I-3 - Taxation Act

Section 560 Disposition versions

2015-12-04

560. The amount that is to be added to the cost, to the parent, of a particular capital property described in the second paragraph of section 559 is equal, subject to the second paragraph, to the lesser of

(a)  the total of

i.  the amount designated after 19 December 2006 by the parent in accordance with paragraph d of subsection 1 of section 88 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in relation to the particular capital property, and

ii.  if the total of the amounts designated by the parent in accordance with paragraph d of subsection 1 of section 88 of the Income Tax Act in relation to the aggregate of the capital properties described in the second paragraph of section 559 corresponds to the maximum total of the amounts that the parent may then designate in accordance with that paragraph d in relation to the aggregate of those capital properties, the portion—that is specified by the parent, in its fiscal return under this Part for the taxation year in which the subsidiary is wound up, in relation to the particular capital property and that is not so specified in relation to another capital property—of the amount by which the amount described in the third paragraph in respect of the capital properties described in the second paragraph of section 559 exceeds the portion of the maximum total of the amounts that the parent may then designate in accordance with that paragraph d in relation to the aggregate of those capital properties that exceeds the aggregate of all amounts each of which is the amount by which the amount described in subparagraph i in respect of a capital property described in the second paragraph of section 559 exceeds the amount determined under subparagraph b in respect of that capital property; and

(b)  the amount by which the fair market value of the particular capital property, at the time the parent last acquired control of the subsidiary, exceeds the aggregate of

i.  the greater of the cost amount to the subsidiary of the capital property at the time the parent last acquired control of the subsidiary and the cost amount to the subsidiary of the capital property immediately before the winding-up, and

ii.  the amount prescribed for the purposes of C in the formula in subparagraph ii of paragraph d of subsection 1 of section 88 of the Income Tax Act.

However, if the aggregate of the amounts determined under the first paragraph in respect of the capital properties described in the second paragraph of section 559 would, but for this paragraph, exceed the amount described in the third paragraph, the amount otherwise determined under the first paragraph in respect of such a capital property must be reduced to the amount specified in relation to that capital property by the parent in its fiscal return under this Part for the taxation year in which the subsidiary is wound up or, if no amount is so specified, by the Minister, so that the aggregate is equal to the amount described in the third paragraph.

The amount referred to in subparagraph ii of subparagraph a of the first paragraph and in the second paragraph is an amount equal to the amount by which the aggregate described in paragraph b of section 558 exceeds the aggregate of

(a)  the amount determined under subparagraph ii of paragraph a of section 558; and

(b)  the aggregate of each amount relating to a share of the capital stock of the subsidiary disposed of by the parent on the winding-up or in contemplation of the winding-up and equal to the aggregate of each amount received by the parent or by a corporation with which the parent was not dealing at arm’s length, otherwise than because of a right referred to in paragraph b of section 20 in respect of the subsidiary, in respect of that share or a share (in this subparagraph referred to as a “replacement share”) that replaced that share or a replacement share or that was exchanged for that share or a replacement share, as a taxable dividend, to the extent that the amount was deductible under sections 738 to 745 or section 845 in computing the taxable income of the recipient corporation for a taxation year and was not an amount on which it was required to pay prescribed tax, or as a capital dividend or life insurance capital dividend.

Chapter V.2 of Title II of Book I applies in relation to a designation made under paragraph d of subsection 1 of section 88 of the Income Tax Act or in relation to a determination made under this section before 20 December 2006.

1972, c. 23, s. 438; 1978, c. 26, s. 102; 1980, c. 13, s. 57; 1990, c. 59, s. 201; 1993, c. 16, s. 222; 1997, c. 3, s. 71; 2009, c. 5, s. 183; 2015, c. 36, s. 23.

2009-05-15

560. The amount that is to be added to the cost, to the parent, of a particular capital property described in the second paragraph of section 559 is equal, subject to the second paragraph, to the lesser of

(a)  the total of

i.  the amount designated after 19 December 2006 by the parent in accordance with paragraph d of subsection 1 of section 88 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in relation to the particular capital property, and

ii.  if the total of the amounts designated by the parent in accordance with paragraph d of subsection 1 of section 88 of the Income Tax Act in relation to the aggregate of the capital properties described in the second paragraph of section 559 corresponds to the maximum total of the amounts that the parent may then designate in accordance with that paragraph d in relation to the aggregate of those capital properties, the portion—that is specified by the parent, in its fiscal return under this Part for the taxation year in which the subsidiary is wound up, in relation to the particular capital property and that is not so specified in relation to another capital property—of the amount by which the amount described in the third paragraph in respect of the capital properties described in the second paragraph of section 559 exceeds the portion of the maximum total of the amounts that the parent may then designate in accordance with that paragraph d in relation to the aggregate of those capital properties that exceeds the aggregate of all amounts each of which is the amount by which the amount described in subparagraph i in respect of a capital property described in the second paragraph of section 559 exceeds the amount determined under subparagraph b in respect of that capital property; and

(b)  the amount by which the fair market value of the particular capital property, at the time the parent last acquired control of the subsidiary, exceeds the cost amount of that capital property to the subsidiary immediately before the winding-up.

However, if the aggregate of the amounts determined under the first paragraph in respect of the capital properties described in the second paragraph of section 559 would, but for this paragraph, exceed the amount described in the third paragraph, the amount otherwise determined under the first paragraph in respect of such a capital property must be reduced to the amount specified in relation to that capital property by the parent in its fiscal return under this Part for the taxation year in which the subsidiary is wound up or, if no amount is so specified, by the Minister, so that the aggregate is equal to the amount described in the third paragraph.

The amount referred to in subparagraph ii of subparagraph a of the first paragraph and in the second paragraph is an amount equal to the amount by which the aggregate described in paragraph b of section 558 exceeds the aggregate of

(a)  the amount determined under subparagraph ii of paragraph a of section 558; and

(b)  the aggregate of each amount relating to a share of the capital stock of the subsidiary disposed of by the parent on the winding-up or in contemplation of the winding-up and equal to the aggregate of each amount received by the parent or by a corporation with which the parent was not dealing at arm’s length, otherwise than because of a right referred to in paragraph b of section 20 in respect of the subsidiary, in respect of that share or a share (in this subparagraph referred to as a “replacement share”) that replaced that share or a replacement share or that was exchanged for that share or a replacement share, as a taxable dividend, to the extent that the amount was deductible under sections 738 to 745 or section 845 in computing the taxable income of the recipient corporation for a taxation year and was not an amount on which it was required to pay prescribed tax, or as a capital dividend or life insurance capital dividend.

Chapter V.2 of Title II of Book I applies in relation to a designation made under paragraph d of subsection 1 of section 88 of the Income Tax Act or in relation to a determination made under this section before 20 December 2006.

1972, c. 23, s. 438; 1978, c. 26, s. 102; 1980, c. 13, s. 57; 1990, c. 59, s. 201; 1993, c. 16, s. 222; 1997, c. 3, s. 71; 2009, c. 5, s. 183.

2006-03-01

560. For the purposes of the second paragraph of section 559, the parent shall itself determine in its fiscal return for the taxation year in which the subsidiary is wound up the part of the excess to be added to each property.

However, the part of that excess that is added must not exceed, in respect of a capital property contemplated in the second paragraph of section 559, that part of the fair market value of the capital property at the time the parent last acquired control of the subsidiary that exceeds the cost amount of the capital property to the subsidiary immediately before the winding-up.

Furthermore, the aggregate of all the parts so determined in respect of all the capital properties contemplated in the second paragraph of section 559 must not exceed the amount by which the aggregate contemplated in paragraph b of section 558 exceeds the aggregate of the amount determined under subparagraph ii of paragraph a of section 558 and the amount determined under subparagraph b of the second paragraph of section 559.

1972, c. 23, s. 438; 1978, c. 26, s. 102; 1980, c. 13, s. 57; 1990, c. 59, s. 201; 1993, c. 16, s. 222; 1997, c. 3, s. 71.