Archived - Explanatory Notes to Legislative Proposals Relating to Income Tax

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Published by
The Honourable Ralph Goodale, P.C., M.P.
Minister of Finance

July 2005


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These notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.

Table of Contents


Clause in Legislation

Section of the Act Amended

Topic


Preface

1

Title


Part 1 - Foreign Investment Entities and Non-Resident Trusts

2

12

Income from Business or Property

3

12.2

Life Insurance Policies - Definitions

4

17

Loan to Non-resident - Controlled Foreign Affiliate

5

39

Capital Gain from Disposition of Property

6

51

Convertible Property

7

52

Cost of Certain Property

8

53

Adjustments to Cost Base

9

70

Death of a Taxpayer

10

73

Inter Vivos

Transfers by Individuals

11

75

Trusts - Attribution

12

85

Definition of "eligible property"

13

85.1

Share-for-share Exchange

14

86

Share-for-share Exchange - Reorganization of Capital

15

87

Amalgamations - Non-resident Trusts and Foreign Investment Entities

16

91

Amounts to be Included in Respect of Share of a Foreign Affiliate

17

94

Non-resident Trusts

18

94.1 to 94.4

Foreign Investment Entities

19

95

Foreign Affiliates

20

96

Partnerships and their Members

21

97

Contributions of Property to a Partnership

22

98

Disposition of Partnership Property

23

104

Trusts and their Beneficiaries

24

107

Cost of Capital Interest

25

107.4

Qualifying Disposition

26

108

Trusts

27

113

Deduction in Respect of Dividend Received from Foreign Affiliate

28

114

Part-year Residents

29

115

Taxable Income Earned in Canada

30

122

Tax Payable by Inter Vivos Trust

31

126

Foreign Tax Credit

32

128.1

Changes in Residence

33

149

Exempt Corporations

34

152

Assessment and Reassessment

35

160

Tax Liability - Non-arm's Length Transfers of Property

36 and 37

162 and 163

Penalties

38

215

Withholding and Remittance of Tax

39

216

Deduction and Payment of Tax

40

233.2

Foreign Reporting Requirements

41

233.3

Returns in Respect of Foreign Property

42

233.4

Returns Respecting Foreign Affiliates

43

233.5

Due Diligence Exception

44

248

Interpretation and Certain Arrangements under Civil Law

45

S.C. 2001, c. 17

Inter Vivos

Transfer of Property by an Individual

46

S.C. 2001, c. 17

Disposition by Taxpayer of Capital Interest


Part 2 - General Amendments

47

4

Income or Loss from a Source or from Sources in a Place - Deductions Applicable

48

6

Employment Income

49

7

Employment Security Options - Definitions

50

8

Income from Office or Employment - Deductions

51

12

Income Inclusions

52

13

Depreciable Property

53

14

Eligible Capital Property

54

15

Shareholder Benefits

55

18

Prohibited Deductions

56

18.1

Non-application of Section 18.1

57

20

Deductions

58

37

Scientific Research and Experimental Development

59

38.1

Allocation of Gain on Gifts to Qualified Donees

60

40

Gains and Losses - General Rules

61

43

Part Dispositions

62

43.1

Life Estates in Real Property

63

44

Exchanges of Property

64

44.1

Capital Gains Deferral - Eligible Small Business Investments

65

53

Adjustments to Cost Base

66

54

Definitions - Capital Gains and Losses

67

54.1

Exception to Principal Residence Rules

68

55

Tax Avoidance - Dividends

69

56

Other Sources of Income

70

56.4

Restrictive Covenants

71

60

Deductions in Computing Income

72

60.011

Application of Paragraph 60(1) to Annuity With Trust as a Annuitant

73

63

Child Care Expenses

74

66

Exploration and Development Expenses

75

66.7

Exploration and Development Expenses - Successor Rules

76

68

Allocation of Amounts in Consideration for Property, Services or Restrictive Covenants

77

69

Inadequate Consideration

78

70

Death of a Taxpayer

79

72

Election by Legal Representative and Transferee re Reserves

80

73

Inter Vivos

Transfers by Individuals

81

75.2

Rules Applicable With Respect to "Qualifying Trust Annuity"

82

80.2

Reimbursement of Crown Charges

83

82

Compensation Payments Deductible by Individuals

84

84

Deemed Dividend

85

85

Transfer of Property to Corporation by Shareholders

86

86.1

Eligible Distribution Not Included in Income

87

87

Amalgamations

88

88

Winding-up of a Corporation

89

89

Taxable Canadian Corporation

90

96

Partnerships and their Members

91

99

Fiscal Period of Terminated Partnership

92

100

Replacement of Partnership Capital

93

104

Trusts and their Beneficiaries

94

106

Proceeds of Disposition of Income Interest

95

107

Interests in Trusts

96

107.1

Dispositions by Employee Trust, Employee Benefit Plan or Similar Trust

97

107.2

Distribution by a Retirement Compensation Arrangement

98

107.4

Qualifying Disposition

99

108

Taxation of Trusts and Their Beneficiaries

100

110

Taxable Income - Deductions

101

110.1

Charitable Donations Deduction

102

110.6

Lifetime Capital Gains Exemption

103

111

Loss Carryovers

104

116

Certificates for Dispositions

105

118

Personal Tax Credits

106

118.1

Charitable Donations Tax Credit

107

118.2

Medical Expense Tax Credit

108

118.3

Tax Credit for Mental or Physical Impairment

109

118.5

Tuition Credit

110

118.6

Education Tax Credit

111

118.61

Unused Tuition and Education Tax Credit

112

120.2

Minimum Tax Carry-over

113

120.3

Lump-sum Payments

114

120.4

Tax on Split Income

115

122.3

Overseas Employment Tax Credit

116

125

Small Business Deduction

117

125.1

Manufacturing and Processing Profits Deduction

118

125.11

Resource Income

119

125.4

Canadian Film or Video Production Tax Credit

120

126

Foreign Tax Credit

121

126.1

UI Premium Tax Credit

122

127

Deductions in Computing Tax

123

127.4

Labour-sponsored Venture Capital Corporations

124

127.52

Minimum Tax

125

127.531

Basic Minimum Tax Credit Determined

126

128.1

Returning Trust Beneficiary

127

129

Private Corporations - Refundable Dividend Tax on Hand

128

132

Definition "mutual fund trust"

129

132.11

Taxation Year of Mutual Fund Trust

130

132.2

Mutual Fund Qualifying Exchanges

131

134.1

Non-resident-owned Investment Corporations - Transition

132

136

Cooperative Corporation

133

137

Credit Unions

134

137.1

Deposit Insurance Corporations

135

138

Insurance Corporations

136

142.6

Mark-to-market Rules

137

142.7

Authorized Foreign Banks - Conversion

138

143

Communal Organizations

139

143.2

Limited-recourse Debt in Respect of a Gift or Monetary Contribution

140

146

Registered Retirement Savings Plans

141

146.01

Home Buyers' Plan

142

146.1

Registered Education Savings Plans - Conditions for Registration

143

146.3

Registered Retirement Income Funds

144

147

Deferred Profit Sharing Plans

145

148

Amounts Included in Computing Policyholder's Income

146

148.1

Eligible Funeral Arrangements

147

149

Exemptions

148

149.1

Charities

149

152

Assessment

150

157

Instalments

151

159

Person Acting for Another - Personal Liability

152

160

Tax Liability - Non-arm's Length Transfers of Property

153

160.1

Where Excess Refunded

154

160.2

Joint and Several Liability - Amounts Received out of or under RRSP

155

160.3

Liability - Amounts Received out of or under RCA Trust

156

160.4

Liability - Transfers by Insolvent Corporation

157

162

Penalties

158

163

False Statements or Omissions - GSTC Payments

159

164

Refunds

160

Part I.3

Large Corporations Tax

161

181.2

Taxable Capital Employed in Canada

162

181.3

Taxable Capital Employed in Canada of Financial Institution

163

Part III

Additional Tax on Excessive Elections

164

188

Revocation Tax

165

190.13

Financial Institutions Capital Tax

166

191

Excluded Dividend - Partner

167

191.1

Tax on Taxable Dividends

168

200

Distribution Deemed Disposition

169

204.81

Labour-sponsored Venture Capital Corporations

170

204.9

Transfers Between Plans

171

Part XI

Foreign Property Rules

172

207.31

Tax Payable by Recipient of an Ecological Gift

173

Part XII.2

Tax on Designated Income of Certain Trusts

174

210.2

Amateur Athlete Trusts

175

211.6

Part XII.4

176

Part XII.5

Recovery of Labour-Sponsored Funds Tax Credit

177

212

Taxation of Non-residents

178

214

Deemed Payments

179

216

Alternative re Rents and Timber Royalties

180

220

Security for Tax on Distributions of Taxable Canadian Property to Non-resident Beneficiaries

181

230

Records and Books

182

231.2

Requirement to Provide Documents or Information

183

237.1

Tax Shelters

184

241

Provision of Information

185

248

Interpretation

186

249

Taxation Year

187

251

Arm's Length

188

252

Extended meaning of "spouse" and "former spouse"

189

253.1

Investments in Limited Partnerships

190

256

Acquisition of Control of a Corporation

191

259

Proportional Holdings in Properties

192

260

Securities Lending Arrangements

193

Schedule

Listed Corporations

194 and 195

Amendments to An Act to Amend the Income Tax Act (Natural Resources)

196

Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act

197

FPFAA 12.2

Amendments to the Federal - Provincial Fiscal Arrangements Act

198

S.C. 2000, c. 17

Debt Forgiveness Rules

199

S.C. 2000, c. 17

Disposition of Shares in a Foreign Affiliate


Part 3 - Amendments Related to Bijuralism


Appendix A - Draft Income Tax Regulations and Explanatory Notes - Status of Corporations and Trusts