Income Tax Act — I-3.3 53
tal gains balance (as defined in subsection 39.1(1)) in respect of the entity for the taxpayer’s taxation year that includes that time exceeds the total of all amounts each of which is (i) the amount by which a capital gain is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity, or (ii) twice an amount by which a taxable capital gain, or the income from a business, is reduced under section 39.1 for the year because of the taxpayer’s exempt capital gains balance in respect of the entity, B is the fair market value at that time of the property, and C is the fair market value at that time of all the taxpayer’s interests in, and shares of the capital stock of, the entity; (s) if the property was acquired under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(i) in computing the income of the taxpayer for a taxation year; and (t) if the property is disposed of under a derivative forward agreement, any amount required to be included in respect of the property under subparagraph 12(1)(z.7)(ii) in computing the income of the taxpayer for the taxation year that includes that time. Deemed contribution of capital (1.1) For the purposes of paragraph 53(1)(c), where there has been a disposition of property before May 7, 1974 and (a) the taxpayer and the corporation referred to in that paragraph have made an election under section 85 in respect of that property, and (b) the consideration received by the taxpayer for the property did not include shares of the capital stock of the corporation, the disposition of property shall be deemed to be a contribution of capital equal to the amount, if any, by which (c) the amount that the taxpayer and the corporation have agreed on in the election exceeds (d) the fair market value at the time of the disposition of any consideration received by the taxpayer for the property so disposed of. Flow-through entity before 2005 (1.2) For the purposes of paragraph (1)(r), if the fair market value of all of a taxpayer’s interests in, and shares of the capital stock of, a flow-through entity is nil when the taxpayer disposes of those interests and shares, the fair market value of each such interest or share at that time is deemed to be $1. Amounts to be deducted (2) In computing the adjusted cost base to a taxpayer of property at any time, there shall be deducted such of the following amounts in respect of the property as are applicable: (a) where the property is a share of the capital stock of a corporation resident in Canada, (i) any amount received by the taxpayer after 1971 and before that time as, on account or in lieu of payment of, or in satisfaction of, a dividend on the share (other than a taxable dividend or a dividend in respect of which the corporation paying the dividend has elected in accordance with subsection 83(2) or 83(2.1) in respect of the full amount thereof), (ii) any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share, except to the extent that the amount is deemed by subsection 84(4) or 84(4.1) to be a dividend received by the taxpayer, (iii) any amount required to be deducted before that time under section 84.1 of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, as it applied before May 23, 1985 in computing the adjusted cost base to the taxpayer of the share, (iv) any amount, to the extent that such amount is not proceeds of disposition of a share, received by the taxpayer before that time that would, but for subsection 84(8), be deemed by subsection 84(2) to be a dividend received by the taxpayer, and (v) any amount required by paragraph 44.1(2)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share; (b) where the property is a share of the capital stock of a non-resident corporation, (i) if the corpora