Income Tax Act — I-3.3 84.1
t would be its adjusted cost base to the taxpayer if the Income Tax Application Rules were read without reference to subsections 26(3) and (7) of that Act, and (ii) the total of all amounts each of which is an amount received by the taxpayer after 1971 and before that time as a dividend on the share and in respect of which the corporation that paid the dividend has made an election under subsection 83(1); (a.1) where a share disposed of by a taxpayer was acquired by the taxpayer after 1971 from a person with whom the taxpayer was not dealing at arm’s length, was a share substituted for such a share or was a share substituted for a share owned by the taxpayer at the end of 1971, the adjusted cost base to the taxpayer of the share at any time shall be deemed to be the amount, if any, by which its adjusted cost base to the taxpayer, otherwise determined, exceeds the total of (i) where the share or a share for which the share was substituted was owned at the end of 1971 by the taxpayer or a person with whom the taxpayer did not deal at arm’s length, the amount in respect of that share equal to the amount, if any, by which (A) the fair market value of the share or the share for which it was substituted, as the case may be, on valuation day (within the meaning assigned by section 24 of the Income Tax Application Rules ) exceeds the total of (B) the actual cost (within the meaning assigned by subsection 26(13) of that Act) of the share or the share for which it was substituted, as the case may be, on January 1, 1972, to the taxpayer or the person with whom the taxpayer did not deal at arm’s length, and (C) the total of all amounts each of which is an amount received by the taxpayer or the person with whom the taxpayer did not deal at arm’s length after 1971 and before that time as a dividend on the share or the share for which it was substituted and in respect of which the corporation that paid the dividend has made an election under subsection 83(1), and (ii) the total of all amounts each of which is an amount determined after 1984 under subparagraph 40(1)(a)(i) in respect of a previous disposition of the share or a share for which the share was substituted (or such lesser amount as is established by the taxpayer to be the amount in respect of which a deduction under section 110.6 was claimed) by the taxpayer or an individual with whom the taxpayer did not deal at arm’s length; (a.2) [Repealed, 1998, c. 19, s. 115(1)] (b) in respect of any disposition described in subsection 84.1(1) by a taxpayer of shares of the capital stock of a subject corporation to a purchaser corporation, the taxpayer shall, for greater certainty, be deemed not to deal at arm’s length with the purchaser corporation if the taxpayer (i) was, immediately before the disposition, one of a group of fewer than 6 persons that controlled the subject corporation, and (ii) was, immediately after the disposition, one of a group of fewer than 6 persons that controlled the purchaser corporation, each member of which was a member of the group referred to in subparagraph 84.1(2)(b)(i); (c) [Repealed, 1998, c. 19, s. 115(2)] (d) a trust and a beneficiary of the trust or a person related to a beneficiary of the trust shall be deemed not to deal with each other at arm’s length; and (e) notwithstanding any other paragraph in this subsection, if this paragraph applies because of subsection (2.31) or (2.32) to a disposition of subject shares by a taxpayer to a purchaser corporation, the taxpayer and the purchaser corporation are deemed to deal with each other at arm’s length at the time of the disposition of the subject shares. Rules for par. 84.1(2)(a.1) (2.01) For the purpose of paragraph 84.1(2)(a.1), (a) where at any time a corporation issues a share of its capital stock to a taxpayer, the taxpayer and the corporation are deemed not to be dealing with each other at arm’s length at that time; (b) where a taxpayer is deemed by paragraph 110.6(19)(a) to have reacquired a share, t