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Income Tax Regulations

Version of section 5204 from 2013-12-12 to 2021-03-23:


 Where a corporation is a member of a partnership at any time in a taxation year of the corporation, the following rules apply:

cost of capital

cost of capital of the corporation for the year means an amount equal to the aggregate of

  • (a) 10 per cent of the aggregate of all amounts each of which is the gross cost to the corporation of a property referred to in paragraph 1100(1)(e), (f), (g) or (h), paragraph 1102(1)(d) or (g) or Schedule II that

    • (i) was owned by the corporation at the end of the year, and

    • (ii) was used by the corporation at any time during the year,

  • (b) the aggregate of all amounts each of which is the rental cost incurred by the corporation during the year for the use of any property a portion of the gross cost of which would be included by virtue of paragraph (a) if the property were owned by the corporation at the end of the year, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to “the fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the gross cost of a property or rental cost for the use of any property does not include that portion of those costs that reflects the extent to which the property was used by the corporation during the year or by the partnership during its fiscal period coinciding with or ending in the year

  • (d) in an active business carried on outside Canada,

  • (e) to earn Canadian investment income or foreign investment income as defined in subsection 129(4) of the Act on the assumption that subsection 129(4) of the Act applied to a partnership as well as to a corporation,

  • (f) in activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) in activities referred to in subparagraph 66(15)(b)(i), (ii) or (v), subparagraph 66(15)(e)(i) or (ii), subparagraph 66.1(6)(a)(i), (ii), (iii) or (v) or subparagraph 66.2(5)(a)(i), (ii) or (v) of the Act; (coût en capital)

cost of labour

cost of labour of the corporation for the year means an amount equal to the aggregate of

  • (a) the salaries and wages paid or payable during the year to all employees of the corporation for services performed during the year,

  • (b) all other amounts each of which is an amount paid or payable during the year for the performance during the year, by any person other than an employee of the corporation, of functions relating to

    • (i) the management or administration of the corporation,

    • (ii) scientific research as defined in section 2900, or

    • (iii) a service or function that would normally be performed by an employee of the corporation, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to the “fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the salaries and wages referred to in paragraph (a) or other amounts referred to in paragraph (b), of the corporation or the partnership, as the case may be, do not include that portion of those amounts that

  • (d) was included in the gross cost to the corporation or partnership of a property (other than a property that was manufactured by the corporation or partnership and leased during the year by the corporation or the partnership to another person) that was included in computing the cost of capital of the corporation for the year,

  • (e) was related to an active business carried on outside Canada by the corporation or the partnership,

  • (f) was related to the activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) was included in the Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expense or Canadian development expense, within the meanings assigned by paragraphs 66(15)(b) and (e), 66.1(6)(a) and 66.2(5)(a) of the Act respectively, of the corporation; (coût en main-d’oeuvre)

cost of manufacturing and processing capital

cost of manufacturing and processing capital of the corporation for the year means 100/85 of that portion of the cost of capital of the corporation for that year that reflects the extent to which each property included in the calculation thereof was used directly in qualified activities

  • (a) of the corporation during the year, or

  • (b) of the partnership during its fiscal period coinciding with or ending in the year, as the case may be,

but the amount so calculated shall not exceed the cost of capital of the corporation for the year; (coût en capital de fabrication et de transformation)

cost of manufacturing and processing labour

cost of manufacturing and processing labour of the corporation for the year means 100/75 of that portion of the cost of labour of the corporation for that year that reflects the extent to which

  • (a) the salaries and wages included in the calculation thereof were paid or payable to persons for the portion of their time that they were directly engaged in qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year, and

  • (b) the other amounts included in the calculation thereof were paid or payable to persons for the performance of functions that would be directly related to qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year,

    if those persons were employees of the corporation or the partnership, as the case may be,

but the amount so calculated shall not exceed the cost of labour of the corporation for the year; (coût en main-d’oeuvre de fabrication et de transformation)

gross cost

gross cost of a property at any time means

  • (a) in respect of a property that has become available for use by the partnership for the purposes of subsection 13(26) of the Act, the capital cost to the partnership of the property computed without reference to subsections 13(7.1), (7.4) and (10) and sections 21 and 80 of the Act, and

  • (b) in respect of any other property of the partnership, nil,

and, for the purposes of paragraph (a), if the partnership acquired the property from a person who was a majority-interest partner of the partnership immediately after the property was acquired, the capital cost to the partnership of the property is to be computed as if the property had been acquired at a capital cost equal to the gross cost to the person of the property, except that if the property was partnership property on December 31, 1971, its gross cost is its capital cost to the partnership as determined under subsection 20(3) or (5) of the Income Tax Application Rules. (coût brut)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 14
  • SOR/94-140, s. 13
  • SOR/94-169, s. 8
  • SOR/94-686, ss. 48, 78(F) to 81(F)
  • 2013, c. 40, s. 110
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