I-3 - Taxation Act

Full text
chapter I-3
Taxation Act
TAXATION ACTMarch 1 2006
PART I
INCOME TAX
BOOK I
INTERPRETATION AND RULES OF GENERAL APPLICATION
TITLE I
INTERPRETATION
1972, c. 23.
1. In this Part and in the regulations, unless the context indicates a different meaning, the expression:
"accredited museum" means a museum accredited by the Bibliothèque et Archives nationales du Québec(*) and the accreditation of which is in force;
"Act establishing a labour-sponsored fund" means
(a)  the Act to establish Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi (chapter F-3.1.2); or
(b)  the Act to establish the Fonds de solidarité des travailleurs du Québec (F.T.Q.) (chapter F-3.2.1);
"additional voluntary contribution" to a registered pension plan means a contribution that is made by a member to the plan, that is used to provide benefits under a money purchase provision, within the meaning of section 965.0.1, of the plan and that is not required as a general condition of membership in the plan;
"adjusted cost base" has the meaning assigned by Chapter III of Title IV of Book III;
"adjustment time" has the meaning assigned by section 107.1;
"advocate" means an advocate or a notary and, in another Canadian province, a barrister or a solicitor;
"allowable business investment loss" has the meaning given to it by section 231;
"allowable capital loss" has the meaning assigned by section 231;
"alter ego trust" has the meaning assigned by section 652.1;
"amateur athlete trust" has the meaning assigned by section 851.34;
"amortized cost" of a loan or lending asset has the meaning assigned by sections 21.26 and 21.27;
"amount" means money, rights or things expressed in terms of an amount of money or their value in terms of money, except that
(a)  in any case where section 187.2 or 187.3 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) or any of sections 21.4.3, 21.10, 21.10.1, 740.1 to 740.3.1 and 740.5 applies to a stock dividend, the amount of the stock dividend is equal to the greater of
i.  the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend, and
ii.  the fair market value of the share or shares paid as a stock dividend at the time of payment;
(b)  in any other case, the amount of any stock dividend is equal to the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend;
"annuity" includes an amount payable on a periodic basis whether payable at intervals longer or shorter than a year, under a contract, will, trust or otherwise;
"assessment" includes a reassessment and an additional assessment;
"aunt" of a taxpayer includes the spouse of the taxpayer’s uncle;
"authorized foreign bank" has the meaning assigned by section 2 of the Bank Act (Statutes of Canada, 1991, chapter 46);
"automobile" means a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers, but does not include
(a)  an ambulance,
(b)  a motor vehicle acquired or leased primarily for use as a taxi, a bus used in a business of transporting passengers or a hearse used in the course of a business of arranging or managing funerals,
(c)  except for the purposes of sections 36 to 47.17, a motor vehicle acquired or leased to be sold or leased in the course of carrying on a business of selling or leasing motor vehicles or a motor vehicle used for the purpose of transporting passengers in the course of carrying on a business of arranging or managing funerals, and
(d)  a motor vehicle
i.  of a type commonly called a van or pick-up truck or a similar vehicle
(1)  that has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income, or
(2)  the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income, or
ii.  of a type commonly called a pick-up truck that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods, equipment or passengers in the course of gaining or producing income at one or more locations in Canada that are
(1)  described in subparagraph i or ii of paragraph a of section 42, in respect of any of the occupants of the vehicle, and
(2)  at least 30 kilometres outside the nearest point on the boundary of the nearest urban area, as defined by the last census dictionary published by Statistics Canada before the year, that has a population of at least 40,000 individuals as determined in the last census published by Statistics Canada before the year;
"balance-due day" of a taxpayer for a taxation year means
(a)  where the taxpayer is a corporation, the last day of the two-month period ending after the end of the year;
(b)  where the taxpayer is a trust, the day that is 90 days after the end of the year;
(c)  where the taxpayer is a person who died in the year, or after the end of the year but on or before 30 April in the following calendar year, the later of 30 April in that calendar year and the day that is six months after the day of death;
(d)  in the case of any other person, 30 April in the following calendar year;
"bank" means a bank within the meaning of section 2 of the Bank Act or an authorized foreign bank;
"bankrupt" has the meaning assigned by the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3);
"bankruptcy" has the meaning assigned by the Bankruptcy and Insolvency Act;
"benefit under a deferred profit sharing plan" received by a taxpayer in a taxation year means the total of all the amounts received by the taxpayer in the year from a trustee under the plan, minus any amounts deductible under sections 883 and 884 in computing the taxpayer’s income for the year;
"bituminous sands" means sands or other rock materials containing naturally occurring hydrocarbons, other than coal, which hydrocarbons have
(a)  a viscosity, determined in a prescribed manner, equal to or greater than 10,000 centipoise; or
(b)  a density, determined in a prescribed manner, equal to or less than 12 degrees API;
"borrowed money" includes the proceeds to a taxpayer from the sale of a post-dated bill drawn by the taxpayer on a bank;
"brother" of a taxpayer includes the brother of the taxpayer’s spouse and the spouse of the taxpayer’s sister;
"business" includes a profession, calling, trade, manufacture or undertaking of any kind whatsoever and, except for the purposes of subparagraph a of the first paragraph of section 164, section 250.4 and subparagraph i of the second paragraph of section 726.6.1, an adventure or concern in the nature of trade but does not include an office or employment;
"Canada" includes
(a)  the sea bed and subsoil of the submarine areas adjacent to the coasts of Canada in respect of which the Government of Canada or of a province grants a right, licence or privilege to explore for, drill for or take any minerals, petroleum, natural gas or any related hydrocarbons; and
(b)  the seas and airspace above the submarine areas referred to in paragraph a in respect of any activities carried on in connection with the exploration for or exploitation of any resource referred to in that paragraph;
"Canadian banking business" means the business carried on by an authorized foreign bank through an establishment in Canada, other than business conducted through a representative office registered or required to be registered under section 509 of the Bank Act;
"Canadian-controlled private corporation" has the meaning assigned by section 21.19;
"Canadian corporation" has the meaning assigned by paragraph l of section 570;
"Canadian development expenses" has the meaning assigned by sections 408 to 410;
"Canadian exploration and development expenses" has the meaning assigned by sections 364 to 366;
"Canadian exploration expenses" has the meaning assigned by sections 395 to 397;
"Canadian oil and gas property expense" has the meaning assigned by sections 418.2 to 418.4;
"Canadian partnership" has the meaning assigned by section 599;
"Canadian resource property" has the meaning assigned by section 370;
"Canadian stock exchange" means a prescribed Canadian stock exchange;
"capital dividend" has the meaning assigned by sections 502 to 502.0.4;
"capital interest" in a trust by a taxpayer has the meaning assigned by section 683;
"capital property" has the meaning assigned by section 249;
"cash method" has the meaning assigned by section 194;
"cemetery care trust" has the meaning assigned by section 979.19;
"certified archival centre" means an archival centre certified by the Minister of Culture and Communications and the certification of which is in force;
"charity" means a charitable organization or charitable foundation, within the meaning of section 985.1;
"child" of a taxpayer includes:
(a)  (subparagraph repealed);
(b)  a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before such person attained the age of 19 years did have, in law or in fact, the custody and control;
(c)  the spouse of a child of the taxpayer; and
(d)  a child of the taxpayer’s spouse;
"common share" means a share the holder of which is not precluded, upon the reduction or redemption of the capital stock, from participating in the assets of the corporation beyond the amount then paid for that share plus a fixed premium and a defined rate of dividend;
"compensation for the loss of financial support" means a benefit payable under a public compensation plan in the form of a pension or a lump sum in lieu of a pension that is granted following the death of the victim of an accident, employment injury or bodily injury to a person who, under the terms of the public compensation plan, is the victim’s surviving spouse or a person who is considered to have been the victim’s dependant;
"corporation incorporated in Canada" includes any corporation incorporated in any region of Canada before or after it became part of Canada;
"cost amount" to a taxpayer of any property at any time means:
(a)  in the case of depreciable property of a prescribed class, the amount that would be that proportion of the undepreciated capital cost to the taxpayer of property of that class at that time that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that has not been disposed of by the taxpayer before that time if section 99 were read without reference to paragraph d.1 thereof and if paragraph b and subparagraph i of paragraph d of that section were read as follows:
"(b) subject to section 284, where a taxpayer, having acquired property for some other purpose, begins at a particular time to use it to gain income, the taxpayer is deemed to have acquired it at that particular time at a capital cost to the taxpayer equal to the fair market value of the property at that time;";
"i. where the proportion of the use made of the property to gain income has increased at a particular time, the taxpayer is deemed to have acquired at that time depreciable property of that class at a capital cost equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property to gain income is of the whole of the use made of it;";
(b)  in the case of capital property, other than depreciable property, of the taxpayer, its adjusted cost base to the taxpayer at that time;
(c)  in the case of property described in an inventory of the taxpayer, its value at that time as determined for the purpose of computing the taxpayer’s income;
(c.1)  where the taxpayer is a financial institution, within the meaning assigned by section 851.22.1, in its taxation year that includes that time and the property is mark-to-market property, within the meaning assigned by that section, for the year, the cost to the taxpayer of the property;
(d)  in the case of incorporeal capital property of the taxpayer in respect of a business, 4/3 of the amount that would, but for section 106.1, be the proportion of the eligible incorporeal capital amount of the taxpayer in respect of the business at that time that the fair market value, at that time, of the incorporeal capital property is of the fair market value, at that time, of the aggregate of incorporeal capital properties of the taxpayer in respect of the business;
(d.1)  where the property was a loan or lending asset, other than a net income stabilization account, a farm income stabilization account or a property in respect of which any of paragraphs b to c.1 and d.2 applies, the amortized cost of the property to the taxpayer at that time;
(d.2)  where the taxpayer is a financial institution within the meaning assigned by section 851.22.1 in its taxation year that includes that time and the property is a specified debt obligation within the meaning assigned by that section, other than a mark-to-market property within the meaning assigned by that section for the year, the tax basis, within the meaning assigned by section 851.22.7, of the property to the taxpayer at that time;
(e)  where the property was a right of the taxpayer to receive an amount, other than property that is a debt the amount of which was deducted under section 141 in computing the taxpayer’s income for a taxation year that ended before that time, a net income stabilization account, a farm income stabilization account, a right in respect of which any of paragraphs b to c.1, d.1 and d.2 applies, or a right to receive production, as defined in section 158.1, to which a matchable expenditure, as defined in section 158.1, relates, the amount the taxpayer has a right to receive;
(e.1)  in the case of a policy loan, within the meaning assigned by paragraph h of section 835, of an insurer or an interest of a beneficiary under an environmental trust, an amount equal to zero;
(f)  in any other case, the cost to the taxpayer of the property as determined for the purpose of computing the taxpayer’s income, except to the extent that that cost has been deducted in computing the taxpayer’s income for any taxation year ending before that time;
"death benefit" has the meaning assigned by section 3;
"deferred amount" at the end of a taxation year under a salary deferral arrangement in respect of an individual has the meaning assigned by section 47.17;
"deferred profit sharing plan" has the meaning assigned by section 870;
"depreciable property" has the meaning assigned by subparagraph c of the first paragraph of section 93;
"designated insurance property" has the meaning assigned by section 818;
"development bond" has the meaning assigned by section 119.2;
"disposition" has the meaning assigned by section 248;
"dividend" includes a stock dividend, other than a stock dividend that is paid to a corporation or to a mutual fund trust by a corporation that is not resident in Canada;
"dividend rental arrangement" of a person means any arrangement entered into by the person where it may reasonably be considered that the main reason for the person entering into the arrangement is to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or a share described in section 21.6.1 or an amount deemed, by reason of the first paragraph of section 119, to be received as a dividend on a share of the capital stock of a corporation, and under the arrangement someone other than that person enjoys the opportunity for profit or gain or bears the risk of loss with respect to the share in any material respect, and includes any arrangement under which
(a)  a corporation at any time receives on a particular share a taxable dividend that would, but for section 740.4.1, be deductible in computing its taxable income for the taxation year that includes that time, and
(b)  the corporation is obligated to pay to another person an amount as compensation for any of the following dividends that, if paid, would be deemed by section 21.32 to have been received by that other person as a taxable dividend:
i.  the dividend referred to in paragraph a,
ii.  a dividend on a share that is identical to the particular share, or
iii.  a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate opportunity for gain or risk of loss as the particular share;
"eligible funeral arrangement" has the meaning assigned by section 979.19;
"eligible incorporeal capital amount" has the meaning assigned by section 107;
"eligible relocation" has the meaning assigned by the first paragraph of section 349.1;
"employee" means any person employed or holding an office;
"employee benefit plan" has the meaning assigned by section 47.6;
"employee trust" has the meaning assigned by sections 47.7 to 47.9;
"employer", in relation to an employee, means the person from whom the employee receives remuneration;
"employment" means the position of an individual in the service of some other person, including the State, Her Majesty or a foreign state or sovereign;
"environmental trust" has the meaning assigned by section 21.40;
"establishment" has the meaning assigned to it by sections 12 to 16.2;
"exempt income" means property received or acquired by a person in such circumstances that it is, because of any provision of this Part, not included in computing the person’s income, but does not include a dividend on a share;
"farm income stabilization account" means an account of a person or partnership under the Farm Income Stabilization Account program established under the Act respecting La Financière agricole du Québec (chapter L-0.1);
"farming" includes livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming;
"farm loss" has the meaning assigned by section 728.2;
"filing-due date" of a taxpayer for a taxation year means the day on or before which the taxpayer’s fiscal return under this Part for the year is required to be filed or would be required to be filed if tax under this Part were payable by the taxpayer for the year;
"fishing" includes fishing for or catching shell fish, crustaceans and marine animals but does not include an office or employment under a person engaged in the business of fishing;
"flow-through share" has the meaning assigned by section 359.1;
"foreign affiliate" has the meaning assigned by section 571;
"foreign currency" means currency of a foreign country;
"foreign exploration and development expenses" has the meaning assigned by sections 372 and 372.1;
"foreign resource expense" has the meaning assigned by sections 418.1.1 and 418.1.2;
"foreign resource pool expenses" of a taxpayer means the taxpayer’s foreign resource expenses in relation to all countries and the taxpayer’s foreign exploration and development expenses;
"foreign resource property" has the meaning assigned by section 373;
"foreign retirement arrangement" means a prescribed plan or arrangement;
"foreign stock exchange" means a prescribed foreign stock exchange;
"former business property" of a taxpayer means a capital property of the taxpayer that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business and that was immovable property or an interest therein of the taxpayer, but does not include
(a)  immovable property owned by the taxpayer, whether jointly with another person or otherwise, and used by the taxpayer in the taxation year to which the expression "former business property" is being applied principally for the purpose of gaining or producing gross revenue that is rent, other than property either leased by the taxpayer to a person related to the taxpayer and used by that related person principally for any other purpose, or leased by the taxpayer or the related person to a lessee, in the ordinary course of a business of the taxpayer or the related person of selling goods or rendering services, under a contract by which the lessee undertakes to use the property to carry on the business of selling or promoting the sale of the goods or services of the taxpayer or the related person,
(b)  land subjacent to a property referred to in paragraph a,
(c)  land contiguous to land referred to in paragraph b that is a parking area, driveway, yard or garden or that is otherwise necessary for the use of the property referred to in paragraph a, or
(d)  a leasehold interest in any property described in paragraphs a, b and c;
"goods and services tax" means the tax payable under Part IX of the Excise Tax Act (Revised Statutes of Canada, 1985, chapter E-15);
"grandfather" of a taxpayer includes the grandfather of the taxpayer’s spouse and the spouse of the taxpayer’s grandmother;
"grandfathered share" has the meaning assigned by sections 21.11.20 and 21.11.21;
"grandmother" of a taxpayer includes the grandmother of the taxpayer’s spouse and the spouse of the taxpayer’s grandfather;
"great-aunt" of a taxpayer includes the spouse of the taxpayer’s great-uncle;
"great-uncle" of a taxpayer includes the spouse of the taxpayer’s great-aunt;
"gross revenue" of a taxpayer for a taxation year means the aggregate of:
(a)  all amounts received or receivable in the year, depending on the method regularly followed by the taxpayer in computing the taxpayer’s income, otherwise than as or on account of capital; and
(b)  all amounts, other than amounts referred to in paragraph a, included in computing the taxpayer’s income from a business or property for the year by virtue of section 89, 92 or 92.1 or any of sections 92.11 to 92.19;
(c)  (paragraph repealed);
"group term life insurance policy" means a group life insurance policy under which the only amounts payable by the insurer are
(a)  amounts payable on the death or disability of individuals whose lives are insured because of, or in the course of, their office or employment or former office or employment, and
(b)  policy dividends or experience rating refunds;
"home relocation loan" means a loan made to an individual or the individual’s spouse in circumstances where the individual has commenced employment at a new work location in Canada and by reason thereof has moved from the old residence in Canada at which, before the move, the individual ordinarily resided to a new residence in Canada at which, after the move, the individual ordinarily resides, if
(a)  the distance between the old residence and the new work location is at least 40 kilometres greater than the distance between the new residence and the new work location;
(b)  the loan is used to acquire a dwelling, or a share of the capital stock of a housing cooperative acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the cooperative, where the dwelling is for the habitation of the individual and is the individual’s new residence;
(c)  the loan is received in the circumstances described in section 487.1, or would have been so received if the second paragraph of section 487.1 had applied to the loan at the time it was received; and
(d)  the loan is designated by the individual to be a home relocation loan, but in no case shall more than one loan in respect of a particular move, or more than one loan at any particular time, be designated as a home relocation loan by the individual;
"income-averaging annuity" has the meaning assigned by sections 342 and 343;
"income-averaging annuity respecting income from artistic activities" in relation to an individual means, except for the purposes of Chapter VI.0.1 of Title VI of Book III, an annuity established under a contract that meets the conditions set out in section 346.0.2 and in respect of which the individual has deducted an amount in computing the individual’s income under section 346.0.1;
"income bond" or "income debenture" has the meaning assigned by sections 21.12 to 21.15;
"income interest" in a trust by a taxpayer has the meaning assigned by section 683;
"income replacement indemnity" means a benefit paid under a public compensation plan to compensate a total or partial disability affecting a person’s capacity to perform the duties of an office or employment or to carry on a business either alone or as a partner actively engaged in the business, or to compensate the loss of a benefit under the Employment Insurance Act (Statutes of Canada, 1996, chapter 23), unless, under the terms of the public compensation plan, no employer, whether required or not to pay all or part of the benefit, may be reimbursed for the expense incurred by the employer in that respect; for that purpose, a benefit computed by reference to a person’s recognized earnings under the public compensation plan is deemed a benefit paid to compensate the total or partial disability affecting the person’s capacity to perform the duties of an office or employment or to carry on a business either alone or as a partner actively engaged in the business;
"incorporeal capital amount" has the meaning assigned by section 106;
"incorporeal capital property" has the meaning assigned by section 250;
"indexed debt obligation" means a debt obligation the terms or conditions of which provide for an adjustment to an amount payable in respect of the obligation for a period during which the obligation was outstanding that is determined by reference to a change in the purchasing power of money;
"individual" means a person other than a corporation;
"insurance corporation" has the same meaning as "insurer";
"insurance policy" includes a life insurance policy;
"insurer" means a corporation carrying on an insurance business;
"international financial centre" has the meaning assigned by section 6 of the Act respecting international financial centres (chapter C-8.3);
"international traffic", in respect of a person not resident in Canada who carries on a transportation business, means a voyage made in the course of that business, to transport persons or goods between two places outside Canada or between Canada and a place outside Canada;
"inter vivos trust" means a trust other than a testamentary trust;
"inventory" means a description of property the cost or value of which is relevant in computing a taxpayer’s income from a business for a taxation year or would have been so relevant if the income from the business had not been computed in accordance with the cash method and, with respect to a farming business, includes all of the livestock held in the course of carrying on the business;
"investment corporation" has the meaning assigned by Book I of Part III;
"joint spousal trust" has the meaning assigned by section 652.1;
"law" includes any Act other than an Act of the Parliament of Québec;
"legal representative" of a taxpayer means a trustee in bankruptcy, an assignee, a receiver, a trustee, an heir, an administrator of the property of others, or any other like person, administering, winding up, controlling or otherwise dealing in a representative or fiduciary capacity with the property that belongs or belonged to, or that is or was held for the benefit of, the taxpayer or the taxpayer’s succession;
"lending assets" means a bond, debenture, note, hypothecary claim, mortgage, agreement of sale or any other indebtedness, or a prescribed share, but does not include a prescribed property;
"life insurance business" includes the business of issuing contracts in respect of which all or any part of the issuer’s reserves vary depending upon the fair market value of a specified group of assets, and an annuities business, carried on by a life insurer;
"life insurance corporation" has the same meaning as "life insurer";
"life insurance policy" has the meaning assigned by paragraph e of section 835;
"life insurance policy in Canada" has the meaning assigned by paragraph e.1 of section 835;
"life insurer" means a corporation carrying on a life insurance business other than a business referred to in the definition of "life insurance business", even if it also carries on a business so described;
"limited partnership loss" in respect of the partnership has the meaning assigned by sections 613.1 and 726.4.17.11;
"majority interest partner" of a particular partnership at any time means a person or partnership, in paragraphs a and b referred to as the "taxpayer",
(a)  whose share of the particular partnership’s income from all sources for the fiscal period of the particular partnership that ended before that time or, if the particular partnership’s first fiscal period includes that time, for that fiscal period, would have exceeded 1/2 of the particular partnership’s income from all sources for that period if the taxpayer had held throughout that fiscal period each interest in the particular partnership that the taxpayer or a person affiliated with the taxpayer held at that time; or
(b)  whose share, together with the shares of every person with whom the taxpayer is affiliated, of the total amount that would be paid to all members of the particular partnership, otherwise than as a share of any income of the particular partnership, if it were wound up at that time exceeds 1/2 of that total amount;
"mineral" includes ammonite gemstone, coal, calcium chloride, kaolin, bituminous sands, oil shale and silica, but does not include petroleum, natural gas or other related hydrocarbons;
"mineral resource" means a base or precious metal deposit, a coal deposit, a bituminous sands deposit or oil shale deposit, or a mineral deposit in respect of which the principal mineral extracted is
(a)  an industrial mineral contained in a non-bedded deposit, as certified by the Minister of Natural Resources, Wildlife and Parks;
(b)  ammonite gemstone, calcium chloride, diamond, gypsum, halite, kaolin or sylvite;
(c)  silica that is extracted from sandstone or quartzite;
"Minister" means the Minister of Revenue;
"mortgage investment corporation" has the meaning assigned by section 1108;
"motor vehicle" means an automotive vehicle designed or adapted to be used on highways and streets, other than a trolleybus or a vehicle designed or adapted to be operated exclusively on rails;
"municipality" includes a metropolitan community and the Kativik Regional Government, established under the Act respecting Northern villages and the Kativik Regional Government (chapter V-6.1);
"mutual fund corporation" has the meaning assigned by Book III of Part III;
"mutual fund trust" has the meaning assigned by Book IV of Part III;
"net capital loss" has the meaning assigned by section 730;
"net income stabilization account" means an account of a taxpayer under the net income stabilization account program under the Farm Income Protection Act (Statutes of Canada, 1991, chapter 22);
"nephew" of a taxpayer includes the nephew of the taxpayer’s spouse;
"niece" of a taxpayer includes the niece of the taxpayer’s spouse;
"NISA Fund No. 2" means the portion of a taxpayer’s net income stabilization account described in paragraph b of subsection 2 of section 8 of the Farm Income Protection Act;
"non-capital loss" has the meaning assigned by section 728;
"non-resident-owned investment corporation" has the meaning assigned by Book V of Part III;
"office" means the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a minister of the State or Crown, the office of a member of a legislative assembly, a member of the Senate or House of Commons of Canada or a member of an executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity, and also includes the position of member of the board of directors of a corporation even where the individual neither performs administrative functions within the corporation nor receives stipends or a remuneration to hold that position;
"oil or gas well" means any well, other than an exploratory probe or a well drilled from below the surface of the earth, drilled for the purpose of producing petroleum or natural gas or of determining the existence, location, extent or quality of a natural accumulation of petroleum or natural gas, but, for the purpose of applying sections 93 to 104 and 130 and any regulations made for the purpose of paragraph a of section 130 in respect of property acquired after 6 March 1996, does not include a well for the extraction of material from a deposit of bituminous sands or oil shales;
"paid-up capital" has the meaning assigned by paragraph a of section 570, except for the purposes of Titles VI.1 and VI.2 of Book VII and Title V of Book IX, excluding sections 1045 to 1049;
"passenger vehicle" means an automobile acquired after 17 June 1987, other than an automobile acquired after that date pursuant to an obligation in writing entered into before 18 June 1987, and an automobile leased under a lease entered into, extended or renewed after 17 June 1987;
"pension benefit" includes any amount received under a pension plan and also includes any payment made to a beneficiary under the plan, or to an employer or former employer of the beneficiary in accordance with the conditions of the plan, following any change made in it or resulting from its winding-up;
"person", or any word or expression descriptive of a person, includes any corporation, and any entity exempt, because of Book VIII, from tax under this Part and the legal representatives of such a person, according to the law of that part of Canada to which the context extends;
"personal or living expenses" includes:
(a)  the expenses of properties maintained by any person for the use or benefit of the taxpayer or any person connected with the taxpayer by blood relationship, marriage or adoption, but does not include expenses in respect of properties maintained in connection with a business carried on for profit or with a reasonable expectation of profit;
(b)  the expenses, premiums or other costs of an insurance policy, annuity contract or other like contract if the proceeds of the policy or contract are payable to or for the benefit of the taxpayer or a person connected with the taxpayer by blood relationship, marriage or adoption; and
(c)  expenses of properties maintained by a succession or trust for the benefit of the taxpayer as one of the beneficiaries;
"personal services business" means a services business carried on by a corporation in a taxation year where an employee who provides services on behalf of the corporation, referred to in this definition and in section 135.2 as an "incorporated employee", or a person related to an incorporated employee is a specified shareholder of the corporation and the incorporated employee could reasonably be regarded as an employee of the person or partnership to whom or to which the services were provided but for the existence of the corporation, unless
(a)  the corporation employs in the business throughout the year more than five full-time employees; or
(b)  the amount received or receivable by the corporation in the year for the services provided is paid or payable by a corporation with which it was associated during that year;
"personal trust" has the meaning assigned by section 649.1;
"personal-use property" has the meaning assigned by section 287;
"post-1971 spousal trust" has the meaning assigned by section 652.1;
"precious property" means a property contemplated in section 265;
"preferred share" means a share other than a common share;
"prescribed class" means a class prescribed under subparagraph e of the first paragraph of section 1086;
"principal amount" in relation to any obligation means the amount that, under the terms of the obligation or any agreement relating thereto, is the maximum amount or maximum aggregate amount, as the case may be, payable on account of the obligation by the issuer thereof, otherwise than as or on account of interest or as or on account of any premium payable by the issuer conditional upon the exercise by the issuer of a right to redeem the obligation before the maturity thereof;
"private corporation" has the meaning assigned by paragraph n of section 570;
"private foundation" has the meaning assigned by paragraph e of section 985.1;
"private health services plan" means a contract of insurance in respect of medical expenses, hospital expenses or any combination of such expenses, or a medical care insurance plan or hospital care insurance plan or both a medical care and hospital care insurance plan, to the extent that the contract or plan essentially applies to expenses described in section 752.0.11.1 and that all or substantially all of the premium or any other consideration payable for coverage provided under the contract or plan is attributable to such expenses, except any such contract or plan established by or pursuant to a law of a province that establishes a health care insurance plan that is a health care insurance plan within the meaning of section 2 of the Canada Health Act (Revised Statutes of Canada, 1985, chapter C-6);
"professional corporation" means a corporation that carries on the professional practice of an accountant, dentist, advocate, physician, veterinarian or chiropractor;
"profit sharing plan" has the meaning assigned by section 852, except for the purposes of Title III.1 of Book V;
"property" means property of any kind whatever whether real or personal, corporeal or incorporeal, and also includes a share, a right of any kind whatever and the work in progress of a business that is a profession;
"property of the bankrupt" has the meaning assigned by the Bankruptcy and Insolvency Act;
"province" means a province of Canada and includes the Northwest Territories, the Yukon Territory and Nunavut;
"public compensation plan" means a plan established under a law of Québec or of another jurisdiction that provides for the payment of benefits following an accident, employment injury, bodily injury or death or in order to prevent bodily injury, other than the Act respecting the Québec Pension Plan (chapter R-9), the Canada Pension Plan (Revised Statutes of Canada, 1985, chapter C-8) or any other law establishing a plan equivalent to that established under the Act respecting the Québec Pension Plan;
"public corporation" has the meaning assigned by paragraph o of section 570;
"public foundation" has the meaning assigned by paragraph f of section 985.1;
"qualified business", in respect of any business carried on by a taxpayer resident in Canada, means any business carried on by the taxpayer other than a specified investment business or a personal services business;
"qualified donee" has the meaning assigned by paragraph b of section 985.1;
"Québec museum" means a museum situated in Québec and any other museum that is an accredited museum at the time the gift is made.
"Québec sales tax" means the tax payable under Title I of the Act respecting the Québec sales tax (chapter T-0.1);
"recognized arts organization" means an arts organization that is recognized by the Minister on the recommendation of the Minister of Culture and Communications and whose recognition is in effect, but does not include a registered charity;
"recognized gift with reserve of usufruct or use" by a taxpayer in relation to a work of art or a cultural property described in the third paragraph of section 232, means the gift by the taxpayer of the work of art or the cultural property, other than immovable property, that meets the following conditions:
(a)  the gift is a gift inter vivos whereby the taxpayer disposes of the bare ownership of the work of art or the cultural property but retains the usufruct or right of use;
(b)  in the case of a work of art, other than cultural property described in the third paragraph of section 232, the gift is made to a Québec museum;
(c)  in the case of cultural property described in the third paragraph of section 232, the gift is made to an institution or a public authority in Canada which is, at the time of the gift, designated under subsection 2 of section 32 of the Cultural Property Export and Import Act (Revised Statutes of Canada, 1985, chapter C-51) for general purposes or for a specified purpose related to that cultural property, to a certified archival centre or an accredited museum;
(d)  the usufruct or right of use is established only for the taxpayer and is not successive;
(e)  the usufruct or right of use is established for the lifetime of the taxpayer, where the taxpayer is an individual, or for a term not exceeding thirty years;
(f)  the taxpayer was the sole owner of the work of art or the cultural property immediately before the gift was made; and
(g)  the deed of gift provides that
i.  the taxpayer may not dispose of the taxpayer’s usufruct or right of use without the consent of the bare owner,
ii.  the taxpayer shall keep the work of art or the cultural property in a place designated in the deed of gift and shall move it only with the consent of the bare owner and under the terms and conditions determined by the bare owner,
iii.  the taxpayer shall keep the work of art or the cultural property insured against ordinary risks for the duration of the usufruct or right of use and undertake to inform the bare owner without delay of the deterioration or disappearance of the work of art or the cultural property,
iv.  the bare owner may, where the work of art or the cultural property deteriorates,
(1)  decide to restore it, in which case the bare owner shall designate the person for that purpose, who will be remunerated out of the proceeds of the insurance referred to in subparagraph iii, or
(2)  decide not to restore it, in which case the bare owner may claim from the taxpayer the proceeds of the insurance referred to in subparagraph iii that the taxpayer will be required to give to the bare owner within ten days of the receipt of the written confirmation of the decision, and
v.  the usufruct or right of use is extinguished where the work of art or the cultural property disappears and the taxpayer may claim the proceeds of the insurance referred to in subparagraph iii;
"recognized political education organization" has the meaning assigned by section 985.36;
"registered Canadian amateur athletic association" has the meaning assigned by section 21.41;
"registered charity" at any time means a charitable organization within the meaning of section 985.1, a private foundation or a public foundation, that is at that time registered with the Minister as a charitable organization within the meaning of that section 985.1, a private foundation or a public foundation, or that is deemed to be so registered in accordance with sections 985.5 to 985.5.2;
"registered education savings plan" has the meaning assigned by Title III of Book VII;
"registered national arts service organization", at any time, means a national arts service organization that is deemed to be registered at that time by the Minister under section 985.24 and whose registration is in force;
"registered pension plan" means a plan accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;
"registered Québec amateur athletic association" has the meaning assigned by section 21.42;
"registered retirement income fund" means a fund accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;
"registered retirement plan" means an employees’ superannuation plan accepted before 1 January 1986 by the Minister for registration for the purposes of this Part in respect of its constitution and operations for the taxation year under consideration;
"registered retirement savings plan" means a plan accepted as such by the Minister of Revenue of Canada for the purposes of the Income Tax Act and the registration of which is in force;
"registered securities dealer" means a person authorized to trade in securities, in the capacity of an agent or principal, without any restriction as to the types or kinds of securities in which that person may trade by reason of the fact that the person
(a)  is registered or licensed under the laws of a province; or
(b)  meets the following conditions:
i.  the person is registered with, or licensed by, a competent authority other than the competent authority of a province, and
ii.  the person obtained from the Autorité des marchés financiers or from a securities commission or similar body an exemption from registration pursuant to the laws of a province;
"registered supplementary unemployment benefit plan" has the meaning assigned by subsection 3 of section 962;
"regulation" means a regulation made by the Government under this Part;
"restricted farm loss" has the meaning assigned by section 207;
"restricted financial institution" means
(a)  a bank;
(b)  a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering its services as trustee;
(c)  a savings and credit union;
(d)  an insurance corporation;
(e)  a corporation whose principal business is the lending of money to persons with whom it is dealing at arm’s length or the purchasing of debt obligations issued by such persons, or a combination thereof;
(e.1)  a corporation referred to in paragraph g of the definition of "financial institution" in subsection 1 of section 181 of the Income Tax Act;
(f)  a corporation that is controlled by one or more corporations described in any of paragraphs a to e.1;
"retirement compensation arrangement" has the meaning assigned by section 890.1;
"retirement income fund" has the meaning assigned by subsection 1 of section 146.3 of the Income Tax Act;
"retirement savings plan" has the meaning assigned by subsection 1 of section 146 of the Income Tax Act;
"retiring allowance" means an amount, other than an amount received as a consequence of the death of an employee, a pension benefit or a benefit referred to in the third paragraph of section 38 in respect of counselling services described therein, received by a taxpayer or, after the taxpayer’s death, by a dependent or a relative of the taxpayer or by the legal representative of the taxpayer
(a)  on or after retirement of the taxpayer from an office or employment in recognition of the taxpayer’s long service; or
(b)  in respect of the loss of an office or employment of the taxpayer, whether or not received as, on account of or in lieu of damages or pursuant to an order or judgment of a competent tribunal;
"salary deferral arrangement" in respect of an individual has the meaning assigned by sections 47.15 and 47.16;
"salary or wages", except in section 32 and in paragraph a of the definition of "earned income" set out in section 1029.8.67, means the income of a taxpayer from an office or employment as computed under Title II of Book III and includes all fees received by the taxpayer for services not rendered in the course of the taxpayer’s business, but does not include pension benefits or retiring allowances;
"savings and credit union" has the meaning assigned by section 797;
"scientific research and experimental development" has the meaning assigned by subsections 2 to 4 of section 222;
"self-contained domestic establishment" means a dwelling-house, apartment or other similar place of residence in which a person as a general rule sleeps and eats;
"servant" means a person engaged in employment;
"share" means a share or fraction of a share of the capital stock of a corporation and includes, except for the purposes of Title VI.1 of Book VII, a share or fraction of a share of the capital of a prescribed cooperative or of a savings and credit union;
"shareholder" includes any person entitled to receive payment of a dividend;
"short-term preferred share" has the meaning assigned by sections 21.11.11 to 21.11.13;
"sister" of a taxpayer includes the sister of the taxpayer’s spouse and the spouse of the taxpayer’s brother;
"small business bond" has the meaning assigned by section 119.15;
"small business corporation", at any particular time, means, subject to section 726.6.2 and on the assumption, for the purposes of this definition, that the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil, a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which is attributable to assets that are, at that time,
(a)  used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it;
(b)  shares of the capital stock of a small business corporation connected with the corporation within the meaning of the regulations;
(c)  indebtedness of a corporation described in paragraph b, or
(d)  assets described in subparagraphs a to c;
"specified employee" of a person means an employee of the person who is a specified shareholder of the person or who does not deal at arm’s length with the person;
"specified financial institution", at a particular time, means
(a)  a bank;
(b)  a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering its services as trustee;
(c)  a savings and credit union;
(d)  an insurance corporation;
(e)  a corporation whose principal business is the lending of money to persons with whom it is dealing at arm’s length or the purchasing of debt obligations issued by such persons, or a combination thereof;
(e.1)  a corporation referred to in paragraph g of the definition of "financial institution" in subsection 1 of section 181 of the Income Tax Act;
(f)  a corporation that is controlled by one or more corporations referred to in any of paragraphs a to e.1 and, for the purposes of this paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length;
(g)  a corporation that is related to a particular corporation referred to in any of paragraphs a to f, other than a particular corporation referred to in paragraph e or e.1 the principal business of which is the factoring of trade accounts receivable that the particular corporation acquired from a related person, that arose in the course of an eligible business carried on by a person, in this paragraph referred to as the "business entity", related at that time to the particular corporation, and that at no particular time before that time were held by a person other than a person who was related to the business entity and, for the purposes of this paragraph, where in the case of two or more corporations it may reasonably be considered, having regard to all the circumstances, that one of the main reasons for the separate existence of those corporations in a taxation year is to limit or avoid the application of any of sections 740.1, 740.2 to 740.3.1 and 845, those corporations are deemed to be related to each other and to each other corporation to which any such corporation is related;
"specified individual" has the meaning assigned by section 766.5;
"specified investment business" has the meaning assigned by section 771.1;
"specified member" of a partnership in a fiscal period or taxation year of the partnership, as the case may be, means
(a)  any member of the partnership who is a limited partner, within the meaning assigned by section 613.6, of the partnership at any time in the fiscal period or taxation year;
(b)  any member of the partnership, other than a member who is actively engaged in those activities of the partnership business that are other than the financing of the partnership business, or is carrying on a business similar to that carried on by the partnership in its taxation year, otherwise than as a member of a partnership, on a regular, continuous and substantial basis throughout that part of the fiscal period or taxation year during which the business of the partnership is ordinarily carried on and during which the member is a member of the partnership;
"specified shareholder" has the meaning assigned by sections 21.17 and 21.18;
"specified tax consequence" for a taxation year means
(a)  the consequence of the exclusion from the income or the deduction of an amount referred to in the first paragraph of section 1044;
(b)  the consequence of a reduction under section 359.15 of an amount purported to be renounced by a corporation after the beginning of the year to a person or partnership under section 359.2 or 359.2.1 because of the application of section 359.8, determined as if the purported renunciation would, but for section 359.15, have been effective only where the requirements in paragraphs b and c of section 359.8 and the following requirements had been satisfied:
i.  the purported renunciation occurred in the first three months of a particular calendar year,
ii.  the effective date of the purported renunciation was the last date of the calendar year preceding the particular calendar year,
iii.  the corporation agreed in the calendar year preceding the particular calendar year to issue a flow-through share to a person or partnership;
iv.  the amount does not exceed the amount by which the consideration for which the share was issued exceeds the aggregate of all other amounts purported by the corporation to have been renounced under section 359.2 or 359.2.1 in respect of that consideration, and
v.  the form prescribed for the purpose of section 359.12 in respect of the purported renunciation is filed by the corporation with the Minister before 1 May of the particular calendar year;
(c)  the consequence of an adjustment or a reduction described in section 1042.1;
"split income" has the meaning assigned by section 766.5;
"stock dividend" includes any dividend, determined without reference to the definition of "dividend" in this section, paid by a corporation to the extent that it is paid by the issuance of shares of any class of the capital stock of the corporation;
"subsidiary controlled corporation" means a corporation more than 50% of the issued capital stock of which having full voting rights under all circumstances belongs to the corporation to which it is subsidiary;
"subsidiary wholly-owned corporation" means a corporation all the issued capital stock of which except directors’ qualifying shares, belongs to the corporation to which it is subsidiary;
"succession" has the meaning assigned by section 646;
"supplementary unemployment benefit plan" has the meaning assigned by subsection 1 of section 962;
"tar sands" means a mineral extracted, otherwise than by a well, from a mineral resource that is a deposit of bituminous sands or oil shales and, for the purpose of applying sections 93 to 104 and 130 and any regulations made under paragraph a of section 130 in respect of property acquired after 6 March 1996, includes material extracted by a well from a deposit of bituminous sands or oil shales;
"tax agreement" with a country other than Canada at any time means an agreement for the elimination of double taxation on income, between the Government of Québec and the government of the country, which has the force of law in Québec at that time or, in the absence of such an agreement, a comprehensive agreement or convention for the elimination of double taxation on income, between the Government of Canada and the government of the country, which has the force of law in Canada at that time;
"tax-agreement-protected business" of a taxpayer at any time means a business in respect of which any income of the taxpayer for a period that includes that time would, because of a tax agreement with a country other than Canada, be exempt from tax under this Part;
"tax-agreement-protected property" of a taxpayer at any time means property any income or gain from the disposition of which by the taxpayer at that time would, because of a tax agreement with a country other than Canada, be exempt from tax under this Part;
"tax shelter" has the meaning assigned by section 1079.1;
"taxable Canadian corporation" has the meaning assigned by paragraph m of section 570;
"taxable Canadian property" has the meaning assigned by Part II and, for the purposes of section 688.0.0.1, Chapter I of Title I.1 of Book VI and sections 1000 to 1003, and for the purpose of applying section 521 and subparagraph c of the second paragraph of section 614 in respect of a disposition made by a person not resident in Canada, includes
(a)  a Canadian resource property;
(b)  a timber resource property;
(c)  an income interest in a trust resident in Canada;
(d)  a right to a share of the income or loss of a partnership under an agreement referred to in section 608; and
(e)  a life insurance policy in Canada;
"taxable capital gain" has the meaning assigned by section 231;
"taxable dividend" has the meaning assigned by paragraph g of section 570;
"taxable income" has the meaning assigned by section 24 or 26.1, as the case may be, and in no case may the taxpayer’s taxable income be less than $0;
"taxable net gain" from the disposition of precious property has the meaning assigned by section 265;
"taxable preferred share" has the meaning assigned by sections 21.11.14 to 21.11.16;
"taxable Québec property" has the meaning assigned by Part II and, for the purposes of sections 26 and 27, and for the purpose of applying section 521 and subparagraph c of the second paragraph of section 614 in respect of a disposition made by a person not resident in Canada, includes
(a)  a Québec resource property within the meaning of paragraph d of section 1089,
(b)  a timber resource property situated in Québec, including at any particular time an interest therein and an option in respect thereof,
(c)  an income interest in a trust resident in Québec,
(d)  a right to a share in the income or loss of a partnership having an establishment in Québec under an agreement described in section 608, and
(e)  a life insurance policy issued or subscribed by an insurer on the life of a person resident in Québec at the time of the issue or subscription;
"taxation year" means, in the case of a corporation, a fiscal period and, in the case of an individual, a calendar year;
"taxpayer" includes any person whether or not liable to pay tax;
"term preferred share" has the meaning assigned by sections 21.5 to 21.9.5;
"testamentary trust" has the meaning assigned by section 677;
"timber resource property" has the meaning assigned by subparagraph d of the first paragraph of section 93;
"Treasury Board" means the Conseil du trésor continued under the Public Administration Act (chapter A-6.01);
"trust" has the meaning assigned by section 646;
"uncle" of a taxpayer includes the spouse of the taxpayer’s aunt;
"undepreciated capital cost" of depreciable property of a prescribed class of a taxpayer has the meaning assigned by section 93;
"undepreciable property" means any property other than depreciable property;
"unit trust" has the meaning assigned by section 649;
"written separation agreement" includes an agreement by which a person agrees to make payments on a periodic basis for the maintenance of a former spouse, child or both, after the marriage has been dissolved whether the agreement was made before or after the marriage was dissolved.
1972, c. 23, s. 1; 1972, c. 26, s. 31; 1973, c. 17, s. 1; 1973, c. 18, s. 1; 1975, c. 21, s. 1; 1975, c. 22, s. 1; 1977, c. 5, s. 14; 1977, c. 26, s. 1; 1978, c. 26, s. 1; 1979, c. 18, s. 1; 1979, c. 38, s. 1; 1979, c. 81, s. 20; 1980, c. 13, s. 1; 1982, c. 5, s. 1; 1982, c. 17, s. 47; 1982, c. 56, s. 8; 1983, c. 44, s. 13; 1984, c. 15, s. 1; 1985, c. 25, s. 17; 1986, c. 15, s. 31; 1986, c. 19, s. 1; 1987, c. 21, s. 7; 1987, c. 67, s. 4; 1988, c. 4, s. 17; 1988, c. 18, s. 2; 1989, c. 5, s. 20; 1989, c. 77, s. 2; 1990, c. 59, s. 3; 1991, c. 7, s. 13; 1991, c. 25, s. 2; 1992, c. 1, s. 6; 1993, c. 16, s. 1; 1993, c. 19, s. 12; 1993, c. 64, s. 4; 1994, c. 13, s. 15; 1994, c. 22, s. 41; 1995, c. 1, s. 11; 1995, c. 49, s. 1; 1995, c. 63, s. 12; 1996, c. 39, s. 8; 1997, c. 3, s. 13; 1997, c. 14, s. 10; 1997, c. 31, s. 2; 1997, c. 85, s. 32; 1998, c. 16, s. 4; 1999, c. 83, s. 26; 1999, c. 86, s. 75; 1999, c. 89, s. 53; O.C. 149-2000; 2000, c. 5, s. 4; 2000, c. 8, s. 152; O.C. 1027-2000; 2000, c. 56, s. 218(12); 2001, c. 7, s. 1; 2001, c. 51, s. 17; 2001, c. 53, s. 1; 2002, c. 45, s. 517; O.C. 45-2004; 2003, c. 2, s. 2; 2003, c. 8, s. 6; 2003, c. 9, s. 10; 2004, c. 8, s. 4; 2004, c. 21, s. 37; [(*): since January 31, 2006, a reference to the Minister of Culture and Communications concerning the national archives of Québec is a reference to Bibliothèque et Archives nationales du Québec: 2004, c. 25, s. 70 and O.C. 1295-2005;]; 2004, c. 37, s. 90; 2005, c. 1, s. 20; 2005, c. 23, s. 30; 2005, c. 38, s. 44.
1.1. In this Act and the regulations, an interest in real property includes a leasehold interest in real property but does not include an interest as security only derived by virtue of a hypothecary claim, mortgage, agreement of sale or other similar obligation.
1978, c. 26, s. 2; 1993, c. 64, s. 5; 1996, c. 39, s. 9; 2005, c. 1, s. 21.
1.2. For the purposes of this Part, other than paragraph a of section 618 and Title VI.5.1 of Book IV, the following rules apply:
(a)  where a person has disposed of or exchanged a particular property and acquired other property in substitution therefor and subsequently, by one or more further transactions, has acquired other property in substitution for that property or for property already acquired in substitution, the property acquired by any such transaction is deemed to have been substituted for the particular property; and
(b)  any share received as a stock dividend on another share of the capital stock of a corporation is deemed to be property substituted for that other share.
1982, c. 5, s. 2; 1987, c. 67, s. 5; 1993, c. 19, s. 13; 1996, c. 39, s. 10; 1997, c. 3, s. 71; 1998, c. 16, s. 5.
1.3. For the purposes of this Part, except Title VI.1 of Book VII, where a corporation issues shares of a class of its capital stock in one or more series, a reference to the class shall be read, with the necessary modifications, as a reference to a series of the class.
1984, c. 15, s. 2; 1987, c. 21, s. 8; 1990, c. 59, s. 4; 1995, c. 63, s. 261; 1997, c. 3, s. 71.
1.4. (Repealed).
1985, c. 25, s. 18; 1988, c. 18, s. 3.
1.5. For the purposes of this Part, where there is a reference to a series of transactions or events, the series is deemed to include any related transactions or events completed in contemplation of the series.
1987, c. 67, s. 6.
1.6. Except as otherwise provided in this Part, property is considered to have become available for use for the purposes of this Part at the time at which it has, or would have if it were depreciable property, become available for use for the purposes of section 93.6.
1993, c. 16, s. 2.
1.7. In this Act and the regulations, a legal person, whether or not established for pecuniary gain, is designated by the word corporation .
1997, c. 3, s. 14.
TITLE II
RULES OF GENERAL APPLICATION
1972, c. 23.
CHAPTER I
GENERALITIES
1972, c. 23.
2. Unless the context indicates otherwise, for the purposes of this Part and the regulations, except for the definition of "person of Indian ancestry" in section 725.0.1, words referring to the father or mother of a taxpayer include a person whose child the taxpayer is, a person whose child the taxpayer had previously been within the meaning of paragraph b of the definition of "child" in section 1, or a person who is the father or mother of the taxpayer’s spouse.
1972, c. 23, s. 2; 1973, c. 17, s. 2; 1994, c. 22, s. 42; 1995, c. 1, s. 12; 1997, c. 85, s. 33.
2.1. In this Act and the regulations, unless otherwise provided, where the ownership of a property is indeterminate owing to a matrimonial regime, the following rules apply:
(a)  where the property was, immediately before the regime was entered into, the property of one of the spouses subject to the regime, it is deemed to remain the property of that spouse; and
(b)  in other cases, the property is deemed to be the property of the spouse who administers it under the regime.
1979, c. 38, s. 2.
2.1.1. For the purposes of this Part and subject to sections 2.1, 2.1.2, 2.1.3 and 456.1, where at any time a property owned by two or more persons is the subject of a partition, the following rules apply, notwithstanding any retroactive or declaratory effect of such partition:
(a)  each such person who had an interest in the property immediately before that time is deemed not to have disposed at that time of that proportion, not exceeding 1, of the interest that the fair market value of that person’s interest in the property immediately after that time is of the fair market value of that person’s interest in the property immediately before that time;
(b)  each such person who has an interest in the property immediately after that time is deemed not to have acquired at that time that proportion of the interest that the fair market value of that person’s interest in the property immediately before that time is of the fair market value of that person’s interest in the property immediately after that time;
(c)  each such person who had an interest in the property immediately before that time is deemed to have had until that time, and to have disposed at that time of, that proportion of the person’s interest to which subparagraph a does not apply;
(d)  each such person who has an interest in the property immediately after that time is deemed not to have had before that time, and to have acquired at that time, that proportion of the person’s interest to which subparagraph b does not apply;
(e)  subparagraphs a to d do not apply where the interest of the person is an interest in fungible corporeal property described in that person’s inventory.
For the purposes of this section, where an interest in the property is an undivided interest, the fair market value of the interest at any time is deemed to be equal to that proportion of the fair market value of the property at that time that the interest is of all the undivided interests in the property.
1993, c. 16, s. 3; 1995, c. 49, s. 2; 2005, c. 1, s. 22.
2.1.2. Where a property owned by two or more persons is the subject of a partition among such persons and, as a consequence thereof, each such person has, in the property, a new interest the fair market value of which immediately after the partition, expressed as a percentage of the fair market value of all the interests in the property immediately after the partition, is equal to the fair market value of that person’s undivided interest immediately before the partition, expressed as a percentage of the fair market value of all the undivided interests in the property immediately before the partition, the following rules apply:
(a)  section 2.1.1 does not apply to the property, and
(b)  the new interest of each such person is deemed to be a continuation of that person’s undivided interest in the property immediately before the partition.
For the purposes of this section, the following rules apply:
(a)  subdivisions of a building or of a parcel of land that are established in the course of, or in contemplation of, a partition and that are co-owned by the same persons who co-owned the building or the parcel of land, or by their assignees, shall be regarded as one property; and
(b)  where an interest in the property is or includes an undivided interest, the fair market value of the interest shall be determined without regard to any discount or premium that may apply to a minority or majority interest in the property.
1993, c. 16, s. 3; 2005, c. 1, s. 23.
2.1.3. For the purposes of this Part and the regulations, where, as a consequence of the laws of a province relating to spouses’ interests in respect of property as a result of marriage, property is, after the death of an individual,
(a)  transferred or assigned to a person who was the individual’s spouse at the time of the death, or acquired by that person, the property is deemed to have been so transferred, assigned or acquired, as the case may be, as a consequence of the death; or
(b)  transferred or assigned to the individual’s succession, or acquired by the individual’s succession, the property is deemed to have been so transferred, assigned or acquired, as the case may be, immediately before the time that is immediately before the death.
1995, c. 49, s. 3; 1998, c. 16, s. 251.
2.2. For the purposes of the definitions of joint spousal trust and post-1971 spousal trust in section 1, sections 2.1, 312.3, 312.4, 313 to 313.0.5, 336.0.2, 336.0.3, 336.0.6 to 336.4, 440 to 441.2, 454, 454.1, 456.1, 462.0.1, 462.0.2 and 651, the definition of pre-1972 spousal trust in section 652.1, sections 653, 656.3, 656.3.1, 656.5, 657, 660, 890.0.1 and 913, subparagraph b of the second paragraph of section 961.17, sections 965.0.9, 965.0.11, 971.2 and 971.3 and Division II.11.13 of Chapter III.1 of Title III of Book IX, spouse and former spouse of a particular individual include another individual who is a party to an annulled or annullable marriage, as the case may be, with the particular individual.
1984, c. 15, s. 3; 1986, c. 15, s. 32; 1991, c. 25, s. 3; 1993, c. 16, s. 4; 1993, c. 19, s. 14; 1994, c. 22, s. 43; 1998, c. 16, s. 6; 2002, c. 6, s. 141; 2003, c. 2, s. 3; 2004, c. 21, s. 38; 2005, c. 38, s. 45.
2.2.1. In this Act and the regulations,
(a)  words referring to a spouse at any time of a taxpayer include the person of the opposite or the same sex who cohabits at that time with the taxpayer in a conjugal relationship and has so cohabited with the taxpayer throughout a 12-month period ending before that time, or would be the father or mother of a child of whom the taxpayer would be the father or mother if the definition of child in section 1 were read without reference to paragraph c thereof and section 2 were read without reference to the words “or a person who is the father or mother of the taxpayer’s spouse”;
(b)  references to marriage shall be read as if a conjugal relationship between two individuals who are, because of subparagraph a or of a civil union, spouses of each other were a marriage;
(c)  provisions that apply to a person who is married apply to a person who is, because of subparagraph a or of a civil union, a spouse of a taxpayer; and
(d)  provisions that apply to a person who is unmarried do not apply to a person who is, because of subparagraph a or of a civil union, a spouse of a taxpayer;
(e)  references to a matrimonial regime include a civil union regime.
For the purposes of subparagraph a of the first paragraph, where at any time the taxpayer and the person referred to in that subparagraph cohabit in a conjugal relationship, they are deemed to be so cohabiting at any particular time after that time, unless they were not cohabiting at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship.
Subparagraph a of the first paragraph, as amended by section 14 of the Act to amend various legislative provisions concerning de facto spouses (1999, chapter 14), applies, notwithstanding section 40 of that Act, from a particular time of the taxation year 1998 or the part of the taxation year 1999 preceding 16 June, to a taxpayer and a person of the same sex that would have been the person’s spouse at that time if the Act to amend various legislative provisions concerning de facto spouses had then been in force, where the taxpayer and the person made jointly a valid election under section 144 of the Modernization of Benefits and Obligations Act (Statutes of Canada, 2000, chapter 12) for the taxation year that includes the particular time.
A copy of every document sent to the Minister of National Revenue in connection with the election referred to in the third paragraph must be filed with the Minister on or before the taxpayer’s and the person’s filing-due date for the taxation year that includes 20 December 2001.
Notwithstanding sections 1010 to 1011, the Minister shall make such assessments, reassessments or additional assessments of tax, interest and penalties and such determinations and redeterminations as are necessary for any taxation year to take into account the application of the third paragraph.
1994, c. 22, s. 44; 1995, c. 1, s. 13; 1995, c. 49, s. 4; 1999, c. 14, s. 14; 2000, c. 5, s. 5; 2001, c. 53, s. 2; 2002, c. 6, s. 142.
2.2.2. (Repealed).
1994, c. 22, s. 44; 2000, c. 5, s. 6.
2.3. Where a document has been issued or a contract has been entered into before 31 July 1997 purporting to create, to establish, to extinguish or to be in substitution for, a taxpayer’s right to an amount or amounts, immediately or in the future, out of or under a pension plan, the following rules apply:
(a)  where the rights provided for in the document or contract are rights provided for by the pension plan or are rights to a payment or payments out of the pension plan, and the taxpayer acquired an interest under the document or contract before that date, any payment under the document or contract is deemed to be a payment out of or under the pension plan and the taxpayer is deemed not to have received, on the issuance of the document or the entering into the contract, an amount out of or under a pension plan; and
(b)  where the rights created or established by the document or contract are not rights provided for by the pension plan or rights to a payment or payments out of the pension plan, the taxpayer is deemed to have received an amount out of or under the pension plan equal to the value of the rights created or established by the document or contract when the document was issued or the contract was entered into.
1991, c. 25, s. 4; 2000, c. 5, s. 7.
3. Death benefit means the amount by which the aggregate of amounts received by a taxpayer in a taxation year upon or after the death of an employee in recognition of the employee’s service in an office or employment exceeds the amount determined under section 4.
1972, c. 23, s. 3; 1982, c. 17, s. 48; 1986, c. 19, s. 2.
4. The amount which a taxpayer shall subtract from the amount determined under section 3 is,
(a)  where the taxpayer is the only person who has received an amount under section 3, the lesser of
i.  the aggregate of all amounts so received by the taxpayer in the year, and
ii.  the amount, if any, by which $10,000 exceeds the aggregate of all amounts received by the taxpayer in preceding taxation years upon or after the death of the employee in recognition of the employee’s service in an office or employment;
(b)  in all other cases, the lesser of
i.  the aggregate of all amounts so received by the taxpayer in the year, and
ii.  such proportion of $10,000 as the aggregate described in subparagraph i is of the aggregate of all amounts received by all taxpayers at any time upon or after the death of the employee in recognition of the employee’s service in an office or employment.
1972, c. 23, s. 4; 1986, c. 19, s. 2; 1994, c. 22, s. 45; 1997, c. 14, s. 11.
5. When in this Part, a reference is made to a taxation year by identifying it with a calendar year, this reference contemplates the taxation year which coincides with that calendar year or ends therein.
1972, c. 23, s. 5.
5.1. For the purposes of this Act and notwithstanding the definition of taxation year set forth in section 1, and section 5,
(a)  the taxation year of a corporation that commenced before 1 January 1988 and that would, but for this paragraph, have ended after 31 December 1987 is deemed to have ended on 31 December 1987 and a new taxation year is deemed to have commenced on 1 January 1988 if the following conditions are met:
i.  the corporation is a Canadian-controlled private corporation throughout the period extending from the beginning of its last taxation year commencing before 1 January 1988 to 31 December 1987;
ii.  that corporation so elects in the fiscal return it is required to file under this Part for its taxation year that commenced before 1 January 1988 and would, but for this paragraph, have ended after 31 December 1987;
(b)  the taxation year of a corporation that commenced before 1 July 1988 and that would, but for this paragraph, have ended after 30 June 1988 is deemed to have ended on 30 June 1988 and a new taxation year is deemed to have commenced on 1 July 1988 if the following conditions are met:
i.  the corporation is a private corporation other than a Canadian-controlled private corporation throughout the period extending from the beginning of its last taxation year commencing before 1 July 1988 to 30 June 1988;
ii.  that corporation so elects in the fiscal return it is required to file under this Part for its taxation year that commenced before 1 July 1988 and would, but for this paragraph, have ended after 30 June 1988.
1990, c. 59, s. 5; 1997, c. 3, s. 15.
5.2. Where section 5.1 applies in respect of a corporation, the corporation is deemed not to have established a fiscal period before 1 January 1988 or 1 July 1988, as the case may be, for the purpose of determining its fiscal period after 31 December 1987 or 30 June 1988, as the case may be.
1990, c. 59, s. 5; 1997, c. 3, s. 71.
6. The reference to a taxation year ending in another year includes a reference to a taxation year the end of which coincides with that of such other year.
The reference to a fiscal period ending in a taxation year includes a reference to a fiscal period the end of which coincides with the end of that taxation year.
1972, c. 23, s. 6; 1986, c. 15, s. 33; 1996, c. 39, s. 11.
6.1. Where the fiscal period of a corporation exceeds 365 days and by reason thereof the corporation does not have a taxation year that ends in a particular calendar year, for the purposes of this Part the corporation’s first taxation year ending in the immediately following calendar year is deemed to end on the last day of the particular calendar year.
1979, c. 18, s. 2; 1997, c. 3, s. 71.
6.2. Where, at any time, control of a corporation, other than a corporation that is a foreign affiliate of a taxpayer resident in Canada and that did not carry on a business in Canada at any time in its last taxation year commencing before that time, has been acquired by a person or group of persons, the following rules apply for the purposes of this Part:
(a)  subject to paragraph c, the taxation year of the corporation that would, but for this paragraph, have included that time is deemed to have ended immediately before that time;
(b)  a new taxation year of the corporation is deemed to have commenced at that time;
(c)  subject to section 779, Chapter I of Title I.1 of Book VI and paragraph a of sections 851.22.23 and 999.1, and notwithstanding the definition of taxation year in section 1 and sections 5 and 6.1, where the taxation year of the corporation that would, but for this section, have been its last taxation year that ended before that time would, but for this paragraph, have ended within the seven- day period that ended immediately before that time, that taxation year is, except where control of the corporation was acquired by a person or group of persons within that period, deemed to end immediately before that time where the corporation so elects in its fiscal return under this Part for that taxation year; and
(d)  for the purpose of determining the corporation’s fiscal period after that time, the corporation is deemed not to have established a fiscal period before that time.
1989, c. 77, s. 3; 1993, c. 16, s. 5; 1995, c. 49, s. 5; 1996, c. 39, s. 12; 1997, c. 3, s. 71; 2004, c. 8, s. 5.
7. In this Part and the regulations, unless the context indicates otherwise, fiscal period of a business or a property of a person or partnership means the period for which the person’s or partnership’s accounts in respect of the business or property are made up for purposes of assessment under this Part.
However, a fiscal period may not end
(a)  in the case of a business or a property of a corporation, more than 53 weeks after the period began;
(b)  in any of the following cases, after the end of the calendar year in which the period began unless, in the case of a business, the business is not carried on in Canada, is a prescribed business or is carried on by a prescribed person or partnership:
i.  a business or property of an individual, other than an individual in respect of whom any of sections 980 to 999.1 applies or other than a testamentary trust,
i.1.  a business or property of an inter vivos trust, other than a fiscal period in respect of which paragraph c of section 1121.7 applies,
ii.  a business or property of a particular partnership of which an individual, other than an individual in respect of whom any of sections 980 to 999.1 applies or other than a testamentary trust, a professional corporation, or a partnership in respect of which this subparagraph applies, would, if the fiscal period of the particular partnership ended at the end of the calendar year in which the period began, be a member in the fiscal period, or
iii.  a business or property of a professional corporation that would, if the fiscal period ended at the end of the calendar year in which the period began, be in the fiscal period a member of a partnership in respect of which subparagraph ii applies;
(c)  in any other case, more than 12 months after the period began.
For the purposes of this section, the activities of a person in respect of whom any of sections 980 to 999.1 applies are deemed to be a business.
1972, c. 23, s. 7; 1997, c. 3, s. 71; 1997, c. 31, s. 3; 2001, c. 53, s. 3; 2004, c. 8, s. 6.
7.0.1. For the purposes of subparagraph ii of subparagraph b of the second paragraph of section 7 and of section 7.0.3, a person or partnership that would not have a share of any income or loss of a partnership for a fiscal period of the partnership, if the fiscal period ended at the end of the calendar year in which it began, is deemed not to be a member of the partnership in that fiscal period.
1997, c. 31, s. 4.
7.0.2. Where a fiscal period of a business or a property of a person or partnership ends at a particular time, the subsequent fiscal period of the business or property of the person or partnership is deemed to begin immediately after that time.
1997, c. 31, s. 4.
7.0.3. Subparagraph b of the second paragraph of section 7 does not apply to a fiscal period of a business carried on, throughout the period of time that began at the beginning of the fiscal period and ended at the end of the calendar year in which the fiscal period began, by an individual, otherwise than as a member of a partnership, or by an individual as a member of a partnership if, throughout that period of time, each member of the partnership is an individual and the partnership is not a member of another partnership, where
(a)  in the case of a business carried on by an individual otherwise than as a member of a partnership, or as a member of a partnership no member of which is a testamentary trust, an election in prescribed form to have subparagraph b of the second paragraph of section 7 not apply is filed with the Minister by the individual on or before the individual’s filing-due date, and with the individual’s fiscal return under this Part, for the taxation year that includes the first day of the first fiscal period of the business that begins after 31 December 1994; and
(b)  in the case of a business carried on by an individual as a member of a partnership a member of which is a testamentary trust, an election in prescribed form to have subparagraph b of the second paragraph of section 7 not apply is filed with the Minister by the individual on or before the earliest of the filing-due dates of the members of the partnership for a taxation year that includes the first day of the first fiscal period of the business that begins after 31 December 1994.
1997, c. 31, s. 4.
7.0.4. Section 7.0.3 does not apply to a particular fiscal period of a business where, in a preceding fiscal period or throughout the period of time that began at the beginning of the particular fiscal period and ended at the end of the calendar year in which the particular fiscal period began, the expenditures made in the course of carrying on the business were primarily the cost or capital cost of tax shelter investments, within the meaning of section 851.38.
1997, c. 31, s. 4; 2001, c. 7, s. 2.
7.0.5. Section 7.0.3 does not apply to a fiscal period of a business carried on by an individual that begins after the beginning of a particular taxation year of the individual where
(a)  an election in prescribed form to revoke an election filed under section 7.0.3 in respect of the business is filed with the Minister; and
(b)  the election to revoke is filed
i.  in the case of an individual who is not a member of a partnership, or who is a member of a partnership no member of which is a testamentary trust, by the individual on or before the individual’s filing-due date, and with the individual’s fiscal return under this Part, for the particular taxation year, and
ii.  in the case of an individual who is a member of a partnership a member of which is a testamentary trust, by the individual on or before the earliest of the filing-due dates of the members of the partnership for a taxation year that includes the first day of the first fiscal period of the business that begins after the beginning of the particular taxation year.
1997, c. 31, s. 4.
7.0.6. For the purposes of this Part, no change in the time when a fiscal period ends may be made without the concurrence of the Minister.
1997, c. 31, s. 4.
7.1. A transfer, distribution or acquisition of property is deemed, for the purposes of this Part, to be made as a consequence of the death of a taxpayer or the taxpayer’s spouse, as the case may be, where it is made
(a)  under or as a consequence of the terms of the will or other testamentary instrument of the taxpayer or the taxpayer’s spouse or as a consequence of the law governing the intestacy of the taxpayer or the taxpayer’s spouse; or
(b)  as a consequence of a disclaimer, release or surrender by a person who was a beneficiary under the will or other testamentary instrument or on the intestacy of the taxpayer or the taxpayer’s spouse.
1986, c. 19, s. 3; 1994, c. 22, s. 46; 1996, c. 39, s. 273; 1998, c. 16, s. 7.
7.2. A release or surrender by a person who was a beneficiary under the will or other testamentary instrument or on the intestacy of a taxpayer with respect to any property that was property of the taxpayer immediately before the taxpayer’s death is deemed, for the purposes of this Part, not to be a disposition of the property by that person.
1986, c. 19, s. 3; 1994, c. 22, s. 47; 1998, c. 16, s. 8.
7.3. For the purposes of sections 7.1 and 7.2, the expression release or surrender means
(a)  a release or surrender made under the laws of a province other than Québec, that does not direct in any manner who is entitled to benefit therefrom and that is made within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the taxpayer’s legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances;
(b)  a gift inter vivos made under the laws of Québec of an interest in, or right to property of, a succession that is made within the period referred to in paragraph a to the person or persons who would have benefited if the donor had made a renunciation of the succession that was not made in favour of any person.
1986, c. 19, s. 3.
7.4. In section 7.1, disclaimer means a disclaimer made under the laws of a province other than Québec and includes a renunciation of a succession made under the laws of Québec that is not made in favour of any person, but does not include any disclaimer or renunciation, as the case may be, made after the period ending 36 months after the death of the taxpayer unless written application therefor has been made to the Minister by the taxpayer’s legal representative before the expiry of that period and the disclaimer or renunciation, as the case may be, is made within such longer period as the Minister considers reasonable.
1986, c. 19, s. 3; 1995, c. 49, s. 6; 1996, c. 39, s. 273.
7.4.1. In this Part and the regulations, a trust is deemed to be created by an individual’s will if the trust is created by an order of a court in relation to the individual’s succession made under any law of a province that provides for the relief or support of dependants of an individual.
1994, c. 22, s. 48; 1998, c. 16, s. 251.
7.4.2. For the purposes of this Part and the regulations, property is deemed not to have become vested indefeasibly in an individual other than a trust or in a trust under which the taxpayer’s spouse is a beneficiary, where the trust is created by the will of the taxpayer, unless the property became so vested before the death of the individual or of the taxpayer’s spouse, as the case may be.
1994, c. 22, s. 48.
7.5. Except as otherwise provided in this Part, where an amount or a number is required under this Part to be determined or calculated by or in accordance with an algebraic formula, if the amount or number when so determined or calculated would, but for this section, be a negative amount or number, it is deemed to be nil.
1989, c. 5, s. 21.
7.6. Notwithstanding any other provision of this Act, where the Minister and another person who is a party to a convention or agreement referred to in subsection 1 of section 115.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) have entered into a particular agreement with respect to the taxation of the other person in relation to matters referred to in the convention or agreement, all determinations made in accordance with the terms and conditions of the particular agreement are deemed to be in accordance with this Act.
Where rights and obligations under the particular agreement described in the first paragraph have been transferred to another person with the concurrence of the Minister, that other person is deemed, for the purposes of the first paragraph, to have entered into the particular agreement with the Minister.
1989, c. 77, s. 4; 1994, c. 22, s. 49.
7.7. For the purposes of this Part, one bond, debenture, bill, note or similar obligation issued by a person is identical to another such obligation issued by that person if both are identical in respect of all rights, either immediately or in the future and either absolutely or contingently, attaching thereto, except as regards the principal amount of the obligation.
1990, c. 59, s. 6.
7.8. For the purposes of sections 21.4.3, 21.5 to 21.11, paragraph f of section 21.11.16, sections 21.12 to 21.16, 508, where the latter section applies to a reduction of the paid-up capital in respect of a term preferred share, 508.1 and 740.7, where after 12 November 1981 a person has an interest in a trust or partnership, whether directly or indirectly through an interest in any other trust or partnership or in any manner whatever, that person is deemed to be a beneficiary of the trust or a member of the partnership, as the case may be.
1990, c. 59, s. 6; 1997, c. 3, s. 71.
7.9. For the purposes of this Part and the regulations, the following rules apply, subject to section 7.9.1:
(a)  a usufruct is deemed to be a trust, established by will where the usufruct was so established, and property subject to a usufruct is deemed to have been transferred to the trust and to be held in trust and not otherwise;
(b)  a right of use is deemed to be a trust, established by will where the right was so established, and property subject to such a right is deemed to have been transferred to the trust and to be held in trust and not otherwise;
(c)  a substitution is deemed to be a trust, established by will where the substitution was so established, and property subject to a substitution is deemed to have been transferred to the trust and to be held in trust and not otherwise;
(d)  property referred to in paragraphs a to c is deemed to have been transferred on the death of the testator and as a consequence thereof where the usufruct, the right of use or the substitution, as the case may be, was established by will.
1993, c. 16, s. 6; 1994, c. 22, s. 50; 2003, c. 9, s. 11; 2004, c. 8, s. 7.
7.9.1. Paragraphs a and b of section 7.9 do not apply in respect of a recognized gift with reserve of usufruct or use.
2003, c. 9, s. 12.
7.10. For the purposes of this Part and the regulations, an arrangement other than a trust is deemed to be a trust and property subject to rights and obligations under the arrangement is deemed to be held in trust and not otherwise, if the arrangement meets the following conditions:
(a)  it is established by or pursuant to a written contract that is governed by the laws of Québec and in which it is provided that, for the purposes of this Part, the arrangement is considered to be a trust;
(b)  it creates rights and obligations that are substantially similar to the rights and obligations under a trust, determined without reference to sections 7.9 to 7.11.
1993, c. 16, s. 6; 2004, c. 8, s. 8.
7.11. For the purposes of this Part and the regulations, the following rules apply:
(a)  a person who has a right, whether immediate or future and whether absolute or contingent, to receive all or any part of the income or capital in respect of property referred to in section 7.9 or 7.10 is deemed to be beneficially interested in the trust referred to in that section; and
(b)  a person who at any particular time and in relation to a property, has a right of ownership, a right in an emphyteutic lease or a beneficial interest in a trust is deemed, even if the property is subject to a servitude, to have beneficial ownership of the property at that time.
1993, c. 16, s. 6; 1996, c. 39, s. 273; 2004, c. 8, s. 9.
7.11.1. For the purposes of this Part and the regulations, the following rules apply:
(a)  a person or partnership beneficially interested in a particular trust includes any person or partnership that has any right, whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretionary power by any person or partnership, as a beneficiary under a trust to receive all or any part of the income or capital of the particular trust either directly from the particular trust or indirectly through one or more trusts or partnerships;
(b)  except for the purposes of this subparagraph, a particular person or partnership is deemed to be beneficially interested in a particular trust at a particular time where
i.  the particular person or partnership is not beneficially interested in the particular trust at the particular time,
ii.  because of the terms or conditions of the particular trust or any agreement in respect of the particular trust at the particular time, the particular person or partnership might, because of the exercise of any discretion by any person or partnership, become beneficially interested in the particular trust at the particular time or at a later time, and
iii.  at or before the particular time, either the particular trust has acquired property, directly or indirectly in any manner whatever, from a person or partnership described in the second paragraph, or a person or partnership described in that paragraph has given a guarantee on behalf of the particular trust or provided any other financial assistance whatever to the particular trust; and
(c)  a member of a partnership that is beneficially interested in a trust is deemed to be beneficially interested in the trust.
The person or partnership to which subparagraph iii of subparagraph b of the first paragraph refers is
(a)  the particular person or partnership;
(b)  another person with whom the particular person or partnership, or a member of the particular partnership, does not deal at arm’s length;
(c)  a person or partnership with whom the other person referred to in subparagraph b does not deal at arm’s length;
(d)  a controlled foreign affiliate of the particular person or of another person with whom the particular person or partnership, or a member of the particular partnership, does not deal at arm’s length; or
(e)  a corporation not resident in Canada that would, if the particular partnership were a corporation resident in Canada, be a controlled foreign affiliate of the particular partnership.
1994, c. 22, s. 51; 1995, c. 49, s. 7; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 9; 2001, c. 7, s. 3.
7.11.2. Without restricting the personal liabilities under this Act of the trustees of the trusts mentioned hereinafter or the application of section 656.9 or paragraph f of section 769, where a particular trust transfers property at a particular time to another trust, other than a trust governed by a registered retirement savings plan or by a registered retirement income fund, in circumstances to which subparagraph b of the second paragraph of section 248 applies, the other trust is deemed to be after that time the same trust as, and a continuation of, the particular trust.
2003, c. 2, s. 4.
7.11.3. Except for the purposes of this section, where at a particular time property is transferred to a trust in circumstances to which subparagraph g of the second paragraph of section 248 applies, the trust is deemed to act as agent or mandatary for the transferor in respect of the property throughout the period that begins at the time of the transfer and ends at the time of the first change after that time in the beneficial ownership of the property.
2003, c. 2, s. 4.
7.11.4. Where a trust issues a unit of the trust to a taxpayer directly in consideration of a right to enforce payment of an amount by the trust in respect of the taxpayer’s capital interest in the trust, the cost to the taxpayer of the unit is deemed to be equal to that amount where
(a)  at the time the unit is issued, the trust is neither a personal trust nor a trust prescribed for the purposes of section 688; and
(b)  the unit meets either of the following conditions:
i.  the unit is capital property and subparagraph i.1 of paragraph n of section 257 applies in respect of that amount or would apply if that subparagraph i.1 were read without reference to subparagraphs 1 to 3 thereof, or
ii.  the unit is not capital property and subparagraph i.1 of paragraph n of section 257 does not apply in respect of that amount but would so apply if that subparagraph i.1 were read without reference to subparagraphs 1 to 3 thereof.
2003, c. 2, s. 4.
7.11.5. Where at a particular time a taxpayer’s capital interest in a trust includes a right to enforce payment of an amount by the trust, the amount shall be added at the particular time to the cost otherwise determined to the taxpayer of the capital interest where
(a)  immediately after the particular time, the taxpayer disposes of the capital interest;
(b)  as a consequence of the disposition, the right to enforce payment of the amount is acquired by another person or partnership; and
(c)  if the right to enforce payment of the amount had been satisfied by a payment to the taxpayer by the trust, there would have been no disposition of that right for the purposes of this Part by reason of the application of subparagraph e of the second paragraph of section 248.
2003, c. 2, s. 4.
7.12. For greater certainty, it is hereby declared that, unless specifically permitted by this Part, neither the equity nor the consolidation method of accounting shall be used to determine any amount for the purposes of this Part.
1993, c. 16, s. 6.
7.13. Where a tax agreement between Québec and a particular country that has force of law in Québec provides for an income tax privilege, other than an income tax exemption, this Act and the regulations shall be applied on the assumption that they contain such provisions as are necessary for the granting of such a privilege.
1993, c. 16, s. 6.
7.14. The application of this Act and the regulations is not affected by article 77 of the Civil Code as regards the determination of whether or not a person is resident in Québec, in Canada or elsewhere.
1994, c. 22, s. 52.
7.15. All the structural units of a trade union, including each local, branch, national and international unit, are deemed to be a single employer and a single entity for the purposes of the provisions of this Part, and the regulations, relating to the determination of whether a contribution made under a plan or arrangement is a resident’s contribution within the meaning of section 890.6.1.
1995, c. 49, s. 8.
7.16. Where at a particular time a person or partnership, in this section referred to as the debtor , becomes liable to repay money borrowed by the debtor or becomes liable to pay an amount, other than interest, as consideration for any property acquired by the debtor or services rendered to the debtor, or that is deductible in computing the debtor’s income, for the purpose of applying this Part relating to the liability, the liability is deemed to be an obligation, issued at that time by the debtor, that has a principal amount at that time equal to the amount of the liability at that time.
1996, c. 39, s. 13; 1997, c. 3, s. 71.
7.17. For the purposes of this Part,
(a)  unless the context requires otherwise, an obligation issued by a debtor includes any part of a larger obligation that was issued by the debtor;
(b)  the principal amount of that part is deemed to be the portion of the principal amount of that larger obligation that relates to that part; and
(c)  the amount for which that part was issued is deemed to be the portion of the amount for which that larger obligation was issued that relates to that part.
1996, c. 39, s. 13.
7.18. For the purposes of this Part, where in a taxation year a person who is not resident in Canada carries on an activity, or disposes of a property, described in the second paragraph, the person is deemed to carry on business in Canada in the year in respect of the activity or disposition.
For the purposes of the first paragraph,
(a)  an activity to which that paragraph refers is an activity that consists
i.  in producing, growing, mining, creating, manufacturing, fabricating, improving, packing, preserving or constructing, in whole or in part, anything in Canada whether or not the person exports that thing without disposing of it before exportation, or
ii.  in soliciting orders or offering anything for sale in Canada through an agent or servant, whether the contract or transaction is to be completed inside or outside Canada or partly in and partly outside Canada; and
(b)  a property to which that paragraph refers is
i.  Canadian resource property, except where an amount in respect of the disposition thereof is included in computing an amount determined under paragraph e of section 330 on account of an amount deducted under section 412 in computing the cumulative Canadian development expenses at the end of a taxation year or under section 418.12 on account of an amount deducted under section 418.6 in computing the cumulative Canadian oil and gas property expenses at the end of a taxation year,
ii.  property, other than depreciable property, that is a timber resource property or an interest therein or option in respect thereof, or
iii.  property, other than capital property, that is an immovable property situated in Canada, including an interest therein or option in respect thereof, whether or not the property is in existence.
1997, c. 14, s. 12.
7.18.1. For the purposes of subparagraph ii of paragraph b of section 649, subparagraphs i to iv of paragraph c.2 of section 998, paragraph b of sections 1117 and 1120 and any regulations made under paragraphs c.3 and c.4 of section 998 and under section 1108, where a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.
2004, c. 8, s. 10.
7.19. Except as otherwise provided, no provision of this Act shall be read or construed
(a)  to require the inclusion or permit the deduction, either directly or indirectly, in computing a taxpayer’s income, taxable income or taxable income earned in Canada, for a taxation year or in computing a taxpayer’s income or loss for a taxation year from a source in Canada or from sources in another place, of any amount to the extent that the amount has already been directly or indirectly included or deducted, as the case may be, in computing such income, taxable income, taxable income earned in Canada or loss, for the year or any preceding taxation year;
(b)  to permit the deduction, either directly or indirectly, in computing a taxpayer’s taxes payable under this Act for a taxation year of any amount to the extent that the amount has already been directly or indirectly deducted in computing such taxes payable for the year or any preceding taxation year; or
(c)  to consider an amount to have been paid on account of a taxpayer’s taxes payable under this Act for a taxation year to the extent that the amount has already been considered to have been paid on account of such taxes payable for the year or any preceding taxation year.
Subparagraph a of the first paragraph does not apply to prevent a taxpayer from deducting, in computing the taxpayer’s income for a taxation year, an amount the taxpayer pays in the year as a reimbursement of an amount the taxpayer deducted in computing the taxpayer’s taxable income for a preceding taxation year.
1997, c. 31, s. 5; 2005, c. 38, s. 46.
CHAPTER II
DEEMED RESIDENCE
1972, c. 23; 1994, c. 22, s. 53.
8. An individual is deemed to have been resident in Québec throughout a taxation year if, at any time in the year, the individual
(a)  sojourned in Québec for a period of, or periods the total of which is, 183 days or more and was ordinarily resident outside Canada;
(b)  was a member of the Canadian Armed Forces and was resident in Québec immediately before leaving Canada on military service in a foreign country;
(c)  was an ambassador, Member of Parliament, officer, high commissioner, minister, servant or senator of Canada, or an agent-general, officer or servant of a province, and was resident in Québec immediately prior to election, employment or appointment by Canada or the province or received representation allowances in respect of the year;
(d)  performed services in a country other than Canada under a prescribed international development assistance program of the Government of Québec or Canada and was resident in Québec at any time in the six month period preceding the day on which those services commenced;
(e)  (paragraph repealed);
(f)  was a child of, and dependent for support on, an individual to whom any of paragraphs b, c and d applies and the child’s income for the year did not exceed the amount in dollars referred to in the first paragraph of section 752.0.0.1, that is used in computing the child’s deduction under that section; or
(g)  was at any time in the year, under a tax agreement with one or more other countries, entitled to an exemption from an income tax otherwise payable in any of those countries in respect of income from any source, unless all or substantially all of the individual’s income from all sources was not so exempt, because at that time the individual was related to or a member of the family of a particular individual, other than a trust, who was resident in Québec.
1972, c. 23, s. 8; 1972, c. 26, s. 32; 1974, c. 18, s. 1; 1977, c. 5, s. 14; 1982, c. 38, s. 11; 1986, c. 15, s. 34; 1989, c. 5, s. 22; 1993, c. 64, s. 6; 1995, c. 49, s. 9; 1998, c. 16, s. 10; 2001, c. 53, s. 4; 2003, c. 9, s. 13; 2005, c. 1, s. 24.
8.1. In determining whether an individual is, for all or part of a taxation year, a foreign researcher within the meaning of section 737.19, a foreign researcher on a post-doctoral internship within the meaning of section 737.22.0.0.1, a foreign expert within the meaning of section 737.22.0.0.5, a foreign professor within the meaning of section 737.22.0.5 or a foreign specialist within the meaning of any of sections 737.18.6, 737.18.29 and 737.22.0.1, section 8 shall be read without reference to paragraph a thereof.
2004, c. 21, s. 39.
9. Where, at a particular time in a taxation year, a taxpayer ceases to be an individual described in paragraph b, c or d of section 8 and the taxpayer would, but for this section, be deemed to have been resident in Québec throughout the year by reason of those paragraphs, the taxpayer is deemed to have been resident in Québec throughout the part of the year preceding that time.
The same applies to the taxpayer’s spouse referred to in paragraph e of section 8 and the taxpayer’s child referred to in paragraph f of that section.
1972, c. 23, s. 9; 1990, c. 59, s. 7; 1998, c. 16, s. 11.
10. Reference to a person resident in Québec or Canada also includes for the purposes of this Part a person who at the relevant time was ordinarily resident in Québec or Canada.
1972, c. 23, s. 10.
11. For the purposes of this Part a corporation is deemed to have been resident in Canada throughout a taxation year if:
(a)  it was incorporated in Canada after 26 April 1965;
(b)  it was incorporated in Canada before 9 April 1959 and at any time in the taxation year or in any preceding taxation year beginning after 1971 it was resident in Canada or carried on business in Canada and was a corporation which
i.  was on 18 June 1971 a foreign business corporation, within the meaning of the regulations, controlled by a corporation resident in Canada, and
ii.  throughout the 10-year period ending on 18 June 1971 carried on business in a country other than Canada, and, during those years, paid dividends to its shareholders resident in Canada on which they paid tax to the government of the other country; and
(c)  in the case of a corporation incorporated before 27 April 1965 other than a corporation to which paragraph b applies it was incorporated in Canada and at any time in the taxation year or in a preceding taxation year of the corporation ending after 26 April 1965 it was resident in Canada or carried on business in Canada.
1972, c. 23, s. 11; 1997, c. 3, s. 71.
11.1. Notwithstanding section 11, for the purposes of this Part, other than paragraph a of section 772.6.1, a corporation is deemed not to be resident in Canada at any time if it is deemed not to be resident in Canada at that time under subsection 5 of section 250 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).
1986, c. 19, s. 4; 1997, c. 3, s. 71; 2004, c. 8, s. 11.
11.1.1. For the purposes of this Part, a corporation that is incorporated or otherwise formed under the laws of a country other than Canada or of a state, province or other political subdivision of such a country is deemed to be resident in that country throughout a taxation year and not to be resident in Canada at any time in the year, where
(a)  the corporation
i.  has as its principal business in the year the operation of ships that are used primarily in transporting persons or goods in international traffic, determined on the assumption that the corporation is not resident in Canada and that, in the case of a voyage from Canada to a place outside Canada, any port or other place on the Great Lakes or St.Lawrence River is in Canada, or
ii.  holds throughout the year shares of one or more other corporations, each of which is a subsidiary wholly-owned corporation of the corporation as defined by subsection 5 of section 544, and is deemed by this section to be resident in a country other than Canada throughout the year, and at no time in the year is the total of the cost amounts to the corporation of all those shares less than 50% of the total of the cost amounts to it of all its property;
(b)  all or substantially all of the corporation’s gross revenue for the year consists of
i.  gross revenue from the operation of ships in transporting persons or goods in that international traffic referred to in subparagraph i of paragraph a,
ii.  dividends from one or more other corporations each of which is a subsidiary wholly-owned corporation of the corporation as defined by subsection 5 of section 544, and is deemed by this section to be resident in a country other than Canada throughout each of its taxation years that began after 28 February 1991 and before the last time at which it paid any of those dividends, or
iii.  a combination of amounts described in subparagraphs i and ii; and
(c)  the corporation has not been granted articles of continuance in Canada before the end of the year.
1993, c. 16, s. 7; 1997, c. 3, s. 71; 2001, c. 7, s. 4.
11.1.2. For the purposes of the provisions of this Act that apply to a trust for a taxation year only where the trust has been resident in Canada throughout the year, where a particular trust ceases at any time to exist and the particular trust was resident in Canada immediately before that time, the particular trust is deemed to be resident in Canada throughout the period that begins at that time and ends at the end of the year.
2003, c. 2, s. 5.
11.2. (Repealed).
1992, c. 57, s. 589; 1994, c. 22, s. 54.
11.3. Where a corporation is at any time, in this section referred to as the time of continuation , granted articles of continuance or similar constitutional documents, the corporation is
(a)  for the purpose of applying this Part, other than section 11, in respect of all times from the time of continuation in a particular jurisdiction until the time of continuation in a different jurisdiction, deemed to have been incorporated in the particular jurisdiction and not to have been incorporated in the other jurisdiction; and
(b)  for the purpose of applying section 11 in respect of all times from the time of continuation in a particular jurisdiction until the time of continuation in a different jurisdiction, deemed to have been incorporated in the particular jurisdiction at the time of continuation in that jurisdiction and not to have been incorporated in the other jurisdiction.
1995, c. 49, s. 10; 1997, c. 3, s. 71.
11.4. For the purposes of this Part, where a trust resident in Canada would be an environmental trust at any time if it were resident at that time in the province in which the site to which the trust relates is situated, the trust is deemed to be resident at that time in that province and in no other province.
1996, c. 39, s. 14; 2000, c. 5, s. 8.
11.5. For the purposes of this Act, unless the context indicates otherwise, the following rules apply:
(a)  a taxation year of a person not resident in Canada shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and
(b)  a person for whom income for a taxation year is determined in accordance with this Act includes a person not resident in Canada.
2003, c. 2, s. 6.
CHAPTER III
ESTABLISHMENT
1972, c. 26, s. 33.
12. The establishment of a taxpayer means a fixed place where the taxpayer carries on the taxpayer’s business or, if there is no such place, the taxpayer’s principal place of business. An establishment also includes an office, a branch, a mine, an oil or gas well, a farm, a timberland, a factory, a warehouse or a workshop.
Without restricting the generality of the first paragraph, a corporation has an establishment in each province of Canada in which an immovable owned by the corporation and used principally for the purpose of earning or producing gross revenue that is rent is situated.
1972, c. 26, s. 33; 1982, c. 56, s. 9; 1993, c. 19, s. 15; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 12.
13. Where a taxpayer carries on business through an employee, agent or mandatary, established in a particular place, who has general authority to contract for the employer or mandator or who has a stock of merchandise owned by such employer or mandator from which the employee, agent or mandatary regularly fills orders which the employee, agent or mandatary receives, the taxpayer is deemed to have an establishment in that place.
However, a taxpayer is not deemed to have an establishment for the sole reason that the taxpayer has business dealings through a commission agent, a broker or other independent agent or maintains an office or warehouse solely for the purchase of merchandise; similarly, the taxpayer is not deemed to have an establishment in a place solely because of the taxpayer’s control over a subsidiary carrying on business in that place.
1972, c. 26, s. 33; 1998, c. 16, s. 13; 2000, c. 39, s. 2.
14. A corporation that has an establishment in Canada under this chapter and is the owner of land in a province is deemed to have with respect to such land an establishment in that province.
1972, c. 26, s. 33; 1997, c. 3, s. 71.
15. A taxpayer using at a particular place substantial machinery or material at a particular time in a taxation year is deemed to have an establishment at that place.
1972, c. 26, s. 33.
16. An insurance corporation is deemed to have an establishment at each place where it is registered or holds a permit to carry on business.
1972, c. 26, s. 33; 1973, c. 17, s. 3; 1997, c. 3, s. 71.
16.1. Where, in a taxation year, a corporation not resident in Canada operates a mine, produces, processes, preserves, packs or builds goods or a product in whole or in part, or produces or presents a public show, it is deemed to have an establishment at the place, in Canada, where it carries on one or the other of these activities.
1979, c. 38, s. 3; 1997, c. 3, s. 71.
16.1.1. Sections 15 and 16.1 do not apply in respect of a taxpayer’s activities relating to a business of the taxpayer that consists in operating a sports team that plays one or more of its matches or games, or that takes part in one or more competitions, outside Québec, or to a sports club if, in connection with its activities, one of its members plays a match or game, or takes part in a competition, outside Québec.
1995, c. 63, s. 13.
16.1.2. For the purposes of subparagraph a of the first paragraph of section 21.32, section 125.1, the second paragraph of section 171, sections 217.15 and 740 and paragraph b.1 of section 1029.8.17, where a person is not resident in Canada but is resident in a country with which a tax agreement was entered into and in which the expression permanent establishment is defined, the establishment of the person means, notwithstanding sections 12 to 16.1, the permanent establishment of the person, within the meaning assigned by the tax agreement.
1996, c. 39, s. 15; 2001, c. 53, s. 5; 2004, c. 8, s. 12.
16.2. For the purposes of this chapter, the word province includes
(a)  the Nova Scotia offshore area, within the meaning of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act (Statutes of Canada, 1988, chapter 28);
(b)  the Newfoundland offshore area, within the meaning of the Canada-Newfoundland Atlantic Accord Implementation Act (Statutes of Canada, 1987, chapter 3);
(c)  (paragraph repealed);
(d)  (paragraph repealed).
1993, c. 19, s. 16; 1995, c. 49, s. 11.
CHAPTER IV
NON-ARM’S LENGTH AND RELATED PERSONS AND GROUPS
1972, c. 23.
17. In this Part a group is related when each person forming it is related to each other person of the group.
1972, c. 23, s. 12.
18. For the purposes of this Part, the following rules apply:
(a)  related persons are deemed not to deal with each other at arm’s length;
(b)  a taxpayer and a personal trust, other than a trust described in any of subparagraphs a to d of the third paragraph of section 647, are deemed not to deal with each other at arm’s length if the taxpayer, or any person not dealing at arm’s length with the taxpayer, would be beneficially interested in the trust if section 7.11.1 were read without reference to subparagraphs b to d of the second paragraph; and
(c)  where paragraph b does not apply, it is a question of fact whether persons not related to each other are at a particular time dealing with each other at arm’s length.
1972, c. 23, s. 13; 2003, c. 2, s. 7.
19. (1)  For the purposes of this Part, related persons or persons related to each other are
(a)  individuals connected by blood relationship, marriage or adoption;
(b)  a corporation and
i.  a person who controls that corporation,
ii.  a person who is a member of a related group that controls the corporation, or
iii.  a person related to the person contemplated by subparagraph i or ii;
(c)  any two corporations
i.  if they are controlled by the same person or group of persons,
ii.  if each of them is controlled by a person and that person who controls one of the corporations is related to the person who controls the other corporation,
iii.  if one of them is controlled by a person related to any member of a related group that controls the other,
iv.  if one of the corporations is controlled by a person related to each member of an unrelated group that controls the other,
v.  if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other, or
vi.  if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other.
(2)  Two corporations related to the same corporation under subsection 1 are deemed, for the purposes of subsection 1 and section 18, to be related to each other.
(3)  Where there has been an amalgamation or merger of two or more particular corporations and the new corporation formed as a result of the amalgamation or merger would have been related to any of the particular corporations immediately before the amalgamation or merger if the new corporation were in existence at that time, and if the persons who were the shareholders of the new corporation immediately after the amalgamation or merger were the shareholders of the new corporation at that time, the new corporation and that particular corporation shall be deemed to have been related persons.
(4)  Where there has been an amalgamation or merger of two or more particular corporations each of which was related, otherwise than because of a right referred to in paragraph b of section 20, to each other immediately before the amalgamation or merger, the new corporation formed as a result of the amalgamation or merger and each of the particular corporations are deemed to have been related to each other.
1972, c. 23, s. 14; 1984, c. 15, s. 4; 1989, c. 5, s. 23; 1997, c. 3, s. 71; 2000, c. 5, s. 9.
20. For the purposes of sections 19 and 21.19,
(a)  a related group which is in a position to control a corporation is deemed to be a related group which controls it, whether or not it is part of a larger group which in fact controls the corporation;
(b)  where at any time a person has a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently,
i.  to, or to acquire, shares of the capital stock of a corporation or to control the voting rights of such shares, the person is, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person owned the shares at that time,
ii.  to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the corporation, the person is, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the shares were so redeemed, acquired or cancelled by the corporation at that time,
iii.  to, or to acquire or control, voting rights in respect of shares of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person could exercise the voting rights at that time, or
iv.  to cause the reduction of voting rights in respect of shares, owned by other shareholders, of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the voting rights were so reduced at that time; and
(c)  a shareholder of two or more corporations is, as shareholder of one of the corporations, deemed to be related to himself, herself or itself as shareholder of each of the other corporations.
1972, c. 23, s. 15; 1982, c. 5, s. 3; 1986, c. 15, s. 35; 1989, c. 5, s. 24; 1990, c. 59, s. 8; 1993, c. 16, s. 8; 1997, c. 3, s. 71; 1998, c. 16, s. 14; 2000, c. 5, s. 10.
21. For the purposes of this Part, except sections 752.0.1 to 752.0.7,
(a)  persons are connected by blood relationship if one is the child, other descendant, brother or sister of the other;
(b)  persons are connected by marriage if one is married to the other or to a person connected with the other by blood relationship or by adoption; and
(c)  persons are connected by adoption if one has been adopted, either legally or in fact, and would be connected with the other by blood relationship or by marriage if filiation by adoption were filiation by blood.
1972, c. 23, s. 16; 1974, c. 18, s. 2; 1975, c. 22, s. 2; 1982, c. 17, s. 49; 1986, c. 15, s. 36; 1989, c. 5, s. 25; 1998, c. 16, s. 15.
CHAPTER IV.1
AFFILIATED PERSONS
2000, c. 5, s. 11.
21.0.1. In this chapter,
affiliated group of persons means a group of persons each member of which is affiliated with every other member of the group;
beneficiary , under a trust, includes a person beneficially interested in the trust;
contributor , to a trust, means a person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, if the person deals at arm’s length with the trust at that time and is not immediately after that time a majority-interest beneficiary of the trust, a loan made at a reasonable rate of interest or a transfer made for fair market value consideration;
controlled means controlled, directly or indirectly in any manner whatever;
majority-interest beneficiary , of a trust at any time, means a person whose interest as a beneficiary, at that time,
(a)  in the income of the trust has, together with the interests as a beneficiary in the income of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the income of the trust; or
(b)  in the capital of the trust has, together with the interests as a beneficiary in the capital of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the capital of the trust;
majority-interest group of beneficiaries , of a trust at any time, means a group of persons each of whom is a beneficiary under the trust at that time such that
(a)  if one person held the interests as a beneficiary under the trust of all of the members of the group, that person would be a majority-interest beneficiary of the trust; and
(b)  if any member of the group were not a member, the test described in paragraph a would not be met;
majority-interest group of partners of a partnership means a group of persons each of whom has an interest in the partnership such that
(a)  if one person held the interests of all members of the group, that person would be a majority-interest partner of the partnership; and
(b)  if any member of the group were not a member, the test described in paragraph a would not be met.
2000, c. 5, s. 11; 2005, c. 38, s. 47.
21.0.2. For the purposes of this chapter, the following rules apply:
(a)  persons are affiliated with themselves;
(b)  a person includes a partnership;
(c)  despite section 646, a trust does not include the trustee or other persons who own or control the trust property; and
(d)  for the purpose of determining whether a person is affiliated with a trust,
i.  if the amount of income or capital of the trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be,
ii.  the interest of a person in a trust as a beneficiary is disregarded in determining whether the person deals at arm’s length with the trust if the person would, in the absence of the interest as a beneficiary, be considered to deal at arm’s length with the trust,
iii.  a trust is not a majority-interest beneficiary of another trust unless the trust has an interest as a beneficiary in the income or capital of the other trust, and
iv.  in determining whether a contributor to one trust is affiliated with a contributor to another trust, individuals connected by blood, marriage or adoption are deemed to be affiliated with one another.
2000, c. 5, s. 11; 2005, c. 38, s. 48.
21.0.3. For the purposes of this Part, affiliated persons, or persons affiliated with each other, are
(a)  an individual and a spouse of the individual;
(b)  a corporation and
i.  a person by whom the corporation is controlled,
ii.  each member of an affiliated group of persons by which the corporation is controlled, or
iii.  a spouse of a person described in subparagraph i or ii;
(c)  two corporations, if
i.  each corporation is controlled by a person, and the person by whom one corporation is controlled is affiliated with the person by whom the other corporation is controlled,
ii.  one corporation is controlled by a person, the other corporation is controlled by a group of persons, and each member of that group is affiliated with that person, or
iii.  each corporation is controlled by a group of persons, and each member of each group is affiliated with at least one member of the other group;
(d)  a corporation and a partnership, if the corporation is controlled by a particular group of persons each member of which is affiliated with at least one member of a majority-interest group of partners of the partnership, and each member of that majority-interest group is affiliated with at least one member of the particular group of persons;
(e)  a partnership and a majority-interest partner of the partnership;
(f)  two partnerships, if
i.  the same person is a majority-interest partner of both partnerships,
ii.  a majority-interest partner of one partnership is affiliated with each member of a majority-interest group of partners of the other partnership, or
iii.  each member of a majority-interest group of partners of each partnership is affiliated with at least one member of a majority-interest group of partners of the other partnership;
(g)  a person and a trust, if the person
i.  is a majority-interest beneficiary of the trust, or
ii.  would, but for this paragraph, be affiliated with a majority-interest beneficiary of the trust; and
(h)  two trusts, if a contributor to one of the trusts is affiliated with a contributor to the other trust and
i.  a majority-interest beneficiary of one of the trusts is affiliated with a majority-interest beneficiary of the other trust,
ii.  a majority-interest beneficiary of one of the trusts is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or
iii.  each member of a majority-interest group of beneficiaries of each of the trusts is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust.
2000, c. 5, s. 11; 2005, c. 38, s. 49.
21.0.4. Where at any time two or more particular corporations amalgamate or merge to form a new corporation, the new corporation and the particular corporations are deemed to have been persons affiliated with each other where they would have been affiliated with each other immediately before that time if the new corporation had existed immediately before that time and the shareholders of the new corporation immediately after that time had been the shareholders of the new corporation immediately before that time.
2000, c. 5, s. 11.
CHAPTER V
CONTROL OF A CORPORATION
1978, c. 26, s. 3; 1997, c. 3, s. 71.
21.1. Sections 21.2 to 21.3.1 apply in respect of the control of a corporation for the purposes of sections 6.2, 21.2 to 21.3.1, 83.0.3, 93.3.1, 93.4, 106.4, 158.1 to 158.14, 175.9, 222 to 230.0.0.2, 237 to 238.1, 308.0.1 to 308.6, 384, 384.4, 384.5, 418.26 to 418.30 and 485 to 485.18, paragraph d of section 485.42, sections 564.2 to 564.4.2, 711.2, 727 to 737 and 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, paragraphs d and e of section 771.13, paragraph f of section 772.13, section 776.1.5.6, paragraph c of the definition of "qualified corporation" in the first paragraph of sections 1029.8.36.0.3.46 and 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of "specified corporation" in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of "excluded corporation" in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of "qualified corporation" in the first paragraph of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 and sections 1029.8.36.171.3, 1029.8.36.171.4 and 1137.8.
Sections 21.4 and 21.4.0.1 to 21.4.0.3 apply in respect of the control of a corporation for the purposes of this Part.
Section 21.4.1 applies in respect of the control of a corporation for the purposes of sections 6.2, 21.0.1 to 21.0.4, 83.0.3, 93.4, 222 to 230.0.0.2, 308.1, 384, 384.4, 384.5, 418.26 to 418.30 and 485 to 485.18, paragraph d of section 485.42, subparagraph d of the third paragraph of section 559, sections 560.1.2, 727 to 737 and 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, paragraphs d and e of section 771.13, paragraph f of section 772.13, section 776.1.5.6, paragraph c of the definition of "qualified corporation" in the first paragraph of sections 1029.8.36.0.3.46 and 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of "specified corporation" in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of "excluded corporation" in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of "qualified corporation" in the first paragraph of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 and sections 1029.8.36.171.3, 1029.8.36.171.4 and 1137.8.
1978, c. 26, s. 3; 1980, c. 13, s. 2; 1982, c. 5, s. 4; 1984, c. 15, s. 5; 1989, c. 77, s. 5; 1993, c. 16, s. 9; 1993, c. 19, s. 17; 1996, c. 39, s. 16; 1997, c. 3, s. 71; 2000, c. 5, s. 12; 2001, c. 7, s. 5; 2003, c. 2, s. 8; 2004, c. 21, s. 40; 2005, c. 23, s. 31; 2005, c. 38, s. 50.
21.2. Where two or more corporations, each of which is referred to in this section as a predecessor corporation , have amalgamated to form one corporate entity, in this section referred to as the new corporation , the following rules apply:
(a)  control of a corporation is deemed not to have been acquired by any person or group of persons solely because of the amalgamation unless it is deemed under paragraph b or c to have been so acquired;
(b)  a person or group of persons that controls the new corporation immediately after the amalgamation and did not control a predecessor corporation immediately before the amalgamation is deemed to have acquired immediately before the amalgamation control of the predecessor corporation and of each corporation it controlled immediately before the amalgamation, unless the person or group of persons would not have acquired control of the predecessor corporation if the person or group of persons had acquired all the shares of the predecessor corporation immediately before the amalgamation; and
(c)  control of a predecessor corporation and of each corporation it controlled immediately before the amalgamation is deemed to have been acquired immediately before the amalgamation by a person or group of persons
i.  unless the predecessor corporation was related, otherwise than because of a right referred to in paragraph b of section 20, immediately before the amalgamation to each other predecessor corporation,
ii.  unless, if one person had immediately after the amalgamation acquired all the shares of the new corporation’s capital stock that the shareholders of the predecessor corporation, or of another predecessor corporation that controlled the predecessor corporation, acquired on the amalgamation in consideration for their shares of the predecessor corporation or of the other predecessor corporation, as the case may be, the person would have acquired control of the new corporation as a result of the acquisition of those shares, or
iii.  unless this paragraph would, but for this subparagraph, deem control of each predecessor corporation to have been acquired on the amalgamation where the amalgamation is an amalgamation of
(1)  two corporations, or
(2)  two particular corporations and one or more other corporations that would, if all the shares of each other corporation’s capital stock that were held immediately before the amalgamation by the particular corporations had been held by one person, have been controlled by that person.
1978, c. 26, s. 3; 1982, c. 5, s. 5; 1984, c. 15, s. 5; 1997, c. 3, s. 71; 2000, c. 5, s. 13.
21.2.1. Subject to section 21.3, where two or more persons, in this section referred to as the transferors , dispose of shares of the capital stock of a particular corporation in exchange for shares of the capital stock of another corporation, in this section referred to as the acquiring corporation , control of the acquiring corporation and of each corporation controlled by it immediately before the exchange is deemed to have been acquired at the time of the exchange by a person or group of persons unless
(a)  the particular corporation and the acquiring corporation were related, otherwise than because of a right referred to in paragraph b of section 20, to each other immediately before the exchange; or
(b)  if all the shares of the acquiring corporation’s capital stock that were acquired by the transferors on the exchange were acquired at the time of the exchange by one person, the person would not control the acquiring corporation.
2000, c. 5, s. 14.
21.3. Control of a particular corporation is deemed not to have been acquired solely because of
(a)  the acquisition at any time of shares of any corporation by a person who acquired the shares from another person to whom the person was related, otherwise than because of a right referred to in paragraph b of section 20, immediately before that time, a person who was related to the particular corporation, otherwise than because of a right referred to in that paragraph b, immediately before that time, a succession that acquired the shares because of the death of a person, or a person who acquired the shares from a succession that arose on the death of another person to whom the person was related; or
(b)  the cancellation or redemption at any particular time of, or a change at any particular time in the terms or conditions of, shares of the particular corporation or of a corporation controlling the particular corporation, where each person and each member of each group of persons that controls the particular corporation immediately after the particular time was related, otherwise than because of a right referred to in paragraph b of section 20, to the particular corporation
i.  immediately before the particular time, or
ii.  immediately before the death of a person, where the shares were held immediately before the particular time by a succession that acquired the shares because of the person’s death.
1978, c. 26, s. 3; 1979, c. 18, s. 3; 1982, c. 5, s. 5; 1993, c. 16, s. 10; 1994, c. 22, s. 55; 1995, c. 49, s. 12; 1997, c. 3, s. 71; 2000, c. 5, s. 15.
21.3.1. Where at a particular time shares of the capital stock of a particular corporation are disposed of to another corporation, in this section referred to as the acquiring corporation , for consideration that includes shares of the acquiring corporation’s capital stock, control of the particular corporation and of each corporation controlled by it immediately before that time is deemed not to have been acquired by the acquiring corporation solely because of the disposition if
(a)  immediately after the particular time, the acquiring corporation and the particular corporation are controlled by a person or group of persons who controlled the particular corporation immediately before the particular time, and did not, as part of the series of transactions or events that includes the disposition, cease to control the acquiring corporation; or
(b)  all the shares of the particular corporation’s capital stock are disposed of to the acquiring corporation for consideration that consists solely of shares of the acquiring corporation’s capital stock and, immediately after the particular time,
i.  the acquiring corporation is not controlled by any person or group of persons, and
ii.  the fair market value of the shares of the capital stock of the particular corporation is not less than 95% of the fair market value of the aggregate of the assets of the acquiring corporation.
2000, c. 5, s. 16.
21.4. Where, but for this section, a particular corporation would be regarded as being controlled, or controlled, directly or indirectly in any manner whatever, by a person or partnership at a particular time and it is established that the conditions set forth in the second paragraph are fulfilled, the particular corporation is deemed not to be controlled by that person or partnership at that particular time.
The conditions referred to in the first paragraph are:
(a)  there is in effect at the particular time an enforceable agreement or arrangement under which, upon the happening of an event or the satisfaction of a condition that it is reasonable to expect will happen or be satisfied, the particular corporation will cease to be controlled, or controlled, directly or indirectly in any manner whatever, as the case may be, by the person or partnership, and will be or become controlled, or controlled, directly or indirectly in any manner whatever, as the case may be, by a person or group of persons with whom or with each of the members of which, as the case may be, the person or partnership is at the particular time dealing at arm’s length;
(b)  the purpose of the control referred to in the first paragraph is, at the particular time, the safeguarding of the rights or interests of the person or partnership in respect of any indebtedness owing to the person or partnership the whole or any part of the principal amount of which is outstanding at the particular time, or of any shares of the capital stock of the particular corporation that are owned by the person or partnership at the particular time and that are, under the enforceable agreement or arrangement referred to in subparagraph a, to be redeemed by the particular corporation or purchased by the person or group of persons referred to in subparagraph a.
1980, c. 13, s. 3; 1987, c. 67, s. 7; 1990, c. 59, s. 9; 1997, c. 3, s. 71; 2000, c. 5, s. 17.
21.4.0.1. A corporation that would be controlled by another corporation if that other corporation were not controlled by any person or group of persons, is controlled by the other corporation and by any person or group of persons by whom the other corporation is controlled.
2003, c. 2, s. 9.
21.4.0.2. A corporation that would be controlled by a group of persons, in this section referred to as the first-tier group , if no corporation that is a member of the first-tier group were controlled by any person or group of persons, is controlled by
(a)  the first-tier group; and
(b)  any group of one or more persons comprised of, in respect of every member of the first-tier group, either the member, or a person or group of persons by whom the member is controlled.
2003, c. 2, s. 9.
21.4.0.3. For their application within the framework of the circumstances described in section 21.25, sections 21.4.0.1 and 21.4.0.2 shall be read as if the references to controlled were references to controlled, directly or indirectly in any manner whatever, .
2003, c. 2, s. 9.
21.4.1. A taxpayer who, at a particular time, acquires a right referred to in paragraph b of section 20 in respect of a share of the capital stock of a corporation is deemed to be in the same position in relation to the control of the corporation as if the right were immediate and absolute and as if the taxpayer had exercised the right at the particular time, where it can reasonably be concluded that one of the main purposes of the acquisition of the right is
(a)  to avoid any limitation on the deductibility of any net capital loss, non-capital loss or farm loss or any amount referred to in section 384 or sections 418.26 to 418.30;
(b)  to avoid the application of Chapter IV.1, any of sections 83.0.3, 93.4, 225, 308.1, 384.4, 384.5, 560.1.2 and 736, paragraph a or b of section 736.0.2, section 736.0.3.1 or 737.18.9.2, subparagraph 2 of subparagraph i of subparagraph b of the second paragraph of section 771.8.5, paragraph d or e of section 771.13, paragraph c of the definition of qualified corporation in the first paragraph of section 1029.8.36.0.3.46 or 1029.8.36.0.3.60, subparagraph iv of paragraph b of the definition of specified corporation in the first paragraph of section 1029.8.36.0.17, subparagraph b of the first paragraph of any of sections 1029.8.36.0.21.2, 1029.8.36.0.22.1 and 1029.8.36.0.25.2, paragraph d of the definition of excluded corporation in the first paragraph of section 1029.8.36.0.38, paragraph c of the definition of qualified corporation in the first paragraph of any of sections 1029.8.36.72.1, 1029.8.36.72.29, 1029.8.36.72.56 and 1029.8.36.72.83 or any of sections 1029.8.36.171.3, 1029.8.36.171.4 and 1137.8; or
(c)  to affect the application of sections 485 to 485.18.
1982, c. 5, s. 6; 1984, c. 15, s. 6; 1985, c. 25, s. 19; 1989, c. 77, s. 6; 1996, c. 39, s. 17; 2000, c. 5, s. 18; 2004, c. 21, s. 41; 2005, c. 23, s. 32.
21.4.1.1. For the purposes of sections 21.2 to 21.3.1 and 21.4.1, the following rules apply:
(a)  a corporation incorporated without share capital is deemed to have a capital stock of a single class of shares;
(b)  each member, policyholder and other participant in the corporation is deemed to be a shareholder of the corporation; and
(c)  the membership, policy or other interest in the corporation of each of those participants is deemed to be the number of shares of the corporation’s capital stock that the Minister considers reasonable in the circumstances, having regard to the total number of participants in the corporation and the nature of their participation.
2000, c. 5, s. 19.
21.4.2. For the purposes of this Part, where control of a corporation is acquired by a person or group of persons at a particular time on a day, control of the corporation is deemed to have been acquired by the person or group of persons, as the case may be, at the commencement of that day and not at the particular time unless the corporation elects in its fiscal return under this Part filed for its taxation year ending immediately before the acquisition of control not to have this section apply.
1989, c. 77, s. 7; 1997, c. 3, s. 71.
CHAPTER V.I
DIVIDEND DEEMED TO BE INTEREST
1990, c. 59, s. 10.
21.4.3. Where a dividend is received on a share in a taxation year and after 18 June 1987 from a corporation not resident in Canada, other than a corporation in which the recipient of the dividend had or would have, if the corporation were a taxable Canadian corporation, a substantial interest within the meaning of section 191 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), such dividend is deemed, for the purposes of paragraphs c and l of section 87 and sections 746 to 749 and section 772.2 to 772.13, to have been received in the year as interest and not as a dividend on a share of the capital stock of the payer corporation, if the dividend is a dividend in respect of which no deduction could have been made under section 738, 740 or 845 by reason of sections 740.2 to 740.3.1 or section 740.5 if the corporation that paid the dividend were a taxable Canadian corporation.
1990, c. 59, s. 10; 1995, c. 49, s. 13; 1995, c. 63, s. 14; 1997, c. 3, s. 71.
CHAPTER VI
TERM PREFERRED SHARES
1980, c. 13, s. 3.
21.5. A share of a class of the capital stock of a corporation is a term preferred share of the corporation if one of the following conditions is met:
(a)  the share was issued or acquired after 28 June 1982 and, at the time the share was issued or acquired, the existence of the corporation is, or there is an existing agreement under which it could be, limited;
(b)  it is issued after 16 November 1978, the owner thereof acquired it after 23 October 1979 and is a corporation, trust or partnership described in section 21.5.1 that, either alone or together with any such corporations, partnerships or trusts, controls or has an absolute or contingent right to control or to acquire control of the corporation;
(c)  it is issued after 16 November 1978 and, under its terms or conditions, an agreement in respect of the share or a modification of such terms or conditions or such agreement, either in the case of a share issued after 16 November 1978 and before 13 November 1981, or after 12 November 1981 and before 1 January 1983 pursuant to an agreement in writing to do so made before 13 November 1981, the share is convertible, directly or indirectly, into debt or into a share that would, if issued, be a term preferred share, and in any other case, the share is convertible or exchangeable, unless it is convertible into or exchangeable for a consideration described in section 21.5.5, or one of the provisions described in section 21.5.2, 21.5.3 or 21.5.4 applies.
1980, c. 13, s. 3; 1982, c. 5, s. 7; 1984, c. 15, s. 7; 1990, c. 59, s. 11; 1993, c. 16, s. 11; 1997, c. 3, s. 71.
21.5.1. For the purposes of paragraph b of section 21.5, the owner of the share must be
(a)  a corporation referred to in any of paragraphs a to e.1 of the definition of specified financial institution in section 1;
(b)  a corporation that is controlled by one or more corporations referred to in paragraph a,
(c)  a corporation that acquired the share after 11 December 1979 and is related to a corporation referred to in paragraph a or b, or
(d)  a partnership or trust of which a corporation referred to in paragraph a or b or a person related thereto is a member or a beneficiary.
1984, c. 15, s. 7; 1989, c. 5, s. 26; 1990, c. 59, s. 12; 1997, c. 3, s. 71; 2001, c. 53, s. 6.
21.5.2. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 16 November 1978 and 24 October 1979, the following:
(a)  the owner thereof may, within 10 years after the date of issue, cause the share to be redeemed, acquired or cancelled, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced,
(b)  the issuing corporation or any person with whom it is not dealing at arm’s length is or may be required to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, otherwise than pursuant to a requirement of the corporation to redeem, acquire or cancel, annually, not more than 5% of the issued and fully paid shares of that class, or unless the owner may cause the share to be redeemed, acquired or cancelled by reason only of a right to convert or exchange the share, or
(c)  a person is or may be required to provide a guarantee or a similar covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the owner thereof or any person related thereto, with respect to the share.
1984, c. 15, s. 7; 1993, c. 16, s. 12; 1997, c. 3, s. 71.
21.5.3. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 23 October 1979 and 13 November 1981 or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement in writing to that effect entered into before 13 November 1981, the following:
(a)  the owner thereof may, within 10 years after the date of issue, cause the share to be redeemed, acquired or cancelled, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced,
(b)  a person is or may be required to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, within 10 years after the date of issue,
i.  otherwise than pursuant to a requirement of the issuing corporation to redeem, acquire or cancel annually not more than 5% of the issued and fully paid shares of that class and, where the requirement was agreed to after 21 April 1980, it provides that such redemption, acquisition or cancellation be in proportion to the number of shares of the class or of the series of the class registered in the name of each shareholder, or
ii.  unless the requirement to redeem, acquire or cancel the share arises by reason only of right to convert or exchange the share, or
(c)  a person provides or may be required to provide a guarantee or similar indemnity or covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the owner thereof or any person related thereto, with respect to the share.
1984, c. 15, s. 7; 1993, c. 16, s. 13; 1997, c. 3, s. 71.
21.5.4. The provisions referred to in paragraph c of section 21.5 are, in the case of a share issued between 12 November 1981 and 1 January 1983 otherwise than pursuant to an agreement referred to in section 21.5.3 or a share issued after 31 December 1982, one of the following:
(a)  the owner thereof may cause the share to be acquired, cancelled or redeemed, otherwise than by reason only of a right to convert or exchange the share, or cause its paid-up capital to be reduced;
(b)  a person or partnership is or may be required to acquire, cancel or redeem the share, in whole or in part, otherwise than by reason only of a right to convert or exchange the share, or to reduce its paid-up capital;
(c)  a person or partnership provides or may be required to provide a guarantee or similar indemnity or covenant, including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the holder thereof or any person related thereto, with respect to the share.
1984, c. 15, s. 7; 1990, c. 59, s. 13; 1997, c. 3, s. 71.
21.5.5. The consideration for which a share may be converted or exchanged and to which paragraph c of section 21.5 refers shall only include
(a)  another share of the issuing corporation or a corporation related to it that, if issued, would not be a term preferred share,
(b)  a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the issuing corporation or a corporation related to it that, if issued, would not be a term preferred share, or
(c)  both a share described in subparagraph a and a right or warrant described in subparagraph b.
For the purposes of the first paragraph, where a taxpayer may become entitled, upon the conversion or exchange of a share, to receive any particular consideration, other than consideration described in the first paragraph, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of section 21.10, 21.10.1 or 740.1.
1990, c. 59, s. 14; 1997, c. 3, s. 71.
21.6. For the purposes of section 21.5, a term preferred share does not include
(a)  a share issued after 16 November 1978 and before 1980 pursuant to an agreement in writing to do so made before 17 November 1978;
(b)  a share issued as a stock dividend before 22 April 1980 on a share of the capital stock of a public corporation that was not a term preferred share, or after 21 April 1980 on a share that was, at the time such dividend was paid, a share prescribed for the purposes of paragraph e;
(c)  a share described in section 21.6.1;
(d)  a share that is listed on a Canadian stock exchange and was issued before 22 April 1980 by
i.  a corporation referred to in any of paragraphs a to d of the definition of specified financial institution in section 1,
ii.  a corporation whose principal business is the lending of money or the purchasing of debt obligations or a combination thereof, or
iii.  an issuing corporation associated with a corporation described in subparagraph i or ii;
(e)  a share that is, at that time, a prescribed share;
(f)  a share that is a taxable preferred share held by a specified financial institution that acquired the share before 16 December 1987 or before 1 January 1989 pursuant to an agreement in writing entered into before 16 December 1987, other than a share that is
i.  a share deemed, under section 21.9.4.2 or paragraph a of section 21.11.12, to have been issued after 15 December 1987, or
ii.  a share that would be deemed, under paragraph c of section 21.11.16, to have been issued after 15 December 1987 if the reference in the said section to “8:00 p.m. Eastern Daylight Saving Time, 18 June 1987” were read as a reference to “15 December 1987”.
1980, c. 13, s. 3; 1982, c. 5, s. 8; 1984, c. 15, s. 8; 1989, c. 5, s. 27; 1990, c. 59, s. 15; 1997, c. 3, s. 71; 2001, c. 7, s. 6.
21.6.1. A share is not a term preferred share, for a period of 10 years from the date of its issue, that was issued between 16 November 1978 and 13 November 1981, or for a period of 5 years from the date of its issue, if it was issued after 12 November 1981, and that was issued by a corporation resident in Canada and, in the case of a share issued after 23 October 1979, the proceeds from the issue may be regarded as having been used by the corporation or a corporation with which it was not dealing at arm’s length in the financing of its business carried on or, in the case of a share issued after 12 November 1981, carried on in Canada, immediately before the share was issued, and that was issued
(a)  as part of a proposal to, or an arrangement with, its creditors that had been approved by a competent court under the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3),
(b)  at a time when all or substantially all of its assets were under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or
(c)  at a time when, by reason of financial difficulty, the corporation or another corporation resident in Canada with which it does not deal at arm’s length was in default, or could reasonably be expected to default, on a debt obligation held by a person with whom the corporation or the other corporation was dealing at arm’s length and the share was issued, wholly or in substantial part, directly or indirectly in exchange or substitution for that obligation or a part thereof.
1984, c. 15, s. 9; 1990, c. 59, s. 16; 1995, c. 49, s. 14; 1997, c. 3, s. 71.
21.7. For the purposes of this chapter, where the terms or conditions of an agreement in writing referred to in paragraph a of section 21.6 were amended after 16 November 1978, the agreement is deemed to have been made after that date.
1980, c. 13, s. 3.
21.7.1. Where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a taxable preferred share of the capital stock of a corporation relating to any matter referred to in paragraph c of section 21.5 or sections 21.5.2 to 21.5.5 have been established or modified, or any agreement in respect of the share relating to any such matter has been entered into or changed by the corporation or a specified person in relation to it, within the meaning of paragraph f of section 21.11.16, the share is deemed after that particular time to have been issued at that particular time.
1990, c. 59, s. 17; 1997, c. 3, s. 71.
21.8. Where the redemption date of a share was extended or the terms or conditions relating to its redemption, acquisition, cancellation or conversion or reduction of its paid-up capital were changed, the share is, for the purposes of determining whether it is a term preferred share, deemed to have been issued at the time of the extension or change otherwise than pursuant to an agreement referred to in section 21.5.3 or in paragraph a of section 21.6
1980, c. 13, s. 3; 1982, c. 5, s. 9; 1984, c. 15, s. 10.
21.9. The rule provided by section 21.8 applies where the change or extension occurs after 16 November 1978 in the case of a share issued before 17 November 1978, or after 12 November 1981 in the case of a share issued between 16 November 1978 and 13 November 1981 or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement referred to in section 21.5.3.
1980, c. 13, s. 3; 1982, c. 5, s. 10; 1984, c. 15, s. 10.
21.9.1. Subject to section 21.9.2, the rule provided by section 21.8 also applies, with the necessary modifications, in the following cases:
(a)  where the terms or conditions of a share issued pursuant to an agreement referred to in paragraph a of section 21.6 or those of any agreement relating to such a share have been changed;
(b)  where the owner of a share may, alone or together with one or more taxpayers, require the acquisition, cancellation, conversion or redemption of the share or the reduction of its paid-up capital
i.  after 16 November 1978 under the terms or conditions of a share issued before 17 November 1978 and not listed on 16 November 1978 on a Canadian stock exchange, of a share issued pursuant to an agreement referred to in paragraph a of section 21.6, of any agreement between the issuer and the owner of such a share, or any agreement relating to such a share made after 23 October 1979;
ii.  after 12 November 1981 in the case of a share issued between 16 November 1978 and 13 November 1981, except a share described in section 21.6.1 or a share listed on 13 November 1981 on a Canadian stock exchange, or a share issued between 12 November 1981 and 1 January 1983 pursuant to an agreement referred to in section 21.5.3;
(c)  where a specified financial institution or a partnership or trust of which a specified financial institution or a person related thereto is a member or a beneficiary acquires,
i.  between 23 October 1979 and 13 November 1981, from a person, a share issued before 17 November 1978 or a share issued pursuant to an agreement referred to in paragraph a of section 21.6;
ii.  after 12 November 1981, from a person or a partnership, a share issued before 13 November 1981 or a share pursuant to an agreement referred to in section 21.5.3.
1984, c. 15, s. 10; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 2001, c. 7, s. 7.
21.9.2. The rule provided by section 21.8 does not apply, in the case provided for in paragraph b of section 21.9.1, where the owner’s right could be exercised by reason of a default under the terms or conditions of the share or any agreement that related to, and was entered into at the time of, the issuance of the share.
The same applies, in the case provided for in paragraph c of the said section 21.9.1, where
(a)  the share described in subparagraph i of that paragraph c is
i.  a share issued to a corporation that was, at the time of issue,
(1)  a corporation referred to in any of paragraphs a to e of the definition of specified financial institution in section 1, or
(2)  a corporation controlled by one or more corporations referred to in subparagraph 1,
ii.  a share acquired from a person that was, at the time of acquisition, a corporation referred to in subparagraph 1 or 2 of subparagraph i, or
iii.  a share acquired under an agreement in writing made before 24 October 1979; and
(b)  the share described in subparagraph ii of that paragraph c is
i.  a share described in section 21.6.1,
ii.  a share acquired from a person that was, at the time of acquisition, a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1,
iii.  a share acquired in an acquisition that was not subject to an undertaking, referred to in section 740.2, given after 12 November 1981, or
iv.  a share acquired under an agreement in writing made before 24 October 1979 or an agreement referred to in section 21.5.3.
For the purposes of subparagraph 2 of subparagraph i of subparagraph a of the second paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length.
1984, c. 15, s. 10; 1990, c. 59, s. 18; 1997, c. 3, s. 71; 1998, c. 16, s. 16; 2001, c. 53, s. 7.
21.9.3. Where a share of the capital stock of a corporation is issued or its terms or conditions are modified and it may reasonably be considered, having regard to all circumstances, including the rate of interest on any debt or the dividend provided on any term preferred share, that but for the existence of the debt or the term preferred share, the share would not have been issued or its terms or conditions modified, and one of the main purposes for its issue or for the modification of its terms or conditions was to avoid a limitation provided by section 740.1 or 845 in respect of a deduction, the share is deemed, from 1 January 1983, to be a term preferred share of the corporation.
1984, c. 15, s. 10; 1986, c. 19, s. 5; 1997, c. 3, s. 71.
21.9.4. Where the terms or conditions of a share of the capital stock of a corporation are modified or established after 28 June 1982 and as a consequence thereof the corporation, any person related thereto or any partnership or trust of which the corporation or a person related thereto is a member or a beneficiary, may reasonably be expected to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid-up capital, the share is deemed as from the date of the modification or establishment to be a share described in paragraph c of section 21.5.
1984, c. 15, s. 10; 1997, c. 3, s. 71.
21.9.4.1. Where it may reasonably be considered that the dividends that may be declared or paid at any time on a share, other than a prescribed share or a share described in section 21.6.1 during the applicable time period referred to in that section, of the capital stock of a corporation issued after 15 December 1987 or acquired after 15 June 1988 are derived primarily from dividends received on term preferred shares of the capital stock of another corporation, and that the share was issued or acquired as part of a transaction or event or series of transactions or events one of the main purposes of which was to avoid or limit the application of section 740.1 or 845, the share is deemed, at that time, to be a term preferred share acquired in the ordinary course of business.
1990, c. 59, s. 19; 1997, c. 3, s. 71.
21.9.5. (Repealed).
1984, c. 15, s. 10; 1990, c. 59, s. 20.
21.10. Where a specified financial institution resident in Canada receives, in a taxation year, from a corporation not resident in Canada an amount as a dividend on a term preferred share, the amount is deemed, for the purposes of paragraphs c and l of section 87 and sections 746 to 749 and 772.2 to 772.13, to be received in the year as interest and not as a dividend on a share of the capital stock of a corporation.
1980, c. 13, s. 3; 1982, c. 5, s. 11; 1990, c. 59, s. 21; 1993, c. 16, s. 365; 1994, c. 22, s. 649; 1995, c. 63, s. 15; 1997, c. 3, s. 71.
21.10.1. The rule provided in section 21.10 also applies where a particular corporation receives, in a taxation year, from a corporation not resident in Canada a dividend on a share, other than a term preferred share, that is a grandfathered share or was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and was not deemed by section 740.3.1 to have been issued after that time, if the dividend is a dividend in respect of which no deduction could have been made under section 738, 740 or 845 by reason of sections 740.2 to 740.3.1 as they read on 17 June 1987, if the corporation that paid the dividend had been a taxable Canadian corporation.
1982, c. 5, s. 11; 1990, c. 59, s. 21; 1993, c. 16, s. 365; 1994, c. 22, s. 56; 1994, c. 22, s. 649; 1997, c. 3, s. 71.
21.10.2. Section 21.10 is not applicable to a dividend described therein if the share on which the dividend is paid was not acquired in the ordinary course of the business carried on by the specified financial institution.
1982, c. 5, s. 11.
21.11. Notwithstanding section 119, where an amount is paid or payable after 1978 as interest or as an amount in lieu of interest in respect of a dividend that became payable or in arrears after 16 November 1978 and the dividend is in respect of a share that is not a term preferred share by reason of having been issued before 17 November 1978 or pursuant to an agreement in writing referred to in paragraph a of section 21.6, the amount is, for the purposes of section 740.1 and the second paragraph of section 845, deemed to be a dividend received on a term preferred share.
1980, c. 13, s. 3.
CHAPTER VI.1
SHORT-TERM PREFERRED SHARES
1984, c. 15, s. 11.
21.11.1. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.2. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.3. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.4. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.5. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.6. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.7. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.8. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.9. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.10. (Repealed).
1984, c. 15, s. 11; 1990, c. 59, s. 22.
21.11.11. A short-term preferred share of a corporation at any particular time is a share, other than a grandfathered share, of the capital stock of the corporation issued after 15 December 1987 that, at that particular time, is
(a)  a share where, under the terms and conditions of the share, any agreement relating to the share or any modification of such terms, conditions or agreement, the corporation or a specified person in relation to it is or may, at any time within five years from the date of its issued, be required to acquire, cancel or redeem, in whole or in part, the share or to reduce the paid-up capital of the share, unless the requirement to acquire, cancel or redeem the share arises only in the event of the death of the shareholder or by reason only of a right to convert or exchange the share, or
(b)  a share that is convertible or exchangeable at any time within five years from the date of its issue, unless
i.  it is convertible into or exchangeable for
(1)  another share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share;
(2)  a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation or a corporation related to the corporation that, if issued, would not be a short-term preferred share, or
(3)  both a share described in subparagraph 1 and a right or warrant described in subparagraph 2, and
ii.  all the consideration receivable for the share on the conversion or exchange is the share described in subparagraph 1 of subparagraph i or the right or warrant described in subparagraph 2 of the said subparagraph i or both such share and such right or warrant, and, for the purposes of this subparagraph, where a taxpayer may become entitled upon the conversion or exchange of a share to receive any particular consideration, other than consideration described in any of subparagraphs 1 to 3 of subparagraph i, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).
1990, c. 59, s. 23; 1997, c. 3, s. 71.
21.11.12. For the purposes of this chapter, the following rules apply:
(a)  where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a share of the capital stock of a corporation that are relevant to any matter referred to in any of paragraphs a and b of section 21.11.11 or d and f of this section are established or modified, or any agreement in respect of any such matter to which the corporation or a specified person in relation to it is a party, is entered into or changed, the share is deemed after that particular time to have been issued at that particular time;
(b)  where, at any particular time after 15 December 1987, a particular share of the capital stock of a corporation has been issued or its terms or conditions have been modified or an agreement in respect of the share is entered into or modified, the particular share is deemed after that particular time to have been issued at that particular time and to be a short-term preferred share of the corporation, if it may reasonably be considered, having regard to all the circumstances, including the rate of interest on any debt obligation or the dividend provided on any short-term preferred share, that
i.  but for the existence at any time of such a debt obligation or such a short-term preferred share, the particular share would not have been issued or its terms or conditions modified or the agreement in respect of the share would not have been entered into or modified;
ii.  one of the main purposes for the issue of the particular share or the modification of its terms or conditions or the entering into or modification of the agreement in respect of the share was to avoid or limit the tax payable under subsection 1 of section 191.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement);
(c)  where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the terms or conditions of a share of the capital stock of a corporation are established or modified or any agreement in respect of the share has been entered into or changed, and as a consequence thereof the corporation or a specified person in relation to it may reasonably be expected to acquire, cancel or redeem the share, in whole or in part, otherwise than by reason of the death of the shareholder or by reason only of a right to convert or exchange the share that would not cause the share to be a short-term preferred share by reason of paragraph b of section 21.11.11, or to reduce its paid-up capital, within five years from the particular time, the share is deemed to have been issued at that particular time and to be a short-term preferred share of the corporation from the particular time until the time that such reasonable expectation ceases to exist;
(d)  where a share of the capital stock of a corporation was issued after 15 December 1987 and at the time the share was issued the existence of the corporation was, or there was an arrangement under which it could be, limited to a period that was within five years from the date of its issue, the share is deemed to be a short-term preferred share of the corporation unless the share is a grandfathered share and the arrangement is a written arrangement entered into before 16 December 1987;
(e)  where a share of the capital stock of a corporation is acquired at any time after 15 December 1987 by the corporation or a specified person in relation to it and the share is at any particular time after that time acquired from the corporation or a specified person in relation to it by a person with whom the corporation or a specified person in relation to it was dealing at arm’s length if this Part were read without reference to paragraph b of section 20, the share is deemed after that particular time to have been issued at that particular time;
(f)  where at any particular time after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, as a result of the terms or conditions of a share of the capital stock of a corporation or any agreement entered into by the corporation or a specified person in relation to it, any person, other than the corporation or an individual other than a trust, was obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking within five years after the date on which the share was issued, including any guarantee, covenant or agreement to purchase or repurchase the share, and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the shareholder or a specified person in relation to the shareholder, the share is deemed after that particular time to have been issued at the particular time and to be at and immediately after the particular time a short-term preferred share, if the undertaking is given
i.  to ensure that any loss that the shareholder or a specified person in relation to the shareholder may sustain by reason of the ownership, holding or disposition of the share or any other property is limited in any respect, and
ii.  as part of a transaction or event or series of transactions or events that included the issuance of the share;
(g)  for the purposes of paragraph f where the undertaking referred to therein in respect of a share is given after 15 December 1987, otherwise than pursuant to a written arrangement entered into before 16 December 1987, the share is deemed to have been issued at that time and the undertaking is deemed to have been given as part of a series of transactions that included the issuance of the share;
(h)  a share that is, at the time a dividend is paid thereon, a share described in section 21.6.1 during the applicable time period referred to in that section or a prescribed share is, notwithstanding any other provision of this chapter, deemed not to be a short-term preferred share at that time;
(i)  the expression specified person has the meaning assigned by paragraph f of section 21.11.16.
1990, c. 59, s. 23; 1997, c. 3, s. 71; 2003, c. 2, s. 10.
21.11.13. For the purposes of paragraph a of section 21.11.11 and paragraph c of section 21.11.12,
(a)  an agreement in respect of a share of the capital stock of a corporation shall be read without reference to that part of the agreement under which a person agrees to acquire the share for an amount
i.  in the case of a share, other than a share that would, but for that part of the agreement, be a taxable preferred share, the agreement in respect of which provides that the share is to be acquired within 60 days after the date on which the agreement was entered into, that does not exceed the greater of the fair market value of the share at the time the agreement was entered into, determined without reference to the agreement, and the fair market value of the share at the time of the acquisition, determined without reference to the agreement;
ii.  in any other case, that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement, or for an amount determined by reference to the assets or earnings of the corporation where such determination may reasonably be considered to be used to determine an amount that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement;
(b)  the expression shareholder includes a shareholder of a shareholder.
1990, c. 59, s. 23; 1997, c. 3, s. 71.
CHAPTER VI.2
TAXABLE PREFERRED SHARES
1990, c. 59, s. 23.
21.11.14. A taxable preferred share at any particular time is
(a)  a share issued after 15 December 1987 that is a short-term preferred share at that particular time, or
(b)  a share, other than a grandfathered share, of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 where, at that particular time, by reason of the terms or conditions of the share or any agreement in respect of the share or its issue to which the corporation, or a specified person in relation to it, is a party,
i.  it may reasonably be considered, having regard to all the circumstances, that the amount of the dividends that may be declared or paid on the share, in this chapter referred to as the dividend entitlement , is, by way of a formula or otherwise, fixed, limited to a maximum, or, if with respect to the dividend that may be declared or paid on the share there is a preference over any other dividend that may be declared or paid on any other share of the capital stock of the corporation, established to be not less than a minimum, including any amount determined on a cumulative basis,
ii.  it may reasonably be considered, having regard to all the circumstances, that the amount that the shareholder, which includes a shareholder of the shareholder for the purposes of this subparagraph, is entitled to receive in respect of the share on the dissolution, liquidation or winding-up of the corporation or on the acquisition, cancellation or redemption of the share, unless the requirement to acquire, cancel or redeem the share arises only in the event of the death of the shareholder or by reason only of a right to convert or exchange the share, or on the reduction of the paid-up capital of the share by the corporation or by a specified person in relation to it, in this chapter referred to as the liquidation entitlement , is, by way of a formula or otherwise, fixed, limited to a maximum, or established to be not less than a minimum,
iii.  the share is convertible or exchangeable at any time, unless
(1)  it is convertible into or exchangeable for another share of the corporation or a corporation related to it that, if issued, would not be a taxable preferred share, referred to in this subparagraph and in subparagraph 2 as the particular share , for a right or warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation or a corporation related to it that, if issued, would not be a taxable preferred share, or for both a particular share and such right or warrant, and
(2)  all the consideration receivable for the share on the conversion or exchange is the particular share or the right or warrant described in subparagraph 1 or both such share and such right or warrant, and for the purposes of this subparagraph, where a taxpayer may become entitled upon the conversion or exchange of a share to receive any particular consideration, other than consideration described in subparagraph 1, in lieu of a fraction of a share, the particular consideration is deemed not to be consideration unless it may reasonably be considered that the particular consideration was receivable as part of a series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), or
iv.  any person, other than the corporation, was, at or immediately before that particular time, obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking, in this chapter referred to as a guarantee agreement , including any guarantee, covenant or agreement to purchase or repurchase the share, and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the shareholder or any specified person in relation to the shareholder, given
(1)  as part of a transaction or event or series of transactions or events that included the issuance of the share, and
(2)  to ensure that any loss that the shareholder or a specified person in relation to the shareholder may sustain by reason of the ownership, holding or disposition of the share or any other property is limited, or allow the shareholder or a specified person in relation to the shareholder to derive earnings by reason of the ownership, holding or disposition of the share or any other property.
For the purposes of subparagraph b of the first paragraph, where the guarantee agreement in respect of a share of the capital stock of a corporation is given after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, otherwise than pursuant to a written arrangement entered into before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, the share is deemed to have been issued at that time and the guarantee agreement is deemed to have been given as part of a series of transactions that included the issuance of the share.
1990, c. 59, s. 23; 1997, c. 3, s. 71.
21.11.15. For the purposes of section 21.11.14, a taxable preferred share does not include a share that is, at the particular time prescribed in that section, a share described in section 21.6.1 during the applicable time period referred to in that section or a prescribed share.
1990, c. 59, s. 23.
21.11.16. For the purposes of this chapter,
(a)  the dividend entitlement of a share of the capital stock of a corporation is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where all dividends on the share are determined solely by reference to the dividend entitlement of another share of the capital stock of the corporation or of a corporation that controls the corporation that would not be a taxable preferred share if this chapter were read without reference to paragraph d, and if the other share were issued after 18 June 1987 and were not a grandfathered share, a prescribed share or a share described in section 21.6.1;
(b)  the liquidation entitlement of a share of the capital stock of a corporation is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where all the liquidation entitlement is determinable solely by reference to the liquidation entitlement of another share of the capital stock of the corporation or of a corporation that controls the corporation that would not be a taxable preferred share if this section were read without reference to paragraph d, and if the other share were issued after 18 June 1987 and were not a grandfathered share, a prescribed share or a share described in section 21.6.1;
(c)  where at any particular time after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, otherwise than pursuant to a written arrangement entered into before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, the terms or conditions of a share of the capital stock of a corporation that are relevant to any matter referred to in any of subparagraphs i to iv of subparagraph b of the first paragraph of section 21.11.14 or the second paragraph of that section are established or modified, or any agreement in respect of any such matter to which the corporation or a specified person in relation to it is a party, is entered into or changed, the share is, for the purposes of determining whether it is a taxable preferred share after the particular time, deemed to have been issued at that particular time, unless the share is a share described in paragraph b of section 21.11.20 and the particular time is before 16 December 1987 and before the time at which the share is first issued;
(d)  an agreement in respect of a share of the capital stock of a corporation shall be read without reference to that part of the agreement under which a person agrees to acquire the share for an amount
i.  in the case of a share the agreement in respect of which provides that the share is to be acquired within 60 days after the date on which the agreement was entered into, that does not exceed the greater of the fair market value of the share at the time the agreement was entered into, determined without reference to the agreement, and the fair market value of the share at the time of the acquisition, determined without reference to the agreement;
ii.  in any other case, that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement, or for an amount determined by reference to the assets or earnings of the corporation where such determination may reasonably be considered to be used to determine an amount that does not exceed the fair market value of the share at the time of the acquisition, determined without reference to the agreement;
(e)  where it may reasonably be considered that the dividends that may be declared or paid to a shareholder at any time on a share, other than a prescribed share or a share described in section 21.6.1 during the applicable time period referred to in that section, of the capital stock of a corporation issued after 15 December 1987 or acquired after 15 June 1988 are derived primarily from dividends received on taxable preferred shares of the capital stock of another corporation, and that the share was issued or acquired as part of a transaction or event or series of transactions or events one of the main purposes of which was to avoid or limit the application of Part IV.1 or VI.1 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), the share is deemed, at that time, to be a taxable preferred share;
(f)  a specified person in relation to any particular person is a person with whom the particular person does not deal at arm’s length or any partnership or trust of which the particular person or the person is a member or beneficiary.
1990, c. 59, s. 23; 1997, c. 3, s. 71.
CHAPTER VI.3
Repealed, 1993, c. 16, s. 14.
1990, c. 59, s. 23; 1993, c. 16, s. 14.
21.11.17. (Repealed).
1990, c. 59, s. 23; 1993, c. 16, s. 14.
21.11.18. (Repealed).
1990, c. 59, s. 23; 1993, c. 16, s. 14.
21.11.19. (Repealed).
1990, c. 59, s. 23; 1993, c. 16, s. 14.
CHAPTER VI.4
GRANDFATHERED SHARES
1990, c. 59, s. 23.
21.11.20. A grandfathered share is
(a)  a share of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 pursuant to an agreement in writing entered into before that time,
(b)  a share of the capital stock of a corporation issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 with a public body in accordance with the securities legislation of the jurisdiction in which the shares are distributed,
(c)  a share of the capital stock of a corporation the right of exchange and all or substantially all the terms and conditions of which were established in writing before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 and that is issued after that time in exchange for
i.  a share of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 or is a grandfathered share, or
ii.  a debt obligation of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987, or issued after that time pursuant to an agreement in writing entered into before that time, or after that time and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before that time with a public authority pursuant to and in accordance with the securities legislation of the jurisdiction in which the debt obligation is distributed, or
(d)  a share of a class of the capital stock of a Canadian corporation listed on a Canadian stock exchange or a foreign stock exchange that was issued after 8:00 p.m. Eastern Daylight Saving Time, 18 June 1987 upon the exercise of a right listed on a prescribed stock exchange that was issued before that time, that was issued after that time pursuant to an agreement in writing entered into before that time or that was issued after that time and before 1 January 1988 as part of a distribution to the public made in accordance with the terms of a final prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before that time with a public authority pursuant to and in accordance with the securities legislation of the jurisdiction in which the rights were distributed, where all or substantially all the terms and conditions of the right and the share were established in writing before that time.
1990, c. 59, s. 23; 1993, c. 16, s. 15; 1997, c. 3, s. 71; 1997, c. 14, s. 13l; 2001, c. 7, s. 169; 2001, c. 53, s. 8; 2003, c. 2, s. 11.
21.11.21. For the purposes of section 21.11.20, a share that is deemed under Chapter VI, VI.1 or VI.2 or section 740.3.1 to have been issued at any time is, for the purposes of that chapter or section, deemed not to be a grandfathered share after that time.
1990, c. 59, s. 23.
CHAPTER VII
INCOME BONDS
1980, c. 13, s. 3.
21.12. In this Part, income bond or income debenture of a particular corporation means a bond or debenture in respect of which interest or dividends are payable only to the extent that the particular corporation has made a profit before taking into account the payment of the interest or dividend, and which is a bond or debenture
(a)  that was issued before 17 November 1978;
(b)  that was issued after 16 November 1978 and before 1980 pursuant to an agreement in writing to do so made before 17 November 1978; or
(c)  issued, for a term that in no circumstances may exceed five years, by a corporation that is resident in Canada, the proceeds from the issue of which, in the case of a bond or debenture issued after 12 November 1981, may reasonably be regarded as having been used by the particular corporation or a corporation with which it was not dealing at arm’s length in the financing of its business carried on in Canada immediately before it was issued and that was issued
i.  as part of a proposal to, or an arrangement with, the creditors of the particular corporation that had been approved by a competent court under the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3),
ii.  at a time when all or substantially all of the assets of the particular corporation were under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or
iii.  wholly or in substantial part, directly or indirectly, in exchange or substitution for a debt obligation, or a part thereof, of the particular corporation or another corporation resident in Canada with which it does not deal at arm’s length held by a person with whom the particular corporation or the other corporation was dealing at arm’s length at a time when, by reason of financial difficulty, the particular corporation or the other corporation was in default or could reasonably be expected to default on that debt.
1980, c. 13, s. 3; 1982, c. 5, s. 12; 1984, c. 15, s. 12; 1990, c. 59, s. 24; 1995, c. 49, s. 15; 1997, c. 3, s. 71; 2003, c. 2, s. 12; 2005, c. 23, s. 33.
21.13. For the purposes of this chapter, where the terms or conditions of an agreement in writing referred to in paragraph b of section 21.12 were amended after 16 November 1978, the agreement is deemed to have been made after that date.
1980, c. 13, s. 3.
21.14. Where, at a particular time after 16 November 1978, the maturity date of a bond or debenture was extended or the terms or conditions relating to the repayment of the principal amount thereof were changed, the bond or debenture is, for the purposes of determining at any time after the particular time whether it is an income bond or income debenture, as the case may be, deemed to have been issued at the particular time otherwise than pursuant to an agreement in writing referred to in paragraph b of section 21.12.
1980, c. 13, s. 3; 1982, c. 5, s. 13.
21.15. The rule provided in section 21.14 applies also where
(a)  the terms or conditions of a bond or debenture issued pursuant to an agreement in writing referred to in paragraph b of section 21.12 or those of any agreement relating to such a bond or debenture have been changed at a particular time;
(b)  under the terms or conditions of a bond or debenture acquired in the ordinary course of the business carried on by a specified financial institution or a partnership or trust, other than a testamentary trust, or under the terms or conditions of any agreement relating to any such bond or debenture, other than an agreement made before 24 October 1979 to which the issuer or any person related thereto was not a party, the owner thereof could at a particular time after 16 November 1978 require, either alone or together with one or more taxpayers, the repayment, acquisition, cancellation or conversion of the bond or debenture otherwise than by reason of a failure or default under the terms or conditions of the bond or debenture or of any agreement that related to, and was entered into at the time of, the issuance of the bond or debenture;
(c)  at a particular time a specified financial institution, or a partnership or trust of which a specified financial institution or a person related to such an institution is a member or beneficiary, acquires a bond or debenture that
i.  was issued before 17 November 1978 or under an agreement in writing referred to in paragraph b of section 21.12,
ii.  was issued to a person other than a corporation that was, at the time of issue,
(1)  a corporation referred to in any of paragraphs a to e of the definition of specified financial institution in section 1, or
(2)  a corporation controlled by one or more corporations referred to in subparagraph 1,
iii.  was acquired from a person that was, at the particular time and at the time the person last acquired the bond or debenture, a person other than a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1, and
iv.  was acquired otherwise than under an agreement in writing made before 24 October 1979; or
(d)  at a particular time after 12 November 1981, a specified financial institution, or a partnership or trust of which a specified financial institution or a person related to such an institution is a member or beneficiary, acquires a bond or debenture that
i.  was not a bond or debenture referred to in subparagraph c,
ii.  was acquired from a person that was, at the particular time, a corporation referred to in any of paragraphs a to f of the definition of specified financial institution in section 1, and
iii.  was acquired subject to an undertaking given after 12 November 1981 that would be an undertaking referred to in section 740.2 if that section applied to an income bond or income debenture.
For the purposes of subparagraph 2 of subparagraph ii of subparagraph c of the first paragraph, one corporation is controlled by another corporation if more than 50% of its issued share capital having full voting rights under all circumstances belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length.
1980, c. 13, s. 3; 1982, c. 5, s. 14; 1984, c. 15, s. 13; 1990, c. 59, s. 25; 1997, c. 3, s. 71; 2001, c. 53, s. 9.
21.16. Notwithstanding section 119, where an amount is paid or payable after 31 December 1978 as interest or as an amount in lieu of interest in respect of any interest or dividend payable after 16 November 1978 on an income bond or an income debenture issued before 17 November 1978 or pursuant to an agreement in writing referred to in paragraph b of section 21.12, the amount is, for the purposes of section 740.1 and the second paragraph of section 845, deemed to be a dividend received on a term preferred share.
1980, c. 13, s. 3; 1986, c. 19, s. 6.
CHAPTER VIII
SPECIFIED SHAREHOLDERS AND CANADIAN CONTROLLED PRIVATE CORPORATIONS
1986, c. 15, s. 37; 1997, c. 3, s. 16.
21.17. A specified shareholder of a corporation in a taxation year is a taxpayer who owns, directly or indirectly, at any time in the year, not less than 10% of the issued shares of any class of the capital stock of the corporation or of any other corporation that is related to the corporation.
1986, c. 15, s. 37; 1997, c. 3, s. 71.
21.18. The following rules apply for the purpose of determining whether or not a taxpayer is a specified shareholder of a corporation at any time:
(a)  a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person with whom the taxpayer does not deal at arm’s length;
(b)  each beneficiary of a trust is deemed to own that proportion of all the shares of the capital stock of a corporation that are owned by the trust at that time that the fair market value at that time of the beneficial interest of the beneficiary in the trust is of the fair market value at that time of all beneficial interests in the trust;
(c)  each member of a partnership is deemed to own that proportion of all the shares of the capital stock of a corporation that are property of the partnership at that time that the fair market value at that time of the member’s interest in the partnership is of the fair market value at that time of the interests of all members in the partnership;
(d)  an individual who performs services on behalf of a corporation that would be carrying on a personal services business if the individual or any person related to the individual were at that time a specified shareholder of the corporation is deemed to be a specified shareholder of the corporation at that time if the individual, or any person or partnership with whom the individual does not deal at arm’s length, is, or by virtue of any arrangement, may become, entitled, directly or indirectly, to not less than 10% of the assets or the shares of any class of the capital stock of the corporation or any corporation related thereto; and
(e)  notwithstanding paragraph b, where a beneficiary’s share of the income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, a power to appoint, the beneficiary is deemed to own each share of the capital stock of a corporation owned at that time by the trust.
1986, c. 15, s. 37; 1994, c. 22, s. 57; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1998, c. 16, s. 17; 2005, c. 1, s. 25.
21.19. Canadian-controlled private corporation means a private corporation that is a Canadian corporation other than a corporation
(a)  controlled, directly or indirectly in any manner whatever, by one or more persons not resident in Canada, by one or more public corporations, other than a prescribed corporation, by one or more corporations described in paragraph c, or by any combination thereof;
(b)  that would, if each share of the capital stock of a corporation that is owned by a person not resident in Canada, by a public corporation, other than a prescribed corporation, or by a corporation described in paragraph c were owned by a particular person, be controlled by the particular person; or
(c)  a class of the shares of the capital stock of which is listed on a Canadian stock exchange or a foreign stock exchange.
1986, c. 15, s. 37; 1990, c. 59, s. 26; 1997, c. 3, s. 17; 2001, c. 7, s. 8; 2003, c. 2, s. 13.
CHAPTER IX
ASSOCIATED CORPORATIONS
1989, c. 5, s. 28; 1997, c. 3, s. 71.
21.20. For the purposes of this Part, one corporation is associated with another in a taxation year if at any time in the year,
(a)  one of the corporations controlled, directly or indirectly in any manner whatever, the other;
(b)  both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons;
(c)  each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof;
(d)  one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof; or
(e)  each of the corporations was controlled, directly or indirectly in any manner whatever, by a related group and each of the members of one of the related groups was related to all of the members of the other related group, and one person who was a member of both related groups owned alone, or several persons who were members of both related groups owned together, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof.
1989, c. 5, s. 28; 1990, c. 59, s. 27; 1997, c. 3, s. 71.
21.20.1. For the purposes of section 21.20, the expression specified class means a class of shares of the capital stock of a corporation where, under the terms or conditions of the shares or any agreement in respect thereof,
(a)  the shares are not convertible or exchangeable;
(b)  the shares are non-voting;
(c)  the amount of each dividend payable on the shares is a fixed amount or is determined by reference to a fixed percentage of the fair market value of the consideration for which the shares were issued;
(d)  the annual rate of the dividend on the shares, expressed as a percentage of the fair market value of the consideration for which the shares were issued, cannot in any event exceed the prescribed rate of interest at the time the shares were issued; and
(e)  the amount that any holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length cannot exceed the aggregate of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends thereon.
1990, c. 59, s. 28; 1997, c. 3, s. 71.
21.20.2. For the purposes of sections 21.20 to 21.24,
(a)  a group of persons in respect of a corporation means any two or more persons each of whom owns shares of the capital stock of the corporation;
(b)  for greater certainty,
i.  a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation is deemed to be controlled by that group of persons, and
ii.  a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons;
(c)  a corporation is deemed to be controlled by another corporation, a person or a group of persons at any time where the other corporation, the person or the group of persons, as the case may be, owns at that time
i.  shares of the capital stock of the corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation, or
ii.  common shares of the capital stock of the corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding common shares of the capital stock of the corporation;
(d)  shares of the capital stock of a corporation that are owned or deemed under this section to be owned at any time by another corporation are deemed to be owned at that time by each shareholder of that other corporation in a proportion equal to the proportion of all such shares that
i.  the fair market value of the shares of the capital stock of the other corporation owned at that time by the shareholder is of
ii.  the fair market value of all the issued and outstanding shares of the capital stock of the other corporation at that time;
(e)  shares of the capital stock of a corporation that are owned or deemed under this section to be owned at any time by a partnership are deemed to be owned at that time by each member of the partnership in a proportion equal to the proportion of all such shares that
i.  the member’s share of the income or loss of the partnership for its fiscal period that includes that time, on the assumption that, where the income and loss of the partnership for that fiscal period are nil, the income of the partnership for that fiscal period is equal to $1,000,000, is of
ii.  the income or loss of the partnership for its fiscal period that includes that time, on the assumption that, where the income and loss of the partnership for that fiscal period are nil, the income of the partnership for that fiscal period is equal to $1,000,000;
(f)  where shares of the capital stock of a corporation are owned or deemed under this section to be owned at any time by a trust,
i.  in the case of a testamentary trust under which one or more beneficiaries are entitled to receive all of the income of the trust arising before the date of death of one or the last surviving of such beneficiaries, in this paragraph referred to as the distribution date , and under which no other person can, before the distribution date, receive or otherwise obtain the enjoyment of any of the income or capital of the trust,
(1)  where any such beneficiary’s share of the income or capital of the trust depends upon the exercise by any person of, or the failure by any person to exercise, a power to appoint, such shares are deemed to be owned at any time before the distribution date by the beneficiary, and
(2)  where subparagraph 1 does not apply, such shares are deemed to be owned at any time before the distribution date by any such beneficiary in a proportion that is equal to the proportion of all such shares that the fair market value of the beneficial interest in the trust of the beneficiary is of the fair market value of the beneficial interests in the trust of all such beneficiaries,
ii.  where any such beneficiary’s share of the accumulating income or capital of the trust depends upon the exercise by any person of, or the failure by any person to exercise, a power to appoint, such shares are deemed to be owned at that time by the beneficiary, except where subparagraph i applies and that time is before the distribution date,
iii.  in any case where subparagraph ii does not apply, a beneficiary is deemed at that time to own the proportion of such shares that the fair market value of the beneficial interest in the trust of the beneficiary is of the fair market value of all beneficial interests in the trust, except where subparagraph i applies and that time is before the distribution date, and
iv.  in the case of a trust referred to in section 467, the person referred to therein from whom property of the trust or property for which it was substituted was directly or indirectly received is deemed to own such shares at that time; and
(g)  in determining the fair market value of a share of the capital stock of a corporation, all issued and outstanding shares of the capital stock of the corporation are deemed to be non-voting.
1990, c. 59, s. 28; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 2005, c. 1, s. 26.
21.20.3. Shares of the capital stock of a corporation that are owned at any time by a child who is under 18 years of age are deemed, for the purposes of determining whether the corporation is associated at that time with any other corporation that is controlled, directly or indirectly in any manner whatever, by the father or the mother of the child or by a group of persons of which the father or mother is a member, to be owned at that time by the father or the mother, as the case may be, unless, having regard to all the circumstances, it may reasonably be considered that the child manages the business and affairs of the corporation and does so without a significant degree of influence by the father or mother.
1990, c. 59, s. 28; 1993, c. 16, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 18.
21.20.4. For the purpose of determining if a corporation is associated with any other corporation with which it is not otherwise associated, where a person or any partnership in which the person has an interest has a right at any time under a contract or otherwise, either immediately or in the future and either absolutely or contingently,
(a)  to, or to acquire, shares of the capital stock of a corporation, or to control the voting rights of such shares, the person or partnership is, except where the right cannot be exercised at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed to own the shares at that time and the shares are deemed to be issued and outstanding at that time; or
(b)  to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of a corporation, the person or partnership is, except where the right cannot be exercised at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, deemed at that time to have had the same position in relation to control of the corporation and ownership of shares of the capital stock of the corporation as if the shares were redeemed, acquired or cancelled by the corporation.
1990, c. 59, s. 28; 1993, c. 16, s. 16; 1997, c. 3, s. 71.
21.20.5. For the purposes of sections 21.20 to 21.24, a person who owns shares in two or more corporations is deemed, as shareholder of one of the corporations, to be related to himself, herself or itself as shareholder of each of the other corporations.
1990, c. 59, s. 28; 1997, c. 3, s. 71; 1998, c. 16, s. 19.
21.20.6. For the purposes of section 21.20.2 and notwithstanding section 21.20.4,
(a)  any share that is described in section 21.6.1 during one of the periods referred to therein or that is a share of a specified class within the meaning of section 21.20.1 is deemed not to be issued and outstanding and not to be owned by any shareholder;
(b)  an amount equal to the greater of the paid-up capital of the share referred to in paragraph a and the amount that any holder of the share is entitled to receive on the redemption, cancellation or acquisition of the share by the corporation is deemed to be a liability of the corporation.
1990, c. 59, s. 28; 1997, c. 3, s. 71.
21.20.7. For the purpose of determining if two corporations are associated with each other at any time by reason of both of the corporations being controlled at that time, directly or indirectly, by the same group of persons that includes one or more specified entities, neither the shares of the capital stock of those corporations owned by any specified entity that is a member of the group of persons, nor any right referred to in section 21.20.4 held by any specified entity that is a member of the group of persons, shall be taken into account at that time.
However, where a specified entity is a member at a particular time of a group of persons that controls several corporations, and, at that time, the specified entity acts in concert with one or more members of the group of persons to control those corporations, the specified entity is deemed, for the purposes of the first paragraph in respect of those corporations, not to be a specified entity at that time.
2002, c. 40, s. 18.
21.20.8. For the purpose of determining if a corporation is associated with a specified entity at any time, otherwise than by virtue of section 21.25, neither the fair market value of the shares of the capital stock of the corporation owned by the specified entity, nor any right referred to in section 21.20.4 held by the specified entity, shall be taken into account at that time.
2002, c. 40, s. 18.
21.20.9. In sections 21.20.7 and 21.20.8, specified entity means any of the following entities:
(a)  the Business Development Bank of Canada;
(b)  the Caisse de dépôt et placement du Québec;
(c)  Fondaction, le Fonds de développement de la Confédération des syndicats nationaux pour la coopération et l’emploi;
(d)  the Fonds de solidarité des travailleurs du Québec (F.T.Q.);
(e)  Hydro-Québec CapiTech inc.;
(f)  Investissement Québec;
(g)  the Société générale de financement du Québec;
(h)  the Société Innovatech du Grand Montréal;
(i)  the Société Innovatech du sud du Québec;
(j)  the Société Innovatech Québec et Chaudière-Appalaches;
(k)  the Société Innovatech Régions ressources;
(k.1)  the entity governed by the Act constituting Capital régional et coopératif Desjardins (chapter C-6.1);
(l)  a Québec university; and
(m)  a corporation all the issued capital stock of which, except director’s qualifying shares, belongs to one or more entities described in any of paragraphs a to l or in this paragraph.
2002, c. 40, s. 18; 2005, c. 23, s. 34.
21.20.10. For the purposes of Divisions II.6.0.1.7 and II.6.6.1 to II.6.6.7 of Chapter III.1 of Title III of Book IX and notwithstanding section 21.20.4, for the purpose of determining whether a corporation is associated at any time with a public corporation, otherwise than as a consequence of the application of section 21.25, a right referred to in section 21.20.4 that is held by the public corporation shall not be taken into account.
2003, c. 9, s. 14.
21.21. Two corporations that are associated, or deemed by this section to be associated, with the same corporation at any time and that, but for this section, would not be associated with each other at that time, are deemed, for the purposes of this Part, to be associated with each other at that time.
1989, c. 5, s. 28; 1990, c. 59, s. 29; 1992, c. 1, s. 7; 1997, c. 3, s. 17; 1997, c. 14, s. 14; 2000, c. 39, s. 3.
21.21.1. For the purposes of this Part, where it may reasonably be considered that one of the main reasons for the separate existence of two or more corporations in a taxation year is to reduce the amount of tax that would otherwise be payable under this Part, those corporations are deemed to be associated with each other in the year.
1990, c. 59, s. 30; 1997, c. 3, s. 71.
21.22. Where one corporation would, but for this section, be associated with another corporation in a taxation year by reason of both of the corporations being controlled by the same trustee, liquidator of a succession or executor and it is established to the satisfaction of the Minister that the trustee, liquidator or executor did not acquire control of the corporations as a result of one or more trusts created or successions opened by the same individual or two or more individuals not dealing with each other at arm’s length, and that the trust or succession under which the trustee, liquidator or executor acquired control of each of the corporations arose only upon the death of the individual who created the trust or whose succession was opened, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year.
1989, c. 5, s. 28; 1994, c. 22, s. 58; 1997, c. 3, s. 71; 2005, c. 1, s. 27.
21.23. Where one corporation would, but for this section, be associated with another corporation in a taxation year, by reason only that the other corporation is a trustee under a trust pursuant to which the corporation is controlled, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year unless, at any time in the year, a settlor of the trust controlled or is a member of a related group that controlled the other corporation that is the trustee under the trust.
1989, c. 5, s. 28; 1997, c. 3, s. 71.
21.24. Where a particular corporation would, but for this section, be associated with another corporation in a taxation year by reason of being controlled, directly or indirectly in any manner whatever, by the other corporation or by reason of both of the corporations being controlled, directly or indirectly in any manner whatever, by the same person at a particular time in the year and it is established to the satisfaction of the Minister that the conditions set out in the second paragraph are fulfilled, the two corporations are deemed, for the purposes of this Part, not to be associated with each other in the year.
The conditions referred to in the first paragraph are as follows:
(a)  there was in effect at the particular time an enforceable agreement or arrangement under which, upon the happening of an event or the satisfaction of a condition that it is reasonable to expect will happen or be satisfied, the particular corporation will cease to be controlled, directly or indirectly in any manner whatever, by the other corporation or the person so controlling the particular corporation and will be or become controlled, directly or indirectly in any manner whatever, by a person or group of persons with whom or with each of the members of which, as the case may be, the other corporation or the person so controlling the particular corporation was at the particular time dealing at arm’s length;
(b)  the purpose for which the particular corporation was at the particular time so controlled was the safeguarding of rights or interests of the other corporation or the person so controlling the particular corporation in respect of any indebtedness owing to the other corporation or the person so controlling the particular corporation the whole or any part of the principal amount of which was outstanding at the particular time, or in respect of any shares of the capital stock of the particular corporation that were owned by the other corporation or the person so controlling the particular corporation at the particular time and that were, under the enforceable agreement or arrangement referred to in subparagraph a, to be redeemed by the particular corporation or purchased by the person or group of persons referred to in subparagraph a who are to acquire control of the particular corporation.
1989, c. 5, s. 28; 1990, c. 59, s. 31; 1997, c. 3, s. 71.
21.25. For the purposes of this Part, where the expression controlled, directly or indirectly in any manner whatever, is used, a corporation is deemed to be so controlled by another corporation, a person or a group of persons at any time where, at that time, the other corporation, the person or the group of persons has any direct or indirect influence that, if exercised, would result in control in fact of the corporation.
Notwithstanding the foregoing, where the corporation and the other corporation, the person or the group of persons are dealing with each other at arm’s length and the influence referred to in the first paragraph is derived from a franchise, licence, lease, distribution, supply or management agreement or other similar agreement or arrangement, the main purpose of which is to govern the relationship between the corporation and the other corporation, the person or the group of persons regarding the manner in which the business carried on by the corporation is to be conducted, the corporation shall not be considered to be controlled, directly or indirectly in any manner whatever, by the other corporation, the person or the group of persons by reason only of such agreement or arrangement.
1990, c. 59, s. 32; 1997, c. 3, s. 71.
CHAPTER X
AMORTIZED COST OF A LOAN OR LENDING ASSET
1990, c. 59, s. 32.
21.26. Subject to section 838, amortized cost , to a taxpayer, of a loan or lending asset at a particular time means the amount by which the aggregate of the following amounts exceeds the amount computed at that time in respect of the loan or lending asset under section 21.27:
(a)  in the case of a loan made by taxpayer, the aggregate of all amounts advanced in respect of the loan at or before the particular time;
(b)  in the case of a loan or lending asset acquired by the taxpayer, the cost to the taxpayer of the loan or lending asset;
(c)  in the case of a loan or lending asset acquired by the taxpayer, the part of the amount by which the principal amount of the loan or lending asset at the time it was so acquired exceeds the cost to the taxpayer of the loan or lending asset that was included in computing the taxpayer’s income for any taxation year ending at or before the particular time;
(c.1)  the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was included in computing the taxpayer’s income for a taxation year that ended at or before that time in respect of changes in the value of the loan or lending asset attributable to the fluctuation in the value of a foreign currency relative to Canadian currency;
(d)  where the taxpayer is an insurer, any amount in respect of the loan or lending asset that was deemed, by reason of paragraph a of section 830 as it read for the taxation year 1977, to be a gain for any taxation year ending at or before the particular time;
(e)  the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was included under paragraph i of section 87 in computing the taxpayer’s income for any taxation year ending at or before the particular time.
1990, c. 59, s. 32; 1996, c. 39, s. 18; 1998, c. 16, s. 20.
21.27. The amount that must be deducted in computing the amortized cost, to a taxpayer, of a loan or lending asset at the particular time contemplated in section 21.26 is the aggregate of the following amounts:
(a)  in the case of a loan or lending asset acquired by the taxpayer, the part of the amount by which the cost to the taxpayer of the loan or lending asset exceeds the principal amount of the loan or lending asset at the time it was so acquired that was deducted in computing the taxpayer’s income for any taxation year ending at or before the particular time;
(a.1)  the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was deducted in computing the taxpayer’s income for a taxation year that ended at or before that time in respect of changes in the value of the loan or lending asset attributable to the fluctuation in the value of a foreign currency relative to Canadian currency;
(b)  all amounts that the taxpayer received at or before the particular time as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the loan or lending asset;
(c)  where the taxpayer is an insurer, any amount in respect of the loan or lending asset that was deemed, by reason of paragraph b of section 830 as it read for the taxation year 1977, to be a loss for any taxation year ending at or before the particular time;
(d)  the aggregate of all amounts each of which is an amount in respect of the loan or lending asset that was deducted under section 141 in computing the taxpayer’s income for any taxation year ending at or before the particular time.
1990, c. 59, s. 32; 1996, c. 39, s. 19; 1998, c. 16, s. 21.
CHAPTER XI
TRANSFER OR LENDING OF SECURITIES
1991, c. 25, s. 5.
21.28. In this chapter,
qualified security means
(a)  a share of a class of the capital stock of a corporation that is listed on a Canadian stock exchange or a foreign stock exchange or of a class of the capital stock of a corporation that is a public corporation by reason of the designation of the class for the purposes of subparagraph i or ii of paragraph b of the definition of public corporation in subsection 1 of section 89 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement),
(b)  a bond, debenture, note or similar obligation issued by a corporation described in paragraph a or by a corporation that is controlled by such a corporation,
(c)  a bond, debenture, note or similar obligation issued or guaranteed by the government of any country, province, state, municipality or other political subdivision, or by a corporation, commission, agency or association controlled by such a government, or
(d)  a warrant, right, option or similar instrument with respect to a share described in paragraph a;
securities lending arrangement means an arrangement, other than an arrangement one of the main purposes of which may reasonably be considered to be to avoid or defer the inclusion in income of any profit or gain with respect to a qualified security, under which
(a)  a person, in this chapter referred to as the lender , transfers or lends at any particular time a qualified security to another person, in this chapter referred to as the borrower , with whom the lender deals at arm’s length,
(b)  it may reasonably be expected, at the particular time, that the borrower will, at a later time, transfer or return to the lender a security, in this chapter referred to as an identical security , that is identical to the security transferred or lent by the lender to the borrower at the particular time,
(c)  where the qualified security is a share of the capital stock of a corporation, the borrower is obligated to pay to the lender, as compensation for each dividend paid on the security that would have been received by the borrower if the borrower had held the security throughout the period beginning after the particular time and ending at the time an identical security is transferred or returned to the lender, an amount equal to that dividend, and
(d)  the lender’s opportunity for gain or profit or risk of loss with respect to the security is not changed in any material respect.
1991, c. 25, s. 5; 1993, c. 16, s. 17; 1995, c. 49, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 22; 2001, c. 7, s. 169.
21.29. For the purposes of this Part, subject to sections 21.30 and 21.31, any transfer or loan by a lender of a security under a securities lending arrangement is deemed not to be a disposition of the security and the security is deemed to continue to be property of the lender.
For the purposes of this section, a security is deemed to include an identical security that has been transferred or returned to the lender under the securities lending arrangement.
1991, c. 25, s. 5.
21.30. For the purposes of this Part, where, at any time, a lender receives property in satisfaction of or in exchange for the lender’s right under a securities lending arrangement to receive the transfer or return of an identical security and the property received at that time is neither an identical property nor an amount deemed, under section 21.31, to have been received as proceeds of disposition, the following rules apply:
(a)  subject to paragraph b, the lender is deemed to have disposed, at that time, of the security initially transferred or lent for proceeds of disposition equal to the fair market value of the property received as consideration for the disposition of the right, other than any portion of the proceeds that is deemed to have been received by the lender as a taxable dividend;
(b)  Division XIII of Chapter IV of Title IV of Book III, Division VI of Chapter IV of Title IX of Book III and Chapters V and VI of Title IX of Book III, as the case may be, apply in computing the income of the lender with respect to a disposition referred to in paragraph a as if the security initially transferred or lent had continued to be property of the lender and the lender had received the property directly.
1991, c. 25, s. 5; 1998, c. 16, s. 23.
21.31. Where, at any time, it may reasonably be considered that a lender would have received proceeds of disposition for a security that was transferred or lent under a securities lending arrangement had the security not been so transferred or lent, the lender is deemed to have disposed of the security at that time for an amount equal to such proceeds.
1991, c. 25, s. 5; 2005, c. 23, s. 35.
21.32. For the purposes of this Part, any amount received as compensation for a taxable dividend paid on a qualified security that is a share of the capital stock of a public corporation is, to the extent of the amount of such dividend, deemed to have been received from the corporation as a taxable dividend on the share, if it has been received
(a)  under a securities lending arrangement from a person resident in Canada, or a person not resident in Canada where, in the latter case, the amount was paid in the course of carrying on business in Canada through an establishment, or
(b)  from or by a person resident in Canada who is a registered securities dealer where the amount is received or paid, as the case may be, in the ordinary course of the business of trading in securities carried on by the dealer.
However, the first paragraph does not apply in respect of an amount received
(a)  as proceeds of disposition of a property, or
(b)  by a corporation under an arrangement where it may reasonably be considered that one of the main reasons for the corporation entering into the arrangement was to enable it to receive an amount that would, but for this subparagraph, have been deemed, under this section, to be a dividend.
1991, c. 25, s. 5; 1996, c. 39, s. 20; 1997, c. 3, s. 71.
21.33. In computing a taxpayer’s income from a business or property,
(a)  where the taxpayer is not a registered securities dealer, no deduction shall be made in respect of an amount that, if paid, would be deemed by section 21.32 to have been received by another person as a taxable dividend; and
(b)  where the taxpayer is a registered securities dealer, no deduction shall be made in respect of more than 2/3 of the amount referred to in paragraph a.
1991, c. 25, s. 5; 1996, c. 39, s. 21.
21.33.1. Notwithstanding section 21.33, there may be deducted in computing a corporation’s income from a business or property for a taxation year an amount equal to the lesser of
(a)  the amount that the corporation is obligated to pay to another person under an arrangement described in paragraphs a and b of the definition of dividend rental arrangement in section 1 that, if paid, would be deemed by section 21.32 to have been received by another person as a taxable dividend, and
(b)  the amount of the dividends received by the corporation under the arrangement referred to in paragraph a that were identified in its fiscal return under this Part for the year as dividends in respect of which no amount was deductible because of section 740.4.1 in computing its taxable income.
1996, c. 39, s. 22; 1997, c. 3, s. 71.
CHAPTER XII
QUÉBEC SALES TAX AND GOODS AND SERVICES TAX
1991, c. 25, s. 5; 1992, c. 1, s. 8.
21.34. For the purposes of this Part, where a liability for the Québec sales tax or the goods and services tax is incurred in respect of a change of use at any time of a property, the liability so incurred is deemed to have been incurred immediately after that time in respect of the acquisition of the property.
1991, c. 25, s. 5; 1992, c. 1, s. 9.
21.35. For the purposes of this Part, except section 58.2 and this section, an amount claimed by a taxpayer as an input tax credit or rebate with respect to the goods and services tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer
(a)  where the amount is claimed as an input tax credit in a return filed under Part IX of the Excise Tax Act (Revised Statutes of Canada, 1985, chapter E-15) for a reporting period under that Act,
i.  at the time the goods and services tax in respect of the input tax credit was paid or became payable, if the tax was paid or became payable in the reporting period, or
ii.  at the end of the reporting period, if no such tax was paid or became payable in respect of the input tax credit in the reporting period; or
(b)  where the amount is claimed as a rebate with respect to the goods and services tax, at the time the amount was received by, or credited to, the taxpayer.
1991, c. 25, s. 5.
21.35.1. For the purposes of this Part, other than section 58.3 and this section, an amount claimed by a taxpayer as an input tax refund or a rebate with respect to the Québec sales tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer
(a)  where the amount is claimed as an input tax refund in a return filed under the Act respecting the Québec sales tax (chapter T-0.1) for a reporting period under that Act,
i.  at the time the Québec sales tax in respect of the input tax refund was paid or became payable, if the tax was paid or became payable in the reporting period, or
ii.  at the end of the reporting period, if no such tax was paid or became payable in respect of the input tax refund in the reporting period; or
(b)  where the amount is claimed as a rebate with respect to the Québec sales tax, at the time the amount was received by, or credited to, the taxpayer.
1992, c. 1, s. 10; 1997, c. 14, s. 15.
21.36. Where the input tax credit of a taxpayer under Part IX of the Excise Tax Act (Revised Statutes of Canada, 1985, chapter E-15) in respect of property that is a passenger vehicle or an aircraft is determined with reference to subsection 4 of section 202 of the said Act, subparagraphs i and ii of paragraph a of section 21.35, where they apply in respect of such property, shall read as follows:
“i. at the beginning of the first taxation year or fiscal period of the taxpayer commencing after the end of the taxation year or fiscal period, as the case may be, in which the goods and services tax in respect of such property was considered, for the purpose of determining the input tax credit, to be payable, if the tax was considered, for the purpose of determining the input tax credit, to have become payable in the reporting period, or
ii. at the end of the reporting period, if no such tax was considered, for the purposes of determining the input tax credit, to have become payable in that period; or”.
1991, c. 25, s. 5.
21.36.1. Where the input tax refund of a taxpayer under the Act respecting the Québec sales tax (chapter T-0.1) in respect of property that is a passenger vehicle or an aircraft is determined with reference to section 252 of the said Act, subparagraphs i and ii of paragraph a of section 21.35.1, where they apply in respect of such property, shall read as follows:
“i. at the beginning of the first taxation year or fiscal period of the taxpayer commencing after the end of the taxation year or fiscal period, as the case may be, in which the Québec sales tax in respect of such property was considered, for the purpose of determining the input tax refund, to be payable, if the tax was considered, for the purpose of determining the input tax refund, to have become payable in the reporting period, or
ii. at the end of the reporting period, if no such tax was considered, for the purpose of determining the input tax refund, to have become payable in that period; or”.
1992, c. 1, s. 11.
21.37. For the purposes of this Part, where an amount is added at a particular time in determining the net tax of a taxpayer under Part IX of the Excise Tax Act (Revised Statutes of Canada, 1985, chapter E-15) in respect of an input tax credit relating to property or a service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service pursuant to a legal obligation to repay all or part of that assistance.
1991, c. 25, s. 5; 1993, c. 16, s. 18.
21.38. For the purposes of this Part, where an amount is added at a particular time in determining the net tax of a taxpayer under the Act respecting the Québec sales tax (chapter T-0.1) in respect of an input tax refund relating to property or a service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service pursuant to a legal obligation to repay all or part of that assistance.
1992, c. 1, s. 12; 1994, c. 22, s. 59; 1997, c. 14, s. 16.
CHAPTER XIII
Repealed, 2000, c. 5, s. 20.
1996, c. 39, s. 23; 2000, c. 5, s. 20.
21.39. (Repealed).
1996, c. 39, s. 23; 1997, c. 3, s. 71; 2000, c. 5, s. 20.
CHAPTER XIV
ENVIRONMENTAL TRUST
2000, c. 5, s. 21.
21.40. An environmental trust at any time means a trust resident in a province and maintained at that time for the sole purpose of funding the reclamation of a site in the province that is or has been used primarily for, or for any combination of, the operation of a mine, the extraction of clay, peat, sand, shale or aggregates, including dimension stone and gravel, or the deposit of waste where
(a)  the maintenance of the trust is provided for, or may become provided for, pursuant to the terms of a contract entered into between the Government of Canada or of a province or pursuant to a law of Canada or the province and the contract was entered into or that law was enacted, as the case may be, on or before the later of 1 January 1996 and the day that is one year after the day on which the trust was created; and
(b)  the trust is none of the trusts described in the second paragraph.
The trusts to which subparagraph b of the first paragraph refers are any of the following:
(a)  a trust that relates at the time referred to in the first paragraph, in this paragraph referred to as the particular time , to the reclamation of a well;
(b)  a trust that is not maintained at the particular time to secure the reclamation obligations of one or more persons or partnerships that are beneficiaries under the trust;
(c)  a trust that at the particular time has a trustee other than the Government of Canada or of the province referred to in the first paragraph or a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee;
(d)  a trust that borrows money at the particular time;
(e)  a trust that acquires at the particular time any property that is not described in any of paragraphs a, b and f of the definition of qualified investment in section 204 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement);
(f)  a trust to which the first contribution was made before 1 January 1992;
(g)  a trust from which any amount was distributed before 23 February 1994;
(h)  if the particular time is before 1 January 1998, a trust, other than a mining reclamation trust at that time,
i.  to which the first contribution was made before 1 January 1996,
ii.  from which no amount was distributed before 19 February 1997, or
iii.  any interest in which was disposed of before 19 February 1997;
(i)  a trust not resident in Québec that is not a qualifying environmental trust for the purposes of the Income Tax Act because of an election made by it to that effect in accordance with paragraph i of the definition of qualifying environmental trust in subsection 1 of section 248 of that Act;
(j)  a trust resident in Québec that elected in a notice in writing filed with the Minister on or before 31 December 1999 or on or before 1 April of the year following the year in which the first contribution to the trust was made, not to be an environmental trust; and
(k)  a trust that was, at any time before the particular time but during its existence, not an environmental trust.
2000, c. 5, s. 21.
CHAPTER XV
REGISTERED AMATEUR ATHLETIC ASSOCIATIONS
2005, c. 23, s. 36.
21.41. A registered Canadian amateur athletic association means a Canadian amateur athletic association registered as such with the Minister.
For the purposes of the first paragraph, the following rules apply:
(a)  a Canadian amateur athletic association is registered as such with the Minister if it is an association that
i.  is created under a law in force in Canada,
ii.  is resident in Canada,
iii.  is a person exempt from tax described in section 996,
iv.  has, as its primary purpose and its primary function, the promotion of amateur athletics in Canada on a nation-wide basis, and
v.  has filed an application with the Minister in prescribed form for registration as a Canadian amateur athletic association that has been granted and its registration has not been revoked in accordance with section 1065; and
(b)  subject to the Minister’s power to refuse or revoke registration, a Canadian amateur athletic association validly registered as such under the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) is deemed to be also registered as such with the Minister.
2005, c. 23, s. 36.
21.42. A registered Québec amateur athletic association means a Québec amateur athletic association registered as such with the Minister and the registration of which is in force.
For the purposes of the first paragraph, the Minister may, on application made to the Minister in prescribed form, register an organization as a Québec amateur athletic association if the Minister considers that the organization
(a)  is created under a law of Québec or Canada;
(b)  has its management and control centre in Québec;
(c)  is a person exempt from tax described in section 996; and
(d)  has, as its primary purpose and its primary function, the promotion of amateur athletics in Québec on a Québec-wide basis.
2005, c. 23, s. 36.
BOOK II
LIABILITY FOR TAX
1972, c. 23.
22. Every person who is an individual resident in Québec on the last day of a taxation year or a corporation having an establishment in Québec at any time in a taxation year shall pay a tax on the taxable income of the individual or the corporation, as the case may be, for that taxation year.
The tax payable under section 750 by an individual referred to in the first paragraph who carries on a business in Canada but outside Québec is equal to the proportion of the tax that would be determined under this section but for this paragraph that the individual’s income earned in Québec is of the individual’s income earned in Québec and elsewhere, as determined by the regulations.
1972, c. 23, s. 17; 1972, c. 26, s. 34; 1973, c. 17, s. 4; 1984, c. 15, s. 14; 1988, c. 4, s. 18; 1989, c. 5, s. 29; 1993, c. 64, s. 7; 1995, c. 63, s. 16; 1997, c. 3, s. 71; 1998, c. 16, s. 24; 2001, c. 53, s. 10.
23. When an individual ceases to be resident in Canada in a taxation year, the last day of the individual’s taxation year is, for the purposes of section 22, the last day on which the individual was resident in Canada.
The taxable income, for the taxation year, of an individual referred to in the first paragraph who was resident in Québec on that day is the amount by which the amount determined under the third paragraph exceeds the aggregate of
(a)  the deductions permitted by sections 727, 728.1, 729 and 733.0.0.1 and, to the extent that they relate to amounts included in computing an amount referred to in the third paragraph, the deductions permitted by sections 725, 725.1.2 and 725.2 to 725.4; and
(b)  any other deduction permitted by Book IV, to the extent that
i.  the deduction can reasonably be considered to be attributable to the part of the year throughout which the individual was resident in Canada, or
ii.  if all or substantially all of the individual’s income for the part of the year throughout which the individual was not resident in Canada is included in the amount referred to in the third paragraph, the deduction can reasonably be considered to be attributable to that part of the year.
The amount to which the second paragraph refers is the amount that would be the individual’s income for the year if, for the part of the year throughout which the individual was not resident in Canada, only the following elements were taken into account:
(a)  the elements described in section 1090; and
(b)  the income that would be included in computing the individual’s income earned in Canada for the year under subparagraph g of the first paragraph of section 1090 if the part of the year throughout which the individual was not resident in Canada were a whole taxation year.
1972, c. 23, s. 18; 1972, c. 26, s. 35; 1982, c. 5, s. 15; 1989, c. 5, s. 30; 1993, c. 16, s. 19; 1995, c. 49, s. 17; 1996, c. 39, s. 24; 1998, c. 16, s. 25; 2004, c. 8, s. 13.
24. The taxable income of an individual referred to in section 22 for a taxation year is the individual’s income for the year plus the additions provided for in Book IV and minus the deductions permitted by that Book, except where the individual was resident in Canada for only part of that taxation year. In the latter case, the individual’s taxable income shall be computed in the manner described in section 23, whether the individual is an individual who became resident in Canada in the year or an individual who ceased to be resident in Canada in the year.
1972, c. 23, s. 19; 1972, c. 26, s. 36; 1985, c. 25, s. 20; 1989, c. 5, s. 31; 1995, c. 49, s. 18; 1998, c. 16, s. 26.
25. Every individual resident in Canada but outside Québec on the last day of a taxation year shall, if the individual carried on a business in Québec at any time in the year, pay a tax on the individual’s income earned in Québec for the year as determined under Part II.
The tax payable under section 750 by an individual referred to in the first paragraph is equal to the portion of the tax that the individual would pay, but for this paragraph, under that section on the individual’s taxable income determined under section 24 if the individual were resident in Québec, that is the proportion, which shall not exceed 1, that that income earned in Québec is of the amount by which the amount that would have been the individual’s income, computed without reference to section 1029.8.50, had the individual been resident in Québec on the last day of the taxation year, exceeds any amount deducted by the individual under any of sections 726.20.2, 726.28, 737.14, 737.16, 737.16.1, 737.18.10, 737.18.28, 737.18.34, 737.21, 737.22.0.0.3, 737.22.0.0.7, 737.22.0.3, 737.22.0.7, 737.25 and 737.28 in computing that taxable income.
For the purposes of this section, where an individual ceases to be resident in Canada in a taxation year, the last day of the individual’s taxation year is the last day on which the individual was resident in Canada.
1972, c. 23, s. 20; 1972, c. 26, s. 37; 1973, c. 17, s. 5; 1984, c. 15, s. 15; 1987, c. 21, s. 9; 1988, c. 4, s. 19; 1989, c. 5, s. 32; 1993, c. 64, s. 8; 1995, c. 1, s. 14; 1995, c. 63, s. 17; 1997, c. 14, s. 17; 1997, c. 85, s. 34; 1998, c. 16, s. 27; 1999, c. 83, s. 27; 2000, c. 39, s. 264; 2002, c. 40, s. 19; 2003, c. 9, s. 15; 2004, c. 21, s. 42.
26. Every individual who was not resident in Canada at any time in a taxation year and who, in the taxation year or a previous taxation year, was employed in Québec, carried on a business in Québec or disposed of a taxable Québec property, shall pay a tax on the individual’s income earned in Québec for the year as determined under Part II.
The tax payable under sections 750 and 752.12 to 752.16 by an individual referred to in the first paragraph is equal to the proportion, which cannot exceed 1, of the tax that would, but for this paragraph, be payable under those sections on the individual’s taxable income earned in Canada as determined under Part II if the individual were resident in Québec, that the individual’s income earned in Québec is of the individual’s income earned in Canada as determined in accordance with section 1090.
1972, c. 23, s. 21; 1972, c. 26, s. 38; 1988, c. 4, s. 20; 1989, c. 5, s. 33; 1993, c. 64, s. 9; 1998, c. 16, s. 28; 2001, c. 53, s. 11.
26.1. The taxable income of a corporation referred to in section 22 for a taxation year is its income for the year plus the additions provided for in Book IV and minus the deductions permitted by the said Book.
1989, c. 77, s. 8; 1997, c. 3, s. 71.
27. Any corporation not contemplated in section 22 and not resident in Canada that disposes in a taxation year of taxable Québec property shall pay a tax at the rate established in subsection 1 of section 771 on the amounts described in subparagraphs d, e, f, h and l of the first paragraph of section 1089 that are applicable thereto and on the amount by which the aggregate of its taxable capital gains exceeds the aggregate of its allowable capital losses from the disposition of such property.
Where a corporation contemplated in section 22 has an establishment outside Québec, its tax payable is equal to the proportion of the tax established under subsection 1 of section 771 that the business it carries on in Québec is of the entire business it carries on in Canada or in Québec and elsewhere, as determined under subsection 2 of section 771.
1972, c. 23, s. 22; 1973, c. 17, s. 6; 1975, c. 22, s. 3; 1987, c. 21, s. 10; 1991, c. 8, s. 1; 1992, c. 1, s. 13; 1993, c. 16, s. 20; 1995, c. 1, s. 199; 1997, c. 3, s. 71.
BOOK III
COMPUTATION OF INCOME
1972, c. 23.
TITLE I
BASIC RULES
1972, c. 23.
28. A taxpayer shall, to determine the income of the taxpayer for a taxation year for the purposes of this Part,
(a)  add the aggregate of the taxpayer’s income for the year, other than the taxable capital gains from dispositions of property, from each source inside and outside Canada;
(b)  add to the aggregate so determined the amount by which
i.  the taxpayer’s taxable capital gains for the year from dispositions of property other than precious property and the taxpayer’s taxable net gain for the year from dispositions of precious property, exceed
ii.  the amount by which the taxpayer’s allowable capital losses for the year from dispositions of property other than precious property exceed the taxpayer’s allowable business investment losses for the year; and
(c)  subtract from the total so determined
i.  the deductions permitted by Title VI in computing the taxpayer’s income for the year, except those taken into account in computing the aggregate of the income referred to in paragraph a and, if there is any remainder,
ii.  the losses incurred in the year by the taxpayer from an office, employment, business or property and the taxpayer’s allowable business investment losses for the year;
iii.  (subparagraph replaced).
1972, c. 23, s. 23; 1979, c. 18, s. 4; 1982, c. 56, s. 10; 1987, c. 67, s. 8; 1998, c. 16, s. 29.
28.1. Where the amount determined under section 28 for a taxation year in respect of a taxpayer does not exceed zero, the taxpayer is deemed, for the purposes of this Part, to have income for the year in an amount equal to zero.
1993, c. 16, s. 21; 1993, c. 64, s. 10.
29. Where income or loss is from an office, employment, business, property or other source in Canada or in another place, or where income or loss is from an office, employment or business performed or carried on partly in Canada and partly in another place, the taxpayer shall compute separately the income or loss from each source according to the place and shall only apply to it such part of the deductions provided by this Part as may reasonably be applied to such source according to the place.
Notwithstanding the first paragraph, the deductions permitted by sections 334 to 358.0.3 shall, subject to the third paragraph, be applied to the whole income of the taxpayer.
For the purposes of Part II and sections 671, 671.1 and 772.2 to 772.13, in respect of income or loss from a source in Canada or in another place or from an office, employment or business, performed or carried on partly in Canada and partly in another place,
(a)  subject to subparagraph b, the deductions permitted in computing the income of the taxpayer under this Part, except those permitted by paragraphs c to e and j of section 336, sections 336.0.3 and 336.0.4, paragraphs b to g and i of section 339 and sections 340 and 341, shall be applied separately to the income from each of those places;
(b)  the deductions permitted by paragraphs a and b of section 657 shall not be applied to income from a source in a country other than Canada.
1972, c. 23, s. 24; 1990, c. 59, s. 33; 1994, c. 22, s. 60; 1995, c. 1, s. 15; 1995, c. 63, s. 18; 1997, c. 85, s. 35; 1998, c. 16, s. 30; 2005, c. 38, s. 51.
30. (Repealed).
1972, c. 23, s. 25; 1973, c. 17, s. 7; 1993, c. 16, s. 22; 1997, c. 31, s. 6.
31. For the purpose of computing a taxpayer’s income for a taxation year, and unless otherwise prescribed,
(a)  any deduction allowed to the taxpayer under a provision of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in computing the taxpayer’s income for a preceding taxation year in respect of which the taxpayer or, in the case of a partnership, each of the members, was not subject to tax under this Part, is deemed to have also been allowed to the taxpayer under the corresponding provision of this Part in computing the taxpayer’s income for that preceding year;
(b)  where, for the purposes of Part I of the Income Tax Act, the cost, the capital cost or the cost amount of property, to the taxpayer, determined as a consequence of the application of a particular provision of that Act in respect of a transaction or event that occurred during a preceding taxation year described in paragraph a, is different from that which it would have been at that time but for that provision, the corresponding provision of this Part is deemed, for the purpose of determining the cost, the capital cost or the cost amount, as the case may be, of the property to the taxpayer for the purposes of this Part, to have applied in respect of the property at the same time and for the same amounts as for the application of the particular provision in respect of the property.
1977, c. 26, s. 2; 1997, c. 85, s. 36.
TITLE II
INCOME OR LOSS FROM AN OFFICE OR EMPLOYMENT
1972, c. 23.
CHAPTER I
BASIC RULES
1972, c. 23.
32. Subject to this Part, an individual’s income for a taxation year from an office or employment is the salary, wages and other remuneration, including gratuities, received by the individual in the year.
1972, c. 23, s. 26; 1998, c. 16, s. 31.
33. An individual’s loss for a taxation year from an office or employment is the amount of such loss computed, with the necessary modifications, by applying the provisions of this Part respecting computation of income from that source.
1972, c. 23, s. 27; 1995, c. 63, s. 19.
34. Every amount an individual receives from another person while in the employment of the latter is presumed received as remuneration for services rendered. The same applies to every amount received in payment of an obligation arising out of an agreement between two persons immediately prior to, during or immediately after a period that one person is in the employment of the other.
1972, c. 23, s. 28.
35. The presumption provided in section 34 may be rebutted if it is established that, irrespective of when the agreement, if any, was made and the terms thereof, the payment was not made for services rendered or to be rendered, to prompt an individual to accept an office or employment or in consideration for a covenant with reference to what the employee is, or is not, to do before the employee becomes or after the employee ceases to be an employee.
1972, c. 23, s. 29; 1998, c. 16, s. 32.
CHAPTER II
INCLUSIONS
1972, c. 23.
DIVISION I
GENERALITIES
1972, c. 23.
36. An individual shall, in computing the income of the individual for the year from an office or employment, include all amounts the individual receives or benefits from in that year or which are allocated to the individual for that year, and that are provided for in this chapter.
Such amounts include the fees received by the individual because of, or in the course of, an office or employment, including director’s fees.
1972, c. 23, s. 30; 1983, c. 43, s. 3; 1998, c. 16, s. 33.
36.1. (Repealed).
1995, c. 1, s. 16; 1995, c. 63, s. 20; 1997, c. 85, s. 37.
DIVISION II
FRINGE BENEFITS
1972, c. 23.
37. The amounts that an individual is required to include in computing the income of the individual include the value of board, lodging and other benefits of any kind whatever received or enjoyed by the individual because of, or in the course of, the individual’s office or employment and the allowances received by the individual, including any amount received, without having to account for its use, for personal or living expenses or for any other purpose.
1972, c. 23, s. 31; 1992, c. 1, s. 14; 1998, c. 16, s. 34.
37.0.1. For the purposes of section 37, a benefit is deemed to have been enjoyed by an individual at any time an obligation issued by any debtor, including the individual, is settled or extinguished and the value of that benefit is deemed to be the forgiven amount at that time in respect of the obligation.
In the first paragraph, the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by section 485 if
(a)  the obligation were a commercial obligation, within the meaning assigned by section 485, issued by the debtor;
(b)  no amount included in computing income because of the obligation being settled or extinguished at that time were taken into account;
(c)  the definition of forgiven amount in section 485 were read without reference to paragraphs f and h; and
(d)  section 485.3 were read without reference to subparagraphs b and r of the first paragraph of that section.
1989, c. 77, s. 9; 1996, c. 39, s. 25.
37.0.1.1. For the purposes of section 37, the value of the benefit received or enjoyed by an individual for a taxation year where, because of a previous, the current or an intended office or employment of the individual, the individual is provided coverage during the year under a plan for the insurance of persons, is equal to
(a)  in the case of a plan for the insurance of persons which provides coverage through insurance with an insurer, the amount established for the year under sections 37.0.1.2 and 37.0.1.3 in respect of the individual in relation to the plan;
(b)  in the case of a plan for the insurance of persons which provides coverage otherwise than through insurance with an insurer, the amount established for the year under sections 37.0.1.4 to 37.0.1.6 in respect of the individual in relation to the plan.
For the purposes of this section and sections 37.0.1.2 to 37.0.1.6, the following rules apply:
(a)  any premium paid in respect of an individual, because of the individual’s office or employment with an employer, under a plan for the insurance of persons, by a person to whom the employer is related, is deemed to be a premium paid by the employer and not by the person to whom the employer is related;
(b)  any amount paid as a dividend, return or refund of premiums, under a plan for the insurance of persons, to a person to whom the employer is related, in relation to the coverage and benefits enjoyed by the employees of the employer under the plan, is deemed to be a dividend, a return or a refund of premiums paid, to the employer and not to the person to whom the employer is related;
(c)  where, in a taxation year, an employer pays, under a plan for the insurance of persons, an additional premium in respect of the coverage or benefits under the plan enjoyed by the employees for a period prior to that year, the additional premium is deemed to be a premium paid at that time in respect of the coverage or benefits enjoyed by the employees for that year and not in respect of the coverage or benefits enjoyed by the employees for the preceding year;
(d)  tax does not include tax payable by the employer under Part IV.1 or Part VI, if any.
1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 35.
37.0.1.2. The amount contemplated in subparagraph a of the first paragraph of section 37.0.1.1 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, means an amount equal to the amount by which
(a)  the aggregate of the premium, other than the portion of the premium which can reasonably be attributed to coverage related to the cost that would be assumed by the Régie de l’assurance maladie du Québec on behalf of an insured person in respect of insured services under the Health Insurance Act (chapter A-29), paid by the employer of the individual in respect of the coverage and benefits enjoyed by the individual for any period of the year under the plan, and the tax relating to that premium, exceeds
(b)  the aggregate of
i.  the portion of the aggregate described in subparagraph a that the individual has reimbursed to the employer during the year, and
ii.  the amount determined for the year in respect of the individual in accordance with section 37.0.1.3 in relation to the plan.
However, where, for a particular period, included in the year, throughout which the individual is not entitled to benefit from the provisions of the Health Insurance Act, the benefits enjoyed by the individual in relation to particular coverage under the plan covers at least all the services that would be insured in the individual’s respect under the said Act for the particular period if the individual were entitled to benefit from the provisions of that Act at that time, the amount referred to in subparagraph a of the first paragraph for the particular period in respect of the individual in relation to the particular coverage is deemed to be the amount that would otherwise be determined under that subparagraph for the particular period in respect of the individual in relation to the particular coverage if the exception provided for therein were disregarded, if the premium referred to therein were reduced by the amount prescribed for the particular period in respect of the individual in relation to the particular coverage and if the tax referred to therein were reduced to the portion of the tax which can reasonably be attributed to the premium so reduced.
1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 36; 1999, c. 89, s. 53.
37.0.1.3. The amount contemplated in subparagraph ii of subparagraph b of the first paragraph of section 37.0.1.2 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, is the portion, hereinafter described, of the amount called particular amount in this section, that corresponds to the amount by which the aggregate of the amount paid during the year to the employer of the individual as a dividend, return or refund of premiums under the plan and the related tax, exceeds the portion, if any, of that aggregate that can reasonably be attributed to the share of the employer’s employees in the cost of the plan that was distributed to the employees in the year:
(a)  where the amount paid to the employer as a dividend, return or refund of premiums is based on the experience of all coverage and benefits provided by the plan, the proportion of the particular amount that the premium paid by the employer in respect of the coverage and benefits enjoyed by the individual for any period of the year under the plan is of the premium paid by the employer in respect of the coverage and benefits enjoyed by all the employer’s employees for any period of the year under the plan;
(b)  where the amount paid to the employer as a dividend, return or refund of premiums is based on the experience of only certain coverage and benefits provided by the plan, called particular coverage and benefits in this paragraph, the proportion of the particular amount that the premium paid by the employer in respect of the particular coverage and benefits enjoyed by the individual for any period of the year under the plan is of the premium paid by the employer in respect of the particular coverage and benefits enjoyed by all the employer’s employees for any period of the year under the plan.
1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 37.
37.0.1.4. The amount contemplated in subparagraph b of the first paragraph of section 37.0.1.1 in respect of an individual for a taxation year in relation to a plan for the insurance of persons, means the amount by which the aggregate of the following amounts exceeds the total of the amounts paid by the individual in the year for any period, after 20 May 1993, of the year or of a preceding year as a contribution under the plan:
(a)  the aggregate of all amounts each of which corresponds to the amount determined, in respect of the particular coverage and benefits enjoyed by the individual in the year under the plan, by the formula

(A × B) / C;

(b)  the amount determined by the formula

(D × E) / F.

For the purposes of the formulas set forth in the first paragraph,
(a)  A is the aggregate of the benefits paid in the year for any period, after 20 May 1993, of the year or of a previous year in respect of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan, and the related tax;
(b)  B is the number of days of the year during which the individual enjoys the particular coverage and benefits under the plan;
(c)  C is the number, for each day of the year, of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan;
(d)  D is the aggregate of the expenses, except those relating to the establishment of or a modification to the plan, incurred in respect of a third person for the administration or management of the plan for any period of the year, and the related tax, if any;
(e)  E is the number of days of the year during which the individual enjoys coverage under the plan;
(f)  F is the number, for each day of the year, of all employees of the employer of the individual who enjoy coverage under the plan.
1993, c. 64, s. 11; 1995, c. 63, s. 261.
37.0.1.5. For the purposes of section 37.0.1.4,
(a)  the portion of a benefit, which can reasonably be considered to relate to the cost that would be assumed by the Régie de l’assurance maladie du Québec on behalf of an insured person in respect of insured services under the Health Insurance Act (chapter A-29), is deemed not to be a benefit contemplated in subparagraph a of the second paragraph of section 37.0.1.4;
(b)  where the risk to an employer, or to a person related to the employer, in relation to a particular plan for the insurance of persons, is reduced by the fact that the employer, or the person related to the employer, has purchased excess of loss insurance from an insurer,
i.  a benefit paid by the insurer under the excess of loss insurance in relation to the particular plan is deemed not to be a benefit contemplated in subparagraph a of the second paragraph of section 37.0.1.4 in relation to that plan, and
ii.  the portion of the premium paid by the employer, which can reasonably be attributed to particular coverage and benefits under the particular plan, in relation to the excess of loss insurance for any period of a year, is deemed to be a benefit contemplated for the year in subparagraph a of the second paragraph of section 37.0.1.4 in relation to such coverage and benefits under the particular plan, except if the excess of loss insurance covers all the coverage and benefits provided under the particular plan, in which case the premium is deemed to constitute expenses contemplated for the year in subparagraph d of the second paragraph of the said section 37.0.1.4 in respect of the particular plan;
(c)  where, for a particular period, included in the year, throughout which the individual is not entitled to benefit from the provisions of the Health Insurance Act, the particular benefits enjoyed by the individual in relation to particular coverage under the plan covers at least all the services that would be insured in respect of the individual under the said Act for the particular period if the individual were entitled to benefit from the provisions of that Act at that time, subparagraph a of the second paragraph of section 37.0.1.4 shall, in respect of such particular coverage and benefits, apply without reference to paragraph a and read as follows:
“(a) A is the aggregate of the amount by which the benefits paid in the year for any period, after 20 May 1993, of the year or of a previous year in respect of all the employees of the employer of the individual who enjoy the particular coverage and benefits under the plan exceeds the amount prescribed in respect of the particular coverage and benefits, and the portion of the related tax which can reasonably be attributed to the excess amount;”.
1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 38; 1999, c. 89, s. 53.
37.0.1.6. For the purposes of section 37.0.1.4, where the plan for the insurance of persons provides identical coverage to the employer’s employees under Québec jurisdiction and to the employer’s other employees, the employer must elect, from among the following data in the employer’s possession, the data which will best reflect the coverage provided under the plan to those of the employer’s employees under Québec jurisdiction:
(a)  actual data relating to all the employees of the employer who enjoy coverage under the plan;
(b)  actual data relating to the employer’s employees under Québec jurisdiction who enjoy coverage under the plan.
In the first paragraph, the expression employee under Québec jurisdiction of an employer means an employee of the employer who reports for work in an establishment of the employer situated in Québec, and an employee of the employer who is not required to report for work at an establishment of the employer but whose wages are paid or deemed to be paid from such an establishment situated in Québec.
1993, c. 64, s. 11; 1995, c. 63, s. 261; 1998, c. 16, s. 39.
37.0.2. An individual shall, in computing the income of the individual for the year from an office or employment, include all amounts received by the individual in the year as an allowance or reimbursement in respect of an amount that would, if the individual were entitled to no reimbursements or allowances, be deductible under Chapter III in computing the individual’s income, except to the extent that the amounts so received are otherwise included in computing the individual’s income for the year or are taken into account in computing the amount that is deducted under Chapter III by the individual for the year or a preceding taxation year.
1991, c. 25, s. 6; 1998, c. 16, s. 40.
37.0.3. Without restricting the generality of sections 36 and 37, an individual shall, in computing the income of the individual for the year from an office or employment, include
(a)  the value of any indemnity for meals or transportation between the individual’s ordinary place of residence and the individual’s work location received by the individual in the year, as an allowance or refund or under any other form, for overtime worked in the course of performing the duties of the individual’s office or employment; and
(b)  any amount that is the amount by which the value of a meal or service of transportation between the individual’s ordinary place of residence and the individual’s work location supplied in the year for overtime worked in performing the duties of the individual’s office or employment exceeds the amount the individual pays in respect of the meal or service of transportation.
However, the individual is not required in computing the income of the individual to include an amount referred to in the first paragraph in relation to overtime if it was worked at the request of the employer for a scheduled period of at least three consecutive hours and are infrequent or occasional in nature and if,
(a)  in the case of an indemnity for meals or a meal supplied,
i.  the value of the indemnity for meals or of the meal supplied is reasonable, and
ii.  in the case of an indemnity for meals, the indemnity is the full or partial refund, upon presentation of vouchers, of the meal expenses incurred by the individual because of the overtime; and
(b)  in the case of an indemnity for transportation or a service of transportation supplied,
i.  public transit is not available or it is reasonable to consider that, under the circumstances, the individual’s safety would be jeopardized because of the time at which the transportation is provided, and
ii.  in the case of an indemnity for transportation, the indemnity is the full or partial refund, upon presentation of vouchers, of the taxi transportation expenses incurred by the individual because of the overtime to travel between the individual’s ordinary place of residence and the individual’s work location.
2003, c. 9, s. 16.
37.0.4. An individual shall, in computing the income of the individual for the year from an office or employment, include any amount that the individual received from the individual’s employer in the year under a public compensation plan and that may not be considered to be an amount received as an income replacement indemnity solely because no employer may obtain the reimbursement of that amount.
2005, c. 38, s. 52.
37.1. An individual referred to in section 487.1 shall, in computing the income of the individual for the year from an office or employment, include every amount deemed by section 487.1 to be a benefit received in the year by the individual.
1978, c. 26, s. 4; 1983, c. 44, s. 14; 1998, c. 16, s. 40.
37.1.1. An amount paid or the value of assistance provided by any person because of, or in the course of, an individual’s office or employment in respect of the cost of, the financing of, the use of or the right to use, a residence is, for the purposes of this division, a benefit received by the individual because of the office or employment.
2001, c. 53, s. 12.
37.1.2. In this division,
eligible housing loss in respect of a residence designated by an individual means a housing loss in respect of an eligible relocation of the individual or a person who does not deal at arm’s length with the individual and, for the purposes of this definition, no more than one residence may be so designated in respect of an eligible relocation;
housing loss at any time in respect of a residence of an individual means the amount by which the greater of the adjusted cost base of the residence at that time to the individual or to another person who does not deal at arm’s length with the individual and the highest fair market value of the residence within the six-month period that ends at that time exceeds
(a)  if the residence is disposed of by the individual or the other person before the end of the first taxation year that begins after that time, the lesser of the proceeds of disposition of the residence and the fair market value of the residence at that time; and
(b)  in any other case, the fair market value of the residence at that time.
Where sections 37.1.1 to 37.1.4 apply in respect of a relocation of an individual who is absent from Canada but resident in Québec, the definition of eligible relocation in section 349.1 shall be read, for the purposes of those sections 37.1.1 to 37.1.4, without reference to the words “in Canada” in subparagraph a of the first paragraph of that section  349.1 and without reference to subparagraph b of that paragraph.
2001, c. 53, s. 12.
37.1.3. For the purposes of section 37, an amount paid at any time in respect of a housing loss other than an eligible housing loss to or on behalf of an individual or a person who does not deal at arm’s length with the individual because of, or in the course of, an office or employment is deemed to be a benefit received by the individual at that time because of the office or employment.
2001, c. 53, s. 12.
37.1.4. For the purposes of section 37, an amount paid at any time in a taxation year in respect of an eligible housing loss to or on behalf of an individual or a person who does not deal at arm’s length with the individual because of, or in the course of, an office or employment is deemed to be a benefit received by the individual at that time because of the office or employment to the extent of the amount by which one half of the amount by which the aggregate of all amounts each of which is so paid in the year or in a preceding taxation year exceeds $15,000 exceeds the aggregate of all amounts each of which is an amount included in computing the individual’s income because of this section for a preceding taxation year in respect of the loss.
2001, c. 53, s. 12.
37.1.5. For the purposes of section 37, the value of the benefit received or enjoyed by an individual for a taxation year because of, or in the course of, the individual’s office or employment is deemed to be equal,
(a)  for all the gifts, other than excluded gifts, received in the year by the individual from the individual’s employer for one or more special occasions, such as Christmas, an anniversary, a wedding or similar occasion, to the amount by which the value otherwise determined of the benefit for the year exceeds the lesser of
i.  $500, and
ii.  the aggregate of all amounts each of which is the value of such a gift; and
(b)  for all the awards, other than excluded awards, received in the year by the individual from the individual’s employer in recognition of certain achievements, such as reaching a set number of years of service, meeting or exceeding safety standards or reaching similar objectives, to the amount by which the value otherwise determined of the benefit for the year exceeds the lesser of
i.  $500, and
ii.  the aggregate of all amounts each of which is the value of such an award.
In the first paragraph, an excluded gift or an excluded award means a gift or an award that
(a)  is in cash;
(b)  may easily be converted into cash, except a gift coupon or gift certificate, including a smart card, that must be used to purchase a property or a service from one or more designated merchants; or
(c)  constitutes a benefit that is referred to in another special provision of this chapter or that may reasonably be considered, without reference to section 34, to be a benefit received or enjoyed by the individual as consideration for the individual’s performance of work.
2003, c. 9, s. 17.
37.2. For the purposes of section 37, where an employer or former employer of an individual makes a top-up disability payment, within the meaning assigned by section 43.0.2, in respect of the individual, the payment is deemed not to be a benefit received or enjoyed by the individual.
2000, c. 5, s. 22.
38. An individual is not required in computing the income of the individual to include the value of benefits derived from contributions paid in respect of the individual by the individual’s employer under
(a)  a registered pension plan;
(b)  a group insurance plan, in relation to coverage against the loss of all or part of the income from an office or employment;
(c)  (subparagraph repealed);
(d)  a supplementary unemployment benefit plan;
(e)  a deferred profit sharing plan; or
(f)  (subparagraph repealed);
(g)  a multi-employer insurance plan.
Similarly, the individual is not required in computing the individual’s income to include the value of any benefit derived from group coverage which, otherwise than under an insurance plan referred to in subparagraph b of the first paragraph, is provided to the individual under a plan, against the loss of all or part of the income from an office or employment, or the value of any benefit derived from the payment by the individual’s employer of the tax provided for under the Retail Sales Tax Act (chapter I-1) or under Title III of the Act respecting the Québec sales tax (chapter T-0.1), in respect of such group coverage or of the contributions paid by the individual’s employer under subparagraph b or g of the first paragraph in respect of the individual.
Furthermore, the individual is not required in computing the individual’s income to include the value of any benefit under a retirement compensation arrangement, an employee benefit plan or an employee trust or under a salary deferral arrangement, except to the extent that the value of the benefit is included under section 37 because of section 47.11, the value of any benefit that was a benefit in respect of the use of an automobile, except if the benefit related to the use of an automobile owned or leased by the individual and is not referred to in section 41.1.2, the value of any benefit derived from counselling services received by the individual or a person related to the individual in respect of stress management or the use or consumption of tobacco, drugs or alcohol, other than a benefit attributable to an outlay or expense to which section 134 applies, or from counselling services in respect of the re-employment or retirement of the individual, or the value of any benefit derived from the individual’s participation in a training activity the cost of which is borne by the individual’s employer, if it is reasonable to consider that the training significantly benefits the individual’s employer.
1972, c. 23, s. 32; 1972, c. 26, s. 39; 1982, c. 5, s. 16; 1983, c. 44, s. 15; 1986, c. 15, s. 38; 1989, c. 77, s. 10; 1990, c. 59, s. 34; 1991, c. 25, s. 7; 1993, c. 16, s. 23; 1993, c. 64, s. 12; 1995, c. 49, s. 19; 1995, c. 63, s. 261; 1997, c. 31, s. 7; 1998, c. 16, s. 41; 1999, c. 83, s. 28.
39. An individual is not required to include in computing the individual’s income
(a)  travel, personal or living expense allowances
i.  expressly established by the laws of Canada,
ii.  paid under the Act respecting public inquiry commissions (chapter C-37), or
iii.  paid under the authority of the Treasury Board of Canada to a person who was appointed or whose services were engaged pursuant to the Inquiries Act (Revised Statutes of Canada, 1985, chapter I-11) in respect of the discharge of the person’s duties relating to such appointment or engagement;
(b)  travel and separation allowances received by the individual under service regulations as a member of the Canadian Forces;
(c)  representation or other special allowances received by the individual in respect of a period of absence from Canada as a person described in paragraph b, c or d of section 8;
(d)  representation or other special allowances received by the individual as an agent-general of a province in respect of a period while the individual was in Ottawa in such capacity;
(e)  reasonable allowances received by the individual as a minister or clergyman in charge of or ministering to a diocese, parish or congregation for transportation incident to the discharge of the duties of that office or employment;
(f)  (paragraph repealed);
(f.1)  allowances not exceeding a reasonable amount received by the individual for the purchase or care of distinctive clothing the individual is required to wear, under the terms of the individual’s contract of employment, in the performance of the duties of the employment;
(f.2)  allowances received by the individual for expenses incidental to the individual’s relocation, by reason of a change in the location of employment with the individual’s employer, up to an amount not exceeding an amount equal to two weeks’ salary, calculated on the basis of the salary paid to the individual on the date of reassignment; and
(g)  prescribed travel, personal, living or representation expense allowances and any other amount prescribed in respect of such expenses.
1972, c. 23, s. 33; 1978, c. 26, s. 5; 1982, c. 5, s. 17; 1993, c. 64, s. 13; 1995, c. 63, s. 21; 1997, c. 85, s. 38; 1998, c. 16, s. 251; 2003, c. 9, s. 18; 2005, c. 38, s. 53.
39.1. (Repealed).
1993, c. 64, s. 14; 1997, c. 85, s. 39; 1998, c. 16, s. 251; 2005, c. 38, s. 54.
39.2. An individual who is a member of the National Assembly or of the legislature of another province is not required in computing the individual’s income for a taxation year to include the portion of the allowance the individual receives in the year for expenses incident to the discharge of the individual’s duties, which does not exceed one-half of the maximum fixed amount provided by the laws of a province as payable to the individual by way of salary, indemnity and other remuneration in respect of attendance at a session.
1997, c. 14, s. 18; 1998, c. 16, s. 42; 2005, c. 38, s. 55.
39.3. An individual who is an elected member of a municipal council, a member of the council or executive committee of a metropolitan community, regional county municipality or other similar body established under an Act of the Parliament of Québec, a member of a municipal utilities commission or corporation or any other similar body administering such a service or a member of a public or separate school board or any other similar body administering a school district, is not required in computing the income of the individual for a taxation year to include the allowance the individual receives in the year from the municipality or body for expenses incident to the discharge of the individual’s duties, other than an allowance the individual is not otherwise required to include in computing the individual’s income, to the extent that the allowance does not exceed one-half of the amount, determined without reference to that allowance, paid to the individual in the year by the municipality or body by way of salary or other remuneration.
1997, c. 14, s. 18; 1998, c. 16, s. 43; 2000, c. 56, s. 218.
39.4. An individual who is a member of the council of a regional county municipality or a member of the council of the Kativik Regional Government, constituted under the Act respecting Northern villages and the Kativik Regional Government (chapter V-6.1), is not required to include in computing the individual’s income for a taxation year an amount received by the individual in the year from the municipality as an allowance for, or reimbursement of, travel expenses other than those incident to the discharge of the individual’s duties as such a member, to the extent that the amount does not exceed a reasonable amount.
1997, c. 14, s. 18; 1997, c. 85, s. 40; 2001, c. 51, s. 18.
39.4.1. An individual who is elected or appointed in a representative capacity to hold an office with a body that is a corporation, association or other similar organization with which the individual was dealing at arm’s length is not required to include in computing the individual’s income for a taxation year an amount received by the individual in the year from the body as an allowance for, or reimbursement of, travel expenses to enable the individual to attend a meeting of the council or committee of which the individual is a member, other than travel expenses incurred in the performance of the individual’s duties, to the extent that the amount does not exceed a reasonable amount and that the meeting is held at a location
(a)  not less than 80 kilometres from the individual’s ordinary place of residence; and
(b)  where the body is a non-profit organization, that may reasonably be considered as being connected to the territory within which that body regularly carries on its activities or, in any other case, is situated within the local municipal territory or the metropolitan area, as the case may be, where the head office or principal place of business of the body is situated.
2001, c. 51, s. 19.
39.5. An individual who had part-time employment with an employer with whom the individual was dealing at arm’s length is not required to include in computing the individual’s income for a taxation year an amount, not exceeding a reasonable amount, received by the individual in the year from that employer as an allowance for, or reimbursement of, travel expenses other than expenses incurred in the performance of the duties of the individual’s part-time employment, if
(a)  the individual’s part-time employment
i.  was during a period throughout which the individual had other employment or was carrying on a business, or
ii.  was as a teacher in an educational institution referred to in paragraph a of section 752.0.18.10;
(b)  the duties of the part-time employment were performed at a location not less than 80 kilometres from both the individual’s ordinary place of residence and, where the condition set out in subparagraph ii of paragraph a is not met, of the principal place of the individual’s other employment or the principal place of the individual’s business.
1997, c. 14, s. 18; 1997, c. 85, s. 40; 2000, c. 39, s. 4.
39.6. An individual who is employed in a taxation year by a government, municipality or public authority, in this section referred to as the employer , is not required to include in computing the individual’s income for the year derived from the performance of the duties provided for in paragraph a, an amount received by the individual or the value of a benefit received or enjoyed by the individual in the year, because of the individual’s employment with that employer for the performance of those duties, up to an amount of $1,000, where
(a)  the individual receives or enjoys the amount for the performance of the individual’s duties as a volunteer ambulance technician, a volunteer firefighter or a volunteer assisting in the search and rescue of individuals or in other emergency operations; and
(b)  the employer certifies in writing where so requested by the Minister that the individual was in the year an employee of the employer and performed the duties provided for in paragraph a and that the individual was at no time in the year an employee of the employer otherwise than as a volunteer, in connection with the performance of any of those duties or of similar duties.
2003, c. 2, s. 14; 2004, c. 21, s. 43.
40. An individual is not required to include in computing the individual’s income,
(a)  reasonable allowances for travel expenses received by the individual from the individual’s employer in respect of any period when the individual was employed in connection with the selling of property or negotiating of contracts for the employer;
(b)  reasonable allowances for travel expenses, other than allowances for the use of a motor vehicle, received from the employer by the individual as an employee, other than an employee referred to in paragraph a, for travelling away from the local municipal territory or the metropolitan area, as the case may be, where the employer’s establishment at which the employee ordinarily works or with which the employee is ordinarily connected is located, in the performance of the duties of the employment; or
(c)  reasonable allowances for the use of a motor vehicle received by the individual as an employee, other than an employee referred to in paragraph a, from the employer for travelling in the performance of the duties of the employment.
1972, c. 23, s. 34; 1977, c. 26, s. 3; 1990, c. 59, s. 35; 1993, c. 16, s. 24; 1995, c. 63, s. 261; 1997, c. 85, s. 41.
40.1. For the purposes of paragraph e of section 39 and paragraphs a and c of section 40, an allowance received in the year by the individual for the use of a motor vehicle in connection with or in the course of the individual’s office or employment is deemed not to be a reasonable allowance
(a)  where the measurement of the use of the vehicle for the purpose of determining the allowance is not based solely on the actual number of kilometres for which the motor vehicle is used in connection with or in the course of the office or employment; or
(b)  where the individual both receives an allowance in respect of that use and is reimbursed in whole or in part for expenses in respect of that use, except where the reimbursement is in respect of supplementary business insurance or toll or ferry charges and the amount of the allowance was determined without reference to those reimbursed expenses.
1990, c. 59, s. 36; 1993, c. 16, s. 25; 1995, c. 49, s. 20; 1998, c. 16, s. 44; 2003, c. 9, s. 19.
41. Where an employer or a person related to the employer makes an automobile available to an employee of the employer, or to a person related to the employee, in the year, the employee shall, in computing the income of the employee, include the amount by which a reasonable amount corresponding to the value of such right of use for the total number of days in the year during which the automobile was made so available exceeds the aggregate of all amounts each of which is an amount, other than an expense related to the operation of the automobile, paid in the year to the employer or a person related to the employer by the employee or the person related to the employee for the use of the automobile.
1972, c. 23, s. 35; 1973, c. 17, s. 8; 1978, c. 26, s. 6; 1980, c. 13, s. 4; 1983, c. 44, s. 16; 1990, c. 59, s. 37; 1998, c. 16, s. 45.
41.0.1. For the purposes of section 41, a reasonable amount corresponding to the value of the right of use of an automobile for the total number of days, in this section referred to as the total available days , in a year during which the automobile is made available to an individual or to a person related to the individual by an employer or a person related to the employer, both of whom are in this section referred to as the employer , is deemed to be equal to the amount determined by the formula

A / B [2% (C × D) + 2/3 (E − F)].

In the formula provided for in the first paragraph,
(a)  A is
i.  the lesser of the total number of kilometres that the automobile is driven, otherwise than in connection with or in the course of the individual’s office or employment, during the total available days, and the product determined for the year under subparagraph b, if
(1)  the individual is required by the employer to use the automobile in connection with or in the course of the office or employment, and
(2)  the distance travelled by the automobile during the total available days is primarily in connection with or in the course of the office or employment, and
ii.  in any other case, the product determined for the year under subparagraph b;
(b)  B is the product obtained by multiplying 1,667 by the quotient obtained by dividing the total available days by 30 and, if the quotient so obtained is not a whole number and exceeds one, by rounding it to the nearest whole number or, where that quotient is equidistant from two consecutive whole numbers, by rounding it to the lower of those two numbers;
(c)  C is the cost of the automobile to the employer where the employer owns the vehicle at any time in the year;
(d)  D is the quotient obtained by dividing such of the total available days as are days when the employer owns the automobile by 30 and, if the quotient so obtained is not a whole number and exceeds one, by rounding it to the nearest whole number or, where that quotient is equidistant from two consecutive whole numbers, by rounding it to the lower thereof;
(e)  E is the aggregate of all amounts that may reasonably be regarded as having been payable by the employer to a lessor for the purpose of leasing the automobile during such of the total available days as are days when the automobile is leased to the employer;
(f)  F is the part of the amount determined under subparagraph e that may reasonably be regarded as having been payable to the lessor in respect of all or part of the cost to the lessor of insuring against loss of, or damage to, the automobile or liability resulting from the use or operation of the automobile.
1990, c. 59, s. 38; 1998, c. 16, s. 46; 2005, c. 1, s. 28.
41.0.2. Where, in a year, an individual is employed principally in selling or leasing automobiles, an automobile owned by the individual’s employer is made available by the employer to the individual or to a person related to the individual, and the employer has acquired one or more automobiles, the reasonable amount corresponding to the value of the right of use determined under section 41.0.1 shall, at the option of the employer, be computed as if
(a)  the reference in the formula therein to 2% were read as a reference to 1.5%, and
(b)  the cost of the automobile to the employer were the greater of
i.  the quotient obtained by dividing the cost to the employer of all new automobiles acquired by the employer in the year for sale or lease in the course of the employer’s business by the number of new automobiles so acquired, and
ii.  the quotient obtained by dividing the cost to the employer of all automobiles acquired by the employer in the year for sale or lease in the course of the employer’s business by the number of automobiles so acquired.
1990, c. 59, s. 38; 1998, c. 16, s. 47.
41.1. (Repealed).
1986, c. 15, s. 39; 1990, c. 59, s. 39; 1995, c. 49, s. 21.
41.1.1. Where, in computing the income of the individual for a taxation year as income from an office or employment, a reasonable amount corresponding to the value of the right of use of an automobile is determined under sections 41 to 41.0.2, and an amount in respect of the operation, otherwise than in connection with or in the course of the individual’s office or employment, of the automobile for the period or periods in the year during which the automobile was made available to the individual or a person related to the individual is paid or payable by the individual’s employer or a person related to the individual’s employer, each of whom is in this section referred to as the payor , the individual shall, in computing the individual’s income for the year from an office or employment, include the amount determined by the formula

A − B.

For the purposes of the formula in the first paragraph,
(a)  A is
i.  where the automobile is used primarily in the performance of the duties of the individual during the period or periods referred to in the first paragraph and the individual notifies the employer in writing before the end of the year of the individual’s intention to have this subparagraph apply, one-half of the reasonable amount corresponding to the value of the right of use determined in respect of the automobile under sections 41 to 41.0.2 in computing the individual’s income for the year, and
ii.  in any other case, the amount equal to the product obtained when the amount prescribed for the year is multiplied by the total number of kilometres that the automobile is driven, otherwise than in connection with or in the course of the individual’s office or employment, during the period or periods referred to in the first paragraph; and
(b)  B is the aggregate of all amounts in respect of the operation of the automobile in the year paid in the year or within 45 days after the end of the year to the payor by the individual or by the person related to the individual.
This section does not apply where the aggregate of all amounts each of which is an amount referred to in the first paragraph, paid or payable by the payor, is paid, in the year or within 45 days after the end of the year, to the payor by the individual or by the person related to the individual.
1995, c. 49, s. 22; 1998, c. 16, s. 48.
41.1.2. An individual shall, in computing the income of the individual for a taxation year from an office or employment, include the value of a benefit in respect of the operation of an automobile, other than a benefit to which section 41.1.1 applies or would apply but for the third paragraph thereof, received or enjoyed by the individual in the year because of, or in the course of, the individual’s office or employment.
1995, c. 49, s. 22l; 1998, c. 16, s. 49.
41.1.3. An individual who is a member of a police force or of a fire safety service is not required to include, in computing the individual’s income for a taxation year from an office or employment, the value of a benefit in respect of the use of a vehicle that is, in the year, made available to the individual by the employer or a person related to the employer, if
(a)  a written directive of the employer limits the use, by the individual, of the vehicle for personal purposes and specifies that the vehicle is to be returned to the employer during an extended absence; and
(b)  the vehicle is clearly identified with the employer’s name or, failing that, the vehicle has special equipment allowing for a prompt intervention in the case of events concerning public safety.
2004, c. 21, s. 44.
41.1.4. If an employer or a person to whom the employer is related makes an automobile, other than a vehicle in respect of which section 41.1.3 applies, available in a taxation year to an employee or to a person related to the employee, the employee shall keep, in respect of trips made with the automobile for the total number of days in the year during which the automobile is so made available to the employee or to a person to whom the employee is related, a logbook in which the employee enters the information provided for in section 41.1.5, and shall give a copy of the logbook to the employer on or before the tenth day following the last day of the year during which the employer or a person related to the employer made such an automobile available to the employee or to a person to whom the employee is related.
2005, c. 23, s. 37.
41.1.5. The information to which section 41.1.4 refers is
(a)  the total number of days in the year during which the employer or a person to whom the employer is related made the automobile available to the individual or to a person related to the individual;
(b)  on a daily, weekly or monthly basis, the total number of kilometres travelled by the automobile during the total number of days referred to in subparagraph a; and
(c)  on a daily basis, for each trip made with the automobile in connection with or in the course of the office or employment of the individual, the identification of the place of departure and the place of destination, the number of kilometres travelled by the automobile between those two places, and any information necessary to establish that the trip was made in connection with or in the course of the office or employment of the individual.
However, if the kilometres travelled by the automobile during the total number of days referred to in subparagraph a are kilometres exclusively travelled by the automobile otherwise than in connection with or in the course of the office or employment of the individual, the information to which section 41.1.4 refers is
(a)  the total number of days in the year during which the employer or a person to whom the employer is related made the automobile available to the individual or to a person related to the individual; and
(b)  the kilometres registered on the odometer of the automobile at the beginning and end of each period, within the year, during which the automobile was made available, on a continuous basis, to the individual or a person to whom the individual is related by the employer or a person related to the employer.
2005, c. 23, s. 37.
41.2. (Repealed).
1991, c. 25, s. 8; 1994, c. 22, s. 61; 1995, c. 1, s. 17; 1995, c. 49, s. 23; 1997, c. 31, s. 8.
41.2.1. (Repealed).
1994, c. 22, s. 62; 1995, c. 1, s. 18; 1995, c. 49, s. 24; 1997, c. 14, s. 19; 1997, c. 31, s. 8.
41.2.2. (Repealed).
1994, c. 22, s. 62; 1995, c. 49, s. 25.
41.3. To the extent that the cost to a person of purchasing a property or service or an amount payable by a person for the purpose of leasing property is taken into account in determining an amount required under any of sections 36 to 47.17 to be included in computing the income of an individual for a taxation year, that cost or that amount payable, as the case may be, shall include any tax that was payable by the person in respect of the property or service or that would have been so payable if the person were not exempt from the payment of that tax because of the nature of the person or the use to which the property or service is to be put.
1991, c. 25, s. 8; 1994, c. 22, s. 63; 1995, c. 49, s. 26; 1997, c. 31, s. 9.
41.4. For the purposes of this division, the value of a benefit in respect of the use of a motor vehicle by an individual does not include the value of a benefit related to the parking of the vehicle.
1995, c. 49, s. 27.
42. Notwithstanding sections 36 and 37, an individual who is not entitled to the deduction provided for in section 737.25 is not required, in computing the income of the individual for a taxation year from an office or employment, to include any amount received or enjoyed by the individual because of, or in the course of, the office or employment that is the value of, or an allowance, not in excess of a reasonable amount, in respect of expenses the individual has incurred
(a)  for the individual’s board and lodging for a period during which the individual was required by the individual’s duties to be away from the individual’s principal place of residence, or to be at the special work site referred to in subparagraph i or at the location referred to in subparagraph ii, for not less than 36 hours, if such board and lodging were
i.  at a special work site at which the duties performed by the individual were of a temporary nature and if the individual maintained at another location a self-contained domestic establishment as the individual’s principal place of residence that was, throughout the period, available for the individual’s occupancy and not rented to any other person, and to which, by reason of distance, the individual could not reasonably be expected to have returned daily from the special work site, or
ii.  at a location at which, by virtue of its remoteness from any established community, the individual could not reasonably be expected to establish and maintain a self-contained domestic establishment; or
(b)  for transportation, in respect of a period described in paragraph a during which the individual received board and lodging, or a reasonable allowance in respect of board and lodging, from the individual’s employer, between
i.  the individual’s principal place of residence and the special work site referred to in subparagraph i of paragraph a, or
ii.  the location referred to in subparagraph ii of paragraph a and a location in Canada or in the country in which the individual is employed.
1972, c. 23, s. 36; 1982, c. 5, s. 18; 1983, c. 49, s. 10; 1986, c. 19, s. 7; 1990, c. 7, s. 10; 1991, c. 25, s. 9; 1993, c. 16, s. 26; 1995, c. 1, s. 19; 1998, c. 16, s. 50.
42.0.1. Notwithstanding sections 36 and 37, an individual is not required in computing the income of the individual for a taxation year from an office or employment to include any amount received or enjoyed by the individual because of, or in the course of, the individual’s office or employment that is the value of a benefit, or an allowance, not in excess of a reasonable amount, in respect of expenses incurred by the individual for
(a)  the transportation of the individual between the individual’s ordinary place of residence and the individual’s work location, including parking near that location, if the individual is blind or subparagraphs a to c of the first paragraph of section 752.0.14 apply in respect of the individual for the year by reason of the individual’s mobility impairment; or
(b)  an attendant to assist the individual in the performance of the individual’s duties if subparagraphs a to c of the first paragraph of section 752.0.14 apply in respect of the individual for the year.
1993, c. 16, s. 27; 1997, c. 85, s. 42; 1998, c. 16, s. 51; 2005, c. 38, s. 56.
DIVISION II.1
GRATUITIES
1983, c. 43, s. 4.
42.1. (Repealed).
1983, c. 43, s. 4; 1997, c. 85, s. 43.
42.2. (Repealed).
1983, c. 43, s. 4; 1997, c. 85, s. 43.
42.3. (Repealed).
1983, c. 43, s. 4; 1997, c. 85, s. 43.
42.4. (Repealed).
1983, c. 43, s. 4; 1997, c. 85, s. 43.
42.5. (Repealed).
1983, c. 43, s. 4; 1997, c. 85, s. 43.
42.6. In this division,
regulated establishment means, subject to section 42.7,
(a)  a place situated in Québec specially laid out where lodging or food for consumption on the premises is ordinarily provided in return for payment;
(b)  a place situated in Québec where alcoholic beverages are served for consumption on the premises in return for payment;
(c)  a railway train or a vessel, operated in connection with a business carried on entirely or almost entirely in Québec and on which food or beverages are served;
(d)  a place situated in Québec where, in connection with the carrying on of a business, food or beverages for consumption elsewhere than on the premises are provided in return for payment;
tippable sale means a sale in a regulated establishment that, in keeping with the prevailing custom in Québec, is likely to entail tipping by the customer, but does not include a sale of food or beverages for consumption elsewhere than on the premises of the regulated establishment.
1997, c. 85, s. 44.
42.7. For the purposes of the definition of regulated establishment in section 42.6, a regulated establishment does not include
(a)  a place situated in Québec where mainly lodging or food, or both, are provided by the week, month or year in return for payment;
(b)  a place where the activity consisting in the providing of food and beverages is carried on by an educational institution, a hospital institution, a shelter for needy persons or victims of violence or any other similar establishment;
(c)  a place where the activity consisting in the providing of food and beverages is carried on by a charity or a similar organization but is not carried on on a regular basis;
(d)  a cafeteria;
(e)  a fast food outlet in which the employees do not ordinarily receive tips from the majority of customers.
1997, c. 85, s. 44.
42.8. An individual shall, in computing income for the year, include every tip the individual receives or benefits from, and an amount equal to the amount that the employer is deemed, where such is the case, to have paid to the individual in that year because of subparagraph b of the first paragraph of section 1019.7, except
(a)  a tip remitted to another individual under a tip-sharing arrangement that has been implemented for the employees performing their employment duties for the same regulated establishment as the regulated establishment for which the individual performs employment duties, and that is managed by the employees;
(b)  a tip that is otherwise included in computing income for the year; and
(c)  where applicable, a tip the individual received or benefited from in the year and that is equal to an amount that the employer is deemed, because of subparagraph b of the first paragraph of section 1019.7, to pay to the individual in the following year.
1997, c. 85, s. 44.
42.9. An individual performing employment duties for a regulated establishment is not required in computing income for the year to include the portion of the individual’s salary, wages or other remuneration that is equal to the amount borne by the individual in the year as credit card costs in relation to the remittance of the individual’s tips.
1997, c. 85, s. 44.
42.10. An individual shall, in computing income for the year, include all tips attributed to the individual in the year pursuant to section 42.11.
1997, c. 85, s. 44.
42.11. Every person who employs an individual who receives or benefits from tips in the performance of employment duties for a regulated establishment shall, for each pay period, attribute to that individual, at the time referred to in the second paragraph, an amount equal to the amount by which 8% of the total of the amounts of all tippable sales that are attributable to the pay period and to that individual in the performance of employment duties for the regulated establishment exceeds the total of the amounts of each tip in respect of tippable sales that is attributable to the pay period and to the individual in the performance of employment duties for the regulated establishment.
For the purposes of the first paragraph, the attribution of an amount determined under that paragraph in respect of a pay period shall be made at the time the employer pays to the individual referred to therein the individual’s salary or wages for that pay period or, where, having regard to the information available at that time and the time required to determine the amount of that attribution, it may reasonably be considered that the employer cannot at that time change the amount of the salary or wages to take into account that attribution owing to the fact that the payment of the salary or wages for that pay period is made at a time that follows too closely the end of that pay period, at the time the employer pays to the individual the salary or wages for the pay period immediately following that pay period.
1997, c. 85, s. 44.
42.12. Section 42.11 does not apply to an individual in relation to employment duties performed by the individual for a regulated establishment where all or substantially all of the tips the individual receives or benefits from in the performance of employment duties are derived from service charges paid by the customers of the regulated establishment and where
(a)  the service charges required from the customer in respect of a tippable sale are, in all or substantially all cases, equal to at least 10% of the amount of the tippable sale;
(b)  the customers are informed of the mandatory nature of the service charges and of the percentage charged in relation to the amount of tippable sales; and
(c)  the tip-sharing arrangement, if any, is not managed by the employees.
In addition, section 42.11 does not apply, for a pay period, to an individual in relation to employment duties as a cloakroom attendant performed for a regulated establishment or to an individual in relation to employment duties performed for a regulated establishment where
(a)  all or substantially all of the tips the individual receives or benefits from during the pay period are derived from a redistribution of tips received or benefited from by other individuals;
(b)  the individual is an employee of a corporation that operates the regulated establishment and the shares of the capital stock of which carrying voting rights in all circumstances are more than 40% held, at the end of the pay period, by the individual or the individual’s spouse;
(c)  the individual is an employee of a partnership that operates the regulated establishment, the individual’s spouse is a member of the partnership at the end of the pay period, and the spouse’s share, at that time, of the income of the partnership would be equal to more than 40% of the income of the partnership if the partnership’s fiscal period ended at that time and the partnership’s income for that fiscal period were equal to $1,000,000; or
(d)  the individual is an employee of the individual’s spouse.
1997, c. 85, s. 44; 2004, c. 21, s. 45.
42.13. For the purposes of this section and sections 42.11 and 42.14, the following rules apply:
(a)  subject to paragraph b, a tippable sale is attributable to the pay period during which the obligations relating to that sale are fully fulfilled;
(b)  where the funds representing the proceeds of a tippable sale in a regulated establishment are not received by the operator of the regulated establishment before the end of the pay period referred to in paragraph a in respect of that tippable sale, and where remittance of the tip attributable to that sale to the individual in respect of whom the sale is attributable is deferred to a time after that pay period, the tippable sale is attributable to the pay period during which the funds are received by the operator of the regulated establishment;
(c)  a tip in respect of a sale made to a customer that is a tippable sale attributable to an individual, means the amount by which the tip determined by the customer in respect of the sale, including the portion of the tip to be remitted to another individual under a tip-sharing arrangement in effect in the regulated establishment, exceeds the amount borne by the individual as credit card costs in relation to the remittance of the tip;
(d)  subject to paragraph e, a tip in respect of a tippable sale is attributable to the pay period during which the obligations relating to that sale are fully fulfilled;
(e)  where the funds representing the proceeds of a tippable sale in a regulated establishment are not received by the operator of the regulated establishment before the end of the pay period referred to in paragraph d in respect of that tippable sale, and where remittance of the tip attributable to that sale to the individual in respect of whom the sale is attributable is deferred to a time after that pay period, the tip is attributable to the pay period during which the funds are received by the operator of the regulated establishment;
(f)  an individual who receives or benefits from tips in the performance of employment duties for a regulated establishment, other than an individual to whom the first paragraph of section 42.12 applies, shall, except where the individual performs the employment duties referred to in the second paragraph of that section 42.12, report in writing to the employer, in respect of a pay period, every tip in respect of a tippable sale attributable to the individual and to that pay period.
1997, c. 85, s. 44.
42.14. Every person who operates a regulated establishment for which an individual performs employment duties without being an employee of the regulated establishment shall declare in writing to the employer of that individual in relation to those duties, at the end of each pay period of that employer, the total of the amounts of each of the tippable sales attributable to the individual and at that pay period.
1997, c. 85, s. 44; 2004, c. 21, s. 46.
42.15. Where the Minister considers it necessary, the Minister may determine, in respect of a regulated establishment or class of sales in a regulated establishment, a percentage that is lesser than the percentage mentioned in section 42.11.
The Minister may determine, in respect of a regulated establishment or a class of sales in a regulated establishment, a percentage that is lesser than the percentage mentioned in section 42.11 if the employer who is to attribute an amount under that section applies therefor or, where that employer refuses to do so, if the majority of individuals performing their employment duties for the regulated establishment or for a class of sales in the regulated establishment apply therefor, and it is established to the satisfaction of the Minister that the percentage of 8% is too high having regard to the circumstances.
The Minister may determine, for a period in a calendar year, the percentage considered to be appropriate by the Minister having regard to the circumstances.
1997, c. 85, s. 44; 2000, c. 39, s. 5.
DIVISION III
INCOME INSURANCE BENEFITS
1972, c. 23.
43. (1)  An individual shall, in computing the income of the individual, include the amounts payable on a periodic basis that the individual receives in respect of the loss of all or part of the individual’s income from an office or employment, pursuant to an insurance plan to which the individual’s employer has made a contribution, not exceeding the limit fixed under subsection 2.
(2)  Such limit shall be established by computing the amount by which
(a)  the aggregate of all such amounts received by the individual pursuant to the plan before the end of the year and after the later of the end of the year 1971 and the end of the last year in which any such amount was included in the individual’s income; exceeds
(b)  the aggregate of the contributions made by the individual under the plan before the end of the year and after the later of the end of the year 1967 and the end of the last year in which any amount referred to in paragraph a was included in the individual’s income.
1972, c. 23, s. 37; 1991, c. 25, s. 176; 1993, c. 64, s. 15; 1998, c. 16, s. 52.
43.0.1. For the purposes of section 43, where an employer or former employer of an individual makes a top-up disability payment in respect of the individual, the following rules apply:
(a)  the payment is deemed not to be a contribution made by the employer or former employer to or under the insurance plan of which the disability policy in respect of which the payment is made is or was a part; and
(b)  if the payment is made to the individual, it is deemed to be an amount received by the individual pursuant to the insurance plan referred to in paragraph a.
2000, c. 5, s. 23.
43.0.2. In section 43.0.1 and in this section,
disability policy means a group disability insurance policy that provides for periodic payments to individuals in respect of the loss of remuneration from an office or employment;
top-up disability payment in respect of an individual means a payment made by an employer or former employer of the individual as a consequence of the insolvency of an insurer that was obligated to make payments to the individual under a disability policy where
(a)  the payment is made to an insurer so that periodic payments made to the individual under the disability policy will not be reduced because of the insolvency, or will be reduced by a lesser amount; or
(b)  the payment is made to the individual to replace, in whole or in part, periodic payments that would have been made under the disability policy to the individual but for the insolvency and the payment is made under an arrangement by which the individual is required to reimburse the payment to the extent that the individual subsequently receives an amount from an insurer in respect of the portion of the periodic payments that the payment was intended to replace.
For the purposes of paragraphs a and b of the definition of top-up disability payment in the first paragraph, an insurance policy that replaces a disability policy is deemed to be the same policy as, and a continuation of, the disability policy that was replaced.
2000, c. 5, s. 23.
DIVISION III.1
MULTI-EMPLOYER INSURANCE PLAN
1993, c. 64, s. 16; 1995, c. 63, s. 22.
43.1. In this Title, a multi-employer insurance plan means a plan for the insurance of persons which is applicable by operation of law, the regulations or a government order, to an economic sector, an industry, an activity or a part of such a sector, industry or activity, and is offered jointly by employers belonging to the same economic sector, the same industry or the same activity and is managed by a common administrator.
1993, c. 64, s. 16; 1995, c. 63, s. 261.
43.2. An individual shall, in relation to a multi-employer insurance plan, include in computing the income of the individual for a taxation year the portion, which can reasonably be attributed to a plan for the insurance of persons, otherwise than in relation to coverage against the loss of all or part of the income from an office or employment, and which relates to work performed by the individual, of the aggregate of all amounts each of which is an amount that corresponds to the total contribution which, because of a previous, the current or an intended office or employment of the individual, was paid, for any period of the year, by an employer of the individual to the administrator of the multi-employer insurance plan and the related tax, within the meaning of subparagraph d of the second paragraph of section 37.0.1.1.
1993, c. 64, s. 16; 1995, c. 63, s. 261; 1998, c. 16, s. 53.
43.3. Where the amount established in accordance with the second paragraph for a taxation year in respect of an individual in relation to a multi-employer insurance plan exceeds the amount referred to in section 43.2 for the year in respect of the individual in relation to that plan, the individual shall include the excess in computing the income of the individual for the year.
The amount which must be established for a taxation year in respect of an individual in relation to a multi-employer insurance plan is equal to the amount that would be established for the year under sections 37.0.1.1 to 37.0.1.6 in respect of the individual in relation to the coverage, other than coverage against the loss of all or part of the income from an office or employment, enjoyed by the individual under the plan for any period of the year, if the administrator of the plan was the employer of all the employees who enjoy coverage under the plan during the year and if those employees were employees of the administrator and enjoyed that coverage by reason of an office or employment with the latter.
For the purposes of the second paragraph, no amount paid by an individual during the year as contribution to the plan shall be taken into account in computing the amount determined under section 37.0.1.2 or 37.0.1.4 in respect of the individual otherwise than because of a previous, the current or an intended office or employment of the individual.
In addition, for the purposes of this Title, except the third paragraph and this paragraph, where it may reasonably be considered that, at any time in a taxation year, an individual enjoys, otherwise than because of a previous, the current or an intended office or employment of the individual, all or part of a coverage under a multi-employer insurance plan, other than coverage against the loss of all or part of the income from an office, employment or business,
(a)  the individual is deemed to be an employee who, during the year, enjoys that coverage, or part thereof, by reason of an office or employment; and
(b)  the value of the benefit derived from that coverage or part thereof is deemed to be referred to in section 38.
1993, c. 64, s. 16; 1995, c. 63, s. 23; 1998, c. 16, s. 54.
DIVISION IV
Repealed, 1993, c. 64, s. 17.
1993, c. 64, s. 17.
44. (Repealed).
1972, c. 23, s. 38; 1975, c. 22, s. 4; 1993, c. 64, s. 17.
45. (Repealed).
1972, c. 23, s. 39; 1993, c. 64, s. 17.
46. (Repealed).
1972, c. 23, s. 40; 1993, c. 64, s. 17.
DIVISION V
PROFIT SHARING PLANS
1972, c. 23.
47. For the purposes of this chapter, an individual shall, in computing the income of the individual, include the amounts allocated to the individual under a profit-sharing plan as provided by Title I of Book VII, except those referred to in section 860, and the amounts required by section 857 to be included in computing the individual’s income.
1972, c. 23, s. 41; 1998, c. 16, s. 55.
DIVISION V.1
EMPLOYEE BENEFIT PLANS AND EMPLOYEE TRUSTS
1982, c. 5, s. 19.
47.1. An individual shall, in computing the income of the individual for a taxation year, include all amounts allocated to the individual for that year by a trustee under an employee trust and all amounts received by the individual in the year out of or under an employee benefit plan or from the disposition of any interest in any such plan.
1982, c. 5, s. 19; 1998, c. 16, s. 56.
47.2. Notwithstanding section 47.1, an individual is not required in computing the income of the individual to include an amount received in respect of an employee benefit plan, to the extent that such amount represents a return of amounts contributed to the plan by the individual or a deceased employee of whom the individual is a legatee by particular title or legal representative, a death benefit or an amount that would, but for the deduction provided for in sections 3 and 4, be a death benefit, or a pension benefit attributable to services rendered by a person in a period throughout which the person was not resident in Canada.
1982, c. 5, s. 19; 1991, c. 25, s. 10; 1998, c. 16, s. 57; 2000, c. 5, s. 293.
47.3. For the purposes of section 47.2, an amount included in computing the income of an individual in respect of an employee benefit plan for a taxation year preceding the year in which it is paid, is deemed to be an amount contributed to the plan by the individual.
1982, c. 5, s. 19.
47.4. For the purposes of section 47.2, where an amount is received in a taxation year by an individual from an employee benefit plan that was in a preceding year an employee trust, that amount is deemed to be the return of the amounts contributed to the plan by the individual, up to the amount by which the lesser of the amounts determined under paragraph a or b of section 47.5 exceeds the aggregate of all amounts previously received out of the plan by the individual or a deceased person of whom the individual is a legatee by particular title or legal representative at a time when the plan was an employee benefit plan, to the extent that the latter amounts were deemed by this section to be a return of amounts contributed to the plan.
1982, c. 5, s. 19; 1998, c. 16, s. 58; 2000, c. 5, s. 293.
47.5. The amounts referred to in section 47.4 are the following:
(a)  the amount by which the aggregate of all amounts allocated to the individual or a deceased person of whom the individual is a legatee by particular title or legal representative, by a trustee of the plan at a time when the plan was an employee trust, exceeds the aggregate of all amounts previously paid out of the plan to or for the benefit of the individual or the deceased person at that time; and
(b)  the portion of the amount by which the cost amount to the plan of its property immediately before it ceased to be an employee trust exceeds the liabilities of the plan at that time that the amount determined under paragraph a in respect of the individual is of the aggregate of amounts determined under that paragraph in respect of all individuals who were beneficiaries under the plan immediately before it ceased to be an employee trust.
1982, c. 5, s. 19; 1998, c. 16, s. 59; 2000, c. 5, s. 293.
47.6. For the purposes of this division, employee benefit plan means an arrangement under which contributions are made by an employer or by a person with whom the employer does not deal at arm’s length to another person, referred to in this Part as the custodian of an employee benefit plan, and under which one or more payments are to be made to or for the benefit of employees or former employees of the employer or persons who do not deal at arm’s length with any such employee or former employee, other than a payment that, if this chapter were read without reference to the third paragraph of section 38 and to section 47.1, would not be required to be included in computing the income of the recipient.
However, such a plan does not include a plan referred to in subparagraph a, d or e of the first paragraph of section 38 or in section 43 or 47, a group health or accident insurance plan, a private health services plan, a group term life insurance policy, a trust referred to in paragraph m of section 998, an employee trust, an arrangement the sole purpose of which is to provide education or training for employees of the employer to improve their work or work-related skills and abilities, a salary deferral arrangement in respect of an individual under which a deferred amount must be included as a benefit under section 37 in computing the income of that individual, a retirement compensation arrangement or a prescribed arrangement.
1982, c. 5, s. 19; 1987, c. 21, s. 11; 1988, c. 18, s. 4; 1989, c. 77, s. 11; 1991, c. 25, s. 176; 1993, c. 64, s. 18; 1995, c. 49, s. 28; 1995, c. 63, s. 24; 1996, c. 39, s. 26; 1998, c. 16, s. 60; 1999, c. 89, s. 53.
47.7. For the purposes of this division, employee trust means an arrangement established after 1979, the trustee of which arrangement has elected to qualify it as an employee trust in the fiscal return filed within 90 days from the end of its first taxation year and under which
(a)  payments are made by one or more employers to a trustee in trust solely to provide for the payment of benefits to employees or former employees of the employer or a person with whom the employer does not deal at arm’s length;
(b)  the right to a benefit referred to in paragraph a vests only at the time of payment thereof;
(c)  the amount of a benefit referred to in paragraph a does not depend on the individual’s position, performance or compensation as an employee; and
(d)  the trustee has, since the commencement of the arrangement, each year allocated to individuals who are beneficiaries under the trust, in such manner as is reasonable, an amount equal to the excess contemplated in section 47.8.
1982, c. 5, s. 19.
47.8. The excess referred to in paragraph d of section 47.7 is obtained by subtracting the aggregate of the capital losses of the trust for the year from the disposition of property and of the losses, other than allowable capital losses from the disposition of property, of the trust for the year from any source other than a business, from the aggregate of amounts received under the arrangement by the trustee in the year from an employer or from a person with whom the employer does not deal at arm’s length, capital gains of the trust for the year from the disposition of property and amounts that would, but for paragraph a of section 657 and section 657.1, be the income of the trust for the year, other than a taxable capital gain from the disposition of property, from any source other than a business.
1982, c. 5, s. 19.
47.9. Notwithstanding section 47.7, an employee trust does not include a profit sharing plan, a deferred profit sharing plan or a plan the registration of which is revoked under subsection 14 or 14.1 of section 147 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).
1982, c. 5, s. 19; 1991, c. 25, s. 11.
DIVISION V.2
SALARY DEFERRAL ARRANGEMENTS
1988, c. 18, s. 5.
47.10. An individual shall, in computing the income of the individual for a taxation year, include an amount equal to the amount by which the aggregate of all amounts received by any person as benefits, other than amounts received by or from a trust governed by a salary deferral arrangement, in the year out of or under a salary deferral arrangement in respect of the individual exceeds the amount by which
(a)  the aggregate of all deferred amounts under the arrangement that were included under section 37 as benefits in computing the individual’s income for preceding taxation years exceeds
(b)  the aggregate of all deferred amounts received by any person in preceding taxation years out of or under the arrangement, and all deferred amounts under the arrangement that were deducted under section 78.2 in computing the individual’s income for the year or preceding taxation years.
1988, c. 18, s. 5; 1998, c. 16, s. 61.
47.11. Where at the end of a taxation year any person has a right under a salary deferral arrangement in respect of an individual to receive a deferred amount, an amount equal to the deferred amount is deemed, for the purposes only of section 37, to have been received by the individual as a benefit in the year, to the extent that the amount was not otherwise included in computing the individual’s income for the year or any preceding taxation year.
1988, c. 18, s. 5.
47.12. Where at the end of a taxation year any person has a right under a salary deferral arrangement, other than a trust governed by a salary deferral arrangement, in respect of an individual to receive a deferred amount, an amount equal to any interest or other additional amount that accrued to, or for the benefit of, that person to the end of the year in respect of the deferred amount is deemed at the end of the year, for the purposes only of section 47.11, to be a deferred amount that the person has a right to receive under the arrangement.
1988, c. 18, s. 5; 1998, c. 16, s. 62.
47.13. Section 47.11 does not apply in respect of a deferred amount under a salary deferral arrangement in respect of an individual that was established primarily for the benefit of one or more employees not resident in Canada in respect of services to be rendered in a country other than Canada, to the extent that the deferred amount
(a)  was in respect of services rendered by an employee who was not resident in Canada at the time the services were rendered, or was resident in Canada for a period, in this section referred to as an excluded period , of not more than 36 of the 72 months preceding the time the services were rendered and was an employee to whom the arrangement applied before the employee became resident in Canada; and
(b)  cannot reasonably be regarded as being in respect of services rendered or to be rendered during a period, other than an excluded period, when the employee was resident in Canada.
1988, c. 18, s. 5; 1997, c. 14, s. 20; 1998, c. 16, s. 63.
47.14. For the purposes of this Part, other than this section, where deferred amounts under a salary deferral arrangement in respect of an individual, in this section referred to as that arrangement , are required to be included as benefits under section 37 in computing the individual’s income and that arrangement is part of a plan or arrangement, in this section referred to as the plan , under which amounts or benefits not related to the deferred amounts are payable or provided, the following rules apply:
(a)  that arrangement is deemed to be a separate arrangement independent of other parts of the plan of which it is a part;
(b)  where any person has a right to a deferred amount under that arrangement, an amount received by the person as a benefit at any time out of or under the plan is deemed to have been received out of or under that arrangement except to the extent that it exceeds the amount by which
i.  the aggregate of all deferred amounts under that arrangement that were included under section 37 as benefits in computing the individual’s income for taxation years ending before that time exceeds
ii.  the aggregate of all deferred amounts received by any person before that time out of or under the plan that were deemed by this paragraph to have been received out of or under that arrangement, and all deferred amounts under that arrangement that were deducted under section 78.2 in computing the individual’s income for the year or a preceding taxation year.
1988, c. 18, s. 5; 1998, c. 16, s. 64.
47.15. For the purposes of this division, a salary deferral arrangement in respect of an individual means a plan or arrangement, whether funded or not, under which any person has a right in a taxation year to receive an amount after the end of the year where it is reasonable to consider that one of the main purposes for the creation or existence of the right is to postpone tax payable under this Part by the individual in respect of an amount that is, or is on account or in lieu of, salary or wages of the individual for services rendered by the individual in the year or a preceding taxation year.
The right referred to in the first paragraph includes a right that is subject to one or more conditions unless there is a substantial risk that any one of those conditions will not be satisfied.
1988, c. 18, s. 5; 1998, c. 16, s. 65.
47.16. For the purposes of section 47.15, a salary deferral arrangement does not include
(a)  a registered pension plan,
(b)  a disability or income maintenance insurance plan under a policy with an insurance corporation,
(c)  a deferred profit sharing plan,
(d)  a profit sharing plan,
(e)  an employee trust,
(f)  a group sickness or accident insurance plan,
(g)  a supplementary unemployment benefit plan,
(h)  a trust described in paragraph m of section 998,
(i)  a plan or arrangement the sole purpose of which is to provide education or training for employees of an employer to improve their work or work-related skills and abilities,
(j)  a plan or arrangement established for the purpose of deferring the salary or wages of a professional athlete for the services of the athlete as such with a team that participates in a league having regularly scheduled games,
(k)  a plan or arrangement under which an individual has a right to receive a bonus or similar payment in respect of services rendered by the individual in a taxation year to be paid within three years following the end of the year, or
(l)  a prescribed plan or arrangement.
1988, c. 18, s. 5; 1991, c. 25, s. 12; 1997, c. 3, s. 71; 1998, c. 16, s. 66.
47.17. For the purposes of this division, a deferred amount at the end of a taxation year under a salary deferral arrangement in respect of an individual means
(a)  in the case of a trust governed by the arrangement, any amount that a person has a right under the arrangement at the end of the year to receive after the end of the year where the amount has been received, is receivable or may at any time become receivable by the trust as salary or wages of the individual for services rendered in the year or a preceding taxation year;
(b)  in the case where no trust is governed by the arrangement, any amount that a person has a right under the arrangement at the end of the year to receive after the end of the year.
The right referred to in the first paragraph includes a right that is subject to one or more conditions unless there is a substantial risk that any one of those conditions will not be satisfied.
1988, c. 18, s. 5.
DIVISION VI
AGREEMENT TO ISSUE SECURITIES TO EMPLOYEES
1972, c. 23; 2001, c. 53, s. 13.
47.18. In this division and in sections 259.0.1 and 725.2 to 725.2.3,
qualifying person means a corporation or a mutual fund trust;
security of a qualifying person means
(a)  if the qualifying person is a corporation, a share of the capital stock of the corporation; and
(b)  if the qualifying person is a mutual fund trust, a unit of the trust.
2001, c. 53, s. 14; 2003, c. 2, s. 15.
48. This division applies where a particular qualifying person agrees to sell or issue one of its securities or a security of a qualifying person with which it does not deal at arm’s length to one of its employees or to an employee of a qualifying person with which it does not deal at arm’s length.
1972, c. 23, s. 42; 1987, c. 67, s. 9; 1988, c. 4, s. 21; 1992, c. 1, s. 15; 1997, c. 3, s. 71; 2001, c. 53, s. 15.
49. Subject to sections 49.2 and 58.0.1, an employee who acquires a security under the agreement referred to in section 48 is deemed to receive because of the employee’s office or employment, in the taxation year in which the employee acquires the security, a benefit equal to the amount by which the value of the security at the time the employee acquires it exceeds the aggregate of the amount paid or to be paid to the qualifying person by the employee for the security and the amount paid by the employee to acquire the right to acquire the security.
1972, c. 23, s. 43; 1986, c. 15, s. 40; 1988, c. 4, s. 22; 1992, c. 1, s. 15; 1993, c. 16, s. 28; 1997, c. 3, s. 71; 1998, c. 16, s. 67; 2001, c. 53, s. 15; 2003, c. 2, s. 16.
49.1. (Repealed).
1986, c. 15, s. 40; 1987, c. 67, s. 10; 1988, c. 4, s. 22; 1992, c. 1, s. 16.
49.2. Where section 49 applies in respect of a security that is a share of the capital stock of a corporation, it shall be read with the words “in which the employee acquires the security” replaced by the words “in which the employee disposes of or exchanges the security” where
(a)  the agreement contemplated in section 48 is made with a particular Canadian-controlled private corporation that has agreed to sell or issue a share of its capital stock or of the capital stock of a Canadian-controlled private corporation with which it is not dealing at arm’s length, to one of its employees or to an employee of a Canadian-controlled private corporation with which it does not deal at arm’s length;
(b)  the share is acquired by an employee who, at the time immediately after the agreement was made, was dealing at arm’s length with the particular corporation, the Canadian-controlled private corporation, the share of the capital stock of which has been agreed to be sold or issued by the particular corporation, and the Canadian-controlled private corporation that is the employer of the employee.
1986, c. 15, s. 40; 1987, c. 67, s. 11; 1988, c. 4, s. 22; 1992, c. 1, s. 17; 1997, c. 3, s. 18; 1998, c. 16, s. 68; 2001, c. 53, s. 16.
49.2.1. For the purposes of this division, a mutual fund trust is deemed not to deal at arm’s length with a corporation only if the trust controls the corporation.
2001, c. 53, s. 17.
49.2.2. For the purposes of this section, sections 49.2 and 58.0.1, Title IV, sections 725.2.2 and 725.2.3, paragraph a of section 725.3 and section 888.1, and subject to section 49.2.3 and paragraph c of section 58.0.5, a taxpayer is deemed to dispose of securities that are identical properties in the order in which the taxpayer acquired them and the following rules apply for that purpose:
(a)  where a taxpayer acquires a particular security, other than under the circumstances to which section 49.2, 58.0.1 or 886 applies, at a time when the taxpayer also acquires or holds one or more other securities that are identical to the particular security and are, or were, acquired under circumstances to which any of those sections applied, the taxpayer is deemed to have acquired the particular security at the time immediately preceding the earliest of the times at which the taxpayer acquired those other securities; and
(b)  where a taxpayer acquires, at the same time, two or more identical securities under the circumstances to which section 49.2 or 58.0.1 applied, the taxpayer is deemed to have acquired the securities in the order in which the agreements under which the taxpayer acquired the rights to acquire the securities were made.
2003, c. 2, s. 17.
49.2.3. Where a taxpayer acquires, at a particular time, a particular security under an agreement referred to in section 48 and, on a day that is no later than 30 days after the day that includes the particular time, the taxpayer disposes of a security that is identical to the particular security, the particular security is deemed to be the security that is so disposed of if
(a)  no other securities that are identical to the particular security are acquired, or disposed of, by the taxpayer after the particular time and before the disposition;
(b)  the taxpayer identifies the particular security as the security so disposed of in the taxpayer’s fiscal return under this Part for the year in which the disposition occurs; and
(c)  the taxpayer has not so identified the particular security, in accordance with this section, in relation to the disposition of any other security.
2003, c. 2, s. 17.
49.3. (Repealed).
1986, c. 15, s. 40; 1987, c. 67, s. 12.
49.4. For the purposes of this division, the rules provided for in the fourth paragraph apply where a taxpayer disposes of rights under an agreement referred to in section 48 to acquire securities of the particular qualifying person that made the agreement or of a qualifying person with which the particular qualifying person does not deal at arm’s length, which rights and securities are referred to in this section as the exchanged option and the old securities , respectively, and where
(a)  the taxpayer receives no consideration for the disposition of the exchanged option other than rights under an agreement with any of the following persons to acquire securities of any such person or of a qualifying person with which any such person does not deal at arm’s length, which rights and securities are referred to in this section as the new option and the new securities , respectively:
i.  the particular qualifying person,
ii.  a qualifying person with which the particular qualifying person does not deal at arm’s length immediately after the disposition of the exchanged option,
iii.  a corporation formed on the amalgamation or merger of the particular qualifying person and one or more other corporations,
iv.  a qualifying person with which the corporation referred to in subparagraph iii does not deal at arm’s length immediately after the disposition of the exchanged option, and
v.  a mutual fund trust to which the particular qualifying person has transferred property in circumstances to which Title I.2 of Book VI applied; and
(b)  the amount by which the total value of the new securities immediately after the disposition exceeds the amount determined under the second paragraph does not exceed the amount by which the total value of the old securities immediately before the disposition exceeds the amount determined under the third paragraph.
The first amount to which subparagraph b of the first paragraph refers is equal to the total amount payable by the taxpayer to acquire the new securities under the new option.
The second amount to which subparagraph b of the first paragraph refers is equal to the amount payable by the taxpayer to acquire the old securities under the exchanged option.
The rules to which the first paragraph refers are as follows:
(a)  the taxpayer is deemed, except for the purposes of subparagraph ii of paragraph d of section 58.0.2, not to have disposed of the exchanged option and not to have acquired the new option;
(b)  the new option is deemed to be the same option as, and a continuation of, the exchanged option; and
(c)  the person described in any of subparagraphs ii to v of subparagraph a of the first paragraph is deemed to be the same person as, and a continuation of, the particular qualifying person.
1986, c. 19, s. 8; 1989, c. 77, s. 12; 1993, c. 16, s. 29; 1997, c. 3, s. 71; 2001, c. 53, s. 18; 2003, c. 2, s. 18.
49.5. For the purposes of this division and sections 725.2, 725.2.2 and 725.3, where a taxpayer disposes of or exchanges securities of a particular qualifying person that were acquired by the taxpayer under circumstances to which section  49.2 or 58.0.1 applied, in this section referred to as the exchanged securities , the taxpayer receives no consideration for the disposition or exchange of the exchanged securities other than securities, in this section referred to as the new securities of any of the persons described in the second paragraph, and the total value of the new securities immediately after the disposition or exchange does not exceed the total value of the exchanged securities immediately before the disposition or exchange, the following rules apply:
(a)  the taxpayer is deemed not to have exchanged or disposed of the exchanged securities and not to have acquired the new securities;
(b)  the new securities are deemed to be the same securities as, and a continuation of, the exchanged securities, except for the purpose of determining if the new securities are identical to any other securities;
(c)  the qualifying person that issued the new securities is deemed to be the same person as, and a continuation of, the qualifying person that issued the exchanged securities; and
(d)  where the exchanged securities were issued under an agreement, the new securities are deemed to have been issued under that agreement.
The persons to which the first paragraph refers are the following:
(a)  the particular qualifying person;
(b)  a qualifying person with which the particular qualifying person does not deal at arm’s length immediately after the disposition or exchange of the exchanged securities;
(c)  a corporation formed on the amalgamation or merger of the particular qualifying person and one or more other corporations;
(d)  a qualifying person with which the corporation referred to in subparagraph c does not deal at arm’s length immediately after the disposition or exchange of the exchanged securities, and
(e)  a mutual fund trust to which the particular qualifying person has transferred property in circumstances to which Title I.2 of Book VI applied.
1986, c. 19, s. 8; 1987, c. 67, s. 13; 1992, c. 1, s. 18; 1993, c. 16, s. 30; 1995, c. 49, s. 29; 1997, c. 3, s. 71; 2003, c. 2, s. 19.
49.6. For the purposes of this division and section 725.3, a taxpayer is deemed not to have disposed of a share acquired under circumstances to which section 49.2 applied solely because of section 785.2.
2003, c. 2, s. 20.
49.7. For the purposes of sections 50 and 725.2, where a taxpayer receives at a particular time one or more particular amounts in respect of rights of the taxpayer to acquire securities under an agreement referred to in section 48 ceasing to be exercisable in accordance with the terms of the agreement, and the cessation would not, but for this section, constitute a transfer or disposition of those rights by the taxpayer, the following rules apply:
(a)  the taxpayer is deemed to have disposed of those rights at the particular time to a person with whom the taxpayer was dealing at arm’s length and to have received the particular amounts as consideration for the disposition; and
(b)  for the purpose of determining the amount, if any, of the benefit that the taxpayer is deemed by section 50 to have received as a consequence of the disposition referred to in paragraph a, the taxpayer is deemed to have paid an amount to acquire those rights equal to the amount by which the amount paid by the taxpayer to acquire those rights, determined without reference to this section, exceeds the aggregate of all amounts each of which is an amount received by the taxpayer before the particular time in respect of the cessation.
2003, c. 2, s. 20.
50. An employee who transfers or disposes of rights under the agreement referred to in section 48 in respect of securities to a person with whom the employee is dealing at arm’s length, is deemed to receive because of the employee’s office or employment, in the taxation year in which the employee makes the transfer or disposition, a benefit equal to the amount by which the value of the consideration for the transfer or disposition exceeds the amount paid by the employee to acquire those rights.
1972, c. 23, s. 44; 1993, c. 16, s. 31; 1998, c. 16, s. 69; 2001, c. 53, s. 19.
51. If rights of the employee under the agreement referred to in section 48 have, by one or more transactions between persons not dealing at arm’s length, become vested in a person who exercises the employee’s right to acquire a security under the agreement, the employee is deemed, subject to the second paragraph, to receive because of the employee’s office or employment, in the taxation year in which the person acquired the security, a benefit equal to the amount by which the value of the security at the time that person acquired it exceeds the aggregate of the amount paid or to be paid to the qualifying person by the person for the security and the amount paid by the employee to acquire the right to acquire the security.
Where the employee was deceased at the time the person acquired the security, the benefit is deemed to have been received by the person, in the taxation year in which the person acquired the security, as income from the duties of an office or employment performed by the person in that year in the country in which the employee primarily performed the duties of the employee’s office or employment.
1972, c. 23, s. 45; 1993, c. 16, s. 31; 1997, c. 3, s. 71; 1998, c. 16, s. 70; 2001, c. 53, s. 19.
52. If rights of the employee under the agreement referred to in section 48 have, by one or more transactions between persons not dealing at arm’s length, become vested in a particular person who transfers or disposes of the rights to another person with whom the particular person is dealing at arm’s length, the employee is deemed, subject to the second paragraph, to receive because of the employee’s office or employment, in the taxation year in which the particular person made the transfer or disposition, a benefit equal to the amount by which the value of the consideration for the transfer or disposition exceeds the amount paid by the employee to acquire those rights.
Where the employee was deceased at the time the other person acquired the employee’s rights, the benefit is deemed to have been received by the particular person, in the taxation year in which the particular person transferred or disposed of the employee’s rights, as income from the duties of an office or employment performed by the particular person in that year in the country in which the employee primarily performed the duties of the employee’s office or employment.
1972, c. 23, s. 46; 1993, c. 16, s. 31; 1998, c. 16, s. 71.
52.1. Where an employee has died and, immediately before the death, the employee owned a right to acquire a security under the agreement referred to in section 48, the employee is deemed to have received because of the employee’s office or employment, in the taxation year in which the employee died, a benefit equal to the amount by which the value of the right immediately after the death exceeds the amount paid by the employee to acquire the right, and sections 50 to 52 do not apply.
1993, c. 16, s. 32; 1998, c. 16, s. 72; 2001, c. 53, s. 20.
53. If a security is held by a trustee, in any manner whatever, for an employee, the employee is deemed, for the purposes of this division and sections 725.2, 725.2.2 and 725.3, to acquire the security at the time the trustee begins so to hold it and to exchange or dispose of the security at the time the trustee exchanges it or disposes of it to any person other than the employee.
1972, c. 23, s. 47; 1987, c. 67, s. 14; 1998, c. 16, s. 72; 2001, c. 53, s. 21; 2003, c. 2, s. 21.