I-3 - Taxation Act

Section 333.10 Disposition versions

2015-10-21

333.10. For the purposes of section 333.9, subparagraph 1 of subparagraph ii of each of subparagraphs b and c of the first paragraph of that section applies to the grant of a restrictive covenant only if

(a)  the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property; and

(b)  where all or part of the consideration can reasonably be regarded as being for a goodwill amount, section 333.5, subparagraph b of the first paragraph of section 333.6 and subparagraph i of subparagraphs b and c of the first paragraph of section 333.9 apply to that consideration.

In determining whether the conditions of subparagraph c of the first paragraph of section 333.9 have been met, and for the purposes of section 422, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that could reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.

2009, c. 5, s. 117; 2015, c. 21, s. 164.

2009-05-15

333.10. Subject to section 333.13, section 421 does not apply to deem consideration to be an amount received or receivable by a taxpayer (in this section referred to as the “vendor”) for a restrictive covenant granted by the taxpayer if

(a)  the restrictive covenant is granted by the vendor to another taxpayer (in this section and section 333.11 referred to as the “purchaser”) with whom the vendor deals at arm’s length, determined without reference to paragraph b of section 20;

(b)  the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser or by a person related to the purchaser in the course of carrying on the business to which the restrictive covenant relates;

(c)  it is reasonable to conclude that the restrictive covenant is an integral part of an agreement in writing

i.  under which the vendor disposes of a property, other than a property to which subparagraph ii applies, to the purchaser for consideration that is received or receivable by the vendor, or

ii.  under which shares of the capital stock of a corporation (in this section and section 333.11 referred to as the “target corporation”) are disposed of to the purchaser;

(d)  if subparagraph i of paragraph c applies, the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor as consideration for the disposition of the property;

(e)  if subparagraph ii of paragraph c applies, no portion of the amount of consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable, directly or indirectly, in any manner whatever, by an individual (in this section and section 333.11 referred to as the “non arm’s length individual”) with whom the vendor does not deal at arm’s length or by another taxpayer in which the non arm’s length individual holds, directly or indirectly, an interest;

(f)  section 506 does not apply to the disposition;

(g)  neither sections 518 to 533 nor the second paragraph of section 614 applies to the disposition; and

(h)  the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of the vendor’s property disposed of to the purchaser or of the shares of the target corporation disposed of to the purchaser.

2009, c. 5, s. 117.