I-3 - Taxation Act

Section 590 Disposition versions

2015-10-21

590. If a taxpayer resident in Canada or a foreign affiliate (which taxpayer or foreign affiliate is referred to in this section as the “transferee”) of the taxpayer acquires shares of the capital stock of one or more foreign affiliates (each referred to in this section as an “acquired affiliate”) of the taxpayer on a disposition of shares (such shares disposed of being referred to in this section as the “disposed shares”) of the capital stock of any other foreign affiliate of the taxpayer (other than, where the transferee is a foreign affiliate of the taxpayer, a disposition of shares that are, immediately before the disposition, excluded property of the transferee or a disposition to which section 238.1 applies), the following rules apply:

(a)  the capital loss of the transferee from the disposition is deemed to be nil; and

(b)  in computing the adjusted cost base to the transferee of a share of a particular class of the capital stock of an acquired affiliate that is owned by the transferee immediately after the disposition, there is to be added the amount determined by the formula

[(A-B) × C/D]/E.

In the formula in subparagraph b of the first paragraph,

(a)  A is the aggregate of all amounts each of which is the cost amount to the transferee, immediately before the disposition, of a disposed share;

(b)  B is the total of

i.  the aggregate of all amounts each of which is the proceeds of disposition of a disposed share, and

ii.  the aggregate of all amounts in respect of the computation of losses of the transferee from the dispositions of the disposed shares, each of which is, in respect of the disposition of a disposed share, the amount by which the amount referred to in subparagraph a of the second paragraph of section 591 exceeds the amount determined by the formula in that second paragraph;

(c)  C is the fair market value, immediately after the disposition, of all shares of the particular class owned, immediately after the disposition, by the transferee;

(d)  D is the fair market value, immediately after the disposition, of all shares owned, immediately after the disposition, by the transferee of the capital stock of all acquired affiliates; and

(e)  E is the number of shares of the particular class that are owned by the transferee immediately after the disposition.

1975, c. 22, s. 162; 1993, c. 16, s. 234; 2000, c. 5, s. 133; 2015, c. 21, s. 196.

2006-03-01

590. Where a taxpayer resident in Canada or a foreign affiliate of the taxpayer acquires shares of a foreign affiliate of the taxpayer, in paragraph b referred to as the “acquired affiliate”, on the disposition of shares of any other foreign affiliate of the taxpayer, other than a disposition to which section 238.1 applies, the following rules apply:

(a)  the capital loss therefrom otherwise determined is deemed to be nil;

(b)  the taxpayer or, as the case may be, the foreign affiliate which acquires the shares, in computing the adjusted cost base of all shares of any particular class of the capital stock of the acquired affiliate owned by it immediately after the disposition, shall add an amount equal to that proportion of the amount by which the cost amount to it, immediately before the disposition, of the shares disposed of exceeds the aggregate of the proceeds of the disposition and the total of all amounts each of which is an amount deducted under the second paragraph of section 591 in computing a loss sustained by it from the disposition of the shares disposed of, that the fair market value, immediately after the disposition, of all shares of that particular class then owned by it is of the fair market value, immediately after the disposition, of all shares of the capital stock of the acquired affiliate owned by it at that time.

1975, c. 22, s. 162; 1993, c. 16, s. 234; 2000, c. 5, s. 133.