Income Tax Act

Version of section 93 from 2004-08-31 to 2013-06-25:

Marginal note:Election re disposition of share in foreign affiliate
  •  (1) For the purposes of this Act, where a corporation resident in Canada so elects, in prescribed manner and within the prescribed time, in respect of any share of the capital stock of a foreign affiliate of the corporation disposed of by it or by another foreign affiliate of the corporation,

    • (a) the amount (in this subsection referred to as the “elected amount”) designated by the corporation in its election not exceeding the proceeds of disposition of the share shall be deemed to have been a dividend received on the share from the affiliate by the disposing corporation or disposing affiliate, as the case may be, immediately before the disposition and not to have been proceeds of disposition; and

    • (b) where subsection 40(3) applies to the disposing corporation or disposing affiliate, as the case may be, in respect of the share,

      • (i) the amount deemed by that subsection to be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share shall, except for the purposes of paragraph 53(1)(a), be deemed to be equal to the amount, if any, by which

        • (A) the amount deemed by that subsection to be the gain from the disposition of the share determined without reference to this subparagraph

        exceeds

        • (B) the elected amount, and

      • (ii) for the purposes of determining the exempt surplus, exempt deficit, taxable surplus, taxable deficit and underlying foreign tax of the affiliate in respect of the corporation resident in Canada (within the meanings assigned by Part LIX of the Income Tax Regulations), the affiliate is deemed to have redeemed at the time of the disposition shares of a class of its capital stock.

  • Marginal note:Idem

    (1.1) Where at any time shares of the capital stock of a foreign affiliate of a corporation resident in Canada that are excluded property are disposed of by another foreign affiliate of the corporation (other than a disposition to which paragraph 95(2)(c), 95(2)(d) or 95(2)(e) applies), the corporation shall be deemed to have made an election at that time under subsection 93(1) in respect of each such share disposed of and in the election to have designated an amount equal to such amount as is prescribed.

  • Marginal note:Disposition of shares of a foreign affiliate held by a partnership

    (1.2) Where a particular corporation resident in Canada or a foreign affiliate of the particular corporation (each of which is referred to in this subsection as the “disposing corporation”) would, but for this subsection, have a taxable capital gain from a disposition by a partnership, at any time, of shares of a class of the capital stock of a foreign affiliate of the particular corporation and the particular corporation so elects in prescribed manner in respect of the disposition,

    • (a) twice

      • (i) the amount designated by the particular corporation (which amount shall not exceed the amount that is equal to the proportion of the taxable capital gain of the partnership that the number of shares of that class of the capital stock of the foreign affiliate, determined as the amount, if any, by which the number of those shares that were deemed to have been owned by the disposing corporation for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that were deemed to have been owned for those purposes by the disposing corporation immediately after the disposition, is of the number of those shares of the foreign affiliate that were owned by the partnership immediately before the disposition), or

      • (ii) where subsection (1.3) applies, the amount prescribed for the purpose of that subsection

      in respect of those shares is deemed to have been a dividend received immediately before that time on the number of those shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purpose of subsection 93.1(1) immediately before the disposition exceeds the number of those shares of the foreign affiliate that the disposing corporation was deemed to own for the purposes of subsection 93.1 (1) immediately after the disposition;

    • (b) notwithstanding section 96, the disposing corporation’s taxable capital gain from the disposition of those shares is deemed to be the amount, if any, by which the disposing corporation’s taxable capital gain from the disposition of the shares otherwise determined exceeds the amount designated by the particular corporation in respect of the shares;

    • (c) for the purpose of any regulation made under this subsection, the disposing corporation is deemed to have disposed of the number of those shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that the disposing corporation was deemed to own for those purposes immediately after the disposition;

    • (d) for the purposes of section 113 in respect of the dividend referred to in paragraph (a), the disposing corporation is deemed to have owned the shares on which that dividend was received; and

    • (e) where the disposing corporation has a taxable capital gain from the partnership because of the application of subsection 40(3) to the partnership in respect of those shares, for the purposes of this subsection, the shares are deemed to have been disposed of by the partnership.

  • Marginal note:Deemed election

    (1.3) Where a foreign affiliate of a particular corporation resident in Canada has a gain from the disposition by a partnership at any time of shares of a class of the capital stock of a foreign affiliate of the particular corporation that are excluded property, the particular corporation is deemed to have made an election under subsection (1.2) in respect of the number of shares of the foreign affiliate which shall be determined as the amount, if any, by which the number of those shares that the disposing corporation was deemed to own for the purposes of subsection 93.1(1) immediately before the disposition exceeds the number of those shares that the disposing corporation was deemed to own for those purposes immediately after the disposition.

  • Marginal note:Loss limitation on disposition of share

    (2) Where

    • (a) a corporation resident in Canada has a loss from the disposition by it at any time of a share of the capital stock of a foreign affiliate of the corporation (in this subsection referred to as the “affiliate share”), or

    • (b) a foreign affiliate of a corporation resident in Canada has a loss from the disposition by it at any time of a share of the capital stock of another foreign affiliate of the corporation resident in Canada that is not excluded property (in this subsection referred to as the “affiliate share”),

    the amount of the loss is deemed to be the amount determined by the formula

    A - (B - C)

    where

    A
    is the amount of the loss determined without reference to this subsection,
    B
    is the total of all amounts each of which is an amount received before that time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, by
    • (a) the corporation resident in Canada,

    • (b) a corporation related to the corporation resident in Canada,

    • (c) a foreign affiliate of the corporation resident in Canada, or

    • (d) a foreign affiliate of a corporation related to the corporation resident in Canada, and

    C
    is the total of
    • (a) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from another disposition at or before that time by a corporation or foreign affiliate described in the description of B of the affiliate share or a share for which the affiliate share was substituted, was reduced under this subsection in respect of the exempt dividends referred to in the description of B,

    • (b) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under subsection (2.1) in respect of the exempt dividends referred to in the description of B,

    • (c) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a disposition at or before that time by a corporation or foreign affiliate described in the description of B of an interest in a partnership, was reduced under subsection (2.2) in respect of the exempt dividends referred to in the description of B, and

    • (d) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of an interest in another partnership, was reduced under subsection (2.3) in respect of the exempt dividends referred to in the description of B.

  • Marginal note:Loss limitation — disposition of share by partnership

    (2.1) Where

    • (a) a corporation resident in Canada has an allowable capital loss from a disposition at any time by a partnership of a share of the capital stock of a foreign affiliate of the corporation (in this subsection referred to as the “affiliate share”), or

    • (b) a foreign affiliate of a corporation resident in Canada has an allowable capital loss from a disposition at any time by a partnership of a share of the capital stock of another foreign affiliate of the corporation resident in Canada that would not be excluded property of the affiliate if the affiliate owned the share immediately before it was disposed of (in this subsection referred to as the “affiliate share”),

    the amount of the allowable capital loss is deemed to be the amount determined by the formula

    A - (B - C)

    where

    A
    is the amount of the allowable capital loss determined without reference to this subsection,
    B
    is 1/2 of the total of all amounts each of which was received before that time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, by
    • (a) the corporation resident in Canada,

    • (b) a corporation related to the corporation resident in Canada,

    • (c) a foreign affiliate of the corporation resident in Canada, or

    • (d) a foreign affiliate of a corporation related to the corporation resident in Canada, and

    C
    is the total of
    • (a) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under this subsection in respect of the exempt dividends referred to in the description of B,

    • (b) the total of all amounts each of which is 1/2 of the amount by which a loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from another disposition at or before that time of the affiliate share or a share for which the affiliate share was substituted, was reduced under subsection (2) in respect of the exempt dividends referred to in the description of B,

    • (c) the total of all amounts each of which is 1/2 of the amount by which a loss (determined without reference to this section), from a disposition at or before that time by a corporation or foreign affiliate described in the description of B of an interest in a partnership, was reduced under subsection (2.2) in respect of the exempt dividends referred to in the description of B, and

    • (d) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of an interest in another partnership, was reduced under subsection (2.3) in respect of exempt dividends referred to in the description of B.

  • Marginal note:Loss limitation — disposition of partnership interest

    (2.2) Where

    • (a) a corporation resident in Canada has a loss from the disposition by it at any time of an interest in a partnership (in this subsection referred to as the “partnership interest”), which has a direct or indirect interest in shares of the capital stock of a foreign affiliate of the corporation resident in Canada (in this subsection referred to as “affiliate shares”), or

    • (b) a foreign affiliate of a corporation resident in Canada has a loss from the disposition by it at any time of an interest in a partnership (in this subsection referred to as the “partnership interest”), which has a direct or indirect interest in shares of the capital stock of another foreign affiliate of the corporation resident in Canada that would not be excluded property if the shares were owned by the affiliate (in this subsection referred to as “affiliate shares”),

    the amount of the loss is deemed to be the amount determined by the formula

    A - (B - C)

    where

    A
    is the amount of the loss determined without reference to this subsection,
    B
    is the total of all amounts each of which was received before that time, in respect of an exempt dividend on affiliate shares or on shares for which affiliate shares were substituted, by
    • (a) the corporation resident in Canada,

    • (b) a corporation related to the corporation resident in Canada,

    • (c) a foreign affiliate of the corporation resident in Canada, or

    • (d) a foreign affiliate of a corporation related to the corporation resident in Canada, and

    C
    is the total of
    • (a) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from another disposition at or before that time by a corporation or foreign affiliate described in the description of B of affiliate shares or shares for which affiliate shares were substituted, was reduced under subsection (2) in respect of the exempt dividends referred to in the description of B,

    • (b) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from another disposition at or before that time by a partnership of affiliate shares or shares for which affiliate shares were substituted, was reduced under subsection (2.1) in respect of the exempt dividends referred to in the description of B,

    • (c) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a disposition at or before that time by a corporation or foreign affiliate described in the description of B of an interest in a partnership, was reduced under this subsection in respect of the exempt dividends referred to in the description of B, and

    • (d) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of an interest in another partnership, was reduced under subsection (2.3) in respect of the exempt dividends referred to in the description of B.

  • Marginal note:Loss limitation — disposition of partnership interest

    (2.3) Where

    • (a) a corporation resident in Canada has an allowable capital loss from a partnership from a disposition at any time of an interest in another partnership that has a direct or indirect interest in shares of the capital stock of a foreign affiliate of the corporation resident in Canada (in this subsection referred to as “affiliate shares”), or

    • (b) a foreign affiliate of a corporation resident in Canada has an allowable capital loss from a partnership from a disposition at any time by a partnership of an interest in another partnership that has a direct or indirect interest in shares of the capital stock of a foreign affiliate of the corporation resident in Canada that would not be excluded property of the affiliate if the affiliate owned the shares immediately before the disposition (in this subsection referred to as “affiliate shares”),

    the amount of the allowable capital loss is deemed to be the amount determined by the formula

    A - (B - C)

    where

    A
    is the amount of the allowable capital loss determined without reference to this subsection,
    B
    is 1/2 of the total of all amounts each of which was received before that time, in respect of an exempt dividend on affiliate shares or on shares for which affiliate shares were substituted, by
    • (a) the corporation resident in Canada,

    • (b) a corporation related to the corporation resident in Canada,

    • (c) a foreign affiliate of the corporation resident in Canada, or

    • (d) a foreign affiliate of a corporation related to the corporation resident in Canada, and

    C
    is the total of
    • (a) the total of all amounts each of which is 1/2 of the amount by which a loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from another disposition at or before that time of affiliate shares or shares for which affiliate shares were substituted, was reduced under subsection (2) in respect of the exempt dividends referred to in the description of B,

    • (b) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of affiliate shares or shares for which affiliate shares were substituted, was reduced under subsection (2.1) in respect of the exempt dividends referred to in the description of B,

    • (c) the total of all amounts each of which is 1/2 of the amount by which a loss (determined without reference to this section), from a disposition at or before that time by a corporation or foreign affiliate described in the description of B of an interest in a partnership, was reduced under subsection (2.2) in respect of the exempt dividends referred to in the description of B, and

    • (d) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or foreign affiliate described in the description of B from a disposition at or before that time by a partnership of an interest in another partnership, was reduced under this subsection in respect of the exempt dividends referred to in the description of B.

  • Marginal note:Exempt dividends

    (3) For the purposes of subsections (2) to (2.3),

    • (a) a dividend received by a corporation resident in Canada is an exempt dividend to the extent of the amount in respect of the dividend that is deductible from the income of the corporation for the purpose of computing the taxable income of the corporation because of paragraph 113(1)(a), (b) or (c); and

    • (b) a dividend received by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation is an exempt dividend to the extent of the amount, if any, by which the portion of the dividend that was not prescribed to have been paid out of the pre-acquisition surplus of the other affiliate exceeds the total of such portion of the income or profits tax that can reasonably be considered to have been paid in respect of that portion of the dividend by the particular affiliate or by a partnership in which the particular affiliate had, at the time of the payment of the income or profits tax, a partnership interest, either directly or indirectly.

  • Marginal note:Loss on disposition of shares of foreign affiliate

    (4) Where a taxpayer resident in Canada or a foreign affiliate of the taxpayer (in this subsection referred to as the “vendor”) has acquired shares of a foreign affiliate of the taxpayer (in this subsection referred to as the “acquired affiliate”) on the disposition of shares of any other foreign affiliate of the taxpayer (other than a disposition to which subsection 40(3.4) applies), the following rules apply:

    • (a) the capital loss therefrom otherwise determined shall be deemed to be nil; and

    • (b) in computing the adjusted cost base to the vendor of all shares of any particular class of the capital stock of the acquired affiliate owned by the vendor immediately after the disposition, there shall be added an amount determined by the formula

      (A - B) × C/D

      where

      A
      is the cost amount to the vendor immediately before the disposition of the shares disposed of,
      B
      is the total of
      • (i) the proceeds of disposition of the shares disposed of, and

      • (ii) the total of all amounts deducted under paragraph 93(2)(d) in computing losses of the vendor from the dispositions of the shares disposed of,

      C
      is the fair market value, immediately after the disposition, of all shares of that particular class owned by it at that time, and
      D
      is the fair market value, immediately after the disposition, of all shares of the capital stock of the acquired affiliate owned by it at that time.
  • Marginal note:Late filed elections

    (5) Where the election referred to in subsection 93(1) was not made on or before the day on or before which the election was required by that subsection to be made, the election shall be deemed to have been made on that day if, on or before the day that is 3 years after that day,

    • (a) the election is made in prescribed manner; and

    • (b) an estimate of the penalty in respect of that election is paid by the corporation when that election is made.

  • Marginal note:Special cases

    (5.1) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable

    • (a) to permit an election under subsection 93(1) to be made after the day that is 3 years after the day on or before which the election was required by that subsection to be made, or

    • (b) to permit an election made under subsection 93(1) to be amended,

    the election or amended election shall be deemed to have been made on the day on or before which the election was so required to be made if

    • (c) the election or amended election is made in prescribed form, and

    • (d) an estimate of the penalty in respect of the election or amended election is paid by the corporation when the election or amended election is made,

    and where this subsection applies to the amendment of an election, that election shall be deemed not to have been effective.

  • Marginal note:Penalty for late filed election

    (6) For the purposes of this section, the penalty in respect of an election or amended election referred to in paragraph 93(5)(a) or 93(5.1)(c) is an amount equal to the lesser of

    • (a) 1/4 of 1% of the amount designated in the election or amended election for each month or part of a month during the period commencing with the day on or before which the election is required by subsection 93(1) to be made and ending on the day the election is made, and

    • (b) an amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 93(6)(a).

  • Marginal note:Unpaid balance of penalty

    (7) The Minister shall, with all due dispatch, examine each election and amended election referred to in paragraph 93(5)(a) or 93(5.1)(c), assess the penalty payable and send a notice of assessment to the corporation, and the corporation shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 93;
  • 1994, c. 7, Sch. II, s. 69;
  • 1998, c. 19, s. 120;
  • 2001, c. 17, s. 70.
Date modified: