I-3 - Taxation Act

Section 308.6 Disposition versions

2019-06-19

308.6. For the purposes of this division, the following rules apply:

(a)  where a dividend referred to in sections 308.1 and 308.2 is received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series of transactions or events is deemed to be a portion of a capital gain attributable to anything other than income;

(b)  the income earned or realized by a corporation for a period throughout which it was resident in Canada and was not a private corporation is deemed to be the aggregate of

i.  its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as it read before being struck out, and sections 230.1 to 230.11, as they read before their repeal,

ii.  the amount by which the amount by which the aggregate of the capital gains of the corporation for the period exceeds the aggregate of its taxable capital gains for the period, exceeds the amount by which the aggregate of the capital losses of the corporation for the period exceeds the aggregate of its allowable capital losses for the period,

iii.  the aggregate of all amounts each of which is an amount relating to a business carried on by the corporation at any time in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, and each of which is equal to the amount by which the amount determined under the second paragraph is exceeded by the aggregate of

(1)  where the period began before the corporation’s adjustment time, within the meaning of section 107.1, as it read in that portion of the period, the amount by which the aggregate of the amounts relating to the business that is determined under the third paragraph in respect of the corporation exceeds the aggregate of the amounts relating to the business that is determined under the fourth paragraph in respect of the corporation,

(2)  1/3 of the aggregate of the amounts relating to the business that, in respect of the portion of the period following the corporation’s adjustment time but preceding the beginning of the corporation’s first taxation year that ends after 27 February 2000, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read in that portion of the period, and

(3)  1/3 of all amounts required to be included in computing the corporation’s income by reason of paragraph i.1 of section 87 and that are received in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000,

iv.  the amount by which 1/2 of the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, as that paragraph b read for that year, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, as that section 142.1 read for that year, or has an allowable capital loss for such a year by reason of the application of section 142.2, as that section 142.2 read for that year, the amount determined by the formula

A + B, and

(2)  in any other case, nil, and

v.   the amount by which the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 17 October 2000, as that paragraph b read for that year, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 17 October 2000, as that section 142.1 read for that year, or has an allowable capital loss for such a year by reason of the application of section 142.2, as that section 142.2 read for that year, the amount determined by the formula

B + C, and

(2)  in any other case, nil;

(c)  the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as that paragraph read before being struck out, or sections 230.1 to 230.11, as they read before their repeal;

(d)  the income earned or realized by a corporation (in this subparagraph referred to as the “affiliate”) for a period that ends at a time when that corporation is a foreign affiliate of another corporation is deemed to be equal to the lesser of

i.  the amount that would, at that time, if the Income Tax Regulations made under the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) were read without reference to subsection 5.6 of section 5905 of those Regulations, be the tax-free surplus balance, within the meaning of subsection 5.5 of that section 5905, of the affiliate in respect of the other corporation, and

ii.  the fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;

iii.  (subparagraph repealed);

(e)  in determining whether two or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,

i.  a person is deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person,

ii.  where at any time a person is related to each beneficiary, other than a registered charity, under a trust who is or may, otherwise than by reason of the death of another beneficiary under the trust, be entitled to share in the income or capital of the trust, the person and the trust are deemed to be related at that time to each other and, for this purpose, a person is deemed to be related to himself,

iii.  a person and a trust are deemed not to be related to each other unless they are deemed by paragraph d of section 308.3.2 or subparagraph ii to be related to each other or the person is a corporation that is controlled by the trust, and

iv.  this Act shall be read without reference to subsection 2 of section 19 and paragraph b of section 20; and

(f)  unless section 308.2.0.2 applies, where a corporation receives a dividend any portion of which is a taxable dividend (such a portion being referred to in this subparagraph as the “taxable part”), as part of a transaction or event or a series of transactions or events, the following rules apply:

i.  a portion of the dividend is deemed to be a separate taxable dividend equal to the lesser of

(1)  the taxable part, and

(2)  the amount of the income earned or realized by a corporation after 31 December 1971 and before the safe-income determination time, in relation to the transaction or event or series of transactions or events, that can reasonably be considered to contribute to the capital gain that would have been realized on a disposition at fair market value of the share on which the dividend was received, if the disposition had occurred immediately before the dividend was paid, and

ii.  the amount by which the taxable part exceeds the amount of the separate taxable dividend referred to in subparagraph i is deemed to be a separate taxable dividend.

The amount to which subparagraph iii of subparagraph b of the first paragraph refers is equal to the aggregate of

(a)  where the period, referred to in subparagraph b of the first paragraph, began after the corporation’s adjustment time but before the beginning of the corporation’s first taxation year that ends after 27 February 2000, 1/3 of the corporation’s eligible incorporeal capital amount in respect of the business at the beginning of that period;

(b)  1/4 of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation in respect of that portion of that period that follows the corporation’s adjustment time but precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000 and a portion of which was not included in subparagraph c of the fourth paragraph;

(c)  where that period began before the corporation’s adjustment time, 1/2 of the amount by which the aggregate of all amounts determined in respect of the corporation under subparagraphs a and b of the fourth paragraph exceeds the amount determined in respect of the corporation under the third paragraph; and

(d)  1/3 of all amounts deducted by the corporation under section 142.1, as that section read in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, in respect of debts established by it to have become bad debts during that portion of the period.

The first aggregate of the amounts relating to a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, in respect of a corporation, is equal to the aggregate of the amounts relating to the business that, in respect of the portion of the period referred to in that subparagraph 1 that precedes the corporation’s adjustment time, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read during the portion of that period.

The second aggregate of the amounts in respect of a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, with regard to a corporation, is the aggregate of

(a)  the corporation’s eligible incorporeal capital amount in respect of the business at the commencement of the period contemplated in such subparagraph 1;

(b)  one-half of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation during that portion of the period preceding the corporation’s adjustment time;

(c)  1/2 of the aggregate of the incorporeal capital amounts in respect of the business payable or disbursed by the corporation during the portion of that period that follows the corporation’s adjustment time but that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, to the extent that the aggregate determined under the third paragraph exceeds the aggregate of the amounts determined under subparagraphs a and b.

In the formulas provided for in subparagraph 1 of subparagraph iv of subparagraph b of the first paragraph and subparagraph 1 of subparagraph v of that subparagraph b,

(a)  A is 1/2 of the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period, as that section 142.1 read for that year, if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000;

(b)  B is 1/3 of the amount that would be determined under subparagraph b of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period, as that section 142.1 read for that year, if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000; and

(c)  C is the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period, as that section 142.1 read for that year, if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000.

1982, c. 5, s. 66; 1990, c. 59, s. 139; 1995, c. 49, s. 236; 1996, c. 39, s. 103; 1997, c. 3, s. 71; 1998, c. 16, s. 106; 2000, c. 5, s. 81; 2003, c. 2, s. 107; 2004, c. 8, s. 57; 2005, c. 1, s. 83; 2009, c. 5, s. 108; 2010, c. 25, s. 26; 2015, c. 21, s. 155; 2019, c. 14, s. 112.

2015-10-21

308.6. For the purposes of this division, the following rules apply:

(a)  where a dividend referred to in sections 308.1 and 308.2 is received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series of transactions or events is deemed to be a portion of a capital gain attributable to anything other than income;

(b)  the income earned or realized by a corporation for a period throughout which it was resident in Canada and was not a private corporation is deemed to be the aggregate of

i.  its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as it read before being struck out, and sections 230.1 to 230.11, as they read before their repeal,

ii.  the amount by which the amount by which the aggregate of the capital gains of the corporation for the period exceeds the aggregate of its taxable capital gains for the period, exceeds the amount by which the aggregate of the capital losses of the corporation for the period exceeds the aggregate of its allowable capital losses for the period,

iii.  the aggregate of all amounts each of which is an amount relating to a business carried on by the corporation at any time in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, and each of which is equal to the amount by which the amount determined under the second paragraph is exceeded by the aggregate of

(1)  where the period began before the corporation’s adjustment time, within the meaning of section 107.1, the amount by which the aggregate of the amounts relating to the business that are determined under the third paragraph in respect of the corporation exceeds the aggregate of the amounts relating to the business that are determined under the fourth paragraph in respect of the corporation,

(2)  1/3 of the aggregate of the amounts relating to the business that, in respect of the portion of the period following the corporation’s adjustment time but preceding the beginning of the corporation’s first taxation year that ends after 27 February 2000, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read in that portion of the period, and

(3)  1/3 of all amounts required to be included in computing the corporation’s income by reason of paragraph i.1 of section 87 and that are received in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000,

iv.  the amount by which 1/2 of the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

A + B, and

(2)  in any other case, nil, and

v.  the amount by which the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 17 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 17 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

B + C, and

(2)  in any other case, nil;

(c)  the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as that paragraph read before being struck out, or sections 230.1 to 230.11, as they read before their repeal;

(d)  the income earned or realized by a corporation (in this subparagraph referred to as the “affiliate”) for a period that ends at a time when that corporation is a foreign affiliate of another corporation is deemed to be equal to the lesser of

i.  the amount that would, at that time, if the Income Tax Regulations made under the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) were read without reference to subsection 5.6 of section 5905 of those Regulations, be the tax-free surplus balance, within the meaning of subsection 5.5 of that section 5905, of the affiliate in respect of the other corporation, and

ii.  the fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;

iii.  (subparagraph repealed);

(e)  in determining whether two or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,

i.  a person is deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person,

ii.  where at any time a person is related to each beneficiary, other than a registered charity, under a trust who is or may, otherwise than by reason of the death of another beneficiary under the trust, be entitled to share in the income or capital of the trust, the person and the trust are deemed to be related at that time to each other and, for this purpose, a person is deemed to be related to himself,

iii.  a person and a trust are deemed not to be related to each other unless they are deemed by paragraph d of section 308.3.2 or subparagraph ii to be related to each other or the person is a corporation that is controlled by the trust, and

iv.  this Act shall be read without reference to subsection 2 of section 19 and paragraph b of section 20; and

(f)  where a corporation has received a dividend any portion of which is a taxable dividend,

i.  subject to subparagraphs iii to v, if, in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the corporation designates, after 19 December 2006, a portion of the taxable dividend, or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in this subparagraph i and subparagraph iv referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, as a separate taxable dividend, the portion of the taxable dividend that is equal to the lesser of the following amounts is deemed to be a separate taxable dividend:

(1)  the aggregate of the amount of the so designated separate taxable dividend and of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and—if the designated or deemed separate taxable dividend corresponds to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of that subsection 2 in its respect—of the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and

(2)  an amount equal to the maximum portion of the taxable dividend that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of section 308.1 in its respect,

ii.  subject to subparagraphs iii to v, the portion of the taxable dividend that exceeds the amount of the deemed separate taxable dividend under subparagraph i is deemed to be a separate taxable dividend,

iii.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, are each dividends that do not give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect, that subparagraph 1 is to be read as follows:

“(1) the aggregate of the total of the amount of the so designated separate taxable dividend and the amount of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, and the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and”,

iv.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, each give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect,

(1)  subparagraph i must—if no portion of the capital gain referred to in subsection 2 of section 55 of the Income Tax Act in respect of each of those separate taxable dividends can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act—be applied as if the portion designated by the corporation in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, in respect of the taxable dividend or deemed dividend for federal purposes, were equal to zero and were a taxable dividend that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and

(2)  in any other case, subparagraphs i and ii do not apply and the taxable dividend is deemed to be a dividend referred to in section 308.2,

v.  if the designation referred to in subparagraph i is not made, that subparagraph must be applied as if the corporation had designated, after 19 December 2006 and in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, a portion of the taxable dividend or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in subparagraphs 1 and 2 and subparagraph vi referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, that is equal

(1)  to zero, and that must be considered as a taxable dividend that does not give rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the capital gain referred to in that subsection 2 in respect of the taxable dividend or deemed dividend for federal purposes can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act, or

(2)  to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the taxable dividend or deemed dividend for federal purposes is deemed, under that subsection 2, not to be a dividend received by the corporation, and

vi.  if the designation referred to in subparagraph i is not made, subparagraph v does not apply, the taxable dividend or deemed dividend for federal purposes gives rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, and, but for this subparagraph vi, the taxable dividend would not give rise to the application of section 308.1 in its respect, the taxable dividend is deemed to be a dividend referred to in section 308.2.

The amount to which subparagraph iii of subparagraph b of the first paragraph refers is equal to the aggregate of

(a)  where the period, referred to in subparagraph b of the first paragraph, began after the corporation’s adjustment time but before the beginning of the corporation’s first taxation year that ends after 27 February 2000, 1/3 of the corporation’s eligible incorporeal capital amount in respect of the business at the beginning of that period;

(b)  1/4 of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation in respect of that portion of that period that follows the corporation’s adjustment time but precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000 and a portion of which was not included in subparagraph c of the fourth paragraph;

(c)  where that period began before the corporation’s adjustment time, 1/2 of the amount by which the aggregate of all amounts determined in respect of the corporation under subparagraphs a and b of the fourth paragraph exceeds the amount determined in respect of the corporation under the third paragraph; and

(d)  1/3 of all amounts deducted by the corporation under section 142.1 in respect of debts established by it to have become bad debts during the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000.

The first aggregate of the amounts relating to a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, in respect of a corporation, is equal to the aggregate of the amounts relating to the business that, in respect of the portion of the period referred to in that subparagraph 1 that precedes the corporation’s adjustment time, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read during the portion of that period.

The second aggregate of the amounts in respect of a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, with regard to a corporation, is the aggregate of

(a)  the corporation’s eligible incorporeal capital amount in respect of the business at the commencement of the period contemplated in such subparagraph 1;

(b)  one-half of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation during that portion of the period preceding the corporation’s adjustment time;

(c)  1/2 of the aggregate of the incorporeal capital amounts in respect of the business payable or disbursed by the corporation during the portion of that period that follows the corporation’s adjustment time but that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, to the extent that the aggregate determined under the third paragraph exceeds the aggregate of the amounts determined under subparagraphs a and b.

In the formulas provided for in subparagraph 1 of subparagraph iv of subparagraph b of the first paragraph and subparagraph 1 of subparagraph v of that subparagraph b,

(a)  A is 1/2 of the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000;

(b)  B is 1/3 of the amount that would be determined under subparagraph b of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000; and

(c)  C is the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000.

Chapter V.2 of Title II of Book I applies in relation to a designation made under subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act or in relation to a designation made under subparagraph i of subparagraph f of the first paragraph before 20 December 2006.

1982, c. 5, s. 66; 1990, c. 59, s. 139; 1995, c. 49, s. 236; 1996, c. 39, s. 103; 1997, c. 3, s. 71; 1998, c. 16, s. 106; 2000, c. 5, s. 81; 2003, c. 2, s. 107; 2004, c. 8, s. 57; 2005, c. 1, s. 83; 2009, c. 5, s. 108; 2010, c. 25, s. 26; 2015, c. 21, s. 155.

2010-10-27

308.6. For the purposes of this division, the following rules apply:

(a)  where a dividend referred to in sections 308.1 and 308.2 is received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series of transactions or events is deemed to be a portion of a capital gain attributable to anything other than income;

(b)  the income earned or realized by a corporation for a period throughout which it was resident in Canada and was not a private corporation is deemed to be the aggregate of

i.  its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as it read before being struck out, and sections 230.1 to 230.11, as they read before their repeal,

ii.  the amount by which the amount by which the aggregate of the capital gains of the corporation for the period exceeds the aggregate of its taxable capital gains for the period, exceeds the amount by which the aggregate of the capital losses of the corporation for the period exceeds the aggregate of its allowable capital losses for the period,

iii.  the aggregate of all amounts each of which is an amount relating to a business carried on by the corporation at any time in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, and each of which is equal to the amount by which the amount determined under the second paragraph is exceeded by the aggregate of

(1)  where the period began before the corporation’s adjustment time, within the meaning of section 107.1, the amount by which the aggregate of the amounts relating to the business that are determined under the third paragraph in respect of the corporation exceeds the aggregate of the amounts relating to the business that are determined under the fourth paragraph in respect of the corporation,

(2)  1/3 of the aggregate of the amounts relating to the business that, in respect of the portion of the period following the corporation’s adjustment time but preceding the beginning of the corporation’s first taxation year that ends after 27 February 2000, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read in that portion of the period, and

(3)  1/3 of all amounts required to be included in computing the corporation’s income by reason of paragraph i.1 of section 87 and that are received in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000,

iv.  the amount by which 1/2 of the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

A + B, and

(2)  in any other case, nil, and

v.  the amount by which the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 17 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 17 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

B + C, and

(2)  in any other case, nil;

(c)  the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as that paragraph read before being struck out, or sections 230.1 to 230.11, as they read before their repeal;

(d)  the income earned or realized by a corporation for a period that ends at a time when that corporation is a foreign affiliate of another corporation is deemed to be equal to the aggregate of the amount that would be deductible by that other corporation at that time under paragraph a of section 746 and the amount that would be deductible by that other corporation at that time under paragraph b of that section if

i.  that other corporation had owned all of the shares of the capital stock of that affiliate immediately before that time,

ii.   that other corporation had disposed at that time of all of the shares referred to in subparagraph i for proceeds of disposition equal to their fair market value at that time, and

iii.  that other corporation had made the election referred to in section 589 in respect of the full amount of the proceeds of disposition referred to in subparagraph ii;

(e)  in determining whether two or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,

i.  a person is deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person,

ii.  where at any time a person is related to each beneficiary, other than a registered charity, under a trust who is or may, otherwise than by reason of the death of another beneficiary under the trust, be entitled to share in the income or capital of the trust, the person and the trust are deemed to be related at that time to each other and, for this purpose, a person is deemed to be related to himself,

iii.  a person and a trust are deemed not to be related to each other unless they are deemed by paragraph d of section 308.3.2 or subparagraph ii to be related to each other or the person is a corporation that is controlled by the trust, and

iv.  this Act shall be read without reference to subsection 2 of section 19 and paragraph b of section 20; and

(f)  where a corporation has received a dividend any portion of which is a taxable dividend,

i.  subject to subparagraphs iii to v, if, in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the corporation designates, after 19 December 2006, a portion of the taxable dividend, or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in this subparagraph i and subparagraph iv referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, as a separate taxable dividend, the portion of the taxable dividend that is equal to the lesser of the following amounts is deemed to be a separate taxable dividend:

(1)  the aggregate of the amount of the so designated separate taxable dividend and of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and—if the designated or deemed separate taxable dividend corresponds to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of that subsection 2 in its respect—of the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and

(2)  an amount equal to the maximum portion of the taxable dividend that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of section 308.1 in its respect,

ii.  subject to subparagraphs iii to v, the portion of the taxable dividend that exceeds the amount of the deemed separate taxable dividend under subparagraph i is deemed to be a separate taxable dividend,

iii.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, are each dividends that do not give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect, that subparagraph 1 is to be read as follows:

“(1) the aggregate of the total of the amount of the so designated separate taxable dividend and the amount of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, and the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and”,

iv.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, each give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect,

(1)  subparagraph i must—if no portion of the capital gain referred to in subsection 2 of section 55 of the Income Tax Act in respect of each of those separate taxable dividends can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act—be applied as if the portion designated by the corporation in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, in respect of the taxable dividend or deemed dividend for federal purposes, were equal to zero and were a taxable dividend that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and

(2)  in any other case, subparagraphs i and ii do not apply and the taxable dividend is deemed to be a dividend referred to in section 308.2,

v.  if the designation referred to in subparagraph i is not made, that subparagraph must be applied as if the corporation had designated, after 19 December 2006 and in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, a portion of the taxable dividend or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in subparagraphs 1 and 2 and subparagraph vi referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, that is equal

(1)  to zero, and that must be considered as a taxable dividend that does not give rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the capital gain referred to in that subsection 2 in respect of the taxable dividend or deemed dividend for federal purposes can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act, or

(2)  to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the taxable dividend or deemed dividend for federal purposes is deemed, under that subsection 2, not to be a dividend received by the corporation, and

vi.  if the designation referred to in subparagraph i is not made, subparagraph v does not apply, the taxable dividend or deemed dividend for federal purposes gives rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, and, but for this subparagraph vi, the taxable dividend would not give rise to the application of section 308.1 in its respect, the taxable dividend is deemed to be a dividend referred to in section 308.2.

The amount to which subparagraph iii of subparagraph b of the first paragraph refers is equal to the aggregate of

(a)  where the period, referred to in subparagraph b of the first paragraph, began after the corporation’s adjustment time but before the beginning of the corporation’s first taxation year that ends after 27 February 2000, 1/3 of the corporation’s eligible incorporeal capital amount in respect of the business at the beginning of that period;

(b)  1/4 of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation in respect of that portion of that period that follows the corporation’s adjustment time but precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000 and a portion of which was not included in subparagraph c of the fourth paragraph;

(c)  where that period began before the corporation’s adjustment time, 1/2 of the amount by which the aggregate of all amounts determined in respect of the corporation under subparagraphs a and b of the fourth paragraph exceeds the amount determined in respect of the corporation under the third paragraph; and

(d)  1/3 of all amounts deducted by the corporation under section 142.1 in respect of debts established by it to have become bad debts during the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000.

The first aggregate of the amounts relating to a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, in respect of a corporation, is equal to the aggregate of the amounts relating to the business that, in respect of the portion of the period referred to in that subparagraph 1 that precedes the corporation’s adjustment time, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read during the portion of that period.

The second aggregate of the amounts in respect of a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, with regard to a corporation, is the aggregate of

(a)  the corporation’s eligible incorporeal capital amount in respect of the business at the commencement of the period contemplated in such subparagraph 1;

(b)  one-half of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation during that portion of the period preceding the corporation’s adjustment time;

(c)  1/2 of the aggregate of the incorporeal capital amounts in respect of the business payable or disbursed by the corporation during the portion of that period that follows the corporation’s adjustment time but that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, to the extent that the aggregate determined under the third paragraph exceeds the aggregate of the amounts determined under subparagraphs a and b.

In the formulas provided for in subparagraph 1 of subparagraph iv of subparagraph b of the first paragraph and subparagraph 1 of subparagraph v of that subparagraph b,

(a)  A is 1/2 of the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000;

(b)  B is 1/3 of the amount that would be determined under subparagraph b of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000; and

(c)  C is the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000.

Chapter V.2 of Title II of Book I applies in relation to a designation made under subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act or in relation to a designation made under subparagraph i of subparagraph f of the first paragraph before 20 December 2006.

1982, c. 5, s. 66; 1990, c. 59, s. 139; 1995, c. 49, s. 236; 1996, c. 39, s. 103; 1997, c. 3, s. 71; 1998, c. 16, s. 106; 2000, c. 5, s. 81; 2003, c. 2, s. 107; 2004, c. 8, s. 57; 2005, c. 1, s. 83; 2009, c. 5, s. 108; 2010, c. 25, s. 26.

2005-05-15

308.6. For the purposes of this division, the following rules apply:

(a)  where a dividend referred to in sections 308.1 and 308.2 is received by a corporation as part of a transaction or event or a series of transactions or events, the portion of a capital gain attributable to any income expected to be earned or realized by a corporation after the safe-income determination time for the transaction, event or series of transactions or events is deemed to be a portion of a capital gain attributable to anything other than income;

(b)  the income earned or realized by a corporation for a period throughout which it was resident in Canada and was not a private corporation is deemed to be the aggregate of

i.  its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as it read before being struck out, and sections 230.1 to 230.11, as they read before their repeal,

ii.  the amount by which the amount by which the aggregate of the capital gains of the corporation for the period exceeds the aggregate of its taxable capital gains for the period, exceeds the amount by which the aggregate of the capital losses of the corporation for the period exceeds the aggregate of its allowable capital losses for the period,

iii.  the aggregate of all amounts each of which is an amount relating to a business carried on by the corporation at any time in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, and each of which is equal to the amount by which the amount determined under the second paragraph is exceeded by the aggregate of

(1)  where the period began before the corporation’s adjustment time, within the meaning of section 107.1, the amount by which the aggregate of the amounts relating to the business that are determined under the third paragraph in respect of the corporation exceeds the aggregate of the amounts relating to the business that are determined under the fourth paragraph in respect of the corporation,

(2)  1/3 of the aggregate of the amounts relating to the business that, in respect of the portion of the period following the corporation’s adjustment time but preceding the beginning of the corporation’s first taxation year that ends after 27 February 2000, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read in that portion of the period, and

(3)  1/3 of all amounts required to be included in computing the corporation’s income by reason of paragraph i.1 of section 87 and that are received in the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000,

iv.  the amount by which 1/2 of the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 27 February 2000 but before 18 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

A + B, and

(2)  in any other case, nil, and

v.  the amount by which the aggregate of all amounts each of which is an amount required by paragraph b of section 105 to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after 17 October 2000, exceeds

(1)  where the corporation has deducted an amount under section 142.1 in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after 17 October 2000, or has an allowable capital loss for such a year by reason of the application of section 142.2, the amount determined by the formula

B + C, and

(2)  in any other case, nil;

(c)  the income earned or realized by a corporation for a period throughout which it was a private corporation is deemed to be its income for the period otherwise determined on the assumption that no amounts were deductible by the corporation in respect of that period under paragraph j of section 157, as that paragraph read before being struck out, or sections 230.1 to 230.11, as they read before their repeal;

(d)  the income earned or realized by a corporation for a period that ends at a time when that corporation is a foreign affiliate of another corporation is deemed to be equal to the aggregate of the amount that would be deductible by that other corporation at that time under paragraph a of section 746 and the amount that would be deductible by that other corporation at that time under paragraph b of that section if

i.  that other corporation had owned all of the shares of the capital stock of that affiliate immediately before that time,

ii.   that other corporation had disposed at that time of all of the shares referred to in subparagraph i for proceeds of disposition equal to their fair market value at that time, and

iii.  that other corporation had made an election under section 589 in respect of the full amount of the proceeds of disposition referred to in subparagraph ii;

(e)  in determining whether two or more persons are related to each other, in determining whether a person is at any time a specified shareholder of a corporation and in determining whether control of a corporation has been acquired by a person or group of persons,

i.  a person is deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person,

ii.  where at any time a person is related to each beneficiary, other than a registered charity, under a trust who is or may, otherwise than by reason of the death of another beneficiary under the trust, be entitled to share in the income or capital of the trust, the person and the trust are deemed to be related at that time to each other and, for this purpose, a person is deemed to be related to himself,

iii.  a person and a trust are deemed not to be related to each other unless they are deemed by paragraph d of section 308.3.2 or subparagraph ii to be related to each other or the person is a corporation that is controlled by the trust, and

iv.  this Act shall be read without reference to subsection 2 of section 19 and paragraph b of section 20; and

(f)  where a corporation has received a dividend any portion of which is a taxable dividend,

i.  subject to subparagraphs iii to v, if, in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the corporation designates, after 19 December 2006, a portion of the taxable dividend, or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in this subparagraph i and subparagraph iv referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, as a separate taxable dividend, the portion of the taxable dividend that is equal to the lesser of the following amounts is deemed to be a separate taxable dividend:

(1)  the aggregate of the amount of the so designated separate taxable dividend and of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and—if the designated or deemed separate taxable dividend corresponds to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of that subsection 2 in its respect—of the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and

(2)  an amount equal to the maximum portion of the taxable dividend that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of section 308.1 in its respect,

ii.  subject to subparagraphs iii to v, the portion of the taxable dividend that exceeds the amount of the deemed separate taxable dividend under subparagraph i is deemed to be a separate taxable dividend,

iii.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, are each dividends that do not give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect, that subparagraph 1 is to be read as follows:

“(1) the aggregate of the total of the amount of the so designated separate taxable dividend and the amount of the deemed separate taxable dividend under subparagraph ii of paragraph f of subsection 5 of section 55 of the Income Tax Act, and the amount that the corporation specifies in the fiscal return it is required to file for the taxation year in which the dividend is received, and”,

iv.  if the designated separate taxable dividend and the deemed separate taxable dividend, which are referred to in subparagraph 1 of subparagraph i, each give rise to the application of subsection 2 of section 55 of the Income Tax Act in their respect,

(1)  subparagraph i must—if no portion of the capital gain referred to in subsection 2 of section 55 of the Income Tax Act in respect of each of those separate taxable dividends can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act—be applied as if the portion designated by the corporation in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, in respect of the taxable dividend or deemed dividend for federal purposes, were equal to zero and were a taxable dividend that does not give rise to the application of subsection 2 of section 55 of that Act in its respect, and

(2)  in any other case, subparagraphs i and ii do not apply and the taxable dividend is deemed to be a dividend referred to in section 308.2,

v.  if the designation referred to in subparagraph i is not made, that subparagraph must be applied as if the corporation had designated, after 19 December 2006 and in accordance with subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act, a portion of the taxable dividend or, if the taxable dividend is a particular amount that is deemed to be a dividend or taxable dividend, a portion of the amount, corresponding to the particular amount and in subparagraphs 1 and 2 and subparagraph vi referred to as the “deemed dividend for federal purposes”, that is deemed to be a dividend or taxable dividend for the purposes of that Act, that is equal

(1)  to zero, and that must be considered as a taxable dividend that does not give rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the capital gain referred to in that subsection 2 in respect of the taxable dividend or deemed dividend for federal purposes can reasonably be attributed to income earned or realized by a corporation after 1971 and before the safe-income determination time in relation to the transaction, event or series of transactions or events, as part of which the dividend is received, as determined for the purposes of section 55 of that Act, or

(2)  to the maximum portion of the taxable dividend or deemed dividend for federal purposes that could, if it were a separate taxable dividend, then be received by the corporation without giving rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, if no portion of the taxable dividend or deemed dividend for federal purposes is deemed, under that subsection 2, not to be a dividend received by the corporation, and

vi.  if the designation referred to in subparagraph i is not made, subparagraph v does not apply, the taxable dividend or deemed dividend for federal purposes gives rise to the application of subsection 2 of section 55 of the Income Tax Act in its respect, and, but for this subparagraph vi, the taxable dividend would not give rise to the application of section 308.1 in its respect, the taxable dividend is deemed to be a dividend referred to in section 308.2.

The amount to which subparagraph iii of subparagraph b of the first paragraph refers is equal to the aggregate of

(a)  where the period, referred to in subparagraph b of the first paragraph, began after the corporation’s adjustment time but before the beginning of the corporation’s first taxation year that ends after 27 February 2000, 1/3 of the corporation’s eligible incorporeal capital amount in respect of the business at the beginning of that period;

(b)  1/4 of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation in respect of that portion of that period that follows the corporation’s adjustment time but precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000 and a portion of which was not included in subparagraph c of the fourth paragraph;

(c)  where that period began before the corporation’s adjustment time, 1/2 of the amount by which the aggregate of all amounts determined in respect of the corporation under subparagraphs a and b of the fourth paragraph exceeds the amount determined in respect of the corporation under the third paragraph; and

(d)  1/3 of all amounts deducted by the corporation under section 142.1 in respect of debts established by it to have become bad debts during the portion of the period that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000.

The first aggregate of the amounts relating to a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, in respect of a corporation, is equal to the aggregate of the amounts relating to the business that, in respect of the portion of the period referred to in that subparagraph 1 that precedes the corporation’s adjustment time, are required to be included in computing the corporation’s eligible incorporeal capital amount by reason of subparagraph ii of paragraph b of section 107, as that subparagraph read during the portion of that period.

The second aggregate of the amounts in respect of a business referred to in subparagraph 1 of subparagraph iii of subparagraph b of the first paragraph, with regard to a corporation, is the aggregate of

(a)  the corporation’s eligible incorporeal capital amount in respect of the business at the commencement of the period contemplated in such subparagraph 1;

(b)  one-half of the aggregate of all incorporeal capital amounts in respect of the business payable or disbursed by the corporation during that portion of the period preceding the corporation’s adjustment time;

(c)  1/2 of the aggregate of the incorporeal capital amounts in respect of the business payable or disbursed by the corporation during the portion of that period that follows the corporation’s adjustment time but that precedes the beginning of the corporation’s first taxation year that ends after 27 February 2000, to the extent that the aggregate determined under the third paragraph exceeds the aggregate of the amounts determined under subparagraphs a and b.

In the formulas provided for in subparagraph 1 of subparagraph iv of subparagraph b of the first paragraph and subparagraph 1 of subparagraph v of that subparagraph b,

(a)  A is 1/2 of the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000;

(b)  B is 1/3 of the amount that would be determined under subparagraph b of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000; and

(c)  C is the amount that would be determined under subparagraph a of the second paragraph of section 142.1 in respect of the corporation for the last taxation year that ends in the period if no amount had been established to have become a bad debt in a taxation year that ends before 28 February 2000.

Chapter V.2 of Title II of Book I applies in relation to a designation made under subparagraph i of paragraph f of subsection 5 of section 55 of the Income Tax Act or in relation to a designation made under subparagraph i of subparagraph f of the first paragraph before 20 December 2006.

1982, c. 5, s. 66; 1990, c. 59, s. 139; 1995, c. 49, s. 236; 1996, c. 39, s. 103; 1997, c. 3, s. 71; 1998, c. 16, s. 106; 2000, c. 5, s. 81; 2003, c. 2, s. 107; 2004, c. 8, s. 57; 2005, c. 1, s. 83; 2009, c. 5, s. 108.