I-3 - Taxation Act

Section 589.2 Disposition versions

2019-06-19

589.2. If the disposition of shares of a class of the capital stock of a foreign affiliate of a particular corporation resident in Canada by a partnership would, but for this section, result in a taxable capital gain for a corporation (in this section referred to as the “disposing corporation”) that is the particular corporation or a foreign affiliate of the particular corporation and the particular corporation makes a valid election under subsection 1.2 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 in respect of the disposition, the following rules apply:

(a)  the amount determined in accordance with the second paragraph in respect of those shares is deemed to be a dividend received immediately before the disposition on the number of those shares that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(b)  notwithstanding Title XI, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount determined in accordance with subparagraph a of the second paragraph in relation to those shares;

(c)  (paragraph repealed);

(d)  for the purposes of sections 746 to 749 in relation to the dividend referred to in subparagraph a, the shares of the capital stock of the foreign affiliate on which that dividend was received are deemed to have been owned by the disposing corporation; and

(e)  where the application of section 261 in respect of the partnership, in relation to those shares, results in a taxable capital gain for the disposing corporation, the partnership is deemed, for the purposes of this section, to have disposed of those shares.

The amount to which subparagraph a of the first paragraph refers in respect of shares of a class of the capital stock of the foreign affiliate is, subject to the third paragraph, twice

(a)  the amount designated in respect of shares in accordance with subparagraph i of paragraph a of subsection 1.2 of section 93 of the Income Tax Act, not exceeding the proportion of the taxable capital gain of the partnership that the amount by which the number of shares of that class of the capital stock of the foreign affiliate that are deemed to be owned by the disposing corporation under section 592.1 immediately before the disposition exceeds the number of those shares that are deemed to be owned by the disposing corporation under that section immediately after the disposition, is of the number of shares of that class of the capital stock of the foreign affiliate that are owned by the partnership immediately before the disposition; or

(b)  where section 589.3 applies, the amount prescribed by regulation for the purposes of subparagraph ii of paragraph a of subsection 1.2 of section 93 of the Income Tax Act.

For the purposes of the second paragraph in respect of a disposing corporation for any of the following taxation years, the reference to “twice” in that paragraph shall be replaced, with the necessary modifications, by the following fraction, as the case may be:

(a)  in the case of a taxation year that ends before 28 February 2000, 4/3; and

(b)  in the case of a taxation year that includes 28 February 2000 or 17 October 2000 or that begins after 28 February 2000 and ends before 17 October 2000, the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies in respect of the disposing corporation for the year.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1.2 of section 93 of the Income Tax Act or in relation to an election made under the first paragraph before 20 December 2006.

2004, c. 8, s. 119; 2010, c. 25, s. 47; 2015, c. 36, s. 26; 2019, c. 14, s. 156.

2015-12-04

589.2. If the disposition of shares of a class of the capital stock of a foreign affiliate of a particular corporation resident in Canada by a partnership would, but for this section, result in a taxable capital gain for a corporation (in this section referred to as the “disposing corporation”) that is the particular corporation or a foreign affiliate of the particular corporation and the particular corporation makes a valid election under subsection 1.2 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 in respect of the disposition, the following rules apply:

(a)  the amount determined in accordance with the second paragraph in respect of those shares is deemed to be a dividend received immediately before the disposition on the number of those shares that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(b)  notwithstanding Title XI, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount determined in accordance with subparagraph a of the second paragraph in relation to those shares;

(c)  for the purposes of any regulation made under this section, the disposing corporation is deemed to have disposed of the number of shares of the capital stock of the foreign affiliate that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(d)  for the purposes of sections 746 to 749 in relation to the dividend referred to in subparagraph a, the shares of the capital stock of the foreign affiliate on which that dividend was received are deemed to have been owned by the disposing corporation; and

(e)  where the application of section 261 in respect of the partnership, in relation to those shares, results in a taxable capital gain for the disposing corporation, the partnership is deemed, for the purposes of this section, to have disposed of those shares.

The amount to which subparagraph a of the first paragraph refers in respect of shares of a class of the capital stock of the foreign affiliate is, subject to the third paragraph, twice

(a)  the amount designated in respect of shares in accordance with subparagraph i of paragraph a of subsection 1.2 of section 93 of the Income Tax Act, not exceeding the proportion of the taxable capital gain of the partnership that the amount by which the number of shares of that class of the capital stock of the foreign affiliate that are deemed to be owned by the disposing corporation under section 592.1 immediately before the disposition exceeds the number of those shares that are deemed to be owned by the disposing corporation under that section immediately after the disposition, is of the number of shares of that class of the capital stock of the foreign affiliate that are owned by the partnership immediately before the disposition; or

(b)  where section 589.3 applies, the amount prescribed by regulation for the purposes of subparagraph ii of paragraph a of subsection 1.2 of section 93 of the Income Tax Act.

For the purposes of the second paragraph in respect of a disposing corporation for any of the following taxation years, the reference to “twice” in that paragraph shall be replaced, with the necessary modifications, by the following fraction, as the case may be:

(a)  in the case of a taxation year that ends before 28 February 2000, 4/3; and

(b)  in the case of a taxation year that includes 28 February 2000 or 17 October 2000 or that begins after 28 February 2000 and ends before 17 October 2000, the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies in respect of the disposing corporation for the year.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1.2 of section 93 of the Income Tax Act or in relation to an election made under the first paragraph before 20 December 2006.

2004, c. 8, s. 119; 2010, c. 25, s. 47; 2015, c. 36, s. 26.

2010-10-27

589.2. If the disposition of shares of a class of the capital stock of a foreign affiliate of a particular corporation resident in Canada by a partnership would, but for this section, result in a taxable capital gain for a corporation (in this section referred to as the “disposing corporation”) that is the particular corporation or a foreign affiliate of the particular corporation and the particular corporation makes a valid election under subsection 1.2 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 in respect of the disposition, the following rules apply:

(a)  the amount determined in accordance with the second paragraph in respect of those shares is deemed to be a dividend received immediately before the disposition on the number of those shares that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(b)  notwithstanding Title XI, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount determined in accordance with subparagraph a of the second paragraph in relation to those shares;

(c)  for the purposes of any regulation made under this section, the disposing corporation is deemed to have disposed of the number of shares of the capital stock of the foreign affiliate that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(d)  for the purposes of sections 746 to 749 in relation to the dividend referred to in subparagraph a, the shares of the capital stock of the foreign affiliate on which that dividend was received are deemed to have been owned by the disposing corporation; and

(e)  where the application of section 261 in respect of the partnership, in relation to those shares, results in a taxable capital gain for the disposing corporation, the partnership is deemed, for the purposes of this section, to have disposed of those shares.

The amount to which subparagraph a of the first paragraph refers in respect of shares of a class of the capital stock of the foreign affiliate is, subject to the third paragraph, twice

(a)  the amount designated in respect of shares in accordance with subparagraph i of paragraph a of subsection 1.2 of section 93 of the Income Tax Act, not exceeding the proportion of the taxable capital gain of the partnership that the amount by which the number of shares of that class of the capital stock of the foreign affiliate that are deemed to be owned by the disposing corporation under section 592.1 immediately before the disposition exceeds the number of those shares that are deemed to be owned by the disposing corporation under that section immediately after the disposition, is of the number of shares of that class of the capital stock of the foreign affiliate that are owned by the partnership immediately before the disposition; or

(b)  where section 589.3 applies, the amount prescribed for the purposes of this section.

For the purposes of the second paragraph in respect of a disposing corporation for any of the following taxation years, the reference to “twice” in that paragraph shall be replaced, with the necessary modifications, by the following fraction, as the case may be:

(a)  in the case of a taxation year that ends before 28 February 2000, 4/3; and

(b)  in the case of a taxation year that includes 28 February 2000 or 17 October 2000 or that begins after 28 February 2000 and ends before 17 October 2000, the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies in respect of the disposing corporation for the year.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1.2 of section 93 of the Income Tax Act or in relation to an election made under the first paragraph before 20 December 2006.

2004, c. 8, s. 119; 2010, c. 25, s. 47.

2006-03-01

589.2. Where the disposition of shares of a class of the capital stock of a foreign affiliate of a particular corporation resident in Canada by a partnership would, but for this section, result in a taxable capital gain for a corporation, in this section referred to as the “disposing corporation”, that is the particular corporation or a foreign affiliate of the particular corporation, the following rules apply if the particular corporation so elects in prescribed form and prescribed manner:

(a)  the amount determined in accordance with the second paragraph in respect of those shares is deemed to be a dividend received immediately before the disposition on the number of those shares that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(b)  notwithstanding Title XI, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount designated by the particular corporation in relation to those shares;

(c)  for the purposes of any regulation made under this section, the disposing corporation is deemed to have disposed of the number of shares of the capital stock of the foreign affiliate that is the amount by which the number of those shares that the disposing corporation is deemed to own under section 592.1 immediately before the disposition exceeds the number of those shares that the disposing corporation is deemed to own under that section immediately after the disposition;

(d)  for the purposes of sections 746 to 749 in relation to the dividend referred to in subparagraph a, the shares of the capital stock of the foreign affiliate on which that dividend was received are deemed to have been owned by the disposing corporation; and

(e)  where the application of section 261 in respect of the partnership, in relation to those shares, results in a taxable capital gain for the disposing corporation, the partnership is deemed, for the purposes of this section, to have disposed of those shares.

The amount to which subparagraph a of the first paragraph refers in respect of shares is, subject to the third paragraph, twice

(a)  the amount designated in the election by the particular corporation, which amount shall not exceed the proportion of the taxable capital gain of the partnership that the amount by which the number of shares of that class of the capital stock of the foreign affiliate that are deemed to be owned by the disposing corporation under section 592.1 immediately before the disposition exceeds the number of those shares that are deemed to be owned by the disposing corporation under that section immediately after the disposition, is of the number of shares of that class of the capital stock of the foreign affiliate that are owned by the partnership immediately before the disposition; or

(b)  where section 589.3 applies, the amount prescribed for the purposes of this section.

For the purposes of the second paragraph in respect of a disposing corporation for any of the following taxation years, the reference to “twice” in that paragraph shall be replaced, with the necessary modifications, by the following fraction, as the case may be:

(a)  in the case of a taxation year that ends before 28 February 2000, 4/3; and

(b)  in the case of a taxation year that includes 28 February 2000 or 17 October 2000 or that begins after 28 February 2000 and ends before 17 October 2000, the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies in respect of the disposing corporation for the year.

2004, c. 8, s. 119.