I-3 - Taxation Act

Section 577.1 Disposition versions

2006-03-01

577.1. Notwithstanding section 577, a taxpayer who, immediately before a prescribed reorganization, held a common share of the capital stock of a prescribed corporation, referred to as a “share of the corporation” in the second paragraph, and who elects that the rules in the second paragraph apply for the purposes of this Part is not required to include, in computing his income for the taxation year 1984, the amount which, under section 577 and but for this section, should have been included, as a consequence of the reorganization, in respect of the value of a share of the capital stock of a prescribed regional holding company that he received at the time of the reorganization, referred to as a “distributed share” in the second paragraph.

For the purposes of computing the adjusted cost base, at any particular time after the reorganization, to the taxpayer contemplated in the first paragraph, of each share of the corporation and each distributed share owned by him immediately after the reorganization and thereafter without interruption until the particular time, the following rules apply:

(a)  the taxpayer is deemed to have disposed, at the time of the reorganization, of the share of the corporation for proceeds of disposition equal to its adjusted cost basis to him immediately before the reorganization and to have reacquired it immediately after the reorganization at a cost equal to the proportion of the adjusted cost base to him, immediately before the reorganization, of all the shares of the corporation held by him immediately before the reorganization that the fair market value of the share of the corporation, immediately after the reorganization, is of the fair market value of the aggregate of the shares of the corporation and the distributed shares held by him immediately after the reorganization; and

(b)  the taxpayer is deemed to have acquired, immediately after the reorganization, the distributed share at a cost equal to the proportion of the adjusted cost base to him, immediately before the reorganization of all the shares of the corporation held by him immediately before the reorganization, that the fair market value of the distributed share, immediately after the reorganization, is of the fair market value of the aggregate of the shares of the corporation and the distributed shares held by him immediately after the reorganization.

1986, c. 19, s. 128; 1997, c. 3, s. 71.