Income Tax Act — I-3.3 56.4
ll amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or (B) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing (I) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or (II) under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation, (ii) the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and (iii) the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be; (d) no proceeds are received or receivable by the vendor for granting the restrictive covenant; (e) subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be; (f) the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of (i) the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made, (ii) the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or (iii) the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and (g) a joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by (i) in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or (ii) in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be. Application of subsection (7) and section 69 — special rules (8) For the purpose (a) of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if (i) the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and (ii) if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and (b) of determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property. Anti-avoidance rule — non-application of paragra