Income Tax Act — I-3.3 (a)
Canadian ordinary income , of a taxpayer for a taxation year in respect of a payment, means an amount that is (a) if the taxpayer is not a partnership, included in respect of the payment in computing, in the case of a taxpayer resident in Canada, the income of the taxpayer for the purposes of this Part — or, in the case of a taxpayer that is a non-resident person, the taxable income earned in Canada of the taxpayer — for the year, except to the extent that (i) the amount is included in the Canadian ordinary income of any taxpayer under paragraph (b) or (c), (ii) the taxpayer is entitled to a deduction under section 112 or 113 in respect of the payment, or (iii) the amount can otherwise reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part by reason of any exemption, exclusion, deduction, credit (other than a credit for a tax substantially similar to tax under Part XIII) or other form of relief under this Act that (A) applies specifically in respect of all or a portion of the amount and not in computing income generally, or (B) arises in respect of the payment; (b) if the taxpayer is a partnership, determined by the formula A × B ÷ C − D where A is an amount that is included in respect of the payment in computing the income or loss of the partnership from any source, or from sources in a particular place, for the year, except to the extent that the amount (i) is included in the Canadian ordinary income of any taxpayer under paragraph (c), or (ii) can reasonably be considered to be excluded, reduced, offset or otherwise sheltered by any reason described in subparagraph (a)(iii), B is the total of all amounts, each of which is, in respect of the partnership’s income or loss from that source or the sources in the particular place for the year, (i) the share of a member of the partnership that is a person resident in Canada, or (ii) the share of a member of the partnership that is a non-resident person to the extent it is included in computing the non-resident person’s taxable income earned in Canada, C is the income or loss of the partnership from the source, or the sources in the particular place, for the year, and D is the total of all amounts, each of which is an amount deductible, in respect of the payment, by a member of the partnership under section 112 or 113; or (c) determined by the formula E × F where E is the amount determined by the formula G × H where G is an amount that is included in respect of the payment in computing the foreign accrual property income of a controlled foreign affiliate of the taxpayer for a taxation year (as defined in subsection 95(1)) of the affiliate ending in the year, except to the extent the amount can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered for any reason described in subparagraph (a)(iii), and H is the aggregate participating percentage (as defined in subsection 91(1.3)) of the taxpayer in respect of the affiliate for the taxation year of the affiliate, and F is (i) if the taxpayer is a partnership, the amount determined by the formula I ÷ E where I is the total of all amounts each of which is a share of the amount determined for E of a member of the partnership that is a person resident in Canada, and (ii) in any other case, 1. ( revenu ordinaire canadien )