I-3 - Taxation Act

Section 522 Disposition versions

2010-10-27

522. Notwithstanding section 521.2 and subject to the fourth paragraph, where the taxpayer and the corporation make the election referred to in section 518 in respect of the disposition of property, where the conditions described in the second paragraph are met for the transferor and for the transferee, where the prescribed form referred to in the first paragraph of section 520.1 is sent to the Minister on or before the end of a three-year period, or a longer period allowed by the Minister in the circumstances, that follows the particular date referred to in subparagraph i of subparagraph a of the third paragraph of section 520.1 in respect of the disposition and where, in the prescribed form referred to in the first paragraph of section 520.1 or, if the application made to the Minister under the third paragraph in respect of the disposition is granted by the Minister, in the prescribed form referred to in the second paragraph of section 520.1, the taxpayer and the corporation jointly agree on an amount in respect of the property, the amount so agreed on is deemed to be

(a)  the taxpayer’s proceeds of disposition of the property and the cost of the property to the corporation;

(b)  subject to subparagraph c, equal to the fair market value, at the time of the disposition, of the consideration received by the taxpayer for the property if the amount agreed on is actually less than that fair market value and if the consideration is not a share of the capital stock of the corporation or a right to receive any such share; and

(c)  equal to the fair market value of the property, at the time of the disposition, if the amount agreed on is actually greater than that fair market value.

The conditions referred to in the first paragraph are as follows:

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the disposition is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or in Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the disposition is made, must be not less than 9/10; and

(c)  in the case of a partnership, the proportion that the business carried on in Québec is of the aggregate of the business carried on in Canada or in Québec and elsewhere that would be established in its respect by the regulations made under section 771 for its taxation year in which the disposition is made if the partnership were a corporation and if its fiscal period were a taxation year, must be not less than 9/10.

In addition, the Minister may, on a joint application by the taxpayer and by the corporation, allow, for the purposes of the first paragraph in respect of the disposition, the taxpayer and the corporation

(a)  where the election made by the taxpayer and the corporation is the first election mentioned in section 518, to agree on an amount in respect of the property if they have not done so in the prescribed form referred to in the first paragraph of section 520.1;

(b)  where the election made by the taxpayer and the corporation is the first election mentioned in section 518, to be deemed never to have agreed on an amount in respect of the property; or

(c)  to agree on a new amount in respect of the property, which amount is deemed to be the only amount agreed on in respect of the property for the purposes of the first paragraph.

However, where the election made by the taxpayer and the corporation is the first election mentioned in section 518, this section does not apply in respect of the disposition unless all or substantially all of the difference between the amount that would, but for this section, be determined in respect of the property under section 521.2 and the amount agreed on in its respect in the first paragraph, is justified by a difference between the cost amount of the property to the taxpayer, immediately before the disposition, for the purposes of Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where the election made by the taxpayer and the corporation in respect of the disposition is not the first election mentioned in section 518 and, but for this paragraph, any of the conditions for the application of the first paragraph in respect of the disposition is not met, the election is deemed, notwithstanding section 518, never to have been made by the taxpayer and the corporation in respect of the disposition.

1972, c. 23, s. 407; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1997, c. 85, s. 86; 2002, c. 40, s. 40; 2003, c. 9, s. 35; 2010, c. 25, s. 38.

2006-03-01

522. Notwithstanding section 521.2 and subject to the fourth paragraph, where the taxpayer and the corporation make the election referred to in section 518 in respect of the disposition of property, where the conditions described in the second paragraph are met, where the prescribed form referred to in the first paragraph of section 520.1 is sent to the Minister on or before the end of a three-year period, or a longer period allowed by the Minister in the circumstances, that follows the particular date referred to in subparagraph i of subparagraph a of the third paragraph of section 520.1 in respect of the disposition and where, in the prescribed form referred to in the first paragraph of section 520.1 or, if the application made to the Minister under the third paragraph in respect of the disposition is granted by the Minister, in the prescribed form referred to in the second paragraph of section 520.1, the taxpayer and the corporation jointly agree on an amount in respect of the property, the amount so agreed on is deemed to be

(a)  the taxpayer’s proceeds of disposition of the property and the cost of the property to the corporation;

(b)  subject to subparagraph c, equal to the fair market value, at the time of the disposition, of the consideration received by the taxpayer for the property if the amount agreed on is actually less than that fair market value and if the consideration is not a share of the capital stock of the corporation or a right to receive any such share; and

(c)  equal to the fair market value of the property, at the time of the disposition, if the amount agreed on is actually greater than that fair market value.

The conditions referred to in the first paragraph require that, for the transferor and for the transferee,

(a)  in the case of an individual, the individual must be resident in Québec at the end of the individual’s taxation year in which the disposition is made and, if the second paragraph of section 22 applies to the individual for that year, the proportion applicable in respect of the individual in that second paragraph for that year must be not less than 9/10;

(b)  in the case of a corporation, the proportion that the business carried on by the corporation in Québec is of the aggregate of the business carried on in Canada or Québec and elsewhere established by the regulations made under section 771 for its taxation year in which the disposition is made, must be not less than 9/10; and

(c)  in the case of a partnership, the proportion that the business carried on in Québec is of the aggregate of the business carried on in Canada or Québec and elsewhere that would be established in its respect by the regulations made under section 771 for its taxation year in which the disposition is made if the partnership were a corporation and if its fiscal period were a taxation year, must be not less than 9/10.

In addition, the Minister may, on a joint application by the taxpayer and by the corporation, allow, for the purposes of the first paragraph in respect of the disposition, the taxpayer and the corporation

(a)  where the election made by the taxpayer and the corporation is the first election mentioned in section 518, to agree on an amount in respect of the property if they have not done so in the prescribed form referred to in the first paragraph of section 520.1;

(b)  where the election made by the taxpayer and the corporation is the first election mentioned in section 518, to be deemed never to have agreed on an amount in respect of the property; or

(c)  to agree on a new amount in respect of the property, which amount is deemed to be the only amount agreed on in respect of the property for the purposes of the first paragraph.

However, where the election made by the taxpayer and the corporation is the first election mentioned in section 518, this section does not apply in respect of the disposition unless all or substantially all of the difference between the amount that would, but for this section, be determined in respect of the property under section 521.2 and the amount agreed on in its respect in the first paragraph, is justified by a difference between the cost amount of the property to the taxpayer, immediately before the disposition, for the purposes of Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

Where the election made by the taxpayer and the corporation in respect of the disposition is not the first election mentioned in section 518 and, but for this paragraph, any of the conditions for the application of the first paragraph in respect of the disposition is not met, the election is deemed, notwithstanding section 518, never to have been made by the taxpayer and the corporation in respect of the disposition.

1972, c. 23, s. 407; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1997, c. 85, s. 86; 2002, c. 40, s. 40; 2003, c. 9, s. 35.