Income Tax Act — I-3.3 39.1
y or on behalf of that person to such creditor, and (j) a trust all or substantially all of the properties of which consist of shares of the capital stock of a corporation, where the trust was established pursuant to an agreement between 2 or more shareholders of the corporation and one of the main purposes of the trust is to provide for the exercise of voting rights in respect of those shares pursuant to that agreement. ( entité intermédiaire ) Reduction of capital gain (2) Where at any time after February 22, 1994 an individual disposes of an interest in or a share of the capital stock of a flow-through entity, the individual’s capital gain, if any, otherwise determined for a taxation year from the disposition shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula A - B - C where A is the exempt capital gains balance of the individual for the year in respect of the entity, B is (a) if the entity made a designation under subsection 104(21) in respect of the individual for the year, twice the amount, if any, claimed under subsection 39.1(3) by the individual for the year in respect of the entity, (b) if the entity is a partnership, twice the amount, if any, claimed under subsection (4) by the individual for the year in respect of the entity, and (c) in any other case, the amount, if any, claimed under subsection 39.1(6) by the individual for the year in respect of the entity, and C is the total of all reductions under this subsection in the individual’s capital gains otherwise determined for the year from the disposition of other interests in or shares of the capital stock of the entity. Reduction of taxable capital gain (3) The taxable capital gain otherwise determined under subsection 104(21) of an individual for a taxation year as a result of a designation made under that subsection by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding 1/2 of the individual’s exempt capital gains balance for the year in respect of the entity. Reduction in share of partnership’s taxable capital gains (4) An individual’s share otherwise determined for a taxation year of a taxable capital gain of a partnership from the disposition of a property (other than property acquired by the partnership after February 22, 1994 in a transfer to which subsection 97(2) applied) for its fiscal period that ends after February 22, 1994 and in the year shall be reduced by such amount as the individual claims, not exceeding the amount determined by the formula A - B where A is 1/2 of the individual’s exempt capital gains balance for the year in respect of the partnership, and B is the total of amounts claimed by the individual under this subsection in respect of other taxable capital gains of the partnership for that fiscal period. (5) [Repealed, 2016, c. 12, s. 14] Reduction of capital gains (6) The total capital gains otherwise determined under subsection 130.1(4) or 131(1), subsections 138.1(3) and 138.1(4) or subsection 144(4), as the case may be, of an individual for a taxation year as a result of one or more elections, allocations or designations made after February 22, 1994 by a flow-through entity shall be reduced by such amount as the individual claims, not exceeding the individual’s exempt capital gains balance for the year in respect of the entity. Nil exempt capital gains balance (7) Notwithstanding subsection 39.1(1), where at any time an individual ceases to be a member or shareholder of, or a beneficiary under, a flow-through entity, the exempt capital gains balance of the individual in respect of the entity for each taxation year that begins after that time is deemed to be nil. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] 1995, c. 3, s. 11; 1998, c. 19, s. 88; 2001, c. 17, s. 24; 2013, c. 34, s. 101; 2016, c. 12, s. 14