Income Tax Act — I-3.3 131
y of the shareholders of a corporation to have received a dividend on any shares of the capital stock of the corporation, if at the time the dividend would, but for this subsection, be deemed by that section to have been so paid or received, as the case may be, the corporation was a mutual fund corporation. Sections not applicable (4.1) Sections 51, 85, 85.1, 86 and 87 do not apply to a taxpayer that holds a share (in this subsection referred to as the old share ) of a class of shares, that is recognized under securities legislation as or as part of an investment fund, of a mutual fund corporation if the taxpayer exchanges or otherwise disposes of the old share for another share (in this subsection referred to as the new share ) of a mutual fund corporation, unless (a) if the exchange or disposition occurs in the course of a transaction, event or series of transactions or events described in subsections 86(1) or 87(1), (i) all shares of the class (determined without reference to subsection 248(6)) that includes the old share at the time of the exchange or disposition are exchanged for shares of the class that includes the new share, (ii) the old share and the new share derive their value in the same proportion from the same property or group of properties, and (iii) the transaction, event or series was undertaken solely for bona fide purposes and not to cause this paragraph to apply; (b) if the old share and the new share are shares of the same class (determined without reference to subsection 248(6)) of shares of the same mutual fund corporation, (i) the old share and the new share derive their value in the same proportion from the same property or group of properties held by the corporation that is allocated to that class, and (ii) that class is recognized under securities legislation as or as part of a single investment fund; or (c) if the old share and the new share are not shares of the same class but are shares of Capital régional et coopératif Desjardins , (i) the old share and the new share derive their value in the same proportion from the same property or group of properties, and (ii) the shares are recognized under securities legislation as or as part of the same investment fund. Dividend refund to mutual fund corporation (5) A corporation that was a mutual fund corporation throughout a taxation year (a) is deemed for the purposes of paragraph 87(2)(aa) and section 129 to have been a private corporation throughout the year, except that its non-eligible refundable dividend tax on hand (as defined in subsection 129(4)) at the end of the year shall be determined without reference to paragraph (a) of that definition; and (b) where it was not an investment corporation throughout the year, is deemed for the purposes of Part IV to have been a private corporation throughout the year except that, in applying subsection 186(1) to the corporation in respect of the year, that subsection shall be read without reference to paragraph 186(1)(b). TCP gains distribution (5.1) If a mutual fund corporation elects under subsection (1) to treat a dividend as a capital gains dividend, for the purposes of this Part and Part XIII, (a) each shareholder to whom the dividend is paid is deemed to receive from the corporation, at the time the dividend is paid, a TCP gains distribution equal to the lesser of the amount of the dividend and the shareholder’s pro rata portion at that time of the mutual fund corporation’s TCP gains balance; and (b) where the dividend is paid to a shareholder who is a non-resident person or a partnership that is not a Canadian partnership, (i) subparagraph (1)(b)(ii) does not apply in respect of the dividend, to the extent of the TCP gains distribution, and (ii) the TCP gains distribution is a taxable dividend that, except for the purpose of the definition of capital gains dividend account in subsection (6), is not a capital gains dividend. Application of subsection (5.1) (5.2) Subsection (5.1) applies to a dividend p