The Income Tax Act - When is a Valuation Required?

WARNING:  Dry blog post ahead....

Unless you're an accountant, tax specialist or a business valuator, you should probably stop reading now ;)

The Income Tax Act of Canada requires value to be determined for many different reasons.  The most common reason that value needs to be determined for income tax reasons is for a corporate reorganization (more on that later).

First, below is a laundry list of most instances when the Income Tax Act would require value to be determined.  Some are well known, others less so:

- Employee stock options

- Debts of shareholders and certain persons connected with shareholders (section 15)

- Capital gains & losses

- Purchase price allocation