I-3 - Taxation Act

Section 437 Disposition versions

2019-06-19

437. Despite section 440, where property included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1) of a taxpayer in respect of a business carried on by the taxpayer immediately before the taxpayer’s death that is a property to which sections 436, 439 and 439.1 would otherwise apply is, as a consequence of the death, transferred or distributed (otherwise than by way of a distribution of property by a trust that claimed a deduction under paragraph a of section 130 or paragraph b of that section, as it read immediately before 1 January 2017, in respect of the property or in circumstances to which section 189 applies) to any person (in this section referred to as the “beneficiary”), the following rules apply:

(a)  section 436 does not apply in respect of the property;

(b)  the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the taxpayer of the property immediately before the death;

(c)  the beneficiary is deemed to have acquired the property at the time of the death at a cost equal to those proceeds; and

(d)  section 439 applies as if the portion of that section before paragraph a were read as follows:

"439. For the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or section 130.1, where depreciable property of a prescribed class of a deceased individual is deemed under paragraph c of section 437 to be acquired by a person, except where the individual’s proceeds of disposition of the property determined under paragraph b of section 437 are redetermined under sections 93.1 to 93.3, and the capital cost to the individual of the property exceeds the amount determined under paragraph c of section 437 to be the cost to the person of the property, the following rules apply: ”

1975, c. 22, s. 96; 1990, c. 59, s. 171; 1993, c. 16, s. 182; 1994, c. 22, s. 164; 1995, c. 49, s. 122; 1996, c. 39, s. 125; 2001, c. 7, s. 45; 2003, c. 2, s. 119; 2005, c. 1, s. 103; 2019, c. 14, s. 126.

2006-03-01

437. Notwithstanding section 188, where at any time an individual has died and any person has, as a consequence of the individual’s death, acquired an incorporeal capital property of the individual in respect of a business carried on by the individual immediately before that time, otherwise than by way of a distribution of property by a trust that has deducted an amount under paragraph b of section 130 in respect of the property or in circumstances to which section 189 applies, the following rules apply:

(a)  the individual is deemed to have disposed of the capital property immediately before his death for proceeds of disposition equal to 4/3 of that proportion of the eligible incorporeal capital amount of the individual in respect of the business that the fair market value immediately before that time of the capital property is of the fair market value immediately before that time of all of the incorporeal capital property of the individual in respect of the business;

(b)  the person is deemed, in respect of the incorporeal capital property, to have acquired a capital property at the time of the death of the individual at a cost equal to the proceeds of disposition determined under paragraph a, except where the person continues to carry on the business of the individual, in which case the person is deemed to have, at the time of the individual’s death, acquired an incorporeal capital property and disbursed therefor an incorporeal capital amount equal to the aggregate of

i.  the proceeds of disposition determined in paragraph a, and

ii.  4/3 of that proportion of the excess determined under subparagraph a of the second paragraph of section 107 in respect of the business of the individual at that time that the fair market value immediately before that time of the capital property is of the fair market value immediately before that time of all incorporeal capital property of the individual in respect of the business;

(c)  for the purposes of determining, at any time, the person’s eligible incorporeal capital amount contemplated in paragraph b in respect of the business he continues to carry on, an amount equal to 3/4 of the amount determined under subparagraph ii of paragraph b shall be added to the aggregate otherwise determined under subparagraph i of subparagraph a of the second paragraph of section 107;

(d)  for the purpose of determining, after the individual’s death, the amount required by paragraph b of section 105 to be included in computing the income of the person referred to in paragraph b in respect of any subsequent disposition of the property of the business, there shall be added to the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 the proportion of the amount determined under that subparagraph ii in respect of the business of the individual immediately before the individual’s death that the fair market value of that incorporeal capital property immediately before the time of the death is of the fair market value at that time of the aggregate of the incorporeal capital property of the individual in respect of the business.

1975, c. 22, s. 96; 1990, c. 59, s. 171; 1993, c. 16, s. 182; 1994, c. 22, s. 164; 1995, c. 49, s. 122; 1996, c. 39, s. 125; 2001, c. 7, s. 45; 2003, c. 2, s. 119; 2005, c. 1, s. 103.