I-3 - Taxation Act

Section 444 Disposition versions

2017-12-07

444. The rules set out in the second paragraph apply to an individual and to a child of the individual in respect of a property to which section 436 would, if this Act were read without reference to this section, apply if

(a)  the property was, immediately before the individual’s death,

i.  a share of the capital stock of a family farm or fishing corporation of the individual or an interest in a family farm or fishing partnership of the individual, or

ii.  land or a depreciable property of a prescribed class situated in Canada that was, before the death, used principally in the course of carrying on a farming or fishing business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of a property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot;

(b)  the child of the individual was resident in Canada immediately before the day on which the individual died; and

(c)  because of the individual’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the individual’s death or, if application has been made to the Minister by the individual’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the individual’s legal representative does not make a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  sections 422 and 436 do not apply to the individual and the child in respect of the property,

ii.  the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the individual and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the individual that the capital cost of the property to the individual is of the capital cost to the individual of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, or a share of the capital stock of a family farm or fishing corporation of the individual, the adjusted cost base of the property to the individual immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the individual’s death, an interest in a family farm or fishing partnership of the individual, other than an interest to which section 636 applies, the following rules apply:

(1)  the individual is deemed, except for the purposes of section 632, not to have disposed of the property because of the individual’s death,

(2)  the child is deemed to have acquired the property at the time of the individual’s death at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the individual, immediately before the individual’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the individual’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, except where the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the individual exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, and the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class of the individual and the capital cost of the property to the individual exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the individual’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the individual’s legal representative makes a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph ii of this subparagraph b,

ii.  subject to subparagraph iii, the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the individual’s legal representative, the amount established in accordance with section 450.5 that is designated in respect of the property by the individual’s legal representative in the individual’s fiscal return filed in accordance with section 1000 for the year in which the individual died, if the individual, immediately before the individual’s death, and the child, at the end of the child’s taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the individual died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.01 or 9.21, if subparagraph 1 does not apply in respect of the property,

iii.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the individual’s legal representative makes another valid election under subparagraph iii of paragraph b of subsection 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that subparagraph iii of paragraph b apply to the individual in respect of the property, and

iv.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph ii, or

(2)  if subparagraph iii applies, at the time of the individual’s death and at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death.

However, subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph ii and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the individual, immediately before the individual’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the legal representative of the deceased individual, the Minister may allow subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the legal representative, after the individual’s filing-due date for the year in which the individual died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the legal representative under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the legal representative of the deceased individual incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year in which the individual died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the legal representative in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.01 or 9.21 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the legal representative of the deceased individual

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year of the individual’s death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the legal representative of the deceased individual incurs under this section in respect of the property may not exceed the greater of the penalties that the legal representative would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1973, c. 17, s. 49; 1977, c. 26, s. 53; 1979, c. 18, s. 30; 1986, c. 15, s. 81; 1986, c. 19, s. 100; 1993, c. 16, s. 184; 1994, c. 22, s. 174; 1995, c. 49, s. 127; 1997, c. 3, s. 71; 1997, c. 85, s. 70; 2000, c. 5, s. 293; 2002, c. 40, s. 36; 2004, c. 8, s. 92; 2007, c. 12, s. 57; 2009, c. 5, s. 149; 2017, c. 29, s. 64.

2009-05-15

444. The rules set out in the second paragraph apply to an individual and to a child of the individual in respect of a property to which section 436 would, if this Act were read without reference to this section, apply if

(a)  the property was, immediately before the individual’s death,

i.  a share of the capital stock of a family farm corporation of the individual, an interest in a family farm partnership of the individual, a share of the capital stock of a family fishing corporation of the individual or an interest in a family fishing partnership of the individual, or

ii.  land or a depreciable property of a prescribed class situated in Canada that was, before the death, used principally in the course of carrying on a fishing or farming business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of a property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot;

(b)  the child of the individual was resident in Canada immediately before the day on which the individual died; and

(c)  because of the individual’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the individual’s death or, if application has been made to the Minister by the individual’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the individual’s legal representative does not make a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  sections 422 and 436 do not apply to the individual and the child in respect of the property,

ii.  the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the individual and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the individual that the capital cost of the property to the individual is of the capital cost to the individual of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, a share of the capital stock of a family farm corporation of the individual or a share of the capital stock of a family fishing corporation of the individual, the adjusted cost base of the property to the individual immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the individual’s death, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, other than an interest to which section 636 applies, the following rules apply:

(1)  the individual is deemed, except for the purposes of section 632, not to have disposed of the property because of the individual’s death,

(2)  the child is deemed to have acquired the property at the time of the individual’s death at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the individual, immediately before the individual’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the individual’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, except where the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the individual exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, and the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class of the individual and the capital cost of the property to the individual exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the individual’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the individual’s legal representative makes a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph ii of this subparagraph b,

ii.  subject to subparagraph iii, the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the individual’s legal representative, the amount established in accordance with section 450.5 that is designated in respect of the property by the individual’s legal representative in the individual’s fiscal return filed in accordance with section 1000 for the year in which the individual died, if the individual, immediately before the individual’s death, and the child, at the end of the child’s taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the individual died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.01 or 9.21, if subparagraph 1 does not apply in respect of the property,

iii.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the individual’s legal representative makes another valid election under subparagraph iii of paragraph b of subsection 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that subparagraph iii of paragraph b apply to the individual in respect of the property, and

iv.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph ii, or

(2)  if subparagraph iii applies, at the time of the individual’s death and at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death.

However, subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph ii and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the individual, immediately before the individual’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the legal representative of the deceased individual, the Minister may allow subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the legal representative, after the individual’s filing-due date for the year in which the individual died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the legal representative under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the legal representative of the deceased individual incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year in which the individual died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the legal representative in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.01 or 9.21 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the legal representative of the deceased individual

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year of the individual’s death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the legal representative of the deceased individual incurs under this section in respect of the property may not exceed the greater of the penalties that the legal representative would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1973, c. 17, s. 49; 1977, c. 26, s. 53; 1979, c. 18, s. 30; 1986, c. 15, s. 81; 1986, c. 19, s. 100; 1993, c. 16, s. 184; 1994, c. 22, s. 174; 1995, c. 49, s. 127; 1997, c. 3, s. 71; 1997, c. 85, s. 70; 2000, c. 5, s. 293; 2002, c. 40, s. 36; 2004, c. 8, s. 92; 2007, c. 12, s. 57; 2009, c. 5, s. 149.

2007-11-07

444. The rules set out in the second paragraph apply to an individual and to a child of the individual in respect of a property to which section 436 would, if this Act were read without reference to this section, apply if

(a)  the property was, immediately before the individual’s death,

i.  a share of the capital stock of a family farm corporation of the individual, an interest in a family farm partnership of the individual, a share of the capital stock of a family fishing corporation of the individual or an interest in a family fishing partnership of the individual, or

ii.  land or a depreciable property of a prescribed class situated in Canada that was, before the death, used principally in the course of carrying on a fishing or farming business in Canada in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of a property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot;

(b)  the child of the individual was resident in Canada immediately before the day on which the individual died; and

(c)  because of the individual’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the individual’s death or, if application has been made to the Minister by the individual’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the individual’s legal representative does not make a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  sections 422 and 436 do not apply to the individual and the child in respect of the property,

ii.  the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the individual and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the individual that the capital cost of the property to the individual is of the capital cost to the individual of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, a share of the capital stock of a family farm corporation of the individual or a share of the capital stock of a family fishing corporation of the individual, the adjusted cost base of the property to the individual immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the individual’s death, an interest in a family farm partnership of the individual or an interest in a family fishing partnership of the individual, other than an interest to which section 636 applies, the following rules apply:

(1)  the individual is deemed, except for the purposes of section 632, not to have disposed of the property because of the individual’s death,

(2)  the child is deemed to have acquired the property at the time of the individual’s death at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the individual, immediately before the individual’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the individual’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, except where the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the individual exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the individual is deemed under subparagraph ii to be acquired by the child because of the individual’s death, and the individual’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class of the individual and the capital cost of the property to the individual exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the individual, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the individual’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the individual’s legal representative makes a valid election under paragraph b of subsection 9.01 or 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that paragraph b apply to the individual and the child in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph ii of this subparagraph b,

ii.  subject to subparagraph iii, the individual is deemed, immediately before the individual’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the individual’s legal representative, the amount established in accordance with section 450.5 that is designated in respect of the property by the individual’s legal representative in the individual’s fiscal return filed in accordance with section 1000 for the year in which the individual died, if the individual, immediately before the individual’s death, and the child, at the end of the child’s taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the individual died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.01 or 9.21, if subparagraph 1 does not apply in respect of the property,

iii.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the individual’s legal representative makes another valid election under subparagraph iii of paragraph b of subsection 9.21 of section 70 of the Income Tax Act in the individual’s fiscal return filed under Part I of that Act for the year in which the individual died, to have that subparagraph iii of paragraph b apply to the individual in respect of the property, and

iv.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph ii, or

(2)  if subparagraph iii applies, at the time of the individual’s death and at a cost equal to the cost of the interest to the individual immediately before the time that is immediately before the time of the individual’s death.

However, subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph ii and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the individual, immediately before the individual’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the legal representative of the deceased individual, the Minister may allow subparagraph 1 of subparagraph ii of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the legal representative, after the individual’s filing-due date for the year in which the individual died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the legal representative under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the legal representative of the deceased individual incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year in which the individual died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the legal representative in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.01 or 9.21 of section 70 of that Act is extended or such an election made previously is amended or revoked, the legal representative of the deceased individual

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year of the individual’s death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the legal representative of the deceased individual incurs under this section in respect of the property may not exceed the greater of the penalties that the legal representative would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or revoked election referred to in the sixth paragraph.

1973, c. 17, s. 49; 1977, c. 26, s. 53; 1979, c. 18, s. 30; 1986, c. 15, s. 81; 1986, c. 19, s. 100; 1993, c. 16, s. 184; 1994, c. 22, s. 174; 1995, c. 49, s. 127; 1997, c. 3, s. 71; 1997, c. 85, s. 70; 2000, c. 5, s. 293; 2002, c. 40, s. 36; 2004, c. 8, s. 92; 2007, c. 12, s. 57.

2006-03-01

444. Notwithstanding section 436, where property referred to in that section is, immediately before the death of an individual, a share of the capital stock of a family farm corporation of the individual or an interest in a family farm partnership of the individual or is land or depreciable property of a prescribed class situated in Canada which was, before the death, used principally in the business of farming in which the individual, the individual’s spouse or any of the individual’s children was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot, and the property is, by reason of the death, transferred or distributed to a child of the individual who was resident in Canada immediately before the death and it can be shown, within the period ending 36 months after the death of the individual or, where written application therefor has been made to the Minister by the individual’s legal representative before the expiry of that period, within such longer period as the Minister considers reasonable, that the property has become vested indefeasibly in the child,

(a)  the individual is deemed to have, immediately before his death, disposed of the property and received proceeds of disposition therefor equal to the following amount, and the child is deemed to have acquired the property at the time of the death at a cost equal to those proceeds:

i.  where the property was depreciable property of a prescribed class, the lesser of the capital cost and the cost amount to the individual of the property immediately before his death, and

ii.  where the property is land, other than land to which subparagraph i applies, or a share of the capital stock of a family farm corporation, the adjusted cost base of the property to the individual immediately before his death;

(a.1)  where the property is an interest in a family farm partnership, other than an interest to which section 636 applies,

i.  the individual is deemed, except for the purpose of section 632, not to have disposed of the property as a consequence of his death,

ii.  the child is deemed to have acquired the property at the time of the death at a cost equal to the cost to the individual of the property, and

iii.  each amount added or deducted under section 255 or 257, as the case may be, in computing the adjusted cost base to the individual of the property is deemed to be required by that section 255 or 257 to be added or deducted in computing the adjusted cost base to the child of the property;

(b)  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 the individual is deemed under subparagraph a to be acquired by the child as a consequence of the individual’s death, except where the individual’s proceeds of disposition of the property under subparagraph a are redetermined under sections 93.1 to 93.3, and the capital cost to the individual of the property exceeds the amount determined under subparagraph a to be the cost to the child of the property, the following rules apply:

i.  the capital cost to the child of the property is deemed to be equal to the capital cost to the individual of the property, and

ii.  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition; and

(c)  notwithstanding subparagraph a, where property of an individual is deemed under subparagraph a to be acquired by the child as a consequence of the individual’s death, and the individual’s proceeds of disposition of the property under subparagraph a are redetermined under sections 93.1 to 93.3, the following rules apply:

i.  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 the property was depreciable property of a prescribed class and the capital cost to the individual of the property exceeds the amount so redetermined under sections 93.1 to 93.3,

(1)  the capital cost to the child of the property is deemed to be equal to the capital cost to the individual of the property, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

ii.  where the property is land, other than land to which subparagraph i applies, the cost to the child of the property is deemed to be equal to the amount that was the individual’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3.

Notwithstanding the foregoing, where the legal representative of the individual referred to in the first paragraph makes a valid election under subsection 9 or 9.2 of section 70 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in respect of property referred to in the first paragraph, the following rules apply:

(a)  the first paragraph applies without reference to subparagraphs a and a.1 thereof, and as if the references to subparagraph a in subparagraphs b and c of that paragraph were read as references to subparagraph b of this paragraph;

(b)  the individual is deemed to have, immediately before the individual’s death, disposed of the property and received proceeds of disposition therefor equal to

i.  subject to the fourth paragraph and unless otherwise indicated by the individual’s legal representative, such amount established in accordance with section 450.5 as is designated in respect of the property by the individual’s legal representative in the individual’s fiscal return filed in accordance with section 1000 for the year in which the individual died, where the individual, immediately before the death, and the child, at the end of the individual’s taxation year in which the death occurred, were resident in Québec and where the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the individual died, was not less than 9/10 for that year, or

ii.  such amount as is determined in respect of the property under subsection 9 or 9.2, as the case may be, where subparagraph i does not apply in respect of the property; and

(c)  the child is deemed to have acquired the property at the time of the death at a cost equal to the proceeds of the disposition established in the child’s respect under subparagraph b.

Sections 520.3 and 522.1 to 522.5 apply, with the necessary modifications, in respect of the disposition of the property and the conditions described in subparagraph i of subparagraph b of the second paragraph in relation to the individual and the child for the year in which the individual died.

However, subparagraph i of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph i, be referred to in respect of the property in subparagraph ii of that subparagraph b and the amount designated in its respect in that subparagraph i, is justified by a difference between the cost amount of the property to the individual, immediately before the individual’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the legal representative of the deceased individual, the Minister may allow subparagraph i of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the legal representative, after the individual’s filing-due date for the year in which the individual died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the legal representative under that subparagraph in respect of the property.

Where an application made under the fifth paragraph is granted by the Minister, the legal representative of the deceased individual incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year in which the individual died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the legal representative in respect of the transfer or distribution of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under subsection 9 or 9.2, as the case may be, of section 70 of that Act is extended or such an election made previously is amended or revoked, the legal representative of the deceased individual

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the legal representative to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the individual’s filing-due date for the year of the individual’s death and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the legal representative of the deceased individual incurs under this section in respect of the property may not exceed the greater of the penalties that the legal representative would otherwise incur in respect of the property, under the sixth paragraph or subparagraph b of the seventh paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fifth paragraph, or the election or the amended or revoked election referred to in the seventh paragraph.

1973, c. 17, s. 49; 1977, c. 26, s. 53; 1979, c. 18, s. 30; 1986, c. 15, s. 81; 1986, c. 19, s. 100; 1993, c. 16, s. 184; 1994, c. 22, s. 174; 1995, c. 49, s. 127; 1997, c. 3, s. 71; 1997, c. 85, s. 70; 2000, c. 5, s. 293; 2002, c. 40, s. 36; 2004, c. 8, s. 92.