Income Tax Act

Version of section 149.2 from 2007-12-14 to 2009-03-11:

Marginal note:Material and insignificant interests
  •  (1) In this section and section 149.1,

    • (a) a person has, at any time, a material interest in respect of a class of shares of the capital stock of a corporation if, at that time,

      • (i) the percentage of the shares of that class held by the person exceeds 0.5% of all the issued and outstanding shares of that class, or

      • (ii) the fair market value of the shares so held exceeds $100,000; and

    • (b) a private foundation has, at any time, an insignificant interest in respect of a class of shares of the capital stock of a corporation if, at that time, the percentage of shares of that class held by the private foundation does not exceed 2% of all the issued and outstanding shares of that class.

  • Marginal note:Material transaction — anti-avoidance

    (2) If a private foundation or a relevant person in respect of the private foundation has engaged in one or more transactions or series of transactions or events, a purpose of which may reasonably be considered to be to avoid the application of the definition material transaction, each of those transactions or series of transactions or events is deemed to be a material transaction.

  • Marginal note:Net increase in excess corporate holdings percentage

    (3) The net increase in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, determined by the formula

    A - B

    where

    A
    is the excess corporate holdings percentage of the private foundation at the end of the taxation year, in respect of the class, and
    B
    is
    • (a) 0%, if

      • (i) at the beginning of the taxation year the private foundation was not both a private foundation and a registered charity, or

      • (ii) the private foundation was both a registered charity and a private foundation on March 18, 2007 and the taxation year is the first taxation year of the private foundation that begins after that date; and

    • (b) in any other case, the excess corporate holdings percentage of the private foundation in respect of the class at the end of its preceding taxation year.

  • Marginal note:Net decrease in excess corporate holdings percentage

    (4) The net decrease in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, by which the percentage determined for B in the formula in subsection (3) for the taxation year exceeds the percentage determined for A in that formula for the taxation year.

  • Marginal note:Allocation of net increase in excess corporate holdings percentage

    (5) For the purpose of the description of B in the definition divestment obligation percent-age in subsection 149.1(1), the net increase in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation, for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first to the divestment obligation percent-age of the private foundation in respect of that class for the current year, to the extent that the private foundation has in the current year acquired for consideration shares of that class;

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for its fifth subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), and

      • (ii) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of bequest;

    • (c) then to the divestment obligation percent-age of the private foundation in respect of that class for its second subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a) or (b), and

      • (ii) the total of

        • (A) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of gift, other than from a relevant person or by way of bequest, and

        • (B) the portion of the net increase in the excess corporate holdings percentage of the private foundation that is attributable to the redemption, acquisition or cancellation of any of the issued and outstanding shares of that class in the current year by the corporation; and

    • (d) then to the divestment obligation percent-age of the private foundation in respect of that class for its subsequent taxation year, to the extent of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), (b) or (c).

  • Marginal note:Minister’s discretion

    (6) Notwithstanding subsection (5), on application by a private foundation, the Minister may, if the Minister believes it would be just and equitable to do so, reallocate any portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year, that would otherwise be allocated under subsection (5) to the private foundation’s divestment obligation percentage in respect of that class for a particular taxation year, to the private foundation’s divestment obligation percentage in respect of that class for any of the ten taxation years subsequent to the particular taxation year.

  • Marginal note:Allocation of net decrease in excess corporate holdings percentage

    (7) For the purpose of the description of C in the definition divestment obligation percent-age in subsection 149.1(1), the net decrease in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first, to the divestment obligation percentage of the private foundation in respect of that class for the current year, to the extent of that divestment obligation percentage; and

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for a subsequent taxation year of the private foundation (referred to in this paragraph as the “subject year”), to the extent of the lesser of

      • (i) that portion of the net decrease in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), or under this paragraph, to the divestment obligation percentage of the private foundation in respect of that class for a taxation year of the private foundation that precedes the subject year, and

      • (ii) the amount of the divestment obligation percentage of the private foundation in respect of that class for the subject year, calculated as at the end of the current year and without reference to this subsection.

  • Marginal note:Transitional rule

    (8) If the original corporate holdings percent-age of a private foundation in respect of a class of shares of the capital stock of a corporation exceeds 20%, for the purpose of applying the definition “excess corporate holdings percent-age” in subsection 149.1(1) to

    • (a) the first taxation year of the private foundation that begins after March 18, 2007, the reference to 20% in that definition in respect of that class is to be read as the original corporate holdings percentage of the private foundation in respect of that class;

    • (b) taxation years of the private foundation that are after the taxation year referred to in paragraph (a) and that begin before March 19, 2012, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the immediately preceding taxation year, and

        • (B) the original corporate holdings percentage in respect of that class;

    • (c) taxation years of the private foundation that begin after March 18, 2012 and before March 19, 2017, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 20%;

    • (d) taxation years of the private foundation that begin after March 18, 2017 and before March 19, 2022, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 40%; and

    • (e) taxation years of the private foundation that begin after March 18, 2022 and before March 19, 2027, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 60%.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2007, c. 35, s. 47.
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