I-3 - Taxation Act

Section 251.1 Disposition versions

2006-03-01

251.1. In this chapter,

“exempt capital gains balance” of an individual for a taxation year that ends before 1 January 2005 in respect of a flow-through entity means the amount determined by the formula

A − B − C − D;

“flow-through entity” means

(a)  a mutual fund trust;

(b)  a segregated fund trust referred to in section 851.2;

(c)  a trust all or substantially all of the properties of which consist of shares of the capital stock of a corporation, where the trust was established pursuant to an agreement between two or more shareholders of the corporation and one of the main purposes of the trust is to provide for the exercise of voting rights in respect of those shares pursuant to that agreement;

(d)  a trust established exclusively for the benefit of one or more persons each of whom was, at the time the trust was created, either a person from whom the trust received property or a creditor of that person, where one of the main purposes of the trust is to secure the payments required to be made by or on behalf of that person to such creditor;

(e)  a trust maintained primarily for the benefit of employees of a corporation or two or more corporations that do not deal at arm’s length with each other, where one of the main purposes of the trust is to hold interests in shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm’s length therewith;

(f)  a trust governed by a profit sharing plan;

(g)  a partnership;

(h)  an investment corporation;

(i)  a mortgage investment corporation; and

(j)  a mutual fund corporation.

For the purposes of the formula in the definition of “exempt capital gains balance” in the first paragraph,

(a)  A is

i.  if the entity is a trust referred to in any of paragraphs b to f of the definition of “flow-through entity” in the first paragraph, the amount determined under subparagraph c of the first paragraph of section 726.9.2 in respect of the individual’s interest or interests therein, and

ii.  in any other case, the lesser of

(1)  4/3 of the aggregate of the taxable capital gains that resulted from elections made under section 726.9.2 in respect of the individual’s interests in or shares of the capital stock of the entity, and

(2)  the amount that would be determined under subparagraph 1 if this Act were read without reference to section 726.9.3 and the amount designated in the election in respect of each interest or share were equal to the amount by which the fair market value of the interest or share at the end of 22 February 1994 exceeds the portion of the amount designated in the election in respect of that interest or share that exceeds 11/10 of its fair market value at that time;

(b)  B is the aggregate of all amounts each of which is the amount by which the individual’s capital gain for a preceding taxation year, determined without reference to section 251.2, from the disposition of an interest in or a share of the capital stock of the entity was reduced under that section;

(c)  C is

i.  if the entity is a trust described in any of paragraphs a and c to e of the definition of “flow-through entity” in the first paragraph, the aggregate of

(1)  4/3 of the aggregate of all amounts each of which is the amount by which the individual’s taxable capital gain, determined without reference to this chapter, for a preceding taxation year that ended before 28 February 2000 and that resulted from a designation made under section 668 by the trust, was reduced under section 251.3,

(2)  3/2 of the aggregate of all amounts each of which is the amount by which the individual’s taxable capital gain, determined without reference to this chapter, for a preceding taxation year that began after 27 February 2000 and ended before 18 October 2000 and that resulted from a designation made under section 668 by the trust, was reduced under section 251.3,

(3)  the amount claimed by the individual under paragraph a of section 668.5 or paragraph b of section 668.8 for a preceding taxation year, and

(4)  twice the aggregate of all amounts each of which is the amount by which the individual’s taxable capital gain, determined without reference to this chapter, for a preceding taxation year that began after 17 October 2000 and that resulted from a designation made under section 668 by the trust, was reduced under section 251.3,

ii.  if the entity is a partnership, the aggregate of

(1)  4/3 of the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains, determined without reference to this chapter, for its fiscal period that ended before 28 February 2000 and in a preceding taxation year, was reduced under section 251.4,

(2)  4/3 of the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business, determined without reference to this chapter, for its fiscal period that ended before 28 February 2000 and in a preceding taxation year, was reduced under section 251.5,

(3)  the aggregate of all amounts each of which is the product obtained by multiplying the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the partnership for its fiscal period that ended in a preceding taxation year and includes 28 February 2000 or 17 October 2000, or began after 28 February 2000 and ended before 17 October 2000, by the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains, determined without reference to this chapter, for its fiscal period, was reduced under section 251.4,

(4)  the aggregate of all amounts each of which is the product obtained by multiplying the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the partnership for its fiscal period that ended in a preceding taxation year and includes 28 February 2000 or 17 October 2000, or began after 28 February 2000 and ended before 17 October 2000, by the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business, determined without reference to this chapter, for its fiscal period, was reduced under section 251.5,

(5)  twice the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s taxable capital gains, determined without reference to this chapter, for its fiscal period that began after 17 October 2000 and ended in a preceding taxation year, was reduced under section 251.4, and

(6)  twice the aggregate of all amounts each of which is the amount by which the individual’s share of the partnership’s income from a business, determined without reference to this chapter, for its fiscal period that began after 17 October 2000 and ended in a preceding taxation year, was reduced under section 251.5, and

iii.  in any other case, the aggregate of all amounts each of which is the amount by which the aggregate of the individual’s capital gains otherwise determined under sections 851.16, 851.21, 860, 1106, 1113 and 1116 for a preceding taxation year in respect of the entity was reduced under section 251.6; and

(d)  D is

i.  if the entity is a trust described in any of paragraphs c to f of the definition of “flow-through entity” in the first paragraph, the aggregate of all amounts each of which is an amount included before the year in the cost to the individual of a property under section 688.2 or paragraph c of section 858 because of the individual’s exempt capital gains balance in respect of the entity, and

ii.  in any other case, nil.

1996, c. 39, s. 69; 1997, c. 3, s. 71; 2000, c. 5, s. 67; 2003, c. 2, s. 79.