Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2017-06-05 and last amended on 2017-05-01. Previous Versions

 [Repealed, 2014, c. 39, s. 45]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1986, c. 55, s. 50;
  • 2014, c. 39, s. 45].
Marginal note:Basic minimum tax credit determined

 An individual’s basic minimum tax credit for a taxation year is the total of all amounts each of which is

  • (a) an amount deducted under any of subsections 118(1), (2) and (10), sections 118.01 to 118.07, subsection 118.3(1), sections 118.5 to 118.7 and 119 and subsection 127(1) in computing the individual’s tax payable for the year under this Part; or

  • (b) the amount that was claimed under section 118.1 or 118.2 in computing the individual’s tax payable for the year under this Part, determined without reference to this Division, to the extent that the amount claimed does not exceed the maximum amount deductible under that section in computing the individual’s tax payable for the year under this Part, determined without reference to this Division.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 127.531;
  • 2006, c. 4, s. 76;
  • 2007, c. 2, s. 35;
  • 2009, c. 31, s. 14;
  • 2011, c. 24, s. 41;
  • 2014, c. 20, s. 19.
Marginal note:Definitions
  •  (1) In this section,

    foreign income

    impôts payés à l’étranger

    foreign income of an individual for a taxation year means the total of

    • (a) the individual’s incomes for the year from businesses carried on by the individual in countries other than Canada, and

    • (b) the individual’s incomes for the year from sources in countries other than Canada in respect of which the individual has paid non-business-income taxes, within the meaning assigned by subsection 126(7), to governments of countries other than Canada; (impôts payés à l’étranger)

    foreign taxes

    revenu de source étrangère

    foreign taxes of an individual for a taxation year means the total of the business-income taxes, within the meaning assigned by subsection 126(7), paid by the individual for the year in respect of businesses carried on by the individual in countries other than Canada and 2/3 of the non-business-income taxes, within the meaning assigned by that subsection, paid by the individual for the year to the governments of countries other than Canada. (revenu de source étrangère)

  • Marginal note:Foreign tax credit

    (2) For the purposes of section 127.5, an individual’s special foreign tax credit for a taxation year is the greater of

    • (a) the total of all amounts deductible under section 126 from the individual’s tax for the year, and

    • (b) the lesser of

      • (i) the individual’s foreign taxes for the year, and

      • (ii) the amount determined by the formula

        A × B

        where

        A
        is the appropriate percentage for the taxation year, and
        B
        is the individual’s foreign income for the year.
  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 127.54;
  • 2001, c. 17, s. 120;
  • 2006, c. 4, s. 77.
Marginal note:Application of s. 127.5

 Section 127.5 does not apply in respect of

  • (a) a return of income of an individual filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4);

  • (b) [Repealed, 2001, c. 17, s. 121(1)]

  • (c) an individual for the taxation year in which the individual dies;

  • (d) an individual for the 1986 taxation year if the individual dies in 1987;

  • (e) a trust described in paragraph 104(4)(a) or (a.1) for its taxation year that includes the day determined in respect of the trust under that paragraph; and

  • (f) a taxation year of a trust throughout which the trust is

    • (i) a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)),

    • (ii) a mutual fund trust,

    • (iii) a trust prescribed to be a master trust, or

    • (iv) an employee life and health trust.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 127.55;
  • 1994, c. 7, Sch. II, s. 107, Sch. VIII, s. 71;
  • 1998, c. 19, s. 151;
  • 2001, c. 17, s. 121;
  • 2010, c. 25, s. 27.

DIVISION FSpecial Rules Applicable in Certain Circumstances

Bankruptcies

Marginal note:Where corporation bankrupt
  •  (1) Where a corporation has become a bankrupt, the following rules are applicable:

    • (a) the trustee in bankruptcy shall be deemed to be the agent of the bankrupt for all purposes of this Act;

    • (b) the estate of the bankrupt shall be deemed not to be a trust or an estate for the purposes of this Act;

    • (c) the income and the taxable income of the corporation for any taxation year of the corporation during which it was a bankrupt and for any subsequent year shall be calculated as if

      • (i) the property of the bankrupt did not pass to and vest in the trustee in bankruptcy on the bankruptcy order being made or the assignment filed but remained vested in the bankrupt, and

      • (ii) any dealing in the estate of the bankrupt or any act performed in the carrying on of the business of the bankrupt estate by the trustee was done as agent on behalf of the bankrupt and any income of the trustee from such dealing or carrying on is income of the bankrupt and not of the trustee;

    • (d) a taxation year of the corporation shall be deemed to have commenced on the day the corporation became a bankrupt and a taxation year of the corporation that would otherwise have ended after the corporation became a bankrupt shall be deemed to have ended on the day immediately before the day on which the corporation became a bankrupt;

    • (e) if, in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation fails to pay any tax payable by it under this Act for any such year, the corporation and the trustee in bankruptcy are jointly and severally, or solidarily, liable to pay the tax, except that

      • (i) the trustee is only liable to the extent of the property of the bankrupt in the trustee’s possession, and

      • (ii) payment by either of them discharges the liability to the extent of the amount paid;

    • (f) in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation shall be deemed not to be associated with any other corporation in the year; and

    • (g) where an absolute order of discharge is granted in respect of the corporation, for the purposes of section 111 any loss of the corporation for any taxation year preceding the year in which the order of discharge was granted is not deductible by the corporation in computing its taxable income for the taxation year of the corporation in which the order was granted or any subsequent year.

  • Marginal note:Where individual bankrupt

    (2) Where an individual has become a bankrupt, the following rules are applicable:

    • (a) the trustee in bankruptcy shall be deemed to be the agent of the bankrupt for all purposes of this Act;

    • (b) the estate of the bankrupt shall be deemed not to be a trust or an estate for the purposes of this Act;

    • (c) the income and the taxable income of the individual for any taxation year during which the individual was a bankrupt and for any subsequent year shall be calculated as if

      • (i) the property of the bankrupt did not pass to and vest in the trustee in bankruptcy on the bankruptcy order being made or the assignment filed but remained vested in the bankrupt, and

      • (ii) any dealing in the estate of the bankrupt or any act performed in the carrying on of the business of the bankrupt estate by the trustee was done as agent on behalf of the bankrupt and any income of the trustee from such dealing or carrying on is income of the bankrupt and not of the trustee;

    • (d) except for the purposes of subsections 146(1), 146.01(4) and 146.02(4) and Part X.1,

      • (i) a taxation year of the individual is deemed to have begun at the beginning of the day on which the individual became a bankrupt, and

      • (ii) the individual’s last taxation year that began before that day is deemed to have ended immediately before that day;

    • (d.1) where, by reason of paragraph (d), a taxation year of the individual is not a calendar year,

      • (i) paragraph 146(5)(b) shall, for the purpose of the application of subsection 146(5) to the taxation year, be read as follows:

        • “(b) the amount, if any, by which

          • (i) the amount, if any, by which the taxpayer’s RRSP deduction limit for the particular calendar year in which the taxation year ends exceeds the total of all contributions made by an employer in the particular calendar year to a pooled registered pension plan in respect of the taxpayer

          exceeds

          • (ii) the total of the amounts deducted under this subsection and subsection (5.1) in computing the taxpayer’s income for any preceding taxation year that ends in the particular calendar year.”,

      and

      • (ii) paragraph 146(5.1)(b) shall, for the purpose of the application of subsection 146(5.1) to the taxation year, be read as follows:

        • “(b) the amount, if any, by which

          • (i) the amount, if any, by which the taxpayer’s RRSP deduction limit for the particular calendar year in which the taxation year ends exceeds the total of all contributions made by an employer in the particular calendar year to a pooled registered pension plan in respect of the taxpayer

          exceeds

          • (ii) the total of the amount deducted under subsection (5) in computing the taxpayer’s income for the year and the amounts deducted under this subsection and subsection (5) in computing the taxpayer’s income for any preceding taxation year that ends in the particular calendar year.”;

    • (d.2) where, by reason of paragraph 128(2)(d), the individual has two taxation years ending in a calendar year, each amount deducted in computing the individual’s income for either of the taxation years shall be deemed, for the purposes of the definition unused RRSP deduction room in subsection 146(1) and Part X.1, to have been deducted in computing the individual’s income for the calendar year;

    • (e) where the individual was a bankrupt at any time in a calendar year the trustee shall, within 90 days from the end of the year, file a return with the Minister, in prescribed form, on behalf of the individual of the individual’s income for any taxation year occurring in the calendar year computed as if

      • (i) the only income of the individual for that taxation year was the income for the year, if any, arising from dealings in the estate of the bankrupt or acts performed in the carrying on of the business of the bankrupt by the trustee,

      • (ii) in computing the individual’s taxable income for that taxation year, no deduction were permitted by Division C, other than

        • (A) an amount under any of paragraphs 110(1)(d) to (d.3) and section 110.6 to the extent that the amount is in respect of an amount included in income under subparagraph (i) for that taxation year, and

        • (B) an amount under section 111 to the extent that the amount was in respect of a loss of the individual for any taxation year that ended before the individual was discharged absolutely from bankruptcy,

      • (iii) in computing the individual’s tax payable under this Part for that taxation year, no deduction were allowed

        • (A) under any of sections 118 to 118.07, 118.2, 118.3, 118.5, 118.8 and 118.9,

        • (B) under section 118.1 with respect to a gift made by the individual on or after the day the individual became bankrupt,

        • (B.1) under section 118.62 with respect to interest paid on or after the day on which the individual became bankrupt, and

        • (C) under subsection 127(5) with respect to an expenditure incurred or property acquired by the individual in any taxation year that ends after the individual was discharged absolutely from bankruptcy,

        and the trustee is liable to pay any tax so determined for that taxation year;

    • (f) notwithstanding paragraph 128(2)(e), the individual shall file a separate return of the individual’s income for any taxation year during which the individual was a bankrupt, computed as if

      • (i) the income required to be reported in respect of the year by the trustee under paragraph 128(2)(e) was not the income of the individual,

      • (ii) in computing income, the individual was not entitled to deduct any loss sustained by the trustee in the year in dealing with the estate of the bankrupt or in carrying on the business of the bankrupt,

      • (iii) in computing the individual’s taxable income for the year, no amount were deductible under any of paragraphs 110(1)(d) to (d.3) and section 110.6 in respect of an amount included in income under subparagraph (e)(i), and no amount were deductible under section 111, and

      • (iv) in computing the individual’s tax payable under this Part for the year, no amount were deductible under

        • (A) section 118.1 in respect of a gift made before the day on which the individual became bankrupt,

        • (B) section 118.62 in respect of interest paid before the day on which the individual became bankrupt, or

        • (C) section 118.61 or 120.2 or subsection 127(5),

        and the individual is liable to pay any tax so determined for that taxation year;

    • (g) notwithstanding subparagraphs 128(2)(e)(ii) and 128(2)(e)(iii) and 128(2)(f)(iii) and 128(2)(f)(iv), where at any time an individual was discharged absolutely from bankruptcy,

      • (i) in computing the individual’s taxable income for any taxation year that ends after that time, no amount shall be deducted under section 111 in respect of losses for taxation years that ended before that time,

      • (ii) in computing the individual’s tax payable under this Part for any taxation year that ends after that time,

        • (A) no amount shall be deducted under section 118.61 or 120.2 in respect of an amount for any taxation year that ended before that time,

        • (B) no amount shall be deducted under section 118.1 in respect of a gift made before the individual became bankrupt,

        • (B.1) no amount shall be deducted under section 118.62 in respect of interest paid before the day on which the individual became bankrupt, and

        • (C) no amount shall be deducted under subsection 127(5) in respect of an expenditure incurred or a property acquired by the individual in any taxation year that ended before that time, and

      • (iii) the individual’s unused tuition, textbook and education tax credits (as determined under subsection 118.61(1)) at the end of the last taxation year that ended before that time is deemed to be nil;

    • (h) where, in a taxation year commencing after an order of discharge has been granted in respect of the individual, the trustee deals in the estate of the individual who was a bankrupt or performs any act in the carrying on of the business of the individual, paragraphs 128(2)(e), 128(2)(f) and 128(2)(g) shall apply as if the individual were a bankrupt in the year; and

    • (i) the portion of the individual’s non-capital loss for a particular taxation year in which paragraph 128(2)(e) applied in respect of the individual and any preceding taxation year that does not exceed the lesser of

      • (i) the amount of the individual’s allowable business investment losses for the particular taxation year, and

      • (ii) any portion of the individual’s non-capital loss for that particular year that was not deducted in computing the individual’s taxable income for any taxation year in which paragraph 128(2)(e) applied in respect of the individual or any preceding taxation year,

      shall, for the purpose of determining the individual’s cumulative gains limit under section 110.6 for taxation years following the taxation year in which paragraph 128(2)(e) was last applicable in respect of the individual, be deemed not to have been an allowable business investment loss.

  • (3) [Repealed, 1998, c. 19, s. 152]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 128;
  • 1994, c. 7, Sch. V, s. 90, Sch. VIII, s. 72, c. 8, s. 18;
  • 1998, c. 19, s. 152;
  • 1999, c. 22, s. 51;
  • 2001, c. 17, s. 122;
  • 2004, c. 25, s. 201;
  • 2006, c. 4, s. 78;
  • 2007, c. 2, s. 36;
  • 2009, c. 31, s. 15;
  • 2011, c. 24, s. 42;
  • 2012, c. 31, s. 29;
  • 2013, c. 34, ss. 129, 272;
  • 2014, c. 20, s. 20;
  • 2015, c. 36, s. 33;
  • 2016, c. 7, s. 37.
 
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