I-3 - Taxation Act

Section 589.1.1 Disposition versions

2015-10-21

589.1.1. The rules in the second paragraph apply if

(a)  a particular foreign affiliate of a corporation resident in Canada disposes at any time of a share (in this subparagraph and the second paragraph referred to as the “disposed share”) of the capital stock of another foreign affiliate of the corporation and the particular foreign affiliate would, in the absence of section 589 and the second paragraph, have realized a capital gain from the disposition of the disposed share; or

(b)  in the absence of section 589 and the second paragraph, a corporation resident in Canada would be deemed under section 261, because of a valid election under section 577.3 or subparagraph i of paragraph b of subsection 2 of section 5901 of the Income Tax Regulations made under the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)), to have realized a gain, at any time, from the disposition of a share (in the second paragraph referred to as the “disposed share”) of the capital stock of a foreign affiliate of the corporation.

The rules to which the first paragraph refers are the following:

(a)  the corporation resident in Canada is deemed to have made the election referred to in the first paragraph of section 589, at the time referred to in the first paragraph, in respect of the disposition of the disposed share; and

(b)  the corporation resident in Canada is deemed to have designated, in the election, an amount equal to the amount that it is deemed, under paragraph b of subsection 1.11 of section 93 of the Income Tax Act, to have designated in the election in respect of the disposition of the disposed share.

2015, c. 21, s. 195.