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



DIVISION VIII 
REPRESENTATION EXPENSES
1972, c. 23.

155. A taxpayer may deduct any amount he pays as expenses incurred in making any representation relating to a business carried on by him or to obtain a license, permit, franchise or trade mark relating to that business if such representation is made:

 (a) to the government of a country, province or state or to a municipal or public body performing a function of government in Canada, or

 (b) to an agency of a government or body mentioned in paragraph a, if such agency is authorized by law to make rules or regulations relating to the business carried on by the taxpayer.

1972, c. 23, s. 143.

156. Instead of deducting any amount deductible under section 155, the taxpayer may, if he so elects in prescribed manner, deduct one-tenth of that amount in computing his income for that year and make a similar deduction in computing his income for each of the nine subsequent years.

1972, c. 23, s. 144.

DIVISION VIII.1 
ADDITIONAL DEDUCTION IN RESPECT OF CERTAIN INVESTMENTS
1989, c. 5, s. 46.

156.1. A taxpayer, other than a trust, may deduct, in computing the taxpayer's income from a business for a taxation year,

 (a) where the taxpayer is an individual, the proportion of the amount determined for the year in his respect under section 156.2 that the aggregate of the income earned in Québec and elsewhere by the individual for the year is of the income earned in Québec by the individual for the year;

 (b) where the taxpayer is a corporation, the proportion of the amount determined for the year in its respect under section 156.3 that the aggregate of the business carried on in Canada or in Québec and elsewhere by the corporation in the year is of the business carried on in Québec by the corporation in the year.

1989, c. 5, s. 46; 1993, c. 16, s. 81; 1995, c. 1, s. 199; 1997, c. 3, s. 71; 1999, c. 83, s. 35.

156.1.1. A partnership may deduct, in computing the partnership's income from a business for a fiscal period, the proportion of the amount determined in its respect for the period under section 156.3.1 that the aggregate of the business carried on in Canada or in Québec and elsewhere by the partnership in the period is of the business carried on in Québec by the partnership in the period.

1999, c. 83, s. 36.

156.2. The amount referred to in paragraph a of section 156.1 is, in respect of an individual for a taxation year, equal to 20% of the amount determined in respect of the individual for the year according to the following formula:


A × (B / C).


For the purposes of the formula provided in the first paragraph,

 (a) the letter A represents the amount deducted by the individual, in computing his income for the year, under paragraph a of section 130 or the second paragraph of section 130.1 in respect of a prescribed depreciable property;

 (b) the letter B represents the amount by which the aggregate of the income earned in Québec and elsewhere by the individual for the year exceeds the income earned in Québec by the individual for the year;

 (c) the letter C represents the aggregate of the income earned in Québec and elsewhere by the individual for the year.

1989, c. 5, s. 46; 1993, c. 19, s. 18; 1997, c. 85, s. 53.

156.3. The amount referred to in paragraph b of section 156.1 is, in respect of a corporation for a taxation year, equal to 20% of the amount determined in respect of the corporation for the year according to the following formula:


A × (B / C).


For the purposes of the formula provided in the first paragraph,

 (a) the letter A represents the amount deducted by the corporation, in computing its income for the year, under paragraph a of section 130 or the second paragraph of section 130.1 in respect of a prescribed depreciable property;

 (b) the letter B represents the amount by which the aggregate of the business carried on in Canada or in Québec and elsewhere by the corporation in the year exceeds the business carried on in Québec by the corporation in the year;

 (c) the letter C represents the aggregate of the business carried on in Canada or in Québec and elsewhere by the corporation in the year.

1989, c. 5, s. 46; 1993, c. 19, s. 19; 1995, c. 1, s. 199; 1997, c. 3, s. 71; 1997, c. 85, s. 54.

156.3.1. The amount to which section 156.1.1 refers is, in respect of a partnership for a fiscal period, equal to 20% of the amount determined for the fiscal period in respect of the partnership according to the formula


A × (B / C).


In the formula provided for in the first paragraph,

 (a) A is the amount deducted by the partnership, in computing its income for the fiscal period, under paragraph a of section 130 or the second paragraph of section 130.1 in respect of a property that would, if the partnership were a corporation, be a prescribed depreciable property for the purposes of subparagraph a of the second paragraph of section 156.3;

 (b) B is the amount by which the aggregate of the business carried on in Canada or in Québec and elsewhere by the partnership in the fiscal period exceeds the business carried on in Québec by the partnership in the fiscal period; and

 (c) C is the aggregate of the business carried on in Canada or in Québec and elsewhere by the partnership in the fiscal period.

1999, c. 83, s. 37.

156.4. For the purposes of sections 156.1 to 156.3.1, the following rules apply:

 (a) the computation of income earned in Québec and of income earned in Québec and elsewhere is made in the manner prescribed in the regulations made pursuant to section 22, with the necessary modifications; and

 (b) the computation of the business carried on in Canada, in Québec and in Québec and elsewhere by a corporation is made in the manner prescribed in the regulations made under subsection 2 of section 771, with the necessary modifications, and the computation of the business carried on in Canada, in Québec and in Québec and elsewhere by a partnership is made in the manner so prescribed in those regulations, with the necessary modifications, as if the partnership were a corporation and if its fiscal period were a taxation year.

1989, c. 5, s. 46; 1995, c. 1, s. 26; 1995, c. 63, s. 261; 1999, c. 83, s. 38.

DIVISION VIII.2 
SUPPLEMENTARY DEDUCTION IN RESPECT OF CERTAIN INVESTMENTS
1997, c. 85, s. 55.

156.5. Subject to the second paragraph, a taxpayer other than a trust may deduct, in computing the taxpayer's income from a business for a taxation year,

 (a) where the taxpayer is an individual, the proportion of the amount determined for the year in respect of the individual under the first paragraph of section 156.6 that the aggregate of the income earned in Québec and elsewhere by the individual for the year is of the income earned in Québec by the individual for the year;

 (b) where the taxpayer is a corporation, the proportion of the amount determined for the year in respect of the corporation under the first paragraph of section 156.6 that the aggregate of the business carried on in Canada or in Québec and elsewhere by the corporation in the year is of the business carried on in Québec by the corporation in the year;

 (c) (subparagraph repealed).

No deduction may be made by a taxpayer under the first paragraph, in computing the taxpayer’s income from a business for a taxation year, in respect of property acquired from a person or partnership with whom or with which the taxpayer was not dealing at arm’s length at the time of acquisition if

 (a) the property is property acquired by the person or partnership before 26 March 1997 or after 25 March 1997 pursuant to an obligation in writing entered into before 26 March 1997 or the construction of which, by or on behalf of the person or partnership, had begun by 25 March 1997;

 (b) the person or partnership was entitled to deduct, for a taxation year or fiscal period, as the case may be, preceding the taxation year or fiscal period in which the property was disposed of, an amount in computing the person’s or partnership’s income from a business under the first paragraph or under the first paragraph of section 156.5.1, as the case may be, in respect of the property; or

 (c) this paragraph or the second paragraph of section 156.5.1 applied to the person or partnership in respect of the property.

1997, c. 85, s. 55; 1999, c. 83, s. 39; 2001, c. 51, s. 24; 2004, c. 21, s. 57.

156.5.1. Subject to the second paragraph, a partnership may deduct, in computing its income from a business for a fiscal period the proportion of the amount determined for the fiscal period in its respect under the second paragraph of section 156.6 that the aggregate of the business carried on in Canada or in Québec and elsewhere by the partnership in the fiscal period is of the business carried on in Québec by the partnership in the fiscal period.

No deduction may be made by a partnership under the first paragraph, in computing the partnership’s income from a business for a fiscal period, in respect of property acquired from a person or partnership with whom or with which the partnership was not dealing at arm’s length at the time of acquisition if

 (a) the property is property acquired by the person or partnership before 26 March 1997 or after 25 March 1997 pursuant to an obligation in writing entered into before 26 March 1997 or the construction of which, by or on behalf of the person or partnership, had begun by 25 March 1997;

 (b) the person or partnership was entitled to deduct, for a taxation year or fiscal period, as the case may be, preceding the taxation year or fiscal period in which the property was disposed of, an amount in computing the person’s or partnership’s income from a business under the first paragraph or under the first paragraph of section 156.5, as the case may be, in respect of the property; or

 (c) this paragraph or the second paragraph of section 156.5 applied to the person or partnership in respect of the property.

1999, c. 83, s. 40; 2004, c. 21, s. 58.

156.6. The amount to which subparagraphs a and b of the first paragraph of section 156.5 refer in relation to a taxpayer for a taxation year, is equal to 25% of the aggregate of all amounts each of which is an amount deducted by the taxpayer under paragraph a of section 130 or the second paragraph of section 130.1, in computing the taxpayer's income for the year, in respect of property which is prescribed depreciable property for the purpose, where the taxpayer is an individual, of subparagraph a of the second paragraph of section 156.2, and where the taxpayer is a corporation, of subparagraph a of the second paragraph of section 156.3.

The amount to which the first paragraph of section 156.5.1 refers, in relation to a partnership for a fiscal period, is equal to 25% of the aggregate of all amounts each of which is an amount deducted by the partnership under paragraph a of section 130 or the second paragraph of section 130.1 in computing the partnership's income for the fiscal period, in respect of property that would be prescribed depreciable property for the purpose of subparagraph a of the second paragraph of section 156.3 if the partnership were a corporation.

1997, c. 85, s. 55; 1999, c. 83, s. 41; 2000, c. 39, s. 15; 2001, c. 51, s. 25; 2004, c. 21, s. 59.

156.7. For the purposes of sections 156.5 and 156.5.1, the following rules apply:

 (a) the computation of income earned in Québec and of income earned in Québec and elsewhere is made in the manner prescribed in the regulations made under section 22, with the necessary modifications; and

 (b) the computation of the business carried on in Canada, in Québec and in Québec and elsewhere by a corporation is made in the manner prescribed in the regulations made under subsection 2 of section 771, with the necessary modifications, and the computation of the business carried on in Canada, in Québec and in Québec and elsewhere by a partnership is made in the manner so prescribed in those regulations as if the partnership were a corporation and if its fiscal period were a taxation year, and with the necessary modifications.

1997, c. 85, s. 55; 1999, c. 83, s. 42.

DIVISION VIII.2.1 
OTHER DEDUCTION IN RESPECT OF CERTAIN INVESTMENTS
2011, c. 1, s. 23.

156.7.1. A taxpayer, other than a trust, may deduct, in computing the taxpayer's income from a business for a taxation year, an amount equal to 85% of the aggregate of all amounts each of which is an amount deducted by the taxpayer in computing the taxpayer's income for the year under paragraph a of section 130 or the second paragraph of section 130.1, in respect of the taxpayer's prescribed depreciable property.

2011, c. 1, s. 23.

DIVISION VIII.2.2 
ADDITIONAL DEDUCTION RELATING TO CANADIAN VESSELS
2015, c. 21, s. 124.

156.7.2. For the purposes of this division,

eligible work means work that a taxpayer has carried out by a corporation under a contract entered into after 4 June 2014 and before 1 January 2024 in a qualified shipyard that the corporation operates;

qualified shipyard has the meaning assigned by section 979.24.

2015, c. 21, s. 124.

156.7.3. In computing a taxpayer's income for a taxation year from a business, there may be deducted an amount equal to 50% of the aggregate of all amounts each of which is the portion of the amount deducted in computing the taxpayer's income for the year under paragraph a of section 130 or the second paragraph of section 130.1, in respect of the taxpayer's prescribed depreciable property, that relates to the cost of eligible work.

2015, c. 21, s. 124.

DIVISION VIII.3 
ADDITIONAL DEDUCTION RELATING TO PUBLIC TRANSIT PASSES
2006, c. 36, s. 27.

156.8. A taxpayer may deduct, in computing the taxpayer's income from a business for a taxation year, the aggregate of all amounts each of which is an amount otherwise deductible in computing that income for that taxation year and that is

 (a) an amount paid to an employee, after 23 March 2006, as the total or partial reimbursement 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 employee acquired with a view to using it to commute between the employee's ordinary place of residence and the employee's work location;

 (b) an amount paid to an employee, after 23 March 2006, as the total or partial reimbursement of the cost of an eligible paratransit pass, valid after that date, that the employee acquired with a view to using it to commute between the employee's ordinary place of residence and the employee's work location; or

 (c) the cost to the taxpayer of an eligible transit pass or eligible paratransit pass that is supplied, after 23 March 2006, to an employee primarily to commute between the employee's ordinary place of residence and the employee's work location.

2006, c. 36, s. 27.

156.9. In section 156.8,

eligible paratransit pass means a transit pass that allows the use of a paratransit service provided by a public entity authorized under an Act of Québec to organize such a service;

eligible transit pass means a transit pass that allows the use of a public transit service, other than paratransit, provided by a public entity authorized under an Act of Québec to organize such a service.

2006, c. 36, s. 27.

DIVISION VIII.4 
ADDITIONAL DEDUCTION RELATING TO THE ORGANIZATION OF AN INTERMUNICIPAL SHARED TRANSPORTATION SERVICE
2013, c. 10, s. 18.

156.10. A taxpayer may deduct, in computing the taxpayer's income from a business for a taxation year, the aggregate of all amounts each of which is an amount otherwise deductible in computing that income for that taxation year in respect of the setting up or operation of a shared transportation service of the taxpayer.

For the purposes of the first paragraph, a shared transportation service of a taxpayer means a transportation service organized by the taxpayer, alone or jointly with others, for the benefit of employees whose place of residence is outside the local municipal territory where their employer's establishment to which they ordinarily report for work is located, if

 (a) the shared transportation service is provided at least five days a week, except during holiday periods or a slowdown in the business' activities;

 (b) employees are transported in a coach, minibus or van or any other vehicle with a design capacity of at least 15 people; and

 (c) employees can get on and off the vehicle only at predetermined places.

2013, c. 10, s. 18.

DIVISION VIII.5 
ADDITIONAL DEDUCTION FOR TRANSPORTATION COSTS INCURRED BY REMOTE SMALL AND MEDIUM MANUFACTURING ENTERPRISES
2015, c. 21, s. 125.

156.11. In this division,

additional deduction rate that applies to a manufacturing corporation for a taxation year means, subject to sections 156.12 and 156.13,

 (a) 0%, if the major portion of the corporation's cost of manufacturing and processing capital for the year is attributable to property it uses outside the central area, the intermediate area, the remote area and the special remote area;

 (a.1) 1%, if the major portion of the corporation's cost of manufacturing and processing capital for the year is attributable to property it uses in the central area;

 (b) 3%, if the major portion of the corporation's cost of manufacturing and processing capital for the year is attributable to property it uses in the intermediate area;

 (c) 5%, if the major portion of the corporation's cost of manufacturing and processing capital for the year is attributable to property it uses in the remote area; or

 (d) 7%, if the major portion of the corporation's cost of manufacturing and processing capital for the year is attributable to property it uses in the special remote area;

central area means an area that includes the part of the territory of Québec that is not included in the intermediate area, the remote area and the special remote area;

cost of manufacturing and processing capital of a manufacturing corporation for a taxation year means the amount determined in respect of the corporation for the year under the definition of “cost of manufacturing and processing capital” in section 5202 of the Income Tax Regulations made under the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.));

intermediate area means an area that is

 (a) the territory of any of the following regions described in the Décret concernant la révision des limites des régions administratives du Québec (chapitre D-11, r. 1), or any part of such a region:

(i)  administrative region 03 Capitale-Nationale, except the part of the territory comprising the territory of the municipalities in the Québec census metropolitan area as described in the Standard Geographical Classification (SGC) 2011 published by Statistics Canada and the territory of Municipalité régionale de comté de Charlevoix-Est,

(ii)  the southern part of administrative region 04 Mauricie that includes the territory of the cities of Trois-Rivières and Shawinigan and the territory of the regional county municipalities of Chenaux and Maskinongé,

(iii)  the western part of administrative region 05 Estrie that includes the territory of Ville de Sherbrooke and of the regional county municipalities of Memphrémagog, Val-Saint-François, des Sources and Coaticook,

(iv)  administrative region 12 Chaudière-Appalaches, except the part of the territory comprising the territory of the municipalities in the Québec census metropolitan area as described in the Standard Geographical Classification (SGC) 2011 published by Statistics Canada,

(v)  administrative region 14 Lanaudière, except the part of the territory comprising the territory of the municipalities in the Montréal census metropolitan area as described in the Standard Geographical Classification (SGC) 2011 published by Statistics Canada,

(vi)  administrative region 15 Laurentides, except the part of the territory comprising the territory of the municipalities in the Montréal census metropolitan area as described in the Standard Geographical Classification (SGC) 2011 published by Statistics Canada, and the territory of Municipalité régionale de comté d'Antoine-Labelle,

(vii)  administrative region 16 Montérégie, except the part of the territory comprising the territory of the municipalities in the Montréal census metropolitan area as described in the Standard Geographical Classification (SGC) 2011 published by Statistics Canada, and

(vii)  administrative region 17 Centre-du-Québec; or

 (b) the territory of Municipalité régionale de comté de Papineau;

manufacturing corporation for a taxation year means a Canadian-controlled private corporation the proportion of the manufacturing or processing activities of which for the year is greater than 25%;

proportion of the manufacturing or processing activities of a manufacturing corporation for a taxation year means the proportion that the amount determined in respect of the corporation for the year under paragraph a of section 5200 of the Income Tax Regulations made under the Income Tax Act is of the amount determined in respect of the corporation for the year under paragraph b of section 5200 of those Regulations;

remote area means an area that is

 (a) the territory of any of the following regions described in the Décret concernant la révision des limites des régions administratives du Québec, or any part of such a region:

(i)  administrative region 01 Bas-Saint-Laurent,

(ii)  administrative region 02 Saguenay–Lac-Saint-Jean,

(iii)  the eastern part of administrative region 05 Estrie that includes the territory of the regional county municipalities of Granit and Haut-Saint-François,

(iv)  administrative region 08 Abitibi-Témiscamingue,

(v)  administrative region 09 Côte-Nord, except the part of the region within the territory of Municipalité de l'Île-d'Anticosti and of Municipalité régionale de comté du Golfe-du-Saint-Laurent,

(vi)  administrative region 10 Nord-du-Québec, except the part of the region within the territory of the Kativik Regional Government, and

(vii)  the part of administrative region 11 Gaspésie–Îles-de-la-Madeleine comprising the territory of the regional county municipalities of Avignon, Bonaventure, Côte-de-Gaspé, Haute-Gaspésie and Rocher-Percé;

 (b) the territory of any of the following regional county municipalities:

(i)  Municipalité régionale de comté d'Antoine-Labelle,

(ii)  Municipalité régionale de comté de Charlevoix-Est,

(iii)  Municipalité régionale de comté de La Vallée-de-la-Gatineau,

(iv)  Municipalité régionale de comté de Mékinac, and

(v)  Municipalité régionale de comté de Pontiac; or

 (c) the territory of the urban agglomeration of La Tuque as described in section 8 of the Act respecting certain municipal powers in certain urban agglomerations (chapter E-20.001);

special remote area means an area that is

 (a) the territory of Municipalité de l'Île-d'Anticosti;

 (b) the territory of the urban agglomeration of Îles-de-la-Madeleine as described in section 9 of the Act respecting certain municipal powers in certain urban agglomerations;

 (c) the territory of Municipalité régionale de comté du Golfe-du-Saint-Laurent; or

 (d) the territory of the Kativik Regional Government,

2015, c. 21, s. 125; 2015, c. 24, s. 29.

156.12. For the purposes of the definition of “additional deduction rate” in section 156.11, a manufacturing corporation for a taxation year may determine the part of its cost of manufacturing and processing capital for the year attributable to goods it uses in a particular area by adding to it the portion of the corporation's cost of manufacturing and processing capital for the year attributable to goods it uses in another area for which a higher additional deduction rate for the year is provided.

2015, c. 21, s. 125.

156.13. Despite the definition of “additional deduction rate” in section 156.11, the additional deduction rate applicable to a manufacturing corporation for a taxation year is, for the year, equal to the rate determined by the formula


A × [(B - 25%)/25%].


In the formula in the first paragraph,

 (a) A is the additional deduction rate applicable to the manufacturing corporation for the year, determined without reference to this section; and

 (b) B is the lesser of 50% and the proportion of the manufacturing or processing activities of the manufacturing corporation for the year.

For the taxation year of a manufacturing corporation that ends after 4 June 2014 and that includes that date, the additional deduction rate applicable to the corporation for the year is equal to the rate of the deduction, determined for the year with reference to the first and second paragraphs, multiplied by the proportion that the number of days in the year that follow 4 June 2014 is of the number of days in the year.

2015, c. 21, s. 125.

156.14. Subject to section 156.15, a manufacturing corporation for a taxation year may deduct, in computing its income from a business for the year, an amount equal to

 (a) the amount obtained by multiplying its gross revenue for the year by the additional deduction rate applicable to it for the year, if 7% is the additional deduction rate that would be applicable to it for the year in the absence of section 156.13; or

 (b) in any other case, the lesser of

(i)  the amount obtained by multiplying its gross revenue for the year by the additional deduction rate applicable to it for the year, and

(ii)  the regional limit that is applicable to it for the year.

In this section and in section 156.14.1, “regional limit” applicable to a manufacturing corporation for a taxation year means

 (a) $50,000, if 1% is the additional deduction rate that would be applicable to the corporation for the year in the absence of section 156.13;

 (b) $150,000, if 3% is the additional deduction rate that would be applicable to the corporation for the year in the absence of section 156.13; or

 (c) $350,000, if 5% is the additional deduction rate that would be applicable to the corporation for the year in the absence of section 156.13.

For the purposes of the definition of “regional limit” in the second paragraph, if the number of days in the manufacturing corporation's taxation year is less than 365, the amount of $50,000, $150,000 or $350,000, as the case may be, is to be replaced by the proportion of that amount that the number of days in the year is of 365.

2015, c. 21, s. 125; 2015, c. 24, s. 30.

156.14.1. For the purposes of section 156.14, if a manufacturing corporation for a taxation year to which a regional limit is applicable for the year is associated in the year with one or more other manufacturing corporations for the year to which a regional limit is applicable for the year, the regional limit that is applicable to each of those corporations for the year is equal to zero, unless all of those corporations file with the Minister in the prescribed form containing prescribed information an agreement whereby, for the purposes of this division, they allocate a particular percentage to one or more of them, in which case the following rules apply:

 (a) where the percentage or the aggregate of the percentages so allocated, as the case may be, does not exceed 100%, the regional limit applicable to each of those corporations for the year is deemed to be equal to the product obtained by multiplying the amount corresponding to the regional limit that is applicable to it for the year, determined without reference to this section, by the percentage so allocated to it; and

 (b) in any other case, the regional limit applicable to the corporation for the year is deemed to be equal to zero.

If one of the corporations fails to file with the Minister the agreement within 30 days after notice in writing by the Minister has been sent to any of them that such an agreement is required for the purposes of any assessment of tax under this Part, the Minister shall, for the purposes of this division, allocate a percentage to one or more of those corporations for the taxation year, which percentage or the aggregate of which percentages, as the case may be, is to be equal to 100% and, in such a case, the regional limit that is applicable to each of those corporations for the year is deemed to be equal to the product obtained by multiplying the amount corresponding to the regional limit applicable to it for the year, determined without reference to this section, by the percentage so allocated to it by the Minister.

2015, c. 24, s. 31.

156.15. Despite section 156.14, the amount of the deduction to which a manufacturing corporation is entitled under that section is equal, for a taxation year that ends in a calendar year, to the amount by which the amount of the deduction, determined without reference to this section, exceeds the amount determined by the formula


A × [(B - $10,000,000)/$5,000,000$].


In the formula in the first paragraph,

 (a) A is the amount of the deduction to which the manufacturing corporation is entitled for the taxation year under section 156.14, determined without reference to this section; and

 (b) B is,

(i)  if the corporation is not associated with any other corporation in the taxation year for the purposes of section 771.2.1.8, the corporation's paid-up capital determined as provided in section 771.2.1.9 for its preceding taxation year or, if the corporation is in its first fiscal period, on the basis of its financial statements prepared at the beginning of the fiscal period in accordance with generally accepted accounting principles, and

(ii)  if the corporation is associated with one or more other corporations in the taxation year for the purposes of section 771.2.1.8, the aggregate of all amounts each of which is, for the corporation or any of the other corporations, the amount of its paid-up capital determined as provided in section 771.2.1.9 for its last taxation year ending in the preceding calendar year or, if the corporation is in its first fiscal period, on the basis of its financial statements prepared at the beginning of the fiscal period in accordance with generally accepted accounting principles.

2015, c. 21, s. 125.

DIVISION IX 
OTHER DEDUCTIONS
1972, c. 23; 1977, c. 26, s. 16.

157. A taxpayer may deduct:

 (a) (paragraph repealed);

 (b) (paragraph repealed);

 (c) despite section 128, an amount that the taxpayer pays to attend, in connection with the taxpayer's business, not more than two conventions held during the year by a business or professional organization at a place that may reasonably be regarded as consistent with the territorial scope of its activities;

 (d) an amount, other than a commission, that is paid by the taxpayer to a person or a partnership for advice as to the advisability for the taxpayer of purchasing or selling a specific share or security or for services in respect of the administration or management of the taxpayer's shares or securities, if that person's or partnership's principal business is to so advise or includes the provision of such services;

 (e) an amount that the taxpayer pays for investigating the suitability of a site for a building or other structure planned by the taxpayer for use in connection with a business carried on by the taxpayer;

 (f) an amount that the taxpayer pays to a person with whom the taxpayer deals at arm's length for the purpose of making a service connection to the taxpayer's place of business for the supply, by means of wires, pipes or conduits, of water, electricity, gas, telephone service or sewers supplied by that person, to the extent that such amount is not paid to enable the taxpayer to acquire property or as consideration for the goods or services for the supply of which the service connection has been made;

 (g) the proportion of an amount not otherwise deductible that was paid or that became payable by the taxpayer before the end of the year to a person for the cancellation of a lease of property of the taxpayer leased by the taxpayer to that person that the number of days that remained in the term of the lease, including all renewal periods of the lease, not exceeding 40 years, immediately before its cancellation and that were in the year is of the total number of days in any case if the property was owned at the end of the year by the taxpayer or by a person with whom the taxpayer was not dealing at arm's length and no part of the amount was deductible by the taxpayer under paragraph g.1 in computing the taxpayer's income for a preceding taxation year;

 (g.1) an amount not otherwise deductible that was paid or that became payable by the taxpayer before the end of the year to a person for the cancellation of a lease of property of the taxpayer leased by the taxpayer to that person, to the extent of that amount or, in the case of capital property, 1/2 of that amount that was not deductible by the taxpayer under paragraph g in computing the taxpayer's income for any preceding taxation year in any case if the property was not owned at the end of the year by the taxpayer or by a person with whom the taxpayer was not dealing at arm's length, and no part of the amount was deductible by the taxpayer under this paragraph in computing the taxpayer's income for any preceding taxation year;

 (h) an amount paid by the taxpayer for the landscaping of grounds around a building or other structure owned by the taxpayer and that the taxpayer uses primarily to gain income from it or from a business;

 (h.1) an amount paid by the taxpayer in the year for prescribed renovations or alterations to a building that is used by the taxpayer primarily for the purpose of gaining or producing income from the property or from a business that are made to enable individuals who have a mobility impairment to gain access to the building or be mobile within it, to the extent that the amount was not deducted in computing the taxpayer's income for the year or in computing the taxpayer's income for a preceding taxation year under paragraph h.1.1;

 (h.1.1) the portion of an amount paid by the taxpayer in the year for renovations or alterations to a building that is used by the taxpayer primarily for the purpose of gaining or producing income from the property or from a business, in respect of which an architect, an engineer or a professional technologist certifies in the prescribed form that the renovation or alteration work was carried out in accordance with the barrier-free design standards set out in the Construction Code (chapter B-1.1, r. 2);

 (h.2) an amount paid by the taxpayer in the year for any prescribed disability-specific device or equipment;

 (i) an amount paid by the taxpayer in the year as a levy under the Western Grain Stabilization Act (R.S.C. 1985, c. W-7), as a premium in respect of the gross revenue insurance program established under the Farm Income Protection Act (S.C. 1991, c. 22) or as an administration fee in respect of a net income stabilization account;

 (i.1) an amount that is paid by the taxpayer in the year as a contribution under the Farm Income Stabilization Account program established under the Act respecting La Financière agricole du Québec (chapter L-0.1) and that is

(i)  a contribution referred to in section 15 of that program,

(ii)  an additional contribution referred to in section 16 of that program,

(iii)  a special contribution referred to in section 16.1 or 50 of that program, or

(iv)  a special contribution referred to in the first paragraph of section 50.1 of that program, where the special contribution is made by a partnership;

 (j) (paragraph repealed);

 (k) (paragraph repealed);

 (k.1) a repayment in the year by the taxpayer of an amount the taxpayer is required by paragraph a of section 87 to include in computing the taxpayer's income from a business for the year or a preceding taxation year;

 (l) any amount included by the taxpayer under paragraph q of section 87 in computing the taxpayer's income for the preceding taxation year;

 (l.1) such part of any amount paid in the year by the taxpayer on an amount payable by the taxpayer under section 32 of the Tax Administration Act (chapter A-6.002) if that section applies to an excess in relation to this Part, or under a prescribed disposition and as may reasonably be considered to be a repayment of interest that the taxpayer included in computing the taxpayer's income for the year or a preceding taxation year;

 (m) the amount of any assistance or benefit received by the taxpayer in the year as a deduction from or reimbursement of an expense that is either a tax, other than the Québec sales tax or the goods and services tax, or royalty to the extent that

(i)  the tax or royalty is, by reason of the receipt of the amount by the taxpayer, not deductible in computing the taxpayer's income for a taxation year, and

(ii)  the deduction or reimbursement was included by the taxpayer in the amount determined under paragraph e of section 399, paragraph h of section 412 or paragraph e of section 418.6;

 (n) such portion claimed by the taxpayer of an amount that is an outlay or expense made or incurred by the taxpayer before the end of the year that is a cost to the taxpayer of any substance injected before that time into a natural reservoir to assist in the recovery of petroleum, natural gas or related hydrocarbons to the extent that that portion was not otherwise deducted in computing the taxpayer's income for the year or deducted in computing the taxpayer's income for any preceding taxation year;

 (n.1) the tax, if any, under Part III.14, under Part XII.6 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or under a law of a province other than Québec under which tax similar to that payable under Part III.14 is imposed, paid in the year or payable in respect of the year by the taxpayer, depending on the method regularly followed by the taxpayer in computing the taxpayer's income;

 (o) an amount repaid by the taxpayer in the year pursuant to a legal obligation to repay all or part of a particular amount

(i)  included under paragraph w of section 87 in computing the taxpayer's income for the year or a preceding taxation year, or

(ii)  that is, by reason of subparagraph ii of paragraph w of section 87 or section 87.4, not included in computing the taxpayer's income under paragraph w for the year or a preceding taxation year, if the particular amount relates to an outlay or expense, other than an outlay or expense described in section 157.2.1, that would have been deductible in computing the taxpayer's income for the year or a preceding taxation year were it not for the receipt of the particular amount;

 (o.1) 3/4 of any amount, other than an amount to which subparagraph ii of paragraph a of section 106.2 applies in respect of a taxpayer, repaid by the taxpayer in the year pursuant to a legal obligation to repay all or part of an amount to which paragraph b of section 106.2 applies in respect of the taxpayer;

 (p) any deferred amount under a salary deferral arrangement in respect of another person to the extent that the deferred amount is in respect of services rendered to the taxpayer and is included under section 37 as a benefit in computing the income of the other person for the taxation year of the other person that ends in the taxpayer's taxation year;

 (q) any amount under a salary deferral arrangement in respect of another person, other than an arrangement established primarily for the benefit of one or more employees not resident in Canada in respect of services to be rendered outside Canada, to the extent that the amount was in respect of services rendered to the taxpayer and was included under section 47.10 in computing the income of the other person for the taxation year of the other person that ends in the taxpayer's taxation year;

 (r) a contribution made in the year by the taxpayer to an environmental trust under which the taxpayer is a beneficiary;

 (s) the consideration paid by the taxpayer in the year for the acquisition from another person or partnership of all or part of the taxpayer's interest as a beneficiary under an environmental trust, other than consideration that is the assumption of a reclamation obligation in respect of the trust;

 (t) any amount deducted in computing the taxpayer's income for the year because of paragraph a of section 485.15 or section 485.27; and

 (u) an amount paid in the year by the taxpayer as or on account of an existing or proposed countervailing or anti-dumping duty in respect of property other than depreciable property.

1972, c. 23, s. 145; 1975, c. 21, s. 4; 1977, c. 26, s. 16; 1978, c. 26, s. 36; 1980, c. 13, s. 9; 1982, c. 5, s. 45; 1984, c. 15, s. 36; 1985, c. 25, s. 32; 1986, c. 15, s. 50; 1986, c. 19, s. 27; 1987, c. 21, s. 13; 1987, c. 67, s. 40; 1988, c. 18, s. 11; 1989, c. 5, s. 47; 1990, c. 59, s. 89; 1991, c. 25, s. 47; 1992, c. 1, s. 27; 1993, c. 16, s. 82; 1994, c. 22, s. 105; 1995, c. 49, s. 46; 1996, c. 39, s. 50; 1997, c. 3, s. 71; 1998, c. 16, s. 93; 2000, c. 5, s. 43; 2001, c. 53, s. 44; 2003, c. 2, s. 48; 2004, c. 21, s. 60; 2006, c. 36, s. 28; 2009, c. 5, s. 60; 2009, c. 15, s. 58; 2010, c. 31, s. 175; 2015, c. 21, s. 126.

157.1. (Repealed).

1982, c. 5, s. 46; 1998, c. 16, s. 94; 2015, c. 21, s. 127.

157.2. (Repealed).

1982, c. 5, s. 46; 1997, c. 3, s. 71; 1998, c. 16, s. 95; 2005, c. 1, s. 63; 2015, c. 21, s. 127.

157.2.0.1. For the purposes of paragraph n of section 157, where the year referred to therein is less than 51 weeks, the amount that may be claimed under the said paragraph by the taxpayer for the year shall not exceed the greater of

 (a) that proportion of the maximum amount that may otherwise be claimed under the said paragraph n by the taxpayer for the year that the number of days in the year is of 365, and

 (b) the amount of such outlay or expense described in that paragraph n that was made or incurred by the taxpayer in the year and not otherwise deducted in computing the taxpayer's income for the year.

1993, c. 16, s. 83; 1998, c. 16, s. 96.

157.2.1. For the purposes of subparagraph ii of paragraph o of section 157, an outlay or expense does not include an outlay or expense that is in respect of the cost of property of the taxpayer or that is deductible under any of Divisions II to IV.1 of Chapter X of Title VI, except sections 360 and 361, or would be deductible if the amount so deductible by the taxpayer were not limited by reason of paragraph b of section 371, section 400, subparagraph ii of subparagraph a of the first paragraph of section 413, the percentage of 30% provided for in subparagraph 2 of subparagraph ii of paragraph a of section 418.1.10, subparagraph 3 or 4 of subparagraph ii of paragraph a of section 418.1.10 or subparagraph ii of paragraph a of section 418.7.

1991, c. 25, s. 48; 1995, c. 49, s. 47; 2004, c. 8, s. 28.

157.2.2. There may be deducted in computing a taxpayer's income for a taxation year in respect of a derivative forward agreement, the amount determined by the formula


A - B.


In the formula in the first paragraph,

 (a) A is the lesser of

(i)  the total of all amounts each of which is

(1)  if the taxpayer acquires property under the agreement in the year or a preceding taxation year, the amount by which the cost to the taxpayer of the property exceeds the fair market value of the property at the time it is acquired by the taxpayer, or

(2)  if the taxpayer disposes of property under the agreement in the year or a preceding taxation year, the amount by which the fair market value of the property at the time the agreement is entered into exceeds the proceeds of disposition, within the meaning of section 251, of the property, and

(ii)  the amount that is,

(1)  if final settlement of the agreement occurs in the year and it cannot reasonably be considered that one of the main reasons for entering into the agreement is to obtain a deduction under this section, the amount determined under subparagraph i, or

(2)  in any other case, the total of all amounts included in computing the taxpayer's income under paragraph z.7 of section 87 in respect of the agreement for the year or a preceding taxation year; and

 (b) B is the total of all amounts deducted under this section in respect of the agreement for a preceding taxation year.

2015, c. 24, s. 32.

157.3. Where a taxpayer in a particular taxation year receives an amount under an annuity contract in respect of which an amount was by virtue of section 92 included in computing his income for a taxation year commencing before 1 January 1983, there may be deducted in computing his income for the particular year such amount as is allowed by regulation.

1982, c. 5, s. 46; 1984, c. 15, s. 37.

157.4. A taxpayer who has acquired as the first purchaser a film certified as a Québec film within the meaning of the regulations made under section 130, may deduct, in computing his income for a taxation year at the end of which he is the owner of that film and has been so without interruption from that acquisition, an amount not exceeding the amount by which 50% of the aggregate of the amounts deducted by him in computing his income for that year or for a previous taxation year, in respect of the film, under paragraph a of section 130 exceeds any amount deducted under this section, in respect of the film, in computing his income for a previous taxation year.

Furthermore, where the taxpayer disposes of the film for the first time, he may deduct, in computing his income for the taxation year in which he disposes of the film, the amount by which 50% of the aggregate of the amount he could have deducted in such computation, in respect of the film, under paragraph a of section 130, had it not been for the disposition, and the amounts deducted by him in computing his income for a previous taxation year, in respect of the film, under the said paragraph a, exceeds any amount deducted under this section, in respect of the film, in computing his income for a previous taxation year.

1983, c. 44, s. 23; 1984, c. 35, s. 12.

157.4.1. Where a taxpayer is a member of a partnership at the end of a particular fiscal period of that partnership during which it acquired as the first purchaser a film certified as a Québec film within the meaning of the regulations made under section 130, he may deduct, in computing his income for a taxation year in which a fiscal period of the partnership ends and at the end of which he is a member thereof and has been a member without interruption from the end of the particular fiscal year, an amount not exceeding the amount by which his share of 50% of the aggregate of the amounts deducted by the partnership in computing its income for that fiscal period or a previous fiscal period, in respect of the film, under paragraph a of section 130, exceeds any amount deducted by the taxpayer under this section or section 157.4, in respect of the film, in computing his income for a previous taxation year.

Furthermore, where the partnership disposes of the film for the first time, the taxpayer contemplated in the first paragraph may deduct, in computing his income for the taxation year in which the fiscal period of the partnership ends and during which the disposition occurs, the amount by which his share of 50% of the aggregate of the amount that the partnership could have deducted in computing its income for that fiscal period, in respect of the film, under paragraph a of section 130, had it not been for the disposition, and the amounts deducted by the partnership in computing its income for a previous fiscal period, in respect of the film, under the said paragraph a, exceeds any amount deducted by the taxpayer under this section or section 157.4, in respect of the film, in computing his income for a previous taxation year.

For the purposes of this section, the share of a taxpayer is deemed to be equal to the lesser of:

 (a) his share in the profits of the partnership determined in the absence of this paragraph; and

 (b) his share in the profits of the partnership determined in respect of the fiscal period of the partnership during which it acquired the film.

1984, c. 35, s. 12; 1997, c. 3, s. 71.

157.4.2. Notwithstanding sections 157.4 and 157.4.1, no amount may be deducted under those sections in computing the income of a taxpayer in respect of a film certified as a Québec film, within the meaning of the regulations under section 130, acquired after 31 December 1986, except in respect of the first purchaser of such a film certified as a Québec film by the Société générale du cinéma du Québec not later than 31 December 1987 where

 (a) production work on the film was sufficiently advanced on 11 December 1986, or

 (b) the sums collected for that purpose were collected through the sale of units in respect of which the receipt for the final prospectus was issued not later than 31 December 1986 and the receipt for the preliminary prospectus was issued before 11 December 1986.

1988, c. 4, s. 27.

157.4.3. Notwithstanding sections 157.4 to 157.4.2, no individual may deduct any amount under the said sections in computing his income for a taxation year from his taxation year 1988.

1989, c. 5, s. 48.

157.5. Where a taxpayer disposes of an interest in a life insurance policy that is not an annuity contract, otherwise than as a consequence of a death, or of an interest in an annuity contract, other than a prescribed annuity contract, there may be deducted in computing his income for the taxation year in which the disposition occurs an amount equal to the lesser of

 (a) the aggregate of all amounts each of which is an amount that was included by virtue of sections 92.11 to 92.19 or paragraph c.1 of section 312 in respect of that interest in computing his income for the year or any preceding taxation year, and

 (b) the amount by which the adjusted cost basis, within the meaning assigned by sections 976 to 977.1, to him of that interest immediately before the disposition exceeds the proceeds of the disposition, within the meaning assigned by paragraph b.4 of section 966, of the interest that the policyholder, a beneficiary or an assignee became entitled to receive.

1984, c. 15, s. 38; 1985, c. 25, s. 33; 1986, c. 19, s. 28; 1991, c. 25, s. 49; 1993, c. 16, s. 84.

157.6. Where a taxpayer disposes of a property that is an interest in a debt obligation for consideration equal to its fair market value at the time of disposition, there may be deducted in computing his income for the taxation year in which the disposition occurs the amount by which the aggregate of all amounts each of which was included in computing his income for the year or a preceding taxation year as interest on the property exceeds the aggregate of all amounts each of which is

 (a) such portion of an amount that was received or became receivable by him in the year or in a preceding taxation year as can reasonably be considered to be in respect of an amount that was included in computing his income for the year or a preceding taxation year as interest on the property and that was not repaid by the taxpayer to the issuer of the debt obligation because of an adjustment in respect of interest received before the time of disposition by the taxpayer, or

 (b) an amount in respect of the property that was deductible by him by virtue of the second paragraph of section 167 in computing his income for the year or a preceding taxation year.

1984, c. 15, s. 38; 1985, c. 25, s. 33; 1993, c. 16, s. 85; 1994, c. 22, s. 106.

157.6.1. An insurer may, in computing the income of the insurer for a taxation year, deduct the amount included under paragraph e.1 of section 87 by the insurer in computing the insurer's income for the preceding taxation year.

1998, c. 16, s. 97.

157.7. (Repealed).

1984, c. 15, s. 38; 1991, c. 25, s. 50.

157.8. (Repealed).

1984, c. 15, s. 38; 1991, c. 25, s. 50.

157.9. (Repealed).

1984, c. 15, s. 38; 1991, c. 25, s. 50.

157.10. Where an amount is included under paragraph a of section 87 in computing a taxpayer's income for a taxation year in respect of an undertaking to which subparagraph i or ii of that paragraph applies and the taxpayer paid a reasonable amount in a particular taxation year to another person as consideration for the assumption by that other person of the taxpayer's obligations in respect of the undertaking, the following rules apply if the taxpayer and the other person make a valid election under subsection 24 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the undertaking:

 (a) the payment may be deducted in computing the taxpayer's income for the particular year;

 (b) no amount is deductible under section 150 or 150.1 in computing the taxpayer's income for the particular year or any subsequent taxation year in respect of the undertaking; and

 (c) where the amount was received by the other person in carrying on a business, it is deemed to be an amount described in subparagraph i or ii of paragraph a of section 87.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 24 of section 20 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1986, c. 19, s. 29; 1994, c. 22, s. 107; 2009, c. 5, s. 61.

157.11. (Repealed).

1986, c. 19, s. 29; 1997, c. 31, s. 18; 2009, c. 5, s. 62.

157.12. (Repealed).

1990, c. 59, s. 90; 1996, c. 39, s. 51; 2015, c. 21, s. 128.

157.13. In computing a taxpayer's income from a business or property for a taxation year ending before the time at which a building or a part thereof acquired after 31 December 1989 by the taxpayer has become available for use by the taxpayer, there may be deducted an amount not exceeding the amount by which

 (a) the lesser of

(i)  the amount that would have been deductible under paragraph a of section 130 for the year in respect of the building if section 93.6 were not applicable, and

(ii)  the taxpayer's income for the year from renting the building, computed without reference to this section and before deducting any amount in respect of the building under paragraph a of section 130, exceeds

 (b) the amount deductible for the year under paragraph a of section 130 in respect of the building, computed without reference to this section.

The amount deducted under the first paragraph is deemed to be an amount deducted by the taxpayer by reason of paragraph a of section 130 in computing the taxpayer's income for the year.

1993, c. 16, s. 86.

157.14. Where, by reason of section 135.4, no amount would, but for this section, be deductible by a taxpayer in respect of an outlay or expense in respect of a building, or part thereof, and the outlay or expense would, but for section 135.4 and this section, be deductible in computing the taxpayer's income for a taxation year, there may be deducted in respect of such an outlay or expense in computing the taxpayer's income for the year an amount equal to the lesser of

 (a) the aggregate of all amounts each of which is such an outlay or expense, and

 (b) the taxpayer's income for the year from renting the building or the part thereof, computed without reference to section 157.13 and this section.

1993, c. 16, s. 86.

157.15. Notwithstanding sections 128 and 133, a taxpayer may deduct, in computing the income of the taxpayer from a business for a taxation year, the portion, which can reasonably be attributed to a plan for the insurance of persons, otherwise than in relation to coverage against the loss of all or part of the income from a business, of the aggregate of all amounts each of which is the total contribution relating to work performed in connection with that business and payable by the taxpayer for a period in the year, otherwise than because of a previous, the current or an intended office or employment of another person, to the administrator of a multi-employer insurance plan, within the meaning of section 43.1, and of the tax, within the meaning of subparagraph d of the second paragraph of section 37.0.1.1, relating thereto.

1995, c. 63, s. 31; 1998, c. 16, s. 98.

157.16. A corporation may, in computing its income for a taxation year, deduct an additional amount equal to half the contribution, otherwise deductible in computing its income from a business, that is made in the year by the corporation to the Réseau d'investissement social du Québec.

1999, c. 83, s. 43.

157.17. Where a corporation is a member of a partnership at the end of a fiscal period of the partnership during which the partnership made a contribution to the Réseau d'investissement social du Québec, the corporation may, in computing its income for a taxation year in which that fiscal period ends, deduct an amount equal to half the corporation's share of the contribution, otherwise deductible in computing the income of the partnership from a business.

For the purposes of the first paragraph, the share of a corporation in a contribution made by a partnership of which the corporation is a member is equal to the agreed proportion of the contribution in respect of the corporation for the fiscal period of the partnership that ends in the taxation year of the corporation.

1999, c. 83, s. 43; 2009, c. 15, s. 59.

157.17.1. For the purposes of section 157.17, the following rules apply in respect of a corporation if one or more partnerships (each of which is in this section referred to as an “interposed partnership”) are interposed between the corporation and a given partnership, for a given fiscal period of the given partnership:

 (a) the corporation is deemed to be a member of a particular partnership at the end of a particular fiscal period of the particular partnership and that particular fiscal period is deemed to end in the corporation's taxation year in which ends the fiscal period of the interposed partnership of which it is directly a member, if

(i)  the particular fiscal period is that which ends in the fiscal period (in this section referred to as the “interposed fiscal period”) of the interposed partnership that is a member of the particular partnership at the end of that particular fiscal period, and

(ii)  the corporation is a member, or deemed to be a member under this paragraph, of the interposed partnership described in subparagraph i at the end of the interposed partnership's interposed fiscal period; and

 (b) for the purpose of determining the corporation's share in an amount in respect of the given partnership for the given fiscal period, the agreed proportion in respect of the corporation for that fiscal period of the given partnership is deemed to be equal to the product obtained by multiplying the agreed proportion in respect of the corporation for the interposed fiscal period of the interposed partnership of which it is directly a member, by

(i)  if there is only one interposed partnership, the agreed proportion in respect of the interposed partnership for the given partnership's given fiscal period, or

(ii)  if there is more than one interposed partnership, the result obtained by multiplying together all proportions each of which is the agreed proportion in respect of an interposed partnership for the particular fiscal period of the particular partnership referred to in paragraph a of which the interposed partnership is a member at the end of that particular fiscal period.

2009, c. 15, s. 60.

157.17.2. Section 157.17.1 does not apply in respect of a corporation, in relation to a given partnership, if the Minister is of the opinion that the interposition, between the corporation and the given partnership, of one or more other partnerships is part of an operation or transaction or of a series of operations or transactions, one of the purposes of which is to cause the corporation to be able to deduct, in computing its income for a taxation year under section 157.17, an amount greater than the amount that the corporation could have so deducted for that taxation year, but for that interposition.

2009, c. 15, s. 60.

157.18. (Repealed).

2001, c. 51, s. 26; 2003, c. 2, s. 49; 2005, c. 38, s. 63.

157.19. (Repealed).

2001, c. 51, s. 26; 2003, c. 2, s. 50; 2005, c. 38, s. 63.

DIVISION X 
SOCIAL BENEFIT PLANS
1972, c. 23.

158. An employer shall not deduct, for the purposes of this chapter, an amount which he pays to a trustee:

 (a) under a supplementary unemployment benefit plan, except to the extent allowed under section 964;

 (b) under a deferred profit sharing plan, except to the extent provided in section 881;

 (c) on behalf of his employees or those of a corporation with whom he does not deal at arm's length under a profit sharing plan except to the extent provided for in section 856.

1972, c. 23, s. 146; 1973, c. 17, s. 13; 1991, c. 25, s. 51; 1997, c. 3, s. 71.

DIVISION X.1 
EXPENDITURES MATCHABLE WITH A RIGHT TO RECEIVE PRODUCTION
2001, c. 7, s. 26.

158.1. In this division,

matchable expenditure of a taxpayer means the amount of an expenditure that is made by the taxpayer to

 (a) acquire a right to receive production;

 (b) fulfil a covenant or obligation in circumstances in which it is reasonable to consider that a relationship exists between the covenant or obligation and a right to receive production; or

 (c) preserve or protect a right to receive production;

right to receive production means a right under which a taxpayer is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount all or a portion of which is established by reference to use of property, production, revenue, profit, cash flow, commodity price, cost or value of property or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares where the amount is in respect of another taxpayer’s activity, property or business but such a right does not include an income interest in a trust, a Canadian resource property or a foreign resource property;

tax benefit means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act;

tax shelter means a property that would be a tax shelter, as defined in section 1079.1, if

 (a) the cost of a right to receive production were equal to the aggregate of all amounts each of which is a matchable expenditure to which the right relates; and

 (b) sections 158.2 to 158.12 did not apply for the purpose of computing an amount, or in the case of a partnership a loss, represented to be deductible;

taxpayer includes a partnership.

For the purposes of the definition of matchable expenditure in the first paragraph, the amount of an expenditure that a taxpayer may deduct in computing the taxpayer’s income for a taxation year under this chapter, otherwise than under this division, is not a matchable expenditure.

2001, c. 7, s. 26; 2003, c. 2, s. 51.

158.2. Subject to section 158.3, no amount of a matchable expenditure may be deducted by a taxpayer in computing the taxpayer’s income from a business or property for a taxation year.

2001, c. 7, s. 26.

158.3. If a taxpayer’s matchable expenditure would, but for section 158.2 and this section, be deductible in computing the taxpayer’s income for a taxation year, the taxpayer may deduct in respect of the matchable expenditure in computing the taxpayer’s income for a taxation year the amount that is determined under section 158.4 for the year in respect of the expenditure.

2001, c. 7, s. 26.

158.4. The amount to which section 158.3 refers for a taxation year in respect of a taxpayer’s matchable expenditure is the amount that is the least of

 (a) the aggregate of the amount by which the amount determined under this subparagraph for the preceding taxation year in respect of the matchable expenditure exceeds the amount of the matchable expenditure deductible in computing the taxpayer’s income for that preceding year and the lesser of

(i)  1/5 of the matchable expenditure, and

(ii)  the amount determined by the formula


(A / B) × C;


 (b) the aggregate of all amounts each of which is included in computing the taxpayer’s income for the year, other than any portion of such amount that is the subject of a reserve claimed by the taxpayer for the year under this Act, in respect of the right to receive production to which the matchable expenditure relates and the amount by which the amount determined under this subparagraph for the preceding taxation year in respect of the matchable expenditure exceeds the amount of the matchable expenditure deductible in computing the taxpayer’s income for that preceding year; and

 (c) the amount by which the aggregate of all amounts each of which is the amount of the matchable expenditure that would, but for this division, have been deductible in computing the taxpayer’s income for the year or a preceding taxation year exceeds the aggregate of all amounts each of which is the amount of the matchable expenditure deductible under section 158.3 in computing the taxpayer’s income for a preceding taxation year.

In the formula provided for in subparagraph a of the first paragraph,

 (a) A is the number of months that are in the taxation year and after the day on which the right to receive production to which the matchable expenditure relates is acquired;

 (b) B is the lesser of 240 and the number of months that are in the period that begins on the day on which the right to receive production to which the matchable expenditure relates is acquired and that ends on the day the right is to terminate; and

 (c) C is the amount of the matchable expenditure.

2001, c. 7, s. 26.

158.5. For the purposes of this division, the following rules apply:

 (a) where a taxpayer’s matchable expenditure is made before the day on which the related right to receive production is acquired by the taxpayer, the expenditure is deemed to have been made on that day;

 (b) where a taxpayer has one or more rights to renew a particular right to receive production to which a matchable expenditure relates for one or more additional terms, after the term that includes the time at which the particular right was acquired, the particular right is deemed to terminate on the latest day on which the latest possible such term could terminate if all rights to renew the particular right were exercised;

 (c) where a taxpayer has more than one right to receive production that can reasonably be considered to be related to each other, the rights are deemed to be one right; and

 (d) where the term of a taxpayer’s right to receive production is for an indeterminate period, the right is deemed to terminate 20 years after it is acquired.

2001, c. 7, s. 26.

158.6. Where in a taxation year a taxpayer disposes of all or part of a right to receive production to which a matchable expenditure relates, the proceeds of the disposition shall be included in computing the taxpayer’s income for the year.

2001, c. 7, s. 26.

158.7. Subject to sections 158.8 and 158.9, the amount that a taxpayer may deduct, under section 158.3, in computing the taxpayer’s income for a taxation year, in respect of a matchable expenditure, other than a matchable expenditure no portion of which would, if this division were read without reference to this section, be deductible under section 158.3 in computing the taxpayer’s income, is deemed to be the amount determined under subparagraph c of the first paragraph of section 158.4 for the year in respect of the matchable expenditure where in the year

 (a) the taxpayer disposes, otherwise than in a disposition to which subsections 1 and 2 of section 544 or sections 556 to 564.1 and 565 apply, of all of the taxpayer’s right to receive production to which the matchable expenditure relates; or

 (b) the taxpayer’s right to receive production to which the matchable expenditure relates has expired.

2001, c. 7, s. 26.

158.8. Section 158.9 applies where a taxpayer’s particular right to receive production to which a matchable expenditure, other than a matchable expenditure no portion of which would, if this division were read without reference to sections 158.7 and 158.9, be deductible under section 158.3 in computing the taxpayer’s income, relates has expired or the taxpayer has disposed of all of the right, otherwise than in a disposition to which subsections 1 and 2 of section 544 or sections 556 to 564.1 and 565 apply, and

 (a) where

(i)  during the period that begins 30 days before and ends 30 days after the disposition or expiry, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer acquires a right to receive production, in this section and section 158.9 referred to as the substituted property, that is, or is identical to, the particular right, and

(ii)  at the end of the period referred to in subparagraph i, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer owns the substituted property; or

 (b) during the period that begins at the time of the disposition or expiry and ends 30 days after that time, a taxpayer that had an interest, directly or indirectly, in the right to receive production, has another interest, directly or indirectly, in another right to receive production, which is a tax shelter or a tax shelter investment as defined by section 851.38.

2001, c. 7, s. 26.

158.9. Where this section applies because of section 158.8 to a disposition or expiry in a taxation year or a preceding taxation year of a taxpayer’s right to receive production to which a matchable expenditure relates, the following rules apply:

 (a) the amount that may be deducted under section 158.3 in respect of the expenditure in computing the taxpayer’s income for a taxation year that ends at or after the disposition or expiry of the right is the amount determined under section 158.4 for the year in respect of the expenditure; and

 (b) the amount determined under section 158.4 in respect of the expenditure for a taxation year is deemed to be the amount determined under subparagraph c of the first paragraph of section 158.4 in respect of the expenditure for the year where the year includes the time that is immediately before the first time, after the disposition or expiry,

(i)  at which the right would, if it were owned by the taxpayer, be deemed by Chapter I of Title I.1 of Book VI or section 999.1 to have been disposed of by the taxpayer,

(ii)  that is immediately before control of the taxpayer is acquired by a person or group of persons, if the taxpayer is a corporation,

(iii)  at which winding-up of the taxpayer begins, other than a winding-up to which sections 556 to 564.1 and 565 apply, if the taxpayer is a corporation,

(iv)  where section 158.8 applies otherwise than because of paragraph b thereof, at which a 30-day period begins throughout which neither the taxpayer nor a person affiliated, or who does not deal at arm’s length, with the taxpayer owns the substituted property, or a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period began, or

(v)  where section 158.8 applies otherwise than because of paragraph a thereof, at which a 30-day period begins throughout which no taxpayer who had an interest, directly or indirectly, in the right has an interest, directly or indirectly, in another right to receive production if one or more of those direct or indirect interests in the other right is a tax shelter or tax shelter investment as defined by section 851.38.

2001, c. 7, s. 26; 2004, c. 8, s. 29.

158.10. For the purposes of paragraph b of section 158.9, where a partnership ceases to exist at any time after a disposition or expiry referred to in section 158.9, the partnership is deemed not to have ceased to exist, and each taxpayer who was a member of the partnership immediately before the partnership would, but for this section, have ceased to exist is deemed to remain a member of the partnership until the time that is immediately after the first of the times described in subparagraphs i to v of paragraph b of section 158.9.

2001, c. 7, s. 26.

158.11. For the purpose of applying section 158.8, otherwise than because of paragraph b thereof, and section 158.9, a right to acquire a particular right to receive production, other than a right, as security only, derived from a hypothec, mortgage, agreement of sale or similar obligation, is deemed to be a right to receive production that is identical to the particular right.

2001, c. 7, s. 26; 2005, c. 1, s. 64.

158.12. For the purpose of applying Title VIII of Book VI to an amount that would, if this division were read without reference to this section, be a matchable expenditure any portion of the cost of which is deductible under section 158.3, the expenditure is deemed to be a tax shelter investment and that Title VIII shall be read without reference to paragraph b of section 851.41.

2001, c. 7, s. 26.

158.13. Where the rate of return on a taxpayer’s right to receive production to which a matchable expenditure, other than a matchable expenditure no portion of which would, if this division were read without reference to this section, be deductible under section 158.3 in computing the taxpayer’s income, relates is reasonably certain at the time the taxpayer acquires the right, the following rules apply:

 (a) for the purposes of section 92.5 and the regulations made under that section,

(i)  the right is deemed to be a debt obligation in respect of which no interest is stipulated to be payable in respect of the principal amount, and

(ii)  the obligation is deemed to be satisfied at the time the right terminates for an amount equal to the total of the return on the debt obligation and the amount that would otherwise be the matchable expenditure that is related to the right; and

 (b) notwithstanding section 158.3, no amount may be deducted in computing the taxpayer’s income in respect of any matchable expenditure that relates to the right.

2001, c. 7, s. 26.

158.14. Sections 158.2 to 158.12 do not apply to a taxpayer's matchable expenditure in respect of a right to receive production if

 (a) no portion of the expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm's length, to acquire the right to receive production from the other taxpayer and

(i)  no portion of the expenditure can reasonably be considered to relate to a tax shelter or a tax shelter investment, within the meaning of section 851.38, and

(ii)  none of the main purposes for making the expenditure can reasonably be considered to have been to obtain a tax benefit for the taxpayer, a person or partnership with whom the taxpayer does not deal at arm's length, or a person or partnership that holds, directly or indirectly, an interest in the taxpayer; or

 (b) the expenditure is in respect of commissions or other expenses related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer and both the taxpayer and the person to whom the expenditure is made or is to be made are insurers subject to the supervision of the Superintendent of Financial Institutions of Canada, in the case of an insurer that is required by law to report to the Superintendent of Financial Institutions of Canada, or where the insurer is an insurance corporation incorporated under the laws of a province, the superintendent of insurance or another officer or authority of that province or the Autorité des marchés financiers.

2001, c. 7, s. 26; 2003, c. 2, s. 52; 2004, c. 37, s. 90; 2009, c. 5, s. 63.

158.15. Subparagraph a of the first paragraph of section 158.4 does not apply in determining the amount that a taxpayer may deduct for a taxation year in respect of a matchable expenditure in respect of a right to receive production if

 (a) before the end of the taxation year in which the expenditure is made, the aggregate of all amounts each of which is included in computing the taxpayer's income for the year, other than the portion of such an amount that is the subject of a reserve claimed by the taxpayer for the year under this Act, in respect of the right to receive production that relates to the matchable expenditure exceeds 80% of the expenditure; and

 (b) no portion of the expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm's length, to acquire the right to receive production from the other taxpayer.

2009, c. 5, s. 64.

DIVISION XI 
RESTRICTIONS ON ADVERTISING EXPENSES
1972, c. 23.

§ 1. —  Canadian newspapers
2003, c. 2, s. 53.

159. In this subdivision,

Canadian citizen includes the following persons and entities:

 (a) a corporation or trust described in paragraph c.1 or d of section 998 formed in connection with a pension plan that exists for the benefit of individuals a majority of whom are Canadian citizens;

 (b) a trust described in paragraph h or i.1 of section 998 the annuitant in respect of which is a Canadian citizen;

 (c) a mutual fund trust, other than a mutual fund trust the majority of the units of which are held by citizens or subjects of a country other than Canada;

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

 (e) an association, society or person described in paragraph c or d of the definition of Canadian newspaper;

Canadian issue of a newspaper means an issue, including a special issue, that is typeset, printed and published in Canada and that is edited in Canada by individuals resident in Canada;

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

 (a) a Canadian citizen;

 (b) a partnership in which interests representing in value at least 3/4 of the total value of the partnership property are beneficially owned by one or more corporations described in paragraph e, one or more Canadian citizens or any combination thereof, and at least 3/4 of each income or loss of the partnership from any source is included in computing the income of one or more of those persons;

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

 (d) the State, Her Majesty in right of Canada or a province, other than Québec, or a municipality in Canada;

 (e) a corporation that is incorporated under the laws of Canada or a province of which the chairperson or other presiding officer and at least 3/4 of the directors or other similar officers are Canadian citizens and that, if it is a corporation having capital stock, is

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

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

United States means

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

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

For the purposes of the definition of Canadian issue in the first paragraph, a newspaper issue is a Canadian issue of that newspaper even if the type for the advertisements and features is not set in Canada and if the comics supplements of that issue are not printed in Canada.

For the purposes of subparagraph ii of paragraph e of the definition of Canadian newspaper in the first paragraph, the following rules apply:

 (a) where shares of a class of the capital stock of a corporation are owned, or deemed under this paragraph to be owned, at any time by another corporation, other than a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange located in Canada, each shareholder of that other corporation shall be deemed to own at that time that proportion of the number of such shares of that class that the fair market value of the shares of the capital stock of the other corporation owned at that time by the shareholder is of the fair market value of all the issued shares of the capital stock of the other corporation outstanding at that time; and

 (b) where at any time shares of a class of the capital stock of a corporation are owned, or deemed under this paragraph to be owned, by a partnership, each member of the partnership shall be deemed to own at that time the least proportion of the number of such shares of that class that the member’s share of the income or loss of the partnership from any source for its fiscal period that includes that time is of the income or loss of the partnership from that source for its fiscal period that includes that time.

For the purposes of subparagraph b of the third paragraph, where the income and loss of a partnership from any source for a fiscal period are nil, the partnership shall be deemed to have had income from that source for that fiscal period in the amount of $1,000,000.

1972, c. 23, s. 147; 1977, c. 26, s. 17; 1997, c. 31, s. 19; 2003, c. 2, s. 54; 2010, c. 5, s. 22.

159.1. Where the right to produce or publish a newspaper is held by a person, partnership, association or society described in the definition of Canadian newspaper in section 159 on behalf of a trust or an estate, the newspaper is not a Canadian newspaper unless each beneficiary under the trust or estate is a person, partnership, association or society described in that definition.

2003, c. 2, s. 55.

159.2. A newspaper is deemed to be a Canadian newspaper until the end of the twelfth month that follows the month in which it would, but for this section, cease to be a Canadian newspaper.

2003, c. 2, s. 55.

159.3. Where at any time one or more persons or entities that are not described in any of paragraphs a to e of the definition of Canadian newspaper in section 159 have any direct or indirect influence that, if exercised, would result in control in fact of a person or entity that holds a right to produce or publish issues of a newspaper, the newspaper is deemed not to be a Canadian newspaper at that time.

2003, c. 2, s. 55.

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

 (a) the issue is a Canadian issue of a Canadian newspaper; and

 (b) the issue would be a Canadian issue of a Canadian newspaper were it not that the issue was typeset or printed entirely in the United States or partly in the United States and partly in Canada.

2003, c. 2, s. 55.

159.5. Section 159.4 does not apply in respect of an advertisement in a special issue or edition of a newspaper that is edited in whole or in part and printed and published outside Canada if that special issue or edition is devoted to features or news related primarily to Canada and the publishers thereof publish such issue or edition not more frequently than twice a year.

2003, c. 2, s. 55.

§ 2. —  Periodicals
2003, c. 2, s. 55.

159.6. In this subdivision,

advertisement directed at the Canadian market has the meaning assigned by subsection 1 of section 19.01 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement);

author includes a writer, a journalist, an illustrator and a photographer;

original editorial content of an issue of a periodical means non-advertising content

 (a) the author of which is a Canadian citizen or a permanent resident within the meaning of the Immigration and Refugee Protection Act (Statutes of Canada, 2001, chapter 27); or

 (b) that is created for the Canadian market and has not been published in any other edition of that issue published outside Canada;

periodical has the meaning assigned by subsection 1 of section 19.01 of the Income Tax Act.

For the purposes of the definition of original editorial content in the first paragraph, the following rules apply:

 (a) where an issue of a periodical is published in several versions, each version is an edition of that issue; and

 (b) where an issue of a periodical is published in only one version, that version is an edition of that issue.

2003, c. 2, s. 55; 2007, c. 12, s. 42.

159.7. A taxpayer may deduct in computing income, in respect of an outlay or expense of the taxpayer for advertising space in an issue of a periodical for an advertisement directed at the Canadian market, only 1/2 of the amount of that outlay or expense if

 (a) the space occupied by the original editorial content in the issue is less than 80% of the space occupied by the total non-advertising content in the issue; and

 (b) the outlay or expense would, but for this section, be deductible in computing the taxpayer’s income.

2003, c. 2, s. 55.

§ 3. —  Broadcasting
2003, c. 2, s. 55.

159.8. In this subdivision,

foreign broadcasting undertaking means a broadcasting undertaking or a network operation located outside Canada or on a ship or aircraft not registered in Canada;

operation of a broadcasting network includes any activity involving two or more broadcasting undertakings whereby control over all or any part of the programs or program schedules of any of the broadcasting undertakings is delegated to a network operator.

2003, c. 2, s. 55.

159.9. In computing income, no deduction shall be made by a taxpayer in respect of an outlay or expense of the taxpayer for an advertisement directed primarily to a market in Canada and broadcast by a foreign broadcasting undertaking.

2003, c. 2, s. 55.

DIVISION XII 
INTEREST AND CERTAIN PROPERTY TAXES
1972, c. 23; 2004, c. 21, s. 61.

160. A taxpayer may deduct the lesser of a reasonable amount and the amount paid in the year or payable in respect of the year, depending on the method that he regularly follows in computing his income, pursuant to a legal obligation to pay interest on:

 (a) borrowed money used to earn income from a business or property;

 (b) an amount payable for property acquired to gain or produce income from it or from a business;

 (c) an amount paid to the taxpayer under a law to advance or sustain the technological capacity of any industry or for any other reason, to the extent prescribed; or

 (d) borrowed money used to acquire an interest in an annuity contract in respect of which sections 92.11 to 92.19 apply, or would apply if the contract had an anniversary day in the year at a time when the taxpayer held the interest, except that, where annuity payments have commenced under the contract in a preceding taxation year, the amount of interest paid or payable in the year shall not be deducted to the extent that it exceeds the amount included under the said sections in computing the taxpayer's income for the year with respect to his interest in the contract.

1972, c. 23, s. 148; 1984, c. 15, s. 39; 1986, c. 19, s. 30; 1991, c. 25, s. 52; 1993, c. 16, s. 87; 2005, c. 1, s. 65.

161. No amount may be deducted under paragraphs a and b of section 160 to the extent that it represents interest on

 (a) borrowed money used to acquire property the income from which would be exempt from tax or to acquire a life insurance policy which does not include a policy that is an annuity contract issued before 1 January 1978 providing for annuity payments to commence not later than the day on which the policy holder attains 75 ;years of age, a policy that is a registered pension plan, a pooled registered pension plan, a registered retirement savings plan, a deferred profit sharing plan, an income-averaging annuity contract or a policy issued under any such plan or contract, or a policy that is an annuity contract all or part of the insurer's reserves for which vary in amount depending on the fair market value of a specified group of properties;

 (b) an amount payable for property referred to in paragraph a or for property representing an interest in a life insurance policy referred to in the said paragraph; or

 (c) borrowed money used to acquire a share of the capital stock of the corporation governed by the Act constituting Capital régional et coopératif Desjardins (chapter C-6.1), a class “A” or class “B” share issued by the corporation governed by 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 a class “A” share issued by the corporation governed by the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.) (chapter F-3.2.1), or an amount payable for such shares.

1972, c. 23, s. 149; 1978, c. 26, s. 37; 1980, c. 13, s. 10; 1984, c. 35, s. 13; 1991, c. 25, s. 53; 1993, c. 16, s. 88; 2001, c. 53, s. 45; 2004, c. 21, s. 62; 2005, c. 1, s. 66; 2010, c. 25, s. 17; 2015, c. 21, s. 129.

162. For the purposes of section 160, where a person borrows money in consideration of a promise by him to repay a larger amount and pay interest on the larger amount, the amount borrowed is deemed the larger amount. However, where the amount actually borrowed has been used in part only to earn income from a business or property, the amount so used is deemed the proportion of the larger amount that the amount actually so used is of the amount actually borrowed.

1972, c. 23, s. 150.

163. There shall be deductible an amount paid in the year pursuant to a legal obligation to pay interest on an amount that would be deductible under section 160 if it were paid in the year or payable in respect of the year.

1972, c. 23, s. 151.

163.1. For the purposes of sections 160 and 163, an amount paid in the year by a taxpayer pursuant to a legal obligation to pay interest includes an amount paid by the taxpayer in the year, after 1980 and in respect of a period commencing after 1980, which is an interest, within the meaning of subparagraph i of the first paragraph of section 835, in respect of a policy loan, within the meaning that it would be given under subparagraph h of the first paragraph of the same section if that subparagraph did not refer to an advance granted in accordance with the terms and conditions of an annuity contract granted by an insurer to the extent that the amount is verified by the insurer in prescribed form and within the prescribed time to be

 (a) such an interest paid in the year on the loan;

 (b) such an interest that is not included in the computation of the adjusted cost basis, within the meaning of sections 976 and 976.1, to the taxpayer, of his interest in the policy; and

 (c) an interest that is not paid on money borrowed before 1978 to acquire a life insurance policy that is an annuity contract issued before 1978 under which pension payments are to begin not later than on the day the policyholder reaches 75 years of age or on an amount payable in respect of property acquired before 1978 which is an interest in such a contract.

1981, c. 12, s. 1; 1986, c. 19, s. 31; 1996, c. 39, s. 273; 2001, c. 53, s. 46; 2005, c. 1, s. 67; 2010, c. 25, s. 18.

163.2. (Repealed).

1984, c. 35, s. 14; 1990, c. 59, s. 91.

164. Notwithstanding section 160, no amount shall be deducted by a taxpayer in computing his income for a particular taxation year in respect of an expense incurred by him in the year as, or in lieu of, full or partial payment of interest on debt relating to the acquisition of land or as, or in lieu of, full or partial payment of property taxes paid or payable by him in respect of land to a province or to a Canadian municipality, except to the extent of the amount determined in the second paragraph, unless, having regard to all the circumstances, including the cost to the taxpayer of the land in relation to his gross revenue therefrom for the particular year or any preceding taxation year, the land can reasonably be considered to have been, in the year,

 (a) used in the course of a business carried on in the particular year by the taxpayer, other than a business in the ordinary course of which land is held primarily for the purposes of resale or development, or

 (b) held primarily by the taxpayer for the purposes of gaining or producing income therefrom for the particular year.

The amount referred to in the first paragraph is equal to the aggregate of

 (a) the amount by which the taxpayer's gross revenue from the land for the particular year exceeds the aggregate of all other amounts deducted in computing his income from the land for the year;

 (b) where the taxpayer is a corporation whose principal business is the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of immovable property owned by it, to or for a person with whom it is dealing at arm's length, the corporation's base level deduction for the particular year.

1972, c. 23, s. 152; 1975, c. 22, s. 20; 1980, c. 13, s. 11; 1990, c. 59, s. 92; 1997, c. 3, s. 71.

165. For the purposes of section 164:

 (a) the word land, except to the extent that it is used for the provision of parking facilities for a fee or charge, does not include:

(i)  any building or other structure affixed to land;

(ii)  the land subjacent to any property described in subparagraph i; or

(iii)  the land immediately contiguous to the land contemplated in subparagraph ii that is a parking area, driveway, yard, garden or similar land necessary for the use of any property described in subparagraph i;

 (b) the expression property taxes does not include an income or profits tax or a tax relating to the transfer of property;

 (c) the expression interest on debt relating to the acquisition of land includes interest paid or payable in the year in respect of borrowed money that may reasonably be considered, having regard to all the circumstances:

(i)  to be borrowed money used in respect of the acquisition of land, even if it cannot be identified with particular land; or

(ii)  to have been used to assist, directly or indirectly, any person with whom the taxpayer does not deal at arm's length, a corporation of which the taxpayer is a specified shareholder or a partnership of which the taxpayer's share of any income or loss is 10% or more, to acquire land to be used or held by that person, corporation or partnership otherwise than as provided for in subparagraph a or b of the first paragraph of section 164, except where the assistance is in the form of a loan to that person, corporation or partnership and a reasonable rate of interest thereon is charged by the taxpayer.

1972, c. 23, s. 153; 1975, c. 22, s. 21; 1990, c. 59, s. 93; 1997, c. 3, s. 71.

165.1. Where a taxpayer who is a member of a partnership is obligated to pay an amount as interest or in full or partial payment of interest on money that was borrowed by him before 1 April 1977 and that was used by him to acquire land owned by the partnership before that day or pursuant to an obligation entered into by him before 1 April 1977 to pay for such land, and, in a taxation year of the taxpayer, the partnership disposes of all or part of the land, or the taxpayer disposes of all or part of his interest in the partnership, to a person other than a person with whom the taxpayer does not deal at arm's length, the taxpayer may, in computing his income for the year or any subsequent taxation year, deduct such part of the amount as may reasonably be attributed to the part of the land or interest in the partnership, as the case may be, that is so disposed of and that was not

 (a) deductible under section 164 in computing the income of the taxpayer for any previous year,

 (b) deductible in computing the income of another taxpayer for any taxation year,

 (c) included in computing the adjusted cost base to the taxpayer of any property, nor

 (d) deductible, under this section, in computing the income of the taxpayer for a previous taxation year.

1978, c. 26, s. 38; 1995, c. 49, s. 48; 1997, c. 3, s. 71.

165.2. For the purposes of this division, a corporation's base level deduction for a taxation year is equal to the amount that would be the amount of interest for the year, computed at the prescribed rate, in respect of a loan of $1,000,000 outstanding throughout the year, unless the corporation is associated in the year with one or more other corporations in which case, subject to sections 165.3 to 165.5, its base level deduction for the year is nil.

1990, c. 59, s. 94; 1997, c. 3, s. 71.

165.3. Notwithstanding section 165.2, where none of the corporations that are associated with each other in a taxation year has, in that year, an establishment in a province other than Québec and all of those corporations have filed with the Minister, in prescribed form, an agreement whereby, for the purposes of this division, they allocate an amount to one or more of them for the taxation year and the amount so allocated or the aggregate of the amounts so allocated, as the case may be, does not exceed $1,000,000, the base level deduction for each of the corporations for the year is equal to the base level deduction that would be computed under section 165.2 in respect of the corporation if the reference in that section to an amount of $1,000,000 were read as a reference to the amount so allocated to it.

1990, c. 59, s. 94; 1997, c. 3, s. 71; 1999, c. 83, s. 44.

165.4. Where any of the corporations referred to in section 165.3 has failed to file with the Minister an agreement referred to in that section within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purposes of any assessment of tax under this Part, the Minister shall, for the purposes of this division, allocate an amount to one or more of them for the taxation year, which amount or the aggregate of which amounts, as the case may be, shall be equal to $1,000,000 and, in any such case, the amount so allocated to any such corporation is deemed to be an amount allocated to the corporation pursuant to section 165.3.

1990, c. 59, s. 94; 1997, c. 3, s. 71; 1999, c. 83, s. 44; 2010, c. 25, s. 19.

165.4.1. Notwithstanding section 165.2, where one of the corporations that are associated with each other in a taxation year has, in that year, an establishment in a province other than Québec and an amount is, pursuant to subsection 2.3 of section 18 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), allocated to one or more such corporations for the year, the base level deduction for the year for each such corporation shall be equal to its base level deduction determined for that year for the purposes of paragraph f of subsection 2 of the said section 18.

Where, for a taxation year, a corporation referred to in the first paragraph files an agreement with the Minister of Revenue of Canada in accordance with paragraph 2.3 of section 18 of the Income Tax Act, the corporation shall file with the Minister, for that year, a copy of that agreement.

1999, c. 83, s. 45; 2000, c. 5, s. 293.

165.5. Notwithstanding any other provision of this division,

 (a) where a corporation to which section 165.3 or 165.4 applies, in this section referred to as the first corporation, has more than one taxation year ending in the same calendar year and is associated in two or more of those taxation years with another corporation that has a taxation year ending in that calendar year, the base level deduction of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to paragraph b, an amount equal to its base level deduction for the first such taxation year determined without reference to paragraph b; and

 (b) where a corporation to which any of sections 165.2 to 165.4 applies, other than a corporation to which section 165.4.1 applies, has a taxation year that is less than 51 weeks, its base level deduction for the year is equal to that proportion of its base level deduction for the year, determined without reference to this paragraph, that the number of days in the year is of 365.

1990, c. 59, s. 94; 1997, c. 3, s. 71; 1999, c. 83, s. 46.

166. A corporation shall not deduct an amount paid as interest or otherwise to the holders of its income bonds or income debentures unless they have been issued or their provisions in respect of interest have been adopted since 1930 to provide the debtor with assistance in meeting his financial difficulties and to replace or alter bonds or debentures which, at the end of 1930, were bearing a fixed unconditional rate of interest.

1972, c. 23, s. 154; 1997, c. 3, s. 71; 1997, c. 14, s. 46.

167. Where, by virtue of the disposition of a debt obligation other than an income bond, an income debenture, a development bond or a small business bond, the transferee has become entitled to an amount of interest that accrued thereon for a period ending at the time of the disposition and that is not payable until after that time, such amount shall be included as interest in computing the transferor's income for his taxation year in which the disposition occurred, except to the extent that it was otherwise included in computing his income for the year or a preceding taxation year.

In that case, the transferee may, in computing his income for a taxation year, deduct the amount of any interest accrued at the time of the disposition to the extent that the amount was included as interest in computing his income for the year.

1972, c. 23, s. 155; 1984, c. 15, s. 40; 1996, c. 39, s. 273.

167.1. Where a person who has issued a debt obligation, other than an income bond, an income debenture, a small business development bond or a small business bond, is obligated to pay an amount that is stipulated to be interest on that debt obligation in respect of a period before its issue and it is reasonable to consider that the consideration paid to the issuer by the person to whom the debt obligation was issued includes that interest, the following rules apply:

 (a) for the purposes of sections 87, 87.2, 89 to 92.7 and 167, the issue of the debt obligation is deemed to be a disposition of the debt obligation from the issuer, as transferor, to the person to whom the obligation is issued, as transferee, and that interest is deemed to be interest that accrued on the debt obligation for a period ending at the time of the disposition; and

 (b) notwithstanding paragraph a or any other provision of this Act, the issuer shall not deduct or include that interest in computing his income.

1985, c. 25, s. 34; 1991, c. 25, s. 54.

168. (Repealed).

1972, c. 23, s. 156; 1984, c. 15, s. 41.

169. Despite any other provision of this Act (other than section 174.2), a corporation or a trust shall not make any deduction in respect of the proportion, determined in accordance with section 170, of any amount otherwise deductible in computing its income from a business (other than the Canadian banking business of an authorized foreign bank) or property for a taxation year, in respect of interest paid or payable by it on outstanding debts to specified persons not resident in Canada.

1972, c. 23, s. 157; 1997, c. 3, s. 71; 2015, c. 21, s. 130; 2015, c. 24, s. 33.

170. The proportion to which section 169 refers is the proportion that the amount described in the second paragraph is of the average (in this section referred to as the “average outstanding debts”) of all amounts each of which is, in respect of a month that ends in the year, the greatest amount at any time in the month of the corporation's or trust's outstanding debts to specified persons not resident in Canada.

The amount to which the first paragraph refers is equal to the amount by which the corporation's or trust's average outstanding debts for the year exceeds the amount equal to 150% of the corporation's or trust's equity amount for the year.

1972, c. 23, s. 158; 1997, c. 3, s. 71; 2003, c. 2, s. 56; 2015, c. 21, s. 131; 2015, c. 24, s. 34.

171. For the purposes of sections 169, 170 and 172, a corporation's or trust's outstanding debts at any particular time in a taxation year to specified persons not resident in Canada are the aggregate of all amounts each of which is an amount outstanding at that time in respect of any debt or other obligation to pay an amount payable by the corporation or trust to a person who is, in the year, a specified person not resident in Canada, on which interest paid or payable is or would be, but for section 169, deductible in computing the corporation's or trust's income for the year.

However, the outstanding debts referred to in sections 169 and 170 do not include an amount outstanding at the particular time in relation to a debt or other obligation to pay an amount to

 (a) an insurance corporation not resident in Canada to the extent that the amount outstanding was, for the insurance corporation’s taxation year that included the particular time, designated insurance property in relation to an insurance business carried on in Canada through an establishment; or

 (b) an authorized foreign bank, if the bank uses or holds the amount outstanding at the particular time in its Canadian banking business.

1972, c. 23, s. 159; 1975, c. 22, s. 22; 1984, c. 15, s. 42; 1990, c. 59, s. 95; 1994, c. 22, s. 108; 1997, c. 3, s. 71; 1998, c. 16, s. 99; 2004, c. 8, s. 30; 2015, c. 24, s. 35.

172. Despite any other provision of this Act, other than section 173.1, for the purposes of this section, sections 169 to 171 and 173.2 to 174,

 (a) “specified shareholder” of a corporation at any time means a person who at that time, either alone or together with persons with whom that person is not dealing at arm's length, owns shares of the capital stock of the corporation

(i)  that give the holders thereof 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, or

(ii)  that have a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the corporation;

 (b) “specified shareholder not resident in Canada” of a corporation at any time means a specified shareholder of the corporation who was at that time a person not resident in Canada or an investment corporation owned by persons not resident in Canada;

 (b.1) “equity contribution”, to a trust, means a transfer of property to the trust that is made

(i)  in exchange for an interest as a beneficiary under the trust,

(ii)  in exchange for a right to acquire an interest as a beneficiary under the trust, or

(iii)  gratuitously by a person beneficially interested in the trust;

 (b.2) “tax-paid earnings”, of a trust resident in Canada for a taxation year, means the aggregate of all amounts each of which is the amount, in respect of a particular taxation year of the trust that ended before the year, determined by the formula


A - B;


 (b.3) “beneficiary” means a beneficiary within the meaning of the second paragraph of section 646;

 (b.4) “specified beneficiary”, of a trust at any time, means a person who at that time, either alone or together with persons with whom that person does not deal at arm's length, has an interest as a beneficiary under the trust with a fair market value that is not less than 25% of the fair market value of all interests as a beneficiary under the trust;

 (b.5) “specified beneficiary not resident in Canada”, of a trust at any time, means a specified beneficiary of the trust who at that time is a person not resident in Canada;

 (b.6) “equity amount”, of a corporation or a trust for a taxation year, means

(i)  in the case of a corporation resident in Canada, the aggregate of

(1)  the retained earnings of the corporation at the beginning of the year, except to the extent that those earnings include retained earnings of any other corporation,

(2)  the average of all amounts each of which is the corporation's contributed surplus (other than any portion of that contributed surplus that arose in connection with an investment to which subsection 2 of section 212.3 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) applies) at the beginning of a month that ends in the year, to the extent that it was contributed by a specified shareholder not resident in Canada of the corporation, and

(3)  the average of all amounts each of which is the corporation's paid-up capital at the beginning of a month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified shareholder not resident in Canada of the corporation,

(ii)  in the case of a trust resident in Canada, the amount determined by the formula


C - D, or


(iii)  in the case of a corporation or trust that is not resident in Canada, the amount determined by the formula


40% × (E - F);


 (c) “specified person not resident in Canada” in respect of a corporation or a trust means

(i)  a specified shareholder not resident in Canada of the corporation or a specified beneficiary not resident in Canada of the trust, or

(ii)  a person not resident in Canada not dealing at arm's length with a specified shareholder of the corporation or with a specified beneficiary of the trust, as the case may be.

In the formulas in subparagraphs b.2 and b.6 of the first paragraph,

 (a) A is the taxable income of the trust under this Part for the particular year;

 (b) B is the total of tax payable under this Part by the trust for the particular year, tax payable by the trust for the particular year under Part I of the Income Tax Act and all income taxes payable by the trust for the particular year under the laws of a province, other than Québec;

 (c) C is the total of the average of all amounts each of which is the total amount of all equity contributions to the trust made before a month that ends in the year, to the extent that the contributions were made by a specified beneficiary not resident in Canada of the trust, and the tax-paid earnings of the trust for the year;

 (d) D is the average of all amounts each of which is the total of all amounts that were paid or became payable by the trust to a beneficiary of the trust in respect of the beneficiary's interest under the trust before a month that ends in the year except to the extent that the amount is

(i)  included in computing the beneficiary's income for a taxation year because of section 663,

(ii)  an amount in respect of which tax was deducted under Part XIII of the Income Tax Act because of paragraph c of subsection 1 of section 212 of that Act, or

(iii)  paid or payable to a person other than a specified beneficiary not resident in Canada of the trust;

 (e) E is the average of all amounts each of which is the cost of a property, other than an interest as a member of a partnership, owned by the corporation or trust at the beginning of a month that ends in the year, that is used by the corporation or trust in the year in, or held by it in the year in the course of, carrying on a business in Canada; and

 (f) F is the average of all amounts each of which is the total of all amounts outstanding, at the beginning of a month that ends in the year, in relation to a debt or other obligation to pay an amount that was payable by the corporation or trust and that may reasonably be regarded as relating to a business carried on by it in Canada, other than a debt or obligation that is included in the outstanding debts to specified persons not resident in Canada of the corporation or trust.

For the purpose of determining whether a particular person is a specified shareholder of a corporation at any time, the particular person or the person with whom the particular person is not dealing at arm's length, as the case may be, is deemed at that time to own the shares referred to in subparagraph a of the first paragraph and the corporation referred to in subparagraph b of the first paragraph is deemed at that time to have redeemed, acquired or cancelled the shares referred to in the said subparagraph b, where the particular person or the person with whom the particular person is not dealing at arm's length has at that time a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, other than a right that is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual,

 (a) to, or to acquire, shares in a corporation or to control the voting rights of shares in a corporation; or

 (b) to cause a corporation to redeem, acquire or cancel any of its shares, other than shares held by the particular person or the person with whom the particular person is not dealing at arm's length.

For the purpose of determining whether a particular person is a specified beneficiary of a trust at any time, the following rules apply:

 (a) if the particular person, or a person with whom the particular person does not deal at arm's length, has at that time a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, to acquire an interest as a beneficiary under the trust, the particular person or the person with whom the particular person does not deal at arm's length, as the case may be, is deemed at that time to own the interest;

 (b) if the particular person, or a person with whom the particular person does not deal at arm's length, has at that time a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, to cause a trust to redeem, acquire or cancel any interest in it as a beneficiary (other than an interest held by the particular person or a person with whom the particular person does not deal at arm's length), the trust is deemed at that time to have redeemed, acquired or cancelled the interest, unless the right is not exercisable at that time because the exercise of the right is contingent on the death, bankruptcy or permanent disability of an individual; and

 (c) if the amount of income or capital of the trust that the particular person, or a person with whom the particular person does not deal at arm's length, may receive as a beneficiary of 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.

For the purposes of subparagraph e of the second paragraph, the following rules apply:

 (a) if a property is partly used or held by a taxpayer in a taxation year in the course of carrying on a business in Canada, the cost of the property to the taxpayer is deemed for the year to be equal to the proportion of the cost to the taxpayer of the property (determined without reference to this paragraph) that the proportion of the use or holding made of the property in the course of carrying on a business in Canada in the year is of the whole use or holding made of the property in the year; and

 (b) if a corporation or trust is deemed to own a portion of a property of a partnership because of section 174.1 at any time,

(i)  the property is deemed to have, at that time, a cost to the corporation or trust equal to the proportion of the cost of the property to the partnership that is the proportion that the debts and other obligations to pay an amount of the partnership allocated to it under section 174.1 is of the total amount of all debts and other obligations to pay an amount of the partnership, and

(ii)  in the case of a partnership that carries on a business in Canada, the corporation or trust is deemed to use or hold the property in the course of carrying on a business in Canada to the extent the partnership uses or holds the property in the course of carrying on a business in Canada for the fiscal period of the partnership that includes that time.

1972, c. 23, s. 160; 1973, c. 18, s. 5; 1984, c. 15, s. 42; 1986, c. 15, s. 51; 1994, c. 22, s. 109; 1997, c. 3, s. 71; 2003, c. 2, s. 57; 2015, c. 24, s. 36.

173. (Repealed).

1973, c. 18, s. 6; 1997, c. 3, s. 71; 2003, c. 2, s. 58.

173.1. For the purposes of this section and sections 169 to 172 and 173.2 to 174, where a particular person would, but for this section, be a specified shareholder of a corporation or a specified beneficiary of a trust at any time, the particular person is deemed not to be a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, at that time if

 (a) there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person ceases to be a specified shareholder of the corporation or a specified beneficiary of the trust; and

 (b) the purpose for which the particular person became a specified shareholder of the corporation or a specified beneficiary of the trust was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm's length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm's length.

1994, c. 22, s. 110; 1997, c. 3, s. 71; 2003, c. 2, s. 59; 2015, c. 24, s. 37.

173.2. For the purposes of sections 169 to 173.1, 173.3 and 174, a corporation not resident in Canada is deemed to be a specified shareholder not resident in Canada of itself and a trust not resident in Canada is deemed to be a specified beneficiary not resident in Canada of itself.

2015, c. 24, s. 38.

173.3. For the purposes of this Act, where a trust that is resident in Canada designates, for the purposes of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)), an amount for a taxation year in accordance with subsection 5.4 of section 18 of that Act in respect of all or any portion of an amount paid or credited as interest by the trust, or by a partnership, in the year to a person not resident in Canada, the amount so designated is deemed to be income of the trust that has been paid to the person not resident in Canada as a beneficiary of the trust, and not to have been paid or credited by the trust or the partnership as interest, to the extent that an amount in respect of the interest

 (a) is included in computing the income of the trust for the year under paragraph m.1 of section 87; or

 (b) is not deductible in computing the income of the trust for the year because of section 169.

Chapter V.2 of Title II of Book I applies in relation to a designation made under subsection 5.4 of section 18 of the Income Tax Act.

2015, c. 24, s. 38.

174. For the purposes of sections 169 to 171, where a particular person, described in the second paragraph, makes a loan to another person on condition that a loan be made by a person to a particular corporation or trust, the lesser of these two loans is deemed to be a debt incurred by the particular corporation or trust to the particular person.

The particular person referred to in the first paragraph is

 (a) a specified shareholder not resident in Canada of a corporation or a specified beneficiary not resident in Canada of a trust; or

 (b) a person not resident in Canada who is not dealing at arm's length with a specified shareholder of a corporation or with a specified beneficiary not resident in Canada of a trust.

1972, c. 23, s. 161; 1977, c. 26, s. 18; 1984, c. 15, s. 43; 1986, c. 19, s. 32; 1997, c. 3, s. 71; 2015, c. 24, s. 39.

174.1. For the purposes of sections 87.0.1 and 169 to 174 and this section, each member of a partnership at a particular time is deemed at that time

 (a) to owe the portion (in this section referred to as the “debt amount”) of any debt or other obligation to pay an amount of the partnership and to own the portion of each property of the partnership that is equal to the following proportion of the debt or other obligation:

(i)  the agreed proportion, in respect of the member of the partnership, determined for the partnership's last fiscal period ending at or before the end of the taxation year referred to in section 169 and at a time when the member is a member of the partnership, and

(ii)  if no agreed proportion may be determined, in respect of the member of the partnership, in accordance with subparagraph i, the proportion that the fair market value of the member's interest in the partnership at the particular time is of the fair market value of all interests in the partnership at the particular time;

 (b) to owe the debt amount to the person to whom the partnership owes the debt or other obligation to pay an amount; and

 (c) to have paid interest on the debt amount that is deductible in computing the member's income to the extent that an amount in respect of interest paid or payable on the debt amount by the partnership is deductible in computing the partnership's income.

2015, c. 21, s. 132; 2015, c. 24, s. 40.

174.2. Any amount in respect of interest paid or payable to a controlled foreign affiliate of a corporation resident in Canada that would otherwise not be deductible by the corporation for a taxation year because of section 169 may be deducted to the extent that an amount included under section 580 in computing the corporation's income for the year or a subsequent year can reasonably be considered to be in respect of the interest.

2015, c. 21, s. 132.

175. (Repealed).

1972, c. 23, s. 162; 1982, c. 5, s. 47; 1986, c. 19, s. 33.

175.1.  (1) Notwithstanding any other provision of this Act, a taxpayer shall not, in computing the taxpayer's income for a taxation year from a business or property other than income from a business computed in accordance with the method authorized by section 194, make any deduction in respect of an outlay or expense to the extent that it can reasonably be regarded as having been made or incurred

(a)  as consideration for services to be rendered after the end of the year;

(b)  as consideration for insurance in respect of a period after the end of the year, other than, where the taxpayer is an insurer, consideration for reinsurance;

(c)  as, or in lieu of, full or partial payment of interest, tax or taxes other than taxes payable by an insurer in relation to the insurance premiums of a policy referred to in paragraph a or b of subsection 4, rent or royalty in respect of a period that is after the end of the year; or

(d)  as consideration, subject to sections 869.4 to 869.7, for a “designated employee benefit” (as defined in section 869.1) required to be provided after the end of the year (other than consideration payable in the year, to a corporation that is licensed to provide insurance, for coverage in respect of the year).

 (2) The portion of any outlay or expense, other than an outlay or expense of a corporation, partnership or trust as, or in lieu of, full or partial payment of interest, that, but for subsection 1, would have been deductible in computing a taxpayer's income for a taxation year is deductible in computing the taxpayer's income for the subsequent taxation year to which it can reasonably be considered to relate.

 (3) For the purposes of subsection 1, an outlay or expense is deemed not to include a payment that is referred to in paragraph d or e of subsection 1 of section 222 and that

(a)  is made by the taxpayer to a person or partnership with which the taxpayer deals at arm's length; and

(b)  is not an expenditure in respect of scientific research and experimental development related to a business of the taxpayer and undertaken in Canada on behalf of the taxpayer.

 (4) For the purposes of this section, an outlay or expense made or incurred by an insurer on account of the acquisition of an insurance policy, other than the following policies, is deemed to be an expense incurred as consideration for services rendered consistently throughout the period of coverage of the policy:

(a)  a non-cancellable or guaranteed renewable accident and sickness insurance policy; or

(b)  a life insurance policy other than a group term life insurance policy that provides coverage for a period of 12 months or less.

1982, c. 5, s. 47; 1988, c. 18, s. 12; 1990, c. 59, s. 96; 1994, c. 22, s. 111; 1997, c. 3, s. 71; 1997, c. 31, s. 20; 2004, c. 8, s. 31; 2011, c. 6, s. 121; 2015, c. 21, s. 133.

175.1.1. Subject to section 851.22.13.1, where, at any time, a payment is made to a person or partnership by a taxpayer in the course of carrying on a business or earning income from property in respect of borrowed money or on an amount payable for property acquired by the taxpayer, in this section referred to as a debt obligation, as consideration for a reduction in the rate of interest payable by the taxpayer on the debt obligation, or as a penalty or bonus payable by the taxpayer by reason of the repayment by the taxpayer of all or part of the principal amount of the debt obligation before its maturity, the payment is deemed, to the extent that it may reasonably be considered to relate to, and does not exceed the value at that time of, an amount that, but for the reduction or the repayment, would have been paid or payable by the taxpayer as interest on the debt obligation for a taxation year of the taxpayer ending after that time,

 (a) for the purposes of this Part, to have been paid by the taxpayer and received by the person or partnership at that time as interest on the debt obligation, and

 (b) for the purpose of computing the taxpayer's income in respect of the business or property for the year, to have been paid or payable by the taxpayer in that year as interest pursuant to a legal obligation to pay interest,

(i)  in the case of any such reduction, on the debt obligation, and

(ii)  in the case of any such repayment, where the repayment was in respect of all or part of the principal amount of the debt obligation that was

(1)  borrowed money, except to the extent that the borrowed money was used by the taxpayer to acquire property, on borrowed money used in the year for the purpose for which the borrowed money that was repaid was used, or

(2)  either borrowed money used to acquire property or an amount payable for property acquired by the taxpayer, on the debt obligation to the extent that the property or property substituted therefor is used by the taxpayer in the year for the purpose of earning income therefrom or for the purposes of gaining and producing income from a business.

The first paragraph does not apply where the payment

 (a) may reasonably be considered to have been made in respect of the extension of the term of a debt obligation or in respect of the substitution or conversion of a debt obligation to another debt obligation or share, or

 (b) is contingent or dependent on the use of or production from property or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

1993, c. 16, s. 89; 1995, c. 49, s. 49; 1997, c. 3, s. 71; 2001, c. 7, s. 27; 2003, c. 2, s. 60.

175.1.2. For the purposes of this Part, the amount of interest payable on borrowed money or on an amount payable for property, in this section and sections 175.1.3 to 175.1.8 referred to as the debt obligation, by a corporation, partnership or trust, in this section and sections 175.1.3 to 175.1.7 referred to as the borrower, in respect of a taxation year is, notwithstanding subparagraph i of paragraph b of section 175.1.1, deemed to be an amount equal to the lesser of

 (a) the amount of interest, not in excess of a reasonable amount, that would have been payable on the debt obligation by the borrower in respect of the year if no amount had been paid before the end of the year in satisfaction of the obligation to pay interest on the debt obligation in respect of the year and if the amount outstanding at each particular time in the year that is after 31 December 1991 on account of the principal amount of the debt obligation were the amount by which the amount outstanding at the particular time on account of the principal amount of the debt obligation exceeds the total of

(i)  the aggregate of all amounts each of which is an amount paid before the particular time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after 31 December 1991, after the beginning of the year, and after the time the amount was so paid, other than a period or part thereof that is in the year where no such amount has been paid before the particular time in respect of a period or part thereof that is after the end of the year, and

(ii)  the amount by which

(1)  the aggregate of all amounts each of which is the amount of interest payable on the debt obligation, determined without reference to this section, by the borrower in respect of a taxation year ending after 31 December 1991 and before the year, to the extent that such interest does not exceed a reasonable amount, exceeds

(2)  the aggregate of all amounts each of which is the amount of interest deemed by this section to have been payable on the debt obligation by the borrower in respect of a taxation year ending before the year; and

 (b) the amount by which

(i)  the aggregate of all amounts each of which is an amount of interest payable on the debt obligation, determined without reference to this section, by the borrower in respect of the year or a taxation year ending after 31 December 1991 and before the year, to the extent that such interest does not exceed a reasonable amount, exceeds

(ii)  the aggregate of all amounts each of which is the amount of interest deemed by this section to be payable on the debt obligation by the borrower in respect of a taxation year ending before the year.

1994, c. 22, s. 112; 1997, c. 3, s. 71.

175.1.3. Where at any time in a taxation year of a borrower a debt obligation of the borrower is settled or extinguished or the holder of the obligation acquires or reacquires property of the borrower in circumstances in which sections 484 to 484.6 apply in respect of the debt obligation and, at that time, the aggregate determined in the second paragraph exceeds the aggregate determined in the third paragraph, which excess is in this section referred to as the excess amount, the following rules apply:

 (a) for the purpose of applying sections 484 to 484.6 in respect of the borrower, the principal amount at that time of the debt obligation is deemed to be equal to the amount by which the principal amount at that time of the debt obligation exceeds the excess amount; and

 (b) the excess amount shall be deducted at that time in computing the forgiven amount in respect of the obligation, within the meaning assigned by section 485.

The aggregate first referred to in the first paragraph, at any particular time, is equal to the total of the following amounts:

 (a) the aggregate of all amounts each of which is an amount paid at or before that time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part of a period that is after the particular time; and

 (b) the aggregate of all amounts each of which is the amount of interest payable on the debt obligation, determined without reference to section 175.1.2, by the borrower in respect of a taxation year ending after 31 December 1991 and before the particular time, or in respect of a period or part thereof that is in the year and before the particular time, to the extent that such interest does not exceed a reasonable amount.

The second aggregate referred to in the first paragraph, at any particular time, is equal to the total of the following amounts:

 (a) the aggregate of all amounts each of which is an amount of interest deemed by section 175.1.2 to have been payable on the debt obligation by the borrower in respect of a taxation year ending before the particular time; and

 (b) the amount of interest that would be deemed by section 175.1.2 to have been payable on the debt obligation by the borrower in respect of the year if the year had ended immediately before the particular time.

1994, c. 22, s. 112; 1996, c. 39, s. 52.

175.1.4. Where an amount is paid at any time by a person or partnership in respect of a debt obligation of a borrower as, or in lieu of, full or partial payment of interest on the debt obligation in respect of a period or part thereof that is after 31 December 1991 and after the time the amount was so paid, or as consideration for a reduction in the rate of interest payable on the debt obligation, excluding a payment described in the second paragraph of section 175.1.1, in respect of a period or part thereof that is after 31 December 1991 and after the time the amount was so paid, that amount is deemed,

 (a) for the purposes of section 175.1.5 and, subject to that section, for the purposes of subparagraph 1 of subparagraph ii of paragraph a of section 175.1.2, subparagraph i of paragraph b of that section, subparagraph b of the second paragraph of section 175.1.3 and section 175.1.6, to be an amount of interest payable on the debt obligation by the borrower in respect of that period or part thereof; and

 (b) for the purposes of subparagraph i of paragraph a of section 175.1.2 and subparagraph a of the second paragraph of section 175.1.3, to be an amount paid at that time in satisfaction of the obligation to pay interest on the debt obligation in respect of that period or part thereof.

1994, c. 22, s. 112; 1997, c. 3, s. 71.

175.1.5. Where an amount of interest payable on a debt obligation, determined without reference to section 175.1.2, by a borrower in respect of a particular period or part thereof that is after 31 December 1991 can reasonably be regarded as an amount payable as consideration for a reduction in the amount of interest that would otherwise be payable on the debt obligation in respect of a subsequent period, or a reduction in the amount that was or may be paid before the beginning of a subsequent period in satisfaction of the obligation to pay interest on the debt obligation in respect of that subsequent period, such reductions being determined without reference to the existence of, or the amount of any interest paid or payable on, any other debt obligation, that amount,

 (a) for the purposes of subparagraph 1 of subparagraph ii of paragraph a of section 175.1.2, subparagraph i of paragraph b of that section, subparagraph b of the second paragraph of section 175.1.3 and section 175.1.6, is deemed to be an amount of interest payable on the debt obligation by the borrower in respect of the subsequent period and not to be an amount of interest payable on the debt obligation by the borrower in respect of the particular period; and

 (b) when paid, is deemed for the purposes of subparagraph i of paragraph a of section 175.1.2 and subparagraph a of the second paragraph of section 175.1.3 to be an amount paid in satisfaction of the obligation to pay interest on the debt obligation in respect of the subsequent period.

1994, c. 22, s. 112.

175.1.6. Where liability in respect of a debt obligation of a person or partnership is assumed by a borrower at any time,

 (a) the amount of interest payable on the debt obligation, determined without reference to section 175.1.2, by any person or partnership in respect of a period is, to the extent that that period is included in a taxation year of the borrower ending after 31 December 1991, deemed, for the purposes of subparagraph 1 of subparagraph ii of paragraph a of section 175.1.2, subparagraph i of paragraph b of that section and subparagraph b of the second paragraph of section 175.1.3, to be an amount of interest payable on the debt obligation by the borrower in respect of that year; and

 (b) the application of sections 175.1.2 and 175.1.3 to the borrower in respect of the debt obligation after that time shall be determined on the assumption that section 175.1.2 applied to the borrower in respect of the debt obligation before that time.

For the purposes of this section, where the borrower came into existence at a particular time that is after the beginning of the particular period commencing at the beginning of the first period in respect of which interest was payable on the debt obligation by any person or partnership and ending at the particular time, the borrower is deemed to have been in existence throughout the particular period, and to have had, throughout the particular period, taxation years ending on the day of the year on which its first taxation year ended.

1994, c. 22, s. 112; 1997, c. 3, s. 71.

175.1.7. Where the amount paid by a borrower at any particular time, in satisfaction of the obligation to pay a particular amount of interest on a debt obligation in respect of a subsequent period or part thereof, exceeds the particular amount of that interest, discounted for the particular period beginning at the particular time and ending at the end of the subsequent period or part thereof, and at the rate or rates of interest applying under the debt obligation during the particular period or, where the rate of interest in respect of any part of the particular period is not fixed at the particular time, at the prescribed rate of interest in effect at the particular time, such excess is deemed

 (a) for the purposes of sections 175.1.2 to 175.1.6 and 175.1.8, to be neither an amount of interest payable on the debt obligation nor an amount paid in satisfaction of the obligation to pay interest on the debt obligation; and

 (b) to be a payment as a penalty or bonus, described in section 175.1.1, in respect of the debt obligation.

1994, c. 22, s. 112.

175.1.8. Notwithstanding sections 175.1.2 to 175.1.7, the aggregate of all amounts each of which is an amount of interest payable on a debt obligation by an individual, other than a trust, or deemed by section 175.1.2 to be payable on the debt obligation by a corporation, partnership or trust, in respect of a taxation year ending after 31 December 1991 and before any particular time, shall not exceed the aggregate of all amounts each of which is an amount of interest payable on the debt obligation, determined without reference to section 175.1.2, by a person or partnership in respect of a taxation year ending after 31 December 1991 and before that particular time.

1994, c. 22, s. 112; 1997, c. 3, s. 71.

175.2. Notwithstanding any other provision of this Part, a taxpayer shall not, in computing his income for a taxation year, deduct any amount under section 147, 160, 163, 176, 176.4 or 179 in respect of borrowed money, or other property acquired by the taxpayer, in respect of any period after which the money or other property is used by the taxpayer for the purpose of

 (a) making a payment after 12 November 1981 as consideration for an income-averaging annuity contract, unless such contract was acquired pursuant to an agreement in writing entered into before 13 November 1981;

 (a.1)  making a payment to acquire an income-averaging annuity respecting income from artistic activities;

 (b) paying a premium referred to in paragraph b of subsection 11 of section 18 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

 (c) making a contribution to a registered pension plan, a pooled registered pension plan or a deferred profit sharing plan, other than a contribution described in paragraph b or c of section 71, as they read for the taxation year 1990, that was required to be made pursuant to an obligation entered into before 13 November 1981, or an amount deductible under section 137 or paragraph b of section 158 in computing the taxpayer's income;

 (d) making a payment as consideration for an annuity the payment for which deductible in computing his income by virtue of paragraph f of section 339;

 (d.1) making a contribution to a net income stabilization account;

 (d.1.0.1) paying an amount as a contribution to a farm income stabilization account;

 (d.1.1) making a contribution to a retirement compensation arrangement where the contribution was deductible under section 70.2 in computing his income;

 (d.2) (paragraph repealed);

 (d.3) making a contribution to a registered education savings plan;

 (d.4) making a contribution to a registered disability savings plan;

 (d.5) making a contribution to a tax-free savings account; and

 (d.6) allocating an amount to a tax-free reserve within the meaning of section 979.25;

 (e) (paragraph repealed);

 (f) (paragraph repealed);

 (g) (paragraph repealed);

 (h) (paragraph repealed).

1984, c. 15, s. 44; 1985, c. 25, s. 35; 1987, c. 67, s. 41; 1990, c. 59, s. 97; 1991, c. 25, s. 55; 1993, c. 16, s. 90; 1994, c. 22, s. 113; 1995, c. 49, s. 50; 1997, c. 14, s. 47; 2000, c. 5, s. 44; 2004, c. 21, s. 63; 2005, c. 23, s. 41; 2009, c. 15, s. 61; 2013, c. 10, s. 19; 2015, c. 21, s. 134.

175.2.1. For the purposes of section 175.2, to the extent that an indebtedness is incurred by a taxpayer in respect of a property and at any time that property or a property substituted therefor is used for any of the purposes referred to in the said section, the indebtedness is deemed to be incurred at that time and for that purpose.

1993, c. 16, s. 91; 1994, c. 22, s. 114.

175.2.2. Where at any time after 31 December 1993 borrowed money ceases to be used by a taxpayer for the purpose of earning income from a capital property, other than depreciable property or immovable property, and the amount of the borrowed money that was so used by the taxpayer immediately before that time exceeds the amount determined under the second paragraph, the amount of the excess, to the extent that it is outstanding after that time, is deemed to be borrowed money used by the taxpayer for the purpose of earning income from the property.

The amount referred to in the first paragraph as being determined in the second paragraph is the aggregate of

 (a) where the taxpayer disposed of the property at the particular time for an amount of consideration that is not less than the fair market value of the property at that time, the amount of the borrowed money used to acquire the consideration;

 (b) where the taxpayer disposed of the property at the particular time and paragraph a does not apply, the amount of the borrowed money that, if the taxpayer had received as consideration an amount of money equal to the amount by which the fair market value of the property at that time exceeds the amount included in the aggregate determined under this paragraph by reason of paragraph c, would be considered to be used to acquire the consideration;

 (c) where the taxpayer disposed of the property at the particular time for consideration that includes a reduction in the amount of the borrowed money, the amount of the reduction; and

 (d) where the taxpayer did not dispose of the property at the particular time, the amount of the borrowed money that, if the taxpayer had disposed of the property at that time and received as consideration an amount of money equal to the fair market value of the property at that time, would be considered to be used to acquire the consideration.

1995, c. 49, s. 51.

175.2.3. Where at any particular time after 31 December 1993 a taxpayer ceases to carry on a business and, as a consequence, borrowed money ceases to be used by the taxpayer for the purpose of earning income from the business, the following rules apply:

 (a) where, at any time, in this paragraph referred to as the time of disposition, at or after the particular time, the taxpayer disposes of property that was last used by the taxpayer in the business, an amount of the borrowed money equal to the lesser of the following amounts is deemed to have been used by the taxpayer immediately before the time of disposition to acquire the property:

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

(ii)  the amount of the borrowed money outstanding at the time of disposition that is not deemed by this paragraph to have been used before the time of disposition to acquire any other property;

 (b) subject to paragraph a, the borrowed money is deemed, after the particular time, not to have been used to acquire property that was used by the taxpayer in the business;

 (c) the amount of the borrowed money outstanding at any time after the particular time that is not deemed by paragraph a to have been used before that subsequent time to acquire property is deemed to be used by the taxpayer at that subsequent time for the purpose of earning income from the business; and

 (d) the business is deemed to have fiscal periods after the particular time that coincide with the taxation years of the taxpayer, except that the first such fiscal period is deemed to begin at the end of the business's last fiscal period that began before the particular time.

1995, c. 49, s. 51.

175.2.4. For the purposes of paragraph a of section 175.2.3,

 (a) where a property was used by a taxpayer in a business that the taxpayer has ceased to carry on, the taxpayer is deemed to dispose of the property at the time at which the taxpayer begins to use the property in another business or for any other purpose;

 (b) where a taxpayer, who has at any particular time ceased to carry on a business, regularly used a property in part in the business and in part for some other purpose,

(i)  the taxpayer is deemed to have disposed of the property at that time, and

(ii)  the fair market value of the property at that time is deemed to equal the proportion of the fair market value of the property at that time that the use regularly made of the property in the business was of the whole use regularly made of the property; and

 (c) where the taxpayer is a trust, sections 653 to 656.3.1 do not apply.

1995, c. 49, s. 51; 2004, c. 21, s. 64.

175.2.5. Where an amount is payable by a taxpayer for property, the amount is deemed, for the purposes of sections 175.2.2 to 175.2.7 and, where section 175.2.3 applies with respect to the amount, for the purposes of this Part, to be payable in respect of borrowed money used by the taxpayer to acquire the property.

1995, c. 49, s. 51.

175.2.6. For the purposes of sections 175.2.2 to 175.2.7, where borrowed money that has been used to acquire an interest in a partnership is, as a consequence, considered to be used at any time for the purpose of earning income from a business or property of the partnership, the borrowed money is deemed to be used at that time for the purpose of earning income from property that is the interest in the partnership and not to be used for the purpose of earning income from the business or property of the partnership.

1995, c. 49, s. 51; 1997, c. 3, s. 71.

175.2.7. Where at any time a taxpayer uses borrowed money to repay money previously borrowed that was deemed by paragraph c of section 175.2.3 immediately before that time to be used for the purpose of earning income from a business, the following rules apply:

 (a) paragraphs a to c of section 175.2.3 apply with respect to the borrowed money; and

 (b) section 183 does not apply with respect to the borrowed money.

1995, c. 49, s. 51.

175.2.8. For the purposes of this section and sections 175.2.9 to 175.2.11,

branch advance of an authorized foreign bank means an amount allocated or provided by, or on behalf of, the bank to, or for the benefit of, its Canadian banking business under terms that were documented, before the amount was so allocated or provided, to the same extent as, and in a form similar to the form in which, the bank would ordinarily document a loan by it to a person with whom it deals at arm’s length;

branch financial statements of an authorized foreign bank for a taxation year means the unconsolidated statements of assets and liabilities and of income and expenses, in relation to its Canadian banking business,

 (a) that form part of the bank’s annual report for the year filed with the Superintendent of Financial Institutions of Canada as required under section 601 of the Bank Act (Statutes of Canada, 1991, chapter 46), and accepted by the Superintendent; and

 (b) if such a report is not required to be filed for the year, that are prepared in a manner consistent with the statements in the annual report or reports so filed and accepted for the period or periods in which the year falls;

calculation period of an authorized foreign bank for a taxation year means any one of a series of regular periods into which the year is divided in a designation by the bank in its fiscal return for the year or, in the absence of such a designation, by the Minister,

 (a) none of which is longer than 31 days;

 (b) the first of which commences at the beginning of the year and the last of which ends at the end of the year; and

 (c) that are, unless the Minister otherwise agrees in writing, consistent with the calculation periods designated by the bank for its preceding taxation year.

If the Minister demonstrates that the statements referred to in the definition of branch financial statements in the first paragraph are not prepared in accordance with generally accepted accounting principles in Canada as modified by any specifications applicable to the bank made by the Superintendent of Financial Institutions of Canada under subsection 4 of section 308 of the Bank Act, in this paragraph referred to as modified accounting principles, the expression branch financial statements means the statements subject to such modifications as are required to make them comply with modified accounting principles.

2004, c. 8, s. 32.

175.2.9. In computing the income of an authorized foreign bank from its Canadian banking business for a taxation year, there may be deducted on account of interest for each calculation period of the bank for the year,

 (a) where the total amount at the end of the period of its branch advances and debts to other persons and partnerships is 95% or more of the amount of its assets at that time, an amount not exceeding

(i)  if the amount of debts to other persons and partnerships at that time is less than 95% of the amount of its assets at that time, the amount determined by the formula


E + D × (0.95 × A − C) / B, and


(ii)  if the amount of debts to other persons and partnerships at that time is equal to or greater than 95% of the amount of its assets at that time, the amount determined by the formula


E × (0.95 × A) / C; and


 (b) in any other case, the aggregate of

(i)  the amount determined by the formula


D + E, and


(ii)  the product obtained by multiplying the average, based on daily observations, of the Bank of Canada bank rate for the period by the lesser of the amount claimed by the authorized foreign bank in its fiscal return it is required to file for the year under section 1000 and the amount determined by the formula


(0.95 × A) − (B + C).


In the formulas provided for in the first paragraph,

 (a) A is the amount of the bank’s assets at the end of the period;

 (b) B is the amount of the bank’s branch advances at the end of the period;

 (c) C is the amount of the bank’s debts to other persons and partnerships at the end of the period;

 (d) D is the aggregate of all amounts each of which is a reasonable amount on account of notional interest for the period, in respect of a branch advance, that would be deductible in computing the bank’s income for the year if it were interest payable by, and the advance were indebtedness of, the bank to another person and if this Act were read without reference to sections 133.6 and 175.2.8 to 175.2.11; and

 (e) E is the aggregate of all amounts each of which is an amount on account of interest for the period in respect of a debt of the bank to another person or partnership that would be deductible in computing the bank’s income for the year if this Act were read without reference to sections 133.6 and 175.2.8 to 175.2.11.

2004, c. 8, s. 32.

175.2.10. Only amounts that are in respect of an authorized foreign bank’s Canadian banking business, and that are entered in the accounting records of the business in a manner consistent with the manner in which they are required to be treated for the purposes of the branch financial statements, shall be used to determine the amounts referred to in the first paragraph of section 175.2.9 of an authorized foreign bank’s assets, debts to other persons and partnerships, and branch advances, and the amounts in the second paragraph of section 175.2.9.

2004, c. 8, s. 32.

175.2.11. For the purposes of subparagraph d of the second paragraph of section 175.2.9, a reasonable amount on account of notional interest for a calculation period in respect of a branch advance is the amount that would be payable on account of interest for the period by a notional borrower, having regard to the duration of the advance, the currency in which repayment is required and all other terms, as determined with reference to paragraph c, of the advance, if

 (a) the borrower were a person that carried on the bank’s Canadian banking business, that dealt at arm’s length with the bank and that had the same credit-worthiness and borrowing capacity as the bank;

 (b) the advance were a loan by the bank to the borrower; and

 (c) any of the terms of the advance, excluding the rate of interest, but including the structure of the interest calculation, such as whether the rate is fixed or floating and the choice of any reference rate referred to, that are not terms that would be made between the bank as lender and the borrower, having regard to all the circumstances, including the nature of the Canadian banking business, the use of the advanced funds in the business and normal risk management practices for banks, were instead terms that would be agreed to by the bank and the borrower.

2004, c. 8, s. 32.

175.2.12. For the purposes of this section and sections 175.2.13 to 175.2.15,

exchange date in respect of a debt of a taxpayer that is at any time a weak currency debt means,

 (a) if the debt is incurred or assumed by the taxpayer in relation to borrowed money that is denominated in the final currency, the day that the debt is incurred or assumed by the taxpayer; and

 (b) if the debt is incurred or assumed by the taxpayer in relation to borrowed money that is not denominated in the final currency, or in relation to the acquisition of property, the day on which the taxpayer uses the borrowed money or the acquired property, directly or indirectly, to acquire funds that are, or to settle an obligation that is, denominated in the final currency;

hedge in respect of a debt of a taxpayer that is at any time a weak currency debt means any agreement entered into by the taxpayer

 (a) that can reasonably be regarded as having been entered into by the taxpayer primarily to reduce the taxpayer’s risk, in relation to payments of principal or interest in respect of the debt, of fluctuations in the value of the weak currency; and

 (b) that is designated by the taxpayer as a hedge in respect of the debt in prescribed form filed with the Minister on or before the 30th day after the day on which the taxpayer entered into the agreement;

weak currency debt of a taxpayer at a particular time means a particular debt in a foreign currency, in this section and sections 175.2.13 to 175.2.15 referred to as the weak currency, incurred or assumed by the taxpayer at a time, in this section and sections 175.2.13 to 175.2.15 referred to as the commitment time, after 27 February 2000, in relation to borrowed money or an acquisition of property, where

 (a) any of the following applies, namely,

(i)  the borrowed money is denominated in a currency, in this section and sections 175.2.13 to 175.2.15 referred to as the final currency, other than the weak currency, is used for the purpose of earning income from a business or property and is not used to acquire funds in a currency other than the final currency,

(ii)  the borrowed money or the acquired property is used, directly or indirectly, to acquire funds that are denominated in a currency, in this section and sections 175.2.13 to 175.2.15 also referred to as the final currency, other than the weak currency, that are used for the purpose of earning income from a business or property and that are not used to acquire funds in a currency other than the final currency,

(iii)  the borrowed money or the acquired property is used, directly or indirectly, to settle an obligation that is denominated in a currency, in this section and sections 175.2.13 to 175.2.15 also referred to as the final currency, other than the weak currency, that is incurred or assumed for the purpose of earning income from a business or property and that is not incurred or assumed to acquire funds in a currency other than the final currency, or

(iv)  the borrowed money or the acquired property is used, directly or indirectly, to settle another debt of the taxpayer that is at any time a weak currency debt in respect of which the final currency is a currency other than the currency of the particular debt and is deemed to be the final currency in respect of the particular debt;

 (b) the amount of the particular debt together with any other debt that would, but for this paragraph, be at any time a weak currency debt, and that can reasonably be regarded as having been incurred or assumed by the taxpayer as part of a series of transactions that includes the incurring or assumption of the particular debt, exceeds $500,000; and

 (c) either of the following applies, namely,

(i)  if the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt is determined under a formula based on the value from time to time of a reference rate, other than a reference rate the value of which is established or materially influenced by the taxpayer, the interest rate at the commitment time, as determined under the formula as though interest were then payable, exceeds by more than two percentage points the rate at which interest would have been payable at the commitment time in the final currency if

(1)  the taxpayer had, at the commitment time, instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt, excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating, with those modifications that the difference in currency requires, and

(2)  interest on the equivalent amount of debt referred to in subparagraph 1 was payable at the commitment time, and

(ii)  in any other case, the rate at which interest is payable at the particular time in the weak currency in respect of the particular debt exceeds by more than two percentage points the rate at which interest would have been payable at the particular time in the final currency if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt, excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating, with those modifications that the difference in currency requires.

2004, c. 8, s. 32.

175.2.13. Notwithstanding any other provision of this Act, the following rules apply in respect of a particular debt of a taxpayer, other than a corporation described in any of paragraphs a, b, c and e of the definition of specified financial institution in section 1, that is at any time a weak currency debt:

 (a) no deduction on account of interest that accrues on the debt for any period that begins after the day that is the later of 30 June 2000 and the exchange date during which it is a weak currency debt shall exceed the amount of interest that would, if at the commitment time the taxpayer had instead incurred or assumed an equivalent amount of debt in the final currency on the same terms as the particular debt, excluding the rate of interest but including the structure of the interest calculation, such as whether the rate is fixed or floating, have accrued on the equivalent debt during that period, with those modifications that the difference in currency requires;

 (b) the amount of the taxpayer’s gain or loss, in this section and section 175.2.14 referred to as a foreign exchange gain or foreign exchange loss, for a taxation year on the settlement or extinguishment of the debt that is due to the fluctuation in the value of any currency shall be included or deducted, as the case may be, in computing the taxpayer’s income from the business or the property to which the debt relates; and

 (c) the amount of any interest on the debt that is, because of this section, not deductible is deemed, for the purpose of computing the taxpayer’s foreign exchange gain or foreign exchange loss on the settlement or extinguishment of the debt, to be an amount paid by the taxpayer to settle or extinguish the debt.

2004, c. 8, s. 32.

175.2.14. In applying section 175.2.13 in circumstances where a taxpayer has entered into a hedge in respect of a debt of the taxpayer that is at any time a weak currency debt, the amount paid or payable in the weak currency for a taxation year on account of interest on the debt, or paid in the weak currency for a taxation year on account of the debt’s principal, shall be decreased by the amount of any foreign exchange gain, or increased by the amount of any foreign exchange loss, on the hedge in respect of the amount so paid or payable.

2004, c. 8, s. 32.

175.2.15. Where the amount, expressed in the weak currency, outstanding on account of principal in respect of a debt that is at any time a weak currency debt is reduced before maturity, whether by repayment or otherwise, the amount, expressed in the weak currency, of the reduction is deemed, except for the purpose of determining the rate of interest that would have been charged on an equivalent debt in the final currency and applying paragraph b of the definition of weak currency debt in section 175.2.12, to have been a separate debt from the commitment time.

2004, c. 8, s. 32.

DIVISION XII.0.1 
TRANSITIONAL RULES RELATING TO AN INSURER
2010, c. 25, s. 20.

175.2.16. In sections 175.2.17 to 175.2.19, “insurance business”, “reserve transition amount” and “transition year” have the meaning assigned by section 92.23.

2010, c. 25, s. 20.

175.2.17. If an insurer's reserve transition amount in respect of an insurance business carried on by it in Canada is negative, the reserve transition amount, expressed as a positive number, must be deducted in computing the insurer's income for its transition year from the insurance business.

2010, c. 25, s. 20.

175.2.18. If an amount has been included under section 92.24 in computing an insurer's income for its transition year from an insurance business carried on by it in Canada, there must be deducted in computing the insurer's income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula


A × B/1,825.


In the formula in the first paragraph,

 (a) A is the amount included under section 92.24 in computing the insurer's income for its transition year from that insurance business; and

 (b) B is the number of days in the particular taxation year that are before the day that is 1,825 days after the first day of the transition year.

2010, c. 25, s. 20.

175.2.19. If at any time an insurer ceases (otherwise than as a result of an amalgamation within the meaning of subsections 1 and 2 of section 544) to carry on all or substantially all of an insurance business (in this section referred to as the “discontinued business”), and neither section 92.26 nor 92.27 applies, there must be deducted in computing the insurer's income from the discontinued business for the insurer's taxation year that includes the time that is immediately before that time, the amount determined by the formula

A - B.

In the formula in the first paragraph,

 (a) A is the amount included under section 92.24 in computing the insurer's income from the discontinued business for its transition year; and

 (b) B is the aggregate of all amounts each of which is an amount deducted under section 175.2.18 in computing the insurer's income from the discontinued business for a taxation year that began before that time.

2010, c. 25, s. 20.

175.3. (Repealed).

1985, c. 25, s. 36; 1987, c. 67, s. 42.

DIVISION XII.1 
WORKSPACE IN HOME
1990, c. 59, s. 98; 1999, c. 83, s. 47.

175.4. Notwithstanding any other provision of this Act, an individual or a partnership of which the individual is a member shall not, in computing his or its income from a business for a taxation year or a fiscal period, as the case may be, deduct an amount in respect of an amount otherwise deductible for any part, in this division referred to as the work space, of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either

 (a) the principal place of business of the individual or partnership, as the case may be; or

 (b) used

(i)  exclusively for the purposes of earning income from a business, and

(ii)  on a regular and continuous basis for meeting clients, customers or patients of the individual or partnership in respect of the business, as the case may be.

1990, c. 59, s. 98; 1996, c. 39, s. 273; 1997, c. 14, s. 48; 1997, c. 31, s. 21.

175.5. Where a work space is described in paragraph a or b of section 175.4, the amount in respect of the work space that is deductible by the individual or partnership referred to in that section in computing the income of the individual or partnership from the business referred to in that section for a taxation year or fiscal period, as the case may be, shall not exceed the lesser of

 (a) the aggregate of all amounts each of which is,

(i)  where the individual or the partnership has made an expenditure, other than an expenditure of a capital nature, that may reasonably be considered to relate

(1)  both to the part of the establishment, other than the work space, and to the work space, the product obtained by multiplying the amount that would, but for this section, be deductible in computing the income of the individual or partnership from the business for the taxation year or the fiscal period, as the case may be, in respect of the expenditure, by 50%, or

(2)  solely to the work space, the amount that would, but for this section, be deductible in computing the income of the individual or partnership from the business for the taxation year or the fiscal period, as the case may be, in respect of the expenditure, and

(ii)  the amount deducted by the individual or the partnership in computing the income of the individual or partnership from the business for the taxation year or the fiscal period, as the case may be, under paragraph a of section 130 or the second paragraph of section 130.1, in respect of the work space; and;

 (b) the income of the individual or partnership from the business for the taxation year or the fiscal period, as the case may be, computed before deducting any amount referred to in subparagraphs i and ii of subparagraph a and without reference to sections 217.2 to 217.9.1.

For the purposes of subparagraph i of subparagraph a of the first paragraph,

 (a) an amount paid or payable by the individual or partnership as rent pertaining to the work space is deemed to be an expenditure that may reasonably be considered to relate to both the part of the establishment, other than the work space, and the work space;

 (b) an expenditure, other than an expenditure of a capital nature, made by the individual or partnership, that may reasonably be considered to relate to both the work space in connection with the operation of a tourist accommodation establishment that is a tourist home, bed and breakfast establishment or participating establishment in a hospitality village, within the meaning of the regulations made under the Act respecting tourist accommodation establishments (chapter E-14.2), and the part of the establishment, other than the work space, is deemed to be an expenditure relating solely to the work space if the individual or partnership holds a classification certificate of the appropriate class to which the tourist accommodation establishment belongs, issued under that Act, or is a participant in a hospitality village covered by such a classification certificate;

 (b.1) an expenditure, other than an expenditure of a capital nature, made by the individual or partnership, that may reasonably be considered to relate to both the work space in connection with the operation of a private residential home and the part of the establishment, other than the work space, is deemed to be an expenditure relating solely to the work space; and

 (c) an expenditure, other than an expenditure of a capital nature, made by the individual or partnership, that may reasonably be considered to relate both to the part of the establishment, other than the work space, and to the work space, including an amount paid or payable by the individual or partnership as lighting or heating costs, and that is not an expenditure in relation to the maintenance of the establishment, is deemed to be an expenditure that may reasonably be considered to relate solely to the work space.

For the purposes of subparagraph c of the second paragraph, an amount paid or payable by the individual or partnership as maintenance and repairs costs, rent, interest on a hypothecary loan, property and school taxes or insurance premiums, relating to both the part of the establishment, other than the work space, and the work space, is deemed to be an expenditure relating to the maintenance of the establishment.

1990, c. 59, s. 98; 1997, c. 14, s. 49; 1997, c. 31, s. 22; 1999, c. 83, s. 48; 2000, c. 5, s. 293; 2000, c. 39, s. 16; 2001, c. 51, s. 27; 2002, c. 9, s. 7; 2006, c. 13, s. 29; 2015, c. 24, s. 41.

175.6. Where the amount determined under subparagraph a of the first paragraph of section 175.5, in respect of a business of an individual or partnership for the taxation year or fiscal period, as the case may be, preceding a particular taxation year or fiscal period, as the case may be, exceeds the amount determined under subparagraph b of that first paragraph, in respect of the business of the individual or partnership for that preceding taxation year or fiscal period, as the case may be, the following rules apply:

 (a) for the purposes of section 175.4, the excess amount is deemed, for the purpose of computing the income of the individual or partnership from the business for the particular taxation year or fiscal period, as the case may be, to be an amount otherwise deductible for the particular taxation year or fiscal period, as the case may be, in respect of a work space that is described in paragraph a or b of section 175.4 for the particular taxation year or fiscal period, as the case may be;

 (b) in applying section 175.5, the excess amount is deemed to be an expenditure, other than an expenditure of a capital nature, that may reasonably be considered to relate solely to the work space and that is deductible in computing the income of the individual or partnership from the business for the particular taxation year or the particular fiscal period, as the case may be.

1990, c. 59, s. 98; 1997, c. 14, s. 49; 1997, c. 31, s. 22; 2000, c. 39, s. 17.

DIVISION XII.1.1 
EXPENSES FOR FOOD, BEVERAGES AND ENTERTAINMENT
2004, c. 21, s. 65.

175.6.1. The aggregate of all amounts that a taxpayer may deduct in computing income from a business or property for a taxation year, each of which is an amount to which section 421.1 applies for the year, shall not exceed

 (a) in respect of a business of the taxpayer that consists in acting as an intermediary in selling property included in the inventory of another taxpayer,

(i)  if the taxpayer's deemed gross revenue for the year from the business referred to in this subparagraph does not exceed $32,500, the amount determined by the formula


[2% × (A/B)] + [2% × (C − A)],


(ii)  if the taxpayer's deemed gross revenue for the year from the business referred to in this subparagraph exceeds $32,500 but does not exceed $51,999, $650, and

(iii)  if the taxpayer's deemed gross revenue for the year from the business referred to in this subparagraph exceeds $51,999, the amount determined by the formula


[1.25% × (A/B)] + [1.25% × (C − A)];


 (b) in any other case,

(i)  if the taxpayer's gross revenue for the year from the business or property does not exceed $32,500, an amount equal to 2% of that gross revenue,

(ii)  if the taxpayer's gross revenue for the year from the business or property exceeds $32,500 but does not exceed $51,999, $650, and

(iii)   if the taxpayer's gross revenue for the year from the business or property exceeds $51,999, an amount equal to 1.25% of that gross revenue.

For the purposes of subparagraphs i to iii of subparagraph a of the first paragraph, the taxpayer's deemed gross revenue for the year from the business referred to in that subparagraph a is the amount determined by the formula


(A/B) + (C - A).


In the formulas in subparagraphs i and iii of subparagraph a of the first paragraph and in the second paragraph,

 (a) A is the aggregate of all amounts each of which is the amount of a commission that the taxpayer included in computing income for the year from the business referred to in that subparagraph a;

 (b) B is the average percentage of the aggregate of all the commissions in respect of which the taxpayer included the amount in computing income for the year from the business referred to in that subparagraph a; and

 (c) C is the taxpayer's gross revenue for the year from the business referred to in that subparagraph a.

If the number of days in the taxation year of the taxpayer is less than 365, the following rules apply:

 (a) for the purposes of subparagraphs a and b of the first paragraph, the taxpayer's deemed gross revenue or gross revenue for the year from a business or property is deemed to be equal to the amount obtained by multiplying that revenue by the proportion that 365 is of the number of days in the year; and

 (b) the amount determined under subparagraph a or b of the first paragraph is deemed to be equal to that amount, otherwise determined, multiplied by the proportion that the number of days in the year is of 365.

However, an amount to which section 421.1 applies for a taxation year must not be included in computing the aggregate referred to in the first paragraph, in relation to a business of the taxpayer, where it is an amount in respect of food or beverages consumed by a person in a place that is at least 40 km from the taxpayer's place of business where that person ordinarily works or to which that person is ordinarily attached and to the extent that the amount is paid or payable in connection with activities related to the business that are ordinarily carried on by a person in a place so remotely located from that place of business.

In addition, no taxpayer who is a member of a partnership at the end of a fiscal period of the partnership may, in respect of a business carried on by the partnership or of property owned by the partnership, deduct an amount incurred by the taxpayer and to which section 421.1 applies, in computing income from the business or property for the taxpayer's taxation year in which that fiscal period ends.

2004, c. 21, s. 65; 2005, c. 23, s. 42; 2011, c. 1, s. 24; 2012, c. 8, s. 43.

DIVISION XII.2 
SUPERFICIAL LOSSES
1990, c. 59, s. 98.

175.7. Section 175.9 applies, subject to section 851.22.28, where

 (a) a taxpayer, in this section and section 175.9 referred to as the transferor, disposes of a particular property;

 (b) the disposition is not described in any of paragraphs a to e of section 238;

 (c) the transferor is not an insurer;

 (d) the ordinary business of the transferor includes the lending of money and the particular property was used or held in the course of that business;

 (e) the particular property is a share, or a loan, bond, debenture, note, hypothecary claim, mortgage, agreement of sale or any other indebtedness;

 (f) the particular property was, immediately before the disposition, not a capital property of the transferor;

 (g) during the period that begins 30 days before and ends 30 days after the time of disposition, the transferor or a person affiliated with the transferor acquires a property, in this section and section 175.9 referred to as the substituted property, that is, or is identical to, the particular property; and

 (h) at the end of the 30 days following the time of disposition, the transferor or a person affiliated with the transferor owns the substituted property.

1990, c. 59, s. 98; 1996, c. 39, s. 53; 1997, c. 3, s. 71; 2000, c. 5, s. 45; 2005, c. 1, s. 68.

175.8. Section 175.9 also applies where

 (a) a person, in this section and section 175.9 referred to as the “transferor”, disposes of a particular property;

 (b) the particular property is described in an inventory of a business that is an adventure or concern in the nature of trade;

 (c) the disposition is not a disposition that is deemed to have occurred under any of sections 436, 440, 444, 450, 450.6 and 653, Chapter I of Title I.1 of Book VI, paragraph a or c of section 785.5, or section 832.1 or 999.1;

 (d) during the period that begins 30 days before and ends 30 days after the time of disposition, the transferor or a person affiliated with the transferor acquires property, in this section and section 175.9 referred to as the “substituted property”, that is, or is identical to, the particular property; and

 (e) at the end of the 30 days following the time of disposition, the transferor or a person affiliated with the transferor owns the substituted property.

2000, c. 5, s. 46; 2004, c. 8, s. 33; 2015, c. 36, s. 11.

175.9. If this section applies because of section 175.7 or 175.8 in respect of a disposition of a particular property,

 (a) the transferor's loss from the disposition is deemed to be nil; and

 (b) the transferor's loss from the disposition, determined without reference to this section, is deemed to be a loss of the transferor from a disposition of the particular property at the first time, after the time of disposition,

(i)  at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns the substituted property, or a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,

(ii)  at which the substituted property would, if it were owned by the transferor, be deemed under Chapter I of Title I.1 of Book VI or section 999.1 to have been disposed of by the transferor,

(iii)  that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation, or

(iv)  at which the winding-up of the transferor begins, other than a winding-up referred to in section 556, where the transferor is a corporation.

For the purposes of subparagraph b of the first paragraph, where a partnership otherwise ceases to exist at any time after the time of disposition,

 (a) the partnership is deemed not to have ceased to exist until the time that is immediately after the first time described in subparagraphs i to iv of subparagraph b; and

 (b) each person who was a member of the partnership immediately before the partnership would, but for this section, have ceased to exist is deemed to remain a member of the partnership, until the time that is immediately after the first time described in subparagraphs i to iv of subparagraph b.

2000, c. 5, s. 46; 2004, c. 8, s. 34.

175.10. For the purposes of sections 175.7 to 175.9, a right to acquire a property, other than a right, as security only, derived from a hypothec, mortgage, agreement of sale or similar obligation, is deemed to be a property that is identical to the property.

2000, c. 5, s. 46; 2005, c. 1, s. 69.

DIVISION XIII 
BORROWINGS
1972, c. 23.

176. Subject to section 176.1, a taxpayer may deduct such part of an amount, other than an amount referred to in the second paragraph, that is not otherwise deductible in computing the income of the taxpayer and that is an expense incurred by the taxpayer in the year or a preceding taxation year

 (a) in the course of a borrowing of money used by the taxpayer for the purpose of earning income from a business or property, other than money used by the taxpayer for the purpose of acquiring property the income from which is exempt from tax;

 (b) in the course of incurring indebtedness that is an amount payable for property acquired for the purpose of earning income therefrom or for the purpose of earning income from a business, other than property the income from which would be exempt from tax or property that is an interest in a life insurance policy; or

 (c) in the course of a rescheduling or restructuring of a debt obligation of the taxpayer or an assumption of a debt obligation by the taxpayer, where

 (1) the debt obligation is in respect of a borrowing described in paragraph a or in respect of an amount payable described in paragraph b, and

 (2) in the case of a rescheduling or restructuring, the rescheduling or restructuring, as the case may be, provides for the modification of the terms or conditions of the debt obligation or the substitution or conversion of the debt obligation with or to another debt obligation or a share.

The amount to which the first paragraph refers is

 (a) an amount paid or payable as or on account of the principal amount of a debt obligation or interest in respect of a debt obligation;

 (b) an amount that is contingent or dependent on the use of, or production from, property; or

 (c) an amount that is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

1972, c. 23, s. 163; 1980, c. 13, s. 12; 1990, c. 59, s. 99; 1995, c. 49, s. 53; 2001, c. 7, s. 28; 2003, c. 2, s. 61.

176.1. The amount deductible under section 176 shall not exceed the lesser of

 (a) that proportion of 20% of the expense that the number of days in the year is of 365, and

 (b) the amount by which the expense exceeds the aggregate of all amounts each of which is an amount deductible in respect of the expense in computing the taxpayer's income for a preceding taxation year.

1990, c. 59, s. 100.

176.2. For the purposes of sections 176, 176.1 and 176.3, where in a taxation year all debt obligations in respect of a borrowing of money described in subparagraph a of the first paragraph of section 176 or in respect of an amount payable described in subparagraph b of that first paragraph are settled or extinguished by the taxpayer, otherwise than in a transaction made as part of a series of borrowings or other transactions and repayments, for consideration that does not include any property described in the second paragraph, of the taxpayer or any person with whom the taxpayer does not deal at arm's length or any partnership or trust of which the taxpayer or any person with whom the taxpayer does not deal at arm's length is a member or beneficiary, section 176.1 shall be read without reference to the words “the lesser of” and to paragraph a.

The property referred to in the first paragraph is a unit of a unit investment trust, an interest in a partnership, a share in a syndicate, a share in the capital stock of a corporation or a debt obligation.

1990, c. 59, s. 100; 1995, c. 49, s. 54; 1997, c. 3, s. 71.

176.3. For the purposes of sections 176 to 176.2, where a partnership has ceased to exist at any particular time in a fiscal period of the partnership,

 (a) no amount may be deducted by the partnership under section 176 in computing its income for that fiscal period, and

 (b) any person or partnership that was a member of the partnership immediately before that time may deduct, for a taxation year ending at or after that time, that proportion of the amount that would, but for this section, have been deductible under section 176 by the partnership in the fiscal period ending in the year had it continued to exist and had the partnership interest not been redeemed, acquired or cancelled, that the fair market value of such member's interest in the partnership immediately before that time is of the fair market value of all the interests in the partnership immediately before that time.

1990, c. 59, s. 100; 1997, c. 3, s. 71.

176.4. A taxpayer may deduct an amount payable by him, other than an amount referred to in section 176.5, as a registrar fee, transfer agent fee, standby charge, guarantee fee, filing fee, service fee or any similar fee, that may reasonably be considered to relate solely to the year and that is incurred by the taxpayer

 (a) in the course of a borrowing of money to be used by the taxpayer for the purpose of earning income from a business or property, other than money used by the taxpayer for the purpose of acquiring property the income from which is exempt from tax;

 (b) in the course of incurring indebtedness that is an amount payable for property acquired for the purpose of earning income therefrom or for the purpose of earning income from a business, other than property the income from which is exempt from tax or property that is an interest in a life insurance policy; or

 (c) in the course of rescheduling or restructuring a debt obligation of the taxpayer or an assumption of a debt obligation by the taxpayer, where

 (1) the debt obligation is in respect of a borrowing described in paragraph a, or in respect of an amount payable described in paragraph b, and

 (2) in the case of a rescheduling or restructuring, the rescheduling or restructuring, as the case may be, provides for the modification of the terms or conditions of the debt obligation or the substitution or conversion of the debt obligation with or to another debt obligation or a share.

1990, c. 59, s. 100; 1995, c. 49, s. 55.

176.5. The amount to which section 176.4 refers is

 (a) a payment that is contingent or dependent upon the use of or production from property,

 (b) a payment that is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion, or

 (c) a payment that is computed by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

1990, c. 59, s. 100; 1997, c. 3, s. 71; 2003, c. 2, s. 62.

176.6. A taxpayer may deduct such portion of the lesser of the following amounts as may reasonably be considered to relate to the amount owing from time to time during the year by the taxpayer to a restricted financial institution under a borrowing from the institution:

 (a) the premium payable by the taxpayer under a life insurance policy, other than an annuity contract, in respect of the year, where

(i)  an interest in the policy is assigned to the restricted financial institution in the course of the borrowing;

(ii)  the interest payable in respect of the borrowing is or would, but for sections 135.4, 164, 180 to 182 and 194 to 197, be deductible in computing the taxpayer's income for the year, and

(iii)  the assignment referred to in subparagraph i is required by the restricted financial institution as collateral for the borrowing; and

 (b) the net cost of pure insurance in respect of the year, as determined in accordance with the regulations, in respect of the interest in the policy referred to in subparagraph i of paragraph a.

1993, c. 16, s. 92; 1995, c. 49, s. 56.

177. A taxpayer may deduct the part of any loan or indebtedness repaid by him in the year and which he included under section 113 in computing his income for a preceding taxation year, if it is established that the repayment was not made as part of a series of transactions and repayments.

This section applies only to the extent that the amount of the loan or indebtedness was not deductible for the purpose of computing the taxpayer's taxable income for that preceding taxation year.

1972, c. 23, s. 164; 1973, c. 17, s. 15; 1984, c. 15, s. 45; 1985, c. 25, s. 37; 1994, c. 22, s. 115.

178. (Repealed).

1972, c. 23, s. 165; 1990, c. 59, s. 101.

179.  (1) A taxpayer may deduct an amount paid in the year to pay the principal amount of a bond, debenture, bill, hypothecary claim, mortgage or other similar obligation, but only if they have been issued by the taxpayer after 18 June 1971 and call for the payment of interest and only to the extent that the amount so paid does not exceed:

(a)  where such security has been issued for an amount not less than 97% of its principal amount, and its yield, expressed in yearly percentage on the amount for which it has been issued does not exceed 4/3 of the annual rate of interest stipulated, the amount according to which the lesser of the principal amount of such security and the aggregate of amounts paid in the year or in a previous year to repay its principal amount exceeds the amount for which it has been issued; and

(b)  in all other cases, the lesser of 1/2 of the amount so paid and 1/2 of the amount by which the lesser of the principal amount of the security and the aggregate of the amounts paid in the year or in any preceding taxation year in satisfaction of the principal amount thereof exceeds the amount for which it has been issued.

 (2) Sections 124 and 125 apply to this section.

1972, c. 23, s. 166; 1973, c. 17, s. 16; 1990, c. 59, s. 102; 1996, c. 39, s. 54; 2003, c. 2, s. 63; 2005, c. 1, s. 70.

180. A taxpayer who during a taxation year acquires depreciable property may elect, in his fiscal return filed under this Part for the year, to have the following rules apply:

 (a) in computing his income for the year and for such of the three immediately preceding taxation years as the taxpayer had, sections 160, 163, 176 and 176.4 do not apply to the amount specified in his election that, but for the election, would have been deductible in computing his income, other than exempt income, for any such year in respect of borrowed money used to acquire the depreciable property or the amount payable for the depreciable property;

 (b) the amount referred to in paragraph a shall be included in computing the capital cost to him of the depreciable property.

1972, c. 23, s. 167; 1982, c. 5, s. 48; 1984, c. 15, s. 46; 1986, c. 19, s. 34; 1993, c. 16, s. 93.

181. Where in a taxation year a taxpayer has used borrowed money for the purpose of exploration, development or the acquisition of property and the expenses incurred by the taxpayer in respect of those activities are Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expenses, Canadian development expenses, foreign resource expenses in relation to a country or Canadian oil and gas property expenses, as the case may be, the taxpayer may elect in the taxpayer’s fiscal return filed under this Part for the year, to have the following rules apply:

 (a) in computing the taxpayer’s income for the year and for such of the three immediately preceding taxation years as the taxpayer had, sections 160, 163, 176 and 176.4 do not apply to the amount specified in the taxpayer’s election that, but for that election, would be deductible in computing the taxpayer’s income, other than exempt income or income that is exempt from tax under this Part, for any such year in respect of the borrowed money used for the exploration, development or acquisition of property, as the case may be; and

 (b) the amount described in paragraph a is deemed to be Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expenses, Canadian development expenses, foreign resource expenses in relation to a country or Canadian oil and gas property expenses, as the case may be, incurred by the taxpayer in the year.

1972, c. 23, s. 168; 1975, c. 22, s. 23; 1977, c. 26, s. 19; 1982, c. 5, s. 48; 1986, c. 19, s. 34; 1993, c. 16, s. 94; 2004, c. 8, s. 35.

182. A taxpayer described in the second paragraph may elect, in the taxpayer’s fiscal return filed under this Part for a particular taxation year, to have rules similar to those provided by paragraphs a and b of section 180 or of section 181, as the case may be, apply for the purpose of computing the taxpayer’s income for the particular year in respect of an amount that, but for this section, would be deductible in computing the taxpayer’s income, other than exempt income or, if subparagraph iii of subparagraph a of the second paragraph applies to the taxpayer, income that is exempt from tax under this Part, for the particular year, in respect of the borrowed money or payable amount referred to in the second paragraph.

The first paragraph applies to a taxpayer who

 (a) in any taxation year preceding the particular year,

(i)  made an election under section 180 in respect of borrowed money used to acquire depreciable property or the amount payable for the depreciable property;

(ii)  was required under section 135.4 to include, in respect of the construction of depreciable property for the acquisition of which he borrowed money or for which an amount was payable by him, an amount in computing the cost to him of the depreciable property; or

(iii)  made an election under section 181 in respect of borrowed money used for the exploration, development or acquisition of property; and

 (b) in each taxation year, if any, after the preceding taxation year referred to in subparagraph a and before the particular year, made an election under this section covering the total amount that, but for this section, would have been deductible in computing the taxpayer’s income, other than exempt income or, if subparagraph iii of subparagraph a applies to the taxpayer, income that is exempt from tax under this Part, for each such year in respect of the borrowed money used to acquire the depreciable property, the amount payable for the depreciable property or the borrowed money used for the exploration, development or acquisition of property.

1972, c. 23, s. 169; 1984, c. 15, s. 47; 1986, c. 19, s. 34; 2004, c. 8, s. 36.

183. Subject to section 175.2.7, borrowed money used by a taxpayer to repay money previously borrowed or to pay an amount payable for property referred to in paragraph b of section 160 or 161 and previously acquired (which previously borrowed money or amount payable in respect of previously acquired property is, in this section, referred to as the “previous indebtedness”) is deemed, for the purposes of this division and sections 160, 161, 175.2.2 and 175.2.3, to be used for the purposes for which the previous indebtedness was used or incurred, or was deemed, under this section, to have been used or incurred.

1972, c. 23, s. 170; 1990, c. 59, s. 103; 1995, c. 49, s. 57; 2010, c. 5, s. 23.

CHAPTER IV 
CEASING TO CARRY ON BUSINESS
1972, c. 23.

184. If the sale of all or substantially all the property of a business includes debts that have been or will be included in computing the vendor's income for a previous year or for the taxation year or debts arising from loans made in the ordinary course of the business if part of the vendor's ordinary business has been the lending of money, the purchaser proposes to continue to carry on the business, and the vendor and the purchaser make a valid election under subsection 1 of section 22 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the sale, the following rules apply:

 (a) the vendor may deduct and the buyer must include, in computing their income for the taxation year, an amount equal to the excess of the face value of the debts so sold, other than debts in respect of which a deduction has already been made under section 141 by the vendor over the consideration paid by the purchaser for such debts;

 (b) for the purposes of sections 140 and 141, the debts so sold are deemed to have been included in computing the income of the purchaser for the taxation year or a previous year, but the latter shall not make any deduction under section 141 respecting a debt in respect of which the vendor has previously made a deduction;

 (c) for the purposes of paragraph i of section 87 the purchaser is deemed to have himself deducted the amount deducted by the vendor under section 141 in computing his income for a previous year in respect of any of the debts sold.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 22 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 171; 1974, c. 18, s. 10; 1994, c. 22, s. 116; 2009, c. 5, s. 65.

185. Subject to section 422, a declaration made by the vendor and the purchaser, in respect of the amount paid for the debts assigned, under this section, as it read before 20 December 2006, or, in the case of a valid election made under subsection 1 of section 22 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006, under subsection 2 of section 22 of that Act, is binding on the parties as against the Minister to the extent that it may be relevant in respect of any matter arising under this Part.

1972, c. 23, s. 172; 1975, c. 22, s. 24; 2009, c. 5, s. 66.

186. When a taxpayer ceases to carry on a business or sells all or part of it and thereupon or subsequently sells any property included in the inventory of such business, he is deemed to have sold such property in the course of carrying on the business.

1972, c. 23, s. 173.

187. For the purposes of section 186, any property that would have been included in the inventory of a business if the income from it had not been computed in accordance with the method authorized by section 194 or 215 is deemed to have been so included.

1972, c. 23, s. 176; 1975, c. 22, s. 26; 1986, c. 19, s. 35.

188. Notwithstanding section 129, where at any time after a taxpayer has ceased to carry on a business, the taxpayer no longer owns any property that was incorporeal capital property in respect of the business and that has value, the following rules apply in computing the taxpayer's income for taxation years ending after that time:

 (a) there shall be deducted the taxpayer's eligible incorporeal capital amount in respect of the business at that time for the first such taxation year;

 (b) no amount is deductible by reason of paragraph b of section 130 in respect of the business;

 (c) for the purposes of subparagraph i of subparagraph a of the second paragraph of section 107, the amount deducted by the taxpayer by reason of paragraph a is deemed to be an amount deducted under paragraph b of section 130 in computing the taxpayer’s income from the business for the taxation year that includes that time; and

 (d) for the purposes of section 105, Division III of Chapter II of this Title shall be read without reference to section 110.

1972, c. 23, s. 177; 1993, c. 16, s. 95; 2003, c. 2, s. 64; 2005, c. 1, s. 71.

189. Where at any time an individual has ceased to carry on a business and thereafter the individual's spouse, or a corporation controlled directly or indirectly in any manner whatever by the individual, carries on the business and acquires all of the property that was incorporeal capital property in respect of the business owned by the individual before that time and that had value at that time, the following rules apply:

 (a) in computing the individual's income for the individual's first taxation year ending after that time, section 188 shall read without reference to paragraph a thereof and the reference in paragraph c thereof to “the amount deducted by the taxpayer by reason of paragraph a” shall read as a reference to “an amount equal to the taxpayer's eligible incorporeal capital amount in respect of the business immediately before that time”;

 (b) in computing the eligible incorporeal capital amount of the spouse or the corporation in respect of the business, the spouse or corporation is deemed to have acquired an incorporeal capital property and to have disbursed an incorporeal capital amount at that time at a cost equal to 4/3 of the aggregate of the individual's eligible incorporeal capital amount in respect of the business immediately before that time and the amount determined under subparagraph a of the second paragraph of section 107 in respect of the business of the individual at that time;

 (c) for the purpose of computing the eligible incorporeal capital amount in respect of the business of the spouse or corporation after that time, an amount equal to the amount determined under subparagraph a of the second paragraph of section 107 in respect of the business of the individual at that time shall be added to the amount otherwise determined under subparagraph i of that subparagraph a; and

 (d) for the purpose of computing after that time, in respect of any subsequent disposition of property of the business, the amount to be included under paragraph b of section 105 in computing the income of the spouse or corporation, an amount equal to the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 in respect of the business of the individual immediately before the individual ceases carrying on business shall be added to the amount otherwise determined under that subparagraph ii.

1972, c. 23, s. 178; 1990, c. 59, s. 104; 1993, c. 16, s. 96; 1994, c. 22, s. 117; 1996, c. 39, s. 55; 1997, c. 3, s. 71; 2003, c. 2, s. 65; 2005, c. 1, s. 72.

189.0.1. Notwithstanding section 188, where at any time a partnership is dissolved in circumstances to which Divisions II and III of Chapter IV of Title XI do not apply, a taxpayer who was a member of the partnership immediately before that time may deduct, in computing his income for his first taxation year beginning after that time, an amount determined by the formula


A × (B / C).


For the purposes of the formula in the first paragraph,

 (a) A is the amount that would, had the partnership not been dissolved, have been deductible under section 188 in computing its income;

 (b) B is the fair market value of the taxpayer's interest in the partnership immediately before that time;

 (c) C is the fair market value of all of the interests in the partnership immediately before that time.

1994, c. 22, s. 118; 1997, c. 3, s. 71.

189.1. (Repealed).

1986, c. 15, s. 52; 1986, c. 19, s. 36; 1997, c. 31, s. 23.

190. If an individual who was the sole proprietor of a business disposed of it during a fiscal period of the business, the fiscal period is referred to in the third or fourth paragraph of section 7 and the individual makes a valid election under subsection 1 of section 25 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the fiscal period, Division II of Chapter II is to be read without reference to the exception provided for in paragraph a of section 95 and sections 188 and 189 are to be read without reference to paragraph d of section 188, for the purpose of computing the individual's income for the fiscal period.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 25 of the Income Tax Act.

1972, c. 23, s. 179; 1984, c. 15, s. 48; 1986, c. 19, s. 37; 1997, c. 31, s. 24; 2009, c. 5, s. 67.

CHAPTER V 
SPECIAL CASES
1972, c. 23.

DIVISION I 
BANKS
1972, c. 23.

191. (Repealed).

1972, c. 23, s. 180; 1982, c. 5, s. 49; 1989, c. 77, s. 21; 1990, c. 59, s. 105; 1997, c. 31, s. 25.

191.1. A bank shall include in computing its income for its first taxation year that commences after 17 June 1987 and ends after 31 December 1987, referred to in sections 191.2 and 191.3 as the first year, the aggregate of

 (a) all the specific provisions of the bank at the end of its preceding taxation year, as determined, or as would have been determined if such a determination had been required, under the Minister's rules,

 (b) all general provisions of the bank at the end of its preceding taxation year, as determined, or as would have been determined if such a determination had been required, under the Minister's rules,

 (c) the amount by which

(i)  the amount of the special provision for losses on transborder claims of the bank, as determined, or as would have been determined if such a determination had been required, under the Minister's rules, that was deductible under section 191 in computing its income for its preceding taxation year, exceeds

(ii)  that part of the amount determined under subparagraph i that was a realized loss of the bank for its preceding taxation year, and

 (d) the amount of the tax allowable appropriations account of the bank at the end of its preceding taxation year, as determined, or as would have been determined if such a determination had been required, under the Minister's rules.

1990, c. 59, s. 106.

191.2. A bank may deduct in computing its income for a taxation year an amount not exceeding the aggregate of

 (a) that part, that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, of the aggregate of the amounts of the five-year average loan loss experiences of the bank, as determined, or as would have been determined if such a determination had been required, under the Minister's rules, for all taxation years before its first year,

 (b) that part, that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, of the aggregate of the amounts transferred by the bank to its tax allowable appropriations account, as permitted under the Minister's rules, for all taxation years before its first year,

 (c) that part, that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, of the amount by which

(i)  the amount of the special provision for losses on transborder claims, as determined, or as would have been determined if such a determination had been required, under the Minister's rules, that was deductible by the bank under section 191 in computing its income for its last taxation year before its first year, exceeds

(ii)  that part of the amount determined under subparagraph i that was a realized loss of the bank for its last taxation year before its first year,

 (d) where the tax allowable appropriations account of the bank at the end of its last taxation year before its first year, as determined, or as would have been determined if such a determination had been required, under the Minister's rules, is a negative amount, that part of such amount expressed as a positive number that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, and

 (e) that part, that is specified by the bank for the year and was not deducted by the bank in computing its income for any preceding taxation year, of the aggregate of the amounts calculated in respect of the bank for the purposes of the Minister's rules, or that would have been calculated if such a calculation had been required, under Procedure 8 of the Procedures for the Determination of the Provision for Loan Losses as set out in Appendix 1 of those rules, for all taxation years before its first year.

1990, c. 59, s. 106; 1995, c. 63, s. 32.

191.3. For the purposes of computing the income of a bank, the following rules apply:

 (a) for the purposes of paragraph i of section 87 and section 92.22, any amount that was recorded by the bank as a realized loss or a write-off of an asset and that was included by the bank in the calculation of an amount deductible under the Minister's rules, or would have been included therein if such a calculation had been required, for any taxation year before its first year is deemed to have been deducted under section 141 in computing its income for the year for which it was so recorded;

 (b) for the purposes of section 92.22, any amount that was recorded by the bank as a recovery of a realized loss or a write-off of an asset and that was included by the bank in the calculation of an amount deductible under the Minister's rules, or would have been included if such a calculation had been required, for any taxation year before its first year is deemed to have been included under paragraph i of section 87 in computing its income for the year for which it was so recorded.

1990, c. 59, s. 106.

191.4. In this division, Minister's rules means the Rules for the Determination of the Appropriations for Contingencies of a Bank issued under the authority of the Minister of Finance of Canada pursuant to section 308 of the Bank Act (Revised Statutes of Canada, 1985, chapter B-1), as it read before its repeal, for the purposes of subsections 1 and 2 of section 26 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

1990, c. 59, s. 106; 1997, c. 31, s. 26.

DIVISION II 
STATE AND FEDERAL CROWN BODIES
1972, c. 23; 1997, c. 3, s. 22; 1998, c. 16, s. 100.

192. This Part, except section 985, applies to a State body or a federal Crown body, unless otherwise provided by the regulations.

Notwithstanding any other provision of this Part, a prescribed body and any corporation controlled by it are deemed not to be private corporations.

1972, c. 23, s. 181; 1977, c. 5, s. 14; 1980, c. 13, s. 13; 1987, c. 21, s. 14; 1997, c. 3, s. 22; 1998, c. 16, s. 101; 2000, c. 5, s. 47.

192.1. For the purposes of this Part,

 (a) any income or loss of a State body or a federal Crown body from a business carried on, respectively, by the State body or the Crown body as a mandatary of the State or of Her Majesty, as the case may be, or from a property of the State or of Her Majesty administered, respectively, by the State body or the federal Crown body shall be treated as if it were an income or loss of the State body or federal Crown body from the business or the property, as the case may be; and

 (b) any property, obligation or debt of any kind whatever held, administered, entered into or incurred, as the case may be, by a State body or a federal Crown body as a mandatary of the State or of Her Majesty, as the case may be, shall be treated as if it were a property, obligation or debt, as the case may be, of the State body or federal Crown body.

2000, c. 5, s. 48.

193. Where land of Her Majesty has been transferred, for purposes of disposition, to a body that is a prescribed body for the purposes of the second paragraph of section 192, the acquisition of the property by the body and any disposition thereof are deemed not to have been in the course of the business carried on by the body.

1972, c. 23, s. 182; 1997, c. 3, s. 22; 1998, c. 16, s. 102; 2000, c. 5, s. 49.

DIVISION III 
FARMING BUSINESSES
1972, c. 23.

194. A taxpayer shall compute income from a farming business or fishing business for a taxation year in accordance with the cash method, by which the income from the business is deemed to be equal to the aggregate determined in the second paragraph minus the aggregate determined in the third paragraph, if the taxpayer makes, in relation to the year, a valid election under subsection 1 of section 28 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 of the method provided for in that subsection 1 for computing the taxpayer's income from a farming business or fishing business.

The first aggregate referred to in the first paragraph in respect of a farming business or fishing business for a taxation year is equal to the total of the following amounts:

 (a) all amounts received in the year or deemed by this Part to have been received in the year, in the course of carrying on the business described in the first paragraph, in payment of or on account of an amount that would be included in computing income from the business for that or any other taxation year if that income were not computed in accordance with this cash method;

 (b) in respect of a farming business, the amount specified by the taxpayer in respect of the business in his fiscal return filed under this Part for the year, not exceeding the amount by which the fair market value, at the end of the year, of inventory owned by him at that time in connection with the business exceeds the amount determined under subparagraph c for the year;

 (c) in respect of a farming business, the amount equal to the lesser of

(i)  the taxpayer's loss from the business for the year, computed without reference to this subparagraph and to subparagraph b, and

(ii)  the value of inventory purchased by the taxpayer and owned by him in connection with the business at the end of the year;

 (d) the aggregate of all amounts each of which is an amount included in computing the taxpayer's income for the year from the business because of section 94, 105 or 485.13, the second paragraph of section 487 or section 487.0.3.

The second aggregate referred to in the first paragraph in respect of a farming business or fishing business for a taxation year is equal to the total of the following amounts:

 (a) all amounts, other than an amount described in section 198, that were paid in the year, or are deemed by this Part to have been paid in the year, in the course of carrying on the business,

(i)  in the case of amounts paid, or deemed by this Part to have been paid, for the inventory relating to the business, in payment of or on account of an amount that would be deductible in computing the income from the business for the year or any other taxation year if that income were not computed in accordance with this cash method, and

(ii)  in any other case, in payment of or on account of an amount that would be deductible in computing the income from the business for a preceding taxation year, the year or the following taxation year if that income were not computed in accordance with this cash method;

 (a.1) all amounts, other than an amount described in section 198, that would be deductible in computing the income from the business for the year if that income were not computed in accordance with this cash method, that are not deductible in computing the income from the business for any other taxation year, and that were paid in a preceding taxation year in the course of carrying on the business;

 (b) the aggregate of all amounts each of which is an amount included under subparagraph b or c of the second paragraph in computing the taxpayer's income from the business for the preceding taxation year;

 (c) the aggregate of all amounts each of which is an amount deducted for the year under paragraph a or b of section 130, section 130.1, paragraph t of section 157, section 188 or 198, the first paragraph of section 487 or section 487.0.2 in respect of the business.

If a farming business or fishing business is carried on by several persons, an election referred to in the first paragraph is not valid for any of those persons in respect of the business unless each of them makes such an election in respect of the business.

Subparagraphs b and c of the second paragraph do not apply in computing the income of the taxpayer for the taxation year in which he died.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 28 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 183; 1973, c. 17, s. 17; 1982, c. 5, s. 50; 1990, c. 59, s. 107; 1991, c. 25, s. 56; 1993, c. 16, s. 97; 1996, c. 39, s. 56; 2000, c. 5, s. 50; 2001, c. 7, s. 29; 2009, c. 5, s. 68.

194.0.1. For the purposes of sections 194 to 197, where at any time a taxpayer has, in circumstances where section 422 applies by reason of the application of paragraph a or b thereof, acquired inventory in connection with a farming business the income from which is computed in accordance with the cash method,

 (a) the taxpayer is deemed to have purchased the inventory at the time it was so acquired,

 (b) the taxpayer is deemed to have paid at that time, in the course of carrying on that business, an amount equal to the cost to him of the inventory, and

 (c) the amount referred to in paragraph b is deemed to be the only amount paid for the inventory by the taxpayer.

1993, c. 16, s. 98.

194.1. (Repealed).

1990, c. 59, s. 108; 1993, c. 16, s. 99.

194.2. For the purposes of subparagraph c of the second paragraph of section 194 and notwithstanding sections 83 to 85.6, inventory of a taxpayer in connection with a farming business shall be valued at any time at the lesser of the amount paid by the taxpayer at or before that time to acquire it, in this section and in section 194 referred to as the cash cost, and its fair market value.

Notwithstanding the first paragraph, an animal, in this section and in section 194 referred to as a specified animal, that is a horse or, where the taxpayer so elects in respect thereof for the taxation year that includes the time referred to in the first paragraph or for any preceding taxation year, is a bovine animal registered under the Animal Pedigree Act (Revised Statutes of Canada, 1985, chapter 8, 4th Supplement) shall be valued

 (a) at any time in the taxation year in which the specified animal is acquired, at such amount as is designated by the taxpayer not exceeding its cash cost and not less than 70% of that cost;

 (b) at any time in any subsequent taxation year, at such amount as is designated by the taxpayer not exceeding its cash cost and not less than 70% of the aggregate of its value determined under this section at the end of the preceding taxation year, and the total amount paid on account of the purchase price of the animal during the year.

1990, c. 59, s. 108; 1993, c. 16, s. 100.

194.3. For each taxation year that is less than 51 weeks, the references to “70” in subparagraphs a and b of the second paragraph of section 194.2 shall read as references to the number determined by the formula


100 − (30 × A / 365).


For the purposes of the formula set forth in the first paragraph, A is the number of days in the taxation year referred to therein.

1990, c. 59, s. 108.

195. If a taxpayer has used, for a taxation year, in respect of a farming business or fishing business, the cash method provided for in section 194 because of an election referred to in the first paragraph of that section made in relation to the year, the income from the business for a subsequent taxation year must be computed in accordance with the same method, subject to the other provisions of this Part, unless the taxpayer makes a valid election under subsection 3 of section 28 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 of a method other than the method provided for in subsection 1 of section 28 of that Act, in which case that income must instead be computed in accordance with that other method.

Any condition determined by the Minister of National Revenue for the election referred to in the first paragraph made under subsection 3 of section 28 of the Income Tax Act applies, with the necessary modifications, in computing the income from the farming business or fishing business.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 3 of section 28 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 184; 2009, c. 5, s. 69.

196. Notwithstanding sections 194 and 197, where at the end of a taxation year a taxpayer who carried on a business the income from which was computed in accordance with the cash method is not resident in Canada and does not carry on that business in Canada, an amount equal to the aggregate of all amounts each of which is the fair market value of an amount outstanding in the year on account of a debt owing to the taxpayer that resulted from the carrying on of the business and that would have been included in computing the taxpayer’s income for the year if the amount had been received by the taxpayer during the year, shall, to the extent that the amount was not otherwise included in computing the taxpayer’s income for the year or a preceding taxation year, be included in computing the taxpayer’s income from the business for the year or, if the taxpayer was resident in Canada at any time in the year, for the part of the year throughout which the taxpayer was resident in Canada.

1972, c. 23, s. 185; 1974, c. 18, s. 11; 1993, c. 16, s. 101; 2004, c. 8, s. 37.

196.1. (Repealed).

1993, c. 16, s. 102; 2004, c. 8, s. 38.

197. A taxpayer shall include in computing his income for a taxation year an amount he receives as payment for debts that resulted from carrying on the business, to the extent that they would have been included in computing his income if he had been paid for them while he was still carrying on the business.

1972, c. 23, s. 186.

198. A taxpayer may deduct in computing his income from a farming business for a taxation year any amount paid by him before the end of the year for clearing land, levelling land or installing a land drainage system for the purposes of the business, to the extent that such amount has not been deducted in computing his income for a preceding taxation year.

1972, c. 23, s. 187; 1990, c. 59, s. 109.

DIVISION IV 
BASIC HERD
1972, c. 23.

199. The rules set out in this division apply if a taxpayer who has a basic herd of a particular class of animals and disposes of an animal of that class in carrying on a farming business in a taxation year makes, in relation to that year, a valid election under subsection 1 of section 29 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to that business.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 29 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 188; 2009, c. 5, s. 70.

200. In the case of a disposition referred to in the first paragraph of section 199 of an animal of a class, the taxpayer shall deduct

 (a) in counting the taxpayer's basic herd of that class at the end of the year, the least of the number the taxpayer designates in relation to the basic herd, under paragraph a of subsection 1 of section 29 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), in the election referred to in the first paragraph of section 199, the taxpayer's basic herd of that class of animals at the end of the preceding taxation year, the number of animals of that class disposed of by the taxpayer in the year, and one-tenth of the taxpayer's basic herd of that class on 31 December 1971; and

 (b) in computing his income from the farming business for the taxation year, the product obtained by multiplying the number determined under paragraph a by the quotient obtained when the fair market value on 31 December 1971 of such animals of that class is divided by the number of such animals of that class on that day.

1972, c. 23, s. 189; 2009, c. 5, s. 71.

201. Where the basic herd of a class at the end of the year preceding the taxation year minus the deduction required at the end of the year under paragraph a of section 200 exceeds the number of animals of that class owned by the taxpayer at the end of the year, he shall deduct:

 (a) in computing his basic herd of that class at the end of the year, the number of animals comprising the excess, and

 (b) in computing his income from the farming business for the taxation year, the product obtained by multiplying the number of animals determined under paragraph a by the quotient obtained when the fair market value of the animals of that class on 31 December 1971 is divided by the number of the animals of that class on the same day.

1972, c. 23, s. 190.

202. In this division:

 (a) a taxpayer's basic herd of any class of animals at a particular time means such number of the animals of that class that he had on hand at the end of his 1971 taxation year as were, for the purpose of assessing his tax for that year, accepted by the Minister, on an application by the taxpayer, to be capital properties minus the number of animals required under this division to be deducted in computing his basic herd of that class at the end of the taxation years before the particular time;

 (b) class of animals means animals of one of the following species: cattle, horses, sheep or swine, if they are:

(i)  purebred animals of that species for which a certificate of registration has been issued by a person recognized by the breeders in Canada of purebred animals of that species to be the registrar of the breed to which such animals belong, or issued by the Registrar of the Canadian National Livestock Records, or

(ii)  animals of that species other than purebred animals described in subparagraph i.

1972, c. 23, s. 191; 1973, c. 17, s. 18; 1997, c. 14, s. 290.

203. Each group of animals contemplated in subparagraphs i and ii of paragraph b of section 202 is deemed to be of a separate class, unless the number of animals of the same species described in one of those subparagraphs is not greater than 10 per cent of the total number of the animals of that species. In this case, all such animals together are deemed to be of a single class.

1972, c. 23, s. 192.

204. In determining the number of animals of any class on hand at any time, the taxpayer shall include neither an animal acquired for a feeder operation, nor animals of the same class whose age is less than two years for cattle, three years for horses or one year for sheep or swine; in the case of an animal whose age is less than such ages two of such animals of the same class shall be counted as one.

1972, c. 23, s. 193.

DIVISION V 
CERTAIN FARMING LOSSES
1972, c. 23.

205. Where a taxpayer's chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income that is a subordinate source of income for the taxpayer, the loss from all farming businesses carried on by the taxpayer is deemed to be the aggregate of

 (a) the lesser of the following amounts:

(i)  the amount by which the aggregate of the taxpayer's losses, determined without reference to this division and before any deduction under sections 222 to 230, from all farming businesses carried on by the taxpayer during the year exceeds the aggregate of the taxpayer's incomes, so determined, of the same nature for the same year, and

(ii)  $2,500 plus the lesser of $15,000 and one-half of the amount by which the amount determined under subparagraph i exceeds $2,500; and

 (b) the amount by which the amount that would be computed under subparagraph i of paragraph a, if subparagraph i were read without reference to “and before any deduction under sections 222 to 230”, exceeds the amount computed under that subparagraph.

1972, c. 23, s. 194; 1973, c. 17, s. 19; 1980, c. 13, s. 14; 1990, c. 59, s. 110; 2000, c. 5, s. 51; 2015, c. 36, s. 12.

206. Section 205 does not apply to a taxpayer for a taxation year if the taxpayer's chief source of income for the year is a combination of farming and manufacturing or processing in Canada of goods for sale and all or substantially all output from all farming businesses carried on by the taxpayer is used in the manufacturing or processing.

1972, c. 23, s. 195; 2015, c. 36, s. 12.

207. For the purposes of this Part, a taxpayer's restricted farm loss for a taxation year is the amount by which the amount determined under subparagraph i of paragraph a of section 205 in respect of the taxpayer for the year exceeds the aggregate of the amount determined under subparagraph ii of that paragraph a in respect of the taxpayer for the year and all amounts each of which is an amount by which the taxpayer's restricted farm loss for the year is required to be reduced because of sections 485 to 485.18.

1972, c. 23, s. 196; 1973, c. 17, s. 20; 1996, c. 39, s. 57.

DIVISION VI 
INSURANCE AGENTS AND BROKERS
1972, c. 23; 1989, c. 48, s. 257.

208. In computing the income of a taxpayer from the taxpayer's business as an insurance agent or broker, there may be deducted, as a reserve in respect of unearned commissions from that business, only an amount equal to the lesser of

 (a) the aggregate of all amounts each of which is that proportion of an amount that has been included in computing the taxpayer's income for the year or a previous year as a commission in respect of an insurance contract other than a life insurance contract, that the number of days in the period provided for in the insurance contract that fall after the end of the taxation year is of the total number of days in that period, and

 (b) the aggregate of all amounts each of which is the amount that would, but for this section, be deductible under section 150 for the year in respect of a commission referred to in paragraph a.

1972, c. 23, s. 197; 1989, c. 48, s. 257; 1993, c. 16, s. 103; 1994, c. 22, s. 119.

209. An insurance agent or broker shall include in computing his income from his business every amount deducted under section 208 for the preceding taxation year.

1972, c. 23, s. 198; 1989, c. 48, s. 257.

209.0.1. In computing the income of a taxpayer for a taxation year ending after 31 December 1990 from a business carried on by the taxpayer throughout the year as an insurance agent or broker, there may be deducted as an additional reserve in respect of unearned commissions an amount not exceeding

 (a) where the year ends in 1991, 90%,

 (b) where the year ends in 1992, 80%,

 (c) where the year ends in 1993, 70%,

 (d) where the year ends in 1994, 60%,

 (e) where the year ends in 1995, 50%,

 (f) where the year ends in 1996, 40%,

 (g) where the year ends in 1997, 30%,

 (h) where the year ends in 1998, 20%,

 (i) where the year ends in 1999, 10%, and

 (j) where the year ends after 31 December 1999, 0%

of the amount by which the reserve that was deducted by the taxpayer under section 208 for the taxpayer's last taxation year ending before 1 January 1991 exceeds the amount deductible by the taxpayer under section 208 for the taxpayer's first taxation year ending after 31 December 1990.

For the purposes of section 209, any amount deducted by the taxpayer under the first paragraph for a taxation year is deemed to have been deducted for that year pursuant to section 208.

1993, c. 16, s. 104; 1994, c. 22, s. 120.

DIVISION VI.1 
EMPLOYEE BENEFIT PLANS
1982, c. 5, s. 51.

209.1. A taxpayer who makes contributions to an employee benefit plan in respect of his employees or former employees may deduct, in computing his income for a taxation year, the amount allocated to him for the year under section 209.3 by the custodian of the plan that does not, however, exceed the amount by which the aggregate of all contributions made by him to the plan for the year or a preceding year exceeds the aggregate of all amounts deducted by him, in respect of the plan, in computing his income for a preceding year and all amounts received by him in the year or a preceding year as a return of his contributions to the plan.

1982, c. 5, s. 51; 1991, c. 25, s. 176.

209.2. A taxpayer contemplated in section 209.1 may also deduct, where at the end of the year all of the obligations of the plan to his employees and former employees have been satisfied and no property of the plan will thereafter be paid or otherwise be available for the benefit of the taxpayer, the amount equal to the amount by which the aggregate of the contributions paid by him to the plan for the year or a preceding year exceeds the aggregate of all amounts deducted by him in respect of the plan in computing his income for a preceding year or, under section 209.1, for the year, and all amounts received by him in the year or a preceding year as a return of his contributions to the plan.

1982, c. 5, s. 51; 1991, c. 25, s. 176.

209.3. The custodian of an employee benefit plan shall each year allocate to persons who have made contributions to the plan in respect of their employees or former employees the amount by which the aggregate of all payments made in the year out of or under the plan to or for the benefit of their employees or former employees, other than the portion thereof that, by virtue of section 47.2, is not required to be included by the taxpayer in computing the taxpayer's income and that is a return of amounts paid by the taxpayer or a deceased employee of whom the taxpayer is a legatee by particular title or legal representative, and all payments made in the year out of or under the plan to the legatees by particular title or the legal representatives of their employees or former employees, exceeds the income of the plan for the year.

1982, c. 5, s. 51; 1984, c. 15, s. 49; 1991, c. 25, s. 176; 2000, c. 5, s. 52.

209.4. For the purposes of section 209.3, the income of an employee benefit plan for a year is the aggregate of all amounts each of which is the amount by which a payment under the plan by the custodian thereof in the year exceeds, in the case of an annuity, that part of the payment determined in prescribed manner to have been a return of capital and, in any other case, that part of the payment that could, but for sections 47.1 and 47.2, reasonably be regarded as being a payment of a capital nature.

Notwithstanding the first paragraph, in the case of a plan that is a trust, the income of the plan for a year is the amount that would be its income for the year but for sections 652, 653 to 657.3, 659 to 660.2, 663 to 663.2, 664, 666 to 668.3, 671 to 671.4 and 680 to 682.

1982, c. 5, s. 51; 1996, c. 39, s. 58; 2004, c. 21, s. 66; 2009, c. 5, s. 72.

DIVISION VII 
Repealed, 1990, c. 59, s. 111.
1990, c. 59, s. 111.

210. (Repealed).

1972, c. 23, s. 199; 1975, c. 22, s. 27; 1989, c. 77, s. 22; 1990, c. 59, s. 111.

211. (Repealed).

1972, c. 23, s. 200; 1975, c. 22, s. 28; 1990, c. 59, s. 111.

212. (Repealed).

1975, c. 22, s. 29; 1990, c. 59, s. 111.

213. (Repealed).

1972, c. 23, s. 201; 1975, c. 22, s. 30; 1990, c. 59, s. 111.

214. (Repealed).

1972, c. 23, s. 202; 1975, c. 22, s. 31; 1990, c. 59, s. 111.

DIVISION VIII 
PROFESSIONALS
1972, c. 23.

215. For the purpose of computing the income of a taxpayer for a taxation year from a business that is the professional practice of an accountant, dentist, advocate, physician, veterinarian or chiropractor, no amount is to be included in respect of work in progress at the end of the year if the taxpayer makes, in relation to the year, a valid election under paragraph a of section 34 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the business.

Chapter V.2 of Title II of Book I applies in relation to an election made under paragraph a of section 34 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 203; 1973, c. 17, s. 21; 1984, c. 15, s. 50; 1986, c. 19, s. 38; 1997, c. 14, s. 50; 2009, c. 5, s. 73.

216. If a taxpayer has not, in respect of a business, included any amount in respect of work in progress at the end of a taxation year because of an election referred to in the first paragraph of section 215 made in relation to the year, the taxpayer shall apply that paragraph for the purpose of computing the taxpayer's income from the business for subsequent taxation years, unless the taxation year is a year in relation to which a revocation, made by the taxpayer under paragraph b of section 34 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006, of an election made under paragraph a of section 34 of that Act in respect of the business, is valid.

Any condition determined by the Minister of National Revenue for the revocation referred to in the first paragraph applies, with the necessary modifications, in computing the income from the business.

Chapter V.2 of Title II of Book I applies in relation to a revocation made under paragraph b of section 34 of the Income Tax Act or in relation to a revocation made under this section before 20 December 2006.

1972, c. 23, s. 204; 1986, c. 19, s. 38; 2009, c. 5, s. 73.

217. (Repealed).

1972, c. 23, s. 205; 1986, c. 19, s. 39.

217.1. (Repealed).

1984, c. 15, s. 51; 1986, c. 19, s. 39.

DIVISION VIII.1 
ADDITIONAL BUSINESS INCOME OF AN INDIVIDUAL
1997, c. 31, s. 27; 2013, c. 10, s. 20.

217.2. If an individual, other than a testamentary trust, carries on a business in a taxation year, a particular fiscal period of the business begins in the year and ends after the end of the year, and the individual has made an election referred to in the first paragraph of section 7.0.3 in respect of the business, where the particular fiscal period is a fiscal period referred to in the second paragraph of section 7, or has made an 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 business, where the particular fiscal period is a fiscal period referred to in the third or fourth paragraph of section 7, the individual shall, if the election has not been revoked, include, in computing the individual's income for the year from the business, the amount determined by the formula


(A - B) × (C / D).


For the purposes of the formula in the first paragraph,

 (a) A is the total of the individual's income from the business for the fiscal periods of the business that end in the year;

 (b) B is the lesser of

(i)  the aggregate of all amounts each of which is an amount included in the total determined under subparagraph a in respect of the business and that is deemed to be a taxable capital gain for the purposes of Title VI.5 of Book IV, and

(ii)  the aggregate of all amounts deducted under the said Title VI.5 in computing the individual's taxable income for the year;

 (c) C is the number of days on which the individual carries on the business that are both in the year and in the particular fiscal period; and

 (d) D is the number of days on which the individual carries on the business that are in fiscal periods of the business that end in the year.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 4 of section 249.1 of the Income Tax Act in relation to a fiscal period referred to in the third or fourth paragraph of section 7.

1997, c. 31, s. 27; 2009, c. 5, s. 74.

217.3. If an individual, other than a testamentary trust, begins carrying on a business in a taxation year but not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this section referred to as the “particular fiscal period”) and the individual has made an election referred to in the first paragraph of section 7.0.3 in respect of the business, where the particular fiscal period is a fiscal period referred to in the second paragraph of section 7, or has made an 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 business, where the particular fiscal period is a fiscal period referred to in the third or fourth paragraph of section 7, the individual shall, if the election has not been revoked, include, in computing the individual's income for the year from the business, the lesser of

 (a) the amount designated in the individual's fiscal return under this Part for the year; and

 (b) the amount determined by the formula


(A - B) × (C / D).


For the purposes of the formula in subparagraph b of the first paragraph,

 (a) A is the individual's income from the business for the particular fiscal period;

 (b) B is the lesser of

(i)  the aggregate of all amounts each of which is an amount included in the amount determined under subparagraph a in respect of the business and that is deemed to be a taxable capital gain for the purposes of Title VI.5 of Book IV, and

(ii)  the aggregate of all amounts deducted under the said Title VI.5 in computing the individual's taxable income for the individual's taxation year that includes the end of the particular fiscal period;

 (c) C is the number of days on which the individual carries on the business that are both in the year and in the particular fiscal period; and

 (d) D is the number of days on which the individual carries on the business that are in the particular fiscal period.

1997, c. 31, s. 27; 2009, c. 5, s. 75.

217.4. An individual shall deduct in computing the individual's income for a taxation year from a business the amount included under section 217.2 or 217.3 in computing the individual's income for the preceding taxation year from the business.

1997, c. 31, s. 27.

217.5. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 42.

217.6. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 42.

217.7. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 42.

217.8. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 42.

217.9. Sections 217.2 and 217.3 do not apply in computing an individual's income for a taxation year from a business where

 (a) the individual dies or otherwise ceases to carry on the business in the taxation year; or

 (b) the individual becomes a bankrupt in the calendar year in which the taxation year ends.

1997, c. 31, s. 27.

217.9.1. Where an individual carries on a business in a taxation year, the individual dies in the year and after the end of a fiscal period of the business that ends in the year, another fiscal period of the business ends because of the individual's death, in this section referred to as the short period, and the individual's legal representative elects that this section apply in computing the individual's income for the year or files a separate fiscal return under section 1003 in respect of the individual's business, notwithstanding section 217.9, there shall be included in computing the individual's income for the year from the business, the amount determined by the formula


(A − B) × (C / D).


In the formula provided for in the first paragraph,

 (a) A is the total of the individual's income from the business for fiscal periods, other than the short period, of the business that end in the year;

 (b) B is the lesser of

(i)  the aggregate of all amounts each of which is an amount included in the total determined under subparagraph a in respect of the business that is deemed to be a taxable capital gain for the purposes of Title VI.5 of Book IV, and

(ii)  the aggregate of all amounts deducted under Title VI.5 of Book IV in computing the individual's taxable income for the year;

 (c) C is the number of days in the short period; and

 (d) D is the number of days in fiscal periods of the business, other than the short period, that end in the year.

2000, c. 5, s. 53.

DIVISION VIII.2  Repealed, 2015, c. 24, s. 43.
1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.10. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.11. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.12. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.13. (Repealed).

1997, c. 31, s. 27; 2000, c. 5, s. 54; 2002, c. 40, s. 22; 2004, c. 21, s. 67; 2015, c. 24, s. 43.

217.14. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.15. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.16. (Repealed).

1997, c. 31, s. 27; 2015, c. 24, s. 43.

217.17. (Repealed).

2000, c. 5, s. 55; 2015, c. 24, s. 43.

DIVISION VIII.3 
ADDITIONAL BUSINESS INCOME OF A CORPORATION
2013, c. 10, s. 21.

§ 1. —  Limitation on the deferral of corporate tax through the use of a partnership
2013, c. 10, s. 21.

217.18. In this division,

adjusted stub period accrual of a corporation in respect of a partnership—in which the corporation has a significant interest at the end of the last fiscal period of the partnership that ends in the corporation's taxation year in circumstances where another fiscal period (in subparagraphs c and e of the second paragraph and in section 217.33 referred to as the particular fiscal period) begins in the year and ends after the end of the year—means

 (a) if paragraph b does not apply, the amount determined by the formula


[(A - B) × C/D] - (E + F); or


 (b) if a fiscal period of the partnership ends in the corporation's taxation year and the year is the first taxation year in which the fiscal period of the partnership (in this paragraph and subparagraphs j to m of the second paragraph referred to as the eligible fiscal period) is aligned with the fiscal period of one or more other partnerships under a multi-tier alignment,

(i)  where a fiscal period of the partnership ends in the year and before the eligible fiscal period, the amount determined by the formula


[(G - H) × C/I] - (E + F), and


(ii)  where the eligible fiscal period of the partnership is the first fiscal period of the partnership that ends in the corporation's taxation year, the amount determined by the formula


[(J - K - L) × C/M] - (E + F);


eligible alignment income, of a corporation, means

 (a) if a partnership is subject to a single-tier alignment, the first aligned fiscal period of the partnership ends in the first taxation year of the corporation ending after 22 March 2011 (in this paragraph and subparagraphs n to p of the second paragraph referred to as the eligible fiscal period) and the corporation is a member of the partnership at the end of the eligible fiscal period,

(i)  where the eligible fiscal period is preceded by another fiscal period of the partnership that ends in the corporation's first taxation year that ends after 22 March 2011 and the corporation is a member of the partnership at the end of that preceding fiscal period, the amount determined by the formula


N - O - P, or


(ii)  where the eligible fiscal period is the first fiscal period of the partnership that ends in the corporation's first taxation year ending after 22 March 2011, an amount equal to zero; or

 (b) if a partnership is subject to a multi-tier alignment, the first aligned fiscal period of the partnership ends in the taxation year of the corporation (in this paragraph and subparagraphs q to s of the second paragraph referred to as the eligible fiscal period) and the corporation is a member of the partnership at the end of the eligible fiscal period, the amount determined by the formula


Q - R - S;


multi-tier alignment, in respect of a partnership, means the alignment of the fiscal period of the partnership and the fiscal period of one or more other partnerships that results from a valid alignment election the members of the partnership make under subsection 9 of section 249.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or from the deemed alignment election under subsection 11 of that section;

qualified resource expense, of a corporation for a taxation year in respect of a fiscal period of a partnership that begins in the year and ends after the end of the year, means an expense incurred by the partnership in the portion of the fiscal period that is in the year and that is a Canadian exploration expense, a Canadian development expense, a foreign resource expense or a Canadian oil and gas property expense;

qualifying transitional income, of a corporation that is a member of a partnership on 22 March 2011, means the amount that is the aggregate of the following amounts, computed in accordance with section 217.31,

 (a) the corporation's eligible alignment income in respect of the partnership; and

 (b) the corporation's adjusted stub period accrual in respect of the partnership for

(i)  if there is a multi-tier alignment in respect of the partnership, the corporation's taxation year during which ends the fiscal period of the partnership that is aligned with the fiscal period of one or more other partnerships under the multi-tier alignment, or

(ii)  in any other case, the corporation's first taxation year that ends after 22 March 2011;

significant interest, of a corporation in a partnership at any time, means an interest of the corporation in the partnership if the corporation, or the corporation together with one or more persons or partnerships related to or affiliated with the corporation, is entitled at that time to more than 10% of

 (a) the income or loss of the partnership; or

 (b) the net assets of the partnership if it were to cease to exist;

single-tier alignment, in respect of a partnership, means the determination of the partnership's fiscal period end date as part of a valid alignment election the members of the partnership make under subsection 8 of section 249.1 of the Income Tax Act;

specified percentage, of a corporation for a particular taxation year in respect of a partnership, means

 (a) if the first taxation year in respect of which the corporation has qualifying transitional income ends in the calendar year 2011 and the particular year ends in

(i)  the calendar year 2011, 100%,

(ii)  the calendar year 2012, 85%,

(iii)  the calendar year 2013, 65%,

(iv)  the calendar year 2014, 45%,

(v)  the calendar year 2015, 25%, and

(vi)  the calendar year 2016, 0%;

 (b) if the first taxation year in respect of which the corporation has qualifying transitional income ends in the calendar year 2012 and the particular year ends in

(i)  the calendar year 2012, 100%,

(ii)  the calendar year 2013, 85%,

(iii)  the calendar year 2014, 65%,

(iv)  the calendar year 2015, 45%,

(v)  the calendar year 2016, 25%, and

(vi)  the calendar year 2017, 0%; and

 (c) if the first taxation year in respect of which the corporation has qualifying transitional income ends in the calendar year 2013 and the particular year ends in

(i)  the calendar year 2013, 85%,

(ii)  the calendar year 2014, 65%,

(iii)  the calendar year 2015, 45%,

(iv)  the calendar year 2016, 25%, and

(v)  the calendar year 2017, 0%.

In the formulas in the definitions of adjusted stub period accrual and eligible alignment income in the first paragraph,

 (a) A is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for a fiscal period of the partnership that ends in the year (other than any amount in respect of which a deduction is available under sections 738 to 749);

 (b) B is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph a—of the partnership for a fiscal period of the partnership that ends in the year;

 (c) C is the number of days that are in both the year and the particular fiscal period;

 (d) D is the number of days in fiscal periods of the partnership that end in the year;

 (e) E is the amount of the qualified resource expense in respect of the particular fiscal period of the partnership that is designated by the corporation for the year under section 217.23 in its fiscal return for the year filed with the Minister on or before its filing-due date for the year;

 (f) F is an amount (other than an amount included in the amount described in subparagraph e) designated by the corporation in its fiscal return for the year filed with the Minister on or before its filing-due date for the year;

 (g) G is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the first fiscal period of the partnership that ends in the year (other than any amount in respect of which a deduction is available under sections 738 to 749);

 (h) H is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph g—of the partnership for the first fiscal period of the partnership that ends in the year;

 (i) I is the number of days in the first fiscal period of the partnership that ends in the year;

 (j) J is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

 (k) K is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph j—of the partnership for the eligible fiscal period;

 (l) L is the corporation's eligible alignment income for the eligible fiscal period;

 (m) M is the number of days that are in the eligible fiscal period that ends in the year;

 (n) N is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the eligible fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

 (o) O is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph n—of the partnership for the eligible fiscal period;

 (p) P is, where an outlay or expense of the partnership is deemed by section 359.18 to have been made or incurred by the corporation at the end of the eligible fiscal period, the aggregate of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of Divisions III to IV.1 of Chapter X of Title VI if each such outlay or expense were the only amount used in determining the amount deductible;

 (q) Q is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the eligible fiscal period, other than any amount

(i)  in respect of which a deduction is available under sections 738 to 749, or

(ii)  that would be included in computing the income of the corporation for the year if there were no multi-tier alignment;

 (r) R is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph q—of a partnership for the eligible fiscal period; and

 (s) S is, where an outlay or expense of the partnership is deemed by section 359.18 to have been made or incurred by the corporation at the end of the eligible fiscal period, the aggregate of all amounts each of which is an amount that would be deductible by the corporation for the taxation year under any of Divisions III to IV.1 of Chapter X of Title VI if each such outlay or expense were the only amount used in determining the amount deductible.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 8 or 9 of section 249.1 of the Income Tax Act.

2013, c. 10, s. 21.

217.19. Subject to sections 217.22 and 217.25, a corporation (other than a professional corporation) shall include in computing its income for a taxation year its adjusted stub period accrual in respect of a partnership if

 (a) the corporation has a significant interest in the partnership at the end of the last fiscal period of the partnership that ends in the year;

 (b) another fiscal period of the partnership begins in the year and ends after the end of the year; and

 (c) at the end of the year, the corporation is entitled to a share of an income, loss, taxable capital gain or allowable capital loss of the partnership for the fiscal period referred to in paragraph b.

2013, c. 10, s. 21.

217.20. Subject to section 217.22, if a corporation (other than a professional corporation) becomes a member of a partnership during a fiscal period of the partnership (in this section referred to as the particular fiscal period) that begins in the corporation's taxation year and ends after the end of the taxation year but on or before its filing-due date for the taxation year and the corporation has a significant interest in the partnership at the end of the particular fiscal period, the corporation may include in computing its income for the taxation year the lesser of

 (a) the amount designated by the corporation in its fiscal return for the taxation year; and

 (b) the amount determined by the formula


A × B/C.


In the formula in subparagraph b of the first paragraph,

 (a) A is the corporation's income from the partnership for the particular fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

 (b) B is the number of days that are both in the corporation's taxation year and the particular fiscal period; and

 (c) C is the number of days in the particular fiscal period.

2013, c. 10, s. 21.

217.21. The following rules apply for a particular taxation year if an amount was included in computing the income of a corporation in respect of a partnership for the preceding taxation year under section 217.19 or 217.20:

 (a) the portion of the amount that, because of subparagraph i or ii of paragraph a of section 217.22, was income for that preceding taxation year is deductible in computing the income of the corporation for the particular year; and

 (b) the portion of the amount that, because of subparagraph i or ii of paragraph a of section 217.22, was a taxable capital gain for that preceding taxation year is deemed to be an allowable capital loss of the corporation for the particular year from the disposition of property.

2013, c. 10, s. 21; 2015, c. 24, s. 44.

217.22. For the purposes of this Act, the following rules apply:

 (a) in computing the income of a corporation for a taxation year,

(i)  an adjusted stub period accrual included under section 217.19 in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as the income and taxable capital gains that were allocated by the partnership to the corporation for all fiscal periods of the partnership ending in the year,

(ii)  an amount included under section 217.20 in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as the income and taxable capital gains that were allocated by the partnership to the corporation for the particular fiscal period referred to in that section,

(iii)  an amount, a portion of which is deductible or is an allowable capital loss under section 217.21 in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the income and taxable capital gains included in computing the corporation's income for the preceding taxation year under section 217.19 or 217.20 in respect of the partnership,

(iv)  an amount claimed as a reserve under section 217.27 in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the qualifying transitional income in respect of the partnership for the year, and

(v)  an amount, a portion of which is included in computing income under paragraph a of section 217.28, or is deemed to be a taxable capital gain under paragraph b of section 217.28, in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the amount claimed as a reserve under section 217.27 in respect of the partnership for the preceding taxation year; and

 (b) the reference in subparagraph i.4 of paragraph l of section 257 to an amount deducted under section 217.27 includes an amount that is deemed to be an allowable capital loss under subparagraph c of the first paragraph of section 217.27.

2013, c. 10, s. 21; 2015, c. 24, s. 45.

217.23. A corporation may designate an amount for a taxation year in respect of a qualified resource expense for the purposes of the definition of adjusted stub period accrual in section 217.18, subject to the following rules:

 (a) the corporation cannot designate an amount for the year in respect of a qualified resource expense in respect of a partnership except to the extent the corporation obtains from the partnership, before the corporation's filing-due date for the year, information in writing identifying the qualified resource expenses described in paragraph d of section 395 or 408, paragraph e of section 418.1.1 or paragraph b of section 418.2 and determined as if those expenses had been incurred by the partnership in its last fiscal period that ended in the year; and

 (b) the amount designated for the year by the corporation is not to exceed the maximum amount that would be deductible by the corporation under any of Divisions III to IV.1 of Chapter X of Title VI in computing its income for the year if

(i)  the amounts referred to in paragraph a in respect of the partnership were the only amounts used in determining the maximum amount, and

(ii)  the fiscal period of the partnership that begins in the year and ends after the year had ended at the end of the year and each qualified resource expense were deemed under section 359.18 to be incurred by the corporation at the end of the year.

2013, c. 10, s. 21.

217.24. Sections 217.19 and 217.20 do not apply in computing a corporation's income for a taxation year in respect of a partnership if the corporation becomes a bankrupt in the year.

2013, c. 10, s. 21.

217.25. If a corporation is a member of a partnership subject to a multi-tier alignment, section 217.19 does not apply to the corporation in respect of the partnership for taxation years preceding the taxation year that includes the end of the first aligned fiscal period of the partnership under the multi-tier alignment.

2013, c. 10, s. 21.

217.26. Once a corporation makes a designation in calculating its adjusted stub period accrual in respect of a partnership for a taxation year under subparagraph e or f of the second paragraph of section 217.18, the designation cannot be amended or revoked.

2013, c. 10, s. 21.

217.27. Where a corporation has qualifying transitional income in respect of a partnership for a particular taxation year, the following rules apply:

 (a) the corporation may, in computing its income for the particular year, claim an amount, as a reserve, not exceeding the least of

(i)  the specified percentage for the particular year of the corporation's qualifying transitional income in respect of the partnership,

(ii)  if, for the preceding taxation year, an amount was claimed under this section in computing the corporation's income in respect of the partnership, the amount that is the aggregate of

(1)  the amount included under section 217.28 in computing the corporation's income for the particular year in respect of the partnership, and

(2)  the amount by which the corporation's qualifying transitional income in respect of the partnership is increased in the particular year because of the application of sections 217.32 and 217.33, and

(iii)  the amount determined by the formula


A - B;


 (b) the portion of the amount claimed under subparagraph a for the particular year that, because of subparagraph iv of paragraph a of section 217.22, has a character other than capital is deductible in computing the income of the corporation for the particular year; and

 (c) the portion of the amount claimed under subparagraph a for the particular year that, because of subparagraph iv of paragraph a of section 217.22, has the character of capital is deemed to be an allowable capital loss for the particular year from the disposition of property.

In the formula in subparagraph iii of subparagraph a of the first paragraph,

 (a) A is the corporation's income for the particular year computed before deducting or claiming any amount under this section in respect of the partnership or under sections 346.2 to 346.4; and

 (b) B is the aggregate of all amounts each of which is an amount deductible by the corporation for the year under sections 738 to 749 as a dividend received by the corporation after 20 December 2012.

2013, c. 10, s. 21; 2015, c. 24, s. 46.

217.28. Subject to section 217.22, the following rules apply for a particular taxation year if a reserve was claimed by a corporation under section 217.27 in respect of a partnership for the preceding taxation year:

 (a) the portion of the reserve that was deducted under subparagraph b of the first paragraph of section 217.27 for that preceding year is to be included in computing the income of the corporation for the particular year; and

 (b) the portion of the reserve that was deemed by subparagraph c of the first paragraph of section 217.27 to be an allowable capital loss of the corporation for that preceding year is deemed to be a taxable capital gain of the corporation for the particular year from the disposition of property.

2013, c. 10, s. 21; 2015, c. 24, s. 46.

217.29. No claim may be made under section 217.27 in computing a corporation's income for a taxation year in respect of a partnership

 (a) unless, in the case of a corporation that is a member of a partnership in respect of which there is a multi-tier alignment, the corporation has been a member of the partnership continuously since before 22 March 2011 to the end of the year;

 (b) unless, in the case of a corporation that is a member of a partnership in respect of which there is no multi-tier alignment, the corporation is a member of the partnership

(i)  at the end of the partnership's fiscal period that begins before 22 March 2011 and ends in the taxation year of the corporation that includes that date,

(ii)  at the end of the partnership's fiscal period commencing immediately after the fiscal period referred to in subparagraph i and continues to be a member until after the end of the taxation year of the corporation that includes 22 March 2011, and

(iii)  continuously since before 22 March 2011 until the end of the year;

 (c) if at the end of the year or at any time in the following taxation year,

(i)  the corporation's income is exempt from tax under this Part, or

(ii)  the corporation is not resident in Canada and the partnership does not carry on business through an establishment in Canada; or

 (d) if the year ends immediately before another taxation year

(i)  at the beginning of which the partnership no longer principally carries on the activities to which the reserve relates,

(ii)  in which the corporation becomes a bankrupt, or

(iii)  in which the corporation is dissolved or wound up (other than in circumstances to which the rules in sections 556 to 564.1 and 565 apply).

2013, c. 10, s. 21; 2015, c. 24, s. 47.

217.30. A corporation that cannot claim an amount under section 217.27 for a taxation year in respect of a partnership solely because it has disposed of its interest in the partnership is deemed for the purposes of paragraphs a and b of section 217.29 to be a member of the partnership continuously until the end of the taxation year if

 (a) the corporation disposed of its interest to another corporation related to, or affiliated with, the corporation at the time of the disposition; and

 (b) a corporation related to, or affiliated with, the corporation has the partnership interest referred to in paragraph a at the end of the taxation year.

2013, c. 10, s. 21; 2015, c. 24, s. 48.

217.31. For the purpose of determining a corporation's qualifying transitional income, the income or loss of a partnership for a fiscal period must be computed as if

 (a) the partnership had deducted for the fiscal period the maximum amount deductible in respect of any expense, reserve or other amount;

 (b) this Act were read without reference to subparagraph b of the second paragraph of section 194; and

 (c) the partnership had made a valid election for the purposes of paragraph a of section 34 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)).

2013, c. 10, s. 21.

217.32. Section 217.33 applies for a particular taxation year of a corporation and for each subsequent taxation year for which the corporation may claim an amount under section 217.27 in respect of a partnership if the particular year is the first taxation year

 (a) that is after the taxation year in which the corporation has, or would have if the partnership had income, an adjusted stub period accrual that is included in the corporation's qualifying transitional income in respect of the partnership because of paragraph b of the definition of qualifying transitional income in the first paragraph of section 217.18; and

 (b) in which ends the fiscal period of the partnership that began in the taxation year referred to in paragraph a.

2013, c. 10, s. 21; 2015, c. 24, s. 49.

217.33. If, because of section 217.32, this section applies in respect of a partnership for a taxation year of a corporation, the adjusted stub period accrual included in the corporation's qualifying transitional income in respect of the partnership for the year must be computed as if subparagraphs a, b, d and f to m of the second paragraph of section 217.18 were read as follows:

“(a)  A is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the particular fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

“(b)  B is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph a—of the partnership for the particular fiscal period;

“(d)  D is the number of days in the particular fiscal period;

“(f)  F is an amount equal to zero;

“(g)  G is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the particular fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

“(h)  H is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph g—of the partnership for the particular fiscal period;

“(i)  I is the number of days in the particular fiscal period;

“(j)  J is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the partnership for the particular fiscal period (other than any amount in respect of which a deduction is available under sections 738 to 749);

“(k)  K is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss—to the extent that the total of all allowable capital losses does not exceed the total of all taxable capital gains included in the aggregate described in subparagraph j—of the partnership for the particular fiscal period;

“(l)  L is an amount equal to zero;

“(m)  M is the number of days in the particular fiscal period;”.

2013, c. 10, s. 21; 2015, c. 24, s. 50.

217.34. If it is reasonable to conclude that one of the main reasons a corporation is a member of a partnership in a taxation year is to avoid the application of section 217.29, the corporation is deemed not to be a member of the partnership for the purposes of that section.

2013, c. 10, s. 21.

§ 2. —  Income shortfall adjustment
2013, c. 10, s. 21.

217.35. In this subdivision,

actual stub period accrual, of a corporation in respect of a qualifying partnership for a taxation year, means the positive or negative amount determined by the formula


(A - B) × C/D - E;


base year, of a corporation in respect of a qualifying partnership for a taxation year, means the preceding taxation year of the corporation in which began a fiscal period of the partnership that ends in the corporation's taxation year;

income shortfall adjustment, of a corporation in respect of a qualifying partnership for a particular taxation year, means the positive or negative amount determined by the formula


(F - G) × H × I;


qualifying partnership, in respect of a corporation for a particular taxation year, means a partnership a fiscal period of which began in a preceding taxation year and ends in the particular taxation year, and in respect of which the corporation was required to calculate an adjusted stub period accrual for the preceding taxation year.

In the formulas in the definitions of actual stub period accrual and income shortfall adjustment in the first paragraph,

 (a) A is the aggregate of all amounts each of which is the corporation's share of an income or taxable capital gain of the qualifying partnership for the last fiscal period of the partnership that began in the base year (other than any amount in respect of which a deduction was available under sections 738 to 749);

 (b) B is the aggregate of all amounts each of which is the corporation's share of a loss or allowable capital loss of the qualifying partnership for the last fiscal period of the partnership that began in the base year (to the extent that the total of all allowable capital losses included in the aggregate described in this subparagraph in respect of all qualifying partnerships for the taxation year does not exceed the corporation's share of all taxable capital gains of all qualifying partnerships for the taxation year);

 (c) C is the number of days that are in both the base year and the fiscal period;

 (d) D is the number of days in the fiscal period;

 (e) E is the amount of the qualified resource expense in respect of the qualifying partnership that was designated by the corporation for the base year under section 217.23 in its fiscal return for the base year filed with the Minister on or before its filing-due date for the base year;

 (f) F is the amount that is the lesser of

(i)  the actual stub period accrual in respect of the qualifying partnership, and

(ii)  the amount that would be the corporation's adjusted stub period accrual for the base year in respect of the qualifying partnership if, for the purposes of paragraph a of the definition of adjusted stub period accrual in the first paragraph of section 217.18, the amount determined under subparagraph f of the second paragraph of that section were equal to zero;

 (g) G is the amount included under section 217.19 in computing the corporation's income for the base year in respect of the qualifying partnership;

 (h) H is the number of days in the period that begins on the day after the day on which the base year ends and ends on the day on which the taxation year ends; and

 (i) I is the average daily rate of interest determined by reference to the rate of interest prescribed under section 28 of the Tax Administration Act (chapter A-6.002) for the period referred to in subparagraph h.

2013, c. 10, s. 21.

217.36. Section 217.37 applies to a corporation for a taxation year if

 (a) the corporation has designated an amount for the purposes of subparagraph f of the second paragraph of section 217.18 in calculating its adjusted stub period accrual for the base year in respect of a qualifying partnership for the taxation year; and

 (b) where the corporation has qualifying transitional income, the taxation year is after the first taxation year of the corporation to which section 217.33 applies.

2013, c. 10, s. 21.

217.37. If, because of section 217.36, this section applies to a corporation for a taxation year, the corporation shall include in computing its income for the taxation year the amount determined by the formula


A + 0.50 × (A - B).


In the formula in the first paragraph,

 (a) A is the aggregate of all amounts each of which is the corporation's income shortfall adjustment in respect of a qualifying partnership for the year; and

 (b) B is the lesser of the aggregate described in subparagraph a and the aggregate of all amounts each of which is 25% of the positive amount that would be the income shortfall adjustment in respect of a qualifying partnership for the year if the amount referred to in subparagraph g of the second paragraph of section 217.35 were equal to zero.

2013, c. 10, s. 21.

DIVISION IX 
PROSPECTORS
1972, c. 23.

218. Where a prospector receives a share of the capital stock of a corporation as consideration for the disposition to the corporation of a mining property or interest in that property acquired by him as a result of his efforts as a prospector, the following rules apply:

 (a) he shall not include any amount in respect of the receipt of the share in computing his income, except as provided in paragraph b , or in computing the amount contemplated in paragraph b of section 412;

 (b) he shall include in respect of the receipt of the share in computing his income for the year in which the share is disposed of or exchanged an amount equal to the lesser of the following amounts:

(i)  the fair market value of the share at the time of its acquisition;

(ii)  the fair market value of the share at the time of its disposition or exchange;

 (c) he shall not include any amount in computing the cost of the share in respect of the disposition of the mining property or the interest therein, as the case may be;

 (d) the corporation shall not include any amount in respect of the share in computing the cost of the mining property or the interest therein;

 (e) for the purpose of paragraph b, a prospector is deemed to have disposed of or exchanged shares that are identical properties in the order in which they were acquired.

1972, c. 23, s. 206; 1977, c. 26, s. 20; 1987, c. 67, s. 43; 1997, c. 3, s. 71.

219. In this division,

 (a) a prospector is an individual who prospects or explores for minerals or develops a property for minerals on behalf of himself, on behalf of himself and others, or as an employee;

 (b) a mining property means

(i)  a right, licence or privilege to prospect, explore, drill or mine for minerals in a mineral resource in Canada, or

(ii)  immovable property in Canada, other than depreciable property, the principal value of which depends on its mineral resource content.

1972, c. 23, s. 207; 2004, c. 8, s. 39.

220. The rule provided in section 218 applies to any person other than a prospector if:

 (a) that person, under an arrangement with a prospector made before the prospecting or exploration for minerals or development of a property for minerals, or as an employer of a prospector, advanced money for or paid part or all of the expenses incurred in such work; and

 (b) the share was received as consideration for the disposition to the corporation by the person referred to in paragraph a of a mining property or interest in that property acquired by him under the arrangement contemplated in that paragraph, or if the prospector was his employee, acquired by him through his employee's efforts.

Notwithstanding the foregoing, the rules provided in paragraphs b and e of section 218 do not apply to such person unless he is an individual or a partnership other than a partnership each member of which is a taxable Canadian corporation.

1972, c. 23, s. 208; 1987, c. 67, s. 44; 1997, c. 3, s. 71.

DIVISION X  Repealed, 2015, c. 24, s. 51.
1972, c. 23; 2015, c. 24, s. 51.

221. (Repealed).

1972, c. 23, s. 209; 1977, c. 26, s. 21; 1991, c. 25, s. 57; 2015, c. 24, s. 51.

DIVISION XI 
SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT
1972, c. 23; 1987, c. 67, s. 45.

222.  (1) A taxpayer who carries on a business in Canada in a taxation year may deduct, in computing the taxpayer's income from the business for the year, an amount not exceeding the aggregate of all amounts each of which is an expenditure of a current nature made by the taxpayer in the year or in a preceding taxation year ending after 31 December 1973

(a)  on scientific research and experimental development that is related to a business of the taxpayer and directly undertaken in Canada by the taxpayer;

(b)  on scientific research and experimental development that is related to a business of the taxpayer and directly undertaken in Canada on behalf of the taxpayer;

(c)  by payments to a corporation resident in Canada to be used for scientific research and experimental development undertaken in Canada that is related to a business of the taxpayer, where the taxpayer is entitled to exploit the results of that scientific research and experimental development;

(d)  by payments to be used for scientific research and experimental development undertaken in Canada that is related to a business of the taxpayer, if the taxpayer is entitled to exploit the results of that scientific research and experimental development and if the payment was made to

(i)  an association recognized by the Minister to undertake scientific research and experimental development,

(ii)  a university, college, research institute or other similar institution recognized by the Minister,

(iii)  a corporation resident in Canada and exempt from tax under section 991, or

(iv)  an organization recognized by the Minister that makes payments to an association, institution or corporation described in any of subparagraphs i to iii; or

(e)  where the taxpayer is a corporation, by payments to an entity described in subparagraph iii of paragraph d, for scientific research and experimental development undertaken in Canada that is basic research or applied research the primary purpose of which is the use of results therefrom by the taxpayer in conjunction with other scientific research and experimental development activities undertaken or to be undertaken by or on behalf of the taxpayer that relate to a business of the taxpayer, and that has the technological potential for application to other businesses of a type unrelated to that carried on by the taxpayer.

 (2) In this division, “scientific research and experimental development” means, subject to subsection 4, systematic investigation or search that is carried out in a field of science or technology by means of

(a)  basic research or applied research undertaken for the advancement of scientific knowledge; or

(b)  experimental development undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, products, devices or processes, including incremental improvements thereto.

 (3) For the purposes of the definition of “scientific research and experimental development” in subsection 2 in respect of a taxpayer, scientific research and experimental development include work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing and psychological research, where the work is directly in support of research referred to in paragraph a of subsection 2 that is undertaken in Canada by or on behalf of the taxpayer, or experimental development referred to in paragraph b of that subsection that is undertaken in Canada by or on behalf of the taxpayer, and is commensurate with the needs of such research or experimental development.

 (4) For the purposes of the definition of “scientific research and experimental development” in subsection 2, scientific research and experimental development do not include work related to

(a)  market research or sales promotion;

(b)  quality control or routine testing of materials, products, devices or processes;

(c)  research in the social sciences or the humanities;

(d)  prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas;

(e)  the commercial production of a new or improved material, device or product, or the commercial use of a new or improved process;

(f)  style changes; or

(g)  routine data collection.

1972, c. 23, s. 210; 1975, c. 22, s. 32; 1987, c. 67, s. 45; 1988, c. 18, s. 13; 1989, c. 5, s. 49; 1993, c. 16, s. 105; 1996, c. 39, s. 59; 1997, c. 3, s. 71; 1997, c. 31, s. 28; 2000, c. 5, s. 56; 2015, c. 21, s. 135.

222.1. (Repealed).

1993, c. 16, s. 106; 1997, c. 3, s. 71; 1997, c. 31, s. 29; 2015, c. 21, s. 136.

223. (Repealed).

1972, c. 23, s. 211; 1974, c. 18, s. 12; 1987, c. 67, s. 46; 1989, c. 5, s. 50; 1995, c. 49, s. 236; 2015, c. 21, s. 136.

223.0.1. For the purposes of section 223, as it read before being repealed, in respect of a property, an expenditure made by a taxpayer in respect of the property is deemed not to have been made by the taxpayer before the property is considered to have become available for use by the taxpayer.

1993, c. 16, s. 107; 2015, c. 21, s. 137.

223.1. Where a taxpayer carries on a business in Canada in a taxation year by reason of an arrangement, a transaction or an event, or of a series of arrangements, transactions or events, and it may reasonably be considered that one of the purposes of the arrangement, transaction or event or of the series of arrangements, transactions or events is to cause the taxpayer to carry on the business so as to allow the taxpayer to deduct an amount in computing the taxpayer’s income from that business for that taxation year, pursuant to sections 222 to 226, the taxpayer is, for the purposes of those sections, deemed not to carry on the business in that year by reason of the arrangement, transaction or event or of the series of arrangements, transactions or events unless the taxpayer is, by reason of the arrangement, transaction or event, or of the series of arrangements, transactions or events, a member of a partnership other than a specified member of that partnership.

1990, c. 7, s. 11; 2000, c. 39, s. 18.

224. A taxpayer referred to in subsection 1 of section 222 may also deduct, in computing his income from the business referred to therein for the year, all amounts included by virtue of paragraph t of section 87 in computing his income for any previous taxation year and the aggregate of all amounts each of which is an expenditure made by the taxpayer in the year or in any previous taxation year ending after 31 December 1973 as repayment of an amount described in paragraph b of section 225.

1972, c. 23, s. 212; 1975, c. 22, s. 33; 1982, c. 5, s. 52; 1987, c. 67, s. 47; 1989, c. 5, s. 51.

224.1. For the purposes of section 224, an amount is deemed to be an expenditure made in a taxation year by a taxpayer as repayment of an amount described in paragraph b of section 225 if the amount

 (a) reduced, by the effect of paragraph b of section 225, the aggregate of the amounts that may be deducted by the taxpayer under sections 222 to 224 in computing his income for a taxation year;

 (b) was not received by the taxpayer; and

 (c) ceased in the taxation year to be an amount that the taxpayer can reasonably be expected to receive.

1994, c. 22, s. 121.

225. The aggregate of the amounts that may be deducted by a taxpayer under sections 222 to 224, in computing his income for a taxation year, shall be reduced by the aggregate of the following amounts:

 (a) the amount prescribed;

 (b) the aggregate of all amounts each of which is the amount of any government assistance or non-government assistance, within the meaning assigned to those expressions by the first paragraph of section 1029.6.0.0.1, in respect of an expenditure described in section 222 or 223, as each of those sections read in relation to the expenditure, that, on or before the taxpayer's filing-due date for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;

 (b.1) where, in respect of a scientific research and experimental development project referred to in section 222 or 223, as each of those sections read in relation to the project, or in respect of the carrying out of the project, a person has obtained, is entitled to obtain or can reasonably be expected to obtain a benefit or an advantage, whether in the form of a reimbursement, compensation or guarantee or in the form of proceeds of disposition of a property which exceed the fair market value of the property or in any other form or manner, and it may reasonably be considered that the benefit or advantage directly or indirectly results in a compensation or indemnity or, otherwise, in any manner whatsoever, in a benefit for a party to the project, the amount of the benefit or advantage that the person has obtained, is entitled to obtain or can reasonably be expected to obtain on or before the taxpayer's filing-due date for the year;

 (c) the aggregate of all amounts each of which is an amount deducted under sections 222 to 224 in computing the taxpayer's income for a preceding taxation year, except amounts described in section 229;

 (c.1) the aggregate of all amounts each of which is the lesser of the amount deducted under section 346.2 in computing the taxpayer's income for a preceding taxation year and the amount by which the amount that was deductible under sections 222 to 225 in computing the taxpayer's income for that preceding year exceeds the amount deducted under those sections in computing the taxpayer's income for that preceding year;

 (d) where the taxpayer is a corporation control of which has been acquired by a person or group of persons before the end of the year, the amount determined for the year under section 225.1 with respect to the corporation.

1975, c. 22, s. 34; 1979, c. 18, s. 13; 1982, c. 5, s. 52; 1984, c. 15, s. 52; 1989, c. 5, s. 52; 1990, c. 7, s. 12; 1996, c. 39, s. 60; 1997, c. 3, s. 71; 1997, c. 31, s. 30; 2004, c. 21, s. 68; 2015, c. 21, s. 138.

225.1. Where a taxpayer is a corporation control of which was last acquired by a person or group of persons at any time before the end of a taxation year of the corporation, the amount determined for the purposes of paragraph d of section 225 for the year with respect to the corporation is the amount obtained by subtracting the amount determined under the second paragraph from the amount by which

 (a) the aggregate of all amounts each of which is

(i)  an expenditure described in section 222 that was made by the corporation before that time or an expenditure described in section 224, where that section refers to an expenditure made as repayment of an amount described in paragraph b of section 225 that was made by the corporation before that time;

(ii)  the lesser of the amounts determined immediately before that time in respect of the corporation under paragraphs a and b of section 223, as those paragraphs read on 29 March 2012 in respect of expenditures made, and property acquired, by the corporation before 1 January 2014;

(iii)  an amount determined in respect of the corporation for its taxation year ending immediately before that time under section 224, where that section refers to an amount included, under paragraph t of section 87, in computing its income for a preceding taxation year, exceeds

 (b) the aggregate of all amounts each of which is

(i)  the aggregate of all amounts determined in respect of the corporation under paragraphs a to c of section 225 for its taxation year ending immediately before that time;

(ii)  the amount deducted by virtue of sections 222 to 225 in computing the corporation's income for its taxation year ending immediately before that time.

The amount referred to in the first paragraph is equal to the aggregate of

 (a) where the business to which the amounts referred to in any of paragraphs i, ii and iii of subparagraph a of the first paragraph may reasonably be considered to relate was carried on by the corporation for profit or with a reasonable expectation of profit throughout the year, the aggregate of

(i)  the corporation's income for the year from the business before making any deduction under sections 222 to 225; and

(ii)  where properties were sold, leased, rented or developed, or services were rendered, in the course of carrying on the business before the time referred to in the first paragraph, the corporation's income for the year, before making any deduction under sections 222 to 225, from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services; and

 (b) the aggregate of all amounts each of which is an amount determined in respect of a preceding taxation year of the corporation that ended after the time referred to in the first paragraph equal to the lesser of

(i)  the amount determined under subparagraph a with respect to the corporation in respect of the business for that preceding taxation year; and

(ii)  the amount in respect of the business deducted by virtue of sections 222 to 225 in computing the corporation's income for that preceding taxation year.

1989, c. 5, s. 52; 1997, c. 3, s. 71; 2015, c. 21, s. 139.

225.2. For the purposes of sections 222 to 225 and notwithstanding section 230.0.0.1, where a taxpayer is a corporation, scientific research and experimental development, related to a business carried on by another corporation to which the taxpayer is related, otherwise than by reason of a right referred to in paragraph b of section 20 and in which that other corporation is actively engaged, at the time at which an expenditure or payment in respect of the scientific research and experimental development is made by the taxpayer, shall be considered to be related to a business of the taxpayer at that time.

1989, c. 5, s. 52; 1997, c. 3, s. 71.

225.3.  For the purposes of this division, an expenditure is deemed to have been made by a taxpayer in Canada if the expenditure is made

 (a) by the taxpayer in the course of a business carried on by the taxpayer in Canada; and

 (b) for the prosecution of scientific research and experimental development in the exclusive economic zone of Canada, within the meaning of the Oceans Act (Statutes of Canada, 1996, chapter 31), or in the airspace above that zone or the seabed or subsoil below that zone.

2006, c. 13, s. 30.

226. A taxpayer may deduct, in computing his income for a taxation year from a business of the taxpayer, expenditures of a current nature made by him in the year either on scientific research and experimental development carried on outside Canada, directly undertaken by or on behalf of the taxpayer, and related to the business or by way of payments to any of the entities described in subparagraphs i and ii of paragraph d of subsection 1 of section 222 to be used for scientific research and experimental development carried on outside Canada related to the business provided that the taxpayer is entitled to exploit the results of such scientific research and experimental development.

1972, c. 23, s. 213; 1987, c. 67, s. 48; 1989, c. 5, s. 52; 2015, c. 21, s. 140.

226.1. Where, in respect of a scientific research and experimental development project referred to in section 226 or in respect of the carrying out of that project, a person has obtained, is entitled to obtain or can reasonably be expected to obtain a benefit or an advantage, whether in the form of a reimbursement, compensation, guarantee or the proceeds of the disposition of property exceeding the fair market value of the property or in any other form or manner, and it may reasonably be considered that the benefit or advantage directly or indirectly results in a compensation or indemnity or, otherwise, in any manner whatsoever, in a benefit for a party to the project, the amount which the taxpayer may deduct under the said section 226 for the taxation year referred to therein shall be reduced by the amount of the benefit or advantage which the person has obtained, is entitled to obtain or can reasonably be expected to obtain on or before the taxpayer's filing-due date for the year.

1990, c. 7, s. 13; 1997, c. 31, s. 31.

227. (Repealed).

1972, c. 23, s. 214; 1977, c. 5, s. 14; 1979, c. 77, s. 27; 1984, c. 36, s. 44; 1987, c. 67, s. 48; 1988, c. 41, s. 89; 1994, c. 16, s. 51; 1999, c. 8, s. 19; 2003, c. 29, s. 137; 2005, c. 1, s. 73.

228. No deduction may be made under this division in respect of an expenditure made to acquire rights in or arising out of scientific research and experimental development and no deduction permitted under this division may be claimed under section 710 or sections 752.0.10.1 to 752.0.10.14.

1972, c. 23, s. 215; 1987, c. 67, s. 48; 1993, c. 64, s. 23.

229. For the purposes of sections 93 to 104, an amount deducted under section 223 that may reasonably be considered to be in respect of a property described in that section, as it read before being repealed, in respect of the property, is deemed to be an amount deductible under the regulations made under paragraph a of section 130 and, for that purpose, the property so acquired is deemed to be of a separate prescribed class.

1972, c. 23, s. 216; 2015, c. 21, s. 141.

229.1. (Repealed).

1988, c. 4, s. 28; 1989, c. 5, s. 53.

230. Expenditures on scientific research and experimental development include only

 (a) in the cases referred to in section 226,

(i)  expenditures each of which was an expenditure incurred for and all or substantially all of which was attributable to the prosecution of scientific research and experimental development, and

(ii)  expenditures of a current nature that were directly attributable, as determined by regulation, to the prosecution of scientific research and experimental development;

 (b) in cases other than those referred to in section 226, expenditures incurred by a taxpayer in a taxation year, other than a taxation year for which the taxpayer has elected under subparagraph c, each of which is

(i)  an expenditure of a current nature all or substantially all of which was attributable to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development carried on in Canada,

(ii)  an expenditure of a current nature directly attributable, as determined by regulation, to the prosecution, or to the provision of premises, facilities or equipment for the prosecution, of scientific research and experimental development carried on in Canada, or

(iii)  (subparagraph repealed);

(1)  that such premises, facilities or equipment would be used during all or substantially all of their operating time in their expected useful life for the prosecution of scientific research and experimental development carried on in Canada, or

(2)  that all or substantially all of their value would be consumed in the prosecution of scientific research and experimental development carried on in Canada; and

 (c) in cases other than those referred to in section 226, where a taxpayer has elected in prescribed form and in accordance with section 230.0.0.4 for a taxation year, expenditures incurred by the taxpayer in the year each of which is

(i)  (subparagraph repealed);

(ii)  an expenditure of a current nature in respect of the prosecution of scientific research and experimental development in Canada directly undertaken on behalf of the taxpayer,

(iii)  (subparagraph repealed);

(iv)  (subparagraph repealed);

(v)  an expenditure incurred in relation to the cost of materials consumed or transformed in the prosecution of scientific research and experimental development carried on in Canada, or

(vi)  one-half of any other expenditure of a current nature in respect of the lease of premises, facilities or equipment used primarily for the prosecution of scientific research and experimental development carried on in Canada, other than an expenditure in respect of general purpose office equipment or furniture.

For greater certainty, it is understood that scientific research and experimental development relating to a business includes any scientific research and experimental development that may lead to or facilitate an extension of that business.

1972, c. 23, s. 217; 1987, c. 67, s. 49; 1989, c. 5, s. 54; 1995, c. 1, s. 27; 2000, c. 5, s. 57; 2002, c. 40, s. 23; 2009, c. 5, s. 76; 2015, c. 21, s. 142.

230.0.0.1. Except in the case of a taxpayer that derives all or substantially all of his revenue from the prosecution of scientific research and experimental development, including the sale of rights arising out of scientific research and experimental development carried on by him, the prosecution of scientific research and experimental development shall not be considered to be a business of the taxpayer to which scientific research and experimental development is related.

1989, c. 5, s. 55; 1992, c. 1, s. 28.

230.0.0.1.1. For the purposes of this division, expenditures of a current nature include any expenditure made by a taxpayer, other than

 (a) an expenditure made by the taxpayer for the acquisition from a person or partnership of a property that is a capital property of the taxpayer; or

 (b) an expenditure made by the taxpayer for the use of, or the right to use, property that would be capital property of the taxpayer if it were owned by the taxpayer.

2015, c. 21, s. 143.

230.0.0.2. Despite the first paragraph of section 230, expenditures on scientific research and experimental development do not include

 (a) any expenditure made in respect of the acquisition or lease of animals, other than laboratory animals within the meaning of the regulations, or in respect of any other similar kind of transaction regarding such animals; and

 (b) a payment to any of the following entities to the extent that the payment may reasonably be considered to have been made to enable the entity to acquire rights in, or arising out of, scientific research and experimental development:

(i)  a corporation resident in Canada and exempt from tax under section 991, a research institute recognized by the Minister or an association recognized by the Minister, with which the taxpayer does not deal at arm's length,

(ii)  a corporation other than a corporation referred to in subparagraph i, or

(iii)  a university, college or organization recognized by the Minister.

1989, c. 5, s. 55; 1991, c. 8, s. 2; 1993, c. 64, s. 24; 1995, c. 1, s. 28; 1997, c. 3, s. 71; 2015, c. 21, s. 144.

230.0.0.3. For the purposes of subparagraphs b and c of the first paragraph of section 230, an expenditure of a taxpayer does not include remuneration based on profits or a bonus, where the remuneration or bonus, as the case may be, is in respect of a specified employee of the taxpayer.

1995, c. 1, s. 29; 1997, c. 85, s. 56.

230.0.0.3.1. For the purposes of subparagraphs b and c of the first paragraph of section 230, expenditures incurred by a taxpayer in a taxation year do not include expenses incurred in the year in respect of salary or wages of a specified employee of the taxpayer to the extent that those expenses exceed the amount determined by the formula


A × B / 365.


In the formula provided for in the first paragraph,

 (a) A is 5 times the amount of the Maximum Pensionable Earnings, as determined under section 40 of the Act respecting the Québec Pension Plan (chapter R-9), for the calendar year in which the taxation year ends; and

 (b) B is the number of days in the taxation year during which the employee is a specified employee of the taxpayer.

1998, c. 16, s. 103.

230.0.0.3.2. For the purposes of subparagraphs b and c of the first paragraph of section 230, where in a taxation year of a corporation that ends in a particular calendar year, the corporation employs an individual who is a specified employee of the corporation, the corporation is associated with another corporation, in this section referred to as the associated corporation, in a taxation year of the associated corporation that ends in the particular calendar year, and the individual is a specified employee of the associated corporation in that taxation year of the associated corporation, the expenditures incurred by the corporation in its taxation year or years that end in the calendar year and by each associated corporation in its taxation year or years that end in the particular calendar year do not include expenses incurred in those taxation years in respect of salary or wages of the specified employee unless the corporation and all of the associated corporations have filed with the Minister an agreement referred to in section 230.0.0.3.3 in respect of those years in respect of that employee or section 230.0.0.3.5 applies to those corporations in respect of those years in respect of that employee.

1998, c. 16, s. 103.

230.0.0.3.3. Where none of the members of a group of corporations that are associated with each other in a taxation year that ends in a particular calendar year and of which an individual is a specified employee has, in that taxation year, an establishment in a province other than Québec, all of the members of the group of associated corporations file, in respect of their taxation years that end in the particular calendar year, an agreement with the Minister in which they allocate an amount in respect of the individual to one or more of them for those years and the amount so allocated or the aggregate of the amounts so allocated, as the case may be, does not exceed the amount determined by the following formula, the maximum amount that may be claimed in respect of salary or wages of the individual for the purposes of subparagraphs b and c of the first paragraph of section 230 by each of the corporations for each of those years is the amount so allocated to it for each of those years:


A × B / 365.


In the formula provided for in the first paragraph,

 (a) A is 5 times the amount of the Maximum Pensionable Earnings, as determined under section 40 of the Act respecting the Québec Pension Plan (chapter R-9), for the particular calendar year; and

 (b) B is the lesser of 365 and the number of days in those taxation years during which the individual was a specified employee of one or more of the corporations.

1998, c. 16, s. 103.

230.0.0.3.4. An agreement referred to in the first paragraph of section 230.0.0.3.3 is deemed not to have been filed by a taxpayer with the Minister unless it is in prescribed form, and, where the taxpayer is a corporation, it is accompanied by, where the directors of the corporation are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made or, where the directors of the corporation are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made.

1998, c. 16, s. 103.

230.0.0.3.5. Where one of the members of a group of corporations that are associated with each other in a taxation year that ends in a particular calendar year and of which an individual is a specified employee has, in that taxation year, an establishment in a province other than Québec and an amount in respect of the individual is allocated, in accordance with subsection 9.3 of section 37 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), to one or more of them for each of their taxation years that ends in the particular calendar year, the maximum amount that may be claimed in respect of salary or wages of the individual for the purposes of subparagraphs b and c of the first paragraph of section 230 by each of the corporations for each of those years is the amount so allocated to it for each of those years.

Where, in respect of a taxation year, a member of a group of associated corporations referred to in the first paragraph files, in respect of an individual, an agreement with the Minister of Revenue of Canada in accordance with subsection 9.3 of section 37 of the Income Tax Act, the member is required to file with the Minister, in respect of that year, a copy of the agreement.

1998, c. 16, s. 103; 2000, c. 5, s. 293.

230.0.0.3.6. For the purposes of this section and sections 230.0.0.3.2, 230.0.0.3.3 and 230.0.0.3.5, each of the following is deemed to be a corporation associated with a particular corporation:

 (a) an individual related to the particular corporation;

 (b) a partnership of which a majority-interest partner is an individual related to the particular corporation or a corporation associated with the particular corporation; and

 (c) a limited partnership of which a member whose liability as a member is not limited is an individual related to the particular corporation or a corporation associated with the particular corporation.

1998, c. 16, s. 103.

230.0.0.4. Any election made under subparagraph c of the first paragraph of section 230 for a taxation year by a taxpayer shall be filed in prescribed form by the taxpayer, on the day on which the taxpayer first files a prescribed form referred to in section 230.0.0.4.1 for the year.

1995, c. 1, s. 29; 1997, c. 31, s. 32.

230.0.0.4.1. No amount in respect of an expenditure that would be made by a taxpayer in a taxation year that begins after 31 December 1995 if this Act were read without reference to section 482 may be deducted under sections 222 to 224 by the taxpayer in computing the taxpayer's income unless the taxpayer files with the Minister the prescribed form containing the prescribed information in respect of the expenditure on or before the day that is 12 months after the taxpayer's filing-due date for the year.

For the purposes of the first paragraph, a taxpayer is deemed to have filed with the Minister the prescribed form containing prescribed information in respect of an expenditure on or before the day that is 12 months after the taxpayer's filing-due date for a taxation year so that an amount may be deducted by the taxpayer in computing the taxpayer's income under sections 222 to 224 in respect of the expenditure, if

 (a) the taxpayer has filed with the Minister the prescribed form containing prescribed information and, if applicable, a copy of each agreement, certificate, favourable advance ruling, qualification certificate, rate schedule, receipt or report within the time limit provided for in the first paragraph of section 1029.6.0.1.2 that applies to the taxpayer for the taxation year, so as to be deemed to have paid an amount to the Minister for the year in respect of the expenditure under any of Divisions II.5.1 to II.6.15 of Chapter III.1 of Title III of Book IX; and

 (b) the taxpayer files with the Minister the prescribed form containing prescribed information more than 12 months after that date so that an amount may be deducted by the taxpayer in computing the taxpayer's income under sections 222 to 224 in respect of the expenditure.

1997, c. 31, s. 33; 2000, c. 5, s. 58; 2011, c. 1, s. 25; 2011, c. 6, s. 122; 2015, c. 36, s. 13.

230.0.0.5. If a taxpayer has not filed the prescribed form that was required to be filed in respect of an expenditure in accordance with section 230.0.0.4.1, for the purposes of this Part, the expenditure is deemed not to be an expenditure on or in respect of scientific research and experimental development.

1996, c. 39, s. 61; 1997, c. 31, s. 34; 2000, c. 5, s. 59.

230.0.0.5.1. For the purposes of paragraphs b to e of subsection 1 of section 222, the amount of a particular expenditure made by a taxpayer is required to be reduced by the amount of any related expenditure of the person or partnership to whom the particular expenditure is made that is not an expenditure of a current nature of the person or partnership.

2015, c. 21, s. 145.

230.0.0.5.2. If an expenditure is required to be reduced because of section 230.0.0.5.1, the person or the partnership referred to in that section is required to inform the taxpayer in writing of the amount of the reduction without delay if requested by the taxpayer and in any other case no later than 90 days after the end of the calendar year in which the expenditure was made.

2015, c. 21, s. 145.

230.0.0.6. For the purposes of this division, an expenditure that is made by a taxpayer in a taxation year and that would, but for subsection 1 of section 175.1, have been deductible under this division in computing the taxpayer's income for the year, is deemed not to be made by the taxpayer in the year and to be made by the taxpayer in the subsequent taxation year to which the expenditure may reasonably be considered to relate.

1997, c. 31, s. 35.

DIVISION XII 
Repealed, 2000, c. 5, s. 60.
1979, c. 18, s. 14; 1987, c. 67, s. 50; 2000, c. 5, s. 60.

230.0.1. (Repealed).

1985, c. 25, s. 38; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.0.2. (Repealed).

1985, c. 25, s. 38; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.0.3. (Repealed).

1985, c. 25, s. 38; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.1. (Repealed).

1979, c. 18, s. 14; 1980, c. 13, s. 15; 1987, c. 67, s. 51; 1997, c. 3, s. 71; 1997, c. 31, s. 36; 1998, c. 16, s. 251; 2000, c. 5, s. 60.

230.2. (Repealed).

1979, c. 18, s. 14; 1989, c. 5, s. 56.

230.3. (Repealed).

1979, c. 18, s. 14; 1980, c. 13, s. 16; 1987, c. 67, s. 52; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 60.

230.4. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.5. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.6. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 1997, c. 14, s. 51; 2000, c. 5, s. 60.

230.7. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.8. (Repealed).

1979, c. 18, s. 14; 1987, c. 67, s. 53; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.9. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.10. (Repealed).

1979, c. 18, s. 14; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

230.11. (Repealed).

1982, c. 5, s. 53; 1997, c. 3, s. 71; 2000, c. 5, s. 60.

DIVISION XIII 
Repealed, 2002, c. 9, s. 8.
2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.12. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.13. (Repealed).

2000, c. 39, s. 19; 2001, c. 51, s. 28; 2002, c. 9, s. 8.

230.14. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.15. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.16. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.17. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.18. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.19. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.20. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.21. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

230.22. (Repealed).

2000, c. 39, s. 19; 2002, c. 9, s. 8.

TITLE IV 
CAPITAL GAINS AND CAPITAL LOSSES
1972, c. 23.

CHAPTER I 
GENERAL RULES
1972, c. 23.

231. Subject to sections 231.0.1 to 231.2.1, a taxable capital gain, an allowable capital loss or an allowable business investment loss is equal to 1/2 of the capital gain, 1/2 of the capital loss or 1/2 of the business investment loss, as the case may be, from the disposition of property.

The capital gain, the capital loss or the business investment loss shall be computed in accordance with this Title in reference to the taxation year during which the disposition of the property takes place, unless otherwise provided in this Part.

1972, c. 23, s. 218; 1979, c. 18, s. 15; 1990, c. 59, s. 112; 2001, c. 51, s. 29; 2003, c. 2, s. 66; 2009, c. 15, s. 62.

231.0.1. For the purposes of the first paragraph of section 231 in respect of a taxpayer for any following taxation year of the taxpayer, the references to the fraction “1/2” in that paragraph shall be read as a reference to the following fraction:

 (a) if the taxation year begins after 28 February 2000 and ends before 18 October 2000, 2/3;

 (b) if the taxation year includes 28 February 2000 but does not include 18 October 2000,

(i)  3/4, where the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000, in this paragraph referred to as the first period, exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 28 February 2000 and ends at the end of the year, in this paragraph referred to as the second period,

(ii)  3/4, where the amount of the taxpayer’s net capital losses from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the second period,

(iii)  2/3, where the amount of the taxpayer’s net capital gains from dispositions of property in the first period is less than the amount of the taxpayer’s net capital losses from dispositions of property in the second period,

(iv)  2/3, where the amount of the taxpayer’s net capital losses from dispositions of property in the first period is less than the amount of the taxpayer’s net capital gains from dispositions of property in the second period,

(v)  the fraction determined under section 231.0.2, where the taxpayer has only net capital gains, or only net capital losses, from dispositions of property in each of the first and second periods,

(vi)  2/3, where the net capital gains and net capital losses of the taxpayer for the year are nil, and

(vii)  2/3, in any other case;

 (c) if the taxation year begins after 27 February 2000 and includes 18 October 2000,

(i)  2/3, where the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 17 October 2000, in this paragraph referred to as the first period, exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year, in this paragraph referred to as the second period,

(ii)  2/3, where the amount of the taxpayer’s net capital losses from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the second period,

(iii)  1/2, where the amount of the taxpayer’s net capital gains from dispositions of property in the first period is less than the amount of the taxpayer’s net capital losses from dispositions of property in the second period,

(iv)  1/2, where the amount of the taxpayer’s net capital losses from dispositions of property in the first period is less than the amount of the taxpayer’s net capital gains from dispositions of property in the second period,

(v)  the fraction determined under section 231.0.3, where the taxpayer has only net capital gains, or only net capital losses, from dispositions of property in each of the first and second periods,

(vi)  1/2, where the net capital gains and net capital losses of the taxpayer for the year are nil, and

(vii)  1/2, in any other case; and

 (d) if the taxation year includes 27 February 2000 and 18 October 2000,

(i)  3/4, where the amount by which the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000, in this paragraph referred to as the first period, exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000, in this paragraph referred to as the second period, exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year, in this paragraph referred to as the third period,

(ii)  3/4, where the amount by which the amount of the taxpayer’s net capital losses from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the second period, exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the third period,

(iii)  2/3, where the amount by which the amount of the taxpayer’s net capital gains from dispositions of property in the second period exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the first period, exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the third period,

(iv)  2/3, where the amount by which the amount of the taxpayer’s net capital losses from dispositions of property in the second period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the first period, exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the third period,

(v)  the fraction determined under section 231.0.4, where the taxpayer has net capital gains in each of the first and second periods and the total amount of those net capital gains in those periods exceeds the amount of the taxpayer’s net capital losses in the third period,

(vi)  the fraction determined under section 231.0.5, where the taxpayer has net capital losses in each of the first and second periods and the total amount of those net capital losses in those periods exceeds the amount of the taxpayer’s net capital gains in the third period,

(vii)  the fraction determined under section 231.0.6, where the taxpayer has only net capital gains, or only net capital losses, from dispositions of property in each of the first, second and third periods,

(viii)  the fraction determined under section 231.0.7, where the amount of the taxpayer’s net capital gains from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the second period and the taxpayer has net capital gains from dispositions of property in the third period,

(ix)  the fraction determined under section 231.0.8, where the amount of the taxpayer’s net capital losses from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the second period and the taxpayer has net capital losses from dispositions of property in the third period,

(x)  the fraction determined under section 231.0.9, where the amount of the taxpayer’s net capital gains from dispositions of property in the second period exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the first period and the taxpayer has net capital gains from dispositions of property in the third period,

(xi)  the fraction determined under section 231.0.10, where the amount of the taxpayer’s net capital losses from dispositions of property in the second period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the first period and the taxpayer has net capital losses from dispositions of property in the third period, and

(xii)  1/2, in any other case.

2003, c. 2, s. 67.

231.0.2. The fraction referred to in subparagraph v of paragraph b of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 2/3)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000; and

 (b) B is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins on 28 February 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.3. The fraction referred to in subparagraph v of paragraph c of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 2/3) + (B × 1/2)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins at the beginning of the year and ends on 17 October 2000; and

 (b) B is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.4. The fraction referred to in subparagraph v of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 2/3)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000; and

 (b) B is the taxpayer’s net capital gains from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000.

2003, c. 2, s. 67.

231.0.5. The fraction referred to in subparagraph vi of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 2/3)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s net capital losses from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000; and

 (b) B is the taxpayer’s net capital losses from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000.

2003, c. 2, s. 67.

231.0.6. The fraction referred to in subparagraph vii of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 2/3) + (C × 1/2)] / (A + B + C).


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000;

 (b) B is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000; and

 (c) C is the taxpayer’s net capital gains or net capital losses, as the case may be, from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.7. The fraction referred to in subparagraph viii of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 1/2)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the amount by which the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000 exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000; and

 (b) B is the taxpayer’s net capital gains from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.8. The fraction referred to in subparagraph ix of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 3/4) + (B × 1/2)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the amount by which the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000 exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000; and

 (b) B is the taxpayer’s net capital losses from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.9. The fraction referred to in subparagraph x of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 2/3) + (B × 1/2)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the amount by which the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000 exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000; and

 (b) B is the taxpayer’s net capital gains from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.10.  The fraction referred to in subparagraph xi of paragraph d of section 231.0.1 in respect of a taxation year of a taxpayer is determined by the formula


[(A × 2/3) + (B × 1/2)] / (A + B).


In the formula provided for in the first paragraph,

 (a) A is the amount by which the amount of the taxpayer’s net capital losses from dispositions of property in the period that begins on 28 February 2000 and ends on 17 October 2000 exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the period that begins at the beginning of the year and ends on 27 February 2000; and

 (b) B is the taxpayer’s net capital losses from dispositions of property in the period that begins on 18 October 2000 and ends at the end of the year.

2003, c. 2, s. 67.

231.0.11. For the purpose of determining which fraction in paragraphs a to d of section 231.0.1 applies to a taxpayer for a taxation year, the following rules apply:

 (a) the net capital gains of the taxpayer from dispositions of property in a period is the amount by which the taxpayer’s capital gains from dispositions of property in the period exceed the taxpayer’s capital losses from dispositions of property in the period;

 (b) the net capital losses of the taxpayer from dispositions of property in a period is the amount by which the taxpayer’s capital losses from dispositions of property in the period exceed the taxpayer’s capital gains from dispositions of property in the period;

 (c) the net amount included as a capital gain of the taxpayer for a taxation year from a disposition to which section 231.1, as it read before being repealed, or section 231.2 applies is deemed to be equal to 1/2 of the capital gain;

 (d) the net amount included as a capital gain of the taxpayer for a particular taxation year from a disposition of property in a preceding taxation year as a consequence of the application of the second paragraph of section 234 is deemed to be a capital gain of the taxpayer from a disposition of property on the first day of the particular year;

 (e) each capital loss that is a business investment loss shall be determined without reference to sections 264.4 and 264.5;

 (f) where an amount is included in computing the income of the taxpayer for the year by reason of section 485.13 in respect of a commercial obligation that is settled, the amount that would be determined by the formula provided for in the first paragraph of that section in respect of the obligation, if the value of E in that formula were 1, is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the settlement occurs;

 (g) the capital gains and losses of the taxpayer from dispositions of property, other than taxable Canadian property, while the taxpayer is not resident in Canada are deemed to be nil;

 (h) where an election is made by a taxpayer for a year under paragraph d of section 668.5 or any of sections 668.6, 1106.0.3, 1106.0.5, 1113.3, 1113.4, 1116.3 and 1116.5, the portion of the taxpayer’s net capital gains for the year that are to be treated as being in respect of capital gains from dispositions of property that occurred in a particular period in the year is that proportion of those net capital gains that the number of days in the particular period is of the number of days in the year;

 (i) where the election made for the year under paragraph d of section 668.5, or section 668.6, was made by a personal trust, the portion of the taxpayer’s net capital gains for the year that are to be treated as being in respect of capital gains from dispositions of property that occurred in a particular period in the year is that proportion of those net capital gains that the number of days in the particular period is of the number of days that are in all periods in the year in which a net gain was realized;

 (j) where an amount is designated under section 668 in respect of a beneficiary by a trust in respect of the net taxable capital gains of the trust for a taxation year of the trust and the trust does not elect under paragraph d of section 668.5, for the year, the deemed gains of the beneficiary referred to in section 668.5 are deemed to have been realized in each period in the year in a proportion that is equal to the same proportion that the net capital gains of the trust realized by the trust in that period is of the aggregate of the net capital gains realized by the trust in the year;

 (k) where in the course of administering the estate of a deceased taxpayer, a capital loss from a disposition of property by the legal representative of the deceased taxpayer is deemed under paragraph a of section 1054 to be a capital loss of the deceased taxpayer from the disposition of property by the taxpayer in the taxpayer’s last taxation year and not to be a capital loss of the estate, the capital loss is deemed to be from the disposition of a property by the taxpayer immediately before the taxpayer’s death ;

 (l) each capital gain referred to in paragraph a of section 668.5 in respect of a beneficiary shall be determined as if no amount had been claimed by the beneficiary for the purposes of that paragraph;

 (m) where no capital gains are realized or capital losses sustained in a period, the amount of net capital gains or losses for that period is deemed to be nil;

 (n) the net amount included as a capital gain of a taxpayer for a taxation year because of the granting of an option in respect of which section 294 applies is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the option was granted;

 (o) the net amount included under section 295 as a capital gain of a corporation for a taxation year because of the expiration of an option that was granted by the corporation is deemed to be a capital gain of the corporation from a disposition of property on the day on which the option expired;

 (p) the net amount included under section 295.1 as a capital gain of a trust for a taxation year because of the expiration of an option that was granted by the trust is deemed to be a capital gain of the trust from a disposition of property on the day on which the option expired; and

 (q) the net amount included as a capital gain of a taxpayer for a taxation year by reason of sections 296 and 296.1 is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the option was exercised.

2003, c. 2, s. 67; 2004, c. 8, s. 40.

231.1. (Repealed).

2001, c. 51, s. 30; 2003, c. 2, s. 68; 2004, c. 8, s. 41.

231.2. The taxable capital gain of a taxpayer for a taxation year from the disposition of a property is equal to zero if the disposition is

 (a) a gift made to a qualified donee of a property that is

(i)  a share, debt obligation or right listed on a designated stock exchange,

(ii)  a share of the capital stock of a mutual fund corporation,

(iii)  a unit of a mutual fund trust,

(iv)  an interest in a trust created in respect of a segregated fund within the meaning of section 851.2, or

(v)  a bond, debenture, note, hypothecary claim, mortgage or similar obligation, either issued or guaranteed by the Government of Canada, or issued by the government of a province or its mandatary;

 (b) a gift made to a qualified donee, other than a private foundation, of a property that is a property described, in respect of the taxpayer, in section 710.0.1 or in the definition of “qualified property” in the first paragraph of section 752.0.10.1;

 (c) a deemed disposition by reason of the application of Division III of Chapter III of Title VII, the property is that of a deceased individual and the individual is deemed, pursuant to section 752.0.10.10, to have made a gift referred to in paragraph a or b in respect of the property; or

 (d) the exchange, for a property described in paragraph a, of a share of the capital stock of a corporation, which share included, at the time it was issued and at the time of the disposition, a condition allowing the holder to exchange it for the property, and the taxpayer

(i)  receives no consideration on the exchange other than the property, and

(ii)  makes a gift of the property to a qualified donee not more than 30 days after the exchange.

2003, c. 2, s. 69; 2004, c. 8, s. 42; 2005, c. 1, s. 74; 2006, c. 36, s. 29; 2009, c. 15, s. 63; 2010, c. 5, s. 24; 2010, c. 25, s. 21.

231.2.1. A taxpayer's taxable capital gain for a taxation year, from the disposition of an interest in a partnership (other than a prescribed interest) that would be an exchange described in paragraph d of section 231.2 if the interest were a share in the capital stock of a corporation, is equal to the lesser of

 (a) that taxable capital gain determined without reference to this section; and

 (b) the amount determined by the formula


(A - B)/2.


In the formula in subparagraph b of the first paragraph,

 (a) A is the aggregate of the cost to the taxpayer of the partnership interest and of each amount required by subparagraph iv or x of paragraph i of section 255 to be added in computing the adjusted cost base to the taxpayer of the partnership interest;

 (b) B is the adjusted cost base to the taxpayer of the partnership interest determined without reference to subparagraphs iv and v of paragraph l of section 257.

2009, c. 15, s. 64.

231.3. For the purposes of section 231.1, as it read before being repealed, and section 231.2, where the taxation year of the donor includes 28 February 2000 or 17 October 2000, or begins after 28 February 2000 and ends before 17 October 2000, the fraction “1/4” in the portion before paragraph a of either of those sections shall be replaced by the fraction obtained by multiplying the fraction in paragraphs a to d of section 231.0.1 that applies to the donor for the year by 1/2.

2003, c. 2, s. 69; 2004, c. 8, s. 43.

231.4. If a taxpayer is entitled to an amount of an advantage in respect of a gift of a property described in section 231.2, the following rules apply:

 (a) that section applies only to that proportion of the taxpayer's capital gain in respect of the gift that the eligible amount of the gift is of the taxpayer's proceeds of disposition in respect of the gift; and

 (b) section 231 applies to the extent that the taxpayer's capital gain in respect of the gift exceeds the amount of the capital gain to which section 231.2 applies.

2009, c. 5, s. 77.

231.5. For the purposes of section 231.2, if a gift is made to a private foundation after 18 March 2007 and subsection 8 of section 149.2 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) applies to the foundation in respect of a class of shares of the capital stock of a corporation, the portion of paragraph a of section 231.2 before subparagraph i is to be read as if “, other than a private foundation,” was inserted after “qualified donee”.

2009, c. 15, s. 65.

232. A capital gain or a capital loss arises from the disposition of any property other than the following property:

 (a) incorporeal capital property;

 (b) a timber resource property;

 (c) a Canadian resource property;

 (d) a foreign resource property;

 (e) an insurance policy, including a life insurance policy, except for that part of a life insurance policy in respect of which a policyholder is deemed by section 851.11 to have an interest in a related segregated fund trust contemplated in section 851.2;

 (f) an interest of a beneficiary under an environmental trust; or

 (g) a property in respect of whose disposition any of sections 851.22.11, 851.22.13 and 851.22.14 applies.

However, subject to the fourth paragraph, the disposition of a cultural property described in the third paragraph, the disposition of the bare ownership of such property made in the course of a recognized gift with reserve of usufruct or use or the disposition of a musical instrument resulting from a gift described in paragraph e of section 710 or in the definition of total musical instrument gifts in the first paragraph of section 752.0.10.1 does not give rise to a capital gain and the disposition of depreciable property does not give rise to a capital loss.

A cultural property to which the second paragraph refers is any of the following properties:

 (a) a property which complies with the criteria of significance and importance set out in subsection 3 of section 29 of the Cultural Property Export and Import Act (R.S.C. 1985, c. C-51) as determined by the Canadian Cultural Property Export Review Board, and that has been disposed of to an institution or a public authority in Canada which is, at the time of disposition, designated under subsection 2 of section 32 of that Act for general purposes or for a specified purpose related to that property;

 (b) a property that is classified, at the time of disposition, in accordance with the Cultural Heritage Act (chapter P-9.002) and that has been disposed of to an institution or a public authority referred to in subparagraph a; and

 (c) a property that is the subject of a certificate issued by the Conseil du patrimoine culturel du Québec to the effect that it was acquired by a museum established under the Act respecting the Montréal Museum of Fine Arts (chapter M-42) or the National Museums Act (chapter M-44), a certified archival centre or a recognized museum in accordance with its acquisition and conservation policy and the directives of the Ministère de la Culture et des Communications.

The second paragraph does not apply in respect of a property of the taxpayer that was a gift referred to in section 752.0.10.10 and made to an institution or a public authority referred to in subparagraph a of the third paragraph, to a certified archival centre, to a recognized museum or to an entity referred to in any of paragraphs a to e of the definition of total musical instrument gifts in the first paragraph of section 752.0.10.1, and which was not vested in that donee within the 36-month period following the death of the taxpayer or, if the taxpayer's legal representative so requests in writing to the Minister before the expiry of such period, within such longer period as the Minister considers reasonable.

1972, c. 23, s. 219; 1975, c. 22, s. 35; 1978, c. 26, s. 39; 1984, c. 15, s. 53; 1985, c. 25, s. 39; 1986, c. 19, s. 40; 1987, c. 67, s. 54; 1996, c. 39, s. 62; 2000, c. 5, s. 293; 2003, c. 9, s. 21; 2005, c. 1, s. 75; 2006, c. 36, s. 30; 2010, c. 25, s. 22; 2011, c. 1, s. 26; 2011, c. 21, s. 231.

232.1. A business investment loss arises from the disposition after 31 December 1977 of any property that is a share of the capital stock of a small business corporation or a debt owing by such a corporation or by a particular corporation described in the third paragraph, other than a debt disposed of by a corporation which is owed to the latter by a corporation with which it does not deal at arm's length.

However, the disposition of property gives rise to a business investment loss only if section 299 applies to the disposition or if the disposition of property is made by a taxpayer in favour of a person with whom he deals at arm's length.

The particular corporation referred to in the first paragraph is a Canadian-controlled private corporation that is

 (a) a bankrupt that was a small business corporation at the time it last became a bankrupt, or

 (b) a corporation referred to in section 6 of the Winding-up Act (Revised Statutes of Canada, 1985, chapter W-11) that was insolvent, within the meaning of the said Act, and was a small business corporation at the time a winding-up order under the said Act was made in its respect.

1979, c. 18, s. 16; 1982, c. 5, s. 54; 1987, c. 67, s. 55; 1993, c. 16, s. 108; 1996, c. 39, s. 273; 1997, c. 3, s. 23.

232.1.1. For the purposes of sections 232.1 and 236.1, the expression small business corporation at any particular time includes a corporation that was at any time in the 12 months preceding that time a small business corporation.

1988, c. 18, s. 14; 1997, c. 3, s. 71.

232.1.2. For the purposes of sections 232.1 and 236.1, where an amount in respect of a debt owed by a corporation has been paid by a taxpayer to a person with whom the taxpayer was dealing at arm's length pursuant to an arrangement under which the taxpayer guaranteed the debt, and the corporation was a small business corporation at the time the debt was incurred and at any time in the 12 months before the time an amount first became payable by the taxpayer under the arrangement in respect of a debt owed by the corporation, that part of the amount that is owing to the taxpayer by the corporation is deemed to be a debt owing to the taxpayer by a small business corporation.

1993, c. 16, s. 109; 1997, c. 3, s. 71.

233. An amount shall not constitute a capital gain, a capital loss or a business investment loss to the extent that it must otherwise be included or may otherwise be deducted in computing the income of the taxpayer for the year or any other year.

1972, c. 23, s. 220; 1979, c. 18, s. 17.

234. Unless otherwise provided in this Part, the gain from the disposition of property shall be computed by subtracting from the proceeds of disposition the aggregate of

 (a) the adjusted cost base of that property immediately before the disposition and the expenses made or incurred by the taxpayer for the purpose of making the disposition; and

 (b) subject to section 234.1, an amount as a reserve that is equal to the least of

(i)  a reasonable amount as a reserve in respect of the portion of the proceeds of disposition of the property that is payable to the taxpayer after the end of the year and that can reasonably be regarded as a portion of the amount by which the proceeds of disposition of the property exceed the aggregate of the amounts referred to in subparagraph a in respect of the property,

(ii)  an amount equal to the product obtained by multiplying 1/5 of the amount by which the proceeds of disposition of the property exceed the aggregate of the amounts referred to in subparagraph a in respect of the property by the amount by which four exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property, and

(iii)  the amount allowed as a deduction for the year under subparagraph iii of paragraph a of subsection 1 of section 40 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing, for the purposes of that Act, the taxpayer's gain for the year from that disposition or, if the amount that is so allowed as a deduction is equal to the maximum amount that the taxpayer may claim as a deduction in that computation under that subparagraph iii in respect of the disposition, the amount that the taxpayer specifies and that is not less than that maximum amount.

In each subsequent year, the taxpayer shall regard as a gain the amount of the reserve established under subparagraph b of the first paragraph for the preceding year and claim an amount as a new reserve, without exceeding the amount of that gain, computed in accordance with that paragraph.

Sections 21.4.6 and 21.4.7 apply, with the necessary modifications, in relation to a deduction claimed under subparagraph iii of paragraph a of subsection 1 of section 40 of the Income Tax Act.

1972, c. 23, s. 221; 1975, c. 22, s. 36; 1984, c. 15, s. 54; 1996, c. 39, s. 63; 1997, c. 14, s. 52; 1997, c. 85, s. 57; 2010, c. 5, s. 25.

234.0.1. A taxpayer's gain for a particular taxation year from a disposition of a non-qualifying security of the taxpayer, as defined in the first paragraph of section 752.0.10.1, that is the making of a gift of the security, other than an excepted gift within the meaning assigned by that paragraph, to a qualified donee is equal to the amount by which

 (a) an amount equal to

(i)  where the disposition occurred in the particular taxation year, the amount by which the taxpayer's proceeds of disposition exceed the aggregate of the adjusted cost base to the taxpayer of the security immediately before the disposition and any outlays and expenses made or incurred by the taxpayer for the purpose of making the disposition, and

(ii)  where the disposition occurred in the 60-month period ending at the beginning of the particular taxation year, the amount, if any, deducted under paragraph b in computing the taxpayer's gain for the preceding taxation year from the disposition of the security; exceeds

 (b) the amount that the taxpayer claims as a deduction in the prescribed form filed with the taxpayer's fiscal return for the particular taxation year, not exceeding the eligible amount of the gift, if the taxpayer is not deemed under section 752.0.10.16 to have made a gift of a property before the end of the particular taxation year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of that year.

1999, c. 83, s. 49; 2003, c. 2, s. 70; 2009, c. 5, s. 78.

234.0.2. Where, in respect of a taxation year, an individual has made an election under section 1086.28, the amount deemed to be a capital gain under subparagraph b of the first paragraph of that section is deemed to be a gain from the disposition of property for the year.

2011, c. 34, s. 26.

234.1. In computing the amount that a taxpayer may deduct as a reserve under subparagraph b of the first paragraph of section 234 in computing the taxpayer's gain from the disposition of a property, that subparagraph is to be read as if “1/5” and “4” were replaced by “1/10” and “9”, respectively, if

 (a) the property was disposed of by the taxpayer to the taxpayer's child;

 (b) that child was resident in Canada immediately before the disposition; and

 (c) that property was, immediately before the disposition,

(i)  land in Canada or a depreciable property in Canada of a prescribed class that was used by the taxpayer or the spouse, a child or the father or mother of the taxpayer in carrying on a farming or fishing business in Canada,

(ii)  a share of the capital stock of a family farm corporation of the taxpayer within the meaning of subparagraph a of the first paragraph of section 451 or an interest in a family farm partnership of the taxpayer within the meaning of subparagraph f of that paragraph,

(iii)  a qualified small business corporation share of the taxpayer within the meaning of section 726.6.1, or

(iv)  a share of the capital stock of a family fishing corporation of the taxpayer within the meaning of subparagraph a.1 of the first paragraph of section 451 or an interest in a family fishing partnership of the taxpayer within the meaning of subparagraph g of that first paragraph.

1984, c. 15, s. 55; 1987, c. 67, s. 56; 1997, c. 3, s. 71; 1997, c. 14, s. 53; 2004, c. 8, s. 44; 2007, c. 12, s. 43; 2010, c. 5, s. 26.

235. A taxpayer may not deduct the reserve established under section 234 for a taxation year if

 (a) at the end of the year or at any time in the following taxation year, the taxpayer is not resident in Canada or is exempt from tax under this Part;

 (b) the purchaser of the property sold is a corporation that, immediately after the sale,

(i)  is controlled, directly or indirectly, in any manner whatever, by the taxpayer,

(ii)  is controlled, directly or indirectly, in any manner whatever, by a person or group of persons by whom the taxpayer is controlled, directly or indirectly, in any manner whatever, or

(iii)  if the taxpayer is a corporation, controls the taxpayer, directly or indirectly, in any manner whatever; or

 (c) the purchaser of the property sold is a partnership in which the taxpayer is, immediately after the sale, a majority-interest partner.

1975, c. 22, s. 37; 1990, c. 59, s. 113; 1997, c. 3, s. 71; 2009, c. 5, s. 79; 2010, c. 5, s. 27.

236. The loss from the disposition of a property shall be computed by subtracting the proceeds of disposition of that property from the aggregate of the adjusted cost base of such property immediately before the disposition and the expenses made or incurred by the taxpayer for the purposes of the disposition.

1972, c. 23, s. 222.

236.1. A business investment loss, in the case of a share referred to in the first paragraph of section 232.1, is computed by subtracting from the loss determined in accordance with this Title the amount that must be added after 1977 by virtue of the application of paragraph b of section 535 in computing the adjusted cost base of the share or of any other share, in this paragraph referred to as a replaced share, for which the share or a replaced share was substituted or exchanged.

In the case of a share that is not a share that was acquired after 31 December 1971 from a person with whom the taxpayer was dealing at arm's length, but that is a share referred to in the first paragraph of section 232.1 that was issued before 1 January 1972 or a share, in this paragraph and in the third paragraph referred to as a substituted share, that was substituted or exchanged for such a share issued before 1 January 1972 or for a substituted share, the aggregate of all amounts that the taxpayer, his spouse or a trust of which the taxpayer or his spouse was a beneficiary received after 31 December 1971 and before or upon the disposition of the share as a taxable dividend on the share or on any other share in respect of which the share disposed of is a substituted share or which are receivable as such by one of such persons at the time of the disposition of the share must also be deducted from the loss determined in accordance with this Title.

Furthermore, where the taxpayer is a trust to which subparagraph a of the first paragraph of section 653 applies and the share is a share referred to in the second paragraph, the aggregate of all amounts each of which is an amount received after 31 December 1971 by the settlor, within the meaning of the first paragraph of section 658, or his spouse, as a taxable dividend on that share or on any other share in respect of which the share disposed of is a substituted share or which are receivable as such by one of such persons at the time of the disposition of the share must also be deducted from the loss determined in accordance with this Title.

Lastly, a business investment loss is computed by subtracting the amount determined in respect of the taxpayer under section 264.4 or 264.5, as the case may be.

1979, c. 18, s. 18; 1980, c. 13, s. 17; 1982, c. 5, s. 55; 1986, c. 19, s. 41; 1987, c. 67, s. 57; 1994, c. 22, s. 122; 1997, c. 31, s. 37; 2000, c. 5, s. 61.

236.2. Where the taxpayer is a corporation, its loss from the disposition at a particular time in a taxation year of shares of the capital stock of a corporation, in this section referred to as the controlled corporation, that was controlled, directly or indirectly in any manner whatever, by the taxpayer at any time in the year, is its loss otherwise determined from that disposition less the amount by which the amount determined in the second paragraph exceeds the aggregate of the amounts by which the taxpayer's losses have been reduced by virtue of this section in respect of dispositions before the particular time of shares of the capital stock of the controlled corporation.

The amount to which the first paragraph refers is the aggregate of all amounts added under paragraph c.1 of section 255 to the cost to a corporation, other than the controlled corporation, of property disposed of to that corporation by the controlled corporation that were added to the cost of the property during the period while the controlled corporation was controlled by the taxpayer and that can reasonably be attributed to losses on the property that accrued during the period while the controlled corporation was controlled by the taxpayer.

1980, c. 13, s. 18; 1990, c. 59, s. 114; 1997, c. 3, s. 71; 2000, c. 5, s. 62.

236.3. For the purposes of section 236.2, where, in the case of an amalgamation within the meaning of section 544 of several corporations, a particular corporation was controlled, directly or indirectly in any manner whatever, by a predecessor corporation immediately before the amalgamation, and has become so controlled by the new corporation by virtue of the amalgamation, the new corporation is deemed to have acquired control of the particular corporation at the time control thereof was acquired by the predecessor corporation.

1980, c. 13, s. 18; 1990, c. 59, s. 114; 1997, c. 3, s. 71.

237. The loss of a taxpayer from the disposition of a particular property is not allowable where

 (a) during the period that begins 30 days before and ends 30 days after the time of disposition, the taxpayer or a person affiliated with the taxpayer acquires a property, in this section referred to as the substituted property, that is, or is identical to, the particular property; and

 (b) at the end of the 30 days following the time of disposition, the taxpayer or a person affiliated with the taxpayer owns or has a right to acquire the substituted property.

For the purposes of the first paragraph,

 (a) a right to acquire a property (other than a right, as security only, derived from a hypothec, mortgage, agreement of sale or similar obligation) is deemed to be a property that is identical to the property; and

 (b) a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 1 January 2013, deemed to be a property that is identical to an interest in the entity that is an investment in a SIFT wind-up entity.

1972, c. 23, s. 223; 1975, c. 22, s. 38; 1977, c. 26, s. 22; 1990, c. 59, s. 115; 1997, c. 3, s. 71; 2000, c. 5, s. 63; 2005, c. 1, s. 76; 2010, c. 25, s. 23.

238. Section 237 does not apply where the disposition is

 (a) a disposition deemed to have occurred under section 242, as it read before 1 January 1993, any of sections 281, 283, 299 to 300, 436, 440, 444, 450, 450.6 and 653, Chapter I of Title I.1 of Book VI, paragraph a or c of section 785.5 or any of sections 832.1, 851.22.15, 851.22.23 to 851.22.31, 861, 862 and 999.1;

 (b) the expiry of an option;

 (c) a disposition referred to in section 264.0.1;

 (d) a disposition by a corporation the control of which was acquired by a person or group of persons within 30 days after the time of disposition;

 (e) a disposition by a person that, within 30 days after the time of disposition, became or ceased to be exempt from tax under this Part on its taxable income;

 (f) a disposition to which section 238.1 or the second paragraph of section 424 applies; or

 (g) a disposition referred to in section 979.39 or 979.40.

1972, c. 23, s. 224; 1975, c. 22, s. 39; 1984, c. 15, s. 56; 1985, c. 25, s. 40; 1987, c. 67, s. 58; 1995, c. 49, s. 58; 1996, c. 39, s. 64; 2000, c. 5, s. 63; 2004, c. 8, s. 45; 2009, c. 5, s. 80; 2010, c. 25, s. 24; 2015, c. 21, s. 146; 2015, c. 36, s. 14.

238.1. The rules in the second paragraph apply where

 (a) a corporation, trust or partnership, in this section referred to as the transferor, disposes of a particular capital property, other than depreciable property of a prescribed class, otherwise than in a disposition described in any of paragraphs a to e of section 238;

 (b) during the period that begins 30 days before and ends 30 days after the time of disposition, the transferor or a person affiliated with the transferor acquires a property, in this section referred to as the substituted property, that is, or is identical to, the particular capital property; and

 (c) at the end of the 30 days following the time of disposition, the transferor or a person affiliated with the transferor owns the substituted property.

The rules to which the first paragraph refers are as follows:

 (a) the transferor's loss from the disposition is not allowable;

 (b) the amount of the transferor's loss from the disposition, determined without reference to this paragraph and sections 237, 240, 241 and 288, is deemed to be a loss of the transferor from a disposition of the particular capital property at the time that is immediately before the first time, after the time of disposition,

(i)  at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns the substituted property, or a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,

(ii)  at which the substituted property would, if it were owned by the transferor, be deemed under Chapter I of Title I.1 of Book VI or section 999.1 to have been disposed of by the transferor,

(iii)  that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation,

(iv)  at which the transferor or a person affiliated with the transferor is deemed under Division XII of Chapter IV to have disposed of the substituted property, where the substituted property is a debt or a share of the capital stock of a corporation, or

(v)  at which the winding-up of the transferor begins, other than a winding-up referred to in section 556, where the transferor is a corporation; and

 (c) for the purposes of subparagraph b, where a partnership otherwise ceases to exist at any time after the time of disposition,

(i)  the partnership is deemed not to have ceased to exist until the time that is immediately after the first time described in subparagraphs i to v of subparagraph b, and

(ii)  each person who was a member of the partnership immediately before the partnership would, but for this paragraph, have ceased to exist is deemed to remain a member of the partnership, until the time that is immediately after the first time described in subparagraphs i to v of subparagraph b.

2000, c. 5, s. 64; 2004, c. 8, s. 46.

238.2. For the purposes of section 238.1,

 (a) a right to acquire a property, other than a right, as security only, derived from a hypothec, mortgage, agreement of sale or similar obligation, is deemed to be a property that is identical to the property;

 (b) a share of the capital stock of a corporation that is acquired in exchange for another share in a transaction is deemed to be a property that is identical to the other share if

(i)  Division XIII of Chapter IV or Chapter V or VI of Title IX applies to the transaction, or

(ii)  the following conditions are met:

(1)  Division VI of Chapter IV of Title IX applies to the transaction,

(2)  the second paragraph of section 238.1 applied to a prior disposition of the other share, and

(3)  none of the times described in any of subparagraphs i to v of subparagraph b of the second paragraph of section 238.1 has occurred in respect of the prior disposition;

 (b.1) a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 1 January 2013, deemed to be a property that is identical to an interest in the entity that is an investment in a SIFT wind-up entity;

 (c) where section 238.1 applies in respect of the disposition by a person or partnership of a share of the capital stock of a corporation, and after the disposition the corporation is merged with one or more other corporations, otherwise than in a transaction in respect of which paragraph b applies to the share, or is wound up in a winding-up referred to in section 556, the corporation formed on the merger or the parent, within the meaning of that section 556, as the case may be, is deemed to own the share while it is affiliated with the person or partnership; and

 (d) where section 238.1 applies to the disposition by a person or partnership of a share of the capital stock of a corporation, and after the disposition the share is redeemed, acquired or cancelled by the corporation, otherwise than in a transaction in respect of which paragraph b or c applies to the share, the person or partnership is deemed to own the share while the corporation is affiliated with the person or partnership.

2000, c. 5, s. 64; 2005, c. 1, s. 77; 2009, c. 5, s. 81; 2010, c. 25, s. 25.

238.3. Where at a particular time a taxpayer disposes, to a corporation that is affiliated with the taxpayer immediately after the disposition, of a share of a class of the capital stock of the corporation, other than a share that is a distress preferred share within the meaning of section 485, the following rules apply:

 (a) the taxpayer's loss from the disposition is not allowable; and

 (b) in computing the adjusted cost base to the taxpayer after the particular time of a share of a class of the capital stock of the corporation owned by the taxpayer immediately after the particular time, the taxpayer shall add the proportion of the amount of the taxpayer's loss from the disposition, determined without reference to this section and sections 237, 240, 241 and 288, that

(i)  the fair market value, immediately after the particular time, of the share is of

(ii)  the fair market value, immediately after the particular time, of all shares of the capital stock of the corporation owned by the taxpayer.

2000, c. 5, s. 64.

238.3.1. If all or any portion of the capital loss of the succession of a deceased taxpayer, computed without reference to sections 238.1 and 238.3, from the disposition of a share of the capital stock of a corporation is, because of section 1054, considered to be a capital loss of the deceased taxpayer from the disposition of the share, sections 238.1 and 238.3 apply to the succession in respect of the loss only to the extent that the amount of the loss exceeds the portion of the loss that is determined under subparagraph a of the first paragraph of section 1054.

2005, c. 38, s. 64; 2009, c. 5, s. 82.

238.4. For the application of sections 638.1, 686, 741 to 742.3 and 745 in computing the individual’s loss from the disposition of property after having ceased to be resident in Canada, the following rules apply:

 (a) the individual is deemed to be a corporation in respect of dividends received by the individual at a particular time that is after the time at which the individual last acquired the property and at which the individual was not resident in Canada; and

 (b) each taxable dividend received by the individual at a particular time described in paragraph a is deemed to be a taxable dividend that was received by the individual and that was deductible in computing the individual’s taxable income or taxable income earned in Canada under sections 738 to 745 for the taxation year that includes the particular time.

2004, c. 8, s. 47.

239. (Repealed).

1972, c. 23, s. 225; 1990, c. 59, s. 116; 1997, c. 3, s. 71; 2000, c. 5, s. 65.

240. A loss from the disposition of a debt or of any other right to receive an amount shall not be allowed unless the taxpayer has acquired such debt or right to produce or gain income from a business or property other than exempt income or as consideration for the disposition of capital property to a person with whom he was dealing at arm's length.

1972, c. 23, s. 226.

241. A loss from the disposition of a property shall not be allowed where the disposition was in favour of

 (a) a trust governed by a registered retirement income fund, a deferred profit sharing plan, a profit sharing plan, a registered disability savings plan or a tax-free savings account under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary; or

 (b) a trust governed by a registered retirement savings plan under which the taxpayer or the taxpayer's spouse is an annuitant or becomes, within 60 days after the end of the year, an annuitant.

1977, c. 26, s. 23; 1978, c. 26, s. 40; 1979, c. 18, s. 19; 1991, c. 25, s. 58; 2003, c. 2, s. 71; 2009, c. 15, s. 66.

241.0.1. A loss incurred by a taxpayer following the disposition, at a particular time, of a share of the capital stock of a corporation that was at any time a prescribed corporation or a share of the capital stock of a taxable Canadian corporation that was held in a prescribed stock savings plan, or of a property substituted for such share is deemed to be the amount, if any, by which

 (a) the loss otherwise determined, exceeds

 (b) the amount, if any, by which the amount of prescribed assistance that the taxpayer, or a person on with whom the taxpayer was not dealing at arm's length, received or is entitled to receive in respect of the share exceeds any loss otherwise determined from the disposition of the share or of the property substituted for the share before the particular time by the taxpayer or the person.

1986, c. 15, s. 53; 1989, c. 77, s. 23; 1995, c. 49, s. 59; 1997, c. 3, s. 71; 2011, c. 1, s. 27.

241.0.2. A loss incurred by an individual following the disposition, at a particular time, of a share of the capital stock of the corporation governed by the Act constituting Capital régional et coopératif Desjardins (chapter C-6.1) is deemed to be equal to the amount by which the amount of the individual’s loss otherwise determined exceeds the amount by which the amount that the individual or a person with whom the individual was not dealing at arm’s length deducted in respect of the share under section 776.1.5.0.11, exceeds the aggregate of

 (a) the amount of tax that the individual is required to pay, where applicable, under section 1129.27.6 following the redemption or purchase of the share; and

 (b) the amount of any other loss otherwise determined from the disposition of the share before the particular time by a person with whom the individual was not dealing at arm’s length.

2002, c. 9, s. 9.

241.1. (Repealed).

1985, c. 25, s. 41; 1987, c. 67, s. 59.

241.2. (Repealed).

1985, c. 25, s. 41; 1987, c. 67, s. 59.

242. (Repealed).

1972, c. 23, s. 227; 1973, c. 17, s. 22; 1985, c. 25, s. 42; 1987, c. 67, s. 60; 1995, c. 49, s. 60.

243. (Repealed).

1972, c. 23, s. 228; 1973, c. 17, s. 22; 1995, c. 49, s. 60.

244. (Repealed).

1973, c. 17, s. 22; 1987, c. 67, s. 61.

245. (Repealed).

1973, c. 17, s. 22; 1987, c. 67, s. 62; 1995, c. 49, s. 60.

246. (Repealed).

1973, c. 17, s. 22; 1975, c. 22, s. 40; 1995, c. 49, s. 60.

247. (Repealed).

1972, c. 23, s. 229; 1973, c. 17, s. 22; 1995, c. 49, s. 60.

247.1. (Repealed).

1984, c. 15, s. 57; 1995, c. 49, s. 60.

247.2. Where, at any time in a taxation year, an individual owns capital property that is a share of a class of the capital stock of a corporation that, at that time, is a small business corporation and, immediately after that time, ceases to be a small business corporation because a class of the shares of its capital stock or the capital stock of another corporation is listed on a designated stock exchange and the individual makes a valid election under subsection 1 of section 48.1 of the Income Tax Act (R.S.C., 1985, c. 1, (5th Suppl.)) in respect of the share, the individual is deemed, except for the purposes of Division VI of Chapter II of Title II, Division IX of Chapter V of Title III and sections 725.3, 766.3.5 and 766.3.6,

 (a) to have disposed of the share at that time for proceeds of disposition equal to the greater of

(i)  the adjusted cost base to the individual of the share at that time, and

(ii)  such amount as is designated under subparagraph ii of paragraph c of subsection 1 of section 48.1 of the Income Tax Act in respect of the share, not exceeding the fair market value of the share at that time, and

 (b) to have reacquired the share immediately after that time at a cost equal to the proceeds of disposition determined under paragraph a.

1993, c. 16, s. 110; 1997, c. 3, s. 71; 2001, c. 7, s. 30; 2003, c. 2, s. 72; 2010, c. 5, s. 28; 2012, c. 8, s. 44; 2015, c. 21, s. 147.

247.2.1. An individual who makes a valid election under subsection 1 of section 48.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in respect of a share referred to in section 247.2, shall file with the Minister the prescribed form along with a copy of every document sent to the Minister of National Revenue in connection with that election and, as the case may be, an estimate by the individual of the penalty under section 247.5.

2003, c. 2, s. 73.

247.3. (Repealed).

1993, c. 16, s. 110; 1997, c. 31, s. 38; 2003, c. 2, s. 74.

247.4. (Repealed).

1993, c. 16, s. 110; 2003, c. 2, s. 74.

247.5. For the purposes of section 247.2.1, where an individual makes a valid election for a taxation year in respect of a share, under subsection 1 of section 48.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), and the individual files with the Minister, after the individual’s filing-due date for the year, the prescribed form along with a copy of every document sent to the Minister of National Revenue in connection with that election, the individual is required to pay a penalty equal to the lesser of

 (a) 0.25% of the amount by which the proceeds of disposition, determined under section 247.2, of the share exceed the amount referred to in subparagraph i of paragraph a of that section in respect of the share, for each month or part of a month during the period beginning on the individual’s filing-due date for the year and ending on the day on which the prescribed form and required documents are filed with the Minister; and

 (b) an amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph a.

1993, c. 16, s. 110; 2003, c. 2, s. 75.

247.6. The Minister shall examine with dispatch the prescribed form and documents sent to the Minister under section 247.2.1, assess the penalty payable and send a notice of assessment to the individual, who shall pay forthwith to the Minister any unpaid balance of the penalty.

1993, c. 16, s. 110; 2003, c. 2, s. 76.

CHAPTER II 
DEFINITION OF CERTAIN EXPRESSIONS
1972, c. 23.

DIVISION I 
DISPOSITION OF PROPERTY
1972, c. 23.

248. For the purposes of this Title, the disposition of property includes, except as expressly otherwise provided,

 (a) any transaction or event entitling to proceeds of disposition of the property;

 (b) any transaction or event by which,

(i)  where the property is a share, bond, debenture, bill, mortgage created under the jurisdiction of a province other than Québec, agreement of sale or other similar property, or an interest in it, the property is in whole or in part redeemed, acquired or cancelled,

(ii)  where the property is a debt or any other right to receive an amount, the debt or other right is settled or cancelled,

(iii)  where the property is a share, the share is converted because of an amalgamation or merger,

(iv)  where the property is an option to acquire or dispose of property, the option expires, and

(v)  a trust, that can reasonably be considered to act as agent or mandatary for all the beneficiaries under the trust with respect to all dealings with all of the trust's property, ceases to act as agent or mandatary for a beneficiary under the trust in respect of any dealing with any of the trust's property, unless the trust is described in any of subparagraphs a to d of the third paragraph of section 647;

 (c) any transfer of the property to a trust or, where the property is property of a trust, any transfer of the property to any beneficiary under the trust, except as provided by subparagraphs b and g of the second paragraph; and

 (d) where the property is, or is part of, a taxpayer's capital interest in a trust, a payment after 31 December 1999 to the taxpayer from the trust that can reasonably be considered to have been made because of the taxpayer's capital interest in the trust, except as provided by subparagraphs d and e of the second paragraph.

The disposition of property does not include

 (a) any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property, except where the transfer is

(i)  from a person or a partnership to a trust for the benefit of the person or the partnership,

(ii)  from a trust to a beneficiary under the trust, or

(iii)  from one trust maintained for the benefit of one or more beneficiaries under the trust to another trust maintained for the benefit of the same beneficiaries;

 (b) any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property, where

(i)  the transferor and the transferee are trusts that are, at the time of the transfer, resident in Canada,

(ii)  (subparagraph repealed);

(iii)  the transferee does not receive the property as consideration for the transferee's right as a beneficiary under the transferor trust,

(iv)  the transferee holds no property immediately before the transfer, other than property the cost of which is not included, for the purposes of this Part, in computing a balance of undeducted outlays, expenses or other amounts in respect of the transferee,

(v)  the transferee is not a transferee who, in relation to the transfer, makes a valid election under subparagraph v of paragraph f of the definition of “disposition” in subsection 1 of section 248 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in order to avoid the application of that paragraph f;

(vi)  if the transferor is an amateur athlete trust, a cemetery care trust, an employee trust, a trust referred to in section 851.25, a segregated fund trust referred to in section 851.2, a trust described in paragraph c.4 of section 998 or a trust governed by an eligible funeral arrangement, a profit sharing plan, a registered education savings plan, a registered disability savings plan, a registered supplementary unemployment benefit plan or a tax-free savings account, the transferee is the same type of trust, and

(vii)  the transfer results, or is part of a series of transactions or events that results, in the transferor ceasing to exist and, immediately before the time of the transfer or the beginning of that series, as the case may be, the transferee never held any property or held only property having a nominal value;

 (c) (subparagraph repealed);

 (d) where the property is part of a capital interest of a taxpayer in a trust, other than a personal trust or a trust prescribed for the purposes of section 688, that is described by reference to units issued by the trust, a payment after 31 December 1999 from the trust in respect of the capital interest, where the number of units in the trust that are owned by the taxpayer is not reduced because of the payment;

 (e) where the property is a taxpayer's capital interest in a trust, a payment to the taxpayer after 31 December 1999 in respect of the capital interest to the extent that the payment

(i)  is out of the income of the trust, determined without reference to paragraph a of section 657 and section 657.1, for a taxation year or out of the capital gains of the trust for the year, if the payment was made in the year or the right to the payment was acquired by the taxpayer in the year, or

(ii)  is in respect of an amount designated in respect of the taxpayer by the trust under section 667;

 (f) any transfer of the property for the purpose only of securing a debt or a loan, or any transfer by a creditor for the purpose only of returning property that has been used as security for a debt or a loan;

 (g) any transfer of the property to a trust as a consequence of which there is no change in the beneficial ownership of the property, where the main purpose of the transfer is

(i)  to effect payment under a debt or loan,

(ii)  to provide assurance that an absolute or contingent obligation of the transferor will be satisfied, or

(iii)  to facilitate either the provision of compensation or the enforcement of a penalty, in the event that an absolute or contingent obligation of the transferor is not satisfied;

 (h) any issue of a bond, debenture, bill, hypothecary claim or mortgage;

 (i) any issue by a corporation of a share of its capital stock, or any other transaction that, but for this subparagraph, would be a disposition by a corporation of a share of its capital stock;

 (i.1) any redemption, acquisition or cancellation of a share of the capital stock of a corporation (in this subparagraph referred to as the “issuing corporation”) or of a right to acquire such a share, which share or which right being referred to in this subparagraph as the “security”, held by another corporation (in this subparagraph referred to as the “disposing corporation”), if

(i)  the redemption, acquisition or cancellation occurs as part of a merger or combination of two or more corporations, including the issuing corporation and the disposing corporation, to form a new corporation,

(ii)  the merger or combination

(1)  is an amalgamation, within the meaning of subsections 1 and 2 of section 544, to which section 550.9 does not apply,

(2)  is an amalgamation, within the meaning of subsections 1 and 2 of section 544, to which section 550.9 applies, if the issuing corporation and the disposing corporation are described in section 550.9 as the parent and the subsidiary, respectively,

(3)  is a foreign merger, within the meaning of section 555.0.1, or

(4)  would be a foreign merger, within the meaning of section 555.0.1, if subparagraph ii of paragraph c of that section were read without reference to “resident in a country other than Canada”, and

(iii)  either

(1)  the disposing corporation receives no consideration for the security, or

(2)  in the case where the merger or combination is described in subparagraph 3 or 4 of subparagraph ii, the disposing corporation receives no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, becomes property of the new corporation; and

 (j) any transfer of a property governed by civil law which does not entail a change in the right of the person who has the full ownership thereof, although such property be subject to a servitude, or in the right of the usufructuary, the emphyteutic lessee, an institute in a substitution or a beneficiary in a trust.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph v of paragraph f of the definition of “disposition” in subsection 1 of section 248 of the Income Tax Act or in relation to an election made under subparagraph v of subparagraph b of the second paragraph before 20 December 2006.

1972, c. 23, s. 230; 1984, c. 15, s. 58; 1996, c. 39, s. 65; 1997, c. 3, s. 71; 2003, c. 2, s. 77; 2004, c. 8, s. 48; 2005, c. 1, s. 78; 2006, c. 13, s. 31; 2009, c. 5, s. 83; 2009, c. 15, s. 67.

248.1. A redemption, an acquisition or a cancellation, at a particular time after 31 December 1971 and before 24 December 1998, of a share of the capital stock of a corporation (in this section referred to as the “issuing corporation”) or of a right to acquire a share, which share or which right being referred to in this section as the “security”, held by another corporation (in this section referred to as the “disposing corporation”), is not a disposition, within the meaning of section 248 as it read in respect of transactions and events that occurred at the particular time, if

 (a) the redemption, acquisition or cancellation occurred as part of a merger or combination of two or more corporations, including the issuing corporation and the disposing corporation, to form a new corporation;

 (b) the merger or combination

(i)  is an amalgamation, within the meaning of subsections 1 and 2 of section 544 as they read at the particular time, to which section 550.9 if in force, and as it read, at the particular time, does not apply,

(ii)  is an amalgamation, within the meaning of subsections 1 and 2 of section 544 as they read at the particular time, to which section 550.9 if in force, and as it read, at the particular time, applies, if the issuing corporation and the disposing corporation are described in section 550.9, if in force, and as it read, at the particular time, as the parent and the subsidiary, respectively,

(iii)  occurred before 13 November 1981 and is a merger of corporations that is described in section 555, as it read in respect of the merger or combination, or

(iv)  occurred after 12 November 1981 and

(1)  is a foreign merger, within the meaning of section 555.0.1 as it read in respect of the merger or combination, or

(2)  the conditions set out in the second paragraph are met; and

 (c) either

(i)  the disposing corporation received no consideration for the security, or

(ii)  in the case where the merger or combination is described in subparagraph iv of subparagraph b, the disposing corporation received no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, became property of the new corporation.

The conditions to which subparagraph 2 of subparagraph iv of subparagraph b of the first paragraph refers are the following:

 (a) the merger or combination is not a foreign merger, within the meaning of section 555.0.1, as it read in respect of the merger or combination;

 (b) section 555.0.1, as it read in respect of the merger or combination, contained a subparagraph ii in its paragraph c; and

 (c) the merger or combination would be a foreign merger, within the meaning of section 555.0.1, as it read in respect of the merger or combination, if subparagraph ii of paragraph c of that section were read as follows:

“ii. another foreign corporation (in this section referred to as the “parent corporation”), if, immediately after the merger, the new foreign corporation was controlled by the parent corporation.”

2009, c. 5, s. 84.

DIVISION II 
CAPITAL PROPERTY
1972, c. 23.

249. For the purposes of this Title, capital property means any depreciable property of the taxpayer and his other property on the occasion of the disposition of which any gain or loss would be a capital gain or a capital loss for him.

1972, c. 23, s. 231.

250. For the purposes of this Title, an incorporeal capital property of a taxpayer means any property a part of the proceeds of disposition of which would, if the taxpayer disposed of the property, be an amount determined under subparagraph b of the second paragraph of section 107 in respect of a business of the taxpayer.

1972, c. 23, s. 232; 1990, c. 59, s. 117; 2003, c. 2, s. 78; 2005, c. 1, s. 79.

DIVISION II.1 
DEEMED CAPITAL PROPERTY
1978, c. 26, s. 41.

250.1. Subject to section 250.3, if a Canadian security is disposed of by a taxpayer in a taxation year and the taxpayer makes a valid election under subsection 4 of section 39 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 as a consequence of the disposition, every Canadian security owned by the taxpayer in the year or any subsequent taxation year is deemed to be a capital property owned by the taxpayer and every disposition by the taxpayer of any such Canadian security is deemed to be a disposition of a capital property.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 4 of section 39 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1978, c. 26, s. 41; 1984, c. 15, s. 59; 2001, c. 51, s. 31; 2009, c. 5, s. 85.

250.1.1. For the purpose of computing the income of a taxpayer who is a member of a partnership, sections 250.1 and 250.3 apply as if every Canadian security owned by the partnership were owned by the taxpayer, and every Canadian security disposed of by the partnership in a fiscal period of the partnership were disposed of by the taxpayer at the end of that fiscal period.

1993, c. 16, s. 111; 1997, c. 3, s. 71.

250.2. In this division, Canadian security means a security, other than a prescribed security, that is a share of the capital stock of a corporation resident in Canada, a unit of a mutual fund trust, or a bond, debenture, bill, note, hypothecary claim, mortgage or similar obligation issued by a person resident in Canada.

1978, c. 26, s. 41; 1982, c. 5, s. 56; 1985, c. 25, s. 43; 1987, c. 67, s. 63; 1996, c. 39, s. 66; 1997, c. 3, s. 71; 2005, c. 1, s. 80.

250.3. The first paragraph of section 250.1 does not apply to a disposition of a Canadian security by a taxpayer, other than a mutual fund corporation or a mutual fund trust, who, at the time of the disposition, is

 (a) a trader or dealer in securities;

 (b) a financial institution, within the meaning assigned by section 851.22.1;

 (c) (paragraph repealed);

 (d) (paragraph repealed);

 (e) (paragraph repealed);

 (f) a corporation whose principal business is the lending of money or the purchasing of debt obligations, or a combination thereof; or

 (g) a person not resident in Canada.

1978, c. 26, s. 41; 1984, c. 15, s. 60; 1993, c. 16, s. 112; 1996, c. 39, s. 67; 1997, c. 3, s. 71; 2000, c. 5, s. 66; 2009, c. 5, s. 86.

250.4. Where a person disposes of all or substantially all of the assets used in a qualified business carried on by him to a corporation for consideration that includes shares of the corporation, the shares are deemed to be capital property of that person.

1990, c. 59, s. 118; 1997, c. 3, s. 71.

DIVISION II.2 
SPECIFIED PROPERTY
1996, c. 39, s. 68.

250.5. In this Title, specified property of a taxpayer is capital property of the taxpayer that is

 (a) a share;

 (b) an interest in a partnership;

 (c) a capital interest in a trust; or

 (d) an option to acquire a property described in any of paragraphs a to c or an option to acquire such an option.

1996, c. 39, s. 68; 1997, c. 3, s. 71.

DIVISION III 
PROCEEDS OF DISPOSITION
1972, c. 23.

251. The proceeds of disposition of property include, for the purposes of this Title, the same elements as the proceeds of disposition of property referred to in subparagraph f of the first paragraph of section 93 and any amount deemed not to be a dividend under paragraph b of section 568; it does not include an amount deemed to be a dividend paid to a taxpayer under sections 517.1 to 517.3.1, an amount deemed to be a dividend received under section 508 to the extent that it refers to a dividend deemed paid under sections 505 and 506 and not deemed not to be a dividend under paragraph a of section 308.1 or under paragraph b of section 568, nor a prescribed amount.

1972, c. 23, s. 233; 1975, c. 22, s. 41; 1978, c. 26, s. 42; 1982, c. 5, s. 57; 1984, c. 15, s. 61; 1985, c. 25, s. 44; 1987, c. 67, s. 64; 2001, c. 53, s. 260.

CHAPTER II.1 
CAPITAL GAINS REDUCTION
1996, c. 39, s. 69.

251.1. In this chapter,

exempt capital gains balance of an individual for a taxation year that ends before 1 January 2005 in respect of a flow-through entity means the amount determined by the formula


A − B − C − D;


flow-through entity means

 (a) a mutual fund trust;

 (b) a segregated fund trust referred to in section 851.2;

 (c) a trust all or substantially all of the properties of which consist of shares of the capital stock of a corporation, where the trust was established pursuant to an agreement between two or more shareholders of the corporation and one of the main purposes of the trust is to provide for the exercise of voting rights in respect of those shares pursuant to that agreement;

 (d) a trust established exclusively for the benefit of one or more persons each of whom was, at the time the trust was created, either a person from whom the trust received property or a creditor of that person, where one of the main purposes of the trust is to secure the payments required to be made by or on behalf of that person to such creditor;

 (e) a trust maintained primarily for the benefit of employees of a corporation or two or more corporations that do not deal at arm's length with each other, where one of the main purposes of the trust is to hold interests in shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm's length therewith;

 (f)