I-3 - Taxation Act

Section 726.9.2 Disposition versions

2006-03-01

726.9.2. Subject to section 726.9.3, where an individual, other than a trust, or a personal trust, each of which is referred to in this chapter as the “elector”, elects in prescribed form to have the provisions of this section apply in respect of

(a)  a capital property, other than an interest in a trust referred to in any of paragraphs b to f of the definition of “flow-through entity” in the first paragraph of section 251.1, owned at the end of 22 February 1994 by the elector, the property is deemed, except for the purposes of Division VI of Chapter II of Title II of Book III, sections 218 to 220 and paragraph a of section 725.3,

i.  to have been disposed of by the elector at that time for proceeds of disposition equal to the greater of

(1)  the amount by which the amount designated in respect of the capital property in the election exceeds the amount that would, if the disposition were a disposition for the purposes of Division VI of Chapter II of Title II of Book III or sections 218 to 220, be included under that division and those sections as a result of the disposition in computing the income of the elector, and

(2)  the adjusted cost base to the elector of the capital property immediately before the disposition, and

ii.  to have been reacquired by the elector immediately after that time at a cost equal to

(1)  where the capital property is an interest in or a share of the capital stock of a flow-through entity, within the meaning assigned by section 251.1, of the elector, the cost to the elector of the property immediately before the disposition referred to in subparagraph i,

(2)  where an amount would, if the disposition referred to in subparagraph i were a disposition for the purposes of Division VI of Chapter II of Title II of Book III or sections 218 to 220, be included under that division and those sections as a result of the disposition in computing the income of the elector, the lesser of the elector’s proceeds of disposition of the property determined under subparagraph i, and the amount determined by the formula

A − B;

(3)  in any other case, the lesser of the amount designated in respect of the capital property in the election, and the amount by which the fair market value of the property at that time exceeds the amount determined by the formula

C − 1.1D;

(b)  a business carried on by the elector, otherwise than as a member of a partnership, on 22 February 1994,

i.  the amount that would be determined under subparagraph ii of paragraph a of section 105 at the end of 22 February 1994 in respect of the elector if the fiscal period of the business ended at that time and all the incorporeal capital property owned at that time by the elector in respect of the business were disposed of by the elector immediately before that time for proceeds of disposition equal to the amount designated in the election in respect of the business is deemed to be a taxable capital gain of the elector for the taxation year in which the fiscal period of the business that includes that time ends from the disposition of a particular property, and

ii.  for the purposes of subparagraph b of the first paragraph of section 106.1, the amount of the taxable capital gain determined under subparagraph i is deemed to have been claimed, by a person who does not deal at arm’s length with each particular person or partnership that does not deal at arm’s length with the elector, as a deduction under this Title in respect of a disposition at that time of the incorporeal capital property; and

(c)  an interest owned at the end of 22 February 1994 by the elector in a trust referred to in any of paragraphs b to f of the definition of “flow-through entity” in the first paragraph of section 251.1, the elector is deemed to have a capital gain for the year from the disposition on 22 February 1994 of property equal to the lesser of

i.  the total of amounts designated in elections made under this section by the elector in respect of interests in the trust, and

ii.  4/3 of the amount that would, if all of the trust’s capital properties were disposed of at the end of 22 February 1994 for proceeds of disposition equal to their fair market value at that time and that portion of the trust’s capital gains and capital losses or its net taxable capital gains, as the case may be, arising from the dispositions as can reasonably be considered to represent the elector’s share thereof were allocated to or designated in respect of the elector, be the increase in the annual gains limit of the elector for the 1994 taxation year as a result of the dispositions.

For the purposes of the formulas in subparagraphs 2 and 3 of subparagraph ii of subparagraph a of the first paragraph,

(a)  A is the amount by which the fair market value of the capital property at the end of 22 February 1994 exceeds the amount that would, if the disposition referred to in subparagraph i of subparagraph a of the first paragraph were a disposition for the purposes of Division VI of Chapter II of Title II of Book III or sections 218 to 220, be included under that division and those sections as a result of the disposition in computing the income of the elector;

(b)  B is the amount that would be determined by the formula in subparagraph  3 of subparagraph ii of subparagraph a of the first paragraph in respect of the capital property if that subparagraph 3 applied to the property;

(c)  C is the amount designated in respect of the capital property in the election; and

(d)  D is the fair market value of the capital property at the end of 22 February 1994.

For the purposes of this Title, the elector is deemed to have disposed of the particular property referred to in subparagraph i of subparagraph b of the first paragraph at the end of 22 February 1994.

1996, c. 39, s. 186; 1997, c. 3, s. 71; 2001, c. 53, s. 260; 2003, c. 2, s. 203; 2005, c. 1, s. 139.