Income Tax Act

Marginal note:Ceasing to carry on business

• 24 (1) Notwithstanding paragraph 18(1)(b), where at any time after a taxpayer ceases to carry on a business the taxpayer no longer owns any property that was eligible capital property in respect of the business and that has value, in computing the taxpayer’s income for taxation years ending after that time,

  • (a) there shall be deducted, for the first such taxation year, the amount of the taxpayer’s cumulative eligible capital in respect of the business at that time;

  • (b) no amount may be deducted under paragraph 20(1)(b) in respect of the business;

  • (c) for the purposes of determining the value of P in the definition cumulative eligible capital in subsection 14(5), the amount deducted by the taxpayer under paragraph 24(1)(a) shall be deemed to be an amount deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for the taxation year that included that time; and

  • (d) for the purposes of subsection 14(1), section 14 shall be read without reference to subsection 14(4).

• Marginal note:Business carried on by spouse or common-law partner or controlled corporation

  (2) Notwithstanding subsection 24(1), where at any time an individual ceases to carry on a business and thereafter the individual’s spouse or common-law partner, or a corporation controlled directly or indirectly in any manner whatever by the individual, carries on the business and acquires all of the property that was eligible capital property in respect of the business owned by the individual before that time and that had value at that time,

  • (a) in computing the individual’s income for the individual’s first taxation year ending after that time, subsection 24(1) shall be read without reference to paragraph 24(1)(a) and the reference in paragraph 24(1)(c) to “the amount deducted by the taxpayer under paragraph (a)” shall be read as a reference to “an amount equal to the taxpayer’s cumulative eligible capital in respect of the business immediately before that time”;

  • (b) in computing the cumulative eligible capital of the spouse or common-law partner or the corporation, as the case may be, in respect of the business, the spouse or common-law partner or corporation shall be deemed to have acquired an eligible capital property and to have made an eligible capital expenditure at that time at a cost equal to 4/3 of the total of

    • (i) the cumulative eligible capital of the taxpayer in respect of the business immediately before that time, and

    • (ii) the amount, if any, determined for F in the definition cumulative eligible capital in subsection 14(5) in respect of the business of the individual at that time;

  • (c) for the purposes of determining the cumulative eligible capital in respect of the business of the spouse or common-law partner or corporation after that time, an amount equal to the amount determined under subparagraph 24(2)(b)(ii) shall be added to the amount otherwise determined in respect thereof for P in the definition cumulative eligible capital in subsection 14(5); and

  • (d) for the purpose of determining after that time the amount required to be included under paragraph 14(1)(b) in computing the income of the spouse, the common-law partner or the corporation in respect of any subsequent disposition of property of the business, there shall be added to the amount otherwise determined for Q in the definition cumulative eligible capital in subsection 14(5) the amount, if any, determined for Q in that definition in respect of the business of the individual immediately before the individual ceased to carry on business.

• Marginal note:Where partnership has ceased to exist

  (3) Notwithstanding subsection 24(1), where at any time a partnership ceases to exist in circumstances to which neither subsection 98(3) nor subsection 98(5) applies, there may be deducted, in computing the income for the first taxation year beginning after that time of a taxpayer who was a member of the partnership immediately before that time, an amount determined by the formula

  A × B/C

  where

  A

  is the amount that would, had the partnership continued to exist, have been deductible under subsection 24(1) in computing its income;

  B

  is the fair market value of the taxpayer’s interest in the partnership immediately before that time; and

  C

  is the fair market value of all interests in the partnership immediately before that time.