Section 15 — Income Tax Act: Benefit conferred on shareholder

If, at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholder where the corporation is resident in Canada at the time, by the reduction of the paid-up capital of the corporation, by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, on the winding-up, discontinuance or reorganization of the corporation’s business, or by way of a transaction to which subsection 88(1) or (2) applies; where the corporation is not resident in Canada at the time, by way of a distribution to which subsection 86.1(1) applies, by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies, by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, or on the winding-up, or liquidation and dissolution, of the corporation; by the payment of a dividend or a stock dividend; by conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph, the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation if the voting rights attached to the particular class differ from the voting rights attached to the other class, and there are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, and rights are not considered identical if the cost of acquiring the rights differs; or by an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies. Notwithstanding subsection (1), if in a taxation year a corporation has paid a stock dividend to a person and it may reasonably be considered that one of the purposes of that payment was to significantly alter the value of the interest of any specified shareholder of the corporation, the fair market value of the stock dividend shall, except to the extent that it is otherwise included in computing that person’s income under any of paragraphs 82(1)(a), (a.1) and (c) to (e), be included in computing the income of that person for the year. For the purpose of subsection 15(1), the value of the benefit where an obligation issued by a debtor is settled or extinguished at any time shall be deemed to be the forgiven amount at that time in respect of the obligation. For the purpose of subsection 15(1.2), the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by subsection 80(1) if the obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor; no amount included in computing income (otherwise than because of paragraph 6(1)(a)) because of the obligation being settled or extinguished were taken into account; the definition forgiven amount in subsection 80(1) were read without reference to paragraphs (f) and (h) of the description B in that definition; and section 80 were read without reference to paragraphs (2)(b) and (q) of that section. To the extent that the cost to a person of purchasing a property or service or an amount payable by a person for the purpose of leasing property is taken into account in determining an amount required under this section to be included in computing a taxpayer’s income for a taxation year, that cost or amount payable, as the case may be, shall include any tax that was payable by the person in respect of the property or service or that would have been so payable if the person were not exempt from the payment of that tax because of the nature of the person or the use to which the property or service is to be put. For the purposes of this subsection and subsection (1), a contemplated shareholder of a corporation is a person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, or a member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation; a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership; a benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person —

if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm’s length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be; and for the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm’s length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested. [Repealed, 2018, c. 27, s. 2] If a non-resident corporation (in this subsection referred to as the “original corporation”) governed by the laws of a foreign jurisdiction undergoes a division under those laws that results in all or part of its property and liabilities becoming the property and liabilities of one or more other non-resident corporations (each of which is referred to in this subsection as a “new corporation”) and, as a consequence of the division, a shareholder of the original corporation acquires one or more shares (referred to in this subsection as “new shares”) of the capital stock of a new corporation at a particular time, the following rules apply: except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies (determined without reference to this subsection) to the acquisition of the new shares in the case where, for each class of shares of the capital stock of the original corporation of which shares are held by the shareholder immediately before the division, new shares are received at the particular time by shareholders of that class on a pro rata basis in respect of all the shares (referred to in this subsection as the “original shares”) of that class at the particular time, the original corporation is deemed to have distributed, and the shareholder is deemed to have received, as a dividend in kind in respect of the original shares, the new shares acquired by the shareholder at the particular time, and the amount of the dividend in kind received by the shareholder in respect of an original share is deemed to be equal to the fair market value, immediately after the particular time, of the new shares acquired by the shareholder at the particular time in respect of the original share, and in any case where subparagraph (i) does not apply, the original corporation is deemed, at the particular time, to have conferred a benefit on the shareholder equal to the total fair market value, at that time, of the new shares acquired by the shareholder as a consequence of the division; any gain or loss of the original corporation from a distribution of the new shares as a consequence of the division is deemed to be nil; and each property of the original corporation that becomes at any time (referred to in this paragraph as the “disposition time”) property of the new corporation as a consequence of the division is deemed to be disposed of by the original corporation immediately before the disposition time for proceeds of disposition equal to the property’s fair market value, and acquired by the new corporation at the disposition time at a cost equal to the amount determined under subparagraph (i) to be the original corporation’s proceeds of disposition. Where a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) is a shareholder of a particular corporation, connected with a shareholder of a particular corporation, or a member of a partnership, or a beneficiary of a trust, that is a shareholder of a particular corporation and the person or partnership has in a taxation year received a loan from or become indebted to (otherwise than by way of a pertinent loan or indebtedness) the particular corporation, any other corporation related to the particular corporation or a partnership of which the particular corporation or a corporation related to the particular corporation is a member, the amount of the loan or indebtedness is included in computing the income for the year of the person or partnership. For the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is a foreign affiliate of the particular corporation; or a foreign affiliate of a person resident in Canada with which the particular corporation does not deal at arm’s length. For the purposes of subsection (2) and subject to subsection 17.1(3), pertinent loan or indebtedness means a loan received, or an indebtedness incurred, at any time, by a non-resident corporation (in this subsection referred to as the “subject corporation”), or by a partnership of which the subject corporation is, at that time, a member, that is an amount owing to a corporation resident in Canada (in this subsection and subsections (2.12) and (2.14) referred to as the “CRIC”) or to a qualifying Canadian partnership in respect of the CRIC and in respect of which amount owing all of the following apply: subsection (2) would, in the absence of this subsection, apply to the amount owing; the amount becomes owing after March 28, 2012; at that time, the CRIC is controlled by a non-resident corporation that is the subject corporation, or does not deal at arm’s length with the subject corporation; and either in the case of an amount owing to the CRIC, the CRIC and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for the taxation year that includes that time, or in the case of an amount owing to the qualifying Canadian partnership, all the members of the qualifying Canadian partnership and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for its taxation year in which ends the fiscal period of the qualifying Canadian partnership that includes that time. Where an election referred to in paragraph (2.11)(d) was not made on or before the day on or before which the election was required by that paragraph to be made, the election is deemed to have been made on that day if the election is made on or before the day that is three years after that day and the penalty in respect of the election is paid by the CRIC when the election is made. For the purposes of subsection (2.12), the penalty in respect of an election referred to in that subsection is the amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period commencing with the day on or before which the election is required by paragraph (2.11)(d) to be made and ending on the day the election is made. For purposes of this subsection, subsection (2.11), section 17.1 and subsection 18(5), a qualifying Canadian partnership , at any time in respect of a CRIC, means a partnership each member of which is, at that time, the CRIC or another corporation resident in Canada to which the CRIC is, at that time, related; and a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership. For the purposes of subsections (2.11) and (2.14), if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection;

and if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection. Subsection (2.17) applies at any time if at that time, a person or partnership (referred to in this subsection and subsections (2.17) to (2.192) as the intended borrower ) has an amount outstanding as or on account of a debt or other obligation to pay an amount (in this subsection and subsections (2.17) to (2.192) referred to as the shareholder debt ) to a person or partnership (in this subsection and subsections (2.17) to (2.192) referred to as the immediate funder ); subsection (2) would not, in the absence of this subsection and subsection (2.17), apply to the shareholder debt; at that time, a funder, in respect of a particular funding arrangement, has an amount outstanding as or on account of a debt or other obligation to pay an amount (other than a debt or other obligation to pay an amount to which subsection (2) applies or would apply if it were not a pertinent loan or indebtedness , as defined in subsection (2.11)) to a person or partnership that meets either of the following conditions: recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a funding arrangement, or it can reasonably be concluded that all or a portion of the particular funding arrangement was entered into or was permitted to remain outstanding because all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or the funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and the existence of the specified right is required under the terms and conditions of the particular funding arrangement, or it can reasonably be concluded that all or a portion of the particular funding arrangement was entered into, or was permitted to remain in effect, because the specified right was granted, or the funder anticipated that the specified right would be granted; and at that time, one or more funders is an ultimate funder. If this subsection applies at a particular time, then for the purposes of this section and section 80.4, the intended borrower is deemed to receive a loan from each particular ultimate funder at the particular time, the amount of which is equal to the amount determined by the formula A × B/C – (D – E) where A is the lesser of the amount outstanding as or on account of the shareholder debt at the particular time, and the total of all amounts, each of which is, at the particular time, an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt; B is the total of all amounts, each of which is, at the particular time, an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt; C is the total amount determined under paragraph (b) of the description of A; D is the total of all amounts, each of which is, in respect of the shareholder debt, an amount that the intended borrower has been deemed by this subsection to have received from the particular ultimate funder as a loan at any time before the particular time; and E is the total amount of any repayments deemed by subsections (2.19) and (2.191) to have occurred before the particular time, in respect of any deemed loans from the particular ultimate funder that are referred to in the description of D. Subsection (2.19) applies in respect of an intended borrower and a particular ultimate funder at a particular time if prior to the particular time, subsection (2.17) has applied in respect of a shareholder debt to deem one or more loans to have been received by the intended borrower from the particular ultimate funder; and at the particular time, an amount owing in respect of the shareholder debt is repaid in whole or in part, an amount owing in respect of a debt or other obligation owing to the particular ultimate funder by a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt is repaid in whole or in part, or either there is a decrease in the fair market value of a property in respect of which a specified right was granted by the particular ultimate funder to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, or a right described in clause (A) is extinguished. If this subsection applies in respect of an intended borrower and a particular ultimate funder at a particular time, the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the deemed loans referred to in paragraph (2.18)(a) at the particular time; and the total amount of the deemed repayments referred to in paragraph (a) is to be determined by the following formula: A – B – C where A is the total of all amounts, each of which is the amount of a loan deemed by subsection (2.17) to have been received, at any time before the particular time, by the intended borrower from the particular ultimate funder in respect of the shareholder debt, B is the total of all amounts deemed by this subsection to have been repaid, at any time before the particular time, by the intended borrower in respect of any loans referred to in the description of A, and C is the amount determined by the formula D × E/F where D is the lesser of the amount outstanding as or on account of the shareholder debt, immediately after the particular time, and the total of all amounts, each of which is, immediately after the particular time, an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, E is the total of all amounts, each of which is, immediately after the particular time an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, and F is the amount determined under subparagraph (ii) in the description of D. If, in the absence of section 257, the formula in subsection (2.17) would result in a negative amount at a particular time, the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the loans deemed by subsection (2.17) to have been received by the intended borrower from the particular ultimate funder before the particular time; and the total amount of the deemed repayments referred to in paragraph (a) is equal to the absolute value of that negative amount. The following definitions apply in this subsection and subsections (2.16) to (2.191). funder , in respect of a funding arrangement, means if the funding arrangement is described in paragraph (a) of the definition funding arrangement , the immediate funder; if the funding arrangement is described in paragraph (b) of the definition funding arrangement , the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; and a person or partnership that does not deal at arm’s length with a person or partnership referred to in paragraph (a) or (b). ( bailleur de fonds ) funding arrangement means the shareholder debt; and each debt or other obligation or specified right, owing by or granted to a funder, in respect of a particular funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (2.16)(c)(i) or (ii) in respect of a funding arrangement. ( mécanisme de financement ) specified right has the same meaning as in subsection 18(5). ( droit déterminé ) ultimate funder means a funder, if subsection (2) would apply to the shareholder debt if the creditor under the shareholder debt were the funder instead of the immediate funder. ( bailleur de fonds ultime ) Subsection 15(2) does not apply to indebtedness between non-resident persons. Subsection (2) does not apply to a debt that arose in the ordinary course of the creditor’s business or a loan made in the ordinary course of the lender’s ordinary business of lending money (other than a business of lending money if, at any time during which the loan is outstanding, less than 90% of the aggregate outstanding amount of the loans of the business is owing by borrowers that deal at arm’s length with the lender) where, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the debt or loan within a reasonable time. For the purposes of this subsection and subsection (2.3), a person or partnership that is a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership; and a borrower shall be considered to deal at arm’s length with a lender only if for greater certainty, the borrower and the lender deal with each other at arm’s length, where either the borrower or the lender is a partnership and the other party is not, each member of the partnership deals at arm’s length with the other party, and where both the borrower and the lender are partnerships, the borrower and each member of the borrower deal at arm’s length with the lender and each member of the lender. Subsection 15(2) does not apply to a loan made or a debt that arose in respect of an individual who is an employee of the lender or creditor but not a specified employee of the lender or creditor, in respect of an individual who is an employee of the lender or creditor or who is the spouse or common-law partner of an employee of the lender or creditor to enable or assist the individual to acquire a dwelling or a share of the capital stock of a cooperative housing corporation acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the corporation, where the dwelling is for the individual’s habitation, where the lender or creditor is a particular corporation, in respect of an employee of the particular corporation or of another corporation that is related to the particular corporation, to enable or assist the employee to acquire from the particular corporation, or from another corporation related to the particular corporation, previously unissued fully paid shares of the capital stock of the particular corporation or the related corporation, as the case may be, to be held by the employee for the employee’s own benefit, or in respect of an employee of the lender or creditor to enable or assist the employee to acquire a motor vehicle to be used by the employee in the performance of the duties of the employee’s office or employment, where it is reasonable to conclude that the employee or the employee’s spouse or common-law partner received the loan, or became indebted, because of the employee’s employment and not because of any person’s share-holdings, and at the time the loan was made or the debt was incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time. Subsection 15(2) does not apply to a loan made or a debt that arose in respect of a trust where the lender or creditor is a private corporation; the corporation is the settlor and sole beneficiary of the trust; the sole purpose of the trust is to facilitate the purchase and sale of the shares of the corporation, or of another corporation related to the corporation, for an amount equal to their fair market value at the time of the purchase or sale, as the case may be, from or to the employees of the corporation or of the related corporation (other than employees who are specified employees of the corporation or of another corporation related to the corporation), as the case may be; and at the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time. Subsection (2) does not apply to a loan made or a debt that arose in respect of a qualifying business transfer if immediately following the qualifying business transfer, the lender or creditor is a qualifying business, and the borrower is the employee ownership trust that controls the qualifying business described in subparagraph (i); the sole purpose of the loan or the debt is to facilitate the qualifying business transfer; and at the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within 15 years of the qualifying business transfer. Subsection 15(2) does not apply to a loan or an indebtedness repaid within one year after the end of the taxation year of the lender or creditor in which the loan was made or the indebtedness arose, where it is established, by subsequent events or otherwise, that the repayment was not part of a series of loans or other transactions and repayments. For the purpose of this section, an individual who is an employee of a partnership is deemed to be a specified employee of the partnership where the individual is a specified shareholder of one or more corporations that, in total, are entitled, directly or indirectly, to a share of any income or loss of the partnership, which share is not less than 10% of the income or loss. An amount paid as interest or a dividend by a corporation resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been paid by the corporation and received by the taxpayer as a dividend on a share of the capital stock of the corporation, unless the corporation is entitled to deduct the amount so paid in computing its income. An amount paid as interest or a dividend by a corporation not resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been received by the taxpayer as a dividend on a share of the capital stock of the corporation unless the amount so paid was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country. For the purposes of subsection (1), the value of the benefit to be included in computing a shareholder’s income for a taxation year with respect to an automobile made available to the shareholder, or a person related to the shareholder, by a corporation shall (except where an amount is determined under subparagraph 6(1)(e)(i) in respect of the automobile in computing the shareholder’s income for the year) be computed on the assumption that subsections 6(1), (1.1), (2) and (7) apply, with such modifications as the circumstances require, and as though references therein to “the employer” were read as “the corporation”. For greater certainty, subsections 15(1), (2) and (5) are applicable in computing, for the purposes of this Part, the income of a shareholder or of a person or partnership whether or not the corporation, or the lender or creditor, as the case may be, was resident or carried on business in Canada. [Repealed, 1998, c. 19, s. 75(3)] Where an amount in respect of a loan or debt is deemed by section 80.4 to be a benefit received by a person or partnership in a taxation year, the amount is deemed for the purpose of subsection 15(1) to be a benefit conferred in the year on a shareholder, unless subsection 6(9) or paragraph 12(1)(w) applies to the amount.