Budget Implementation Act, 2006, No. 2 (S.C. 2007, c. 2)
Full Document:
Assented to 2007-02-21
44. (1) Subsection 82(1) of the Act is replaced by the following:
Marginal note:Taxable dividends received
82. (1) In computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:
(a) the amount, if any, by which
(i) the total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts paid by the taxpayer in the taxation year that are deemed by subsection 260(5) to have been received by another person as taxable dividends (other than eligible dividends);
(a.1) the amount, if any, by which
(i) the total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts paid by the taxpayer in the taxation year that are deemed by subsection 260(5) to have been received by another person as eligible dividends;
(b) if the taxpayer is an individual, other than a trust that is a registered charity, the total of
(i) 25% of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year, and
(ii) 45% of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year;
(c) all taxable dividends received by the taxpayer in the taxation year, from corporations resident in Canada, under dividend rental arrangements of the taxpayer;
(d) all taxable dividends (other than taxable dividends described in paragraph (c)) received by the taxpayer in the taxation year from corporations resident in Canada that are not taxable Canadian corporations; and
(e) if the taxpayer is a trust, all amounts each of which is all or part of a taxable dividend (other than a taxable dividend described in paragraph (c) or (d)) that was received by the trust in the taxation year on a share of the capital stock of a taxable Canadian corporation and that can reasonably be considered to have been included in computing the income of a beneficiary under the trust who was non-resident at the end of the taxation year.
(2) Subsection 82(3) of the Act is replaced by the following:
Marginal note:Dividends received by spouse or common-law partner
(3) Where the amount that would, but for this subsection, be deductible under subsection 118(1) by reason of paragraph 118(1)(a) in computing a taxpayer’s tax payable under this Part for a taxation year that is less than the amount that would be so deductible if no amount were required by subsection (1) to be included in computing the income for the year of the taxpayer’s spouse or common-law partner and the taxpayer so elects in the taxpayer’s return of income for the year under this Part, all amounts described in paragraph (1)(a) or (a.1) received in the year from taxable Canadian corporations by the taxpayer’s spouse or common-law partner are deemed to have been so received by that taxpayer and not by the spouse or common-law partner.
(3) Subsections (1) and (2) apply to amounts received or paid after 2005.
45. (1) Paragraph 87(2)(z.2) of the Act is replaced by the following:
Marginal note:Application of Parts III and III.1
(z.2) for the purposes of Parts III and III.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(2) Subsection 87(2) of the Act is amended by striking out the word “and” at the end of paragraph (tt) and by adding the following after paragraph (uu):
Marginal note:General rate income pool
(vv) if the new corporation is a Canadian-controlled private corporation or a deposit insurance corporation in its first taxation year, in computing its general rate income pool at the end of that first taxation year there shall be added the total of all amounts determined under subsection 89(5) in respect of the corporation for that first taxation year; and
Marginal note:Low rate income pool
(ww) if the new corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation in its first taxation year, there shall be added in computing its low rate income pool at any time in that first taxation year the total of all amounts determined under subsection 89(9) in respect of the corporation for that first taxation year.
(3) Subsections (1) and (2) apply to amalgamations that occur, and to windings-up that begin, after 2005.
46. (1) The portion of paragraph 88(1)(e.2) of the Act before subparagraph (i) is replaced by the following:
(e.2) paragraphs 87(2)(c), (d.1), (e.1), (e.3), (g) to (l), (l.3) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (ww), subsection 87(6) and, subject to section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to
(2) Paragraph 88(1)(e.2) of the Act is amended by adding the following after subparagraph (viii):
(ix) “subsection 89(5)” and “subsection 89(9)” were read as “subsection 89(6)” and “subsection 89(10)”, respectively,
(3) Subsections (1) and (2) apply to windings-up that begin after 2005.
47. (1) Subsection 89(1) of the Act is amended by adding the following in alphabetical order:
“eligible dividend”
« dividende déterminé »
“eligible dividend” means a taxable dividend that is received by a person resident in Canada, paid after 2005 by a corporation resident in Canada and designated, as provided under subsection (14), to be an eligible dividend;
“excessive eligible dividend designation”
« désignation excessive de dividende déterminé »
“excessive eligible dividend designation”, made by a corporation in respect of an eligible dividend paid by the corporation at any time in a taxation year, means
(a) unless paragraph (c) applies to the dividend, if the corporation is in the taxation year a Canadian-controlled private corporation or a deposit insurance corporation, the amount, if any, determined by the formula
(A - B) × C/A
where
- A
- is the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in the taxation year,
- B
- is the greater of nil and the corporation’s general rate income pool at the end of the taxation year, and
- C
- is the amount of the eligible dividend,
(b) unless paragraph (c) applies to the dividend, if the corporation is not a corporation described in paragraph (a), the amount, if any, determined by the formula
A × B/C
where
- A
- is the lesser of
(i) the total of all amounts each of which is an eligible dividend paid by the corporation at that time, and
(ii) the corporation’s low rate income pool at that time,
- B
- is the amount of the eligible dividend, and
- C
- is the amount determined under subparagraph (i) of the description of A, and
(c) an amount equal to the amount of the eligible dividend, if it is reasonable to consider that the eligible dividend was paid in a transaction, or as part of a series of transactions, one of the main purposes of which was to artificially maintain or increase the corporation’s general rate income pool, or to artificially maintain or decrease the corporation’s low rate income pool;
“general rate income pool”
« compte de revenu à taux général »
“general rate income pool” at the end of a particular taxation year, of a taxable Canadian corporation that is a Canadian-controlled private corporation or a deposit insurance corporation in the particular taxation year, is the positive or negative amount determined by the formula
A - B
where
- A
- is the positive or negative amount that would, before taking into consideration the specified future tax consequences for the particular taxation year, be determined by the formula
C + 0.68(D - E - F) + G + H - I
where
- C
- is the corporation’s general rate income pool at the end of its preceding taxation year,
- D
- is
(a) unless paragraph (b) applies, the corporation’s taxable income for the particular taxation year, and
(b) if the corporation is a deposit insurance corporation in the particular taxation year, nil,
- E
- is the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for the particular taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for the particular taxation year,
- F
- is
(a) if the corporation is a Canadian-controlled private corporation in the particular taxation year, the lesser of the corporation’s aggregate investment income for the particular taxation year and the corporation’s taxable income for the particular taxation year, and
(b) in any other case, nil,
- G
- is the total of all amounts each of which is
(a) an eligible dividend received by the corporation in the particular taxation year, or
(b) an amount deductible under section 113 in computing the taxable income of the corporation for the particular taxation year,
- H
- is the total of all amounts determined under subsections (4) to (6) in respect of the corporation for the particular taxation year, and
- I
- is
(a) unless paragraph (b) applies, the amount, if any, by which
(i) the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, or
(b) if subsection (4) applies to the corporation in the particular taxation year, nil, and
- B
- is 68% of the amount, if any, by which
(a) the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for the corporation’s preceding three taxation years, determined without taking into consideration the specified future tax consequences, for those preceding taxation years, that arise in respect of the particular taxation year,
exceeds
(b) the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for those preceding taxation years;
“low rate income pool”
« compte de revenu à taux réduit »
“low rate income pool”, at any particular time in a particular taxation year, of a corporation (in this definition referred to as the “non-CCPC”) that is resident in Canada and is in the particular taxation year neither a Canadian-controlled private corporation nor a deposit insurance corporation, is the amount determined by the formula
(A + B + C + D + E + F) - (G + H)
where
- A
- is the non-CCPC’s low rate income pool at the end of its preceding taxation year,
- B
- is the total of all amounts each of which is an amount deductible under section 112 in computing the non-CCPC’s taxable income for the year in respect of a taxable dividend (other than an eligible dividend) that became payable, in the particular taxation year but before the particular time, to the non-CCPC by a corporation resident in Canada,
- C
- is the total of all amounts determined under subsections (8) to (10) in respect of the non-CCPC for the particular taxation year,
- D
- is
(a) if the non-CCPC would, but for paragraph (d) of the definition “Canadian-controlled private corporation” in subsection 125(7), be a Canadian-controlled private corporation in its preceding taxation year, 80% of its aggregate investment income for its preceding taxation year, and
(b) in any other case, nil,
- E
- is
(a) if the non-CCPC was not a Canadian-controlled private corporation in its preceding taxation year, 80% of the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for that preceding taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for that preceding taxation year, and
(b) in any other case, nil,
- F
- is
(a) if the non-CCPC was an investment corporation in its preceding taxation year, four times the amount, if any, deducted by it under subsection 130(1) for its preceding taxation year, and
(b) in any other case, nil,
- G
- is the total of all amounts each of which is a taxable dividend (other than an eligible dividend, a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1) or a taxable dividend deductible by the non-CCPC under subsection 130.1(1) in computing its income for the particular taxation year or for its preceding taxation year) that became payable, in the particular taxation year but before the particular time, by the non-CCPC, and
- H
- is the total of all amounts each of which is an excessive eligible dividend designation made by the non-CCPC in the particular taxation year but before the particular time;
(2) Section 89 of the Act is amended by adding the following after subsection (3):
Marginal note:GRIP addition — becoming CCPC
(4) If, in a particular taxation year, a corporation is a Canadian-controlled private corporation or a deposit insurance corporation but was, in its preceding taxation year, a corporation resident in Canada other than a Canadian-controlled private corporation or a deposit insurance corporation, there may be included in computing the corporation’s general rate income pool at the end of the particular taxation year, the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;
- B
- is the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;
- C
- is the amount, if any, by which
(a) the total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation year
exceeds
(b) the total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for that preceding taxation year;
- D
- is the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;
- E
- is the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;
- F
- is the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;
- G
- is the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year; and
- H
- is the corporation’s low rate income pool immediately before the end of its preceding taxation year.
Marginal note:GRIP addition — post-amalgamation
(5) If a Canadian-controlled private corporation or a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of an amalgamation (within the meaning assigned by subsection 87(1)), there shall be included in computing the new corporation’s general rate income pool at the end of its first taxation year the total of all amounts each of which is
(a) in respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined in respect of the predecessor corporation by the formula
A - B
where
- A
- is the predecessor corporation’s general rate income pool at the end of its last taxation year, and
- B
- is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the predecessor corporation in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the predecessor corporation in its last taxation year; or
(b) in respect of a predecessor corporation (in this paragraph referred to as the “non-CCPC predecessor”) that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), not a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the non-CCPC predecessor of a property immediately before the end of its last taxation year,
- B
- is the amount of any money of the non-CCPC predecessor on hand immediately before the end of its last taxation year,
- C
- is the amount, if any, by which
(i) the total of all amounts that, if the non-CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the non-CCPC predecessor’s taxable income for its last taxation year,
- D
- is the total of all amounts each of which is the amount of any debt owing by the non-CCPC predecessor, or of any other obligation of the non-CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,
- E
- is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the non-CCPC predecessor,
- F
- is the total of all amounts each of which is a reserve deducted in computing the non-CCPC predecessor’s income for its last taxation year,
- G
- is the non-CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, and
- H
- is the non-CCPC predecessor’s low rate income pool immediately before the end of its last taxation year.
Marginal note:GRIP addition — post-winding-up
(6) If subsection 88(1) applies to the winding-up of a subsidiary into a parent (within the meanings assigned by that subsection) that is a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the parent’s general rate income pool at the end of its taxation year that immediately follows the taxation year during which it receives the assets of the subsidiary on the winding-up
(a) if the subsidiary was, in its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined by the formula
A - B
where
- A
- is the subsidiary’s general rate income pool at the end of its last taxation year, and
- B
- is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year; and
(b) in any other case, the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”),
- B
- is the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,
- C
- is the amount, if any, by which
(i) the total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,
- D
- is the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,
- E
- is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,
- F
- is the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,
- G
- is the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, and
- H
- is the subsidiary’s low rate income pool immediately before the end of its last taxation year.
Marginal note:GRIP addition for 2006
(7) If a corporation was (or, but for an election under subsection (11), would have been), throughout its first taxation year that includes any part of January 1, 2006, a Canadian-controlled private corporation, its general rate income pool at the end of its immediately preceding taxation year is deemed to be the greater of nil and the amount determined by the formula
A - B
where
- A
- is the total of
(a) 63% of the total of all amounts each of which is the corporation’s full rate taxable income (as defined in subsection 123.4(1)), for a taxation year of the corporation that ended after 2000 and before 2004, determined before taking into consideration the specified future tax consequences for that taxation year,
(b) 63% of the total of all amounts each of which is the corporation’s full rate taxable income (as would be defined in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) and (ii)), for a taxation year of the corporation that ended after 2003 and before 2006, determined before taking into consideration the specified future tax consequences for that taxation year, and
(c) all amounts each of which was deductible under subsection 112(1) in computing the corporation’s taxable income for a taxation year of the corporation (in this paragraph referred to as the “particular corporation”) that ended after 2000 and before 2006, and is in respect of a dividend received from a corporation (in this paragraph referred to as the “payer corporation”) that was, at the time it paid the dividend, connected (within the meaning assigned by subsection 186(4)) with the particular corporation, to the extent that it is reasonable to consider, having regard to all the circumstances (including but not limited to other shareholders having received dividends from the payer corporation), that the dividend was attributable to an amount that is, or if this subsection applied to the payer corporation would be, described in this paragraph or in paragraph (a) or (b) in respect of the payer corporation; and
- B
- is the total of all amounts each of which is a taxable dividend paid by the corporation in those taxation years.
Marginal note:LRIP addition — ceasing to be CCPC
(8) If, in a particular taxation year, a corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation but was, in its preceding taxation year, a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the corporation’s low rate income pool at any time in the particular taxation year the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;
- B
- is the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;
- C
- is the amount, if any, by which
(a) the total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation year
exceeds
(b) the total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for its preceding taxation year;
- D
- is the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;
- E
- is the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;
- F
- is the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;
- G
- is
(a) if the corporation is not a private corporation in the particular taxation year, the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year, and
(b) in any other case, nil; and
- H
- is the positive or negative amount determined by the formula
I - J
where
- I
- is the corporation’s general rate income pool at the end of its preceding taxation year, and
- J
- is the amount, if any, by which
(a) the total of all amounts each of which is an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(b) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year.
Marginal note:LRIP addition — amalgamation
(9) If a corporation that is resident in Canada and that is neither a Canadian-controlled private corporation nor a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of the amalgamation or merger of two or more corporations one or more of which is a taxable Canadian corporation, there shall be included in computing the new corporation’s low rate income pool at any time in its first taxation year the total of all amounts each of which is
(a) in respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the predecessor corporation’s low rate income pool at the end of that taxation year; and
(b) in respect of a predecessor corporation (in this paragraph referred to as the “CCPC predecessor”) that was, throughout its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the CCPC predecessor of a property immediately before the end of its last taxation year,
- B
- is the amount of any money of the CCPC predecessor on hand immediately before the end of its last taxation year,
- C
- is the amount, if any, by which
(i) the total of all amounts that, if the CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the CCPC predecessor’s taxable income for its last taxation year,
- D
- is the total of all amounts each of which is the amount of any debt owing by the CCPC predecessor, or of any other obligation of the CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,
- E
- is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the CCPC predecessor,
- F
- is the total of all amounts each of which is a reserve deducted in computing the CCPC predecessor’s income for its last taxation year,
- G
- is
(i) if the new corporation is not a private corporation in its first taxation year, the CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, and
(ii) in any other case, nil, and
- H
- is the positive or negative amount determined by the formula
I - J
where
- I
- is the CCPC predecessor’s general rate income pool at the end of its last taxation year, and
- J
- is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the CCPC predecessor in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the CCPC predecessor in its last taxation year.
Marginal note:LRIP addition — winding-up
(10) If, in a particular taxation year, a corporation (in this subsection referred to as the “parent”) is neither a Canadian-controlled private corporation nor a deposit insurance corporation and in the particular taxation year all or substantially all of the assets of another corporation (in this subsection referred to as the “subsidiary”) were distributed to the parent on a dissolution or winding-up of the subsidiary, there shall be included in computing the parent’s low rate income pool at any time in the particular taxation year that is at or after the end of the subsidiary’s taxation year (in this subsection referred to as the subsidiary’s “last taxation year”) during which its assets were distributed to the parent on the winding-up,
(a) if the subsidiary was, in its last taxation year, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the subsidiary’s low rate income pool immediately before the end of that taxation year; and
(b) in any other case, the amount determined by the formula
A + B + C - D - E - F - G - H
where
- A
- is the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its last taxation year,
- B
- is the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,
- C
- is the amount, if any, by which
(i) the total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,
- D
- is the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,
- E
- is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,
- F
- is the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,
- G
- is
(i) if the parent is not a private corporation in the particular taxation year, the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, and
(ii) in any other case, nil, and
- H
- is the positive or negative amount determined by the formula
I - J
where
- I
- is the subsidiary’s general rate income pool at the end of its last taxation year, and
- J
- is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year.
Marginal note:Election: non-CCPC
(11) Subject to subsection (12), a corporation that files with the Minister on or before its filing-due date for a particular taxation year an election in prescribed form to have this subsection apply is deemed for the purposes described in paragraph (d) of the definition “Canadian-controlled private corporation” in subsection 125(7) not to be a Canadian-controlled private corporation at any time in or after the particular taxation year.
Marginal note:Revoking election
(12) If a corporation files with the Minister on or before its filing-due date for a particular taxation year a notice in prescribed form revoking, as of the end of the particular taxation year, an election described in subsection (11), the election ceases to apply to the corporation at the end of the particular taxation year.
Marginal note:Repeated elections — consent required
(13) If a corporation has, under subsection (12), revoked an election, any subsequent election under subsection (11) or subsequent revocation under subsection (12) is invalid unless
(a) the Minister consents in writing to the subsequent election or the subsequent revocation, as the case may be; and
(b) the corporation complies with any conditions imposed by the Minister.
Marginal note:Dividend designation
(14) A corporation designates a dividend it pays at any time to be an eligible dividend by notifying in writing at that time each person or partnership to whom it pays all or any part of the dividend that the dividend is an eligible dividend.
Meaning of expression “deposit insurance corporation”
(15) For the purposes of paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions “excessive eligible dividend designation”, “general rate income pool”, and “low rate income pool” in subsection (1) and subsections (4) to (6) and (8) to (10), a corporation is a deposit insurance corporation if it would be a deposit insurance corporation as defined in the definition “deposit insurance corporation” in subsection 137.1(5) were that definition read without reference to its paragraph (b) and were this Act read without reference to subsection 137.1(5.1).
(3) Subsections (1) and (2) apply to taxation years that end after 2005 except that
(a) subsection 89(7) of the Act, as enacted by subsection (2), applies only to the first taxation year of a corporation that includes any part of January 1, 2006;
(b) in respect of a dividend paid before this Act is assented to, a designation under subsection 89(14) of the Act, as enacted by subsection (2), is deemed to have been made in a timely manner if it is made on or before the day that is 90 days after the day on which this Act is assented to; and
(c) in applying the definition “low rate income pool” in subsection 89(1) of the Act, as enacted by subsection (1), for taxation years that began before 2006, the description of B in that definition shall be read as follows:
- B
- is the total of all amounts each of which is an amount deductible under section 112 in computing the non-CCPC’s taxable income for the year in respect of a taxable dividend (other than an eligible dividend) that became payable, in the particular taxation year and after 2005, but before the particular time, to the non-CCPC by a corporation resident in Canada,
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