I-3 - Taxation Act

Section 477 Disposition versions

2009-05-15

477. If the property described in section 476 is acquired as a dividend payable in kind or as a benefit that the taxpayer should include in computing the taxpayer’s income under section 111, and the taxpayer makes, after 19 December 2006, a valid election under the portion of subsection 4 of section 80.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) before paragraph a in respect of all such property, the following rules apply in respect of each such property:

(a)  an amount equal to the principal amount of the property or, if, in accordance with subparagraph ii of paragraph a of subsection 4 of section 80.1 of the Income Tax Act, the taxpayer has designated in the election an amount in respect of the property that is less than the principal amount, equal to that lesser amount, is deemed to be, despite section 304, the cost to the taxpayer of the property and the amount of the dividend or benefit received by the taxpayer because of the acquisition of the property;

(b)  if the property is so acquired as such a benefit and, in accordance with paragraph b of subsection 4 of section 80.1 of the Income Tax Act, the taxpayer has designated in that election a class of shares of the capital stock of the taxpayer’s affiliate in respect of the property, the amount of the benefit is deemed to have been received by the taxpayer as a dividend from the taxpayer’s affiliate on that class and not as an amount the taxpayer is required to include in computing the taxpayer’s income under section 111;

(c)  in computing his taxable income for the taxation year in which he acquired the property, the taxpayer may deduct the excess of the amount received by him as a dividend by reason of such acquisition over the aggregate of the amounts deductible for the year in respect of such dividend under sections 580 to 584 and 746 to 749 in computing his income or taxable income, as the case may be;

(d)  in computing the adjusted cost base to the taxpayer of each share of the class of shares of the capital stock of his foreign affiliate in respect of which an amount was received by him as a dividend by the acquisition of the property, the taxpayer shall deduct an amount equal to the quotient obtained by dividing the amount deducted by him under subparagraph c in respect of such dividend, by the number of shares of that class owned by the taxpayer immediately before that amount was received by him;

(e)  a capital loss of the taxpayer pursuant to the disposition, after the time the property was acquired by the taxpayer, of a share of the capital stock of his foreign affiliate is deemed nil; and

(f)  if the taxpayer makes a valid election under paragraph f of subsection 4 of section 80.1 of the Income Tax Act after 19 December 2006 in respect of the property, the first paragraph of section 471 applies as if the property were an indemnity acquired by the taxpayer for foreign property taken by a government or person referred to in section 469.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 4 of section 80.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1973, c. 17, s. 53; 1975, c. 22, s. 107; 1978, c. 26, s. 80; 2009, c. 5, s. 165.

2006-03-01

477. Where property contemplated by section 476 is acquired as a dividend payable in kind or benefit that the taxpayer should include in computing his income under section 111, he may elect, in the form and within the time prescribed with respect to all such property, that the following rules apply with respect to each such property:

(a)  an amount equal to the principal amount of the property or to a lesser amount is deemed to be, notwithstanding section 304, the cost to the taxpayer of the property and the amount of the dividend or benefit received by him by the acquisition of the property;

(b)  where the asset was so acquired as such a benefit and the taxpayer has designated in his election a class of shares of the capital stock of his affiliate in respect of the property, the amount of the benefit is deemed to have been received by him as a dividend from his foreign affiliate on such class and not as an amount to be included in computing his income under section 111;

(c)  in computing his taxable income for the taxation year in which he acquired the property, the taxpayer may deduct the excess of the amount received by him as a dividend by reason of such acquisition over the aggregate of the amounts deductible for the year in respect of such dividend under sections 580 to 584 and 746 to 749 in computing his income or taxable income, as the case may be;

(d)  in computing the adjusted cost base to the taxpayer of each share of the class of shares of the capital stock of his foreign affiliate in respect of which an amount was received by him as a dividend by the acquisition of the property, the taxpayer shall deduct an amount equal to the quotient obtained by dividing the amount deducted by him under paragraph c in respect of such dividend, by the number of shares of that class owned by the taxpayer immediately before that amount was received by him;

(e)  a capital loss of the taxpayer pursuant to the disposition, after the time the property was acquired by the taxpayer, of a share of the capital stock of his foreign affiliate is deemed nil; and

(f)  the taxpayer may elect, in prescribed form and within prescribed delay, that section 471 apply as if the property were an indemnity acquired by him for foreign property taken by a government or person contemplated in section 469.

1973, c. 17, s. 53; 1975, c. 22, s. 107; 1978, c. 26, s. 80.