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

Investment Corporations

Marginal note:Deduction from tax
  •  (1) A corporation that was, throughout a taxation year, an investment corporation may deduct from the tax otherwise payable by it under this Part for the year an amount equal to 20% of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year.

  • Marginal note:Application of subsections 131(1) to (3.2), (4.1) and (6)

    (2) Where a corporation was an investment corporation throughout a taxation year (other than a corporation that was a mutual fund corporation throughout the year), subsections 131(1) to (3.2), (4.1) and (6) apply in respect of the corporation for the year

    • (a) as if the corporation had been a mutual fund corporation throughout that and all previous taxation years ending after 1971 throughout which it was an investment corporation; and

    • (b) as if its capital gains redemptions for that and all previous taxation years ending after 1971, throughout which it would, but for the assumption made by paragraph 130(2)(a), not have been a mutual fund corporation, were nil.

  • Meaning of expressions investment corporation and taxed capital gains

    (3) For the purposes of this section,

    • (a) a corporation is an investment corporation throughout any taxation year in respect of which the expression is being applied if it complied with the following conditions:

      • (i) it was throughout the year a Canadian corporation that was a public corporation,

      • (ii) at least 80% of its property throughout the year consisted of shares, bonds, marketable securities or cash,

      • (iii) not less than 95% of its income (determined without reference to subsection 49(2)) for the year was derived from, or from dispositions of, investments described in subparagraph 130(3)(a)(ii),

      • (iv) not less than 85% of its gross revenue for the year was from sources in Canada,

      • (v) not more than 25% of its gross revenue for the year was from interest,

      • (vi) at no time in the year did more than 10% of its property consist of shares, bonds or securities of any one corporation or debtor other than Her Majesty in right of Canada or of a province or a Canadian municipality,

      • (vii) no person would have been a specified shareholder of the corporation in the year if

        • (A) the portion of the definition specified shareholder in subsection 248(1) before paragraph (a) were read as follows:

          specified shareholder

          specified shareholder of a corporation in a taxation year means a taxpayer who owns, directly or indirectly, at any time in the year, more than 25% of the issued shares of any class of the capital stock of the corporation and, for the purposes of this definition,”

        • (B) paragraph (a) of that definition were read as follows:

          • “(a) a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person related to the taxpayer,”

        • (B.1) [Repealed, 2013, c. 34, s. 371]

        • (C) that definition were read without reference to paragraph (d) of that definition,

        • (C.1) [Repealed, 2013, c. 34, s. 371]

        and

        • (D) paragraph 251(2)(a) were read as follows:

          • “(a) an individual and

            • (i) the individual’s child (as defined in subsection 70(10)) who is under 19 years of age, or

            • (ii) the individual’s spouse or common-law partner;”

      • (viii) an amount not less than 85% of the total of

        • (A) 2/3 of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year, and

        • (B) the amount, if any, by which all taxable dividends received by it in the year to the extent of the amount thereof deductible under section 112 or 113 from its income for the year exceeds the amount that the corporation’s non-capital loss for the year would be if the amount determined in respect of the corporation for the year under paragraph 3(b) was nil,

        (less any dividends or interest received by it in the form of shares, bonds or other securities that had not been sold before the end of the year) was distributed, otherwise than by way of capital gains dividends, to its shareholders before the end of the year; and

    • (b) the amount of the taxed capital gains of a taxpayer for a taxation year is the amount, if any, by which

      • (i) its taxable capital gains for the year from dispositions of property

      exceeds

      • (ii) the total of its allowable capital losses for the year from dispositions of property and the amount, if any, deducted under paragraph 111(1)(b) for the purpose of computing its taxable income for the year.

  • Marginal note:Wholly owned subsidiaries

    (4) Where a corporation so elects in its return of income under this Part for a taxation year, each of the corporation’s properties that is a share or indebtedness of another Canadian corporation that is at any time in the year a subsidiary wholly owned corporation of the corporation shall, for the purposes of subparagraphs 130(3)(a)(ii) and (vi), be deemed not to be owned by the corporation at any such time in the year, and each property owned by the other corporation at that time shall, for the purposes of those subparagraphs, be deemed to be owned by the corporation at that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 130;
  • 1994, c. 7, Sch. II, s. 109, Sch. VIII, s. 74;
  • 1998, c. 19, s. 155;
  • 1999, c. 22, s. 92;
  • 2000, c. 12, s. 142;
  • 2013, c. 34, s. 371;
  • 2016, c. 12, s. 47.

Mortgage Investment Corporations

Marginal note:Deduction from tax
  •  (1) In computing the income for a taxation year of a corporation that was, throughout the year, a mortgage investment corporation,

    • (a) there may be deducted the total of

      • (i) all taxable dividends, other than capital gains dividends, paid by the corporation during the year or within 90 days after the end of the year to the extent that those dividends were not deductible by the corporation in computing its income for the preceding year, and

      • (ii) 1/2 of all capital gains dividends paid by the corporation during the period commencing 91 days after the commencement of the year and ending 90 days after the end of the year; and

    • (b) no deduction may be made under section 112 in respect of taxable dividends received by it from other corporations.

  • Marginal note:Dividend equated to bond interest

    (2) For the purposes of this Act, any amount received from a mortgage investment corporation by a shareholder of the corporation as or on account of a taxable dividend, other than a capital gains dividend, shall be deemed to have been received by the shareholder as interest payable on a bond issued by the corporation after 1971.

  • Marginal note:Application of s. (2)

    (3) Subsection 130.1(2) applies where the taxable dividend (other than a capital gains dividend) described in that subsection was paid during a taxation year throughout which the paying corporation was a mortgage investment corporation or within 90 days thereafter.

  • Marginal note:Election re capital gains dividend

    (4) Where at any particular time during the period that begins 91 days after the beginning of a taxation year of a corporation that was, throughout the year, a mortgage investment corporation and ends 90 days after the end of the year, a dividend is paid by the corporation to shareholders of the corporation, if the corporation so elects in respect of the full amount of the dividend in prescribed manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,

    • (a) the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the amount, if any, by which

      • (i) twice the taxed capital gains of the corporation for the year

      exceeds

      • (ii) the total of all dividends, and parts of dividends, paid by the corporation during the period and before the particular time that are deemed by this paragraph to be capital gains dividends; and

    • (b) notwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount

      • (i) shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and

      • (ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.

  • Marginal note:Application of ss. 131(1.1) to (1.4)

    (4.1) Where at any particular time a mortgage investment corporation paid a dividend to its shareholders and subsection 130.1(4) would have applied to the dividend except that the corporation did not make an election under that subsection on or before the day on or before which it was required by that subsection to be made, subsections 131(1.1) to 131(1.4) apply with such modifications as the circumstances require.

  • (4.2) to (4.5) [Repealed, 2013, c. 34, s. 276]

  • Marginal note:Public corporation

    (5) Notwithstanding any other provision of this Act, a mortgage investment corporation shall be deemed to be a public corporation.

  • Meaning of mortgage investment corporation

    (6) For the purposes of this section, a corporation is a mortgage investment corporation throughout a taxation year if, throughout the year,

    • (a) it was a Canadian corporation;

    • (b) its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property;

    • (c) none of the property of the corporation consisted of

      • (i) debts owing to the corporation that were secured on real or immovable property situated outside Canada,

      • (ii) debts owing to the corporation by non-resident persons, except any such debts that were secured on real or immovable property situated in Canada,

      • (iii) shares of the capital stock of corporations not resident in Canada, or

      • (iv) real or immovable property situated outside Canada, or any leasehold interest in such property;

    • (d) there were 20 or more shareholders of the corporation and no person would have been a specified shareholder of the corporation at any time in the year if

      • (i) the portion of the definition specified shareholder in subsection 248(1) before paragraph (a) were read as follows:

        specified shareholder

        specified shareholder of a corporation at any time means a taxpayer who owns, directly or indirectly, at that time, more than 25% of the issued shares of any class of the capital stock of the corporation and, for the purposes of this definition,”

      • (ii) paragraph (a) of that definition were read as follows:

        • “(a) a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person related to the taxpayer,”

      • (iii) that definition were read without reference to paragraph (d) of that definition, and

      • (iv) paragraph 251(2)(a) were read as follows:

        • “(a) an individual and

          • (i) the individual’s child (as defined in subsection 70(10)) who is under 18 years of age, or

          • (ii) the individual’s spouse or common-law partner;”

    • (e) any holders of preferred shares of the corporation had a right, after payment to them of their preferred dividends, and payment of dividends in a like amount per share to the holders of the common shares of the corporation, to participate pari passu with the holders of the common shares in any further payment of dividends;

    • (f) the cost amount to the corporation of such of its property as consisted of

      • (i) debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of the National Housing Act) or on property included within a housing project (as defined in that section as it read on June 16, 1999), and

      • (ii) amounts of any deposits standing to the corporation’s credit in the records of

        • (A) a bank or other corporation any of whose deposits are insured by the Canada Deposit Insurance Corporation or the Régie de l’assurance-dépôts du Québec, or

        • (B) a credit union,

      plus the amount of any money of the corporation was at least 50% of the cost amount to it of all its property;

    • (g) the cost amount to the corporation of all real or immovable property of the corporation, including leasehold interests in such property (except real or immovable property acquired by the corporation by foreclosure or otherwise after default made on a mortgage, hypothec or agreement of sale of real or immovable property) did not exceed 25% of the cost amount to it of all its property;

    • (h) its liabilities did not exceed 3 times the amount by which the cost amount to it of all its property exceeded its liabilities, where at any time in the year the cost amount to it of such of its property as consisted of property described in subparagraphs 130.1(6)(f)(i) and 130.1(6)(f)(ii) plus the amount of any money of the corporation was less than 2/3 of the cost amount to it of all of its property; and

    • (i) its liabilities did not exceed 5 times the amount by which the cost amount to it of all its property exceeded its liabilities, where paragraph 130.1(6)(h) is not applicable.

  • Marginal note:How shareholders counted

    (7) In paragraph (6)(d), a trust governed by a registered pension plan or deferred profit sharing plan by which shares of the capital stock of a corporation are held shall be counted as four shareholders of the corporation for the purpose of determining the number of shareholders of the corporation, but as one shareholder for the purpose of determining whether any person is a specified shareholder (as defined for the purpose of that paragraph).

  • Marginal note:First taxation year

    (8) For the purposes of subsection 130.1(6), a corporation that was incorporated after 1971 shall be deemed to have complied with paragraph 130.1(6)(d) throughout the first taxation year of the corporation in which it carried on business if it complied with that paragraph on the last day of that taxation year.

  • Marginal note:Definitions

    (9) In this section,

    liabilities

    passif

    liabilities of a corporation at any particular time means the total of all debts owing by the corporation, and all other obligations of the corporation to pay an amount, that were outstanding at that time; (passif)

    non-qualifying real property

    non-qualifying real property[Repealed, 1995, c. 3, s. 40(2)]

    non-qualifying taxed capital gains

    non-qualifying taxed capital gains[Repealed, 1995, c. 3, s. 40(2)]

    qualifying taxed capital gains

    qualifying taxed capital gains[Repealed, 1995, c. 3, s. 40(2)]

    taxed capital gains

    gains en capital imposés

    taxed capital gains has the meaning assigned by paragraph 130(3)(b). (gains en capital imposés)

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 130.1;
  • 1994, c. 7, Sch. VIII, s. 75;
  • 1995, c. 3, s. 40;
  • 1998, c. 19, s. 156;
  • 1999, c. 22, s. 53;
  • 2000, c. 12, s. 142;
  • 2001, c. 17, ss. 127, 214(E);
  • 2013, c. 34, ss. 131, 276.
 
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