Section 119

Administrative Policy

7 October 2016 APFF Roundtable Q. 18, 2016-0652791C6 F - Taxable Canadian property and Part XIII tax

property must have been TCP continuously from the time of emigration

Will CRA provide the s. 119 credit respecting dividends paid on shares which are not taxable Canadian property but which have been deemed to be disposed of by virtue of s. 128.1(4)? In responding negatively, CRA stated:

[S]ection 119… provides that…the property deemed to have been disposed of must be capital property that was a TCP throughout the period beginning with the emigration and ending at the time of the actual disposition of the property.

8 July 2015 External T.I. 2011-0430021E5 - Section 119

Part XIII dividend tax credited against a departure gain on the shares if s. 40(3.7) stop loss

Mr. X was deemed by s. 128.1(4)(b) to have disposed of shares of Canco, which were taxable Canadian property, when he ceased to be resident in Canada in 2009, and then received dividends in 2010 and 2011 which were subject to Part XIII withholding. CRA noted:

If, on the actual disposition of the property, subsection 40(3.7) applies, an amount computed by reference to the Part XIII tax paid on any dividends to the taxpayer subsequent to their departure from Canada may be credited against the taxes otherwise payable in respect of the deemed gain realized under subsection 128.1(4), subject to the calculation found in section 119.


Henry Shew, "Section 119: Flawed Relief from Departure Tax", Canadian Tax Focus, Vol. 6, No. 2, May 2016, p.9

Example of operation to avoid double taxation (p. 9)

[S]ection 119...applies to the withholding tax on dividends subject to the stop-loss rules in subsection 40(3.7) and provides a credit against tax payable in the year of departure. In order the claim this credit, the taxapyer must file an amended departure return to reflect the reduced tax payable. ...

[A]ssume that Ms. A owns shares of Canco with a nominal ACB and an FMV of $100. Upon emigration, she recognizes the gain of $100 and pays tax of $25 under part I. The ACB of the shares is increased to $100. Post-departure, Ms. A receives $50 of dividends and pays withholding tax of $10. If she subsequently disposes of the shares for $50, she will recognize a loss of $50, which will be reduced to nil pursuant to subsection 40(3.7)….By applying section 119, she will receive a deduction, in computing tax payable, equal to the lesser of the part I departure tax of $25 and the part XIII withholding tax of $10….

Two departures from double-taxation relief (pp. 9-10)

For section 119 to apply, the property deemed disposed of under subsection 128.1(4) must be TCP…. [A]ccordingly, double taxation may still occur.

The section 119 deduction becomes available only when the property is ultimately disposed of, so the double taxation relief is delayed. One solution is to elect under subsection 220(4.5) to post security to the CRA and defer payment of departure tax until disposition.

Subsection 119(1)


Israel v. The Queen, 79 DTC 5418, [1979] CTC 468 (FCTD)

An individual's chief source of income is not from farming if all the relevant farming activities are carried out by a corporation controlled by him.

See Also

Gunderson v. MNR, 91 DTC 523 (TCC)

Given that all of the taxpayer's activities were directed towards his store as his probable chief source of income in the future, his farm was not his chief source of income for the taxation years in question applying the Moldowan test.

Administrative Policy

27 March 1992 T.I. (Tax Window, No. 18, p. 15, ¶1834)

Where there was no gross income from farming for one or more of the years to be averaged, it would appear that the taxpayer did not satisfy the requirement that throughout the period his chief source of income was from farming.


Jack Bernstein, "Canadian Provision to Prevent Double Taxation of Emigrants Undermined by AMT", Tax Notes International Magazine, Vol. 36, December 13, 2004, p. 943.