I-3 - Taxation Act

Section 333.6 Disposition versions

2019-06-19

333.6. Section 333.5 does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (in this section and section 333.7 referred to as the “purchaser”) with whom the particular taxpayer deals at arm’s length, determined without reference to paragraph b of section 20, if

(a)  the amount has been included in computing the particular taxpayer’s income for the year under sections 32 to 47.17 or would have been so included in computing the particular taxpayer’s income if the amount had been received in the year;

(b)  the amount would, but for this chapter, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1), or is an amount to which section 93.18 applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer makes a valid election under paragraph b of subsection 3 of section 56.4 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 to have that paragraph b apply in respect of the restrictive covenant; or

(c)  subject to section 333.11, the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest under paragraph c of the definition of “eligible interest” in section 333.4 if the other corporation referred to in that paragraph c carries on the business to which the restrictive covenant relates, and

i.  the disposition is to the purchaser or to a person related to the purchaser,

ii.  the amount is consideration for an undertaking by the particular taxpayer 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,

iii.  the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser,

iv.  if the restrictive covenant is granted after 17 July 2005, section 506 does not apply to the disposition,

v.  the amount is added to the particular taxpayer’s proceeds of disposition, within the meaning assigned by section 251, for the purpose of applying this Part to the disposition of the particular taxpayer’s eligible interest, and

vi.  the particular taxpayer and the purchaser make a valid election under subparagraph vi of paragraph c of subsection 3 of section 56.4 of the Income Tax Act;

vii.  (paragraph replaced).

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 3 of section 56.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2009, c. 5, s. 117; 2015, c. 21, s. 162; 2019, c. 14, s. 116.

2015-10-21

333.6. Section 333.5 does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (in this section and section 333.7 referred to as the “purchaser”) with whom the particular taxpayer deals at arm’s length, determined without reference to paragraph b of section 20, if

(a)  the amount has been included in computing the particular taxpayer’s income for the year under sections 32 to 47.17 or would have been so included in computing the particular taxpayer’s income if the amount had been received in the year;

(b)  the amount would, but for this chapter, be required to be included in the aggregate determined under subparagraph b of the second paragraph of section 107 in respect of a business to which the restrictive covenant relates, and the particular taxpayer makes a valid election under paragraph b of subsection 3 of section 56.4 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 to have that paragraph b apply in respect of the restrictive covenant; or

(c)  subject to section 333.11, the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest under paragraph c of the definition of “eligible interest” in section 333.4 if the other corporation referred to in that paragraph c carries on the business to which the restrictive covenant relates, and

i.  the disposition is to the purchaser or to a person related to the purchaser,

ii.  the amount is consideration for an undertaking by the particular taxpayer 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,

iii.  the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser,

iv.  if the restrictive covenant is granted after 17 July 2005, section 506 does not apply to the disposition,

v.  the amount is added to the particular taxpayer’s proceeds of disposition, within the meaning assigned by section 251, for the purpose of applying this Part to the disposition of the particular taxpayer’s eligible interest, and

vi.  the particular taxpayer and the purchaser make a valid election under subparagraph vi of paragraph c of subsection 3 of section 56.4 of the Income Tax Act;

vii.  (paragraph replaced).

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 3 of section 56.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2009, c. 5, s. 117; 2015, c. 21, s. 162.

2009-05-15

333.6. Section 333.5 does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (in this section and section 333.7 referred to as the “purchaser”) with whom the particular taxpayer deals at arm’s length, determined without reference to paragraph b of section 20, if

(a)  the amount has been included in computing the particular taxpayer’s income for the year under sections 32 to 47.17 or would have been so included in computing the particular taxpayer’s income if the amount had been received in the year;

(b)  the amount would, but for this chapter, be required to be included in the aggregate determined under subparagraph b of the second paragraph of section 107 in respect of a business to which the restrictive covenant relates, and the particular taxpayer elects or, if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect, in the prescribed form to have this paragraph apply in respect of the amount; or

(c)  subject to section 333.12, the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest under paragraph c of the definition of “eligible interest” in section 333.4 if the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and

i.  the disposition is to the purchaser or to a person related to the purchaser,

ii.  the amount is consideration for an undertaking by the particular taxpayer 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,

iii.  the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser,

iv.  if the restrictive covenant is granted after 17 July 2005, section 506 does not apply to the disposition,

v.  neither sections 518 to 533 nor the second paragraph of section 614 applies to the disposition of the eligible interest by the particular taxpayer,

vi.  the amount is added to the particular taxpayer’s proceeds of disposition, within the meaning assigned by section 251, for the purpose of applying this Part to the disposition of the particular taxpayer’s eligible interest, and

vii.  the particular taxpayer and the purchaser elect in the prescribed form to have this paragraph apply in respect of the amount.

2009, c. 5, s. 117.