I-3 - Taxation Act

Section 93.18 Disposition versions

2019-06-19

93.18. Where a taxpayer has incurred an incorporeal capital amount in respect of a business before 1 January 2017, the following rules apply:

(a)  at the beginning of 1 January 2017, the total capital cost of all property of the taxpayer included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1) in respect of the business, each of which was an incorporeal capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is deemed to be equal to the amount determined by the formula

4/3 × (A + B – C);

(b)  at the beginning of 1 January 2017, the capital cost of each property of the taxpayer included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act in respect of the business, each of which was an incorporeal capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is to be determined as follows:

i.  the order for determining the capital cost of each property that is not the goodwill property is identical to the order that is determined for the same purposes under subparagraph i of paragraph b of subsection 38 of section 13 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)),

ii.  the capital cost of a particular property that is not the goodwill property in respect of the business is deemed to be equal to the lesser of the incorporeal capital amount of the taxpayer in respect of the particular property and the amount by which the total capital cost of property of the class determined under subparagraph a exceeds the aggregate of all amounts each of which is an amount deemed under this subparagraph ii to be the capital cost of a property that is determined in advance of the determination of the capital cost of the particular property, and

iii.  the capital cost of the goodwill property is deemed to be equal to the amount by which the total capital cost of property of that Class 14.1 exceeds the aggregate of all amounts each of which is an amount deemed under subparagraph ii to be the capital cost of a property;

(c)  an amount equal to the amount by which the aggregate of the total capital cost of property of that Class 14.1 and the amount determined under subparagraph c of the second paragraph exceeds the amount determined under subparagraph a of the second paragraph is deemed to have been allowed to the taxpayer as depreciation in respect of property of that class under paragraph a of section 130 in computing the taxpayer’s income for taxation years ending before 1 January 2017; and

(d)  if no taxation year of the taxpayer ends immediately before 1 January 2017 and the taxpayer would have had a particular amount included, because of paragraph b of section 105, as it read before being repealed, in computing the taxpayer’s income from the business for the particular taxation year that includes that day if the particular year had ended immediately before that day,

i.  for the purposes of the formula in subparagraph a, 3/2 of the particular amount is to be included in computing the amount determined under subparagraph b of the first paragraph of section 107, as it read before being repealed,

ii.  the taxpayer is deemed to dispose of a capital property in respect of the business immediately before 1 January 2017 for proceeds of disposition equal to twice the particular amount,

iii.  if the taxpayer makes a valid election under subparagraph iii of paragraph d of subsection 38 of section 13 of the Income Tax Act, subparagraph ii does not apply and an amount equal to the particular amount is to be included in computing the taxpayer’s income from the business for the particular year,

iv.  if, after 31 December 2016 and in the particular year, the taxpayer acquires a property included in that Class 14.1 in respect of the business or is deemed under section 93.15 to acquire goodwill in respect of the business, and the taxpayer makes a valid election under subparagraph iv of paragraph d of subsection 38 of section 13 of the Income Tax Act,

(1)  for the purposes of subparagraphs ii and iii, the particular amount must be reduced by the lesser of the particular amount otherwise determined and 1/2 of the capital cost of the property or goodwill acquired (determined without reference to subparagraph 2), and

(2)  the capital cost of the property or goodwill acquired, as the case may be, must be reduced by twice the amount of the reduction under subparagraph 1, and

v.  if, in the part of the particular year preceding that day, the taxpayer disposed of a qualified farm or fishing property (as defined in subparagraph a.0.2 of the first paragraph of section 726.6) that was an incorporeal capital property of the taxpayer, the capital property disposed of by the taxpayer under subparagraph ii is deemed to be such a property to the extent of the lesser of

(1)  the proceeds of disposition of the capital property, and

(2)  the amount by which the proceeds of disposition of the qualified farm or fishing property exceed its cost.

In the formula in subparagraph a of the first paragraph,

(a)  A is the eligible incorporeal capital amount of the taxpayer in respect of the business at the beginning of 1 January 2017;

(b)  B is the excess amount determined under subparagraph a of the second paragraph of section 107, as it read before being repealed, in respect of the business at the beginning of 1 January 2017; and

(c)  C is the amount by which the amount determined under the second paragraph of section 107, as it read before being repealed, in respect of the business exceeds the aggregate of all amounts each of which is an amount determined under any of subparagraphs a to e of the first paragraph of that section in respect of the business at the beginning of 1 January 2017, with reference to any adjustment provided for in subparagraph i of subparagraph d of the first paragraph.

For the purposes of subparagraph i of subparagraph b of the first paragraph and subparagraphs iii and iv of subparagraph d of that paragraph, Chapter V.2 of Title II of Book I applies in relation to the order for determining the capital cost of a property in accordance with subparagraph i of paragraph b of subsection 38 of section 13 of the Income Tax Act and in relation to an election referred to in subparagraphs iii and iv of paragraph d of that subsection 38.

2019, c. 14, s. 74.