Income Tax Act — I-3.3 56.4
Definitions 56.4 (1) The following definitions apply in this section. eligible corporation , of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock. ( société admissible ) eligible individual , in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time. ( particulier admissible ) eligible interest , of a taxpayer, means capital property of the taxpayer that is (a) a partnership interest in a partnership that carries on a business; (b) a share of the capital stock of a corporation that carries on a business; or (c) a share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation. ( participation admissible ) goodwill amount , of a taxpayer, is an amount the taxpayer has or may become entitled to receive that would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations , or is an amount to which subsection 13(38) applies, in respect of a business carried on by the taxpayer through a permanent establishment located in Canada. ( montant pour achalandage ) permanent establishment means a permanent establishment as defined for the purpose of subsection 16.1(1). ( établissement stable ) restrictive covenant , of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm’s length with the taxpayer, other than an agreement or undertaking (a) that disposes of the taxpayer’s property; or (b) that is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value. ( clause restrictive ) taxpayer includes a partnership. ( contribuable ) Income — restrictive covenants (2) There is to be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm’s length (other than an amount that has been included in computing the taxpayer’s income because of this subsection for a preceding taxation year or in the taxpayer’s eligible corporation’s income because of this subsection for the taxation year or a preceding taxation year). Non-application of subsection (2) (3) Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the “purchaser”) with whom the particular taxpayer deals at arm’s length (determined without reference to paragraph 251(5)(b)), if (a) section 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year; (b) the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations , or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respec