 2006, or a real estate investment trust within the meaning of that first paragraph, control of the acquiring corporation and of each corporation controlled by it immediately before the particular time is deemed to have been acquired by a person or group of persons at the particular time, except in the following cases:

 (a) in relation to each of those corporations, a person (in this paragraph referred to as a “relevant person”) who would be affiliated with the SIFT trust, SIFT partnership or real estate investment trust, but for the definition of “controlled” in section 21.0.1, owns shares of the corporation having a total fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the corporation at all times during the period that ends immediately before the particular time and begins at the time of the last acquisition of control of the corporation by a relevant person or, if later, on the later of

(i)  14 July 2008, and

(ii)  the day the corporation was constituted;

 (b) if all the securities, within the meaning of the first paragraph of section 1129.70, of the acquiring corporation that were acquired as part of the series of transactions or events at or before the particular time were acquired by one person, the person would not at the particular time control the acquiring corporation and would have at the particular time acquired securities of the acquiring corporation having a fair market value of not more than 50% of the fair market value of all the issued and outstanding shares of the acquiring corporation; and

 (c) this section previously applied to deem an acquisition of control of the acquiring corporation upon an acquisition of shares that was part of the same series of transactions or events.

2015, c. 24, s. 14.

21.3. Control of a particular corporation is deemed not to have been acquired solely because of

 (a) the acquisition at any time of shares of the capital stock of any corporation by

(i)  a person who acquired the shares from another person to whom the person was related, otherwise than because of a right referred to in paragraph b of section 20, immediately before that time,

(ii)  a person who was related to the particular corporation, otherwise than because of a right referred to in paragraph b of section 20, immediately before that time,

(iii)  a succession that acquired the shares because of the death of a person,

(iv)  a person who acquired the shares from a succession that arose on the death of another person to whom the person was related, or

(v)  a corporation on a distribution, within the meaning assigned by the first paragraph of section 308.0.1, by a specified corporation, within the meaning assigned by that paragraph, if a dividend, to which section 308.1 does not apply because of section 308.3, is received in the course of the reorganization in which the distribution occurs;

 (b) the cancellation or redemption at any particular time of, or a change at any particular time in the terms or conditions of, shares of the particular corporation or of a corporation controlling the particular corporation, where each person and each member of each group of persons that controls the particular corporation immediately after the particular time was related, otherwise than because of a right referred to in paragraph b of section 20, to the particular corporation

(i)  immediately before the particular time, or

(ii)  immediately before the death of a person, where the shares were held immediately before the particular time by a succession that acquired the shares because of the person's death; or

 (c) the acquisition at any time of shares of the particular corporation if

(i)  the acquisition would otherwise result in the acquisition of control of the particular corporation at that time by a related group, and

(ii)  each member of each group of persons that controls the particular corporation at that time was related, otherwise than because of a right referred to in paragraph b of section 20, to the particular corporation immediately before that time.

1978, c. 26, s. 3; 1979, c. 18, s. 3; 1982, c. 5, s. 5; 1993, c. 16, s. 10; 1994, c. 22, s. 55; 1995, c. 49, s. 12; 1997, c. 3, s. 71; 2000, c. 5, s. 15; 2009, c. 5, s. 29.

21.3.1. If at a particular time shares of the capital stock of a particular corporation are disposed of to another corporation (in this paragraph referred to as the “acquiring corporation”) for consideration that includes shares of the acquiring corporation's capital stock, control of the particular corporation and of each corporation controlled by it immediately before that time is deemed not to have been acquired by the acquiring corporation solely because of the disposition if, immediately after the particular time, the acquiring corporation and the particular corporation are controlled by a person or group of persons who controlled the particular corporation immediately before the particular time, and did not, as part of the series of transactions or events that includes the disposition, cease to control the acquiring corporation.

Control of a particular corporation and of each corporation controlled by it immediately before a particular time is deemed not to have been acquired at the particular time by a corporation (in this paragraph referred to as the “acquiring corporation”), if at the particular time, the acquiring corporation acquires shares of the particular corporation's capital stock for consideration that consists solely of shares of the acquiring corporation's capital stock, and if

 (a) immediately after the particular time,

(i)  the acquiring corporation owns all the shares of each class of the particular corporation's capital stock, without reference to shares of a specified class of the capital stock of the particular corporation, within the meaning of section 560.1.2.1,

(ii)  the acquiring corporation is not controlled by a person or group of persons, and

(iii)  the fair market value of the shares of the particular corporation's capital stock that are owned by the acquiring corporation is not less than 95% of the fair market value of all the assets of the acquiring corporation; or

 (b) any of subparagraphs i to iii of subparagraph a do not apply and the acquisition occurs as part of a plan of arrangement that, on completion, results in

(i)  the acquiring corporation, or a new corporation that is formed on an amalgamation of the acquiring corporation and a wholly-controlled subsidiary of the acquiring corporation, owning all the shares of each class of the particular corporation's capital stock, without reference to shares of a specified class of the capital stock of the particular corporation, within the meaning of section 560.1.2.1,

(ii)  the acquiring corporation, or the new corporation, not being controlled by a person or group of persons, and

(iii)  the fair market value of the shares of the particular corporation's capital stock that are owned by the acquiring corporation, or the new corporation, being not less than 95% of the fair market value of all the assets of the acquiring corporation or the new corporation.

A particular trust that would, in the absence of this paragraph, acquire control of a corporation solely because of a SIFT trust wind-up event that is a distribution of shares of the capital stock of the corporation by another trust is deemed not to acquire control of the corporation because of the distribution if

 (a) the particular trust is described in paragraph c of the definition of “SIFT trust wind-up event” in section 1;

 (b) the particular trust is the only beneficiary of the other trust; and

 (c) the other trust controlled the corporation immediately before the distribution.

Where a corporation (in this paragraph referred to as the “acquiring corporation”) acquires shares of the capital stock of a particular corporation on a distribution that is a SIFT trust wind up event of a trust that is a SIFT wind up entity, the acquiring corporation is deemed not to acquire control of the particular corporation because of that acquisition if the following conditions are met:

 (a) the acquiring corporation is the only beneficiary under the trust immediately before the distribution;

 (b) the trust controlled the particular corporation immediately before the distribution;

 (c) as part of a series of transactions or events under which the acquiring corporation became the only beneficiary under the trust, two or more persons acquired shares of the acquiring corporation in exchange for their interests as beneficiaries under the trust; and

 (d) if all the shares described in subparagraph c had been acquired by one person, the person would control the acquiring corporation and would have acquired shares of the acquiring corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the acquiring corporation.

2000, c. 5, s. 16; 2009, c. 5, s. 30; 2010, c. 25, s. 6; 2015, c. 24, s. 15.

21.3.2. A person or group of persons is deemed not to have acquired control of a corporation at any time after 11 June 2003 if a significant shareholder, or a significant group of shareholders, of the corporation owns, at that time, shares of the capital stock of the corporation that give the shareholder or group 50% or more of the votes that could be cast under all circumstances at the annual meeting of shareholders of the corporation.

2006, c. 13, s. 27.

21.3.3. A person or group of persons deemed not to have acquired control of a corporation at any time after 11 June 2003 because of the application of section 21.3.2, is deemed to have acquired control of that corporation at a later time when, for the first time, no significant shareholder, or significant group of shareholders, of the corporation owns shares of the capital stock of the corporation that give the shareholder or group 50% or more of the votes that could be cast under all circumstances at the annual meeting of shareholders of the corporation.

2006, c. 13, s. 27.

21.3.4. For the purposes of sections 21.3.2 to 21.3.6,

 (a) a person who owned, immediately before 12 June 2003, 25% or more in vote and value of the shares of the capital stock of a corporation is a significant shareholder of the corporation at any time after 11 June 2003;

 (b) a group of persons in respect of which the following conditions are satisfied is a significant group of shareholders of a corporation at any given time after 11 June 2003:

(i)  immediately before 12 June 2003, the group owned 25% or more in vote and value of the shares of the capital stock of the corporation, and

(ii)  at the given time, each member of the group owned 10% or more in vote and value of the shares of the capital stock of the corporation;

 (c) two or more persons each of whom owns shares of the capital stock of a corporation is a group of persons in respect of that corporation; and

 (d) the percentage, in vote and value, of the shares of the capital stock of a corporation owned by a person or group of persons at any given time corresponds to the lesser of

(i)  the proportion, expressed as a percentage, that, at that time, the number of votes that could be cast under all circumstances at the annual meeting of shareholders of the corporation given by the shares of the capital stock of the corporation owned by the person or group of persons is of the number of votes of that kind given by all the issued shares of that capital stock, and

(ii)  the proportion, expressed as a percentage, that, at that time, the fair market value of the shares of the capital stock of the corporation owned by the person or group of persons is of the fair market value of all the issued shares of that capital stock.

2006, c. 13, s. 27.

21.3.5. For the purpose of determining, in accordance with section 21.3.4, whether a person or group of persons is a significant shareholder, or a significant group of shareholders, as the case may be, of a particular corporation,

 (a) subject to the second paragraph, the rules set out in paragraphs d to f of section 21.20.2 apply in respect of the ownership of the shares of the capital stock of the particular corporation;

 (b) another corporation, a partnership or a trust is deemed not to own, or not to be deemed to own because of the application of subparagraph a, a share of the capital stock of the particular corporation that is deemed to be owned, because of the application of that subparagraph, by

(i)  a shareholder of the other corporation,

(ii)  a member of the partnership, or

(iii)  a beneficiary under the trust or, if it is a trust referred to in section 467, the person referred to in that section;

 (c) a person is deemed to have owned, immediately before 12 June 2003, a share the person acquired after 11 June 2003 from another person with whom the person was not dealing at arm's length, if that other person owned the share immediately before 12 June 2003;

 (d) if, between 11 June 2003 and 1 July 2004, the particular corporation was the subject of an acquisition of control that was the result of a transaction to which any of the provisions referred to in the second paragraph of section 21.1 refers, the transaction is deemed to have been completed on 11 June 2003 for the purpose of applying sections 21.3.2 and 21.3.3 in respect of a subsequent acquisition of control of the particular corporation for the purposes of that provision;

 (e) a person is deemed to have exercised, on 11 June 2003, one or more rights referred to in paragraph b of section 20 that the person exercised after that date but had acquired before 12 June 2003; and

 (f) a person is deemed to have performed, on 11 June 2003, one or more obligations described in the third paragraph that the person performed after that date but had contracted before 12 June 2003.

Despite subparagraph 1 of subparagraph i of paragraph f of section 21.20.2 and subparagraphs ii and iv of that paragraph f, the number of shares of the capital stock of a corporation that the members of a group who are beneficiaries under a trust or the members of a group who are persons referred to in section 467 in respect of a trust referred to in that section are deemed to own because of the application of subparagraph a of the first paragraph to each of them, may not be greater than the number of shares of that capital stock that are owned, or deemed to be owned because of the application of that subparagraph a, by the trust.

An obligation to which subparagraph f of the first paragraph refers is an obligation whose performance puts the person who contracted it in the same position in relation to the control of a corporation as that in which the person would be if the person had acquired and exercised any of the rights referred to in paragraph b of section 20.

2006, c. 13, s. 27.

21.3.6. In determining, for the purposes of sections 21.3.2 and 21.3.3, the number of shares of the capital stock of a particular corporation owned by a significant shareholder, or a significant group of shareholders, of the particular corporation, subparagraph a of the first paragraph of section 21.3.5 applies, but with reference to the following rules:

 (a) despite paragraph d of section 21.20.2,

(i)  a shareholder of another corporation is deemed to own all the shares of the capital stock of the particular corporation that are owned, or deemed to be owned because of the application of this section, by the other corporation, if the shares of the capital stock of the other corporation owned by the shareholder give the shareholder 50% or more of the votes that could be cast under all circumstances at the annual meeting of shareholders of the other corporation, and

(ii)  the presumption in subparagraph i applies to a particular group consisting of members of a significant group of shareholders of the particular corporation who are shareholders of another corporation, if the shares of the capital stock of the other corporation owned by the particular group give the particular group 50% or more of the votes that could be cast under all circumstances at the annual meeting of shareholders of the other corporation;

 (b) a person who is a shareholder of more than one corporation, in this paragraph referred to as the “intermediary corporations”, may not be deemed to own a number of shares of the capital stock of the particular corporation that are owned, or deemed to be owned because of the application of this section, by another corporation of which the intermediary corporations are shareholders that is greater than the number of those shares that the person would be deemed to own if this section applied to each intermediary corporation without reference to the rule set out in subparagraph i of paragraph a; and

 (c) if a significant group of shareholders of the particular corporation includes persons each of whom is deemed to own, because of the application of this section, shares of the capital stock of the particular corporation that are owned by another corporation, the total number of those shares that those persons are deemed to own may not be greater than the number of shares of that capital stock that the other corporation owns.

2006, c. 13, s. 27.

21.3.7. When sections 21.3.2 and 21.3.3 apply in respect of the control of a corporation for the purposes of subparagraph e of the first paragraph of section 771.13 and subparagraph b of the first paragraph of section 1029.8.36.0.22.1,

 (a) sections 21.3.2 to 21.3.5 are to be read as if “11 June 2003” was replaced wherever it appears by “30 March 2004”; and

 (b) section 21.3.4 and the first paragraph of section 21.3.5 are to be read as if “12 June 2003” was replaced wherever it appears by “31 March 2004”.

2006, c. 13, s. 27; 2007, c. 12, s. 22.

21.4. Where, but for this section, a particular corporation would be regarded as being controlled, or controlled, directly or indirectly in any manner whatever, by a person or partnership at a particular time and it is established that the conditions set forth in the second paragraph are fulfilled, the particular corporation is deemed not to be controlled by that person or partnership at that particular time.

The conditions referred to in the first paragraph are:

 (a) there is in effect at the particular time an enforceable agreement or arrangement under which, upon the happening of an event or the satisfaction of a condition that it is reasonable to expect will happen or be satisfied, the particular corporation will cease to be controlled, or controlled, directly or indirectly in any manner whatever, as the case may be, by the person or partnership, and will be or become controlled, or controlled, directly or indirectly in any manner whatever, as the case may be, by a person or group of persons with whom or with each of the members of which, as the case may be, the person or partnership is at the particular time dealing at arm's length;

 (b) the purpose of the control referred to in the first paragraph is, at the particular time, the safeguarding of the rights or interests of the person or partnership in respect of any indebtedness owing to the person or partnership the whole or any part of the principal amount of which is outstanding at the particular time, or of any shares of the capital stock of the particular corporation that are owned by the person or partnership at the particular time and that are, under the enforceable agreement or arrangement referred to in subparagraph a, to be redeemed by the particular corporation or purchased by the person or group of persons referred to in subparagraph a.

1980, c. 13, s. 3; 1987, c. 67, s. 7; 1990, c. 59, s. 9; 1997, c. 3, s. 71; 2000, c. 5, s. 17.

21.4.0.1. A corporation that would be controlled by another corporation if that other corporation were not controlled by any person or group of persons, is controlled by the other corporation and by any person or group of persons by whom the other corporation is controlled.

2003, c. 2, s. 9.

21.4.0.2. A corporation that would be controlled by a group of persons, in this section referred to as the first-tier group, if no corporation that is a member of the first-tier group were controlled by any person or group of persons, is controlled by

 (a) the first-tier group; and

 (b) any group of one or more persons comprised of, in respect of every member of the first-tier group, either the member, or a person or group of persons by whom the member is controlled.

2003, c. 2, s. 9.

21.4.0.3. For their application within the framework of the circumstances described in section 21.25, sections 21.4.0.1 and 21.4.0.2 shall be read as if the references to controlled were references to controlled, directly or indirectly in any manner whatever,.

2003, c. 2, s. 9.

21.4.1. A taxpayer who, at a particular time, acquires a right referred to in paragraph b of section 20 in respect of a share of the capital stock of a corporation is deemed to be in the same position in relation to the control of the corporation as if the right were immediate and absolute and as if the taxpayer had exercised the right at the particular time, where it can reasonably be concluded that one of the main purposes of the acquisition of the right is

 (a) to avoid any limitation on the deductibility of any net capital loss, non-capital loss or farm loss or any amount referred to in section 384 or sections 418.26 to 418.30;

 (b) to avoid the application of Chapter IV.1, any of sections 83.0.3, 93.4, 225, 308.1, 384.4, 384.5, 560.1.2 and 736, paragraph a or b of section 736.0.2, section 736.0.3.1 or 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, any of subparagraphs d to f of the first paragraph of section 771.13, section 776.1.12 or 776.1.13, paragraph c of the definition of qualified corporation in the first paragraph of section 1029.8.36.0.3.46 or 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of specified corporation in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of any of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of excluded corporation in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of qualified corporation in the first paragraph of any of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 or any of sections 1029.8.36.166.49, 1029.8.36.166.50, 1029.8.36.171.3, 1029.8.36.171.4 and 1137.8; or

 (c) to affect the application of sections 485 to 485.18.

1982, c. 5, s. 6; 1984, c. 15, s. 6; 1985, c. 25, s. 19; 1989, c. 77, s. 6; 1996, c. 39, s. 17; 2000, c. 5, s. 18; 2004, c. 21, s. 41; 2005, c. 23, s. 32; 2007, c. 12, s. 23; 2009, c. 15, s. 30.

21.4.1.1. For the purposes of sections 21.2 to 21.3.1 and 21.4.1, the following rules apply:

 (a) a corporation incorporated without share capital is deemed to have a capital stock of a single class of shares;

 (b) each member, policyholder and other participant in the corporation is deemed to be a shareholder of the corporation; and

 (c) the membership, policy or other interest in the corporation of each of those participants is deemed to be the number of shares of the corporation's capital stock that the Minister considers reasonable in the circumstances, having regard to the total number of participants in the corporation and the nature of their participation.

2000, c. 5, s. 19.

21.4.2. For the purposes of this Part, other than for the purpose of determining if a corporation is, at any time, a small business corporation or a Canadian-controlled private corporation, if control of a corporation is acquired by a person or group of persons at a particular time on a day, control of the corporation is deemed to have been acquired by the person or group of persons at the commencement of that day and not at the particular time unless the corporation makes a valid election under subsection 9 of section 256 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the acquisition of control.

Chapter V.2 applies in relation to an election made under subsection 9 of section 256 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1989, c. 77, s. 7; 1997, c. 3, s. 71; 2009, c. 5, s. 31; 2010, c. 5, s. 10.

CHAPTER V.I 
DIVIDEND DEEMED TO BE INTEREST
1990, c. 59, s. 10.

21.4.3. Where a dividend is received on a share in a taxation year and after 18 June 1987 from a corporation not resident in Canada, other than a corporation in which the recipient of the dividend had or would have, if the corporation were a taxable Canadian corporation, a substantial interest within the meaning of section 191 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), such dividend is deemed, for the purposes of paragraphs c and l of section 87 and sections 746 to 749 and section 772.2 to 772.13, to have been received in the year as interest and not as a dividend on a share of the capital stock of the payer corporation, if the dividend is a dividend in respect of which no deduction could have been made under section 738, 740 or 845 by reason of sections 740.2 to 740.3.1 or section 740.5 if the corporation that paid the dividend were a taxable Canadian corporation.

1990, c. 59, s. 10; 1995, c. 49, s. 13; 1995, c. 63, s. 14; 1997, c. 3, s. 71.

CHAPTER V.2 
MAKING CERTAIN ELECTIONS
2009, c. 5, s. 32.

21.4.4. This chapter applies when a provision of this Act (in this chapter referred to as the “particular provision”) refers to this chapter in relation to an election made under the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or under this Act.

A person, legal representative or partnership that makes such an election is referred to as the “elector” in this chapter.

2009, c. 5, s. 32.

21.4.5. If an election, which should have been made on or before 19 December 2006 or which was made before 20 December 2006, is made or amended as a consequence of the application of subsection 5 or 5.1 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) or of subsection 3.2 of section 220 of that Act, the date on which the election was made, which is to be taken into account for the purposes of sections 21.4.6, 21.4.9 and 21.4.10 and of the particular provision, is, despite the presumption provided for in that respect in that subsection 5 or 5.1 or in paragraph a of subsection 3.3 of that section 220, the date on which the election is actually made or amended.

If, in relation to any subject (in this paragraph referred to as the “subject of an election made for federal purposes”), an election is rescinded after 19 December 2006 in circumstances where section 7.19.1 applies and a particular valid election has been made before 20 December 2006 under the particular provision in relation to the subject of an election made for federal purposes, the particular valid election is deemed never to have been made.

2009, c. 5, s. 32; 2010, c. 25, s. 7.

21.4.6. If, after 19 December 2006, an elector makes a valid election under the provision of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to which the particular provision refers, the elector or, if the elector is a partnership, any member of the partnership shall, on or before the date provided for in the second paragraph, notify the Minister in writing of the election and attach to the notice a copy of every document sent to the Minister of National Revenue in connection with the election.

The date to which the first paragraph refers is the date of the 30th day following that on which the election is made or, if it is later, the filing-due date of the person in respect of whom the election is made or, where the election is made in respect of a partnership, of the member of the partnership for the taxation year for which the election has to be sent to the Minister of National Revenue.

This section does not apply if the person in respect of whom the election is made or, where the election is made in respect of a partnership, each of its members was not subject to tax under this Part for the taxation year for which the election had to be sent to the Minister of National Revenue.

2009, c. 5, s. 32; 2012, c. 8, s. 37.

21.4.6.1. If, after 19 December 2006, an elector makes a valid election under the provision of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to which the particular provision refers, other than an election described in the second paragraph, the person in respect of whom the election is made or, where the election is made in respect of a partnership, each of its members was not subject to tax under this Part for the taxation year for which the election had to be sent to the Minister of National Revenue and, for the purposes of the Income Tax Act, the election is in force for a subsequent taxation year (in this section referred to as the tax liability year) for which the person in respect of whom the election is made or, where the election is made in respect of a partnership, any of its members becomes subject to tax under this Part, the elector or any member of the partnership shall, on or before the date provided for in the third paragraph, notify the Minister in writing of the election and attach to the notice a copy of every document sent to the Minister of National Revenue in connection with the election.

An election to which the first paragraph refers is an election that is made for the purpose of computing, for a taxation year, the income or taxable income of a taxpayer for the purposes of the Income Tax Act and that relates to a deduction in that computation or to the determination of the cost, capital cost or cost amount of a property of the taxpayer, to which section 31 or 694 applies for the purpose of determining, for the tax liability year or a subsequent taxation year, the taxpayer's income or taxable income for the purposes of this Part.

The date to which the first paragraph refers is the filing-due date, for the tax liability year, of the person in respect of whom the election is made or, where the election is made in respect of a partnership, of the member of the partnership who first becomes subject to tax under this Part for the tax liability year.

2012, c. 8, s. 38.

21.4.7. In the event of non-compliance with a requirement of section 21.4.6 or 21.4.6.1, the elector incurs a penalty of $25 a day for every day the omission continues, up to $2,500.

2009, c. 5, s. 32; 2012, c. 8, s. 39.

21.4.8. If, in relation to any subject (in this section referred to as the “subject of an election made for federal purposes”) and as a consequence of the application of subsection 3.2 of section 220 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the period within which an elector may make the election under section 21.4.6 has been extended or an election made by the elector under the provision of that Act to which the particular provision refers is amended or rescinded after 19 December 2006, the following rules apply:

 (a) the elector shall notify the Minister in writing and attach to the notice a copy of every document sent to the Minister of National Revenue for that purpose;

 (b) the elector incurs a penalty equal to $100 for each complete month included in the period beginning on the day on or before which the election or the amended or rescinded election was required to have been made and ending on the day on which the notice referred to in paragraph a is sent to the Minister, up to $5,000; and

 (c) if a particular valid election has been made before 20 December 2006 under the particular provision in relation to the subject of an election made for federal purposes,

(i)  in the case of the election made or amended,

(1)  the particular provision is to apply in respect of the subject of an election made for federal purposes, as the particular provision reads on 20 December 2006 and not as it read before that date, and

(2)  the particular valid election is deemed never to have been made, and

(ii)  in the case of the rescinded election, the particular valid election is deemed never to have been made.

2009, c. 5, s. 32.

21.4.9. Subject to sections 21.4.5, 21.4.8 and 21.4.11, if, in relation to any subject (in this section referred to as the “subject of an election made for Québec purposes”), an elector made a particular valid election under the particular provision before 20 December 2006, the particular provision must apply in respect of the subject of an election made for Québec purposes, as the particular provision read before that date, unless, after 19 December 2006, the elector makes, in relation to the subject of an election made for Québec purposes, a valid election under the provision of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to which the particular provision refers, in which case the following rules apply:

 (a) the particular provision must apply in respect of the subject of an election made for Québec purposes, as the particular provision reads on 20 December 2006 and not as it read before that date; and

 (b) the particular valid election is deemed never to have been made.

2009, c. 5, s. 32.

21.4.10. If, before 20 December 2006 and in relation to any subject (in this section referred to as the “subject of an election made for federal purposes”), an elector made a particular valid election under the provision of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to which the particular provision refers and did not rescind it after 19 December 2006 as a consequence of the application of subsection 3.2 of section 220 of that Act, and the elector has not made a valid election under the particular provision, the following rules apply:

 (a) if the applicable period within which to make the election under the particular provision in relation to the subject of an election made for federal purposes, as the particular provision read before 20 December 2006, would have ended after 19 December 2006, the particular provision must, if the elector so decides on or before the time at which the period should have ended, apply in respect of the subject of an election made for federal purposes as if the particular valid election had been made on 20 December 2006, and, for that purpose, section 603 applies, with the necessary modifications, in respect of that decision if the particular provision was referred to in section 603, as that section read on 19 December 2006;

 (b) if subsection 3.2 of section 220 of the Income Tax Act applies, in relation to the subject of an election made for federal purposes, to the provision of that Act to which the particular provision refers and if section 21.4.8 does not apply,

(i)  the Minister may allow that the particular provision apply in respect of the subject of an election made for federal purposes as if the particular valid election had been made on 20 December 2006, if

(1)  the applicable period within which to make the election under the particular provision in relation to the subject of an election made for federal purposes, as the particular provision read before 20 December 2006, would have ended on or before a particular day of any of the elector's taxation years or fiscal periods, as the case may be, and

(2)  the elector files an application with the Minister in that respect on or before the day that is 10 calendar years after the end of the taxation year or fiscal period, and, for that purpose, section 603 applies, with the necessary modifications, in respect of that application if the particular provision was referred to in section 603, as that section read on 19 December 2006, and

(ii)  if the Minister grants the application filed under subparagraph i, the elector incurs a penalty equal to $100 for each complete month included in the period beginning on the day on or before which the particular valid election was required to have been made and ending on the day on which the application is filed with the Minister, up to $5,000; and

 (c) if the particular provision is any of sections 85.5, 194, 215, 250.1, 312.3, 462.16, 688.1.1, 853 and 985.3 and, before 20 December 2006, in the case of sections 85.5, 194 and 215, the elector has not made a valid election under the provision of the Income Tax Act to which section 85.6, 195 or 216, as the case may be, refers in relation to the particular valid election, or, in the case of section 985.3, the Minister of National Revenue has not revoked the particular valid election, the elector may, with the consent of the Minister and on the conditions determined by the Minister, apply the particular provision, for or from a particular taxation year or particular day or from a particular date, as the case may be, as if the particular valid election was a valid election made after 19 December 2006 in that respect, for or from the particular taxation year or particular day or from the particular date, as the case may be, under the provision of the Income Tax Act to which the particular provision refers.

2009, c. 5, s. 32.

21.4.11. If an elector made a particular valid election under the particular provision before 20 December 2006 in relation to any subject (in this section referred to as the “subject of an election made for Québec purposes”), the following rules apply:

 (a) if subsection 3.2 of section 220 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) applies, in relation to the subject of an election made for Québec purposes, to the provision of that Act (in this subparagraph referred to as the “corresponding provision”) to which the particular provision refers, if section 21.4.8 does not apply and if the elector made, in relation to the subject of an election made for Québec purposes, a valid election under the corresponding provision before 20 December 2006 that has not been rescinded before that date as a consequence of the application of that subsection 3.2, or the elector did not make such an election or made such an election that was thus rescinded before that date,

(i)  the Minister may allow that the particular provision, as it reads on 20 December 2006 and not as it read before that date, apply in respect of the subject of an election made for Québec purposes as if the election made for the purposes of the Income Tax Act that was not rescinded had been made on 20 December 2006, or that the particular valid election be revoked in any other case, if

(1)  the period within which, in relation to the subject of an election made for Québec purposes, the election under the particular provision was to be made, as the particular provision read before 20 December 2006, would have ended on or before a particular day of any of the elector's taxation years or fiscal periods, as the case may be, and

(2)  the elector files an application with the Minister in that respect on or before the day that is 10 calendar years after the end of the taxation year or fiscal period, and, for that purpose, section 603 applies, with the necessary modifications, in respect of that application if the particular provision was referred to in section 603, as that section read on 19 December 2006, and

(ii)  if the Minister grants the application filed under subparagraph i,

(1)  the elector incurs a penalty equal to $100 for each complete month included in the period beginning on the day on or before which the election under the corresponding provision in relation to the subject of an election made for Québec purposes was required to have been made and ending on the day on which the application is filed, up to $5,000, and

(2)  the particular valid election is deemed never to have been made;

 (b) if the particular provision is any of sections 85.5, 194, 215 and 985.3 and the conditions set out in the second paragraph are met before 20 December 2006, the elector may, with the consent of the Minister and on the conditions determined by the Minister, apply the particular provision, for a particular taxation year or from a particular date, as if the valid election referred to in subparagraph b of the second paragraph was a valid election made after 19 December 2006 in that respect, for the particular taxation year or from the particular date, under the provision of the Income Tax Act to which the particular provision refers;

 (c) if the particular provision is any of sections 85.5, 194, 215, 284 and 985.3 and the conditions set out in the third paragraph are met before 20 December 2006,

(i)  in the case of sections 85.5, 194, 215 and 284, the elector may, with the consent of the Minister and on the conditions determined by the Minister, apply section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, for a particular taxation year, as if the valid election referred to in subparagraph c of the third paragraph was a valid election made in that respect after 19 December 2006, for the particular taxation year, under the provision of the Income Tax Act to which section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, refers, and

(ii)  in the case of section 985.3, the Minister may revoke the particular valid election from the particular date referred to in subparagraph c of the third paragraph; and

 (d) if the particular provision is any of sections 85.5, 194, 215, 284 and 985.3 and the conditions set out in the fourth paragraph are met before 20 December 2006,

(i)  in the case of sections 85.5, 194, 215 and 284, the elector may, with the consent of the Minister and on the conditions determined by the Minister, apply section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, for a particular taxation year, as if a valid election had been made in that respect after 19 December 2006, for the particular taxation year, under the provision of the Income Tax Act to which section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, refers, and

(ii)  in the case of section 985.3, the Minister may revoke the particular valid election from the date the Minister determines.

The conditions to which subparagraph b of the first paragraph refers are as follows:

 (a) in the case of sections 85.5, 194 and 215, the elector has made a valid election under section 85.6, 195 or 216, as the case may be, in relation to the particular valid election, or, in the case of section 985.3, the Minister has revoked the particular valid election;

 (b) the elector has made a valid election, in relation to the subject of an election made for Québec purposes, under the provision of the Income Tax Act to which the particular provision refers; and

 (c) in the case of sections 85.5, 194 and 215, the elector has not made a valid election under the provision of the Income Tax Act to which section 85.6, 195 or 216, as the case may be, refers in relation to the valid election referred to in subparagraph b, or, in the case of section 985.3, the Minister of National Revenue has not revoked the valid election referred to in subparagraph b.

The conditions to which subparagraph c of the first paragraph refers are as follows:

 (a) in the case of sections 85.5, 194, 215 and 284, the elector has not made a valid election under section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, in relation to the particular valid election, or, in the case of section 985.3, the Minister has not revoked the particular valid election;

 (b) the elector has made a valid election, in relation to the subject of an election made for Québec purposes, under the provision of the Income Tax Act to which section 85.5, 194 or 215 or the first paragraph of section 284, as the case may be, refers; and

 (c) in the case of sections 85.5, 194, 215 and 284, the elector has made a valid election under the provision of the Income Tax Act to which section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, refers in relation to the valid election referred to in subparagraph b, or, in the case of section 985.3, the Minister of National Revenue has revoked the valid election referred to in subparagraph b from a particular date.

The conditions to which subparagraph d of the first paragraph refers are as follows:

 (a) in the case of sections 85.5, 194, 215 and 284, the elector has not made a valid election under section 85.6, 195 or 216 or the second paragraph of section 284, as the case may be, in relation to the particular valid election, or, in the case of section 985.3, the Minister has not revoked the particular valid election; and

 (b) the elector has not made a valid election, in relation to the subject of an election made for Québec purposes, under the provision of the Income Tax Act to which section 85.5, 194 or 215 or the first paragraph of section 284, as the case may be, refers.

2009, c. 5, s. 32.

21.4.12. The Minister may determine any penalty payable by a partnership under this chapter and send the partnership a notice of assessment in that respect.

2009, c. 5, s. 32.

21.4.13. The total amount of the penalties incurred by the elector under this chapter in relation to a particular election may not exceed the greatest penalty that would otherwise have been incurred in respect of that election under any of the provisions of this chapter.

2009, c. 5, s. 32.

21.4.14. Under this Part and despite sections 1010 to 1011, the Minister shall make such assessments of tax, interest and penalties as are necessary for any taxation year to take into account any election, any amended, rescinded or revoked election or any election deemed never to have been made, and any application of the particular provision, referred to in any of sections 21.4.5, 21.4.8 and 21.4.9, in paragraph b of section 21.4.10 or in subparagraph a of the first paragraph of section 21.4.11.

2009, c. 5, s. 32.

21.4.15. If any given provision of this Act refers to this chapter in relation to an operation that consists in the rescinding or revocation of an election, or in an agreement or arrangement, an application, an attribution, a designation, a determination, a distribution or a specification relating to a property, an amount or anything else, this chapter is to be interpreted as if the operation consisted in an election made under the given provision or under the provision of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to which the given provision refers.

2009, c. 5, s. 32.

CHAPTER V.3 
USE OF THE CANADIAN CURRENCY OR OF A FUNCTIONAL CURRENCY
2010, c. 5, s. 11.

21.4.16. In this chapter,

Canadian currency year of a taxpayer means a taxation year that precedes the first functional currency year of the taxpayer;

elected functional currency of a taxpayer means the currency of a country other than Canada that is the elected functional currency of the taxpayer, within the meaning of subsection 1 of section 261 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), for the purposes of that section;

functional currency year of a taxpayer means a taxation year in respect of which the rules set out in section 21.4.19 apply to the taxpayer;

pre-reversion debt of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer's first reversionary year;

pre-transition debt of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer's first functional currency year;

Québec tax results of a taxpayer for a taxation year means

 (a) the amount of the income, taxable income or taxable income earned in Canada of the taxpayer for the taxation year, or any other amount used as a basis for computing an amount that the taxpayer is required to pay for the taxation year under this Act, other than under Part III.7 (except for the purposes of section 21.4.17);

 (b) the amount (other than an amount payable on behalf of another person under section 1015 or, except for the purposes of section 21.4.17, other than an amount payable under Part III.7) of tax or any other amount payable under this Act by the taxpayer in respect of the taxation year;

 (c) the amount (other than an amount refundable on behalf of another person in respect of amounts payable on behalf of that person under section 1015) of tax or any other amount refundable under this Act to the taxpayer in respect of the taxation year; and

 (d) any amount (including an amount provided for in Chapter V of the Act respecting international financial centres (chapter C-8.3)) that is relevant in computing the amounts described in respect of the taxpayer in paragraphs a to c;

relevant spot rate for a particular day means, in respect of a conversion of an amount from a particular currency to another currency,

 (a) if the particular currency or the other currency is Canadian currency, the rate quoted by the Bank of Canada for noon on the particular day (or, if there is no such rate quoted for the particular day, the closest preceding day for which such a rate is quoted) for the exchange of the particular currency for the other currency, or, for the purposes of paragraph b of section 21.4.17 and paragraph c of section 21.4.19, any other rate of exchange that is acceptable to the Minister; and

 (b) if neither the particular currency nor the other currency is Canadian currency, the rate—calculated by reference to the rates quoted by the Bank of Canada for noon on the particular day (or, if either of such rates is not quoted for the particular day, the closest preceding day for which both such rates are quoted)—for the exchange of the particular currency for the other currency, or, for the purposes of paragraph b of section 21.4.17 and paragraph c of section 21.4.19, any other rate of exchange that is acceptable to the Minister;

reversionary year of a taxpayer means a taxation year that begins after the last functional currency year of the taxpayer;

tax reporting currency of a taxpayer for a taxation year, and at any time in the taxation year, means the currency in which the taxpayer's Québec tax results for the taxation year are to be computed.

2010, c. 5, s. 11.

21.4.17. The following rules apply in computing the Québec tax results of a taxpayer for a taxation year:

 (a) subject to this chapter, other than this section, Canadian currency is to be used; and

 (b) subject to this chapter, other than this section, section 484.6, subparagraph l of the first paragraph of section 485.3 and paragraph b of section 851.22.39, if a particular amount that is relevant in computing those Québec tax results is expressed in a currency other than Canadian currency, the particular amount, other than an amount provided for in subparagraph b or c of the second paragraph of section 1029.8.36.0.95 or 1029.8.36.0.105, is to be converted to an amount expressed in Canadian currency using the relevant spot rate for the day on which the particular amount arose.

2010, c. 5, s. 11; 2011, c. 34, s. 13.

21.4.18. The rules set out in section 21.4.19 apply to a taxpayer in respect of a particular taxation year if, because of subsection 3 of section 261 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), subsection 5 of section 261 of that Act applies to the taxpayer in respect of the particular taxation year for the purposes of that Act.

Chapter V.2 applies in relation to an election made under paragraph b of subsection 3 of section 261 of the Income Tax Act and, if applicable, in relation to the revocation of that election made under subsection 4 of section 261 of that Act.

2010, c. 5, s. 11.

21.4.19. The rules to which the first paragraph of section 21.4.18 refers and that apply to a taxpayer in respect of a particular taxation year are the following:

 (a) the taxpayer's elected functional currency is to be used for the purpose of computing the taxpayer's Québec tax results for the particular taxation year;

 (b) unless the context otherwise requires, each reference in this Act or the regulations made under it to an amount (other than in respect of a penalty or fine) that is described as a particular number of Canadian dollars is, in respect of the taxpayer and the particular taxation year, to be read as a reference to that amount expressed in the taxpayer's elected functional currency using the relevant spot rate for the first day of the particular taxation year;

 (c) subject to paragraph b of section 21.4.24, sections 21.4.30 and 484.6, subparagraph l of the first paragraph of section 485.3 and paragraph b of section 851.22.39, if a particular amount that is relevant in computing the taxpayer's Québec tax results for the particular taxation year is expressed in a currency other than the taxpayer's elected functional currency, the particular amount, other than an amount provided for in subparagraph b or c of the second paragraph of section 1029.8.36.0.95 or 1029.8.36.0.105, is to be converted to an amount expressed in the taxpayer's elected functional currency using the relevant spot rate for the day on which the particular amount arose;

 (d) the definition of “exchange rate” in section 736.0.0.2 is, in respect of the taxpayer and the particular taxation year, and with the necessary modifications, to be read as follows:

““exchange rate” at a particular time in respect of a particular currency other than the taxpayer's elected functional currency means the relevant spot rate, for the day that includes that time, in respect of the conversion of an amount from the particular currency to the taxpayer's elected functional currency, or a rate of exchange acceptable to the Minister;”;

 (e) section 262 is, in respect of the taxpayer and the particular taxation year, and with the necessary modifications, to be read as if “in foreign currency in relation to Canadian currency after 1971” in the first paragraph was replaced by “after 1971 in the currency of one or more countries (other than the taxpayer's elected functional currency) relative to the taxpayer's elected functional currency”;

 (f) a reference to “Canadian currency” wherever it appears in the following provisions is, in respect of the taxpayer and the particular taxation year, and with the necessary modifications, to be read as a reference to the “taxpayer's elected functional currency”:

(i)  paragraph c.1 of section 21.26,

(ii)  paragraph a.1 of section 21.27,

(iii)  sections 474, 483.2, 483.3 and 484.6,

(iv)  subparagraph l of the first paragraph of section 485.3,

(v)  section 485.28,

(vi)  paragraph f of the definition of “tax basis” in section 851.22.7,

(vii)  paragraph g of section 851.22.8,

(viii)  the portion of subparagraph i of paragraph b of section 851.22.39 before subparagraph 1,

(ix)  subparagraph 2 of subparagraph i of paragraph b of section 851.22.39,

(x)  subparagraph ii of paragraph b of section 851.22.39, and

(xi)  subparagraph iv of subparagraph a of the second paragraph of section 1079.1R3 of the Regulation respecting the Taxation Act (chapter I-3, r. 1);

 (g) the definition “foreign currency” in section 1 is, in respect of the taxpayer and the particular taxation year, and with the necessary modifications, to be read as follows:

““foreign currency” in respect of a taxpayer, at any time in a taxation year, means a currency other than the taxpayer's elected functional currency;”;

 (h) this chapter applies, with the necessary modifications, for the purposes of Book II of Part VI in respect of the taxpayer in relation to a particular month, if the particular month is included in the particular taxation year; and

 (i) this chapter applies, with the necessary modifications, for the purposes of Part VI.4 in respect of the taxpayer in relation to a particular calendar year, if the last fiscal period of the taxpayer, for the purposes of Part VI.4, that ends in the preceding calendar year is a fiscal period that ends in the particular taxation year or the end of which coincides with the end of that particular taxation year.

2010, c. 5, s. 11; 2011, c. 34, s. 14.

21.4.20. For the purpose of computing the Québec tax results of a particular taxpayer for each taxation year that is a functional currency year or a reversionary year of the particular taxpayer, this chapter is to be applied as if each partnership of which the particular taxpayer is a member in the taxation year were a taxpayer that

 (a) had as its first functional currency year its first fiscal period that

(i)  is a fiscal period during which the particular taxpayer is a member of the partnership,

(ii)  begins after 13 December 2007, and

(iii)  ends at least six months after the day that is six months before the end of the particular taxpayer's first functional currency year;

 (b) had as its last Canadian currency year its last fiscal period that ends before its first functional currency year;

 (c) had as its first reversionary year its first fiscal period that begins after the particular taxpayer's last functional currency year;

 (d) is a taxpayer to which section 21.4.19 applies in respect of each of its fiscal periods that is, or begins after, its first functional currency year and that ends before its first reversionary year;

 (e) had as its elected functional currency in respect of each fiscal period described in paragraph d the elected functional currency of the particular taxpayer; and

 (f) had as its last functional currency year its last fiscal period that ends before its first reversionary year.

2010, c. 5, s. 11.

21.4.21. For the purpose of computing a taxpayer's income for a particular taxation year that is a functional currency year or a reversionary year of the taxpayer, foreign accrual property income of a foreign affiliate of the taxpayer, in respect of the taxpayer for the particular taxation year, is to be determined in accordance with the regulations made under section 579 after taking into account the application of subsection 6.1 of section 261 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in respect of the taxpayer for the particular taxation year.

2010, c. 5, s. 11.

21.4.22. For the purpose of applying this Act to a taxpayer for a functional currency year of the taxpayer (in this section referred to as the “particular taxation year”), the following amounts are to be converted from Canadian currency to the taxpayer's elected functional currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year:

 (a) each amount that

(i)  is, or is relevant in computing, an amount that may be deducted or is deemed to have been paid to the Minister for the particular taxation year under any of sections 222 to 225, 371, 710, 727 to 737, 772.12, 776.1.9, 1029.8.36.166.46, 1029.8.36.171.1 and 1135.2, and

(ii)  was determined for a Canadian currency year of the taxpayer;

 (b) the cost to the taxpayer of a property that was acquired by the taxpayer in a Canadian currency year of the taxpayer;

 (c) any amount that was required by section 255 or 257 to be added or deducted in computing, at any time in a Canadian currency year of the taxpayer, the adjusted cost base to the taxpayer of a capital property that was acquired by the taxpayer in such a year;

 (d) any amount that

(i)  is in respect of the taxpayer's undepreciated capital cost of depreciable property of a prescribed class, the taxpayer's eligible incorporeal capital amount in respect of a business of the taxpayer, the taxpayer's cumulative Canadian exploration expenses within the meaning of section 398, the taxpayer's cumulative Canadian development expenses within the meaning of section 411, the taxpayer's cumulative foreign resource expense, in relation to a country other than Canada, within the meaning of section 418.1.3, or the taxpayer's cumulative Canadian oil and gas property expense within the meaning of section 418.5 (each of which is in this paragraph referred to as a “pool amount”), and

(ii)  was added to or deducted in computing a pool amount of the taxpayer in respect of a Canadian currency year of the taxpayer;

 (e) any amount that has been deducted or claimed as a reserve in computing the income of the taxpayer for the taxpayer's last Canadian currency year;

 (f) any outlay or expense referred to in section 175.1 or 230.0.0.6 that was made or incurred by the taxpayer in respect of a Canadian currency year of the taxpayer, and any amount that was deducted in respect of the outlay or expense in computing the income of the taxpayer for such a year; and

 (g) any other amount (other than an amount referred to in any of sections 21.4.20, 21.4.21 and 21.4.23) determined under the provisions of this Act for or in respect of a Canadian currency year of the taxpayer that is relevant in computing the Québec tax results of the taxpayer for the particular taxation year.

2010, c. 5, s. 11.

21.4.23. In computing, in a functional currency year of a taxpayer, the amount for which a pre-transition debt of the taxpayer (other than a pre-transition debt denominated in the taxpayer's elected functional currency) was issued and its principal amount at the beginning of the taxpayer's first functional currency year, those amounts are to be converted from the pre-transition debt currency to the taxpayer's elected functional currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year.

2010, c. 5, s. 11.

21.4.24. A pre-transition debt of a taxpayer that is denominated in a currency other than the taxpayer's elected functional currency is deemed to have been issued immediately before the taxpayer's first functional currency year for the purpose of

 (a) computing the amount of the taxpayer's income, gain or loss, for a functional currency year of the taxpayer (other than an amount that section 21.4.25 deems to arise), that is attributable to a fluctuation in the value of a currency; and

 (b) applying subparagraph l of the first paragraph of section 485.3 in respect of a functional currency year of the taxpayer.

2010, c. 5, s. 11.

21.4.25. If a taxpayer has, in a taxation year that is a functional currency year or a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-transition debt of the taxpayer, the following rules apply:

 (a) if the taxpayer would have made a gain—or, if the pre-transition debt was not on account of capital, would have had income—(in the second paragraph referred to as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer's having paid, immediately before the end of the taxpayer's last Canadian currency year, an amount equal to the principal amount (expressed in the currency in which the pre-transition debt is denominated, which currency is in this section referred to as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the taxation year equal to the amount determined by the formula


A × B / C; and


 (b) if the taxpayer would have sustained a loss—or, if the pre-transition debt was not on account of capital, would have had a loss—(in this subparagraph referred to as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer's having paid, immediately before the end of the taxpayer's last Canadian currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the taxation year equal to the amount that would be determined by the formula in subparagraph a if the reference to “hypothetical gain or income” in subparagraph i of subparagraph a of the second paragraph were read as a reference to “hypothetical loss”.

In the formula in subparagraph a of the first paragraph,

 (a) A is

(i)  if the taxation year is a functional currency year of the taxpayer, the amount of the hypothetical gain or income converted to the taxpayer's elected functional currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year, and

(ii)  if the taxation year is a reversionary year of the taxpayer, the amount determined under subparagraph i converted to Canadian currency using the relevant spot rate for the last day of the taxpayer's last functional currency year;

 (b) B is the amount of the particular payment (expressed in the debt currency); and

 (c) C is the principal amount of the pre-transition debt at the beginning of the taxpayer's first functional currency year (expressed in the debt currency).

2010, c. 5, s. 11.

21.4.26. Despite sections 21.4.19 and 21.4.22, for the purposes of this Act and the Tax Administration Act (chapter A-6.002) in respect of a functional currency year (in this section referred to as the “particular taxation year”) of a taxpayer, the following rules apply:

 (a) for the purpose of computing the payments that the taxpayer is required to make in relation to the particular taxation year under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a:

(i)  each estimated amount described in subparagraph i of that subparagraph a, or in subparagraph 1 of subparagraph iii of that subparagraph a, that is payable by the taxpayer for the particular taxation year is to be determined by converting that amount, as determined in the taxpayer's elected functional currency, to Canadian currency using the relevant spot rate for the day on or before which the amount is required to be paid,

(ii)  the taxpayer's first basic provisional account referred to in subparagraph i of that subparagraph a for the particular taxation year is to be determined, if the particular taxation year is the taxpayer's first functional currency year, without reference to this chapter and, in any other case, as if the tax payable by the taxpayer for the taxpayer's functional currency year (in this paragraph referred to as the “first base year”) preceding the particular taxation year were equal to the total of

(1)  the aggregate of the payments that the taxpayer is required to make under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a, as the case may be, determined in accordance with this subparagraph ii or with subparagraph i or iii, as the case may be, in respect of the first base year, and

(2)  the remainder of the tax payable by the taxpayer under subparagraph b of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph b, as the case may be, determined in accordance with paragraph b, in respect of the first base year,

(iii)  the taxpayer's second basic provisional account described in subparagraph ii of that subparagraph a for the particular taxation year is to be determined, if the particular taxation year is the taxpayer's first functional currency year or the taxpayer's taxation year that follows the taxpayer's first functional currency year, without reference to this chapter and, in any other case, as if the tax payable by the taxpayer for the taxpayer's functional currency year (in this subparagraph referred to as the “second base year”) preceding the first base year were equal to the total of

(1)  the aggregate of the payments that the taxpayer is required to make under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a, as the case may be, determined in accordance with this subparagraph iii or with subparagraph i or ii, as the case may be, in respect of the second base year, and

(2)  the remainder of the tax payable by the taxpayer under subparagraph b of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph b, as the case may be, determined in accordance with paragraph b, in respect of the second base year, and

(iv)  those payments must correspond to the payments based on a method described in that subparagraph a that is referred to in the fourth paragraph of section 1038 in respect of the taxpayer in relation to the particular taxation year;

 (b) the remainder of the tax payable by the taxpayer for the particular taxation year under subparagraph b of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph b, is equal to the amount obtained by converting to Canadian currency, using the relevant spot rate for the taxpayer's balance-due day for the particular taxation year, the amount by which the tax payable by the taxpayer under this Part or under any of Parts IV, IV.1, VI and VI.1, as the case may be, for the particular taxation year, expressed in the taxpayer's elected functional currency, exceeds the aggregate of all amounts each of which is the amount obtained by converting the amount of a payment that the taxpayer is required to make in relation to that Part in respect of the particular taxation year, determined under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a, as the case may be, and with reference to any of subparagraphs i, ii and iii of subparagraph a, to the taxpayer's elected functional currency using the relevant spot rate for the day on or before which the payment is required to be made;

 (c) for the purpose of computing an amount (other than tax) that is payable by the taxpayer for the particular taxation year under this Part or under any of Parts IV, IV.1, VI and VI.1, or under the Tax Administration Act in relation to an amount that is payable under any of those Parts, the tax payable by the taxpayer for the particular taxation year under that Part is deemed to be equal to the total of

(i)  the aggregate of the payments that the taxpayer is required to make under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a, as the case may be, determined in accordance with any of subparagraphs i, ii and iii of subparagraph a in respect of the particular taxation year, and

(ii)  the remainder of the tax payable by the taxpayer under subparagraph b of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph b, as the case may be, determined in accordance with paragraph b, in respect of the particular taxation year;

 (d) any amount of tax that is payable under this Act (otherwise than under this Part or under any of Parts IV, IV.1, VI and VI.1) by the taxpayer for the particular taxation year is, if applicable, to be determined by converting the amount, as determined in the taxpayer's elected functional currency, to Canadian currency using the relevant spot rate for the day on or before which the amount is required to be paid;

 (e) in relation to any particular amount that is deemed under this Part to have been paid at a particular time on account of an amount payable by the taxpayer under this Act for the particular taxation year,

(i)  if, for the purpose of computing the payments that the taxpayer is required to make under subparagraph a of the first paragraph of section 1027, or any of sections 1145, 1159.7, 1175 and 1175.19 if they refer to that subparagraph a, a particular provision of this Part establishes the portion of the particular amount that the taxpayer is deemed to have paid to the Minister on account of the aggregate of the taxpayer's tax payable for the particular taxation year under this Part and the taxpayer's tax payable for the particular taxation year under Parts IV, IV.1, VI and VI.1, on the date on or before which each of those payments is required to be made,

(1)  the first excess amount referred to in the computation, provided for in that particular provision, of the portion of the particular amount in relation to a particular date is to be determined with reference to the particular amount as determined in the taxpayer's elected functional currency and by converting each portion of the particular amount, referred to in relation to an earlier date in the computation of that excess amount and as determined in Canadian currency, to the taxpayer's elected functional currency using the relevant spot rate for that earlier date, and is equal to the amount obtained by converting that excess amount so determined to Canadian currency using the relevant spot rate for the particular date, and

(2)  the amount by which the particular amount, as determined in the taxpayer's elected functional currency, exceeds the aggregate of all amounts each of which is the amount obtained by converting the amount—determined, with reference to subparagraph 1, in Canadian currency under the particular provision in respect of the particular amount in relation to a particular date—to the taxpayer's elected functional currency using the relevant spot rate for the particular date, is to be converted to Canadian currency using the relevant spot rate for the day that includes the particular time, and

(ii)  if subparagraph i does not apply in respect of the particular amount, the particular amount, as determined in the taxpayer's elected functional currency, is to be converted to Canadian currency using the relevant spot rate for the day that includes the particular time;

 (f) for the purpose of applying the second paragraph of section 1135.1 to the taxpayer in respect of the particular taxation year, the excess amount referred to in subparagraph i of subparagraph b of that second paragraph in relation to a particular date is to be determined with reference to the amount determined in accordance with the first paragraph of that section, as determined in the taxpayer's elected functional currency and by converting each portion of that amount, referred to in relation to an earlier date in the computation of that excess amount and as determined in Canadian currency, to the taxpayer's elected functional currency using the relevant spot rate for that earlier date, and is equal to the amount obtained by converting that excess amount so determined to Canadian currency using the relevant spot rate for the particular date;

 (g) for the purposes of section 1.2.1 of the Tax Administration Act, the amount of the taxpayer's paid-up capital for the particular taxation year, as determined in the taxpayer's elected functional currency and in the manner provided for in that section, is to be converted to Canadian currency using the relevant spot rate for the last day of the particular taxation year;

 (h) for the purposes of section 59.2.2 of the Tax Administration Act, the amount of an income referred to in the first paragraph of that section in relation to the particular taxation year, as determined in the taxpayer's elected functional currency, is to be converted to Canadian currency using the relevant spot rate for the taxpayer's balance-due day for the particular taxation year; and

 (i) any amount payable by the taxpayer for the particular taxation year under this Act, or under the Tax Administration Act in relation to such an amount, is to be paid in Canadian currency.

2010, c. 5, s. 11; 2010, c. 31, s. 175.

21.4.27. For the purpose of applying this Act to a taxpayer's reversionary year, sections 21.4.22 and 21.4.23 are to be read as if

 (a) “Canadian currency year” was replaced in the following provisions by “functional currency year”:

(i)  the portion of section 21.4.22 before paragraph a,

(ii)  subparagraph ii of paragraph a of section 21.4.22,

(iii)  paragraphs b and c of section 21.4.22,

(iv)  subparagraph ii of paragraph d of section 21.4.22,

(v)  paragraphs e to g of section 21.4.22, and

(vi)  section 21.4.23;

 (b) “functional currency year” was replaced wherever it appears in the following provisions by “reversionary year”:

(i)  the portion of section 21.4.22 before paragraph a, and

(ii)  section 21.4.23;

 (c) “pre-transition debt” was replaced wherever it appears in section 21.4.23 by “pre-reversion debt”;

 (d) “the taxpayer's elected functional currency” was replaced wherever it appears in the following provisions by “Canadian currency”:

(i)  the portion of section 21.4.22 before paragraph a, and

(ii)  section 21.4.23; and

 (e) “Canadian currency” in the portion of section 21.4.22 before paragraph a was replaced by “the taxpayer's elected functional currency”.

2010, c. 5, s. 11.

21.4.28. A pre-reversion debt of a taxpayer that is denominated in a currency other than Canadian currency is deemed to have been issued immediately before the taxpayer's first reversionary year for the purpose of

 (a) computing the amount of the taxpayer's income, gain or loss, for a reversionary year of the taxpayer (other than an amount that section 21.4.29 deems to arise), that is attributable to a fluctuation in the value of a currency; and

 (b) applying subparagraph l of the first paragraph of section 485.3 in respect of a reversionary year of the taxpayer.

2010, c. 5, s. 11.

21.4.29. If a taxpayer has, in a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-reversion debt of the taxpayer, the following rules apply:

 (a) if the taxpayer would have made a gain—or, if the pre-reversion debt was not on account of capital, would have had income—(in the second paragraph referred to as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer's having paid, immediately before the end of the taxpayer's last functional currency year, an amount equal to the principal amount (expressed in the currency in which the pre-reversion debt is denominated, which currency is in this section referred to as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the reversionary year equal to the amount determined by the formula


A × B/C; and


 (b) if the taxpayer would have sustained a loss—or, if the pre-reversion debt was not on account of capital, would have had a loss—(in this subparagraph referred to as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer's having paid, immediately before the end of the taxpayer's last functional currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the reversionary year equal to the amount that would be determined by the formula in subparagraph a if the reference to “hypothetical gain or income” in subparagraph a of the second paragraph were read as a reference to “hypothetical loss”.

In the formula in subparagraph a of the first paragraph,

 (a) A is the amount of the hypothetical gain or income converted to Canadian currency using the relevant spot rate for the last day of the taxpayer's last functional currency year;

 (b) B is the amount of the particular payment (expressed in the debt currency); and

 (c) C is the principal amount of the pre-reversion debt at the beginning of the taxpayer's first reversionary year (expressed in the debt currency).

2010, c. 5, s. 11.

21.4.30. For the purpose of computing the amount that may be deducted, or that is deemed to have been paid to the Minister, by a taxpayer, in respect of a particular amount that arises in a subsequent taxation year, under any of sections 727 to 737, 772.12, 776.1.9, 1029.8.36.166.47 and 1029.8.36.171.2 in computing the taxpayer's Québec tax results for a particular taxation year, the following rules apply:

 (a) if the subsequent taxation year is a functional currency year of the taxpayer and the particular taxation year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer's elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year:

(i)  the particular amount, and

(ii)  any amount so deducted, or so deemed to have been paid to the Minister, in computing the taxpayer's Québec tax results for another functional currency year of the taxpayer;

 (b) if the subsequent taxation year is a reversionary year of the taxpayer and the particular taxation year is a functional currency year of the taxpayer,

(i)  the following amounts (expressed in Canadian currency) are to be converted to the taxpayer's elected functional currency using the relevant spot rate for the last day of the taxpayer's last functional currency year:

(1)  the particular amount, and

(2)  any amount so deducted, or so deemed to have been paid to the Minister, in computing the taxpayer's Québec tax results for another reversionary year of the taxpayer, and

(ii)  any amount (expressed in Canadian currency) so deducted, or so deemed to have been paid to the Minister, in computing the taxpayer's Québec tax results for a Canadian currency year of the taxpayer is to be converted to the taxpayer's elected functional currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year;

 (c) if the subsequent taxation year is a reversionary year of the taxpayer and the particular taxation year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer's elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer's last Canadian currency year:

(i)  the amount that would be determined under subparagraph 1 of subparagraph i of paragraph b in respect of the particular amount if the particular taxation year were a functional currency year of the taxpayer, and

(ii)  any amount so deducted, or so deemed to have been paid to the Minister, in computing the taxpayer's Québec tax results for a functional currency year of the taxpayer; and

 (d) in any other case, this section does not apply.

2010, c. 5, s. 11.

21.4.31. If a winding-up described in section 556 begins at a particular time and the parent and the subsidiary referred to in that section would, in the absence of this section, have different tax reporting currencies at that time, the following rules apply for the purpose of computing the subsidiary's Québec tax results for its taxation years that end after the particular time:

 (a) if the subsidiary's tax reporting currency is Canadian currency,

(i)  despite section 21.4.18, section 21.4.19 is deemed to apply to the subsidiary in respect of its taxation year that includes the particular time and each of its subsequent taxation years,

(ii)  the subsidiary is deemed to have as its elected functional currency the parent's tax reporting currency, and

(iii)  if the subsidiary's taxation year that includes the particular time would, in the absence of this section, be a reversionary year of the subsidiary, this chapter applies with the necessary modifications; and

 (b) if neither the subsidiary's tax reporting currency nor the parent's tax reporting currency is Canadian currency,

(i)  the subsidiary's first reversionary year is deemed to end at the given time that is immediately after the time at which it began,

(ii)  a new taxation year of the subsidiary is deemed to begin immediately after the given time,

(iii)  despite section 21.4.18, section 21.4.19 is deemed to apply to the subsidiary in respect of its taxation year that includes the particular time and each of its subsequent taxation years, and

(iv)  the subsidiary is deemed to have as its elected functional currency the parent's tax reporting currency.

2010, c. 5, s. 11.

21.4.32. If, in respect of an amalgamation within the meaning of section 544, a predecessor corporation has a tax reporting currency for its last taxation year that is different from that of the new corporation for its first taxation year, paragraphs a and b of section 21.4.31 apply, for the purpose of computing the predecessor corporation's Québec tax results for its last taxation year, as if the tax reporting currencies referred to in those paragraphs were the tax reporting currencies referred to in this section and as if

 (a) “subsidiary” and “subsidiary's” were replaced wherever they appear in the following provisions by “predecessor corporation” and “predecessor corporation's”, respectively:

(i)  the portion of that paragraph a before subparagraph iii,

(ii)  that paragraph b;

 (b) “the subsidiary's taxation year that includes the particular time” in subparagraph iii of that paragraph a was replaced by “the predecessor corporation's last taxation year”;

 (c) “parent's” was replaced in the following provisions by “new corporation's”:

(i)  subparagraph ii of that paragraph a,

(ii)  the portion of that paragraph b before subparagraph i, and

(iii)  subparagraph iv of that paragraph  b; and

 (d) “its taxation year that includes the particular time and each of its subsequent taxation years” was replaced in the following provisions by “its last taxation year”:

(i)  subparagraph i of that paragraph a, and

(ii)  subparagraph iii of that paragraph b.

2010, c. 5, s. 11.

21.4.33. If, for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the Canadian tax results of a corporation, within the meaning of subsection 1 of section 261 of that Act, for one or more taxation years are to be computed, under subsection 18 of that section 261, using the particular currency referred to in that subsection 18, the Québec tax results of the corporation for that taxation year or for those taxation years are to be computed, subject to the second paragraph, using that particular currency.

The Québec tax results of a corporation for one or more taxation years are to be computed using a given currency if

 (a) at any time (in this paragraph referred to as the “transfer time”) one or more properties are directly or indirectly transferred

(i)  by the corporation to another corporation (in this paragraph referred to as the “transferor” and the “transferee”, respectively), or

(ii)  by another corporation to the corporation (in this paragraph referred to as the “transferor” and the “transferee”, respectively);

 (b) the transferor and the transferee are related at the transfer time or become related in the course of a series of transactions or events that includes the transfer;

 (c) the transfer time

(i)  is, or would in the absence of sections 21.4.31 and 21.4.32 be, in a functional currency year of the transferor and the transferor and the transferee have, or would in the absence of those sections have, different tax reporting currencies at the transfer time, or

(ii)  is, or would in the absence of sections 21.4.31 and 21.4.32 be, in a reversionary year of the transferor and is not in a reversionary year of the transferee;

 (d) it can reasonably be considered that one of the main purposes of the transfer or of any portion of a series of transactions or events that includes the transfer is to change, or to enable the changing of, the currency in which the Québec tax results in respect of the property, or property substituted for it, for a taxation year would otherwise be determined; and

 (e) the Minister directs that those Québec tax results be computed in the given currency.

2010, c. 5, s. 11.

21.4.34. For the purposes of the second paragraph of section 21.4.33, if two or more corporations (each of which is in this section referred to as a “predecessor corporation”) are amalgamated or otherwise merged at a particular time to form one corporate entity (in this section referred to as the “new corporation”), the following rules apply:

 (a) the predecessor corporation is deemed to have transferred to the new corporation at the time (in this section referred to as the “merger transfer time”) that is immediately before the particular time each property that was held at the merger transfer time by the predecessor corporation and at the particular time by the new corporation;

 (b) the new corporation is deemed to exist, and to be related to the predecessor corporation, at the merger transfer time; and

 (c) the new corporation is deemed to have as its tax reporting currency at the merger transfer time its tax reporting currency at the particular time.

2010, c. 5, s. 11.

21.4.35. The rule set out in section 21.4.36 applies for the purpose of computing a taxpayer's income, gain or loss for a taxation year in respect of a transaction (in this section and section 21.4.36 referred to as a “specified transaction”) if

 (a) the specified transaction was entered into, directly or indirectly, at any time by the taxpayer and a corporation (in this section referred to as the “related corporation”) to which the taxpayer was at that time related;

 (b) the taxpayer and the related corporation had different tax reporting currencies during the period (in this section referred to as the “accrual period”) in which the income, gain or loss accrued; and

 (c) it would, in the absence of this section and section 21.4.36, be reasonable to consider that a fluctuation during the accrual period in the value of the taxpayer's tax reporting currency relative to the value of the related corporation's tax reporting currency

(i)  increased the taxpayer's loss in respect of the specified transaction,

(ii)  reduced the taxpayer's income or gain in respect of the specified transaction, or

(iii)  caused the taxpayer to have a loss, instead of income or a gain, in respect of the specified transaction.

2010, c. 5, s. 11.

21.4.36. The rule to which section 21.4.35 refers is the rule according to which each fluctuation in value referred to in paragraph c of that section is, for the purpose of computing a taxpayer's income, gain or loss in respect of the specified transaction and despite any other provision of this Act, deemed not to have occurred.

2010, c. 5, s. 11.

21.4.37. For the purposes of this section and sections 21.4.33 to 21.4.36, the following rules apply:

 (a) if a property is directly or indirectly transferred to or by a partnership, the property is deemed to have been transferred to or by, as the case may be, each member of the partnership; and

 (b) if a partnership is a party to a transaction, each member of the partnership is deemed to be that party to that transaction.

2010, c. 5, s. 11.

CHAPTER VI 
TERM PREFERRED SHARES
1980, c. 13, s. 3.

21.5. A share of a class of the capital stock of a corporation is a term preferred share of the corporation if one of the following conditions is met:

 (a) the share was issued or acquired after 28 June 1982 and, at the time the share was issued or acquired, the existence of the corporation is, or there is an existing agreement under which it could be, limited;

 (b) it is issued after 16 November 1978, the owner thereof acquired it after 23 October 1979 and is a corporation, trust or partnership described in section 21.5.1 that, either alone or together with any such corporations, partnerships or trusts, controls or has an absolute or contingent right to control or to acquire control of the corporation;

 (c) it is issued after 16 November 1978 and, under its terms or conditions, an agreement in respect of the share or a modification of such terms or conditions or such agreement, either in the case of a share issued after 16 November 1978 and before 13 November 1981, or after 12 November 1981 and before 1 January 1983 pursuant to an agreement in writing to do so made before 13 November 1981, the share is convertible, directly or indirectly, into debt or into a share that would, if issued, be a term preferred share, and in any other case, the share is convertible or exchangeable, unless it is convertible into or exchangeable for a consideration described in section 21.5.5, or one of the provisions described in section 21.5.2, 21.5.3 or 21.5.4 applies.

1980, c. 13, s. 3; 1982, c. 5, s. 7; 1984, c. 15, s. 7; 1990, c. 59, s. 11; 1993, c. 16, s. 11; 1997, c. 3, s. 71.

21.5.1. For the purposes of paragraph b of section 21.5, the owner of the share must be

 (a) a corporation referred to in any of paragraphs a to e.1 of the definition of specified financial institution in section 1;

 (b) a corporation that is controlled by one or more corporations referred to in paragraph a,

 (c) a corporation that acquired the share after 11 December 1979 and is related to a corporation referred to in paragraph a or b, or

 (d) a partnership or trust of which a corporation referred to in paragraph a or b or a person related thereto is a member or a beneficiary.

1984, c. 15, s. 7; 1989, c. 5, s. 26; 1990, c. 59, s. 12; 1997, c. 3, s. 71; 2001, c. 53, s. 6.

21.5.2. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 16 November 1978 and 24 October 1979, the following:

 (a) the owner thereof may, within 10 years after the date of issue, cause the share to be redeemed, acquired or cancelled, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced,

 (b) the issuing corporation or any person with whom it is not dealing at arm's length is or may be required to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, otherwise than pursuant to a requirement of the corporation to redeem, acquire or cancel, annually, not more than 5% of the issued and fully paid shares of that class, or unless the owner may cause the share to be redeemed, acquired or cancelled by reason only of a right to convert or exchange the share, or

 (c) a person is or may be required to provide a guarantee or a similar covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the owner thereof or any person related thereto, with respect to the share.

1984, c. 15, s. 7; 1993, c. 16, s. 12; 1997, c. 3, s. 71.

21.5.3. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 23 October 1979 and 13 November 1981 or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement in writing to that effect entered into before 13 November 1981, the following:

 (a) the owner thereof may, within 10 years after the date of issue, cause the share to be redeemed, acquired or cancelled, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced,

 (b) a person is or may be required to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, within 10 years after the date of issue,

(i)  otherwise than pursuant to a requirement of the issuing corporation to redeem, acquire or cancel annually not more than 5% of the issued and fully paid shares of that class and, where the requirement was agreed to after 21 April 1980, it provides that such redemption, acquisition or cancellation be in proportion to the number of shares of the class or of the series of the class registered in the name of each shareholder, or

(ii)  unless the requirement to redeem, acquire or cancel the share arises by reason only of right to convert or exchange the share, or

 (c) a person provides or may be required to provide a guarantee or similar indemnity or covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the owner thereof or any person related thereto, with respect to the share.

1984, c. 15, s. 7; 1993, c. 16, s. 13; 1997, c. 3, s. 71.

21.5.4. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 12 November 1981 and 1 January 1983 otherwise than pursuant to an agreement referred to in section 21.5.3 or a share issued after 31 December 1982, one of the following:

 (a) the owner thereof may cause the share to be acquired, cancelled or redeemed, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced;

 (b) a person or partnership is or may be required to acquire, cancel or redeem the share, in whole or in part, otherwise than by reason only of a right to convert or exchange the share, or to reduce its paid-up capital;

 (c) a person or partnership provides or may be required to provide a guarantee or similar indemnity or covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the holder thereof or any person related thereto, with respect to the share.

1984, c. 15, s. 7; 1990, c. 59, s. 13; 1997, c. 3, s. 71.

21.5.5. The consideration for which a share may be converted or exchanged and to which paragraph c of section 21.5 refers shall only include

 (a) another share of the issuing corporation or a corporation related to it that, if issued, would not be a term preferred share,

 (b) a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the issuing corporation or a corporation related to it that, if issued, would not be a term preferred share, or

 (c) both a share described in subparagraph a and a right or warrant described in subparagraph b.

For the purposes of the first paragraph, where a taxpayer may become entitled, upon the conversion or exchange of a share, to receive any particular consideration, other than consideration described in the first paragraph, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of section 21.10, 21.10.1 or 740.1.

1990, c. 59, s. 14; 1997, c. 3, s. 71.

21.6. For the purposes of section 21.5, a term preferred share does not include

 (a) a share issued after 16 November 1978 and before 1980 pursuant to an agreement in writing to do so made before 17 November 1978;

 (b) a share issued as a stock dividend before 22 April 1980 on a share of the capital stock of a public corporation that was not a term preferred share, or after 21 April 1980 on a share that was, at the time such dividend was paid, a share prescribed for the purposes of paragraph e;

 (c) a share described in section 21.6.1;

 (d) a share that is listed on a designated stock exchange located in Canada and was issued before 22 April 1980 by

(i)  a corporation referred to in any of paragraphs a to d of the definition of specified financial institution in section 1,

(ii)  a corporation whose principal business is the lending of money or the purchasing of debt obligations or a combination thereof, or

(iii)  an issuing corporation associated with a corporation described in subparagraph i or ii;

 (e) a share that is, at that time, a prescribed share;

 (f) a share that is a taxable preferred share held by a specified financial institution that acquired the share before 16 December 1987 or before 1 January 1989 pursuant to an agreement in writing entered into before 16 December 1987, other than a share that is

(i)  a share deemed, under section 21.9.4.2 or paragraph a of section 21.11.12, to have been issued after 15 December 1987, or

(ii)  a share that would be deemed, under paragraph c of section 21.11.16, to have been issued after 15 December 1987 if the reference in the said section to “8:00 p.m. Eastern Daylight Saving Time, 18 June 1987” were read as a reference to “15 December 1987”.

1980, c. 13, s. 3; 1982, c. 5, s. 8; 1984, c. 15, s. 8; 1989, c. 5, s. 27; 1990, c. 59, s. 15; 1997, c. 3, s. 71; 2001, c. 7, s. 6; 2010, c. 5, s. 12.

21.6.1. A share is not a term preferred share, for a period of 10 years from the date of its issue, that was issued between 16 November 1978 and 13 November 1981, or for a period of 5 years from the date of its issue, if it was issued after 12 November 1981, and that was issued by a corporation resident in Canada and, in the case of a share issued after 23 October 1979, the proceeds from the issue may be regarded as having been used by the corporation or a corporation with which it was not dealing at arm's length in the financing of its business carried on or, in the case of a share issued after 12 November 1981, carried on in Canada, immediately before the share was issued, and that was issued

 (a) as part of a proposal to, or an arrangement with, its creditors that had been approved by a competent court under the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3),

 (b) at a time when all or substantially all of its assets were under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or

 (c) at a time when, by reason of financial difficulty, the corporation or another corporation resident in Canada with which it does not deal at arm's length was in default, or could reasonably be expected to default, on a debt obligation held by a person with whom the corporation or the other corporation was dealing at arm's length and the share was issued, wholly or in substantial part, directly or indirectly in exchange or substitution for that obligation or a part thereof.

1984, c. 15, s. 9; 1990, c. 59, s. 16; 1995, c. 49, s. 14; 1997, c. 3, s. 71.

21.7. For the purposes of this chapter, where the terms or conditions of an agreement in writing referred to in paragraph a of section 21.6 were amended after 16 November 1978, the agreement is deemed to have been made after that date.

1980, c. 13, s. 3.

21.7.1. Where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a taxable preferred share of the capital stock of a corporation relating to any matter referred to in paragraph c of section 21.5 or sections 21.5.2 to 21.5.5 have been established or modified, or any agreement in respect of the share relating to any such matter has been entered into or changed by the corporation or a specified person in relation to it, within the meaning of paragraph f of section 21.11.16, the share is deemed after that particular time to have been issued at that particular time.

1990, c. 59, s. 17; 1997, c. 3, s. 71.

21.8. Where the redemption date of a share was extended or the terms or conditions relating to its redemption, acquisition, cancellation or conversion or reduction of its paid-up capital were changed, the share is, for the purposes of determining whether it is a term preferred share, deemed to have been issued at the time of the extension or change otherwise than pursuant to an agreement referred to in section 21.5.3 or in paragraph a of section 21.6

1980, c. 13, s. 3; 1982, c. 5, s. 9; 1984, c. 15, s. 10.

21.9. The rule provided by section 21.8 applies where the change or extension occurs after 16 November 1978 in the case of a share issued before 17 November 1978, or after 12 November 1981 in the case of a share issued between 16 November 1978 and 13 November 1981 or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement referred to in section 21.5.3.

1980, c. 13, s. 3; 1982, c. 5, s. 10; 1984, c. 15, s. 10.

21.9.1. Subject to section 21.9.2, the rule provided by section 21.8 also applies, with the necessary modifications, in the following cases:

 (a) where the terms or conditions of a share issued pursuant to an agreement referred to in paragraph a of section 21.6 or those of any agreement relating to such a share have been changed;

 (b) where the owner of a share may, alone or together with one or more taxpayers, require the acquisition, cancellation, conversion or redemption of the share or the reduction of its paid-up capital

(i)  after 16 November 1978 under the terms or conditions of a share issued before 17 November 1978 and not listed on 16 November 1978 on a Canadian stock exchange that was prescribed on that date, of a share issued pursuant to an agreement referred to in paragraph a of section 21.6, of any agreement between the issuer and the owner of such a share, or any agreement relating to such a share made after 23 October 1979;

(ii)  after 12 November 1981 in the case of a share issued between 16 November 1978 and 13 November 1981, except a share described in section 21.6.1 or a share listed on 13 November 1981 on a Canadian stock exchange that was prescribed on that date, or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement referred to in section 21.5.3;

 (c) where a specified financial institution or a partnership or trust of which a specified financial institution or a person related thereto is a member or a beneficiary acquires,

(i)  between 23 October 1979 and 13 November 1981, from a person, a share issued before 17 November 1978 or a share issued pursuant to an agreement referred to in paragraph a of section 21.6;

(ii)  after 12 November 1981, from a person or a partnership, a share issued before 13 November 1981 or a share pursuant to an agreement referred to in section 21.5.3.

1984, c. 15, s. 10; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 2001, c. 7, s. 7; 2010, c. 5, s. 13.

21.9.2. The rule provided by section 21.8 does not apply, in the case provided for in paragraph b of section 21.9.1, where the owner's right could be exercised by reason of a default under the terms or conditions of the share or any agreement that related to, and was entered into at the time of, the issuance of the share.

The same applies, in the case provided for in paragraph c of the said section 21.9.1, where

 (a) the share described in subparagraph i of that paragraph c is

(i)  a share issued to a corporation that was, at the time of issue,

(1)  a corporation referred to in any of paragraphs a to e of the definition of specified financial institution in section 1, or

(2)  a corporation controlled by one or more corporations referred to in subparagraph 1,

(ii)  a share acquired from a person that was, at the time of acquisition, a corporation referred to in subparagraph 1 or 2 of subparagraph i, or

(iii)  a share acquired under an agreement in writing made before 24 October 1979; and

 (b) the share described in subparagraph ii of that paragraph c is

(i)  a share described in section 21.6.1,

(ii)  a share acquired from a person that was, at the time of acquisition, a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1,

(iii)  a share acquired in an acquisition that was not subject to an undertaking, referred to in section 740.2, given after 12 November 1981, or

(iv)  a share acquired under an agreement in writing made before 24 October 1979 or an agreement referred to in section 21.5.3.

For the purposes of subparagraph 2 of subparagraph i of subparagraph a of the second paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length.

1984, c. 15, s. 10; 1990, c. 59, s. 18; 1997, c. 3, s. 71; 1998, c. 16, s. 16; 2001, c. 53, s. 7.

21.9.3. Where a share of the capital stock of a corporation is issued or its terms or conditions are modified and it may reasonably be considered, having regard to all circumstances, including the rate of interest on any debt or the dividend provided on any term preferred share, that but for the existence of the debt or the term preferred share, the share would not have been issued or its terms or conditions modified, and one of the main purposes for its issue or for the modification of its terms or conditions was to avoid a limitation provided by section 740.1 or 845 in respect of a deduction, the share is deemed, from 1 January 1983, to be a term preferred share of the corporation.

1984, c. 15, s. 10; 1986, c. 19, s. 5; 1997, c. 3, s. 71.

21.9.4. Where the terms or conditions of a share of the capital stock of a corporation are modified or established after 28 June 1982 and as a consequence thereof the corporation, any person related thereto or any partnership or trust of which the corporation or a person related thereto is a member or a beneficiary, may reasonably be expected to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, the share is deemed as from the date of the modification or establishment to be a share described in paragraph c of section 21.5.

1984, c. 15, s. 10; 1997, c. 3, s. 71.

21.9.4.1. Where it may reasonably be considered that the dividends that may be declared or paid at any time on a share, other than a prescribed share or a share described in section 21.6.1 during the applicable time period referred to in that section, of the capital stock of a corporation issued after 15 December 1987 or acquired after 15 June 1988 are derived primarily from dividends received on term preferred shares of the capital stock of another corporation, and that the share was issued or acquired as part of a transaction or event or series of transactions or events one of the main purposes of which was to avoid or limit the application of section 740.1 or 845, the share is deemed, at that time, to be a term preferred share acquired in the ordinary course of business.

1990, c. 59, s. 19; 1997, c. 3, s. 71.

21.9.5. (Repealed).

1984, c. 15, s. 10; 1990, c. 59, s. 20.

21.10. Where a specified financial institution resident in Canada receives, in a taxation year, from a corporation not resident in Canada an amount as a dividend on a term preferred share, the amount is deemed, for the purposes of paragraphs c and l of section 87 and sections 746 to 749 and 772.2 to 772.13, to be received in the year as interest and not as a dividend on a share of the capital stock of a corporation.

1980, c. 13, s. 3; 1982, c. 5, s. 11; 1990, c. 59, s. 21; 1993, c. 16, s. 365; 1994, c. 22, s. 649; 1995, c. 63, s. 15; 1997, c. 3, s. 71.

21.10.1. The rule provided in section 21.10 also applies where a particular corporation receives, in a taxation year, from a corporation not resident in Canada a dividend on a share, other than a term preferred share, that is a grandfathered share or was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and was not deemed by section 740.3.1 to have been issued after that time, if the dividend is a dividend in respect of which no deduction could have been made under section 738, 740 or 845 by reason of sections 740.2 to 740.3.1 as they read on 17 June 1987, if the corporation that paid the dividend had been a taxable Canadian corporation.

1982, c. 5, s. 11; 1990, c. 59, s. 21; 1993, c. 16, s. 365; 1994, c. 22, s. 56; 1994, c. 22, s. 649; 1997, c. 3, s. 71.

21.10.2. Section 21.10 is not applicable to a dividend described therein if the share on which the dividend is paid was not acquired in the ordinary course of the business carried on by the specified financial institution.

1982, c. 5, s. 11.

21.11. Notwithstanding section 119, where an amount is paid or payable after 1978 as interest or as an amount in lieu of interest in respect of a dividend that became payable or in arrears after 16 November 1978 and the dividend is in respect of a share that is not a term preferred share by reason of having been issued before 17 November 1978 or pursuant to an agreement in writing referred to in paragraph a of section 21.6, the amount is, for the purposes of section 740.1 and the second paragraph of section 845, deemed to be a dividend received on a term preferred share.

1980, c. 13, s. 3.

CHAPTER VI.1 
SHORT-TERM PREFERRED SHARES
1984, c. 15, s. 11.

21.11.1. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.2. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.3. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.4. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.5. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.6. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.7. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.8. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.9. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.10. (Repealed).

1984, c. 15, s. 11; 1990, c. 59, s. 22.

21.11.11. A short-term preferred share of a corporation at any particular time is a share, other than a grandfathered share, of the capital stock of the corporation issued after 15 December 1987 that, at that particular time, is

 (a) a share where, under the terms and conditions of the share, any agreement relating to the share or any modification of such terms, conditions or agreement, the corporation or a specified person in relation to it is or may, at any time within five years from the date of its issued, be required to acquire, cancel or redeem, in whole or in part, the share or to reduce the paid-up capital of the share, unless the requirement to acquire, cancel or redeem the share arises only in the event of the death of the shareholder or by reason only of a right to convert or exchange the share, or

 (b) a share that is convertible or exchangeable at any time within five years from the date of its issue, unless

(i)  it is convertible into or exchangeable for

(1)  another share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share;

(2)  a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share, or

(3)  both a share described in subparagraph 1 and a right or warrant described in subparagraph 2, and

(ii)  all the consideration receivable for the share on the conversion or exchange is the share described in subparagraph 1 of subparagraph i or the right or warrant described in subparagraph 2 of the said subparagraph i or both such share and such right or warrant, and, for the purposes of this subparagraph, where a taxpayer may become entitled upon the conversion or exchange of a share to receive any particular consideration, other than consideration described in any of subparagraphs 1 to 3 of subparagraph i, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

1990, c. 59, s. 23; 1997, c. 3, s. 71.

21.11.12. For the purposes of this chapter, the following rules apply:

 (a) where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a share of the capital stock of a corporation that are relevant to any matter referred to in any of paragraphs a and b of section 21.11.11 or d and f of this section are established or modified, or any agreement in respect of any such matter to which the corporation or a specified person in relation to it is a party, is entered into or changed, the share is deemed after that particular time to have been issued at that particular time;

 (b) where, at any particular time after 15 December 1987, a particular share of the capital stock of a corporation has been issued or its terms or conditions have been modified or an agreement in respect of the share is entered into or modified, the particular share is deemed after that particular time to have been issued at that particular time and to be a short-term preferred share of the corporation, if it may reasonably be considered, having regard to all the circumstances, including the rate of interest on any debt obligation or the dividend provided on any short-term preferred share, that

(i)  but for the existence at any time of such a debt obligation or such a short-term preferred share, the particular share would not have been issued or its terms or conditions modified or the agreement in respect of the share would not have been entered into or modified;

(ii)  one of the main purposes for the issue of the particular share or the modification of its terms or conditions or the entering into or modification of the agreement in respect of the share was to avoid or limit the tax payable under subsection 1 of section 191.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement);

 (c) where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a share of the capital stock of a corporation are established or modified or any agreement in respect of the share has been entered into or changed, and as a consequence thereof the corporation or a specified person in relation to it may reasonably be expected to acquire, cancel or redeem the share, in whole or in part, otherwise than by reason of the death of the shareholder or by reason only of a right to convert or exchange the share that would not cause the share to be a short-term preferred share by reason of paragraph b of section 21.11.11, or to reduce its paid-up capital, within five years from the particular time, the share is deemed to have been issued at that particular time and to be a short-term preferred share of the corporation from the particular time until the time that such reasonable expectation ceases to exist;

 (d) where a share of the capital stock of a corporation was issued after 15 December 1987 and at the time the share was issued the existence of the corporation was, or there was an arrangement under which it could be, limited to a period that was within five years from the date of its issue, the share is deemed to be a short-term preferred share of the corporation unless

(i)  the share is a grandfathered share and the arrangement is a written arrangement entered into before 16 December 1987, or

(ii)  the share is issued to an individual after 14 April 2005 under an agreement referred to in section 48, if at the time the individual last acquired a right under the agreement to acquire a share of the capital stock of the corporation, the existence of the corporation was not, and no arrangement was in effect under which it could be, limited to a period that was within five years from that time;

 (e) where a share of the capital stock of a corporation is acquired at any time after 15 December 1987 by the corporation or a specified person in relation to it and the share is at any particular time after that time acquired from the corporation or a specified person in relation to it by a person with whom the corporation or a specified person in relation to it was dealing at arm's length if this Part were read without reference to paragraph b of section 20, the share is deemed after that particular time to have been issued at that particular time;

 (f) where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, as a result of the terms or conditions of a share of the capital stock of a corporation or any agreement entered into by the corporation or a specified person in relation to it, any person, other than the corporation or an individual other than a trust, was obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking within five years after the date on which the share was issued, including any guarantee, covenant or agreement to purchase or repurchase the share, and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the shareholder or a specified person in relation to the shareholder, the share is deemed after that particular time to have been issued at the particular time and to be at and immediately after the particular time a short-term preferred share, if the undertaking is given

(i)  to ensure that any loss that the shareholder or a specified person in relation to the shareholder may sustain by reason of the ownership, holding or disposition of the share or any other property is limited in any respect, and

(ii)  as part of a transaction or event or series of transactions or events that included the issuance of the share;

 (g) for the purposes of paragraph f where the undertaking referred to therein in respect of a share is given after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the share is deemed to have been issued at that time and the undertaking is deemed to have been given as part of a series of transactions that included the issuance of the share;

 (h) a share that is, at the time a dividend is paid thereon, a share described in section 21.6.1 during the applicable time period referred to in that section or a prescribed share is, notwithstanding any other provision of this chapter, deemed not to be a short-term preferred share at that time;

 (i) the expression specified person has the meaning assigned by paragraph f of section 21.11.16.

1990, c. 59, s. 23; 1997, c. 3, s. 71; 2003, c. 2, s. 10; 2015, c. 24, s. 16.

21.11.13. For the purposes of paragraph a of section 21.11.11 and paragraph c of section 21.11.12,

 (a) an agreement in respect of a share of the capital stock of a corporation shall be read without reference to that part of the agreement under which a person agrees to acquire the share for an amount

(i)  in the case of a share, other than a share that would, but for that part of the agreement, be a taxable preferred share, the agreement in respect of which provides that the share is to be acquired within 60 days after the date on which the agreement was entered into, that does not exceed the greater of the fair market value of the share at the time the agreement was entered into, determined without reference to the agreement, and the fair market value of the share at the time of the acquisition, determined without reference to the agreement;

(ii)  in any other case, that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement, or for an amount determined by reference to the assets or earnings of the corporation where such determination may reasonably be considered to be used to determine an amount that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement;

 (b) the expression shareholder includes a shareholder of a shareholder.

1990, c. 59, s. 23; 1997, c. 3, s. 71.

CHAPTER VI.2 
TAXABLE PREFERRED SHARES
1990, c. 59, s. 23.

21.11.14. A taxable preferred share at any particular time is

 (a) a share issued after 15 December 1987 that is a short-term preferred share at that particular time, or

 (b) a share, other than a grandfathered share, of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 where, at that particular time, by reason of the terms or conditions of the share or any agreement in respect of the share or its issue to which the corporation, or a specified person in relation to it, is a party,

(i)  it may reasonably be considered, having regard to all the circumstances, that the amount of the dividends that may be declared or paid on the share, in this chapter referred to as the dividend entitlement, is, by way of a formula or otherwise, fixed, limited to a maximum, or, if with respect to the dividend that may be declared or paid on the share there is a preference over any other dividend that may be declared or paid on any other share of the capital stock of the corporation, established to be not less than a minimum, including any amount determined on a cumulative basis,

(ii)  it may reasonably be considered, having regard to all the circumstances, that the amount that the shareholder, which includes a shareholder of the shareholder for the purposes of this subparagraph, is entitled to receive in respect of the share on the dissolution, liquidation or winding-up of the corporation or on the acquisition, cancellation or redemption of the share, unless the requirement to acquire, cancel or redeem the share arises only in the event of the death of the shareholder or by reason only of a right to convert or exchange the share, or on the reduction of the paid-up capital of the share by the corporation or by a specified person in relation to it, in this chapter referred to as the liquidation entitlement, is, by way of a formula or otherwise, fixed, limited to a maximum, or established to be not less than a minimum,

(iii)  the share is convertible or exchangeable at any time, unless

(1)  it is convertible into or exchangeable for another share of the corporation or a corporation related to it that, if issued, would not be a taxable preferred share, referred to in this subparagraph and in subparagraph 2 as the particular share, for a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation or a corporation related to it that, if issued, would not be a taxable preferred share, or for both a particular share and such right or warrant, and

(2)  all the consideration receivable for the share on the conversion or exchange is the particular share or the right or warrant described in subparagraph 1 or both such share and such right or warrant, and for the purposes of this subparagraph, where a taxpayer may become entitled upon the conversion or exchange of a share to receive any particular consideration, other than consideration described in subparagraph 1, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), or

(iv)  any person, other than the corporation, was, at or immediately before that particular time, obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking, in this chapter referred to as a guarantee agreement, including any guarantee, covenant or agreement to purchase or repurchase the share, and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the shareholder or any specified person in relation to the shareholder, given

(1)  as part of a transaction or event or series of transactions or events that included the issuance of the share, and

(2)  to ensure that any loss that the shareholder or a specified person in relation to the shareholder may sustain by reason of the ownership, holding or disposition of the share or any other property is limited, or allow the shareholder or a specified person in relation to the shareholder to derive earnings by reason of the ownership, holding or disposition of the share or any other property.

For the purposes of subparagraph b of the first paragraph, where the guarantee agreement in respect of a share of the capital stock of a corporation is given after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, otherwise than pursuant to a written arrangement entered into before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, the share is deemed to have been issued at that time and the guarantee agreement is deemed to have been given as part of a series of transactions that included the issuance of the share.

1990, c. 59, s. 23; 1997, c. 3, s. 71.

21.11.15. For the purposes of section 21.11.14, a taxable preferred share does not include a share that is, at the particular time prescribed in that section, a share described in section 21.6.1 during the applicable time period referred to in that section or a prescribed share.

1990, c. 59, s. 23.

21.11.16. For the purposes of this chapter,

 (a) the dividend entitlement of a share of the capital stock of a corporation is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where all dividends on the share are determined solely by reference to the dividend entitlement of another share of the capital stock of the corporation or of a corporation that controls the corporation that would not be a taxable preferred share if this chapter were read without reference to paragraph d, and if the other share were issued after 18 June 1987 and were not a grandfathered share, a prescribed share or a share described in section 21.6.1;

 (b) the liquidation entitlement of a share of the capital stock of a corporation is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where all the liquidation entitlement is determinable solely by reference to the liquidation entitlement of another share of the capital stock of the corporation or of a corporation that controls the corporation that would not be a taxable preferred share if this section were read without reference to paragraph d, and if the other share were issued after 18 June 1987 and were not a grandfathered share, a prescribed share or a share described in section 21.6.1;

 (c) where at any particular time after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, otherwise than pursuant to a written arrangement entered into before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, the terms or conditions of a share of the capital stock of a corporation that are relevant to any matter referred to in any of subparagraphs i to iv of subparagraph b of the first paragraph of section 21.11.14 or the second paragraph of that section are established or modified, or any agreement in respect of any such matter to which the corporation or a specified person in relation to it is a party, is entered into or changed, the share is, for the purposes of determining whether it is a taxable preferred share after the particular time, deemed to have been issued at that particular time, unless the share is a share described in paragraph b of section 21.11.20 and the particular time is before 16 December 1987 and before the time at which the share is first issued;

 (d) an agreement in respect of a share of the capital stock of a corporation shall be read without reference to that part of the agreement under which a person agrees to acquire the share for an amount

(i)  in the case of a share the agreement in respect of which provides that the share is to be acquired within 60 days after the date on which the agreement was entered into, that does not exceed the greater of the fair market value of the share at the time the agreement was entered into, determined without reference to the agreement, and the fair market value of the share at the time of the acquisition, determined without reference to the agreement;

(ii)  in any other case, that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement, or for an amount determined by reference to the assets or earnings of the corporation where such determination may reasonably be considered to be used to determine an amount that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement;

 (e) where it may reasonably be considered that the dividends that may be declared or paid to a shareholder at any time on a share, other than a prescribed share or a share described in section 21.6.1 during the applicable time period referred to in that section, of the capital stock of a corporation issued after 15 December 1987 or acquired after 15 June 1988 are derived primarily from dividends received on taxable preferred shares of the capital stock of another corporation, and that the share was issued or acquired as part of a transaction or event or series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), the share is deemed, at that time, to be a taxable preferred share;

 (f) a specified person in relation to any particular person is a person with whom the particular person does not deal at arm's length or any partnership or trust of which the particular person or the person is a member or beneficiary.

1990, c. 59, s. 23; 1997, c. 3, s. 71.

CHAPTER VI.3 
Repealed, 1993, c. 16, s. 14.
1990, c. 59, s. 23; 1993, c. 16, s. 14.

21.11.17. (Repealed).

1990, c. 59, s. 23; 1993, c. 16, s. 14.

21.11.18. (Repealed).

1990, c. 59, s. 23; 1993, c. 16, s. 14.

21.11.19. (Repealed).

1990, c. 59, s. 23; 1993, c. 16, s. 14.

CHAPTER VI.4 
GRANDFATHERED SHARES
1990, c. 59, s. 23.

21.11.20. A grandfathered share is

 (a) a share of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 pursuant to an agreement in writing entered into before that time,

 (b) a share of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 with a public body in accordance with the securities legislation of the jurisdiction in which the shares are distributed,

 (c) a share of the capital stock of a corporation the right of exchange and all or substantially all the terms and conditions of which were established in writing before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and that is issued after that time in exchange for

(i)  a share of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 or is a grandfathered share, or

(ii)  a debt obligation of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, or issued after that time pursuant to an agreement in writing entered into before that time, or after that time and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before that time with a public authority pursuant to and in accordance with the securities legislation of the jurisdiction in which the debt obligation is distributed, or

 (d) a share of a class of the capital stock of a Canadian corporation listed on a designated stock exchange that was issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 upon the exercise of a right listed on a designated stock exchange that was issued before that time, that was issued after that time pursuant to an agreement in writing entered into before that time or that was issued after that time and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before that time with a public authority pursuant to and in accordance with the securities legislation of the jurisdiction in which the rights were distributed, where all or substantially all the terms and conditions of the right and the share were established in writing before that time.

1990, c. 59, s. 23; 1993, c. 16, s. 15; 1997, c. 3, s. 71; 1997, c. 14, s. 13l; 2001, c. 7, s. 169; 2001, c. 53, s. 8; 2003, c. 2, s. 11; 2010, c. 5, s. 14.

21.11.21. For the purposes of section 21.11.20, a share that is deemed under Chapter VI, VI.1 or VI.2 or section 740.3.1 to have been issued at any time is, for the purposes of that chapter or section, deemed not to be a grandfathered share after that time.

1990, c. 59, s. 23.

CHAPTER VII 
INCOME BONDS
1980, c. 13, s. 3.

21.12. In this Part, income bond or income debenture of a particular corporation means a bond or debenture in respect of which interest or dividends are payable only to the extent that the particular corporation has made a profit before taking into account the payment of the interest or dividend, and which is a bond or debenture

 (a) that was issued before 17 November 1978;

 (b) that was issued after 16 November 1978 and before 1980 pursuant to an agreement in writing to do so made before 17 November 1978; or

 (c) issued, for a term that in no circumstances may exceed five years, by a corporation that is resident in Canada, the proceeds from the issue of which, in the case of a bond or debenture issued after 12 November 1981, may reasonably be regarded as having been used by the particular corporation or a corporation with which it was not dealing at arm's length in the financing of its business carried on in Canada immediately before it was issued and that was issued

(i)  as part of a proposal to, or an arrangement with, the creditors of the particular corporation that had been approved by a competent court under the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3),

(ii)  at a time when all or substantially all of the assets of the particular corporation were under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or

(iii)  wholly or in substantial part, directly or indirectly, in exchange or substitution for a debt obligation, or a part thereof, of the particular corporation or another corporation resident in Canada with which it does not deal at arm's length held by a person with whom the particular corporation or the other corporation was dealing at arm's length at a time when, by reason of financial difficulty, the particular corporation or the other corporation was in default or could reasonably be expected to default on that debt.

1980, c. 13, s. 3; 1982, c. 5, s. 12; 1984, c. 15, s. 12; 1990, c. 59, s. 24; 1995, c. 49, s. 15; 1997, c. 3, s. 71; 2003, c. 2, s. 12; 2005, c. 23, s. 33.

21.13. For the purposes of this chapter, where the terms or conditions of an agreement in writing referred to in paragraph b of section 21.12 were amended after 16 November 1978, the agreement is deemed to have been made after that date.

1980, c. 13, s. 3.

21.14. Where, at a particular time after 16 November 1978, the maturity date of a bond or debenture was extended or the terms or conditions relating to the repayment of the principal amount thereof were changed, the bond or debenture is, for the purposes of determining at any time after the particular time whether it is an income bond or income debenture, as the case may be, deemed to have been issued at the particular time otherwise than pursuant to an agreement in writing referred to in paragraph b of section 21.12.

1980, c. 13, s. 3; 1982, c. 5, s. 13.

21.15. The rule provided in section 21.14 applies also where

 (a) the terms or conditions of a bond or debenture issued pursuant to an agreement in writing referred to in paragraph b of section 21.12 or those of any agreement relating to such a bond or debenture have been changed at a particular time;

 (b) under the terms or conditions of a bond or debenture acquired in the ordinary course of the business carried on by a specified financial institution or a partnership or trust, other than a testamentary trust, or under the terms or conditions of any agreement relating to any such bond or debenture, other than an agreement made before 24 October 1979 to which the issuer or any person related thereto was not a party, the owner thereof could at a particular time after 16 November 1978 require, either alone or together with one or more taxpayers, the repayment, acquisition, cancellation or conversion of the bond or debenture otherwise than by reason of a failure or default under the terms or conditions of the bond or debenture or of any agreement that related to, and was entered into at the time of, the issuance of the bond or debenture;

 (c) at a particular time a specified financial institution, or a partnership or trust of which a specified financial institution or a person related to such an institution is a member or beneficiary, acquires a bond or debenture that

(i)  was issued before 17 November 1978 or under an agreement in writing referred to in paragraph b of section 21.12,

(ii)  was issued to a person other than a corporation that was, at the time of issue,

(1)  a corporation referred to in any of paragraphs a to e of the definition of specified financial institution in section 1, or

(2)  a corporation controlled by one or more corporations referred to in subparagraph 1,

(iii)  was acquired from a person that was, at the particular time and at the time the person last acquired the bond or debenture, a person other than a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1, and

(iv)  was acquired otherwise than under an agreement in writing made before 24 October 1979; or

 (d) at a particular time after 12 November 1981, a specified financial institution, or a partnership or trust of which a specified financial institution or a person related to such an institution is a member or beneficiary, acquires a bond or debenture that

(i)  was not a bond or debenture referred to in subparagraph c,

(ii)  was acquired from a person that was, at the particular time, a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1, and

(iii)  was acquired subject to an undertaking given after 12 November 1981 that would be an undertaking referred to in section 740.2 if that section applied to an income bond or income debenture.

For the purposes of subparagraph 2 of subparagraph ii of subparagraph c of the first paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length.

1980, c. 13, s. 3; 1982, c. 5, s. 14; 1984, c. 15, s. 13; 1990, c. 59, s. 25; 1997, c. 3, s. 71; 2001, c. 53, s. 9.

21.16. Notwithstanding section 119, where an amount is paid or payable after 31 December 1978 as interest or as an amount in lieu of interest in respect of any interest or dividend payable after 16 November 1978 on an income bond or an income debenture issued before 17 November 1978 or pursuant to an agreement in writing referred to in paragraph b of section 21.12, the amount is, for the purposes of section 740.1 and the second paragraph of section 845, deemed to be a dividend received on a term preferred share.

1980, c. 13, s. 3; 1986, c. 19, s. 6.

CHAPTER VIII 
SPECIFIED SHAREHOLDERS AND CANADIAN CONTROLLED PRIVATE CORPORATIONS
1986, c. 15, s. 37; 1997, c. 3, s. 16.

21.17. A specified shareholder of a corporation in a taxation year is a taxpayer who owns, directly or indirectly, at any time in the year, not less than 10% of the issued shares of any class of the capital stock of the corporation or of any other corporation that is related to the corporation.

1986, c. 15, s. 37; 1997, c. 3, s. 71.

21.18. The following rules apply for the purpose of determining whether or not a taxpayer is a specified shareholder of a corporation at any time:

 (a) a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person with whom the taxpayer does not deal at arm's length;

 (b) each beneficiary of a trust is deemed to own that proportion of all the shares of the capital stock of a corporation that are owned by the trust at that time that the fair market value at that time of the beneficial interest of the beneficiary in the trust is of the fair market value at that time of all beneficial interests in the trust;

 (c) each member of a partnership is deemed to own that proportion of all the shares of the capital stock of a corporation that are property of the partnership at that time that the fair market value at that time of the member's interest in the partnership is of the fair market value at that time of the interests of all members in the partnership;

 (d) an individual who performs services on behalf of a corporation that would be carrying on a personal services business if the individual or any person related to the individual were at that time a specified shareholder of the corporation is deemed to be a specified shareholder of the corporation at that time if the individual, or any person or partnership with whom the individual does not deal at arm's length, is, or by virtue of any arrangement, may become, entitled, directly or indirectly, to not less than 10% of the assets or the shares of any class of the capital stock of the corporation or any corporation related thereto; and

 (e) notwithstanding paragraph b, where a beneficiary's share of the income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, a power to appoint, the beneficiary is deemed to own each share of the capital stock of a corporation owned at that time by the trust.

1986, c. 15, s. 37; 1994, c. 22, s. 57; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 17; 2005, c. 1, s. 25.

21.19. Canadian-controlled private corporation means a private corporation that is a Canadian corporation other than a corporation

 (a) controlled, directly or indirectly in any manner whatever, by one or more persons not resident in Canada, by one or more public corporations, other than a prescribed corporation, by one or more corporations described in subparagraph c, or by any combination thereof;

 (b) that would, if each share of the capital stock of a corporation that is owned by a person not resident in Canada, by a public corporation, other than a prescribed corporation, or by a corporation described in subparagraph c were owned by a particular person, be controlled by the particular person;

 (c) a class of the shares of the capital stock of which is listed on a designated stock exchange; or

 (d) that, for the purposes of section 6.1.1 and of subsection 1 of section 771 in respect of a particular taxation year, made a valid election under subsection 11 of section 89 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) to not be considered, for certain purposes, to be a Canadian-controlled private corporation at any time in or after a taxation year that is the particular taxation year or a preceding taxation year, and that did not revoke the election in accordance with subsection 12 of section 89 of that Act as of the end of a taxation year preceding the particular taxation year.

Chapter V.2 applies in relation to an election made under subsection 11 of section 89 of the Income Tax Act and, if applicable, in relation to the revocation of that election made under subsection 12 of section 89 of that Act.

1986, c. 15, s. 37; 1990, c. 59, s. 26; 1997, c. 3, s. 17; 2001, c. 7, s. 8; 2003, c. 2, s. 13; 2009, c. 5, s. 33; 2010, c. 5, s. 15.

CHAPTER IX 
ASSOCIATED CORPORATIONS
1989, c. 5, s. 28; 1997, c. 3, s. 71.

21.20. For the purposes of this Part, one corporation is associated with another in a taxation year if at any time in the year,

 (a) one of the corporations controlled, directly or indirectly in any manner whatever, the other;

 (b) both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons;

 (c) each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof;

 (d) one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof; or

 (e) each of the corporations was controlled, directly or indirectly in any manner whatever, by a related group and each of the members of one of the related groups was related to all of the members of the other related group, and one person who was a member of both related groups owned alone, or several persons who were members of both related groups owned together, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof.

1989, c. 5, s. 28; 1990, c. 59, s. 27; 1997, c. 3, s. 71.

21.20.1. For the purposes of section 21.20, the expression specified class means a class of shares of the capital stock of a corporation where, under the terms or conditions of the shares or any agreement in respect thereof,

 (a) the shares are not convertible or exchangeable;

 (b) the shares are non-voting;

 (c) the amount of each dividend payable on the shares is a fixed amount or is determined by reference to a fixed percentage of the fair market value of the consideration for which the shares were issued;

 (d) the annual rate of the dividend on the shares, expressed as a percentage of the fair market value of the consideration for which the shares were issued, cannot in any event exceed the prescribed rate of interest at the time the shares were issued; and

 (e) the amount that any holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm's length cannot exceed the aggregate of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends thereon.

1990, c. 59, s. 28; 1997, c. 3, s. 71.

21.20.2. For the purposes of sections 21.20 to 21.24,

 (a) a group of persons in respect of a corporation means any two or more persons each of whom owns shares of the capital stock of the corporation;

 (b) for greater certainty,

(i)  a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation is deemed to be controlled by that group of persons, and

(ii)  a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons;

 (c) a corporation is deemed to be controlled by another corporation, a person or a group of persons at any time where the other corporation, the person or the group of persons, as the case may be, owns at that time

(i)  shares of the capital stock of the corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation, or

(ii)  common shares of the capital stock of the corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding common shares of the capital stock of the corporation;

 (d) shares of the capital stock of a corporation that are owned or deemed under this section to be owned at any time by another corporation are deemed to be owned at that time by each shareholder of that other corporation in a proportion equal to the proportion of all such shares that

(i)  the fair market value of the shares of the capital stock of the other corporation owned at that time by the shareholder is of

(ii)  the fair market value of all the issued and outstanding shares of the capital stock of the other corporation at that time;

 (e) shares of the capital stock of a corporation that are owned or deemed under this section to be owned at any time by a partnership are deemed to be owned at that time by each member of the partnership in a proportion equal to the agreed proportion in respect of the member for the partnership's fiscal period that includes that time;

 (f) where shares of the capital stock of a corporation are owned or deemed under this section to be owned at any time by a trust,

(i)  in the case of a testamentary trust under which one or more beneficiaries are entitled to receive all of the income of the trust arising before the date of death of one or the last surviving of such beneficiaries, in this paragraph referred to as the “distribution date”, and under which no other person can, before the distribution date, receive or otherwise obtain the enjoyment of any of the income or capital of the trust,

(1)  where any such beneficiary's share of the income or capital of the trust depends upon the exercise by any person of, or the failure by any person to exercise, a power to appoint, such shares are deemed to be owned at any time before the distribution date by the beneficiary, and

(2)  where subparagraph 1 does not apply, such shares are deemed to be owned at any time before the distribution date by any such beneficiary in a proportion that is equal to the proportion of all such shares that the fair market value of the beneficial interest in the trust of the beneficiary is of the fair market value of the beneficial interests in the trust of all such beneficiaries,

(ii)  where any such beneficiary's share of the accumulating income or capital of the trust depends upon the exercise by any person of, or the failure by any person to exercise, a power to appoint, such shares are deemed to be owned at that time by the beneficiary, except where subparagraph i applies and that time is before the distribution date,

(iii)  in any case where subparagraph ii does not apply, a beneficiary is deemed at that time to own the proportion of such shares that the fair market value of the beneficial interest in the trust of the beneficiary is of the fair market value of all beneficial interests in the trust, except where subparagraph i applies and that time is before the distribution date, and

(iv)  in the case of a trust referred to in section 467, the person referred to therein from whom property of the trust or property for which it was substituted was directly or indirectly received is deemed to own such shares at that time; and

 (g) in determining the fair market value of a share of the capital stock of a corporation, all issued and outstanding shares of the capital stock of the corporation are deemed to be non-voting.

1990, c. 59, s. 28; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 2005, c. 1, s. 26; 2009, c. 15, s. 31.

21.20.3. Shares of the capital stock of a corporation that are owned at any time by a child who is under 18 years of age are deemed, for the purposes of determining whether the corporation is associated at that time with any other corporation that is controlled, directly or indirectly in any manner whatever, by the father or the mother of the child or by a group of persons of which the father or mother is a member, to be owned at that time by the father or the mother, as the case may be, unless, having regard to all the circumstances, it may reasonably be considered that the child manages the business and affairs of the corporation and does so without a significant degree of influence by the father or mother.

1990, c. 59, s. 28; 1993, c. 16, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 18.

21.20.4. For the purpose of determining if a corporation is associated with any other corporation with which it is not otherwise associated, where a person or any partnership in which the person has an interest has a right at any time under a contract or otherwise, either immediately or in the future and either absolutely or contingently,

 (a) to, or to acquire, shares of the capital stock of a corporation, or to control the voting rights of such shares, the person or partnership is, except where the right cannot be exercised at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to own the shares at that time and the shares are deemed to be issued and outstanding at that time; or

 (b) to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of a corporation, the person or partnership is, except where the right cannot be exercised at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed at that time to have had the same position in relation to control of the corporation and ownership of shares of the capital stock of the corporation as if the shares were redeemed, acquired or cancelled by the corporation.

1990, c. 59, s. 28; 1993, c. 16, s. 16; 1997, c. 3, s. 71.

21.20.5. For the purposes of sections 21.20 to 21.24, a person who owns shares in two or more corporations is deemed, as shareholder of one of the corporations, to be related to himself, herself or itself as shareholder of each of the other corporations.

1990, c. 59, s. 28; 1997, c. 3, s. 71; 1998, c. 16, s. 19.

21.20.6. For the purposes of section 21.20.2 and notwithstanding section 21.20.4,

 (a) any share that is described in section 21.6.1 during one of the periods referred to therein or that is a share of a specified class within the meaning of section 21.20.1 is deemed not to be issued and outstanding and not to be owned by any shareholder;

 (b) an amount equal to the greater of the paid-up capital of the share referred to in paragraph a and the amount that any holder of the share is entitled to receive on the redemption, cancellation or acquisition of the share by the corporation is deemed to be a liability of the corporation.

1990, c. 59, s. 28; 1997, c. 3, s. 71.

21.20.7. For the purpose of determining if two corporations are associated with each other at any time by reason of both of the corporations being controlled at that time, directly or indirectly, by the same group of persons that includes one or more specified entities, neither the shares of the capital stock of those corporations owned by any specified entity that is a member of the group of persons, nor any right referred to in section 21.20.4 held by any specified entity that is a member of the group of persons, shall be taken into account at that time.

However, where a specified entity is a member at a particular time of a group of persons that controls several corporations, and, at that time, the specified entity acts in concert with one or more members of the group of persons to control those corporations, the specified entity is deemed, for the purposes of the first paragraph in respect of those corporations, not to be a specified entity at that time.

2002, c. 40, s. 18.

21.20.8. For the purpose of determining if a corporation is associated with a specified entity at any time, otherwise than by virtue of section 21.25, neither the fair market value of the shares of the capital stock of the corporation owned by the specified entity, nor any right referred to in section 21.20.4 held by the specified entity, shall be taken into account at that time.

2002, c. 40, s. 18.

21.20.9. In sections 21.20.7 and 21.20.8, “specified entity” means any of the following entities:

 (a) the Business Development Bank of Canada;

 (b) the Caisse de dépôt et placement du Québec;

 (c) Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l'emploi;

 (d) the Fonds de solidarité des travailleurs du Québec (F.T.Q.);

 (e) Hydro-Québec CapiTech inc.;

 (f) Investissement Québec;

 (g) (paragraph repealed);

 (h) the Société Innovatech du Grand Montréal;

 (i) the Société Innovatech du sud du Québec;

 (j) the Société Innovatech Québec et Chaudière-Appalaches;

 (k) the Société Innovatech Régions ressources;

 (k.1) the entity governed by the Act constituting Capital régional et coopératif Desjardins (chapter C-6.1);

 (l) a Québec university; or

 (m) a corporation all the issued capital stock of which, except directors' qualifying shares, belongs to one or more entities described in any of subparagraphs a to l or in this subparagraph.

2002, c. 40, s. 18; 2005, c. 23, s. 34; 2010, c. 37, s. 106; 2015, c. 21, s. 98; 2015, c. 36, s. 8.

21.20.10. For the purposes of Divisions II.6.0.1.7 and II.6.6.1 to II.6.6.7 of Chapter III.1 of Title III of Book IX and notwithstanding section 21.20.4, for the purpose of determining whether a corporation is associated at any time with a public corporation, otherwise than as a consequence of the application of section 21.25, a right referred to in section 21.20.4 that is held by the public corporation shall not be taken into account.

2003, c. 9, s. 14.

21.20.11. For the purposes of section 965.66 and despite section 21.20.4, to determine whether a corporation (in this section referred to as the “issuing corporation”) is associated at any time with a particular corporation, otherwise than as a consequence of the application of section 21.25, a right referred to in section 21.20.4 that is held by the particular corporation is not to be taken into account, if

 (a) the Minister is of the opinion that the issuing corporation is associated with the particular corporation only because of the application of section 21.20.4; and

 (b) the contract granting the particular corporation a right referred to in section 21.20.4 stipulates that the right will cease to exist by reason of a public share issue, within the meaning assigned by section 965.55, made by the issuing corporation.

2009, c. 5, s. 34.

21.21. Two corporations that are associated, or deemed by this section to be associated, with the same corporation at any time and that, but for this section, would not be associated with each other at that time, are deemed, for the purposes of this Part, to be associated with each other at that time.

1989, c. 5, s. 28; 1990, c. 59, s. 29; 1992, c. 1, s. 7; 1997, c. 3, s. 17; 1997, c. 14, s. 14; 2000, c. 39, s. 3.

21.21.1. For the purposes of this Part, where it may reasonably be considered that one of the main reasons for the separate existence of two or more corporations in a taxation year is to reduce the amount of tax that would otherwise be payable under this Part, those corporations are deemed to be associated with each other in the year.

1990, c. 59, s. 30; 1997, c. 3, s. 71.

21.22. Where one corporation would, but for this section, be associated with another corporation in a taxation year by reason of both of the corporations being controlled by the same trustee, liquidator of a succession or executor and it is established to the satisfaction of the Minister that the trustee, liquidator or executor did not acquire control of the corporations as a result of one or more trusts created or successions opened by the same individual or two or more individuals not dealing with each other at arm’s length, and that the trust or succession under which the trustee, liquidator or executor acquired control of each of the corporations arose only upon the death of the individual who created the trust or whose succession was opened, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year.

1989, c. 5, s. 28; 1994, c. 22, s. 58; 1997, c. 3, s. 71; 2005, c. 1, s. 27.

21.23. Where one corporation would, but for this section, be associated with another corporation in a taxation year, by reason only that the other corporation is a trustee under a trust pursuant to which the corporation is controlled, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year unless, at any time in the year, a settlor of the trust controlled or is a member of a related group that controlled the other corporation that is the trustee under the trust.

1989, c. 5, s. 28; 1997, c. 3, s. 71.

21.24. Where a particular corporation would, but for this section, be associated with another corporation in a taxation year by reason of being controlled, directly or indirectly in any manner whatever, by the other corporation or by reason of both of the corporations being controlled, directly or indirectly in any manner whatever, by the same person at a particular time in the year and it is established to the satisfaction of the Minister that the conditions set out in the second paragraph are fulfilled, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year.

The conditions referred to in the first paragraph are as follows:

 (a) there was in effect at the particular time an enforceable agreement or arrangement under which, upon the happening of an event or the satisfaction of a condition that it is reasonable to expect will happen or be satisfied, the particular corporation will cease to be controlled, directly or indirectly in any manner whatever, by the other corporation or the person so controlling the particular corporation and will be or become controlled, directly or indirectly in any manner whatever, by a person or group of persons with whom or with each of the members of which, as the case may be, the other corporation or the person so controlling the particular corporation was at the particular time dealing at arm's length;

 (b) the purpose for which the particular corporation was at the particular time so controlled was the safeguarding of rights or interests of the other corporation or the person so controlling the particular corporation in respect of any indebtedness owing to the other corporation or the person so controlling the particular corporation the whole or any part of the principal amount of which was outstanding at the particular time, or in respect of any shares of the capital stock of the particular corporation that were owned by the other corporation or the person so controlling the particular corporation at the particular time and that were, under the enforceable agreement or arrangement referred to in subparagraph a, to be redeemed by the particular corporation or purchased by the person or group of persons referred to in subparagraph a who are to acquire control of the particular corporation.

1989, c. 5, s. 28; 1990, c. 59, s. 31; 1997, c. 3, s. 71.

21.25. For the purposes of this Part, where the expression controlled, directly or indirectly in any manner whatever, is used, a corporation is deemed to be so controlled by another corporation, a person or a group of persons at any time where, at that time, the other corporation, the person or the group of persons has any direct or indirect influence that, if exercised, would result in control in fact of the corporation.

Notwithstanding the foregoing, where the corporation and the other corporation, the person or the group of persons are dealing with each other at arm's length and the influence referred to in the first paragraph is derived from a franchise, licence, lease, distribution, supply or management agreement or other similar agreement or arrangement, the main purpose of which is to govern the relationship between the corporation and the other corporation, the person or the group of persons regarding the manner in which the business carried on by the corporation is to be conducted, the corporation shall not be considered to be controlled, directly or indirectly in any manner whatever, by the other corporation, the person or the group of persons by reason only of such agreement or arrangement.

1990, c. 59, s. 32; 1997, c. 3, s. 71.

CHAPTER X 
AMORTIZED COST OF A LOAN OR LENDING ASSET
1990, c. 59, s. 32.

21.26. Subject to section 838, amortized cost, to a taxpayer, of a loan or lending asset at a particular time means the amount by which the aggregate of the following amounts exceeds the amount computed at that time in respect of the loan or lending asset under section 21.27:

 (a) in the case of a loan made by taxpayer, the aggregate of all amounts advanced in respect of the loan at or before the particular time;

 (b) in the case of a loan or lending asset acquired by the taxpayer, the cost to the taxpayer of the loan or lending asset;

 (c) in the case of a loan or lending asset acquired by the taxpayer, the part of the amount by which the principal amount of the loan or lending asset at the time it was so acquired exceeds the cost to the taxpayer of the loan or lending asset that was included in computing the taxpayer's income for any taxation year ending at or before the particular time;

 (c.1) the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was included in computing the taxpayer's income for a taxation year that ended at or before that time in respect of changes in the value of the loan or lending asset attributable to the fluctuation in the value of a foreign currency relative to Canadian currency;

 (d) where the taxpayer is an insurer, any amount in respect of the loan or lending asset that was deemed, by reason of paragraph a of section 830 as it read for the taxation year 1977, to be a gain for any taxation year ending at or before the particular time;

 (e) the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was included under paragraph i of section 87 in computing the taxpayer's income for any taxation year ending at or before the particular time.

1990, c. 59, s. 32; 1996, c. 39, s. 18; 1998, c. 16, s. 20.

21.27. The amount that must be deducted in computing the amortized cost, to a taxpayer, of a loan or lending asset at the particular time contemplated in section 21.26 is the aggregate of the following amounts:

 (a) in the case of a loan or lending asset acquired by the taxpayer, the part of the amount by which the cost to the taxpayer of the loan or lending asset exceeds the principal amount of the loan or lending asset at the time it was so acquired that was deducted in computing the taxpayer's income for any taxation year ending at or before the particular time;

 (a.1) the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was deducted in computing the taxpayer's income for a taxation year that ended at or before that time in respect of changes in the value of the loan or lending asset attributable to the fluctuation in the value of a foreign currency relative to Canadian currency;

 (b) all amounts that the taxpayer received at or before the particular time as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the loan or lending asset;

 (c) where the taxpayer is an insurer, any amount in respect of the loan or lending asset that was deemed, by reason of paragraph b of section 830 as it read for the taxation year 1977, to be a loss for any taxation year ending at or before the particular time;

 (d) the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was deducted under section 141 in computing the taxpayer's income for any taxation year ending at or before the particular time.

1990, c. 59, s. 32; 1996, c. 39, s. 19; 1998, c. 16, s. 21.

CHAPTER XI 
TRANSFER OR LENDING OF SECURITIES
1991, c. 25, s. 5.

21.28. In this chapter,

dealer compensation payment means an amount received by a taxpayer as compensation for an underlying payment from a registered securities dealer resident in Canada who paid the amount in the ordinary course of a business of trading in securities, or for an underlying payment in the ordinary course of such a business of the taxpayer, where the taxpayer is such a dealer resident in Canada;

qualified security means

 (a) a share of a class of the capital stock of a corporation that is listed on a stock exchange or of a class of the capital stock of a corporation that is a public corporation by reason of the designation of the class for the purposes of subparagraph i or ii of paragraph b of the definition of public corporation in subsection 1 of section 89 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement),

 (b) a bond, debenture, note or similar obligation issued by a corporation described in paragraph a or by a corporation that is controlled by such a corporation,

 (c) a bond, debenture, note or similar obligation issued or guaranteed by the government of any country, province, state, municipality or other political subdivision, or by a corporation, commission, agency or association controlled by such a government,

 (d) a warrant, right, option or similar instrument with respect to a share described in paragraph a, or

 (e) a qualified trust unit;

qualified trust unitmeans an interest, as a beneficiary under a trust, that is listed on a stock exchange;

securities lending arrangement means an arrangement, other than an arrangement one of the main purposes of which may reasonably be considered to be to avoid or defer the inclusion in income of any profit or gain with respect to a qualified security, under which

 (a) a person (in this chapter referred to as the “lender”) transfers or lends at any particular time a qualified security to another person (in this chapter referred to as the “borrower”),

 (b) it may reasonably be expected, at the particular time, that the borrower will, at a later time, transfer or return to the lender a security, in this chapter referred to as an identical security, that is identical to the security transferred or lent by the lender to the borrower at the particular time,

 (c) the borrower is obligated to pay to the lender, as compensation for each particular amount paid on the security that would have been received by the borrower if the borrower had held the security throughout the period beginning after the particular time and ending at the time an identical security is transferred or returned to the lender, an amount equal to the particular amount,

 (d) the lender's opportunity for gain or profit or risk of loss with respect to the security is not changed in any material respect, and

 (e) if the lender and the borrower do not deal with each other at arm's length, it is intended that neither the arrangement nor any series of securities lending arrangements, loans or other transactions of which the arrangement is a part be in effect for more than 270 days;

securities lending arrangement compensation payment or “SLA compensation payment” means an amount paid pursuant to a securities lending arrangement as compensation for an underlying payment;

security distribution means

 (a) an underlying payment; or

 (b) an SLA compensation payment, or a dealer compensation payment, that is deemed under section 21.32 to be an amount received as an amount described in any of subparagraphs a to c of the first paragraph of that section;

underlying payment means an amount paid on a qualified security by the issuer of the security.

1991, c. 25, s. 5; 1993, c. 16, s. 17; 1995, c. 49, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 22; 2001, c. 7, s. 169; 2010, c. 5, s. 16; 2015, c. 24, s. 17.

21.29. For the purposes of this Part, subject to sections 21.30 and 21.31, any transfer or loan by a lender of a security under a securities lending arrangement is deemed not to be a disposition of the security and the security is deemed to continue to be property of the lender.

For the purposes of this section, a security is deemed to include an identical security that has been transferred or returned to the lender under the securities lending arrangement.

1991, c. 25, s. 5.

21.30. For the purposes of this Part, where, at any time, a lender receives property in satisfaction of or in exchange for the lender's right under a securities lending arrangement to receive the transfer or return of an identical security and the property received at that time is neither an identical property nor an amount deemed, under section 21.31, to have been received as proceeds of disposition, the following rules apply:

 (a) subject to paragraph b, the lender is deemed to have disposed, at that time, of the security initially transferred or lent for proceeds of disposition equal to the fair market value of the property received as consideration for the disposition of the right, other than any portion of the proceeds that is deemed to have been received by the lender as a taxable dividend;

 (b) Division XIII of Chapter IV of Title IV of Book III, Division VI of Chapter IV of Title IX of Book III and Chapters V and VI of Title IX of Book III, as the case may be, apply in computing the income of the lender with respect to a disposition referred to in paragraph a as if the security initially transferred or lent had continued to be property of the lender and the lender had received the property directly.

1991, c. 25, s. 5; 1998, c. 16, s. 23.

21.31. Where, at any time, it may reasonably be considered that a lender would have received proceeds of disposition for a security that was transferred or lent under a securities lending arrangement had the security not been so transferred or lent, the lender is deemed to have disposed of the security at that time for an amount equal to such proceeds.

1991, c. 25, s. 5; 2005, c. 23, s. 35.

21.32. A particular amount that is received by a taxpayer in a taxation year as an SLA compensation payment from a person described in the second paragraph or as a dealer compensation payment, is deemed, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the year as,

 (a) where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which subparagraph b applies), a taxable dividend on the share and, if the particular amount has the characteristics described in the third paragraph, an eligible dividend on the share;

 (b) where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,

(i)  to the extent that section 663 applied to the underlying payment, an amount of the trust's income that was paid by the trust to the taxpayer as a beneficiary under the trust and that was designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust in accordance with this Part in respect of the recipient of the underlying payment, and

(ii)  to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or

 (c) in any other case, interest.

A person to whom the first paragraph refers is

 (a) a person resident in Canada; or

 (b) a person not resident in Canada who pays the particular amount in the course of carrying on business in Canada through an establishment.

The characteristics to which the first paragraph refers in respect of the particular amount are the following:

 (a) the amount is deemed, under the first paragraph, to be a taxable dividend; and

 (b) the amount is received by a person resident in Canada as

(i)  compensation for an eligible dividend, or

(ii)  compensation for a taxable dividend, other than an eligible dividend, paid by a corporation to a shareholder not resident in Canada in circumstances where it may reasonably be considered that the corporation would, if that shareholder had been resident in Canada, have designated the dividend as an eligible dividend under subsection 14 of section 89 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) for the purposes of that Act.

However, the first paragraph does not apply in respect of an amount received

 (a) as proceeds of disposition of a property, or

 (b) by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment or a dealer compensation payment that would be deductible in computing the person's taxable income, or not included in computing the person's income, for any taxation year.

1991, c. 25, s. 5; 1996, c. 39, s. 20; 1997, c. 3, s. 71; 2009, c. 5, s. 35; 2015, c. 24, s. 18.

21.33. A taxpayer who, in a taxation year, pays a particular amount as an SLA compensation payment or as a dealer compensation payment, may deduct, in computing income from a business or property for the year, an amount equal to

 (a) if the taxpayer is a registered securities dealer and the particular amount is deemed under section 21.32 to have been received as a taxable dividend, no more than 2/3 of the particular amount; or

 (b) if the particular amount is in respect of an amount other than an amount that is, or is deemed under section 21.32 to have been, received as a taxable dividend,

(i)  where the taxpayer disposes of the borrowed security and includes the gain or loss, if any, from the disposition in computing income from a business, the particular amount, or

(ii)  in any other case, the lesser of the particular amount and the amount, if any, in respect of the security distribution to which the SLA compensation payment or dealer compensation payment relates that is included in computing the income, and not deducted in computing the taxable income, for any taxation year of the taxpayer or of any person to whom the taxpayer is related.

1991, c. 25, s. 5; 1996, c. 39, s. 21; 2015, c. 24, s. 19.

21.33.1. Notwithstanding section 21.33, there may be deducted in computing a corporation's income from a business or property for a taxation year an amount equal to the lesser of

 (a) the aggregate of all amounts each of which is an amount that the corporation becomes obligated in the year to pay to another person under an arrangement described in paragraphs a and b of the definition of “dividend rental arrangement” in section 1 and that, if paid, would be deemed under section 21.32 to have been received by the other person as a taxable dividend; and

 (b) the amount of the dividends received by the corporation under the arrangement referred to in paragraph a that were identified in its fiscal return under this Part for the year as dividends in respect of which no amount was deductible because of section 740.4.1 in computing its taxable income.

1996, c. 39, s. 22; 1997, c. 3, s. 71; 2015, c. 24, s. 20.

21.33.2. For the purposes of this chapter,

 (a) a person includes a partnership; and

 (b) a partnership is deemed to be a registered securities dealer if each member of the partnership is a registered securities dealer.

The following rules apply to a corporation that is, in a taxation year, a member of a partnership:

 (a) for the purposes of section 21.32, the corporation is deemed to receive, in the year, the agreed proportion in its respect, for each fiscal period of the partnership that ends in the year, of each amount received by the partnership in that fiscal period, and is deemed to be the same person as the partnership in respect of the receipt of the agreed proportion of that amount; and

 (b) for the purposes of section 21.33.1, the corporation is deemed to become obligated, in the year, to pay the agreed proportion in its respect, for each fiscal period of the partnership that ends in the year, of the amount the partnership becomes, in that fiscal period, obligated to pay to another person under the arrangement referred to in paragraph a of that section.

The following rules apply to an individual who is, in a taxation year, a member of a partnership:

 (a) for the purposes of section 21.32, the individual is deemed to receive, in the year, the agreed proportion in respect of the individual, for each fiscal period of the partnership that ends in the year, of each amount received by the partnership in that fiscal period, and is deemed to be the same person as the partnership in respect of the receipt of the agreed proportion of that amount; and

 (b) for the purposes of section 497, the individual is deemed to have paid, in the year, the agreed proportion in respect of the individual, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed under section 21.32 to have been received by another person as a taxable dividend.

2015, c. 24, s. 21.

CHAPTER XII 
QUÉBEC SALES TAX AND GOODS AND SERVICES TAX
1991, c. 25, s. 5; 1992, c. 1, s. 8.

21.34. For the purposes of this Part, where a liability for the Québec sales tax or the goods and services tax is incurred in respect of a change of use at any time of a property, the liability so incurred is deemed to have been incurred immediately after that time in respect of the acquisition of the property.

1991, c. 25, s. 5; 1992, c. 1, s. 9.

21.35. For the purposes of this Part, except section 58.2 and this section, an amount claimed by a taxpayer as an input tax credit or rebate with respect to the goods and services tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

 (a) if the amount was claimed as an input tax credit in a return filed under Part IX of the Excise Tax Act (R.S.C. 1985, c. E-15) for a reporting period under that Act,

(i)  at the particular time that is the time that the goods and services tax in respect of the credit was paid or, if it is earlier, the time that it became payable if

(1)  the particular time is in the reporting period, or

(2)  the taxpayer's threshold amount, determined in accordance with subsection 1 of section 249 of the Excise Tax Act, is greater than $500,000 for the taxpayer's fiscal period, within the meaning of that Act, that includes the particular time and the taxpayer claimed the input tax credit at least 120 days before the end of the period described in paragraph a or a.0.1 of subsection 2 of section 1010, for the taxation year that includes the particular time,

(ii)  at the end of the reporting period, if

(1)  subparagraph i does not apply, and

(2)  the taxpayer's threshold amount, determined in accordance with subsection 1 of section 249 of the Excise Tax Act, is $500,000 or less for the taxpayer's fiscal period, within the meaning of that Act, that includes the particular time, and

(iii)  in any other case, on the last day of the taxpayer's first taxation year that begins after the taxation year that includes the particular time and for which the period described in paragraph a or a.0.1 of subsection 2 of section 1010 ends at least 120 days after the time that the input tax credit was claimed; or

 (b) if the amount was claimed as a rebate with respect to the goods and services tax, at the time the amount was received by, or credited to, the taxpayer.

1991, c. 25, s. 5; 2009, c. 5, s. 36.

21.35.1. For the purposes of this Part, other than section 58.3 and this section, an amount claimed by a taxpayer as an input tax refund or a rebate with respect to the Québec sales tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

 (a) where the amount is claimed as an input tax refund in a return filed under the Act respecting the Québec sales tax (chapter T-0.1) for a reporting period under that Act,

(i)  at the particular time that is the time that the Québec sales tax in respect of the refund was paid or, if it is earlier, the time that it became payable if

(1)  the particular time is in the reporting period, or

(2)  the taxpayer's threshold amount, determined in accordance with section 462 of that Act, is greater than $500,000 for the taxpayer's fiscal period, within the meaning of that Act, that includes the particular time and the taxpayer claimed the input tax refund at least 120 days before the end of the period described in paragraph a or a.0.1 of subsection 2 of section 1010, for the taxation year that includes the particular time,

(ii)  at the end of the reporting period, if

(1)  subparagraph i does not apply, and

(2)  the taxpayer's threshold amount, determined in accordance with section 462 of that Act, is $500,000 or less for the taxpayer's fiscal period, within the meaning of that Act, that includes the particular time, and

(iii)  in any other case, on the last day of the taxpayer's first taxation year that begins after the taxation year that includes the particular time and for which the period described in paragraph a or a.0.1 of subsection 2 of section 1010 ends at least 120 days after the time that the input tax refund was claimed; or

 (b) where the amount is claimed as a rebate with respect to the Québec sales tax, at the time the amount was received by, or credited to, the taxpayer.

1992, c. 1, s. 10; 1997, c. 14, s. 15; 2009, c. 5, s. 37.

21.36. If the input tax credit of a taxpayer under Part IX of the Excise Tax Act (R.S.C. 1985, c. E-15) in respect of property that is a passenger vehicle or an aircraft is determined with reference to subsection 4 of section 202 of that Act, no reference is to be made to subparagraph iii of paragraph a of section 21.35, and subparagraphs i and ii of that paragraph a, when they apply in respect of such property, are to be read as follows:

“i. at the beginning of the first taxation year or fiscal period of the taxpayer that begins after the end of the taxation year or fiscal period, as the case may be, in which the goods and services tax in respect of such property was considered, for the purpose of determining the input tax credit, to be payable, if the tax was considered, for the purpose of determining the input tax credit, to have become payable in the reporting period, or

ii. at the end of the reporting period, if no such tax was considered, for the purpose of determining the input tax credit, to have become payable in that period; or”.

1991, c. 25, s. 5; 2009, c. 5, s. 38.

21.36.1. If the input tax refund of a taxpayer under the Act respecting the Québec sales tax (chapter T-0.1) in respect of property that is a passenger vehicle or an aircraft is determined with reference to section 252 of that Act, no reference is to be made to subparagraph iii of paragraph a of section 21.35.1, and subparagraphs i and ii of that paragraph a, when they apply in respect of such property, are to be read as follows:

“i. at the beginning of the first taxation year or fiscal period of the taxpayer that begins after the end of the taxation year or fiscal period, as the case may be, in which the Québec sales tax in respect of such property was considered, for the purpose of determining the input tax refund, to be payable, if the tax was considered, for the purpose of determining the input tax refund, to have become payable in the reporting period, or

ii. at the end of the reporting period, if no such tax was considered, for the purpose of determining the input tax refund, to have become payable in that period; or”.

1992, c. 1, s. 11; 2009, c. 5, s. 38.

21.36.2. An amount in respect of an input tax credit that is deemed, under subsection 5 of section 296 of the Excise Tax Act (R.S.C. 1985, c. E-15), to have been claimed in a return or application filed under Part IX of that Act is deemed to have been so claimed for the reporting period under that Act that includes the time when an assessment referred to in that subsection is made in respect of a taxpayer.

2009, c. 5, s. 39.

21.36.3. An amount in respect of an input tax refund that is deemed, under section 30.5 of the Tax Administration Act (chapter A-6.002), to have been claimed is deemed to have been so claimed for the reporting period under the Act respecting the Québec sales tax (chapter T-0.1) that includes the day on which an assessment, indicating that the refund has been allocated under that section 30.5, is made in respect of a taxpayer.

2009, c. 5, s. 39; 2010, c. 31, s. 175.

21.37. For the purposes of this Part, where an amount is added at a particular time in determining the net tax of a taxpayer under Part IX of the Excise Tax Act (Revised Statutes of Canada, 1985, chapter E-15) in respect of an input tax credit relating to property or a service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service pursuant to a legal obligation to repay all or part of that assistance.

1991, c. 25, s. 5; 1993, c. 16, s. 18.

21.38. For the purposes of this Part, where an amount is added at a particular time in determining the net tax of a taxpayer under the Act respecting the Québec sales tax (chapter T-0.1) in respect of an input tax refund relating to property or a service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service pursuant to a legal obligation to repay all or part of that assistance.

1992, c. 1, s. 12; 1994, c. 22, s. 59; 1997, c. 14, s. 16.

CHAPTER XIII 
Repealed, 2000, c. 5, s. 20.
1996, c. 39, s. 23; 2000, c. 5, s. 20.

21.39. (Repealed).

1996, c. 39, s. 23; 1997, c. 3, s. 71; 2000, c. 5, s. 20.

CHAPTER XIV  Repealed, 2013, c. 10, s. 15.
2000, c. 5, s. 21; 2013, c. 10, s. 15.

21.40. (Repealed).

2000, c. 5, s. 21; 2009, c. 5, s. 40; 2011, c. 34, s. 15; 2013, c. 10, s. 15.

CHAPTER XV  Repealed, 2012, c. 8, s. 40.
2005, c. 23, s. 36; 2012, c. 8, s. 40.

21.41. (Repealed).

2005, c. 23, s. 36; 2012, c. 8, s. 40.

21.42. (Repealed).

2005, c. 23, s. 36; 2012, c. 8, s. 40.

CHAPTER XVI 
QUALIFYING TRUST ANNUITY
2009, c. 15, s. 32.

21.43. A qualifying trust annuity with respect to a taxpayer means

 (a) an annuity in respect of which the following conditions are met:

(i)  it is acquired after 31 December 2005,

(ii)  the annuitant is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the succession of an individual,

(iii)  it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv)  if it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;

 (b) an annuity in respect of which the following conditions are met:

(i)  it is acquired after 31 December 1988,

(ii)  the annuitant is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,

(iii)  it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv)  if it is acquired after 31 December 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; and

 (c) an annuity in respect of which the following conditions are met:

(i)  it is acquired after 31 December 2000 and before 1 January 2005 at a time at which the taxpayer was mentally or physically infirm, or in the year 2005 at a time at which the taxpayer was mentally infirm,

(ii)  the annuitant is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity, and

(iii)  it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.

For the purposes of the first paragraph, a trust is at a particular time a lifetime benefit trust with respect to a taxpayer and the succession of an individual if

 (a) immediately before the death of the individual, the taxpayer

(i)  was both a spouse of the individual and mentally infirm, or

(ii)  was both a child or grandchild of the individual and dependent on the individual for support because of mental infirmity; and

 (b) the trust is, at the particular time, a personal trust under which

(i)  no person other than the taxpayer may receive or otherwise obtain the enjoyment of, during the taxpayer's lifetime, all or part of the income or capital of the trust, and

(ii)  the trustees are empowered to pay amounts from the trust to the taxpayer, and are required—in determining whether to pay, or not to pay, an amount to the taxpayer—to consider the needs of the taxpayer, including the comfort, care and maintenance of the taxpayer.

2009, c. 15, s. 32.

BOOK II 
LIABILITY FOR TAX
1972, c. 23.

22. Every person who is an individual resident in Québec on the last day of a taxation year or a corporation having an establishment in Québec at any time in a taxation year shall pay a tax on the taxable income of the individual or the corporation, as the case may be, for that taxation year.

The tax payable under section 750 by an individual referred to in the first paragraph who carries on a business in Canada but outside Québec is equal to the proportion of the tax that would be determined under this section but for this paragraph that the individual's income earned in Québec is of the individual's income earned in Québec and elsewhere, as determined by the regulations.

1972, c. 23, s. 17; 1972, c. 26, s. 34; 1973, c. 17, s. 4; 1984, c. 15, s. 14; 1988, c. 4, s. 18; 1989, c. 5, s. 29; 1993, c. 64, s. 7; 1995, c. 63, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 24; 2001, c. 53, s. 10.

23. When an individual ceases to be resident in Canada in a taxation year, the last day of the individual's taxation year is, for the purposes of section 22, the last day on which the individual was resident in Canada.

The taxable income, for the taxation year, of an individual referred to in the first paragraph who was resident in Québec on that day is the amount by which the amount determined under the third paragraph exceeds the aggregate of

 (a) the deductions permitted by sections 727, 728.1, 729 and 733.0.0.1 and, to the extent that they relate to amounts included in computing an amount referred to in the third paragraph, the deductions permitted by sections 725, 725.1.2 and 725.2 to 725.4; and

 (b) any other deduction permitted by Book IV, to the extent that

(i)  the deduction can reasonably be considered to be attributable to the part of the year throughout which the individual was resident in Canada, or

(ii)  if all or substantially all of the individual’s income for the part of the year throughout which the individual was not resident in Canada is included in the amount referred to in the third paragraph, the deduction can reasonably be considered to be attributable to that part of the year.

The amount to which the second paragraph refers is the amount that would be the individual’s income for the year if, for the part of the year throughout which the individual was not resident in Canada, only the following elements were taken into account:

 (a) the elements described in section 1090; and

 (b) the income that would be included in computing the individual’s income earned in Canada for the year under subparagraph g of the first paragraph of section 1090 if the part of the year throughout which the individual was not resident in Canada were a whole taxation year.

1972, c. 23, s. 18; 1972, c. 26, s. 35; 1982, c. 5, s. 15; 1989, c. 5, s. 30; 1993, c. 16, s. 19; 1995, c. 49, s. 17; 1996, c. 39, s. 24; 1998, c. 16, s. 25; 2004, c. 8, s. 13.

24. The taxable income of an individual referred to in section 22 for a taxation year is the individual's income for the year plus the additions provided for in Book IV and minus the deductions permitted by that Book, except where the individual was resident in Canada for only part of that taxation year. In the latter case, the individual's taxable income shall be computed in the manner described in section 23, whether the individual is an individual who became resident in Canada in the year or an individual who ceased to be resident in Canada in the year.

1972, c. 23, s. 19; 1972, c. 26, s. 36; 1985, c. 25, s. 20; 1989, c. 5, s. 31; 1995, c. 49, s. 18; 1998, c. 16, s. 26.

25. Every individual resident in Canada but outside Québec on the last day of a taxation year shall, if the individual carried on a business in Québec at any time in the year, pay a tax on the individual's income earned in Québec for the year as determined under Part II.

The tax payable under section 750 by an individual referred to in the first paragraph is equal to the portion of the tax that the individual would pay, but for this paragraph, under that section on the individual's taxable income determined under section 24 if the individual were resident in Québec, that is the proportion, which is not to exceed 1, that that income earned in Québec is of the amount by which the aggregate of the amount that would have been the individual's income, computed without reference to section 1029.8.50, had the individual been resident in Québec on the last day of the taxation year and the amount that the individual included in computing that taxable income under section 726.35, exceeds any amount deducted by the individual under any of sections 726.20.2, 726.28, 726.33, 737.14, 737.16, 737.16.1, 737.18.10, 737.18.34, 737.21, 737.22.0.0.3, 737.22.0.0.7, 737.22.0.3, 737.22.0.4.7, 737.22.0.7, 737.25 and 737.28 in computing that taxable income.

For the purposes of this section, where an individual ceases to be resident in Canada in a taxation year, the last day of the individual's taxation year is the last day on which the individual was resident in Canada.

1972, c. 23, s. 20; 1972, c. 26, s. 37; 1973, c. 17, s. 5; 1984, c. 15, s. 15; 1987, c. 21, s. 9; 1988, c. 4, s. 19; 1989, c. 5, s. 32; 1993, c. 64, s. 8; 1995, c. 1, s. 14; 1995, c. 63, s. 17; 1997, c. 14, s. 17; 1997, c. 85, s. 34; 1998, c. 16, s. 27; 1999, c. 83, s. 27; 2000, c. 39, s. 264; 2002, c. 40, s. 19; 2003, c. 9, s. 15; 2004, c. 21, s. 42; 2006, c. 36, s. 23; 2010, c. 25, s. 8; 2013, c. 10, s. 16.

26. Every individual who was not resident in Canada at any time in a taxation year and who, in the taxation year or a previous taxation year, was employed in Québec, carried on a business in Québec or disposed of a taxable Québec property, shall pay a tax on the individual's income earned in Québec for the year as determined under Part II.

The tax payable under sections 750 and 752.12 to 752.16 by an individual referred to in the first paragraph is equal to the proportion, which cannot exceed 1, of the tax that would, but for this paragraph, be payable under those sections on the individual's taxable income earned in Canada as determined under Part II if the individual were resident in Québec, that the individual's income earned in Québec is of the individual's income earned in Canada as determined in accordance with section 1090.

1972, c. 23, s. 21; 1972, c. 26, s. 38; 1988, c. 4, s. 20; 1989, c. 5, s. 33; 1993, c. 64, s. 9; 1998, c. 16, s. 28; 2001, c. 53, s. 11.

26.1. The taxable income of a corporation referred to in section 22 for a taxation year is its income for the year plus the additions provided for in Book IV and minus the deductions permitted by the said Book.

1989, c. 77, s. 8; 1997, c. 3, s. 71.

27. Any corporation not contemplated in section 22 and not resident in Canada that disposes in a taxation year of taxable Québec property shall pay a tax at the rate established in subsection 1 of section 771 on the amounts described in subparagraphs d, e, f, h and l of the first paragraph of section 1089 that are applicable thereto and on the amount by which the aggregate of its taxable capital gains exceeds the aggregate of its allowable capital losses from the disposition of such property.

Where a corporation contemplated in section 22 has an establishment outside Québec, its tax payable is equal to the proportion of the tax established under subsection 1 of section 771 that the business it carries on in Québec is of the entire business it carries on in Canada or in Québec and elsewhere, as determined under subsection 2 of section 771.

1972, c. 23, s. 22; 1973, c. 17, s. 6; 1975, c. 22, s. 3; 1987, c. 21, s. 10; 1991, c. 8, s. 1; 1992, c. 1, s. 13; 1993, c. 16, s. 20; 1995, c. 1, s. 199; 1997, c. 3, s. 71.

BOOK III 
COMPUTATION OF INCOME
1972, c. 23.

TITLE I 
BASIC RULES
1972, c. 23.

28. A taxpayer shall, to determine the income of the taxpayer for a taxation year for the purposes of this Part,

 (a) add the aggregate of the taxpayer's income for the year, other than the taxable capital gains from dispositions of property, from each source inside and outside Canada;

 (b) add to the aggregate so determined the amount by which

(i)  the taxpayer's taxable capital gains for the year from dispositions of property other than precious property and the taxpayer's taxable net gain for the year from dispositions of precious property, exceed

(ii)  the amount by which the taxpayer's allowable capital losses for the year from dispositions of property other than precious property exceed the taxpayer's allowable business investment losses for the year; and

 (c) subtract from the total so determined

(i)  the deductions permitted by Title VI in computing the taxpayer's income for the year, except those taken into account in computing the aggregate of the income referred to in paragraph a and, if there is any remainder,

(ii)  the losses incurred in the year by the taxpayer from an office, employment, business or property and the taxpayer's allowable business investment losses for the year;

(iii)  (subparagraph replaced).

1972, c. 23, s. 23; 1979, c. 18, s. 4; 1982, c. 56, s. 10; 1987, c. 67, s. 8; 1998, c. 16, s. 29.

28.1. Where the amount determined under section 28 for a taxation year in respect of a taxpayer does not exceed zero, the taxpayer is deemed, for the purposes of this Part, to have income for the year in an amount equal to zero.

1993, c. 16, s. 21; 1993, c. 64, s. 10.

29. Where income or loss is from an office, employment, business, property or other source in Canada or in another place, or where income or loss is from an office, employment or business performed or carried on partly in Canada and partly in another place, the taxpayer shall compute separately the income or loss from each source according to the place and shall only apply to it such part of the deductions provided by this Part as may reasonably be applied to such source according to the place.

Notwithstanding the first paragraph, the deductions permitted by sections 334 to 358.0.4 shall, subject to the third paragraph, be applied to the whole income of the taxpayer.

For the purposes of Part II and sections 671, 671.1 and 772.2 to 772.13, in respect of income or loss from a source in Canada or in another place or from an office, employment or business, performed or carried on partly in Canada and partly in another place,

 (a) subject to subparagraph b, the deductions permitted in computing the income of the taxpayer under this Part, except those permitted by paragraphs c to e and j of section 336, sections 336.0.3 and 336.0.4, paragraphs b to g and i of section 339 and sections 340 and 341, shall be applied separately to the income from each of those places;

 (b) the deductions permitted by paragraphs a and b of section 657 shall not be applied to income from a source in a country other than Canada.

1972, c. 23, s. 24; 1990, c. 59, s. 33; 1994, c. 22, s. 60; 1995, c. 1, s. 15; 1995, c. 63, s. 18; 1997, c. 85, s. 35; 1998, c. 16, s. 30; 2005, c. 38, s. 51; 2011, c. 1, s. 22.

30. (Repealed).

1972, c. 23, s. 25; 1973, c. 17, s. 7; 1993, c. 16, s. 22; 1997, c. 31, s. 6.

31. For the purpose of computing a taxpayer's income for a taxation year, and unless otherwise prescribed,

 (a) any deduction allowed to the taxpayer under a provision of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in computing the taxpayer's income for a preceding taxation year in respect of which the taxpayer or, in the case of a partnership, each of the members, was not subject to tax under this Part, is deemed to have also been allowed to the taxpayer under the corresponding provision of this Part in computing the taxpayer's income for that preceding year;

 (b) where, for the purposes of Part I of the Income Tax Act, the cost, the capital cost or the cost amount of property, to the taxpayer, determined as a consequence of the application of a particular provision of that Act in respect of a transaction or event that occurred during a preceding taxation year described in paragraph a, is different from that which it would have been at that time but for that provision, the corresponding provision of this Part is deemed, for the purpose of determining the cost, the capital cost or the cost amount, as the case may be, of the property to the taxpayer for the purposes of this Part, to have applied in respect of the property at the same time and for the same amounts as for the application of the particular provision in respect of the property.

1977, c. 26, s. 2; 1997, c. 85, s. 36.

31.1. The amounts referred to in the fourth paragraph that are to be used for a taxation year subsequent to the taxation year 2007 are to be adjusted annually in such a manner that each amount used for that taxation year is equal to the total of the amount used for the preceding taxation year and the product obtained by multiplying that latter amount by the factor determined by the formula


(A/B) - 1.


In the formula in the first paragraph,

 (a) A is the overall average Québec consumer price index without alcoholic beverages and tobacco products for the 12-month period that ended on 30 September of the taxation year preceding that for which an amount is to be adjusted; and

 (b) B is the overall average Québec consumer price index without alcoholic beverages and tobacco products for the 12-month period that ended on 30 September of the taxation year immediately before the year preceding that for which the amount is to be adjusted.

If the factor determined by the formula in the first paragraph has more than four decimal places, only the first four decimal digits are retained and the fourth is increased by one unit if the fifth is greater than 4.

The amounts to which the first paragraph refers are

 (a) the amount of $300 mentioned in paragraph e.1 of section 39;

 (b) the amount of $1,120 mentioned in the first paragraph of section 39.6;

 (c) the amount of $1,000 mentioned in subparagraph b of the second paragraph of section 75.2.1; and

 (d) the amount of $1,000 mentioned in the first paragraph of section 358.0.3.

If the amount that results from the adjustment provided for in the first paragraph is not a multiple of $5, it is to be rounded to the nearest multiple of $5 or, if it is equidistant from two such multiples, to the higher of the two.

2009, c. 15, s. 33; 2012, c. 8, s. 41; 2015, c. 24, s. 22.

TITLE II 
INCOME OR LOSS FROM AN OFFICE OR EMPLOYMENT
1972, c. 23.

CHAPTER I 
BASIC RULES
1972, c. 23.

32. Subject to this Part, an individual's income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the individual in the year.

1972, c. 23, s. 26; 1998, c. 16, s. 31.

33. An individual's loss for a taxation year from an office or employment is the amount of such loss computed, with the necessary modifications, by applying the provisions of this Part respecting computation of income from that source.

1972, c. 23, s. 27; 1995, c. 63, s. 19.

34. Every amount an individual receives from another person while in the employment of the latter is presumed received as remuneration for services rendered. The same applies to every amount received in payment of an obligation arising out of an agreement between two persons immediately prior to, during or immediately after a period that one person is in the employment of the other.

1972, c. 23, s. 28.

35. The presumption provided in section 34 may be rebutted if it is established that, irrespective of when the agreement, if any, was made and the terms thereof, the payment was not made for services rendered or to be rendered, to prompt an individual to accept an office or employment or in consideration for a covenant with reference to what the employee is, or is not, to do before the employee becomes or after the employee ceases to be an employee.

1972, c. 23, s. 29; 1998, c. 16, s. 32.

35.1. If an amount, other than an amount to which section 37 applies because of section 47.11, is receivable at the end of a taxation year by an individual in respect of a covenant, agreed to by the individual more than 36 months before the end of the year, with reference to what the individual is, or is not, to do, and the amount would be included in computing the individual's income for the year under this Title if it were received by the individual in the year, the amount

 (a) is deemed to be received by the individual at the end of the year for services rendered as an employee or during the period of employment; and

 (b) is deemed not to be received at any other time.

2009, c. 5, s. 41.

CHAPTER II 
INCLUSIONS
1972, c. 23.

DIVISION I 
GENERALITIES
1972, c. 23.

36. An individual shall, in computing the income of the individual for the year from an office or employment, include all amounts the individual receives or benefits from in that year or which are allocated to the individual for that year, and that are provided for in this chapter.

Such amounts include the fees received by the individual because of, or in the course of, an office or employment, including director's fees.

1972, c. 23, s. 30; 1983, c. 43, s. 3; 1998, c. 16, s. 33.

36.1. (Repealed).

1995, c. 1, s. 16; 1995, c. 63, s. 20; 1997, c. 85, s. 37.

DIVISION II 
FRINGE BENEFITS
1972, c. 23.

37. The amounts required to be included in computing an individual's income are the value of board, lodging and other benefits of any kind whatever received or enjoyed by the individual, or by a person who does not deal at arm's length with the individual, because of, or in the course of, the individual's office or employment and the allowances received by the individual, including any amount received, without having to account for its use, for personal or living expenses or for any other purpose.

1972, c. 23, s. 31; 1992, c. 1, s. 14; 1998, c. 16, s. 34; 2015, c. 21, s. 99.

37.0.1. For the purposes of section 37, a benefit is deemed to have been enjoyed by an individual at any time an obligation issued by any debtor, including the individual, is settled or extinguished and the value of that benefit is deemed to be the forgiven amount at that time in respect of the obligation.

In the first paragraph, the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by section 485 if

 (a) the obligation were a commercial obligation, within the meaning assigned by section 485, issued by the debtor;

 (b) no amount included in computing income because of the obligation being settled or extinguished at that time were taken into account;

 (c) the definition of forgiven amount in section 485 were read without reference to paragraphs f and h; and

 (d) section 485.3 were read without reference to subparagraphs b and r of the first paragraph of that section.

1989, c. 77, s. 9; 1996, c. 39, s. 25.

37.0.1.1. For the purposes of section 37, the value of the benefit received or enjoyed by an individual for a taxation year where, because of a previous, the current or an intended office or employment of the individual, the individual is provided coverage during the year under a plan for the insurance of persons, is equal to

 (a) in the case of a plan for the insurance of persons which provides coverage through insurance with an insurer, the amount established for the year under sections 37.0.1.2 and 37.0.1.3 in respect of the individual in relation to the plan;

 (b) in the case of a plan for the insurance of persons which provides coverage otherwise than through insurance with an insurer, the amount established for the year under sections 37.0.1.4 to 37.0.1.6 in respect of the individual in relation to the plan.

For the purposes of this section and sections 37.0.1.2 to 37.0.1.6, the following rules apply:

 (a) any premium paid in respect of an individual, because of the individual's office or employment with an employer, under a plan for the insurance of persons, by a person to whom the employer is related, is deemed to be a premium paid by the employer and not by the person to whom the employer is related;

 (b) any amount paid as a dividend, return or refund of premiums, under a plan for the insurance of persons, to a person to whom the employer is related, in relation to the coverage and benefits enjoyed by the employees of the employer under the plan, is deemed to be a dividend, a return or a refund of premiums paid, to the employer and not to the person to whom the employer is related;

 (c) where, in a taxation year, an employer pays, under a plan for the insurance of persons, an additional premium in respect of the coverage or benefits under the plan enjoyed by the employees for a period prior to that year, the additional premium is deemed to be a premium paid at that time in respect of the coverage or benefits enjoyed by the employees for that year and not in respect of the coverage or benefits enjoyed by the employees for the preceding year;

 (d) tax does not include tax payable by the employer under Part IV.1 or Part VI, if any.

1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 35.

37.0.1.2. The amount contemplated in subparagraph a of the first paragraph of section 37.0.1.1 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, means an amount equal to the amount by which

 (a) the aggregate of the premium, other than the portion of the premium which can reasonably be attributed to coverage related to the cost that would be assumed by the Régie de l'assurance maladie du Québec on behalf of an insured person in respect of insured services under the Health Insurance Act (chapter A-29), paid by the employer of the individual in respect of the coverage and benefits enjoyed by the individual for any period of the year under the plan, and the tax relating to that premium, exceeds

 (b) the aggregate of

(i)  the portion of the aggregate described in subparagraph a that the individual has reimbursed to the employer during the year, and

(ii)  the amount determined for the year in respect of the individual in accordance with section 37.0.1.3 in relation to the plan.

However, where, for a particular period, included in the year, throughout which the individual is not entitled to benefit from the provisions of the Health Insurance Act, the benefits enjoyed by the individual in relation to particular coverage under the plan covers at least all the services that would be insured in the individual's respect under the said Act for the particular period if the individual were entitled to benefit from the provisions of that Act at that time, the amount referred to in subparagraph a of the first paragraph for the particular period in respect of the individual in relation to the particular coverage is deemed to be the amount that would otherwise be determined under that subparagraph for the particular period in respect of the individual in relation to the particular coverage if the exception provided for therein were disregarded, if the premium referred to therein were reduced by the amount prescribed for the particular period in respect of the individual in relation to the particular coverage and if the tax referred to therein were reduced to the portion of the tax which can reasonably be attributed to the premium so reduced.

1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 36; 1999, c. 89, s. 53.

37.0.1.3. The amount contemplated in subparagraph ii of subparagraph b of the first paragraph of section 37.0.1.2 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, is the portion, hereinafter described, of the amount called particular amount in this section, that corresponds to the amount by which the aggregate of the amount paid during the year to the employer of the individual as a dividend, return or refund of premiums under the plan and the related tax, exceeds the portion, if any, of that aggregate that can reasonably be attributed to the share of the employer's employees in the cost of the plan that was distributed to the employees in the year:

 (a) where the amount paid to the employer as a dividend, return or refund of premiums is based on the experience of all coverage and benefits provided by the plan, the proportion of the particular amount that the premium paid by the employer in respect of the coverage and benefits enjoyed by the individual for any period of the year under the plan is of the premium paid by the employer in respect of the coverage and benefits enjoyed by all the employer's employees for any period of the year under the plan;

 (b) where the amount paid to the employer as a dividend, return or refund of premiums is based on the experience of only certain coverage and benefits provided by the plan, called particular coverage and benefits in this paragraph, the proportion of the particular amount that the premium paid by the employer in respect of the particular coverage and benefits enjoyed by the individual for any period of the year under the plan is of the premium paid by the employer in respect of the particular coverage and benefits enjoyed by all the employer's employees for any period of the year under the plan.

1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 37.

37.0.1.4. The amount contemplated in subparagraph b of the first paragraph of section 37.0.1.1 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, means the amount by which the aggregate of the following amounts exceeds the total of the amounts paid by the individual in the year for any period, after 20 May 1993, of the year or of a preceding year as a contribution under the plan:

 (a) the aggregate of all amounts each of which corresponds to the amount determined, in respect of the particular coverage and benefits enjoyed by the individual in the year under the plan, by the formula


(A × B) / C;


 (b) the amount determined by the formula


(D × E) / F.


For the purposes of the formulas set forth in the first paragraph,

 (a) A is the aggregate of the benefits paid in the year for any period, after 20 May 1993, of the year or of a previous year in respect of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan, and the related tax;

 (b) B is the number of days of the year during which the individual enjoys the particular coverage and benefits under the plan;

 (c) C is the number, for each day of the year, of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan;

 (d) D is the aggregate of the expenses, except those relating to the establishment of or a modification to the plan, incurred in respect of a third person for the administration or management of the plan for any period of the year, and the related tax, if any;

 (e) E is the number of days of the year during which the individual enjoys coverage under the plan;

 (f) F is the number, for each day of the year, of all employees of the employer of the individual who enjoy coverage under the plan.

1993, c. 64, s. 11; 1995, c. 63, s. 261.

37.0.1.5. For the purposes of section 37.0.1.4,

 (a) the portion of a benefit, which can reasonably be considered to relate to the cost that would be assumed by the Régie de l'assurance maladie du Québec on behalf of an insured person in respect of insured services under the Health Insurance Act (chapter A-29), is deemed not to be a benefit contemplated in subparagraph a of the second paragraph of section 37.0.1.4;

 (b) where the risk to an employer, or to a person related to the employer, in relation to a particular plan for the insurance of persons, is reduced by the fact that the employer, or the person related to the employer, has purchased excess of loss insurance from an insurer,

(i)  a benefit paid by the insurer under the excess of loss insurance in relation to the particular plan is deemed not to be a benefit contemplated in subparagraph a of the second paragraph of section 37.0.1.4 in relation to that plan, and

(ii)  the portion of the premium paid by the employer, which can reasonably be attributed to particular coverage and benefits under the particular plan, in relation to the excess of loss insurance for any period of a year, is deemed to be a benefit contemplated for the year in subparagraph a of the second paragraph of section 37.0.1.4 in relation to such coverage and benefits under the particular plan, except if the excess of loss insurance covers all the coverage and benefits provided under the particular plan, in which case the premium is deemed to constitute expenses contemplated for the year in subparagraph d of the second paragraph of the said section 37.0.1.4 in respect of the particular plan;

 (c) where, for a particular period, included in the year, throughout which the individual is not entitled to benefit from the provisions of the Health Insurance Act, the particular benefits enjoyed by the individual in relation to particular coverage under the plan covers at least all the services that would be insured in respect of the individual under the said Act for the particular period if the individual were entitled to benefit from the provisions of that Act at that time, subparagraph a of the second paragraph of section 37.0.1.4 shall, in respect of such particular coverage and benefits, apply without reference to paragraph a and read as follows:

“(a) A is the aggregate of the amount by which the benefits paid in the year for any period, after 20 May 1993, of the year or of a previous year in respect of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan exceeds the amount prescribed in respect of the particular coverage and benefits, and the portion of the related tax which can reasonably be attributed to the excess amount;”.

1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 38; 1999, c. 89, s. 53.

37.0.1.6. For the purposes of section 37.0.1.4, where the plan for the insurance of persons provides identical coverage to the employer's employees under Québec jurisdiction and to the employer's other employees, the employer must elect, from among the following data in the employer's possession, the data which will best reflect the coverage provided under the plan to those of the employer's employees under Québec jurisdiction:

 (a) actual data relating to all the employees of the employer who enjoy coverage under the plan;

 (b) actual data relating to the employer's employees under Québec jurisdiction who enjoy coverage under the plan.

In the first paragraph, the expression employee under Québec jurisdiction of an employer means an employee of the employer who reports for work in an establishment of the employer situated in Québec, and an employee of the employer who is not required to report for work at an establishment of the employer but whose wages are paid or deemed to be paid from such an establishment situated in Québec.

1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 39.

37.0.2. An individual shall, in computing the income of the individual for the year from an office or employment, include all amounts received by the individual in the year as an allowance or reimbursement in respect of an amount that would, if the individual were entitled to no reimbursements or allowances, be deductible under Chapter III in computing the individual's income, except to the extent that the amounts so received are otherwise included in computing the individual's income for the year or are taken into account in computing the amount that is deducted under Chapter III by the individual for the year or a preceding taxation year.

1991, c. 25, s. 6; 1998, c. 16, s. 40.

37.0.3. Without restricting the generality of sections 36 and 37, an individual shall, in computing the income of the individual for the year from an office or employment, include

 (a) the value of any indemnity for meals or transportation between the individual’s ordinary place of residence and the individual’s work location received by the individual in the year, as an allowance or refund or under any other form, for overtime worked in the course of performing the duties of the individual’s office or employment; and

 (b) any amount that is the amount by which the value of a meal or service of transportation between the individual’s ordinary place of residence and the individual’s work location supplied in the year for overtime worked in performing the duties of the individual’s office or employment exceeds the amount the individual pays in respect of the meal or service of transportation.

However, the individual is not required in computing the income of the individual to include an amount referred to in the first paragraph in relation to overtime if it was worked at the request of the employer for a scheduled period of at least two consecutive hours and are infrequent or occasional in nature and if,

 (a) in the case of an indemnity for meals or a meal supplied,

(i)  the value of the indemnity for meals or of the meal supplied is reasonable, and

(ii)  in the case of an indemnity for meals, the indemnity is the full or partial refund, upon presentation of vouchers, of the meal expenses incurred by the individual because of the overtime; and

 (b) in the case of an indemnity for transportation or a service of transportation supplied,

(i)  public transit is not available or it is reasonable to consider that, under the circumstances, the individual’s safety would be jeopardized because of the time at which the transportation is provided, and

(ii)  in the case of an indemnity for transportation, the indemnity is the full or partial refund, upon presentation of vouchers, of the taxi transportation expenses incurred by the individual because of the overtime to travel between the individual’s ordinary place of residence and the individual’s work location.

2003, c. 9, s. 16; 2015, c. 21, s. 100.

37.0.4. An individual shall, in computing the income of the individual for the year from an office or employment, include any amount that the individual received from the individual’s employer in the year under a public compensation plan and that may not be considered to be an amount received as an income replacement indemnity solely because no employer may obtain the reimbursement of that amount.

2005, c. 38, s. 52.

37.1. An individual referred to in section 487.1 shall, in computing the income of the individual for the year from an office or employment, include every amount deemed by section 487.1 to be a benefit received in the year by the individual.

1978, c. 26, s. 4; 1983, c. 44, s. 14; 1998, c. 16, s. 40.

37.1.1. An amount paid or the value of assistance provided by any person because of, or in the course of, an individual’s office or employment in respect of the cost of, the financing of, the use of or the right to use, a residence is, for the purposes of this division, a benefit received by the individual because of the office or employment.

2001, c. 53, s. 12.

37.1.2. In this division,

eligible housing loss in respect of a residence designated by an individual means a housing loss in respect of an eligible relocation of the individual or a person who does not deal at arm’s length with the individual and, for the purposes of this definition, no more than one residence may be so designated in respect of an eligible relocation;

housing loss at any time in respect of a residence of an individual means the amount by which the greater of the adjusted cost base of the residence at that time to the individual or to another person who does not deal at arm’s length with the individual and the highest fair market value of the residence within the six-month period that ends at that time exceeds

 (a) if the residence is disposed of by the individual or the other person before the end of the first taxation year that begins after that time, the lesser of the proceeds of disposition of the residence and the fair market value of the residence at that time; and

 (b) in any other case, the fair market value of the residence at that time.

2001, c. 53, s. 12; 2015, c. 21, s. 101.

37.1.3. For the purposes of section 37, an amount paid at any time in respect of a housing loss other than an eligible housing loss to or on behalf of an individual or a person who does not deal at arm’s length with the individual because of, or in the course of, an office or employment is deemed to be a benefit received by the individual at that time because of the office or employment.

2001, c. 53, s. 12.

37.1.4. For the purposes of section 37, an amount paid at any time in a taxation year in respect of an eligible housing loss to or on behalf of an individual or a person who does not deal at arm’s length with the individual because of, or in the course of, an office or employment is deemed to be a benefit received by the individual at that time because of the office or employment to the extent of the amount by which one half of the amount by which the aggregate of all amounts each of which is so paid in the year or in a preceding taxation year exceeds $15,000 exceeds the aggregate of all amounts each of which is an amount included in computing the individual’s income because of this section for a preceding taxation year in respect of the loss.

2001, c. 53, s. 12.

37.1.5. For the purposes of section 37, the value of the benefit received or enjoyed by an individual for a taxation year because of, or in the course of, the individual’s office or employment is deemed to be equal,

 (a) for all the gifts, other than excluded gifts, received in the year by the individual from the individual’s employer for one or more special occasions, such as Christmas, an anniversary, a wedding or similar occasion, to the amount by which the value otherwise determined of the benefit for the year exceeds the lesser of

(i)  $500, and

(ii)  the aggregate of all amounts each of which is the value of such a gift; and

 (b) for all the awards, other than excluded awards, received in the year by the individual from the individual’s employer in recognition of certain achievements, such as reaching a set number of years of service, meeting or exceeding safety standards or reaching similar objectives, to the amount by which the value otherwise determined of the benefit for the year exceeds the lesser of

(i)  $500, and

(ii)  the aggregate of all amounts each of which is the value of such an award.

In the first paragraph, an excluded gift or an excluded award means a gift or an award that

 (a) is in cash;

 (b) may easily be converted into cash, except a gift coupon or gift certificate, including a smart card, that must be used to purchase a property or a service from one or more designated merchants; or

 (c) constitutes a benefit that is referred to in another special provision of this chapter or that may reasonably be considered, without reference to section 34, to be a benefit received or enjoyed by the individual as consideration for the individual’s performance of work.

2003, c. 9, s. 17.

37.2. For the purposes of section 37, where an employer or former employer of an individual makes a top-up disability payment, within the meaning assigned by section 43.0.2, in respect of the individual, the payment is deemed not to be a benefit received or enjoyed by the individual.

2000, c. 5, s. 22.

38. An individual is not required in computing income to include the value of benefits derived from contributions paid in respect of the individual by the individual's employer to or under

 (a) a registered pension plan;

 (a.1) a pooled registered pension plan;

 (b) a group insurance plan, in relation to coverage against the loss of all or part of the income from an office or employment;

 (b.1) an employee life and health trust, to the extent that it may reasonably be considered that those contributions are attributable to coverage against the loss of all or part of the income from an office or employment;

 (c) (subparagraph repealed);

 (d) a supplementary unemployment benefit plan;

 (e) a deferred profit sharing plan; or

 (f) (subparagraph repealed);

 (g) a multi-employer insurance plan.

Similarly, the individual is not required in computing the individual's income to include the value of any benefit derived from group coverage which, otherwise than under an insurance plan referred to in subparagraph b of the first paragraph, is provided to the individual under a plan, against the loss of all or part of the income from an office or employment, or the value of any benefit derived from the payment by the individual's employer of the tax provided for under the Retail Sales Tax Act (chapter I-1) or under Title III of the Act respecting the Québec sales tax (chapter T-0.1), in respect of such group coverage or of the contributions paid by the individual's employer under subparagraph b or g of the first paragraph in respect of the individual.

Furthermore, the individual is not required in computing the individual's income to include the value of any benefit

 (a) derived from a retirement compensation arrangement, an employee benefit plan or an employee trust;

 (b) derived from a salary deferral arrangement, except to the extent that the value of the benefit is included under section 37 because of section 47.11;

 (c) in respect of the use of an automobile, unless the benefit is related to the use of an automobile owned or leased by the individual and is not referred to in section 41.1.2;

 (d) derived from counselling services received by the individual or a person related to the individual in respect of stress management or the use or consumption of tobacco, drugs or alcohol, other than a benefit attributable to an outlay or expense to which section 134 applies, or from counselling services in respect of the re-employment or retirement of the individual;

 (e) derived from the individual's participation in a training activity the cost of which is borne by the individual's employer, if it is reasonable to consider that the training significantly benefits the individual's employer; or

 (f) received or enjoyed by a person, other than the individual, under a program offered by the individual's employer to help persons continue their studies, if the individual deals at arm's length with the employer and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the individual.

1972, c. 23, s. 32; 1972, c. 26, s. 39; 1982, c. 5, s. 16; 1983, c. 44, s. 15; 1986, c. 15, s. 38; 1989, c. 77, s. 10; 1990, c. 59, s. 34; 1991, c. 25, s. 7; 1993, c. 16, s. 23; 1993, c. 64, s. 12; 1995, c. 49, s. 19; 1995, c. 63, s. 261; 1997, c. 31, s. 7; 1998, c. 16, s. 41; 1999, c. 83, s. 28; 2011, c. 6, s. 113; 2015, c. 21, s. 102.

38.1. An individual is not required in computing the individual's income to include the value of benefits received from the individual's employer and derived from

 (a) the total or partial reimbursement, after 23 March 2006, of the cost of an eligible transit pass taking the form of a subscription for a minimum period of one month, valid after that date, that the individual acquired with a view to using it to commute between the individual's ordinary place of residence and the individual's work location;

 (b) the total or partial reimbursement, after 23 March 2006, of the cost of an eligible paratransit pass, valid after that date, that the individual acquired with a view to using it to commute between the individual's ordinary place of residence and the individual's work location; or

 (c) the supply, after 23 March 2006, of an eligible transit pass or eligible paratransit pass, if the pass is supplied to the individual primarily to commute between the individual's ordinary place of residence and the individual's work location.

In this section, “eligible paratransit pass” and “eligible transit pass” have the meaning assigned by section 156.9.

2006, c. 36, s. 24.

38.2. An individual is not required in computing the individual's income to include the value of benefits resulting from the use of a shared transportation service of a taxpayer who is the individual's employer in respect of which the taxpayer may deduct, under section 156.10, an amount in computing the taxpayer's income from a business.

In this section, shared transportation service has the meaning assigned by section 156.10.

2013, c. 10, s. 17.

38.3. Despite subparagraph b of the first paragraph of section 38, an individual is required in computing the individual's income for the year to include the value of benefits derived from contributions paid in respect of the individual in the year by the individual's employer under a group insurance plan, in relation to coverage against the loss of all or part of the income from an office or employment, to the extent that the benefit arising from that plan is not payable periodically.

2015, c. 21, s. 103.

39. An individual is not required to include in computing the individual's income

 (a) travel, personal or living expense allowances

(i)  expressly established by the laws of Canada,

(ii)  paid under the Act respecting public inquiry commissions (chapter C-37), or

(iii)  paid under the authority of the Treasury Board of Canada to a person who was appointed or whose services were engaged pursuant to the Inquiries Act (R.S.C. 1985, c. I-11) in respect of the discharge of the person's duties relating to such appointment or engagement;

 (b) travel and separation allowances received by the individual under service regulations as a member of the Canadian Forces;

 (c) representation or other special allowances received by the individual in respect of a period of absence from Canada as a person described in paragraph b, c or d of section 8;

 (d) representation or other special allowances received by the individual as an agent-general of a province in respect of a period while the individual was in Ottawa in such capacity;

 (e) reasonable allowances received by the individual as a minister or clergyman in charge of or ministering to a diocese, parish or congregation for transportation incident to the discharge of the duties of that office or employment;

 (e.1) allowances for the board and lodging received by the individual, to a maximum total of $300 for each month of a taxation year, if

(i)  the individual is, in that month, a registered participant with, or member of, a sports team or recreation program of the employer in respect of which participation or membership is restricted to persons under 21 years of age,

(ii)  the allowance is paid because of the individual's participation or membership and is not attributable to services of the individual as a coach, instructor, trainer, referee, administrator or other similar occupation,

(iii)  the employer is a registered charity or a person described in section 996, and

(iv)  the allowance is reasonably attributable to the cost to the individual of living away from the place where the employee would, but f