Income Tax Act — I-3.3 112
ss on share held by trust — excluded dividends (4.22) A qualified dividend shall not be included in the total determined under paragraph (4.2)(b) if the taxpayer establishes that (a) it was received when the trust, the beneficiary and persons with whom the beneficiary was not dealing at arm’s length did not own in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received; and (b) it was received on a share that the trust owned throughout the 365-day period that ended immediately before the disposition. (4.3) [Repealed, 1998, c. 19, s. 131] Disposition of share by financial institution (5) Subsection 112(5.2) applies to the disposition of a share by a taxpayer in a taxation year where (a) the taxpayer is a financial institution in the year; (b) the share is a mark-to-market property for the year; and (c) the taxpayer received (i) a dividend on the share at a time when the taxpayer and persons with whom the taxpayer was not dealing at arm’s length held in total more than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received, or (ii) a dividend on the share under subsection 84(3). Share held for less than one year (5.1) Subsection 112(5.2) applies to the disposition of a share by a taxpayer in a taxation year where (a) the disposition is an actual disposition; (b) the taxpayer did not hold the share throughout the 365-day period that ended immediately before the disposition; and (c) the share was a mark-to-market property of the taxpayer for a taxation year that begins after October 1994 and in which the taxpayer was a financial institution. Adjustment re dividends (5.2) Subject to subsection 112(5.3), where subsection 112(5) or 112(5.1) provides that this subsection applies to the disposition of a share by a taxpayer at any time, the taxpayer’s proceeds of disposition shall be deemed to be the amount determined by the formula A + B - (C - D) where A is the taxpayer’s proceeds determined without reference to this subsection, B is (a) if the taxpayer received a dividend under subsection 84(3) in respect of the share, the total determined under subparagraph (b)(ii), and (b) in any other case, the lesser of (i) the loss, if any, from the disposition of the share that would be determined before the application of this subsection if the cost of the share to any taxpayer were determined without reference to (A) paragraphs 87(2)(e.2) and (e.4), 88(1)(c), 138(11.5)(e) and 142.5(2)(b), (B) subsection 85(1), where the provisions of that subsection are required by paragraph 138(11.5)(e) to be applied, and (C) paragraph 142.6(1)(d), and (ii) the total of all amounts each of which is (A) where the taxpayer is a corporation, a taxable dividend received by the taxpayer on the share, to the extent of the amount that was deductible under this section or subsection 115(1) or 138(6) in computing the taxpayer’s taxable income or taxable income earned in Canada for any taxation year, (B) where the taxpayer is a partnership, a taxable dividend received by the taxpayer on the share, to the extent of the amount that was deductible under this section or subsection 115(1) or 138(6) in computing the taxable income or taxable income earned in Canada for any taxation year of members of the partnership, (C) where the taxpayer is a trust, an amount designated under subsection 104(19) in respect of a taxable dividend on the share, or (D) a dividend (other than a taxable dividend) received by the taxpayer on the share, C is the total of all amounts each of which is the amount by which (a) the taxpayer’s proceeds of disposition on a deemed disposition of the share before that time were increased because of this subsection, (b) where the taxpayer is a corporation or trust, a loss of the taxpayer on a deemed disposition of the share before that time was reduced because of subsection 112(3), 112(3.2), 112(4) or 112(4.2), or (c) where th