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

and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the taxpayer desired to have conferred on a person related to the taxpayer, the following rules apply:

(c) the taxpayer shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of
- (i) the total of the cost to the taxpayer of the property as determined under paragraph 86(1)(a) and the gift portion
- (ii) the fair market value of the old shares immediately before the disposition,
- (i) the fair market value, immediately after the disposition, of the new shares of that class,
- (ii) the fair market value, immediately after the disposition, of all new shares of the capital stock of the corporation receivable by the taxpayer for the old shares.
(A - B) × C/A where is the total of all amounts each of which is the increase, if any, as a result of the exchange, in the paid-up capital in respect of a class of shares of the capital stock of the corporation, computed without reference to this subsection as it applies to the exchange, is the amount, if any, by which the paid-up capital in respect of the old shares exceeds the fair market value of the consideration (other than shares of the capital stock of the corporation) given by the corporation for the old shares on the exchange, and is the increase, if any, as a result of the exchange, in the paid-up capital in respect of the particular class of shares, computed without reference to this subsection as it applies to the exchange; and
- (i) the amount, if any, by which
  - (A) the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation before the particular time
  - (B) the total that would be determined under clause 86(2.1)(b)(i)(A) if this Act were read without reference to paragraph 86(2.1)(a), and
  - (i) the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the taxpayer of the old shares immediately before the disposition
  - (ii) the amount that would be the taxpayer’s capital gain for the taxation year that includes the time of the disposition from the disposition of the old shares if paragraph 40(1)(a) were read without reference to subparagraph (iii) of that paragraph,
  - [NOTE: Application provisions are not included in the consolidated text
  - see relevant amending Acts and regulations.]
  - R.S., 1985, c. 1 (5th Supp.), s. 86
  - 1994, c. 21, s. 38
  - 1995, c. 21, s. 29
  Foreign Spin-offs
  
  Marginal note: Eligible distribution not included in income
  - 86.1 (1) Notwithstanding any other provision of this Part,
    - (a) the amount of an eligible distribution received by a taxpayer shall not be included in computing the income of the taxpayer; and
    - (b) subsection 52(2) does not apply to the eligible distribution received by the taxpayer.
    - (a) the distribution is with respect to all of the taxpayer’s common shares of the capital stock of the particular corporation (in this section referred to as the “original shares”);
    - (b) the distribution consists solely of common shares of the capital stock of another corporation that were owned by the particular corporation immediately before their distribution to the taxpayer (in this section referred to as the “spin-off shares”);
    - (c) in the case of a distribution that is not prescribed,
      - (i) at the time of the distribution, both corporations are resident in the United States and were never resident in Canada,
      - (ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and
        
        (A) are actively traded on a designated stock exchange in the United States, or
        
        (B) are required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and
        
        (i) at the time of the distribution, both corporations are resident in the same country, other than the United States, with which Canada has a tax treaty (in this section referred to as the “foreign country”) and were never resident in Canada,
        
        (ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and actively traded on a designated stock exchange,
        
        (iii) under the law of the foreign country, those shareholders of the particular corporation who are resident in that country are not taxable in respect of the distribution, and
        
        (iv) the distribution is prescribed subject to such terms and conditions as are considered appropriate in the circumstances;
        
        (i) that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),
        
        (ii) that the particular corporation and the other corporation referred to in paragraph (b) were never resident in Canada,
        
        (iii) the date of the distribution,
        
        (iv) the type and fair market value of each property distributed to residents of Canada,
        
        (v) the name and address of each resident of Canada that received property with respect to the distribution,
        
        (vi) in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution,
        
        (vii) in the case of a distribution that is prescribed, that the distribution is not taxable under the law of the foreign country, and
        
        (viii) such other matters that are required, in prescribed form; and
        
        (i) of the number, cost amount (determined without reference to this section) and fair market value of the taxpayer’s original shares immediately before the distribution,
        
        (ii) of the number, and fair market value, of the taxpayer’s original shares and the spin-off shares immediately after the distribution of the spin-off shares to the taxpayer,
        
        (iii) except where the election is filed with the taxpayer’s return of income for the year in which the distribution occurs, concerning the amount of the distribution, the manner in which the distribution was reported by the taxpayer and the details of any subsequent disposition of original shares or spin-off shares for the purpose of determining any gains or losses from those dispositions, and
        
        (iv) of such other matters that are required, in prescribed form.
        
        (i) the fair market value of the original share immediately after the distribution of the spin-off share to the taxpayer, and
        
        (ii) the fair market value of the spin-off share immediately after its distribution to the taxpayer; and
        
        (a) an eligible distribution to the taxpayer of a spin-off share that is included in the inventory is deemed not to be an acquisition of property in the fiscal period of the business in which the distribution occurs; and
        
        (b) for greater certainty, the value of the spin-off share is to be included in computing the value of the inventory at the end of that fiscal period.
        
        [NOTE: Application provisions are not included in the consolidated text
        
        see relevant amending Acts and regulations.]
        
        2001, c. 17, s. 64
        
        2005, c. 30, s. 3
        
        2007, c. 35, s. 68
        
        2013, c. 34, s. 222
        
        Marginal note: Amalgamations
        
        87 (1) In this section, an amalgamation means a merger of two or more corporations each of which was, immediately before the merger, a taxable Canadian corporation (each of which corporations is referred to in this section as a “predecessor corporation”) to form one corporate entity (in this section referred to as the “new corporation”) in such a manner that
        
        (a) all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the merger becomes property of the new corporation by virtue of the merger,
        
        (b) all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger become liabilities of the new corporation by virtue of the merger, and
        
        (c) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,
        
        otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of that property by the other corporation or as a result of the distribution of that property to the other corporation on the winding-up of the corporation.
        
        (a) a corporation and one or more of its subsidiary wholly-owned corporations, or
        
        (b) two or more corporations each of which is a subsidiary wholly-owned corporation of the same corporation
        
        any shares of the capital stock of a predecessor corporation owned by a shareholder (except any predecessor corporation) immediately before the merger that were not cancelled on the merger shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger as consideration for the disposition of the shares of the capital stock of the predecessor corporations.
        
        (a) the parent;
        
        (b) a corporation that is a subsidiary wholly-owned corporation of the parent; or
        
        (c) any combination of persons each of which is a person described in paragraph 87(1.4)(a) or 87(1.4)(b).
        
        Marginal note: Taxation year (a) for the purposes of this Act, the corporate entity formed as a result of the amalgamation shall be deemed to be a new corporation the first taxation year of which shall be deemed to have commenced at the time of the amalgamation, and a taxation year of a predecessor corporation that would otherwise have ended after the amalgamation shall be deemed to have ended immediately before the amalgamation;
        
        Marginal note: Inventory (b) for the purpose of computing the income of the new corporation, where the property described in the inventory, if any, of the new corporation at the beginning of its first taxation year includes property that was described in the inventory of a predecessor corporation at the end of the taxation year of the predecessor corporation that ended immediately before the amalgamation (which taxation year of a predecessor corporation is referred to in this section as its “last taxation year”), the property so included shall be deemed to have been acquired by the new corporation at the beginning of its first taxation year for an amount determined in accordance with section 10 as the value thereof for the purpose of computing the income of the predecessor corporation for its last taxation year, except that where the income of the predecessor corporation for its last taxation year from a farming business was computed in accordance with the cash method, the amount so determined in respect of inventory owned in connection with that business shall be deemed to be the total of all amounts each of which is an amount included because of paragraph 28(1)(b) or 28(1)(c) in computing that income for that year and, where the income of the new corporation from a farming business is computed in accordance with the cash method, for the purpose of section 28,
        
        (i) an amount equal to that total shall be deemed to have been paid by the new corporation, and
        
        (ii) the new corporation shall be deemed to have purchased the property for an amount equal to that total,
        
        in its first taxation year and in the course of carrying on that business;
        
        (i) there shall be included any amount received or receivable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been received or receivable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been included in computing the income of the predecessor corporation for that year, and
        
        (ii) there may be deducted any amount paid or payable (depending on the method followed by the new corporation in computing its income for that year) by it in that year that would, if it had been paid or payable (depending on the method followed by the predecessor corporation in computing its income for its last taxation year) by the predecessor corporation in its last taxation year, have been deductible in computing the income of the predecessor corporation for that year;
        
        (i) where depreciable property of a prescribed class has been acquired by the new corporation from a predecessor corporation, the capital cost of the property to the new corporation shall be deemed to be the amount that was the capital cost of the property to the predecessor corporation, and
        
        (ii) in determining the undepreciated capital cost to the new corporation of depreciable property of a prescribed class at any time,
        
        (A) there shall be added to the capital cost to the new corporation of depreciable property of the class acquired before that time the cost amount, immediately before the amalgamation, to a predecessor corporation of each property included in that class by the new corporation,
        
        (B) there shall be subtracted from the capital cost to the new corporation of depreciable property of that class acquired before that time the capital cost to the new corporation of property of that class acquired by virtue of the amalgamation,
        
        (C) a reference in subparagraph 13(5)(b)(ii) to amounts that would have been deducted in respect of property in computing a taxpayer’s income shall be construed as including a reference to amounts that would have been deducted in respect of that property in computing a predecessor corporation’s income, and
        
        (D) where depreciable property that is deemed by subsection 37(6) to be a separate prescribed class has been acquired by the new corporation from a predecessor corporation, the property shall continue to be deemed to be of that same separate prescribed class;
        
        (i) the new corporation is a financial institution in its first taxation year and a property acquired by the new corporation from a predecessor corporation is a mark-to-market property of the new corporation for the year, or
        
        (ii) a predecessor corporation was a financial institution in its last taxation year and a property acquired by the new corporation from the predecessor corporation was a mark-to-market property of the predecessor corporation for the year,
        
        the cost of the property to the new corporation shall be deemed to be the amount that was the fair market value of the property immediately before the amalgamation;
        
        (i) any amount that has been deducted as a reserve in computing the income of a predecessor corporation for its last taxation year shall be deemed to have been deducted as a reserve in computing the income of the new corporation for a taxation year immediately preceding its first taxation year, and
        
        (ii) any amount deducted under paragraph 20(1)(p) in computing the income of a predecessor corporation for its last taxation year or a previous taxation year shall be deemed to have been deducted under that paragraph in computing the income of the new corporation for a taxation year immediately preceding its first taxation year;
        
        (i) any debt owing to a predecessor corporation that was included in computing the income of the predecessor corporation for its last taxation year or a preceding taxation year,
        
        (ii) where a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any loan or lending asset made or acquired by the predecessor corporation in the ordinary course of its business of insurance or the lending of money, or
        
        (iii) where a predecessor corporation was an insurer or a corporation the ordinary business of which included the lending of money, any instrument or commitment described in paragraph 20(1)(l.1) that was issued, made or assumed by the predecessor corporation in the ordinary course of its business of insurance or the lending of money,
        
        and that by reason of the amalgamation, has been acquired by the new corporation, shall be deemed to be a debt owing to the new corporation that was included in computing its income for a preceding taxation year, a loan or lending asset made or acquired or an instrument or commitment that was issued, made or assumed by the new corporation in a preceding taxation year in the ordinary course of its business of insurance or the lending of money, as the case may be;
        
        (i) the base period for a particular taxation year of a new corporation that has fewer than 3 preceding taxation years shall be deemed to be the period
        
        (A) commencing on the day that
        
        (I) is the earliest of all days each of which is a day immediately before the commencement of a taxation year of a predecessor corporation in respect of the new corporation that ended after 1976, and
        
        (II) is in the 3 year period ending on the day immediately before the commencement of the particular year, and
        
        (A) in determining the qualified expenditures made by the new corporation in its base period, there shall be included the total of all amounts each of which is the qualified expenditure made by a predecessor corporation in a taxation year that commenced in the base period of the new corporation, and
        
        (B) in determining the total of the amounts paid to the new corporation by persons referred to in subparagraphs (b)(i) to (iii) of the definition in subsection 37.1(5) in its base period, there shall be included the total of all such amounts paid to a predecessor corporation by a person referred to in those subparagraphs in a taxation year that commenced in the base period of the new corporation,
        
        (i) to have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in computing the new corporation’s gain for a taxation year immediately preceding its first taxation year from the disposition of that property by it before its first taxation year, and
        
        (ii) to be the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of that property;
        
        (i) any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,
        
        (ii) any person to whom the option was granted who was not dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm’s length at the time that the option was granted, and
        
        (iii) any person to whom the option was granted who was dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm’s length at the time that the option was granted;
        
        (i) the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation that was an agricultural cooperative corporation at the end of the predecessor corporation’s last taxation year, and
        
        (ii) if, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the “old share”) that was, at the end of the predecessor corporation’s last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange;
        
        (i) for the purposes of subsection 91(5) and paragraph 92(1)(b), any amount required by section 92 to be added or deducted, as the case may be, in computing the adjusted cost base of any such share to the predecessor corporation before the amalgamation shall be deemed to have been so required to be added or deducted, as the case may be, in computing the adjusted cost base of the share to the new corporation, and
        
        (ii) for the purposes of subsections 93(2.01), (2.11), (2.21) and (2.31), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;
        
        (i) any taxable dividend received on a share that was deductible from the predecessor corporation’s income for a taxation year under section 112 or subsection 138(6) is deemed to be a taxable dividend received on the share by the new corporation that was deductible from the new corporation’s income under section 112 or subsection 138(6), as the case may be,
        
        (ii) any dividend (other than a taxable dividend) received on a share by the predecessor corporation is deemed to have been received on the share by the new corporation, and
        
        (iii) a share acquired by the new corporation from a predecessor corporation is deemed to have been owned by the new corporation throughout any period of time throughout which it was owned by a predecessor corporation;
        
        (i) the fiscal period of the new corporation or any of its predecessor corporations, or
        
        (ii) the tax payable under this Act by any predecessor corporation;
        
        (i) for the purpose of computing the and (as defined in subsection 129(4)) of the new corporation at the end of its first taxation year there shall be added to the total determined under those definitions in respect of the new corporation for the year
        
        (A) in respect of the new corporation’s eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the total of all amounts each of which is the portion, if any, of its dividend refund for its last taxation year from its eligible refundable dividend tax on hand determined under subparagraph 129(1)(a)(i) or clause 129(1)(a)(ii)(B), and
        
        (B) in respect of the new corporation’s non-eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the non-eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the portion, if any, of its dividend refund for its last taxation year from its non-eligible refundable dividend tax on hand determined under clause 129(1)(a)(ii)(A), and
        
        (A) that was not a private corporation at the end of its last taxation year, or
        
        (B) where subsection 129(1.2) would have applied to deem a dividend paid by the predecessor corporation immediately before the amalgamation not to be a taxable dividend for the purpose of subsection 129(1);
        
        (i) the amount determined under each of paragraphs (a) and (b) of the definition in subsection 131(6), and
        
        (ii) the values of A and B in the definition in that subsection
        
        in respect of the new corporation at any time the amounts so determined and the values of those factors immediately before the amalgamation in respect of each predecessor corporation that was, immediately before the amalgamation, a mutual fund corporation or an investment corporation;
        
        (i) for the purpose of computing its allowable refundable tax on hand (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had allowable refundable tax on hand immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition in subsection 133(9),
        
        (ii) for the purpose of computing its capital gains dividend account (within the meaning assigned by subsection 133(8)) at any time, where a predecessor corporation had an amount in its capital gains dividend account immediately before the amalgamation, that amount shall be added to the amount determined under paragraph (a) of the description of A in the definition in subsection 133(8), and
        
        (iii) for the purpose of computing its cumulative taxable income (within the meaning assigned by subsection 133(9)) at any time, where a predecessor corporation had cumulative taxable income immediately before the amalgamation, the amount thereof shall be added to the total determined for A in the definition in subsection 133(9);
        
        (i) where a corporation was controlled, directly or indirectly in any manner whatever, by a predecessor corporation immediately before the amalgamation and has, by reason of the amalgamation, become controlled, directly or indirectly in any manner whatever, by the new corporation, the new corporation shall be deemed to have acquired control of the corporation so controlled at the time control thereof was acquired by the predecessor corporation, and
        
        (ii) where a predecessor corporation was immediately before the amalgamation controlled, directly or indirectly in any manner whatever, by a corporation that, immediately after the amalgamation, controlled, directly or indirectly in any manner whatever, the new corporation, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
        
        (i) the amount of any deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business, and
        
        (ii) the amount of its claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property,
        
        be deemed to be the same corporation as, and a continuation of, the predecessor corporation;
        
        (i) a predecessor corporation’s refundable Part VII tax on hand at the end of its last taxation year
        
        (ii) the predecessor corporation’s Part VII refund for its last taxation year;
        
        (i) a particular taxation year that
        
        (A) where it was associated with another corporation in the new corporation’s first taxation year, ended in the calendar year that precedes the calendar year in which that first year ends, and
        
        (B) where clause 87(2)(oo.1)(i)(A) does not apply, immediately precedes that first year,
        
        (i) a predecessor corporation’s cumulative offset account at the end of its last taxation year
        
        (ii) the amount deducted under subsection 66.5(1) in computing the predecessor corporation’s income for its last taxation year;
        
        (a) determining the new corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be, for any taxation year,
        
        (a.1) determining, for any taxation year, the new corporation’s absorbed capacity, excess capacity and transferred capacity in determining its cumulative unused excess capacity for a taxation year, and
        
        (b) determining the extent to which subsections 111(3) to (5.4) and paragraph 149(10)(c) apply to restrict the deductibility by the new corporation of any non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be,
        
        the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection shall in no respect affect the determination of
        
        (c) the fiscal period of the new corporation or any of its predecessors,
        
        (d) the income of the new corporation (other than as a result of an amount of interest and financing expenses being deductible by the new corporation because of paragraph (a.1)) or any of its predecessors, or
        
        (e) the taxable income of, or the tax payable under this Act by, any predecessor corporation.
        
        (a) the amount deducted is in respect of all or any portion of a non-capital loss for another taxation year; and
        
        (b) the non-capital loss or the portion of the non-capital loss, as the case may be, is a non-capital loss of the particular predecessor corporation for the other taxation year.
        
        (a) immediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act , R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; and
        
        (b) on the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.
        
        (a) there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this subsection, in respect of all the shares of the capital stock of the new corporation immediately after the amalgamation or merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share (except a share held by any other predecessor corporation) of the capital stock of a predecessor corporation immediately before the amalgamation or merger, that
        
        (i) the paid-up capital, determined without reference to this subsection, of the particular class of shares of the capital stock of the new corporation immediately after the amalgamation or merger
        
        (ii) the paid-up capital, determined without reference to this subsection, in respect of all of the issued and outstanding shares of the capital stock of the new corporation immediately after the amalgamation or merger; and
        
        (i) the amount, if any, by which
        
        (A) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the new corporation before the particular time
        
        (B) the total that would be determined under clause 87(3)(b)(i)(A) if this Act were read without reference to paragraph 87(3)(a), and
        
        (a) there is an amalgamation of 2 or more corporations,
        
        (b) all of the issued shares, immediately before the amalgamation, of each class of shares (other than a class of shares all of the issued shares of which were cancelled on the amalgamation) of the capital stock of each predecessor corporation (in this subsection referred to as the “exchanged class”) are converted into all of the issued shares, immediately after the amalgamation, of a separate class of shares of the capital stock of the new corporation (in this subsection referred to as the “substituted class”),
        
        (c) immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, and
        
        (d) the new corporation elects in its return of income filed in accordance with section 150 for its first taxation year to have the provisions of this subsection apply,
        
        for the purpose of computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,
        
        (e) subsection 87(3) does not apply in respect of the amalgamation, and
        
        (f) each substituted class shall be deemed to be the same as, and a continuation of, the exchanged class from which it was converted.
        
        (a) to have disposed of the old shares for proceeds equal to the total of the adjusted cost bases to the shareholder of those shares immediately before the amalgamation, and
        
        (b) to have acquired the new shares of any particular class of the capital stock of the new corporation at a cost to the shareholder equal to that proportion of the proceeds described in paragraph 87(4)(a) that
        
        (i) the fair market value, immediately after the amalgamation, of all new shares of that particular class so acquired by the shareholder,
        
        (ii) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
        
        except that, where the fair market value of the old shares immediately before the amalgamation exceeds the fair market value of the new shares immediately after the amalgamation and it is reasonable to regard any portion of the excess (in this subsection referred to as the “gift portion”) as a benefit that the shareholder desired to have conferred on a person related to the shareholder, the following rules apply:
        
        (c) the shareholder shall be deemed to have disposed of the old shares for proceeds of disposition equal to the lesser of
        
        (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares and the gift portion, and
        
        (ii) the fair market value of the old shares immediately before the amalgamation,
        
        (i) the total of the adjusted cost bases to the shareholder, immediately before the amalgamation, of the old shares, and
        
        (ii) the total of the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder and the amount that, but for paragraph 87(4)(d), would have been the shareholder’s capital loss from the disposition of the old shares
        
        (iii) the fair market value, immediately after the amalgamation, of the new shares of that class so acquired by the shareholder
        
        (iv) the fair market value, immediately after the amalgamation, of all new shares so acquired by the shareholder,
        
        and where the old shares were taxable Canadian property of the shareholder, the new shares are deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the shareholder.
        
        (a) the new share shall be deemed to have been issued at the time the exchanged share was issued;
        
        (b) if the exchanged share was issued under an agreement in writing, the new share shall be deemed to have been issued under that agreement; and
        
        (c) the new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.
        
        (a) the new share shall be deemed to have been issued at the time the exchanged share was issued;
        
        (b) where the exchanged share was a share described in paragraph (a), (b), (c) or (d) of the definition in subsection 248(1), the new share shall be deemed to be the same share as the exchanged share for the purposes of that definition;
        
        (c) the new share shall be deemed to have been acquired by the shareholder at the time the exchanged share was acquired by the shareholder;
        
        (d) the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;
        
        (e) an election made under subsection 191.2(1) by a predecessor corporation with respect to the class of shares of its capital stock to which the exchanged share belonged shall be deemed to be an election made by the new corporation with respect to the class of shares of its capital stock to which the new share belongs; and
        
        (f) where the terms or conditions of the exchanged share or an agreement in respect of the exchanged share specify an amount in respect of the exchanged share for the purposes of subsection 191(4) and an amount equal to the amount so specified in respect of the exchanged share is specified in respect of the new share for the purposes of subsection 191(4),
        
        (i) for the purposes of subparagraphs 191(4)(d)(i) and 191(4)(e)(i), the new share shall be deemed to have been issued for the same consideration as that for which the exchanged share was issued and to have been issued for the purpose for which the exchanged share was issued,
        
        (ii) for the purposes of subparagraphs 191(4)(d)(ii) and 191(4)(e)(ii), the new share shall be deemed to be the same share as the exchanged share and to have been issued for the purpose for which the exchanged share was issued, and
        
        (iii) where the shareholder received no consideration for the disposition of the exchanged share other than the new share, for the purposes of subsection 191(4),
        
        (A) in the case of an exchanged share to which subsection 191(4) applies because of paragraph 191(4)(a), the new share shall be deemed to have been issued for consideration having a fair market value equal to the consideration for which the exchanged share was issued, and
        
        (B) in the case of an exchanged share to which subsection 191(4) applies because of an event described in paragraph 191(4)(b) or 191(4)(c), the consideration for which the new share was issued shall be deemed to have a fair market value equal to the fair market value of the exchanged share immediately before the time that event occurred.
        
        (a) there is an amalgamation of two or more corporations each of which is a principal-business corporation (within the meaning assigned by subsection 66(15)) or a corporation that at no time carried on business,
        
        (b) a predecessor corporation entered into an agreement with a person at a particular time for consideration given by the person to the predecessor corporation,
        
        (c) for the consideration under the agreement
        
        (i) a share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or
        
        (ii) a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and
        
        (i) issues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, or
        
        (ii) is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,
        
        for the purposes of subsection 66(12.66) and Part XII.6 and for the purposes of renouncing an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses that would, but for the renunciation, be incurred by the new corporation after the amalgamation,
        
        (e) the person shall be deemed to have given the consideration under the agreement to the new corporation for the issue of the new share,
        
        (f) the agreement shall be deemed to have been entered into between the new corporation and the person at the particular time,
        
        (g) the new share shall be deemed to be a flow-through share of the new corporation, and
        
        (h) the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation.
        
        (a) to have disposed of the old option for proceeds equal to the adjusted cost base to the taxpayer of that option immediately before the amalgamation, and
        
        (b) to have acquired the new option at a cost to the taxpayer equal to the proceeds described in paragraph 87(5)(a),
        
        and where the old option was taxable Canadian property of the taxpayer, the new option is deemed to be, at any time that is within 60 months after the amalgamation, taxable Canadian property of the taxpayer.
        
        (a) there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the new option the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the old option; and
        
        (b) the amount determined under paragraph 87(5.1)(a) shall be added after that time in computing the adjusted cost base to the taxpayer of the new option.
        
        (a) to have disposed of the old property for proceeds equal to the adjusted cost base to the taxpayer of that property immediately before the amalgamation; and
        
        (b) to have acquired the new property at a cost to the taxpayer equal to the proceeds described in paragraph 87(6)(a).
        
        (a) there shall be deducted after that time in computing the adjusted cost base to the taxpayer of the bond, debenture or note the total of all amounts deducted under paragraph 53(2)(g.1) in computing, immediately before that time, the adjusted cost base to the taxpayer of the property for which the particular property was exchanged at that time; and
        
        (b) the amount determined under paragraph 87(6.1)(a) in respect of the particular property shall be added after that time in computing the adjusted cost base to the taxpayer of the particular property.
        
        (a) a debt or other obligation of a predecessor corporation that was outstanding immediately before the amalgamation became a debt or other obligation of the new corporation on the amalgamation, and
        
        (b) the amount payable by the new corporation on the maturity of the debt or other obligation, as the case may be, is the same as the amount that would have been payable by the predecessor corporation on its maturity,
        
        the provisions of this Act
        
        (c) shall not apply in respect of the transfer of the debt or other obligation to the new corporation, and
        
        (d) shall apply as if the new corporation had incurred or issued the debt or other obligation at the time it was incurred or issued by the predecessor corporation under the agreement made on the day on which the predecessor corporation made an agreement under which the debt or other obligation was issued,
        
        except that, for the purposes of the definition or in subsection 248(1), paragraph 87(7)(d) shall not apply to any debt or other obligation of the new corporation unless the terms and conditions thereof immediately after the amalgamation are the same as, or substantially the same as, the terms and conditions of the debt or obligation that was an income bond or income debenture of the predecessor corporation immediately before the amalgamation.
        
        (a) “amalgamation” were read as “foreign merger”;
        
        (b) “predecessor corporation” were read as “predecessor foreign corporation”; and
        
        (c) “new corporation” were read as “new foreign corporation or the foreign parent corporation”.
        
        (a) all or substantially all the property (except amounts receivable from any predecessor foreign corporation or shares of the capital stock of any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination becomes property of the new foreign corporation as a consequence of the merger or combination;
        
        (b) all or substantially all the liabilities (except amounts payable to any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination become liabilities of the new foreign corporation as a consequence of the merger or combination; and
        
        (c) all or substantially all of the shares of the capital stock of the predecessor foreign corporations (except any shares or options owned by any predecessor foreign corporation) are exchanged for or become, because of the merger or combination,
        
        (i) shares of the capital stock of the new foreign corporation, or
        
        (ii) if, immediately after the merger, the new foreign corporation was controlled by another corporation (in this section referred to as the “foreign parent corporation”) that was resident in a country other than Canada, shares of the capital stock of the foreign parent corporation.
        
        (a) the merger or combination is deemed to be a merger or combination of the predecessor foreign corporations to form one non-resident corporation;
        
        (b) the survivor corporation is deemed to be the non-resident corporation so formed;
        
        (c) all of the properties of the survivor corporation immediately before the merger or combination that are properties of the survivor corporation immediately after the merger or combination are deemed to become properties of the survivor corporation as a consequence of the merger or combination;
        
        (d) all of the liabilities of the survivor corporation immediately before the merger or combination that are liabilities of the survivor corporation immediately after the merger or combination are deemed to become liabilities of the survivor corporation as a consequence of the merger or combination;
        
        (e) all of the shares of the capital stock of the survivor corporation that were outstanding immediately before the merger or combination that are shares of the capital stock of the survivor corporation immediately after the merger or combination are deemed to become shares of the capital stock of the survivor corporation as a consequence of the merger or combination; and
        
        (f) all of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.
        
        (a) the new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;
        
        (b) shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; and
        
        (c) the foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, to
        
        (i) a person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length immediately after the transaction, event or series, or
        
        (ii) a partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).
        
        (a) there is at that time a foreign merger of two or more predecessor foreign corporations (within the meaning assigned by subsection (8.1), if that subsection and subsection (8.2) were read without reference to the expression “otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation”) that were, immediately before that time,
        
        (i) resident in the same country, and
        
        (ii) related to each other (determined without reference to paragraph 251(5)(b));
        
        (i) a predecessor foreign corporation (referred to in this subsection and subsection (8.5) as the “disposing predecessor foreign corporation”) disposes of a property (referred to in this subsection and subsection (8.5) as the “subject property”) that is, at that time,
        
        (A) a taxable Canadian property (other than treaty-protected property) of the disposing predecessor foreign corporation, and
        
        (B) any of the following:
        
        (I) a share of the capital stock of a corporation,
        
        (II) an interest in a partnership, and
        
        (III) an interest in a trust, and
        
        (a) if the subject property is an interest in a partnership,
        
        (i) the disposing predecessor foreign corporation is deemed not to dispose of the subject property (other than for the purposes of subsection (8.4)), and
        
        (ii) the new foreign corporation is deemed
        
        (A) to have acquired the subject property at a cost equal to the cost of the subject property to the disposing predecessor foreign corporation, and
        
        (B) to be the same corporation as, and a continuation of, the disposing predecessor foreign corporation in respect of the subject property; and
        
        (i) the subject property is deemed to have been disposed of at that time by the disposing predecessor foreign corporation to the new foreign corporation (that is referred to in subparagraph (8.4)(b)(ii)) for proceeds of disposition equal to the adjusted cost base of the subject property to the disposing predecessor foreign corporation immediately before that time, and
        
        (ii) the cost of the subject property to the new foreign corporation is deemed to be the amount that is deemed by subparagraph (i) to be the proceeds of disposition of the subject property.
        
        (a) for the purposes of paragraph 87(1)(c), subsection 87(4) and the Income Tax Application Rules , any parent shares received by a shareholder of a predecessor corporation shall be deemed to be shares of the capital stock of the new corporation received by the shareholder by virtue of the merger;
        
        (a.1) for the purposes of subsections 87(4.1) and 87(4.2), a parent share issued to a shareholder in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation shall be deemed to be a share of a class of the capital stock of the new corporation that was issued in consideration for the disposition of a share of a class of the capital stock of a predecessor corporation by that shareholder;
        
        (a.2) for the purposes of subsection 87(4.3), a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the parent shall be deemed to be a right listed on a designated stock exchange to acquire a share of a class of the capital stock of the new corporation;
        
        (a.21) for the purpose of paragraph (4.4)(d)
        
        (i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and
        
        (ii) any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;
        
        (i) the reference in paragraph 87(10)(b) to “the new corporation” shall be read as a reference to “the new corporation or the parent, within the meaning assigned by subsection 87(9)”, and
        
        (ii) the references in paragraphs 87(10)(c) and 87(10)(f) to “the new corporation” shall be read as references to “the public corporation described in paragraph 87(9)(b)”.
        
        (i) there shall be deducted that proportion of the amount, if any, by which the paid-up capital, determined without reference to this paragraph, in respect of all the shares of the capital stock of the parent immediately after the merger exceeds the total of all amounts each of which is the paid-up capital in respect of a share of the capital stock of the parent or a predecessor corporation (other than any share of a predecessor corporation owned by the parent or by another predecessor corporation and any share of a predecessor corporation owned by a shareholder other than the parent or another predecessor corporation that was not exchanged on the merger for parent shares) immediately before the merger that
        
        (A) the paid-up capital, determined without reference to this paragraph, in respect of that particular class of shares of the capital stock of the parent immediately after the merger
        
        (B) the paid-up capital, determined without reference to this paragraph, in respect of all the issued and outstanding shares of the classes of the capital stock of the parent that included parent shares immediately after the merger, and
        
        (A) the amount, if any, by which
        
        (I) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the parent before the particular time
        
        (II) the total that would be determined under subclause 87(9)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 87(9)(b)(i), and
        
        (i) the amount otherwise determined under paragraph 87(4)(b) to be the cost of those shares, and
        
        (ii) in any case where the parent owned, immediately after the merger, all the issued shares of the capital stock of the new corporation, such portion of
        
        (A) the amount, if any, by which
        
        (I) the amount by which the total of the money on hand of the new corporation and all amounts each of which is the cost amount to the new corporation of a property owned by it, immediately after the merger, exceeds the total of all amounts each of which is the amount of any debt owing by the new corporation, or of any other obligation of the new corporation to pay any amount, that was outstanding immediately after the merger,
        
        (II) the total of the adjusted cost bases to the parent of all shares of the capital stock of each predecessor corporation beneficially owned by it immediately before the merger
        
        as is designated by the parent in respect of the shares of that particular class in its return of income under this Part for its taxation year in which the merger occurred, except that
        
        (B) in no case shall the amount so designated in respect of the shares of a particular class exceed the amount, if any, by which the total fair market value, immediately after the merger, of the shares of that particular class issued by virtue of the merger exceeds the cost of those shares to the parent determined without reference to this paragraph, and
        
        (C) in no case shall the total of the amounts so designated in respect of the shares of each class of the capital stock of the new corporation exceed the amount determined under clause 87(9)(c)(ii)(A).
        
        (a) a new corporation is formed as a result of an amalgamation,
        
        (b) the new corporation is a public corporation,
        
        (c) the new corporation issues a share (in this subsection referred to as the “new share”) of its capital stock,
        
        (d) the new share is issued in exchange for a share (in this subsection referred to as the “old share”) of the capital stock of a predecessor corporation,
        
        (e) immediately before the amalgamation, the old share was listed on a designated stock exchange, and
        
        (f) the new share is redeemed, acquired or cancelled by the new corporation within 60 days after the amalgamation,
        
        the new share is deemed, for the purposes of subsection 116(6), the definitions in subsections 146(1), 146.1(1), 146.3(1) and 146.4(1), in section 204 and in subsection 207.01(1), and the definition in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.
        
        (a) the shares of the subsidiary are deemed to have been disposed of by the parent immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and 88(1.7) applied, with any modifications that the circumstances require, to the amalgamation; and
        
        (b) the cost to the new corporation of each capital property of the subsidiary acquired on the amalgamation is deemed to be the amount that would have been the cost to the parent of the property if the property had been distributed at that time to the parent on a winding-up of the subsidiary and subsections 88(1) and 88(1.7) had applied to the winding-up.
        
        [NOTE: Application provisions are not included in the consolidated text
        
        see relevant amending Acts and regulations.]
        
        R.S., 1985, c. 1 (5th Supp.), s. 87
        
        1994, c. 7, Sch. II, s. 65, Sch. VI, s. 3, Sch. VIII, s. 37, c. 8, s. 9, c. 21, s. 39
        
        1995, c. 3, s. 23, c. 21, ss. 30, 54
        
        1996, c. 21, s. 15
        
        1997, c. 25, s. 18, c. 26, s. 83
        
        1998, c. 19, s. 15, 117
        
        1999, c. 22, s. 24
        
        2000, c. 19, s. 13
        
        2001, c. 17, ss. 65, 211
        
        2002, c. 9, s. 30
        
        2006, c. 4, s. 55
        
        2007, c. 2, s. 45, c. 35, ss. 68, 108
        
        2008, c. 28, s. 9
        
        2009, c. 2, s. 19
        
        2010, c. 12, s. 8, c. 25, s. 15
        
        2012, c. 31, s. 17
        
        2013, c. 33, s. 6, c. 34, ss. 6, 64, 223, c. 40, s. 39
        
        2014, c. 39, s. 19
        
        2016, c. 12, s. 27
        
        2017, c. 33, s. 24
        
        2018, c. 12, s. 7
        
        2019, c. 29, s. 11
        
        2020, c. 11, s. 1
        
        2020, c. 13, s. 1
        
        2021, c. 23, s. 13
        
        2022, c. 5, s. 2
        
        2022, c. 19, s. 11
        
        2023, c. 26, s. 17
        
        2024, c. 15, s. 18
        
        2024, c. 17, s. 18
        
        2024, c. 17, s. 80

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

Foreign Spin-offs