Income for taxation year

Legislative history

The 1917 Act taxed “income” as defined; the 1948 Act introduced the section that taxes “income from all sources inside or outside Canada” and named the three sources; the 1972 reform recast the section as the step-by-step computation now in force and brought capital gains into it; and the amendments since have adjusted the treatment of capital losses and business investment losses and added the deemed-nil rule. The Justice Laws consolidation lists one amendment after 1985, and its single point-in-time version (31 August 2004 to the present) is identical to the current text. What follows is drawn from what was digitally available on Justice Laws, on publications.gc.ca, and in the Library of Parliament’s historical bills, debates, and journals; where only a bill as introduced was available, and not the enacted statute, that is said. Once the printed statute volumes for 1917, 1948, 1952, and 1972 can be examined, this history will be updated.

• The Income War Tax Act, 1917. Clause 3(1) of Bill 117 defined “income” as “the annual profit or gain or gratuity” from an office or employment, a profession or calling, or a trade, manufacture, or business, together with interest, dividends, and investment profits, a taxpayer’s share of the profits of any syndicate, trust, association, corporation, or partnership, “and also profit or gain from any other source”, subject to listed exemptions and deductions. The Senate inserted “net” before “profit” and recast the gift and life insurance exclusions and added a proviso that “the personal and living expenses shall not be taken into consideration” (Senate Debates, 3 September 1917; Votes and Proceedings, 6 September 1917). The enacted text and chapter number (usually given as S.C. 1917, c. 28) were not digitally available on an official site.
• The Income Tax Act, S.C. 1948, c. 52, s. 3. Bill 338, under the marginal note “World income”, provided: “The income of a taxpayer for a taxation year for the purposes of this Part is his income for the year from all sources inside or outside Canada and, without restricting the generality of the foregoing, includes income for the year from all (a) businesses, (b) property, and (c) offices and employments.” Clause 4 made income from a business or property “the profit therefrom for the year”, and the rule for computing income from a particular source sat in the definitions, clause 127(1)(av). The Federal Court of Appeal has said that “Section 3 of the 1948 Income Tax Act introduced the concept of taxing income by source” (Manrell, para. 39). The enacted text was not digitally available.
• R.S.C. 1952, c. 148, s. 3. The 1948 Act became chapter 148 of the 1952 revision. The Supreme Court quoted the section “as it read in 1951” in Schwartz (para. 51), and construed it in Curran v. M.N.R., [1959] S.C.R. 850, to tax a third party’s inducement payment as income from a source under its general words (as described in Schwartz, para. 51). No official copy of the 1952 text was found online.
• S.C. 1970-71-72, c. 63, s. 1 “3” (Bill C-259, first reading 30 June 1971). New section 3, marked “New” in the explanatory notes, introduced the rule-based computation: paragraph (a) for income from a source inside or outside Canada other than taxable capital gains; paragraph (b) for net taxable capital gains, with the taxable net gain from listed personal property; paragraph (c) for subdivision e deductions; paragraph (d) for losses from an office, employment, business, or property; and paragraph (e), which let an individual deduct up to $1,000 of net allowable capital losses against other income (nil for a corporation). Section 9 of the Income Tax Application Rules applies the new text “to the 1972 and subsequent taxation years”, and s. 26(1) confines the capital gains rules to dispositions after 1971.
• S.C. 1977-78, c. 1, s. 1 (Bill C-11, royal assent 15 December 1977). The paragraph (e) ceiling was raised to $2,000 for 1977 and later years, implementing the Ways and Means Motion of 20 October 1977.
• S.C. 1977-78, c. 42, s. 1 (Bill C-59, royal assent 30 June 1978). Allowable business investment losses were added: subparagraph (b)(ii) became the excess of allowable capital losses over allowable business investment losses, and paragraph (d) added “or his allowable business investment loss for the year”, for 1978 and later years. Companion clauses added paragraphs 38(c) and 39(1)(c). The Motion of 25 May 1978 explained that such losses on shares or debts of a Canadian-controlled private corporation were to “be deductible in computing his income for the year” and, to the extent of any excess, in computing taxable income of the preceding year and the five following years.
• S.C. 1984, c. 1, s. 2 (Bill C-2, royal assent 19 January 1984). Gains and losses from indexed security investment plans were added to subparagraph (b)(i) and paragraph (d), consequential on section 47.1, for taxation years ending after 30 September 1983 (explanatory notes of November 1983, clause 2).
• S.C. 1986, c. 6, s. 1 (Bill C-84, royal assent 13 February 1986). The indexed security investment plan clause was repealed for 1986 and later years, and paragraph (e), the $2,000 deduction of net allowable capital losses against other income, was repealed, with a special reading for 1985, “consequential on the introduction of the lifetime capital gains exemption” (technical notes of November 1985, clause 1). Paragraph (d) became the final step. The repealed paragraph survives in the definition of “pre-1986 capital loss balance” in subsection 111(8), which still refers to “subparagraph 3(e)(ii) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952”.
• R.S.C. 1985, c. 1 (5th Supp.), s. 3. The revision modernized the wording (“aggregate” became “total”, “his” became “the taxpayer’s”, subparagraph (b)(i) was set out as clauses (A) and (B)) and printed the source note “1970-71-72, c. 63, s. 1”3”; 1977-78, c. 1, s. 1, c. 42, s. 1; 1984, c. 1, s. 2; 1986, c. 6, s. 1”. The revised Part I applies to taxation years ending after November 1991 (Income Tax Application Rules, s. 73(a)).
• S.C. 1991, c. 49, s. 1 (Bill C-18, royal assent 17 December 1991), restated as S.C. 1994, c. 7, Sch. II, s. 1. The closing words after paragraph (d) were replaced by paragraphs (e) and (f), for 1990 and later years: where an amount is determined under paragraph (d) it is the taxpayer’s income, and “in any other case, the taxpayer shall be deemed to have income for the year in an amount equal to zero”. The Department of Finance described new paragraph (f) as intended to clarify that a taxpayer with no excess under paragraph (d) has income of zero (explanatory notes of July 1990 and May 1991, clause 1). The Income Tax Amendments Revision Act (Bill C-15, royal assent 12 May 1994) redrafted the 1991 amendment in terms of the revised Act; its schedules “must not be interpreted as new law, but as being identical in substance with the amendments in the original amending Acts”. Nothing else in section 3 was changed.
• Since 1994. No amendment. Justice Laws holds a single point-in-time version, from 31 August 2004, identical to the current text.

Interpretation and application →

Interpretation and application

Section 3 is the bridge between the charging provision and the detailed computation rules. Subsection 2(1) taxes the taxable income of a resident, subsection 2(2) defines taxable income as income plus and minus the Division C adjustments, and section 3 supplies the income figure by aggregating, in a fixed order, the amounts that the rest of Division B produces source by source. Its opening words limit the definition to Part I. The Supreme Court has described the section as recognizing “two basic categories of income: ‘ordinary income’ from office, employment, business and property, all of which are included in s. 3(a), and income from a capital source, or capital gains which are covered by s. 3(b)” (Friesen, para. 5), and the Federal Court of Appeal has summarized its mechanics: “the income from each source is aggregated (paragraph 3(a)) and the loss from each source is totaled and deducted from the aggregate income amount (paragraph 3(d))” (Green, para. 25). Section 4 first requires income or loss to be computed source by source; “once this is done, section 3 requires the taxpayer to combine the income and losses from all sources and determine the amount, if any, by which the total income exceeds the total losses” (Canada v. Independent Order of Foresters, 2026 FCA 146, para. 56). The general policy is that taxpayers “may offset losses from one business or source of income against profits from another without limitation” (Canada v. Craig, 2012 SCC 43, para. 43), subject to the specific restrictions the Act imposes, of which section 31 is the best known.

The source concept in paragraph 3(a)

Paragraph (a) totals “the taxpayer’s income for the year (other than a taxable capital gain from the disposition of a property) from a source inside or outside Canada, including, without restricting the generality of the foregoing, the taxpayer’s income for the year from each office, employment, business and property”. Everything turns on the word “source”, which the Act does not define. “There can be no taxation without income and, absent a specific rule (Division C), there can be no income without a source” (Paletta Estate, para. 30). The same requirement governs losses: gains and losses that do not emanate from a source “can neither be included nor deducted in the computation of his income pursuant to section 3” (para. 31).

The governing test is Stewart. The Supreme Court rejected the “reasonable expectation of profit” analysis as an independent source test (para. 4) and set out a two-stage approach: first, “Is the activity of the taxpayer undertaken in pursuit of profit, or is it a personal endeavour?”; second, “If it is not a personal endeavour, is the source of the income a business or property?” (para. 50). “The first stage of the test assesses the general question of whether or not a source of income exists; the second stage categorizes the source as either business or property” (para. 50). The first stage matters only where there is a personal or hobby element; where there is none, “the taxpayer is necessarily engaged in the pursuit of profit, and therefore a source of income exists” (Walls, para. 19). Where there is such an element, the taxpayer must show a predominant intention to profit and businesslike conduct measured by objective standards, using the Moldowan factors, which are not exhaustive (paras. 54–55). Losses do not show that no source exists, and the existence of a source is distinct from the deductibility of particular expenses (para. 60). Tax motivation does not detract from the commercial nature of an activity (Walls, para. 22), but “the reduction of his own tax cannot by itself be a taxpayer’s business” (para. 21, quoting Moloney).

Moldowan v. The Queen, [1978] 1 S.C.R. 480, which had equated a source of income with a profit or reasonable expectation of profit (p. 485), remains the origin of the objective factors, “the profit and loss experience in past years, the taxpayer’s training, the taxpayer’s intended course of action, the capability of the venture as capitalized to show a profit” (p. 486), and its reading of section 31 was later overruled in Craig (paras. 24–28). The Federal Court of Appeal has since held that the absence of a personal element is not the end of the inquiry. In Paletta Estate, foreign exchange straddle trading undertaken solely to generate tax losses was not a source: Stewart “reaffirms ‘pursuit of profit’ as decisive” (para. 39), and where the evidence shows that despite the appearance of commerciality an activity is not conducted with a view to profit, no business or property source exists (para. 36); indeed “where the sole purpose of an activity is the avoidance of one’s tax, there is no reason to resort to the Stewart test” (para. 53). The Supreme Court refused leave to appeal (Chad, para. 3). In Chad v. Canada, 2026 FCA 84, the Court rejected the argument that Paletta Estate was manifestly wrong or had reinstated the reasonable expectation of profit test: “An intention to pursue profit and a reasonable expectation of profit are different concepts” (para. 18); Paletta Estate “is not a departure from Stewart and Walls” (para. 15) and the Tax Court “was bound to follow” it (para. 20); an activity “aimed exclusively at avoiding one’s tax” cannot be a source (para. 32). The Court declined to restate the test (paras. 23–24), noting that Brown v. Canada, 2022 FCA 200, rephrased the approach without changing it (para. 33). An unpaid corporate director has no source of income from that activity (Nisker, para. 24).

Sources beyond the named four

Paragraph (a)’s words “including, without restricting the generality of the foregoing” have long invited the question whether receipts outside office, employment, business, property, and the specific inclusions in section 56 are taxable. The Royal Commission on Taxation recorded in 1966 that the general provision “might have permitted the bringing into tax of receipts, gains and benefits not expressly referred to in any of the specified sources”, but that it “and the present provision have been given very limited significance in the administration of the legislation and in their interpretation by the courts” (Report, vol. 3, p. 63). The Supreme Court’s majority in Schwartz stated that “s. 3(a) of the Act does contemplate taxability of income arising from sources other than those specifically provided for in s. 3(a) and in Subdivision d of Division B of Part I of the Act” (para. 18), relying on Curran, where a third party’s payment to induce an executive to leave his employment was taxed under the general words (para. 51), while holding that the general provision could not displace the specific retiring allowance scheme Parliament had enacted for payments on loss of employment (paras. 52–53). Major J., concurring, would not have decided the point and observed that a literal reading would depart from the settled position that inheritances and gifts “are nevertheless not taxed because they are not income from employment, property, or business” (paras. 66 and 68). The Federal Court of Appeal treats the matter as open: “It is an open question whether any source of income exists that is not listed in paragraph 3(a) or section 56”, and one that “may never need answering” given the breadth of “business” and “property” (Johnson, paras. 24–25). Section 56 “does not enlarge what is taxable under s. 3, it simply specifies” (The Queen v. Savage, [1983] 2 S.C.R. 428, p. 446), so an amount may be income from a source although it falls outside section 56, and a receipt “in respect of employment” is “of itself” income from a source (pp. 441–442).

Windfalls, gifts, and receipts that are not income from a source

Strike pay equal to the taxpayer’s take-home pay was not shown to be “income . . . from a source” within section 3, and “the benefit of the doubt must go to the taxpayers” (Canada v. Fries, [1990] 2 S.C.R. 1322, p. 1322). Non-competition payments received on a sale of shares were, on the Tax Court’s findings, “not income from a source within the meaning of section 3” (Canada v. Fortino (F.C.A., 14 December 1999), para. 1); when the point later reached the Court of Appeal as a capital gains question, the payment for a covenant not to compete was held not to be proceeds of property and so a non-taxable capital receipt, taxation of such payments being a matter for Parliament (Manrell, paras. 25 and 67–69). Penalty interest on an expropriation award was a windfall and not income (Bellingham v. Canada, [1996] 1 F.C. 613 (C.A.), as described in Mitchell v. Canada, 2002 FCA 407, para. 17). The factors that distinguish a windfall from income from a source come from R. v. Cranswick, [1982] 1 F.C. 813 (C.A.): whether the taxpayer had an enforceable claim to the payment, made an organized effort to receive it, sought or solicited it, expected it, could foresee its recurrence, received it from a customary source, or gave anything in consideration for it (as set out in Johnson, paras. 33–34). “The Cranswick factors have proved to be a useful analytical framework in many cases where it is alleged that an amount received by a taxpayer is not income from a source” (Johnson, para. 35). Applying them, net returns from a Ponzi scheme were income from the investor’s contractual rights, a property, notwithstanding the operator’s fraud (Johnson, paras. 28 and 38–40); pooled tips paid to a casino attendant out of patrons’ winnings were employment income, since “[i]t is the nature of the gratuity as a source of income in the hands of the appellant that matters” (Xia v. Canada, 2020 FCA 35, para. 5); and payments by fund managers to RRSP annuitants for market-timing losses were not windfalls but replaced RRSP value (Lavoie v. Canada, 2010 FCA 266, paras. 5–8). Income from illegal activity is taxable and its expenses deductible, because “tax authorities are not concerned with the legal nature of an activity” (65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804, para. 56). The CRA’s statement of these rules, with the Cranswick factors, is Folio S3-F9-C1, paras. 1.1–1.5, 1.10–1.16, and 1.30.

Damages, settlements, and the surrogatum principle

Damages and settlement payments “are inherently neutral for tax purposes”; their treatment “will depend on what the amount is intended to replace. This approach is known as the surrogatum principle” (Tsiaprailis v. Canada, 2005 SCC 8, para. 7). The questions are “(1) what was the payment intended to replace? And, if the answer to that question is sufficiently clear, (2) would the replaced amount have been taxable in the recipient’s hands?” (para. 15). The Federal Court of Appeal states the rule for Part I as a whole: a payment of damages or a settlement is treated as whatever it replaces, income if it replaces income and capital if it compensates a diminution of capital (Transocean Offshore Ltd. v. Canada, 2005 FCA 104, para. 50). The principle traces to Diplock L.J. in London and Thames Haven Oil Wharves, Ltd. v. Attwooll, [1967] 2 All E.R. 124 (C.A.), as adopted in Canada (Schwartz, para. 45; Tsiaprailis, para. 7). In Schwartz itself the Tax Court’s finding that no part of a settlement had been allocated to lost salary was decisive, so nothing could be taxed under paragraph 3(a) as income from the employment contract (paras. 18 and 43). The Tax Court continues to apply the principle to settlements of property and pension claims (Mann v. The King, 2023 TCC 151, paras. 127–131; Vibert v. The King, 2025 TCC 189, para. 20). A reimbursement of an expense on income account is an income receipt, and a reimbursement of the cost of capital property a capital receipt (Ikea Ltd. v. Canada, [1998] 1 S.C.R. 196, paras. 23–25). The CRA’s bulletin IT-365R2 remains its statement on damages and is still relied on in the Income Tax Audit Manual (chapter 27, section 27.3.2).

The named sources and their measures

Paragraph (a) does not itself say how income from a source is measured; the subdivisions of Division B do. Income from a business or property is “the taxpayer’s profit from that business or property for the year” (subsection 9(1)), a concept the Supreme Court has held Parliament left deliberately undefined and whose determination “is a question of law” (Canderel, paras. 29 and 53), and a loss from a business or property is computed by the same rules with the modifications the circumstances require (subsection 9(2)). Income from a property excludes a capital gain on its disposition (subsection 9(3)), which is why capital gains enter section 3 only through paragraph (b). Section 12 adds specific inclusions “as income from a business or property”. “Income” in this sense is gross income subject to tax, not net profit, where the context so requires (Ludco, paras. 59–61). Office and employment income is computed under Subdivision A. Whether a receipt falls in one source or another can matter because the deduction rules differ, and the courts have declined to blur the categories: capital gains are not income from a business or property source, and “the acquisition of a property in anticipation of a capital gain does not provide a source of income” (Income Tax Technical News No. 25, response 6, adopting Stewart, para. 4; see paras. 51–53 of Stewart on the motivation of capital gains). “Inside or outside Canada” makes the aggregation worldwide (Northcut, para. 118); where the geographic source matters, for a non-resident under section 115 or for the foreign tax credit under section 126, section 4 allocates income and deductions to sources and places.

Net taxable capital gains (paragraph 3(b))

Paragraph (b) brings in the amount by which the total of taxable capital gains on property other than listed personal property and the taxable net gain from listed personal property exceeds the excess of allowable capital losses on such other property over allowable business investment losses. Three consequences follow from its words. First, allowable capital losses are deducted only against taxable capital gains; the amount under paragraph (b) cannot be negative, and an excess of losses becomes a net capital loss under subsection 111(8) for other years (Folio S4-F8-C1, summary; IT-232R3, paras. 7 and 12). Second, losses on listed personal property never enter paragraph (b) directly: they are netted against gains on such property inside section 41, and a net loss becomes a listed-personal-property loss carried within that section (subsection 41(3); IT-232R3, para. 6). Third, allowable business investment losses are carved out of the allowable capital losses in subparagraph (b)(ii) so that they can be deducted against all income under paragraph (d): “an ABIL is not deducted from taxable capital gains under paragraph 3(b) but is deducted from income from all sources under paragraph 3(d)” (Folio S4-F8-C1, para. 1.4). The definitions of capital gain and capital loss in paragraphs 39(1)(a) and (b) are built on the same structure, excluding from capital treatment any gain or loss that would already be included or deducted under paragraph 3(a) or (d).

Subdivision E deductions (paragraph 3(c))

Paragraph (c) subtracts from the sum of paragraphs (a) and (b) “the total of the deductions permitted by Subdivision E in computing the taxpayer’s income for the year”, except to the extent already taken into account under paragraph (a). Subdivision E, beginning at section 60, contains the deductions that belong to no single source, among them the deductions listed in section 60 and those in the sections that follow it; the parenthesis prevents double counting where a Subdivision E deduction has already reduced income from a source. The result, in the CRA’s phrase, is “paragraph 3(c) income”, that is, income “after subdivision e deductions but before deducting losses for the year” (IT-232R3, para. 5), and the same figure is element F of the non-capital loss definition in subsection 111(8). Section 4(2) provides that, subject to subsection 4(3), no deduction permitted by sections 60 to 64 applies to a particular source or place, which is why these deductions sit in paragraph (c) rather than inside any source.

Losses and allowable business investment losses (paragraph 3(d))

Paragraph (d) subtracts the year’s losses from an office, employment, business, or property and the year’s allowable business investment losses from the paragraph (c) figure. These losses are deductible against every kind of income for the year, including net taxable capital gains, and to the extent they can be used they must be: “Losses cannot be used to reduce section 3 income below nil. However, to the extent that the above-mentioned losses can be used in the loss year (i.e., without reducing section 3 income below nil), they must be used in the loss year or forfeited” (IT-232R3, para. 5). A business loss is therefore consumed by a taxable capital gain in the same year even though the taxpayer might have preferred to shelter the gain with the capital gains deduction; the adjustment in subsection 111(1.1) and the capital gains deduction can reinstate a loss so absorbed (IT-232R3, paras. 14 and 25). What paragraph (d) cannot absorb becomes the non-capital loss of subsection 111(8), whose formula starts from the year’s losses from office, employment, business, and property and allowable business investment losses (element E) and subtracts the paragraph 3(c) income (element F); a non-capital loss may be carried back three years and forward twenty (paragraph 111(1)(a)), except that an allowable business investment loss unused after ten years becomes a net capital loss (subsection 111(8), elements E(c) and C; Folio S4-F8-C1, paras. 1.5–1.7). A farming loss is first restricted by section 31 where farming is not the taxpayer’s chief source of income or a combination of farming and some other source, and after Craig a combination exists where the taxpayer places significant emphasis on both (paras. 42–43); the restricted amount alone enters paragraph (d) (IT-232R3, paras. 3–4). Losses keep the character of their source as they pass through a partnership to the partners who compute income under section 3 (Green, paras. 27–29).

Income, or income of zero (paragraphs 3(e) and (f))

Where paragraph (d) yields an amount, that amount is the taxpayer’s income for the year; otherwise the taxpayer “shall be deemed to have income for the year in an amount equal to zero” (paragraphs (e) and (f)). The deeming rule was added for 1990 and later years to state what had been implicit in the closing words of the earlier text (explanatory notes of July 1990 and May 1991). It means that income for the year is never negative; the excess of losses is carried by section 111 into other years, and the individual return shows a nil figure at net income with the negative amount available for a loss carryback (CRA, “Line 23600 – Net income”). It is not a device by which a taxpayer may declare receipts to be “not income from an office, employment, business or property” and deem them to zero; that argument was struck as pseudolegal in Russell v. The Queen, 2016 TCC 122 (paras. 18–23).

Who computes under section 3

Section 3 begins “The income of a taxpayer”. A partnership is not a taxpayer, so the section does not apply to it; income and loss flow to the partners with their source identity intact and are aggregated in each partner’s own section 3 computation (Green, paras. 20 and 25–27). A fraternal benefit society taxable only on its life insurance business under subsection 149(4) computes that income as if it had no other source and cannot blend in losses from another business, the contrast being with sections 3 and 4, under which “section 3 allows a taxpayer to deduct the loss from one business against the income from another business in computing its income” (Independent Order of Foresters, paras. 2–3, 56, and 84). For an individual resident in Canada for part of the year, section 114 computes taxable income from the parts of the year, and for a non-resident section 115 computes taxable income earned in Canada by assuming that the person had no income other than the amounts it lists; both provinces that define “income” by reference to the federal Act carve out these two cases (see “Provincial and treaty parallels”).

← Legislative historyPolicy purpose and commentary →

Policy purpose and commentary

Section 3 embodies a choice between two conceptions of income. The Royal Commission on Taxation recommended a “comprehensive tax base” under which “[t]he distinction between wages, interest, dividends, business income, gains on shares, bequests, sweepstake winnings, and so on, all would disappear”, because “[i]f economic power is increased it does not matter in principle whether it was earned or unearned, from domestic or foreign sources, in money or in kind, anticipated or unanticipated, intended or inadvertent, recurrent or non-recurrent, realized or unrealized” (Report, vol. 3, pp. 25–26); “[a] dollar gained through the sale of a share, bond or piece of real property bestows exactly the same economic power as a dollar gained through employment or operating a business” (vol. 1, pp. 14–15). The Commission traced the narrower Canadian practice to the United Kingdom’s schedular system and the “fruit and the tree” analogy, under which income was the yield from a productive source and the source itself was capital (vol. 3, pp. 65–66), and it recommended that legislation define income by “the general all-inclusive definition” while specifying, “without limiting the generality of the initial definition, that particular kinds of income should be taxed” (p. 69). The 1969 White Paper rejected the full proposition, “often . . . summarized rather inelegantly as ‘a buck is a buck is a buck’”, but accepted that the line between a capital gain and an income receipt was not “great enough or clear enough to warrant the tremendous difference between being completely exempt and being completely taxable” (Proposals for Tax Reform, para. 3.3), and proposed to bring capital gains into income (paras. 1.28, 1.30, and 3.1). Section 3 as enacted in 1971 is the compromise: paragraph (a) keeps the source concept and the “without restricting the generality” drafting the Commission recommended, and paragraph (b) brings in capital gains, but only as a taxable fraction and with their own loss rules.

The later amendments each served a stated purpose. The 1978 addition of allowable business investment losses was designed “to encourage investment in SBCs by giving such losses more generous tax treatment than that available for ordinary capital losses” (Folio S4-F8-C1, summary; Ways and Means Motion of 25 May 1978). The repeal of the $2,000 deduction of net capital losses against other income was “consequential on the introduction of the lifetime capital gains exemption” (technical notes of November 1985, clause 1). The deemed-nil rule of 1990 was explanatory (notes of July 1990 and May 1991). The section’s structure also serves the policy that a taxpayer may set the loss from one source against the income from another (Craig, para. 43), and the courts’ insistence that a source requires the pursuit of profit protects that policy from schemes whose only product is a loss (Paletta Estate, para. 53; Chad, para. 32).

In my view the unresolved question in the case law, whether paragraph (a) taxes an unenumerated source, is now of small practical moment, for the reason the Federal Court of Appeal gave in Johnson: “business” and “property” are defined so broadly, and section 56 reaches so far, that a receipt with the marks of income will almost always find a named source, and a receipt without them will fail the Cranswick factors whatever the theory. The live questions are at the edges of the pursuit of profit test after Paletta Estate and Chad, and in the allocation of settlements under Tsiaprailis.

Selected commentary. The Canadian Tax Foundation has published “Surrogatum, Source, and Tsiaprailis” (2006) 54:4 Canadian Tax Journal 862; “Judge-Made Rules Interpreting Undefined Terms: ‘Source of Income’”, Perspectives on Tax Law & Policy (2025); “Paletta: Straddles Can Work!”, Canadian Tax Focus (2021); and “CRA: Crowdfunding Receipts Are Taxable”, Canadian Tax Focus (2013). The Foundation’s site refused automated access, so these are recorded from catalogue entries only and nothing is taken from them.

← Interpretation and applicationRelevant case law →

Relevant case law

• Stewart v. Canada, 2002 SCC 46, [2002] 2 S.C.R. 645. The reasonable expectation of profit test is not an independent source test; two-stage approach, pursuit of profit or personal endeavour, then business or property; objective factors; losses do not negate a source (paras. 4–5, 49–55, and 60).
• Walls v. Canada, 2002 SCC 47. A clearly commercial activity is necessarily a source; tax motivation does not detract from commerciality, but reducing one’s own tax cannot itself be a business (paras. 19–23).
• Schwartz v. Canada, [1996] 1 S.C.R. 254. Paragraph 3(a) contemplates unenumerated sources (obiter), but the specific retiring allowance scheme governs payments on loss of employment; no allocation, so nothing taxable under 3(a); surrogatum stated (paras. 18, 43, 45, and 50–53; Major J. concurring, paras. 66–69).
• Canada v. Fries, [1990] 2 S.C.R. 1322. Strike pay not shown to be income from a source; benefit of the doubt to the taxpayer (p. 1322).
• The Queen v. Savage, [1983] 2 S.C.R. 428. A benefit in respect of employment is of itself income from a source; section 56 specifies but does not enlarge section 3 (pp. 441–442 and 445–446).
• Friesen v. Canada, [1995] 3 S.C.R. 103. Section 3’s two categories of income; an adventure in the nature of trade is a business (paras. 5–6 and 71).
• Moldowan v. The Queen, [1978] 1 S.C.R. 480. Source of income equated with a profit or reasonable expectation of profit; the objective factors (pp. 485–486); reading of section 31 overruled in Craig.
• Canada v. Craig, 2012 SCC 43. Combination of farming and another source; general policy of offsetting losses from one source against income from another (paras. 24–28 and 42–43).
• Tsiaprailis v. Canada, 2005 SCC 8. The surrogatum principle and its two questions (paras. 7 and 15).
• Canderel Ltd. v. Canada, [1998] 1 S.C.R. 147, and Ikea Ltd. v. Canada, [1998] 1 S.C.R. 196. Profit under section 9 undefined and a question of law (Canderel, paras. 29 and 53); reimbursements characterized by what they reimburse (Ikea, paras. 23–25).
• Ludco Enterprises Ltd. v. Canada, 2001 SCC 62. “Income” means income subject to tax, not net income (paras. 59–61).
• 65302 British Columbia Ltd. v. Canada, [1999] 3 S.C.R. 804. Income from illegal activity is taxable and its expenses deductible (para. 56).
• Chad v. Canada, 2026 FCA 84. Paletta Estate is binding and consistent with Stewart; pursuit of profit, not reasonable expectation of profit, is required; an activity aimed exclusively at avoiding tax is not a source; leave to appeal Paletta Estate refused (paras. 3, 7, 15, 18, 20, 24–27, and 32–33).
• Canada v. Paletta Estate, 2022 FCA 86. No income without a source; straddle trading undertaken solely for tax losses is not a business; appearances of commerciality are not enough (paras. 30–31, 36, 39, and 53).
• Canada v. Independent Order of Foresters, 2026 FCA 146. Sections 3 and 4 contrasted; section 3 combines income and losses from all sources and allows a loss from one business against income from another (paras. 56 and 84). Decided 2 September 2026; whether leave to appeal has been sought is not verified here.
• Canada v. Green, 2017 FCA 107. A partnership is not a taxpayer for section 3; losses keep their source character through tiered partnerships (paras. 20, 25, and 27–29).
• Canada v. Johnson, 2012 FCA 253. Ponzi returns were income from property; the Cranswick factors; unenumerated sources an open question (paras. 23–25, 28, 33–35, and 38–40).
• Xia v. Canada, 2020 FCA 35. Tips out of gambling winnings were employment income; the nature of the receipt in the recipient’s hands governs (paras. 2 and 4–6).
• Lavoie v. Canada, 2010 FCA 266. Market-timing compensation was not a windfall; surrogatum applied to RRSP value (paras. 5–8).
• Transocean Offshore Ltd. v. Canada, 2005 FCA 104. Statement of the surrogatum principle for Part I (para. 50).
• Manrell v. Canada, 2003 FCA 128. Section 3 of the 1948 Act introduced taxation by source; a general right belonging to everyone is not property; non-competition payment a non-taxable capital receipt (paras. 25, 39, and 67–69).
• Mitchell v. Canada, 2002 FCA 407. Records that Bellingham held penalty interest on an expropriation award to be a windfall (para. 17).
• Canada v. Fortino (F.C.A., 14 December 1999, A-950-96). Non-competition payments not income from a source under section 3 (para. 1).
• Canada v. Nisker, 2008 FCA 37. No source of income from an unpaid directorship (para. 24).
• Russell v. The Queen, 2016 TCC 122. Paragraph 3(f) cannot be used to deem contract income to zero; pleading struck (paras. 18–23).
• Mann v. The King, 2023 TCC 151, and Vibert v. The King, 2025 TCC 189. Surrogatum applied to a property settlement and to compensation for lost pension income (Mann, paras. 127–131; Vibert, para. 20).
• Northcut v. The King, 2026 TCC 136. Section 3 includes amounts from a source inside or outside Canada; foreign pensions included (para. 118).
• Cited only as quoted in the decisions above: Curran v. M.N.R., [1959] S.C.R. 850; R. v. Cranswick, [1982] 1 F.C. 813 (C.A.); Bellingham v. Canada, [1996] 1 F.C. 613 (C.A.); Tonn v. Canada, [1996] 2 F.C. 73 (C.A.); Moloney v. The Queen, 92 D.T.C. 6570 (F.C.A.); London and Thames Haven Oil Wharves, Ltd. v. Attwooll, [1967] 2 All E.R. 124 (C.A.); Brown v. Canada, 2022 FCA 200; M.N.R. v. Eldridge, [1964] C.T.C. 545 (Ex. Ct.).

← Policy purpose and commentaryCRA documents →

CRA documents

• Income Tax Folio S3-F9-C1, Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime, effective 3 July 2020, which on first publication (9 December 2014) cancelled IT-185R, IT-213R, IT-256R, and IT-334R2. The CRA’s statement of the section 3 source concept (para. 1.1), the Cranswick windfall factors (para. 1.2), gifts (paras. 1.3–1.5), strike pay and Fries (para. 1.10), illegal income and gambling (paras. 1.11–1.15), prizes (paras. 1.16–1.21), gains from crime (paras. 1.30–1.32), and fraudulent investment schemes and Johnson (paras. 1.42–1.45).
• Income Tax Folio S4-F8-C1, Business Investment Losses, effective 27 October 2023, which replaced IT-484R2 on 27 September 2016. An ABIL is deducted under paragraph 3(d), not 3(b) (para. 1.4); carryover as a non-capital loss and conversion to a net capital loss (paras. 1.5–1.10); deceased taxpayers and paragraph 3(d) (para. 1.73).
• IT-232R3, Losses — Their Deductibility in the Loss Year or in Other Years (4 July 1997, archived but not cancelled, and still cited by Folio S4-F8-C1, para. 1.10). Its reference line begins with “Subsection 111(1) and paragraph 3(d)”; paras. 1, 5, 6, 7, 10, 12, 14, 25, and 27 set out the ordering under paragraphs 3(b) to (d) and the reinstatement of losses. Its figures reflect the three-quarters inclusion rate and seven-year carryforward of 1997.
• IT-365R2, Damages, Settlements and Similar Receipts (8 May 1987, archived, not cancelled; reference line “Section 3”). Personal injury damages excluded (paras. 2 and 4); the income or capital character of compensation for business contracts, quoting Fleming (para. 8); crime compensation (paras. 11 and 13). Still relied on in the Income Tax Audit Manual, section 27.3.2.
• Income Tax Technical News No. 25 (30 October 2002, archived): the CRA’s adoption of Stewart, including that the reasonable expectation of profit test “will no longer be used to determine if there is a source of income” (response 3), that acquiring property in anticipation of a capital gain is not a source (responses 5–6), and that tax motivation does not detract from a source (response 8). The last statement should now be read with Paletta Estate and Chad, which the Audit Manual records.
• Income Tax Folio S4-F11-C1, Meaning of Farming and Farming Business, paras. 1.20–1.22, and Income Tax Folio S4-F14-C1, Artists and Writers, paras. 1.19–1.22: the current folio statements of the Stewart two-stage test. IT-322R, Farm Losses (25 October 1978, archived; paras. 4–6 cancelled) states the pre-Stewart source test (para. 2).
• Income Tax Audit Manual, chapter 27.0, Income (issued 21 December 2021, modified 1 September 2026): section 27.1.1 quotes Friesen on section 3; section 27.2.0, “Pursuit of profit”, records that the CRA formerly “viewed that if there was no REOP, then there was no source for the purposes of section 3”, directs auditors to the Stewart two-stage approach, and summarizes Paletta Estate and Chad; section 27.3.2 states the surrogatum approach to damages. Chapter 13.0, Audit techniques (modified 1 September 2026): non-taxable sources of funds (13.2.1), indirect verification of income, net worth, and bank deposit techniques (13.3–13.5). The manual is the Agency’s internal guidance, published in severed form, and is not law.
• Return-line pages: Line 12700 – Taxable capital gains, Lines 21699 and 21700 – Business investment loss, Line 23600 – Net income, Capital losses, and Amounts that are not reported or taxed (all modified January to September 2026). Guide T4036, Rental Income (Rev. 25), still describes rental losses in reasonable-expectation-of-profit terms and does not cite Stewart.
• CRA technical interpretations are not published on canada.ca, and none is cited here.

← Relevant case lawRegulations, forms, and elections →

Regulations, forms, and elections

• No provision of the Income Tax Regulations, C.R.C., c. 945 (current to 21 September 2026), refers to section 3, and section 3 confers no regulation-making power.
• The T1 return (5000-R) and Guide 5000-G implement the section in three steps: total income (Step 2, lines 10100 to 14600, with taxable capital gains at line 12700), net income (Step 3, lines 20600 to 23600, where the Subdivision E deductions and the allowable business investment loss at line 21700 are taken), and taxable income (Step 4). The return does not follow the statutory order literally: capital gains are netted on Schedule 3 before line 12700, and losses from a source are reported as negative amounts on the income lines rather than as a separate paragraph (d) step.
• Form T1A, Request for Loss Carryback: applies a non-capital or net capital loss of the year to any of the three preceding years under section 111 once section 3 has produced income of zero.
• T2 Schedule 1 reconciles a corporation’s financial statement income to its net income for tax purposes; Form T3RET is the trust return.
• Section 3 contains no election. The elections that bear on its computation are elsewhere: the subsection 50(1) election that creates a capital loss, and thus a possible business investment loss, on a bad debt or worthless share (Folio S4-F8-C1, paras. 1.20–1.28), and the subsection 164(6) election that carries a deceased taxpayer’s estate loss to the final return (para. 1.73).

← CRA documentsCompliance →

Compliance

• Report every source. Income from every source inside or outside Canada enters paragraph (a), whether or not an information slip was issued (Guide 5000-G, Step 2), and whether or not the activity was lawful (65302 British Columbia, para. 56; Folio S3-F9-C1, para. 1.30). The CRA states that gains from crime not reported may attract the penalty in subsection 163(2) for each year (Folio S3-F9-C1, para. 1.31), and reassessments beyond the normal period were restored in Johnson (para. 61) and upheld with gross negligence penalties in Paletta Estate (para. 4) and Xia (para. 7).
• Use the year’s losses in the year. Losses from a source and allowable business investment losses must be applied against the year’s paragraph 3(c) income to the extent they can be, or they are forfeited (IT-232R3, para. 5); allowable capital losses must likewise be applied against the year’s taxable capital gains (para. 7). Only the excess carries over as a non-capital or net capital loss under section 111, three years back and twenty years forward for a non-capital loss, three back and indefinitely forward for a net capital loss, with the ten-year conversion rule for allowable business investment losses (paragraph 111(1)(a) and (b); subsection 111(8); Folio S4-F8-C1, paras. 1.5–1.7). A negative amount at line 23600 is entered as zero and the loss is claimed on Form T1A (CRA, “Line 23600 – Net income”).
• Losses on listed personal property. They may be deducted only from gains on listed personal property, in the year or within the seven-year back and three-year forward window of section 41, and never from other capital gains or income (subsection 41(2); CRA, “Capital losses”).
• Farming losses. Where farming is not the chief source of income or a combination of farming and another source, section 31 restricts the loss before it enters paragraph 3(d); the restricted balance is a restricted farm loss for other years (IT-232R3, paras. 3–4).
• Damages and settlements. Allocate the settlement in the documents. The tax character follows what each part replaces (Tsiaprailis, para. 15), and a finding that no part was allocated to income defeated the assessment in Schwartz (paras. 18 and 43).
• Reassessment period. Three years after the original assessment for individuals and Canadian-controlled private corporations, four for other corporations and mutual fund trusts (subsection 152(3.1)); later only for a misrepresentation attributable to neglect, carelessness, or wilful default, fraud, or a waiver (paragraph 152(4)(a)). Unreported income from a source is the usual ground for the extended period (Johnson, para. 61).
• Records. Records that identify the source of each receipt are what allow a taxpayer to show that an amount is not income or not from the business (Guide T4002, chapter 1). Where records are inadequate the CRA’s auditors are directed to indirect verification of income, principally the net worth and bank deposit techniques, and to question the taxpayer early about non-taxable sources of funds such as gifts, loans, inheritances, and lottery winnings (Income Tax Audit Manual, sections 13.2.1, 13.3.1, 13.4.1, and 13.5.0).

← Regulations, forms, and electionsPlanning and dispute notes →

Planning and dispute notes

Planning

• Establish the source before the loss is incurred. An activity with a personal element must be conducted in a sufficiently commercial manner, with a predominant intention to profit shown by objective conduct (Stewart, paras. 54–55; ITTN No. 25, response 3). Keep the evidence that Moldowan and Stewart make relevant: a business plan, the capital committed, training, the profit and loss record, and the changes made in response to losses. Where the activity has no personal element the source is presumed, but only so long as the evidence shows it was carried on for profit; a strategy whose product is a loss will fail (Paletta Estate, para. 36; Chad, paras. 18 and 32), and the CRA’s auditors are now directed to both decisions (Audit Manual, section 27.2.0).
• Do not rely on tax motivation being neutral. ITTN No. 25 (response 8) says tax motivation does not detract from a source, and Walls (para. 22) supports that for a commercial activity, but Paletta Estate and Chad hold that an activity aimed exclusively at avoiding tax is not a source. In my view the safe reading is that a genuine profit purpose may coexist with tax motives, but cannot be absent.
• Characterize receipts at the outset. A voluntary payment received in the course of a business or profession is income (Folio S3-F9-C1, para. 1.5); a gift is not, and the Cranswick factors decide the doubtful cases (Johnson, paras. 33–35). Payments for a covenant not to compete are, on the current authorities, capital receipts outside section 3 (Fortino; Manrell), a result the Court of Appeal left to Parliament to change (Manrell, para. 67), so any later legislative response should be checked before reliance.
• Sequence capital gains and losses with the paragraph (d) rule in mind. A business loss in a year with a taxable capital gain is consumed by the gain even where the capital gains deduction was available; the deduction can be claimed to reinstate the loss (IT-232R3, para. 14, Example 2), and subsection 111(1.1) makes the corresponding adjustment when net capital losses of other years are applied (para. 25). Where a loss can be realized in a different year, the interaction is worth modelling.
• Treat business investment losses as a separate class. An eligible loss must be treated as an allowable business investment loss and cannot be treated as an ordinary capital loss (Folio S4-F8-C1, para. 1.3); it reduces all income under paragraph (d), carries as a non-capital loss for ten years, and then becomes a net capital loss (paras. 1.4–1.7). The subsection 50(1) election must be made in the return for the year (paras. 1.20–1.28).
• Document settlements by what they replace. Under Tsiaprailis the allocation in the settlement agreement, if sufficiently clear, governs; a lump sum without allocation invites the courts to look for the substance (Abella J. dissenting, paras. 48–52, on breaking down global payments) or, as in Schwartz, to find nothing taxable at all.

Disputes

• Frame the issue as source, not deductibility. Whether a source exists is a question distinct from whether particular expenses are deductible (Stewart, para. 60), and the Minister’s older practice of denying losses for want of a reasonable expectation of profit is no longer the test (ITTN No. 25, responses 2–3). Where the Crown alleges that no source exists because the activity was undertaken for loss, the taxpayer must meet Paletta Estate and Chad on the evidence of purpose; the Tax Court’s findings on purpose are reviewed for palpable and overriding error (Chad, para. 7).
• On windfall claims, argue the Cranswick factors one by one (Johnson, paras. 33–34) and remember that the character of a receipt is judged in the recipient’s hands, not the payer’s (Xia, para. 5). Where a receipt is not shown to be income from a source, the benefit of the doubt goes to the taxpayer (Fries, p. 1322).
• Where the Crown invokes the general words of paragraph (a) for an unenumerated source, the point remains open (Johnson, para. 25) and the specific scheme argument in Schwartz (paras. 52–53) is available where Parliament has dealt with the class of payment elsewhere.
• Settlement cases turn on findings of fact about what the payment replaced (Tsiaprailis, para. 15; Schwartz, paras. 18 and 43); build the record of the claims released and the negotiations.
• A partnership’s losses reach the partners with their source intact and are aggregated in the partner’s section 3 computation; the Crown cannot compute income at the partnership level to strip that character (Green, paras. 20 and 27–29).
• Pseudolegal reliance on paragraph 3(f) to deem income to zero is struck as an abuse of process (Russell, paras. 21–23 and 29).
• Objection deadlines are in subsection 165(1): for an individual (other than a trust) or a graduated rate estate, the later of one year after the filing-due date and 90 days after the notice of assessment; otherwise 90 days.

← ComplianceProvincial and treaty parallels →

Provincial and treaty parallels

• Ontario. The Taxation Act, 2007, S.O. 2007, c. 11, Sch. A, has no counterpart of section 3. “Income” means, for a corporation, “the corporation’s income for the year as determined for the purposes of the Federal Act”, and for an individual the amount under paragraph 114(a) of the federal Act where section 114 applies, the amount under subsection 115(1) as if it ended with paragraph (c) for an individual not resident in Canada throughout the year, and otherwise “the individual’s income for the year as determined in accordance with and for the purposes of the Federal Act” (subsection 1(1)). The Act is interpreted consistently with the federal Act (subsection 1(6)); an individual’s “tax base” is taxable income or taxable income earned in Canada (subsection 3(1)), and a corporation’s taxable income is its federal taxable income (subsection 26(1)).
• Quebec. The Taxation Act, CQLR c. I-3, s. 28, is the counterpart: the taxpayer adds “the aggregate of the taxpayer’s income for the year, other than the taxable capital gains from dispositions of property, from each source inside and outside Canada” (paragraph (a)), adds net taxable capital gains with the same treatment of “precious property” and allowable business investment losses (paragraph (b)), and subtracts the Title VI deductions and then the losses from an office, employment, business, or property and allowable business investment losses (paragraph (c)). It has no enumeration of the four sources and no counterpart of paragraphs 3(e) and (f). Section 29 is the counterpart of section 4; “precious property” is defined in s. 1 by reference to s. 265.
• Alberta. The Alberta Personal Income Tax Act, RSA 2000, c. A-30, s. 1(1)(j), defines “income for the year” by the same three cases as Ontario (paragraph 114(a), paragraphs 115(1)(a) to (c), and otherwise Part I of the federal Act), and s. 5(1) takes federal taxable income; Part XVII of the federal Act applies (s. 1(2)).
• Tax treaties. Treaties allocate taxing rights by categories that broadly track the sources in paragraph 3(a) (income from immovable property, business profits, dividends, interest, royalties, gains, and employment income) and close with an “other income” article. Article XXII(1) of the Canada–United States Convention, given force by the Canada–United States Tax Convention Act, 1984, S.C. 1984, c. 20, provides that “[i]tems of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State, except that if such income arises in the other Contracting State it may also be taxed in that other State”; paragraph 3, added by the 1995 Protocol, allows a resident’s wagering losses against gains taxable in the other State, and paragraph 4, added in 2007, deals with guarantee fees. The Canada–United Kingdom Convention acquired its other income article, Article 20A, by the 2003 Protocol: exclusive residence taxation subject to the permanent establishment carve-out, with paragraph 3 preserving a source-State right. Undefined treaty terms take their meaning under the Act as amended (Income Tax Conventions Interpretation Act, R.S.C. 1985, c. I-4, s. 3; Canada–United States Convention, Art. III(2)); treaty business profits attributable to a permanent establishment in Canada are computed as a resident’s income from a business (s. 4); and gains on taxable Canadian property are deemed to arise in Canada (s. 6.3).

← Planning and dispute notesAnnotated cross-references →

Annotated cross-references

• Section 2: the charge on taxable income, of which section 3 income is the base.
• Section 4: income or loss from a particular source or place, and the rule that Subdivision E deductions attach to no source; the source-by-source computation that precedes the section 3 aggregation.
• Subdivision A (sections 5 to 8): income from an office or employment.
• Section 9, section 12, section 18, and section 20: profit from a business or property, inclusions, and deductions; subsection 9(3) excludes capital gains from income from property.
• Section 31: restricted farm losses, the main limit on paragraph 3(d).
• Sections 38, 39, 40, and 41: taxable capital gains, allowable capital losses, business investment losses, and listed personal property, which define the amounts in paragraph 3(b) by reference back to section 3.
• Section 54: “listed personal property” and the other capital gains definitions.
• Section 56: specific inclusions in income, which specify but do not enlarge section 3 (Savage).
• Section 60 and Subdivision E: the deductions in paragraph 3(c).
• Section 111: loss carryovers and the definitions of non-capital and net capital loss built on paragraphs 3(b) and (c).
• Section 114 and section 115: part-year residents and non-residents, whose income is computed by modified versions of the section 3 rules.
• Subsection 248(1): “amount”, “business”, “disposition”, “employment”, “office”, “property”, “taxable capital gain”, “allowable capital loss”, “allowable business investment loss”, “taxpayer”; section 249: taxation year; section 255: Canada.
• Section 152 and section 165: reassessment periods and objections.

← Provincial and treaty parallelsSources →

Sources

• Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 3: Justice Laws Website (Act current to 21 September 2026, last amended 18 June 2026), the French text, the single point-in-time version from 31 August 2004, and amendments not in force. Related provisions read on the same site: ss. 4, 9, 12, 38, 39, 41, 54, 60, 111, 152, 165, 248, 249, and 255; Income Tax Application Rules, R.S.C. 1985, c. 2 (5th Supp.), ss. 8, 9, 12, 20, 24, 26, and 73 (full text); Interpretation Act, R.S.C. 1985, c. I-21, ss. 8.1, 10, 12, 14, 15, 33, 35, 37, 41, and 45 (full text); Income Tax Conventions Interpretation Act, R.S.C. 1985, c. I-4, ss. 3, 4, 4.3, 5, and 6.3 (full text); Canada–United States Tax Convention Act, 1984, S.C. 1984, c. 20 (full text); Income Tax Regulations, C.R.C., c. 945 (full text, searched for references to section 3).
• Historical texts: Revised Statutes of Canada, 1985, 5th Supplement (s. 3 with its source note); Library of Parliament, Canadian Parliamentary Historical Resources (parl.canadiana.ca): Bill 117 of 1917 and the Senate Debates of 3 September 1917 and Votes and Proceedings of 6 September 1917; Bill 338 of 1948 (clauses 3, 4, and 127(1)); Bill C-259 of 1971 (first reading, ss. 3 and 4 with explanatory notes); Bill C-11 of 1977 and Bill C-59 of 1978 with the royal assent records of 15 December 1977 and 30 June 1978; Bill C-2 of 1983 and the royal assent of 19 January 1984; Bill C-84 of 1985 and the royal assent of 13 February 1986; Bill C-18 of 1991; Bill C-15 of 1994 with the Senate passage of 10 May 1994 and royal assent of 12 May 1994. The enacted texts of the 1917, 1948, 1952, and 1972 provisions were not read on an official site; the bills and Hansard were.
• Department of Finance: Explanatory Notes to a Notice of Ways and Means Motions relating to Income Tax (November 1983), clause 2; Technical Notes to a Bill Amending the Income Tax Act and Related Statutes (November 1985), clause 1; Explanatory Notes to Draft Income Tax Amendments (July 1990), clause 1; Explanatory Notes to Legislation Relating to Income Tax (May 1991), clauses 1 and 2; Proposals for Tax Reform (1969), paras. 1.28, 1.30, 1.34, 3.1, and 3.3; Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations (Technical Amendments) (23 July 2026), read only through a summarizing fetch; consolidated texts of the Canada–United States Convention, the Canada–United Kingdom Convention, and the 2003 Protocol.
• Royal Commission on Taxation, Report (1966), vol. 1, pp. 14–15, and vol. 3, pp. 25–26, 62–69, and 337–338 (page numbers from the scans’ footers).
• Supreme Court of Canada: Stewart, Walls, Moldowan, Schwartz, Fries, Savage, Friesen, 65302 British Columbia, Tsiaprailis, Ludco, Canderel, Ikea, Craig. Curran (1959) is not in the Court’s online collection and is cited as described in Schwartz.
• Federal Court of Appeal: Chad, Paletta Estate, Independent Order of Foresters, Green, Johnson, Xia, Lavoie, Transocean, Manrell, Mitchell, Fortino, Nisker. Cranswick, Bellingham, Tonn, and Moloney are not in the Court’s online collection and are cited as quoted in the decisions read.
• Tax Court of Canada: Russell, Mann, Vibert, Northcut. All judgments were read in full text on the court’s site on 28 September 2026.
• Canada Revenue Agency: Folios S3-F9-C1, S4-F8-C1, S4-F11-C1, and S4-F14-C1, IT-232R3, IT-365R2, IT-322R, Income Tax Technical News No. 25, the Income Tax Audit Manual, Guides 5000-G, T4002, and T4036, the return-line pages, and the IT bulletin–folio table of concordance, as linked above; read in a browser tab on 28 September 2026, so the quotations are the pages’ own text.
• Ontario: Taxation Act, 2007 (e-Laws, consolidated from 1 July 2026). Quebec: Taxation Act, CQLR c. I-3 (LégisQuébec, up to date to 10 June 2026, ss. 1, 28–31, and 334). Alberta: Alberta Personal Income Tax Act (King’s Printer, current as of 11 December 2025).
• Canadian Tax Foundation items under “Selected commentary”: catalogue entries only; the site refused automated access.

← Annotated cross-references