Income Tax Act — I-3.3 110.61
ess that is relevant to the determination of whether subject shares satisfied the condition set out in paragraph (a) of the definition qualifying business transfer in subsection 248(1). Failure to report capital gain (6) Despite subsection (2), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year or any subsequent year, if (a) the individual knowingly or under circumstances amounting to gross negligence (i) fails to file the individual’s return of income for the particular taxation year within one year after the taxpayer’s filing-due date for the particular taxation year, or (ii) fails to report the capital gain in the individual’s return of income for the particular taxation year; and (b) the Minister establishes the facts justifying the denial of such an amount under this section. Deduction not permitted (7) Despite subsection (2), no amount may be deducted under this section in computing an individual’s taxable income for a taxation year in respect of a capital gain of the individual for the taxation year if the capital gain is from a disposition of property which disposition is part of a series of transactions or events (a) that includes a dividend received by a corporation to which dividend subsection 55(2) does not apply but would apply if this Act were read without reference to paragraph 55(3)(b); or (b) in which any property is acquired by a corporation or partnership for consideration that is significantly less than the fair market value of the property at the time of acquisition (other than an acquisition as the result of an amalgamation or merger of corporations or the winding-up of a corporation or partnership or a distribution of property of a trust in satisfaction of all or part of a corporation’s capital interest in the trust). Deduction not permitted (8) Despite subsection (2), if an individual has a capital gain for a taxation year from the disposition of a property and it can reasonably be concluded, having regard to all the circumstances, that a significant part of the capital gain is attributable to the fact that dividends were not paid on a share (other than a prescribed share within the meaning of subsection 110.6(8)) or that dividends paid on such a share in the taxation year or in any preceding taxation year were less than 90% of the average annual rate of return on that share for that year, no amount in respect of that capital gain shall be deducted under this section in computing the individual’s taxable income for the year. Average annual rate of return (9) For the purpose of subsection (8), the average annual rate of return on a share (other than a prescribed share within the meaning of subsection 110.6(8)) of a corporation for a taxation year is the annual rate of return by way of dividends that a knowledgeable and prudent investor who purchased the share on the day it was issued would expect to receive in that year, other than the first year after the issue, in respect of the share if (a) there was no delay or postponement of the payment of dividends and no failure to pay dividends in respect of the share; (b) there was no variation from year to year in the amount of dividends payable in respect of the share (other than where the amount of dividends payable is expressed as an invariant percentage of or by reference to an invariant difference between the dividend expressed as a rate of interest and a generally quoted market interest rate); and (c) the proceeds to be received by the investor on the disposition of the share are the same amount the corporation received as consideration on the issue of the share. Deduction not permitted (10) If it is reasonable to consider that one of the main reasons for an individual acquiring, holding or having an interest in a partnership or trust (other than an interest in a personal trust) or for the existence of any t