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



CHAPTER X 
DEVELOPMENT OF NATURAL RESOURCES
1972, c. 23.

DIVISION I 
GENERAL RULES
1975, c. 22, s. 68.

359. In this chapter,

 (a) outlay or expense made or incurred by a taxpayer before a particular time does not include any amount paid or payable for services to be rendered after that time or any amount paid or payable as rent for a period after that time, but includes an amount designated by the taxpayer at that time, under paragraph b of section 622 or 628, as that paragraph read before being struck out, as a cost in respect of property that is a Canadian resource property or a foreign resource property;

 (b) mining business means an activity described in subparagraph a or a.1 of the first paragraph of section 363 with respect to minerals or in any of subparagraphs b to e, f.1 and g of the first paragraph of that section, and a transaction concerning a property described in any of paragraphs a to g of section 370 that may reasonably be related to minerals;

 (c) oil business means an activity described in subparagraph a or a.1 of the first paragraph of section 363, except with respect to minerals, or in subparagraph f of the first paragraph of that section, and a transaction concerning a property described in any of paragraphs a to g of section 370 that may reasonably be related to petroleum or natural gas and that is not described in paragraph b;

 (c.0.1) assistance means any amount, other than a prescribed amount, received or receivable at any time from a person or government, municipality or other public authority whether such amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit;

 (c.1) proceeds of disposition has the meaning assigned by section 251;

 (d) (paragraph repealed).

1975, c. 22, s. 68; 1982, c. 5, s. 82; 1984, c. 15, s. 84; 1985, c. 25, s. 65; 1986, c. 19, s. 67; 1987, c. 67, s. 79; 1988, c. 18, s. 26; 1993, c. 16, s. 141; 1995, c. 49, s. 80; 1998, c. 16, s. 118; 1999, c. 83, s. 53; 2001, c. 53, s. 260; 2003, c. 2, s. 114; 2012, c. 8, s. 49; 2013, c. 10, s. 29.

DIVISION I.1 
FLOW-THROUGH SHARES
1988, c. 18, s. 27.

359.1. In this chapter, “flow-through share” means a share (other than a prescribed share) of the capital stock of a development corporation or a right (other than a prescribed right) to acquire such a share that is issued to a person under an agreement in writing entered into between the person and the development corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which Division XIII of Chapter IV of Title IV or any of Chapters IV, V and VI of Title IX applies, agrees

 (a) to incur, in the period that begins on the day the agreement was entered into and ends 24 months after the end of the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued; and

 (b) to renounce, before 1 March of the first calendar year that begins after the period referred to in subparagraph a, in prescribed form to the person in respect of the share or right, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right.

In this chapter, “selling instrument” in respect of flow-through shares means a prospectus, registration statement, offering memorandum, term sheet or other similar document that describes the terms of the offer, including the price and number of shares, pursuant to which a corporation offers to issue flow-through shares.

1988, c. 18, s. 27; 1993, c. 16, s. 142; 1995, c. 49, s. 81; 1997, c. 3, s. 71; 1998, c. 16, s. 119; 2002, c. 40, s. 35; 2004, c. 21, s. 76; 2005, c. 23, s. 51; 2015, c. 24, s. 60.

359.1.1. For the purposes of this division, a renunciation made by a corporation under section 359.2, 359.2.1 or 359.4 in respect of a share is effective on the date on which the renunciation is made by the corporation or on an earlier date set out in the form prescribed for the purposes of section 359.12.

1995, c. 49, s. 82; 1997, c. 3, s. 71; 1998, c. 16, s. 120.

359.2. Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was entered into and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than expenses deemed to be Canadian exploration expenses of the corporation under the first paragraph of section 399.3), the corporation may, after it complies with section 359.10 in respect of the share and before 1 March of the first calendar year that begins after that period, renounce to the person in respect of the share the amount by which the part of those expenses incurred by it on or before the effective date of the renunciation, which part is in this section referred to as the “specified expenses”, exceeds the aggregate of

 (a) the assistance that the corporation has received, is entitled to receive, or may reasonably expect to receive at any time, and that can reasonably be related to the specified expenses or to Canadian exploration activities to which the specified expenses relate, other than assistance that can reasonably be related to expenses referred to in subparagraph b or b.1;

 (b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation;

 (b.1) all specified expenses each of which is a cost of, or for the use of, seismic data

(i)  that had been acquired, otherwise than as a consequence of performing work that resulted in the creation of the data, by any other person before the cost was incurred,

(ii)  in respect of which a right to use had been acquired by any other person before the cost was incurred, or

(iii)  all or substantially all of which resulted from work performed more than one year before the cost was incurred; and

 (c) the aggregate of amounts that are renounced by the corporation on or before the date on which the renunciation is made by any other renunciation under this section in respect of those expenses.

Notwithstanding the first paragraph, the amount that may be renounced by the corporation must not in any case exceed

 (a) the amount by which the consideration for the share exceeds the aggregate of other amounts renounced under this section or section 359.2.1 or 359.4 by the corporation in respect of the share on or before the day on which the renunciation is made; or

 (b) the amount by which the cumulative Canadian exploration expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced by the corporation under this section on the date on which the renunciation is made, exceeds the aggregate of all amounts renounced by the corporation under this section in respect of any other share on the date on which the renunciation is made, and effective on or before the effective date of the renunciation.

1988, c. 18, s. 27; 1995, c. 49, s. 83; 1997, c. 3, s. 71; 1998, c. 16, s. 121; 2015, c. 24, s. 61.

359.2.1. Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation, the corporation's paid-up capital amount at the time the consideration was given was not more than $15,000,000, and during the period beginning on the later of 3 December 1992 and the particular day the agreement was entered into and ending on the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses described in paragraph a or a.1 of section 408 or that would be described in paragraph d of that section if the words “expenses described in paragraphs a to c” in that paragraph were read as “expenses described in paragraph a or a.1”, the corporation may, after it complies with section 359.10 in respect of the share and before 1 March of the first calendar year that begins after that period, renounce to the person in respect of the share the amount by which the part of those expenses incurred by it on or before the effective date of the renunciation, which part is in this section referred to as the specified expenses, exceeds the aggregate of

 (a) the assistance that the corporation has received, is entitled to receive, or may reasonably expect to receive at any time, and that can reasonably be related to the specified expenses or Canadian development activities to which the specified expenses relate, other than assistance that can reasonably be related to expenses referred to in paragraph b;

 (b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation;

 (c) all amounts that are renounced by the corporation on or before the day on which the renunciation is made by any other renunciation under this section or section 359.4 in respect of those expenses.

1995, c. 49, s. 84; 1997, c. 3, s. 71; 1998, c. 16, s. 122.

359.2.2. A corporation is deemed not to have renounced any particular amount under section 359.2.1 in respect of a share where

 (a) the particular amount exceeds the amount by which the consideration for the share exceeds the aggregate of other amounts renounced under section 359.2, 359.2.1 or 359.4 by the corporation in respect of the share on or before the day on which the renunciation is made;

 (b) the particular amount exceeds the amount by which the cumulative Canadian development expense of the corporation on the effective date of the renunciation, computed before taking into account any amounts renounced under section 359.2.1 by the corporation on the day on which the renunciation is made, exceeds the aggregate of all amounts renounced by the corporation under this section in respect of any other share on the day on which the renunciation is made, and effective on or before the effective date of the renunciation; or

 (c) the particular amount relates to Canadian development expenses incurred by the corporation in a calendar year and the total amounts renounced, on or before the day on which the renunciation is made, under section 359.2.1 in respect of Canadian development expenses incurred by the corporation in that calendar year or by another corporation associated with the corporation at the time the other corporation incurred such expenses exceeds $1,000,000.

1995, c. 49, s. 84; 1997, c. 3, s. 71; 1998, c. 16, s. 123.

359.2.3. For the purposes of section 359.2.1, a corporation's paid-up capital amount at any time is the aggregate of

 (a) its paid-up capital determined for its last taxation year that ended more than 30 days before that time; and

 (b) the aggregate of all amounts each of which is the paid-up capital of another corporation associated at that time with the corporation, determined for the other corporation's last taxation year that ended more than 30 days before that time.

1998, c. 16, s. 124.

359.2.4. For the purpose of determining the paid-up capital amount at a particular time under section 359.2.3 of any corporation and for the purposes of this section, a corporation that was created as a consequence of an amalgamation or merger of other corporations, each of which is in this section referred to as a predecessor corporation, and that does not have a taxation year that ended more than 30 days before the particular time, is deemed to have paid-up capital for a taxation year that ended more than 30 days before the particular time equal to the aggregate of all amounts each of which is the paid-up capital of a predecessor corporation for its last taxation year that ended more than 30 days before the particular time.

1998, c. 16, s. 124.

359.2.5. For the purpose of determining the paid-up capital amount at a particular time under section 359.2.3 of a corporation and for the purposes of section 359.2.4, a particular corporation's paid-up capital for a taxation year is its paid-up capital that would be determined for the year in accordance with Title I of Book III of Part IV if no reference were made to section 1138.2.6 and to the portion of the amount that the corporation may deduct under section 1138 that is attributable to shares of the capital stock of, or indebtedness of, another corporation that

 (a) was not associated with the particular corporation at the particular time; and

 (b) was associated with the particular corporation at the end of the particular corporation's last taxation year that ended more than 30 days before that time.

1998, c. 16, s. 124; 2009, c. 15, s. 82.

359.3. Subject to sections 359.11 to 359.12.0.1, where a corporation renounces an amount to a person under section 359.2 or 359.2.1, the following rules apply:

 (a) the Canadian exploration expenses or Canadian development expenses to which the amount relates are deemed to be Canadian exploration expenses incurred in that amount by the person on the effective date of the renunciation; and

 (b) the Canadian exploration expenses or Canadian development expenses to which the amount relates are, except in respect of that renunciation, deemed on and after the effective date of the renunciation never to have been Canadian exploration expenses or Canadian development expenses incurred by the corporation.

1988, c. 18, s. 27; 1993, c. 16, s. 143; 1995, c. 49, s. 85; 1997, c. 3, s. 71.

359.4. Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was entered into and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian development expenses, the corporation may, after it complies with section 359.10 in respect of the share and before 1 March of the first calendar year that begins after the period, renounce to the person in respect of the share an amount equal to the amount by which the part of those expenses incurred by it on or before the effective date of the renunciation, which part is in this section referred to as the specified expenses, exceeds the aggregate of

 (a) the assistance that the corporation has received, is entitled to receive or may reasonably expect to receive at any time, and that can reasonably be related to the specified expenses or to Canadian development activities to which the specified expenses relate, other than assistance that can reasonably be related to expenses referred to in subparagraph b or b.1;

 (b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation;

 (b.1) all specified expenses that are described in paragraph c of section 408 or that are described in paragraph d of that section because of the reference in the latter paragraph to paragraph c of section 408; and

 (c) the aggregate of amounts that are renounced by the corporation on or before the date on which the renunciation is made by any other renunciation under this section or section 359.2.1 in respect of those expenses.

Notwithstanding the first paragraph, the amount that may be renounced by the corporation must not in any case exceed

 (a) the amount by which the consideration for the share exceeds the aggregate of other amounts renounced in respect of the share by the corporation under this section or section 359.2 or 359.2.1 on or before the day on which the renunciation is made; or

 (b) the amount by which the cumulative Canadian development expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced by the corporation under this section on the date on which the renunciation is made, exceeds the aggregate of all amounts renounced by the corporation under this section in respect of any other share on the date on which the renunciation is made, and effective on or before the effective date of the renunciation.

1988, c. 18, s. 27; 1995, c. 49, s. 86; 1997, c. 3, s. 71; 1998, c. 16, s. 125.

359.5. Subject to sections 359.11 to 359.12.0.1, where a corporation renounces an amount to a person under section 359.4, the following rules apply:

 (a) the Canadian development expenses to which the amount relates are deemed to be Canadian development expenses incurred in that amount by the person on the effective date of the renunciation;

 (b) the Canadian development expenses to which the amount relates are, except for the purposes of that renunciation, deemed on and after the effective date of the renunciation never to have been Canadian development expenses incurred by the corporation.

1988, c. 18, s. 27; 1993, c. 16, s. 144; 1997, c. 3, s. 71.

359.6. (Repealed).

1988, c. 18, s. 27; 1995, c. 49, s. 87; 1997, c. 3, s. 71; 1998, c. 16, s. 126.

359.7. (Repealed).

1988, c. 18, s. 27; 1993, c. 16, s. 145; 1997, c. 3, s. 71; 1998, c. 16, s. 126.

359.8. Where a corporation that issues a flow-through share to a person under an agreement incurs, in a particular calendar year, Canadian exploration expenses or Canadian development expenses, the corporation is, for the purposes of section 359.2 or for the purposes of section 359.2.1 and paragraph b of section 359.2.2, as the case may be, deemed to have incurred the expenses on the last day of the preceding calendar year, provided that

 (a) the expenses

(i)  are described in any of paragraphs a, b.1, c and c.2 of section 395 or paragraph a or a.1 of section 408,

(ii)  would be described in paragraph d of section 395 if the reference in that paragraph to paragraphs a to b.1 and c to c.5 were read as a reference to paragraphs a, b.1, c and c.2 of that section, or

(iii)  would be described in paragraph d of section 408 if the reference therein to paragraphs a to c were read as a reference to paragraphs a and a.1 of that section;

 (a.1) the agreement was entered into in the preceding calendar year;

 (b) the person paid the consideration for the share in money before the end of the preceding calendar year;

 (c) the corporation and the person deal with each other at arm's length throughout the particular calendar year; and

 (d) in one of the first three months of the particular calendar year, the corporation renounces an amount in respect of the expenses to the person in respect of the share in accordance with section 359.2 or 359.2.1, as the case may be, and the effective date of the renunciation is the last day of the preceding calendar year.

1988, c. 18, s. 27; 1990, c. 59, s. 157; 1995, c. 49, s. 88; 1997, c. 3, s. 71; 1998, c. 16, s. 127; 2000, c. 5, s. 93; 2005, c. 1, s. 92; 2015, c. 24, s. 62.

359.8.1. A corporation that issues a flow-through share to a person under an agreement and incurs, under the agreement and in a particular calendar year, expenses (in this section referred to as “Québec exploration expenses”) that relate to a renunciation in respect of which an amount would be included in the aggregate described in subparagraph a of the second paragraph of section 1129.60 for the purpose of computing the tax that it would be required, but for this section, to pay for a month included in the preceding calendar year under section 1129.60, is, for the purposes of either section 359.2 or section 359.2.1 and paragraph b of section 359.2.2, deemed to have incurred the expenses on the last day of the calendar year that precedes the preceding calendar year, if

 (a) section 359.8 applied in respect of the Québec exploration expenses that the corporation incurred under the agreement in the preceding calendar year and that relate to the renunciation;

 (b) the agreement stipulates that the Québec exploration expenses were to be incurred in the preceding calendar year; and

 (c) the Minister is of the opinion that the Québec exploration expenses that were to be incurred under the agreement in the preceding calendar year could not be incurred because of circumstances beyond the corporation's control.

2009, c. 5, s. 128.

359.9. A corporation is deemed

 (a) not to have renounced under any of sections 359.2, 359.2.1 and 359.4 any expenses that are deemed to have been incurred by it because of a renunciation under this chapter by another corporation that is not related to it;

 (b) not to have renounced under section 359.2.1 to a corporation, trust or partnership any Canadian development expenses if, in respect of the renunciation, it has a prohibited relationship with the corporation, trust or partnership and if the expenses are not expenses renounced to another corporation that renounces under section 359.2 any Canadian exploration expense deemed to have been incurred by it because of the renunciation under section 359.2.1;

 (c) not to have renounced under section 359.2.1 any Canadian development expenses deemed to have been incurred by it because of a renunciation under section 359.4; and

 (d) not to have renounced under section 359.2 to a corporation, trust or partnership any Canadian exploration expenses that are deemed to have been incurred by it because of a renunciation under section 359.2.1 if, in respect of the renunciation under section 359.2, it has a prohibited relationship with the corporation, trust or partnership and if the expenses are not expenses ultimately renounced by another corporation under section 359.2 to an individual, other than a trust, or to a corporation, trust or partnership with which that other corporation does not have, in respect of that ultimate renunciation, a prohibited relationship.

1988, c. 18, s. 27; 1995, c. 49, s. 89; 1997, c. 3, s. 71; 1998, c. 16, s. 128.

359.9.1. For the purposes of section 359.9, where a corporation, in paragraph b referred to as the shareholder corporation, trust or partnership gave consideration under a particular agreement for the issue of a flow-through share of a particular corporation, the particular corporation has, in respect of a renunciation under section 359.2 or 359.2.1 in respect of the share, a prohibited relationship

 (a) with the trust if, at any time after the particular agreement was entered into and before the share is issued to the trust, the particular corporation or any corporation related to it is beneficially interested in the trust;

 (b) with the shareholder corporation if, immediately before the particular agreement was entered into, the shareholder corporation was related to the particular corporation; or

 (c) with the partnership if any part of the amount renounced would, but for the second paragraph of section 359.12, be included, because of paragraph d of section 395, in the Canadian exploration expense of

(i)  the particular corporation, or

(ii)  any other corporation that, at any time after the particular agreement was entered into and before that part of the amount renounced would, but for this paragraph, be incurred, would, if flow-through shares issued by the particular corporation under agreements entered into at the same time as or after the time the particular agreement was entered into were disregarded, be related to the particular corporation.

1995, c. 49, s. 90; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 129.

359.10. A corporation that agrees to issue or prepares a selling instrument in respect of flow-through shares shall file with the Minister a prescribed form together with the amount of $200 and a copy of the selling instrument or agreement to issue the shares on or before the last day of the month following the earlier of

 (a) the month in which the agreement to issue the shares is entered into, and

 (b) the month in which the selling instrument is first delivered to a potential investor.

The Minister shall assign an identification number to the prescribed form and notify the corporation of the number.

1988, c. 18, s. 27; 1992, c. 31, s. 1; 1996, c. 39, s. 107; 1997, c. 3, s. 71.

359.11. Where, in a fiscal period of a partnership, an expense is incurred by the partnership as a consequence of a renunciation of an amount under section 359.2, 359.2.1 or 359.4, the partnership shall, before the end of the third month following the end of the fiscal period, file with the Minister the prescribed form identifying the share of the expense attributable to each member of the partnership at the end of that fiscal period.

Where the form required to be filed under the first paragraph is not so filed, except for the purposes of the first paragraph the partnership is deemed not to have incurred the expense referred to in that paragraph.

1988, c. 18, s. 27; 1993, c. 16, s. 146; 1995, c. 49, s. 91; 1997, c. 3, s. 71; 1998, c. 16, s. 130.

359.11.1. Where a partnership receives or becomes entitled to receive assistance as a mandatary of its members or former members at a particular time in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph b of sections 359.3 and 359.5, would be incurred by a corporation, the following rules apply:

 (a) where the entitlement of any such member or former member to any part of such assistance is known by the partnership as of the end of the partnership's first fiscal period ending after the particular time and that part of such assistance was not required to be reported under paragraph b in respect of a calendar year ending before the end of that fiscal period, the partnership shall, on or before the last day of the third month following the end of that fiscal period, file with the Minister a prescribed form indicating the share of that part of such assistance paid to each such member or former member before the end of that fiscal period or to which each such member or former member is entitled at the end of that fiscal period;

 (b) where the entitlement of any such member or former member to any part of such assistance is known by the partnership at the end of a calendar year that ends after the particular time and that part of such assistance was not required to be reported under paragraph a in respect of a fiscal period ending on or before the end of that calendar year, or under this paragraph in respect of a preceding calendar year, the partnership shall, on or before the last day of the third month following the end of that calendar year, file with the Minister a prescribed form indicating the share of that part of such assistance paid to each such member or former member before the end of that fiscal period or to which each such member or former member is entitled at the end of that calendar year;

 (c) where the prescribed form required to be filed under paragraph a or b is not so filed, the part of such expense relating to the assistance required to be reported in the prescribed form is deemed not to have been incurred by the partnership.

1993, c. 16, s. 147; 1997, c. 3, s. 71; 1998, c. 16, s. 131.

359.12. Where a corporation renounces an amount in respect of Canadian exploration expenses or Canadian development expenses under section 359.2, 359.2.1 or 359.4, the corporation shall file the prescribed form in respect of the renunciation with the Minister before the end of the first month following the month in which the renunciation is made.

Where the form required to be filed under the first paragraph is not so filed, sections 359.3 and 359.5 do not apply in respect of the amount referred to in the first paragraph that the corporation has renounced.

1988, c. 18, s. 27; 1993, c. 16, s. 148; 1995, c. 49, s. 92; 1997, c. 3, s. 71; 1998, c. 16, s. 132.

359.12.0.1. Where a corporation receives or becomes entitled to receive assistance as a mandatary in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph b of sections 359.3 and 359.5, would be incurred by the corporation, the corporation shall, before the end of the first month following the particular month in which it first becomes known to the corporation that a person who holds a flow-through share of the corporation is entitled to a share of any part of the assistance, file with the Minister the prescribed form identifying the share of that part of the assistance to which each of those persons is entitled at the end of the particular month.

Where the form required to be filed under the first paragraph is not so filed, except for the purpose of the first paragraph the corporation is deemed not to have incurred the expense referred to in the first paragraph to which the assistance relates.

1993, c. 16, s. 149; 1997, c. 3, s. 71; 1998, c. 16, s. 132.

359.12.1. A corporation or partnership may file with the Minister a document referred to in any of sections 359.10 to 359.12.0.1 after the particular day on or before which the document is required to be filed under the applicable section, if

 (a) the document is filed on or before the day that is 90 days after the particular day, or after that day where, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the document to be filed, and

 (b) the corporation or partnership, as the case may be, pays to the Minister at the time of filing the penalty prescribed in section 359.12.2 in respect of the late filing.

The document filed in accordance with the first paragraph is deemed, except for the purposes of this section and section 359.12.2, to have been filed with the Minister on the day on or before which it was required to be filed under any of sections 359.10 to 359.12.0.1, as the case may be.

1990, c. 59, s. 158; 1993, c. 16, s. 150; 1997, c. 3, s. 71.

359.12.1.1. Where a corporation purports to renounce an amount under section 359.2, 359.2.1 or 359.4 after the period in which the corporation was entitled to renounce the amount, the amount is deemed, except for the purposes of this section and sections 359.12 and 359.12.2, to have been renounced at the end of the period if

 (a) the corporation renounces the amount on or before the day that is 90 days after the end of that period, or after the day that is 90 days after the end of that period where, in the opinion of the Minister, the circumstances are such that it would be just and equitable that the amount be renounced; and

 (b) the corporation pays to the Minister the penalty payable under section 359.12.2 in respect of the renunciation on or before the day that is 90 days after the day of the renunciation.

1995, c. 49, s. 93; 1997, c. 3, s. 71; 1998, c. 16, s. 133.

359.12.2. For the purposes of sections 359.12.1 and 359.12.1.1, the penalty in respect of the late filing of a document referred to in any of sections 359.10 to 359.12.0.1, or in respect of a renunciation referred to in section 359.12.1.1, is equal to the lesser of $15,000 and

 (a) where the penalty is in respect of the late filing of a document referred to in section 359.10, 359.11 or 359.12, the greater of $100 and 0.25% of the maximum amount in respect of the Canadian exploration expenses and Canadian development expenses renounced or attributed or to be renounced or attributed as set out in the document;

 (b) where the penalty is in respect of the late filing of a document referred to in section 359.11.1 or 359.12.0.1, the greater of $100 and 0.25% of the assistance reported in the document;

 (c) where the penalty is in respect of a renunciation referred to in section 359.12.1.1, the greater of $100 and 0.25% of the amount of the renunciation.

1990, c. 59, s. 158; 1993, c. 16, s. 150; 1995, c. 49, s. 94; 1998, c. 16, s. 134.

359.13. A corporation may renounce an amount under section 359.2, 359.2.1 or 359.4 in respect of Canadian exploration expenses or Canadian development expenses incurred by it only to the extent that, but for the renunciation, it would be entitled to a deduction in respect of the expenses in computing its income.

1988, c. 18, s. 27; 1995, c. 49, s. 95; 1997, c. 3, s. 71; 1998, c. 16, s. 135.

359.14. (Repealed).

1988, c. 18, s. 27; 1993, c. 16, s. 151; 1995, c. 49, s. 96; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 1998, c. 16, s. 136.

359.15. Where the amount that a corporation purports to renounce to a person under section 359.2, 359.2.1 or 359.4 exceeds the amount that it can renounce to the person under that section, the following rules apply:

 (a) the corporation shall file a statement with the Minister in prescribed form where

(i)  the Minister sends a notice in writing to the corporation demanding the statement, or

(ii)  the excess arose as a consequence of a renunciation purported to be made in a calendar year under section 359.2 or 359.2.1 because of the application of section 359.8, if the corporation knew or ought to have known of all or part of the excess,

(1)  if section 359.8.1 applies in respect of expenses that were incurred in the calendar year that follows that in which the purported renunciation was made and that relate to the renunciation, at the end of that subsequent calendar year, and

(2)  in any other case, at the end of the calendar year;

 (b) where subparagraph i of subparagraph a applies, the statement shall be filed not later than 30 days after the Minister sends a notice referred to therein;

 (c) if subparagraph ii of subparagraph a applies, the statement must be filed,

(i)  if section 359.8.1 applies in respect of expenses that were incurred in the calendar year that follows that in which the purported renunciation was made and that relate to the renunciation, before 1 March of the year that follows that subsequent calendar year, and

(ii)  in any other case, before 1 March of the calendar year that follows that in which the purported renunciation was made by the corporation; and

 (d) except for the purposes of Part III.14, any amount that is purported to have been so renounced to any person is deemed, after the statement is filed with the Minister, to have always been reduced by the portion of the excess identified in the statement in respect of that purported renunciation.

Where a corporation fails in the statement referred to in the first paragraph to apply the excess fully to reduce one or more purported renunciations, the Minister may at any time reduce the total amount purported to be renounced by the corporation to one or more persons by the amount of the unapplied excess.

In the case referred to in the second paragraph, except for the purposes of Part III.14, the amount purported to have been renounced by the corporation to a person is deemed, after the time referred to therein, to have always been reduced by the portion of the unapplied excess allocated by the Minister in respect of that person.

1988, c. 18, s. 27; 1995, c. 49, s. 97; 1997, c. 3, s. 71; 1998, c. 16, s. 137; 2009, c. 5, s. 129.

359.16. For the purposes of paragraph c.0.1 of section 359, the first paragraph of section 359.1 and sections 359.2 to 359.15, 359.18, 359.19 and 419.0.1, a partnership is deemed to be a person and its taxation year is deemed to be its fiscal period.

1988, c. 18, s. 27; 1993, c. 16, s. 152; 1997, c. 3, s. 71; 1998, c. 16, s. 138; 2015, c. 24, s. 63.

359.17. For the purposes of paragraph c of section 359.8, a partnership and a corporation are deemed, at all times in a calendar year,

 (a) not to deal with each other at arm’s length, if

(i)  an expense is deemed under section 359.3 to be incurred by the partnership,

(ii)  the expense would, but for paragraph b of section 359.3, be incurred in the calendar year by the corporation, and

(iii)  a share of the expense is included because of paragraph d of section 395 in the Canadian exploration expense of the corporation or of a member of the partnership with whom the corporation does not deal at arm’s length at any time in the calendar year; and

 (b) to deal with each other at arm’s length, in any other case.

1988, c. 18, s. 27; 1993, c. 16, s. 152; 1997, c. 3, s. 71; 1998, c. 16, s. 139; 2005, c. 1, s. 93.

359.18. For the purposes of this division, section 181, paragraphs c to g of section 330, sections 333.1 to 333.3, 359 and 362 to 418.36, Division V, sections 600.1 and 600.2, subparagraph iv of subparagraph a.2 of the first paragraph of section 726.6 and subparagraph b of the second paragraph of section 1129.60 or 1129.60.1, where a person's share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is referred to in respect of the person under paragraph d of any of sections 372, 395 and 408, under paragraph e of section 418.1.1, or under paragraph b of section 418.2, the portion of the outlay or expense so referred to is deemed, except for the purpose of applying sections 372, 372.1, 395 to 397, 408 to 410, 418.1.1, 418.1.2 and 418.2 to 418.4 in respect of the person, to have been made or incurred by the person at the end of that fiscal period.

1993, c. 16, s. 153; 1997, c. 3, s. 71; 1998, c. 16, s. 140; 2004, c. 8, s. 61; 2009, c. 5, s. 130.

359.19. A corporation is not entitled to renounce under section 359.2, 359.2.1 or 359.4 to a person a specified amount where the corporation would not be entitled to so renounce the specified amount if the words “end of that fiscal period” in section 359.18 were read as “time the outlay or expense is made or incurred by the partnership” and the words “on the effective date of the renunciation” in paragraph a of each of sections 359.3 and 359.5 were read as “at the earliest time that any part of such expense is incurred by the corporation”.

For the purposes of the first paragraph, a specified amount in respect of a corporation is an amount that represents all or part of

 (a) the corporation's share of the outlay or expense made or incurred by a partnership of which the corporation is a member or former member; or

 (b) an amount renounced to the corporation under section 359.2, 359.2.1 or 359.4.

1993, c. 16, s. 153; 1995, c. 49, s. 98; 1997, c. 3, s. 71; 1998, c. 16, s. 141.

DIVISION II 
DEPLETION, AND EXPLORATION AND DEVELOPMENT EXPENSES
1975, c. 22, s. 68.

360. A taxpayer may deduct, in computing his income for a taxation year, the amount determined by regulation as an allowance in respect of a natural accumulation of petroleum or natural gas, oil or gas well, mineral resource or timber limit, or in respect of

 (a) the processing of ore, other than iron ore or tar sands, from a mineral resource to any stage that is not beyond the prime metal stage or its equivalent;

 (b) the processing of iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent;

 (c) the processing of tar sands from a mineral resource to any stage that is not beyond the crude oil stage or its equivalent.

Such regulation may allow an amount for only a part of or for all of the natural accumulations of petroleum or natural gas, oil or gas wells or mineral resources in which the taxpayer has an interest, or of the ore processing operations referred to in the first paragraph and carried on by the taxpayer, and the Government may prescribe a formula to determine such amount.

1972, c. 23, s. 327; 1973, c. 18, s. 12; 1986, c. 19, s. 68; 1987, c. 67, s. 80; 1996, c. 39, s. 273.

361. Where a deduction is permitted under section 360 in respect of a coal mine operated by a lessee, he may agree with his lessor as to what portion of the amount each may deduct, and, if they cannot agree, the Minister may determine that portion.

1972, c. 23, s. 328.

362. A development corporation may deduct, in computing its income for a taxation year, the aggregate of the Canadian exploration and development expenses it incurs before the end of the taxation year, to the extent that they were not deductible in computing its income for a previous taxation year, up to the amount which would be its income if no deduction were allowed under this section or section 360, 361 or 400, less the deductions allowed for the year under sections 738 to 749.

1972, c. 23, s. 329; 1973, c. 17, s. 37; 1973, c. 18, s. 13; 1975, c. 22, s. 69; 1978, c. 26, s. 57; 1997, c. 3, s. 71.

363. A development corporation is, for the purposes of this chapter, a corporation whose principal business is any of, or a combination of,

 (a) the production, refining or marketing of petroleum, petroleum products or natural gas,

 (a.1) exploring or drilling for petroleum or natural gas,

 (b) mining or exploring for minerals,

 (c) the processing of mineral ores for the purpose of recovering metals or minerals from the ores,

 (d) the processing or marketing of metals or minerals that were recovered from mineral ores and that include metals or minerals recovered from mineral ores processed by the corporation,

 (e) the fabrication of metals,

 (f) the operation of a pipeline for the transmission of oil or gas,

 (f.1) the production or marketing of calcium chloride, sodium chloride, gypsum, kaolin or potash,

 (g) the manufacturing of products, where the manufacturing involves the processing of calcium chloride, sodium chloride, gypsum, kaolin or potash,

 (h) the generation or distribution of energy, or the production of fuel, using property described in Class 43.1 or 43.2 in Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1); and

 (i) the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project is the capital cost of property described in Class 43.1 or 43.2 in Schedule B to the Regulation respecting the Taxation Act.

A development corporation is also, for the purposes of this chapter, a corporation all or substantially all of the assets of which are shares of the capital stock or indebtedness of one or more development corporations that are related to the corporation otherwise than because of a right referred to in paragraph b of section 20.

1972, c. 23, s. 330; 1975, c. 22, s. 70; 1989, c. 77, s. 35; 1995, c. 49, s. 99; 1997, c. 3, s. 71; 1998, c. 16, s. 142; 2000, c. 39, s. 23; 2001, c. 7, s. 43; 2010, c. 5, s. 42; 2011, c. 34, s. 29.

364. For the purposes of this chapter, Canadian exploration and development expenses are the expenses incurred before 7 May 1974 in the case of an oil business and before 1 April 1975 in the case of a mining business which are:

 (a) exploration or drilling expenses, including the costs of general geological or geophysical studies, incurred after 1971 for exploration or drilling for petroleum or natural gas in Canada;

 (b) prospecting, exploration or development expenses incurred after 1971 in searching for minerals in Canada;

 (c) the cost of any Canadian resource property acquired by the taxpayer after 1971;

 (d) the share of the taxpayer in Canadian exploration and development expenses incurred after 1971 by an association, partnership or syndicate, during one of their fiscal periods, in which he was a member or partner at the end of the fiscal period;

 (e) the expenses incurred after 1971 by the taxpayer pursuant to an agreement with a corporation under which he so incurs such expenses solely as consideration for shares of the capital stock of the corporation or an interest or right in those shares, to the extent that those expenses are incurred as the cost of activities connected with the expenses contemplated in paragraph a or b or as the cost of acquisition of property contemplated in paragraph c; and

 (f) any annual payment made by the taxpayer for the preservation of a Canadian resource property.

1972, c. 23, s. 331; 1973, c. 17, s. 38; 1975, c. 22, s. 71; 1986, c. 19, s. 69; 1997, c. 3, s. 71; 2000, c. 5, s. 94.

365. However, Canadian exploration and development expenses shall not include, for the purposes of this chapter:

 (a) any consideration given for any share, interest or right relating to it, except as provided in paragraph e of section 364; or

 (b) any expenses contemplated in paragraph e of section 364 and incurred by another taxpayer, to the extent that the obligation of that other taxpayer to incur such expenses constituted for him, under the said paragraph, Canadian exploration and development expenses.

1972, c. 23, s. 332; 1973, c. 17, s. 39.

366. For the purposes of this chapter, drilling or exploration expenses include the expenses incurred for drilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well or for injection of water or gas to assist in the recovery of petroleum or natural gas from another well. They also include expenses incurred in drilling for water or gas for injection into a petroleum or natural gas formation.

1972, c. 23, s. 333; 1975, c. 22, s. 72.

367. A corporation not contemplated in paragraph a or b of section 363, whose principal activity is production or marketing of sodium chloride or potash or whose activity includes manufacturing products the manufacturing of which involves processing of these substances may deduct, in computing its income, the exploration or drilling expenses which it incurs before 7 May 1974 in searching for halite or sylvite.

1972, c. 23, s. 334; 1975, c. 22, s. 73; 1997, c. 3, s. 71.

368. A taxpayer other than a development corporation may deduct in computing his income for a taxation year the aggregate of the Canadian exploration and development expenses he incurs, to the extent that they were not deducted in computing his income for a previous taxation year.

1972, c. 23, s. 335; 1986, c. 19, s. 70; 1997, c. 3, s. 71.

369. (Replaced).

1972, c. 23, s. 336; 1973, c. 17, s. 40; 1973, c. 18, s. 14; 1975, c. 22, s. 74; 1977, c. 26, s. 34; 1978, c. 26, s. 58; 1980, c. 11, s. 54; 1982, c. 5, s. 83; 1986, c. 19, s. 70.

370. In this chapter, a Canadian resource property of a taxpayer is any property of the taxpayer which is

 (a) any right, licence or privilege to explore for, drill for or take petroleum, natural gas or other related hydrocarbons in Canada;

 (b) any right, licence or privilege to prospect, explore, drill or mine for minerals in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, or to store underground petroleum, natural gas or other related hydrocarbons in Canada;

 (c) any oil or gas well in Canada or any immovable property or real property in Canada the value of which depends primarily upon its petroleum, natural gas or related hydrocarbon content (not including any depreciable property);

 (d) any right to a rental or royalty computed by reference to the amount or value of production from an oil or gas well in Canada, or from a natural accumulation of petroleum, natural gas or related hydrocarbon in Canada, if the payer of the rental or royalty has a right or an interest in the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation;

 (d.1) any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, if the payer of the rental or royalty has a right or an interest in the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource;

 (e) any immovable property or real property in Canada (not including any depreciable property) the value of which depends primarily upon its mineral resource content, other than where the mineral resource is a bituminous sands deposit or an oil shale deposit;

 (f) any right or interest relating to any property described in any of paragraphs a to d.1, other than such a right or interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership; or

 (g) a real right in an immovable property described in paragraph e or an interest in real property described in that paragraph, other than such a right or interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership.

1972, c. 23, s. 337; 1975, c. 22, s. 75; 1980, c. 13, s. 30; 1982, c. 5, s. 84; 1986, c. 19, s. 71; 1987, c. 67, s. 81; 1995, c. 49, s. 236; 2004, c. 8, s. 62; 2005, c. 1, s. 94; 2012, c. 8, s. 50.

371. A taxpayer who is resident in Canada throughout a taxation year may deduct, in computing the taxpayer's income for that year, the lesser of

 (a) the amount by which the aggregate of all amounts by which the amount determined under this paragraph in respect of the taxpayer is required, because of section 485.8, to be reduced at or before the end of the year is exceeded by the aggregate of the foreign exploration and development expenses, to the extent that they were not deductible in computing the taxpayer’s income for a previous taxation year, incurred by the taxpayer

(i)  before the end of the year,

(ii)  at a time at which the taxpayer was resident in Canada, and

(iii)  where the taxpayer became resident in Canada before the end of the year, after the last time, before the end of the year, that the taxpayer became resident in Canada; and

 (b) the amount computed under section 374.

1972, c. 23, s. 338; 1975, c. 22, s. 76; 1996, c. 39, s. 108; 2004, c. 8, s. 63.

372. In this chapter, the foreign exploration and development expenses of a taxpayer means

 (a) any exploration or drilling expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas outside Canada;

 (b) any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource outside Canada, including any expense incurred in the course of prospecting, carrying out geological, geophysical or geochemical surveys, drilling, trenching, digging test pits or preliminary sampling;

 (c) the cost to the taxpayer of any foreign resource property acquired by the taxpayer;

 (d) subject to section 418.37, the taxpayer’s share of the foreign exploration and development expenses incurred by a partnership in a fiscal period of the partnership, where the taxpayer was a member of the partnership at the end of that fiscal period; and

 (e) any annual payment made by the taxpayer for the preservation of a foreign resource property.

1972, c. 23, s. 339; 1975, c. 22, s. 77; 1980, c. 13, s. 31; 1990, c. 59, s. 159; 2004, c. 8, s. 64.

372.1. A taxpayer's foreign exploration and development expenses do not however include

 (a) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class;

 (b) an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates;

 (c) an expenditure, other than a drilling expense, incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates;

 (d) an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir;

 (e) an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 21 December 2000;

 (f) foreign resource expenses in relation to a country; or

 (g) an expenditure incurred after 27 February 2000, unless the expenditure was incurred

(i)  pursuant to an agreement in writing entered into by the taxpayer before 28 February 2000,

(ii)  for the purpose of enabling the taxpayer to acquire foreign resource property,

(iii)  for the purpose of enhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, or

(iv)  for the purpose of assisting in evaluating whether a foreign resource property is to be acquired by the taxpayer.

1998, c. 16, s. 143; 2004, c. 8, s. 65.

372.2. In this chapter, the specified foreign exploration and development expense of a taxpayer in relation to a country other than Canada means the following expenses that are foreign exploration and development expenses of the taxpayer:

 (a) any exploration or drilling expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country;

 (b) any expense incurred by the taxpayer after 21 December 2000, otherwise than pursuant to an agreement in writing entered into before 22 December 2000, for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course of prospecting, carrying out geological, geophysical or geochemical surveys, drilling, trenching, digging test pits or preliminary samplings;

 (c) any prospecting, exploration or development expense incurred by the taxpayer before 22 December 2000, or after 21 December 2000 pursuant to an agreement in writing entered into before 22 December 2000, in searching for minerals in that country;

 (d) the cost to the taxpayer of any of the taxpayer’s foreign resource properties in relation to that country;

 (e) any annual payment made by the taxpayer in a taxation year of the taxpayer for the preservation of a foreign resource property in relation to that country;

 (f) an amount deemed by section 181 or 182 to be a foreign exploration and development expense incurred by the taxpayer, to the extent that it can reasonably be considered to relate to an amount that, without reference to this paragraph and paragraph g, would be a specified foreign exploration and development expense in relation to that country; and

 (g) subject to section 418.37, the taxpayer’s share of the specified foreign exploration and development expenses of a partnership incurred in a fiscal period of the partnership in relation to that country, where the taxpayer was a member of the partnership at the end of that fiscal period.

2004, c. 8, s. 66.

373. In this chapter, a foreign resource property means a property that would be referred to in section 370, if

 (a) in the case of a foreign resource property in relation to a country, the references in that section to “Canadian resource property of a taxpayer” in the portion before paragraph a and “in Canada” wherever it appears in paragraphs a to e were read as references to “foreign resource property of a taxpayer in relation to a country” and “in that country”, respectively; and

 (b) in any other case, the references in that section to “Canadian” in the portion before paragraph a and “in Canada” wherever it appears in paragraphs a to e were read as references to “foreign” and “outside Canada”, respectively.

1972, c. 23, s. 340; 2004, c. 8, s. 67.

374. The amount to which paragraph b of section 371 refers is the greater of

 (a) the amount claimed by the taxpayer not exceeding 10% of the amount determined under paragraph a of section 371 in respect of the taxpayer for the year; and

 (b) the total of

(i)  that part of the taxpayer’s income for the year, determined without reference to sections 371 and 418.1.10, that can reasonably be attributed to the production of petroleum or natural gas from a natural accumulation of petroleum or natural gas outside Canada or from oil or gas wells outside Canada, or to the production of minerals from mines outside Canada,

(ii)  the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas outside Canada, an oil or gas well outside Canada or a mine outside Canada, determined without reference to sections 371 and 418.1.10, and

(iii)  the aggregate of all amounts each of which is an amount, in respect of a foreign resource property that has been disposed of by the taxpayer, equal to the amount by which the amount included in computing the taxpayer’s income for the year by reason of paragraph a of section 330 in respect of that disposition exceeds the aggregate of all amounts each of which is that portion of an amount deducted under section 418.17 in computing the taxpayer’s income for the year that can reasonably be considered to be in respect of the foreign resource property, but cannot reasonably be considered to have reduced the amount otherwise determined under subparagraph i or ii in respect of the taxpayer for the year.

1972, c. 23, s. 341; 1973, c. 17, s. 41; 1973, c. 18, s. 15; 1975, c. 22, s. 78; 1977, c. 26, s. 35; 1978, c. 26, s. 59; 1986, c. 19, s. 72; 1987, c. 67, s. 82; 1996, c. 39, s. 109; 2004, c. 8, s. 67.

374.1. The portion of an amount deducted under section 371 in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in relation to a country is considered as being attributable to a source in that country.

2004, c. 8, s. 68.

374.2. For the purposes of section 374.1, where a taxpayer has incurred specified foreign exploration and development expenses in relation to two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that is

 (a) reasonable having regard to all the circumstances, including the level and timing of

(i)  the taxpayer’s specified foreign exploration and development expenses in relation to that country, and

(ii)  the profits or gains to which those expenses relate; and

 (b) not inconsistent with the allocation made under section 374.1 for the preceding taxation year.

2004, c. 8, s. 68.

374.3. Where at any time in a taxation year an individual becomes or ceases to be resident in Canada, the following rules apply:

 (a) sections 371 and 374 apply to the individual as if the year were the period or periods in the year throughout which the individual was resident in Canada; and

 (b) for the purposes of sections 371 and 374, section 393.1 does not apply to the individual for the year.

2004, c. 8, s. 68.

375. Sections 329 to 333, 357, 358, 368, 371, 374, 395 to 418.12 and 418.16 to 418.36 do not apply in computing the income for a taxation year of a taxpayer, other than a development corporation, if the business of such taxpayer includes trading or dealing in rights, licences or privileges to explore for, drill for or take minerals, petroleum, natural gas or other related hydrocarbons.

1972, c. 23, s. 342; 1975, c. 22, s. 79; 1982, c. 5, s. 85; 1993, c. 16, s. 154; 1995, c. 49, s. 236; 1997, c. 3, s. 71.

376. (Repealed).

1972, c. 23, s. 343; 1973, c. 18, s. 16; 1975, c. 22, s. 80; 1978, c. 26, s. 60; 1985, c. 25, s. 66; 1986, c. 19, s. 73; 1989, c. 77, s. 36.

377. (Repealed).

1972, c. 23, s. 344; 1975, c. 22, s. 81; 1978, c. 26, s. 61; 1980, c. 13, s. 32; 1980, c. 11, s. 54; 1985, c. 25, s. 67; 1986, c. 19, s. 74; 1987, c. 67, s. 83; 1989, c. 77, s. 36.

378. (Repealed).

1972, c. 23, s. 345; 1973, c. 18, s. 18; 1975, c. 22, s. 82; 1978, c. 26, s. 62; 1985, c. 25, s. 68; 1986, c. 19, s. 75; 1989, c. 77, s. 36.

378.1. (Repealed).

1980, c. 13, s. 33; 1985, c. 25, s. 68; 1989, c. 77, s. 36.

379. (Repealed).

1972, c. 23, s. 346; 1975, c. 22, s. 83; 1980, c. 13, s. 34; 1985, c. 25, s. 68; 1989, c. 77, s. 36.

380. (Repealed).

1972, c. 23, s. 347; 1972, c. 26, s. 47; 1973, c. 17, s. 43; 1973, c. 18, s. 19; 1975, c. 22, s. 84; 1978, c. 26, s. 63; 1980, c. 11, s. 54; 1984, c. 15, s. 85; 1985, c. 25, s. 69; 1986, c. 19, s. 76; 1987, c. 67, s. 84; 1989, c. 77, s. 36.

381. (Repealed).

1972, c. 23, s. 348; 1978, c. 26, s. 64; 1997, c. 3, s. 71; 1998, c. 16, s. 144.

382. A joint exploration corporation is a development corporation which never had more than ten shareholders excluding any individual holding a share for the sole purpose of qualifying as a director.

1972, c. 23, s. 349; 1997, c. 3, s. 71.

383. (Repealed).

1972, c. 23, s. 350; 1973, c. 17, s. 44; 1975, c. 22, s. 85; 1977, c. 26, s. 36; 1978, c. 26, s. 65; 1982, c. 5, s. 86; 1985, c. 25, s. 70; 1997, c. 3, s. 71; 1998, c. 16, s. 144.

384. Where control of a corporation has been acquired after 31 March 1977 but before 13 November 1981 by a person or persons who did not control the corporation at the time it last ceased to carry on a qualified business, the following rules apply:

 (a) the amount by which the Canadian exploration and development expenses or the foreign exploration and development expenses, as the case may be, incurred by the corporation before the time it ceased to carry on active business exceeds the aggregate of all amounts otherwise deductible respectively in respect of such expenses in computing its income for the taxation years ending before control was acquired, is deemed to have been deductible under sections 362 to 394 in computing its income for the taxation years ending before control was so acquired;

 (b) the amount by which the cumulative Canadian exploration expenses, cumulative Canadian development expenses or cumulative Canadian oil and gas property expenses, as the case may be, at the time it ceased to carry on active business exceeds the aggregate of all amounts otherwise deducted under Division III, IV or IV.1, as the case may be, in computing its income for the taxation years ending after the time it ceased to carry on active business and before control was so acquired, is deemed to have been deducted under the said divisions, respectively, in computing its income for the taxation years ending before control was so acquired.

1972, c. 23, s. 351; 1975, c. 22, s. 86; 1978, c. 26, s. 66; 1982, c. 5, s. 87; 1984, c. 15, s. 86; 1990, c. 59, s. 160; 1997, c. 3, s. 71.

384.1. (Repealed).

1984, c. 15, s. 87; 1985, c. 25, s. 71; 1986, c. 19, s. 77; 1987, c. 67, s. 85; 1989, c. 77, s. 37.

384.1.1. (Repealed).

1987, c. 67, s. 86; 1989, c. 77, s. 37.

384.2. (Repealed).

1984, c. 15, s. 87; 1985, c. 25, s. 72; 1986, c. 19, s. 78; 1989, c. 77, s. 37.

384.3. For the purposes of sections 384 and 418.26 to 418.29, where a corporation acquires control of another corporation between 12 November 1981 and 1 January 1983 by reason of the acquisition of shares of the other corporation pursuant to an agreement in writing concluded on or before 12 November 1981, it is deemed to have acquired control of it not later than 12 November 1981.

1984, c. 15, s. 87; 1989, c. 77, s. 38; 1997, c. 3, s. 71.

384.4. For the purposes of sections 371 to 374, 408 to 416 and 418.1 to 418.12, except as those sections apply for the purposes of sections 418.15 to 418.36, where, at a particular time, control of a corporation has been acquired by a person or group of persons, within the 12-month period that ended immediately before that time, the corporation or a partnership of which it was a majority-interest partner acquired a Canadian resource property or a foreign resource property, and immediately before the 12-month period began, the corporation was not a development corporation and the partnership, if it were a corporation, would not be a development corporation,

 (a) the property is deemed, subject to subparagraph b, to have been acquired by the corporation or partnership at the particular time and is deemed not to have been acquired by it before that time; and

 (b) where the property has been disposed of by the corporation or partnership before the particular time and not reacquired by it before that time, the property is deemed to have been acquired by the corporation or partnership immediately before it disposed of the property.

However, the first paragraph does not apply in the case of the acquisition of a property that was owned by the corporation or partnership or a person that would, but for the definition of controlled in section 21.0.1, be affiliated with the corporation throughout the period that began immediately before the 12-month period referred to in the first paragraph and ended at the time the property was acquired by the corporation or partnership.

1989, c. 77, s. 39; 1997, c. 3, s. 71; 2000, c. 5, s. 95.

384.5. For the purposes of section 384.4, where the corporation referred to in that section was incorporated or otherwise formed in the 12-month period, it is deemed to have been

 (a) in existence throughout the period that began immediately before that 12-month period and ended immediately after it was incorporated or otherwise formed; and

 (b) affiliated, throughout the period referred to in paragraph a, with every person with whom it was affiliated, otherwise than because of a right referred to in paragraph b of section 20, throughout the period that began when it was incorporated or otherwise formed and ended immediately before its control was acquired.

1989, c. 77, s. 39; 1997, c. 3, s. 71; 2000, c. 5, s. 95.

385. A taxpayer must deduct, in computing Canadian exploration and development expenses, any amount paid to him, before 7 May 1974 in the case of an oil business or before 1 April 1975 in the case of a mining business, as a subsidy, grant or assistance under an Act of Canada, to the extent provided by regulation.

He may however include any amount he pays after 1971 but before 7 May 1974 in the case of an oil business or before 1 April 1975 in the case a mining business, under such an Act of Canada, except interest.

1972, c. 23, s. 352; 1972, c. 26, s. 48; 1975, c. 22, s. 87.

386. Except as expressly otherwise provided in this Part, in computing a taxpayer's cumulative Canadian exploration expenses, there shall be deducted under paragraph b of section 399 the amount which, at a particular time in a taxation year, becomes receivable by the taxpayer as a result of a transaction made after 6 May 1974 in the case of an oil business, after 31 March 1975 in the case of a mining business or after 5 December 1996 in all other cases, in consideration of services rendered or property ceded by the taxpayer, if the original cost of those services or that property may reasonably be regarded as having been, for the taxpayer, primarily Canadian exploration expenses or Canadian exploration and development expenses, or as if it would have been such expenses if they had been incurred by the taxpayer after 1971 and before 7 May 1974 or before 1 April 1975, as the case may be.

1975, c. 22, s. 88; 2013, c. 10, s. 30.

387. Except as expressly otherwise provided in this Part, a taxpayer, in computing his cumulative Canadian development expenses, shall deduct under paragraph c of section 412 the amount which, at a particular time in a taxation year, becomes receivable by him in the cases described in section 386, if the original cost of the services or property contemplated therein may reasonably be regarded as having been, for him, primarily Canadian development expenses.

1975, c. 22, s. 88.

388. A taxpayer shall, in computing the taxpayer’s foreign exploration and development expenses, deduct the amount that, at a particular time in a taxation year and as a result of a transaction that occurs after 6 May 1974, becomes receivable by the taxpayer as consideration for services rendered or property transferred by the taxpayer, if the original cost of the services or property can reasonably be regarded as having been primarily foreign exploration and development expenses of the taxpayer, or would have been so regarded if they had been incurred by the taxpayer after 1971 and section 372.1 were read without reference to paragraph f thereof.

1975, c. 22, s. 88; 2004, c. 8, s. 69.

389. The foreign exploration and development expenses of a taxpayer are deemed to be nil at the time referred to in section 388 where an amount is included in computing his income by virtue of paragraph c of section 330.

1975, c. 22, s. 88.

390. Sections 386 and 387 do not apply to a share or a Canadian resource property or to any right related thereto and section 388 does not apply to any foreign resource property.

1975, c. 22, s. 88; 1986, c. 19, s. 79.

390.1. Where an amount described in section 388 becomes receivable by a taxpayer at a particular time, there shall at that particular time be included in computing the amount determined under paragraph c of section 418.1.4 in respect of the taxpayer and a country the amount designated under subparagraph ii of paragraph c of section 330 by the taxpayer in respect of that amount and that country.

2004, c. 8, s. 70.

390.2. Where an amount described in section 388 becomes receivable by a partnership in a fiscal period of the partnership, the share of a member of the partnership of that amount is deemed, for the purposes of paragraph c of section 330 and sections 388 and 390.1, to be an amount that became receivable by the member at the end of that fiscal period, that is described in section 388 in respect of the member and that has the same attributes for the member as it did for the partnership.

2004, c. 8, s. 70.

391. A taxpayer, in computing his cumulative Canadian exploration expenses, shall deduct under paragraph b of section 399 the amount that, at a particular time after 6 May 1974, becomes receivable by him from a person with whom he has made an agreement to unitize an oil or gas field in Canada in respect of Canadian exploration expenses, or Canadian exploration and development expenses or expenses that would have been such expenses if they had been incurred by him after 1971 and before 7 May 1974, incurred by the taxpayer in respect of the whole or any part of that field.

Furthermore, the person having to pay that amount shall, in computing his Canadian exploration expenses, include that amount at that time under paragraph b of section 395.

1975, c. 22, s. 88.

392. A taxpayer, in computing his cumulative Canadian development expenses, shall deduct under paragraph c of section 412 the amount that, at a particular time after 6 May 1974, becomes receivable by him from a person with whom he has made an agreement to unitize an oil or gas field in Canada in respect of Canadian development expenses incurred by the taxpayer in respect of the whole or any part of that field.

Furthermore, the person having to pay that amount shall, in computing his Canadian development expenses, include that amount at that time under paragraph a of section 408.

1975, c. 22, s. 88.

392.1. A taxpayer shall, in computing his cumulative Canadian oil and gas property expense, deduct under paragraph c of section 418.6 the amount which, at a particular time, becomes receivable by him from a person with whom he has entered into an agreement to unitize an oil or gas field in Canada in respect of Canadian oil and gas property expense incurred by the taxpayer in respect of that field or any part thereof.

Furthermore, the person who must pay such amount shall, in computing his Canadian oil and gas property expense, include it at that time under paragraph a of section 418.2.

1982, c. 5, s. 88.

392.2. Where a corporation designates an amount for a taxation year for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) under subsection 14.1 of section 66 of the said Act, the amount designated shall be deducted in computing its cumulative Canadian exploration expenses at any time after the end of the year.

1987, c. 67, s. 87; 1997, c. 3, s. 71.

392.3. Where a corporation designates an amount for a taxation year for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) under subsection 14.2 of section 66 of the said Act, the amount designated shall be deducted in computing its cumulative Canadian development expenses at any time after the end of the year.

1987, c. 67, s. 87; 1997, c. 3, s. 71.

393. The taxpayer who has incurred expenses or made outlays in respect of which a deduction is allowed by more than one provision of this chapter, may deduct them only once, and under the provision he elects.

1972, c. 23, s. 353; 1975, c. 22, s. 89; 1993, c. 16, s. 155.

393.1. Where a taxpayer has a taxation year that is less than 51 weeks, the amount determined for the year under any of the following provisions or first under subparagraph c of the first paragraph of section 418.20, shall not exceed the proportion of the amount otherwise determined under that provision or first under that subparagraph c, as the case may be, that the number of days in the year is of 365:

 (a) paragraph a of section 374;

 (b) subparagraph c of the first paragraph of section 413;

 (c) paragraph b of section 418.1.9, without reference to the aggregate last referred to in that paragraph;

 (d) subparagraph i of paragraph a of section 418.1.10;

 (e) subparagraph 2 of subparagraph ii of paragraph a of section 418.1.10;

 (f) paragraph b of section 418.7;

 (g) the second paragraph of section  418.17.3;

 (h) subparagraph i of subparagraph a of the first paragraph of section 418.20;

 (i) subparagraph b of the first paragraph of section 418.20; and

 (j) the second paragraph of section 418.21.

1989, c. 77, s. 40; 2004, c. 8, s. 71.

394. For the purposes of section 28, any amount deductible under the Act respecting the application of the Taxation Act (chapter I-4) in respect of this chapter is deemed deductible under this chapter.

1972, c. 23, s. 354.

DIVISION III 
CANADIAN EXPLORATION EXPENSES
1975, c. 22, s. 90.

395. For the purposes of this chapter, “Canadian exploration expense” of a taxpayer means any expense incurred after 6 May 1974 in the case of an oil business, after 31 March 1975 in the case of a mining business or after 5 December 1996 in all other cases, to such extent as that expense is, as the case may be,

 (a) any expense including an expense for a geological, geophysical or geochemical survey, other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well, incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas, other than a mineral resource, in Canada;

 (a.1) any expense, including clearing, removing overburden and stripping, sinking a well and constructing an adit or other underground entry, incurred by him after 31 March 1985 for the purpose of bringing a natural accumulation of petroleum or natural gas, other than a mineral resource, in Canada into production other than an expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well and incurred prior to the commencement of the production, other than the production from an oil or gas well, in reasonable commercial quantities from such accumulation;

 (b) any expense incurred before 1 April 1987, in drilling or completing an oil or gas well in Canada, or in building a temporary access road to, or preparing a site in respect of, any such well, incurred by him in the year or in any previous year, and included by him in computing his Canadian development expenses for a previous taxation year, if the drilling of the well is completed within six months after the end of the year and

(i)  it is determined that the well is the first well capable of production in commercial quantities from an accumulation of petroleum or natural gas not previously known to exist, other than a mineral resource, or

(ii)  it is reasonable to expect that the well cannot come into production in commercial quantities within 12 months of its completion;

 (b.1) any expense incurred by him after 31 March 1987 and in a taxation year of the taxpayer, in drilling or completing an oil or gas well in Canada, or in building a temporary access road to, or preparing a site in respect of, any such well if

(i)  the drilling or completing of the well resulted in the discovery of a natural underground reservoir containing petroleum or natural gas, where

(1)  before the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas, and

(2)  the discovery occurred at any time before six months after the end of the year;

(ii)  the well is abandoned in the year or within six months after the end of the year without ever having produced otherwise than for specified purposes;

(iii)  the period of 24 months commencing on the day of completion of the drilling of the well ends in the year, the expense was incurred within that period and in the year and the well has not within that period produced otherwise than for specified purposes; or

(iv)  the certificate referred to in subparagraph iv of paragraph d of the definition of Canadian exploration expenses in subsection 6 of section 66.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), in respect of a well has been filed with the Minister, in respect of the well, on or before the day that is six months after the end of the taxation year of the taxpayer in which the drilling of the well was commenced;

 (b.2) any expense deemed under section 399.3 to be a Canadian exploration expense incurred by him;

 (c) any expense incurred by the taxpayer to determine the existence of a mineral resource in Canada, to locate such a resource or to determine the extent or quality of such a resource, including any expense incurred in the course of prospecting, carrying out geological, geophysical or geochemical surveys, drilling and trenching or digging test pits or preliminary sampling, other than any expense incurred in drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well, and other than Canadian development expenses or any expense that may reasonably be related to a mine in the mineral resource that has come into production in reasonable commercial quantities or to an actual or potential extension of such a mine;

 (c.1) any expense incurred by the taxpayer after 16 November 1978 and before 21 March 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities, including any expense for clearing, removing overburden and stripping, sinking a mine shaft and constructing an adit or other underground entry, to the extent that the expense was incurred prior to the commencement of production from the new mine in reasonable commercial quantities;

 (c.2) any Canadian renewable and conservation expense incurred by the taxpayer;

 (c.3) any expense incurred by the taxpayer after 21 March 2011 that is an eligible oil sands mine development expense or a specified oil sands mine development expense;

 (c.4) any expense that would be described in paragraph c.1 if that paragraph were read as if “21 March 2013” were replaced by “1 January 2017” and that is incurred by the taxpayer

(i)  in accordance with an agreement in writing entered into by the taxpayer before 21 March 2013, or

(ii)  as part of the development of a new mine, if

(1)  construction work in relation to the new mine, other than work that involves obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities, was started by, or on behalf of, the taxpayer before 21 March 2013, or

(2)  engineering and design work for the construction of the new mine, as evidenced in writing, other than work that involves obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities, was started by, or on behalf of, the taxpayer before 21 March 2013;

 (c.5) the portion of any expense not described in paragraph c.4 that would be described in paragraph c.1 if that paragraph c.1 were read as if “21 March 2013” were replaced by “1 January 2018” and that is

(i)  100% of the expense if it is incurred before 1 January 2015,

(ii)  80% of the expense if it is incurred in the calendar year 2015,

(iii)  60% of the expense if it is incurred in the calendar year 2016, and

(iv)  30% of the expense if it is incurred in the calendar year 2017;

 (d) subject to section 418.37, the taxpayer's share of the expenses described in paragraphs a to b.1 and c to c.5 and incurred by a partnership in a fiscal period of the partnership, if at the end of the period the taxpayer is a member of the partnership; or

 (e) an expense described in paragraphs a to c.1 incurred by him pursuant to an agreement in writing with a corporation entered into before 1 January 1987, under which he incurs that expense solely as consideration for a share, except a prescribed share, of the capital stock of that corporation issued to him or any interest in or right to such a share.

1975, c. 22, s. 90; 1980, c. 13, s. 35; 1982, c. 5, s. 89; 1984, c. 15, s. 88; 1986, c. 15, s. 80; 1986, c. 19, s. 80; 1987, c. 67, s. 88; 1988, c. 18, s. 28; 1990, c. 59, s. 161; 1992, c. 1, s. 33; 1995, c. 49, s. 100; 1997, c. 3, s. 71; 1998, c. 16, s. 145; 2004, c. 8, s. 72; 2012, c. 8, s. 51; 2013, c. 10, s. 31; 2015, c. 24, s. 64.

395.1. For the purposes of subparagraph iv of paragraph b.1 of section 395, a certificate in respect of an oil or gas well issued by the Minister of Natural Resources of Canada is deemed never to have been issued and never to have been filed with the Minister if it is deemed, under subsection 10 of section 66.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), never to have been so issued and never to have been filed with the Minister of Revenue of Canada.

1990, c. 59, s. 162; 1996, c. 39, s. 110; 2000, c. 5, s. 293.

395.2. For the purposes of paragraph c.3 of section 395, “eligible oil sands mine development expense” means the aggregate of all amounts each of which is the product obtained by multiplying, by the percentage specified in the second paragraph, an expense (other than an expense that is a specified oil sands mine development expense described in section 395.3) that is incurred by a taxpayer after 21 March 2011 but on or before 31 December 2015 and that would be described in paragraph c.1 of section 395 if that paragraph were read without reference to “and before 21 March 2013” and “, other than a bituminous sands deposit or an oil shale deposit,”.

The percentage to which the first paragraph refers, in relation to an expense, is

 (a) 100% if the expense is incurred on or before 31 December 2012;

 (b) 80% if the expense is incurred in the calendar year 2013;

 (c) 60% if the expense is incurred in the calendar year 2014; and

 (d) 30% if the expense is incurred in the calendar year 2015.

2012, c. 8, s. 52; 2015, c. 24, s. 65.

395.3. For the purposes of paragraph c.3 of section 395, “specified oil sands mine development expense” means an expense that is incurred by a taxpayer after 21 March 2011 but on or before 31 December 2014 to achieve completion of a specified oil sands mine development project of the taxpayer and that would be described in paragraph c.1 of section 395 if that paragraph were read without reference to “and before 21 March 2013” and “, other than a bituminous sands deposit or an oil shale deposit,”.

For the purposes of this section,

bitumen mine development project, of a taxpayer, means a project the taxpayer undertakes for the sole purpose of developing a new mine to extract and process tar sands from a mineral resource of the taxpayer to produce bitumen or a similar product;

bitumen upgrading development project, of a taxpayer, means a project the taxpayer undertakes for the sole purpose of constructing an upgrading facility to process bitumen or a similar feedstock (all or substantially all of which is from a mineral resource of the taxpayer) from a new mine to the crude oil stage or its equivalent;

completion, of a specified oil sands mine development project, means the first attainment of a level of average output, attributable to the project and measured over a 60-day period, equal to at least 60% of the planned level of average daily output (as determined in paragraph b of the definition of “specified oil sands mine development project”);

designated asset, in respect of an oil sands mine development project of a taxpayer, means a property that is a building, a structure, machinery or equipment and is, or is an integral and substantial part of,

 (a) in the case of a bitumen mine development project,

(i)  a crusher,

(ii)  a froth treatment plant,

(iii)  a primary separation unit,

(iv)  a steam generation plant,

(v)  a cogeneration plant, or

(vi)  a water treatment plant; or

 (b) in the case of a bitumen upgrading development project,

(i)  a gasifier unit,

(ii)  a vacuum distillation unit,

(iii)  a hydrocracker unit,

(iv)  a hydrotreater unit,

(v)  a hydroprocessor unit, or

(vi)  a coker;

oil sands mine development project, of a taxpayer, means a bitumen mine development project or a bitumen upgrading development project;

preliminary work activity, in respect of a taxpayer's oil sands mine development project, means any activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of the taxpayer of designated assets in respect of the project including, in particular, the following activities:

 (a) obtaining permits or regulatory approvals;

 (b) performing design or engineering work;

 (c) conducting feasibility studies;

 (d) conducting environmental assessments; and

 (e) entering into contracts;

specified oil sands mine development project, of a taxpayer, means an oil sands mine development project (not including any preliminary work activity) in respect of which

 (a) one or more designated assets was, before 22 March 2011, acquired by the taxpayer or in the process of being constructed, fabricated or installed, by or on behalf of the taxpayer; and

 (b) the planned level of average daily output (where that output is bitumen or a similar product in the case of a bitumen mine development project, or synthetic crude oil or a similar product in the case of a bitumen upgrading development project) that can reasonably be expected, is the lesser of

(i)  the level that was the demonstrated intention of the taxpayer on 21 March 2011 to produce from the oil sands mine development project, and

(ii)  the maximum level of output associated with the design capacity, on 21 March 2011, of the designated assets referred to in paragraph a.

2012, c. 8, s. 52; 2015, c. 24, s. 66.

396. A taxpayer's Canadian exploration expenses do not however include

 (a) any consideration given by the taxpayer for any share, or for any interest therein or right thereto, except as provided by paragraph e of section 395;

 (b) any expense described in paragraph e of section 395 and incurred by any other taxpayer to the extent that the expense is a Canadian exploration expense of that other taxpayer by virtue of that paragraph, a Canadian development expense of that other taxpayer by virtue of paragraph e of section 408 or a Canadian oil and gas property expense of that other taxpayer by virtue of paragraph c of section 418.2;

 (c) any amount, other than a Canadian renewable and conservation expense, included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class;

 (c.1) an expense that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 31 December 1987;

 (c.2) any expense, incurred in respect of a mineral resource before a new mine in the mineral resource comes into production in reasonable commercial quantity, that results in income earned, or that may reasonably be expected to result in income earned, before the new mine comes into production in reasonable commercial quantity, except to the extent that the aggregate of all such expenses exceeds the aggregate of those incomes if

(i)  the expense is otherwise described in paragraph c of section 395 and incurred, in respect of the resource, in prospecting, drilling, trenching, digging test pits or preliminary sampling, or

(ii)  the expense is otherwise described in paragraph c.1 of section 395;

 (d) an expenditure incurred at any time after the commencement of production from a Canadian resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of, or to assist in the recovery of, petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the Canadian resource property relates;

 (e) an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir; or

 (f) the taxpayer's share of any consideration, expense, cost or expenditure referred to in any of paragraphs a to e given or incurred, as the case may be, by a partnership.

1975, c. 22, s. 90; 1982, c. 5, s. 90; 1998, c. 16, s. 146; 2004, c. 8, s. 73; 2005, c. 1, s. 95; 2012, c. 8, s. 53.

397. Where a taxpayer has received or is entitled to receive after 25 May 1976 any assistance in respect of or related to his Canadian exploration expenses, the expenses contemplated in paragraphs a to e of section 395 shall not be reduced by the amount of such assistance.

1977, c. 26, s. 37; 1988, c. 18, s. 29.

398. In this chapter, cumulative Canadian exploration expenses of a taxpayer, at any time, means the amount by which the aggregate described in section 399 is exceeded by the aggregate of:

 (a) the Canadian exploration expenses incurred by the taxpayer before that time;

 (b) all amounts included in computing the taxpayer's income under paragraph d of section 330 for a taxation year ending before that time;

 (b.1) all amounts determined under paragraph a of section 418.31.1 in respect of the taxpayer for a taxation year ending before that time;

 (c) all amounts, except interest, paid by him after 6 May 1974 in the case of an oil business, or after 31 March 1975 in the case of a mining business, and before that time as a reimbursement of a subsidy, grant or assistance received before 25 May 1976 under a prescribed Act in respect of Canadian exploration and development expenses or Canadian exploration expenses;

 (d) all amounts described in paragraph b of section 399 that, according to the evidence submitted by him, have become a bad debt before such time; and

 (e) such part of an amount described in paragraph e of section 399 as has been repaid by him before that time pursuant to a legal obligation to repay all or any part of that amount.

1975, c. 22, s. 90; 1977, c. 26, s. 38; 1978, c. 26, s. 67; 1982, c. 5, s. 91; 1991, c. 25, s. 73; 1993, c. 16, s. 156; 1995, c. 49, s. 236; 2004, c. 8, s. 74; 2015, c. 24, s. 67.

399. The amounts required to be deducted in computing the cumulative Canadian exploration expenses of a taxpayer at the time referred to in section 398 are the aggregate of:

 (a) all amounts deducted, or required to be deducted, in computing his income for a taxation year ending before that time in respect of such expenses;

 (b) all amounts that become receivable by him before that time that are required to be deducted in computing such expenses under this paragraph by virtue of section 386 or 391;

 (c) all amounts paid to him after 6 May 1974 in the case of an oil business, or after 31 March 1975 in the case of a mining business, and before 25 May 1976 as a subsidy, grant or assistance received under an Act, in respect of Canadian exploration and development expenses or Canadian exploration expenses, to the extent provided by the regulations;

 (d) all amounts received by the taxpayer before such time in respect of a debt referred to in paragraph d of section 398;

 (e) all amounts of assistance that he has received or is entitled to receive in respect of any Canadian exploration expense incurred after 31 December 1980 or that can reasonably be related to Canadian exploration activities after that date, to the extent that the assistance has not reduced his Canadian exploration expense by virtue of the third paragraph of section 399.3;

 (e.1) all amounts by which his cumulative Canadian exploration expense is required, because of section 485.8, to be reduced at or before that time;

 (f) all amounts that are required to be deducted before that time under section 392.2 in computing his cumulative Canadian exploration expenses;

 (g) that portion of the aggregate of all amounts each of which is an amount deducted by the taxpayer under subsection 5 or 6 of section 127 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) for a taxation year ending before that time that may reasonably be attributed to an expenditure made in a preceding taxation year that is a qualified Canadian exploration expenditure, within the meaning of subsection 9 of section 127 of that Act, as it read for that preceding taxation year, or a pre-production mining expenditure, within the meaning of that subsection 9; and

 (h) all amounts that are required to be deducted before that time under paragraph b of section 418.31 in computing his cumulative Canadian exploration expenses.

1975, c. 22, s. 90; 1977, c. 26, s. 39; 1982, c. 5, s. 92; 1987, c. 67, s. 89; 1988, c. 18, s. 30; 1989, c. 77, s. 41; 1990, c. 59, s. 163; 1995, c. 49, s. 101; 1996, c. 39, s. 111; 1997, c. 31, s. 47; 2005, c. 1, s. 96.

399.1. For the purposes of paragraph e of section 399, where, pursuant to a designation by a trust, an amount is required, under subsection 7 of section 127 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), to be added in computing the investment tax credit, within the meaning of subsection 9 of section 127 of the said Act, of a taxpayer at the end of his taxation year, the portion thereof that can reasonably be considered to relate to an expenditure that, for a taxation year, is a qualified Canadian exploration expenditure, within the meaning of subsection 9 of section 127 of that Act, as it read for that year, of the trust is deemed to have been received by the trust at the end of its taxation year in respect of which the designation was made as assistance from a government in respect of that expenditure.

1988, c. 18, s. 31; 1997, c. 31, s. 48.

399.2. (Repealed).

1988, c. 18, s. 31; 1997, c. 3, s. 71; 1998, c. 16, s. 147.

399.3. Where at any time in a taxpayer's taxation year, one of the events described in the second paragraph occurs in respect of an oil or gas well of the taxpayer, the excess amount determined under the third paragraph is, for the purposes of this Part, deemed to be a Canadian exploration expense referred to in paragraph b.2 of section 395 incurred by the taxpayer at that time.

The events to which the first paragraph refers are the following:

 (a) the drilling or completing of an oil or gas well resulted in the discovery of a natural underground reservoir containing petroleum or natural gas and, before the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas;

 (b) the period of 24 months commencing on the day of completion of the drilling of the oil or gas well ends and the well has not, within that period, produced otherwise than for specified purposes; or

 (c) the oil or gas well is abandoned without ever having produced otherwise than for specified purposes.

The excess amount to which the first paragraph refers is the amount by which the aggregate of the following amounts exceeds any assistance that the taxpayer or a partnership of which the taxpayer is a member has received or is entitled to receive in respect of the expenses referred to in any of subparagraphs a, b and c:

 (a) all Canadian development expenses, other than restricted expenses, described in subparagraph ii of paragraph a of section 408 in respect of the well that are deemed under section 359.5 or sections 417 and 418, as they read in respect of those expenses, to have been incurred by the taxpayer in the year or a preceding taxation year;

 (b) all Canadian development expenses, other than restricted expenses, described in subparagraph ii of paragraph a of section 408 in respect of the well that are required under the second paragraph of section 392 to be included by the taxpayer in the amount referred to in paragraph a of section 408 for the year or a preceding taxation year; and

 (c) all Canadian development expenses, other than expenses referred to in paragraph a or b and restricted expenses, described in subparagraph ii of paragraph a of section 408 incurred by the taxpayer in respect of the well in a taxation year preceding the year.

1988, c. 18, s. 31; 1997, c. 3, s. 71; 1998, c. 16, s. 148; 2001, c. 53, s. 64; 2004, c. 8, s. 75.

399.4. (Repealed).

1988, c. 18, s. 31; 1989, c. 77, s. 42.

399.5. (Repealed).

1988, c. 18, s. 31; 1989, c. 77, s. 42.

399.6. For the purposes of this chapter, the expression restricted expense of a taxpayer means an expense

 (a) incurred by him before 1 April 1987;

 (b) that is deemed under section 418 to have been incurred by him, or included by him in the amount referred to in paragraph a of section 408 by virtue of the second paragraph of section 392, to the extent that the expense was originally incurred before 1 April 1987;

 (c) that was renounced by him under section 359.2.1 or 359.4 or section 417, as it read in respect of the renunciation;

 (d) in respect of which an amount referred to in section 392 becomes receivable by him;

 (e) deemed to be a Canadian exploration expense of the taxpayer or any other taxpayer by virtue of section 399.3; or

 (f) where the taxpayer is a corporation, that was incurred by the corporation before the time control of the corporation was last acquired by a person or persons.

1988, c. 18, s. 31; 1995, c. 49, s. 102; 1997, c. 3, s. 71; 1998, c. 16, s. 149.

399.7. In this chapter,

Canadian renewable and conservation expense has the meaning assigned by the regulations;

specified purpose means

 (a) the operation of an oil or gas well for the sole purpose of testing the well or the well head and related equipment, in accordance with generally accepted engineering practices;

 (b) the burning of natural gas and related hydrocarbons to protect the environment; and

 (c) any prescribed purpose.

For the purpose of determining whether an outlay or expense in respect of a prescribed energy conservation property meets the prescribed criteria in respect of Canadian renewable and conservation expenses, the Technical Guide to Canadian Renewable and Conservation Expenses, as amended from time to time and published by the Department of Natural Resources of Canada, applies conclusively with respect to engineering and scientific matters.

1988, c. 18, s. 31; 1995, c. 49, s. 236; 1998, c. 16, s. 150; 2015, c. 36, s. 20.

400. A development corporation, other than a corporation that would not be a development corporation if the first paragraph of section 363 were read without reference to subparagraphs h and i thereof, may, in computing its income for a taxation year, deduct any amount not exceeding the lesser of

 (a) the aggregate of

(i)  the amount by which its cumulative Canadian exploration expenses at the end of the year exceed the amount, designated by it for the year for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) under subsection 14.1 of section 66 of that Act, and

(ii)  the amount by which the aggregate determined under subparagraph i of paragraph a of section 418.31.1 in respect of the corporation for the year exceeds the amount that would be determined in respect of the corporation for the year under paragraph d of section 330 if the aggregate last referred to in that paragraph d were not taken into account; and

 (b) the amount by which the amount that would be its income for the year if no deduction, other than a prescribed deduction, were allowed under this section and sections 360 and 361 exceeds the aggregate of all amounts each of which is an amount deducted by the corporation under sections 738 to 749 in computing its taxable income for the year.

1975, c. 22, s. 90; 1978, c. 26, s. 68; 1982, c. 5, s. 93; 1987, c. 67, s. 90; 1993, c. 16, s. 157; 1995, c. 49, s. 103; 1997, c. 3, s. 71; 1998, c. 16, s. 151.

401. A taxpayer not contemplated in section 400 may deduct, in computing the income of the taxpayer for a taxation year, an amount not exceeding the aggregate of

 (a) the amount by which the taxpayer's cumulative Canadian exploration expense at the end of the year exceeds the amount designated by the taxpayer for the year for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) under subsection 14.1 of section 66 of the said Act, and

 (b) the amount by which the aggregate determined under subparagraph i of paragraph a of section 418.31.1 in respect of the taxpayer for the year exceeds the amount that would be determined in respect of the taxpayer for the year under paragraph d of section 330 if the aggregate last referred to in the said paragraph d were not taken into account.

1975, c. 22, s. 90; 1977, c. 26, s. 40; 1978, c. 26, s. 69; 1979, c. 38, s. 13; 1980, c. 13, s. 36; 1982, c. 5, s. 94; 1986, c. 19, s. 81; 1987, c. 67, s. 91; 1993, c. 16, s. 157.

401.1. The expense of a taxpayer that is described in paragraph c or c.1 of section 395 and that, because of paragraph c.2 of section 396, is not included in the taxpayer's Canadian exploration expense is deemed not to be an amount or payment described in section 129.

2015, c. 24, s. 68.

402. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1985, c. 25, s. 73; 1986, c. 19, s. 81; 1987, c. 67, s. 91; 1988, c. 18, s. 32; 1989, c. 77, s. 43.

403. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1985, c. 25, s. 73; 1986, c. 19, s. 81; 1987, c. 67, s. 91; 1988, c. 18, s. 32; 1989, c. 77, s. 43.

404. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1980, c. 11, s. 54; 1980, c. 13, s. 37; 1985, c. 25, s. 74; 1986, c. 19, s. 82; 1987, c. 67, s. 92; 1989, c. 77, s. 43.

404.1. (Repealed).

1980, c. 13, s. 38; 1985, c. 25, s. 75; 1989, c. 77, s. 43.

405. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1980, c. 13, s. 39; 1985, c. 25, s. 75; 1988, c. 18, s. 33; 1989, c. 77, s. 43.

406. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1982, c. 5, s. 95; 1985, c. 25, s. 75; 1988, c. 18, s. 34; 1993, c. 16, s. 158; 1995, c. 49, s. 104; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 1998, c. 16, s. 152.

407. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 70; 1985, c. 25, s. 75; 1997, c. 3, s. 71; 1998, c. 16, s. 152.

DIVISION IV 
CANADIAN DEVELOPMENT EXPENSES
1975, c. 22, s. 90.

408. For the purposes of this chapter, “Canadian development expense of a taxpayer” means any cost or expense incurred after 6 May 1974 in the case of an oil business, or after 31 March 1975 in the case of a mining business, to the extent that such cost or expense constitutes

 (a) an expense incurred by him in:

(i)  drilling or converting a well in Canada for the disposal of waste liquids from an oil or gas well;

(ii)  drilling or completing an oil or gas well in Canada, building a temporary access road to the well or preparing a site in respect of the well, to the extent that the expense was not a Canadian exploration expense of the taxpayer in the taxation year during which it was incurred;

(iii)  drilling or converting a well in Canada for the injection of water, gas or any other substance to assist in the recovery of petroleum or natural gas from another well;

(iv)  drilling for water or gas in Canada for injection into a petroleum or natural gas formation; or

(v)  drilling or converting a well in Canada for the purposes of monitoring fluid levels, pressure changes or other phenomena in an accumulation of petroleum or natural gas;

 (a.1) an expense incurred by him after 16 November 1978, in respect of an oil or gas well in Canada after the commencement of production from the well, to drill the well, to maintain or increase its production or to put it back into operation;

 (b) an expense incurred by him before 17 November 1978 to bring a mineral resource in Canada into production, including clearing, removing overburden and stripping, sinking a mine shaft and constructing an adit or other underground entry, to the extent that the expense was incurred prior to the commencement of production from the mine in reasonable commercial quantities;

 (b.0.1) any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer for the purpose of bringing a new mine in a mineral resource in Canada that is a bituminous sands deposit or an oil shale deposit into production and incurred before the new mine comes into production in reasonable commercial quantities, including an expense for clearing the land, removing overburden and stripping, or building an entry ramp;

 (b.0.2) any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer after 20 March 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities, including an expense for clearing, removing overburden and stripping, sinking a mine shaft and constructing an adit or other underground entry, to the extent that the expense was incurred prior to the commencement of production from the new mine in reasonable commercial quantities;

 (b.1) any expense incurred by him after 31 December 1987, other than an amount included in the capital cost of a depreciable property,

(i)  in sinking or excavating a mine shaft, main haulage way or similar underground work designed for continuing use, for a mine in a mineral resource in Canada built or excavated after the mine came into production, or

(ii)  in extending any such shaft, haulage way or work;

 (c) despite section 144, the cost to the taxpayer of property described in any of paragraphs b, d.1 and e of section 370 or of a right or an interest relating to such property, other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, including any payment for the preservation of a taxpayer's rights in respect of such a property, right or interest, but excluding, except for the application of this paragraph to a taxation year that begins after 31 December 2007,

(i)  any payment made to a person referred to in section 90 for the preservation of a taxpayer's rights in respect of a Canadian resource property, and

(ii)  any payment to which subsection 1 of section 144 applies by reason of paragraph b of that subsection 1;

 (d) subject to section 418.37, his share of any expense described in paragraphs a to c incurred by a partnership in a fiscal period thereof, if at the end of that fiscal period he was a member thereof, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is six months after the taxpayer's taxation year in which that period ends; or

 (e) any cost or expense described in paragraphs a to c incurred by him pursuant to an agreement in writing with a corporation entered into before 1 January 1987, under which agreement he so incurs such cost or expense solely as consideration for a share, except a prescribed share, of the capital stock of that corporation issued to him or any interest in or right to such a share.

1975, c. 22, s. 90; 1977, c. 26, s. 41; 1978, c. 26, s. 71; 1980, c. 13, s. 40; 1982, c. 5, s. 96; 1984, c. 15, s. 89; 1985, c. 25, s. 76; 1986, c. 19, s. 83; 1988, c. 18, s. 35; 1990, c. 59, s. 164; 1994, c. 22, s. 153; 1997, c. 3, s. 71; 2005, c. 1, s. 97; 2012, c. 8, s. 54; 2015, c. 24, s. 69.

409. A taxpayer's Canadian development expenses do not however include

 (a) any consideration given by the taxpayer for any share, or for any interest therein or right thereto, except as provided by paragraph e of section 408;

 (b) any expense described in paragraph e of section 408 and incurred by another taxpayer to the extent that the expense is a Canadian development expense of that other taxpayer by virtue of that paragraph, a Canadian exploration expense of that other taxpayer by virtue of paragraph e of section 395 or a Canadian oil and gas property expense of that other taxpayer by virtue of paragraph c of section 418.2;

 (c) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class;

 (c.1) an expense that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 31 December 1987; or

 (d) the taxpayer's share of any consideration, expense, cost or expenditure referred to in any of paragraphs a to c given or incurred, as the case may be, by a partnership.

1975, c. 22, s. 90; 1982, c. 5, s. 97; 1998, c. 16, s. 153; 2004, c. 8, s. 76.

410. Where a taxpayer has received or is entitled to receive after 25 May 1976 assistance in respect of or related to his Canadian development expenses, the expenses contemplated in paragraphs a to e of section 408 shall not be reduced by the amount of such assistance.

1977, c. 26, s. 42; 1988, c. 18, s. 36.

411. In this chapter, “cumulative Canadian development expenses” of a taxpayer, at any time in a taxation year, means the amount by which the aggregate described in section 412 is exceeded by the aggregate of

 (a) the Canadian development expenses incurred by the taxpayer before that time;

 (a.1) all amounts determined under paragraph b of section 418.31.1 in respect of the taxpayer for a taxation year ending before that time;

 (b) all amounts included in computing the taxpayer's income under paragraph e of section 330 for a taxation year ending before that time;

 (c) all amounts described in paragraph b or c of section 412 that, according to the evidence submitted by him, has become a bad debt before that time; and

 (d) such part of an amount described in paragraph h of section 412 as has been repaid by him before that time pursuant to a legal obligation to repay all or any part of that amount.

1975, c. 22, s. 90; 1977, c. 26, s. 43; 1978, c. 26, s. 72; 1980, c. 13, s. 41; 1982, c. 5, s. 98; 1991, c. 25, s. 74; 1993, c. 16, s. 159; 1995, c. 49, s. 236; 2004, c. 8, s. 77; 2015, c. 24, s. 70.

412. The amounts required to be deducted in computing the cumulative Canadian development expenses of a taxpayer at the time referred to in section 411 are the aggregate of:

 (a) all amounts deducted in computing his income for a taxation year ending before that time in respect of such expenses;

 (b) all amounts each of which is, in respect of the disposition by the taxpayer before that time of a property described in any of paragraphs b, d.1 and e of section 370, of a property disposed of after 21 March 2011 which was described in any of those paragraphs and the cost of which when acquired by the taxpayer was included in the Canadian development expense of the taxpayer, or of any right or interest relating to such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, equal to the amount by which

(i)  the amount by which the proceeds of disposition in respect of the property that became receivable by the taxpayer before that time but after 6 May 1974 in the case of an oil business or after 31 March 1975 in the case of a mining business, exceed the aggregate of the outlays or expenses that the taxpayer made or incurred before that time but after 6 May 1974 in the case of an oil business or after 31 March 1975 in the case of a mining business for the purpose of making the disposition and that were not otherwise deductible for the purposes of this Part, exceeds

(ii)  the amount by which the amount determined under the first paragraph of section 412.1 exceeds the amount determined under the second paragraph of that section;

(iii)  (subparagraph repealed);

 (c) all amounts that become receivable by him before that time that are required to be deducted in computing such expenses under this paragraph by virtue of section 387 or 392;

 (d) all amounts included by him under paragraph a of section 408 for a previous taxation year that have become Canadian exploration expenses of the taxpayer by virtue of paragraph b of section 395;

 (d.1) all amounts that became, before that time, Canadian exploration expenses of the taxpayer by virtue of section 399.3;

 (e) all amounts paid to him after 6 May 1974 in the case of an oil business, or after 31 March 1975 in the case of a mining business, and before 25 May 1976 as a subsidy, a grant or assistance received under an Act, in respect of Canadian development expenses, to the extent provided by the regulations;

 (f) all amounts received by the taxpayer before that time in respect of a debt referred to in paragraph c of section 411;

 (g) the amount by which the aggregate of all amounts determined under section 418.12 in respect of a taxation year of the taxpayer ending at or before that time, in this paragraph referred to as the relevant time, exceeds the aggregate of all amounts each of which is the least of

(i)  the amount that would be determined under the second paragraph of section 418.19, at a time, in this paragraph referred to as the particular time, that is the end of the latest taxation year of the taxpayer ending at or before the relevant time, in respect of the taxpayer as a corporation referred to in that section 418.19 in respect of a disposition, in this paragraph referred to as the original disposition, of Canadian resource property by a person who is an original owner of the property because of the original disposition, if

(1)  where the taxpayer has disposed of all or part of the property in circumstances in which section 418.19 applied, that section continued to apply to the taxpayer in respect of the original disposition as if each of the subsequent corporations contemplated in that section 418.19 were the same person as the taxpayer, and

(2)  each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable before the particular time were made before the particular time;

(ii)  the amount by which the aggregate of all amounts each of which became receivable at or before the particular time and before 1 January 1993 by the taxpayer and is included in computing the amount determined under subparagraph b of the second paragraph of section 418.21 in respect of the original disposition exceeds the amount by which

(1)  where the taxpayer disposed of all or part of the property before the particular time in circumstances in which section 418.21 applied, the amount that would be determined at the particular time under subparagraph a of the second paragraph of section 418.21 in respect of the original disposition if that subparagraph continued to apply to the taxpayer in respect of the original disposition as if each of the subsequent corporations contemplated in that section 418.21 were the same person as the taxpayer or, in any other case, the amount determined at the particular time under subparagraph a of the second paragraph of section 418.21 in respect of the original disposition, exceeds

(2)  the amount that would be determined at the particular time under subparagraph b of the second paragraph of section 418.21 in respect of the original disposition if that subparagraph were read without reference to the words “or by the corporation” or “or the corporation”, wherever they appear therein, and if amounts that became receivable after 31 December 1992 were not taken into account; and

(iii)  nil, where

(1)  after the original disposition and at or before the particular time, the taxpayer disposed of all or part of the property in circumstances in which section 418.19 applied, otherwise than by way of an amalgamation or merger or solely because of the application of subparagraph a of the first paragraph of section 418.26, and

(2)  the winding-up of the taxpayer began at or before the relevant time or the taxpayer's disposition referred to in subparagraph 1, other than a disposition under an agreement in writing entered into before 22 December 1992, occurred after 21 December 1992;

 (h) all amounts of assistance that he has received or is entitled to receive in respect of any Canadian development expense, including any amount that has become a Canadian exploration expense of the taxpayer by virtue of section 399.3, incurred after 31 December 1980 or that can reasonably be related to Canadian development activities after that date;

 (h.1) all amounts by which his cumulative Canadian development expense is required, because of section 485.8, to be reduced at or before that time;

 (i) all amounts required to be deducted before that time under section 392.3 in computing his cumulative Canadian development expenses;

 (j) any amount that is required to be deducted before that time under paragraph c of section 418.31 in computing his cumulative Canadian development expense.

1975, c. 22, s. 90; 1977, c. 26, s. 44; 1980, c. 13, s. 42; 1982, c. 5, s. 99; 1984, c. 15, s. 90; 1985, c. 25, s. 77; 1986, c. 19, s. 84; 1987, c. 67, s. 93; 1988, c. 18, s. 37; 1989, c. 77, s. 44; 1995, c. 49, s. 105; 1996, c. 39, s. 112; 1997, c. 3, s. 71; 2004, c. 8, s. 78; 2009, c. 5, s. 131; 2012, c. 8, s. 55.

412.1. The first amount referred to in subparagraph ii of paragraph b of section 412 is the aggregate of all amounts each of which would be determined under the second paragraph of section 418.19, immediately before the time, in this section referred to as the relevant time, when such proceeds of disposition became receivable, in respect of the taxpayer and an original owner of the property, or of any other property acquired by the taxpayer with the property in circumstances in which section 418.19 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

 (a) amounts that became receivable at or after the relevant time were not taken into account;

 (b) each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable before the relevant time were made before the relevant time; and

 (c) no reduction under section 485.8 at or after the relevant time were taken into account.

The second amount referred to in subparagraph ii of paragraph b of section 412 is the total of

 (a) all amounts that would be determined under the second paragraph of section 418.19 at the relevant time in respect of the taxpayer and an original owner of the property or of any other property acquired by the taxpayer with the property in circumstances in which section 418.19 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

(i)  amounts that became receivable after the relevant time and amounts described in subparagraph ii of subparagraph b of the second paragraph of section 418.19 that became receivable at the relevant time were not taken into account,

(ii)  each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable at or before the relevant time were made before the relevant time, and

(iii)  no reduction under section 485.8 at or after the relevant time were taken into account; and

 (b) such portion of the amount otherwise determined under subparagraph ii of paragraph b of section 412 as was otherwise applied to reduce the amount otherwise determined under that paragraph.

1995, c. 49, s. 106; 1996, c. 39, s. 113.

413. A development corporation carrying on an oil business may deduct, in computing its income for a taxation year, an amount not exceeding the aggregate of its cumulative Canadian development expenses incurred in Québec at the end of the year and the amount by which the aggregate determined under subparagraph i of paragraph b of section 418.31.1 in respect of the corporation for the year in respect of its cumulative Canadian development expenses incurred in Québec exceeds the amount that would be determined in respect of the corporation for the year under paragraph e of section 330 in respect of such expenses if the aggregate last referred to in the said paragraph e were not taken into account, and an amount not exceeding the aggregate of

 (a) the lesser of:

(i)  the aggregate of its other cumulative Canadian development expenses at the end of the year and the amount by which the aggregate determined under subparagraph i of paragraph b of section 418.31.1 in respect of the corporation for the year in respect of its other cumulative Canadian development expenses exceeds the amount that would be determined in respect of the corporation for the year under paragraph e of section 330 in respect of such expenses if the aggregate last referred to in the said paragraph e were not taken into account; and

(ii)  the amount by which the amount determined under subparagraph ii of paragraph a of section 418.7 exceeds the amount determined under subparagraph i of the said paragraph; and

 (b) the lesser of

(i)  the amount by which the amount determined under subparagraph i of subparagraph a exceeds the amount determined under subparagraph ii of the said subparagraph; or

(ii)  the amount by which the aggregate of all amounts included in computing its income for the year by reason of the disposition, in the year, of a property included in its inventory under section 419, and acquired by the corporation under circumstances referred to in paragraph e of section 395 or 408, or any amount included, in computing its income, under paragraph e of section 87 to the extent that such amount relates to that property, exceeds the aggregate of any amount deducted as a reserve in computing its income for the year under section 153 to the extent that the reserve relates to such property; and

 (c) 30% of the amount by which the amount determined under subparagraph i of subparagraph b exceeds that determined under subparagraph ii of the said subparagraph.

Any other taxpayer may deduct in computing his income for any taxation year in respect of an oil business an amount not exceeding the aggregate of amounts that would be determined in his respect under subparagraphs a to c of the first paragraph, if account were not taken of the word “other” in subparagraph i of the said subparagraph a.

1975, c. 22, s. 90; 1977, c. 26, s. 45; 1982, c. 5, s. 100; 1993, c. 16, s. 160; 1997, c. 3, s. 71; 1997, c. 14, s. 67; 2001, c. 53, s. 65.

414. A development corporation carrying on a mining business may deduct, in computing its income for a taxation year, the aggregate of its cumulative Canadian development expenses at the end of the year and the amount by which the aggregate determined under subparagraph i of paragraph b of section 418.31.1 in respect of the corporation for the year exceeds the amount that would be determined in respect of the corporation for the year under paragraph e of section 330 if the aggregate last referred to in the said paragraph e were not taken into account.

Any other taxpayer may deduct in respect of a mining business, in computing his income for a taxation year, the aggregate of his cumulative Canadian development expenses at the end of the year and the amount by which the aggregate determined under subparagraph i of paragraph b of section 418.31.1 in respect of the taxpayer for the year exceeds the amount that would be determined in respect of the taxpayer for the year under paragraph e of section 330 if the aggregate last referred to in the said paragraph e were not taken into account, without exceeding the greater of

 (a) the aggregate of amounts that would be determined in his respect under subparagraphs a to c of the first paragraph of section 413, if account were not taken of the word “other” in subparagraph i of the said subparagraph a; and

 (b) the amount by which the total of the aggregate of all amounts deducted in computing the taxpayer's income for the year under section 357 in respect of a Canadian resource property or under section 358 and the aggregate of all amounts deducted for the year under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), sections 418.16 to 418.19 and section 418.21, that can reasonably be attributed to the amounts referred to in subparagraphs i to iii for the year, exceeds the total, before any deduction under section 88.4 of the Act respecting the application of the Taxation Act or any of sections 359 to 419.6, of

(i)  his income for the year that may reasonably be attributed to the production of ore, other than iron or tar sands, from a resource property, processed to any stage that is not beyond the prime metal stage or its equivalent, the production of iron ore from a resource property, processed to any stage that is not beyond the pellet stage or its equivalent, and to any rental or royalty from a resource property, computed by reference to the amount or value of the production of ore;

(ii)  the aggregate of the amounts included in computing his income for the year under paragraph b, d or e of section 330, other than any of the amounts contemplated in subparagraph iii, but to the extent that paragraph b of the said section refers to section 357, only the amounts deducted in computing his income under the said section 357 for the preceding taxation year in respect of the disposition of a Canadian resource property may be taken into consideration; and

(iii)  the aggregate of all amounts included in computing the taxpayer's income for the year under paragraph e of section 330 that can reasonably be attributed to the disposition by the corporation, in the year or in a preceding taxation year, of any interest or right in a Canadian resource property, to the extent that the proceeds of disposition have not been included in computing an amount for a preceding taxation year under this subparagraph, subparagraph i of subparagraph a of the third paragraph of sections 418.16 and 418.18, subparagraph iii of subparagraph c of the first paragraph of section 418.20, section 418.28, or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause A of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules.

1977, c. 26, s. 45; 1978, c. 26, s. 73; 1980, c. 13, s. 43; 1982, c. 5, s. 101; 1986, c. 19, s. 85; 1989, c. 77, s. 45; 1993, c. 16, s. 161; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 154.

415. (Repealed).

1975, c. 22, s. 90; 1977, c. 26, s. 46; 1978, c. 26, s. 74; 1980, c. 13, s. 44; 1985, c. 25, s. 78; 1986, c. 19, s. 86; 1987, c. 67, s. 94; 1988, c. 18, s. 38; 1989, c. 77, s. 46.

415.1. (Repealed).

1980, c. 13, s. 44; 1985, c. 25, s. 79; 1986, c. 19, s. 87; 1987, c. 67, s. 95; 1988, c. 18, s. 39; 1989, c. 77, s. 46.

415.2. (Repealed).

1980, c. 13, s. 44; 1985, c. 25, s. 80; 1987, c. 67, s. 96; 1989, c. 77, s. 46.

415.3. (Repealed).

1980, c. 13, s. 44; 1989, c. 77, s. 46.

416. For the purposes of section 413, cumulative Canadian development expenses are incurred in Québec when they concern expenses that would be described in section 408 if the words “in Canada” were replaced by the words “in Québec” and if paragraph c of the said section 408 applied only to a property which would be described in section 370 if the words “in Canada” were replaced by the words “in Québec”.

1975, c. 22, s. 90; 1978, c. 26, s. 75.

417. (Repealed).

1975, c. 22, s. 90; 1977, c. 26, s. 47; 1978, c. 26, s. 76; 1982, c. 5, s. 102; 1985, c. 25, s. 81; 1988, c. 18, s. 40; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 1998, c. 16, s. 155.

418. (Repealed).

1975, c. 22, s. 90; 1978, c. 26, s. 77; 1985, c. 25, s. 81; 1997, c. 3, s. 71; 1998, c. 16, s. 155.

418.1. Where, pursuant to the terms of an arrangement in writing entered into before 12 December 1979, a taxpayer acquired a property described in paragraph a of section 418.2, for the purposes of this Act, the cost of acquisition of the property shall be deemed to be a Canadian development expense incurred at the time he acquired the property.

1982, c. 5, s. 103.

DIVISION IV.0.1 
FOREIGN RESOURCE EXPENSE
2004, c. 8, s. 79.

418.1.1.  In this chapter, the foreign resource expense of a taxpayer, in relation to a country other than Canada, means

 (a) any exploration or drilling expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country;

 (b) any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course of prospecting, carrying out geological, geophysical or geochemical surveys, drilling, trenching, digging test pits or preliminary sampling;

 (c) the cost to the taxpayer of any of the taxpayer’s foreign resource properties in relation to that country;

 (d) any annual payment made by the taxpayer for the preservation of a foreign resource property in relation to that country; and

 (e) subject to section 418.37, the taxpayer’s share of an expense, cost or payment described in any of paragraphs a to d that is incurred or made by a partnership in a fiscal period of the partnership that begins after 31 December 2000, where the taxpayer was a member of the partnership at the end of that fiscal period.

2004, c. 8, s. 79.

418.1.2. A taxpayer’s foreign resource expense, in relation to a country other than Canada, does not however include

 (a) an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class;

 (b) an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates;

 (c) an expenditure, other than a drilling expense, incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates;

 (d) an expenditure incurred in relation to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir;

 (e) an expenditure incurred by the taxpayer, unless the expenditure was made

(i)  for the purpose of enabling the taxpayer to acquire foreign resource property,

(ii)  for the purpose of enhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, or

(iii)  for the purpose of assisting the taxpayer in evaluating whether a foreign resource property is to be acquired by the taxpayer;

 (f) the taxpayer’s share of any expenditure or cost described in any of paragraphs a to e that is incurred by a partnership; or

 (g) an expenditure incurred by the taxpayer in a taxation year of the taxpayer that begins before 1 January 2001.

2004, c. 8, s. 79; 2005, c. 38, s. 77.

418.1.3. In this chapter, the cumulative foreign resource expense of a taxpayer at a particular time, in relation to a country other than Canada, in this section and sections 418.1.4 and 418.1.5 referred to as the “foreign country”, means the amount by which the aggregate of the following expenses and other amounts exceeds the aggregate determined under section 418.1.4:

 (a) the foreign resource expenses, in relation to the foreign country, incurred by the taxpayer

(i)  before the particular time, and

(ii)  at a time, in this section and section 418.1.4 referred to as a resident time, at which the taxpayer was resident in Canada and, where the taxpayer became resident in Canada before the particular time, that is after the last time before the particular time, that the taxpayer became resident in Canada;

 (a.1) the foreign resource expenses, in relation to the foreign country, attributable to the cost to the taxpayer of any foreign resource property in relation to that country that is deemed to have been acquired by the taxpayer under paragraph c of section 785.1 at the last time before the particular time that the taxpayer became resident in Canada;

 (b) each amount included in computing the taxpayer's income under paragraph e.1 of section 330, in relation to the foreign country, for a taxation year ending before the particular time and at a resident time;

 (c) each amount referred to in paragraph b or c of section 418.1.4 that, in accordance with the evidence submitted by the taxpayer, has become a bad debt before the particular time and at a resident time; and

 (d) each particular amount determined under section 418.32.2, in respect of the taxpayer and the foreign country, for a taxation year ending before the particular time and at a resident time.

2004, c. 8, s. 79; 2015, c. 24, s. 71.

418.1.4. The aggregate which, for the purposes of section 418.1.3, must be determined under this section, is the aggregate of

 (a) each amount deducted in computing the taxpayer’s income for a taxation year ending before the particular time and at a resident time, in respect of the taxpayer’s cumulative foreign resource expense in relation to the foreign country;

 (b) each amount in respect of a foreign resource property, in relation to the foreign country, in section 418.1.5 referred to as the particular property, disposed of by the taxpayer equal to the amount by which the amount designated under subparagraph ii of paragraph a of section 330 by the taxpayer in respect of the portion of the proceeds of that disposition that became receivable before the particular time and at a resident time exceeds the excess amount determined under section 418.1.5;

 (c) each amount in respect of the foreign country that is included in the amount determined under this paragraph by reason of section 390.1 that became receivable by the taxpayer before the particular time and at a resident time;

 (d) each amount received by the taxpayer before the particular time and at a resident time in respect of a debt referred to in paragraph c of section 418.1.3;

 (e) each amount by which the cumulative foreign resource expense of the taxpayer, in relation to the foreign country, is required, by reason of section 485.8, to be reduced at or before the particular time and at a resident time; and

 (f) each amount that is required to be deducted, before the particular time and at a resident time, under paragraph a of section 418.32.1 in computing the taxpayer’s cumulative foreign resource expense, in relation to the foreign country.

2004, c. 8, s. 79.

418.1.5. The excess amount which, for the purposes of paragraph b of section 418.1.4, must be determined under this section, is the amount by which the amount determined under the second paragraph exceeds the amount determined under the third paragraph.

The first amount referred to in the first paragraph is the aggregate of all amounts each of which is an amount that would be determined under the second paragraph of section 418.17.3, immediately before the time, in this section referred to as the relevant time, when such proceeds of disposition became receivable, in respect of the taxpayer, the foreign country and an original owner of the particular property, or of any other property acquired by the taxpayer with the particular property in circumstances to which section 418.17.3 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

 (a) amounts that became receivable at or after the relevant time were not taken into account;

 (b) the second paragraph of section 418.17.3 were read without reference to “30% of”; and

 (c) no reduction under section 485.8 at or after the relevant time were taken into account.

The second amount referred to in the first paragraph is the total of

 (a) the aggregate of all amounts each of which is an amount that would be determined under the second paragraph of section 418.17.3 at the relevant time in respect of the taxpayer, the foreign country and an original owner of the particular property, or of any other property acquired by the taxpayer with the particular property in circumstances to which section 418.17.3 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

(i)  amounts that became receivable after the relevant time were not taken into account,

(ii)  the second paragraph of section 418.17.3 were read without reference to “30% of”, and

(iii)  no reduction under section 485.8 at or after the relevant time were taken into account; and

 (b) the portion of the amount otherwise determined under this section that was applied to reduce the amount otherwise determined under paragraph b of section 418.1.4.

2004, c. 8, s. 79.

418.1.6. In this chapter, the adjusted cumulative foreign resource expense of a taxpayer at the end of a taxation year, in relation to a country, means the aggregate of the cumulative foreign resource expense of the taxpayer, in relation to that country, at the end of the year, and the amount by which the aggregate determined for the year under paragraph a of section 418.32.2 in respect of the taxpayer and that country exceeds the amount that would, but for subparagraph ii of paragraph e.1 of section 330, be determined for the year under that paragraph e.1 in respect of the taxpayer and that country.

2004, c. 8, s. 79.

418.1.7. In this division, the foreign resource income of a taxpayer for a taxation year, in relation to a country other than Canada, means the total of

 (a) that part of the taxpayer’s income for the year, determined without reference to sections 371 and 418.1.10, that can reasonably be attributed to the production of petroleum or natural gas from a natural accumulation of petroleum or natural gas in that country or from oil or gas wells in that country, or to the production of minerals from mines in that country;

 (b) the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas in that country, an oil or gas well in that country or a mine in that country, determined without reference to sections 371 and 418.1.10; and

 (c) the aggregate of all amounts each of which is an amount, in respect of a foreign resource property in relation to that country that has been disposed of by the taxpayer, equal to the amount by which the amount included in computing the taxpayer’s income for the year by reason of paragraph a of section 330 in respect of that disposition exceeds the aggregate of all amounts each of which is that portion of an amount deducted under section 418.17 in computing the taxpayer’s income for the year that can reasonably be considered to be in respect of the foreign resource property, but cannot reasonably be considered to have reduced the amount otherwise determined under paragraph a or b in respect of the taxpayer for the year.

2004, c. 8, s. 79.

418.1.8. In this division, the foreign resource loss of a taxpayer for a taxation year in relation to a country other than Canada means the amount of that loss computed, with the necessary modifications, in accordance with section 418.1.7.

2004, c. 8, s. 79.

418.1.9. In this division, the global foreign resource limit of a taxpayer for a taxation year means the amount that is the lesser of

 (a) the amount by which the amount determined under paragraph b of section 374 in respect of the taxpayer for the year exceeds the total of

(i)  the aggregate of all amounts each of which is the maximum amount that the taxpayer would be permitted to deduct, in relation to a country, under section 418.1.10 in computing the taxpayer’s income for the year if, in its application to the year, that section were read without reference to paragraph b thereof, and

(ii)  the amount deducted under section 371 in computing the taxpayer’s income for the year; and

 (b) the amount by which 30% of the aggregate of all amounts each of which is, at the end of the year, the taxpayer’s adjusted cumulative foreign resource expense in relation to a country exceeds the aggregate described in subparagraph i of paragraph a.

2004, c. 8, s. 79.

418.1.10. In computing a taxpayer’s income for a taxation year throughout which the taxpayer is resident in Canada, the taxpayer may deduct an amount claimed by the taxpayer, in respect of a country other than Canada, not exceeding the total of

 (a) the greater of

(i)  10% of an amount, in this section referred to as a particular amount, equal to the taxpayer’s adjusted cumulative foreign resource expense in relation to that country at the end of the year, and

(ii)  the least of

(1)  if the taxpayer ceases to be resident in Canada immediately after the end of the year, the particular amount,

(2)  if subparagraph 1 does not apply, 30% of the particular amount,

(3)  the amount by which the taxpayer’s foreign resource income for the year in relation to that country exceeds the portion of the amount, deducted under section 371 in computing the taxpayer’s income for the year, that is attributable to a source in that country, and

(4)   the amount by which the aggregate of all amounts each of which is the taxpayer’s foreign resource income for the year in relation to a country exceeds the total of the aggregate of all amounts each of which is the taxpayer’s foreign resource loss for the year in relation to a country and the amount deducted under section 371 in computing the taxpayer’s income for the year; and

 (b) the lesser of

(i)  the amount by which the particular amount exceeds the amount determined for the year under paragraph a in respect of the taxpayer, and

(ii)  that portion of the taxpayer’s global foreign resource limit for the year that is designated for the year by the taxpayer, in relation to that country and no other country, in prescribed form filed with the Minister with the taxpayer’s fiscal return filed under this Part for the year.

2004, c. 8, s. 79.

418.1.11. Where at any time in a taxation year an individual becomes or ceases to be resident in Canada, the following rules apply:

 (a) section 418.1.10 applies to the individual as if the taxation year were the period or periods in the year throughout which the individual was resident in Canada; and

 (b) for the purposes of this chapter, section 393.1 does not apply to the individual for the year.

2004, c. 8, s. 79.

DIVISION IV.1 
CANADIAN OIL AND GAS PROPERTY EXPENSE
1982, c. 5, s. 103.

418.2. In sections 362 to 394, Divisions III and IV and this division, Canadian oil and gas property expense of a taxpayer means any cost or expense incurred after 11 December 1979, to the extent that the cost or expense is

 (a) despite section 144, the cost to the taxpayer of property described in any of paragraphs a, c and d of section 370 or in paragraph f of that section in respect of property described in any of paragraphs a, c and d of that section, including any payment for the preservation of a taxpayer's rights in respect of such a property or an amount paid or, except for the application of this paragraph to a taxation year that begins after 31 December 2007, payable to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on 31 March 1977 to the extent that such amount can reasonably be considered to be a cost of acquiring the lease, but excluding, except for the application of this paragraph to a taxation year that begins after 31 December 2007,

(i)  any payment made to a person referred to in section 90 for the preservation of a taxpayer’s rights in respect of a Canadian resource property, and

(ii)  any payment, other than a net royalty payment referred to in this paragraph, to which subsection 1 of section 144 applies by reason of paragraph b of that subsection;

 (b) subject to section 418.37, his share of any expense described in paragraph a incurred by a partnership in a fiscal period of the partnership of which he was a member at the end of that fiscal period, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is six months after the taxpayer's taxation year in which that period ends; or

 (c) any cost or expense described in paragraph a incurred by the taxpayer pursuant to an agreement in writing with a corporation entered into before 1 January 1987, under which the taxpayer incurred the cost or expense solely as consideration for a share, except a prescribed share, of the capital stock of the corporation issued to him or any interest in or right to such a share.

1982, c. 5, s. 103; 1984, c. 15, s. 91; 1986, c. 19, s. 88; 1988, c. 18, s. 41; 1990, c. 59, s. 165; 1994, c. 22, s. 154; 1997, c. 3, s. 71; 1998, c. 16, s. 156; 2005, c. 1, s. 98; 2015, c. 24, s. 72.

418.3. Canadian oil and gas property expense does not include, however, any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph c of section 418.2, or any expense contemplated in the said paragraph incurred by any other taxpayer to the extent that the expense is for the latter a Canadian oil and gas property expense under the said paragraph, a Canadian exploration expense under paragraph e of section 395 or a Canadian development expense under paragraph e of section 408.

1982, c. 5, s. 103.

418.4. Where a taxpayer has received or is entitled to receive any amount of assistance in respect of or related to his Canadian oil and gas property expense, the expenses contemplated in paragraphs a to c of section 418.2 shall not be reduced by the amount of such assistance.

1982, c. 5, s. 103; 1988, c. 18, s. 42.

418.5. In this chapter, cumulative Canadian oil and gas property expense of a taxpayer at any time in a taxation year means the amount by which the aggregate

 (a) of the Canadian oil and gas property expense incurred by the taxpayer before that time,

 (a.1) of the aggregate of all amounts determined under paragraph c of section 418.31.1 in respect of the taxpayer for a taxation year ending before that time,

 (b) of all amounts determined under section 418.12 in respect of the taxpayer for any taxation year ending before that time,

 (c) of all amounts contemplated in paragraph b or c of section 418.6 that, in accordance with the evidence submitted by the taxpayer, have become a bad debt before that time, and

 (d) of such part of an amount contemplated in paragraph e of section 418.6 as has been repaid by him before that time pursuant to a legal obligation to repay all or any part of that amount exceeds the aggregate described in section 418.6.

1982, c. 5, s. 103; 1991, c. 25, s. 75; 1993, c. 16, s. 162; 1995, c. 49, s. 236; 1997, c. 14, s. 68; 2004, c. 8, s. 80.

418.6. The amounts to be deducted in computing cumulative Canadian oil and gas property expense of a taxpayer at any time contemplated in section 418.5 are the aggregate

 (a) of any amount deducted in computing his income for any taxation year ending before that time in respect of such expense;

 (b) of any amount which in respect of the disposition by the taxpayer before that time of property referred to in paragraph a, c or d of section 370 or in paragraph f of section 370 in respect of property referred to in paragraph a, c or d of that section is equal to the amount by which

(i)  the amount by which the proceeds of disposition in respect of the property that became receivable by the taxpayer before that time exceed the aggregate of any outlays or expenses that the taxpayer made or incurred before that time for the purpose of making the disposition and that were not otherwise deductible for the purposes of this Part, exceeds

(ii)  the total of the amount determined under section 418.6.1 and the amount determined under section 418.6.2,

(iii)  (subparagraph repealed);

 (c) of any amount that, before that time, becomes receivable by him and must be included in the amount contemplated in this paragraph by virtue of section 392.1;

 (d) of any amount received by the taxpayer before that time in respect of a debt contemplated in paragraph c of section 418.5;

 (e) of any amount of assistance that he has received or is entitled to receive in respect of any Canadian oil and gas property expense incurred after 31 December 1980 or that can reasonably be related to any such expense incurred after that date;

 (e.1) of any amount by which his cumulative Canadian oil and gas property expense is required, because of section 485.8, to be reduced at or before that time; and

 (f) any amount that is required to be deducted before that time under paragraph d of section 418.31 in computing his cumulative Canadian oil and gas property expense.

1982, c. 5, s. 103; 1986, c. 19, s. 89; 1988, c. 18, s. 43; 1989, c. 77, s. 47; 1995, c. 49, s. 107; 1996, c. 39, s. 114; 2004, c. 8, s. 81.

418.6.1. The first amount referred to in subparagraph ii of paragraph b of section 418.6 is the amount by which the aggregate of all amounts that would be determined under the second paragraph of section 418.21, immediately before the time, in this section and in section 418.6.2 referred to as the relevant time, when such proceeds of disposition became receivable, in respect of the taxpayer and an original owner of the property, or of any other property acquired by the taxpayer with the property in circumstances in which section 418.21 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, exceeds the amount described in the second paragraph, if

 (a) amounts that became receivable at or after the relevant time were not taken into account;

 (b) each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable before the relevant time were made before the relevant time;

 (c) the second paragraph of section 418.21 were read without reference to “10% of”; and

 (d) no reduction under section 485.8 at or after the relevant time were taken into account.

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

 (a) all amounts that would be determined under the second paragraph of section 418.21 at the relevant time in respect of the taxpayer and an original owner of the property, or of any other property acquired by the taxpayer with the property in circumstances in which section 418.21 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

(i)  amounts that became receivable after the relevant time were not taken into account,

(ii)  each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable at or before the relevant time were made before the relevant time,

(iii)  the second paragraph of section 418.21 were read without reference to “10% of”, and

(iv)  no reduction under section 485.8 at or after the relevant time were taken into account; and

 (b) such portion of the amount determined under this section as was otherwise applied to reduce the amount otherwise determined under paragraph b of section 418.6.

1995, c. 49, s. 108; 1996, c. 39, s. 115.

418.6.2. The second amount referred to in subparagraph ii of paragraph b of section 418.6 is the amount by which the aggregate of all amounts that would be determined under the second paragraph of section 418.19, immediately before the relevant time, in respect of the taxpayer and an original owner of the property, or of any other property acquired by the taxpayer with the property in circumstances in which section 418.19 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, exceeds the amount described in the second paragraph, if

 (a) amounts that became receivable at or after the relevant time were not taken into account;

 (b) each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable before the relevant time were made before the relevant time; and

 (c) no reduction under section 485.8 at or after the relevant time were taken into account.

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

 (a) all amounts that would be determined under the second paragraph of section 418.19 at the relevant time in respect of the taxpayer and an original owner of the property, or of any other property acquired by the taxpayer with the property in circumstances in which section 418.21 applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time, if

(i)  amounts that became receivable after the relevant time and amounts described in subparagraph i of subparagraph b of the second paragraph of section 418.19 that became receivable at the relevant time were not taken into account,

(ii)  each designation made under subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 418.19 in respect of an amount that became receivable at or before the relevant time were made before the relevant time, and

(iii)  no reduction under section 485.8 at or after the relevant time were taken into account; and

 (b) such portion of the amount otherwise determined under this section as was otherwise applied to reduce the amount otherwise determined under paragraph b of section 418.6.

1995, c. 49, s. 108; 1996, c. 39, s. 116.

418.7. A taxpayer may deduct, in computing his income for a taxation year, an amount not exceeding the aggregate of

 (a) the lesser of

(i)  the aggregate of his cumulative Canadian oil and gas property expense at the end of the year and the amount by which the aggregate determined under subparagraph i of paragraph c of section 418.31.1 in respect of the taxpayer for the year exceeds the amount that would be determined in respect of the taxpayer for the year under section 418.12 if the aggregate last referred to in the said section 418.12 were not taken into account; and

(ii)  the amount by which the aggregate of any amount included in computing his income for the year by reason of the disposition, in the year, of a property included in his inventory under section 419, and acquired by him under circumstances referred to in paragraph c of section 418.2, or any amount included, in computing his income, under paragraph e of section 87 to the extent that the amount relates to that property, exceeds the aggregate of any amount deducted as a reserve in computing his income for the year under section 153 to the extent that the reserve relates to such property; and

 (b) 10% of the amount by which any amount determined under subparagraph i of paragraph a exceeds the amount determined under subparagraph ii of the said paragraph.

1982, c. 5, s. 103; 1993, c. 16, s. 163; 1997, c. 14, s. 69.

418.8. (Repealed).

1982, c. 5, s. 103; 1985, c. 25, s. 82; 1986, c. 19, s. 90; 1989, c. 77, s. 48.

418.9. (Repealed).

1982, c. 5, s. 103; 1985, c. 25, s. 82; 1986, c. 19, s. 91; 1989, c. 77, s. 48.

418.10. (Repealed).

1982, c. 5, s. 103; 1985, c. 25, s. 83; 1987, c. 67, s. 97; 1989, c. 77, s. 48.

418.11. (Repealed).

1982, c. 5, s. 103; 1989, c. 77, s. 48.

418.12. For the purposes of subparagraph a of the second paragraph of section 358, as it applies in respect of dispositions occurring before 13 November 1981, paragraph g of section 412 and paragraph b of section 418.5, the amount determined under this section for a taxation year in respect of a taxpayer is equal to the amount by which the aggregate of all amounts deducted under section 418.6 in computing the taxpayer's cumulative Canadian oil and gas property expense at the end of the year exceeds the total of all amounts included under section 418.5 in computing the taxpayer's cumulative Canadian oil and gas property expense at the end of the year and the aggregate determined under subparagraph i of paragraph c of section 418.31.1 in respect of the taxpayer for the year.

1982, c. 5, s. 103; 1993, c. 16, s. 164; 1995, c. 49, s. 109.

418.13. (Repealed).

1982, c. 5, s. 103; 1985, c. 25, s. 84; 1988, c. 18, s. 44; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 1998, c. 16, s. 157.

418.14. (Repealed).

1982, c. 5, s. 103; 1985, c. 25, s. 84; 1997, c. 3, s. 71; 1997, c. 14, s. 70; 1998, c. 16, s. 157.

DIVISION IV.2 
SUCCESSOR CORPORATIONS
1989, c. 77, s. 49; 1997, c. 3, s. 71.

418.15. In this chapter, the expression

 (a) reserve amount of a corporation for a taxation year in respect of an original owner or predecessor owner of a Canadian resource property means the amount by which

(i)  the aggregate of all amounts that are required to be included, under paragraph b of section 330, in computing its income for the year, and required to be included under section 545 or section 564 where it refers to the said section 545, in respect of a reserve deducted under section 357 or 358 in computing the income of the original owner or predecessor owner exceeds

(ii)  the aggregate of all amounts deducted under section 357 or 358 in computing its income for the year in respect of the disposition of property by the original owner or the predecessor owner, as the case may be;

 (b) predecessor owner of a Canadian resource property or a foreign resource property means a corporation

(i)  that acquired the property in circumstances in which any of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property,

(ii)  that disposed of the property to another corporation that acquired it in circumstances in which any of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, applies, or would apply if the other corporation had continued to own the property, to the other corporation in respect of the property, and

(iii)  that would, but for section 418.33, 418.34, 418.34.1 or 418.36, as the case may be, be entitled in computing its income for a taxation year ending after it disposed of the property to a deduction under any of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, in respect of expenses incurred by an original owner of the property;

 (c) original owner of a Canadian resource property or a foreign resource property means a person

(i)  who owned the property and disposed of it to a corporation that acquired it in circumstances in which any of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property, and

(ii)  who would, but for section 418.31, 418.32, 418.32.1 or 418.36, as the case may be, be entitled in respect of expenses described in section 88.5 of the Act respecting the application of the Taxation Act, to the extent that section 88.4 of that Act refers to expenses described in subparagraph i or ii of paragraph c of subsection 25 of section 29 of the Income Tax Application Rules, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses incurred by the person before the person disposed of the property to a deduction, in computing the person’s income for a taxation year ending after the person disposed of the property, under that section 88.4, to the extent that it refers to section 29 of the Income Tax Application Rules, or under any of sections 367, 368, 371, 400, 401, 413, 414, 418.1.10 and 418.7.

For the purposes of this chapter, except for the purposes of subparagraph b of the second paragraph of section 414 and subparagraph c of the first paragraph of section 418.20, production from a Canadian resource property or a foreign resource property means

 (a) petroleum, natural gas and related hydrocarbons produced from the property,

 (b) heavy crude oil produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent,

 (c) ore, other than iron ore or tar sands, produced from the property processed to any stage that is not beyond the prime metal stage or its equivalent,

 (d) iron ore produced from the property processed to any stage that is not beyond the pellet stage or its equivalent,

 (e) tar sands produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, and

 (f) any rental or royalty from the property computed by reference to the amount or value of the production of petroleum, natural gas or related hydrocarbons or ore.

1989, c. 77, s. 49; 1995, c. 49, s. 236; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1997, c. 14, s. 71; 1998, c. 16, s. 158; 2004, c. 8, s. 82.

418.16. Subject to sections 418.22 and 418.23, where after 31 December 1971 a corporation acquired, in any manner whatsoever, a particular Canadian resource property referred to in this section as particular property, it may deduct in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is the lesser of the amount referred to in the second paragraph and the amount referred to in the third paragraph determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to the amount of the Canadian exploration and development expenses incurred by the original owner before he disposed of the particular property, to the extent that those expenses

 (a) were not otherwise deducted in computing the income of the corporation for the year or deducted in computing the income of the corporation for a preceding taxation year or in computing the income of a predecessor owner of the particular property for any taxation year; and

 (b) were not deductible under section 362 or deducted under section 367 or 368 in computing the income of the original owner for any taxation year.

The last amount to which the first paragraph refers is equal to the amount by which

 (a) the part of the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or any of sections 359 to 419.6, that may reasonably be regarded as attributable to

(i)  the amount included in computing its income for the year under paragraph e of section 330 that may reasonably be regarded as attributable to the disposition by the corporation in the year or a preceding taxation year of any interest in or right to the particular property to the extent that the proceeds of the disposition have not been included in computing an amount for any preceding taxation year under this subparagraph, subparagraph i of subparagraph a of the third paragraph of section 418.18, subparagraph iii of subparagraph c of the first paragraph of section 418.20, section 418.28 or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause A of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement),

(ii)  its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or

(iii)  production from the particular property; exceeds

 (b) the aggregate of

(i)  any other amount deducted for the year under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, this section and any of sections 418.18, 418.19 and 418.21, that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph a in respect of the particular property, and

(ii)  any other amount added, because of section 485.13, in computing the amount determined under subparagraph a.

1989, c. 77, s. 49; 1993, c. 16, s. 165; 1996, c. 39, s. 117; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293.

418.17. Subject to sections 418.22 and 418.24, where after 31 December 1971 a corporation acquires, in any manner whatsoever, a particular foreign resource property, referred to in this section as particular property, it may deduct in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is an amount equal to the lesser of the amount referred to in the second paragraph and the amount referred to in the third paragraph determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to the amount by which

 (a) the amount of foreign exploration and development expenses incurred by the original owner before the disposition of the particular property by the original owner, to the extent that those expenses were incurred when the original owner was resident in Canada, were not otherwise deducted in computing the income of the corporation for the year, were not deducted in computing the income of the corporation for any preceding taxation year or in computing the income of any predecessor owner of the particular property for any taxation year and were not deductible in computing the income of the original owner for any taxation year, exceeds

 (b) the aggregate of all amounts by which the amount determined under this paragraph is required, because of section 485.8, to be reduced at or before the end of the year.

The last amount to which the first paragraph refers is equal to the amount by which

 (a) the aggregate of

(i)  the part of the corporation's income for the year, determined before any deduction under any of sections 359 to 419.6, that may reasonably be regarded as attributable to

(1)  the amount included in computing its income for the year under paragraph a of section 330, that may reasonably be regarded as attributable to the disposition by the corporation of any interest in or right to the particular property, or

(2)  production from the particular property, and

(ii)  the lesser of

(1)  the aggregate of all amounts each of which is the amount designated by the corporation for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the corporation or a predecessor owner of the particular property, not exceeding the amount included in computing the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) and sections 359 to 419.6, that may reasonably be regarded as being attributable to the production, after 31 December 1988, from the Canadian resource property, and

(2)  the amount by which 10% of the amount described in the second paragraph for the year in respect of the original owner exceeds the aggregate of all amounts each of which would, but for this subparagraph ii, subparagraph ii of paragraph b and subparagraph ii of subparagraph f of the first paragraph of section 418.26, be determined under this paragraph for the year in respect of the particular property or other foreign resource property owned by the original owner immediately before being acquired with the particular property by the corporation or a predecessor owner of the particular property, exceeds

 (b) the aggregate of

(i)  any other amount deducted for the year under this section and section 418.19 as a result of the application of subparagraph c of the first paragraph of section 418.20 that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph i of subparagraph a in respect of the particular property,

(ii)  any other amount deducted for the year under this section that can reasonably be regarded as attributable to the part of its income referred to in subparagraph 1 of subparagraph ii of subparagraph a for the year in respect of which an amount is designated by the corporation under the said subparagraph 1, and

(iii)  any other amount added, because of section 485.13, in computing the amount determined under subparagraph i of subparagraph a.

Income in respect of which an amount is designated under subparagraph 1 of subparagraph ii of subparagraph a of the third paragraph is deemed, for the purposes of subparagraph iii of subparagraph a of the third paragraph of sections 418.16 and 418.18, subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.19, subparagraph i of subparagraph c of the first paragraph of section 418.20, subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.21, paragraph a of section 418.28 of this Act and section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause B of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)), not to be attributable to production from a Canadian resource property.

1989, c. 77, s. 49; 1993, c. 16, s. 166; 1995, c. 49, s. 110; 1996, c. 39, s. 118; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293; 2004, c. 8, s. 83; 2009, c. 5, s. 132.

418.17.1. The portion of an amount deducted under section 418.17 in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in relation to a country is considered as being attributable to a source in that country.

2004, c. 8, s. 84.

418.17.2. For the purposes of section 418.17.1, where a taxpayer has incurred specified foreign exploration and development expenses in relation to two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that is

 (a) reasonable having regard to all the circumstances, including the level and timing of

(i)  the taxpayer’s specified foreign exploration and development expenses in relation to that country, and

(ii)  the profits or gains to which those expenses relate; and

 (b) not inconsistent with the allocation made under section 418.17.1 for the preceding taxation year.

2004, c. 8, s. 84.

418.17.3. Subject to sections 418.22 and 418.24, where a corporation acquires, in any manner whatever, a particular foreign resource property, in this section referred to as the particular property, in relation to a particular country, there may be deducted by the corporation in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is an amount equal to the lesser of the amount described in the second paragraph and the amount described in the third paragraph determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to 30% of the amount by which the cumulative foreign resource expense, in relation to the particular country, of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not been otherwise deducted in computing the corporation's income for the year, has not been deducted in computing the corporation's income for any preceding taxation year and has not been deducted in computing the income of the original owner or any predecessor owner of the particular property for any taxation year, exceeds the aggregate of

 (a) the aggregate of all amounts each of which is a particular amount, reduced by the portion of that amount provided for in the fifth paragraph, that became receivable by a predecessor owner of the particular property, or by the corporation in the year or a preceding taxation year, and that

(i)  was included by the predecessor owner or the corporation in computing an amount determined, without reference to section 418.1.5, under paragraph b of section 418.1.4 at the end of the year, and

(ii)  can reasonably be attributed to the disposition of a property, in the fifth paragraph referred to as the particular resource property, that is the particular property or another foreign resource property, in relation to the particular country, that was acquired from the original owner with the particular property by the corporation or a predecessor owner of the particular property; and

 (b) the aggregate of all amounts each of which is an amount by which the amount determined under this paragraph is required by reason of section 485.8 to be reduced at or before the end of the year.

The last amount to which the first paragraph refers is equal to the amount by which the amount determined under the fourth paragraph is exceeded by the aggregate of

 (a) the lesser of

(i)  the part of the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or any of sections 359 to 419.6, that can reasonably be attributed to the production from the particular property, and

(ii)  where the corporation acquires the particular property from the original owner at any time in the year, otherwise than as a result of an amalgamation or merger or solely by reason of the application of subparagraph a of the first paragraph of section 418.26 and did not deal with the original owner at arm's length at that time, nil; and

 (b) unless the amount determined under subparagraph a is nil by reason of subparagraph ii of that subparagraph, the lesser of

(i)  the aggregate of all amounts each of which is the amount designated by the corporation for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the corporation or a predecessor owner of the particular property, not exceeding the amount included in computing the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act or any of sections 359 to 419.6, that can reasonably be attributed to the production from the Canadian resource property, and

(ii)  the amount by which 10% of the amount described in the second paragraph for the year, in respect of the original owner, exceeds the aggregate of all amounts each of which would, but for this subparagraph, subparagraph ii of subparagraph b of the third paragraph of section 418.17 and subparagraph ii of subparagraph f of the first paragraph of section 418.26, be determined under this paragraph for the year in respect of the particular property or other foreign resource property, in relation to the particular country, owned by the original owner immediately before being acquired with the particular property by the corporation or a predecessor owner of the particular property.

The amount that, for the purposes of the third paragraph, is required to be determined under this paragraph is the aggregate of

 (a) any other amount deducted for the year under this section, section 418.17 or section 418.19 as a consequence of the application of subparagraph c of the first paragraph of section 418.20, that can reasonably be attributed to the part of the corporation's income for the year, described in subparagraph a of the third paragraph, in relation to the particular property;

 (b) any other amount deducted for the year under this section or section 418.17, that can reasonably be attributed to a part of the corporation's income for the year, described in subparagraph i of subparagraph b of the third paragraph, in respect of which an amount is designated by the corporation under that subparagraph; and

 (c) any amount added, by reason of section 485.13, in computing the amount determined under subparagraph a of the third paragraph.

The particular amount referred to in subparagraph a of the second paragraph shall be reduced by the portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under that paragraph in relation to another original owner of a particular resource property who is not a predecessor owner of a particular resource property or who became such a predecessor owner before the original owner became a predecessor owner of a particular resource property.

The income in respect of which an amount is designated under subparagraph i of subparagraph b of the third paragraph is deemed, for the purposes of the following provisions, not to be attributable to the production from a Canadian resource property:

 (a) subparagraph iii of subparagraph a of the third paragraph of sections 418.16 and 418.18;

 (b) subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.19;

 (c) subparagraph i of subparagraph c of the first paragraph of section 418.20;

 (d) subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.21;

 (e) paragraph a of section 418.28; and

 (f) section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause B of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)).

2004, c. 8, s. 84; 2009, c. 5, s. 133.

418.18. Subject to sections 418.22 and 418.23, where a corporation acquired after 6 May 1974 in the case of an oil business, after 31 March 1975 in the case of a mining business or after 5 December 1996 in all other cases, in any manner whatsoever, a particular Canadian resource property (referred to in this section as particular property), it may deduct in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is the lesser of the amount referred to in the second paragraph and the amount referred to in the third paragraph determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to the amount by which

 (a) the aggregate of the cumulative Canadian exploration expense of the original owner determined immediately after the disposition of the particular property by the original owner, and all amounts required to be added under paragraph c of section 418.25 to the cumulative Canadian exploration expense of the original owner in respect of a predecessor owner of the particular property, or in respect of the corporation, as the case may be, at any time after the disposition of the particular property by the original owner and before the end of the year, to the extent that an amount in respect of that aggregate was not

(i)  otherwise deducted in computing the corporation's income for the year or deducted in computing the corporation's income for a preceding taxation year or in computing the income of a predecessor owner of the particular property for any taxation year, and

(ii)  deducted or required to be deducted under section 400 or 401 in computing the income of the original owner for any taxation year, or designated by the original owner for any taxation year for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) pursuant to subsection 14.1 of section 66 of that Act; exceeds

 (b) the aggregate of all amounts by which the amount determined under this paragraph is required, because of section 485.8, to be reduced at or before the end of the year.

The last amount to which the first paragraph refers is equal to the amount by which

 (a) the part of the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or any of sections 359 to 419.6, that may reasonably be regarded as attributable to

(i)  the amount included in computing its income for the year under paragraph e of section 330 that may reasonably be regarded as being attributable to the disposition by the corporation in the year or a preceding taxation year of any interest in or right to the particular property to the extent that the proceeds of the disposition have not been included in computing an amount for any preceding taxation year under this subparagraph, subparagraph i of subparagraph a of the third paragraph of section 418.16, subparagraph iii of subparagraph c of the first paragraph of section 418.20, section 418.28 or section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause A of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)),

(ii)  its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or

(iii)  production from the particular property; exceeds

 (b) the aggregate of

(i)  any other amount deducted under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, this section and sections 418.16, 418.19 and 418.21 for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph a in respect of the particular property, and

(ii)  any other amount added, because of section 485.13, in computing the amount determined under subparagraph a.

1989, c. 77, s. 49; 1993, c. 16, s. 167; 1995, c. 49, s. 111; 1996, c. 39, s. 119; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293; 2013, c. 10, s. 32.

418.19. Subject to sections 418.22 and 418.23, where a corporation acquired after 6 May 1974 in the case of an oil business, or after 31 March 1975 in the case of a mining business, in any manner whatsoever, a particular Canadian resource property, referred to in this section and in section 418.20 as particular property, it may deduct in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is equal to the lesser of the amount referred to in the second paragraph and the amount referred to in the third paragraph and, as the case may be, the amount referred to in section 418.20, determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to the amount by which

 (a) the amount by which

(i)  the cumulative Canadian development expenses of the original owner, determined immediately after the disposition of the particular property by the original owner, to the extent that the expenses were not otherwise deducted in computing the corporation's income for the year, were not deducted in computing the corporation's income for any preceding taxation year or in computing the income of the original owner or any predecessor owner of the particular property for any taxation year, and were not designated by the original owner for any taxation year for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) pursuant to subsection 14.2 of section 66 of the said Act, exceeds

(ii)  all amounts required to be deducted under paragraph b of section 418.25, at any time after the disposition of the particular property by the original owner and before the end of the year, from the cumulative Canadian development expenses of the original owner in respect of a predecessor owner of the particular property or in respect of the corporation, as the case may be, exceeds

 (b) the aggregate of

(i)  all amounts each of which is a particular amount, reduced by the portion thereof described in the fourth paragraph, that became receivable by a predecessor owner of the particular property or the corporation in the year or a preceding taxation year and that

(1)  was included by the predecessor owner or the corporation in computing an amount determined under subparagraph i of paragraph b of section 412 at the end of the year, and

(2)  can reasonably be regarded as attributable to the disposition of a property, in the fourth paragraph referred to as a relevant mining property, that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the corporation or a predecessor owner of the particular property,

(ii)  all amounts each of which is a particular amount, reduced by the portion thereof described in the fifth paragraph, that became receivable by a predecessor owner of the particular property or the corporation after 31 December 1992 and in the year or a preceding taxation year and that

(1)  is designated in respect of the original owner by the predecessor owner or the corporation, as the case may be, on the prescribed form filed with the Minister within six months after the end of the taxation year in which the particular amount became receivable,

(2)  was included by the predecessor owner or the corporation in computing an amount determined under subparagraph i of paragraph b of section 418.6 at the end of the year, and

(3)  can reasonably be regarded as attributable to the disposition of a property, in the fifth paragraph referred to as a relevant oil and gas property, that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the corporation or a predecessor owner of the particular property, and

(iii)  any amount by which the amount determined under this paragraph is required, because of section 485.8, to be reduced at or before the end of the year.

The second amount to which the first paragraph refers is equal to the amount by which

 (a) the lesser of

(i)  the part of the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or any of sections 359 to 419.6, that may reasonably be regarded as attributable to

(1)  its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or

(2)  production from the particular property, and

(ii)  where the corporation acquired the particular property from the original owner at any time in the year, otherwise than by way of an amalgamation or merger or by reason only of the application of subparagraph a of the first paragraph of section 418.26, and did not deal at arm's length with the original owner at that time, nil, exceeds

 (b) the aggregate of

(i)  any other amount deducted under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)), this section and sections 418.16, 418.18 and 418.21 for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph a in respect of the particular property, and

(ii)  any other amount added, because of section 485.13, in computing the amount determined under subparagraph a.

The particular amount mentioned in subparagraph i of subparagraph b of the second paragraph shall be reduced by the portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under that paragraph in respect of another original owner of a relevant mining property who is not a predecessor owner of a relevant mining property or who became a predecessor owner of a relevant mining property before the original owner became a predecessor owner of a relevant mining property.

The particular amount mentioned in subparagraph ii of subparagraph b of the second paragraph shall be reduced by the portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under the second paragraph of section 418.21 in respect of the original owner or under the second paragraph, or the second paragraph of section 418.21, in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property.

1989, c. 77, s. 49; 1993, c. 16, s. 168; 1995, c. 49, s. 112; 1996, c. 39, s. 120; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293; 2009, c. 5, s. 134.

418.20. The last amount to which the first paragraph of section 418.19 refers is equal,

 (a) where the corporation referred to in section 418.19 is a development corporation carrying on an oil business, to the aggregate of

(i)  30% of the amount by which the expenses referred to in subparagraph a of the second paragraph of section 418.19 that were not incurred in Québec within the meaning of section 416 exceed the aggregate referred to in subparagraph b of the said second paragraph, and

(ii)  the amount by which the expenses referred to in subparagraph a of the second paragraph of section 418.19 that were incurred in Québec within the meaning of section 416 exceed the amount by which the aggregate referred to in subparagraph b of the said second paragraph exceeds the expenses referred to in that subparagraph a which were not incurred in Québec within the meaning of section 416;

 (b) where the corporation referred to in section 418.19 is not a development corporation and carries on an oil business, to 30% of the excess amount referred to in the second paragraph of that section;

 (c) where the corporation referred to in section 418.19 is not a development corporation and carries on a mining business, to the higher of either 30% of the excess amount referred to in the second paragraph of the said section, or the amount by which the total, before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or sections 359 to 419.6, of the following amounts exceeds the amount described in the second paragraph:

(i)  its income for the year that can reasonably be regarded as attributable to the production of ore, other than iron ore or tar sands, from a resource property that is property described in the third paragraph, processed to any stage that is not beyond the prime metal stage or its equivalent, to the production of iron ore from such property, processed to any stage that is not beyond the pellet stage or its equivalent, and to any rental or royalty from such property, computed by reference to the amount or value of ore production,

(ii)  the aggregate of all amounts included in computing its income for the year under paragraph b, d or e of section 330, other than an amount referred to in subparagraph iii, in respect of property described in the third paragraph, but to the extent that paragraph b of section 330 refers to section 357, only the amounts deducted in computing its income, under the last mentioned section, for the preceding taxation year in respect of the disposition of a Canadian resource property may be taken into consideration, and

(iii)  the aggregate of all amounts included in computing its income for the year under paragraph e of section 330, that can reasonably be regarded as attributable to the disposition by the corporation, in the year or in a preceding taxation year, of any interest in or right to a property described in the third paragraph, to the extent that the proceeds of the disposition were not included in computing any amount for a preceding taxation year under this subparagraph, subparagraph i of subparagraph a of the third paragraph of section 418.16 or 418.18, section 418.28 and section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause A of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement).

The amount to which subparagraph c of the first paragraph refers is the total of the following amounts:

 (a) the aggregate of all amounts deducted in computing its income for the year under section 357 in respect of a Canadian resource property that is property described in the third paragraph or under section 358 in respect of property described in that paragraph;

 (b) the aggregate of the other amounts deducted for the year under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, any of sections 418.16 to 418.19 and section 418.21 that can reasonably be regarded as attributable to the amounts referred to in subparagraphs i to iii of subparagraph c of the first paragraph for the year;

 (c) any other amount added, because of section 485.13, in computing the total amount determined under subparagraph c of the first paragraph.

Any property to which subparagraphs i to iii of subparagraph c of the first paragraph and subparagraph a of the second paragraph refer is property owned immediately before the acquisition referred to in section 418.19 by the person from which the property was acquired pursuant to that section.

1989, c. 77, s. 49; 1996, c. 39, s. 121; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293.

418.21. Subject to sections 418.22 and 418.23, where after 11 December 1979 a corporation acquired, in any manner whatsoever, a particular Canadian resource property, referred to in this section as particular property, it may deduct in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is equal to the lesser of the amount referred to in the second paragraph and the amount referred to in the third paragraph, determined in respect of an original owner of the particular property.

The first amount to which the first paragraph refers is equal to 10% of the excess amount, over the aggregate of all amounts each of which is an amount by which the amount determined under this paragraph is required, because of section 485.8, to be reduced at or before the end of the year, of the amount by which

 (a) the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not been otherwise deducted in computing the corporation's income for the year and has not been deducted in computing the corporation's income for any preceding taxation year or in computing the income of the original owner or any predecessor owner of the particular property for any taxation year, exceeds

 (b) the aggregate of all amounts each of which is a particular amount, reduced by the portion thereof described in the fourth paragraph, that became receivable by a predecessor owner of the particular property or the corporation in the year or a preceding taxation year and that

(i)  was included by the predecessor owner or the corporation in computing an amount determined under subparagraph i of paragraph b of section 418.6 at the end of the year, and

(ii)  can reasonably be regarded as attributable to the disposition of a property, in the fourth paragraph referred to as a relevant oil and gas property, that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the corporation or a predecessor owner of the particular property.

The last amount to which the first paragraph refers is equal to the amount by which

 (a) the lesser of

(i)  the part of the corporation's income for the year, determined before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) or any of sections 359 to 419.6, that may reasonably be regarded as attributable to

(1)  its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or

(2)  production from the particular property, and

(ii)  where the corporation acquired the particular property from the original owner at any time in the year, otherwise than by way of an amalgamation or merger or by reason only of the application of subparagraph a of the first paragraph of section 418.26, and did not deal at arm's length with the original owner at that time, nil, exceeds

 (b) the aggregate of

(i)  any other amount deducted under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)), this section and section 418.16, 418.18 or 418.19 for the year that may reasonably be regarded as attributable to the part of its income for the year described in subparagraph a in respect of the particular property, and

(ii)  any amount added, because of section 485.13, in computing the amount determined under subparagraph a.

The particular amount mentioned in subparagraph b of the second paragraph shall be reduced by the portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under the second paragraph, or the second paragraph of section 418.19, in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property.

1989, c. 77, s. 49; 1993, c. 16, s. 169; 1995, c. 49, s. 113; 1996, c. 39, s. 122; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 293; 2009, c. 5, s. 135.

418.22. Section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), and sections 418.16 to 418.19 and 418.21 do not apply

 (a) in respect of a Canadian resource property or a foreign resource property acquired by way of an amalgamation to which subsection 4 of section 544 applies or a winding-up to which section 565.1 applies; or

 (b) to permit, in respect of the acquisition by a corporation before 18 February 1987 of a Canadian resource property or a foreign resource property, a deduction by the corporation of an amount that the corporation would not have been entitled to deduct under section 88.4 of the Act respecting the application of the Taxation Act, Divisions I, I.1 or III to IV.1, sections 362 to 394, 419 to 419.4 or section 419.6 if those sections and divisions, as they read in their application to taxation years ending before 18 February 1987, applied to taxation years ending after 17 February 1987.

1989, c. 77, s. 49; 1997, c. 3, s. 71; 1997, c. 14, s. 72; 1998, c. 16, s. 159.

418.23. Section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), and sections 418.16, 418.18, 418.19 and 418.21 apply only to a corporation that has acquired a particular Canadian resource property, in this section referred to as particular property,

 (a) where it acquired the particular property in a taxation year commencing before 1 January 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on in Canada a business described in paragraphs a to g of section 363;

 (b) where it acquired the particular property in a taxation year commencing after 31 December 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the Canadian resource properties of the person from whom it acquired the particular property;

 (c) where it acquired the particular property after 5 June 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the corporation's filing-due date for its taxation year in which it acquired the particular property;

 (d) where it acquired the particular property after 16 November 1978 and in a taxation year ending before 18 February 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed with the Minister a joint election under and in accordance with sections 376 to 379, 402 to 405, 415 to 415.3 and 418.8 to 418.11 and section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules as all those sections read in their application to that year; and

 (e) where it acquired the particular property in a taxation year ending after 17 February 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earliest of their filing-due dates for the taxation year in which the corporation acquired the particular property.

1989, c. 77, s. 49; 1997, c. 3, s. 71; 1997, c. 31, s. 143; 1998, c. 16, s. 160.

418.24. Sections 418.17 and 418.17.3 apply only to a corporation that has acquired a particular foreign resource property referred to in this section as particular property,

 (a) where it acquired the particular property in a taxation year commencing before 1 January 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on outside Canada a business described in paragraphs a to g of section 363;

 (b) where it acquired the particular property in a taxation year commencing after 31 December 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the foreign resource properties of the person from whom it acquired the particular property;

 (c) where it acquired the particular property after 5 June 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the corporation's filing-due date for its taxation year in which it acquired the particular property;

 (d) where it acquired the particular property after 16 November 1978 and in a taxation year ending before 18 February 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed with the Minister a joint election under and in accordance with section 380, as that section read in its application to that year; and

 (e) where it acquired the particular property in a taxation year ending after 17 February 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earliest of their filing-due dates for the taxation year in which the corporation acquired the particular property.

1989, c. 77, s. 49; 1997, c. 3, s. 71; 1997, c. 31, s. 143; 2004, c. 8, s. 85.

418.25. Where a corporation acquires a Canadian resource property, where section 418.19 applies in respect of the acquisition, and where the cumulative Canadian development expense of an original owner of the property determined under subparagraph i of subparagraph a of the second paragraph of section 418.19 in respect of the corporation includes a Canadian development expense incurred by the original owner in respect of an oil or gas well that would, but for this section, be deemed by section 399.3 to be a Canadian exploration expense incurred in respect of the well by the original owner at any particular time after the acquisition by the corporation and before it disposed of the property, the following rules apply:

 (a) section 399.3 does not apply in respect of the Canadian development expense incurred in respect of the well by the original owner;

 (b) an amount equal to the lesser of

(i)  the amount that would be deemed by section 399.3 to be a Canadian exploration expense incurred in respect of the well by the original owner at the particular time if that section applied in respect of the expense, and

(ii)  the cumulative Canadian development expense of the original owner as determined under subparagraph i of subparagraph a of the second paragraph of section 418.19 in respect of the corporation immediately before the particular time

shall be deducted at the particular time from the cumulative Canadian development expense of the original owner in respect of the corporation for the purposes of subparagraph a of the second paragraph of section 418.19;

 (c) the amount required to be deducted by paragraph b shall be added at the particular time to the cumulative Canadian exploration expense of the original owner in respect of the corporation for the purposes of the second paragraph of section 418.18.

1989, c. 77, s. 49; 1997, c. 3, s. 71.

418.26. Where, at any time after 12 November 1981, control of a corporation has been acquired by a person or group of persons, or a corporation ceases on or before 26 April 1995 to be exempt from tax under this Part on its taxable income, for the purposes of the provisions of the Act respecting the application of the Taxation Act (chapter I-4) and of this Part, other than sections 359.2, 359.2.1, 359.2.2, 359.4 and 359.13, relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses, in this section referred to as resource expenses, incurred by the corporation before that time, the following rules apply:

 (a) the corporation is deemed after that time to be a corporation that had, at that time, acquired all the properties owned by the corporation immediately before that time from an original owner thereof;

 (a.1) where the corporation did not own a foreign resource property immediately before that time, the corporation is deemed to have owned a foreign resource property immediately before that time;

 (b) a joint election is deemed to have been filed in accordance with sections 418.23 and 418.24 in respect of the acquisition;

 (c) the resource expenses incurred by the corporation before that time are deemed to have been incurred by an original owner of the properties and not by the corporation;

 (c.1) the original owner is deemed to have been resident in Canada before that time while the corporation was resident in Canada;

 (d) (paragraph repealed);

 (e) where the corporation (in this subparagraph and the second paragraph referred to as the “transferee”) was, immediately before and at that time, a particular person, within the meaning of subsection 5 of section 544, or a subsidiary wholly-owned corporation, within the meaning of that subsection, of another corporation (in this subparagraph and the second paragraph and in section 418.28 referred to as the “transferor”), the amount corresponding, subject to the second paragraph, to the total of the amount that the transferor designates after 19 December 2006 in accordance with paragraph g of subsection 10 of section 66.7 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in favour of the transferee for a taxation year of the transferor ending after that time and throughout which the transferee was such a particular person or such a subsidiary wholly-owned corporation of the transferor, and—if the total of the amounts designated by the transferor in accordance with that paragraph g in favour of any taxpayer for that year corresponds to the maximum total of the amounts that the transferor may then designate in accordance with that paragraph g in favour of any taxpayer for that year—of the portion on which the transferor and transferee agree and that the transferor specifies in its fiscal return under this Part for that year in respect of the transferee and not in respect of another taxpayer, of the amount by which the particular amount described in section 418.28 exceeds the maximum total of the amounts that the transferor may then designate in accordance with that paragraph g in favour of any taxpayer for that year,

(i)  applies for the purpose of making a deduction under section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)), or this division in respect of resource expenses incurred by the transferee before that time while the transferee was such a particular person or such a subsidiary wholly-owned corporation of the transferor, and

(ii)  is deemed, for the purpose of computing an amount under the third paragraph of any of sections 418.16, 418.18 and 418.19, subparagraph c of the first paragraph of section 418.20, as that subparagraph would read if “to the higher of either 30% of the excess amount referred to in the second paragraph of the said section, or the amount by which” was replaced by “to the amount by which”, the third paragraph of section 418.21 and section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to paragraph d of subsection 25 of section 29 of the Income Tax Application Rules, to be income of the transferee from the sources described in paragraph a or b of section 418.28 for its taxation year in which that taxation year of the transferor ends, and not to be income of the transferor from those sources for that year;

 (f) where the corporation (in this subparagraph and the second paragraph referred to as the “transferee”) was, immediately before and at that time, a particular person, within the meaning of subsection 5 of section 544, or a subsidiary wholly-owned corporation, within the meaning of that subsection, of another corporation (in this subparagraph and the second paragraph and in section 418.29 referred to as the “transferor”), the amount corresponding, subject to the second paragraph, to the total of the amount that the transferor designates after 19 December 2006 in accordance with paragraph h of subsection 10 of section 66.7 of the Income Tax Act in favour of the transferee for a taxation year of the transferor ending after that time and throughout which the transferee was such a particular person or such a subsidiary wholly-owned corporation of the transferor, and—if the total of the amounts designated by the transferor in accordance with that paragraph h in favour of any taxpayer for that year corresponds to the maximum total of the amounts that the transferor may then designate in accordance with that paragraph h in favour of any taxpayer for that year—of the portion on which the transferor and transferee agree and that the transferor specifies in its fiscal return under this Part for that year in respect of the transferee and not in respect of another taxpayer, of the amount by which the particular amount described in section 418.29 exceeds the maximum total of the amounts that the transferor may then designate in accordance with that paragraph h in favour of any taxpayer for that year, is deemed,

(i)  for the purpose of computing an amount under the third paragraph of section 418.17 or 418.17.3 or subparagraph c of the first paragraph of section 418.20, as that subparagraph would read if “to the higher of either 30% of the excess amount referred to in the second paragraph of the said section, or the amount by which” was replaced by “to the amount by which”, to be income of the transferee from the sources described in paragraph a or b of section 418.29 for its taxation year in which that taxation year of the transferor ends, and

(ii)  for the purpose of computing an amount under the third paragraph of section 418.17 or 418.17.3 or subparagraph c of the first paragraph of section 418.20, as that subparagraph would read if “to the higher of either 30% of the excess amount referred to in the second paragraph of the said section, or the amount by which” was replaced by “to the amount by which”, not to be the income of the transferor from those sources for that year;

 (g) where, immediately before and at that time, the corporation (in this subparagraph referred to as the “transferee”) and another corporation (in this subparagraph referred to as the “transferor”) were both subsidiary wholly-owned corporations, within the meaning of subsection 5 of section 544, of the same particular person, within the meaning of that subsection, and if the transferee and the transferor agree after 19 December 2006 in accordance with paragraph i of subsection 10 of section 66.7 of the Income Tax Act to have that paragraph i apply to them for a taxation year of the transferor ending after that time, subparagraph e or f or both, as the agreement provides, apply for that year to the transferee and to the transferor as though one were, in relation to the other, the particular person, within the meaning of subsection 5 of section 544; and

 (h) where that time is after 15 January 1987 and at that time the corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property at that time, for the purposes of subparagraph a, the corporation is deemed to have owned immediately before that time that portion of the property owned by the partnership at that time that is equal to its percentage share of the aggregate of amounts that would be paid to all members of the partnership if it were wound up at that time, and, for the purposes of subparagraph iii of subparagraph a of the third paragraph of section 418.16, subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.17, subparagraph a of the third paragraph of section 418.17.3, subparagraph iii of subparagraph a of the third paragraph of section 418.18, subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.19, subparagraph i of subparagraph c of the first paragraph of section 418.20 and subparagraph 2 of subparagraph i of subparagraph a of the third paragraph of section 418.21 and of section 88.4 of the Act respecting the application of the Taxation Act, to the extent that that section refers to clause B of subparagraph i of paragraph d of subsection 25 of section 29 of the Income Tax Application Rules, for a taxation year ending after that time, the lesser of the following amounts is deemed to be the income of the corporation for the year that can reasonably be attributed to production from the property:

(i)  its share of the part of the income of the partnership for the fiscal period of the partnership ending in the year that may reasonably be regarded as being attributable to the production from the property, and

(ii)  an amount that would be determined under subparagraph i for the year if its share of the income of the partnership for the fiscal period of the partnership ending in the year were determined on the basis of the percentage share referred to in this subparagraph h.

However, when the aggregate of the amounts determined for a taxation year of the transferor under subparagraph e or f of the first paragraph in relation to the transferee would, but for this paragraph, exceed the particular amount described in section 418.28 or 418.29, the amount otherwise determined for the year under that subparagraph in respect of the transferee or another taxpayer must be reduced, if applicable, to the amount specified by the transferor in its fiscal return under this Part for the year or, if the transferor fails to specify such an amount, to the amount specified by the Minister, so that the aggregate is equal to the particular amount.

Chapter V.2 of Title II of Book I applies in relation to a designation or agreement made under any of paragraphs g, h and i of subsection 10 of section 66.7 of the Income Tax Act or in relation to a designation or agreement made under this section before 20 December 2006.

1989, c. 77, s. 49; 1993, c. 16, s. 170; 1995, c. 49, s. 114; 1997, c. 3, s. 71; 1997, c. 14, s. 73; 1998, c. 16, s. 161; 2000, c. 5, s. 96; 2004, c. 8, s. 86; 2009, c. 5, s. 136.

418.27. (Repealed).

1989, c. 77, s. 49; 1993, c. 16, s. 171.

418.28. The particular amount referred to in subparagraph e of the first paragraph and the second paragraph of section 418.26 is the amount equal to the portion of the income of the transferor for the year referred to in that subparagraph, before any deduction under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4) and sections 359 to 419.6, that may reasonably be regarded as attributable

 (a) to the production from a Canadian resource property owned by the transferor immediately before the time referred to in the first paragraph of section 418.26; and

 (b) to the disposition, in the year referred to in subparagraph e of the first paragraph of section 418.26, of a Canadian resource property owned by the transferor immediately before the time referred to in that paragraph.

1989, c. 77, s. 49; 1998, c. 16, s. 251; 2009, c. 5, s. 137.

418.29. The particular amount referred to in subparagraph f of the first paragraph and the second paragraph of section 418.26 is the amount equal to the portion of the income of the transferor for the year referred to in that subparagraph, before any deduction under sections 359 to 419.6, that may reasonably be regarded as attributable

 (a) to the production from a foreign resource property owned by the transferor immediately before the time referred to in the first paragraph of section 418.26; and

 (b) to the disposition of a foreign resource property owned by the transferor immediately before the time referred to in the first paragraph of section 418.26.

1989, c. 77, s. 49; 2009, c. 5, s. 137.

418.29.1. If there has been an amalgamation within the meaning of section 544, other than an amalgamation to which subsection 4 of that section applies, of two or more corporations (each of which is referred to in this section as a “predecessor corporation”) to form a new corporation and immediately before the time of the amalgamation a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property at that time, for the purposes of subparagraph c of the first paragraph of section 418.15 and sections 418.16 to 418.21, the following rules apply:

 (a) the predecessor corporation is deemed to have owned, immediately before the time of the amalgamation, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the time of the amalgamation that is equal to the predecessor corporation's percentage share of the aggregate of the amounts that would be paid to all members of the partnership if the partnership were wound up and to have disposed of those portions to the new corporation at the time of the amalgamation;

 (b) the new corporation is deemed to have, as a consequence of the amalgamation, acquired the portions of property referred to in paragraph a at the time of the amalgamation; and

 (c) the income of the new corporation for a taxation year that ends after the time of the amalgamation that can reasonably be attributable to production from the properties referred to in paragraph a is deemed to be equal to the lesser of

(i)  the new corporation's share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, and

(ii)  the amount that would be determined in accordance with subparagraph i for the year if the new corporation's share of the income of the partnership for each of the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph a.

2015, c. 24, s. 73.

418.30. If, at any time, control of a taxpayer that is a corporation has been acquired by a person or group of persons, or a taxpayer has disposed of all or substantially all of the taxpayer's Canadian resource properties or foreign resource properties, and, before that time, the taxpayer or a partnership of which the taxpayer was a member acquired a property that is a Canadian resource property, a foreign resource property or an interest in a partnership and it may reasonably be considered that one of the main purposes of the acquisition was to avoid any limitation provided for in any of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (R.S.C. 1985, c. 2 (5th Suppl.)), on the deduction in respect of any expenses incurred by the taxpayer or a corporation referred to as a “transferee” in subparagraph e or f of the first paragraph of section 418.26, the taxpayer or the partnership is, for the purpose of applying sections 418.16 to 418.21 and section 88.4 of that Act, to the extent that that section refers to subsection 25 of section 29 of those rules, to or in respect of the taxpayer, deemed not to have acquired the property.

1989, c. 77, s. 49; 1997, c. 3, s. 71; 1998, c. 16, s. 162; 2009, c. 5, s. 137.

418.31. Where in a taxation year an original owner of Canadian resource properties disposes of all or substantially all of the original owner's Canadian resource properties to a particular corporation in circumstances in which section 418.16, 418.18, 418.19 or 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), applies, the following rules apply:

 (a) the Canadian exploration and development expenses incurred by the original owner before he so disposed of the properties are, for the purposes of this Title, deemed after the disposition not to have been incurred by him except for the purposes of making a deduction under section 362 or 367 for the year and of determining the amount that may be deducted under section 418.16 by the particular corporation or by any other corporation that subsequently acquires any of the properties;

 (b) in determining the cumulative Canadian exploration expense of the original owner at any time after the first time referred to in the second paragraph of section 418.18, there shall be deducted the amount thereof determined immediately after the disposition;

 (b.1) for the purposes of the second paragraph of section 418.18, the cumulative Canadian exploration expense of the original owner determined immediately after the disposition that was deducted under section 400 or 401 in computing the original owner's income for the year is deemed to be equal to the lesser of

(i)  the amount deducted in respect of the disposition under paragraph b, and

(ii)  the amount by which

(1)  the amount determined under paragraph a of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

 (b.2) any amount, other than the amount determined under paragraph b.1, that was deducted under section 400 or 401 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.18, not to be in respect of the cumulative Canadian exploration expense of the original owner determined immediately after the disposition;

 (c) in determining the cumulative Canadian development expense of the original owner at any time after the time referred to in subparagraph i of subparagraph a of the second paragraph of section 418.19, there shall be deducted the amount thereof determined immediately after the disposition;

 (c.1) for the purposes of the second paragraph of section 418.19, the cumulative Canadian development expense of the original owner determined immediately after the disposition that was deducted under section 413 or 414 in computing the original owner's income for the year is deemed to be equal to the lesser of

(i)  the amount deducted in respect of the disposition under paragraph c, and

(ii)  the amount by which

(1)  the amount determined under paragraph b of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

 (c.2) any amount, other than the amount determined under paragraph c.1, that was deducted under section 413 or 414 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.19, not to be in respect of the cumulative Canadian development expense of the original owner determined immediately after the disposition;

 (d) in determining the cumulative Canadian oil and gas property expense of the original owner at any time after the time referred to in subparagraph a of the second paragraph of section 418.21, there shall be deducted the amount thereof determined immediately after the disposition;

 (d.1) for the purposes of the second paragraph of section 418.21, the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition that was deducted under section 418.7 in computing the original owner's income for the year is deemed to be equal to the lesser of

(i)  the amount deducted in respect of the disposition under paragraph d, and

(ii)  the amount by which

(1)  the amount determined under paragraph c of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

 (d.2) any amount, other than the amount determined under paragraph d.1, that was deducted under section 418.7 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.21, not to be in respect of the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition;

 (e) the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the original owner before 1 January 1972 on or in respect of exploring or drilling for petroleum or natural gas in Canada and the prospecting, exploration and development expenses incurred by the original owner before 1 January 1972 in searching for minerals in Canada are, for the purposes of section 88.4 of the Act respecting the application of the Taxation Act, deemed after the disposition not to have been incurred by the original owner except for the purpose of making a deduction under section 88.4 of that Act for the year and of determining the amount that may be deducted under that section 88.4, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, by the particular corporation or any other corporation that subsequently acquires any of the properties.

1989, c. 77, s. 49; 1993, c. 16, s. 172; 1995, c. 49, s. 115; 1997, c. 3, s. 71; 1998, c. 16, s. 163.

418.31.1. Where in a taxation year an original owner of Canadian resource properties disposes of all or substantially all of his Canadian resource properties in circumstances in which section 418.18, 418.19 or 418.21 applies, the following rules apply:

 (a) the amount determined in respect of the original owner for the year for the purposes of paragraph b.1 of section 398 and subparagraph 1 of subparagraph ii of paragraph b.1 of section 418.31 is equal to the lesser of

(i)  the aggregate of all amounts each of which is the amount by which

(1)  the amount deducted under paragraph b of section 418.31 in respect of a disposition in the year by the original owner, exceeds

(2)  the amount designated by the original owner in prescribed form filed with the Minister within six months after the end of the year in respect of an amount determined under subparagraph l, and

(ii)  the aggregate of

(1)  the amount deducted by the original owner for the year under section 400 or 401, and

(2)  the amount that would be determined in respect of the original owner for the year under paragraph d of section 330 if the aggregate last referred to therein were not taken into account;

 (b) the amount determined in respect of the original owner for the year for the purposes of paragraph a.1 of section 411 and subparagraph 1 of subparagraph ii of paragraph c.1 of section 418.31 is equal to the lesser of

(i)  the aggregate of all amounts each of which is the amount by which

(1)  the amount deducted under paragraph c of section 418.31 in respect of a disposition in the year by the original owner, exceeds

(2)  the amount designated by the original owner in prescribed form filed with the Minister within six months after the end of the year in respect of an amount determined under subparagraph 1, and

(ii)  the aggregate of

(1)  the amount deducted by the original owner for the year under section 413 or 414, and

(2)  the amount that would be determined in respect of the original owner for the year under paragraph e of section 330 if the aggregate last referred to therein were not taken into account;

 (c) the amount determined in respect of the original owner for the year for the purposes of paragraph a.1 of section 418.5 and subparagraph 1 of subparagraph ii of paragraph d.1 of section 418.31 is equal to the lesser of

(i)  the aggregate of all amounts each of which is the amount by which

(1)  the amount deducted under paragraph d of section 418.31 in respect of a disposition in the year by the original owner, exceeds

(2)  the amount designated by the original owner in prescribed form filed with the Minister within six months after the end of the year in respect of an amount determined under subparagraph 1, and

(ii)  the aggregate of

(1)  the amount deducted by the original owner for the year under section 418.7, and

(2)  the amount that would be determined in respect of the original owner for the year under section 418.12 if the aggregate last referred to therein were not taken into account.

1993, c. 16, s. 173.

418.32. Where after 5 June 1987 an original owner of foreign resource properties disposes of all or substantially all of his foreign resource properties to a particular corporation in circumstances in which section 418.17 applies, the foreign exploration and development expenses incurred by the original owner before he so disposed of the properties are deemed after the disposition not to have been incurred by him except for the purposes of determining the amounts that may be deducted under section 418.17 by the particular corporation or any other corporation that subsequently acquires any of the properties.

1989, c. 77, s. 49; 1997, c. 3, s. 71.

418.32.1. Where in a taxation year an original owner of foreign resource properties in relation to a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which section 418.17.3 applies, the following rules apply:

 (a) in determining the cumulative foreign resource expense of the original owner in relation to that country at any time after the time referred to in the portion of the second paragraph of section 418.17.3 before subparagraph a, there shall be deducted the amount of that cumulative foreign resource expense determined immediately after the disposition; and

 (b) for the purposes of the second paragraph of section 418.17.3, the cumulative foreign resource expense of the original owner in relation to that country determined immediately after the disposition that was deducted under section 418.1.10 in computing the original owner’s income for the year is deemed to be equal to the lesser of

(i)  the amount deducted under paragraph a in respect of the disposition, and

(ii)  the amount by which the particular amount determined for the year under section 418.32.2 in respect of the original owner and that country exceeds the aggregate of all amounts each of which is an amount determined under this paragraph in respect of a previous disposition of foreign resource property, in relation to that country, made by the original owner in the year.

2004, c. 8, s. 87.

418.32.2. Where in a taxation year an original owner of foreign resource properties in relation to a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which section 418.17.3 applies, the particular amount for the year in respect of the original owner and that country for the purposes of paragraph d of section 418.1.3 and subparagraph ii of paragraph b of section 418.32.1 is the lesser of

 (a) the aggregate of all amounts each of which is the amount by which an amount deducted under paragraph a of section 418.32.1 in respect of a disposition in the year by the original owner of foreign resource property in relation to that country, exceeds the amount designated by the original owner in the prescribed form filed with the Minister within six months after the end of the year in respect of the amount deducted under paragraph a of section 418.32.1; and

 (b) the aggregate of

(i)  the amount deducted under section 418.1.10 for the year by the original owner in relation to that country, and

(ii)  the amount that would, but for subparagraph ii of paragraph e.1 of section 330, be determined for the year under that paragraph e.1 in respect of the original owner and that country.

2004, c. 8, s. 87.

418.33. Where in a taxation year a predecessor owner of Canadian resource properties disposes of Canadian resource properties to a corporation in circumstances in which any of sections 418.16, 418.18, 418.19 and 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Act Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement) applies,

 (a) for the purpose of applying any of those sections to the predecessor owner in respect of its acquisition of any Canadian resource property owned by it immediately before the disposition, it is deemed, after the disposition, never to have acquired any such properties except for the purpose of determining the following amounts:

(i)  an amount deductible under section 418.16 or 418.18 for the year,

(ii)  where the predecessor owner and the corporation dealt with each other at arm's length at the time of the disposition or the disposition was by way of an amalgamation or merger, an amount deductible under section 418.19 or 418.21 for the year; and

(iii)  the amount under paragraph b of section 412, subparagraph i or ii of paragraph g of that section or paragraph b of section 418.6; and

 (b) where the corporation or another corporation acquires any of the properties on or after the disposition in circumstances in which section 418.19 or 418.21 applies, amounts that become receivable by the predecessor owner after the disposition in respect of Canadian resource properties retained by it at the time of the disposition are deemed, for the purpose of applying section 418.19 or 418.21 to the corporation or the other corporation in respect of the acquisition, not to have become receivable by the predecessor owner.

1989, c. 77, s. 49; 1993, c. 16, s. 174; 1995, c. 49, s. 116; 1997, c. 3, s. 71; 1998, c. 16, s. 251.

418.34. Where after 5 June 1987 a predecessor owner of foreign resource properties disposes of all or substantially all of its foreign resource properties to a corporation in circumstances in which section 418.17 applies, for the purpose of applying that section to the predecessor owner in respect of its acquisition of any of those properties, or other foreign resource properties retained by it at the time of the disposition which were acquired by it in circumstances in which that section 418.17 applied, it is deemed, after the disposition, never to have acquired the properties.

1989, c. 77, s. 49; 1995, c.49, s. 116; 1997, c. 3, s. 71.

418.34.1. Where in a taxation year a predecessor owner of foreign resource properties disposes of foreign resource properties to a corporation in circumstances to which section 418.17.3 applies, the following rules apply:

 (a) for the purpose of applying section 418.17.3 to the predecessor owner in respect of its acquisition of any foreign resource properties owned by it immediately before the disposition, it is deemed, after the disposition, never to have acquired any such properties except for the purpose of determining,

(i)  where the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition occurred after an amalgamation or merger, an amount deductible under section 418.17.3 for the year, and

(ii)  an amount determined under paragraph b of section 418.1.4; and

 (b) where the corporation or another corporation acquires any of the properties on or after the disposition in circumstances to which section 418.17.3 applies, amounts that become receivable by the predecessor owner after the disposition in respect of foreign resource properties retained by it at the time of the disposition are, for the purpose of applying section 418.17.3 to the corporation or the other corporation in respect of the acquisition, deemed not to have become receivable by the predecessor owner.

2004, c. 8, s. 88.

418.35. Where at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of sections 418.16 to 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement) apply, every person who was an original owner or predecessor owner of the property by reason of having disposed of the property before that time is, for the purpose of applying those sections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property by reason of having disposed of the property before that time.

1989, c. 77, s. 49; 1998, c. 16, s. 251.

418.36. Where in a particular taxation year and before 6 June 1987 a person disposed of a Canadian resource property or a foreign resource property in circumstances in which any of sections 418.16 to 418.21 of this Act or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement) applies, no deduction in respect of an expense incurred before the property was disposed of may be made under this division, Divisions I, I.1 or III to IV.1 or sections 362 to 394, 419 to 419.4 or 419.6 by the person in computing his income for a taxation year subsequent to the particular taxation year.

1989, c. 77, s. 49; 1998, c. 16, s. 164.

DIVISION IV.3 
AT-RISK AMOUNT
1990, c. 59, s. 166.

418.37. Where a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the excess amount described in the second paragraph shall reduce, first, the taxpayer’s share of the Canadian oil and gas property expenses, then, the taxpayer’s share of Canadian development expenses, then, the taxpayer’s share of Canadian exploration expenses, then, the taxpayer’s share of foreign resource expenses in relation to a country, and then, the taxpayer’s share of foreign exploration and development expenses, incurred by the partnership in that fiscal period.

The excess amount referred to in the first paragraph is the amount by which

 (a) the aggregate of all amounts each of which is the taxpayer's share of each class of expenses described in the first paragraph incurred by the partnership in the fiscal period referred to therein, computed without reference to this section, exceeds

 (b) the amount by which the at-risk amount of the taxpayer in respect of his partnership interest at the end of the fiscal period exceeds the aggregate of the following amounts:

(i)  that portion of the amount determined in respect of the partnership that is required by subsection 8 of section 127 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) to be added in computing the investment tax credit of the taxpayer in respect of the fiscal period, within the meaning assigned to that expression by the said Act for the purposes of the said subsection;

(ii)  the taxpayer's share of any losses of the partnership for the fiscal period from a farming business.

For the purposes of the first paragraph, a taxpayer’s share of foreign resource expenses in relation to a country, shall be reduced in the order specified by the taxpayer in a written document filed with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the fiscal period of the partnership ends or, where no such order is specified, in the order determined by the Minister.

For the purposes of this chapter, subparagraph ii of paragraph l of section 257, sections 600.1, 600.2 and 613.1 and Title VII of Book IV, but not for the purposes of this section, the taxpayer's share of each class of expenses described in the first paragraph incurred by the partnership in the fiscal period referred to therein is deemed to be equal to the amount by which the taxpayer's share of that class of expenses exceeds that portion of the excess amount determined in the second paragraph that, under the first paragraph, reduced that class of expenses.

1990, c. 59, s. 166; 1997, c. 3, s. 71; 2004, c. 8, s. 89.

418.38. For the purposes of the second paragraph of section 418.37, the amount by which the taxpayer's share of a class of expenses incurred by a partnership is reduced under the first paragraph of the said section in respect of a fiscal period of the partnership shall be added to the taxpayer's share, otherwise determined, of that class of expenses incurred by the partnership in the following fiscal period of the partnership.

1990, c. 59, s. 166; 1997, c. 3, s. 71.

418.39. In this division,

 (a) the expression “at-risk amount” of a taxpayer in respect of the taxpayer's partnership interest has the meaning that would be assigned by section 613.2 if paragraph a of section 613.3 were read as follows:

“(a) the aggregate of all amounts each of which is an amount owing at the particular time to the partnership, or to a person or partnership not dealing at arm's length with the partnership, by the taxpayer or by a person or partnership not dealing at arm's length with the taxpayer, other than an amount that is

i. any amount deducted under subparagraph i.3 of paragraph l of section 257 in computing the adjusted cost base, or under Title VIII of Book VI in computing the cost, to the taxpayer of the taxpayer's partnership interest at that time, or

ii. any amount owing by the taxpayer to a person in respect of which the taxpayer is a subsidiary wholly-owned corporation or where the taxpayer is a trust, to a person that is the sole beneficiary of the taxpayer; and”;

 (a.1) the expression “limited partner” of a partnership has the meaning assigned by section 613.6;

 (b) a reference to a taxpayer who is a member of a particular partnership shall include a reference to another partnership that is a member of the particular partnership;

 (c) a taxpayer's share of Canadian development expenses or Canadian oil and gas property expenses incurred by a partnership in a fiscal period in respect of which the taxpayer has elected in respect of the share under paragraph d of section 408 or paragraph b of section 418.2, as the case may be, is deemed to be nil.

For the purposes of the definition of “limited partner” of a partnership in subparagraph a.1 of the first paragraph, the definition of “exempt interest” in sections 613.7 and 613.8 is to be read as if “25 February 1986”, “26 February 1986”, “1 January 1987”, “12 June 1986” and “final prospectus, preliminary prospectus, registration statement” wherever they appear in that definition were replaced by “17 June 1987”, “18 June 1987”, “1 January 1988”, “18 June 1987” and “final prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence”, respectively.

1990, c. 59, s. 166; 1994, c. 22, s. 155; 1997, c. 3, s. 71; 2015, c. 24, s. 74.

DIVISION V 
SPECIAL PROVISIONS
1977, c. 26, s. 48.

419. Any share of the capital stock of a corporation or any interest in any such shares or right thereto acquired by a taxpayer under circumstances described in paragraph e of section 395 or 408, or in paragraph c of section 418.2 is deemed,

 (a) if it was acquired before 13 November 1981, not to be a capital property of the taxpayer but, subject to section 851.22.25, to be inventory of the taxpayer acquired at a cost to him of nil; and

 (b) if it was acquired after 12 November 1981, to have been acquired by the taxpayer at a cost to him of nil.

1977, c. 26, s. 48; 1982, c. 5, s. 104; 1984, c. 15, s. 92; 1996, c. 39, s. 123; 1997, c. 3, s. 71.

419.0.1. Any flow-through share of a corporation acquired by a person who was a party to the agreement pursuant to which it was issued is deemed to have been acquired by the person at a cost to him of nil.

1988, c. 18, s. 45; 1997, c. 3, s. 71.

419.1. Sections 419.2 to 419.4 apply where a taxpayer has made a payment or a loan mentioned in subsection 3 of section 383, as it read in respect of that payment or loan, after 19 April 1983, to a joint exploration corporation in respect of which the corporation has at any time renounced, in favour of the taxpayer, under section 406, 417 or 418.13, as they read in respect of that renunciation, any Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses, in sections 419.2 to 419.4 referred to as resource expenses.

1985, c. 25, s. 85; 1997, c. 3, s. 71; 1998, c. 16, s. 165.

419.2. Where the taxpayer contemplated in section 419.1 receives as consideration for the payment or loan property that is capital property to him, the following rules apply:

 (a) he shall deduct in computing the adjusted cost base to him of the property at any time the amount of any resource expenses renounced by the corporation in his favour in respect of the payment or loan at or before that time;

 (b) he shall deduct in computing the adjusted cost base to him at any time of any property for which the property, or any property substituted therefor, was exchanged the amount of any resource expenses renounced by the corporation in his favour in respect of the payment or loan at or before that time except to the extent that such amount has been deducted under paragraph a; and

 (c) the amount of any resource expenses renounced by the corporation in favour of the taxpayer in respect of the payment or loan at any time, except to the extent that the renunciation of such expenses results in a deduction under paragraph a or b, shall, for the purposes of this Act, be deemed to be a capital gain of the taxpayer from the disposition by him of property at that time.

1985, c. 25, s. 85; 1997, c. 3, s. 71.

419.3. Where the taxpayer contemplated in section 419.1 receives as consideration for the payment or loan property that is not capital property to him, the following rules apply:

 (a) he shall deduct in computing the cost to him of the property at any time the amount of any resource expenses renounced by the corporation in his favour in respect of the payment or loan at or before that time; and

 (b) he shall include in computing the amount referred to in paragraph f of section 330 for a taxation year the amount of any resource expenses renounced by the corporation in his favour in respect of the payment or loan at any time in the year, except to the extent that such amount has been deducted by him under paragraph a.

1985, c. 25, s. 85; 1997, c. 3, s. 71.

419.4. Where the taxpayer contemplated in section 419.1 does not receive any property as consideration for the payment, he shall include in computing the amount referred to in paragraph g of section 330 for a taxation year the amount of any resource expenses renounced by the corporation in his favour in respect of the payment in the year, except to the extent that such amount has been deducted by him from the adjusted cost base to him of shares of the corporation under paragraph h of section 257 in respect of the payment.

1985, c. 25, s. 85; 1997, c. 3, s. 71.

419.5. A corporation that does not designate an amount for a taxation year for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) under subsection 14.1 or 14.2 of section 66 of the said Act may deduct in computing its income for the year an amount equal to the amount deducted by it under section 66.5 of the said Act in computing its income for the year for the purposes of the said Act.

1987, c. 67, s. 98; 1997, c. 3, s. 71.

419.6. A taxpayer may deduct in computing his income under this Part for a taxation year, an amount equal to the amount he may deduct for the year under subsection 14.6 of section 66 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

1988, c. 18, s. 46.

419.7. Where a corporation acquires in any manner whatever all or substantially all of the Canadian resource properties or foreign resource properties of a person whose taxable income is exempt from tax under this Part, section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), and sections 418.16 to 418.21 do not apply to the corporation in respect of the acquisition of the properties.

1988, c. 18, s. 46; 1989, c. 77, s. 50; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 97.

419.8. (Repealed).

1988, c. 18, s. 46; 1989, c. 77, s. 50; 1997, c. 3, s. 71; 2000, c. 5, s. 98.

TITLE VII 
RULES RELATING TO COMPUTATION OF INCOME
1972, c. 23.

CHAPTER I 
GENERAL RULES
1972, c. 23.

420. An amount the deduction of which is authorized by this Part in respect of an outlay or expense shall be deducted only to the extent that such outlay or expense was reasonable in the circumstances.

1972, c. 23, s. 355; 1997, c. 85, s. 330.

421. If an amount received or receivable from a person can reasonably be regarded as being in part the consideration for the disposition of a particular property of a taxpayer, for the provision of particular services by a taxpayer or for a restrictive covenant, within the meaning assigned by section 333.4, granted by a taxpayer, the following rules apply:

 (a) the part of the amount that can reasonably be regarded as being the consideration for the disposition is deemed to be proceeds of disposition of the particular property, irrespective of the form or legal effect of the contract or agreement, and the person to whom the property was disposed of is deemed to have acquired it at a cost equal to that part;

 (b) the part of the amount that can reasonably be regarded as being consideration for the provision of particular services is deemed to be an amount received or receivable by the taxpayer in respect of those services, irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the services were rendered in respect of those services;

 (c) the part of the amount that can reasonably be regarded as being the consideration for a restrictive covenant is deemed to be an amount received or receivable by the taxpayer in respect of the restrictive covenant, irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the restrictive covenant was granted.

1972, c. 23, s. 356; 1990, c. 59, s. 167; 2009, c. 5, s. 138.

CHAPTER I.1 
DEDUCTION OF CERTAIN EXPENSES
1990, c. 59, s. 168.

DIVISION I 
EXPENSES FOR FOOD, BEVERAGES AND ENTERTAINMENT
1990, c. 59, s. 168.

421.1. Subject to section 421.1.1, for the purposes of this Part, except sections 348 to 350 and 752.0.11 to 752.0.13.3 and Divisions II.6 to II.6.0.0.5, II.11.1, II.12, II.12.1 and II.13 of Chapter III.1 of Title III of Book IX, an amount paid or payable in respect of food, beverages or entertainment consumed or enjoyed by a person is deemed to be equal to 50% of the lesser of

 (a) the amount paid or payable in respect thereof; and

 (b) an amount in respect thereof that would be reasonable in the circumstances.

1990, c. 59, s. 168; 1993, c. 64, s. 33; 1995, c. 1, s. 40; 1997, c. 14, s. 290; 2001, c. 53, s. 66; 2005, c. 1, s. 99; 2009, c. 15, s. 83.

421.1.1. An amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during an eligible travel period of the driver is deemed to be equal to the amount obtained by multiplying the specified percentage in respect of the amount so paid or payable by the lesser of

 (a) the amount so paid or payable; and

 (b) a reasonable amount in the circumstances.

In this section,

eligible travel period in respect of a long-haul truck driver is a period of at least 24 continuous hours during which the driver is away from the municipality or metropolitan area where the specified place in respect of the driver is located for the purpose of driving a long-haul truck that transports goods to, or from, a location that is beyond a radius of 160 km from the specified place;

long-haul truck means a truck or a tractor that is designed for hauling freight and that has a gross vehicle weight rating, within the meaning of subsection 1 of section 2 of the Motor Vehicle Safety Regulations (C.R.C., c. 1038) made under the Motor Vehicle Safety Act (S.C. 1993, c. 16), that exceeds 11,788 kg;

long-haul truck driver means an individual whose principal business or principal duty of employment is driving a long-haul truck that transports goods;

specified percentage in respect of an amount paid or payable is

 (a) 60%, if the amount is paid or becomes payable after 18 March 2007 and before 1 January 2008;

 (b) 65%, if the amount is paid or becomes payable in the year 2008;

 (c) 70%, if the amount is paid or becomes payable in the year 2009;

 (d) 75%, if the amount is paid or becomes payable in the year 2010; and

 (e) 80%, if the amount is paid or becomes payable after 31 December 2010;

specified place means, in the case of an employee, the employer's establishment to which the employee ordinarily reports for work and, in the case of an individual whose principal business is to drive a long-haul truck to transport goods, the place where the individual resides.

2009, c. 15, s. 84; 2015, c. 21, s. 171.

421.2. Section 421.1 does not apply to an amount paid or payable by a person in respect of the consumption of food or beverages or in respect of entertainment enjoyed by a person, where the amount

 (a) is paid or payable for food, beverages or entertainment provided for, or in the expectation of, compensation in the ordinary course of a business carried on by that person of providing the food, beverages or entertainment for compensation;

 (b) relates to a fund-raising event the primary purpose of which is to benefit a registered charity;

 (c) is an amount for which the person is compensated and the amount of the compensation is reasonable and specifically identified in writing to the person paying the compensation;

 (d) is an amount that is required to be included in computing any individual's income because of the application of Chapters I and II of Title II in respect of food or beverages consumed or entertainment enjoyed by the individual or a person with whom the individual does not deal at arm's length, or would be so required but for section 37.1.5 or subparagraph ii of paragraph a of section 42;

 (d.1) is an amount that

(i)  is not paid or payable in respect of a conference, convention, seminar or similar event,

(ii)  would, but for subparagraph i of paragraph a of section 42, be required to be included in computing any individual's income for a taxation year because of the application of Chapters I and II of Title II in respect of food or beverages consumed or entertainment enjoyed by the individual or a person with whom the individual does not deal at arm's length, and

(iii)  is paid or payable in respect of the individual's duties performed at a work site in Canada that is

(1)  outside any population centre, as defined by the last Census Dictionary published by Statistics Canada before the year, that has a population of at least 40,000 individuals as determined in the last census published by Statistics Canada before the year, and

(2)  at least 30 km from the nearest point on the boundary of the nearest such population centre referred to in subparagraph 1;

 (d.2) is an amount that

(i)  is not paid or payable in respect of entertainment or of a conference, convention, seminar or similar event,

(ii)  would, but for subparagraph i of paragraph a of section 42, be required to be included in computing an individual's income for a taxation year because of the application of Chapters I and II of Title II in respect of food or beverages consumed by the individual or by a person with whom the individual does not deal at arm's length,

(iii)  is paid or payable in respect of the individual's duties performed at a site in Canada at which the person carries on a construction activity or at a construction work camp referred to in subparagraph iv in respect of the site, and

(iv)  is paid or payable for food or beverages provided at a construction work camp, at which the individual is lodged, that was constructed or installed at or near the site to provide board and lodging to employees while they are engaged in construction services at the site;

 (e) is in respect of one of six or fewer special events held in a calendar year at which the food, beverages or entertainment is generally available to all individuals employed by the person at a particular place of business of the person and then consumed or enjoyed by those individuals at that time;

 (f) is an amount that is the cost of a subscription to cultural events that are

(i)  concerts of a symphony orchestra or a classical music or jazz ensemble,

(ii)  operas,

(ii.1)  vocal performances, other than such performances held in venues normally used for sports events,

(ii.2)  performing arts variety shows,

(ii.3)  museum exhibits,

(iii)  dance performances, or

(iv)  theatre performances,

(v)  (subparagraph repealed);

 (g) is an amount that is the cost of all or substantially all the tickets for a performance in an event referred to in any of subparagraphs i to iv of subparagraph f.

For the purpose of determining whether the conditions set out in any of subparagraphs d to d.2 of the first paragraph are met in respect of an amount referred to in section 42, paragraph g of section 39 shall not be taken into account.

For the purposes of subparagraph f of the first paragraph and this paragraph,

cultural events presenter means

 (a) a person or an organization whose mission is to present the arts, history or science and that is responsible for programming professional performances or museum exhibits generating box office or subscription income;

 (b) a person or an organization acting on behalf of a person or organization described in paragraph a; or

 (c) a manager or lessee of a venue for cultural events;

subscription means an agreement between a cultural events presenter and a client under which the client acquires a package put together by the cultural events presenter and consisting of a determined number of tickets for a minimum of three different presentations of events referred to in subparagraphs i to iv of that subparagraph f that are held in Québec.

For the purposes of subparagraphs f and g of the first paragraph, the cost of a subscription or ticket, as the case may be, does not include an amount paid or payable in respect of meals or beverages consumed by a person.

1990, c. 59, s. 168; 1993, c. 16, s. 175; 1995, c. 1, s. 41; 1995, c. 49, s. 236; 1996, c. 39, s. 124; 1997, c. 14, s. 74; 1997, c. 85, s. 68; 2000, c. 39, s. 24; 2001, c. 53, s. 67; 2003, c. 9, s. 28; 2004, c. 8, s. 90; 2005, c. 38, s. 78; 2009, c. 5, s. 139; 2010, c. 25, s. 30; 2015, c. 24, s. 75.

421.3. For the purposes of sections 421.1 and 421.2, where a fee paid or payable for a conference, convention, seminar or similar event entitles the participant to food, beverages or entertainment, other than incidental beverages and refreshments made available during the course of meetings or receptions at the event, and a reasonable part of the fee, determined on the basis of the cost of providing the food, beverages or entertainment, is not identified in the account for the fee as compensation for the food, beverages or entertainment, an amount of $50 or such other amount as may be prescribed is deemed to be the amount paid or payable in respect of food, beverages or entertainment for each day of the event on which food, beverages or entertainment is provided.

For the purposes of this Part, the fee for the event is deemed to be equal to the expenses incurred minus the amount deemed under the first paragraph to be the amount paid or payable for the food, beverages or entertainment.

1990, c. 59, s. 168.

421.4. For the purposes of this division,

 (a) no amount paid or payable for travel on an airplane, a train or a bus shall be considered to be an amount paid or payable in respect of food, beverages or entertainment consumed or enjoyed by a person while travelling thereon;

 (b) the expression entertainment includes amusement and recreation.

1990, c. 59, s. 168.

421.4.1. For the purposes of this division, if a person who is a producer pays or is required to pay in a taxation year an allowance for meal expenses to a person who is an artist in relation to services rendered in the course of a business carried on by the artist, the artist is deemed to be an employee for the purpose of determining the amount that the producer may deduct, in respect of the allowance, in computing the producer's income for the year from a business carried on by the producer, if

 (a) the allowance for meal expenses is paid or payable under a collective or individual agreement that is binding on the artist and the producer; and

 (b) the agreement referred to in subparagraph a is entered into in accordance with the Act respecting the professional status and conditions of engagement of performing, recording and film artists (chapter S-32.1).

In this section, “artist” and “producer” have the meaning assigned by the Act respecting the professional status and conditions of engagement of performing, recording and film artists.

2009, c. 15, s. 85.

DIVISION II 
EXPENSES RELATED TO PASSENGER VEHICLES
1990, c. 59, s. 168.

421.5. For the purposes of this Part, any interest paid or payable for a period by a person on borrowed money used to acquire a passenger vehicle or on an amount paid or payable for such an acquisition is deemed, in computing the income of the person for a taxation year, to be the lesser of the amount paid or payable and the amount equal to that determined by the formula


(A / 30) × B.


For the purposes of the formula set forth in the first paragraph,

 (a) A is $250 or such other amount as may be prescribed;

 (b) B is the number of days in the period in respect of which the interest is paid or payable, as the case may be.

1990, c. 59, s. 168; 1993, c. 16, s. 176; 1994, c. 22, s. 156.

421.6. Notwithstanding any other provision of this Part, where in a taxation year all or part of the lease charges in respect of a passenger vehicle are paid or payable, directly or indirectly, by a taxpayer and an amount may be deducted in respect of such charges in computing the taxpayer's income for the year, for the purposes of determining the amount that may be so deducted, the aggregate of such charges are deemed not to exceed the lesser of the amounts determined by the following formulas:

 (a) [(A × B) / 30] − C − D − E;

 (b) [(F × G) / 0.85H] − I − J.

For the purposes of the formulas set forth in the first paragraph,

 (a) A is $600 or such other amount as may be prescribed;

 (b) B is the number of days in the period commencing at the beginning of the term of the lease of the vehicle and ending at the earlier of the end of the year and the end of the lease;

 (c) C is the aggregate of all amounts deducted in computing the taxpayer's income for the preceding taxation years in respect of the lease charges in respect of the vehicle;

 (d) D is the amount of interest that would be earned on that part of the total of all refundable amounts in respect of the lease that exceeds $1,000 if interest were

(i)  payable on the refundable amounts at the prescribed rate;

(ii)  computed for the period preceding the end of the year during which the refundable amounts were outstanding;

 (e) E is the aggregate of all reimbursements that became receivable before the end of the year by the taxpayer in respect of the lease;

 (f) F is the aggregate of the lease charges in respect of the lease incurred in respect of the year or the aggregate of the lease charges in respect of the lease paid in the year, depending on the method regularly followed by the taxpayer in computing his income;

 (g) G is $20,000 or such other amount as may be prescribed;

 (h) H is the greater of

(i)  $23,529 or such other amount as may be prescribed;

(ii)  the manufacturer's suggested retail price for the vehicle;

 (i) I is the amount of interest that would be earned on that part of the total of all refundable amounts in respect of the lease that exceeds $1,000 if interest were

(i)  payable on the refundable amounts at the prescribed rate;

(ii)  computed for the period in the year during which the refundable amounts are outstanding;

 (j) J is the aggregate of all reimbursements that became receivable during the year by the taxpayer in respect of the lease.

1990, c. 59, s. 168; 1991, c. 25, s. 189; 1993, c. 16, s. 177.

421.7. Where a person owns or leases a motor vehicle jointly with one or more other persons, the reference in paragraphs d.3 and d.4 of section 99 to the amount of $20,000, in section 421.5 to the amount of $250 and in section 421.6 to the amounts of $600, $20,000 and $23,529 shall read as a reference to that proportion of each of those amounts or such other amounts as may be prescribed for the purposes thereof that the fair market value of his interest in the vehicle is of the fair market value of the interests in the vehicle of all such persons.

1990, c. 59, s. 168.

DIVISION III 
ILLEGAL PAYMENTS
1993, c. 16, s. 178.

421.8. In computing income, no amount may be deducted in respect of an outlay made or expense incurred for the purpose of doing anything that is an offence or an indictable offence under section 3 of the Corruption of Foreign Public Officials Act (Statutes of Canada, 1998, chapter 34) or under any of sections 119 to 121, 123 to 125, 393 and 426 of the Criminal Code (Revised Statutes of Canada, 1985, chapter C-46) or an offence or indictable offence under section 465 of the Criminal Code as it relates to an offence or indictable offence described in any of those sections.

Notwithstanding section 1010, the Minister may make such assessments, reassessments and additional assessments of tax, interest and penalties and such determinations and redeterminations as are necessary to give effect to the first paragraph for any taxation year.

1993, c. 16, s. 178; 2004, c. 8, s. 91.

DIVISION IV 
FINES AND PENALTIES
2005, c. 38, s. 79.

421.9. In computing income, no amount may be deducted in respect of a fine or penalty, other than a prescribed fine or penalty, or of an amount of interest relating to that fine or penalty, imposed under the laws of a country or of a state, province, territory or other political subdivision of such a country by a person or public body authorized to impose the fine or penalty.

2005, c. 38, s. 79.

DIVISION V 
INTEREST
2007, c. 12, s. 54.

421.10. In computing income, no amount may be deducted in respect of an amount of interest payable under a fiscal law.

For the purposes of the first paragraph, a fiscal law includes a law of a country or of a state, province, territory or other political subdivision of a country that provides for the collection of income tax, duties or tax.

2007, c. 12, s. 54.

CHAPTER II 
INADEQUATE CONSIDERATIONS AND ATTRIBUTION OF PROPERTY
1972, c. 23.

422. Except as otherwise provided in this Part, the disposition or acquisition of a property by a taxpayer is deemed to be made at the fair market value of the property at the time of the disposition or acquisition, as the case may be, where

 (a) the taxpayer acquires it by gift, succession or will, or because of a disposition that does not result in a change in the beneficial ownership of the property;

 (b) the taxpayer acquires it from a person with whom he is not dealing at arm's length, for an amount greater than such value; or

 (c) the taxpayer disposes of it

(i)  to a person with whom the taxpayer is not dealing at arm’s length, gratuitously or for consideration that is less than that fair market value,

(ii)  to any person by gift inter vivos or

(iii)  to a trust because of a disposition that does not result in a change in the beneficial ownership of the property.

1972, c. 23, s. 357; 2001, c. 53, s. 68; 2003, c. 2, s. 115.

422.1. Where, at any time, a taxpayer disposed of property for proceeds of disposition, determined without reference to this section, equal to or greater than the fair market value at that time of the property, and there existed at that time an agreement under which a person with whom the taxpayer was not dealing at arm's length agreed to pay as rent, royalty or other payment for the use of or the right to use the property an amount less than the amount that would have been reasonable in the circumstances if the taxpayer and the person had been dealing at arm's length at the time the agreement was entered into, the proceeds of disposition of the property are deemed to be the greater of

 (a) such proceeds determined without reference to this section, and

 (b) the fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement.

1994, c. 22, s. 157.

423. (Repealed).

1972, c. 23, s. 358; 1986, c. 19, s. 92; 1993, c. 16, s. 179; 1997, c. 14, s. 75; 2001, c. 7, s. 44.

424. If, at any time, a property of a corporation is appropriated in any manner whatever to or for the benefit of a shareholder of the corporation gratuitously or for consideration that is less than the property's fair market value and a sale of the property at its fair market value would have contributed to increase the corporation's income or to reduce a loss of the corporation, the corporation is deemed, at that time, to have disposed of the property and to have received proceeds of disposition equal to its fair market value at that time.

If, in a taxation year of a corporation, a property is appropriated in any manner whatever to or for the benefit of a shareholder upon the winding-up of the corporation, the following rules apply:

 (a) the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds of disposition equal to its fair market value at that time;

 (b) the shareholder is deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;

 (c) sections 302 and 304 do not apply in computing the cost of the property to the shareholder; and

 (d) sections 93.3.1, 106.4, 175.9, 238.1 and 238.3 do not apply in respect of a property disposed of on the winding-up.

1972, c. 23, s. 359; 1975, c. 22, s. 91; 1980, c. 13, s. 45; 1984, c. 15, s. 93; 1993, c. 16, s. 180; 1995, c. 49, s. 117; 1997, c. 3, s. 71; 2000, c. 5, s. 99; 2003, c. 2, s. 116; 2009, c. 5, s. 140.

425. The disposition or acquisition by a taxpayer, at any time in a taxation year that begins before 1 January 2007, of property that is petroleum, natural gas or other related hydrocarbons, or metal or minerals produced in the operation by the taxpayer of a natural accumulation of petroleum or natural gas, an oil or gas well or a mineral resource, situated in Canada, is deemed to be made at the fair market value of that property at that time, where

 (a) the disposition is to a person referred to in section 90 gratuitously or for a consideration less than that fair market value; or

 (b) the acquisition is from a person referred to in section 90 for an amount greater than that fair market value.

1975, c. 22, s. 92; 1979, c. 18, s. 28; 1987, c. 67, s. 99; 1995, c. 49, s. 236; 2005, c. 1, s. 100.

426. For the purposes of section 425, the fair market value of property referred to in that section is

 (a) in the case of a disposition by the taxpayer to a person referred to in section 90, deemed to be equal, at the time of disposition, for each unit of any particular quantity of such property, to the amount by which the average proceeds of disposition of a like unit that become receivable by that person in the month that includes the time of the disposition from a person other than a person referred to in section 90, exceeds the aggregate of

(i)  the average aggregate of reasonable and necessary expenses, including depreciation, but not the cost of acquisition, incurred by that person referred to in section 90 in respect of such a unit for that month, that may reasonably be attributed to the transporting, marketing or processing of that unit, and

(ii)   in respect of the unit disposed of by the taxpayer, the amount that may reasonably be considered to be an amount that became receivable by Her Majesty in right of Canada for the use and benefit of a band as defined in the Indian Act (Revised Statutes of Canada, 1985, chapter I-5); and

 (b) in the case of an acquisition by the taxpayer from a person referred to in section 90, computed without taking into account any law or contract requiring the taxpayer to acquire that property, and deemed to be equal, at the time of acquisition, for each unit of any particular quantity of such property, to the aggregate of

(i)  the amount paid or payable to the taxpayer by that person in respect of that unit, and

(ii)  the amount in respect of that unit paid or payable to Her Majesty in right of Canada by that person for the use and benefit of a band as defined in the Indian Act.

1975, c. 22, s. 92; 1986, c. 19, s. 93; 2005, c. 1, s. 100.

427. For the purposes of paragraph a of section 426, where a person referred to in section 90 disposes of a unit referred to in the said paragraph to another such person, those two persons are deemed to be the same person.

1975, c. 22, s. 92.

427.1. (Repealed).

1984, c. 15, s. 94; 1985, c. 25, s. 86.

427.2. (Repealed).

1984, c. 15, s. 94; 1985, c. 25, s. 86.

427.3. (Repealed).

1984, c. 15, s. 94; 1985, c. 25, s. 86.

427.4. Notwithstanding any other provision of this Part, where, at any particular time as part of a series of transactions or events, a taxpayer disposes of property for proceeds of disposition that are less than its fair market value, the taxpayer is deemed to have disposed of the property at that time for proceeds of disposition equal to its fair market value at that time, if

 (a) it may reasonably be considered that one of the main purposes of the series of transactions or events is to obtain the benefit of

(i)  any deduction described in the second paragraph or any balance of undeducted outlays, expenses or other amounts available to a person, other than a person that would be affiliated with the taxpayer immediately before the series of transactions or events, but for the definition of controlled in section 21.0.1, in respect of a subsequent disposition of the property or property substituted for the property, or

(ii)  an exemption available to any person from tax payable under this Part on any income arising on a subsequent disposition of the property or property substituted for the property; and

 (b) the subsequent disposition referred to in paragraph a occurs, or arrangements for the subsequent disposition are made, before the day that is three years after the particular time.

The deduction to which subparagraph i of subparagraph a of the first paragraph refers is a deduction, other than a deduction under section 726.7.1 in respect of a capital gain from a disposition of a share acquired by the taxpayer in an acquisition to which sections 530 to 533 or 620 to 625 applied, in computing income, taxable income, taxable income earned in Canada or tax payable under this Part.

1989, c. 77, s. 51; 1997, c. 3, s. 71; 1997, c. 85, s. 330; 2000, c. 5, s. 100.

427.4.1. Notwithstanding sections 1010 to 1011, the Minister may make any assessments or reassessments of the tax, interest and penalties payable by the taxpayer referred to in section 427.4 that are necessary to give effect to that section 427.4

 (a) within three years after the subsequent disposition referred to in subparagraph a of the first paragraph of section 427.4; and

 (b) within four years after the subsequent disposition referred to in subparagraph a of the first paragraph of section 427.4 if, at the end of the taxation year that includes the particular time referred to in that first paragraph, the taxpayer is a mutual fund trust or a corporation other than a Canadian-controlled private corporation.

2000, c. 5, s. 101; 2007, c. 12, s. 55.

427.4.2. For the purposes of section 427.4, where a taxpayer is incorporated or otherwise comes into existence at a particular time during a series of transactions or events, the taxpayer is deemed

 (a) to have existed at the time that was immediately before the series of transactions or events began; and

 (b) to have been affiliated, at the time that was immediately before the series of transactions or events began, with every person with whom the taxpayer is affiliated, otherwise than because of a right referred to in paragraph b of section 20, at the particular time.

2000, c. 5, s. 101.

427.5. Where there has been an amalgamation or merger of a corporation with one or more other corporations to form one corporate entity, in this section referred to as the new corporation, each property of the corporation that became property of the new corporation as a result of the amalgamation or merger is deemed, for the purpose of determining whether section 427.4 is applicable in respect of the amalgamation or merger, to have been disposed of by the corporation immediately before the amalgamation or merger for proceeds of disposition equal to

 (a) in the case of a Canadian resource property or a foreign resource property, nil;

 (b) (paragraph repealed);

 (c) in the case of any other property, the cost amount to the corporation of the property immediately before the amalgamation or merger.

1989, c. 77, s. 51; 1990, c. 59, s. 169; 1994, c. 22, s. 158; 1997, c. 3, s. 25.

CHAPTER III 
DEATH OF A TAXPAYER
1972, c. 23.

DIVISION I 
PERIODIC AMOUNTS AND AMOUNTS RECEIVABLE
1972, c. 23.

428. In computing the income of an individual for the taxation year in which he died, an amount of interest, rent, royalty, annuity, remuneration from an office or employment, or other amount payable periodically, except an amount with respect to an interest in an annuity contract to which paragraph b of section 967 applies, that was not paid before his death, is deemed to have accrued up to that time in equal daily amounts in the period for which such amount was payable and shall be included in computing his income.

Furthermore, for the purposes of the same computation, the reference in paragraph u of section 87 to “in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer's tax payable for” shall read as a reference to “in computing the tax payable for the year or”.

1972, c. 23, s. 360; 1984, c. 15, s. 95; 1990, c. 59, s. 170.

429. The rights and property that an individual owned when the individual died, if they are not property referred to in section 428, or capital property, and if the proceeds thereof when realized or disposed of would have been included in computing the individual's income, must be included at their value in computing the individual's income for the year of the individual's death.

However, the legal representative of an individual may elect, not later than the day that is one year after the date of death or the day that is 90 days after the sending of a notice of assessment, whichever is the later, in respect of the individual's tax for the year of the individual's death, not to include such value in computing the individual's income for the year of the individual's death; in that case, the individual shall file a separate fiscal return for the year under this Part and pay the tax for the year under this Part as if

 (a) the individual were another person;

 (b) that other person's only income for the year were the value of the rights and property; and

 (c) subject to sections 693.1, 752.0.26 and 776.1.5.0.19, that other person were entitled to the deductions to which the individual was entitled under sections 725 to 725.7, 752.0.0.1 to 752.0.13.3, 752.0.14 to 752.0.18.15, 776.1.5.0.17 and 776.1.5.0.18 in computing the individual's taxable income or the individual's tax payable under this Part, as the case may be, for the year.

Within the time limit provided for in the second paragraph, the legal representative may revoke the election made under that paragraph by means of a notice filed with the Minister.

1972, c. 23, s. 361; 1985, c. 25, s. 87; 1986, c. 19, s. 94; 1987, c. 67, s. 100; 1989, c. 5, s. 67; 1993, c. 64, s. 34; 1994, c. 22, s. 159; 1997, c. 14, s. 76; 1999, c. 83, s. 273; 2001, c. 53, s. 69; 2004, c. 4, s. 4; 2005, c. 1, s. 101; 2006, c. 36, s. 41; 2007, c. 12, s. 56; 2011, c. 6, s. 131.

430. Where, before the time allowed under the second paragraph of section 429 has expired, a right or property referred to in the said section, except any compensation or amount referred to in subparagraph ii, iii or iv of subparagraph f of the first paragraph of section 93, has been transferred or distributed to a person who is a beneficiary of the succession or to any other person who is beneficially interested in the succession, the said section 429 does not apply in respect of such right or property and the person shall include in computing his income the amount received by him upon the realization or disposition of such right or property for the year in which such amount is received.

1972, c. 23, s. 362; 1975, c. 22, s. 93; 1978, c. 26, s. 78; 1993, c. 16, s. 181; 1994, c. 22, s. 160; 1996, c. 39, s. 273; 1998, c. 16, s. 251; 2001, c. 53, s. 260; 2009, c. 5, s. 141.

431. If a taxpayer has acquired a property that is a right or property referred to in section 430, the following rules apply:

 (a) paragraph a of section 422 does not apply to that property; and

 (b) the taxpayer is deemed to have acquired the property at a cost equal to the aggregate of

(i)  the portion of the cost to the deceased individual that was not deducted by the deceased individual in computing income for any taxation year, and

(ii)  the expenditures made or incurred by the taxpayer to acquire it.

1975, c. 22, s. 94; 1993, c. 16, s. 181; 1998, c. 16, s. 251; 2009, c. 5, s. 142.

432. For the purposes of this division, a right or property does not include incorporeal capital property, land included in the inventory of a business, a Canadian resource property, a foreign resource property or an interest in a life insurance policy, other than an annuity contract of a taxpayer where the payment made by him for its acquisition was deductible in computing his income because of paragraph  f of section 339, or was made in circumstances in which subsection 21 of section 146 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) applied.

1975, c. 22, s. 94; 1984, c. 15, s. 96; 1986, c. 19, s. 95; 1995, c. 49, s. 118; 2005, c. 1, s. 102.

DIVISION II 
RESOURCE PROPERTIES AND LAND IN INVENTORIES
1975, c. 22, s. 95.

433. An individual who dies is deemed to have, immediately before the individual’s death, disposed of each Canadian resource property and foreign resource property of the individual and received proceeds of disposition for that property equal to its fair market value immediately before the death and the person who as a consequence of the individual’s death acquires such property is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death.

1975, c. 22, s. 95; 1982, c. 5, s. 105; 1986, c. 19, s. 96; 1995, c. 49, s. 119; 2003, c. 2, s. 117.

434. An individual who dies is deemed to have, immediately before the individual’s death, disposed of each property that was land included in the inventory of a business of the individual and received proceeds of disposition for that property equal to its fair market value immediately before the death and the person who as a consequence of the individual’s death acquires such property is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death.

1975, c. 22, s. 95; 1995, c. 49, s. 119; 2003, c. 2, s. 117.

435. Notwithstanding sections 433 and 434, where any property referred to therein was owned by an individual who was resident in Canada immediately before his death and, on or after and as a consequence of the death, that property is transferred or distributed to the spouse of the individual or to a trust described in section 440, if it can be shown within the period ending 36 months after the death of the individual or, where written application therefor has been made to the Minister by the individual's legal representative before the expiry of that period, within such longer period as the Minister considers reasonable, that the property vested indefeasibly in the spouse or trust,

 (a) in the case of a Canadian resource property or a foreign resource property to which section 433 applies, the following rules apply:

(i)  the individual is deemed to have, immediately before the individual's death, disposed of the property and received proceeds of disposition therefor equal to such amount as is specified by the individual's legal representative in the individual's fiscal return filed under paragraph c of subsection 2 of section 1000, to the extent that the amount does not exceed the fair market value of the property immediately before the death, and

(ii)  the spouse or trust is deemed to have acquired the property at the time of death at a cost equal to the amount determined in respect of the disposition under subparagraph i; and

 (b) in the case of a property to which section 434 applies, the individual is deemed to have, immediately before his death, disposed of the property and received proceeds of disposition therefor equal to its cost amount to the individual immediately before the death, and the spouse or the trust is deemed to have acquired the property at the time of the death at a cost equal to those proceeds.

1975, c. 22, s. 95; 1977, c. 26, s. 50; 1982, c. 5, s. 106; 1986, c. 19, s. 97; 1994, c. 22, s. 161; 1995, c. 49, s. 120; 2003, c. 2, s. 118; 2009, c. 5, s. 143.

DIVISION III 
CAPITAL PROPERTY, DEPRECIABLE PROPERTY AND OTHER PROPERTY
1972, c. 23; 1994, c. 22, s. 162.

436. An individual who dies is deemed to have, immediately before his death, disposed of each capital property of the individual and received proceeds of disposition therefor equal to the fair market value of the property immediately before the death, and any person who acquires the property as a consequence of the death is deemed to have acquired it at the time of the death at a cost equal to its fair market value immediately before the death.

1972, c. 23, s. 363; 1973, c. 17, s. 45; 1994, c. 22, s. 163; 1995, c. 49, s. 121.

437. Notwithstanding section 188, where at any time an individual has died and any person has, as a consequence of the individual's death, acquired an incorporeal capital property of the individual in respect of a business carried on by the individual immediately before that time, otherwise than by way of a distribution of property by a trust that has deducted an amount under paragraph b of section 130 in respect of the property or in circumstances to which section 189 applies, the following rules apply:

 (a) the individual is deemed to have disposed of the capital property immediately before his death for proceeds of disposition equal to 4/3 of that proportion of the eligible incorporeal capital amount of the individual in respect of the business that the fair market value immediately before that time of the capital property is of the fair market value immediately before that time of all of the incorporeal capital property of the individual in respect of the business;

 (b) the person is deemed, in respect of the incorporeal capital property, to have acquired a capital property at the time of the death of the individual at a cost equal to the proceeds of disposition determined under paragraph a, except where the person continues to carry on the business of the individual, in which case the person is deemed to have, at the time of the individual's death, acquired an incorporeal capital property and disbursed therefor an incorporeal capital amount equal to the aggregate of

(i)  the proceeds of disposition determined in paragraph a, and

(ii)  4/3 of that proportion of the excess determined under subparagraph a of the second paragraph of section 107 in respect of the business of the individual at that time that the fair market value immediately before that time of the capital property is of the fair market value immediately before that time of all incorporeal capital property of the individual in respect of the business;

 (c) for the purposes of determining, at any time, the person's eligible incorporeal capital amount contemplated in paragraph b in respect of the business he continues to carry on, an amount equal to 3/4 of the amount determined under subparagraph ii of paragraph b shall be added to the aggregate otherwise determined under subparagraph i of subparagraph a of the second paragraph of section 107;

 (d) for the purpose of determining, after the individual’s death, the amount required by paragraph b of section 105 to be included in computing the income of the person referred to in paragraph b in respect of any subsequent disposition of the property of the business, there shall be added to the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 the proportion of the amount determined under that subparagraph ii in respect of the business of the individual immediately before the individual’s death that the fair market value of that incorporeal capital property immediately before the time of the death is of the fair market value at that time of the aggregate of the incorporeal capital property of the individual in respect of the business.

1975, c. 22, s. 96; 1990, c. 59, s. 171; 1993, c. 16, s. 182; 1994, c. 22, s. 164; 1995, c. 49, s. 122; 1996, c. 39, s. 125; 2001, c. 7, s. 45; 2003, c. 2, s. 119; 2005, c. 1, s. 103.

437.1. Where an individual who dies has at the time of death a net income stabilization account, all amounts held for or on behalf of the individual in his NISA Fund No. 2 are deemed to have been paid out of that fund to the individual immediately before his death.

1994, c. 22, s. 165.

437.2. Where an individual who dies has at the time of death a farm income stabilization account, the balance of the account at that time is deemed to have been paid to the individual immediately before the individual’s death.

2004, c. 21, s. 77.

438. (Repealed).

1972, c. 23, s. 364; 1973, c. 17, s. 46; 1994, c. 22, s. 166.

438.1. (Repealed).

1979, c. 38, s. 14; 1985, c. 25, s. 89; 1987, c. 67, s. 102; 1994, c. 22, s. 167; 1995, c. 49, s. 123.

439. For the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or section 130.1, where depreciable property of a prescribed class of a deceased individual is deemed under section 436 to be acquired by a person, except where the individual's proceeds of disposition of the property under section 436 are redetermined under sections 93.1 to 93.3, and the capital cost to the individual of the property exceeds the amount determined under section 436 to be the cost to the person of the property, the following rules apply:

 (a) the capital cost to the person of the property is deemed to be equal to the capital cost to the individual of the property; and

 (b) the excess is deemed to have been allowed to the person as depreciation in respect of the property for the taxation years that ended before the acquisition.

1972, c. 23, s. 365; 1979, c. 18, s. 29; 1994, c. 22, s. 168; 1995, c. 49, s. 124.

439.1. Notwithstanding section 436, where property of a deceased individual is deemed under section 436 to be acquired by a person and the individual's proceeds of disposition of the property under section 436 are redetermined under sections 93.1 to 93.3, the following rules apply:

 (a) for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or section 130.1, where the property was depreciable property of a prescribed class and the amount that was the capital cost to the individual of the property exceeds the amount so redetermined under sections 93.1 to 93.3,

(i)  the capital cost to the person of the property is deemed to be equal to the capital cost to the individual of the property, and

(ii)  the excess is deemed to have been allowed to the person as depreciation in respect of the property for the taxation years that ended before the acquisition; and

 (b) where the property is land, other than land to which paragraph a applies, the cost to the person of the property is deemed to be equal to the amount that was the individual's proceeds of disposition of the property as redetermined under sections 93.1 to 93.3.

1995, c. 49, s. 125.

440. Notwithstanding section 436, where property referred to therein is, as a consequence of the death of an individual who was resident in Canada immediately before his death, transferred or distributed to his spouse who was resident in Canada immediately before the individual's death or to a trust created by the individual's will, which was resident in Canada immediately after the time when the property was indefeasibly vested in the trust, if it can be shown, within the period ending 36 months after the death of the individual or, where written application therefor has been made to the Minister by the individual's legal representative before the expiry of that period, within such longer period as the Minister considers reasonable, that the property has become vested indefeasibly in the spouse or trust,

 (a) subject to subparagraph a.1, the individual is deemed to have, immediately before his death, disposed of the property and received proceeds of disposition therefor equal to the following amount, and the spouse or the trust is deemed to have acquired the property at the time of the death at a cost equal to those proceeds:

(i)  where the property was depreciable property of a prescribed class, the lesser of the capital cost and the cost amount to the individual of the property immediately before his death, and

(ii)  in any other case, the adjusted cost base of the property to the individual immediately before his death;

 (a.1) where the property is an interest in a partnership, other than an interest to which section 636 applies,

(i)  the individual is deemed, except for the purposes of section 632, not to have disposed of the property as a consequence of his death,

(ii)  the spouse or the trust is deemed to have acquired the property at the time of the death at a cost equal to its cost to the individual, and

(iii)  each amount added or deducted under section 255 or 257, as the case may be, in computing the adjusted cost base to the individual of the property is deemed to be required by that section 255 or 257 to be added or deducted in computing the adjusted cost base to the spouse or the trust of the property; and

 (b) section 439 applies to depreciable property of a prescribed class as if the reference therein to section 436 were a reference to subparagraph a of the first paragraph of section 440;

 (c) (subparagraph repealed).

The first paragraph applies only where the will creating the trust entitles the spouse to receive all of the income of the trust that arises before the spouse's death, and no person except the spouse may receive or otherwise obtain enjoyment of any of the income or capital of the trust.

1972, c. 23, s. 366; 1973, c. 17, s. 47; 1975, c. 22, s. 97; 1984, c. 15, s. 97; 1986, c. 19, s. 98; 1993, c. 16, s. 183; 1994, c. 22, s. 169; 1995, c. 49, s. 126; 1997, c. 3, s. 71; 2009, c. 5, s. 145.

441. (Repealed).

1975, c. 22, s. 98; 1977, c. 26, s. 51; 1984, c. 15, s. 98; 1994, c. 22, s. 170.

441.1. Where a property that is a net income stabilization account of an individual is, on or after the individual's death and as a consequence thereof, transferred or distributed to the individual's spouse, or to a trust described in the second paragraph, sections 437.1 and 462.0.1 do not apply in respect of the individual's NISA Fund No. 2 if it can be shown, within the period ending 36 months after the death of the individual or, where written application therefor has been made to the Minister by the individual's legal representative before the expiry of that period, within such longer period as the Minister considers reasonable, that the property has become vested indefeasibly in the spouse or trust.

The trust referred to in the first paragraph is a trust created by the individual's will, under which the individual's spouse is entitled to receive all of the income of the trust that arises before the spouse's death, and no person except the spouse may receive or otherwise obtain enjoyment of any of the income or capital of the trust.

1994, c. 22, s. 171; 2009, c. 5, s. 146.

441.2. Where a property that is a farm income stabilization account of an individual is, on or after the individual's death and as a consequence thereof, transferred or distributed to the individual's spouse, or to a trust described in the second paragraph, sections 437.2 and 462.0.2 do not apply in respect of the property if it can be shown, within the period ending 36 months after the death of the individual or, where written application therefor has been made to the Minister by the individual's legal representative before the expiry of that period, within such longer period as the Minister considers reasonable, that the property has become vested indefeasibly in the spouse or trust.

The trust referred to in the first paragraph is a trust created by the individual's will, under which the individual's spouse is entitled to receive all of the income of the trust that arises before the spouse's death, and no person except the spouse may receive or otherwise obtain enjoyment of any of the income or capital of the trust.

2004, c. 21, s. 78; 2009, c. 5, s. 147.

442. Sections 440 to 441.2 do not apply to any property of a deceased individual in respect of which the individual's legal representative makes a valid election under subsection 6.2 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)).

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election referred to in the first paragraph is extended or a previous such election is rescinded, the legal representative of the individual

 (a) shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

 (b) incurs a penalty equal to $100 for each complete month from the individual's filing-due date for the year of the individual's death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister, up to $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the election or the rescinded election referred to in the second paragraph.

1977, c. 26, s. 52; 1994, c. 22, s. 172; 1997, c. 85, s. 69; 2000, c. 5, s. 293; 2004, c. 21, s. 79; 2009, c. 5, s. 148.

443. (Repealed).

1972, c. 23, s. 367; 1973, c. 17, s. 48; 1975, c. 22, s. 99; 1986, c. 19, s. 99; 1994, c. 22, s. 173.

444. The rules set out in the second paragraph apply to an individual and to a child of the individual in respect of a property to which section 436 would, if this Act were read without reference to this section, apply if

 (a) the property was, immediately before the individual's death,

(i)  a share of the capital stock of a family farm corporation of the individual, an interest in a family farm partnership of the individual, a share of the capital stock of a family fishing corporation of the individual or an interest in a family fishing partnership of the individual, or

(ii)  land or a depreciable property of a prescribed class situated in Canada that was, before the death, used principally in the course of carrying on a fishing or farming business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of a property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot;

 (b) the child of the individual was resident in Canada immediately before the day on which the individual died; and

 (c) because of the individual's death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the individual's death or, if application has been made to the Minister by the individual's legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

 (a) if the individual's legal representative does not make a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the individual's fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

(i)  sections 422 and 436 do not apply to the individual and the child in respect of the property,

(ii)  the individual is deemed, immediately before the individual's death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the individual and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the individual that the capital cost of the property to the individual is of the capital cost to the individual of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, a share of the capital stock of a family farm corporation of the individual or a share of the capital stock of a family fishing corporation of the individual, the adjusted cost base of the property to the individual immediately before the time of the disposition of the property,

(iii)  if the property is, immediately before the individual's death, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, other than an interest to which section 636 applies, the following rules apply:

(1)  the individual is deemed, except for the purposes of section 632, not to have disposed of the property because of the individual's death,

(2)  the child is deemed to have acquired the property at the time of the individual's death at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual's death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the individual, immediately before the individual's death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the individual's death, the adjusted cost base of the property to the child,

(iv)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the individual is deemed under subparagraph ii to be acquired by the child because of the individual's death, except where the individual's proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the individual exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(v)  despite subparagraph ii, if a property of the individual is deemed under subparagraph ii to be acquired by the child because of the individual's death, and the individual's proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class of the individual and the capital cost of the property to the individual exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the individual's proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

 (b) if the individual's legal representative makes a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act in the individual's fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

(i)  subparagraph a applies without reference to its subparagraphs ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph ii of this subparagraph b,

(ii)  subject to subparagraph iii, the individual is deemed, immediately before the individual's death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the individual's legal representative, the amount established in accordance with section 450.5 that is designated in respect of the property by the individual's legal representative in the individual's fiscal return filed in accordance with section 1000 for the year in which the individual died, if the individual, immediately before the individual's death, and the child, at the end of the child's taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the individual died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.01 or 9.21, if subparagraph 1 does not apply in respect of the property,

(iii)  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the individual's legal representative makes another valid election under subparagraph iii of paragraph b of subsection 9.21 of section 70 of the Income Tax Act in the individual's fiscal return filed under Part I of that Act for the year in which the individual died, to have that subparagraph iii of paragraph b apply to the individual in respect of the property, and

(iv)  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph ii, or

(2)  if subparagraph iii applies, at the time of the individual's death and at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual's death.

However, subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph ii and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the individual, immediately before the individual's death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the legal representative of the deceased individual, the Minister may allow subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the legal representative, after the individual's filing-due date for the year in which the individual died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the legal representative under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the legal representative of the deceased individual incurs a penalty equal to $100 for each complete month from the individual's filing-due date for the year in which the individual died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the legal representative in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.01 or 9.21 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the legal representative of the deceased individual

 (a) shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

 (b) incurs a penalty equal to $100 for each complete month from the individual's filing-due date for the year of the individual's death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the legal representative of the deceased individual incurs under this section in respect of the property may not exceed the greater of the penalties that the legal representative would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1973, c. 17, s. 49; 1977, c. 26, s. 53; 1979, c. 18, s. 30; 1986, c. 15, s. 81; 1986, c. 19, s. 100; 1993, c. 16, s. 184; 1994, c. 22, s. 174; 1995, c. 49, s. 127; 1997, c. 3, s. 71; 1997, c. 85, s. 70; 2000, c. 5, s. 293; 2002, c. 40, s. 36; 2004, c. 8, s. 92; 2007, c. 12, s. 57; 2009, c. 5, s. 149.

444.1. (Repealed).

1979, c. 18, s. 31; 1986, c. 19, s. 101; 1987, c. 67, s. 103.

445. Where a trust created by the will of an individual would be a trust referred to in any of sections 440 to 441.2 but for the payment of the debts owing by the individual when he died or for provision for their payment, the following rules apply:

 (a) the time limit to file the fiscal return contemplated in paragraph c of subsection 2 of section 1000 is extended to 18 months after the individual's death; and

 (b) where the legal representative makes a valid election under paragraph b of subsection 7 of section 70 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), and lists, in the individual's fiscal return referred to for that purpose in that paragraph, one or more properties, other than a net income stabilization account or a farm income stabilization account, that were, on or after the individual's death and as a consequence thereof, transferred or distributed to the trust, the fair market value of which properties immediately after the individual's death was not less than the debts of the individual, minus the amounts described in section 449, section 440 does not apply to the properties so listed and, notwithstanding the payment of, or provision for payment of, any outstanding debts of the individual at the time of the death, the trust is deemed to be a trust referred to in section 440.

1973, c. 17, s. 49; 1994, c. 22, s. 175; 1997, c. 85, s. 71; 2004, c. 21, s. 80.

446. Where the fair market value, immediately after the individual's death, of the properties referred to in paragraph b of section 445 exceeds the debts of the individual, minus the amounts described in section 449, and the legal representative designates one property, in the return referred to in that paragraph b, that is capital property other than depreciable property or money,

 (a) the capital gain or capital loss, as the case may be, from the disposition that such individual is deemed to have made of that capital property under section 436 is the portion of that gain or loss represented by the proportion between the amount by which the fair market value of that capital property immediately after his death exceeds that excess, and that fair market value at the same time; and

 (b) the cost of that capital property to the trust is, where the individual has a capital gain contemplated in paragraph a, the aggregate of the adjusted cost base of that capital property to him immediately before his death and the capital gain so determined or, where the individual has a capital loss contemplated in the said paragraph, the amount by which the adjusted cost base to him immediately before his death exceeds the capital loss so determined.

1973, c. 17, s. 49; 1977, c. 26, s. 54; 1994, c. 22, s. 176; 1997, c. 85, s. 72.

447. For the purposes of sections 445 and 446, there shall be deducted from the fair market value of property contemplated therein the amount remaining due on any debt secured by a hypothec or mortgage on that property.

1973, c. 17, s. 49; 1974, c. 18, s. 20; 1996, c. 39, s. 126; 2005, c. 1, s. 104.

448. The debts contemplated in sections 445 and 446, for an individual, mean any amount unpaid immediately before his death in respect of a debt or other obligation to pay and any amount payable by reason of his death, except an amount payable to a person as a beneficiary of the succession; they include tax payable by the individual or for him for any taxation year and all duties payable by reason of his death.

1973, c. 17, s. 49; 1998, c. 16, s. 251.

449. The amounts that must be deducted from the debts of the individual under paragraph b of section 445 and section 446 are the duties payable by reason of the death of the individual in respect of property of the trust or any interest therein, and any debt secured by a hypothec or mortgage on property owned by the individual immediately before his death.

1973, c. 17, s. 49; 1996, c. 39, s. 127; 2005, c. 1, s. 105.

450. The rules set out in the second paragraph apply to a trust and a child of the settlor of the trust in respect of a property to which sections 653 to 656.1 would, if this Act were read without reference to this section, apply to the trust because of the death of the beneficiary under the trust who was the settlor's spouse if

 (a) the property, or a property for which the property was substituted, was transferred to the trust by the settlor;

 (b) section 440, section 454, as that section applied in respect of a transfer that occurred before 1 January 2000, or subparagraph i of paragraph c of section 454.1 applied to the settlor and the trust in respect of the transfer referred to in subparagraph a;

 (c) the property is, immediately before the beneficiary's death,

(i)  land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada,

(ii)  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary's death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a of the first paragraph of section 451 were read without reference to “in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot”,

(iii)  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary's death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a.1 of the first paragraph of section 451 were read without reference to “in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis”, or

(iv)  an interest in a partnership that carried on a fishing or farming business in Canada in which it used all or substantially all of the property;

 (d) in the case of a property referred to in any of subparagraphs ii to iv of subparagraph c, the property, or a property for which the property was substituted, transferred to the trust by the settlor was, immediately before the transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;

 (e) the child of the settlor was resident in Canada immediately before the day on which the beneficiary died; and

 (f) because of the beneficiary's death, the property is transferred to and becomes vested indefeasibly in the settlor's child within the period ending 36 months after the beneficiary's death or, if application has been made to the Minister by the beneficiary's legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

 (a) if the trust does not make a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the trust's fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

(i)  sections 422 and 653 to 656.1 do not apply to the trust and the child in respect of the property,

(ii)  the trust is deemed, immediately before the beneficiary's death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the trust and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost of the property to the trust is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, or, immediately before the beneficiary's death, a share referred to in subparagraph ii or iii of subparagraph c of the first paragraph, the adjusted cost base of the property to the trust immediately before the time of the disposition of the property,

(iii)  if the property is, immediately before the beneficiary's death, an interest in a partnership described in subparagraph iv of subparagraph c of the first paragraph, other than an interest to which section 636 applies, the following rules apply:

(1)  the trust is deemed, except for the purposes of section 632, not to have disposed of the property because of the beneficiary's death,

(2)  the child is deemed to have acquired the property at the time of the beneficiary's death at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary's death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the trust, immediately before the beneficiary's death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the beneficiary's death, the adjusted cost base of the property to the child,

(iv)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, except where the trust's proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the trust exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(v)  despite subparagraph ii, if a property of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, and the trust's proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class and the capital cost of the property to the trust exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the trust's proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

 (b) if the trust makes a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act in the trust's fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

(i)  subparagraph a applies without reference to its subparagraphs i, ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph iv of this subparagraph b,

(ii)  if the property is described in subparagraph i of subparagraph c of the first paragraph, sections 653 to 656.1 do not apply to the trust in respect of the property,

(iii)  if the property is described in any of subparagraphs ii to iv of subparagraph c of the first paragraph, section 422 does not apply to the trust and the child in respect of the transfer of the property and section 653 does not apply to the trust in respect of the property,

(iv)  subject to subparagraph v, the trust is deemed, immediately before the beneficiary's death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the trust, the amount established in accordance with section 450.5 that is designated in respect of the property by the trust in the trust's fiscal return filed in accordance with section 1000 for the year in which the beneficiary under the trust died, if the trust and the child, at the end of their respective taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the beneficiary under the trust died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.11 or 9.31, if subparagraph 1 does not apply in respect of the property,

(v)  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the trust makes another valid election under subparagraph iii of paragraph b of subsection 9.31 of section 70 of the Income Tax Act in the trust's fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that subparagraph iii of paragraph b apply to the trust in respect of the property, and

(vi)  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph iv, or

(2)  if subparagraph v applies, at the time of the beneficiary's death and at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary's death.

However, subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph iv and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the trust, immediately before the beneficiary's death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the trust, the Minister may allow subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the trust, after the trust's filing-due date for the year in which the spouse died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the trust under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the trust incurs a penalty equal to $100 for each complete month from the trust's filing-due date for the year in which the spouse died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the trust in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.11 or 9.31 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the trust

 (a) shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the trust to the Minister of Revenue of Canada; and

 (b) incurs a penalty equal to $100 for each complete month from the trust's filing-due date for the year in which the spouse died and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the trust incurs under this section in respect of the property may not exceed the greater of the penalties that the trust would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1975, c. 22, s. 100; 1979, c. 18, s. 32; 1986, c. 15, s. 82; 1986, c. 19, s. 102; 1993, c. 16, s. 185; 1994, c. 22, s. 177; 1995, c. 49, s. 128; 1997, c. 3, s. 71; 1997, c. 85, s. 73; 2000, c. 5, s. 293; 2002, c. 40, s. 37; 2003, c. 2, s. 120; 2004, c. 8, s. 93; 2007, c. 12, s. 58; 2009, c. 5, s. 151.

450.1. (Repealed).

1979, c. 18, s. 33; 1986, c. 19, s. 103; 1987, c. 67, s. 104.

450.2. For the purposes of sections 436, 439, 439.1 and 653 and Chapter I of Title I.1 of Book VI, the fair market value at a particular time of any property deemed to be disposed of at that time by reason of a particular individual’s death or as a consequence of the particular individual becoming or ceasing to be resident in Canada shall be determined as though the fair market value at that time of any life insurance policy under which the particular individual, or any other individual not dealing at arm’s length with the particular individual at that time or at the time the policy is issued, is the person whose life is insured, were equal to the cash surrender value, within the meaning of paragraph d of section 966, of the policy immediately before the particular individual died or became or ceased to be resident in Canada, as the case may be.

1984, c. 15, s. 99; 1985, c. 25, s. 90; 1986, c. 19, s. 104; 1994, c. 22, s. 178; 1997, c. 3, s. 71; 2003, c. 2, s. 121; 2004, c. 8, s. 94.

450.3. (Repealed).

1985, c. 25, s. 90; 1987, c. 67, s. 105.

450.4. (Repealed).

1985, c. 25, s. 90; 1986, c. 19, s. 105; 1987, c. 67, s. 105.

450.5. For the purposes of subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 444 and subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph of section 450, the amount designated in respect of a property by the legal representative of the individual referred to in section 444 or by the trust referred to in section 450, as the case may be, must not be less than the lesser of nor greater than the greater of

 (a) the fair market value of the property immediately before the time of its disposition; and

 (b) where

(i)  the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the individual or to the trust and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of the property of that class to the individual or to the trust that the capital cost of the property to the individual or to the trust is of the capital cost to the individual or to the trust of all the property of that class that had not, at or before that time, been disposed of,

(ii)  in the case of the individual referred to in section 444, the property is land, other than land to which subparagraph i applies, a share of the capital stock of a family farm corporation, a share of the capital stock of a family fishing corporation, an interest in a family farm partnership, or an interest in a family fishing partnership, the adjusted cost base of the property to the individual immediately before the time of the disposition of the property, or

(iii)  in the case of the trust referred to in section 450, the property is land, other than land to which subparagraph i applies, a share referred to in subparagraph ii or iii of subparagraph c of the first paragraph of that section, or an interest in a partnership described in subparagraph iv of subparagraph c of the first paragraph of that section, the adjusted cost base of the property to the trust immediately before the time of the disposition of the property.

If the amount designated in respect of a property is less than the lesser of the amounts determined in respect of the property under subparagraphs a and b of the first paragraph, it is deemed, for the purposes of subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph of section 444 and subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph of section 450, to be equal to the lesser of those amounts, and if it is greater than the greater of those amounts, it is deemed, for the purposes of those subparagraphs 1, to be equal to the greater of the amounts determined under those subparagraphs a and b of the first paragraph in respect of the property.

1986, c. 15, s. 83; 1995, c. 49, s. 129; 1997, c. 3, s. 71; 1997, c. 85, s. 74; 2007, c. 12, s. 59.

450.6. Section 444 applies in respect of the transfer of a property as if “to a child” and “in the child” were replaced by “to the father or mother” and “in the father or mother”, respectively, and as if “the child” were replaced by “the father or mother”, if

 (a) the property was acquired by an individual in circumstances where any of sections 444, 450 and 460 to 462 applied in respect of the acquisition;

 (b) the property is transferred to the father or mother of the individual because of the individual's death; and

 (c) the individual's legal representative makes a valid election in the fiscal return filed under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) for the taxation year in which the individual died, to have subsection 9.6 of section 70 of that Act apply in respect of the transfer.

1986, c. 15, s. 83; 1997, c. 85, s. 75; 2007, c. 12, s. 60.

450.7. (Repealed).

1986, c. 15, s. 83; 1986, c. 19, s. 106; 1987, c. 67, s. 106.

450.8. (Repealed).

1986, c. 15, s. 83; 1987, c. 67, s. 106.

450.9. For the purposes of section 105, paragraph b of section 130, sections 444 and 459, subparagraph iv of subparagraphs a and a.0.1 of the first paragraph of section 726.6, a property of an individual is, at a particular time, deemed to be used by the individual in a fishing or farming business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a fishing or farming business in Canada, by

 (a) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation, or a share of the capital stock of a family fishing corporation, of the individual or of the spouse, a child or the father or mother of the individual; or

 (b) a partnership, a partnership interest in which is an interest in a family farm partnership, or an interest in a family fishing partnership, of the individual or of the spouse, a child or the father or mother of the individual.

1986, c. 15, s. 83; 1993, c. 16, s. 186; 1997, c. 3, s. 71; 2005, c. 1, s. 106; 2007, c. 12, s. 61.

450.10. For the purposes of Divisions I to III and, where a provision of either of those divisions, other than this section, applies, for the purposes of sections 93 to 104 and Chapter III of Title III, but not for the purposes of any regulations made under paragraph a of section 130, the capital cost to an individual, or to a trust to which section 450 applies, of depreciable property of a prescribed class disposed of immediately before the death of the individual or, as the case may be, of the spouse referred to in that section 450, shall, in respect of property that was not disposed of by the individual or the trust before that time, be the amount that it would be, if

 (a) paragraph b of section 99 were read without reference to “the lesser of the following amounts” in the portion before subparagraph i thereof and without reference to subparagraph ii thereof;

 (b) subparagraph i of paragraph d of section 99 were read as follows:

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

 (c) section 99 were read without reference to paragraph d.1 thereof.

1995, c. 49, s. 130; 1998, c. 16, s. 166.

450.11. Where two or more depreciable properties of a prescribed class are disposed of at the same time as a consequence of an individual's death, Divisions I to III and paragraph a of the definition of cost amount in section 1 apply as if each property so disposed of were separately disposed of in the order designated by the individual's legal representative or, in the case of a trust referred to in section 450, by the trust and, where the taxpayer's legal representative or the trust, as the case may be, does not designate an order, in the order designated by the Minister.

1995, c. 49, s. 130.

451. In this division and sections 234 to 236, 236.2, 237, 240, 241, 261, 264, 271 to 273, 274.1, 278 to 280.4, 288, 293, 428 to 430, 432 to 435, 454 to 455.1 and 459 to 462:

 (a) share of the capital stock of a family farm corporation of an individual at any time means a share of the capital stock of a corporation owned by the individual at that time where, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

(i)  property that has been used, principally in the course of carrying on the business of farming in Canada in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot, by any of the following persons or partnerships:

(1)  the corporation or any other corporation, a share of the capital stock of which was a share of the capital stock of a family farm corporation of the individual or of a spouse, a child or the father or mother of the individual,

(1.1)  a corporation controlled by a corporation referred to in subparagraph 1,

(2)  the individual,

(3)  a spouse, a child or the father or mother of the individual, or

(4)  a partnership, an interest in which was an interest in a family farm partnership of the individual or of a spouse, a child or the father or mother of the individual,

(ii)  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

(iii)  partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

(iv)  property described in any of subparagraphs i to iii;

 (a.1) share of the capital stock of a family fishing corporation of an individual at any time means a share of the capital stock of a corporation owned by the individual at that time if all or substantially all of the fair market value of the property owned by the corporation at that time was attributable to

(i)  property that has been used principally in the course of carrying on a fishing business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis, by

(1)  the corporation or another corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual or of the spouse, a child or the father or mother of the individual,

(2)  a corporation controlled by a corporation described in subparagraph 1,

(3)  the individual,

(4)  the spouse, a child or the father or mother of the individual, or

(5)  a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual or of the spouse, a child or the father or mother of the individual,

(ii)  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

(iii)  partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

(iv)  property described in any of subparagraphs i to iii;

 (b) (subparagraph repealed);

 (c) (subparagraph repealed);

 (d) child of a taxpayer includes a grandchild and a great grandchild of the taxpayer and a person who, at any time before he attained the age of 19 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control;

 (e) (subparagraph repealed);

 (f) interest in a family farm partnership of an individual at any time means an interest owned by the individual at that time in a partnership where, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(i)  property that has been used, principally in the course of carrying on the business of farming in Canada in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot, by the partnership or by

(1)  the individual,

(2)  a spouse, a child or the father or mother of the individual,

(3)  a corporation a share of the capital stock of which was a share of the capital stock of a family farm corporation of the individual or of a spouse, a child or the father or mother of the individual, or

(4)  a partnership, a partnership interest in which is an interest in a family farm partnership of the individual or of the spouse, a child or the father or mother of the individual,

(ii)  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

(iii)  partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

(iv)  property described in any of subparagraphs i to iii;

 (g) interest in a family fishing partnership of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(i)  property that has been used principally in the course of carrying on a fishing business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis by the partnership or by

(1)  the individual,

(2)  the spouse, a child or the father or mother of the individual,

(3)  a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual or of the spouse, a child or the father or mother of the individual, or

(4)  a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual or of the spouse, a child or the father or mother of the individual,

(ii)  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

(iii)  partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

(iv)  property described in any of subparagraphs i to iii.

For the purposes of subparagraph a of the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

1977, c. 26, s. 55; 1979, c. 18, s. 34; 1980, c. 13, s. 46; 1982, c. 5, s. 107; 1984, c. 15, s. 100; 1985, c. 25, s. 91; 1986, c. 15, s. 84; 1987, c. 67, s. 107; 1989, c. 5, s. 68; 1994, c. 22, s. 179; 1997, c. 3, s. 71; 2001, c. 7, s. 46; 2004, c. 8, s. 95; 2004, c. 21, s. 81; 2007, c. 12, s. 62; 2010, c. 5, s. 43.

DIVISION IV 
COMPUTATION OF INCOME
1972, c. 23.

452. Subject to section 453, in computing the income of a taxpayer for the taxation year in which the taxpayer died, sections 153 and 208, subparagraph b of the first paragraph of section 234, paragraph b of section 234.0.1, the amount that the taxpayer may deduct under subparagraph a of the first paragraph of section 279 and sections 357 and 358, as they read in respect of a disposition of property, may not be taken into account.

1972, c. 23, s. 368; 1975, c. 22, s. 101; 1978, c. 26, s. 79; 1987, c. 67, s. 108; 1993, c. 16, s. 187; 2000, c. 5, s. 102; 2009, c. 5, s. 152; 2010, c. 5, s. 44.

DIVISION V 
ELECTION BY SPOUSE OR TRUST
1972, c. 23.

453. If a right to receive an amount is transferred or distributed as a consequence of the death of a taxpayer to a beneficiary who is the taxpayer's spouse resident in Canada immediately before the death or a trust referred to in section 440, and the beneficiary and the legal representative of the taxpayer make a valid election under subsection 2 of section 72 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of that right, the following rules apply if the taxpayer was resident in Canada immediately before dying:

 (a) sections 153 and 208 and sections 357 and 358, as they read in respect of the disposition of property, apply in computing the taxpayer's income for the taxation year of the taxpayer's death, subparagraph b of the first paragraph of section 234 applies in computing the taxpayer's gain for that year and section 452 does not apply for the purpose of computing the taxpayer's gain referred to in subparagraph a of the first paragraph of section 279 for that year, and the beneficiary must include in computing the beneficiary's income or gain for the beneficiary's first taxation year ending after the death the amounts deducted in respect of the taxpayer under sections 153 and 208, subparagraph b of the first paragraph of section 234, subparagraph a of the first paragraph of section 279 or sections 357 and 358;

 (b) the amounts provided for in subparagraph a are deemed to have been included in computing the income or earnings of the beneficiary for a previous year, from a similar source;

 (c) despite paragraphs a and b, if the taxpayer had disposed of a property, the beneficiary is deemed, for the purpose of computing any reserve the beneficiary may deduct, in respect of the disposition of property, under section 153, subparagraph b of the first paragraph of section 234, subparagraph a of the first paragraph of section 279 or either of sections 357 and 358, as they read in respect of that disposition, in computing the beneficiary's income for a taxation year ending after the death of the taxpayer, to be the taxpayer who had disposed of the property and to have disposed of it at the time it was disposed of by the taxpayer.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2 of section 72 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 369; 1973, c. 17, s. 50; 1975, c. 22, s. 102; 1984, c. 15, s. 101; 1987, c. 67, s. 109; 1990, c. 59, s. 172; 1993, c. 16, s. 188; 1994, c. 22, s. 180; 1997, c. 14, s. 77; 2009, c. 5, s. 153; 2010, c. 5, s. 45.

CHAPTER IV 
INTER VIVOS TRANSFERS
1972, c. 23; 1973, c. 17, s. 51.

454. Where at any time a capital property of an individual, other than a trust, is transferred in any of the circumstances to which section 454.1 applies and both the individual and the transferee are resident in Canada at that time, the capital property is deemed to be disposed of at that time by the individual and acquired by the transferee for an amount equal to the adjusted cost base of the capital property immediately before that time or, where the capital property is depreciable property, to the proportion of the undepreciated capital cost of all the property of the same class that the fair market value before that time of the capital property is of the fair market value before that time of the aggregate of all of the property of the same class.

This section does not apply to such a transfer where the taxpayer makes a valid election under subsection 1 of section 73 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) to have the provisions of that subsection not apply to the transfer.

1972, c. 23, s. 370; 1979, c. 38, s. 15; 1982, c. 5, s. 108; 1993, c. 16, s. 189; 1994, c. 22, s. 181; 1997, c. 85, s. 76; 2003, c. 2, s. 122.

454.1. Subject to section 454.2, the circumstances to which section 454 refers are the following:

 (a) the capital property is transferred to the individual’s spouse;

 (b) the capital property is transferred to a former spouse of the individual in settlement of rights arising out of their marriage; and

 (c) the capital property is transferred to a trust created by the individual if the terms of the deed creating it

(i)  entitled the individual’s spouse to receive all of the income of the trust that arose before the spouse’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust,

(ii)  entitled the individual to receive all of the income of the trust that arose before the individual’s death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(iii)  entitled the individual and the individual’s spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust.

2003, c. 2, s. 123.

454.2. Section 454.1 applies to a transfer of capital property by an individual to a trust of which the terms of the deed creating it meet the conditions in subparagraph ii or iii of paragraph c of that section only where

 (a) the trust was created after 31 December 1999;

 (b) either

(i)  the individual attained 65 years of age at the time the trust was created, or

(ii)  the transfer does not result in a change in beneficial ownership of the capital property and there is immediately after the transfer no absolute or contingent right of a person, other than the individual, or partnership as a beneficiary, determined with reference to section 646.1, under the trust; and

 (c) in the case of a trust of which the terms of the deed creating it meet the conditions in subparagraph ii of paragraph c of section 454.1, the trust does not make an election under subparagraph d of the second paragraph of section 653.

2003, c. 2, s. 123.

455. Where section 454 applies and the capital cost to the taxpayer of a depreciable property of a prescribed class exceeds the amount determined under that section, the following rules apply for the purposes of sections 93 to 104, 130 and 130.1 and of the regulations made under paragraph a of section 130 or section 130.1:

 (a) the capital cost of such capital property to the transferee is deemed to be the capital cost of such capital property to the taxpayer; and

 (b) the excess is deemed to have been allowed to the transferee in respect of such capital property under the regulations made under paragraph a of section 130 in computing his income for the previous taxation years.

1972, c. 23, s. 371; 1979, c. 18, s. 35; 1979, c. 38, s. 16.

455.0.1. Where, in respect of the property referred to in section 454 and by virtue of subsection 3.2 of section 220 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the time for making the election referred to in the second paragraph of section 454 is extended or such an election made previously is rescinded, the taxpayer

 (a) shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the taxpayer to the Minister of Revenue of Canada; and

 (b) incurs a penalty equal to $100 for each complete month from the taxpayer's filing-due date for the year in which the transfer is made and ending on the day on which the notice referred to in subparagraph a is sent to the Minister, up to $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the election or the rescinded election referred to in the first paragraph.

1997, c. 85, s. 77; 2000, c. 5, s. 293; 2003, c. 2, s. 124; 2009, c. 5, s. 154.

455.1. (Repealed).

1979, c. 38, s. 17; 1984, c. 15, s. 102.

456. (Repealed).

1972, c. 23, s. 372; 1975, c. 22, s. 103; 1977, c. 26, s. 56; 1980, c. 13, s. 47; 1982, c. 5, s. 109; 1987, c. 67, s. 110.

456.1. For the purposes of this chapter, where a property becomes the property of an individual following the declaratory effect of a partition following the dissolution of the matrimonial regime to which that individual was subject and where that individual was not the deemed owner of the property under section 2.1 immediately before that dissolution, that property is deemed to have been transferred to that individual by his spouse immediately before that dissolution.

1979, c. 38, s. 18.

457. (Repealed).

1972, c. 23, s. 373; 1975, c. 22, s. 104; 1987, c. 67, s. 111.

457.1. (Repealed).

1979, c. 38, s. 19; 1982, c. 5, s. 110; 1987, c. 67, s. 111.

458. (Repealed).

1972, c. 23, s. 374; 1975, c. 22, s. 104; 1987, c. 67, s. 111.

459. Sections 460 to 462 apply to an individual and to a child of the individual in respect of a property transferred, at any time, by the individual to the child, if the child was resident in Canada immediately before the transfer and if

 (a) the property was, before the transfer, land situated in Canada, a depreciable property of a prescribed class situated in Canada or an incorporeal capital property in respect of a fishing or farming business carried on by the individual in Canada, and was used principally in the business of fishing or farming in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of a property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot; or

 (b) the property was, immediately before the transfer, a share of the capital stock of a family farm corporation of the individual, a share of the capital stock of a family fishing corporation of the individual, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual.

1973, c. 17, s. 52; 1979, c. 18, s. 36; 1986, c. 19, s. 107; 1994, c. 22, s. 182; 1997, c. 3, s. 71; 2004, c. 8, s. 96; 2005, c. 1, s. 107; 2007, c. 12, s. 63; 2015, c. 21, s. 172.

460. If, because of section 459, this section applies to an individual in respect of a property transferred by the individual to the child of the individual, the following rules apply:

 (a) in cases where paragraph b and section 461 do not apply, the individual is deemed to have disposed of the property, at the time of the transfer, for proceeds equal to proceeds of disposition otherwise determined;

 (b) subject to paragraph c, if the proceeds of disposition of the property otherwise determined exceed the greater of the following amounts, the individual is deemed to have disposed of the property at the time of the transfer for the greater of those amounts:

(i)  the fair market value of the property immediately before the time of the transfer, and

(ii)  if, immediately before the transfer, the property was

(1)  a depreciable property of a prescribed class, the lesser of the capital cost of the property and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of the property of that class to the individual that the capital cost of the property to the individual is of the capital cost to the individual of all the property of that class that had not, at or before that time, been disposed of,

(2)  land, a share of the capital stock of a family farm corporation of the individual, a share of the capital stock of a family fishing corporation of the individual, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, the adjusted cost base of the property to the individual immediately before the time of the transfer, or

(3)  an incorporeal capital property in respect of a business, the amount obtained by multiplying 4/3 by that proportion of the individual's eligible incorporeal capital amount in respect of the business that the fair market value of the property immediately before the transfer was of the fair market value at that time of the aggregate of the individual's incorporeal capital property in respect of the business;

 (c) if, immediately before the transfer, the property was an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual and the individual receives no consideration in respect of the transfer of the property and makes a valid election under paragraph c of subsection 4.1 of section 73 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in the individual's fiscal return filed under Part I of that Act for the taxation year that includes the time of the transfer, to have that paragraph c apply in respect of the transfer of the property, the individual is deemed, except for the purposes of section 632, not to have disposed of the property at the time of the transfer; and

 (d) section 422 does not apply to the individual in respect of the property.

1973, c. 17, s. 52; 1979, c. 18, s. 37; 1990, c. 59, s. 173; 1994, c. 22, s. 183; 1997, c. 3, s. 71; 2005, c. 1, s. 108; 2007, c. 12, s. 63.

461. If the proceeds of disposition, otherwise determined, of a property referred to in any of subparagraphs 1 to 3 of subparagraph ii of paragraph b of section 460 are less than the lesser of the amount referred to in subparagraph i of that paragraph b and the amount determined under any of subparagraphs 1 to 3 of subparagraph ii of that paragraph b that is applicable in respect of the property, they are deemed to be equal to the lesser of those amounts.

1973, c. 17, s. 52; 2007, c. 12, s. 63.

462. If, because of section 459, this section applies to a child of an individual in respect of a property transferred by the individual to the child, the following rules apply:

 (a) section 422 does not apply to the child in respect of the property;

 (b) subject to subparagraph e, if the property is a depreciable property of a prescribed class of the individual, land, a share of the capital stock of a family farm corporation of the individual, a share of the capital stock of a family fishing corporation of the individual, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, the child is deemed to have acquired the property at a cost equal to the individual's proceeds of disposition of the property, as determined under paragraphs a and b of section 460 and section 461;

 (c) if the property was a depreciable property of a prescribed class of the individual and the capital cost of the property to the individual exceeds the capital cost of the property to the child, for the purposes of sections 93 to 104, 130 and 130.1 and regulations under section 130 or 130.1, the capital cost of the property to the child is deemed to be the amount that was the capital cost of the property to the individual immediately before the transfer and the excess is deemed to have been allowed to the child in respect of the property as depreciation in computing income for the taxation years that ended before the child acquired the property;

 (d) if the property was, immediately before the transfer, an incorporeal capital property of the individual in respect of a business and the child does not continue to carry on the business, the child is deemed to have acquired a capital property, immediately after the transfer, at a cost equal to the individual's proceeds of disposition of the property, as determined under paragraphs a and b of section 460 and section 461; however, if the child continues to carry on the business, the child is deemed to have acquired the incorporeal capital property and have disbursed an incorporeal capital amount equal to the aggregate of

(i)  the individual's proceeds of disposition of the property, as determined under paragraphs a and b of section 460 and section 461, and

(ii)  4/3 of the amount by which that proportion of the excess determined under subparagraph a of the second paragraph of section 107 in respect of the individual's business immediately before the transfer that the fair market value of the property, immediately before the transfer, is of the fair market value at that time of the aggregate of the individual's incorporeal capital property in respect of the business, exceeds the amount included under paragraph a of section 105 in computing the individual's income as a result of the disposition; and

 (e) if the property was, immediately before the transfer, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, other than an interest to which section 636 applies, and the individual receives no consideration in respect of the transfer of the property and makes the election referred to in paragraph c of section 460 in respect of the transfer of the property, the following rules apply:

(i)  the child is deemed to have acquired the property at the time of the transfer at a cost equal to the cost of the interest to the individual immediately before the time of the transfer, and

(ii)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the individual, immediately before the transfer, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing at any time at or after the time of the transfer, the adjusted cost base of the property to the child.

For the purpose of determining, at any subsequent time, the eligible incorporeal capital amount of the child referred to in subparagraph d of the first paragraph in respect of the business the child continues to carry on, an amount equal to 3/4 of the amount determined under subparagraph ii of that subparagraph d is to be added to the aggregate otherwise determined under subparagraph i of subparagraph a of the second paragraph of section 107.

For the purpose of determining, after the time of the transfer, the amount deemed to be the child's capital gain and the amount to be included in computing the child's income, in respect of any disposition of the property, that proportion of the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 in respect of the business immediately before the time of the transfer that the fair market value of the property transferred immediately before that time is of the fair market value, immediately before that time, of the aggregate of the incorporeal capital property of the individual in respect of the business, is to be added to the amount otherwise determined under that subparagraph ii in respect of the business.

1973, c. 17, s. 52; 1979, c. 18, s. 38; 1990, c. 59, s. 174; 1994, c. 22, s. 184; 1996, c. 39, s. 128; 2003, c. 2, s. 125; 2005, c. 1, s. 109; 2007, c. 12, s. 63.

462.0.1. Where at any time a taxpayer disposes of an interest in the taxpayer's NISA Fund No. 2, an amount equal to the balance in the fund so disposed of is deemed to have been paid out of the fund at that time to the taxpayer except that,

 (a) where the interest is disposed of to the taxpayer's spouse, former spouse or an individual referred to in subparagraph d of the second paragraph of section 454, as it applies in respect of transfers of property that occurred before 1 January 1993, in settlement of rights arising out of their marriage, on or after the breakdown of the marriage, that amount is not deemed to have been paid to the taxpayer if

(i)  the disposition is made under a decree, order or judgment of a competent tribunal or, in the case of a spouse or former spouse, under a written separation agreement, and

(ii)  the taxpayer elects in the taxpayer's fiscal return under this Part for the taxation year in which the property was disposed of to have this paragraph apply to the disposition;

 (b) where the interest is disposed of to a taxable Canadian corporation in a transaction in respect of which section 518 applies, an amount equal to the proceeds of disposition in respect of that interest is deemed to be paid, at that time, to the taxpayer out of the taxpayer's NISA Fund No. 2.

1994, c. 22, s. 185; 1995, c. 49, s. 236; 1996, c. 39, s. 129; 1997, c. 3, s. 71; 1997, c. 85, s. 78.

462.0.2. Where at any time a taxpayer disposes of an interest in the taxpayer’s farm income stabilization account, an amount equal to the balance of the account so disposed of is deemed, subject to the second and third paragraphs, to have been paid out of that account at that time to the taxpayer.

The rule set out in the first paragraph does not apply where the interest in the taxpayer’s farm income stabilization account is disposed of by the taxpayer to the taxpayer’s spouse or former spouse, in settlement of rights arising out of their marriage, on or after the breakdown of the marriage, if

 (a) the disposition is made under an order or judgment of a competent tribunal or under a written separation agreement; and

 (b) the taxpayer elects in the taxpayer’s fiscal return under this Part for the taxation year in which the interest was disposed of to have this paragraph apply to the disposition.

Where at any time a taxpayer who is an individual disposes of an interest in the taxpayer’s farm income stabilization account to a taxable Canadian corporation in a transaction in respect of which section 518 applies, an amount equal to the proceeds of disposition in respect of that interest is deemed to be paid, at that time, to the taxpayer out of that account.

2004, c. 21, s. 82.

462.1. Where an individual has transferred or loaned property, otherwise than by partition of a retirement pension pursuant to sections 158.3 to 158.8 of the Act respecting the Québec Pension Plan (chapter R-9) or any comparable provision of a similar plan, within the meaning of that Act, either directly or indirectly, by means of a trust or otherwise, to or for the benefit of a person who is, or who has since become, the spouse of the individual, any income or loss of that person for a taxation year from the property or from property substituted for it, that relates to the period in the year throughout which the individual is resident in Canada and is the person's spouse, is deemed to be income or a loss of the individual for the year and not of that person.

1987, c. 67, s. 112; 1989, c. 77, s. 52; 1995, c. 1, s. 42; 2013, c. 10, s. 33.

462.2. If an individual has transferred or loaned a property, either directly or indirectly, by means of a trust or otherwise, to or for the benefit of a person who was under 18 years of age and who is not dealing with the individual at arm's length or is the niece or nephew of the individual, other than an amount received in respect of that person because of the application of subsection 1 of section 122.61 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), section 4 of the Universal Child Care Benefit Act, enacted by section 168 of the Budget Implementation Act, 2006 (Statutes of Canada, 2006, chapter 4), or section 1029.8.61.18, any income or loss of that person for a taxation year from the property or from any property substituted for that property, that relates to the period in the year throughout which the individual is resident in Canada, is deemed to be income or a loss of the individual for the year and not of that person unless that person has reached 18 years of age before the end of the year.

1987, c. 67, s. 112; 1993, c. 64, s. 35; 1994, c. 22, s. 186; 2007, c. 12, s. 64.

462.3. For the purposes of sections 462.1 and 462.2, where, at any time, an individual has loaned or transferred property, either directly or indirectly, by means of a trust or otherwise, to or for the benefit of a person, and the loaned or transferred property or property substituted therefor is used to repay, in whole or in part, borrowed money with which other property was acquired, or to reduce an amount payable for other property, there shall be included in computing the income from the loaned or transferred property, or from any property substituted therefor, that is so used, the amount determined under section 462.4.

However, nothing in this section shall affect the application of sections 462.1 and 462.2 to any income or loss derived from the other property or from any property substituted therefor.

1987, c. 67, s. 112.

462.4. The amount referred to in section 462.3 is equal to that proportion of the income or loss, as the case may be, derived after that time from the other property or from any property substituted therefor that the fair market value at that time of the loaned or transferred property, or property substituted therefor, that is so used is of the cost to that person of the other property at the time of its acquisition.

1987, c. 67, s. 112.

462.5. Where an individual has loaned or transferred property, either directly or indirectly, by means of a trust or otherwise, to or for the benefit of a person hereinafter referred to as the recipient who is his spouse or who has since become his spouse, the following rules apply for the purposes of computing the income of the individual and the recipient for a taxation year:

 (a) the amount, if any, by which the aggregate of the recipient's taxable capital gains for the year from dispositions of property, other than precious property, that is property so loaned or transferred or property substituted therefor occurring in the period throughout which the individual is resident in Canada and the recipient is his spouse exceeds the aggregate of the recipient's allowable capital losses for the year from dispositions of such property occurring in such period, or the amount, if any, by which the aggregate of such losses exceeds, for the year, the aggregate of such gains, is deemed to be a taxable capital gain or an allowable capital loss, as the case may be, of the individual for the year from the disposition of property other than precious property;

 (b) the amount, if any, by which the amount that the aggregate of the recipient's gains for the year from dispositions occurring in the period described in paragraph a of precious property that is property so loaned or transferred or property substituted therefor would be if the recipient had at no time owned other precious property exceeds the amount that the aggregate of the recipient's losses for the year from dispositions of such property would be during that period if the recipient had at no time owned other precious property or the amount, if any, by which the aggregate of such losses so determined exceeds, for the year, the aggregate of such gains so determined is deemed to be a gain or a loss, as the case may be, of the individual for the year from the disposition of precious property;

 (c) any taxable capital gain or allowable capital loss or any gain or loss taken into account in computing an amount described in paragraph a or b is, except for the purposes of those paragraphs and to the extent that the amount so described is deemed by virtue of this section to be a taxable capital gain or an allowable capital loss or a gain or loss of the individual, deemed not to be a taxable capital gain or an allowable capital loss or a gain or loss, as the case may be, of the recipient.

1987, c. 67, s. 112.

462.6. Where an individual is deemed to have a taxable capital gain or an allowable capital loss for a taxation year under any of sections 457 and 458, as they read before their repeal for that year, 462.5, 463 and 467, such portion of the gain or loss as may reasonably be considered to relate to the disposition of a property by another person in the year is deemed, for the purposes of sections 28 and 727 to 737, as they apply for the purposes of Title VI.5 of Book IV, to arise from the disposition of that property by the individual in the year, and that property is deemed, for the purposes of that Title, to have been disposed of by the individual on the day on which it was disposed of by the other person.

1987, c. 67, s. 112; 1990, c. 59, s. 175; 1993, c. 16, s. 190; 1996, c. 39, s. 130.

462.6.1. Section 462.5 does not apply to a disposition of property made under subparagraph b of the first paragraph of section 785.2 at a particular time by a taxpayer who is a recipient referred to in section 462.5, unless the recipient and the individual referred to in section 462.5 make a valid election under subsection 3 of section 74.2 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 3 of section 74.2 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2004, c. 8, s. 97; 2009, c. 5, s. 155.

462.6.2. For the purposes of section 462.6.1 and notwithstanding sections 1010 to 1011, any assessment of tax payable under this Part by the recipient or the individual referred to in section 462.5 shall be made by the Minister as is necessary to give effect to an election referred to in the first paragraph of section 462.6.1, except that no such assessment shall affect the computation of

 (a) interest payable under this Part to or by a taxpayer in respect of any period that is before the taxpayer's filing-due date for the taxation year that includes the first time, after the particular time referred to in the first paragraph of section 462.6.1, at which the recipient disposes of the property referred to in that paragraph; or

 (b) any penalty payable under this Part.

2004, c. 8, s. 97; 2009, c. 5, s. 156.

462.7. For the purposes of sections 462.8 to 462.24, designated person, in respect of an individual, means a person

 (a) who is the individual's spouse; or

 (b) who is under 18 years of age and who does not deal with the individual at arm's length, or is the niece or nephew of the individual.

1987, c. 67, s. 112.

462.8. The rules provided in sections 462.9 and 462.10 apply where an individual has loaned or transferred property, either directly or indirectly, by means of a trust or otherwise, to a trust in which another individual who is at any time a designated person in respect of the individual is beneficially interested at any time.

1987, c. 67, s. 112; 1994, c. 22, s. 187; 1996, c. 39, s. 273.

462.9. The income of the designated person referred to in section 462.8 for a taxation year from the property so loaned or transferred is deemed, for the purposes of sections 462.1 to 462.4, to be an amount equal to the lesser of

 (a) the amount in respect of the trust that was included by virtue of paragraph n of section 87 in computing the income for the year of the designated person, and

 (b) that proportion of the amount that would be the income of the trust for the year from the property or from any property substituted therefor if no deduction were made under paragraph a or b of section 657 or section 657.1 that

(i)  the amount determined under paragraph a in respect of the designated person for the year, is of

(ii)  the aggregate of all amounts each of which is an amount determined under paragraph a for the year in respect of the designated person or any other person who is throughout the year a designated person in respect of the individual.

1987, c. 67, s. 112.

462.10. The designated person referred to in section 462.8 is deemed, for the purposes of sections 462.5 and 462.6, to have derived a taxable capital gain for the year from the disposition of property other than precious property that is property so loaned or transferred for an amount equal to the lesser of

 (a) the amount that was designated under section 668 in respect of the designated person in the trust's fiscal return for the year, and

 (b) the amount, if any, by which the aggregate of all taxable capital gains for the year exceeds the aggregate of all allowable capital losses for the year from the disposition by the trust of property that is so loaned or transferred or any property substituted therefor.

1987, c. 67, s. 112.

462.11. For the purposes of this section and of sections 462.12 to 462.14,

 (a) excluded consideration, at any time, means consideration received by an individual that is

(i)  indebtedness,

(ii)  a share of the capital stock of a corporation, or

(iii)  a right to receive indebtedness or a share of the capital stock of a corporation;

 (b) outstanding amount of a transferred property or loan at a particular time means

(i)  in the case of a transfer of property to a corporation, the amount, if any, by which the fair market value of the property at the time of the transfer exceeds the aggregate of the fair market value, at the time of the transfer, of the consideration, other than consideration that is excluded consideration at the particular time, received by the transferor for the property, and the fair market value, at the time of receipt, of any consideration, other than consideration that is excluded consideration at the particular time, received by the transferor at or before the particular time from the corporation or from a person with whom the transferor deals at arm's length, in exchange for excluded consideration previously received by the transferor as consideration for the property or for excluded consideration substituted for such consideration;

(ii)  in the case of a loan of money or property to a corporation, the amount, if any, by which the principal amount of the loan of money at the time the loan was made, or the fair market value of the property loaned at the time the loan was made, as the case may be, exceeds the fair market value, at the time the repayment is received by the lender, of any repayment of the loan, other than a repayment that is excluded consideration at the particular time.

1987, c. 67, s. 112; 1997, c. 3, s. 71; 1999, c. 83, s. 54.

462.12. Where an individual has transferred or loaned property, either directly or indirectly, by means of a trust or otherwise, to a corporation and one of the main purposes of the transfer or loan may reasonably be considered to be to reduce the income of the individual and to benefit, either directly or indirectly, by means of a trust or otherwise, a person who is a designated person in respect of the individual, the individual is deemed in computing his income for any taxation year to have received as interest in the year, an amount equal to the amount determined under section 462.13, where the taxation year includes a period after the loan or transfer throughout which

 (a) the individual was resident in Canada;

 (b) the corporation was not a small business corporation; and

 (c) the person is a designated person in respect of the individual and would have been a specified shareholder of the corporation, within the meaning of section 21.17 if the reference therein to “any other corporation that is related to the corporation” were read as a reference to “any other corporation, other than a small business corporation, that is related to the corporation” and if section 21.18 were read without reference to paragraphs a and d thereof.

1987, c. 67, s. 112; 1993, c. 16, s. 191; 1997, c. 3, s. 71.

462.12.1. For the purposes of section 462.12, one of the main purposes of a transfer or loan by an individual to a corporation is not considered to be to benefit, either directly or indirectly, a designated person in respect of the individual, where

 (a) the only interest that the designated person has in the corporation is a beneficial interest in shares of the corporation held by a trust;

 (b) by the terms of the trust, the designated person may not receive or otherwise obtain the use of any of the income or capital of the trust while he is a designated person in respect of the individual; and

 (c) the designated person has not received or otherwise obtained the use of any of the income or capital of the trust, and no deduction has been made by the trust in computing its income under paragraphs a and b of section 657 or section 657.1 in respect of amounts paid or payable to, or included in the income of, that person while he was a designated person in respect of the individual.

1989, c. 77, s. 53; 1996, c. 39, s. 273; 1997, c. 3, s. 71.

462.13. The amount referred to in section 462.12 is equal to the amount, if any, by which the amount that would be interest on the outstanding amount of the loan or transferred property for such periods in the year as are contemplated in section 462.12 exceeds the amount determined under section 462.14 if the interest were computed thereon at the prescribed rate for such periods.

1987, c. 67, s. 112.

462.14. The amount to which section 462.13 refers is equal to the aggregate of the following amounts:

 (a) any interest received in the year by the individual in respect of the transfer or loan other than amounts deemed to have been received as interest under section 462.12;

 (b) the aggregate of all amounts included in computing the individual's income for the year under sections 497 and 577 in relation to the taxable dividends received by the individual in the year, other than dividends deemed under Chapter III of Title IX to have been received on shares that were received from the corporation as consideration for the transfer or as repayment for the loan that were excluded consideration at the time the dividends were received, or on shares substituted therefor that were excluded consideration at that time;

 (c) where the designated person is a specified individual in relation to the year, the amount required to be included in computing the designated person's income for the year in respect of all taxable dividends received by the designated person that can reasonably be considered to be part of the benefit sought to be conferred on the designated person under section 462.12 and are included in computing the designated person's split income for any taxation year.

1987, c. 67, s. 112; 1990, c. 59, s. 176; 1997, c. 3, s. 71; 2001, c. 53, s. 70; 2009, c. 5, s. 157.

462.15. Notwithstanding any other provision of this Act, sections 462.1, 462.2, 462.5 and 462.6 do not apply to any income, gain or loss derived in a particular taxation year from transferred or loaned property, as the case may be, or from property substituted therefor if

 (a) at the time of the transfer the fair market value of the transferred property did not exceed the fair market value of the property received by the transferor as consideration for the transferred property;

 (b) where the consideration received by the transferor included indebtedness or in the case of a loan,

(i)  interest was charged on the indebtedness or loan, as the case may be, at a rate equal to or greater than the lesser of the prescribed rate that was in effect at the time the indebtedness was incurred or the loan was made, and the rate that would, having regard to all the circumstances, have been agreed upon, at the time the indebtedness was incurred or the loan was made, between parties dealing with each other at arm's length;

(ii)  the amount of interest that was payable in respect of the particular year in respect of the indebtedness or loan was paid not later than 30 days after the end of the particular year;

(iii)  the amount of interest that was payable in respect of each taxation year preceding the particular year in respect of the indebtedness or loan was paid not later than 30 days after the end of each such taxation year;

 (c) where the property was transferred to or for the benefit of the transferor's spouse, the second paragraph of section 454 applies to the transfer.

1987, c. 67, s. 112; 1997, c. 85, s. 79; 2003, c. 2, s. 126.

462.16. Section 462.1 does not apply in respect of any income or loss from a property that is attributable to the period throughout which the persons referred to in that section lived separate and apart from each other because of a breakdown of their marriage, and sections 462.5 and 462.6 do not apply in respect of a disposition of property that occurs at any time while the persons referred to in those sections are living separate and apart from each other because of a breakdown of their marriage if the individual and the individual's spouse make a valid election under paragraph b of subsection 3 of section 74.5 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition.

Chapter V.2 of Title II of Book I applies in relation to an election made under paragraph b of subsection 3 of section 74.5 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1987, c. 67, s. 112; 1993, c. 16, s. 192; 1996, c. 39, s. 131; 2009, c. 5, s. 158.

462.17. No amount shall be included in computing the income of an individual under sections 462.12 to 462.14 in respect of a designated person in respect of the individual who is the spouse of the individual for any period throughout which the individual is living separate and apart from the designated person by reason of a breakdown of their marriage.

1987, c. 67, s. 112.

462.18. For the purposes of sections 462.19 and 462.20, specified person, with respect to an individual, means

 (a) a designated person in respect of the individual; or

 (b) a corporation, other than a small business corporation, of which a designated person in respect of the individual would have been a specified shareholder, within the meaning of section 21.17, if section 21.18 were read without reference to paragraphs a and d thereof.

1987, c. 67, s. 112; 1997, c. 3, s. 71.

462.19. Where an individual has loaned or transferred property to another person and that property, or property substituted therefor, is loaned or transferred by a third person directly or indirectly to or for the benefit of a specified person with respect to the individual, or to another person on condition that the property be loaned or transferred by a third person directly or indirectly to or for the benefit of a specified person with respect to the individual, the following rules apply:

 (a) for the purposes of sections 462.1 to 462.14, the property loaned or transferred by the third person is deemed to have been loaned or transferred, as the case may be, by the individual to or for the benefit of the specified person;

 (b) for the purposes of section 462.15, the consideration received by the third person for the transfer of the property is deemed to have been received by the individual.

1987, c. 67, s. 112.

462.20. Where an individual is obligated, either absolutely or contingently, to effect any undertaking including any guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of a loan made by a third person directly or indirectly to or for the benefit of a specified person with respect to the individual or the payment, in whole or in part, of any interest payable in respect of the loan, the following rules apply:

 (a) for the purposes of sections 462.1 to 462.14, the property loaned by the third person is deemed to have been loaned by the individual to or for the benefit of the specified person;

 (b) for the purposes of subparagraphs ii and iii of paragraph b of section 462.15, the amount of interest that is paid in respect of the loan is deemed not to include any amount paid by the individual to the third person as interest on the loan.

1987, c. 67, s. 112.

462.21. Where a taxpayer has loaned or transferred property, either directly or indirectly, by means of a trust or otherwise, to a trust in which another taxpayer is beneficially interested, the taxpayer is, for the purposes of sections 462.1 to 462.24, deemed to have loaned or transferred the property, as the case may be, to or for the benefit of the other taxpayer.

1987, c. 67, s. 112; 1994, c. 22, s. 188; 1996, c. 39, s. 273.

462.22. (Repealed).

1987, c. 67, s. 112; 1994, c. 22, s. 189.

462.23. Notwithstanding any other provision of this Act, sections 462.1 to 462.14 do not apply to a transfer or loan of property where it may reasonably be concluded that one of the main reasons for the transfer or loan, as the case may be, was to reduce the amount of tax that would, but for those sections, be payable under this Part on the income and gains derived from the property or from property substituted therefor.

1987, c. 67, s. 112.

462.24. Sections 462.1 to 462.10 do not apply in respect of a transfer by an individual of property

 (a) as a payment of a premium under a registered retirement savings plan under which the individual's spouse is, immediately after the transfer, the annuitant, within the meaning of section 905.1, to the extent that the premium is deductible in computing the income of the individual for a taxation year;

 (a.1) (paragraph repealed);

 (a.2) as a payment of a contribution under a registered disability savings plan;

 (b) as a payment to another individual who is his spouse or a person who was under 18 years of age in a taxation year and with whom the individual does not deal at arm's length or who is the nephew or niece of the individual of an amount that is deductible by the individual in computing his income for the year and is required to be included in computing the income of the other individual;

 (c) to the individual's spouse, while the property, or a property substituted for it, is held under a tax-free savings account of which the spouse is the holder, to the extent that the spouse does not, at the time of the contribution of the property under that account, have an excess TFSA amount, as defined in subsection 1 of section 207.01 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)).

1987, c. 67, s. 112; 1989, c. 77, s. 54; 1991, c. 25, s. 76; 2009, c. 15, s. 86; 2013, c. 10, s. 34.

462.24.1. Sections 456 to 458, 462.1, 462.2, 462.8 to 462.10 and 467 do not apply to any amount that is included in computing a specified individual’s split income for a taxation year.

2001, c. 53, s. 71.

462.25. For the purposes of sections 316.1, 462.1 to 462.4 and 462.8 to 462.10, where an individual has transferred or loaned property, directly or indirectly, by means of a trust or by any other means, to a person and the property or property substituted therefor is an interest in a partnership, the person's share of the amount of any income or loss of the partnership for a fiscal period in which the person was a specified member of the partnership is deemed to be income or loss, as the case may be, from the property or substituted property.

1990, c. 59, s. 177; 1997, c. 3, s. 71.

463. Where section 459 applies in respect of the transfer of property by a taxpayer to one of his children for an amount less than the fair market value of the property immediately before the transfer and where, in a taxation year during which he has not reached 18 years of age, the transferee disposes of the property, the following rules apply during the lifetime of the transferor while he is resident in Canada:

 (a) the amount, if any, by which the aggregate of the transferee's taxable capital gains for the year from dispositions of property so transferred exceeds the aggregate of the transferee's allowable capital losses from such dispositions or the amount, if any, by which the aggregate of such losses exceeds, in the year, the aggregate of such gains is deemed to be a taxable capital gain or an allowable capital loss, as the case may be, of the transferor for the year from dispositions of property;

 (b) any taxable capital gain or allowable capital loss taken into account in computing an amount described in paragraph a is, except for the purposes of that paragraph, to the extent that the amount so described is deemed by virtue of this section to be a taxable capital gain or an allowable capital loss of the transferor, deemed not to be a taxable capital gain or an allowable capital loss, as the case may be, of the transferee.

1974, c. 18, s. 21; 1975, c. 22, s. 105; 1987, c. 67, s. 113; 1993, c. 16, s. 193.

463.1. (Repealed).

1979, c. 18, s. 39; 1980, c. 13, s. 48; 1987, c. 67, s. 114.

464. (Repealed).

1972, c. 23, s. 375; 1980, c. 13, s. 49.

465. (Repealed).

1972, c. 23, s. 376; 1980, c. 13, s. 49.

466. (Repealed).

1972, c. 23, s. 377; 1975, c. 22, s. 106; 1987, c. 67, s. 115.

467. The income, loss, taxable capital gain or allowable capital loss attributable to property held by a trust created since 1934 that is resident in Canada is deemed, if the property or property for which it was substituted has been directly or indirectly received from a person (in this section referred to as the “transferor”), to be that of the transferor throughout the existence of the transferor as long as the transferor is resident in Canada and if either property meets any of the following conditions:

 (a) it may revert to the transferor;

 (b) it may pass to persons to be determined by the transferor at a time subsequent to the creation of the trust; and

 (c) it may not be disposed of during the existence of the transferor without the transferor’s consent.

1972, c. 23, s. 378; 2001, c. 7, s. 47; 2003, c. 2, s. 127; 2015, c. 36, s. 21.

467.1. Section 467 does not apply to property held in a taxation year

 (a) by a trust governed by a retirement compensation arrangement, a registered retirement income fund, a deferred profit sharing plan, a registered pension plan, a pooled registered pension plan, an employee benefit plan, a profit sharing plan, a registered education savings plan, a registered disability savings plan, a registered retirement savings plan, a registered supplementary unemployment benefit plan or a tax-free savings account;

 (b) by an employee trust, an employee life and health trust, a segregated fund trust within the meaning of subparagraph k of the first paragraph of section 835, a trust described in subparagraph a.1 of the third paragraph of section 647, a trust described in paragraph m of section 998 or a private foundation that is a registered charity;

 (c) (paragrapgh repealed);

 (c.1) by an environmental trust; or

 (d) by a prescribed trust.

1986, c. 19, s. 108; 1991, c. 25, s. 77; 1996, c. 39, s. 132; 2000, c. 5, s. 103; 2003, c. 2, s. 128; 2009, c. 15, s. 87; 2010, c. 25, s. 31; 2011, c. 6, s. 132; 2015, c. 21, s. 173; 2015, c. 36, s. 22.

467.2. If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer is deductible under paragraph f of section 339 in computing the taxpayer's income, the following rules apply:

 (a) any amount that is paid out of or under the annuity at a particular time after 31 December 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by another taxpayer; and

 (b) if the taxpayer dies after 31 December 2005,

(i)  the taxpayer is deemed to have received, immediately before the taxpayer's death, an amount out of or under the annuity equal to the fair market value of the annuity at the time of the taxpayer's death, and

(ii)  for the purposes of section 436, the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer's death) of the taxpayer's interest in the trust that is the annuitant under the annuity.

2009, c. 15, s. 88.

468. (Repealed).

1972, c. 23, s. 379; 1982, c. 5, s. 111.

CHAPTER V 
CONSIDERATION FOR EXPROPRIATED PROPERTY
1973, c. 17, s. 53.

DIVISION I 
GENERAL RULES
1973, c. 17, s. 53.

469. The rules provided in this chapter apply where a taxpayer acquires any bond, debenture, hypothecary claim, mortgage, bill or similar obligation hereinafter called indemnity issued by the government of a foreign country or by a person resident in a foreign country and guaranteed by the government of such country:

 (a) as compensation for shares that the taxpayer owned in a foreign affiliate that carried on business in that country or for all or substantially all the property used by the taxpayer in carrying on business in that country if such shares or property, hereinafter called foreign property, were taken from such taxpayer after 18 June 1971 under the authority of a law of that country; or

 (b) as consideration for the sale of such foreign property after that date under the authority of such a law or after notice or other manifestation of an intention to take possession of such a property.

1973, c. 17, s. 53; 1996, c. 39, s. 133; 2005, c. 1, s. 110.

470. In the case provided for in section 469, if the acquisition is made by a taxpayer resident in Canada and the taxpayer makes a valid election under subsection 1 of section 80.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of all indemnities acquired by the taxpayer, an amount, in respect of each indemnity, equal to its principal amount or, if, in accordance with paragraph d of that subsection 1, the taxpayer has designated in the election an amount in respect of the indemnity that is less than the principal amount, equal to that lesser amount, is deemed to be the cost to the taxpayer of the indemnity and, for the purpose of computing the proceeds of disposition of the foreign property, the amount received by the taxpayer because of the acquisition of the indemnity.

However, if the amount designated by the taxpayer in the election referred to in the first paragraph in respect of an indemnity is less than the principal amount of the indemnity and, but for this paragraph, the proceeds of disposition of the foreign property, computed with reference to the first paragraph, would be less than the cost amount to the taxpayer of the foreign property immediately before it was taken or sold, that cost amount is, for the purposes of the first paragraph, to be increased by the taxpayer on or before the taxpayer's filing-due date for the taxation year in which the taxpayer acquired the indemnity or, if the taxpayer does not do so, by the Minister, so that the proceeds of disposition of the foreign property, computed with reference to the first paragraph, are equal to the cost amount to the taxpayer of the foreign property immediately before it was taken or sold.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 80.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1973, c. 17, s. 53; 2009, c. 5, s. 159.

471. If a taxpayer makes a valid election under subsection 2 of section 80.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of all amounts received or to be received by the taxpayer as interest on the indemnities the taxpayer acquires, the following rules apply in respect of each indemnity:

 (a) in computing the taxpayer's income for the year from the indemnity, in respect of each interest amount that the taxpayer receives in the year, the taxpayer may deduct the lesser of that amount and the aggregate of the amount to be added under subparagraph b in computing the adjusted cost base to the taxpayer of the indemnity and the greater, immediately before the interest amount was received, of the adjusted cost base to the taxpayer of the indemnity and its adjusted principal amount to the taxpayer, and the taxpayer shall include, in respect of each amount the taxpayer receives in the year as the principal amount of the indemnity or as proceeds of disposition of the indemnity, the amount by which the amount the taxpayer so receives exceeds the greater, immediately before receiving that amount, of the adjusted cost base to the taxpayer of the indemnity and its adjusted principal amount to the taxpayer;

 (b) in computing, at a particular time, the adjusted cost base to the taxpayer of the indemnity, in respect of each interest amount received by the taxpayer before that time, the taxpayer shall add an amount equal to the lesser of the income or profit tax paid by the taxpayer in that respect to the government of a foreign country and the proportion of that tax that the adjusted cost base to the taxpayer of the indemnity, immediately before the taxpayer received the amount, is of the amount by which the amount exceeds that tax, and shall deduct each interest amount the taxpayer received before that time in respect of that indemnity and each amount the taxpayer received before that time as the principal amount of that indemnity;

 (c) the amount received by the taxpayer as the principal amount of the indemnity is deemed not to be the proceeds of a partial disposition of the indemnity; and

 (d) for the purposes of sections 772.2 to 772.13, despite the definition assigned to “non-business-income tax” in section 772.2, the non-business-income tax paid by the taxpayer does not include the amount that is required under subparagraph b to be added in computing the adjusted cost base to the taxpayer of the indemnity.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2 of section 80.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1973, c. 17, s. 53; 1995, c. 63, s. 38; 2009, c. 5, s. 159.

472. In this chapter, the adjusted principal amount for a taxpayer of an indemnity at any particular time is the excess of the aggregate of its principal amount and, with respect to each interest amount received by him before that time, the lesser of the tax referred to in subparagraph b of the first paragraph of section 471 and the proportion of that tax determined in that subparagraph, over the aggregate of each amount received by the taxpayer before that time as interest on the indemnity and as principal amount of this indemnity.

1973, c. 17, s. 53; 2009, c. 5, s. 160.

473. For the purposes of the first paragraph of section 471, if an interest amount and a capital amount on an indemnity are received by a taxpayer at the same time, the interest amount is deemed to have been received immediately before the other amount.

1973, c. 17, s. 53; 2009, c. 5, s. 161.

474. In this chapter, the adjusted principal amount of an indemnity or of a property deemed to be an indemnity must be computed in the currency in which the principal amount is payable, under the terms thereof, except that, for the purposes of subparagraph a of the first paragraph of section 471, the adjusted principal amount must be computed in Canadian currency.

1973, c. 17, s. 53; 2009, c. 5, s. 162.

475. For the purposes of Title IV and the first paragraph of section 471, and in applying sections 472 and 474 for those purposes, if two or more indemnities described in section 469 have been issued at the same time in respect of the same foreign property and acquired by a taxpayer who makes a valid election under subsection 9 of section 80.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of all such indemnities, the latter are deemed to constitute a single indemnity so issued and acquired.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 9 of section 80.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1973, c. 17, s. 53; 2009, c. 5, s. 163.

DIVISION II 
SPECIAL RULES FOR FOREIGN AFFILIATES
1973, c. 17, s. 53.

476. This division applies where the foreign affiliate of a taxpayer resident in Canada would be authorized to make an election referred to in the first paragraph of section 470 with respect to properties acquired by it that would on that assumption be indemnities for it if the foreign affiliate were resident in Canada and its only foreign affiliates were foreign affiliates of the taxpayer and if all or part of such properties are subsequently acquired by the taxpayer from the affiliate.

1973, c. 17, s. 53; 2009, c. 5, s. 164.

477. If the property described in section 476 is acquired as a dividend payable in kind or as a benefit that the taxpayer should include in computing the taxpayer's income under section 111, and the taxpayer makes, after 19 December 2006, a valid election under the portion of subsection 4 of section 80.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) before paragraph a in respect of all such property, the following rules apply in respect of each such property:

 (a) an amount equal to the principal amount of the property or, if, in accordance with subparagraph ii of paragraph a of subsection 4 of section 80.1 of the Income Tax Act, the taxpayer has designated in the election an amount in respect of the property that is less than the principal amount, equal to that lesser amount, is deemed to be, despite section 304, the cost to the taxpayer of the property and the amount of the dividend or benefit received by the taxpayer because of the acquisition of the property;

 (b) if the property is so acquired as such a benefit and, in accordance with paragraph