I-3 - Taxation Act

Section 740.5 Disposition versions

2006-03-01

740.5. No deduction may be made under section 738, 740 or 845 in computing the taxable income of a particular corporation in respect of a dividend received on a share, in this section referred to as the “subject share”, other than an exempt share, of the capital stock of another corporation where

(a)  any person or partnership was obligated, in any way whatever, to effect an undertaking, including any covenant or agreement to purchase or repurchase the subject share, under which an investor is entitled, either immediately or in the future, to receive or obtain any amount or benefit for the purpose of reducing the impact, in whole or in part, of any loss that an investor may sustain by virtue of the ownership, holding or disposition of the subject share, and any property is used, in whole or in part, either directly or indirectly in any manner whatever, to secure the undertaking; or

(b)  the undertaking or right referred to in subparagraph i or ii was acquired by the issuer as part of a transaction or event or a series of transactions or events that included the issuance or acquisition of the subject share, or a share for which the subject share was substituted, and the consideration for which the subject share was issued or any other property received, either directly or indirectly, by the issuer from an investor, or any property substituted therefor, is or includes

i.  an undertaking of an investor to make payments that are required to be included, in whole or in part, in computing the income of the issuer, other than an undertaking of a corporation that, immediately before the subject share was issued, would be related to the corporation that issued the subject share if this Act were read without reference to paragraph b of section 20; or

ii.  any right to receive payments that are required to be included, in whole or in part, in computing the income of the issuer where that right is held on condition that it or property substituted therefor may revert or pass to an investor or a person or partnership to be determined by an investor.

1989, c. 77, s. 84; 1997, c. 3, s. 71.