Income Tax Act

Version of section 130.1 from 2004-08-31 to 2013-06-25:

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, any amount received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend 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

      • (i) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, 9/8 of the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year,

      • (ii) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred before February 28, 2000, and the taxation year of the taxpayer includes February 27, 2000, the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year and before February 28, 2000,

      • (iii) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred before February 28, 2000 and the taxation year of the taxpayer began after October 17, 2000, 3/2 of the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year,

      • (iii.1) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred before February 28, 2000 and the taxation year of the taxpayer begins after February 27, 2000 and ends after October 17, 2000, 9/8 of the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the year and before October 18, 2000,

      • (iv) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred after February 27, 2000 and before October 18, 2000, and the taxation year of the taxpayer began after October 17, 2000, 4/3 of the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year,

      • (v) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred after February 27, 2000, and before October 18, 2000 and the taxation year of the taxpayer includes October 17, 2000, the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year and in the period that began after February 27, 2000 and ended before October 18, 2000,

      • (vi) where the dividend was in respect of capital gains of the corporation from dispositions of property that occurred after February 27, 2000, and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 17, 2000, the dividend is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of a capital property in the year, and

      • (vii) in any other case, the dividend is deemed to be a capital gain of the taxpayer from the disposition of capital property after October 17, 2000 and 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.

  • Marginal note:Reporting

    (4.2) Where paragraph (4)(b) applies to a dividend paid by a mortgage investment corporation to a shareholder of any class of shares of its capital stock in the period that begins 91 days after the beginning of the corporation’s taxation year that includes February 28, 2000 or October 17, 2000 and ends 90 days after the end of that year, the corporation shall disclose to the shareholder in prescribed form the amount of the dividend that is in respect of capital gains realized on dispositions of property that occurred

    • (a) before February 28, 2000,

    • (b) after February 27, 2000 and before October 18, 2000, and

    • (c) after October 17, 2000

    and, if it does not do so, the dividend is deemed to be in respect of capital gains from dispositions of property that occurred before February 28, 2000.

  • Marginal note:Allocation

    (4.3) Where subsection (4) applies in respect of a dividend paid by a mortgage investment corporation at any time in the period that begins 91 days after the beginning of the corporation’s taxation year that includes February 28, 2000 or October 17, 2000 and ends 90 days after the end of that year, and the corporation does not elect under subsection (4.4), the following rules apply:

    • (a) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the particular period that began at the beginning of the year and ended at the end of February 27, 2000 is deemed to be that proportion of the dividend that the net capital gains of the corporation from the dispositions of property in the particular period is of the total of the corporation’s net capital gains from the dispositions of property in each of the particular periods referred to in this subsection,

    • (b) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the particular period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000 is deemed to be that proportion of the dividend that the net capital gains of the corporation from the dispositions of property in the particular period is of the total of the corporation’s net capital gains from the dispositions of property in each of the particular periods referred to in this subsection,

    • (c) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the particular period that begins at the beginning of October 18, 2000 and ends at the end of the year, is deemed to be that proportion of the dividend that the net capital gains of the corporation from the dispositions of property in the particular period is of the total of the corporation’s net capital gains from the dispositions of property in each of the periods referred to in this subsection, and

    in this subsection net capital gains from dispositions of property in a particular period means the amount, if any, by which the corporation’s capital gains from dispositions of property in the particular period exceeds the corporation’s capital losses from dispositions of property in the particular period.

  • Marginal note:Allocation

    (4.4) Where subsection (4) applies in respect of a dividend paid by a mortgage investment corporation in the period that begins 91 days after the beginning of the corporation’s taxation year that includes February 28, 2000 or October 17, 2000 and ends 90 days after the end of that year, and the corporation so elects under this subsection in its return of income for the year, the following rules apply:

    • (a) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and before February 28, 2000 is deemed to be that proportion of the dividend that the number of days that are in that year and before February 28, 2000 is of the number of days that are in that year;

    • (b) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000 is deemed to be that proportion of the dividend that the number of days that are in the year and in that period is of the number of days that are in the year; and

    • (c) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the period that begins at the beginning of October 18, 2000 and ends at the end of the year, is deemed to be that proportion of the dividend that the number of days that are in the year and in that period is of the number of days that are in the year.

  • Marginal note:Allocation

    (4.5) Where no dividend to which subsection (4.4) applies is paid by a mortgage investment corporation in respect of its net taxable capital gains for its taxation year that includes February 28, 2000 or October 17, 2000, the corporation has net capital gains or net capital losses from dispositions of property in the year, and the corporation so elects under this subsection in its return of income for the year

    • (a) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and before February 28, 2000 is of the number of days that are in the year,

    • (b) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000, is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and in that period is of the number of days that are in the year, and

    • (c) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of October 18, 2000 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and in that period is of the number of days that are in the year,

    and, for the purpose of this subsection,

    • (d) the net capital gains of a mortgage investment corporation from dispositions of property in a year is the amount, if any, by which the corporation’s capital gains from dispositions of property in a year exceeds the corporation’s capital losses from dispositions of property in the year, and

    • (e) the net capital losses of a mortgage investment corporation from dispositions of property in a year is the amount, if any, by which the corporation’s capital losses from dispositions of property in a year exceeds the corporation’s capital gains from dispositions of property in the year.

  • 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 property;

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

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

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

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

      • (iv) real 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), 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 property of the corporation, including leasehold interests in such property, (except real property acquired by the corporation by foreclosure or otherwise after default made on a mortgage, hypothec or agreement of sale of real 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).
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