I-3, r. 1 - Regulation respecting the Taxation Act

Section 851.22.1r0.3 Disposition versions

2012-09-01

851.22.1R0.3. For the purposes of paragraph e of the definition of “excluded property” in the first paragraph of section 851.22.1 of the Act, the following rules apply:

(a)  a share of the capital stock of a corporation is a prescribed property of a taxpayer if

i.  immediately after the time at which the taxpayer acquired the share, the corporation was a qualified small business corporation, and

(1)  the corporation continued to be a qualified small business corporation for one year after that time, or

(2)  the taxpayer could not reasonably expect at that time that the corporation would cease to be a qualified small business corporation within one year after that time, or

ii.  the share was issued to the taxpayer in exchange for one or more shares of the capital stock of the corporation that were, at the time of the exchange, prescribed property of the taxpayer under this subparagraph;

(b)  a share of the capital stock of a corporation that is held by a savings and credit union is a prescribed property of the savings and credit union for a taxation year if, throughout the period in that year, referred to in this subparagraph as the “holding period”, during which the savings and credit union holds the share,

i.  the corporation is a savings and credit union, or

ii.  the following conditions are satisfied:

(1)  savings and credit unions hold shares of the corporation that give the savings and credit unions at least 50% of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation and have a fair market value of at least 50% of the fair market value of all the issued shares of the corporation,

(2)  the corporation is not controlled, directly or indirectly in any manner whatever, by any person that is not a savings and credit union, and

(3)  the corporation would not be controlled by a person that is not a savings and credit union if each share of the corporation that is not owned at any time in the holding period by a savings and credit union were owned, at that time, by the person;

(c)  a share is a prescribed property of a taxpayer for a taxation year if

i.  the share is a lending asset of the taxpayer in the year, or

ii.  the share was, immediately after its issuance, a share described in section 21.6.1 of the Act and would, at any time in the year, be a term preferred share if Chapter VI of Title II of Book I of the Act were read without reference to sections 21.6 to 21.9.4.1 and, where the share was issued or acquired before 29 June 1982, it were issued or acquired after 28 June 1982; and

(d)  a debt obligation held by a bank is a prescribed property of the bank if the obligation is

i.  an exposure to a designated country within the meaning assigned by section 140.1R1,

ii.  a United Mexican States Collateralized Par Bond due 2019, or

iii.  a United Mexican States Collateralized Discount Bond due 2019.

For the purposes of subparagraph a of the first paragraph, “qualified small business corporation”, at any time, means a corporation in respect of which the following conditions are satisfied at that time:

(a)  the corporation is a Canadian-controlled private corporation;

(b)  the corporation either is an eligible corporation within the meaning of subsection 5100(1) of the Income Tax Regulations made under the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or would be an eligible corporation if the definition of “eligible corporation” in that subsection were read without reference to its paragraph e;

(c)  the total value of its assets and those of each corporation related to it, determined in accordance with generally accepted accounting principles on a consolidated or combined basis, does not exceed $50,000,000; and

(d)  the total number of its employees and those of each corporation related to it does not exceed 500.

O.C. 390-2012, s. 63.