Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Identical properties

• 47 (1) Where at any particular time after 1971 a taxpayer who owns one property that was or two or more identical properties each of which was, as the case may be, acquired by the taxpayer after 1971, acquires one or more other properties (in this subsection referred to as “newly-acquired properties”) each of which is identical to each such previously-acquired property, for the purposes of computing, at any subsequent time, the adjusted cost base of the taxpayer of each such identical property,

  • (a) the taxpayer shall be deemed to have disposed of each such previously-acquired property immediately before the particular time for proceeds equal to its adjusted cost base to the taxpayer immediately before the particular time;

  • (b) the taxpayer shall be deemed to have acquired the identical property at the particular time at a cost equal to the quotient obtained when

    • (i) the total of the adjusted cost bases to the taxpayer immediately before the particular time of the previously-acquired properties, and the cost to the taxpayer (determined without reference to this section) of the newly-acquired properties

    is divided by

    • (ii) the number of the identical properties owned by the taxpayer immediately after the particular time;

  • (c) there shall be deducted, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property, the amount determined by the formula

    A/B

    where

    A 

    is the total of all amounts deducted under paragraph 53(2)(g.1) in computing immediately before the particular time the adjusted cost base to the taxpayer of the previously-acquired properties, and

    B 

    is the number of such identical properties owned by the taxpayer immediately after the particular time or, where subsection 47(2) applies, the quotient determined under that subsection in respect of the acquisition; and

  • (d) there shall be added, after the particular time, in computing the adjusted cost base to the taxpayer of each such identical property the amount determined under paragraph 47(1)(c) in respect of the identical property.

• Marginal note:Where identical properties are bonds, etc.

  (2) For the purposes of subsection 47(1), where a group of identical properties referred to in that subsection is a group of identical bonds, debentures, bills, notes or similar obligations issued by a debtor, subparagraph 47(1)(b)(ii) shall be read as follows:

  • “(ii) the quotient obtained when the total of the principal amounts of all such identical properties owned by the taxpayer immediately after the particular time is divided by the principal amount of the identical property.”

• Marginal note:Securities acquired by employee

  (3) For the purpose of subsection (1), a security (within the meaning assigned by subsection 7(7)) acquired by a taxpayer after February 27, 2000 is deemed not to be identical to any other security acquired by the taxpayer if

  • (a) the security is acquired in circumstances to which any of subsections 7(1.1), (1.5) or (8) or 147(10.1) applies; or

  • (b) the security is a security to which subsection 7(1.31) applies.

Indexed Security Investment Plans

Marginal note:Application of s. 47.1 of R.S.C., 1952, c. 148

• 47.1 (26.1) Words and expressions used in subsections 47.1(27) and 47.1(28) have the meanings assigned to them by subsections 47.1(1) to (26) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as the latter subsections read on July 1, 1986 and in so far as they are not inconsistent with subsections 47.1(27) and 47.1(28).

• Marginal note:Capital losses in 1986

  (27) Notwithstanding any other provision of this Act, where paragraph 47.1(10)(f) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that paragraph read on January 1, 1986, applied in respect of the termination before 1986 of an indexed security investment plan under which a taxpayer was a participant, any amount that would have been deemed under that paragraph to be a capital loss of the taxpayer from the Plan for the 1986 or a subsequent taxation year shall be deemed to be a capital loss of the taxpayer for the 1986 taxation year from the disposition of property in 1986.

• Marginal note:Transition for 1986

  (28) Where a taxpayer was a participant under a Plan on January 1, 1986, the following rules apply:

  • (a) each indexed security owned under the Plan by the taxpayer on that date shall be deemed to have been disposed of under the Plan on that date for proceeds of disposition determined by the formula

    A × B/C

    where

    A 

    is the indexing base of the Plan on that date determined as if subparagraph 47.1(3)(a)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, were read as “the fair market value of all indexed securities owned by the taxpayer under the Plan at the end of the preceding taxation year”,

    B 

    is the fair market value of the security on that date, and

    C 

    is the fair market value of all indexed securities owned under the Plan by the taxpayer on that date;

  • (b) each indexed security deemed under paragraph 47.1(28)(a) to have been disposed of under the Plan shall be deemed to have been reacquired outside the Plan by the taxpayer immediately after that date at a cost equal to the amount deemed under paragraph 47.1(28)(a) to be the proceeds of the disposition of that security;

  • (c) each put or call option referred to in clause 47.1(4)(a)(iv)(B) or (C) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as that clause read on January 1, 1986, outstanding under the Plan on that date shall be deemed to have been closed out under the Plan on that date at a cost equal to the amount that the taxpayer would have had to pay on that date if the taxpayer had actually closed out the option on a prescribed stock exchange in Canada on that date;

  • (d) each put or call option deemed under paragraph 47.1(28)(c) to have been closed out shall be deemed to be written outside the Plan immediately after that date for proceeds equal to the amount deemed under paragraph 47.1(28)(c) to be the cost at which the option was closed out; and

  • (e) for greater certainty, the taxpayer’s indexed gain or loss, as the case may be, for the 1986 taxation year from the Plan and unindexed gain or loss, as the case may be, for that year from the Plan shall be nil.

48 [Repealed, 1994, c. 21, s. 19(1)]

Marginal note:Gain when small business corporation becomes public

• 48.1 (1) Where

  • (a) at any time in a taxation year an individual owns capital property that is a share of a class of the capital stock of a corporation that,

    • (i) at that time, is a small business corporation, and

    • (ii) immediately after that time, ceases to be a small business corporation because a class of its or another corporation’s shares is listed on a designated stock exchange, and

  • (b) the individual elects in prescribed form to have this section apply,

  the individual is deemed, except for the purposes of sections 7 and 35, paragraph 110(1)(d.1) and subsections 120.4(4) and (5),

  • (c) to have disposed of the share at that time for proceeds of disposition equal to the greater of

    • (i) the adjusted cost base to the individual of the share at that time, and

    • (ii) the lesser of the fair market value of the share at that time and such amount as is designated in the prescribed form by the individual in respect of the share, and

  • (d) to have reacquired the share immediately after that time at a cost equal to those proceeds of disposition.

• Marginal note:Time for election

  (2) An election made under subsection 48.1(1) by an individual for a taxation year shall be made on or before the individual’s filing-due date for the year.

• Marginal note:Late filed election

  (3) Where the election referred to in subsection 48.1(2) was not made on or before the day referred to therein, the election shall be deemed for the purposes of subsections 48.1(1) and 48.1(2) to have been made on that day if, on or before the day that is 2 years after that day,

  • (a) the election is made in prescribed form; and

  • (b) an estimate of the penalty in respect of that election is paid by the individual when the election is made.

• Marginal note:Penalty for late filed election

  (4) For the purposes of this section, the penalty in respect of an election referred to in paragraph 48.1(3)(a) is an amount equal to the lesser of

  • (a) 1/4 of 1% of the amount, if any, by which

    • (i) the proceeds of disposition determined under subsection 48.1(1)

    exceed

    • (ii) the amount referred to in subparagraph 48.1(1)(c)(i)

    for each month or part of a month during the period commencing on the day referred to in subsection 48.1(2) and ending on the day the election is made, and

  • (b) an amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in paragraph 48.1(4)(a).

• Marginal note:Unpaid balance of penalty

  (5) The Minister shall, with all due dispatch, examine each election referred to in paragraph 48.1(3)(a), assess the penalty payable and send a notice of assessment to the individual, who shall pay forthwith to the Receiver General the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.