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

Full Document:  

Act current to 2018-07-05 and last amended on 2018-07-01. Previous Versions

Marginal note:Property with more than one use
  •  (1) For the purposes of this subdivision the following rules apply:

    • (a) where a taxpayer,

      • (i) having acquired property for some other purpose, has commenced at a later time to use it for the purpose of gaining or producing income, or

      • (ii) having acquired property for the purpose of gaining or producing income, has commenced at a later time to use it for some other purpose,

      the taxpayer shall be deemed to have

      • (iii) disposed of it at that later time for proceeds equal to its fair market value at that later time, and

      • (iv) immediately thereafter reacquired it at a cost equal to that fair market value;

    • (b) where property has, since it was acquired by a taxpayer, been regularly used in part for the purpose of gaining or producing income and in part for some other purpose, the taxpayer shall be deemed to have acquired, for that other purpose, the proportion of the property that the use regularly made of the property for that other purpose is of the whole use regularly made of the property at a cost to the taxpayer equal to the same proportion of the cost to the taxpayer of the whole property, and, if the property has, in such a case, been disposed of, the proceeds of disposition of the proportion of the property deemed to have been acquired for that other purpose shall be deemed to be the same proportion of the proceeds of disposition of the whole property;

    • (c) where, at any time after a taxpayer has acquired property, there has been a change in the relation between the use regularly made by the taxpayer of the property for gaining or producing income and the use regularly made of the property for other purposes,

      • (i) if the use regularly made of the property for those other purposes has increased, the taxpayer shall be deemed to have

        • (A) disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the increase in the use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and

        • (B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(i)(A), and

      • (ii) if the use regularly made of the property for those other purposes has decreased, the taxpayer shall be deemed to have

        • (A) disposed of the property at that time for proceeds equal to the proportion of the fair market value of the property at that time that the amount of the decrease in use regularly made by the taxpayer of the property for those other purposes is of the whole use regularly made of the property, and

        • (B) immediately thereafter reacquired the property so disposed of at a cost equal to the proceeds referred to in clause 45(1)(c)(ii)(A); and

    • (d) in applying this subsection in respect of a non-resident taxpayer, a reference to “gaining or producing income” shall be read as a reference to “gaining or producing income from a source in Canada”.

  • Marginal note:Election where change of use

    (2) For the purposes of this subdivision and section 13, where subparagraph 45(1)(a)(i) or paragraph 13(7)(b) would otherwise apply to any property of a taxpayer for a taxation year and the taxpayer so elects in respect of the property in the taxpayer’s return of income for the year under this Part, the taxpayer shall be deemed not to have begun to use the property for the purpose of gaining or producing income except that, if in the taxpayer’s return of income under this Part for a subsequent taxation year the taxpayer rescinds the election in respect of the property, the taxpayer shall be deemed to have begun so to use the property on the first day of that subsequent year.

  • Marginal note:Election concerning principal residence

    (3) Where at any time a property that was acquired by a taxpayer for the purpose of gaining or producing income ceases to be used for that purpose and becomes the principal residence of the taxpayer, subsection 45(1) shall not apply to deem the taxpayer to have disposed of the property at that time and to have reacquired it immediately thereafter if the taxpayer so elects by notifying the Minister in writing on or before the earlier of

    • (a) the day that is 90 days after a demand by the Minister for an election under this subsection is sent to the taxpayer, and

    • (b) the taxpayer’s filing-due date for the taxation year in which the property is actually disposed of by the taxpayer.

  • Marginal note:Where election cannot be made

    (4) Notwithstanding subsection 45(3), an election described in that subsection shall be deemed not to have been made in respect of a change in use of property if any deduction in respect of the property has been allowed for any taxation year ending after 1984 and on or before the change in use under regulations made under paragraph 20(1)(a) to the taxpayer, the taxpayer’s spouse or common-law partner or a trust under which the taxpayer or the taxpayer’s spouse or common-law partner is a beneficiary.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 45;
  • 1994, c. 7, Sch. II, s. 25, c. 21, s. 18;
  • 1996, c. 21, s. 10;
  • 2000, c. 12, s. 142;
  • 2001, c. 17, s. 30.
Marginal note:Personal-use property
  •  (1) Where a taxpayer has disposed of a personal-use property (other than an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) of the taxpayer, for the purposes of this subdivision

    • (a) the adjusted cost base to the taxpayer of the property immediately before the disposition shall be deemed to be the greater of $1,000 and the amount otherwise determined to be its adjusted cost base to the taxpayer at that time; and

    • (b) the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of $1,000 and the taxpayer’s proceeds of disposition of the property otherwise determined.

  • Marginal note:Where part only of property disposed of

    (2) Where a taxpayer has disposed of part of a personal-use property (other than a part of an excluded property disposed of in circumstances to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies) owned by the taxpayer and has retained another part of the property, for the purposes of this subdivision

    • (a) the adjusted cost base to the taxpayer, immediately before the disposition, of the part so disposed of shall be deemed to be the greater of

      • (i) the adjusted cost base to the taxpayer at that time of that part otherwise determined, and

      • (ii) that proportion of $1,000 that the amount determined under subparagraph 46(2)(a)(i) is of the adjusted cost base to the taxpayer at that time of the whole property; and

    • (b) the proceeds of disposition of the part so disposed of shall be deemed to be the greater of

      • (i) the proceeds of disposition of that part otherwise determined, and

      • (ii) the amount determined under subparagraph 46(2)(a)(ii).

  • Marginal note:Properties ordinarily disposed of as a set

    (3) For the purposes of this subdivision, where a number of personal-use personal-use properties of a taxpayer that would, if the properties were disposed of, ordinarily be disposed of in one disposition as a set,

    • (a) have been disposed of by more than one disposition so that all of the properties have been acquired by one person or by a group of persons not dealing with each other at arm’s length, and

    • (b) had, immediately before the first disposition referred to in paragraph 46(3)(a), a total fair market value greater than $1,000,

    the properties shall be deemed to be a single personal-use property and each such disposition shall be deemed to be a disposition of a part of that property.

  • Marginal note:Decrease in value of personal-use property of corporation, etc.

    (4) Where it may reasonably be regarded that, by reason of a decrease in the fair market value of any personal-use property of a corporation, partnership or trust,

    • (a) a taxpayer’s gain, if any, from the disposition of a share of the capital stock of a corporation, an interest in a trust or an interest in a partnership has become a loss, or is less than it would have been if the decrease had not occurred, or

    • (b) a taxpayer’s loss, if any, from the disposition of a share or interest described in paragraph 46(4)(a) is greater than it would have been if the decrease had not occurred,

    the amount of the gain or loss, as the case may be, shall be deemed to be the amount that it would have been but for the decrease.

  • Marginal note:Excluded property

    (5) For the purpose of this section, excluded property of a taxpayer means property acquired by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, in circumstances in which it is reasonable to conclude that the acquisition of the property relates to an arrangement, plan or scheme that is promoted by another person or partnership and under which it is reasonable to conclude that the property will be the subject of a gift to which subsection 110.1(1), or the definition total charitable gifts, total cultural gifts or total ecological gifts in subsection 118.1(1), applies.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 46;
  • 2001, c. 17, s. 31.
 
Date modified: