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I-3 - Taxation Act
Section 504
Disposition versions
504. (1) A corporation resident in Canada which, at a particular time after 31 December 1971, increases its paid-up capital in respect of the shares of a given class of its capital stock, is deemed to have then paid, on the issued shares of such class, a dividend equal to the excess of the increase in the paid-up capital over the aggregate of the amount of the increase in the value of the assets or the decrease in the liabilities, as the case may be, contemplated in paragraph b of subsection 2, of the amount of the reduction contemplated in paragraph c of subsection 2 and of the amount of the increase in the paid-up capital that resulted from a conversion referred to in any of paragraphs d to f of subsection 2.
(2) Subsection 1 does not apply if the increase in the paid-up capital is the result of:
(a) the payment of a stock dividend;
(b) a transaction by which the value of the assets less the liabilities has been increased by an amount at least equal to the increase in the paid-up capital in respect of the shares of the class contemplated, or by which the liabilities less the value of the assets has been decreased by such an amount;
(c) a transaction by which the paid-up capital in respect of shares of other classes of the capital stock of the corporation has been reduced by an amount at least equal to the increase in the paid-up capital in respect of the shares of such class;
(d) a transaction by which an insurance corporation converts contributed surplus related to its insurance business (other than any portion of that contributed surplus that arose at a time when the corporation was not resident in Canada, or that arose in connection with a disposition to which subsection 1.1 of section 212.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) applies or an investment to which subsection 2 of section 212.3 of that Act applies) into paid-up capital in respect of shares of its capital stock;
(e) a transaction by which a bank converts contributed surplus resulting from the issuance of shares of its capital stock (other than any portion of that contributed surplus that arose at a time when the corporation was not resident in Canada, or that arose in connection with a disposition to which subsection 1.1 of section 212.1 of the Income Tax Act applies or an investment to which subsection 2 of section 212.3 of that Act applies) into paid-up capital in respect of shares of its capital stock; or
(f) a transaction by which a corporation, other than an insurance corporation or a bank, converts into paid-up capital in respect of a particular class of shares of its capital stock any of its contributed surplus (other than any portion of that contributed surplus that arose at a time when the corporation was not resident in Canada, or that arose in connection with a disposition to which subsection 1.1 of section 212.1 of the Income Tax Act applies or an investment to which subsection 2 of section 212.3 of that Act applies) resulting, after 31 March 1977,
i. from the issuance of shares of that class or shares of another class for which shares of that class were substituted, other than an issuance to which any of sections 236.3, 301, 301.1, 419 and 419.0.1 or Chapters III.1 to VI apply,
ii. from the acquisition of property by the corporation from a person who, at the time of the acquisition, held any of the issued shares of that class or shares of another class for which shares of that class were substituted, where the property is acquired for no consideration or for consideration that does not include shares of the capital stock of the corporation, or
iii. from a transaction by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the transaction.
504. (1) A corporation resident in Canada which, at a particular time after 31 December 1971, increases its paid-up capital in respect of the shares of a given class of its capital stock, is deemed to have then paid, on the issued shares of such class, a dividend equal to the excess of the increase in the paid-up capital over the aggregate of the amount of the increase in the value of the assets or the decrease in the liabilities, as the case may be, contemplated in paragraph b of subsection 2, of the amount of the reduction contemplated in paragraph c of subsection 2 and of the amount of the increase in the paid-up capital that resulted from a conversion referred to in any of paragraphs d to f of subsection 2.
(2) Subsection 1 does not apply if the increase in the paid-up capital is the result of:
(a) the payment of a stock dividend;
(b) a transaction by which the value of the assets less the liabilities has been increased by an amount at least equal to the increase in the paid-up capital in respect of the shares of the class contemplated, or by which the liabilities less the value of the assets has been decreased by such an amount;
(c) a transaction by which the paid-up capital in respect of shares of other classes of the capital stock of the corporation has been reduced by an amount at least equal to the increase in the paid-up capital in respect of the shares of such class;
(d) a transaction by which an insurance corporation converts contributed surplus related to its insurance business (other than any portion of that contributed surplus that arose in connection with an investment to which subsection 2 of section 212.3 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) applies) into paid-up capital in respect of shares of its capital stock;
(e) a transaction by which a bank converts contributed surplus resulting from the issuance of shares of its capital stock (other than any portion of that contributed surplus that arose in connection with an investment to which subsection 2 of section 212.3 of the Income Tax Act applies) into paid-up capital in respect of shares of its capital stock; or
(f) a transaction by which a corporation, other than an insurance corporation or a bank, converts into paid-up capital in respect of a particular class of shares of its capital stock any of its contributed surplus (other than any portion of that contributed surplus that arose in connection with an investment to which subsection 2 of section 212.3 of the Income Tax Act applies) resulting, after 31 March 1977,
i. from the issuance of shares of that class or shares of another class for which shares of that class were substituted, other than an issuance to which any of sections 236.3, 301, 301.1, 419 and 419.0.1 or Chapters III.1 to VI apply,
ii. from the acquisition of property by the corporation from a person who, at the time of the acquisition, held any of the issued shares of that class or shares of another class for which shares of that class were substituted, where the property is acquired for no consideration or for consideration that does not include shares of the capital stock of the corporation, or
iii. from a transaction by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the transaction.
504. (1) A corporation resident in Canada which, at a particular time after 31 December 1971, increases its paid-up capital in respect of the shares of a given class of its capital stock, is deemed to have then paid, on the issued shares of such class, a dividend equal to the excess of the increase in the paid-up capital over the aggregate of the amount of the increase in the value of the assets or the decrease in the liabilities, as the case may be, contemplated in paragraph b of subsection 2, of the amount of the reduction contemplated in paragraph c of subsection 2 and of the amount of the increase in the paid-up capital that resulted from a conversion referred to in any of paragraphs d to f of subsection 2.
(2) Subsection 1 does not apply if the increase in the paid-up capital is the result of:
(a) the payment of a stock dividend;
(b) a transaction by which the value of the assets less the liabilities has been increased by an amount at least equal to the increase in the paid-up capital in respect of the shares of the class contemplated, or by which the liabilities less the value of the assets has been decreased by such an amount;
(c) a transaction by which the paid-up capital in respect of shares of other classes of the capital stock of the corporation has been reduced by an amount at least equal to the increase in the paid-up capital in respect of the shares of such class;
(d) a transaction by which an insurance corporation converts contributed surplus related to its insurance business into paid-up capital in respect of the shares of its capital stock;
(e) a transaction by which a bank converts contributed surplus resulting from the issuance of shares of its capital stock into paid-up capital in respect of shares of its capital stock; or
(f) a transaction by which a corporation, other than an insurance corporation or a bank, converts into paid-up capital in respect of a class of shares of its capital stock any of its contributed surplus resulting, after 31 March 1977,
i. from the issuance of shares of that class or shares of another class for which shares of that class were substituted, other than an issuance to which any of sections 236.3, 301, 301.1, 419 and 419.0.1 or Chapters III.1 to VI apply,
ii. from the acquisition of property by the corporation from a person who, at the time of the acquisition, held any of the issued shares of that class or shares of another class for which shares of that class were substituted, where the property is acquired for no consideration or for consideration that does not include shares of the capital stock of the corporation, or
iii. from a transaction by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the transaction.
504. (1) A corporation resident in Canada which, at a particular time after 31 December 1971, increases its paid-up capital in respect of the shares of a given class of its capital stock, is deemed to have then paid, on the issued shares of such class, a dividend equal to the excess of the increase in the paid-up capital over the aggregate of the amount of the increase in the value of the assets or the decrease in the liabilities, as the case may be, contemplated in paragraph b of subsection 2, of the amount of the reduction contemplated in paragraph c of subsection 2 and of the amount of the increase in the paid-up capital that resulted from a conversion referred to in any of paragraphs d to f of subsection 2.
(2) Subsection 1 does not apply if the increase in the paid-up capital is the result of:
(a) the payment of a stock dividend;
(b) a transaction by which the value of the assets less the liabilities has been increased by an amount at least equal to the increase in the paid-up capital in respect of the shares of the class contemplated, or by which the liabilities less the value of the assets has been decreased by such an amount;
(c) a transaction by which the paid-up capital in respect of shares of other classes of the capital stock of the corporation has been reduced by an amount at least equal to the increase in the paid-up capital in respect of the shares of such class;
(d) a transaction by which an insurance corporation converts contributed surplus related to its insurance business into paid-up capital in respect of the shares of its capital stock;
(e) a transaction by which a bank converts contributed surplus resulting from the issuance of shares of its capital stock into paid-up capital in respect of shares of its capital stock; or
(f) a transaction by which a corporation, other than an insurance corporation or a bank, converts into paid-up capital in respect of a class of shares of its capital stock any of its contributed surplus resulting, after 31 March 1977,
i. from the issuance of shares of that class or shares of another class for which shares of that class were substituted, other than an issuance to which any of sections 236.3, 301, 301.1, 419 and 419.0.1 or Chapters III.1 to VI of Title IX of Book III apply,
ii. from the acquisition of property by the corporation from a person who, at the time of the acquisition, held any of the issued shares of that class or shares of another class for which shares of that class were substituted, where the property is acquired for no consideration or for consideration that does not include shares of the capital stock of the corporation, or
iii. from a transaction by which the paid-up capital in respect of that class of shares or in respect of shares of another class for which shares of that class were substituted was reduced by the corporation, to the extent of the reduction in paid-up capital that resulted from the transaction.
