Income Tax Application Rules — I-3.31 26
ion referred to as the “original owner”) on June 18, 1971 has, by one or more transactions or events between persons not dealing at arm’s length, become vested in another taxpayer (in this subsection referred to as the “subsequent owner”) and the original owner has not elected under subsection (7) in respect of the property, notwithstanding the provisions of the amended Act, for the purposes of computing, at any particular time after 1971, the adjusted cost base of the property to the subsequent owner, (a) the subsequent owner shall be deemed to have owned the property on June 18, 1971 and thereafter without interruption until the particular time; (b) for the purposes of this section, the actual cost of the property to the subsequent owner or, if the property was an obligation, its amortized cost to the subsequent owner on January 1, 1972 shall be deemed to be the amount that was its actual cost or amortized cost, on January 1, 1972, as the case may be, to the original owner; and (c) where the property became vested in the subsequent owner after 1971, there shall be added to the cost to the subsequent owner of the property (as determined under subsection (3)) the amount, if any, by which (i) the total of all amounts each of which is (A) a capital gain (other than any amount deemed by subsection 40(3) of the amended Act to be a capital gain) from the disposition after 1971 of the property by a person who owned the property before it so became vested in the subsequent owner, (B) an amount required by subsection 53(1) of the amended Act to be added in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A), (C) an amount determined under paragraph 88(1)(d) of the amended Act in computing the cost of the property to the subsequent owner or a person who owned the property before it became vested in the subsequent owner, or (D) an amount by which a gain otherwise determined of a person who owned the property before it became so vested in the subsequent owner was reduced because of paragraph 40(2)(b) or (c) of the amended Act, exceeds (ii) the total of all amounts each of which is (A) a capital loss or an amount that would, but for paragraph 40(2)(e) and subsection 85(4) of the amended Act (as that Act read in its application to property disposed of on or before April 26, 1995) and paragraphs 40(2)(e.1) and (e.2) and subsection 40(3.3) of the amended Act, be a capital loss from the disposition to a corporation after 1971 of the property by a person who owned the property before it became vested in the subsequent owner, or (B) an amount required by subsection 53(2) of the amended Act to be deducted in computing the adjusted cost base of the property to a person (other than the subsequent owner) described in clause (A), and there shall be deducted from the cost to the subsequent owner of the property the amount, if any, by which the total determined under subparagraph (ii) exceeds the total determined under subparagraph (i). Idem (5.1) For the purposes of subsection (5), an amalgamation (within the meaning assigned by section 87 of the amended Act) of two or more Canadian corporations shall be deemed to be a transaction between persons not dealing at arm’s length. Transfer of capital property to a corporation (5.2) For the purposes of subsection (5), where a taxpayer has disposed of capital property after May 6, 1974 to a corporation in respect of which an election under section 85 of the amended Act was made, the disposition shall be deemed to be a transaction between persons not dealing at arm’s length. Reacquired property (6) Where a taxpayer has, at any time after June 18, 1971 and before 1972, disposed of any property owned by the taxpayer on that day and has, within 30 days after that time, reacquired the same property or acquired a substantially identical property, for the purposes of this section (a) the taxpayer shall be deemed to have owned the property so reacqui