I-3 - Taxation Act

Section 578.5 Disposition versions

2006-03-01

578.5. Where a spin-off share is distributed by a corporation to a taxpayer pursuant to an eligible distribution in relation to an original share of the taxpayer, the following rules apply:

(a)  there shall be deducted in computing the cost amount to the taxpayer of the original share at any time the amount determined by the formula

A × (B / C); and

(b)  the cost to the taxpayer of the spin-off share is the amount by which the cost amount of the taxpayer’s original share was reduced under subparagraph a.

In the formula provided for in subparagraph a of the first paragraph,

(a)  A is the cost amount, determined without reference to this chapter, to the taxpayer of the original share immediately before the distribution or, if the original share is disposed of by the taxpayer before the distribution, immediately before its disposition;

(b)  B is the fair market value of the spin-off share immediately after its distribution to the taxpayer; and

(c)  C is the aggregate of

i.  the fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, and

ii.  the fair market value of the spin-off share immediately after its distribution to the taxpayer.

2004, c. 8, s. 116.