I-3 - Taxation Act

Section 589 Disposition versions

2015-10-21

589. If a corporation resident in Canada makes a valid election under subsection 1 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)), in respect of any share of the capital stock of a particular foreign affiliate of the corporation that is disposed of, at any time, by the corporation (in this section referred to as the “disposing corporation”) or by another foreign affiliate (in this section referred to as the “disposing affiliate”) of the corporation, the amount designated in the election, in accordance with paragraph a of that subsection 1, not exceeding the amount that would, in the absence of this section, be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share, is deemed, for the purposes of this Part,

(a)  to have been a dividend received on the share from the particular foreign affiliate by the disposing corporation or disposing affiliate, as the case may be, immediately before that time; and

(b)  not to have been received by the disposing corporation or disposing affiliate, as the case may be, as proceeds of disposition in respect of the disposition of the share.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 93 of the Income Tax Act.

1972, c. 23, s. 451; 1972, c. 26, s. 51; 1975, c. 22, s. 161; 1984, c. 15, s. 129; 1986, c. 15, s. 89; 1997, c. 3, s. 71; 2001, c. 53, s. 85; 2010, c. 25, s. 46; 2015, c. 21, s. 194.

2010-10-27

589. If a particular corporation resident in Canada or a particular foreign affiliate of the particular corporation disposes of a share of the capital stock of a foreign affiliate of the particular corporation and the particular corporation makes a valid election under subsection 1 of section 93 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) after 19 December 2006 in respect of the share, the amount designated in the election in accordance with paragraph a of that subsection 1, not exceeding the proceeds of disposition of the share, is deemed, for the purposes of this Part, to be a dividend on that share received from the foreign affiliate by the particular corporation or by the particular foreign affiliate, as the case may be, immediately before the disposition, and not to be proceeds of disposition of that share.

If a foreign affiliate of a corporation resident in Canada disposes of excluded property that is a share of the capital stock of another foreign affiliate of the corporation and subsection 1.1 of section 93 of the Income Tax Act applies in relation to that disposition, the corporation is deemed to have made the election referred to in the first paragraph, at the time of the disposition, in respect of the share disposed of and in the election to have designated an amount equal to the amount that the corporation is deemed, under that subsection 1.1, to have designated in the election in relation to the disposition.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 93 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1972, c. 23, s. 451; 1972, c. 26, s. 51; 1975, c. 22, s. 161; 1984, c. 15, s. 129; 1986, c. 15, s. 89; 1997, c. 3, s. 71; 2001, c. 53, s. 85; 2010, c. 25, s. 46.

2006-03-01

589. Where a corporation resident in Canada or a foreign affiliate of the corporation has disposed of a share of the capital stock of a foreign affiliate of the corporation, the corporation may, for the purposes of this Part, elect in prescribed form and manner that the amount designated in its election, not exceeding the proceeds of disposition of the share, be deemed to be a dividend on that share received from the foreign affiliate immediately before the disposition by the corporation or, as the case may be, by the affiliate which disposed of it, and not to be proceeds of disposition of that share.

Where a foreign affiliate of a corporation resident in Canada has disposed of excluded property that is a share of the capital stock of another foreign affiliate of the corporation, the corporation is deemed, except in the case of a prescribed disposition, to have made an election under the first paragraph, at the time of the disposition, in respect of the share disposed of, and, in the election, to have designated an amount equal to such amount as is prescribed.

Moreover, a corporation may amend an election or a new election previously made by it under the first paragraph or this paragraph in respect of a disposition, if it makes a new election, in prescribed form and manner, similar to that provided for in the first paragraph in respect of the disposition and, in that case, the election or new election made previously in respect of the disposition is deemed not to have been effective.

1972, c. 23, s. 451; 1972, c. 26, s. 51; 1975, c. 22, s. 161; 1984, c. 15, s. 129; 1986, c. 15, s. 89; 1997, c. 3, s. 71; 2001, c. 53, s. 85.