Income Tax Act

Definition of affiliated persons

• 251.1 (1) For the purposes of this Act, affiliated persons, or persons affiliated with each other, are

  • (a) an individual and a spouse or common-law partner of the individual;

  • (b) a corporation and

    • (i) a person by whom the corporation is controlled,

    • (ii) each member of an affiliated group of persons by which the corporation is controlled, and

    • (iii) a spouse or common-law partner of a person described in subparagraph (i) or (ii);

  • (c) two corporations, if

    • (i) each corporation is controlled by a person, and the person by whom one corporation is controlled is affiliated with the person by whom the other corporation is controlled,

    • (ii) one corporation is controlled by a person, the other corporation is controlled by a group of persons, and each member of that group is affiliated with that person, or

    • (iii) each corporation is controlled by a group of persons, and each member of each group is affiliated with at least one member of the other group;

  • (d) a corporation and a partnership, if the corporation is controlled by a particular group of persons each member of which is affiliated with at least one member of a majority-interest group of partners of the partnership, and each member of that majority-interest group is affiliated with at least one member of the particular group;

  • (e) a partnership and a majority-interest partner of the partnership;

  • (f) two partnerships, if

    • (i) the same person is a majority-interest partner of both partnerships,

    • (ii) a majority-interest partner of one partnership is affiliated with each member of a majority-interest group of partners of the other partnership, or

    • (iii) each member of a majority-interest group of partners of each partnership is affiliated with at least one member of a majority-interest group of partners of the other partnership;

  • (g) a person and a trust, if the person

    • (i) is a majority-interest beneficiary of the trust, or

    • (ii) would, if this subsection were read without reference to this paragraph, be affiliated with a majority-interest beneficiary of the trust; and

  • (h) two trusts, if a contributor to one of the trusts is affiliated with a contributor to the other trust and

    • (i) a majority-interest beneficiary of one of the trusts is affiliated with a majority-interest beneficiary of the other trust,

    • (ii) a majority-interest beneficiary of one of the trusts is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or

    • (iii) each member of a majority-interest group of beneficiaries of each of the trusts is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust.

• Marginal note:Affiliation where amalgamation or merger

  (2) Where at any time 2 or more corporations (in this subsection referred to as the “predecessors”) amalgamate or merge to form a new corporation, the new corporation and any predecessor are deemed to have been affiliated with each other where they would have been affiliated with each other immediately before that time if

  • (a) the new corporation had existed immediately before that time; and

  • (b) the persons who were the shareholders of the new corporation immediately after that time had been the shareholders of the new corporation immediately before that time.

• Marginal note:Definitions

  (3) The definitions in this subsection apply in this section.

  affiliated group of persons

  affiliated group of persons means a group of persons each member of which is affiliated with every other member. (groupe de personnes affiliées)

  beneficiary

  beneficiary, under a trust, includes a person beneficially interested in the trust. (bénéficiaire)

  contributor

  contributor, to a trust, means a person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, if the person deals at arm’s length with the trust at that time and is not immediately after that time a majority-interest beneficiary of the trust,

  • (a) a loan made at a reasonable rate of interest; or

  • (b) a transfer made for fair market value consideration. (cotisant)

  controlled

  controlled means controlled, directly or indirectly in any manner whatever. (contrôlé)

  majority-interest beneficiary

  majority-interest beneficiary, of a trust at any time, means a person whose interest as a beneficiary, if any, at that time

  • (a) in the income of the trust has, together with the interests as a beneficiary in the income of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the income of the trust; or

  • (b) in the capital of the trust has, together with the interests as a beneficiary in the capital of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the capital of the trust. (bénéficiaire détenant une participation majoritaire)

  majority-interest group of beneficiaries

  majority-interest group of beneficiaries, of a trust at any time, means a group of persons each of whom is a beneficiary under the trust at that time such that

  • (a) if one person held the interests as a beneficiary of all of the members of the group, that person would be a majority-interest beneficiary of the trust; and

  • (b) if any member of the group were not a member, the test described in paragraph (a) would not be met. (groupe de bénéficiaires détenant une participation majoritaire)

  majority-interest group of partners

  majority-interest group of partners of a partnership means a group of persons each of whom has an interest in the partnership such that

  • (a) if one person held the interests of all members of the group, that person would be a majority-interest partner of the partnership; and

  • (b) if any member of the group were not a member, the test described in paragraph (a) would not be met. (groupe d’associés détenant une participation majoritaire)

• Marginal note:Interpretation

  (4) For the purposes of this section,

  • (a) persons are affiliated with themselves;

  • (b) a person includes a partnership;

  • (c) notwithstanding subsection 104(1), a reference to a trust does not include a reference to the trustee or other persons who own or control the trust property; and

  • (d) in determining whether a person is affiliated with a trust,

    • (i) if the amount of income or capital of the trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be,

    • (ii) the interest of a person in a trust as a beneficiary is disregarded in determining whether the person deals at arm’s length with the trust if the person would, in the absence of the interest as a beneficiary, be considered to deal at arm’s length with the trust,

    • (iii) a trust is not a majority interest beneficiary of another trust unless the trust has an interest as a beneficiary in the income or capital, as the case may be, of the other trust, and

    • (iv) in determining whether a contributor to one trust is affiliated with a contributor to another trust, individuals connected by blood relationship, marriage, common-law partnership or adoption are deemed to be affiliated with one another.