Income Tax Act — I-3.3 86.1
Eligible distribution not included in income 86.1 (1) Notwithstanding any other provision of this Part, (a) the amount of an eligible distribution received by a taxpayer shall not be included in computing the income of the taxpayer; and (b) subsection 52(2) does not apply to the eligible distribution received by the taxpayer. Eligible distribution (2) For the purpose of this section, a distribution by a particular corporation that is received by a taxpayer is an eligible distribution if (a) the distribution is with respect to all of the taxpayer’s common shares of the capital stock of the particular corporation (in this section referred to as the “original shares”); (b) the distribution consists solely of common shares of the capital stock of another corporation that were owned by the particular corporation immediately before their distribution to the taxpayer (in this section referred to as the “spin-off shares”); (c) in the case of a distribution that is not prescribed, (i) at the time of the distribution, both corporations are resident in the United States and were never resident in Canada, (ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and (A) are actively traded on a designated stock exchange in the United States, or (B) are required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and (iii) under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution; (d) in the case of a distribution that is prescribed, (i) at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada, (ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange, (iii) under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, and (iv) the distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances; (e) before the end of the sixth month following the day on which the particular corporation first distributes a spin-off share in respect of the distribution, the particular corporation provides to the Minister information satisfactory to the Minister establishing (i) that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii), (ii) that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada, (iii) the date of the distribution, (iv) the type and fair market value of each property distributed to residents of Canada, (v) the name and address of each resident of Canada that received property with respect to the distribution, (vi) in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, (vii) in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, and (viii) such other matters that are required, in prescribed form; and (f) the taxpayer elects in writing filed with the taxpayer’s return of income for the taxation year in which the distribution occurs that this section apply to the distribution and provides information sa