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I-3 - Taxation Act
Section 1136
Disposition versions
1136. (1) In this Part, the paid-up capital of a corporation includes:
(a) the paid-up capital stock and any other participating interest in the nature of capital stock;
(b) the surpluses, provisions and reserves, except those for amortization or depletion, those permitted by Part I to the extent that they were deducted in computing income under that Part and those for losses, in respect of a contract of lease or of leasing, that a corporation carrying on lease or leasing activities cannot deduct in computing its income under that Part;
(b.0.1) the future tax liabilities;
(b.1) (paragraph repealed);
(b.2) where the corporation is a qualified corporation for the taxation year and the amount of the corporation’s deficit would be nil, but for the eligible activities of any recognized business carried on by the corporation or by any partnership of which the corporation is a member, that are carried on during the base period applicable to the corporation or partnership, as the case may be, in respect of the eligible activities, or the amount of the corporation’s surpluses is less than the amount that would be those surpluses, but for the eligible activities, an amount equal to the lesser of
i. the amount that would be the corporation’s deficit if only the eligible activities were taken into account, and
ii. the amount by which the amount that would be the corporation’s surpluses if no reference were made to the eligible activities, exceeds the amount of the surpluses that are included in computing the corporation’s paid-up capital for the taxation year under paragraph b;
(b.3) the amount of the corporation’s deferred unrealized foreign exchange gains at the end of the taxation year;
(c) a debt contracted or assumed by it, the payment of which is secured, in part or in whole, by a property of the corporation, other than a debt contracted or assumed by the corporation within the preceding six months and that is a trade account payable as consideration for the acquisition of a good or the supply of a service, or a tax payable in connection with the acquisition of a good or the supply of a service where the acquisition or supply gave rise to a trade account payable or would give rise to a trade account payable if the consideration for the acquisition or supply were unpaid;
(d) the loans and advances granted directly or indirectly to the corporation;
(e) any other debt provided it has existed for more than six months;
(f) bankers’ acceptances and other similar securities accepted by a bank or other person, which constitute liabilities of the corporation.
(2) A debt repaid before the end of the taxation year is deemed to be a debt at the end of that year if it is established that the repayment was made as part of a series of loans and repayments in order to unduly reduce the paid-up capital.
(3) A corporation having an interest in a partnership or in a joint venture shall include in computing its paid-up capital the amounts that would be included in computing the paid-up capital of that partnership or joint venture under this section and sections 1137 and 1138, if that partnership or joint venture were a corporation and no reference were made to paragraph b.1.2 of section 1137, in the proportion that the share of the corporation of the income or loss of the partnership or the joint venture, for the fiscal period of the partnership or joint venture ending in the corporation’s taxation year, is of the income or loss of the partnership or joint venture for that fiscal period, on the assumption that, if the income and loss of the partnership or the joint venture for that fiscal period are nil, the income of the partnership or joint venture for that fiscal period is equal to $1,000,000.
For the purposes of the first paragraph, if the share of an amount of $1,000,000 in profits of a partnership for a fiscal period that is attributable to a corporation, on account of its interest in the partnership, is at least $200,000, the following rules apply:
(a) the corporation shall include in computing its paid-up capital its share of the retained profits shown in the partnership’s financial statements, except to the extent that the share is otherwise included in the corporation’s paid-up capital or to the extent that the Minister is of the opinion that the generally accepted accounting principles allow for the share to not be so included in computing the corporation’s paid-up capital; and
(b) the corporation may deduct in computing its paid-up capital its share of the unallocated deficit shown in the partnership’s financial statements, except to the extent that the share is otherwise deducted in computing the corporation’s paid-up capital or to the extent that the Minister is of the opinion that the generally accepted accounting principles do not allow for the share to be so deducted in computing the corporation’s paid-up capital.
However, the corporation shall not include nor deduct in computing its paid-up capital any amount shown in the financial statements of the partnership or joint venture resulting from an operation between the partnership or the joint venture and its members.
1136. (1) In this Part, the paid-up capital of a corporation includes:
(a) the paid-up capital stock and any other participating interest in the nature of capital stock;
(b) the surpluses, provisions and reserves, except those for amortization or depletion, those permitted by Part I to the extent that they were deducted in computing income under that Part and those for losses, in respect of a contract of lease or of leasing, that a corporation carrying on lease or leasing activities cannot deduct in computing its income under that Part;
(b.0.1) the future tax liabilities;
(b.1) (paragraph repealed);
(b.2) where the corporation is a qualified corporation for the taxation year and the amount of the corporation’s deficit would be nil, but for the eligible activities of any recognized business carried on by the corporation or by any partnership of which the corporation is a member, that are carried on during the base period applicable to the corporation or partnership, as the case may be, in respect of the eligible activities, or the amount of the corporation’s surpluses is less than the amount that would be those surpluses, but for the eligible activities, an amount equal to the lesser of
i. the amount that would be the corporation’s deficit if only the eligible activities were taken into account, and
ii. the amount by which the amount that would be the corporation’s surpluses if no reference were made to the eligible activities, exceeds the amount of the surpluses that are included in computing the corporation’s paid-up capital for the taxation year under paragraph b;
(b.3) the amount of the corporation’s deferred unrealized foreign exchange gains at the end of the taxation year;
(c) a debt contracted or assumed by it, the payment of which is secured, in part or in whole, by a property of the corporation, other than a debt contracted or assumed by the corporation within the preceding six months and that is a trade account payable as consideration for the acquisition of a good or the supply of a service, or a tax payable in connection with the acquisition of a good or the supply of a service where the acquisition or supply gave rise to a trade account payable or would give rise to a trade account payable if the consideration for the acquisition or supply were unpaid;
(d) the loans and advances granted directly or indirectly to the corporation;
(e) any other debt provided it has existed for more than six months;
(f) bankers’ acceptances and other similar securities accepted by a bank or other person, which constitute liabilities of the corporation.
(2) A debt repaid before the end of the taxation year is deemed to be a debt at the end of that year if it is established that the repayment was made as part of a series of loans and repayments in order to unduly reduce the paid-up capital.
(3) A corporation having an interest in a partnership or in a joint venture shall include in computing its paid-up capital the amounts that would be included in computing the paid-up capital of that partnership or joint venture under this section and sections 1137 and 1138, if that partnership or joint venture were a corporation and no reference were made to paragraph b.1.2 of section 1137, in the proportion that the share of the corporation of the income or loss of the partnership or the joint venture, for the fiscal period of the partnership or joint venture ending in the corporation’s taxation year, is of the income or loss of the partnership or joint venture for that fiscal period, on the assumption that, if the income and loss of the partnership or the joint venture for that fiscal period are nil, the income of the partnership or joint venture for that fiscal period is equal to $1,000,000.
However, the corporation shall not include nor deduct in computing its paid-up capital any amount shown in the financial statements of the partnership or joint venture resulting from an operation between the partnership or the joint venture and its members.
