,canada ,co/ums                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,patronage ,divid5ds
,numb]3 ,,it-#cfb;,r
,date3 ,augu/ #aj1 #aiij
,ref];e3 ,sec;n #ace 7al sec;ns #adi &
  #bae1 subsec;ns #d7#a71 #ef7#b71
  #abe7#a7 & #abg7#f7 & p>agraphs
  #bj7#a77c7 & 7d7 & #bab7#a77g774

               ,applic,n
    
  ,? bullet9 c.els & replaces ,,it-#cfb
dat$ ,janu>y #ca1 #aigg4 ,except =! -;ts
9 #c & #h1 ! bullet9 applies 6all tax,n
ye>s4 ,! -;ts 9 #c & #h reg>d+ ! deduc;n
"u subsec;n #ace7#b.a7 apply ) respect
6am.ts 4all[$ pursuant 6subsec;n
#ace7#b7 9 a tax,n ye> 5d+ af #aihe4
,curr5t revi.ns >e designat$ 0v]tical
l9es4                                 #a
                ,summ>y              a#a
    
  ,9 -put+ 9come =a tax,n ye>1 a taxpay]
is all[$ 6deduct patronage divid5d
pay;ts made 6cu/om]s4 ,:ile ! taxpay]
9volv$ is usu,y a coop]ative corpor,n1
sole proprietors1 "pn]%ips & ord9>y
corpor,ns may al qualify =! deduc;n4 ,?
bullet9 4cusses ! 3di;ns set =? 9 sec;n
#ace t m/ 2 met 9 ord] 6deduct ! am.t (!
pay;ts4 ,taxpay]s :o claim ! deduc;n >e
requir$ 6file ,=m ,t#b;,s7#af74

          ,4cus.n & ,9t]pret,n
    
          ,alloc,n 9 ,propor;n
      6,patronage 7p>agraphs #a-f7
    
#a4 ,! patronage pay;ts t may qualify =!
  deduc;n "u subsec;n #ace7#a7 >e ^? : h
  be5 made pursuant 6alloc,ns 9 propor;n
  6patronage4 ,an 8alloc,n 9 propor;n
  6patronage0 =a tax,n ye> m1ns an am.t
  cr$it$ 0! taxpay] 6a cu/om] ( t ye>1
  on t]ms t ! cu/om] is 5titl$ 6or    #b
              ,,it-#cfb;,r           b#a
  w rcv pay;t (! am.t1 -put$ at a rate 9
  propor;n 6patronage 7i4e41 ! am.t (
  busi;s d"o )! cu/om] 9 ! tax,n ye>7 )
  appropriate di6];es 9 ! rate = di6]5t
  types ( gds1 products or s]vices &=
  di6]5t classes1 grades1 or qualities (
  s* gds1 products1 or s]vices4
#b4 ,x is g5],y requir$ t all cu/om]s 2
  cr$it$ at ! same rate = simil> gds or
  s]vices 7z describ$ 9 p>agraph
  #ace7#d77a774 ,if !y >e n & non-memb]
  cu/om]s >e 9volv$ :o >e cr$it$ at a
  di6]5t rate ?an memb]s1 or >e exclud$
  f ! alloc,n alt1 ! am.t deducti# 9 !
  ye> 0! taxpay] "u subsec;n #ace7#a7
  may 2 limit$ 0subsec;n
--------------------------------------#b
  #ace7#b74 ,! e6ect ( subsec;n #ace7#b7
  is 6limit ! am.t deducti# 9 respect (
  memb]s 6t propor;n (! taxpay]'s 9come
  f all s\rces1 9clud+ taxa# capital
  ga9s1 t ! busi;s d"o ) memb]s is (!
  busi;s d"o ) all cu/om]s dur+ ! ye>4
  ,! me?od ( calculat+ ! all[a#       #c
              ,,it-#cfb;,r           a#b
  deduc;n "u subsec;n #ace7#a7 9 s*
  cases is set \ 9 ,=m ,t#b;,s7#af74 ,=!
  purposes ( sec;n #ace1 a 8memb]0 is a
  p]son :o is 5titl$ z a memb] or
  %>ehold] 6full vot+ "rs 9 ! 3duct (!
  a6airs (! taxpay] 72+ a corpor,n7 or
  (a corpor,n ( : ! taxpay] is a
  subsidi>y :olly-[n$ corpor,n4
#c4 ,": subsec;n #ace7#b7 applies 9 a
  tax,n ye> 5d+ af #aihe 6d5y ! deduc;n
  ( all or a por;n (! am.t pd 6memb]s1 !
  undeduct$ am.t may 2 deducti# 9 a
  subsequ5t ye> "u subsec;n #ace7#b.a74
  ,e6ective =! #aihg & subsequ5t tax,n
  ye>s1 ? subsec;n p]mits a deduc;n
  equal 6! excess (! taxpay]'s 9come
  attributa# 6memb]s ( t ye> ov] ! am.t
  deduct$ "u subsec;n #ace7#a7 9 respect
  ( ^? memb]s = t ye> 6! ext5t (!
  undeduct$ am.t t 0 n deduct$ 9 previ\s
  ye>s4 ,! me?od ( calculat+ ! all[a#
  deduc;n "u subsec;n #ace7#b.a7 9 s*
  cases is al set \ 9 ,=m ,t#b;,s7#af74
                                      #d
              ,,it-#cfb;,r           b#b
#d4 ,pursuant 6p>agraph #ace7#d77a71 !
  same rate ( patronage alloc,n = simil>
  gds or s]vices m/ 2 appli$ 6all memb]
  cu/om]s (a ye>4 ,if a taxpay] sells at
  special reduc$ prices 6select$ memb]-
  cu/om]s & ?us does n make alloc,ns or
  makes reduc$ alloc,ns 6!m1 any
  alloc,ns 6o!r memb]s = gds or s]vices
  simil> 6^? sold 6! select$ memb]s at
  reduc$ rates >e n reg>d$ z 2+ 9
  propor;n 6patronage4
#e4 ,a taxpay] is 3sid]$ 6qualify 9
  8allocat+ 9 propor;n 6patronage0 ev5
  ?\<1 = r1sons ( 3v5i;e1 cr$it is n
  giv5 6^? cu/om]s 6:om ! patronage
  alloc,n wd 2 less ?an 4#e1jj1 provid$
  all o!r 3di;ns >e met4 ,no deduc;n 9
  -put+ 9come is all[a# = s* cr$its n
  giv54
#f4 ,! am.t m/ 2 cr$it$ 6! cu/om] )9 !
  tax,n ye> = : ! alloc,n is made or )9
  #ab mon?s af ! 5d ( t ye>1 &! prospect
  t s* am.ts wd 2 cr$it$ m/ h be5 held
                                      #e
              ,,it-#cfb;,r           c#b
  =? 6memb] or non-memb] cu/om]s ( t
  ye>4

       ,small ,busi;s ,deduc;n--
      ,9come f an ,active ,busi;s
            7p>agraphs #g-h7
    
#g4 ,z a g5]al rule1 9 calculat+ 9come f
  an active busi;s c>ri$ on 9 ,canada =
  purposes (
--------------------------------------#c
  -put+ ! small busi;s deduc;n "u
  subsec;n #abe7#a71 coop]ative
  corpor,ns : >e ,canadian-3troll$
  private corpor,ns m/ deduct ! 5tire
  all[a# deduc;n "u subsec;n #ace7#a7 =
  patronage divid5ds4 ,h["e1 s9ce
  patronage divid5ds may 2 pd f any
  s\rce ( 9come1 "! may 2 situ,ns ": a
  less] am.t wd 2 deduct$ f active
  busi;s 9come =! purposes (! small
  busi;s deduc;n4 ,? wd o3ur ":3
  7a7 patronage divid5ds 7 pd 6p]sons :o
    7 n cu/om]s (! active busi;s 9    #f
              ,,it-#cfb;,r           a#c
    ,canada 7s* z cu/om]s (a busi;s n
    c>ri$ on 9 ,canada71 or
  7b7 alloc,ns 9 propor;n 6patronage 7 n
    made at ! same rate1 9 respect (
    simil> gds or s]vices1 6all cu/om]s
    (! active busi;s 9 ,canada & "! 0
    9come f ano!r s\rce4
  ,9 ^! situ,ns1 subsec;n #d7#a7 wd
  apply 6allocate patronage divid5ds 6!
  active busi;s 9come (! coop]ative 9
  ,canada on ! basis ( ^? divid5ds t >e
  :olly or r1sonably applica# 6t active
  busi;s 9come4 ,! result is t only !
  patronage divid5ds pd 6cu/om]s (!
  active busi;s 9 ,canada wd 2 deduct$ f
  t active busi;s 9come =! purpose (
  -put+ ! taxpay]'s small busi;s
  deduc;n4 ,if ! ov]all am.t = patronage
  divid5ds : is deducti# 9 -put+ 9come f
  all s\rces is less ?an ! am.t (
  patronage divid5ds pd : >e allocat$ 6!
  active busi;s 9come 7= example1 ": !
  coop]ative su/a9$ a loss f xs non-
  active busi;s7 ! alloc,n 6active    #g
              ,,it-#cfb;,r           b#c
  busi;s 9come wd 2 limit$ 6t less]
  ov]all am.t4 ,fur!r1 subsec;n #ace7#b7
  may apply 9 situ,n 7b71 :e!r or n !
  situ,n describ$ 9 7a7 al exi/s1 6limit
  ! am.t deduct$ 9 respect ( memb]s :o
  >e cu/om]s (! active busi;s 9 ,canada4
  ,9 s* cases1 ! am.t deduct$ wd 2
  limit$ 6t propor;n (! 9come (! active
  busi;s 72f ! deduc;n = patronage
  divid5ds7 t ! busi;s d"o ) ^? memb]s
  is (! busi;s d"o ) all cu/om]s (!
  active busi;s 9 ,canada4 ,9 ? reg>d1
  see3 ,s$gewick ,co-op]ative ,associ,n
  ,limit$ v4 ,! ,que51 ,7#aihd7' ,,ctc
  #ad1 #hc ,,dtc #edee 7,,fctd74
#h4 ,z expla9$ 9 #c abv1 all or a "p (a
  previ\s ye>'s undeduct$ am.t may 2
  c>ri$ ov] & deduct$ 9 -put+ 9come f
  all s\rces "u subsec;n #ace7#b.a7 =!
  curr5t ye>4 ,! am.t t is c>ri$ =w>d &
  deduct$ 9 ? mann] 7or1 9 keep+ )! -;ts
  9 #g abv1 t por;n ( t am.t t relates
  6memb]s :o 7 cu/om]s (! active busi;s
  9 ,canada7 m/ al 2 deduct$ 9        #h
              ,,it-#cfb;,r           c#c
  -put+ a corpor,n's 9come f an active
  busi;s c>ri$ on 9 ,canada =! purpose (
  -put+ xs small busi;s deduc;n =! ye>4
--------------------------------------#d
         ,hold+ ,=? ,prospect (
         ,alloc,n 7p>agraph #i7
    
#i4 ,a taxpay] is deem$ 6h held =? !
  prospect ( alloc,ns 6cu/om]s 0-ply+ )
  any "o (! me?ods provid$ 9 p>agraphs
  #ace7#e77a7 & 7b74 ,": a prospect is
  held =? 0an adv]tise;t 9 a3ord.e )
  p>agraph #ace7#e77b71 ! appropriate "p
  (! newspap] 6be fil$ %d %[ 9 "o piece
  ! adv]tise;t &! "n &! date (!
  newspap]4 ,! prescrib$ =m 7,canada
  ,gazette1 ,novemb] #i1 #aidi7 =!
  adv]tise;t is z foll[s3
  8,z requir$ 0! ,9come ,tax ,act1 ? w
    advise \r cu/om]s t x is \r 9t5;n
    6make pay;t 9 propor;n 6patronage 9
    respect (! ye> 5d+ ! ---- "d ( ----
    #ai-- & we "hby hold =? ! prospect (
    patronage pay;ts acly04           #i
          ,pay;t ( ,patronage        a#d
      ,divid5ds 7p>agraphs #aj-aa7
    
#aj4 ,a patronage pay;t is only deducti#
  0a taxpay] 9 -put+ 9come =a tax,n ye>
  if x is pd )9 ! ye> or )9 #ab mon?s (!
  5d (! ye> 6cu/om]s (! ye> or (a
  previ\s ye> ": s* pay;ts 7 n deducti#
  f 9come (a previ\s ye>4 ,! ways 9 : s*
  pay;t may 2 e6ect$ 9clude ! foll[+3
  7a7 0! 4tribu;n ( m"oy or m]*&ise1
    9clud+ m]*&ise v\*]s redeem$ )9 !
    ye> or )9 #ab mon?s (! 5d (! ye>1
  7b7 0a set-(f ( oblig,ns : may 2
    e6ect$ 0! taxpay] cr$it+ an am.t 6!
    cu/om] pursuant 6! cu/om]'s oblig,n
    6make a loan1 pur*ase %>es1 or pay a
    debt ": ! applic,n (! patronage
    divid5d 6s* an oblig,n has be5
    au?oriz$ 0a cu/om] 9 writ+1 or
    e6ect$ 0! provi.ns (a by-law (!
    taxpay] 7see al #aa 2l7 9 respect (
    memb] cu/om]s only1 except t no =mal
    au?oriz,n is requir$ 0! taxpay]
                                     #aj
              ,,it-#cfb;,r           b#d
    6apply an am.t 6a trade debt ( any
    cu/om]1 or
  7c7 0a pay;t or transf] ( prop]ty 6"s
    o!r p]son1 at ! direc;n ( or )!
    3curr;e (a cu/om]1 z a b5efit 6!
    cu/om] or 6b5efit s* o!r p]son 76!
    ext5t t x is 6be 9clud$ "u subsec;n
    #ef7#b71 9 -put+ ! cu/om]'s 9come =a
    tax,n ye>74
#aa4 ,6e6ect a set-(f ( oblig,ns
  pursuant 6a by-law z 4cuss$ 9 #aj abv1
  ! by-law m/ 2 pass$ "u ! au?or;y (a
  provi.n 9 ! *>t]1 >ticles ( associ,n1
  or /atute "u : ! taxpay] 0 9corporat$4
  ,"! m/ 2 an oblig,n on ! memb] cu/om]
  6make a loan1 pur*ase %>es or pay a
  debt 6! taxpay]1 & an oblig,n on !
  taxpay] 6pay ! patronage divid5d1 2f
  pay;t may 2 e6ect$ 0set-(f ( oblig,ns4
  ,? type ( patronage pay;t %d 2 cr$it$
  sep>ately 6an a3.t = ea* cu/om]
--------------------------------------#e
  3c]n$1 ) ea* cu/om] 2+ notifi$ acly4
                                     #aa
         ,o!r ,pay;ts 6,cu/om]s      a#e
           7p>agraphs #ab-ac7
    
#ab4 ,pay;ts may al 2 made 9 a3ord.e )!
  t]ms & 3di;ns (a 3tract1 or 9 -pli.e
  )! t]ms (! taxpay]'s *>t]1 >ticles (
  associ,n1 or by-laws1 : wd n 2 3sid]$
  6be patronage divid5ds4 ,an example (
  s* pay;ts wd 2 ^? t result f an
  >range;t ": ! taxpay] m>kets !
  products ( xs memb]s & is obligat$
  6pay 6!m ! proce$s (! sale less a
  deduc;n =! taxpay]'s exp5ses &
  res]ves4 7,see ! curr5t v].n ( ,,it-
  #dic1 ,ag5cy ,coop]ative ,corpor,ns47
#ac4 ,": a taxpay] mak+ s* pay;ts al
  makes pay;ts on a patronage basis1 !
  latt] rema9 patronage pay;ts subject
  6! usual limit,ns4 ,taxpay]s %d keep
  _! records 9 s* a mann] t a det]m9,n c
  2 made (! am.ts pd pursuant 6oblig,ns
  describ$ 9 #ab abv &! am.ts 4tribut$ z
  patronage pay;ts4

                                     #ab
      ,tax,n ( ,cu/om]s 7p>agraphs   b#e
                #ad-ah7
    
#ad4 ,all patronage divid5ds rcvd 0a
  cu/om] 79clud+ c]tificates ( 9debt$;s
  rcvd pursuant 6a patronage alloc,n71
  )! excep;n ( ^? ) respect to 83sum]
  gds or s]vices01 >e 9clud$ 9 -put+ !
  recipi5t's 9come pursuant 6subsec;n
  #ace7#g7 =! tax,n ye> 9 : !y >e rcvd4
  ,9 all cases ": pay;t has be5 e6ect$
  0! pay] 9 any mann] :atso"e1 !
  patronage divid5d is 3sid]$ 6h be5
  rcvd 0! cu/om]4
#ae4 ,": ! patronage divid5d relates
  "ply 63sum] gds or s]vices & "ply 6o!r
  gds or s]vices1 b ! ,t#d;,a slip =w>d$
  6! cu/om] 0! pay] does n %[ ! am.t
  applica# 6ea* class ( transac;n1 !
  :ole (! pay;t is 9clud$ 9 -put+ !
  cu/om]'s 9come un.s x c 2 e/abli%$ t a
  por;n ( s* pay;t is applica# 63sum]
  gds or s]vices & z s* %d n 2 subject
  6tax4
                                     #ac
              ,,it-#cfb;,r           c#e
#af4 ,0virtue ( p>agraph #ace7#d77b7 !
  expres.n 83sum] gds & s]vices0 m1ns
  gds or s]vices ! co/ ( : 0 n deducti#
  0! cu/om] 9 -put+ 9come f a busi;s or
  prop]ty4
#ag4 ,subsec;n #ace7#c7 provides t ": !
  am.t1 or ! total ( two or m am.ts1 pd
  0a taxpay] 9 respect ( patronage
  pay;ts 6a cu/om] resid5t 9 ,canada 9 a
  "picul> cal5d> ye> exce$s 4#ajj & t
  resid5t is n exempt f tax "u sec;n
  #adi1 ! taxpay] is requir$ 6deduct &
  )hold a tax ( #ae p]c5t on ! excess &
  remit x 6! ,rcvr ,g5]al on a3.t (!
  cu/om]'s tax liabil;y4 ,if ! taxpay]
  is
--------------------------------------#f
  a coop]ative corpor,n t _h an unus$
  9ve/;t tax cr$it at ! 5d ( xs previ\s
  tax,n ye>1 pursuant 6subsec;n #abg7#f7
  ? require;t 6remit tax 9 ! curr5t
  tax,n ye> may 2 met 6! ext5t t ! unus$
  9ve/;t tax cr$it is appli$ ag/ ! tax
  o!rwise requir$ 6be remitt$4 ,!    #ad
              ,,it-#cfb;,r           a#f
  am.t deem$ 6h be5 remitt$ on a3.t (!
  cu/om] w 2 ! same1 reg>d.s (! mann] 9
  : ! require;t 6remit 0 met4
#ah4 ,all patronage pay;ts made 6a non-
  resid5t cu/om] >e subject 6a #be p]c5t
  )hold+ tax "u p>agraph #bab7#a77g7 &
  sec;n #bae4 ,h["e1 l[] rates ( tax may
  apply 9 a3ord.e )! t]ms ( an 9come tax
  agree;t or 3v5;n )! c.try ": ! cu/om]
  resides4

     ,9t]e/ on ,%>es 7p>agraph #ai7
    
#ai4 ,_m coop]atives1 9 a4i;n 6mak+
  patronage pay;ts 6_! cu/om]s1 pay
  9t]e/ 6_! %>ehold]s on ! \t/&+ capital
  /ock4 ,? s-call$ 9t]e/1 : is calculat$
  on ! numb] ( %>es held 0ea* memb]1 is
  9 r1l;y a divid5d on capital /ock &1
  "!=e1 is n deducti# 9 -put+ 9come (!
  coop]ative4 ,x is taxa# 9 ! h&s (!
  recipi5t z a taxa# divid5d4

                                     #ae
        ,9t]e/ on ,loan ,capital     b#f
           7p>agraphs #bj-ba7
    
#bj4 ,9t]e/ on loan capital is deducti#
  9 -put+ 9come provid$ x is pd or paya#
  9 a3ord.e ) p>agraph #bj7#a77c7 or
  7d74 ,": loan capital results f !
  ex*ange or sub/itu;n ( bonds1
  deb5tures1 notes1 or "s o!r evid;e (
  9debt$;s = capital /ock1 ! transac;n
  is 9 e6ect a redemp;n (! capital /ock
  &a 3curr5t borr[+ ( m"oy f ! =m]
  %>ehold]s4 ,s* loan capital is ?us
  borr[$ m"oy )9 ! m1n+ ( p>agraph
  #bj7#a77c74
#ba4 ,9t]e/ on ! foll[+ classes ( loan
  capital is n deducti#3
  7a7 ,def]r$ ,patronage ,alloc,ns1
    i4e41 patronage alloc,ns ! pay;t ( :
    has be5 def]r$ & : h n be5 loan$ 6!
    taxpay]2
  7b7 ,loan ,units : d n c>ry a legal
    oblig,n 6pay 9t]e/ b 9 respect ( : x
    is left 6! directors 9 _! 4cre;n
                                     #af
              ,,it-#cfb;,r           c#f
    6pay s* 9t]e/ z !y may decide is
    w>rant$4
  




















                                     #ag