I-3 - Taxation Act

Section 725.2.1 Disposition versions

2006-03-01

725.2.1. For the purposes of section 725.2, the following rules apply:

(a)  the amount payable by an individual to acquire a security under an agreement referred to in section 48 shall be determined without reference to any change in the value of a currency of a country other than Canada, relative to Canadian currency, occurring after the agreement was made;

(b)  the fair market value of a security at the time an agreement in respect of the security was made shall be determined on the assumption that all specified events associated with the security referred to in the second paragraph that occurred after the agreement was made and before the sale or issue of the security or the disposition of the taxpayer’s rights under the agreement in respect of the security, as the case may be, occurred immediately before the agreement was made; and

(c)  for the purpose of determining the amount that was included, in respect of a security that a qualifying person has agreed to sell or issue to an individual, in the amount determined under the second paragraph of section 49.4 for the purpose of determining if the condition in subparagraph b of the first paragraph of that section was satisfied in respect of a particular disposition, all specified events associated with the security referred to in the second paragraph that occurred after the particular disposition and before the sale or issue of the security or the individual’s subsequent disposition of rights under the agreement in respect of the security, as the case may be, are deemed to have occurred immediately before the particular disposition.

For the purposes of the first paragraph, the following events are specified events associated with a security:

(a)  where the security is a share of the capital stock of a corporation, any subdivision or consolidation of shares of the capital stock of the corporation, any reorganization of share capital of the corporation and any stock dividend of the corporation; and

(b)  where the security is a unit of a mutual fund trust, any subdivision or consolidation of the units of the trust, and an issuance of units of the trust as payment, or in satisfaction of a person’s right to enforce payment, out of the trust’s income, determined before the application of paragraph a of section 657 and section 657.1, or out of the trust’s capital gains.

1993, c. 16, s. 259; 1997, c. 3, s. 71; 2001, c. 53, s. 95; 2003, c. 2, s. 195.