Temporary exemption from capital tax

Program(s) affected: T2 Document created: November 6, 2003 Tax year(s): 2003 Document last modified: December 16, 2003 Version(s): Problem status: Fixed

How do I calculate the amount that entitles a corporation to the deduction respecting a temporary exemption from capital tax if its fiscal period includes June 12, 2003?

If the temporary exemption includes June 12, 2003, perform the following calculations:

• $3,000,000 X (number of days in the fiscal period before June 13, 2003, that fall within the 5-year period ÷ number of days in the fiscal period) = (A)

• The lesser of $3,000,000 or the amount from line 392 of form CO-17 X (number of days in the fiscal period that come after June 12, 2003, and fall within the 5-year period ÷ number of days in the fiscal period that fall within the 5-year period) X 75% = (B)

• Amount giving entitlement to the deduction respecting a temporary exemption from capital tax = (A) + (B)

Example:

A corporation's fiscal year-end is September 30, 2003. Its exemption period is from October 1, 2001, through September 30, 2006. Its paid-up capital (line 392 of the CO-17) is $100,000.

• $3,000,000 X (255 / 365) = $2,095,890 (A)

• $100,000 X (110 / 365) X 75% = $22,603 (B)

• $2,095,890 (A) + $22,603 (B) = $2,118,493 (amount giving entitlement to the deduction respecting a temporary exemption from capital tax)

In DT Max, select the option Quebec CO-17 under the keyword Override, enter 393 under FIELD-DATA, and enter the amount giving entitlement to the deduction respecting a temporary exemption from capital tax.

In this type of case, it is recommended to join an explanatory note to the file.

The revised CO-17 form will be implemented in a future version of the program.

This calculation is now performed properly in version 7.01.

[Note that the calculation of the amount giving entitlement to the deduction respecting a temporary exemption from capital tax will differ for a financial institution. If your corporate client is a financial institution, please contact the DT Max support team.]