I-3 - Taxation Act

Section 262.4 Disposition versions

2012-05-09

262.4. If, in the course of a transaction or series of transactions to which sections 301 to 301.2, section 454, sections 521 to 526 and 528, section 529, sections 536 to 539, 541 to 543.2, 544 to 555.4, 556 to 564.1 and 565 or 620 to 625 apply, a taxpayer acquires a property (in this section referred to as the “acquired property”) that is included in a flow-through share class of property, the following rules apply:

(a)  if the transfer of the acquired property is part of a gifting arrangement (within the meaning assigned by the first paragraph of section 1079.1) or of a transaction or series of transactions to which sections 620 to 625 apply, or the transferor is a person with whom the taxpayer was, at the time of the acquisition, not dealing at arm’s length, there must be added, at the time of the transfer, to the taxpayer’s exemption threshold in respect of the flow-through share class of property, and deducted from the transferor’s exemption threshold in respect of the flow-through share class of property, the amount determined by the formula

A × B; and

(b)  if the transferor receives particular shares of the capital stock of the taxpayer as consideration for the acquired property and those particular shares are listed on a designated stock exchange or are shares of a mutual fund corporation, for the purposes of this section and section 262.5 the particular shares are deemed to be flow-through shares of the transferor and there must be added to the transferor’s exemption threshold in respect of the flow-through share class of property that includes the particular shares the amount that is determined by the formula in paragraph a or that would be so determined if that paragraph applied to the taxpayer.

In the formula in subparagraph a of the first paragraph,

(a)  A is the amount by which the transferor’s exemption threshold in respect of the flow-through share class of property immediately before the transfer exceeds the capital gain of the transferor as a result of the transfer; and

(b)  B is the proportion that the fair market value of the acquired property immediately before the transfer is of the fair market value of all property of the transferor immediately before the transfer that is included in the flow-through share class of property.

2012, c. 8, s. 45.