Marginal note:Eligible capital property — inclusion in income from business
14 (1) Where, at the end of a taxation year, the total of all amounts each of which is an amount determined, in respect of a business of a taxpayer, for E in the definition cumulative eligible capital in subsection (5) (in this section referred to as an “eligible capital amount”) or for F in that definition exceeds the total of all amounts determined for A to D in that definition in respect of the business (which excess is in this subsection referred to as “the excess”), there shall be included in computing the taxpayer’s income from the business for the year the total of
(a) the amount, if any, that is the lesser of
(i) the excess, and
(ii) the amount determined for F in the definition cumulative eligible capital in subsection (5) at the end of the year in respect of the business, and
(b) the amount, if any, determined by the formula
2/3 × (A - B - C - D)
where
- A
- is the excess,
- B
- is the amount determined for F in the definition cumulative eligible capital in subsection (5) at the end of the year in respect of the business,
- C
- is 1/2 of the amount determined for Q in the definition cumulative eligible capital in subsection (5) at the end of the year in respect of the business, and
- D
- is the amount claimed by the taxpayer, not exceeding the taxpayer’s exempt gains balance for the year in respect of the business.
Marginal note:Election re capital gain
(1.01) Where, at any time in a taxation year, a taxpayer disposes of an eligible capital property (other than goodwill) in respect of a business, the cost of the property to the taxpayer can be determined, the proceeds of the disposition (in this subsection referred to as the “actual proceeds”) exceed that cost, the taxpayer’s exempt gains balance in respect of the business for the year is nil and the taxpayer so elects under this subsection in the taxpayer’s return of income for the year,
(a) for the purposes of subsection (5), the proceeds of disposition of the property are deemed to be equal to that cost;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had at that time an adjusted cost base to the taxpayer equal to that cost, for proceeds of disposition equal to the actual proceeds; and
(c) where the eligible capital property is at that time a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to have been at that time a qualified farm property of the taxpayer.
Marginal note:Deemed taxable capital gain
(1.1) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer’s income for a particular taxation year from a business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified farm property to the extent of the lesser of
(a) the amount included under paragraph (1)(b) in computing the taxpayer’s income for the particular year from the business, and
(b) the amount determined by the formula
A - B
where
- A
- is the amount by which the total of
(i) 3/4 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in a preceding taxation year that began after 1987 and ended before February 28, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer,
(ii) 2/3 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, and
(iii) 1/2 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after October 17, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer
exceeds the total of
(iv) 3/4 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in a preceding taxation year that began after 1987 and ended before February 28, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A),
(v) 2/3 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and
(vi) 1/2 of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after October 17, 2000, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and
- B
- is the total of all amounts each of which is
(i) that portion of an amount deemed by subparagraph 14(1)(a)(v) (as it applied in respect of the business to fiscal periods that began after 1987 and ended before February 23, 1994) to be a taxable capital gain of the taxpayer that can reasonably be attributed to a disposition of a qualified farm property of the taxpayer, or
(ii) an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of qualified farm property of the taxpayer.
Marginal note:Amount deemed payable
(2) Where any amount is, by any provision of this Act, deemed to be a taxpayer’s proceeds of disposition of any property disposed of by the taxpayer at any time, for the purposes of this section, that amount shall be deemed to have become payable to the taxpayer at that time.
Marginal note:Acquisition of eligible capital property
(3) Notwithstanding any other provision of this Act, where at any particular time a person or partnership (in this subsection referred to as the “taxpayer”) has, directly or indirectly, in any manner whatever, acquired an eligible capital property in respect of a business from a person or partnership with which the taxpayer did not deal at arm’s length (in this subsection referred to as the “transferor”) and the property was an eligible capital property of the transferor (other than property acquired by the taxpayer as a consequence of the death of the transferor), the eligible capital expenditure of the taxpayer in respect of the business is, in respect of that acquisition, deemed to be equal to 4/3 of the amount, if any, by which
(a) the amount determined for E in the definition cumulative eligible capital in subsection (5) in respect of the disposition of the property by the transferor
exceeds the total of
(b) the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that ended before February 28, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time,
(b.1) 9/8 of the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that ended after February 27, 2000 and before October 18, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time, and
(b.2) 3/2 of the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 for taxation years that end after October 17, 2000 by any person with whom the taxpayer was not dealing at arm’s length in respect of the disposition of the property by the transferor, or any other disposition of the property before the particular time,
except that, where the taxpayer disposes of the property after the particular time, the amount of the eligible capital expenditure deemed by this subsection to be made by the taxpayer in respect of the property shall be determined at any time after the disposition as if the total of the amounts determined under paragraphs (b), (b.1) and (b.2) in respect of the disposition were the lesser of
(c) the amount otherwise so determined, and
(d) the amount, if any, by which
(i) the amount determined under paragraph 14(3)(a) in respect of the disposition of the property by the transferor
exceeds
(ii) the amount determined for E in the definition cumulative eligible capital in subsection 14(5) in respect of the disposition of the property by the taxpayer.
Marginal note:References to “taxation year” or “year”
(4) Where a taxpayer is an individual and the taxpayer’s income for a taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, for greater certainty a reference in this section to a “taxation year” or “year” shall be read as a reference to a “fiscal period” or “period”.
Marginal note:Definitions
(5) In this section,
adjustment time
moment du rajustement
adjustment time of a taxpayer in respect of a business is
(a) in the case of a corporation formed as a result of an amalgamation occurring after June 30, 1988, the time immediately before the amalgamation,
(b) in the case of any other corporation, the time immediately after the commencement of its first taxation year commencing after June 30, 1988, and
(c) for any other taxpayer, the time immediately after the commencement of the taxpayer’s first fiscal period commencing after 1987 in respect of the business; (moment du rajustement)
cumulative eligible capital
montant cumulatif des immobilisations admissibles
cumulative eligible capital of a taxpayer at any time in respect of a business of the taxpayer means the amount determined by the formula
(A + B + C + D + D.1) - (E + F)
where
- A
- is 3/4 of the total of all eligible capital expenditures in respect of the business made or incurred by the taxpayer before that time and after the taxpayer’s adjustment time,
- B
- is the total of
(a) 3/2 of all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended before that time and after October 17, 2000,
(b) 9/8 of all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended
(i) before that time, and
(ii) after February 27, 2000 and before October 18, 2000,
(c) all amounts included under paragraph (1)(b) in computing the taxpayer’s income from the business for taxation years that ended
(i) before the earlier of that time and February 28, 2000, and
(ii) after the taxpayer’s adjustment time,
(d) all amounts each of which is the amount that would have been included under subparagraph (1)(a)(v) (as that subparagraph applied for taxation years that ended before February 28, 2000) in computing the taxpayer’s income from the business, if the amount determined for D in that subparagraph for the year were nil, for taxation years that ended
(i) before the earlier of that time and February 28, 2000, and
(ii) after February 22, 1994, and
(e) all taxable capital gains included, because of the application of subparagraph (1)(a)(v) (as that subparagraph applied for taxation years that ended before February 28, 2000) to the taxpayer in respect of the business, in computing the taxpayer’s income for taxation years that began before February 23, 1994,
- C
- is 3/2 of the amount, if any, of the taxpayer’s cumulative eligible capital in respect of the business at the taxpayer’s adjustment time,
- D
- is the amount, if any, by which
(a) the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time
exceeds
(b) the total of all amounts included under subsection 14(1) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time,
- D.1
- is where the amount determined by B exceeds zero, 1/2 of the amount determined for Q in respect of the business
- E
- is the total of all amounts each of which is 3/4 of the amount, if any, by which
(a) an amount which, as a result of a disposition occurring after the taxpayer’s adjustment time and before that time, the taxpayer has or may become entitled to receive, in respect of the business carried on or formerly carried on by the taxpayer where the consideration given by the taxpayer therefor was such that, if any payment had been made by the taxpayer after 1971 for that consideration, the payment would have been an eligible capital expenditure of the taxpayer in respect of the business
exceeds
(b) all outlays and expenses to the extent that they were not otherwise deductible in computing the taxpayer’s income and were made or incurred by the taxpayer for the purpose of giving that consideration, and
- F
- is the amount determined by the formula
(P + P.1 + Q) - R
where
- P
- is the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before that time and after the taxpayer’s adjustment time,
- P.1
- is the total of all amounts each of which is an amount by which the cumulative eligible capital of the taxpayer in respect of the business is required to be reduced at or before that time because of subsection 80(7);
- Q
- is the amount, if any, by which
(a) the total of all amounts deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for taxation years ending before the taxpayer’s adjustment time
exceeds
(b) the total of all amounts included under subsection 14(1) in computing the taxpayer’s income for taxation years ending before the taxpayer’s adjustment time, and
- R
- is the total of all amounts included, in computing the taxpayer’s income from the business for taxation years that ended before that time and after the taxpayer’s adjustment time, under subparagraph (1)(a)(iv) in respect of taxation years that ended before February 28, 2000 and under paragraph (1)(a) in respect of taxation years that end after February 27, 2000;
eligible capital expenditure
dépense en capital admissible
eligible capital expenditure of a taxpayer in respect of a business means the portion of any outlay or expense made or incurred by the taxpayer, as a result of a transaction occurring after 1971, on account of capital for the purpose of gaining or producing income from the business, other than any such outlay or expense
(a) in respect of which any amount is or would be, but for any provision of this Act limiting the quantum of any deduction, deductible (otherwise than under paragraph 20(1)(b)) in computing the taxpayer’s income from the business, or in respect of which any amount is, by virtue of any provision of this Act other than paragraph 18(1)(b), not deductible in computing that income,
(b) made or incurred for the purpose of gaining or producing income that is exempt income, or
(c) that is the cost of, or any part of the cost of,
(i) tangible property of the taxpayer,
(ii) intangible property that is depreciable property of the taxpayer,
(iii) property in respect of which any deduction (otherwise than under paragraph 20(1)(b)) is permitted in computing the taxpayer’s income from the business or would be so permitted if the taxpayer’s income from the business were sufficient for the purpose, or
(iv) an interest in, or right to acquire, any property described in any of subparagraphs (i) to (iii)
but for greater certainty and without restricting the generality of the foregoing, does not include any portion of
(d) any amount paid or payable to any creditor of the taxpayer as, on account or in lieu of payment of any debt or as or on account of the redemption, cancellation or purchase of any bond or debenture,
(e) where the taxpayer is a corporation, any amount paid or payable to a person as a shareholder of the corporation, or
(f) any amount that is the cost of, or any part of the cost of,
(i) an interest in a trust,
(ii) an interest in a partnership,
(iii) a share, bond, debenture, mortgage, hypothecary claim, note, bill or other similar property, or
(iv) an interest in, or right to acquire, any property described in any of subparagraphs (f)(i) to (iii). (dépense en capital admissible)
exempt gains balance
solde des gains exonérés
exempt gains balance of an individual in respect of a business of the individual for a taxation year means the amount determined by the formula
A - B
where
- A
- is the lesser of
(a) the amount by which
(i) the amount that would have been the individual’s taxable capital gain determined under paragraph 110.6(19)(b) in respect of the business if
(A) the amount designated in an election under subsection 110.6(19) in respect of the business were equal to the fair market value at the end of February 22, 1994 of all the eligible capital property owned by the elector at that time in respect of the business, and
(B) this Act were read without reference to subsection 110.6(20)
exceeds
(ii) the amount determined by the formula
0.75(C - 1.1D)
where
- C
- is the amount designated in the election that was made under subsection 110.6(19) in respect of the business, and
- D
- is the fair market value at the end of February 22, 1994 of the property referred to in clause 14(5)(a)(i)(A), and
(b) the individual’s taxable capital gain determined under paragraph 110.6(19)(b) in respect of the business, and
- B
- is the total of all amounts each of which is the amount determined for D in subparagraph (1)(a)(v) in respect of the business for a preceding taxation year that ended before February 28, 2000 or the amount determined for D in paragraph (1)(b) for a preceding taxation year that ended after February 27, 2000.
Marginal note:Exchange of property
(6) Where in a taxation year (in this subsection referred to as the “initial year”) a taxpayer disposes of an eligible capital property (in this section referred to as the taxpayer’s “former property”) and the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquires an eligible capital property that is a replacement property for the taxpayer’s former property, such amount, not exceeding the amount that would otherwise be included in the amount determined for E in the definition cumulative eligible capital in subsection 14(5) (if the description of E in that definition were read without reference to “3/4 of”) in respect of a business, as has been used by the taxpayer before the end of the first taxation year after the initial year to acquire the replacement property
(a) shall, subject to paragraph 14(6)(b), not be included in the amount determined for E in that definition for the purpose of determining the cumulative eligible capital of the taxpayer in respect of the business; and
(b) shall, to the extent of 3/4 thereof, be included in the amount determined for E in that definition for the purpose of determining the cumulative eligible capital of the taxpayer in respect of the business at a time that is the later of
(i) the time the replacement property was acquired by the taxpayer, and
(ii) the time the former property was disposed of by the taxpayer.
Marginal note:Replacement property
(7) For the purposes of subsection 14(6), a particular eligible capital property of a taxpayer is a replacement property for a former property of the taxpayer if
(a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
(a.1) it was acquired by the taxpayer for a use that is the same as or similar to the use to which the taxpayer put the former property;
(b) it was acquired for the purpose of gaining or producing income from the same or a similar business as that in which the former property was used; and
(c) where the former property was used by the taxpayer in a business carried on in Canada, the particular property was acquired for use by the taxpayer in a business carried on by the taxpayer in Canada.
Marginal note:Deemed residence in Canada
(8) Where an individual was resident in Canada at any time in a particular taxation year and throughout
(a) the preceding taxation year, or
(b) the following taxation year,
for the purpose of paragraph 14(1)(a), the individual shall be deemed to have been resident in Canada throughout the particular year.
Marginal note:Effect of election under subsection 110.6(19)
(9) Where an individual elects under subsection 110.6(19) in respect of a business, the individual shall be deemed to have received proceeds of a disposition on February 23, 1994 of eligible capital property in respect of the business equal to the amount determined by the formula
(A - B)4/3
where
- A
- is the amount determined in respect of the business under subparagraph (a)(ii) of the description of A in the definition exempt gains balance in subsection 14(5), and
- B
- is the amount determined in respect of the business under subparagraph (a)(i) of the description of A in the definition exempt gains balance in subsection 14(5).
Marginal note:Deemed eligible capital expenditure
(10) For the purposes of this Act, where a taxpayer received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, property the cost of which is an eligible capital expenditure of the taxpayer in respect of a business, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, that eligible capital expenditure shall at any time be deemed to be the amount, if any, by which the total of
(a) that eligible capital expenditure, determined without reference to this subsection, and
(b) such part, if any, of the assistance as the taxpayer repaid before
(i) the taxpayer ceased to carry on the business, and
(ii) that time
under a legal obligation to pay all or any part of the assistance
exceeds
(c) the amount of the assistance the taxpayer received or is entitled to receive before the earlier of that time and the time the taxpayer ceases to carry on the business.
Marginal note:Receipt of public assistance
(11) For the purpose of subsection 14(10), where at any time a taxpayer who is a beneficiary under a trust or a member of a partnership received or is entitled to receive assistance from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, the amount of the assistance that can reasonably be considered to be in respect of, or for the acquisition of, property the cost of which was an eligible capital expenditure of the trust or partnership shall be deemed to have been received at that time by the trust or partnership, as the case may be, as assistance from the government, municipality or other public authority for the acquisition of such property.
Marginal note:Loss on certain transfers
(12) Where
(a) a corporation, trust or partnership (in this subsection referred to as the “transferor”) disposes at any time in a taxation year of a particular eligible capital property in respect of a business of the transferor in respect of which it would, but for this subsection, be permitted a deduction under paragraph 24(1)(a) as a consequence of the disposition, and
(b) during the period that begins 30 days before and ends 30 days after the disposition, the transferor or a person affiliated with the transferor acquires a property (in this subsection referred to as the “substituted property”) that is, or is identical to, the particular property and, at the end of that period, a person or partnership that is either the transferor or a person or partnership affiliated with the transferor owns the substituted property,
the transferor is deemed, for the purposes of this section and sections 20 and 24, to continue to own eligible capital property in respect of the business, and not to have ceased to carry on the business, until the time that is immediately before the first time, after the disposition,
(c) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns
(i) the substituted property, or
(ii) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins,
(d) at which the substituted property is not eligible capital property in respect of a business carried on by the transferor or a person affiliated with the transferor,
(e) at which the substituted property would, if it were owned by the transferor, be deemed by section 128.1 or subsection 149(10) to have been disposed of by the transferor,
(f) that is immediately before control of the transferor is acquired by a person or group of persons, where the transferor is a corporation, or
(g) at which the winding-up of the transferor begins (other than a winding-up to which subsection 88(1) applies), where the transferor is a corporation.
Marginal note:Deemed identical property
(13) For the purpose of subsection 14(12),
(a) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property; and
(b) where a partnership otherwise ceases to exist at any time after the disposition, the partnership is deemed not to have ceased to exist and each person who, immediately before the partnership would, but for this paragraph, have ceased to exist, was a member of the partnership is deemed to remain a member of the partnership, until the time that is immediately after the first time described in paragraphs 14(12)(c) to 14(12)(g).
Marginal note:Ceasing to use property in Canadian business
(14) If at a particular time a non-resident taxpayer ceases to use, in connection with a business or part of a business carried on by the taxpayer in Canada immediately before the particular time, a property that was immediately before the particular time eligible capital property of the taxpayer (other than a property that was disposed of by the taxpayer at the particular time), the taxpayer is deemed to have disposed of the property immediately before the particular time for proceeds of disposition equal to the amount determined by the formula
A - B
where
- A
- is the fair market value of the property immediately before the particular time, and
- B
- is
(a) where at a previous time before the particular time the taxpayer ceased to use the property in connection with a business or part of a business carried on by the taxpayer outside Canada and began to use it in connection with a business or part of a business carried on by the taxpayer in Canada, the amount, if any, by which the fair market value of the property at the previous time exceeded its cost to the taxpayer at the previous time, and
(b) in any other case, nil.
Marginal note:Beginning to use property in Canadian business
(15) If at a particular time a non-resident taxpayer ceases to use, in connection with a business or part of a business carried on by the taxpayer outside Canada immediately before the particular time, and begins to use, in connection with a business or part of a business carried on by the taxpayer in Canada, a property that is an eligible capital property of the taxpayer, the taxpayer is deemed to have disposed of the property immediately before the particular time and to have reacquired the property at the particular time for consideration equal to the lesser of the cost to the taxpayer of the property immediately before the particular time and its fair market value immediately before the particular time.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 14
- 1994, c. 7, Sch. II, s. 10, c. 21, s. 8
- 1995, c. 3, s. 5, c. 21, s. 3
- 1998, c. 19, s. 74
- 2001, c. 17, ss. 7, 197
- Date modified: