Income Tax Act — I-3.3 112
e the disposition. Loss on share held by partnership — excluded dividends (3.12) A taxable dividend received on a share and designated under subsection 104(19) by a particular trust in respect of a beneficiary that was a partnership or trust shall not be included in the total determined under paragraph 112(3.1)(c) where the particular trust establishes that the dividend was received by an individual (other than a trust). Loss on share held by trust (3.2) Subject to subsections 112(5.5) and 112(5.6), the amount of any loss of a trust (other than a mutual fund trust) from the disposition of a share of the capital stock of a corporation that is capital property of the trust is deemed to be the amount of the loss determined without reference to this subsection minus the total of (a) the amount, if any, by which the lesser of (i) the total of all amounts each of which is a dividend received by the trust on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and (ii) the loss determined without reference to this subsection minus the total of all amounts each of which is the amount of a taxable dividend (A) received by the trust on the share, (B) received on the share and designated under subsection 104(19) by the trust in respect of a beneficiary who is an individual (other than a trust), or (C) that is a qualified dividend received on the share and designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or another trust where the trust establishes that (I) it owned the share throughout the 365-day period that ended immediately before the disposition, and (II) the dividend was received while the trust, the beneficiary and persons not dealing at arm’s length with the beneficiary owned in total less than 5% of the issued shares of any class of the capital stock of the corporation from which the dividend was received exceeds (iii) if the trust is an individual’s graduated rate estate, the share was acquired as a consequence of the individual’s death and the disposition occurs during the trust’s first three taxation years, 1/2 of the lesser of (A) the loss determined without reference to this subsection, and (B) the individual’s capital gain from the disposition of the share immediately before the individual’s death, and (b) the total of all amounts each of which is (i) a taxable dividend, or (ii) a life insurance capital dividend received on the share and designated under subsection 104(19) or 104(20) by the trust in respect of a beneficiary that was a corporation, partnership or trust. Loss on share held by trust — special cases (3.3) Notwithstanding subsection 112(3.2), where a trust has at any time acquired a share of the capital stock of a corporation because of subsection 104(4), the amount of any loss of the trust from a disposition after that time is deemed to be the amount of the loss determined without reference to subsection 112(3.2) and this subsection minus the total of (a) the amount, if any, by which the lesser of (i) the total of all amounts each of which is a dividend received after that time by the trust on the share in respect of which an election was made under subsection 83(2) where subsection 83(2.1) does not deem the dividend to be a taxable dividend, and (ii) the loss determined without reference to subsection 112(3.2) and this subsection minus the total of all amounts each of which is the amount of a taxable dividend (A) received by the trust on the share after that time, (B) received on the share after that time and designated under subsection 104(19) by the trust in respect of a beneficiary who is an individual (other than a trust), or (C) that is a qualified dividend received on the share after that time and designated under subsection 104(19) by the trust in respect of a beneficiary that was a corporation, partnership or another trust where the trust est