I-3 - Taxation Act

Section 569 Disposition versions

2015-10-21

569. Despite the second paragraph of section 424, if at any time a taxpayer receives a property (in this section referred to as the “distributed property”) from a foreign affiliate (in this section referred to as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution, the following rules apply:

(a)  subject to sections 569.0.0.3 and 569.0.0.4, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the relevant cost base (within the meaning of subsection 4 of section 95 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, if

i.  the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, or

ii.  the distributed property is a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property (within the meaning of section 576.1) of the disposing affiliate;

(b)  if subparagraph a does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the distributed property’s fair market value at that time;

(c)  the distributed property is deemed to have been acquired, at that time, by the taxpayer at a cost equal to the amount determined under subparagraph a or b to be the disposing affiliate’s proceeds of disposition of the distributed property;

(d)  each share (in subparagraph e and section 569.0.0.3 referred to as a “disposed share”) of a class of the capital stock of the disposing affiliate that is disposed of by the taxpayer on the liquidation and dissolution is deemed to have been disposed of for proceeds of disposition equal to the amount determined by

A/B; and

(e)  if the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, any loss of the taxpayer in respect of the disposition of a disposed share is deemed to be nil.

In the formula in subparagraph d of the first paragraph,

(a)  A is the aggregate of all amounts each of which is the net distribution amount in respect of a distribution of distributed property made, at any time, in respect of the class, and

(b)  B is the total number of issued and outstanding shares of the class that are owned by the taxpayer during the liquidation and dissolution.

1975, c. 22, s. 146; 1977, c. 26, s. 63; 1984, c. 15, s. 125; 1993, c. 16, s. 228; 2009, c. 5, s. 185; 2015, c. 21, s. 187.

2009-05-15

569. If, because of the dissolution of a controlled foreign affiliate, within the meaning of section 572, of a taxpayer, the taxpayer receives a share of the capital stock of another foreign affiliate of the taxpayer, the following rules apply:

(a)  the dissolved affiliate’s proceeds of disposition of the share and the cost of the share to the taxpayer are deemed to be equal to the adjusted cost base to the affiliate of the share immediately before its dissolution or, if, in accordance with paragraph a of subsection 3 of section 88 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the taxpayer claims an amount after 19 December 2006 in respect of the share and that amount is greater than the adjusted cost base, to that greater amount; and

(b)  the taxpayer’s proceeds of disposition of the shares of the capital stock of the dissolved affiliate are deemed to be equal to the amount by which the aggregate of the cost to the taxpayer of each share so received upon the dissolution and the fair market value of any other property that the taxpayer also received at the same time exceeds the amount determined under the second paragraph.

The amount to which subparagraph b of the first paragraph refers is equal to the aggregate of any debt owing by the dissolved affiliate or of any other obligation of the affiliate to pay an amount, otherwise than as a dividend owing by it to the taxpayer or to a person with whom the taxpayer is not dealing at arm’s length, that was outstanding immediately before its dissolution and that is assumed or cancelled by the taxpayer on the dissolution.

Chapter V.2 of Title II of Book I applies in relation to a claim made under paragraph a of subsection 3 of section 88 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1975, c. 22, s. 146; 1977, c. 26, s. 63; 1984, c. 15, s. 125; 1993, c. 16, s. 228; 2009, c. 5, s. 185.

2006-03-01

569. Where, as a result of the dissolution of a controlled foreign affiliate, within the meaning of section 572, of a taxpayer, the latter receives a share of the capital stock of another foreign affiliate of the taxpayer:

(a)  the dissolved affiliate’s proceeds of disposition of such share and the cost thereof to the taxpayer are deemed to be the adjusted cost base to such affiliate immediately before its dissolution or, at the taxpayer’s option, an amount greater than such adjusted cost base not exceeding the fair market value of the share at the same time; and

(b)  the taxpayer’s proceeds of disposition of the shares of the capital stock of the dissolved affiliate are deemed to be the amount by which

i.  the aggregate of the cost to him of each share so received upon the dissolution and the fair market value of any other property that he also received at the same time exceeds

ii.  the aggregate of any debt owing by the dissolved affiliate or of any other obligation of such affiliate to pay an amount, otherwise than on account of a dividend owing by it to the taxpayer or to a person with whom the taxpayer is not dealing at arm’s length, that was outstanding immediately before its dissolution and that is assumed or cancelled by the taxpayer on the dissolution.

1975, c. 22, s. 146; 1977, c. 26, s. 63; 1984, c. 15, s. 125; 1993, c. 16, s. 228.