Income Tax Act — I-3.3 69
Inadequate considerations 69 (1) Except as expressly otherwise provided in this Act, (a) where a taxpayer has acquired anything from a person with whom the taxpayer was not dealing at arm’s length at an amount in excess of the fair market value thereof at the time the taxpayer so acquired it, the taxpayer shall be deemed to have acquired it at that fair market value; (b) where a taxpayer has disposed of anything (i) to a person with whom the taxpayer was not dealing at arm’s length for no proceeds or for proceeds less than the fair market value thereof at the time the taxpayer so disposed of it, (ii) to any person by way of gift, or (iii) to a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property; the taxpayer shall be deemed to have received proceeds of disposition therefor equal to that fair market value; and (c) where a taxpayer acquires a property by way of gift, bequest or inheritance or because of a disposition that does not result in a change in the beneficial ownership of the property, the taxpayer is deemed to acquire the property at its fair market value. Idem, where s. 70(3) applies (1.1) Where a taxpayer has acquired property that is a right or thing to which subsection 70(3) applies, the following rules apply: (a) paragraph 69(1)(c) is not applicable to that property; and (b) the taxpayer shall be deemed to have acquired the property at a cost equal to the total of (i) such part, if any, of the cost thereof to the taxpayer who has died as had not been deducted by the taxpayer in computing the taxpayer’s income for any year, and (ii) any expenditures made or incurred by the taxpayer to acquire the property. Idem (1.2) Where, at any time, (a) a taxpayer disposed of property for proceeds of disposition (determined without reference to this subsection) equal to or greater than the fair market value at that time of the property, and (b) there existed at that time an agreement under which a person with whom the taxpayer was not dealing at arm’s length agreed to pay as rent, royalty or other payment for the use of or the right to use the property an amount less than the amount that would have been reasonable in the circumstances if the taxpayer and the person had been dealing at arm’s length at the time the agreement was entered into, the taxpayer’s proceeds of disposition of the property shall be deemed to be the greater of (c) those proceeds determined without reference to this subsection, and (d) the fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement. (2) and (3) [Repealed, 1998, c. 19, s. 107] Shareholder appropriations (4) Where at any time property of a corporation has been appropriated in any manner whatever to or for the benefit of a shareholder of the corporation for no consideration or for consideration that is less than the property’s fair market value and a sale of the property at its fair market value would have increased the corporation’s income or reduced a loss of the corporation, the corporation shall be deemed to have disposed of the property, and to have received proceeds of disposition therefor equal to its fair market value, at that time. Idem (5) Where in a taxation year of a corporation property of the corporation has been appropriated in any manner whatever to, or for the benefit of, a shareholder, on the winding-up of the corporation, the following rules apply: (a) the corporation is deemed, for the purpose of computing its income for the year, to have disposed of the property immediately before the winding-up for proceeds equal to its fair market value at that time; (b) the shareholder shall be deemed to have acquired the property at a cost equal to its fair market value immediately before the winding-up; (c) subsections 52(1) and (2) do not apply for the purposes of determining the cost to the shareholder of the property; and (d) subsections 13(21.2),