I-3 - Taxation Act

Section 785.6 Disposition versions

2020-09-24

785.6. The amount to which paragraph b of section 785.5.1 and paragraph c of section 785.5.2 refer is,

(a)  in the case of a property referred to in section 785.5.1, the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph b of subsection 4 of section 132.2 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)), except where subparagraph b applies;

(a.1)  in the case of a property referred to in section 785.5.2, the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph c of subsection 5 of section 132.2 of the Income Tax Act, except where subparagraph b applies; or

(b)  subject to the third paragraph and if the conditions set out in the second paragraph are met for the transferor and for the transferee, the lesser of

i.  the fair market value of the property at the transfer time, and

ii.  the greatest of

(1)  the cost amount to the transferor of the property at the transfer time or, where the property is depreciable property, the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,

(2)  the amount that the transferor and the transferee agree on jointly in respect of the property in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4, and

(3)  the fair market value at the transfer time of the consideration, other than units of the transferee, received by the transferor for the disposition of the property.

The conditions referred to in subparagraph b of the first paragraph are as follows:

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the transfer is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or in Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the transfer is made, must be not less than 9/10.

However, subparagraph b of the first paragraph does not apply in respect of property unless all or substantially all of the difference between the amount that would, but for subparagraph b, be referred to in respect of the property in subparagraph a or a.1 of the first paragraph and the amount determined in its respect in that subparagraph b, is justified by a difference between the cost amount of the property to the transferor, immediately before the disposition, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, subparagraph b of the first paragraph applies as if each property so disposed of had been separately disposed of in the order designated by the transferor in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4 or, if the transferor does not so designate any such order, in the order designated by the Minister.

1997, c. 85, s. 195; 2001, c. 7, s. 115; 2002, c. 40, s. 88; 2009, c. 5, s. 342; 2015, c. 36, s. 64; 2020, c. 16, s. 121.

2015-12-04

785.6. The amount to which paragraph b of section 785.5.1 and paragraph c of section 785.5.2 refer is,

(a)  in the case of a property referred to in section 785.5.1, the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph b of subsection 4 of section 132.2 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)), except where subparagraph b applies;

(a.1)  in the case of a property referred to in section 785.5.2, the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph c of subsection 5 of section 132.2 of the Income Tax Act, except where subparagraph b applies; or

(b)  subject to the third paragraph and if the conditions set out in the second paragraph are met for the transferor and for the transferee, the lesser of

i.  the fair market value of the property at the transfer time, and

ii.  the greatest of

(1)  the cost amount to the transferor of the property at the transfer time or, where the property is depreciable property, the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,

(2)  the amount agreed on jointly by the funds in respect of the property in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4, and

(3)  the fair market value at the transfer time of the consideration, other than units of the transferee, received by the transferor for the disposition of the property.

The conditions referred to in subparagraph b of the first paragraph are as follows:

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the transfer is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or in Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the transfer is made, must be not less than 9/10.

However, subparagraph b of the first paragraph does not apply in respect of property unless all or substantially all of the difference between the amount that would, but for subparagraph b, be referred to in respect of the property in subparagraph a or a.1 of the first paragraph and the amount determined in its respect in that subparagraph b, is justified by a difference between the cost amount of the property to the transferor, immediately before the disposition, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, subparagraph b of the first paragraph applies as if each property so disposed of had been separately disposed of in the order designated by the transferor in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4 or, if the transferor does not so designate any such order, in the order designated by the Minister.

1997, c. 85, s. 195; 2001, c. 7, s. 115; 2002, c. 40, s. 88; 2009, c. 5, s. 342; 2015, c. 36, s. 64.

2009-05-15

785.6. The amount to which paragraph c of section 785.5 refers is

(a)  the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph c of subsection 1 of section 132.2 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), except where subparagraph b applies;

(b)  subject to the third paragraph and if the conditions set out in the second paragraph are met for the transferor and for the transferee, the lesser of

i.  the fair market value of the property at the transfer time, and

ii.  the greatest of

(1)  the cost amount to the transferor of the property at the transfer time or, where the property is depreciable property, the lesser of its capital cost and its cost amount to the transferor immediately before the transfer time,

(2)  the amount agreed on jointly by the funds in respect of the property in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4, and

(3)  the fair market value at the transfer time of the consideration, other than units of the transferee, received by the transferor for the disposition of the property.

The conditions referred to in subparagraph b of the first paragraph are as follows:

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the transfer is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or in Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the transfer is made, must be not less than 9/10.

However, subparagraph b of the first paragraph does not apply in respect of property unless all or substantially all of the difference between the amount that would, but for subparagraph b, be referred to in respect of the property in subparagraph a of the first paragraph and the amount determined in its respect in that subparagraph b, is justified by a difference between the cost amount of the property to the transferor, immediately before the disposition, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, subparagraph b of the first paragraph applies as if each property so disposed of had been separately disposed of in the order designated by the transferor in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4 or, if the transferor does not so designate any such order, in the order designated by the Minister.

1997, c. 85, s. 195; 2001, c. 7, s. 115; 2002, c. 40, s. 88; 2009, c. 5, s. 342.

2006-03-01

785.6. The amount to which paragraph c of section 785.5 refers is

(a)  the amount established as proceeds of disposition of the property to the transferor and the cost of the property to the transferee under paragraph c of subsection 1 of section 132.2 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), except where subparagraph b applies;

(b)  subject to the fourth paragraph and where the conditions set out in the second paragraph are met, the lesser of

i.  the fair market value of the property at the transfer time, and

ii.  the greatest of

(1)  the cost amount to the transferor of the property at the transfer time or, where the property is depreciable property, the lesser of its capital cost and its cost amount to the transferor immediately before the transfer time,

(2)  the amount agreed on jointly by the funds in respect of the property in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4, and

(3)  the fair market value at the transfer time of the consideration, other than units of the transferee, received by the transferor for the disposition of the property.

The conditions referred to in subparagraph b of the first paragraph require that, for the transferor and for the transferee,

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the transfer is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the transfer is made, must be not less than 9/10.

Sections 520.3 and 522.1 to 522.5 apply, with the necessary modifications, in respect of the disposition of the property and the conditions described in the second paragraph.

However, subparagraph b of the first paragraph does not apply in respect of property unless all or substantially all of the difference between the amount that would, but for subparagraph b, be referred to in respect of the property in subparagraph a of the first paragraph and the amount determined in its respect in that subparagraph b, is justified by a difference between the cost amount of the property to the transferor, immediately before the disposition, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, subparagraph b of the first paragraph applies as if each property so disposed of had been separately disposed of in the order designated by the transferor in the prescribed form relating to the qualifying exchange filed pursuant to the second paragraph of section 785.4 or, if the transferor does not so designate any such order, in the order designated by the Minister.

1997, c. 85, s. 195; 2001, c. 7, s. 115; 2002, c. 40, s. 88.