Income Tax Act — I-3.3 88
eaning assigned by subsection 131(6), where the corporation is an investment corporation, (ii) capital gains dividend account (within the meaning assigned by section 133), and (iii) pre-1972 capital surplus on hand, at the time (in this paragraph referred to as the “time of computation”) immediately before the particular time, (iv) the taxation year of the corporation that otherwise would have included the particular time shall be deemed to have ended immediately before the time of computation, and a new taxation year shall be deemed to have commenced at that time, and (v) each property of the corporation that was so distributed at the particular time shall be deemed to have been disposed of by the corporation immediately before the end of the taxation year so deemed to have ended for proceeds equal to the fair market value of the property immediately before the particular time, (vi) [Repealed, 1994, c. 7, Sch. II, s. 66] (b) where the corporation is, by virtue of subsection 84(2), deemed to have paid at the particular time a dividend (in this paragraph referred to as the “winding-up dividend”) on shares of any class of its capital stock, the following rules apply: (i) such portion of the winding-up dividend as does not exceed the corporation’s capital dividend account immediately before that time or capital gains dividend account immediately before that time, as the case may be, shall be deemed, for the purposes of an election in respect thereof under subsection 83(2), 131(1) (as that subsection applies for the purposes of section 130) or 133(7.1), as the case may be, and where the corporation has so elected, for all other purposes, to be the full amount of a separate dividend, (ii) the portion of the winding-up dividend equal to the lesser of the corporation’s pre-1972 capital surplus on hand immediately before that time and the amount by which the winding-up dividend exceeds (A) the portion thereof in respect of which the corporation has made an election under subsection 83(2), or (B) the portion thereof in respect of which the corporation has made an election under subsection 133(7.1), as the case may be, shall be deemed not to be a dividend, (iii) notwithstanding the definition taxable dividend in subsection 89(1), the winding-up dividend, to the extent that it exceeds the total of the portion thereof deemed by subparagraph 88(2)(b)(i) to be a separate dividend for all purposes and the portion deemed by subparagraph 88(2)(b)(ii) not to be a dividend, shall be deemed to be a separate dividend that is a taxable dividend, and (iv) each person who held any of the issued shares of that class at the particular time shall be deemed to have received that proportion of any separate dividend determined under subparagraph 88(2)(b)(i) or 88(2)(b)(iii) that the number of shares of that class held by the person immediately before the particular time is of the number of issued shares of that class outstanding immediately before that time, and (c) for the purpose of computing the income of the corporation for its taxation year that includes the particular time, paragraph 12(1)(t) shall be read as follows: “(t) the amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6) or 127.491(10) in computing the taxpayer’s tax payable for the year or a preceding taxation year to the extent that it was not included under this paragraph in computing the taxpayer’s income for a preceding taxation year or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e) or subparagraph 53(2)(c)(vi) to (vi.5) or (h)(ii) or the amount determined for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);”. Definition of pre-1972 capital surplus on hand (2.1) For the purposes of subsection 88(2), pre-1972 capital surplus on hand of a particular corporation at a particular time means the amount, if any, by which t