Section 84.2 — Income Tax Act: Computation of paid-up capital in respect of particular class of shares

In computing the paid-up capital in respect of any particular class of shares of the capital stock of a corporation at any particular time after March 31, 1977, there shall be deducted that proportion of the amount, if any, by which the paid-up capital in respect of all of the issued shares of the capital stock of the corporation on April 1, 1977, determined without reference to this section, exceeds the greater of the amount that the paid-up capital limit of the corporation would have been on March 31, 1977 if paragraph 89(1)(d) of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, as it read at that date, were read without reference to clause 89(1)(d)(iv.1)(F) of that Act and without reference to all subparagraphs of paragraph 89(1)(d) of that Act except subparagraphs 89(1)(d)(iv.1) and (vii) of that Act, and the paid-up capital limit of the corporation on March 31, 1977, that the paid-up capital on April 1, 1977, determined without reference to this section, in respect of the particular class of shares is of the paid-up capital on April 1, 1977, determined without reference to this section, in respect of all of the issued and outstanding shares of the capital stock of the corporation; and there shall be added an amount equal to the lesser of the amount, if any, by which the total of all amounts each of which is an amount deemed by subsection 84(3) or 84(4) to be a dividend on shares of the particular class paid by the corporation after March 31, 1977 and before the particular time exceeds the total that would be determined under clause 84.2(1)(b)(i)(A) if this Act were read without reference to paragraph 84.2(1)(a), and the amount required by paragraph 84.2(1)(a) to be deducted in computing the paid-up capital of shares of the particular class. In computing, after March 31, 1977, the adjusted cost base to an individual of a debt that was owing to the individual by a corporation on March 31, 1977, there shall be deducted the amount of any dividend that would have been deemed to have been received by the individual on that day if the corporation had paid the debt in full on that day. Where, after March 31, 1977 and before 1979, any debt referred to in subsection 84.2(2) owing by a corporation and held by an individual on March 31, 1977 and continuously after that date until conversion, is converted into shares of a particular class of the capital stock of the corporation, subsection 84.2(2) shall not apply in respect of the debt;

and in computing the paid-up capital in respect of the shares of the particular class at any particular time after the conversion, there shall be deducted the amount by which the adjusted cost base to the taxpayer of the debt would, but for paragraph 84.2(3)(a), have been reduced by virtue of subsection 84.2(2), and there shall be added an amount equal to the lesser of the amount, if any, by which the total of all amounts deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of the particular class paid by the corporation after the conversion and before the particular time, exceeds the total that would be determined under subclause 84.2(3)(b)(ii)(A)(I) if this Act were read without reference to subparagraph 84.2(3)(b)(i), and the amount required by subparagraph 84.2(3)(b)(i) to be deducted in computing the paid-up capital of shares of the particular class.