I-3 - Taxation Act

Section 1049.14.6 Disposition versions

2010-04-20

1049.14.6. If a corporation issues a share of its capital stock with the stipulation that it can be included in a stock savings plan II, or issues a share of its capital stock in replacement of a share issued with such a stipulation or in replacement of a share issued in substitution for such a share, and the corporation’s net shareholders’ equity is affected in any manner whatever, directly or indirectly, in the year the share issued with such a stipulation was issued but after the time of the issue or in the two years following that year, following a transaction or operation or a series of transactions or operations other than that referred to in section 965.112 or a particular transaction referred to in section 965.113 in respect of which the corporation is not bound to meet the requirement set out in the second paragraph of section 965.110, it incurs a penalty equal to the amount determined under the second paragraph if, in the opinion of the Minister, it is reasonable to believe that the transaction or operation or the series of transactions or operations is equivalent to the redemption of a share of a class of its capital stock other than a share described in section 965.111.

The amount of the penalty prescribed in the first paragraph in respect of a transaction or operation or of a series of transactions or operations is equal to the lesser of

(a)  25% of the amount obtained by multiplying the amount determined under the second paragraph of section 965.110 in respect of the transaction or operation or of the series of transactions or operations by the proportion that the adjusted cost of the aggregate of the shares of the capital stock of the corporation that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the two years preceding that year, with the stipulation that they could be included in a stock savings plan II, and distributed in Québec and of the shares of the capital stock of the corporation issued in replacement of shares issued with such a stipulation, that were issued in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the two years preceding that year and distributed in Québec, is of the paid-up capital at the time of the issue in respect of the aggregate of such shares of the corporation; and

(b)  25% of the adjusted cost of the aggregate of

i.  the shares of the capital stock of the corporation that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the two years preceding that year, with the stipulation that they could be included in a stock savings plan II, and distributed in Québec to an individual or to a qualified mutual fund,

ii.  the shares of the capital stock of the corporation issued in replacement of shares that are not described in subparagraph i, that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the two years preceding that year, with the stipulation that they could be included in a stock savings plan II, and distributed in Québec to an individual or to a qualified mutual fund, and

iii.  the shares of the capital stock of the corporation issued in replacement of shares, other than shares described in subparagraph ii, issued in substitution for shares, other than shares described in subparagraph i, that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the two years preceding that year, with the stipulation that they could be included in a stock savings plan II, and distributed in Québec to an individual or to a qualified mutual fund.

2006, c. 13, s. 202; 2010, c. 5, s. 174.

2006-06-13

1049.14.6. If a corporation issues a share of its capital stock with the stipulation that it can be included in an SME growth stock plan, or issues a share of its capital stock in replacement of a share issued with such a stipulation or in replacement of a share issued in substitution for such a share, and the corporation’s net shareholders’ equity is affected in any manner whatever, directly or indirectly, in the year the share issued with such a stipulation was issued but after the time of the issue or in the three years following that year, following a transaction or operation or a series of transactions or operations other than that referred to in section 965.112 or a particular transaction referred to in section 965.113 in respect of which the corporation is not bound to meet the requirement set out in the second paragraph of section 965.110, it incurs a penalty equal to the amount determined under the second paragraph if, in the opinion of the Minister, it is reasonable to believe that the transaction or operation or the series of transactions or operations is equivalent to the redemption of a share of a class of its capital stock other than a share described in section 965.111.

The amount of the penalty prescribed in the first paragraph in respect of a transaction or operation or of a series of transactions or operations is equal to the lesser of

(a)  25% of the amount obtained by multiplying the amount determined under the second paragraph of section 965.110 in respect of the transaction or operation or of the series of transactions or operations by the proportion that the adjusted cost of the aggregate of the shares of the capital stock of the corporation that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the three years preceding that year, with the stipulation that they could be included in an SME growth stock plan, and distributed in Québec and of the shares of the capital stock of the corporation issued in replacement of shares issued with such a stipulation, that were issued in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the three years preceding that year and distributed in Québec, is of the paid-up capital at the time of the issue in respect of the aggregate of such shares of the corporation; and

(b)  25% of the adjusted cost of the aggregate of

i.  the shares of the capital stock of the corporation that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the three years preceding that year, with the stipulation that they could be included in an SME growth stock plan, and distributed in Québec to an individual or to a qualified mutual fund,

ii.  the shares of the capital stock of the corporation issued in replacement of shares that are not described in subparagraph i, that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the three years preceding that year, with the stipulation that they could be included in an SME growth stock plan, and distributed in Québec to an individual or to a qualified mutual fund, and

iii.  the shares of the capital stock of the corporation issued in replacement of shares, other than shares described in subparagraph ii, issued in substitution for shares, other than shares described in subparagraph i, that were issued, in the year of the transaction or operation or of the series of transactions or operations but before the time of the transaction or operation or of the series of transactions or operations or in the three years preceding that year, with the stipulation that they could be included in an SME growth stock plan, and distributed in Québec to an individual or to a qualified mutual fund.

2006, c. 13, s. 202.