Income Tax Act — I-3.3 85
ed by the taxpayer as consideration for the property are deemed to be, at any time that is within 60 months after the disposition, taxable Canadian property of the taxpayer. Definition of eligible property (1.1) For the purposes of subsection 85(1), eligible property means (a) a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person); (b) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident insurer if that property and the property received as consideration for that property are designated insurance property for the year; (c) a Canadian resource property; (d) a foreign resource property; (e) [Repealed, 2016, c. 12, s. 26] (f) an inventory (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable); (g) a property that is a security or debt obligation used by the taxpayer in the year in, or held by it in the year in the course of, carrying on the business of insurance or lending money, other than (i) a capital property, (ii) inventory, or (iii) where the taxpayer is a financial institution in the year, a mark-to-market property for the year; (g.1) where the taxpayer is a financial institution in the year, a specified debt obligation (other than a mark-to-market property of the taxpayer for the year); (h) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person (other than a non-resident insurer) and used in the year in a business carried on in Canada by that person; or (i) a NISA Fund No. 2, if that property is owned by an individual. Exception (1.11) Notwithstanding subsection (1.1), a foreign resource property, or an interest in a partnership that derives all or part of its value from one or more foreign resource properties, is not an eligible property of a taxpayer in respect of a disposition by the taxpayer to a corporation where (a) the taxpayer and the corporation do not deal with each other at arm’s length; and (b) it is reasonable to conclude that one of the purposes of the disposition, or a series of transactions or events of which the disposition is a part, is to increase the extent to which any person may claim a deduction under section 126. Eligible derivatives (1.12) Notwithstanding subsection (1.1), an eligible derivative (as defined in subsection 10.1(5)) of a taxpayer to which subsection 10.1(6) applies is not an eligible property of the taxpayer in respect of a disposition by the taxpayer to a corporation. Application of subsection (1) (1.2) Subsection 85(1) does not apply to a disposition by a taxpayer to a corporation of a property referred to in paragraph 85(1.1)(h) unless (a) immediately after the disposition, the corporation is controlled by the taxpayer, a person or persons related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the taxpayer or the taxpayer and a person or persons so related to the taxpayer; (b) the disposition is part of a transaction or series of transactions in which all or substantially all of the property used in the business referred to in paragraph 85(1.1)(h) is disposed of by the taxpayer to the corporation; and (c) the disposition is not part of a series of transactions that result in control of the corporation being acquired by a person or group of persons after the time that is immediately after the disposition. Meaning of wholly owned corporation (1.3) For the purposes of this subsection and paragraph 85(1)(e.2), wholly owned corporation of a taxpayer means a corporation all the issued and outstanding shares of the capital stock of which (except directors’ qualifying shares) b