Income Tax Act

Marginal note:Deduction from tax

• 130 (1) A corporation that was, throughout a taxation year, an investment corporation may deduct from the tax otherwise payable by it under this Part for the year an amount equal to 20% of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year.

• Marginal note:Application of ss. 131(1) to (3.2) and (6)

  (2) Where a corporation was an investment corporation throughout a taxation year (other than a corporation that was a mutual fund corporation throughout the year), subsections 131(1) to (3.2) and (6) apply in respect of the corporation for the year

  • (a) as if the corporation had been a mutual fund corporation throughout that and all previous taxation years ending after 1971 throughout which it was an investment corporation; and

  • (b) as if its capital gains redemptions for that and all previous taxation years ending after 1971, throughout which it would, but for the assumption made by paragraph 130(2)(a), not have been a mutual fund corporation, were nil.

• Meaning of expressions investment corporation and taxed capital gains

  (3) For the purposes of this section,

  • (a) a corporation is an investment corporation throughout any taxation year in respect of which the expression is being applied if it complied with the following conditions:

    • (i) it was throughout the year a Canadian corporation that was a public corporation,

    • (ii) at least 80% of its property throughout the year consisted of shares, bonds, marketable securities or cash,

    • (iii) not less than 95% of its income (determined without reference to subsection 49(2)) for the year was derived from, or from dispositions of, investments described in subparagraph 130(3)(a)(ii),

    • (iv) not less than 85% of its gross revenue for the year was from sources in Canada,

    • (v) not more than 25% of its gross revenue for the year was from interest,

    • (vi) at no time in the year did more than 10% of its property consist of shares, bonds or securities of any one corporation or debtor other than Her Majesty in right of Canada or of a province or a Canadian municipality,

    • (vii) no person would have been a specified shareholder of the corporation in the year if

      • (A) the portion of the definition specified shareholder in subsection 248(1) before paragraph (a) were read as follows:

        specified shareholder

        “specified shareholder of a corporation in a taxation year means a taxpayer who owns, directly or indirectly, at any time in the year, more than 25% of the issued shares of any class of the capital stock of the corporation and, for the purposes of this definition,”

      • (B) paragraph (a) of that definition were read as follows:

        • “(a) a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person related to the taxpayer,”

      • (B.1) [Repealed, 2013, c. 34, s. 371]

      • (C) that definition were read without reference to paragraph (d) of that definition,

      • (C.1) [Repealed, 2013, c. 34, s. 371]

      and

      • (D) paragraph 251(2)(a) were read as follows:

        • “(a) an individual and

          • (i) the individual’s child (as defined in subsection 70(10)) who is under 19 years of age, or

          • (ii) the individual’s spouse or common-law partner;”

    • (viii) an amount not less than 85% of the total of

      • (A) 2/3 of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year, and

      • (B) the amount, if any, by which all taxable dividends received by it in the year to the extent of the amount thereof deductible under section 112 or 113 from its income for the year exceeds the amount that the corporation’s non-capital loss for the year would be if the amount determined in respect of the corporation for the year under paragraph 3(b) was nil,

      (less any dividends or interest received by it in the form of shares, bonds or other securities that had not been sold before the end of the year) was distributed, otherwise than by way of capital gains dividends, to its shareholders before the end of the year; and

  • (b) the amount of the taxed capital gains of a taxpayer for a taxation year is the amount, if any, by which

    • (i) its taxable capital gains for the year from dispositions of property

    exceeds

    • (ii) the total of its allowable capital losses for the year from dispositions of property and the amount, if any, deducted under paragraph 111(1)(b) for the purpose of computing its taxable income for the year.

• Marginal note:Wholly owned subsidiaries

  (4) Where a corporation so elects in its return of income under this Part for a taxation year, each of the corporation’s properties that is a share or indebtedness of another Canadian corporation that is at any time in the year a subsidiary wholly owned corporation of the corporation shall, for the purposes of subparagraphs 130(3)(a)(ii) and (vi), be deemed not to be owned by the corporation at any such time in the year, and each property owned by the other corporation at that time shall, for the purposes of those subparagraphs, be deemed to be owned by the corporation at that time.