I-3 - Taxation Act

Section 279 Disposition versions

2010-04-20

279. In the case provided for in section 278, if the taxpayer acquires the replacement property referred to in that section in a taxation year and the taxpayer makes a valid election under subsection 1 of section 44 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the former property or, if section 278.1 applies, the taxpayer so elects in the taxpayer’s fiscal return filed in accordance with section 1000 for the taxation year, the following rules apply:

(a)  the gain for a particular taxation year from the disposition of the former property is deemed to be equal to the amount by which the amount as a reserve that, subject to section 279.1, is equal to the amount determined under the second paragraph or, if section 278.1 applies, the amount by which the amount as a reserve that the taxpayer may claim as a deduction and that does not exceed, subject to section 279.1, the amount determined under the second paragraph, is exceeded by whichever of the following amounts is applicable:

i.  if the particular year is the year in which the proceeds of disposition of the former property become due to the taxpayer, the lesser of the amount determined under the third paragraph and the amount determined under the fourth paragraph, or

ii.  if the particular year is subsequent to the year in which the proceeds of disposition of the former property become due to the taxpayer, the amount that the taxpayer has deducted under this subparagraph a from the amount determined under subparagraph i or this subparagraph ii in computing the taxpayer’s gain for the year preceding the particular year from the disposition of the former property; and

(b)  the cost or, in the case of depreciable property, the capital cost, to the taxpayer, of the replacement property at any time after the time of the disposition of the former property by the taxpayer, is deemed to be the cost otherwise determined, minus the amount by which the amount determined under the third paragraph exceeds the amount determined under the fourth paragraph.

The amount referred to in the portion of subparagraph a of the first paragraph before subparagraph i is equal, without exceeding the amount from which it must be subtracted, to the least of

(a)  a reasonable amount as a reserve in respect of the portion of the proceeds of disposition of the former property that is payable to the taxpayer after the end of the particular year as can reasonably be regarded as a portion of the amount determined under subparagraph i of subparagraph a of the first paragraph in respect of the property;

(b)  an amount equal to the product obtained when 1/5 of the amount determined under subparagraph i of subparagraph a of the first paragraph in respect of the property is multiplied by the amount by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property; and

(c)  unless section 278.1 applies, the amount allowed as a deduction for the year under subparagraph iii of paragraph e of subsection 1 of section 44 of the Income Tax Act in computing the taxpayer’s gain for the particular year from the disposition of the property or, if the amount that is so allowed as a deduction is equal to the maximum amount that the taxpayer may claim as a deduction in that computation under that subparagraph iii in respect of the disposition, the amount that the taxpayer specifies and that is not less than that maximum amount.

The first amount to which subparagraph i of subparagraph a and subparagraph b of the first paragraph refer is equal to the amount by which the proceeds of disposition of the former property exceed the aggregate of the adjusted cost base of the former property to the taxpayer immediately before the disposition and the outlays made or expenses incurred by the taxpayer for the purpose of making the disposition or, in the case of depreciable property, the lesser of such aggregate and the proceeds of disposition of the former property determined without reference to section 280.3.

The second amount to which subparagraph i of subparagraph a and subparagraph b of the first paragraph refer is equal to the amount by which the proceeds of disposition of the former property exceed the aggregate of the cost or, in the case of depreciable property, the capital cost, to the taxpayer, determined without reference to subparagraph b of the first paragraph, of the replacement property and the outlays made or expenses incurred by the taxpayer for the purpose of making the disposition.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 44 of the Income Tax Act or in relation to an election made under this section before 20 December 2006 but otherwise than as a consequence of the application of section 278.1.

1975, c. 22, s. 51; 1978, c. 26, s. 47; 1982, c. 5, s. 60; 1984, c. 15, s. 66; 1986, c. 15, s. 56; 1996, c. 39, s. 90; 1997, c. 85, s. 330; 2009, c. 5, s. 95; 2010, c. 5, s. 30.

2005-05-15

279. In the case provided for in section 278, if the taxpayer acquires the replacement property referred to in that section in a taxation year and the taxpayer makes a valid election under subsection 1 of section 44 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the former property or, if section 278.1 applies, the taxpayer so elects in the taxpayer’s fiscal return filed in accordance with section 1000 for the taxation year, the following rules apply:

(a)  the gain for a particular taxation year from the disposition of the former property is deemed to be equal to the amount by which the amount that the taxpayer may claim as a deduction and that does not exceed, subject to section 279.1, the amount determined under the second paragraph is exceeded by whichever of the following amounts is applicable:

i.  if the particular year is the year in which the proceeds of disposition of the former property become due to the taxpayer, the lesser of the amount determined under the third paragraph and the amount determined under the fourth paragraph, or

ii.  if the particular year is subsequent to the year in which the proceeds of disposition of the former property become due to the taxpayer, the amount that the taxpayer has deducted under this subparagraph a from the amount determined under subparagraph i or this subparagraph ii in computing the taxpayer’s gain for the year preceding the particular year from the disposition of the former property; and

(b)  the cost or, in the case of depreciable property, the capital cost, to the taxpayer, of the replacement property at any time after the time of the disposition of the former property by the taxpayer, is deemed to be the cost otherwise determined, minus the amount by which the amount determined under the third paragraph exceeds the amount determined under the fourth paragraph.

The amount referred to in the portion of subparagraph a of the first paragraph before subparagraph i is equal to the lesser of

(a)  a reasonable amount as a reserve in respect of the portion of the proceeds of disposition of the former property that is payable to the taxpayer after the end of the particular year as can reasonably be regarded as a portion of the amount determined under subparagraph i of subparagraph a of the first paragraph in respect of the property;

(b)  an amount equal to the product obtained when 1/5 of the amount determined under subparagraph i of subparagraph a of the first paragraph in respect of the property is multiplied by the amount by which 4 exceeds the number of preceding taxation years of the taxpayer ending after the disposition of the property; and

(c)  unless section 278.1 applies, the amount allowed as a deduction for the year under subparagraph iii of paragraph e of subsection 1 of section 44 of the Income Tax Act in computing the taxpayer’s gain for the particular year from the disposition of the property.

The first amount to which subparagraph i of subparagraph a and subparagraph b of the first paragraph refer is equal to the amount by which the proceeds of disposition of the former property exceed the aggregate of the adjusted cost base of the former property to the taxpayer immediately before the disposition and the outlays made or expenses incurred by the taxpayer for the purpose of making the disposition or, in the case of depreciable property, the lesser of such aggregate and the proceeds of disposition of the former property determined without reference to section 280.3.

The second amount to which subparagraph i of subparagraph a and subparagraph b of the first paragraph refer is equal to the amount by which the proceeds of disposition of the former property exceed the aggregate of the cost or, in the case of depreciable property, the capital cost, to the taxpayer, determined without reference to subparagraph b of the first paragraph, of the replacement property and the outlays made or expenses incurred by the taxpayer for the purpose of making the disposition.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 1 of section 44 of the Income Tax Act or in relation to an election made under this section before 20 December 2006 but otherwise than as a consequence of the application of section 278.1.

1975, c. 22, s. 51; 1978, c. 26, s. 47; 1982, c. 5, s. 60; 1984, c. 15, s. 66; 1986, c. 15, s. 56; 1996, c. 39, s. 90; 1997, c. 85, s. 330; 2009, c. 5, s. 95.