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I-3 - Taxation Act

Section 424
Disposition versions

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424. If, at any time, a property of a corporation is appropriated in any manner whatever to or for the benefit of a shareholder of the corporation gratuitously or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have contributed to increase the corporation’s income or to reduce a loss of the corporation, the corporation is deemed, at that time, to have disposed of the property and to have received proceeds of disposition equal to its fair market value at that time.
If, in a taxation year of a corporation, a property is appropriated in any manner whatever to or for the benefit of a shareholder upon the winding-up of the corporation, the following rules apply:
(a)  the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds of disposition equal to its fair market value at that time;
(b)  the shareholder is deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;
(c)  sections 302 and 304 do not apply in computing the cost of the property to the shareholder; and
(d)  sections 93.3.1, 175.9, 238.1 and 238.3 do not apply in respect of a property disposed of on the winding-up.
1972, c. 23, s. 359; 1975, c. 22, s. 91; 1980, c. 13, s. 45; 1984, c. 15, s. 93; 1993, c. 16, s. 180; 1995, c. 49, s. 117; 1997, c. 3, s. 71; 2000, c. 5, s. 99; 2003, c. 2, s. 116; 2009, c. 5, s. 140; 2019, c. 14, s. 123.
424. If, at any time, a property of a corporation is appropriated in any manner whatever to or for the benefit of a shareholder of the corporation gratuitously or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have contributed to increase the corporation’s income or to reduce a loss of the corporation, the corporation is deemed, at that time, to have disposed of the property and to have received proceeds of disposition equal to its fair market value at that time.
If, in a taxation year of a corporation, a property is appropriated in any manner whatever to or for the benefit of a shareholder upon the winding-up of the corporation, the following rules apply:
(a)  the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds of disposition equal to its fair market value at that time;
(b)  the shareholder is deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up;
(c)  sections 302 and 304 do not apply in computing the cost of the property to the shareholder; and
(d)  sections 93.3.1, 106.4, 175.9, 238.1 and 238.3 do not apply in respect of a property disposed of on the winding-up.
1972, c. 23, s. 359; 1975, c. 22, s. 91; 1980, c. 13, s. 45; 1984, c. 15, s. 93; 1993, c. 16, s. 180; 1995, c. 49, s. 117; 1997, c. 3, s. 71; 2000, c. 5, s. 99; 2003, c. 2, s. 116; 2009, c. 5, s. 140.
424. (1)  Where at any time property of a corporation is appropriated in any manner to or for the benefit of a shareholder of the corporation gratuitously or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have contributed to increase the corporation’s income or to reduce a loss of the corporation, the corporation is deemed, at that time, to have disposed of the property and to have received proceeds of disposition therefor equal to its fair market value at that time.
(2)  Where in a taxation year of the corporation such property is appropriated in any manner whatever to, or for the benefit of, a shareholder upon the winding-up of the corporation, the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds of disposition equal to its fair market value at that time, and sections 93.3.1, 106.4, 175.9, 238.1 and 238.3 do not apply in respect of any property disposed of on the winding-up.
(3)  The shareholder referred to in subsection 2 is deemed to have acquired that property at a cost equal to its fair market value immediately before the winding-up and sections 302 and 304 do not apply in computing the cost of that property to him.
(4)  (Subsection repealed).
1972, c. 23, s. 359; 1975, c. 22, s. 91; 1980, c. 13, s. 45; 1984, c. 15, s. 93; 1993, c. 16, s. 180; 1995, c. 49, s. 117; 1997, c. 3, s. 71; 2000, c. 5, s. 99; 2003, c. 2, s. 116.
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