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I-3 - Taxation Act
Section 686
Disposition versions
686. In computing a taxpayer’s taxable capital gain from the disposition of property that is all or any part of the taxpayer’s capital interest in a personal trust or a prescribed trust, the adjusted cost base to the taxpayer of the property immediately before the disposition is deemed to be equal to the greater of
(a) the adjusted cost base, otherwise determined, to the taxpayer of the property immediately before that time; and
(b) the amount by which the cost amount to the taxpayer of the property immediately before that time exceeds the aggregate of all amounts deducted under paragraph b.1 of section 257 in computing the adjusted cost base to the taxpayer of the property immediately before the disposition.
The presumption referred to in the first paragraph does not apply where any part of such interest has ever been acquired for consideration and, at the time of disposition, the trust is not resident in Canada.
Where a taxpayer other than a mutual fund trust disposes of all or any part of the capital interest in a trust, the taxpayer’s loss from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which
(a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and
i. where the taxpayer is a corporation,
(1) was a taxable dividend that was designated under section 666 by the trust in respect of the taxpayer, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the taxpayer’s taxable income for any taxation year, or
(2) was an amount designated under section 667 by the trust in respect of the taxpayer,
ii. where the taxpayer is another trust, was an amount designated under section 666 or 667 by the trust in respect of the taxpayer, and
iii. where the taxpayer is not a corporation, trust or partnership, was an amount designated under section 667 by the trust in respect of the taxpayer; exceeds
(b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the taxpayer’s loss otherwise determined from a previous disposition of an interest in the trust.
Where a partnership disposes of all or any part of the capital interest in a trust, the share of a person, other than another partnership or a mutual fund trust, of any loss of the partnership from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which
(a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and
i. where the person is a corporation,
(1) was a taxable dividend that was designated under section 666 by the trust in respect of the partnership, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the person’s taxable income for any taxation year, or
(2) was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person,
ii. where the person is an individual other than a trust, was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person, and
iii. where the person is another trust, was a dividend designated under section 666 or 667 by the trust in respect of the partnership and was an amount received by the person, or that would have been received by the person if this Part were read without reference to section 666; exceeds
(b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the person’s loss otherwise determined from a previous disposition of an interest in the trust.
Where all or part of a capital interest in a trust is disposed of by a taxpayer and the capital interest is not a capital property of the taxpayer, despite section 690, its cost amount is deemed to be the amount by which the amount that would, if this Part were read without reference to this paragraph and section 690, be its cost amount exceeds the aggregate of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph i.1 of paragraph n of section 257 if its subparagraph 3 were read without reference to “, that is, subject to section 257.4, equal to the amount designated by the trust to be payable to the taxpayer under section 668”.
686. In computing a taxpayer’s taxable capital gain from the disposition of property that is all or any part of the taxpayer’s capital interest in a personal trust or a prescribed trust, the adjusted cost base to the taxpayer of the property immediately before the disposition is deemed to be equal to the greater of
(a) the adjusted cost base, otherwise determined, to the taxpayer of the property immediately before that time; and
(b) the amount by which the cost amount to the taxpayer of the property immediately before that time exceeds the aggregate of all amounts deducted under paragraph b.1 of section 257 in computing the adjusted cost base to the taxpayer of the property immediately before the disposition.
The presumption referred to in the first paragraph does not apply where any part of such interest has ever been acquired for consideration and, at the time of disposition, the trust is not resident in Canada.
Where a taxpayer other than a mutual fund trust disposes of all or any part of the capital interest in a trust, the taxpayer’s loss from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which
(a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and
i. where the taxpayer is a corporation,
(1) was a taxable dividend that was designated under section 666 by the trust in respect of the taxpayer, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the taxpayer’s taxable income for any taxation year, or
(2) was an amount designated under section 667 by the trust in respect of the taxpayer,
ii. where the taxpayer is another trust, was an amount designated under section 666 or 667 by the trust in respect of the taxpayer, and
iii. where the taxpayer is not a corporation, trust or partnership, was an amount designated under section 667 by the trust in respect of the taxpayer; exceeds
(b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the taxpayer’s loss otherwise determined from a previous disposition of an interest in the trust.
Where a partnership disposes of all or any part of the capital interest in a trust, the share of a person, other than another partnership or a mutual fund trust, of any loss of the partnership from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which
(a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and
i. where the person is a corporation,
(1) was a taxable dividend that was designated under section 666 by the trust in respect of the partnership, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the person’s taxable income for any taxation year, or
(2) was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person,
ii. where the person is an individual other than a trust, was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person, and
iii. where the person is another trust, was a dividend designated under section 666 or 667 by the trust in respect of the partnership and was an amount received by the person, or that would have been received by the person if this Part were read without reference to section 666; exceeds
(b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the person’s loss otherwise determined from a previous disposition of an interest in the trust.
