Income Tax Act — I-3.3 40
(1)(c) applies. Deemed capital gain under section 180.01 (3.21) If, in respect of a taxation year, a taxpayer has made an election under subsection 180.01(1), the amount deemed to be a capital gain under paragraph 180.01(2)(b) is deemed to be a gain from the disposition of property for the taxation year. When subsection (3.4) applies (3.3) Subsection 40(3.4) applies when (a) a corporation, trust or partnership (in this subsection and subsection (3.4) referred to as the “transferor”) disposes of a particular capital property — other than depreciable property of a prescribed class and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition superficial loss in section 54; (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 and subsection 40(3.4) referred to as the “substituted property”) that is, or is identical to, the particular property; and (c) at the end of the period, the transferor or a person affiliated with the transferor owns the substituted property. Loss on certain properties (3.4) If this subsection applies because of subsection 40(3.3) to a disposition of a particular property, (a) the transferor’s loss, if any, from the disposition is deemed to be nil, and (b) the amount of the transferor’s loss, if any, from the disposition (determined without reference to paragraph 40(2)(g) and this subsection) is deemed to be a loss of the transferor from a disposition of the particular property at the time that is immediately before the first time, after the disposition, (i) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns (A) the substituted property, or (B) a property that is identical to the substituted property and that was acquired after the day that is 31 days before the period begins, (ii) at which the 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, (iii) that is immediately before the transferor is subject to a loss restriction event, (iv) at which the transferor or a person affiliated with the transferor is deemed by section 50 to have disposed of the property, where the substituted property is a debt or a share of the capital stock of a corporation, or (v) if the transferor is a corporation, (A) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is (I) a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or (II) a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and (B) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins, and for the purpose of paragraph 40(3.4)(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 was a member of the partners