Income Tax Application Rules

Income Tax Application Rules Short title This Act may be cited as the Income Tax Application Rules. Definitions In this Act, amended Act means, according to the context in which that expression appears, the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as amended by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, and by any subsequent Act, and the Income Tax Act, as amended from time to time; (loi modifiée) former Act means the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it was before being amended by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72. (ancienne loi) Application of 1970-71-72, c. 63, s. 1 Subject to the amended Act and this Act, section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, applies to the 1972 and subsequent taxation years. Application of Part XIII of amended Act Where an amount is paid or credited by a person resident in Canada to a non-resident person who is resident in a prescribed country, and with whom the person resident in Canada was dealing at arm’s length, as, on account of, in lieu of payment of or in satisfaction of, interest payable on any bond, debenture, mortgage, note or similar obligation issued before 1976 by the person resident in Canada to the non-resident person, for the purposes of computing the tax under Part XIII of the amended Act payable by the non-resident person on the amount, the reference in subsection 212(1) of that Act to “25%” shall be read as a reference to “15%”. [Repealed, 2007, c. 35, s. 69] Limitation on non-resident’s tax rate Notwithstanding any provision of the amended Act, where an agreement or convention between the Government of Canada and the government of any other country that has the force of law in Canada provides that where an amount is paid or credited, or deemed to be paid or credited, to a resident of that other country the rate of tax imposed thereon shall not exceed a specified rate, any reference in Part XIII of the amended Act to a rate in excess of the specified rate shall, in respect of such an amount, be read as a reference to the specified rate; and except where the amount can reasonably be attributed to a business carried on by that person in Canada, that person shall, for the purpose of the agreement or convention in respect of the amount, be deemed not to have a permanent establishment in Canada. In this section and sections 13 to 18, enactment has the meaning assigned by section 2 of the Interpretation Act; (texte) old law means the Income War Tax Act, The 1948 Income Tax Act, and the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as amended from time to time otherwise than by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, or any subsequent Act; (législation antérieure) The 1948 Income Tax Act means The Income Tax Act, chapter 52 of the Statutes of Canada, 1948, together with all Acts passed in amendment thereof. (Loi de l’impôt sur le revenu (1948)) References relating to same subject-matter Subject to this Act and unless the context otherwise requires, a reference in any enactment to a particular Part or provision of the amended Act shall be construed, as regards any transaction, matter or thing to which the old law applied, to include a reference to the Part or provision, if any, of the old law relating to, or that may reasonably be regarded as relating to, the same subject-matter. Part IV of former Act Part IV of the former Act is continued in force but does not apply in respect of gifts made after 1971. Part VIII of former Act Part VIII of the former Act is continued in force but as though the references in that Part that, according to the context in which they appear, are references to or to provisions of the Income Tax Act were read as references to or to provisions of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as amended from time to time otherwise than by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, or any subsequent Act. Construction of certain references In any enactment, a reference by number to any provision of the Income Tax Act that, according to the context in which the reference appears, is a reference to a provision of Part IV of the former Act, a provision of Part VIII of the former Act, or a provision of the amended Act having the same number as a provision described in paragraph (a) or (b), shall, for greater certainty, be read as reference to the provision described in paragraph (a), (b) or (c), as the case may be, and not to any other provision of the Income Tax Act, or the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, having the same number. Income War Tax Act, s. 8 A taxpayer may deduct from the tax otherwise payable under Part I of the amended Act for a taxation year such amount as would, if the Income War Tax Act applied to the taxation year, be deductible from tax because of subsections 8(6), (7) and (7A) of the Income War Tax Act. S.C. 1947, c. 63, s. 16 There may be deducted in computing income for a taxation year under Part I of the amended Act an amount that would be deductible under section 16 of chapter 63 of the Statutes of Canada, 1947, from income as defined by the Income War Tax Act if that Act applied to the taxation year. Idem There may be deducted from the tax for a taxation year otherwise payable under Part I of the amended Act an amount that would be deductible under section 16 of chapter 63 of the Statutes of Canada, 1947, from the total of taxes payable under the Income War Tax Act and The Excess Profits Tax Act, 1940, if those Acts applied to the taxation year. Retrospection Where there is a reference in the amended Act to any act, matter or thing done or existing before a taxation year, it shall be deemed to include a reference to the act, matter or thing, even though it was done or existing before the commencement of that Act. Amount not previously included as income Where, on the application of a method adopted by a taxpayer for computing income from a business, other than a business that is a profession, or farm or property for a taxation year to which the amended Act applies, an amount received in the year would not be included in computing the taxpayer’s income for the year because on the application of that method it would have been included in computing the taxpayer’s income for the purposes of the Income Tax Act or the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, for a preceding taxation year in respect of which it was receivable, if the amount was not included in computing the income for the preceding year, it shall be included in computing the income for the year in which it was received. S.C. 1949 (2nd S.), c. 25, s. 53 There may be deducted in computing income for a taxation year under Part I of the amended Act an amount that would be deductible under section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session), in computing income under The 1948 Income Tax Act if that Act applied to the taxation year. There may be deducted from the tax for a taxation year otherwise payable under Part I of the amended Act an amount that would be deductible under section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session), from the tax payable under Part I of The 1948 Income Tax Act if that Act applied to the taxation year. Registered pension plan A reference in the amended Act to a registered pension plan shall, in respect of a period while the plan was an approved superannuation or pension fund or plan, be construed as a reference to that approved superannuation or pension fund or plan. General depreciation provisions Where the capital cost to a taxpayer of any depreciable property that was acquired by the taxpayer before 1972 was required by any provision of the old law to be determined for the purpose of computing the amount of any deduction under any such provision in respect of that property, or would have been required by any provision of the old law to be determined for that purpose if any deduction under any such provision had been claimed by the taxpayer in respect of that property, the amount of the capital cost so required to be determined or that would have been so required to be determined, as the case may be, shall be deemed, for all purposes of the amended Act, to be the capital cost to the taxpayer of that property. Where a taxpayer acquired depreciable property before the beginning of the 1949 taxation year, for the purposes of section 13 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act an amount equal to the total of all deductions allowed in computing the taxpayer’s income for the purpose of the Income War Tax Act as “special depreciation”, “extra depreciation” or allowances in lieu of depreciation for property the taxpayer had at the beginning of the 1949 taxation year (except deductions allowed under subparagraph 6(1)(n)(ii) of that Act), and ½ of all amounts allowed to the taxpayer under subparagraph 6(1)(n)(ii) of that Act for property that the taxpayer had at the beginning of the 1949 taxation year, shall be deemed to have been allowed to the taxpayer under regulations made under paragraph 20(1)(a) of the amended Act in computing income for a taxation year before the 1949 taxation year. Provisoes not applicable The second and third provisoes to paragraph 6(1)(n) of the Income War Tax Act do not apply with respect to sales made after the beginning of the 1949 taxation year. Reference to depreciation Reference in this section to depreciation shall be deemed to include a reference to allowances in respect of depreciable property of a taxpayer made under paragraph 5(1)(a) of the Income War Tax Act. Deduction deemed depreciation An amount deducted under paragraph 5(1)(u) of the Income War Tax Act in respect of amounts of a capital nature shall, for the purpose of this section, be deemed to be depreciation taken into account in ascertaining the taxpayer’s income for the purpose of that Act or in ascertaining the taxpayer’s loss for the taxation year for which it was deducted. Income maintenance payments Notwithstanding section 9, paragraph 6(1)(f) of the amended Act does not apply in respect of amounts received by a taxpayer in a taxation year that were payable to the taxpayer in respect of the loss, in consequence of an event occurring before 1974, of all or any part of the taxpayer’s income from an office or employment, under a plan, described in that paragraph, that was established before June 19, 1971. Effect of certain changes made in plan established before June 19, 1971 For the purposes of this section, a plan described in paragraph 6(1)(f) of the amended Act that was in existence before June 19, 1971 does not cease to be a plan established before that date solely because of changes made therein on or after that date for the purpose of ensuring that the plan qualifies as one entitling the employer of persons covered under the plan to a reduction, as provided for by subsection 50(2) of the Unemployment Insurance Act, in the amount of the employer’s premium payable under that Act in respect of insured persons covered under the plan. Depreciable property If the capital cost to a taxpayer of any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 and owned by the taxpayer without interruption from December 31, 1971 until such time after 1971 as the taxpayer disposed of it is less than the fair market value of the property on valuation day and less than the proceeds of disposition thereof otherwise determined, for the purposes of section 13 of the amended Act, subdivision c of Division B of Part I of that Act and any regulations made under paragraph 20(1)(a) of that Act, the taxpayer’s proceeds of disposition of the property shall be deemed to be an amount equal to the total of its capital cost to the taxpayer and the amount, if any, by which the proceeds of disposition thereof otherwise determined exceed the fair market value of the property on valuation day, where the property has, by one or more transactions or events (other than the death of a taxpayer to which subsection 70(5) of the amended Act applies) between persons not dealing at arm’s length, become vested in another taxpayer for the purposes of the amended Act (other than, where paragraph 13(7)(e) of that Act applies in determining the capital cost to that other taxpayer of the property, for the purposes of paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), that other taxpayer shall be deemed to have acquired the property at a capital cost equal to the proceeds deemed to have been received for the property by the person from whom that other taxpayer acquired the property, and for the purposes of this subsection, that other taxpayer shall be deemed to have acquired the property before 1972 at a capital cost equal to the capital cost of the property to the taxpayer who actually owned the property at the end of 1971, and to have owned it without interruption from December 31, 1971 until such time after 1971 as that other taxpayer disposed of it, and where the disposition occurred because of an election under subsection 110.6(19) of the amended Act, for the purposes of that Act (other than paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), the taxpayer is deemed to have reacquired the property at a capital cost equal to where the amount designated in respect of the property in the election did not exceed 110% of the fair market value of the property at the end of February 22, 1994, the taxpayer’s proceeds of disposition determined under paragraph (a) in respect of the disposition of the property that immediately preceded the reacquisition minus the amount, if any, by which the amount designated in respect of the property in the election exceeded that fair market value, and in any other case, the amount otherwise determined under subsection 110.6(19) of that Act to be the cost to the taxpayer of the property immediately after the reacquisition referred to in that subsection minus the amount by which the fair market value of the property on valuation day exceeded the capital cost of the property at the time it was last acquired before 1972, and for the purposes of this subsection, the taxpayer’s capital cost of the property after the reacquisition shall be deemed to be equal to the taxpayer’s capital cost of the property before the reacquisition and the taxpayer shall be considered to have owned the property without interruption from December 31, 1971 until such time after February 22, 1994 as the taxpayer disposes of it. Where depreciable property disposed of to spouse, trust or child Subsection (1) does not apply in any case where subsection 70(6) or 73(1) of the amended Act applies in respect of the disposition by a taxpayer of any depreciable property of a prescribed class to the spouse, common-law partner, trust or transferee, as the case may be, referred to therein, and subsection 70(9) of the amended Act applies in respect of the disposition by a taxpayer of any depreciable property of a prescribed class to a child referred to therein, except that where the spouse, common-law partner, trust, transferee or child, as the case may be, subsequently disposes of the property at any time, subsection (1) applies as if the spouse, common-law partner, trust, transferee or child, as the case may be, had acquired the property before 1972 and owned it without interruption from December 31, 1971 until that time. Extended meaning of child For the purposes of subsection (1.1), child of a taxpayer includes a child of the taxpayer’s child; a child of the taxpayer’s child’s child; and a person who, at any time before attaining the age of 21 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control. Other transfers of depreciable property Where, because of a transaction or an event in respect of which any of subsections 70(5), 85(1), (2) and (3), 87(2), section 88, subsections 97(2), 98(3) and (5) and 107(2) of the amended Act applies, a taxpayer has at any particular time after 1971 acquired any depreciable property of a prescribed class from a person who acquired the property before 1972 and owned it without interruption from December 31, 1971 until the particular time, for the purposes of subsection (1) the taxpayer shall be deemed to have acquired the property before 1972 and to have owned it without interruption from December 31, 1971 until such time after 1971 as the taxpayer disposed of it. Transfers before 1972 not at arm’s length Without restricting the generality of section 18, if any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) has been transferred before 1972 in circumstances such that subsection 20(4) of the former Act would, if that provision applied to transfers of property made in the 1972 taxation year, apply, paragraph 69(1)(b) of the amended Act does not apply to the transfer and subsection 20(4) of the former Act applies thereto. Depreciable property received as dividend in kind The capital cost to a taxpayer, as of any particular time after 1971, of any depreciable property (other than depreciable property referred to in subsection (1.3) or deemed by subparagraph (1)(b)(ii) to have been acquired by the taxpayer before 1972 or a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 as, on account of, in lieu of payment of or in satisfaction of, a dividend payable in kind (other than a stock dividend) in respect of a share owned by the taxpayer of the capital stock of a corporation, is deemed to be the fair market value of that property at the time the property was so received. Recapture of capital cost allowances In determining a taxpayer’s income for a taxation year from farming or fishing, subsection 13(1) of the amended Act does not apply in respect of the disposition by the taxpayer of property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 unless the taxpayer has elected to make a deduction for that or a preceding taxation year, in respect of the capital cost of property acquired by the taxpayer before 1972, under regulations made under paragraph 20(1)(a) of that Act other than a regulation providing solely for an allowance for computing income from farming or fishing. Depreciable property of partnership of prescribed class For the purposes of the amended Act, where a partnership had, on December 31, 1971, partnership property that was depreciable property of a prescribed class, the capital cost to the partnership of each property of that class shall be deemed to be an amount determined as follows: determine, for each person who, because of having been a member of the partnership on the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until December 31, 1971, can reasonably be regarded as having had an interest in the property of that class on December 31, 1971, the persons acquisition cost in respect of property of that class, determine, for each such person, the amount that is that proportion of the person’s acquisition cost in respect of property of that class that 100% is of the person’s percentage in respect of property of that class, select the amount determined under subparagraph (ii) for a person described therein that is not greater than any amount so determined for any other such person, and determine that proportion of the amount selected under subparagraph (iii) (in this subsection referred to as the “capital cost of that class”) that the fair market value on December 31, 1971 of that property is of the fair market value on that day of all property of that class, and the amount determined under subparagraph (iv) is the capital cost to the partnership of that property; for the purposes of sections 13 and 20 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act, the undepreciated capital cost to the partnership of property of that class as of any time after 1971 shall be computed as though the amount, if any, by which the capital cost of that class to the partnership exceeds the undepreciated cost to the partnership of that class had been allowed to the partnership in respect of property of that class under regulations made under paragraph 20(1)(a) of the amended Act in computing income for taxation years before that time; in computing the income for the 1972 and subsequent taxation years of each person who was a member of the partnership on June 18, 1971 and thereafter without interruption until December 31, 1971, there may be deducted such amount as the person claims for the year, not exceeding the amount, if any, by which the total of the lesser of the amount, if any, by which the amount that was the capital cost to the person of all property of that class exceeds the percentage, equal to the person’s percentage in respect of property of that class, of the capital cost of that class to the partnership, and the amount that was the undepreciated capital cost to the person of property of that class as of December 31, 1971, and the amount, if any, by which the undepreciated capital cost to the person of property of that class as of December 31, 1971, less the amount, if any, determined under subparagraph (i) in respect of property of that class, exceeds the percentage, equal to the person’s percentage in respect of property of that class, of the undepreciated cost to the partnership of that class, exceeds the total of all amounts deducted under this paragraph in computing the persons income for preceding taxation years, and, for the purposes of section 3 of the amended Act, the amount so claimed shall be deemed to be a deduction permitted by subdivision e of Division B of Part I of that Act; and notwithstanding paragraph (c), a person who became a member of the partnership after June 18, 1971 and who was a member of the partnership thereafter without interruption until December 31, 1971 shall be deemed to be a person described in paragraph (c) and the amount that may be claimed thereunder as a deduction in computing the person’s income for any taxation year shall not exceed 10% of the total of the amounts determined under subparagraphs (c)(i) and (ii). In subsection (3), acquisition cost of a person who was a member of a partnership on December 31, 1971 in respect of depreciable property of a prescribed class that was partnership property of the partnership on December 31, 1971 means the total of the undepreciated capital cost to the person of property of that class as of December 31, 1971 and the total depreciation allowed to the person before 1972 in respect of property of that class; (coût d’acquisition) percentage of a member of a partnership in respect of any depreciable property of a prescribed class that was partnership property of the partnership on December 31, 1971 means the interest of the member of the partnership in property of that class, expressed as a percentage of the total of the interests of all members of the partnership in property of that class on that day; (pourcentage) undepreciated cost to the partnership of any class of depreciable property means an amount determined as follows: determine, for each person who, because of having been a member of the partnership on the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until December 31, 1971, can reasonably be regarded as having had an interest in property of that class on December 31, 1971, the amount, if any, by which the undepreciated capital cost to the person of property of that class as of December 31, 1971 exceeds the amount, if any, determined under subparagraph (3)(c)(i) for the person in respect of property of that class, determine, for each such person, the amount that is that proportion of the amount determined under paragraph (a) that 100% is of the person’s percentage in respect of property of that class, and select the amount determined under paragraph (b) for a person described therein that is not greater than any amount so determined for any other such person, and the amount selected under paragraph (c) is the undepreciated cost to the partnership of that class. (fraction non amortie du coût, pour la société de personnes) Other depreciable property of partnership For the purposes of the amended Act, where a partnership had, on December 31, 1971, any particular partnership property that was depreciable property other than depreciable property of a prescribed class, the cost to the partnership of the particular property shall be deemed to be the amount that would be determined under paragraph (3)(a) to be the capital cost thereof if the particular property constituted a prescribed class of property, and the acquisition cost of each person described therein in respect of the particular property were its actual cost to the person or the amount at which the person was deemed by subsection 20(6) of the former Act to have acquired it, as the case may be; for the purposes of sections 13 and 20 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act, the undepreciated capital cost of property of any class as of any particular time after 1971 shall be computed as if the amount, if any, by which the amount determined under paragraph (a) to have been the cost to the partnership of the particular property, the amount that would be determined under the definition undepreciated cost to the partnership in subsection (4) to be the undepreciated cost to the partnership of any class of depreciable property comprising the particular property if paragraph (a) of that definition were read without reference to the words “the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until”, the amount determined under subparagraph 3(c)(i) for any person in respect of that class were nil, and the undepreciated capital cost to each person described in the definition acquisition cost in subsection (4) of the particular property as of December 31, 1971 were the amount, if any, by which the amount assumed by subparagraph (a)(ii) to have been the acquisition cost of the person in respect of the property exceeds the total of all allowed to the person in respect of the property under regulations made under paragraph 11(1)(a) of the former Act in computing income for taxation years ending before 1972, had been allowed to the partnership in respect of the particular property under regulations made under paragraph 20(1)(a) of the amended Act in computing income for taxation years ending before the particular time; and in computing the income for the 1972 and subsequent taxation years of each person who was, on December 31, 1971, a member of the partnership, there may be deducted such amount as the person claims for the year, not exceeding the amount, if any, by which the amount by which the amount assumed by clause (b)(ii)(C) to have been the undepreciated capital cost to the person of the particular property as of December 31, 1971 a percentage of the amount determined under subparagraph (b)(ii) in respect of the particular property, equal to the percentage that would be the person’s percentage (within the meaning assigned by subsection (4)) in respect of the particular property if that property constituted a prescribed class, the total of all amounts deducted under this paragraph in computing the person’s income for preceding taxation years, and for the purposes of section 3 of the amended Act the amount so claimed shall be deemed to be a deduction permitted by subdivision e of Division B of Part I of that Act. Government right If as a result of a disposition occurring after 1971 a taxpayer has or may become entitled to receive an amount (in this section referred to as the actual amount) that may reasonably be considered to be consideration received by the taxpayer for the disposition of, or for allowing the expiration of, a government right, in respect of a business carried on by the taxpayer throughout the period beginning January 1, 1972 and ending immediately after the disposition occurred, for the purposes of the amended Act the amount that the taxpayer has or may become entitled to receive is deemed to be the amount, if any, by which the actual amount exceeds the greater of the total of all amounts each of which is an outlay or expenditure made or incurred by the taxpayer as a result of a transaction that occurred before 1972 for the purpose of acquiring the government right, or the taxpayer’s original right in respect of the government right, to the extent that the outlay or expenditure was not otherwise deducted in computing the income of the taxpayer for any taxation year and would, if made or incurred by the taxpayer as a result of a transaction that occurred after 1971, be an eligible capital expenditure of the taxpayer; and the fair market value to the taxpayer on December 31, 1971 of the taxpayer’s specified right in respect of the government right, if no outlay or expenditure was made or incurred by the taxpayer for the purpose of acquiring the right or, if an outlay or expenditure was made or incurred, if that outlay or expenditure would have been an eligible capital expenditure of the taxpayer if it had been made or incurred as a result of a transaction that occurred after 1971. Where the taxpayer and the person by whom the actual amount has become payable to the taxpayer were not dealing with each other at arm’s length, for the purposes of computing the income of that person the portion of the actual amount in excess of the amount deemed by subsection (1) to be the amount that has become payable to the taxpayer shall be deemed not to have been an outlay, expense or cost, as the case may be, of that person. Where after 1971 a taxpayer has acquired a particular government right referred to in subsection (1) from a person with whom the taxpayer was not dealing at arm’s length, or under an agreement with a person with whom the taxpayer was not dealing at arm’s length, if under the terms of the agreement that person allowed the right to expire so that the taxpayer could acquire a substantially similar right from the authority that had issued the right to that person, and an actual amount subsequently becomes payable to the taxpayer as consideration for the disposition by the taxpayer of, or for the taxpayer allowing the expiration of, the particular government right or any other government right acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the particular government right, for the purpose of the amended Act, the amount that has so become payable to the taxpayer shall be deemed to be the amount that would, if that person and the taxpayer had at all times been the same person, be determined under subsection (1) to be the amount that would have become so payable to the taxpayer. Amalgamations For the purposes of this section, an amalgamation (within the meaning of section 87 of the amended Act) of two or more Canadian corporations shall be deemed to be a transaction between persons not dealing at arm’s length. In this section, government right of a taxpayer means a right or licence that enables the taxpayer to carry on a business activity in accordance with a law of Canada or of a province or Canadian municipality, to an extent to which the taxpayer would otherwise be unable to carry it on in accordance therewith, that was granted or issued by Her Majesty in right of Canada or a province or a Canadian municipality, or by a department, board, agency or any other body authorized by or under a law of Canada, a province or a Canadian municipality to grant or issue such a right or licence, and that was acquired by the taxpayer as a result of a transaction that occurred before 1972, or at a particular time for the purpose of affecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under a government right held by the taxpayer before the particular time; (droit gouvernemental) original right of a taxpayer in respect of a government right means a right or licence described in the definition government right in this subsection, and acquired by the taxpayer as a result of a transaction that occurred before 1972 for a purpose other than the purpose described in subparagraph (c)(ii) of that definition, if the government right was acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the right or licence; (droit initial) specified right of a taxpayer in respect of a government right means a right owned by a taxpayer on December 31, 1971 that was an original right, or a government right that was acquired by the taxpayer in substitution for the original right or that was one of a series of government rights acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the original right. (droit particulier) Rules applicable For the purposes of computing the income of a taxpayer for a taxation year ending after 1971 from a business that is a profession, there may be deducted such amount as the taxpayer claims, not exceeding the lesser of the amount deducted under this paragraph in computing the taxpayer’s income from the business for the preceding taxation year, and the taxpayer’s investment interest in the business at the end of the year; where the taxation year is the taxpayer’s 1972 taxation year, the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business shall be deemed to be an amount equal to the taxpayer’s 1971 receivables in respect of the business; there shall be included the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business; and there shall be included amounts received by the taxpayer in the year on account of debts in respect of the business that were established by the taxpayer to have become bad debts before the end of the 1971 fiscal period of the business. Application of para. (3)(a) Paragraph (3)(a) does not apply to allow a deduction in computing the income of a taxpayer from a business that is a profession for the taxation year in which the taxpayer died; or for any taxation year, if, in the case of a taxpayer who at no time in the year was resident in Canada, the taxpayer ceased to carry on the business, or in the case of any other taxpayer, the taxpayer ceased to be resident in Canada and ceased to carry on the business at any time in the year or the following year. Certain persons deemed to be carrying on business by means of partnership For the purposes of paragraph (a) of the definition investment interest in subsection (5), where subsection 98(1) of the amended Act applies, the persons who are deemed not to have ceased to be members of a partnership because of that subsection shall be deemed to be carrying on business in Canada by means of that partnership; and a taxpayer who has a residual interest in a partnership (within the meaning assigned by section 98.1 of the amended Act) shall be deemed to be carrying on business in Canada by means of that partnership. investment interest in a business at the end of a taxation year of a taxpayer means in the case of a taxpayer other than a corporation, the total of all amounts each of which is an amount in respect of a proprietorship or partnership by means of which the taxpayer carried on that business in Canada in the year, equal to, in respect of each such proprietorship, the amount, if any, by which the total of such of the amounts that were included in computing the taxpayer’s income for that or a preceding taxation year as were receivable by the taxpayer at the end of the fiscal period of the proprietorship ending in the taxation year, the amount claimed under paragraph 20(1)(l) of the amended Act as a reserve for doubtful debts in computing the taxpayer’s income from the business for the fiscal period of the proprietorship ending in the year, and in respect of each such partnership, the adjusted cost base to the taxpayer of the taxpayer’s interest in the partnership immediately after the end of the fiscal period of the partnership ending in the year, in the case of a taxpayer that is a corporation, the lesser of the amount thereof that would be determined under paragraph (a) in respect of the corporation if that paragraph applied to a taxpayer that is a corporation, and that proportion of its 1971 receivables in respect of the business that the amount, if any, by which 10 exceeds the number of its taxation years ending after 1971 and either before or coincidentally with the taxation year, is of 10; (participation aux investissements) 1971 receivables in respect of a business of a taxpayer means the total of all amounts that became receivable by the taxpayer in respect of property sold or services rendered in the course of the business (within the meaning given that expression in section 34 of the amended Act) in taxation years ending before 1972 and that were not included in computing the taxpayer’s income for any such taxation year, other than debts that were established by the taxpayer to have become bad debts before the end of the 1971 fiscal period of the business, and the total of all amounts each of which is an amount, in respect of each partnership by means of which the taxpayer carried on that business before 1972, equal to such portion of the total that would be determined under paragraph (a) in respect of the partnership, if the references in that paragraph to “the taxpayer” were read as references to “the partnership”, as is designated by the taxpayer in the taxpayer’s return of income under Part I of the amended Act for the year to be attributable to the taxpayer, except that where the total of the portions so designated by all members of the partnership is less than the total that would be so determined under paragraph (a) in respect of the partnership, the Minister may designate the portion of that total that is attributable to the taxpayer, in which case the portion so designated by the Minister in respect of the taxpayer shall be deemed to be the portion so designated by the taxpayer. (sommes à recevoir pour 1971) Definition of valuation day for capital gains and losses In this Act, valuation day means December 22, 1971, in relation to any property prescribed to be a publicly-traded share or security; and December 31, 1971, in relation to any other property. Capital gains subject to tax The provisions of subdivision c of Division B of Part I of the amended Act apply to dispositions of property made after 1971 and to transactions or events occurring after 1971 because of which any disposition of property was made or deemed to have been made in accordance with the provisions of that subdivision. Principal amount of certain obligations For the purposes of subsection 39(3) and section 80 of the amended Act, the principal amount of any debt or other obligation of a taxpayer to pay an amount that was outstanding on January 1, 1972 (in this subsection referred to as an “obligation”) shall be deemed to be the lesser of the principal amount, otherwise determined for the purposes of the amended Act, of the obligation, and the fair market value, on valuation day, of the obligation, and in applying paragraph 39(3)(a) of the amended Act to an obligation, the reference in that paragraph to “the amount for which the obligation was issued” shall be read as a reference to “the lesser of the principal amount of the obligation and the amount for which the obligation was issued”. Cost of acquisition of capital property owned on Dec. 31, 1971 For the purpose of computing the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) that was owned by the taxpayer on December 31, 1971 and thereafter without interruption until such time as the taxpayer disposed of it, its cost to the taxpayer shall be deemed to be the amount that is neither the greatest nor the least of the following three amounts, namely, its actual cost to the taxpayer or, if the property was an obligation, its amortized cost to the taxpayer on January 1, 1972, its fair market value on valuation day, and the amount, if any, by which the total of the taxpayer’s proceeds of disposition of the property, determined without reference to subsection 13(21.1) of the amended Act, all amounts required by subsection 53(2) of the amended Act to be deducted in computing its adjusted cost base to the taxpayer immediately before the disposition, and all amounts described in clause (5)(c)(ii)(B) that are relevant in computing its adjusted cost base to the taxpayer immediately before the disposition, exceeds the total of all amounts required by subsection 53(1) of the amended Act (other than paragraphs 53(1)(f.1) to (f.2)) to be added in computing its adjusted cost base to the taxpayer immediately before the disposition, and all amounts described in clause (5)(c)(i)(B) that are relevant in computing its adjusted cost base to the taxpayer immediately before the disposition, except that where two or more of the amounts determined under paragraphs (a) to (c) in respect of any property are the same amount, that amount shall be deemed to be its costs to the taxpayer. Determination of cost where property not disposed of For the purpose of computing the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) at any particular time before the taxpayer disposed of it, where the property was owned by the taxpayer on December 31, 1971 and thereafter without interruption until the particular time, its costs to the taxpayer shall be deemed to be the amount that would be determined under subsection (3) to be its cost to the taxpayer if the taxpayer had disposed of it at the particular time and the taxpayer’s proceeds of disposition had been its fair market value at that time. Where property disposed of in transaction not at arm’s length Where any capital property (other than depreciable property or an interest in a partnership) that was owned by a taxpayer (in this subsection referred to as the “original owner”) on June 18, 1971 has, by one or more transactions or events between persons not dealing at arm’s length, become vested in another taxpayer (in this subsection referred to as the “subsequent owner”) and the original owner has not elected under subsection (7) in respect of the property, notwithstanding the provisions of the amended Act, for the purposes of computing, at any particular time after 1971, the adjusted cost base of the property to the subsequent owner, the subsequent owner shall be deemed to have owned the property on June 18, 1971 and thereafter without interruption until the particular time; for the purposes of this section, the actual cost of the property to the subsequent owner or, if the property was an obligation, its amortized cost to the subsequent owner on January 1, 1972 shall be deemed to be the amount that was its actual cost or amortized cost, on January 1, 1972, as the case may be, to the original owner; and where the property became vested in the subsequent owner after 1971, there shall be added to the cost to the subsequent owner of the property (as determined under subsection (3)) the amount, if any, by which the total of all amounts each of which is a capital gain (other than any amount deemed by subsection 40(3) of the amended Act to be a capital gain) from the disposition after 1971 of the property by a person who owned the property before it so became vested in the subsequent owner, an amount required by subsection 53(1) of the amended Act to be added in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A), an amount determined under paragraph 88(1)(d) of the amended Act in computing the cost of the property to the subsequent owner or a person who owned the property before it became vested in the subsequent owner, or an amount by which a gain otherwise determined of a person who owned the property before it became so vested in the subsequent owner was reduced because of paragraph 40(2)(b) or (c) of the amended Act, a capital loss or an amount that would, but for paragraph 40(2)(e) and subsection 85(4) of the amended Act (as that Act read in its application to property disposed of on or before April 26, 1995) and paragraphs 40(2)(e.1) and (e.2) and subsection 40(3.3) of the amended Act, be a capital loss from the disposition to a corporation after 1971 of the property by a person who owned the property before it became vested in the subsequent owner, or an amount required by subsection 53(2) of the amended Act to be deducted in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A), and there shall be deducted from the cost to the subsequent owner of the property the amount, if any, by which the total determined under subparagraph (ii) exceeds the total determined under subparagraph (i). For the purposes of subsection (5), an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more Canadian corporations shall be deemed to be a transaction between persons not dealing at arm’s length. Transfer of capital property to a corporation For the purposes of subsection (5), where a taxpayer has disposed of capital property after May 6, 1974 to a corporation in respect of which an election under section 85 of the amended Act was made, the disposition shall be deemed to be a transaction between persons not dealing at arm’s length. Reacquired property Where a taxpayer has, at any time after June 18, 1971 and before 1972, disposed of any property owned by the taxpayer on that day and has, within 30 days after that time, reacquired the same property or acquired a substantially identical property, for the purposes of this section the taxpayer shall be deemed to have owned the property so reacquired or the substantially identical property so acquired, as the case may be, on June 18, 1971 and thereafter without interruption until the time the taxpayer so reacquired or acquired it as the case may be; where the property was property so reacquired, its actual cost or its amortized cost on January 1, 1972, as the case may be, to the taxpayer shall be determined as if the taxpayer had not so disposed of and so reacquired it; and where the property was substantially identical property so acquired, its actual cost or its amortized cost on January 1, 1972, as the case may be, to the taxpayer shall be deemed to be the amount that was the actual cost or the amortized cost on January 1, 1972, as the case may be, to the taxpayer of the property so disposed of by the taxpayer.

Election re cost Where, but for this subsection, the cost to an individual of any property actually owned by the individual on December 31, 1971 would be determined under subsection (3) or (4) otherwise than because of subsection (5) and the individual has so elected, in prescribed manner and not later than the day on or before which the individual is required by Part I of the amended Act to file a return of income for the first taxation year in which the individual disposes of all or any part of the property, other than personal-use property of the individual that was not listed personal property or real property, listed personal property, if the individual’s gain or loss, as the case may be, from the disposition thereof was, because of subsection 46(1) or (2) of the amended Act, nil, the individual’s principal residence, if the individual’s gain from the disposition thereof was, because of paragraph 40(2)(b) of the amended Act, nil, personal-use property of the individual that was real property (other than the individual’s principal residence), if the individual’s gain from the disposition thereof was, because of subsection 46(1) or (2) of the amended Act, nil, or any other property, the proceeds of disposition of which are equal to its fair market value on valuation day, the cost to the individual of each capital property (other than depreciable property, an interest in a partnership or any property described in any of paragraphs (a) to (e) that was disposed of by the individual before that taxation year) actually owned by the individual on December 31, 1971 shall be deemed to be its fair market value on valuation day. Identical properties For the purposes of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of any capital property (other than depreciable property or an interest in a partnership) that was owned by the taxpayer on December 31, 1971 and thereafter without interruption until the particular time, if the property was one of a group of identical properties owned by the taxpayer on December 31, 1971, section 47 of the amended Act does not apply; where the property was an obligation, for the purpose of paragraph (3)(a), its amortized cost to the taxpayer on January 1, 1972 shall be deemed to be that proportion of the total of the amortized costs to the taxpayer on January 1, 1972 of all obligations of that group that the principal amount of the obligation is of the total of the principal amounts of all obligations of that group, and for the purpose of paragraph (3)(b), its fair market value on valuation day shall be deemed to be that proportion of the fair market value on that day of all obligations of that group that the principal amount of the obligation is of the total of the principal amounts of all obligations of that group; where the property was not an obligation, for the purpose of paragraph (3)(a), its actual cost to the taxpayer shall be deemed to be the quotient obtained when the total of the actual costs to the taxpayer of all properties of that group is divided by the number of properties of that group, and for the purpose of paragraph (3)(b), its fair market value on valuation day shall be deemed to be the quotient obtained when the fair market value on that day of all properties of that group is divided by the number of properties of that group; for the purpose of distinguishing any such property from an otherwise identical property acquired and disposed of by the taxpayer before 1972, properties acquired by the taxpayer at any time shall be deemed to have been disposed of by the taxpayer before properties acquired by the taxpayer after that time; and for the purposes of distinguishing any such property from an otherwise identical property acquired by the taxpayer after 1971, properties owned by the taxpayer on December 31, 1971, shall be deemed to have been disposed of by the taxpayer before properties acquired by the taxpayer at a later time. For the purposes of subsection (8), any property of a life insurance corporation that would, but for this subsection, be identical to any other property of the corporation shall be deemed not to be identical to that other property unless both properties are included in the same segregated fund of the corporation; non-segregated property used in the year in, or held in the course of, carrying on a life insurance business in Canada; or non-segregated property used in the year in, or held in the course of, carrying on an insurance business in Canada, other than a life insurance business. For the purposes of subsection (8), any bond, debenture, bill, note or other similar obligation issued by a debtor is identical to any other such obligation issued by that debtor if both are identical in respect of all rights (in equity or otherwise, either immediately or in the future and either absolutely or contingently) attaching thereto, except as regards the principal amount thereof. Where a corporation resident in Canada has, after 1971, received a stock dividend in respect of a share owned on June 18, 1971 and December 31, 1971 by it or by a corporation with which it did not deal at arm’s length of the capital stock of a foreign affiliate of that corporation and the share or shares received as the stock dividend are identical to the share in respect of which the stock dividend was received, the share or shares received as the stock dividend may, at the option of the corporation, be deemed for the purposes of subsection (5) to be capital property owned by it on June 18, 1971 and for the purposes of this subsection, paragraph (3)(c) and subsection (8) to be capital property owned by it on June 18, 1971 and December 31, 1971 and not to be property acquired by the corporation after 1971 for the purposes of paragraph (8)(e). Where a corporation resident in Canada has, after 1971, received a stock dividend in respect of a share acquired by it after June 18, 1971 from a person with whom it was dealing at arm’s length and owned by it on December 31, 1971 of the capital stock of a foreign affiliate of that corporation and the share or shares received as the stock dividend are identical to the share in respect of which the stock dividend was received, the share or shares received as the stock dividend may, at the option of the corporation, be deemed for the purposes of this subsection, paragraph (3)(c) and subsection (8) to be capital property owned by it on December 31, 1971 and not to be property acquired by the corporation after 1971 for the purposes of paragraph (8)(e). Amalgamation For the purposes of subsections (8.3) and (8.4), where there has been an amalgamation (within the meaning of section 87 of the amended Act), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation. Cost of interest in partnership For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time, the cost to the taxpayer of the interest shall be deemed to be the amount that is neither the greatest nor the least of the following three amounts, namely, its actual cost to the taxpayer as of the particular time, the amount determined under subsection (9.1) in respect of the interest as of the particular time, and the amount, if any, by which the total of the fair market value of the interest at the particular time and all amounts required by subsection 53(2) of the amended Act to be deducted in computing its adjusted cost base to the taxpayer immediately before the particular time exceeds the total of all amounts required by subsection 53(1) of the amended Act to be added in computing its adjusted cost base to the taxpayer immediately before the particular time, except that where two or more of the amounts determined under paragraphs (a) to (c) in respect of the interest are the same amount, that amount shall be deemed to be its cost to the taxpayer. Determination of amounts for purpose of s. (9) For the purposes of subsection (9), the amount determined under this subsection in respect of a taxpayer’s interest in a partnership as of a particular time is the amount, if any, by which the total of the taxpayer’s share, determined at the beginning of the first fiscal period of the partnership ending after 1971, of the tax equity of the partnership at the particular time, such part of any contribution of capital made by the taxpayer to the partnership (otherwise than by way of loan) before 1972 and after the beginning of the partnership’s first fiscal period ending after 1971, as cannot reasonably be regarded as a gift made to, or for the benefit of, any other member of the partnership who was related to the taxpayer, and the amount of any consideration that became payable by the taxpayer after 1971 to any other person to acquire, after 1971, any right in respect of the partnership, the sole purpose of the acquisition of which was to increase the taxpayer’s interest in the partnership, all amounts received by the taxpayer before 1972 and after the beginning of the partnership’s first fiscal period ending after 1971 as, on account of, in lieu of payment of or in satisfaction of, a distribution of the taxpayer’s share of the partnership profits or partnership capital, and all amounts each of which is an amount in respect of the disposition by the taxpayer after 1971 and before the particular time of a part of the taxpayer’s interest in the partnership, equal to such portion of the adjusted cost base to the taxpayer of the interest immediately before the disposition as may reasonably be regarded as attributable to the part so dispose of. Where interest acquired before 1972 and after beginning of 1st fiscal period ending after 1971 Where a taxpayer has, before 1972 and after the beginning of the first fiscal period of a partnership ending after 1971, acquired an interest in the partnership from another person, subsection (9.1) applies as if, for the purposes of paragraphs (a), (b) and (d) thereof, the taxpayer had had in respect of the interest, throughout the period beginning at the beginning of that fiscal period and ending at the time the taxpayer acquired the interest, the same position in relation to the partnership as the taxpayer would have had in relation thereto if, throughout that period, the taxpayer had been the owner of the interest. Amounts deemed to be required to be deducted in respect of interest in partnership For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time, the lesser of the total of all amounts in respect of the interest determined under paragraph (9.1)(d) the total of the taxpayer’s share, determined at the beginning of the first fiscal period of the partnership ending after 1971, of the tax equity of the partnership at the particular time, and the amount in respect of the interest determined under paragraph (9.1)(b), and the total of all amounts in respect of the interest determined as of the particular time under paragraphs 14(e) to (g) the total of all amounts in respect of the interest determined as of the particular time under paragraphs 14(a) to (d), shall be deemed to be required by subsection 53(2) of the amended Act to be deducted. Application of s. 53 of amended Act in respect of interest in partnership For the purpose of computing, at any particular time after 1971, the adjusted cost base to a taxpayer of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time, the reference in clause 53(1)(e)(i)(B) of the amended Act to “relating to” shall be read as a reference to “relating to section 14 or to”; and clause 53(2)(c)(i)(B) of the amended Act shall be read as follows: paragraphs 12(1)(o) and (z.5), 18(1)(m) and 20(1)(v.1), section 31, subsection 40(2), section 55 and subsections 69(6) and (7) of this Act, paragraphs 20(1)(gg) and 81(1)(r) and (s) of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, and the provisions of the Income Tax Application Rules relating to section 14, and” Where paragraph 128.1(1)(b) of amended Act applies Where subsection 48(3) of the amended Act, as it read in its application before 1993, or paragraph 128.1(1)(b) of the amended Act applies for the purpose of determining the cost to a taxpayer of any property, this section does not apply for that purpose. Fair market value of publicly-traded securities For the purposes of this section, the fair market value on valuation day of any property prescribed to be a publicly-traded share or security shall be deemed to be the greater of the amount, if any, prescribed in respect of that property and the fair market value of that property, otherwise determined, on valuation day. Fair market value of share of foreign affiliate For the purposes of computing the fair market value on December 31, 1971, or at any subsequent time for the purposes of subsection (4), of any shares owned by a taxpayer resident in Canada of the capital stock of a foreign affiliate of the taxpayer, the fair market value at that time of any asset owned by the foreign affiliate at that time that was subsequently acquired by the taxpayer from the foreign affiliate as a dividend payable in kind, as a benefit the amount of which was deemed by paragraph 80.1(4)(b) of the amended Act to have been received by the taxpayer as a dividend from the foreign affiliate, or as consideration for the settlement or extinguishment of an obligation described in subsection 80.1(5) of the amended Act, and in respect of which subsection 80.1(4) or (5), as the case may be, of the amended Act applies because of an election described in that subsection made by the taxpayer, shall be deemed to be the principal amount of that asset. For the purposes of computing the fair market value on December 31, 1971 of any shares owned by a taxpayer resident in Canada of the capital stock of a foreign affiliate of the taxpayer, the fair market value on that day of any asset owned by the foreign affiliate on that day that was subsequently acquired by the taxpayer from the foreign affiliate as described in paragraph 80.1(6)(a) or (b) of the amended Act, and in respect of which subsection 80.1(1) of the amended Act applies because of an election described in subsection 80.1(6) of that Act made by the taxpayer, shall be deemed to be the principal amount of that asset, amortized cost to a taxpayer of any obligation on January 1, 1972 means the principal amount of the obligation, if its actual cost to the taxpayer was less than 100% but not less than 95% of that principal amount and the obligation was issued before November 8, 1969, the actual cost to the taxpayer of the obligation, if the actual cost to the taxpayer thereof was less than 105% but not less than 100% of the principal amount thereof, and in any other case, the actual cost to the taxpayer of the obligation, plus that proportion of the discount or minus that proportion of the premium, as the case may be, in respect thereof that the number of full months in the period commencing with the day the taxpayer last acquired the obligation and ending with valuation day, the number of full months in the period commencing with the day the taxpayer last acquired the obligation and ending with the date of its maturity; (coût amorti) capital property of a taxpayer means any depreciable property of the taxpayer, and any property (other than depreciable property) any gain or loss from the disposition of which would, if the property were disposed of after 1971, be a capital gain or a capital loss, as the case may be, of the taxpayer; (immobilisation) discount in respect of any obligation owned by a taxpayer means the amount, if any, by which the principal amount thereof exceeds its actual cost to the taxpayer, determined without reference to subsection (3); (escompte) eligible capital property of a taxpayer means any property, ½ of any amount payable to the taxpayer as consideration for the disposition of which would, if the property were disposed of after 1971, be eligible capital amount in respect of business within the meaning assigned by subsection 14(1) of the amended Act; (immobilisation admissible) obligation means a bond, debenture, bill, note, mortgage, hypothecary claim or agreement of sale; (obligation) premium in respect of any obligation owned by a taxpayer means the amount, if any, by which its actual cost to the taxpayer determined without reference to subsection (3) exceeds the principal amount thereof; (primes) tax equity of a partnership at any particular time means the amount, if any, by which the total of all amounts each of which is the amount of any money of the partnership on hand at the beginning of its first fiscal period ending after 1971, the cost amount to the partnership, at the beginning of that fiscal period, of any partnership property other than capital property or eligible capital property, an amount in respect of any property (other than depreciable property) that was, at the beginning of that fiscal period, capital property of the partnership, equal to, where the property was disposed of before 1972, the proceeds of disposition thereof, where the property was disposed of after 1971 and before the particular time, the amount determined under this section to be its cost to the partnership for the purposes of computing its adjusted cost base to the partnership immediately before it was disposed of, and in any other case, the amount determined under this section to be its cost to the partnership for the purposes of computing its adjusted cost base to the partnership immediately before the particular time, an amount in respect of any prescribed class of depreciable property of the partnership, equal to the amount, if any, by which the total of the undepreciated capital cost to the partnership of property of that class as of January 1, 1972 exceeds the capital cost to the partnership of property of that class acquired by it after the beginning of that fiscal period and before 1972, an amount in respect of any other depreciable property of the partnership at the beginning of that fiscal period, equal to the amount by which the actual cost of the property to the partnership, or the amount at which the partnership was deemed to have acquired the property under subsection 20(6) of the former Act as it read in its application to the 1971 taxation year, as the case may be, the total of all amounts in respect of the cost of the property that were allowed under paragraph 11(1)(a) of the former Act as it read in computing the income from the partnership of the members thereof for taxation years ending before 1972, an amount in respect of any property that was, at the beginning of that fiscal period, partnership property that was depreciable property, equal to where the property was disposed of before 1972, the proceeds of disposition thereof minus the amount, if any, by which the lesser of the proceeds of disposition thereof, and the capital cost of the property, in respect of depreciable property of a prescribed class, the undepreciable capital cost of all of the property of that class at the time of the disposition, or in respect of any other depreciable property, the amount that would be determined under paragraph (e) if the words “at the beginning of that fiscal period” were read as “at the time of the disposition”, where the property was disposed of after 1971 and before the particular time, the amount, if any, by which the lesser of the fair market value of the property on valuation day, exceeds the capital cost to the partnership of the property, and in any other case, the amount, if any, by which the lesser of the fair market value of the property on valuation day and its fair market value at the particular time the capital cost to the partnership of the property, or an amount in respect of any business carried on by the partnership in its 1971 fiscal period and thereafter without interruption until the particular time, equal to the amount, if any, by which 2 times the eligible capital amounts (within the meaning assigned by section 14 of the amended Act) in respect of the business (computed without reference to section 21 of this Act) that would have become payable to the partnership would exceed the amount that would be deemed by subsection 21(1) to be the amount that had become payable to the partnership if the partnership had disposed of the business at the particular time for an amount equal to its fair market value at that time, exceeds the total of all amounts each of which is the amount of any debt owing by the partnership, or of any other obligation of the partnership to pay an amount, that was outstanding at the beginning of the partnership’s first fiscal period ending after 1971, minus such part, if any, thereof as would, if the amount had been paid by the partnership in that fiscal period, have been deductible in computing its income for that fiscal period. (masse fiscale) Meaning of actual cost For the purposes of this section, the actual cost to a person of any property means, except as expressly otherwise provided in this section, the amount, if any, by which its cost to the person computed without regard to the provisions of this section such part of that cost as was deductible in computing the person’s income for any taxation year ending before 1972. For the purposes of this section, the actual cost to a taxpayer, as of any particular time after 1971, of an interest in a partnership of which the taxpayer was a member on December 31, 1971 and thereafter without interruption until the particular time means the amount, if any, by which the total of the cost to the taxpayer of the interest, computed as of the particular time without regard to the provisions of this section, the total of all amounts each of which is an amount in respect of a fiscal period of the partnership that ended before 1972, equal to the total of the amount that the taxpayer’s income from the partnership for the taxation year of the taxpayer in which the period ended would have been, if the former Act had been read without reference to subsection 83(5) of that Act, and the taxpayer’s share, determined at the end of the period, of all profits made from dispositions in the period of capital assets that were partnership property of the partnership, to the extent that those profits were not included in computing the income or loss, as the case may be, from the partnership, of any member thereof, where the taxpayer had, before 1972, made a contribution of capital to the partnership otherwise than by way of loan, such part of the contribution as cannot reasonably be regarded as a gift made to, or for the benefit of, any other member of the partnership who was related to the taxpayer, and where, by means of the partnership, the taxpayer carried on before 1972 a business that was a profession, the amount that the taxpayer’s 1971 receivables (within the meaning assigned by subsection 23(5)) in respect of the business would have been if, before 1972, the taxpayer had carried on no businesses except by means of the partnership, all amounts each of which is an amount in respect of the disposition by the taxpayer before the particular time of a part of the taxpayer’s interest in the partnership, equal to such portion of, where the disposition was made before 1972, the actual cost to the taxpayer of the interest, and in any other case, the adjusted cost base to the taxpayer of the interest immediately before the disposition, as can reasonably be regarded as attributable to the part so disposed of, all amounts each of which is an amount in respect of a fiscal period of the partnership that ended before 1972, equal to the total of the amount that would have been the taxpayer’s loss from the partnership for the taxation year of the taxpayer in which the period ended if the former Act had been read without reference to subsection 83(5) of that Act, the taxpayer’s share, determined the end of the period, of all losses sustained from dispositions in the period of capital assets that were partnership property of the partnership, to the extent that those losses were not included in computing the loss or income, as the case may be, from the partnership of any member thereof, and the taxpayer’s share, determined at the end of the period, of such of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the partnership while the taxpayer was a member thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada as were incurred in the period and after 1948, to the extent that those expenses were not deducted in computing the taxpayer’s income from the partnership for the taxpayer’s 1971 or any preceding taxation year, and all amounts received by the taxpayer before 1972 as, on account of, in lieu of payment of or in satisfaction of, a distribution of the taxpayer’s share of the partnership profits or partnership capital. For the purposes of this section and subsection 88(2.1) of the amended Act, the actual cost to a taxpayer, as of any particular time after 1971, of any shares (in this subsection referred to as “new shares”) of any class of the capital stock of a new corporation formed as a result of an amalgamation of two or more corporations (within the meaning of section 85i of the former Act as it read in its application to the 1971 taxation year) that were owned by the taxpayer on December 31, 1971, and thereafter without interruption until the particular time, and acquired by the taxpayer by the conversion, because of the amalgamation, of shares of the capital stock of a predecessor corporation into shares of the capital stock of the new corporation, means that proportion of the actual cost to the taxpayer of any shares owned by the taxpayer that were so converted because of the amalgamation that the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the taxpayer is of the fair market value, immediately after the amalgamation, of all of the shares of the capital stock of the new corporation so acquired by the taxpayer. For the purposes of this section, the actual cost to an individual, as of any particular time after 1971, of any share of the capital stock of a corporation that was owned by the individual on December 31, 1971 and thereafter without interruption until the particular time, and acquired by the individual in a taxation year before 1972 under an agreement referred to in subsection 85a(1) of the former Act as it read in its application to that taxation year, means an amount equal to the greater of the actual cost to the individual of the share computed without regard to this subsection, and the fair market value of the share at the time the individual so acquired it. For the purposes of this section and subsection 88(2.1) of the amended Act, the actual cost to a taxpayer, as of any particular time after 1971, of any capital property received by the taxpayer before 1972 and owned by the taxpayer thereafter without interruption until the particular time means, where the property was so received as, on account of, in lieu of payment of or in satisfaction of, a dividend payable in kind (other than a stock dividend) in respect of a share owned by the taxpayer of the capital stock of a corporation, the fair market value of that property at the time the property was so received; where the property so received was a share of the capital stock of a corporation received by the taxpayer as a stock dividend, the amount that, because of the receipt of the share, was deemed by subsection 81(3) of the former Act to have been received by the taxpayer as a dividend; and where the property was so received from a pension fund or plan, an employees profit sharing plan, a retirement savings plan, a deferred profit sharing plan or a supplementary unemployment benefit plan, the fair market value of that property at the time the property was so received. Application Where a taxpayer is deemed to have acquired a property because of subsection 138(11.3) of the amended Act, this section does not apply in respect of any subsequent disposition or deemed disposition of the property. Transfer of farm land by a farmer to his child at death Where a taxpayer owned, on December 31, 1971 and thereafter without interruption until the taxpayer’s death, any land referred to in subsection 70(9) of the amended Act, the land has, on or after the death of the taxpayer and as a consequence thereof, been transferred or distributed to a child of the taxpayer who was resident in Canada immediately before the death of the taxpayer, and it can be shown, within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the legal representative of the taxpayer within that period, within such longer period as the Minister considers reasonable in the circumstances, that the land has become vested indefeasibly in the child, the following rules apply: paragraph 70(9)(b) of the amended Act does not apply for the purpose of determining the cost to the child of the land or part thereof, as the case may be, and subsection (5) applies in respect of the transfer or distribution of the land to the child as if the references in that subsection to “June 18, 1971” were references to “December 31, 1971”. Inter vivos transfer of farm land by farmer to child Where a taxpayer owned, on December 31, 1971, and thereafter without interruption until a transfer thereof by the taxpayer to the taxpayer’s child, in circumstances to which subsection 73(3) of the amended Act applies, land referred to in that subsection, paragraph 73(3)(d) of the amended Act does not apply for the purpose of determining the cost to the child of the land; and subsection (5) shall apply in respect of the transfer of the land to the child as if the references in that subsection to “June 18, 1971” were references to “December 31, 1971”. For the purposes of subsections (18) and (19), child of a taxpayer includes Shares received on amalgamation Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”), and any shareholder (except any predecessor corporation) owned shares of the capital stock of a predecessor corporation on December 31, 1971 and thereafter without interruption until immediately before the amalgamation, any shares referred to in paragraph (a) were shares of one class of the capital stock of a predecessor corporation (in this subsection referred to as the “old shares”), no consideration was received by the shareholder for the disposition of the old shares on the amalgamation other than shares of one class of the capital stock of the new corporation (in this subsection referred to as the “new shares”), and the cost of the new shares received by the shareholder because of the amalgamation was determined otherwise than because of paragraph 87(4)(e) of the amended Act, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, the property that was the old shares shall be deemed not to have been disposed of by the shareholder because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new shares, and the property that is the new shares shall be deemed not to have been acquired by the shareholder because of the amalgamation but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the amalgamation. Options received on amalgamations Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”) and a taxpayer has acquired an option to acquire capital property that was shares of the capital stock of the new corporation (in this subsection referred to as the “new option”) as sole consideration for the disposition on the amalgamation of an option to acquire shares of the capital stock of a predecessor corporation (in this subsection referred to as the “old option”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the amalgamation, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new option, the property that was the old option shall be deemed not to have been disposed of by the taxpayer because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new option; and the property that is the new option shall be deemed not to have been acquired by the taxpayer because of the amalgamation but to have been in existence prior thereto in the form of the old option that was altered, in form only, because of the amalgamation. Obligations received on amalgamations Where, after May 6, 1974, there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more corporations (each of which is in this subsection referred to as a “predecessor corporation”) to form one corporate entity (in this subsection referred to as the “new corporation”) and a taxpayer has acquired a capital property that was a bond, debenture, note, mortgage, hypothecary claim or other similar obligation of the new corporation (in this subsection referred to as the “new obligation”) as sole consideration for the disposition on the amalgamation of a bond, debenture, note, mortgage, hypothecary claim or other similar obligation respectively of a predecessor corporation (in this subsection referred to as the “old obligation”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the amalgamation, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new obligation, the property that was the old obligation shall be deemed not to have been disposed of by the taxpayer because of the amalgamation but to have been altered, in form only, because of the amalgamation and to have continued in existence in the form of the new obligation; and the property that is the new obligation shall be deemed not to have been acquired by the taxpayer because of the amalgamation but to have been in existence prior thereto in the form of the old obligation that was altered, in form only, because of the amalgamation. Convertible properties Where there has been an exchange to which subsection 51(1) of the amended Act applies on which a taxpayer has acquired shares of one class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for a share, bond, debenture or note of the corporation (in this subsection referred to as the “old property”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the time of the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and, where the exchange occurred after May 6, 1974, for the purposes of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, the property that was the old property shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old property that was altered, in form only, because of the exchange. Bond conversion Where, after May 6, 1974, there has been an exchange to which section 51.1 of the amended Act applies on which a taxpayer has acquired a bond of a debtor (in this subsection referred to as the “new bond”) in exchange for another bond of the same debtor (in this subsection referred to as the “old bond”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new bond, the property that was the old bond shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new bond; and the property that is the new bond shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old bond that was altered, in form only, because of the exchange. Share for share exchange Where, after May 6, 1974, there has been an exchange to which subsection 85.1(1) of the amended Act applies on which a taxpayer has acquired shares of any particular class of the capital stock of a corporation (in this subsection referred to as the “new shares”) in exchange for shares of any particular class of the capital stock of another corporation (in this subsection referred to as the “old shares”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, the property that was the old shares shall be deemed not to have been disposed of by the taxpayer because of the exchange but to have been altered, in form only, because of the exchange and to have continued in existence in the form of the new shares; and the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the exchange but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the exchange. Reorganization of capital Where, after May 6, 1974, there has been a reorganization of the capital of a corporation to which section 86 of the amended Act applies on which a taxpayer has acquired shares of a particular class of the capital stock of the corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition on the reorganization of shares of another class of the capital stock of the corporation (in this subsection referred to as the “old shares”) owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the reorganization and the cost to the taxpayer of the new shares was determined otherwise than because of subsection 86(2) of the amended Act, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new shares, the property that was the old shares shall be deemed not to have been disposed of by the taxpayer because of the reorganization but to have been altered, in form only, because of the reorganization and to have continued in existence in the form of the new shares; and the property that is the new shares shall be deemed not to have been acquired by the taxpayer because of the reorganization but to have been in existence prior thereto in the form of the old shares that were altered, in form only, because of the reorganization. Where a taxpayer acquired a property (in this subsection referred to as the “first property”) in circumstances to which any of subsections (5) and (21) to (27) applied and subsequently acquires, in exchange for or in consideration for the disposition of the first property, another property in circumstances to which any of subsections (21) to (27) would apply if the taxpayer had owned the first property on December 31, 1971 and thereafter without interruption until the time of the subsequent acquisition, for the purposes of applying subsections (21) to (27) in respect of that subsequent acquisition, the taxpayer shall be deemed to have owned the first property on December 31, 1971 and thereafter without interruption until the time of the subsequent acquisition. Effect of election under subsection 110.6(19) Where subsection 110.6(19) of the amended Act applies to a particular property, for the purposes of determining the cost and the adjusted cost base to a taxpayer of any property at any time after February 22, 1994, the particular property shall be deemed not to have been owned by any taxpayer on December 31, 1971. Additions to taxable Canadian property Subsections (1.1) to (29) do not apply to a disposition by a non-resident person of a property that the person last acquired before April 27, 1995; that would not be a taxable Canadian property immediately before the disposition if section 115 of the amended Act were read as it applied to dispositions that occurred on April 26, 1995; and that would be a taxable Canadian property immediately before the disposition if section 115 of the amended Act were read as it applied to dispositions that occurred on January 1, 1996. Change of use of property before 1972 For the purposes of paragraph 40(2)(b) and the definition principal residence in section 54 of the amended Act, where a taxpayer owned, on December 31, 1971, a property that is a housing unit, a leasehold interest in a housing unit or a share of the capital stock of a cooperative housing corporation, if the housing unit was, or if the share was acquired for the sole purpose of acquiring the right to inhabit, a housing unit owned by the corporation that was ordinarily inhabited by the taxpayer, the taxpayer began at any time thereafter but before 1972 to use the property for the purpose of gaining or producing income therefrom, or for the purpose of gaining or producing income from a business, and the taxpayer elected in the taxpayer’s return of income for the 1974 or 1975 taxation year as if the taxpayer had begun to use the property for the purpose of gaining or producing income therefrom of for the purpose of gaining or producing income from a business on January 1, 1972, the taxpayer shall be deemed to have made an election under subsection 45(2) of the amended Act in the taxpayer’s return of income for the 1972 taxation year and to have so begun to use the property. No capital cost allowance while election in force Where the taxpayer has made the election described in subsection (1), no amount may be deducted under paragraph 20(1)(a) of the amended Act for the 1974 and subsequent taxation years in respect of property referred to in that subsection while the election remains in force. Deduction from income of petroleum or natural gas corporation A corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas may deduct, in computing its income for a taxation year, the lesser of the total of such of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by it on or in respect of exploring or drilling for petroleum or natural gas in Canada as were incurred during the calendar years 1949 to 1952, to the extent that they were not deductible in computing income for a preceding taxation year, and of that total, an amount equal to its income for the taxation year if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsections (9), (10) and (25) of this section and sections 112 and 113 of the amended Act. Deduction from income of mining corporation A corporation whose principal business is mining or exploring for minerals may deduct, in computing its income for a taxation year, the lesser of the total of such of the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada as were incurred during 1952, to the extent that they were not deductible in computing income for a preceding taxation year, and of that total, an amount equal to its income for the taxation year if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsections (9), (10) and (25) of this section and sections 112 and 113 of the amended Act, if the corporation has filed certified statements of those expenses and has satisfied the Minister that it has been actively engaged in prospecting and exploring for minerals in Canada by means of qualified persons and has incurred the expenses for those purposes. Deduction from income of petroleum or natural gas corporation or mining corporation A corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas, or exploring or drilling for petroleum or natural gas, or mining or exploring for minerals, may deduct, in computing its income for a taxation year, the lesser of the total of such of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by it on or in respect of exploring or drilling for petroleum or natural gas in Canada, and the prospecting, exploration and development expenses incurred by it in searching for minerals in Canada, as were incurred after 1952 and before April 11, 1962, to the extent that they were not deductible in computing income for a preceding taxation year, and of that total, an amount equal to its income for the taxation year if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsections (1), (2), (9), (10) and (25) of this section and sections 112 and 113 of the amended Act. Deduction from income of petroleum corporation, etc.

production, refining or marketing of petroleum, petroleum products or natural gas, or exploring or drilling for petroleum or natural gas, processing mineral ores for the purpose of recovering metals therefrom, a combination of processing mineral ores for the purpose of recovering metals therefrom, and processing metals recovered from the ores so processed, fabricating metals, or operating a pipeline for the transmission of oil or natural gas, the drilling and exploration expenses, including all general geological and geophysical expenses incurred by it on or in respect of exploring or drilling for petroleum or natural gas in Canada, and as were incurred after April 10, 1962 and before 1972, to the extent that they were not deductible in computing income for a preceding taxation year, and of that total, an amount equal to its income for the taxation year if no deduction were allowed under this subsection or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsection 66(2) and sections 112 and 113 of the amended Act. Application of para. (4)(g) In applying paragraph (4)(g) to a corporation described in paragraph (4)(f), the reference in paragraph (4)(g) to “April 10, 1962” shall be read as a reference to “June 13, 1963”. [Repealed, 1997, c. 25, s. 73] Deduction from income from businesses of associations, etc. There may be deducted in computing the income of a taxpayer for a taxation year from the businesses of all associations, partnerships or syndicates formed for the purpose of exploring or drilling for petroleum or natural gas and of which the taxpayer was a member or partner, the lesser of the total of the taxpayer’s share of such of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by all those associations, partnerships or syndicates while the taxpayer was a member or partner thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada as were incurred after 1948 and before April 11, 1962, to the extent that they were not deductible in computing the taxpayer’s income for a preceding taxation year, and of that total, an amount equal to the taxpayer’s income from the businesses of all those associations, partnerships or syndicates for the taxation year, computed before making any deduction under this section or section 65, 66 or 66.1 of the amended Act. the total of the taxpayer’s share of such of the drilling and exploration expenses, including all general geological and geophysical expenses incurred by all those associations, partnerships or syndicates while the taxpayer was a member or partner thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada as were incurred after April 10, 1962 and before 1972, to the extent that they were not deductible in computing the taxpayer’s income for a preceding taxation year, and of that total, an amount equal to the taxpayer’s income from the businesses of all those associations, partnerships or syndicates for the taxation year computed before making any deduction under this section or section 65, 66 or 66.1 of the amended Act, minus the deduction allowed for the year under subsection (9) of this section. Deduction from income of corporation A corporation, other than a corporation described in subsection (4), may deduct, in computing its income for a taxation year, the lesser of as were incurred after April 10, 1962 and before 1972, to the extend that they were not deductible in computing income for a preceding taxation year, and of that total, an amount that would be equal to the total of its income for the taxation year from operating an oil or gas well in Canada in which the corporation has an interest, its income for the taxation year from royalties in respect of an oil or gas well in Canada, any amount included in computing its income for the taxation year because of subsection (17), and the amount, if any, included under paragraph 59(3.2)(b) or (c) of the amended Act in computing its income for the year, if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsections (9) and (10) of this section and subsection 66(2) of the amended Act. Deduction by individual of exploration expenses There may be deducted, in computing an individual’s income for a taxation year, the lesser of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the individual on or in respect of exploring or drilling for petroleum or natural gas in Canada, and the individual’s share of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by all associations, partnerships or syndicates described in subsection (9), while the individual was a member or partner thereof, on or in respect of exploring or drilling for petroleum or natural gas in Canada, as were incurred after April 10, 1962 and before 1972, to the extent that they were not deductible in computing the individual’s income for a preceding taxation year, and the individual’s income for the taxation year from a business that consisted of the operation of an oil or gas well in Canada in which the individual had an interest, the individual’s income for the taxation year from royalties in respect of an oil or gas well in Canada, any amount included in computing the individual’s income for the taxation year because of subsection (17), and the amount, if any, included under paragraph 59(3.2)(b) or (c) of the amended Act in computing the individual’s income for the year, if no deduction were allowed under this section or section 65, 66 or 66.1 of the amended Act, minus the deductions allowed for the year under subsections (9) and (10) of this section. Limitation re payments for exploration and drilling rights In computing a deduction under subsection (1), (3) or (9), no amount shall be included in respect of a payment for or in respect of a right, licence or privilege to explore for, drill for or take petroleum or natural gas, acquired before April 11, 1962, other than an annual payment not exceeding $1 per acre. Exploration and drilling rights; payments deductible Where an association, partnership or syndicate described in subsection (9) or a corporation or individual has, after April 10, 1962 and before 1972, acquired under an agreement or other contract or arrangement a right, licence or privilege to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal) under which agreement, contract or arrangement there was not acquired any other right to, over or in respect of the land in respect of which such right, licence or privilege was so acquired except the right to explore for, drill for or take materials and substances (whether liquid or solid and whether hydrocarbons or not) produced in association with the petroleum, natural gas or other related hydrocarbons (except coal) or found in any water contained in an oil or gas reservoir, or to enter on, use and occupy as much of the land as is necessary for the purpose of exploiting the right, licence or privilege, an amount paid in respect of the acquisition thereof that was paid before 1972, shall, for the purposes of subsections (4), (7), (10), (11) and (12), be deemed to be a drilling or exploration expense on or in respect of exploring or drilling for petroleum or natural gas in Canada incurred at the time of its payment, after 1971 and before May, 7, 1974, shall, for the purposes of the amended Act, be deemed to be Canadian exploration and development expenses (within the meaning assigned by subsection 66(15) of the amended Act) incurred at the time of its payment, and after May 6, 1974, shall, for the purposes of the amended Act, be deemed to be a Canadian development expense (within the meaning assigned by subsection 66.2(5) of the amended Act) incurred at the time of its payment. In applying subsection (14) for the purposes of subsection (7), the expression “after April 10, 1962 and before 1972” in subsection (14) shall be read as “after April 10, 1962 and before April 27, 1965”. Receipts for exploration or drilling rights included in income Where a right, licence or privilege to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal) was disposed of after April 10, 1962 and before October 23, 1968 by a corporation described in subsection (4), by a corporation, other than a corporation described in subsection (4), that was at the time of acquisition of the right, licence or privilege a corporation described in subsection (4), or by an association, partnership or syndicate described in subsection (9), any amount received by the corporation, association, partnership or syndicated as consideration for the disposition thereof shall be included in computing its income for its fiscal period in which the amount was received, unless the corporation, association, partnership or syndicate acquired the right, licence or privilege by inheritance or bequest, or acquired the right, licence or privilege before April 11, 1962 and disposed of it before November 9, 1962. Where a right, licence or privilege to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal) that was acquired after April 10, 1962 and before 1972 by an individual or a corporation other than a corporation described in subsection (4), was subsequently disposed of before October 23, 1968, any amount received by the taxpayer as consideration for the disposition thereof shall be included in computing the taxpayer’s income for the taxation year in which the amount was received, unless the right, licence or privilege was acquired by the taxpayer by inheritance or bequest. Subsections (16) and (17) do not apply to any disposition by an association, partnership or syndicate described in subsection (9) or a corporation or an individual of any right, licence or privilege described in subsection (14) or (16) unless the right, licence or privilege was acquired by the association, partnership, syndicate or corporation or individual, as the case may be, under an agreement, contract or arrangement described in subsection (14). For the purposes of subsections (16) and (17), where an association, partnership or syndicate described in subsection (9) or a corporation or an individual has disposed of any interest in land that includes a right, licence or privilege described in subsection (14) that was acquired under an agreement, contract or arrangement described in that subsection, the proceeds of disposition of the interest shall to be deemed to be proceeds of disposition of the right, licence or privilege; and where an association, partnership or syndicate described in subsection (9) or a corporation or an individual has acquired a right, licence or privilege described in subsection (14) under an agreement, contract or arrangement described in that subsection and subsequently disposes of any interest in the right, licence or privilege, or in the production of wells situated on the land to which the right, licence or privilege relates, the proceeds of disposition of the interest shall be deemed to be proceeds of disposition of the right, licence or privilege. Subsections (11), (12) and (17) do not apply in computing the income for a taxation year of a taxpayer whose business includes trading or dealing in rights, licences or privileges to explore for, drill for or take in Canada petroleum, natural gas or other related hydrocarbons (except coal). Bonus payments Notwithstanding subsection (13), where a corporation whose principal business is of the class described in paragraph (3)(a) or (b) or an association, partnership or syndicate formed for the purpose of exploring or drilling for petroleum or natural gas has after 1952 paid an amount (other than a rental or royalty) to the government of Canada or a province for the right to explore for petroleum or natural gas on a specified parcel of land in Canada (which right is, for greater certainty, declared to include a right of the type commonly referred to as a “licence”, “permit” or “reservation”), or a legal lease of the right to take or remove petroleum or natural gas from a specified parcel of land in Canada, and before April 11, 1962 acquired the rights in respect of which the amount was so paid and, before any well came into production on the land in reasonable commercial quantities, the corporation, association, partnership or syndicate surrendered all the rights so acquired (including, in respect of a right of the kind described in paragraph (a), all rights thereunder to any lease and all rights under any lease made thereunder) without receiving any consideration therefor or repayment of any part of the amount so paid, the amount so paid shall, for the purposes of subsections (3), (4), (7), (9) and (10) of this section, and for the purposes of subsections 66(1), (10) and (10.1) and the definitions Canadian exploration and development expenses in subsection 66(15) and Canadian exploration expense in subsection 66.1(6) of the amended Act, be deemed to have been a drilling or exploration expense on or in respect of exploring or drilling for petroleum or natural gas in Canada or a Canadian exploration expense described in paragraph (a) of the definition Canadian exploration expense in subsection 66.1(6) of the amended Act, as the case may be, incurred by the corporation, association, partnership or syndicate during the taxation year in which the rights were so surrendered. In applying the provisions of subsection (25) to determine the amount that may be deducted by a successor corporation in computing its income for a taxation year, where the predecessor corporation has paid an amount (other than a rental or royalty) to the government of Canada or a province for the right to explore for petroleum or natural gas on a specified parcel of land in Canada (which is, for greater certainty, declared to include a right of the type commonly referred to as a “licence”, “permit” or “reservation”), or if, before the predecessor corporation was entitled, because of subsection (21), to any deduction in computing its income for a taxation year in respect of the amount so paid, the property of the predecessor corporation was acquired by the successor corporation before April 11, 1962 in the manner set out in subsection (25), and the successor corporation did, before any well came into production in reasonable commercial quantities on the land referred to in paragraph (a) or (b), surrender all the rights so acquired by the predecessor corporation (including in respect of a right of the kind described in paragraph (a), all rights thereunder to any lease and all rights under any lease made thereunder) without receiving any consideration therefor or payment of any part of the amount so paid by the predecessor corporation, the amount so paid by the predecessor corporation shall be added to the amount determined under paragraph 25(c). Expenses incurred for specified considerations not deductible For the purposes of this section and section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session), it is declared that expenses incurred before 1972 by a corporation, association, partnership or syndicate on or in respect of exploring or drilling for petroleum or natural gas in Canada or in searching for minerals in Canada do not and never did include expenses so incurred by that corporation, association, partnership or syndicate under an agreement under which it undertook to incur those expenses in consideration for shares of the capital stock of a corporation that owned or controlled the mineral rights; an option to purchase shares of the capital stock of a corporation that owned or controlled the mineral rights; or a right to purchase shares of the capital stock of a corporation that was to be formed for the purpose of acquiring or controlling the mineral rights. Exception Notwithstanding subsection (23), a corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas, or as were incurred after 1953 and before 1972, under an agreement under which it undertook to incur those expenses for a consideration mentioned in paragraph (23)(a), (b) or (c), and to the extent that they were not deductible in computing income for a preceding taxation year, and of that total, an amount equal to its income for the taxation year if no deduction were allowed under this subsection or subsection (4) or under section 65, 66 or 66.1 of the amended Act minus the deductions allowed for the year under subsection 66(2) and sections 112 and 113 of the amended Act. but where a corporation has incurred expenses in respect of which this subsection authorizes deduction from income for a taxation year, no deduction in respect of those expenses may be made in computing the income of any other corporation or from the business of an association, partnership or syndicate for any taxation year. Successor rule Notwithstanding subsection (24) and subject to subsections 66.7(6) and (7) of the amended Act, where a corporation (in this subsection referred to as the “successor”) whose principal business is a production, refining or marketing of petroleum, petroleum products or natural gas, or exploring or drilling for petroleum or natural gas, or exploring or drilling for petroleum or natural gas, or has, at any time after 1954, acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise) from another person whose principal business was a business described in paragraph (a) or (b), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of the drilling and exploration expenses, including all general geological and geophysical expenses, incurred before 1972 by the original owner on or in respect of exploring or drilling for petroleum or natural gas in Canada, and the prospecting, exploration and development expenses incurred before 1972 by the original owner in searching for minerals in Canada, to the extent that those expenses were not otherwise deducted in computing the income of the successor for the year, were not deducted in computing the income of the successor for any preceding taxation year and were not deductible by the original owner or deducted by any predecessor owner of the particular property in computing income for any taxation year, and would, but for the provisions of any of this subsection and paragraphs (1)(b), (2)(b), (3)(a), (4)(h) and 24(d), have been deductible in computing the income of the original owner or any predecessor owner of the particular property for the taxation year preceding the taxation year in which the particular property was acquired by the successor, and the part of its income for the year that can reasonably be regarded as being attributable to the amount included in computing its income for the year under paragraph 59(3.2)(c) of the amended Act that can reasonably be regarded as being attributable to the disposition by it in the year or a preceding taxation year of any Canadian resource properties owned by the original owner and each predecessor owner of the particular property before the acquisition of the particular property by the successor to the extent that the proceeds of the disposition have not been included in determining an amount under this clause or clause 66.7(1)(b)(i)(A) or (3)(b)(i)(A) or paragraph 66.7(10)(g) of the amended Act for a preceding taxation year, or production from the particular property, computed as if no deduction were allowed under this section or subdivision e of Division B of Part I of the amended Act, the total of all other amounts deducted under this subsection and subdivision e of Division B of Part I of the amended Act for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph (i) in respect of the particular property. For the purposes of subsection (25), the terms Canadian resource property, original owner, predecessor owner and production have the meanings assigned by subsection 66(15) of the amended Act. Processing or fabricating corporation A reference in subsection (3), (21), (24) or (25) to a corporation whose principal business is mining or exploring for minerals shall, for the purposes of this section, be deemed to include a reference to a corporation whose principal business is processing metals recovered from the ores so processed, or fabricating metals, but in applying the provisions of this section to any such corporation the references, respectively, in subsections (3), (21), (24) and (25) to the years 1952, 1953 and 1954 shall be read as a reference in each case to the year 1956. Meaning of drilling and exploration expenses For the purposes of this section, drilling and exploration expenses incurred on or in respect of exploring or drilling for petroleum or natural gas in Canada include expenses incurred on or in respect of drilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well in Canada; drilling for water or gas for injection into a petroleum or natural gas formation in Canada; and drilling or converting a well for the injection of water or gas to assist in the recovery of petroleum or natural gas from another well in Canada. Deduction from expenses For the purposes of this section, there shall be deducted in computing drilling and exploration expenses incurred by a taxpayer on or in respect of exploring or drilling for petroleum or natural gas in Canada, and prospecting, exploration and development expenses incurred by a taxpayer in searching for minerals in Canada, any amount paid to the taxpayer before 1972 under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, and there shall be included in computing those expenses any amount, except an amount in respect of interest, paid by the taxpayer before 1972 under those Regulations to Her Majesty in right of Canada. Inclusion in drilling and exploration expenses For the purposes of this section, drilling and exploration expenses incurred on or in respect of exploring or drilling for petroleum or natural gas in Canada include an annual payment made for the preservation of a right, licence or privilege described in subsection (14). General limitation Where a corporation, association, partnership or syndicate has incurred expenses the deduction of which from income is authorized under more that one provision of this section, it is not entitled to make the deduction under more than one provision but is entitled to select the provision under which to make the deduction. Deduction for provincial tax Where a corporation whose principal business is production, refining or marketing of petroleum, petroleum products or natural gas or exploring or drilling for petroleum or natural gas could have deducted an amount in respect of expenditures of the corporation in connection with exploration or drilling for petroleum or natural gas incurred in a preceding taxation year from the tax payable under a provincial statute for the 1952 or a subsequent taxation year if the provincial statute were applicable to that year, the corporation may deduct from the tax otherwise payable by it under Part I of the amended Act for the year an amount not exceeding the amount that would have been so deductible. Definition of provincial statute For the purposes of subsection (32), provincial statute means a statute imposing a tax on the incomes of corporations enacted by the legislature of a province in 1949 and, for the purpose of that subsection, an amount deductible thereunder for one year shall, for the purpose of computing the deduction for a subsequent year, be deemed to have been deductible under the provincial statute. Expenses deductible under certain enactments deemed not otherwise deductible Where expenses are or have been, under this section, section 8 of the Income War Tax Act, section 16 of chapter 63 of the Statutes of Canada, 1947, section 16 of chapter 53 of the Statutes of Canada, 1948, section 53 of chapter 25 of the Statutes of Canada, 1949 (Second Session) or section 83A of the former Act, deductible from or in computing a taxpayer’s income, or where any amount is or has been deductible in respect of expenses under any of those provisions from taxes otherwise payable, it is declared that no amount in respect of the same expenses is or has been deductible under any other authority in computing the income or from the income of that taxpayer or any other taxpayer for any taxation year. Reference to this Act in amended Act In subsection 66(14) of the amended Act, any amount deductible under the Income Tax Application Rules in respect of that subsection means any amount deductible under section 29 of this Act. Application of s. 67 of amended Act In respect of any outlay or expense made or incurred by a taxpayer before 1972, section 67 of the amended Act shall be read without reference to the words “in respect of which any amount is”. Application of para. 69(1)(a) of amended Act Paragraph 69(1)(a) of the amended Act does not apply to deem a taxpayer by whom anything was acquired at any time before 1972 to have acquired it at its fair market value at that time, unless, if subsection 17(1) of the former Act had continued to apply, that fair market value would have been deemed to have been paid or to be payable therefor for the purpose of computing the taxpayer’s income from a business. Application of para. 69(1)(b) of amended Act Paragraph 69(1)(b) of the amended Act does not apply to deem a taxpayer by whom anything was disposed of at any time before the 1972 taxation year to have received proceeds of disposition therefor equal to its fair market value at that time. Application of para. 69(1)(c) of amended Act For greater certainty, paragraph 69(1)(c) of the amended Act applies to property acquired by a taxpayer before, at or after the end of 1971. Capital dividend account Where a dividend became payable, or was paid if that time was earlier, by a corporation in a taxation year at a particular time that was before May 7, 1974, for the purpose of computing the corporation’s capital dividend account immediately before the particular time, all amounts each of which is an amount in respect of a capital loss from the disposition of property in the taxation year and before the particular time shall be deemed to be nil. Notwithstanding section 9, subsections 85I(1) and (2) of the former Act continue to apply with such modifications as, in the circumstances, are necessary because of this Act, in respect of any amalgamation of two or more corporations before 1972. In applying the provisions of subsection 29(25) to determine the amount that may be deducted by the successor or second successor corporation, as the case may be, in computing its income under Part I of the amended Act for a taxation year, where a predecessor corporation has paid an amount (other than a rental or royalty) to the government of Canada or a province for and before April 11, 1962 acquired the rights in respect of which the amount was so paid, if, before the predecessor corporation was entitled because of subsection 29(21) to any deduction in computing its income for a taxation year in respect of the amount so paid, the property of the predecessor corporation was acquired by the successor or second successor corporation, as the case may be, and at any time, before any well came into production in reasonable commercial quantities on the land referred to in paragraph (a) or (b), the successor or second successor corporation, as the case may be, surrendered all rights so acquired by the predecessor corporation (including, in respect of a right of the kind described in paragraph (a), all rights thereunder to any lease and all rights under any lease made thereunder) without receiving any consideration therefor or payment of any part of the amount so paid by the predecessor corporation, the amount so paid by the predecessor corporation shall be added at that time to the amount determined under subparagraph 29(25)(c)(i). Definition of amalgamation In this section, amalgamation has the meaning assigned by section 85i of the former Act. Foreign affiliates Section 26 does not apply in determining for the purposes of section 91 of the amended Act the amount of any taxable capital gain or allowable capital loss of a foreign affiliate of a taxpayer. Any corporation that was a foreign affiliate of a taxpayer on January 1, 1972 shall be deemed, for the purposes of subdivision i of Division B of Part I of the amended Act, to have become a foreign affiliate of the taxpayer on that day. Any corporation that was deemed to be a foreign affiliate of a taxpayer at any time prior to May 7, 1974 because of an election made by the taxpayer in accordance with subparagraph 95(1)(b)(iv) of the amended Act, as it read before being amended by chapter 26 of the Statutes of Canada 1974-75-76, shall be deemed to have been a foreign affiliate of the taxpayer at that time. Application of paras. 107(2)(b) and (d) of amended Act In computing the income of a taxpayer for the taxpayer’s 1972 or any subsequent taxation year, paragraphs 107(2)(b) to (d) of the amended Act do not apply in respect of any property of a trust distributed by the trust to the taxpayer at any time before the commencement of the taxpayer’s 1972 taxation year. Payments out of pension funds, etc. In the case of a single payment out of or under a superannuation or pension fund or plan on the death, withdrawal or retirement from employment of an employee or former employee, on the winding-up of the fund or plan in full satisfaction of all rights of the payee in or under the fund or plan, or to which the payee is entitled because of an amendment to the plan although the payee continues to be an employee whom the plan applies, on retirement of an employee in recognition of long service and not made out of or under a superannuation fund or plan, under an employees profit sharing plan in full satisfaction of all rights of the payee in or under the plan, to the extent that the amount thereof would otherwise be included in computing the payee’s income for the year in which the payment was received, or under a deferred profit sharing plan on the death, withdrawal or retirement from employment of an employee or former employee, to the extend that the amount thereof would otherwise be included in computing the payee’s income for the year in which the payment was received, a payment or payments made by an employer to an employee or former employee on or after retirement in respect of loss of office or employment, if made in the year of retirement or within one year after that year, or a payment or payments made as a death benefit, if made in the year of death or within one year after that year, the payment or payments made in a taxation year ending after 1971 and before 1974 may, at the option of the taxpayer by whom it is or they are received, be deemed not to be income of the taxpayer for the purpose of Part I of the amended Act, in which case the taxpayer shall pay, in addition to any other tax payable for the year, a tax on the payment or total of the payments equal to the proportion thereof that the total of the taxes otherwise payable by the employee under that Part for the 3 years immediately preceding the taxation year (before making any deduction under section 120, 121 or 126 or subsection 127(3) of the amended Act), the total of the employee’s incomes for those 3 years. Employee not resident in Canada Where a taxpayer has elected that a payment or payments of one of the classes described in paragraphs (1)(a) to (c) in respect of an employee or former employee who was not resident in Canada throughout the whole of the 3 years referred to in paragraph (1)(e) shall be deemed not to be income of the taxpayer for the purpose of Part I of the amended Act, the tax payable under this section is that proportion of the amount on which the tax is payable that the total of the taxes that would have been payable by the employee under that Part for the 3 years referred to in paragraph (1)(e) (before making any deduction under section 120, 121 or 126 or subsection 127(3) of the amended Act) if the employee had been resident in Canada throughout those years and the employee’s incomes for those years had been from sources in Canada, the total of the employee’s incomes for those 3 years, and, in such a case, the election is not valid unless the taxpayer has filed with the election, a return of the employee’s incomes for each of the 3 years in the same form and containing the same information as the return that the employee, or the employee’s legal representative, would have been required to file under that Part if the employee had been resident in Canada in those years. Determination of amount of payment In determining the amount of any payment or payments made in a taxation year out of or under a superannuation or pension fund or plan, under a deferred profit sharing plan or as a retiring allowance that is deemed, for the purposes of this section, not to be income of the taxpayer by whom it is or they are received, there shall be subtracted from the amount of the payment or payments so made the total of all amounts deductible under paragraph 60(j) of the amended Act in computing the taxpayer’s income for that year; and any amount deductible under paragraph 60(m) of the amended Act because of that payment or those payments in computing the taxpayer’s income for that year. In determining the amount of any payment or payments made in a taxation year as a death benefit that is deemed, for the purpose of this section, not to be income of the taxpayer by whom it is or they are received, there shall be subtracted from the amount of the payment or payments so made any amount deductible under paragraph 60(m) of the amended Act because of that payment or those payments in computing the taxpayer’s income for that year. Maximum amount for election For the purpose of determining the amount of any payment or payments of one or more of the classes described in subsection (1) made in a taxation year that may be deemed, for the purposes of this section, not to be income of the taxpayer by whom it is or they are received, the maximum amount in respect of which an election may be made by the taxpayer under subsection (1) for the taxation year in respect of the payment or payments is, in the case of a payment or payments of a class described in subsection (1) made to the taxpayer on the death of an employee or former employee in respect of whom the payment or payments are made, the amount of the payment or the total amount of the payments, as the case may be, minus any amount subtracted therefrom under subsection (3) or (4); in the case of one or more single payments of a class described in subparagraph (1)(a)(i), (iii) or (iv), other than a payment described in paragraph (a) of this subsection, the lesser of the amount of the payment or the total amount of the payments, as the case may be, minus any amount subtracted therefrom under subsection (3), and the product obtained by multiplying $1,500 by the number of consecutive 12 month periods included in the period throughout which the taxpayer was a member of any plan or plans described in subparagraph (1)(a)(i), (iii) or (iv) (in this subsection referred to as a “retirement plan”), out of or under which a payment was made to the taxpayer in the taxation year or a preceding taxation year ending after April 26, 1965, and to which an employer of the taxpayer has made a contribution on behalf of the taxpayer, the total of all amounts each of which is an amount that, because of a payment to the taxpayer after April 26, 1965, out of or under a retirement plan to which the employer referred to in subclause (A)(II) made a contribution on behalf of the taxpayer, or by the employer referred to in subclause (A)(II), was deemed not to be income of the taxpayer for the purpose of Part I of the amended Act for a preceding taxation year because of an election made by the taxpayer under subsection (1); and in the case of a payment or payments of the class described in subparagraph (1)(a)(ii) or paragraph (1)(b), other than a payment described in paragraph (a) or (b) of this subsection, the lesser of the amount of the payment or the total amount of the payments, as the case may be, minus any amount subtracted therefrom pursuant to subsection (3), and the product obtained by multiplying $1,000 by the number of years during which the taxpayer was an employee of the employer who made the payment the total of all amounts each of which is an amount that, because of a payment to the taxpayer after April 26, 1965 by an employer referred to in clause (A) or a payment to the taxpayer after that date out of or under a retirement plan to which such an employer made a contribution on behalf of the taxpayer, was deemed not to be income of the taxpayer for the purpose of Part I of the amended Act for a preceding taxation year by reason of an election made by the taxpayer under subsection (1), and the total of all amounts each of which is an amount that, because of a payment to the taxpayer after April 26, 1965 out of or under a retirement plan to which an employer referred to in clause (A) made a contribution on behalf of the taxpayer, may be deemed, by subsection (1), not to be income of the taxpayer for the purpose of that Part for the taxation year. For the purpose of subsection (5), where all or substantially all of the property used in carrying on the business of a person who was an employer of an employee (in this subsection referred to as the “former employer”) has been purchased by a person who, because of the purchase, or has been acquired by bequest or inheritance, or because of an amalgamation (within the meaning assigned by section 85i of the former Act), by a person who, because of the acquisition, became an employer of the employee, and who subsequently made a payment of a class described in paragraph (5)(c) in respect of the employee or former employee, the employee or former employee shall be deemed to have been an employee of that employer throughout the period he or she was an employee of the former employer; and a taxpayer may, in computing the number of years during which the taxpayer was a member of a superannuation or pension fund or plan (in this subsection referred to as the “subsequent plan”), include the number of years during which the taxpayer was a member of another plan (in this subsection referred to as the “former plan”) if the taxpayer had received an amount out of or under the former plan all or part of which amount was deductible under paragraph 60(j) of the amended Act in computing the taxpayer’s income for the taxation year in which the amount was received, because of the fact that all or part of the amount, as the case may be, was paid by the taxpayer to or under the subsequent plan as described in clause 60(j)(i)(A) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1978 and preceding taxation years. Limitation This section applies in respect of any payment or payments described in subparagraph (1)(a)(i) or (iv) made in a taxation year ending after 1973, except that the amount of the payment or the total amount of the payments, as the case may be, shall be deemed to be the lesser of the amount thereof otherwise determined and the total of the amounts that the taxpayer would have received out of or under the plan described in subparagraph (1)(a)(i) or (iv), as the case may be, if the taxpayer had withdrawn from the plan on January 1, 1972; there had been no change in the terms and conditions of the plan after June 18, 1971 and before January 2, 1972; and any term or condition of the plan that would, in the event that the taxpayer had withdrawn from the plan on January 1, 1972, have reduced the amount of any payment or payments that would, if the taxpayer remained a member of the plan for a specified period of time after December 31, 1971, have been made to the taxpayer in respect of years ending before 1972 were not a term or condition of the plan. Application rule For the purposes of paragraphs (1)(d) and (2)(a), there may be deducted from the total referred to in those paragraphs 9% of the portion of that total that is attributable to the 1974, 1975 or 1976 taxation year. Tax deemed payable under amended Act Where, because of section 40, any tax is payable in addition to or in lieu of any amount of tax payable under Part I of the amended Act for a taxation year, that tax shall be deemed to be payable under Part I of the amended Act for that taxation year. Application of s. 13 In applying section 13 to section 40, subsection 13(1) shall be read without reference to the words “subject to this Act and unless the context otherwise requires”. Computation of tax deemed payable under amended Act In computing, under section 40 of this Act or any of section 39 and sections 41 to 48 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, any tax that is payable in addition to or in lieu of any amount of tax payable under Part I of the amended Act by an individual for a taxation year, a reference to section 120 of the amended Act does not include a reference to paragraph 33(1)(a) of the former Act; and for the purposes of paragraph 33(1)(a) of the former Act and subsection 120(1) of the amended Act, all of the income of the individual for that or any preceding taxation year shall be deemed to have been income earned in the year in a province. Status of certain corporations For the purposes of the amended Act, a corporation that was, throughout that portion of its 1972 taxation year that is in 1972, a private corporation, a Canadian-controlled private corporation or a public corporation shall be deemed to have been throughout that taxation year a private corporation, a Canadian-controlled private corporation or a public corporation, as the case may be, Election to be public corporation For the purposes of the definition public corporation in subsection 89(1) of the amended Act, where at any particular time before 1973 a corporation elected in the manner referred to in subparagraph (b)(i) of that definition to be a public corporation and at any time after 1971 and before the time of the election the corporation complied with the conditions referred to in that subparagraph, the corporation shall, at such time after 1971 and before the particular time as is specified in the election to be the effective date thereof, or where no time described in paragraph (a) is specified in the election to be the effective date thereof, at the particular time, be deemed to have elected in the manner referred to in that subparagraph to be a public corporation and to have complied with the conditions referred to therein. Designation by Minister For the purposes of the definition public corporation in subsection 89(1) of the amended Act, where at any particular time before March 22, 1972 the Minister, by notice in writing to a corporation, designated the corporation to be a public corporation or not to be a public corporation, as the case may be, and at the time of the designation the corporation complied with the conditions referred to in subparagraph (b)(i) or (c)(i) of that definition, as the case may be, the corporation shall, at such time as is specified by the Minister in the notice, be deemed to have been designated by the Minister, by notice in writing to the corporation, to be a public corporation or not to be a public corporation, as the case may be; and to have complied with the conditions referred to in subparagraph (b)(i) or (c)(i) of that definition, as the case may be. In computing a specified personal corporation’s capital dividend account at any time after the end of its 1972 taxation year, there shall be added to the total of the amounts described in paragraphs (a) and (b) of the definition capital dividend account in subsection 89(1) of the amended Act the total of its net capital gains (within the meaning assigned by subsection 51(3) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, as it read before October 29, 1985) for its 1972 taxation year and that proportion of the total of its incomes for that year, other than any taxable capital gains of the corporation for the year from dispositions of property, and any amounts that were, because of subsection 57(3) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, as it read before October 29, 1985 or under the provisions of subsection 67(1) of the former Act that applied because of subsection 57(12) of those Rules as it read before that date, required to be included in computing the income of the specified personal corporation for its 1972 taxation year, that the number of days in that portion of the 1972 taxation year that is in 1972 is of the number of days in the whole year. Meaning of specified personal corporation For the purposes of this section, a corporation is a specified personal corporation if part of its 1972 taxation year was before and part thereof after the beginning of 1972; and during the whole of the period beginning on the earlier of June 18, 1971 and the beginning of its 1972 taxation year and ending at the end of its 1972 taxation year, it was a personal corporation within the meaning assigned by section 68 of the former Act. Credit unions For the purpose of computing the income of a credit union for the 1972 and subsequent taxation years, property of the credit union that is a bond, debenture, mortgage or agreement of sale owned by it at the beginning of its 1972 taxation year shall be valued at its actual cost to the credit union, plus a reasonable amount in respect of the amortization of the amount by which the principal amount of the property at the time it was acquired by the credit union exceeds its actual cost to the credit union, or minus a reasonable amount in respect of the amortization of the amount by which its actual cost to the credit union exceeds the principal amount of the property, at the time it was acquired by the credit union; property of the credit union that is a debt owing to the credit union (other than property described in paragraph (a) or a debt that became a bad debt before its 1972 taxation year) acquired by it before the beginning of its 1972 taxation year shall be valued at any time at the amount thereof outstanding at that time;

any depreciable property acquired by the credit union in a taxation year ending before 1972 shall be deemed to have been acquired by it on the last day of its 1971 taxation year at a capital cost equal to in the case of any building or automotive equipment owned by it on the last day of its 1971 taxation year, the amount, if any, by which the depreciable cost to the credit union of the building or equipment, as the case may be, exceeds the product obtained when the number of full taxation years in the period beginning on the first day of the taxation year following the taxation year in which the building or equipment, as the case may be, was acquired by it and ending with the last day of its 1971 taxation year is multiplied by, in the case of a building, 2½%, and in the case of equipment 15%, of its depreciable cost (and for the purposes of this subparagraph, a capital improvement or capital addition to a building owned by a credit union shall be deemed not to be part of the building but to be a separate and distinct building acquired by it, if the cost to the credit union of the improvement or addition, as the case may be, exceeded $10,000), in the case of any leasehold interest, the proportion of the capital cost thereof to the credit union (determined without regard to this subparagraph) that the number of months in the period beginning with the first day of the credit union’s 1972 taxation year and ending with the day on which the leasehold interest expires the number of months in the period beginning with the day on which the credit union acquired the leasehold interest and ending with the day on which the leasehold interest expires, and in the case of any property (other than a building, automotive equipment or leasehold interest) acquired by the credit union after 1961, the amount, if any, by which the depreciable cost to the credit union of the property exceeds the product obtained when the number of full taxation years beginning with the first day of the taxation year following the taxation year in which the property was acquired by it and ending with the last day of its 1971 taxation year is multiplied by ½ the relevant percentage of the depreciable cost to the credit union of the property; and the undepreciated capital cost to the credit union as of the first day of its 1972 taxation year of depreciable property of a prescribed class acquired by it before that taxation year is the total of the amounts determined under paragraph (c) to be the capital costs to it as of that day of all property of that class. For the purpose of computing a capital gain from the disposition of depreciable property acquired by a credit union in a taxation year ending before 1972, the capital cost of the property shall be its capital cost determined without reference to paragraph (1)(c). Determination of maximum cumulative reserve at end of taxation year Notwithstanding the definition maximum cumulative reserve in subsection 137(6) of the amended Act, for the purposes of section 137 of the amended Act a credit union’s maximum cumulative reserve at the end of any particular taxation year is the amount, if any, by which its maximum cumulative reserve at that time, determined under that definition without regard to this subsection, exceeds the lesser of its maximum cumulative reserve, determined under that definition without regard to this subsection, at the end of its 1971 taxation year, and the amount, if any, by which its 1971 reserve exceeds the total of the amounts deemed by subsection 58(2) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, to have been deducted by it in computing its income for its 1971 taxation year. Notwithstanding subsection (3.2), where at any time after May 6, 1974 there has been an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more credit unions to form a new credit union, the maximum cumulative reserve of the new credit union shall be deemed to be the amount by which its maximum cumulative reserve, determined under the definition of that term in subsection 137(6) of the amended Act, exceeds the total of all amounts, if any, each of which is the lesser of the amounts referred to in paragraphs (3.2)(a) and (b) in respect of each of the predecessor corporations. Notwithstanding subsection (3.2), where a credit union (in this subsection referred to as the acquirer) has, at any time after May 6, 1974, acquired otherwise than by way of amalgamation all of substantially all of the assets of another credit union, the maximum cumulative reserve of the acquirer shall be the amount by which the acquirer’s maximum cumulative reserve, determined under the definition of that term in subsection 137(6) of the amended Act, exceeds the total of the lesser of the amounts determined under paragraphs (3.2)(a) and (b) in respect of the acquirer, and the lesser of the amounts determined under paragraphs (3.2)(a) and (b) in respect of the other credit union. depreciable cost to a credit union of any property means the actual cost to it of the property or the amount at which it is deemed by subsection 13(7) of the amended Act to have acquired the property, as the case may be; (coût amortissable) relevant percentage in relation to a prescribed class of property is the percentage prescribed in respect of that class by any regulations made under paragraph 11(1)(a) of the former Act; (pourcentage approprié) 1971 reserve of a credit union means the amount, if any, by which the total of all amounts each of which is the amount of any money of the credit union on hand at the beginning of its 1972 taxation year, an amount in respect of any property described in paragraph (1)(a) or (b), equal to the amount at which it is required by those paragraphs to be valued at the beginning of its 1972 taxation year, an amount in respect of depreciable property of a prescribed class owned by the credit union on the first day of its 1972 taxation year, equal to the amount determined under paragraph (1)(d) to be the undepreciated capital cost thereof to the credit union as of that day, or an amount in respect of any capital property (other than depreciable property) owned by the credit union at the beginning of its 1972 taxation year, equal to its cost to the credit union computed without reference to the provisions of section 26, exceeds the total of all amounts each of which is the amount of any debt owing by the credit union or of any other obligation of the credit union to pay an amount, that was outstanding at the beginning of its 1972 taxation year, excluding, for greater certainty, any share in the credit union of any member thereof, or the amount, as of the beginning of the credit union’s 1972 taxation year, of any share in the credit union of any member thereof. (réserve pour 1971) Non-resident-owned investment corporation In its application to the 1972 and subsequent taxation years of a corporation, section 133 of the amended Act shall be read as if, in respect of such portion of any period described in the definition non-resident-owned investment corporation in subsection 133(8) of that Act as ended before the beginning of the corporation’s 1976 taxation year, paragraph (a) of that definition were read as follows: at least 95% of the total value of its issued shares, and all of its bonds, debentures and other funded indebtedness, were beneficially owned by non-resident persons (other than any foreign affiliate of a taxpayer resident in Canada), owned by trustees for the benefit of non-resident persons or their unborn issue, or owned by a corporation, whether incorporated in Canada or elsewhere, at least 95% of the total value of the issued shares of which and all of the bonds, debentures and other funded indebtedness of which were beneficially owned by non-resident persons or owned by trustees for the benefit of non-resident persons or their unborn issue, or by two or more such corporations,” Taxes payable by insurer under Part IA of former Act For the purposes of the description of F in the definition surplus funds derived from operations in subsection 138(12) of the amended Act, the reference in that description to “this Part” shall be deemed to be a reference to “this Part and Part IA of the former Act”. Registered retirement savings plans For the purposes of the definition non-qualified investment in subsection 146(1) of the amended Act, property acquired after June 18, 1971 and before 1972 by a trust governed by a registered retirement savings plan shall, if owned or held by the trust on January 1, 1972, be deemed to have been acquired by the trust on January 1, 1972. Assessments Subsections 152(4) and (5) of the amended Act apply in respect of any assessment made after December 23, 1971, except that subsection 152(5) of that Act does not apply in respect of any such assessment made in consequence of a waiver filed with the Minister before December 23, 1971 in the form and within the time referred to in subsection 152(4) of that Act. Interest Subsections 161(1) and (2), 164(3) and (4), 202(5) and 227(8) and (9) of the amended Act, subsection 183(2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and subsection 195(1) of that Act as it read in its application in respect of dividends paid or received before April 1, 1977, in so far as those subsections relate to the rate of interest payable thereunder, apply in respect of interest payable in respect of any period after December 23, 1971. Objections to assessment Subsection 165(3) of the amended Act applies in respect of any notice of objection served on the Minister after December 23, 1971. Appeals Division J of Part I of the amended Act applies in respect of any appeal or application instituted or made, as the case may be, after December 23, 1971. Appeals to Federal Court Any appeal to the Federal Court instituted, within 2 years after December 23, 1971 and in accordance with Division J of Part I of the former Act and any rules made thereunder (as those rules read immediately before December 23, 1971), shall be deemed to have been instituted in the manner provided by the amended Act, and any document served on the Minister or a taxpayer in connection with an appeal so instituted in the manner provided in that Division and those rules shall be deemed to have been served in the manner provided by the amended Act. [Repealed, 2005, c. 30, s. 19] Part XV of amended Act For greater certainty, section 9 does not apply in respect of the repeal, by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, of Part V of the former Act and the substitution therefor, by that section, of Part XV of the amended Act, and in its application in respect of any offence described in subsection 239(1) of the amended Act that was committed before December 23, 1971, paragraph 239(1)(f) of the amended Act shall be read as follows: a fine of not less than $25 and not more than $10,000 plus, in an appropriate case, an amount not exceeding double the amount of the tax that should have been shown to be payable or that was sought to be evaded, or” Part II of former Act For greater certainty, Part II of the former Act applies only in respect of elections made thereunder before 1972. Prescription of unpaid amounts Her Majesty in right of Canada is not liable, and no action shall be taken, for or in respect of any unrefunded instalment of tax paid under Part IID of the former Act or any interest thereon where a repayment date with respect to the instalment was prescribed by regulation and reasonable efforts were made thereafter to locate the corporation or trust entitled to the refund; at least 5 years have elapsed since publication in the Canada Gazette of the regulation referred to in paragraph (a); and no claim whatever has been received by or on behalf of Her Majesty from the corporation or trust entitled to the refund. In this Act and the Income Tax Act, unless the context otherwise requires, Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 means that Act as amended by section 1 of chapter 63 of the Statutes of Canada, 1970-71-72, and by any subsequent Act that received royal assent before December, 1991; (Loi de l’impôt sur le revenu, chapitre 148 des Statuts revisés du Canada de 1952) Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72 means that Act as amended by any subsequent Act that received royal assent before December, 1991. (Règles de 1971 concernant l’application de l’impôt sur le revenu, Partie III du chapitre 63 des Statuts du Canada de 1970-71-72) Application of Income Tax Application Rules, 1971, 1970-71-72, c. 63 Subject to this Act and the Income Tax Act and unless the context otherwise requires, sections 7 to 9 and 12 to 68 of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, apply with respect to taxation years that ended before December, 1991; and section 10 of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, applies with respect to amounts paid or credited before December, 1991. Application of this Act sections 7 to 9 and 12 to 78 of this Act apply with respect to taxation years that end after November, 1991; and section 10 of this Act applies with respect to amounts paid or credited after November, 1991. Application of Income Tax Act, R.S.C., 1952, c. 148 Subject to this Act and the Income Tax Act and unless the context otherwise requires, the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, applies as follows: Parts I, I.1, 1.2, 1.3, II.1, IV, IV.1, V, VI, VI.1, VII, VIII, IX, X1.3, XII, XII.1, XII.2, XII.3 and XIV of that Act apply with respect to taxation years that ended before December 1991; Part III of that Act applies with respect to dividends that became payable before December, 1991; Parts X, X.1, X.2, XI, XI.1 and XI.2 of that Act apply with respect to calendar years that ended before December, 1991; Part XIII of that Act applies with respect to amounts paid or credited before December, 1991; and Parts XV, XVI and XVII of that Act apply before December, 1991. Application of Income Tax Act Subject to this Act and the Income Tax Act and unless the context otherwise requires, the Income Tax Act applies as follows: Parts I, I.1, I.2, I.3, II.1, IV, IV.1, V, VI, VI.1, VII, VIII, IX, X1.3, XII, XII.1, XII.2, XII.3 and XIV of that Act apply with respect to taxation years that end after November 1991; Part III of that Act applies with respect to dividends that become payable after November, 1991; Parts X, X.1, X.2, XI, XI.1 and XI.2 of that Act apply with respect to calendar years that end after November, 1991; Part XIII of that Act applies with respect to amounts paid or credited after November, 1991; and Parts XV, XVI and XVII of that Act apply after November, 1991. Definition of provision In sections 75 to 78, provision means the whole or part of a provision. Continued effect of amending and application provisions For greater certainty, where an enactment passed after 1971 in amendment of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, or of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, contains an amending, repeal, application or other provision that, immediately before the coming into force of the fifth supplement to the Revised Statutes of Canada, 1985, has any effect on, or in connection with, the application of either or both of those Acts, that provision has, on the coming into force of that supplement, the same effect on, or in connection with, the application of either this Act or the Income Tax Act or both. Application of s. 75 Section 75 is applicable whether or not this Act or the Income Tax Act, as the case may be, contains, or contains the tenor of or any reference to, the amending, repeal, application or other provision referred to in that section; or any provision of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, or the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, expressed or intended to be the subject of or otherwise affected by that amending, repeal, application or other provision. Continued effect of repealed provisions For greater certainty, where a provision of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, or the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, was repealed at any time after 1971 but, immediately before the coming into force of the fifth supplement to the Revised Statutes of Canada, 1985, continues to be applied to any extent or otherwise to have any effect on, or in connection with, the application of either or both of those Acts, the repealed provision, on the coming into force of that supplement, continues to be so applied or to have that effect on, or in connection with, the application of either this Act or the Income Tax Act or both. Application of s. 77 Section 77 is applicable whether or not this Act or the Income Tax Act, as the case may be, contains any reference to the repealed provision referred to in that section or to the subject-matter of that provision. Effect of amendments on former ITA Where a provision of an enactment amends the Income Tax Act or affects the application of the Income Tax Act and the provision applies to or with respect to a period, transaction or event to which the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, applies, the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, shall be read as if it had been amended or its application had been affected by the provision, with such modifications as the circumstances require, to the extent of the provision’s application to or with respect to that period, transaction or event. Effect of amendments on former ITAR Where a provision of an enactment amends this Act or affects the application of this Act and the provision applies to or with respect to a period, transaction or event to which the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, apply, the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, shall be read as if they had been amended or their application had been affected by the provision, with such modifications as the circumstances require, to the extent of the provision’s application to or with respect to that period, transaction or event.