I-3 - Taxation Act

Section 427.4 Disposition versions

2006-03-01

427.4. Notwithstanding any other provision of this Part, where, at any particular time as part of a series of transactions or events, a taxpayer disposes of property for proceeds of disposition that are less than its fair market value, the taxpayer is deemed to have disposed of the property at that time for proceeds of disposition equal to its fair market value at that time, if

(a)  it may reasonably be considered that one of the main purposes of the series of transactions or events is to obtain the benefit of

i.  any deduction described in the second paragraph or any balance of undeducted outlays, expenses or other amounts available to a person, other than a person that would be affiliated with the taxpayer immediately before the series of transactions or events, but for the definition of “controlled” in section 21.0.1, in respect of a subsequent disposition of the property or property substituted for the property, or

ii.  an exemption available to any person from tax payable under this Part on any income arising on a subsequent disposition of the property or property substituted for the property; and

(b)  the subsequent disposition referred to in paragraph a occurs, or arrangements for the subsequent disposition are made, before the day that is three years after the particular time.

The deduction to which subparagraph i of subparagraph a of the first paragraph refers is a deduction, other than a deduction under section 726.7.1 in respect of a capital gain from a disposition of a share acquired by the taxpayer in an acquisition to which sections 530 to 533 or 620 to 625 applied, in computing income, taxable income, taxable income earned in Canada or tax payable under this Part.

1989, c. 77, s. 51; 1997, c. 3, s. 71; 1997, c. 85, s. 330; 2000, c. 5, s. 100.