Section 40

Table of Contents

Subsection 40(1) - General rules

Cases

Abrametz v. Canada, 2009 DTC 5828, 2009 FCA 111

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Calculating and reporting your capital gains and losses

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) 33

Paragraph 40(1)(a)

Subparagraph 40(1)(a)(i)

Cases

Martin v. Canada, 2015 FCA 204

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Gaynor v. The Queen, 91 DTC 5288 (FCA)

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The Queen v. Demers, 86 DTC 6411, [1986] 2 CTC 321 (FCA)

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Tax Topics - Income Tax Act - Section 54 - Proceeds of Disposition 128

See Also

Giguère v. Agence du revenu du Québec, 2018 QCCQ 874

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Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) fraudulent advance did not qualify as a loan 183

Rio Tinto Alcan Inc. v. The Queen, 2016 TCC 172, aff'd 2018 FCA 124

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees investment dealer fees incurred respecting the advisability of making hostile takeover were fully deductible under s. 9 417
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb) investment dealer fees re advisability of making hostile takeover were fully deductible 529
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(cc) legal fees incurred in securing regulatory approval for a hostile bid related to the bidder's business of earning income from shares and interaffiliate sales 182
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(g) takeover bid circular costs did not qualify 102
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Eligible Capital Expenditure fees incurred in order to acquire shares were excluded/butterfly expenses excluded as taxpayer was not in the business of implementing corporate reorganizations 365
Tax Topics - Income Tax Act - Section 169 - Subsection 169(2.1) raising general question of deductibility of fees and listing s. 20(1)(e) did not satisfy s. 165(1.11) 246
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) failure to advance evidence showing allocation of fees to share consideration 139
Tax Topics - Statutory Interpretation - French and English Version finding common meaning of 2 versions of s. 20(1)(bb) 108

Brosamler Estate v. The Queen, 2012 DTC 1193 [at 3493], 2012 TCC 204 (Informal Procedure)

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Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base probate fees added to cost 150

Dubois c. La Reine, 2007 DTC 1534, 2007 TCC 461 (Informal Procedure)

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Avis Immobilièn G.M.B.H. v. The Queen, 94 DTC 1039 (TCC)

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Words and Phrases
expense for the purpose of

Capcount Trading v. Evans, [1993] BTC 3 (C.A.)

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Campbellton Enterprises Ltd. v. MNR, 90 DTC 1869 (TCC)

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Samson Estate v. MNR, 90 DTC 1150 (TCC)

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Bentley v. Pike, [1981] T.R. 17 (HCJ.)

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22 January 2020 External T.I. 2014-0559281E5 F - T5008

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Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) writing of call option (with deemed nil ACB) is reported as having nil “cost” on T5008 99
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(2) “cost” of call options closed out by writer is nil, not the cost of offsetting call option purchase/cost re short sale is the FMV of the borrowed shares 351
Tax Topics - Income Tax Act - Section 9 - Computation of Profit cost of short sale is FMV of borrowed shares 59

15 October 2015 Internal T.I. 2014-0527041I7 F - Disposition de biens

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Words and Phrases
for the purpose

15 September 2015 External T.I. 2015-0583221E5 F - Redemption by a cooperative of its own shares

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10 June 2013 STEP Round Table Q. 10, 2013 0480411C6 (Brosamler decision)

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Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base 75

11 January 2013 External T.I. 2012-0436771E5 - Sale of a business

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(9.1) penalty paid by shareholder 85
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(e) continued deduction where debt settlement by shareholder rather than taxpayer 24

15 November 2012 External T.I. 2012-0461291E5 F - Frais judiciaires pour clarifier une servitude

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Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base no comment on whether legal costs to avoid expanded easement were ACB addition 78

24 April 2012 Internal T.I. 2011-0400671I7 F - Honoraires professionnels

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Start-Up and Liquidation Costs fees incurred by individual before intention to form a corp did not qualify as pre-incorporation expenses 465
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) meaning of “benefit” 153

29 July 2004 Internal T.I. 2003-0023761I7 F - Contrat de SWAP d'équité

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9 June 2003 Internal T.I. 2003-001330 -

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21 October 1993 External T.I. 9325325 - MORTGAGE PAY-OUT PENALTIES

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26 January 1993 Memorandum (Tax Window, No. 28, p. 15, ¶2399)

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91 CR - Q.29

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18 November 1991 Memorandum (Tax Window, No. 11, p. 19, ¶1537)

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89 C.M.TC - "Leasing Costs"

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Subparagraph 40(1)(a)(iii)

Cases

Pineo v. The Queen, 86 DTC 6322, [1986] 2 CTC 71 (FCTD)

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The Queen v. Derbecker, 84 DTC 6549, [1984] CTC 606 (FCA)

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Words and Phrases
due

Neder v. The Queen, 82 DTC 6022, [1981] CTC 501 (FCA)

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Tax Topics - General Concepts - Fair Market Value - Land 64

See Also

Alguire v. The Queen, 95 DTC 532 (TCC)

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Administrative Policy

S4-F7-C1 - Amalgamations of Canadian Corporations

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Tax Topics - Income Tax Act - Section 100 - Subsection 100(2.1) s. 100(2.1) applies to non-qualifying amalgamation 64
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) application following amalgamation 113
Tax Topics - Income Tax Act - Section 116 - Subsection 116(1) deemed tcp following amalgamation 167
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.1) continuity of s. 13(5.1) on amalgamation 132
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) Amalco can continue objection and receive refunds 157
Tax Topics - Income Tax Act - Section 169 Amalco can continue objection 103
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) reserve after amalgamation 62
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder shareholder need not hold shares 88
Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) deemed non-arm's length relationship on amalgamation 172
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) related party, majority and 50% group exceptions 495
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(7) successoring where non-wholly owned amalgamation 109
Tax Topics - Income Tax Act - Section 69 - Subsection 69(13) no disposition of predecessor property on general principles 113
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.4) s. 87(5) not applicable 112
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) non-87 amalgamation/no FX gain 165
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) no deemed dividend to dissenter on amalgamation 87
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) election filing by Amalco 109
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.1) s. 87(1.1) qualifies for all s. 87 purposes 66
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.2) successoring where non-wholly owned amalgamation 109
Tax Topics - Income Tax Act - Section 87 - Subsection 87(10) deemed listing of temporary Amalco shares 120
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11) gain if high PUC is sub shares 55
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) presumptive satisfaction of s. 87(1)(a)/dissent and squeeze-outs onside 297
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) new corp/deemed year end coinciding or not with acquisition of control 758
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(b) Amalco must follow predecessor's valuation method subject to truer picture doctrine 64
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(c) reserve after amalgamation 113
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(d) cost amount carryover 149
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(e.1) s. 100(2.1) applies to non-qualifying amalgamation 64
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(o) no continuity rule for non-security options 139
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(q) pre-amalgamation services 106
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) loss-carry back to parent 169
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) dovetailing with s. 88(1.1) 44
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3.1) 346
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3) PUC shifts 189
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 281
Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) dovetailing with s. 78 and 112(12) 191
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) allocation of s. 87(9)(c)(ii) excess as parent chooses 230
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) late designation 122
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) dovetailing with s. 87(2.1) 62
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) partnership dissolution on amalgamation 137
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) deemed non-arm's length relationship on amalgamation 467
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) deemed non-arm's length relationship on amalgamation 371
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) class continuity on non-arm's length amalgamation 327
Tax Topics - Income Tax Regulations - Regulation 8503 - Subsection 8503(3) - Paragraph 8503(3)(b) pre-amalgamation services 106
Tax Topics - Income Tax Act - Section 249 - Subsection 249(3) 136
Tax Topics - Income Tax Act - Section 22 - Subsection 22(1) 179

24 February 2014 External T.I. 2013-0505391E5 F - Clause de earnout renversé

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Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) no capital gains reserve on reverse earn-out for a share sale 230

7 October 2013 Internal T.I. 2013-0504081I7 F - Interaction between 55(2) and 40(1)(a)(iii)

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Tax Topics - Income Tax Act - Section 55 - Subsection 55(2) s. 40(1)(a)(iii) reserve available where redemption proceeds payable on earnout basis 173
Tax Topics - General Concepts - Payment & Receipt distinction between promissory note as conditional or absolute payment 249

16 November 2001 External T.I. 1999-0009295 - Reserve deemed capital gain

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17 November 1999 External T.I. 9901265 - 97(1) AND A RESERVE

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loan

31 March 1995 External T.I. 9430115 - interest in a family farm partnership & capital gains RESERVE

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93 C.R. - Q. 41

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10 October 1991 T.I. (Tax Window, No. 11, p. 14, ¶1515)

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21 August 1991 T.I. (Tax Window, No. 8, p. 6, ¶1403)

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14 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 12, ¶1119)

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IT-236R2 "Reserves - Dispositions of Capital Property"

IT-436R "Reserves - Where Promissory Notes are Included in Disposal Proceeds"

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Tax Topics - General Concepts - Payment & Receipt 43

Articles

Smith, "Corporate Restructuring Issues: Public Corporations", 1990 Corporate Management Tax Conference Report, pp. 6:6-6:8: discussion of claiming of reserve by vendor under a take-over bid.

Paragraph 40(1)(b)

Administrative Policy

18 August 2014 External T.I. 2014-0540361E5 F - CDA and the deeming rules of 40(3.6) or 112(3)

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Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account no capital loss for CDA purposes where ss. 112(3) and 40(3.6) stop-loss rules apply 128

Subsection 40(2) - Limitations

Paragraph 40(2)(b)

Cases

Cassidy v. Canada, 2011 FCA 271

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The Queen v. Joyner, 88 DTC 6459, [1988] 2 CTC 280 (FCTD)

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The Queen v. Yates, 83 DTC 5158, [1983] CTC 105 (FCTD), aff'd 86 DTC 6296 [1986] 2 CTC 46 (FCA)

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Tax Topics - Income Tax Act - Section 54 - Principal Residence 58

See Also

Francoeur v. Agence du revenu du Québec, 2016 QCCQ 11906

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Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate somewhat quick flip by a builder was eligible for the principal residence exemption 325

Cassidy v. The Queen, 2010 DTC 1336 [at 4287], 2010 TCC 471

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11 October 2019 APFF Roundtable Q. 2, 2019-0812611C6 F - Résiliation d'un bail - Lease cancellation

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Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(z) s. 20(1)(z) applies notwithstanding s. 18(1)(a) but is subject to source rule in s. 20(1) preamble 193
Tax Topics - Income Tax Act - Section 54 - Principal Residence lease termination payment received by tenant was eligible for principal residence exemption 116
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) s. 20(1)-preamble source rule applied 148

5 October 2018 APFF Financial Strategies and Instruments Roundtable Q. 11, 2018-0761571C6 F - Missing info on disposition of principal residence

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Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (c) CRA is only waiving penalties for late-filed principal residence dispositions for 2017 and 2016 returns 355

6 October 2017 APFF Roundtable Q. 3, 2017-0709011C6 F - Désignation d’un bien comme résidence principale

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(b) no loss of bonus year if standard designation
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Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (c) an individual accessing the “+1” rule on a principal residence disposition need not complete Form 2091 253

17 October 2014 Internal T.I. 2014-0546091I7 F - Indemnités lors d'une négociation de gré à gré

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7 October 2016 APFF Roundtable Q. 2, 2016-0652841C6 F - Changement partiel d’usage - immeuble locatif et résidentiel

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Tax Topics - Income Tax Act - Section 45 - Subsection 45(1) - Paragraph 45(1)(c) switch between which triplex units used for personal/family rental or 3rd-party rental did not trigger change of use 249
Tax Topics - Income Tax Act - Section 54 - Principal Residence triplex contained separate housing units 151

7 October 2016 APFF Roundtable Q. 3, 2016-0652851C6 F - Annulation d'une promesse d'achat sur une maison

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(b) no capital loss for damages paid for breach of purchase obligation 73

10 June 2016 External T.I. 2015-0590371E5 F - Résidence principale - stationnement

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Tax Topics - Income Tax Act - Section 54 - Principal Residence - Paragraph (e) a parking space can form part of a condo housing unit 241

13 March 2013 External T.I. 2012-0473291E5 F - Société de personnes - maison détruite par le feu

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Tax Topics - Income Tax Act - Section 44 - Subsection 44(5) - Paragraph 44(5)(a.1) replacement property generally is expected to have the same material characteristics 159
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(c) s. 40(2)(c) unavailable re disposition of building only from fire 111

5 October 2012 Roundtable, 2012-0453961C6 F - Copropriété indivise (50-50) d'un triplex

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11 April 1995 External T.I. 9507405 - 40(2)(B)

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16 February 1995 Mississauga Breakfast Seminar, Q. 4

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88 C.R. - Q.55

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80 C.R. - Q.24

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Paragraph 40(2)(c)

Administrative Policy

13 March 2013 External T.I. 2012-0473291E5 F - Société de personnes - maison détruite par le feu

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(b) partner can use the principal residence exemption re gain allocated by partnership from disposition of personally-used principal residence, including following s. 44 deferral 263
Tax Topics - Income Tax Act - Section 44 - Subsection 44(5) - Paragraph 44(5)(a.1) replacement property generally is expected to have the same material characteristics 159

Paragraph 40(2)(e)

See Also

Plant National Ltd. v. MNR, 89 DTC 401 (TCC)

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Administrative Policy

12 May 1992 Memorandum 921006 (May 1993 Access Letter, p. 194, ¶C38-156)

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25 March 1991 T.I. (Tax Window, No. 1, p. 7, ¶1170)

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10 January 1990 T.I. (June 1990 Access Letter, ¶1257)

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Tax Topics - Income Tax Act - Section 84 - Subsection 84(9) 58

86 C.R. - Q.22

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Paragraph 40(2)(e.1)

Administrative Policy

2014 Ruling 2013-0479701R3 - Transfer of US dollar loan

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) amendment of non-interest bearing loan to be interest-bearing 34
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) s. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved 122
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) S. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved 207

2012 Ruling 2011-0426051R3 - Debt Restructuring

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Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(4) ATR-66 debt tuck-under and wind-up transactions 354

Articles

Mike J. Hegedus, "Paragraph 40(2)(e.1) Versus Subparagraph 40(2)(g)(ii): Potential Conflict?", Resource Sector Taxation (Federated Press), Vol. IX, No. 4, 2014, p.684.

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Paragraph 40(2)(f)

Administrative Policy

S3-F9-C1 - Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime

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Paragraph 40(2)(g)

Subparagraph 40(2)(g)(ii)

Cases

Service v. Canada, 2005 DTC 5281, 2005 FCA 163

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Rich v. Canada, 2003 DTC 5115, 2003 FCA 38

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Byram v. Canada, 99 DTC 5117 (FCA)

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Cadillac Fairview Corp. Ltd. v. Canada, 99 DTC 5121 (FCA)

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Bosa Bros. Construction Ltd. v. The Queen, 96 DTC 6193 (FCTD)

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Brown v. The Queen, 96 DTC 6091 (FCTD)

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Smith v. The Queen, 93 DTC 5351 (FCA)

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Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) benefit concurred in by taxpayer was not taxable under s. 56(2) as it was taxable to the recipient 237

The Queen v. Lalonde, 84 DTC 6159 (FCTD), aff'd 89 DTC 5286 (FCA)

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See Also

Coveley v. The Queen, 2014 DTC 1041 [at 2771], 2013 TCC 417, aff'd 2014 FCA 281

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Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) bad debt claim, but business as usual 116

Audet v. The Queen, 2012 DTC 1208 [at 3556], 2012 TCC 162 (Informal Procedure)

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MacCallum v. The Queen, 2011 DTC 1225 [at 1308], 2011 TCC 316

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Scott v. The Queen, 2010 TCC 401, 2010 DTC 1273 [at 3910]

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Alessandro v. The Queen, 2007 DTC 1373, 2007 TCC 411

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Daniels v. The Queen, 2007 DTC 883, 2007 TCC 179

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Kyriazakos v. The Queen, 2007 DTC 373, 2007 TCC 66

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Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) no attempt to collect was reasonable 124

Toews v. The Queen, 2005 DTC 1359, 2005 TCC 597

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Proulx-Drouin v. The Queen, 2005 DTC 487, 2005 TCC 116

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Bernier v. The Queen, 2004 DTC 3235, 2004 TCC 376

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Joncas v. The Queen, 2004 DTC 2315, 2005 TCC 647 (Informal Procedure)

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MacKay v. The Queen, 2003 DTC 748 (TCC)

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Gordon v. The Queen, 96 DTC 1554 (TCC)

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(12) 79

Burns v. The Queen, 94 DTC 1370 (TCC)

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Tax Topics - Income Tax Act - Section 50 - Subsection 50(1) 109

National Developments Ltd. v. The Queen, 94 DTC 1061 (TCC)

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W.F. Botkin Construction Ltd. v. The Queen, 93 DTC 448 (TCC)

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Glass v. MNR, 92 DTC 1759 (TCC)

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Madaline v. MNR, 91 DTC 1451 (TCC)

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O'Blenes v. MNR, 90 DTC 1068 (TCC)

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Business Art Inc. v. MNR, 86 DTC 1842 (TCC)

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Administrative Policy

14 June 2017 External T.I. 2016-0666411E5 - Negative returns on investments

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Loans and Financing Charges negative interest is deductible under s. 9 if there is a reasonable expectation of receiving (positive) interest 140
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i) negative interest not a contra to positive interest 147

S4-F8-C1 - Business Investment Losses

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16 June 2016 Internal T.I. 2015-0597971I7 F - Perte réputée nulle - loss deemed nil

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(c) BIL potentially could be recognized on a non-interest bearing loan made to a corporation in which the taxpayer had no equity 0

2014 Ruling 2013-0479701R3 - Transfer of US dollar loan

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Tax Topics - Income Tax Act - Section 39 - Subsection 39(2) amendment of non-interest bearing loan to be interest-bearing 34
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(e.1) s. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved 207
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) S. 40(2)(e.1) trumped s. 40(2)(g)(ii) so that US Loan ACB preserved 207

6 May 2014 Internal T.I. 2014-0524651I7 - Loss on conversion

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Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) s. 51 applies where issuer had a cash redemption override 208
Tax Topics - Income Tax Act - Section 51 - Subsection 51(1) conversion not under Note terms 185

8 July 2013 Internal T.I. 2012-0434991I7 F - Déductibilité d'une perte

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii) per jurisprudence on guarantees, taxpayer’s reason for assuming an obligation (to protect an interest-bearing investment) must be examined
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(p) - Subparagraph 20(1)(p)(ii) ordinary business requirement looks to the presence of an organized and continuous system 251

6 December 2012 External T.I. 2012-0463431E5 F - Application of subparagraph 40(2)(g)(ii)

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2012 Ruling 2010-0386201R3 - Tower structure capitalized by interest-free loans

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Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(i) non-interest-bearing loans is made for income producing purposes: generating dividends 890

14 January 2004 External T.I. 2003-003875

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17 December 1996 Internal T.I. 9634547 - DISPOSITION OF EMPLOYMENT BONUS NOTES

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Halifax Round Table, February 1994, Q. 1

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23 December 1993 External T.I. 9317905 - ALLOWABLE BUSINESS INVESTMENT LOSS

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91 C.R. - Q.35

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21 August 1991 T.I. (Tax Window, No. 8, p. 22, ¶1397)

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12 September 1990 T.I. (Tax Window, Prelim. No. 1, p. 10, ¶1016)

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15 September 89 Memorandum (February 1990 Access Letter, ¶1105)

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1 September 89 T.I. (February 1990 Access Letter, ¶1106)

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22 Aug. 89 T.I. (Jan. 90 Access Letter, ¶1078)

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81 C.R. - Q.4

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IT-239R2 "Deductibility of Capital Losses from Guaranteeing Loans for Inadequate Consideration and from Loaning Funds at less than a Reasonable Rate of Interest in Non-arm's Length Circumstances"

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Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) 46

IT-390 "Unit Trusts - Cost of Rights and Adjustments to Cost Base"

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Tax Topics - Income Tax Act - Section 52 - Subsection 52(6) 0

Articles

Reid, "Capital and Non-Capital Losses", 1990 Conference Report, c. 16

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Subparagraph 40(2)(g)(iii)

Administrative Policy

7 October 2016 APFF Financial Strategies and Instruments Roundtable Q. 2, 2016-0651711C6 F - RRIF, Transfer of designated benefit

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Tax Topics - Income Tax Act - Section 54 - Personal-Use Property land underlying duplex used 40% personally is not personal-use property 228
Tax Topics - Income Tax Regulations - Regulation 1102 - Regulation 1102(2) Reg. 1102(2) deems building to be separate from land and does not bifurcate the land 171
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(6.11) computation of eligible amount following year of death 297

Subsection 40(3) - Deemed gain where amounts to be deducted from adjusted cost base exceed cost plus amounts to be added to adjusted cost base

Administrative Policy

30 October 2014 External T.I. 2013-0488881E5 - Upstream Loan

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8 October 2010 Roundtable, 2010-0373461C6 F - Retrait d'une société de personnes

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Tax Topics - Income Tax Act - Section 100 - Subsection 100(2) negative ACB realized pro rata under s. 100(2) as portion of the units are redeemed each year 201
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) all the partner’s units are a single property 81
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property partnership unit is not separate property from other units 57

Rulings Directorate Discussion and Position Paper on Motion Picture Films and Video Tapes as Tax Shelters, Version 29/3/93 930501 (C.T.O. "Motion Picture Films - C.C.A.")

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Articles

Melanie Huynh, Eric Lockwood, "Foreign Affiliates and Adjusted Cost Base", 2007 Canadian Tax Journal, Issue No. 1

Subsection 40(3.1) - Deemed gain for certain partners

See Also

Gladwin Realty Corporation v. The Queen, 2019 TCC 62, aff'd 2020 FCA 142

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Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) using the CDA and negative ACB rules to generate “over-integration” was abusive 594
Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (a) contrary to purpose of the capital dividend rules to fully exempt a capital gains distribution 300
Tax Topics - Income Tax Act - Section 123.3 no CRA challenge to continuance to BVI to avoid s. 123.3 tax 96

Administrative Policy

27 June 2016 External T.I. 2016-0637341E5 F - Partnerships - Negative ACB

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Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c) - Subparagraph 53(2)(c)(v) loan advances to a limited partner may give rise to immediate s. 53(2)(c)(v) grind 261
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.13) retention of partnership profits not a contribution 150
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(iv) assumption of loan can be contribution, but not retained profits 177

18 June 2014 External T.I. 2011-0417491E5 - Non-resident's partnership interest

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15 December 2010 External T.I. 2009-0349911E5 F - Calcul du PBR d'une participation dans une SEC

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Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i) no ACB bump for gains realized in the year until Day 1 of following year 98

Subsection 40(3.12) - Deemed loss for certain partners

Administrative Policy

3 July 2012 External T.I. 2012-0449701E5 - Subsection 40(3.12) and tiered ptnshps

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Articles

Joint Committee, "Response to Green case", 19 January 2018 Joint Committee Submission to Finance respecting the Green case

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Subsection 40(3.13)

Administrative Policy

27 June 2016 External T.I. 2016-0637341E5 F - Partnerships - Negative ACB

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Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c) - Subparagraph 53(2)(c)(v) loan advances to a limited partner may give rise to immediate s. 53(2)(c)(v) grind 261
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.1) loans by LP to partner potentially gave rise to negative ACB gain 168
Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(iv) assumption of loan can be contribution, but not retained profits 177

Subsection 40(3.14)

Paragraph 40(3.14)(a)

Administrative Policy

11 October 2013 APFF Roundtable, 2013-0495861C6 F - Question 20 - APFF Round Table

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Specified Member specified member status determined re involvement in daily management or activities 93

Articles

Lorenzo Bonanno, Guy Buckley, "Limited Liability Partnerships", Canadian Tax Highlights, Vol. 25, No. 2, February 2017, p. 7

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Geneviève C. Lille, Elizabeth J. Johnson, "Partnerships: An Update", 2010 Conference Report (Toronto: Canadian Tax Foundation, 2011), 36:1-62

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Subsection 40(3.15) - Excluded interest

Administrative Policy

24 June 2014 External T.I. 2014-0524331E5 - definition of excluded interest

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.16) distribution not a qualifying use 127

22 May 1998 External T.I. 9806575 - EXCLUDED INTEREST

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Subsection 40(3.16) - Amounts considered not to be substantial

Administrative Policy

24 June 2014 External T.I. 2014-0524331E5 - definition of excluded interest

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.15) 40% indebtedness increase to below original amount was "substantial" 86

Subsection 40(3.3) - When subsection (3.4) applies

Administrative Policy

6 October 2017 APFF Financial Strategies and Instruments Roundtable Q. 10, 2017-0705201C6 F - Capital loss - repayment of loan

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property foreign currency is not property for purposes of the suspended-loss rules 184

3 February 2016 Internal T.I. 2015-0588791I7 - Meaning of substituted property

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6 January 2009 Internal T.I. 2008-0280111I7 - FX loss on disposition of cash

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2007 Ruling 2007-0245281R3 - windup of income trust on sale of assets:3rd party

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21 March 2007 External T.I. 2004-0091061E5 - stop loss rules for depreciable property

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Articles

Marc Ton-That, Rick McLean, "Navigating the Stop-Loss Rules", Corporate Structures and Groups, Vol. VI, No. 3, p. 324.

Subsection 40(3.4) - Loss on certain properties

Administrative Policy

27 October 2014 Internal T.I. 2014-0534981I7 F - Subsection 40(3.4)

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2 July 2014 External T.I. 2014-0529731E5 F - Stop-loss Rules

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28 November 2010 CTF Annual Roundtable Q. 8, 2010-0386311C6 - Subsection 40(3.4)

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6 October 2011 External T.I. 2011-0399611E5 - Subsections 40(3.3) and 40(3.4)

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2010 Conference Report CRA Round Table, Q. 8 [not carried forward to Income Tax Technical News, No. 44]

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18 March 2003 External T.I. 2003-0002915 F - Subsections 40(3.3) & 40(3.4)

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4 July 2001 External T.I. 2001-0088155 - Subsection 40(3.4)

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Paragraph 40(3.4)(b)

Subparagraph 40(3.4)(b)(i)

Administrative Policy

30 April 2019 Internal T.I. 2019-0793481I7 - Application of Paragraph 40(3.4)(b)

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(c) - Subparagraph 40(3.5)(c)(i) a loss that was suspended under s. 40(3.5)(c)(i), can be de-suspended by winding-up the CFA referenced under s. 40(3.5)(c)(i) 198

Subsection 40(3.5) - Deemed identical property

See Also

10737 Newfoundland Limited v. The Queen, 2011 DTC 1255 [at 1460], 2011 TCC 346

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Cascades Inc. v. The Queen, 2008 DTC 2387, 2007 TCC 730

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Administrative Policy

14 March 2003 Internal T.I. 2003-0182977 F - 40(3.5)(c)

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Articles

Carrie Smit, "Exchangeable Shares: Not Just Rights to Foreign Shares", CCH International Tax, No. 59, August 2011, p. 1

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Paragraph 40(3.5)(b)

Administrative Policy

26 January 2018 Internal T.I. 2017-0735771I7 - Application of paragraph 40(3.5)(c)

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(c) - Subparagraph 40(3.5)(c)(i) a suspended loss on the sale of CFA1 to CFA2 was not de-suspended on s. 95(2)(e) wind-up of CFA1 into CFA2 478
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(e) S. 95(2)(e) wind-up constructively resulted in formation of new corporation 79

Paragraph 40(3.5)(c)

Cases

Canada v. Cascades Inc., 2009 DTC 6122, 2009 FCA 135

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Words and Phrases
apply

Subparagraph 40(3.5)(c)(i)

Administrative Policy

30 April 2019 Internal T.I. 2019-0793481I7 - Application of Paragraph 40(3.4)(b)

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Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.4) - Paragraph 40(3.4)(b) - Subparagraph 40(3.4)(b)(i) loss was de-suspended when CFA-formed-on-merger for purposes of s. 40(3.5)(c)(i) was wound-up 387

25 June 2018 Internal T.I. 2017-0737151I7 - Application of paragraph 40(3.5)(c)

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Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 33(2) reference to merger to form one corporation included three 107

26 January 2018 Internal T.I. 2017-0735771I7 - Application of paragraph 40(3.5)(c)

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Words and Phrases
merger formed
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Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.5) - Paragraph 40(3.5)(b) scope of s. 40(3.5)(b) extends to mergers and constructive formation of new entities 443
Tax Topics - Income Tax Act - Section 95 - Subsection 95(2) - Paragraph 95(2)(e) S. 95(2)(e) wind-up constructively resulted in formation of new corporation 79

16 May 2018 IFA Roundtable Q. 5, 2018-0745501C6 - Meaning of “merged or combined” in 40(3.5)(c)(i)

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Words and Phrases
merged or combined formed
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 88 - Subsection 88(3) s. 88(3) wind-up of CFA formed a new corporation 167

Articles

Ian Bradley, Jonathan Bright, "The Stop-Loss Rules and Corporate Reorganizations – Interpretive Challenges", Canadian Tax Journal, (2019) 67:2, 383-410

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Words and Phrases
merger combination winding-up

Subsection 40(3.6) - Loss on shares

Administrative Policy

12 January 2015 Internal T.I. 2014-0560421I7 - FX losses on CFA wind-up

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10 October 2014 APFF Roundtable, 2014-0538241C6 F - 75(2) and definition of "earned income" in 146(1)

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(1) - Earned Income character preservation of s. 75(2) attributed income 122
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) character preservation of attributed income/basis adjustment for denied capital loss at trust level 446

15 August 2014 Internal T.I. 2014-0538591I7 - FX losses on CFA wind-up

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 93 - Subsection 93(2.01) no reduction under s. 93(2.01)(a) if no exempt dividend 132

23 April 2012 Internal T.I. 2012-0436921I7 - Capital Losses

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9 January 2012 External T.I. 2011-0427461E5 F - Attribution Rules and Suspended Loss Rules

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.2 - Subsection 74.2(1) stop-loss rule in s, 40(3.6) trumped s. 74.2(1) so that denied capital loss was added to transferee spouse’s common share ACB 278

16 January 2003 External T.I. 2002-0151025 - Subsection 40(3.6)

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29 March 2001 External T.I. 2001-0074145 - Affiliated persons & stop loss rules

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13 October 2000 Internal T.I. 2000-0031107 - Post Martem Estate Planning

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Articles

Steve Suarez, Pooja Samtani, "Using Exchangeable Shares in Inbound Canadian Transactions", 2007, 48:13, Tax Notes Int'l 1281 (The authors describe an "exchangeable share" as "a share of a Canadian corporation... that, together with some ancillary rights, replicates as closely as possible the economics (and to some extent the legal rights engaged by holders) of a share of another corporation.")

Kevin Wark, "Corporate-Owned Insurance: Revisiting Share Redemption Arrangements", CALU Report, August 2004.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2) 0

Subsection 40(3.61) - Exception — estate loss carried back

Administrative Policy

2019 Ruling 2019-0822951R3 F - Post-mortem Hybrid Pipeline

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2) pipeline transaction for marketable securities company that includes full use of the ERDTOH/NERDTOH balances and s. 164(6) carryback 438

11 October 2013 APFF Roundtable, 2013-0493651C6 F - Affiliated persons and de facto control

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 256 - Subsection 256(5.1) holding of relatively large note where debtor has a iliquid business could give rise to de facto control 260

Subsection 40(4) - Disposal of principal residence to spouse or trust for spouse

See Also

Levatte Estate v. The Queen, 2019 TCC 177

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 162 - Subsection 162(1) penalty waived based on personal stress and the near miss 130

Administrative Policy

5 November 2014 External T.I. 2014-0521891E5 F - Résidence principale et copropriété

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership whether a tacit co-ownership agreement is respected is a private law issue 126

1 September 1995 External T.I. 9507695 - PRINCIPAL RESIDENCE PROVISIONS

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14 July 1994 External T.I. 9405025 - GAIN ON PROPERTY TRANSFERRED FROM SPOUSE

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23 June 1992 T.I. 920894 (December 1992 Access Letter, p. 13, ¶C38-248)

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7 March 1992 T.I. (Tax Window, No. 17, p. 7, ¶1786)

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Paragraph 40(4)(b)

Subparagraph 40(4)(b)(i)

Administrative Policy

30 September 2010 Internal T.I. 2010-0373901I7 F - Bigamie fiscale - transfert de biens au décès

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) - Paragraph 70(6)(a) s. 70(6)(a) could apply simultaneously to the devise of House A to surviving spouse and of House B to surviving common-law partner 103

Subsection 40(6.1)

Subsection 40(7) - Property in satisfaction of interest in trust

Subsection 40(10)

Administrative Policy

7 October 2016 APFF Roundtable Q. 17, 2016-0652781C6 F - Functional currency and acquisition of control

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(4) - Paragraph 111(4)(e) FX gains or losses on pre-transition debts not affected 229
Tax Topics - Income Tax Act - Section 261 - Subsection 261(9) - Paragraph 261(9)(a) exclusion of pre-transition debts from s. 111(4) 98

Subsection 40(11)

Articles

Carrie Smit, "Foreign Currency Debts and Acquisitions of Control: Beware the Unexpected Gain", International Tax (Wolters Kluwer CCH), February 2017, No. 9, p. 6

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) 495

Subsection 40(12) - Donated flow-through shares

Administrative Policy

19 January 2018 External T.I. 2017-0683501E5 - Flow-Through Shares

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Exemption Threshold taxpayer with no flow-through shares has no exemption threshold 188
Tax Topics - Income Tax Act - Section 38.1 general paraphrase 307

16 October 2012 External T.I. 2012-0437911E5 - Donation of flow-through shares

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 38.1 148

2 March 2004 2003-0042631E5 F - Déductibilité de dépenses

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 38.1 112