I-3 - Taxation Act

Section 559 Disposition versions

2009-05-15

559. Notwithstanding the reference to section 546 in section 564, except where section 546 applies in respect of a property to which subparagraph b of the second paragraph of section 557 applies, the cost to the parent of each property of the subsidiary distributed to the parent on the winding-up is deemed, subject to the second paragraph, to be equal

(a)  in the case of a property that is an interest in a partnership, to the amount that but for this section would be the cost to the parent of the property; and

(b)  in any other case, to the amount by which the amount that, but for section 427.4, would be deemed by section 557 to be the proceeds of disposition of the property exceeds the amount by which the cost amount to the subsidiary has been reduced because of sections 485 to 485.18 on the winding-up.

If the property referred to in the first paragraph is a capital property, other than property described in the third paragraph, owned by the subsidiary at the time the parent last acquired control of the subsidiary and subsequently without interruption until the time it was distributed to the parent on the winding-up, there is to be added to the cost to the parent of the property, as otherwise determined under the first paragraph, the amount determined under section 560 in respect of the property.

The property referred to in the second paragraph is

(a)  depreciable property, including a leasehold interest in a depreciable property and an option to acquire a depreciable property;

(b)  property transferred to the parent on the winding-up where the transfer is part of a distribution, within the meaning assigned by section 308.0.1, made in the course of a reorganization in which a dividend was received to which section 308.1 would, but for section 308.3, apply;

(c)  property acquired by the subsidiary from the parent or from any person or partnership that was not, otherwise than because of a right referred to in paragraph b of section 20, dealing at arm’s length with the parent, or any other property acquired by the subsidiary in substitution for it, where the acquisition was part of the series of transactions or events in which the parent last acquired control of the subsidiary; or

(d)  property distributed to the parent on the winding-up where, as part of the series of transactions or events that includes the winding-up,

i.  the parent acquired control of the subsidiary, and

ii.  any property distributed to the parent on the winding-up or any other property acquired by any person in substitution therefor is acquired by

(1)  a particular person, other than a specified person, that, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, was a specified shareholder of the subsidiary,

(2)  two or more persons, other than specified persons, if a particular person would have been, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, a specified shareholder of the subsidiary if all the shares that were then owned by those two or more persons were owned at that time by the particular person, or

(3)  a corporation, other than a specified person or the subsidiary, of which a particular person referred to in subparagraph 1 is, at any time during the course of the series of transactions or events and after control of the subsidiary was last acquired by the parent, a specified shareholder, or of which a particular person would be, at any time during the course of the series of transactions or events and after control of the subsidiary was last acquired by the parent, a specified shareholder if all the shares then owned by persons, other than specified persons, referred to in subparagraph 2 and acquired by those persons as part of the series of transactions or events were owned at that time by the particular person.

1972, c. 23, s. 437; 1975, c. 22, s. 140; 1978, c. 26, s. 101; 1980, c. 13, s. 56; 1984, c. 15, s. 118; 1989, c. 77, s. 63; 1990, c. 59, s. 200; 1993, c. 16, s. 221; 1994, c. 22, s. 204; 1996, c. 39, s. 157; 1997, c. 3, s. 71; 2000, c. 5, s. 125; 2004, c. 8, s. 112; 2009, c. 5, s. 182.

2006-03-01

559. Notwithstanding the reference to section 546 in section 564, except where section 546 applies in respect of a property to which subparagraph b of the second paragraph of section 557 applies, the cost to the parent of each property of the subsidiary distributed to the parent on the winding-up is deemed, subject to the second paragraph, to be equal

(a)  in the case of a property that is an interest in a partnership, to the amount that but for this section would be the cost to the parent of the property; and

(b)  in any other case, to the amount by which the amount that, but for section 427.4, would be deemed by section 557 to be the proceeds of disposition of the property exceeds the amount by which the cost amount to the subsidiary has been reduced because of sections 485 to 485.18 on the winding-up.

Where the property referred to in the first paragraph is a capital property, other than property described in the third paragraph, owned by the subsidiary at the time the parent last acquired control of the subsidiary and thereafter without interruption until such time as it was distributed to the parent on the winding-up, there shall be added to the cost to the parent of the property, as otherwise determined under the first paragraph, the part, determined in accordance with section 560 in respect of the capital property, of the amount by which the aggregate determined under paragraph b of section 558 exceeds the aggregate

(a)  of the amount of the excess determined under subparagraph ii of paragraph a of section 558 and

(b)  of the aggregate of all amounts each of which is in respect of any share of the capital stock of the subsidiary disposed of by the parent on the winding-up or in contemplation of the winding-up and equal to the aggregate of all amounts each of which is received by the parent or by a corporation with which the parent was not dealing at arm’s length, otherwise than by reason of a right referred to in paragraph b of section 20 in respect of the subsidiary, in respect of that share or any share, in this subparagraph referred to as a “replaced share”, that replaced that share or a replaced share or that was exchanged for that share or a replaced share, as a taxable dividend to the extent that the amount was deductible under sections 738 to 745 or section 845 in computing the taxable income of the recipient corporation for a taxation year and was not an amount on which it was required to pay prescribed tax, or as a capital dividend or life insurance capital dividend.

The property referred to in the second paragraph is

(a)  depreciable property, including a leasehold interest in a depreciable property and an option to acquire a depreciable property;

(b)  property transferred to the parent on the winding-up where the transfer is part of a distribution, within the meaning assigned by section 308.0.1, made in the course of a reorganization in which a dividend was received to which section 308.1 would, but for section 308.3, apply;

(c)  property acquired by the subsidiary from the parent or from any person or partnership that was not, otherwise than because of a right referred to in paragraph b of section 20, dealing at arm’s length with the parent, or any other property acquired by the subsidiary in substitution for it, where the acquisition was part of the series of transactions or events in which the parent last acquired control of the subsidiary; or

(d)  property distributed to the parent on the winding-up where, as part of the series of transactions or events that includes the winding-up,

i.  the parent acquired control of the subsidiary, and

ii.  any property distributed to the parent on the winding-up or any other property acquired by any person in substitution therefor is acquired by

(1)  a particular person, other than a specified person, that, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, was a specified shareholder of the subsidiary,

(2)  two or more persons, other than specified persons, if a particular person would have been, at any time during the course of the series and before control of the subsidiary was last acquired by the parent, a specified shareholder of the subsidiary if all the shares that were then owned by those two or more persons were owned at that time by the particular person, or

(3)  a corporation, other than a specified person or the subsidiary, of which a particular person referred to in subparagraph 1 is, at any time during the course of the series of transactions or events and after control of the subsidiary was last acquired by the parent, a specified shareholder, or of which a particular person would be, at any time during the course of the series of transactions or events and after control of the subsidiary was last acquired by the parent, a specified shareholder if all the shares then owned by persons, other than specified persons, referred to in subparagraph 2 and acquired by those persons as part of the series of transactions or events were owned at that time by the particular person.

1972, c. 23, s. 437; 1975, c. 22, s. 140; 1978, c. 26, s. 101; 1980, c. 13, s. 56; 1984, c. 15, s. 118; 1989, c. 77, s. 63; 1990, c. 59, s. 200; 1993, c. 16, s. 221; 1994, c. 22, s. 204; 1996, c. 39, s. 157; 1997, c. 3, s. 71; 2000, c. 5, s. 125; 2004, c. 8, s. 112.