127.1. (1) Where a taxpayer (other than a person exempt from tax under section 149) files

(a) with the taxpayer's return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(f) or subsection 150(4)) for a taxation year, or

(b) with a prescribed form amending a return referred to in paragraph 127.1(1)(a)

a prescribed form containing prescribed information, the taxpayer is deemed to have paid on the taxpayer's balance-due day for the year an amount on account of the taxpayer's tax payable under this Part for the year equal to the lesser of

(c) the taxpayer's refundable investment tax credit for the year, and

(d) the amount designated by the taxpayer in the prescribed form.

(2) In this section,

"excluded corporation" for a taxation year means a corporation that is, at any time in the year,

(a) controlled directly or indirectly, in any manner whatever, by

(i) one or more persons exempt from tax under this Part by virtue of section 149,

(ii) Her Majesty in right of a province, a Canadian municipality or any other public authority, or

(iii) any combination of persons each of whom is a person referred to in subparagraph 127.1(2) "excluded corporation" (a)(i) or 127.1(2) "excluded corporation" (a)(ii), or

(b) related to any person referred to in paragraph 127.1(2) "excluded corporation" (a);

"qualifying corporation" for a particular taxation year that ends in a calendar year means

(a) a corporation that is a Canadian-controlled private corporation throughout the particular year (other than a corporation associated with another corporation in the particular year) the taxable income of which for its immediately preceding taxation year (determined before taking into consideration the specified future tax consequences for that preceding year) does not exceed its business limit for that preceding year, or

(b) a corporation that is a Canadian-controlled private corporation throughout the particular year and associated with another corporation in the particular year, where the total of all amounts each of which is the taxable income of the corporation or such an associated corporation for its last taxation year that ended in the preceding calendar year (determined before taking into consideration the specified future tax consequences for that last year) does not exceed the total of all amounts each of which is the business limit of the corporation or such an associated corporation for that last year;

"refundable investment tax credit" of a taxpayer for a taxation year means, in the case of a taxpayer who is

(a) a qualifying corporation for the year,

(b) an individual other than a trust, or

(c) a trust each beneficiary of which is a person referred to in paragraph 127.1(2) "refundable investment tax credit" (a) or 127.1(2) "refundable investment tax credit" (b),

an amount equal to 40% of the amount, if any, by which

(d) the total of all amounts included in computing the taxpayer's investment tax credit at the end of the year

(i) in respect of property (other than qualified small-business property) acquired, or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph 127.1(2) "refundable investment tax credit" (f) in computing the taxpayer's refundable investment tax credit for the year) incurred, by the taxpayer in the year, or

(ii) because of paragraph (b) of the definition "investment tax credit" in subsection 127(9) in respect of a property (other than qualified small-business property) acquired or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph 127.1(2) "refundable investment tax credit" (f) in computing the taxpayer's refundable investment tax credit for the year) incurred

exceeds

(e) the total of

(i) the portion of the total of all amounts deducted under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2) "refundable investment tax credit" (d), and

(ii) the portion of the total of all amounts required by subsection 127(6) or 127(7) to be deducted in computing the taxpayer's investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2) "refundable investment tax credit" (d),

plus where the taxpayer is a qualifying corporation (other than an excluded corporation) for the year, the amount, if any, by which

(f) the total of

(i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer's investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a capital nature) incurred by the taxpayer in the year, and

(ii) all amounts determined under paragraph (a.1) of the definition "investment tax credit" in subsection 127(9) in respect of expenditures for which an amount is included in subparagraph 127.1(2) "refundable investment tax credit" (f)(i)

exceeds

(g) the total of

(i) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2) "refundable investment tax credit" (f), and

(ii) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer's investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2) "refundable investment tax credit" (f).

(2.01) In the case of a taxpayer that is a Canadian-controlled private corporation other than a qualifying corporation or an excluded corporation, the refundable investment tax credit of the taxpayer for a taxation year is 40% of the amount, if any, by which

(a) the total of

(i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer's investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a current nature) incurred by the taxpayer in the year, and

(ii) all amounts determined under paragraph (a.1) of the definition "investment tax credit" in subsection 127(9) in respect of expenditures for which an amount is included in subparagraph 127.1(2.01)(a)(i)

exceeds

(b) the total of

(i) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2.01)(a), and

(ii) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer's investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2.01)(a)

plus the amount, if any, by which

(c) the total of

(i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer's investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a capital nature) incurred by the taxpayer in the year, and

(ii) all amounts determined under paragraph (a.1) of the definition "investment tax credit" in subsection 127(9) in respect of expenditures for which an amount is included in subparagraph 127.1(2.01)(c)(i)

exceeds

(d) the total of

(i) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2.01)(c), and

(ii) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer's investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph 127.1(2.01)(c).

(2.1) The definitions in subsection 127(9) apply to this section.

(3) For the purposes of this Act, the amount deemed under subsection 127.1(1) to have been paid by a taxpayer for a taxation year shall be deemed to have been deducted by the taxpayer under subsection 127(5) for the year.

S.C. 1984, c. 1, s. 73; S.C. 1984, c. 45, s. 44; S.C. 1985, c. 45, s. 73; S.C. 1986, c. 6, s. 72; S.C. 1986, c. 55, ss. 48, 49; S.C. 1988, c. 55, s. 107; S.C. 1994, c. 8, s. 16; S.C. 1995, c. 3, s. 38; S.C. 1996, c. 21, s. 31; S.C. 1997, c. 25, s. 36; S.C. 1998, c. 19, s. 147.

127.2. (1) There may be deducted from the tax otherwise payable under this Part by a taxpayer for a taxation year an amount not exceeding the total of

(a) the taxpayer's share-purchase tax credit for the year, and

(b) the taxpayer's unused share-purchase tax credit for the taxation year immediately following the year.

(2) Where a taxpayer who was throughout a taxation year a person described in any of paragraphs 149(1)(e) to (y) files with the taxpayer's return of income under this Part for the year a prescribed form containing prescribed information, the taxpayer shall be deemed to have paid, on the day on which the return is filed, an amount, on account of the taxpayer's tax under this Part for the year, equal to the taxpayer's share-purchase tax credit for the year.

(3) Where, in a particular taxation year of a taxpayer who is a beneficiary under a trust, an amount is included in computing the share-purchase tax credit of the trust for its taxation year ending in that particular taxation year, the trust may, in its return of income for its taxation year ending in that particular taxation year, designate as attributable to the taxpayer such portion of that amount

(a) as may, having regard to all the circumstances (including the terms and conditions of the trust arrangement), reasonably be considered to be attributable to the taxpayer, and

(b) as was not designated by the trust in respect of any other beneficiary of that trust,

and, where the trust so designates such a portion, an amount equal to that portion shall be

(c) added in computing the share-purchase tax credit of the taxpayer for the particular taxation year, and

(d) deducted in computing the share-purchase tax credit of the trust for its taxation year ending in the particular taxation year.

(3.1) For the purposes of subsection 127.2(3), a trust does not include a trust that is

(a) governed by an employee benefit plan or a revoked deferred profit sharing plan; or

(b) exempt from tax under section 149.

(4) Where, in a taxation year of a taxpayer who is a member of a partnership, an amount is included in computing the share-purchase tax credit of the partnership for its fiscal period ending in that year, such portion of that amount as may reasonably be considered to be the taxpayer's share thereof shall be

(a) added in computing the share-purchase tax credit of the taxpayer for that year; and

(b) deducted in computing the share-purchase tax credit of the partnership for that fiscal period.

(5) Where at any particular time in a taxation year a taxpayer that is a cooperative corporation (within the meaning assigned by subsection 136(2)) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by subsection 135(3) to be remitted to the Receiver General, an amount not exceeding the amount, if any, by which

(a) the amount that would, but for this subsection, be its share-purchase tax credit for the taxation year in which it made the payment if that year had ended immediately before the particular time

exceeds

(b) the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,

and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3) shall be

(c) deducted in computing the share-purchase tax credit of the taxpayer for the taxation year, and

(d) deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.

(6) In this section,

"share-purchase tax credit" of a taxpayer for a taxation year means the amount determined by the formula

(A + B) - C

where

A is the total of all amounts each of which is an amount designated by a corporation under subsection 192(4) in respect of a share acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder,

B is the total of all amounts each of which is an amount required by subsection 127.2(3) or (4) to be added in computing the taxpayer's share-purchase tax credit for the year, and

C is the total of all amounts each of which is an amount required by subsection 127.2(3), (4) or (5) to be deducted in computing the taxpayer's share-purchase tax credit for the year;

"unused share-purchase tax credit" of a taxpayer for a taxation year means the amount determined by the formula

A - (B + C)

where

A is the taxpayer's share-purchase tax credit for the year,

B is the taxpayer's tax otherwise payable under this Part for the year, the amount deemed by subsection 127.2(2) to have been paid on account of the taxpayer's tax payable under this Part for the year or, where Division E.1 is applicable to the taxpayer for the year, the amount, if any, by which the taxpayer's tax otherwise payable under this Part for the year exceeds the taxpayer's minimum amount for the year determined under section 127.51, as the case may be, and

C is the taxpayer's refundable Part VII tax on hand at the end of the year.

(7) In this section, "tax otherwise payable" under this Part by a taxpayer means the amount that would, but for this section and section 120.1, be the tax payable under this Part by the taxpayer.

(8) For the purposes of this Act, where, at any time in a taxation year, a taxpayer has acquired a share and is the first registered holder of the share, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 192(4) in respect of the share, the following rules apply:

(a) the taxpayer shall be deemed to have acquired the share at a cost to the taxpayer equal to the amount by which

(i) its cost to the taxpayer as otherwise determined

exceeds

(ii) the amount so designated in respect of the share; and

(b) where the amount determined under subparagraph 127.2(8)(a)(ii) exceeds the amount determined under subparagraph 127.2(8)(a)(i), the excess shall

(i) where the share is a capital property to the taxpayer, be deemed to be a capital gain of the taxpayer for the year from the disposition of that property, and

(ii) in any other case, be included in computing the income of the taxpayer for the year,

and the cost to the taxpayer of the share shall be deemed to be nil.

(9) For the purposes of this section and subsection 193(5), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.

(10) Where a share of a public corporation has been lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with a public authority in Canada pursuant to and in accordance with the law of Canada or of any province, and, where required by law, accepted for filing by such a public authority, the corporation, if it has designated an amount under subsection 192(4) in respect of the share, may, in the prescribed form required to be filed under that subsection, elect that, for the purposes of this section, the first person, other than a broker or dealer in securities, to have acquired the share (and no other person) shall be considered to be the first person to be a registered holder of the share.

(11) For greater certainty,

(a) for the purposes of this section and Part VII, the amount of consideration for which a share is acquired and issued includes the amount of any consideration for the designation under subsection 192(4) in respect of the share; and

(b) the amount received by a corporation as consideration for a designation under subsection 192(4) in respect of a share issued by it shall not be included in computing its income.

S.C. 1984, c. 1, s. 73; S.C. 1984, c. 45, s. 45; S.C. 1988, c. 55, s. 108.

127.3. (1) There may be deducted from the tax otherwise payable under this Part by a taxpayer for a taxation year an amount not exceeding the total of the taxpayer's

(a) scientific research and experimental development tax credit for the year, and

(b) unused scientific research and experimental development tax credit for the taxation year immediately following the year.

(2) In this section,

"scientific research and experimental development tax credit" of a taxpayer for a taxation year means the amount determined by the formula

A - B

where

A is the total of all amounts each of which is an amount equal to

(a) where the taxpayer is a corporation, 50%, or

(b) where the taxpayer is an individual other than a trust, 34%

of an amount designated by a corporation under subsection 194(4) in respect of

(c) a share acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder thereof,

(d) a bond, debenture, bill, note, mortgage or similar obligation (in this section referred to as a "debt obligation") acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of that debt obligation, or

(e) a right acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to have acquired that right, and

B is the total of all amounts required by subsection 127.3(5) to be deducted in computing the taxpayer's scientific research and experimental development tax credit for the year;

"unused scientific research and experimental development tax credit" of a taxpayer for a taxation year means the amount determined by the formula

A - (B + C)

where

A is the taxpayer's scientific research and experimental development tax credit for the year,

B is the taxpayer's tax otherwise payable under this Part for the year or, where Division E.1 is applicable to the taxpayer for the year, the amount, if any, by which the taxpayer's tax otherwise payable under this Part for the year exceeds the taxpayer's minimum amount for the year determined under section 127.51, as the case may be, and

C is the taxpayer's refundable Part VIII tax on hand at the end of the year.

(3) For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a beneficiary under a trust and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the trust in a taxation year of the trust where the trust is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be,

(a) the trust may, in its return of income for that year, specify such portion of that amount as may, having regard to all the circumstances (including the terms and conditions of the trust arrangement), reasonably be considered to be attributable to the taxpayer and as was not specified by the trust in respect of any other beneficiary under that trust; and

(b) the portion specified pursuant to paragraph 127.3(3)(a) shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.

(3.1) For the purposes of subsection (3), a trust does not include a trust that is

(a) governed by an employee benefit plan or a revoked deferred profit sharing plan; or

(b) exempt from tax under section 149.

(4) For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a member of a partnership and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the partnership in a taxation year of the partnership where the partnership is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be, such portion of that amount as may reasonably be considered to be the taxpayer's share thereof shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.

(5) Where at any particular time in a taxation year a taxpayer that is a cooperative corporation (within the meaning assigned by subsection 136(2)) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by subsection 135(3) to be remitted to the Receiver General, an amount not exceeding the amount, if any, by which

(a) the amount that would, but for this subsection, be its scientific research and experimental development tax credit for the taxation year in which it made the payment if that year had ended immediately before the particular time

exceeds

(b) the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,

and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3) shall be

(c) deducted in computing the scientific research and experimental development tax credit of the taxpayer for the taxation year, and

(d) deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.

(6) For the purposes of this Act, where at any time in a taxation year a taxpayer has acquired a share, debt obligation or right and is the first registered holder of the share or debt obligation or the first person to have acquired the right, as the case may be, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 194(4), in respect of the share, debt obligation or right, the following rules apply:

(a) the taxpayer shall be deemed to have acquired the share, debt obligation or right at a cost to the taxpayer equal to the amount by which

(i) its cost to the taxpayer as otherwise determined

exceeds

(ii) 50% of the amount so designated in respect thereof; and

(b) where the amount determined under subparagraph 127.3(6)(a)(ii) exceeds the amount determined under subparagraph (a)(i), the excess shall

(i) where the share, debt obligation or right, as the case may be, is a capital property to the taxpayer, be deemed to be a capital gain of the taxpayer for the year from the disposition of that property, and

(ii) in any other case, be included in computing the income of the taxpayer for the year,

and the cost to the taxpayer of the share, debt obligation or right, as the case may be, shall be deemed to be nil.

(7) For the purposes of this section and Part VIII, a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.

(8) In this section, "tax otherwise payable" under this Part by a taxpayer means the amount that would, but for this section and section 120.1, be the tax payable under this Part by the taxpayer.

(9) Where a share or debt obligation of a public corporation has been lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with a public authority in Canada pursuant to and in accordance with the law of Canada or of any province, and, where required by law, accepted for filing by that public authority, the corporation, if it has designated an amount under subsection 194(4) in respect of the share or debt obligation, may, in the prescribed form required to be filed under that subsection, elect that, for the purposes of this section, the first person, other than a broker or dealer in securities, to have acquired the share or debt obligation, as the case may be, (and no other person) shall be considered to be the first person to be a registered holder thereof.

(10) For greater certainty,

(a) for the purposes of this section and Part VIII, the amount of consideration for which a share, debt obligation or right was acquired and issued or granted includes the amount of any consideration for the designation under subsection 194(4) in respect of the share, debt obligation or right; and

(b) the amount received by a corporation as consideration for a designation under subsection 194(4) in respect of a share, debt obligation or right issued or granted by it shall not be included in computing its income.

S.C. 1984, c. 1, s. 73; S.C. 1984, c. 45, s. 46; S.C. 1986, c. 6, s. 15; S.C. 1988, c. 55, s. 109.

127.4. (1) In this section,

"approved share" means a share of the capital stock of a prescribed labour-sponsored venture capital corporation, but does not include

(a) a share issued by a registered labour-sponsored venture capital corporation the venture capital business of which was discontinued before the time of the issue, and

(b) a share issued by a prescribed labour-sponsored venture capital corporation (other than a registered labour-sponsored venture capital corporation) if, at the time of the issue, every province under the laws of which the corporation is a prescribed labour-sponsored venture capital corporation has suspended or terminated its assistance in respect of the acquisition of shares of the capital stock of the corporation;

(Repealed by S.C. 1997, c. 25, s. 37(2).)

"net cost" to an individual of an approved share means the amount, if any, by which

(a) the amount of consideration paid by the individual to acquire or subscribe for the share

exceeds

(b) the amount of any assistance (other than an amount included in computing a tax credit of the individual in respect of that share) provided or to be provided by a government, municipality or any public authority in respect of, or for the acquisition of, the share;

"original acquisition" of a share means the first acquisition of the share, except that

(a) where the share is irrevocably subscribed and paid for before its first acquisition, subject to paragraphs (b) and (c), the original acquisition of the share is the first transaction whereby the share is irrevocably subscribed and paid for,

(b) a share is deemed never to have been acquired and never to have been irrevocably subscribed and paid for unless the first registered holder of the share is, subject to paragraph (c), the first person to either acquire or irrevocably subscribe and pay for the share, and

(c) for the purpose of this definition, a broker or dealer in securities acting in that capacity is deemed never to acquire or subscribe and pay for the share and never to be the registered holder of the share;

"qualifying trust" for an individual in respect of a share means

(a) a trust governed by a registered retirement savings plan, under which the individual is the annuitant, that is not a spousal plan (in this definition having the meaning assigned by subsection 146(1)) in relation to another individual, or

(b) a trust governed by a registered retirement savings plan, under which the individual or the individual's spouse or common-law partner is the annuitant, that is a spousal plan in relation to the individual or the individual's spouse or common-law partner, if the individual and no other person claims a deduction under subsection 127.4(2) in respect of the share;

"tax otherwise payable" by an individual means the amount that, but for this section, would be the individual's tax payable under this Part.

(1.1) Subsections 204.8(2) and 204.85(3) apply for the purpose of this section.

(2) There may be deducted from the tax otherwise payable by an individual (other than a trust) for a taxation year such amount as the individual claims not exceeding the individual's labour-sponsored funds tax credit limit for the year.

(3) (Repealed by S.C. 1999, c. 22, s. 49(3)).

(4) (Repealed by S.C. 1999, c. 22, s. 49(3)).

(5) For the purpose of subsection 127.4(2), an individual's labour-sponsored funds tax credit limit for a taxation year is the lesser of

(a) $750, and

(b) the amount, if any, by which

(i) the total of all amounts each of which is the individual's labour-sponsored funds tax credit in respect of an original acquisition in the year or in the first 60 days of the following taxation year of an approved share

exceeds

(ii) the portion of the total described in subparagraph 127.4(5)(b)(i) that was deducted under subsection 127.4(2) in computing the individual's tax payable under this Part for the preceding taxation year.

(5.1) If the Minister so directs, an original acquisition of an approved share that occurs in an individual's taxation year (other than in the first 60 days of the year) is deemed for the purpose of this section to have occurred at the beginning of the year and not at the time it actually occurred.

(6) For the purpose of subsection (5), an individual's labour-sponsored funds tax credit in respect of an original acquisition of an approved share is equal to the least of

(a) 15% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust,

(b) nil, where the share was issued by a registered labour-sponsored venture capital corporation unless the information return described in paragraph 204.81(6)(c) is filed with the individual's return of income for the taxation year for which a claim is made under subsection 127.4(2) in respect of the original acquisition of the share (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)),

(c) nil, where the individual dies after December 5, 1996 and before the original acquisition of the share, and

(d) nil, where a payment in respect of the disposition of the share has been made under section 211.9.

S.C. 1986, c. 6, s. 73; S.C. 1988, c. 55, s. 10; S.C. 1994, c. 7, Sch. II, s. 105; S.C. 1994, c. 7, Sch. VIII, s. 69; S.C. 1994, c. 8, s. 17; S.C. 1997, c. 25, s. 37; S.C. 1999, c. 22, s. 49; S.C. 2000, c. 19, s. 36; S.C. 2000, c. 12, s. 142.

127.41. (1) In this section, the Part XII.4 tax credit of a taxpayer for a particular taxation year means the total of

(a) all amounts each of which is an amount determined by the formula

A x B/C

where

A is the tax payable under Part XII.4 by a qualifying environmental trust for a taxation year (in this paragraph referred to as the "trust's year") that ends in the particular year,

B is the amount, if any, by which the total of all amounts in respect of the trust that were included (otherwise than because of being a member of a partnership) because of the application of subsection 107.3(1) in computing the taxpayer's income for the particular year exceeds the total of all amounts in respect of the trust that were deducted (otherwise than because of being a member of a partnership) because of the application of subsection 107.3(1) in computing that income, and

C is the trust's income for the trust's year, computed without reference to subsections 104(4) to 104(31) and sections 105 to 107, and

(b) in respect of each partnership of which the taxpayer was a member, the total of all amounts each of which is the amount that can reasonably be considered to be the taxpayer's share of the relevant credit in respect of the partnership and, for this purpose, the relevant credit in respect of a partnership is the amount that would, if a partnership were a person and its fiscal period were its taxation year, be the Part XII.4 tax credit of the partnership for its taxation year that ends in the particular year.

(2) There may be deducted from a taxpayer's tax otherwise payable under this Part for a taxation year such amount as the taxpayer claims not exceeding the taxpayer's Part XII.4 tax credit for the year.

(3) There is deemed to have been paid on account of the tax payable under this Part by a taxpayer (other than a taxpayer exempt from such tax) for a taxation year on the taxpayer's balance-due day for the year, such amount as the taxpayer claims not exceeding the amount, if any, by which

(a) the taxpayer's Part XII.4 tax credit for the year

exceeds

(b) the amount deducted under subsection 127.41(2) in computing the taxpayer's tax payable under this Part for the year.

S.C. 1995, c. 3, s. 39; S.C. 1997, c. 25, s. 38; S.C. 1998, c. 19, ss. 34, 148.

DIVISION E.1
MINIMUM TAX

127.5. Notwithstanding any other provision of this Act but subject to subsection 120.4(3) and section 127.55, where the amount that, but for section 120, would be determined under Division E to be an individual's tax payable for a taxation year is less than the amount determined under paragraph (a) in respect of the individual for the year, the individual's tax payable under this Part for the year is the total of

(a) the amount, if any, by which

(i) the individual's minimum amount for the year determined under section 127.51

exceeds

(ii) the individual's special foreign tax credit determined under section 127.54 for the year, and

(b) the amount, if any, required by section 120 to be added to the individual's tax otherwise payable under this Part for the year.

S.C. 1986, c. 55, s. 50; S.C. 1998, c. 19, s. 149; S.C. 2000, c. 19, s. 37.

127.51. An individual's minimum amount for a taxation year is the amount determined by the formula

A(B - C) - D

where

A

is the appropriate percentage for the year;

B

is the individual's adjusted taxable income for the year determined under section 127.52;

C

is the individual's basic exemption for the year determined under section 127.53; and

D

is the individual's basic minimum tax credit for the year determined under section 127.531.

S.C. 1986, c. 55, s. 50; S.C. 1988, c. 55, s. 111.

127.52. (1) Subject to subsection 127.52(2), an individual's adjusted taxable income for a taxation year is the amount that would be the individual's taxable income for the year or the individual's taxable income earned in Canada for the year, as the case may be, if it were computed on the assumption that

(a) (Repealed by S.C. 1999, c. 22, s. 50(2)).

(b) the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual's income for the year in respect of a rental or leasing property (other than an amount included in the individual's share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible and the amount, if any, by which the total of

(i) the total of all amounts each of which is the individual's income for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and

(ii) the amount, if any, by which

(A) the total of all amounts each of which is the individual's taxable capital gain for the year from the disposition of a rental or leasing property owned by the individual or by a partnership

exceeds

(B) the total of all amounts each of which is the individual's allowable capital loss for the year from the disposition of a rental or leasing property owned by the individual or by a partnership

exceeds the total of all amounts each of which is the individual's loss for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership (other than an amount included in the individual's share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);

(c) the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual's income for the year in respect of a film property referred to in paragraph 127.52(1)(w) of Class 10 of Schedule II to the Income Tax Regulations (other than an amount included in the individual's share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible by the individual for the year and the amount, if any, by which the total of

(i) the total of all amounts each of which is the individual's income for the year from the renting or leasing of a film property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and

(ii) the amount, if any, by which

(A) the total of all amounts each of which is the individual's taxable capital gain for the year from the disposition of such a film property owned by the individual or by a partnership

exceeds

(B) the total of all amounts each of which is the individual's allowable capital loss for the year from the disposition of such a film property owned by the individual or by a partnership

exceeds the total of all amounts each of which is the individual's loss for the year from such a film property owned by the individual or by a partnership (other than amounts included in the individual's share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);

(c.1) where, during a partnership's fiscal period that ends in the year (other than a fiscal period that ends because of the application of subsection 99(1)), the individual is a limited partner of the partnership or a member of the partnership who was a specified member of the partnership at all times since becoming a member of the partnership, or the individual's interest in the partnership is an interest for which an identification number is required to be, or has been, obtained under section 237.1,

(i) the individual's share of allowable capital losses of the partnership for the fiscal period were the lesser of

(A) the total of all amounts each of which is the individual's

(I) share of a taxable capital gain for the fiscal period from the disposition of property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

(II) taxable capital gain for the year from the disposition of the individual's interest in the partnership if the individual, or a person who does not deal at arm's length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year, and

(B) the individual's share of allowable capital losses of the partnership for the fiscal period,

(ii) the individual's share of each loss from a business of the partnership for the fiscal period were the lesser of

(A) the individual's share of the loss, and

(B) the amount, if any, by which

(I) the total of all amounts each of which is the individual's

1. share of a taxable capital gain for the fiscal period from the disposition of property used by the partnership in the business (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

2. taxable capital gain for the year from the disposition of the individual's interest in the partnership if the individual, or a person who does not deal at arm's length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year

exceeds

(II) the total of all amounts each of which is the individual's share of an allowable capital loss for the fiscal period, and

(iii) the individual's share of losses from property of the partnership for the fiscal period were the lesser of

(A) the total of

(I) the individual's share of incomes for the fiscal period from properties of the partnership, and

(II) the amount, if any, by which the total of all amounts each of which is the individual's

1. share of a taxable capital gain for the fiscal period from the disposition of property held by the partnership for the purpose of earning income from property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or

2. taxable capital gain for the year from the disposition of the individual's interest in the partnership if the individual, or a person who does not deal at arm's length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year,

exceeds the total of all amounts each of which is the individual's share of an allowable capital loss for the fiscal period, and

(B) the individual's share of losses from property of the partnership for the fiscal period;

(c.2) where, during a fiscal period of a partnership that ends in the year (other than a fiscal period that ends because of the application of subsection 99(1)),

(i) the individual is a limited partner of the partnership, or is a member of the partnership who was a specified member of the partnership at all times since becoming a member of the partnership, or

(ii) the partnership owns a rental or leasing property or a film property and the individual is a member of the partnership,

the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual's income for the year in respect of the individual's acquisition of the partnership interest were the lesser of

(iii) the total of all amounts otherwise so deductible, and

(iv) the total of all amounts each of which is the individual's share of any income of the partnership for the fiscal period, determined in accordance with subsection 96(1);

(c.3) the total of all amounts each of which is an amount deductible in computing the individual's income for the year in respect of a property for which an identification number is required to be, or has been, obtained under section 237.1 (other than an amount to which any of paragraphs 127.52(1)(b) to 127.52(1)(c.2) applies) were nil;

(d) except in respect of dispositions of property occurring before 1986 or to which section 79 applies,

(i) the references to the fraction applicable to the individual for the year in each of paragraphs 38(a), (b) and (c) and section 41 were read as a reference to "4/5", other than in the case of a capital gain from a disposition that is the making of a gift of property to a qualified donee, and

(ii) each amount (other than an amount to which subsection 104(21.4) applies) that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula

4/5(A x 1/B)

where

A

is the amount so deemed to be a taxable capital gain for the year of the individual, and

B

is the fraction in paragraph 38(a) applicable to the trust for the particular year of the trust for which the designation is made;

(e) the total of all amounts deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of the Income Tax Application Rules in computing the individual's income for the year were the lesser of the amounts otherwise so deductible by the individual for the year and the total of

(i) the individual's income for the year from royalties in respect of, and such part of the individual's income, other than royalties, for the year as may reasonably be considered as attributable to, the production of petroleum, natural gas and minerals, determined before deducting those amounts, and

(ii) all amounts included in computing the individual's income for the year under section 59;

(e.1) the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual's income for the year in respect of a property that is a flow-through share (if the individual is the person to whom the share was issued under an agreement referred to in the definition "flow-through share" in subsection 66(15)), a Canadian resource property or a foreign resource property were the lesser of the total of the amounts otherwise so determined for the year and the amount, if any, by which

(i) the total of all amounts each of which is an amount described in subparagraph 127.52(1)(e)(i) or 127.52(1)(e)(ii), determined without reference to paragraphs 20(1)(c) to 20(1)(f),

exceeds

(ii) the total of all amounts each of which is an amount deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of the Income Tax Application Rules in computing the individual's income for the year;

(f) subsection 82(1) were read without reference to that portion following paragraph 82(1)(a);

(g) the total of all amounts deductible under section 104 in computing the income of a trust for the year were equal to the total of

(i) the total of all amounts otherwise deductible under that section, and

(ii) the total of all amounts each of which is 3/5 of

(A) an amount designated by the trust under subsection 104(21) for the year, or

(B) that portion of a net taxable capital gain of the trust that may reasonably be considered to

(I) be part of an amount included, by virtue of subsection 104(13) or section 105, in computing the income for the year of a non-resident beneficiary of the trust, or

(II) have been paid in the year by a trust governed by an employee benefit plan to a beneficiary thereunder;

(h) the only amounts deductible under sections 110 to 110.7 in computing the individual's taxable income for the year or taxable income earned in Canada for the year, as the case may be, were

(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (3) and (12) and 110.7(1),

(ii) the amount deducted under paragraph 110(1)(d), not exceeding the total of

(A) twice the amount deducted under paragraph 110(1)(d.01), and

(B) 2/5 of the amount, if any, by which

(I) the amount deducted under paragraph 110(1)(d)

exceeds

(II) the amount determined under clause (A),

(iii) the amount deducted under paragraph 110(1)(d.01),

(iv) 2/5 of the amounts deducted under any of paragraphs 110(1)(d.1) to (d.3),

(v) the amount that would be deductible under paragraph 110(1)(f) if paragraph (d) were applicable in computing the individual's income for the year, and

(vi) the amount deducted under paragraph 110(1)(g);

(h.1) the formula in paragraph 110.6(21)(a) were read as

A - B

(i) in computing the individual's taxable income for the year or the individual's taxable income earned in Canada for the year, as the case may be, the only amounts deductible under

(i) paragraphs 111(1)(a), 111(1)(c), 111(1)(d) and 111(1)(e) were the lesser of

(A) the amount deducted under those paragraphs for the year, and

(B) the total of all amounts that would be deductible under those paragraphs for the year if

(I) paragraphs (b), (c) and (e) of this subsection, as they read in respect of taxation years that began after 1985 and before 1995, applied in computing the individual's non-capital loss, restricted farm loss, farm loss and limited partnership loss for any of those years, and

(II) paragraphs (b) to (c.3), (e) and (e.1) of this subsection applied in computing the individual's non-capital loss, restricted farm loss, farm loss and limited partnership loss for any taxation year that begins after 1994, and

(ii) paragraph 111(1)(b) were the lesser of

(A) the total of all amounts each of which is an amount that can reasonably be considered to be the amount that the individual would have deducted under paragraph 111(1)(b) had paragraph (d) of this subsection been applicable in computing the amount deductible under paragraph 111(1)(b), and

(B) the total of all amounts that would be deductible under that paragraph for the year if

(I) paragraph (d) of this subsection applied in computing the individual's net capital loss for any taxation year that began before 1995, and

(II) paragraphs (c.1) and (d) of this subsection applied in computing the individual's net capital loss for any taxation year that begins after 1994; and

(j) the Income Tax Application Rules were read without reference to section 40 of that Act.

(2) For the purposes of subsection 127.52(1) and this subsection, any amount deductible under a provision of this Act in computing the income or loss of a partnership for a fiscal period is, to the extent of a member's share of the partnership's income or loss, deemed to be deductible by the member under that provision in computing the member's income for the taxation year in which the fiscal period ends.

(2.1) Where it can reasonably be considered that one of the main reasons that a member of a partnership was not a specified member of the partnership at all times since becoming a member of the partnership is to avoid the application of this section to the member's interest in the partnership, the member is deemed for the purpose of this section to have been a specified member of the partnership at all times since becoming a member of the partnership.

(3) For the purposes of this section,

"film property" means a property described in paragraph (n) of Class 12, or paragraph (w) of Class 10, of Schedule II to the Income Tax Regulations;

"limited partner" has the meaning that would be assigned by subsection 96(2.4) if that subsection were read without reference to "if the member's partnership interest is not an exempt interest (within the meaning assigned by subsection 127.52(2.5)) at that time and";

"rental or leasing property" means a property that is a rental property or a leasing property for the purpose of section 1100 of the Income Tax Regulations.

(Repealed by S.C. 1998, c. 19, s. 150(8).)

S.C. 1986, c. 55, s. 50; S.C. 1988, c. 55, s. 112; S.C. 1990, c. 35, s. 11; S.C. 1994, c. 7, Sch. II, s. 106; S.C. 1994, c. 7, Sch. VIII, s. 70; S.C. 1998, c. 19, ss. 35, 150; S.C. 1999, c. 22, s. 50; S.C. 2001, c. 17, s. 119; S.C. 2002, c. 9, s. 40.

127.53. (1) An individual's basic exemption for a taxation year is

(a) $40,000, in the case of an individual other than a trust;

(b) $40,000, in the case of a testamentary trust or an inter vivos trust described in subsection 122(2); and

(c) in any other case, nil.

(2) Notwithstanding paragraph 127.53(1)(b), where more than one trust described in that paragraph arose as a consequence of contributions to the trusts by an individual and those trusts have filed with the Minister in prescribed form an agreement whereby, for the purpose of this Division, they allocate an amount to one or more of them for a taxation year and the total of the amounts so allocated does not exceed $40,000, the basic exemption for the year of each of the trusts is the amount so allocated to it.

(3) Notwithstanding paragraph 127.53(1)(b), where more than one trust described in that paragraph arose as a consequence of contributions to the trusts by an individual and no agreement as contemplated by subsection 127.53(2) has been filed with the Minister before the expiration of 30 days after notice in writing has been forwarded by the Minister to any of the trusts that such an agreement is required for the purpose of an assessment of tax under this Part, the Minister may, for the purpose of this Division, allocate an amount to one or more of the trusts for a taxation year, the total of all of which amounts does not exceed $40,000, and the basic exemption for the year of each of the trusts is the amount so allocated to it.

S.C. 1986, c. 55, s. 50.

127.531. An individual's basic minimum tax credit for a taxation year is the total of amounts that may be deducted in computing the individual's tax payable for the year under this Part under any of subsections 118(1) and (2), sections 118.1 and 118.2, subsection 118.3(1) and sections 118.5 to 118.7.

S.C. 1988, c. 55, s. 113.

127.54. (1) In this section,

"foreign income" of an individual for a taxation year means the total of

(a) the individual's incomes for the year from businesses carried on by the individual in countries other than Canada, and

(b) the individual's incomes for the year from sources in countries other than Canada in respect of which the individual has paid non-business-income taxes, within the meaning assigned by subsection 126(7), to governments of countries other than Canada;

"foreign taxes" of an individual for a taxation year means the total of the business-income taxes, within the meaning assigned by subsection 126(7), paid by the individual for the year in respect of businesses carried on by the individual in countries other than Canada and 2/3 of the non-business-income taxes, within the meaning assigned by that subsection, paid by the individual for the year to the governments of countries other than Canada.

(2) For the purposes of section 127.5, an individual's special foreign tax credit for a taxation year is the greater of

(a) the total of all amounts deductible under section 126 from the individual's tax for the year, and

(b) the lesser of

(i) the individual's foreign taxes for the year, and

(ii) 16% of the individual's foreign income for the year.

S.C. 1986, c. 55, s. 50; S.C. 2001, c. 17, s. 120.

127.55. Section 127.5 does not apply in respect of

(a) a return of income of an individual filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4);

(b) (Repealed by S.C. 2001, c. 17, s. 121(1).)

(c) an individual for the taxation year in which the individual dies;

(d) an individual for the 1986 taxation year if the individual dies in 1987;

(e) a trust described in paragraph 104(4)(a) or (a.1) for its taxation year that includes the day determined in respect of the trust under that paragraph; and

(f) a taxation year of a trust throughout which the trust is

(i) a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)),

(ii) a mutual fund trust, or

(iii) a trust prescribed to be a master trust.

S.C. 1986, c. 55, s. 50; S.C. 1988, s. 55, s. 114; S.C. 1994, c. 7, Sch. II, s. 107; S.C. 1994, c. 7, Sch. VIII, s. 71; S.C. 1998, c. 19, s. 151; S.C. 2001, c. 17, s. 121.