Section 135.1 — Income Tax Act: Definitions

The following definitions apply in this section and section 135. agricultural business means a business, carried on in Canada, that consists of one or any combination of farming (including, if the person carrying on the business is a corporation described in paragraph (a) of the definition agricultural cooperative corporation , the production, processing, storing and wholesale marketing of the products of its members’ farming activities); or the provision of goods or services (other than financial services) that are required for farming. ( entreprise d’agriculture ) agricultural cooperative corporation at any time means a corporation that was incorporated or continued by or under the provisions of a law, of Canada or of a province, that provide for the establishment of the corporation as a cooperative corporation or that provide for the establishment of cooperative corporations; and that has at that time as its principal business an agricultural business, or members, making up at least 75% of all members of the corporation, each of whom is an agricultural cooperative corporation, or has as their principal business a farming business. ( coopérative agricole ) allowable disposition means a disposition by a taxpayer of a tax deferred cooperative share less than five years after the day on which the share was issued if before the disposition, the agricultural cooperative corporation is notified in writing that the taxpayer has after the share was issued become disabled and permanently unfit for work, or termi­nally ill, or the taxpayer ceases to be a member of the agricultural cooperative corporation; or the agricultural cooperative corporation is notified in writing that the share is held by a person on whom the share has devolved as a consequence of the death of the taxpayer. ( disposition admissible ) eligible member of an agricultural cooperative corporation means a member who carries on an agricultural business and who is an individual resident in Canada; an agricultural cooperative corporation; a corporation resident in Canada that carries on the business of farming in Canada; or a partnership that carries on the business of farming in Canada, all of the members of which are described in any of paragraphs (a) to (c) or this paragraph. ( membre admissible ) tax deferred cooperative share at any time means a share issued, after 2005 and before 2031, by an agricultural cooperative corporation to a person or partnership that is at the time the share is issued an eligible member of the agricultural cooperative corporation, pursuant to an allocation in proportion to patronage; the holder of which is not entitled to receive on the redemption, cancellation or acquisition of the share by the agricultural cooperative corporation or by any person with whom the agricultural cooperative corporation does not deal at arm’s length an amount that is greater than the amount that would, if this Act were read without reference to this section, be included under subsection 135(7) in computing the eligible member’s income for their taxation year in which the share was issued; that has not before that time been deemed by subsection (4) to have been disposed of; and that is of a class the terms of which provide that the agricultural cooperative corporation shall not, otherwise than pursuant to an allowable disposition, redeem, acquire or cancel a share of the class before the day that is five years after the day on which the share was issued, and that is identified by the agricultural cooperative corporation in prescribed form and manner as a class of tax deferred cooperative shares. ( part à imposition différée ) tax paid balance of a taxpayer at the end of a particular taxation year of the taxpayer means the amount, if any, by which the total of the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and the amount, if any, that is included in computing the taxpayer’s income under this Part for the particular taxation year because of an election described in subparagraph (2)(a)(ii), exceeds the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share that the taxpayer disposed of in the particular taxation year. ( solde libéré d’impôt ) In computing the income of a taxpayer for a particular taxation year, there shall be included under subsection 135(7), in respect of the taxpayer’s receipt, as an eligible member, of tax deferred cooperative shares of an agricultural cooperative corporation in the particular taxation year, only the total of the lesser of the total of all amounts, in respect of the taxpayer’s receipt in the particular taxation year of tax deferred cooperative shares, that would, if this Act were read without reference to this section, be included under subsection 135(7) in computing the taxpayer’s income for the particular taxation year, and the greater of nil and the amount, if any, specified by the taxpayer in an election in prescribed form that is filed with the taxpayer’s return of income for the particular taxation year, and the amount, if any, by which the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share disposed of by the taxpayer in the particular taxation year exceeds the total of the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and the amount, if any, that is included in computing the taxpayer’s income for the particular taxation year because of an election described in subparagraph (a)(ii). The amount that may be deducted under subsection 135(1) for a particular taxation year by an agricultural cooperative corporation in respect of payments, in the form of tax deferred cooperative shares, made pursuant to allocations in proportion to patronage shall not exceed 85% of the agricultural cooperative corporation’s income of the taxation year attributable to business done with members. A taxpayer who holds a tax deferred cooperative share is deemed to have disposed of the share, for proceeds of disposition equal to the amount that would, if this Act were read without reference to this section, have been included under subsection 135(7), in respect of the share, in computing the taxpayer’s income for the taxation year in which the share was issued, at the earliest time at which the paid-up capital of the share is reduced otherwise than by way of a redemption of the share; or the taxpayer pledges, or for civil law hypothecates, assigns or in any way alienates the share as security for indebtedness of any kind. A taxpayer who is deemed by subsection (4) to have disposed at any time of a tax deferred cooperative share is deemed to have reacquired the share, immediately after that time, at a cost equal to the taxpayer’s proceeds of disposition from that disposition. Subsection 135(3) does not apply to a payment pursuant to an allocation in proportion to patronage that is paid by an agricultural cooperative corporation through the issuance of a tax deferred cooperative share. A person or partnership (in this subsection referred to as the “redeeming entity”) that redeems, acquires or cancels a shareholder’s share shall withhold and forthwith remit to the Receiver General, on account of the shareholder’s tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation, if the share was, at the time it was issued, a tax deferred cooperative share; the redeeming entity is the corporation that issued the share, or a person or partnership with whom the corporation does not deal at arm’s length; and the shareholder is not a trust whose taxable income is exempt from tax under this Part because of paragraph 149(1)(r) or (x). Subsections 84(2) and (3) do not apply to a tax deferred cooperative share. Subsection (10) applies in respect of the disposition, after September 28, 2009, by a taxpayer of a tax deferred cooperative share (in this subsection and subsection (10) referred to as the “old share”) of an agricultural cooperative corporation if the disposition results from the acquisition, cancellation or redemption of the old share in the course of a reorganization of the capital of the corporation; in exchange for the old share the corporation issues to the taxpayer a share (in this subsection and subsection (10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition tax deferred cooperative share in subsection (1); 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. If this subsection applies in respect of an exchange of a taxpayer’s old share for a new share, for the purposes of this section (other than subsection (9)), the new share issued in exchange for the old share is deemed to have been issued, pursuant to an allocation in proportion to patronage, at the time the old share was issued; and provided that no person or partnership receives at any time any consideration (other than the new share) in exchange for the old share, for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.