Income Tax Application Rules — I-3.31 23
Rules applicable 23 (3) For the purposes of computing the income of a taxpayer for a taxation year ending after 1971 from a business that is a profession, (a) there may be deducted such amount as the taxpayer claims, not exceeding the lesser of (i) the amount deducted under this paragraph in computing the taxpayer’s income from the business for the preceding taxation year, and (ii) the taxpayer’s investment interest in the business at the end of the year; (b) where the taxation year is the taxpayer’s 1972 taxation year, the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business shall be deemed to be an amount equal to the taxpayer’s 1971 receivables in respect of the business; (c) there shall be included the amount deducted under paragraph (a) in computing the taxpayer’s income for the preceding taxation year from the business; and (d) there shall be included amounts received by the taxpayer in the year on account of debts in respect of the business that were established by the taxpayer to have become bad debts before the end of the 1971 fiscal period of the business. Application of para. (3)(a) (4) Paragraph (3)(a) does not apply to allow a deduction in computing the income of a taxpayer from a business that is a profession (a) for the taxation year in which the taxpayer died; or (b) for any taxation year, if, (i) in the case of a taxpayer who at no time in the year was resident in Canada, the taxpayer ceased to carry on the business, or (ii) in the case of any other taxpayer, the taxpayer ceased to be resident in Canada and ceased to carry on the business at any time in the year or the following year. Certain persons deemed to be carrying on business by means of partnership (4.1) For the purposes of paragraph (a) of the definition investment interest in subsection (5), (a) where subsection 98(1) of the amended Act applies, the persons who are deemed not to have ceased to be members of a partnership because of that subsection shall be deemed to be carrying on business in Canada by means of that partnership; and (b) a taxpayer who has a residual interest in a partnership (within the meaning assigned by section 98.1 of the amended Act) shall be deemed to be carrying on business in Canada by means of that partnership. Definitions (5) In this section, investment interest in a business at the end of a taxation year of a taxpayer means (a) in the case of a taxpayer other than a corporation, the total of all amounts each of which is an amount in respect of a proprietorship or partnership by means of which the taxpayer carried on that business in Canada in the year, equal to, (i) in respect of each such proprietorship, the amount, if any, by which (A) the total of such of the amounts that were included in computing the taxpayer’s income for that or a preceding taxation year as were receivable by the taxpayer at the end of the fiscal period of the proprietorship ending in the taxation year, exceeds (B) the amount claimed under paragraph 20(1)(l) of the amended Act as a reserve for doubtful debts in computing the taxpayer’s income from the business for the fiscal period of the proprietorship ending in the year, and (ii) in respect of each such partnership, the adjusted cost base to the taxpayer of the taxpayer’s interest in the partnership immediately after the end of the fiscal period of the partnership ending in the year, (b) in the case of a taxpayer that is a corporation, the lesser of (i) the amount thereof that would be determined under paragraph (a) in respect of the corporation if that paragraph applied to a taxpayer that is a corporation, and (ii) that proportion of its 1971 receivables in respect of the business that (A) the amount, if any, by which 10 exceeds the number of its taxation years ending after 1971 and either before or coincidentally with the taxation year, is of (B) 10; ( participation aux investissements ) 1971 receivables in respect of a business