Income Tax Act — I-3.3 100
interest. Exception — non-resident person (1.3) Subsection (1) does not apply in respect of a disposition of an interest in a partnership by a taxpayer to a person referred to in paragraph (1.1)(b) if (a) property of the partnership is used, immediately before and immediately after the acquisition of the interest by the non-resident person, in carrying on business through one or more permanent establishments in Canada; and (b) the total fair market value of the property referred to in paragraph (a) equals at least 90% of the total fair market value of all property of the partnership. Anti-avoidance — dilution (1.4) Subsection (1.5) applies in respect of a taxpayer’s interest in a partnership if (a) it is reasonable to conclude that one of the purposes of a dilution, reduction or alteration of the interest was to avoid the application of subsection (1) in respect of the interest; and (b) as part of a transaction or event or series of transactions or events that includes the dilution, reduction or alteration, there is (i) an acquisition of an interest in the partnership by a person or partnership described in any of paragraphs (1.1)(a) to (d), or (ii) an increase in, or alteration of, an interest in the partnership held by a person or partnership described in any of paragraphs (1.1)(a) to (d). Deemed gain — dilution (1.5) If this subsection applies in respect of a particular interest in a partnership of a taxpayer, then for the purposes of subsection (1), (a) the taxpayer is deemed to have disposed of an interest in the partnership at the time of the dilution, reduction or alteration; (b) the taxpayer is deemed to have a capital gain from the disposition equal to the amount by which the fair market value of the particular interest immediately before the dilution, reduction or alteration exceeds its fair market value immediately thereafter; and (c) the person or partnership referred to in paragraph (1.4)(b) is deemed to have acquired an interest in the partnership as part of the transaction or event or series of transactions or events that includes the disposition referred to in paragraph (a). Gain from disposition of interest in partnership (2) In computing a taxpayer’s gain for a taxation year from the disposition of an interest in a partnership, there shall be included, in addition to the amount thereof determined under subsection 40(1), the amount, if any, by which (a) the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer, immediately before the disposition, of the interest in the partnership, exceeds (b) the total of (i) the cost to the taxpayer of the interest in the partnership determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time, and (ii) all amounts required by subsection 53(1) to be added to the cost to the taxpayer of that interest in computing the adjusted cost base to the taxpayer of that interest at that time. Idem (2.1) Where, as a result of an amalgamation or merger, an interest in a partnership owned by a predecessor corporation has become property of the new corporation formed as a result of the amalgamation or merger and the predecessor corporation was not related to the new corporation, the predecessor corporation shall be deemed to have disposed of the interest in the partnership to the new corporation immediately before the amalgamation or merger for proceeds of disposition equal to the adjusted cost base to the predecessor corporation of the interest in the partnership at the time of the disposition and the new corporation shall be deemed to have acquired the interest in the partnership from the predecessor corporation immediately after that time at a cost equal to the proceeds of disposition. Transfer of interest on death (3) Where by virtue of the death of an individual a taxpayer has acquired a property that was an interest in a partnership immediately before the individual’s death (