Income Tax Act — I-3.3 256
Associated corporations 256 (1) For the purposes of this Act, one corporation is associated with another in a taxation year if, at any time in the year, (a) one of the corporations controlled, directly or indirectly in any manner whatever, the other; (b) both of the corporations were controlled, directly or indirectly in any manner whatever, by the same person or group of persons; (c) each of the corporations was controlled, directly or indirectly in any manner whatever, by a person and the person who so controlled one of the corporations was related to the person who so controlled the other, and either of those persons owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof; (d) one of the corporations was controlled, directly or indirectly in any manner whatever, by a person and that person was related to each member of a group of persons that so controlled the other corporation, and that person owned, in respect of the other corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof; or (e) each of the corporations was controlled, directly or indirectly in any manner whatever, by a related group and each of the members of one of the related groups was related to all of the members of the other related group, and one or more persons who were members of both related groups, either alone or together, owned, in respect of each corporation, not less than 25% of the issued shares of any class, other than a specified class, of the capital stock thereof. Definition of specified class (1.1) For the purposes of subsection 256(1), specified class means a class of shares of the capital stock of a corporation where, under the terms or conditions of the shares or any agreement in respect thereof, (a) the shares are not convertible or exchangeable; (b) the shares are non-voting; (c) the amount of each dividend payable on the shares is calculated as a fixed amount or by reference to a fixed percentage of an amount equal to the fair market value of the consideration for which the shares were issued; (d) the annual rate of the dividend on the shares, expressed as a percentage of an amount equal to the fair market value of the consideration for which the shares were issued, cannot in any event exceed, (i) where the shares were issued before 1984, the rate of interest prescribed for the purposes of subsection 161(1) at the time the shares were issued, and (ii) where the shares were issued after 1983, the prescribed rate of interest at the time the shares were issued; and (e) the amount that any holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length cannot exceed the total of an amount equal to the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends thereon. Control, etc. (1.2) For the purposes of this subsection and subsections 256(1), 256(1.1) and 256(1.3) to 256(5), (a) a group of persons in respect of a corporation means any two or more persons each of whom owns shares of the capital stock of the corporation; (b) for greater certainty, (i) a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation shall be considered to be controlled by that group of persons, and (ii) a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons; (c) a corporation shall be deemed to be controlled by another corporation, a person or a group of persons at any time where (i) shares of the capital stock of the corporation having a fair market value of more than 50% of the fair market value of all the issued and o