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Notice of Ways and Means Motion to amend the Income Tax Act, the Excise Tax Act and related legislation

PART 5
OTHER AMENDMENTS TO THE INCOME TAX ACT AND RELATED LEGISLATION

R.S., c. 1 (5th Supp.)

Income Tax Act

169. (1) Paragraph 4(3)(a) of the Income Tax Act is replaced by the following:

(asubject to paragraph (b), all deductions permitted in computing a taxpayer's income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (z), apply either wholly or in part to a particular source or to sources in a particular place; and

(2) Subsection (1) applies to the 2002 and subsequent taxation years, except that, for taxation years that end before 2007, paragraph 4(3)(a) of the Act, as enacted by subsection (1), is to be read as follows:

(asubject to paragraph (b), all deductions permitted in computing a taxpayer's income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (x), apply either wholly or in part to a particular source or to sources in a particular place; and

170. (1) Paragraph 6(1)(a) of the Act is replaced by the following:

Value of benefits

(athe value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or by a person who does not deal at arm's length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer's office or employment, except any benefit

(i) derived from the contributions of the taxpayer's employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,

(ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust,

(iii) that was a benefit in respect of the use of an automobile,

(iv) derived from counselling services in respect of

(A) the mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or

(B) the re-employment or retirement of the taxpayer,

(v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11), or

(vi) that is received or enjoyed by an individual other than the taxpayer under a program provided by the taxpayer's employer that is designed to assist individuals to further their education, if the taxpayer deals with the employer at arm's length and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer;

(2) Paragraph 6(1)(l) of the Act is replaced by the following:

Where standby charge does not apply

(lthe value of a benefit in respect of the operation of an automobile (other than a benefit to which paragraph (1)(k) applies or would apply but for subparagraph (1)(k)(iii)) received or enjoyed by the taxpayer, or by a person related to the taxpayer , in the year in respect of, in the course of or because of, the taxpayer's office or employment.

(3) Section 6 of the Act is amended by adding the following after subsection (1.1):

Deeming rule — amount received

(1.2) For the purposes of paragraph (1)(g), an amount received by an individual out of or under an employee benefit plan is deemed to have been received by a taxpayer and not by the individual if

(athe individual does not deal at arm's length with the taxpayer;

(bthe amount is received in respect of an office or employment of the taxpayer; and

(cthe taxpayer is living at the time the amount is received by the individual.

(4) Section 6 of the Act is amended by adding the following after subsection (3):

Amount receivable for covenant

(3.1) If an amount (other than an amount to which paragraph (1)(a) applies because of subsection (11)) is receivable at the end of a taxation year by a taxpayer in respect of a covenant, agreed to by the taxpayer more than 36 months before the end of that taxation year, with reference to what the taxpayer is, or is not, to do, and the amount would be included in the taxpayer's income for the year under this subdivision if it were received by the taxpayer in the year, the amount

(ais deemed to be received by the taxpayer at the end of the taxation year for services rendered as an officer or during the period of employment; and

(bis deemed not to be received at any other time.

(5) Subsection 6(15.1) of the French version of the Act is replaced by the following:

Montant remis

(15.1) Pour l'application du paragraphe (15), le « montant remis » à un moment donné sur une dette émise par un débiteur s'entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :

ala dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;

bil n'était pas tenu compte d'un montant inclus dans le calcul du revenu en raison du règlement ou de l'extinction de la dette à ce moment;

cil n'était pas tenu compte des alinéas f) et h) de l'élément B de la formule figurant à la définition de « montant remis » au paragraphe 80(1);

dil n'était pas tenu compte des alinéas 80(2)b) et q).

(6) Subsections (1) to (3) apply in respect of benefits received or enjoyed on or after October 31, 2011.

(7) Subsection (4) applies to amounts receivable in respect of a covenant agreed to after October 7, 2003.

(8) Subsection (5) applies to taxation years that end after February 21, 1994.

171. (1) The portion of subsection 7(7) of the Act before the definition "qualifying person" is replaced by the following:

Definitions

(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.1), (1.2), (1.5) to (1.8) and (2.1).

(2) Subsection (1) is deemed to have come into force on January 1, 1999. However,

(ait does not apply to a right under an agreement to which subsection 7(7) of the Act, as enacted by subsection 3(7) of the Income Tax Amendments Act, 1998 , does not (except for the purpose of applying paragraph 7(3)(b) of the Act) apply; and

(bbefore 2000, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition "qualifying person" is to be read as follows:

(7) The definitions in this subsection apply in this section and in paragraph 110(1)(d) and subsections 110(1.5) to (1.8).

(cin respect of rights (other than rights referred to in paragraph (a)) exercised after 2000 but on or before 4:00 p.m. Eastern Standard Time, March 4, 2010, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition "qualifying person" is to be read as follows:

(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.5) to (1.8) and (2.1).

172. (1) Paragraph 8(1)(b) of the Act is replaced by the following:

Legal expenses of employee

(bamounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect, or to establish a right to, an amount owed to the taxpayer that, if received by the taxpayer, would be required by this subdivision to be included in computing the taxpayer's income ;

(2) The portion of paragraph 8(1)(i) of the Act before subparagraph (i) is replaced by the following:

Dues and other expenses of performing duties

(ian amount paid by the taxpayer in the year, or on behalf of the taxpayer in the year if the amount paid on behalf of the taxpayer is required to be included in the taxpayer's income for the year, as

(3) Subsection 8(1) of the Act is amended by adding the following after paragraph (l.1):

Quebec parental insurance plan

(l.2an amount payable by the taxpayer in the year as an employer's premium under the Act respecting parental insurance , R.S.Q., c. A-29.011 in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer's office or employment if an amount is deductible by the taxpayer for the year under subparagraph (i)(ii) in respect of that individual;

(4) Subsection (1) applies to amounts paid in the 2001 and subsequent taxation years.

(5) Subsection (3) applies to the 2006 and subsequent taxation years.

173. (1) Paragraph 12(1)(j) of the Act is replaced by the following:

Dividends from resident corporations

(jany amount of a dividend in respect of a share of the capital stock of a corporation resident in Canada that is required by subdivision h to be included in computing the taxpayer's income for the year;

(2) Paragraph 12(1)(s) of the Act is repealed.

(3) Paragraph 12(1)(x) of the Act is amended by adding the following after subparagraph (v):

(v.1) is not an amount received by the taxpayer in respect of a restrictive covenant, as defined by subsection 56.4(1), that was included, under subsection 56.4(2), in computing the income of a person related to the taxpayer,

(4) Subparagraph 12(1)(x)(vii) of the French version of the Act is replaced by the following:

(vii) ne réduit pas, en application du paragraphe (2.2) ou 13(7.4) ou de l'alinéa 53(2)s), le coût ou coût en capital du bien ou le montant de la dépense,

(5) Section 12 of the Act is amended by adding the following after subsection (2):

No deferral of section 9 income under paragraph (1)(g)

(2.01) Paragraph (1)(g) does not defer the inclusion in income of any amount that would, if this section were read without reference to that paragraph, be included in computing the taxpayer's income in accordance with section 9.

(6) Subsection (1) is deemed to have come into force on November 6, 2010.

(7) Subsection (2) applies to reinsurance commissions paid after 1999.

(8) Subsection (3) is deemed to have come into force on October 8, 2003.

174. (1) Section 12.3 of the Act is repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

175. (1) Subsection 13(1) of the Act is replaced by the following:

Recaptured depreciation

13. (1) If , at the end of a taxation year, the total of the amounts determined for E to K in the definition "undepreciated capital cost" in subsection (21) in respect of a taxpayer's depreciable property of a particular prescribed class exceeds the total of the amounts determined for A to D.1 in that definition in respect of that property , the excess shall be included in computing the taxpayer's income of the year.

(2) Subparagraph 13(4)(c)(ii) of the Act is replaced by the following:

(ii) the amount that has been used by the taxpayer to acquire

(A) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year , or

(B) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year ,

a replacement property of a prescribed class that has not been disposed of by the taxpayer before the time at which the taxpayer disposed of the former property, and

(3) Section 13 of the Act is amended by adding the following after subsection (4.1):

Election — limited period franchise, concession or license

(4.2) Subsection (4.3) applies if

(aa taxpayer (in this subsection and subsection (4.3) referred to as the "transferor") has, pursuant to a written agreement with a person or partnership (in this subsection and subsection (4.3) referred to as the "transferee"), at any time disposed of or terminated a former property that is a franchise, concession or licence for a limited period that is wholly attributable to the carrying on of a business at a fixed place;

(bthe transferee acquired the former property from the transferor or, on the termination, acquired a similar property in respect of the same fixed place from another person or partnership; and

(cthe transferor and the transferee jointly elect in their returns of income for their taxation years that include that time to have subsection (4.3) apply in respect of the acquisition and the disposition or termination.

Effect of election

(4.3) If this subsection applies in respect of an acquisition and a disposition or termination,

(aif the transferee acquired a similar property referred to in paragraph (4.2)(b), the transferee is deemed to have also acquired the former property at the time that the former property was terminated and to own the former property until the transferee no longer owns the similar property;

(bif the transferee acquired the former property referred to in paragraph (4.2)(b), the transferee is deemed to own the former property until such time as the transferee owns neither the former property nor a similar property in respect of the same fixed place to which the former property related;

(cfor the purpose of calculating the amount deductible under paragraph 20(1)(a) in respect of the former property in computing the transferee's income, the life of the former property remaining on its acquisition by the transferee is deemed to be equal to the period that was the life of the former property remaining on its acquisition by the transferor; and

(dany amount that would, if this Act were read without reference to this subsection, be an eligible capital amount to the transferor or an eligible capital expenditure to the transferee in respect of the disposition or termination of the former property by the transferor is deemed to be

(i) neither an eligible capital amount nor an eligible capital expenditure,

(ii) an amount required to be included in computing the capital cost to the transferee of the former property, and

(iii) an amount required to be included in computing the proceeds of disposition to the transferor in respect of a disposition of the former property.

(4) The description of E in the definition "undepreciated capital cost" in subsection 13(21) of the Act is replaced by the following:

E

is the total depreciation allowed to the taxpayer for property of the class before that time, including, if the taxpayer is an insurer, depreciation deemed to have been allowed before that time under subsection (22) or (23) as they read in their application to the taxpayer's last taxation year that began before November 2011,

(5) Subsections 13(22) to (23.1) of the Act are repealed.

(6) Subsection (1) applies to taxation years that end after February 23, 1998.

(7) Subsection (2) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000, except that for those dispositions that occur in taxation years that end before December 20, 2001, clause 13(4)(c)(ii)(B) of the Act, as enacted by subsection (2), is to be read as follows:

(B) in any other case, before the end of the first taxation year following the initial year,

(8) Subsection (3) applies in respect of dispositions and terminations that occur after December 20, 2002.

(9) Subsections (4) and (5) apply to taxation years that begin after October 31, 2011.

176. (1) Paragraph 14(3)(a) of the Act is replaced by the following:

(athe amount determined for E in the definition "cumulative eligible capital" in subsection (5) in respect of the disposition of the property by the transferor or, if the property is the subject of an election under subsection (1.01) or (1.02) by the transferor, 3/4 of the actual proceeds referred to in that subsection ,

(2) The definition "adjustment time" in subsection 14(5) of the Act is replaced by the following:

"adjustment time"

« moment du rajustement »

"adjustment time" , of a taxpayer in respect of a business, means

(afor a corporation, the time immediately after the commencement of its first taxation year commencing after June 1988, and

(bfor any other taxpayer, the time immediately after the commencement of the taxpayer's first fiscal period commencing after 1987 in respect of the business;

(3) The description of A in the definition "cumulative eligible capital" in subsection 14(5) of the Act is replaced by the following:

A

is the amount, if any, by which 3/4 of the total of all eligible capital expenditures in respect of the business made or incurred by the taxpayer after the taxpayer's adjustment time and before that time exceeds the total of all amounts each of which is determined by the formula

1/2 × (A.1 – A.2) × (A.3/A.4)
where
A.1

is the amount required, because of paragraph (1)(b) or 38(a), to be included in the income of a person or partnership (in this definition referred to as the "transferor") not dealing at arm's length with the taxpayer in respect of the disposition after December 20, 2002 of a property that was an eligible capital property acquired by the taxpayer directly or indirectly, in any manner whatever, from the transferor and not disposed of by the taxpayer before that time,

A.2

is the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 by the transferor in respect of that disposition,

A.3

is the transferor's proceeds from that disposition, and

A.4

is the transferor's total proceeds of disposition of eligible capital property in the taxation year of the transferor in which the property described in A.1 was disposed of,

(4) The description of R in the definition "cumulative eligible capital" in subsection 14(5) of the Act is replaced by the following:

R

is the total of all amounts each of which is an amount included, in computing the taxpayer's income from the business for a taxation year that ended before that time and after the taxpayer's adjustment time

(a)  in the case of a taxation year that ends after February 27, 2000, under paragraph (1)(a), or

(b)  in the case of a taxation year that ended before February 28, 2000,

(i)  under subparagraph (1)(a)(iv), as that subparagraph applied in respect of that taxation year, or

(ii) under paragraph (1)(b), as that paragraph applied in respect of that taxation year, to the extent that the amount so included is in respect of an amount included in the amount determined for P;

(5) Section 14 of the Act is amended by adding the following after subsection (5):

Restrictive covenant amount

(5.1) The description of E in the definition "cumulative eligible capital" in subsection (5) does not apply to an amount that is received or receivable by a taxpayer in a taxation year if that amount is required to be included in the taxpayer's income because of subsection 56.4(2).

(6) The portion of subsection 14(6) of the Act before paragraph (a) is replaced by the following:

Exchange of property

(6) If in a taxation year (in this subsection referred to as the "initial year") a taxpayer disposes of an eligible capital property (in this section referred to as the taxpayer's "former property") and the taxpayer so elects under this subsection in the taxpayer's return of income for the year in which the taxpayer acquires an eligible capital property that is a replacement property for the taxpayer's former property, the amount, not exceeding the amount that would otherwise be included in the amount determined for E in the definition "cumulative eligible capital" in subsection (5) (if the description of E in that definition were read without reference to "3/4 of") in respect of a business, that has been used by the taxpayer to acquire the replacement property before the later of the end of the first taxation year after the initial year and 12 months after the end of the initial year

(7) Subsections (1), (3) and (4) apply to taxation years that end after February 27, 2000, except that

(athe reference to "subsection (1.01) or (1.02)" in paragraph 14(3)(a) of the Act, as enacted by subsection (1), is to be read as a reference to "subsection (1.01)" for taxation years that end after February 27, 2000 and before December 20, 2002; and

(bthe reference to "disposition after December 20, 2002 of a property that was an eligible capital property" in the description of A.1 in the definition "cumulative eligible capital" in subsection 14(5) of the Act, as enacted by subsection (3), is to be read as a reference to "disposition after 2003 of a property that was an eligible capital property" if

(i) the taxpayer referred to in that description of A.1 acquired the property referred to in that description from the transferor referred to in that description,

(ii) the property was so acquired under an agreement in writing made before December 21, 2002 between the transferor, or a particular person that controlled the transferor, and another person who dealt at arm's length with the transferor and the particular person, and

(iii) no clause in the agreement or any other arrangement allows an obligation of any party to the agreement to be changed, reduced or waived in the event of a change to, or an adverse assessment under, the Act.

(8) Subsection (2) is deemed to have come into force on November 1, 2011.

(9) Subsection (5) is deemed to have come into force on October 8, 2003.

(10) Subsection (6) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.

177. (1) Subsection 15(1) of the Act is replaced by the following:

Benefit conferred on shareholder

15. (1) If , at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholder

(awhere the corporation is resident in Canada at the time,

(i) by the reduction of the paid-up capital of the corporation,

(ii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock,

(iii) on the winding-up, discontinuance or reorganization of the corporation's business, or

(iv) by way of a transaction to which subsection 88(1) or (2) applies;

(a.1)  where the corporation is not resident in Canada at the time,

(i)  by way of a distribution to which subsection 86.1(1) applies,

(ii)  by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies,

(iii)  by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, or

(iv)  on the winding-up, or liquidation and dissolution, of the corporation;

(bby the payment of a dividend or a stock dividend;

(cby conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph,

(i) the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation if

(A) the voting rights attached to the particular class differ from the voting rights attached to the other class, and

(B) there are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, and

(ii) rights are not considered identical if the cost of acquiring the rights differs; or

(dby an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies.

(2) Subsection 15(1.21) of the French version of the Act is replaced by the following:

Montant remis

(1.21) Pour l'application du paragraphe (1.2), le « montant remis » à un moment donné sur une dette émise par un débiteur s'entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :

ala dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;

bil n'était pas tenu compte d'un montant inclus dans le calcul du revenu (autrement que par l'effet de l'alinéa 6(1)a)) en raison du règlement ou de l'extinction de la dette;

cil n'était pas tenu compte des alinéas f) et h) de l'élément B de la formule figurant à la définition de « montant remis » au paragraphe 80(1);

dil n'était pas tenu compte des alinéas 80(2)b) et q).

(3) Section 15 of the Act is amended by adding the following after subsection (1.3):

Interpretation — subsection (1)

(1.4) For the purposes of this subsection and subsection (1),

(aa contemplated shareholder of a corporation is

(i) a person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, or

(ii) a member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation;

(ba person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership;

(ca benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person — if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm's length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be; and

(dfor the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm's length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested.

(4) Subsection 15(1.4) of the Act, as enacted by subsection (3), is amended by striking out "and" at the end of paragraph (c), by adding "and" at the end of paragraph (d) and by adding the following after paragraph (d):

(eif a non-resident corporation (in this paragraph referred to as the "original corporation") governed by the laws of a foreign jurisdiction is divided under those laws into two or more non-resident corporations and, as a consequence of the division, a shareholder of the original corporation acquires at any time one or more shares of another corporation (in this paragraph referred to as the "new corporation"), the original corporation is deemed at that time to have conferred a benefit on the shareholder equal to the value at that time of the shares of the new corporation acquired by the shareholder except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies to the acquisition of the shares.

(5) The portion of subsection 15(2.1) of the Act before paragraph (a) is replaced by the following:

Meaning of connected

(2.1) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm's length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is

(6) Subsections (1) and (3) apply in respect of benefits conferred on or after October 31, 2011.

(7) Subsection (2) applies to taxation years that end after February 21, 1994.

(8) Subsection (4) applies in respect of divisions of non-resident corporations that occur on or after ANNOUNCEMENT DATE.

(9) Subsection (5) applies in respect of loans made and indebtedness arising after October 31, 2011.

178. (1) Subsection 18(1) of the Act is amended by striking out "and" at the end of paragraph (u), by adding "and" at the end of paragraph (v) and by adding the following after paragraph (v):

Underlying payments on qualified securities

(wexcept as expressly permitted, an amount that is deemed by subsection 260(5.1) to have been received by another person as an amount described in any of paragraphs 260(5.1)(a) to (c).

(2) Paragraph 18(14)(c) of the Act is replaced by the following:

(cthe disposition is not a disposition that is deemed to have occurred by section 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c) or subsection 138(11.3) or 149(10);

(3) Subsection (1) is deemed to have come into force on January 1, 2002.

(4) Subsection (2) applies to dispositions that occur after 1998.

179. (1) Subsection 18.1(15) of the Act is replaced by the following:

Non-application — risks ceded between insurers

(15) Subsections (2) to (13) do not apply to a taxpayer's matchable expenditure in respect of a right to receive production if

(athe expenditure is in respect of commissions, or other expenses, related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer; and

(bthe taxpayer and the person to whom the expenditure is made, or is to be made, are both insurers who are subject to the supervision of

(i) the Superintendent of Financial Institutions, if the taxpayer or that person, as the case may be, is an insurer who is required by law to report to the Superintendent of Financial Institutions, or

(ii) the Superintendent of Insurance, or other similar officer or authority, of the province under whose laws the insurer is incorporated, in any other case.

Non-application — no rights, tax benefits or shelters

(16) Subsections (2) to (13) do not apply to a taxpayer's matchable expenditure in respect of a right to receive production if

(ano portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm's length, to acquire the right from the other taxpayer;

(bno portion of the matchable expenditure can reasonably be considered to relate to a tax shelter or a tax shelter investment (within the meaning assigned by subsection 143.2(1)); and

(cnone of the main purposes for making the matchable expenditure can reasonably be considered to have been to obtain a tax benefit for the taxpayer, a person or partnership with whom the taxpayer does not deal at arm's length, or a person or partnership that holds, directly or indirectly, an interest in the taxpayer.

Revenue exception

(17) Paragraph (4)(a) does not apply in determining the amount for a taxation year that may be deducted in respect of a taxpayer's matchable expenditure in respect of a right to receive production if

(abefore the end of the taxation year in which the matchable expenditure is made, the total of all amounts each of which is included in computing the taxpayer's income for the year (other than any portion of any of those amounts that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production that relates to the matchable expenditure exceeds 80% of the matchable expenditure; and

(bno portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm's length, to acquire the right from the other taxpayer.

(2) Subject to subsection (3), subsection (1) applies in respect of expenditures made by a taxpayer on or after September 18, 2001 in respect of a right to receive production, except if

(athe expenditure was

(i) required to be made under a written agreement made by the taxpayer before September 18, 2001,

(ii) made under, or described in, the terms of a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or

(iii) made under, or described in, the terms of an offering memorandum distributed as part of an offering of securities if

(A) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,

(B) the memorandum was distributed before September 18, 2001,

(C) solicitations in respect of a sale of the securities contemplated in the offering were made before September 18, 2001, and

(D) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum;

(bthe expenditure was made before 2002;

(cthe expenditure was made in consideration for services that were rendered in Canada before 2002 in respect of an activity, or a business, all or substantially all of which was carried on in Canada;

(dthere is no agreement or other arrangement under which the obligation of any taxpayer in respect of the expenditure can, on or after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;

(eif the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001; and

(fif the expenditure was made under, or described in, the terms of a document that is a prospectus, a preliminary prospectus, a registration statement or an offering memorandum (and regardless of whether the expenditure was also made under a written agreement)

(i) all of the funds raised pursuant to the document that may reasonably be used to make a matchable expenditure were received by the taxpayer before 2002,

(ii) all or substantially all of the securities distributed pursuant to the document for the purpose of raising the funds described in subparagraph (i) were acquired before 2002 by a person who is not

(A) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,

(B) a vendor of the right to receive production,

(C) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or

(D) a person who does not deal at arm's length with a person to whom clause (A) or (B) applies, and

(iii) all or substantially all of the funds raised pursuant to the document before 2002 were used to make expenditures that were required to be made pursuant to agreements in writing made before September 18, 2001.

(3) Subsection (1) does not apply to an expenditure made by a taxpayer in respect of a right to receive production in respect of a particular film or video production if

(aexpenditures in respect of the particular film or video production

(i) were made before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002), or

(ii) were required to be made by the taxpayer under a written agreement made before September 18, 2001 by the taxpayer;

(bprincipal photography of the particular film or video production

(i) began before 2002,

(ii) was primarily completed before April 2002, and

(iii) was conducted primarily in Canada;

(cthe expenditure

(i) was made before April 2002 in the course of the taxpayer's business of providing film production services in respect of the particular film or video production (as determined for the purpose of this subparagraph without reference to subsection 143.2(10) of the Act, except to the extent that a repaid amount for the purposes of that subsection is paid after 2002),

(ii) was made under, or described in, the terms of

(A) a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or

(B) an offering memorandum distributed as part of an offering of securities if

(I) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,

(II) the memorandum was distributed before September 18, 2001,

(III) solicitations in respect of a sale of the securities contemplated in the offering have been made before September 18, 2001, and

(IV) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum, and

(iii) was not an amount in respect of advertising, marketing, promotion or market research;

(dexcept where the particular film or video production is a designated production of the taxpayer, at least 75% of the total of all expenditures, each of which is an expenditure made by the taxpayer in the course of the business referred to in subparagraph (c)(i), is an expenditure described for the purpose of that subparagraph made in consideration for the supply of goods or services that are supplied or rendered in Canada before April 2002 by persons that are subject to tax on the expenditure under Part I or XIII of the Act;

(ethere is no agreement or other arrangement under which the obligation of any taxpayer to acquire a security distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum can, after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;

(fif the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001;

(gall of the funds raised pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum that may reasonably be used to make a matchable expenditure before April 2002 in respect of the particular film or video production are received by the taxpayer before 2003;

(hall of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired before 2002;

(iall or substantially all of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired by a person who is not

(i) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,

(ii) a vendor of the right to receive production,

(iii) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or

(iv) a person who does not deal at arm's length with a person referred to in subparagraph (i) or (ii); and

(jexcept where the particular film or video production is a designated production of the taxpayer, all or substantially all of the matchable expenditures made by the taxpayer that are wholly attributable to the principal photography of the particular film or video production are wholly attributable to principal photography conducted in Canada.

(4) For the purpose of paragraphs (3)(d) and (j), a designated production of a taxpayer is

(aa film or video production in respect of which

(i) all of the expenditures made by the taxpayer in respect of the particular film or video production were required to be made under a written agreement made by the taxpayer before September 18, 2001,

(ii) if the taxpayer is a partnership,

(A) the taxpayer's expenditures in respect of the particular film or video production were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the taxpayer, pursuant to subscriptions in writing for the issue of units in the taxpayer,

(B) all or substantially all of those written subscriptions were received by the taxpayer on or before September 18, 2001,

(C) at least one member of the taxpayer referred to in subparagraph (i) is a partnership (in this subsection referred to as a "master partnership"),

(D) the subscriptions in writing of all master partnerships for units in the taxpayer were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the master partnerships, pursuant to subscriptions in writing for the issue of units in the master partnerships, and

(E) all or substantially all of the subscriptions in writing referred to in clause (D) were received by the master partnership on or before September 18, 2001,

(iii) if a member of a particular master partnership is a partnership (in this subsection referred to as an "original master partnership"),

(A) the subscriptions in writing of all original master partnerships for units in the particular master partnership were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the original master partnerships, pursuant to subscriptions in writing for the issue of units in the original master partnerships, and

(B) all or substantially all of those written subscriptions were received by the original master partnership on or before September 18, 2001, and

(iv) no member of an original master partnership is a partnership, an interest in which is a tax shelter; or

(ba film or video production in respect of which

(i) principal photography was all or substantially all complete before September 18, 2001, and

(ii) all or substantially all of the taxpayer's expenditures were made on or before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002).

180. (1) Paragraph 20(1)(bb) of the Act is replaced by the following:

Fees paid to investment counsel

(bban amount, other than a commission, that

(i) is paid by the taxpayer in the year to a person or partnership the principal business of which

(A)  is advising others as to the advisability of purchasing or selling specific shares or securities, or

(B)  includes the provision of services in respect of the administration or management of shares or securities, and

(ii) is paid for

(A)  advice as to the advisability of purchasing or selling a specific share or security of the taxpayer, or

(B)  services in respect of the administration or management of shares or securities of the taxpayer;

(2) Paragraph 20(1)(jj) of the Act is repealed.

(3) Subsection 20(8) of the Act is amended by striking out "or" at the end of paragraph (a) and by adding the following after paragraph (b):

(cthe purchaser of the property sold was a corporation that, immediately after the sale,

(i) was controlled, directly or indirectly, in any manner whatever, by the taxpayer,

(ii) was controlled, directly or indirectly, in any manner whatever, by a person or group of persons that controlled the taxpayer, directly or indirectly, in any manner whatever, or

(iii) controlled the taxpayer, directly or indirectly, in any manner whatever; or

(dthe purchaser of the property sold was a partnership in which the taxpayer was, immediately after the sale, a majority interest partner.

(4) Subsection 20(12) of the Act is replaced by the following:

Foreign non-business income tax

(12) In computing the income of a taxpayer who is resident in Canada at any time in a taxation year from a business or property for the year , there may be deducted any amount that the taxpayer claims that does not exceed the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada (within the meaning assigned by subsection 126(7) read without reference to paragraphs (c) and (e) of the definition "non-business income tax" in that subsection) in respect of that income, other than any of those taxes paid that can, in whole or in part, reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.

(5) Paragraph 20(16)(a) of the Act is replaced by the following:

(athe total of all amounts used to determine A to D.1 in the definition "undepreciated capital cost" in subsection 13(21) in respect of a taxpayer's depreciable property of a particular class exceeds the total of all amounts used to determine E to K in that definition in respect of that property, and

(6) Subsection 20(16.1) of the Act is replaced by the following:

Non-application of subsection (16)

(16.1) Subsection (16) does not apply

(a)  in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or any other amount that is prescribed; and

(bin respect of a taxation year in respect of a property that was a former property deemed by paragraph 13(4.3)(a) or (b) to be owned by the taxpayer, if

(i) within 24 months after the taxpayer last owned the former property, the taxpayer or a person not dealing at arm's length with the taxpayer acquires a similar property in respect of the same fixed place to which the former property applied, and

(ii) at the end of the taxation year, the taxpayer or the person owns the similar property or another similar property in respect of the same fixed place to which the former property applied.

(7) Subsections 20(17) and (18) of the Act are repealed.

(8) Subsection 20(26) of the Act is repealed.

(9) Subsection (1) applies to amounts paid after June 2005.

(10) Subsection (2) applies to reinsurance commissions paid after 1999.

(11) Subsection (3) applies in respect of property sold by a taxpayer after December 20, 2002. However, if a property so sold pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004

(asubsection 20(8) of the Act, as it read immediately before the enactment of subsection (3), applies in respect of the property; and

(bfor the purpose of applying paragraph 20(1)(n) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of an amount not due in respect of the sale may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.

(12) Subsection (4) applies after December 20, 2002 in respect of taxes paid at any time.

(13) Subsection (5) applies to taxation years that end after February 23, 1998.

(14) Subsection (6) applies in respect of taxation years that end after December 20, 2002.

(15) Subsection (8) applies to taxation years that begin after October 31, 2011.

181. (1) Subclause 37(8)(a)(ii)(B)(V) of the Act is replaced by the following:

(V) the cost of materials consumed or transformed in the prosecution of scientific research and experimental development in Canada, or

(2) Subsection (1) applies to costs incurred after February 23, 1998.

182. (1) The Act is amended by adding the following before section 39:

Allocation of gain re certain gifts

38.2 If a taxpayer is entitled to an amount of an advantage in respect of a gift of property described in paragraph 38(a.1) or (a.2),

(athose paragraphs apply only to that proportion of the taxpayer's capital gain in respect of the gift that the eligible amount of the gift is of the taxpayer's proceeds of disposition in respect of the gift; and

(bparagraph 38(a) applies to the extent that the taxpayer's capital gain in respect of the gift exceeds the amount of the capital gain to which paragraph 38(a.1) or (a.2) applies.

(2) Subsection (1) applies to gifts made after December 20, 2002.

183. (1) Paragraph 40(1.01)(c) of the Act is replaced by the following:

(cthe amount that the taxpayer claims in prescribed form filed with the taxpayer's return of income for the particular year, not exceeding the eligible amount of the gift, where the taxpayer is not deemed by subsection 118.1(13) to have made a gift of property before the end of the particular year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of the particular year.

(2) Paragraph 40(2)(a) of the Act is amended by striking out "or" at the end of subparagraph (i), by adding "or" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the purchaser of the property sold is a partnership in which the taxpayer was, immediately after the sale, a majority interest partner;

(3) The descriptions of A and B in subsection 40(3.11) of the Act are replaced by the following:

A

is the total of

(a)  all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the member of the interest in the partnership at that time, and

(b)  if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(2)(c)(i) in respect of the taxpayer for that fiscal period; and

B

is the total of

(a) the cost to the member of the interest determined for the purpose of computing the adjusted cost base to the member of the interest at that time,

(b) all amounts required by subsection 53(1) to be added to the cost to the member of the interest in computing the adjusted cost base to the member of the interest at that time, and

(c) if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(1)(e)(i) in respect of the taxpayer for that fiscal period.

(4) Section 40 of the Act is amended by adding the following after subsection (3.11):

Meaning of "professional partnership"

(3.111) In this section, "professional partnership" means a partnership through which one or more persons carry on the practice of a profession that is governed or regulated under a law of Canada or a province.

(5) Paragraph 40(3.14)(a) of the English version of the Act is replaced by the following:

(aby operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member's liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);

(6) Paragraph 40(3.5)(b) of the Act is replaced by the following:

(ba share of the capital stock of a corporation that is acquired in exchange for another share in a transaction is deemed to be a property that is identical to the other share if

(i)  section 51, 86, or 87 applies to the transaction, or

(ii) the following conditions are met, namely,

(A) section 85.1 applies to the transaction,

(B) subsection (3.4) applied to a prior disposition of the other share, and

(C) none of the times described in any of subparagraphs (3.4)(b)(i) to (v) has occurred in respect of the prior disposition;

(7) Subsection (1) applies to gifts made after December 20, 2002.

(8) Subsection (2) applies to sales that occur after December 20, 2002.

(9) Subsections (3) and (4) apply to fiscal periods that end after November 2001.

(10) Subsection (5) is deemed to have come into force on June 21, 2001.

(11) Subsection (6) applies to dispositions of property that occur after April 26, 1995, except that it does not apply to any of those dispositions by a person or partnership that occurred before 1996 and that is described in subsection 247(1) of the Income Tax Amendments Act, 1997 unless the person or partnership, as the case may be, made an election under subsection 247(2) of that Act.

184. (1) Section 42 of the Act is replaced by the following:

Dispositions subject to warranty

42. (1)  For the purposes of this subdivision,

(aan amount received or receivable by a person or partnership (referred to in this subsection as the "vendor" ), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the "subject property" ) disposed of by the vendor,

(i) if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor's proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and

(ii) in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and

(ban outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,

(i) if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor's proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and

(ii) in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.

Meaning of "specified date"

(2)  In subsection (1), "specified date" means,

(aif the vendor is a partnership, the last day of the vendor's fiscal period in which the vendor disposed of the subject property; and

(bin any other case, the vendor's filing-due date for the vendor's taxation year in which the vendor disposed of the subject property.

(2) Subsection (1) applies to taxation years and fiscal periods that end after February 27, 2004 except that, in its application to taxation years and fiscal periods that end before November 5, 2010, section 42 of the Act, as enacted by subsection (1), is to be read as follows:

42. For the purposes of this subdivision,

(aan amount received or receivable by a taxpayer in a taxation year as consideration for a warranty, a covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of a property disposed of, at any time, by the taxpayer

(i) is, if the amount is received or becomes receivable on or before the taxpayer's filing-due date for the taxpayer's taxation year in which the taxpayer disposed of the property, to be included in computing the taxpayer's proceeds of disposition of the property, and

(ii) is, if the amount is received or becomes receivable after that filing-due date, deemed to be a capital gain of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is received or becomes receivable; and

(ban outlay or expense paid or payable by the taxpayer in a taxation year under a warranty, covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of property disposed of, at any time, by the taxpayer

(i) is, if the amount is paid or becomes payable on or before the taxpayer's filing-due date for the taxpayer's taxation year in which the taxpayer disposed of the property, to be deducted in computing the taxpayer's proceeds of disposition of the property, and

(ii) is, if the amount is paid or becomes payable after that filing-due date, deemed to be a capital loss of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is paid or becomes payable.

185. (1) The portion of subsection 43(2) of the Act before the formula in paragraph (a) is replaced by the following:

Ecological gifts

(2) For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,

(athe portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or real servitude, as the case may be, is deemed to be equal to the amount determined by the formula

(2) Subsection (1) applies to gifts made after December 20, 2002.

186. (1) Paragraphs 44(1)(c) and (d) of the Act are replaced by the following:

(cif the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year , and

(din any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year ,

(2) Subsection 44(7) of the Act is amended by striking out "or" at the end of paragraph (a), by adding "or" at the end of paragraph (b) and by adding the following after paragraph (b):

(cthe former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority interest partner.

(3) Paragraph 44(1)(c) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000.

(4) Paragraph 44(1)(d) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.

(5) Subsection (2) applies to dispositions of property by a taxpayer that occur after December 20, 2002. However, if a property so disposed of pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004

(asubsection 44(7) of the Act, as it read immediately before the enactment of subsection (2), applies in respect of the disposition of property; and

(bfor the purpose of applying subparagraph 44(1)(e)(iii) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of the proceeds of disposition may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.

187. (1) The portion of subsection 44.1(6) of the Act before paragraph (b) is replaced by the following:

Special rule — re eligible small business corporation share exchanges

(6) For the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the "new shares") as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the "exchanged shares"), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual if

(asection 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; and

(2) The portion of subsection 44.1(7) of the Act before paragraph (b) is replaced by the following:

Special rule — re active business corporation share exchanges

(7) For the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the "new shares") as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the "exchanged shares"), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, if

(asection 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;

(3) Paragraph 44.1(12)(b) of the Act is replaced by the following:

(bthe new shares (or shares for which the new shares are substituted property) were

(i)  issued by the corporation that issued the old shares,

(ii)  issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm's length with

(A)  the corporation that issued the old shares, or

(B) the individual, or

(iii) issued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; and

(4) Section 44.1 of the Act is amended by adding the following after subsection (12):

Order of disposition of shares

(13) For the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.

(5) Subsections (1) and (2) apply to dispositions that occur after February 27, 2000.

(6) Subsection (3) applies in respect of dispositions that occur after February 27, 2004.

(7) Subsection (4) applies in respect of dispositions that occur after December 20, 2002. However, if an individual so elects in writing and files the election with the Minister of National Revenue on or before the individual's filing-due date for the individual's taxation year in which this Act receives royal assent, subsection (4) applies, in respect of the individual, to dispositions that occur after February 27, 2000.

188. (1) Subsections 49(2) and (2.1) of the Act are replaced by the following:

Expired option — shares

(2) If at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unless

(athe option is held, at that time, by a person who deals at arm's length with the corporation and the option was granted by the corporation to a person who was dealing at arm's length with the corporation at the time that the option was granted, or

(bthe option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definition "Canadian exploration and development expenses" in subsection 66(15), paragraph (i) of the definition "Canadian exploration expense" in subsection 66.1(6), paragraph (g) of the definition "Canadian development expense" in subsection 66.2(5) or paragraph (c) of the definition "Canadian oil and gas property expense" in subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.

Expired option — trust units

(2.1) If, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm's length with the trust or was granted to a person who did not deal at arm's length with the trust at the time that the option was granted,

(athe trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; and

(bthe adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.

(2) Subsection (1) applies to options issued after ANNOUNCEMENT DATE.

189. (1) Subsection 52(1) of the Act is replaced by the following:

Cost of certain property the value of which is included in income

52. (1) In applying this subdivision, an amount equal to the particular amount described by paragraph (d) shall be added in computing the cost at any time to a taxpayer of a property if

(athe taxpayer acquired the property after 1971;

(bthe amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;

(c)  the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer's capital interest in the trust; and

(d)  a particular amount in respect of the property's value was

(i) included, otherwise than under section 7, in computing

(A) the taxpayer's taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, or

(B) the taxpayer's income for a taxation year throughout which the taxpayer was resident in Canada, or

(ii) for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.

(2) Paragraph 52(3)(a) of the Act is replaced by the following:

(awhere the stock dividend is a dividend, the amount, if any, by which

(i) the amount of the stock dividend

exceeds

(ii) the amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder's taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received,

(3) Subsection (1) applies to taxation years that begin after 2006.

(4) Subsection (2) applies in respect of amounts received on or after November 9, 2006.

190. (1) Paragraph 53(1)(b) of the Act is replaced by the following:

(bwhere the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which

(i)  the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time

exceeds

(ii) the portion of the total determined under subparagraph (i) that relates to dividends in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer's taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received;

(2) Clause 53(1)(e)(i)(A.1) of the Act is repealed.

(3) Subparagraph 53(1)(e)(i) of the Act, as amended by subsection (2), is amended by adding the following after clause (A):

(A.1) subparagraph 39(1)(a)(i.1) in respect of an object referred to in that subparagraph that is not the subject of a gifting arrangement, as defined in subsection 237.1(1), nor a property that is a tax shelter,

(4) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (iv):

(iv.1) each amount that is in respect of a specified amount described in subsection 80.2(1) and that is paid by the taxpayer to the partnership, to the extent that the amount paid is not deductible in computing the income of the taxpayer,

(5) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (viii):

(viii.1) an amount deemed, before that time, by subsection 59(1.1) to be proceeds of disposition receivable by the taxpayer in respect of the disposition of a foreign resource property,

(6) Clause 53(2)(c)(i)(A.1) of the Act is repealed.

(7) Subparagraph 53(2)(c)(iii) of the Act is replaced by the following:

(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made by the taxpayer by reason of the taxpayer's membership in the partnership at the end of a fiscal period of the partnership ending before that time,

(8) The portion of subsection 53(4) of the Act before paragraph (a) is replaced by the following:

Recomputation of adjusted cost base on transfers and deemed dispositions

(4) If at any time in a taxation year a person or partnership (in this subsection referred to as the "vendor") disposes of a specified property and the proceeds of disposition of the property are determined under paragraph 48.1(1)(c), section 70 or 73, subsection 85(1), paragraph 87(4)(a) or (c) or 88(1)(a), subsection 97(2) or 98(2), paragraph 98(3)(f) or (5)(f), subsection 104(4), paragraph 107(2)(a) or (2.1)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,

(9) Subsection (1) applies in respect of a dividend received by a taxpayer on or after November 9, 2006. However, if the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, in respect of the dividend received by the taxpayer before July 16, 2010, paragraph 53(1)(b) of the Act, as enacted by subsection (1), is to be read as follows:

(bwhere the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which

(i) the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time

exceeds

(ii) the portion of the total determined under subparagraph (i) that relates to dividends

(A) in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer's taxable income, and

(B) that arose directly or indirectly as a result of a conversion of contributed surplus into paid-up capital;

(10) Subsections (2) and (6) apply in respect of amounts that became payable after December 20, 2002.

(11) Subsection (3) applies in respect of the disposition of an object made after 2003.

(12) Subsection (4) applies to payments made in taxation years that end after 2002.

(13) Subsection (5) applies for fiscal periods of a partnership that begin after 2000.

(14) Subsection (7) applies in respect of gifts and contributions made after December 20, 2002, except that in its application before 2007, subparagraph 53(2)(c)(iii) of the Act, as enacted by subsection (7), is to be read as follows:

(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made, or by subsection 127(4.2) to have been an amount contributed, by the taxpayer by reason of the taxpayer's membership in the partnership at the end of a fiscal period of the partnership ending before that time,

(15) Subsection (8) is deemed to have come into force on February 28, 2004.

191. (1) Paragraph (c) of the definition "superficial loss" in section 54 of the Act is replaced by the following:

(ca disposition deemed to have been made by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),

(2) Subsection (1) applies to dispositions that occur after 1998, except that, in its application to taxation years that begin before October 2006, paragraph (c) of the definition "superficial loss" in section 54 of the Act, as enacted by subsection (1), is to be read as follows:

(ca disposition deemed by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsection 144(4.1) or (4.2) or 149(10) to have been made,

192. (1) The portion of subsection 54.1(1) of the English version of the Act before paragraph (a) is replaced by the following:

Exception to principal residence rules

54.1 (1) A taxation year in which a taxpayer does not ordinarily inhabit the taxpayer's property as a consequence of the relocation of the place of employment of the taxpayer or the taxpayer's spouse or common-law partner while the taxpayer or the taxpayer's spouse or common-law partner, as the case may be, is employed by an employer who is not a person to whom the taxpayer or the taxpayer's spouse or common-law partner is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definition "principal residence" in section 54 if

(2) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act , in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.

193. (1) The definition "specified class" in subsection 55(1) of the Act is amended by striking out "and" at the end of paragraph (b) and by replacing paragraph (c) with the following:

(cno holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm's length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares, and

(dthe shares are non-voting in respect of the election of the board of directors except in the event of a failure or default under the terms or conditions of the shares;

(2) Subsection 55(1) of the Act is amended by adding the following in alphabetical order:

"qualified person"

« personne admissible »

"qualified person" , in relation to a distribution, means a person or partnership with whom the distributing corporation deals at arm's length at all times during the course of the series of transactions or events that includes the distribution if

(aat any time before the distribution,

(i) all of the shares of each class of the capital stock of the distributing corporation that includes shares that cause that person or partnership to be a specified shareholder of the distributing corporation (in this definition all of those shares in all of those classes are referred to as the "exchanged shares") are, in the circumstances described in paragraph (a) of the definition "permitted exchange" , exchanged for consideration that consists solely of shares of a specified class of the capital stock of the distributing corporation (in this definition referred to as the "new shares"), or

(ii) the terms or conditions of all of the exchanged shares are amended (which shares are in this definition referred to after the amendment as the "amended shares") and the amended shares are shares of a specified class of the capital stock of the distributing corporation,

(bimmediately before the exchange or amendment, the exchanged shares are listed on a designated stock exchange,

(cimmediately after the exchange or amendment, the new shares or the amended shares, as the case may be, are listed on a designated stock exchange,

(dthe exchanged shares would be shares of a specified class if they were not convertible into, or exchangeable for, other shares,

(ethe new shares or the amended shares, as the case may be, and the exchanged shares are non-voting in respect of the election of the board of directors of the distributing corporation except in the event of a failure or default under the terms or conditions of the shares, and

(fno holder of the new shares or the amended shares, as the case may be, is entitled to receive on the redemption, cancellation or acquisition of the new shares or the amended shares, as the case may be, by the distributing corporation or by any person with whom the distributing corporation does not deal at arm's length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the exchanged shares were issued and the amount of any unpaid dividends on the new shares or on the amended shares, as the case may be;

(3) Clause 55(3)(a)(iii)(B) of the Act is replaced by the following:

(B) property (other than shares of the capital stock of the dividend recipient) more than 10% of the fair market value of which was, at any time during the course of the series, derived from shares of the capital stock of the dividend payer,

(4) Paragraph 55(3.01)(d) of the Act is replaced by the following:

(dproceeds of disposition are to be determined without reference to

(i) the expression "paragraph 55(2)(a) or" in paragraph (j) of the definition "proceeds of disposition" in section 54, and

(ii) section 93 ; and

(5) Clause 55(3.1)(b)(i)(B) of the Act is replaced by the following:

(B) the vendor (other than a qualified person in relation to the distribution) was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, and

(6) Paragraph 55(3.2)(h) of the Act is replaced by the following:

(hin relation to a distribution each corporation (other than a qualified person in relation to the distribution) that is a shareholder and a specified shareholder of the distributing corporation at any time during the course of a series of transactions or events, a part of which includes the distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.

(7) Section 55 of the Act is amended by adding the following after subsection (3.3):

Specified shareholder exclusion

(3.4) In determining whether a person is a specified shareholder of a corporation for the purposes of the definition "qualified person" in subsection (1), subparagraph (3.1)(b)(i) and paragraph (3.2)(h) as it applies for the purpose of subparagraph (3.1)(b)(iii), the reference to "not less than 10% of the issued shares of any class of the capital stock of the corporation" in the definition "specified shareholder" in subsection 248(1) is to be read as "not less than 10% of the issued shares of any class of the capital stock of the corporation, other than shares of a specified class (within the meaning of subsection 55(1))".

Amalgamation of related corporations

(3.5) For the purposes of paragraphs (3.1)(c) and (d), a corporation formed by an amalgamation of two or more corporations (each of which is referred to in this subsection as a "predecessor corporation") that were related to each other immediately before the amalgamation, is deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.

(8) Section 55 of the Act is amended by adding the following after subsection (5):

Unlisted shares deemed listed

(6) A share (in this subsection referred to as the "reorganization share") is deemed, for the purposes of subsection 116(6) and the definition "taxable Canadian property" in subsection 248(1), to be listed on a designated stock exchange if

(aa dividend, to which subsection (2) does not apply because of paragraph (3)(b), is received in the course of a reorganization;

(bin contemplation of the reorganization

(i) the reorganization share is issued to a taxpayer by a public corporation in exchange for another share of that corporation (in this subsection referred to as the "old share") owned by the taxpayer, and

(ii) the reorganization share is exchanged by the taxpayer for a share of another public corporation (in this subsection referred to as the "new share") in an exchange that would be a permitted exchange if the definition "permitted exchange" were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition;

(cimmediately before the exchange, the old share

(i) is listed on a designated stock exchange, and

(ii) is not taxable Canadian property of the taxpayer; and

(dthe new share is listed on a designated stock exchange.

(9) Subsection (1) applies in respect of shares issued after December 20, 2002.

(10) Subsections (2), (5) and (6) and subsection 55(3.4) of the Act, as enacted by subsection (7), apply in respect of dividends received after 1999, except that for the period before December 14, 2007, the references to "designated stock exchange" in the definition "qualified person" in subsection 55(1) of the Act, as enacted by subsection (2), are to be read as references to "prescribed stock exchange".

(11) Subsections (3) and (4) apply to dividends received after February 21, 1994.

(12) Subsection 55(3.5) of the Act, as enacted by subsection (7), applies in respect of dividends received after April 26, 1995.

(13) Subsection (8) applies to shares that are issued after April 26, 1995, except that for the period before December 14, 2007, the references to "designated stock exchange" in subsection 55(6), as enacted by subsection (8), are to be read as references to "prescribed stock exchange".

194. (1) Subparagraph 56(1)(a)(iv) of the Act is replaced by the following:

(iv) a benefit under the Unemployment Insurance Act , other than a payment relating to a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act, or a benefit under Part I, VII.1, VIII or VIII.1 of the Employment Insurance Act ,

(2) Paragraph 56(1)(a) of the Act is amended by striking out "or" at the end of subparagraph (v), by adding "or" at the end of subparagraph (vi) and by adding the following after subparagraph (vi):

(vii) a benefit under the Act respecting parental insurance , R.S.Q., c. A-29.011;

(3) Subsection 56(1) of the Act is amended by adding the following after paragraph (l.1):

Bad debt recovered

(many amount received by the taxpayer, or by a person who does not deal at arm's length with the taxpayer, in the year on account of a debt in respect of which a deduction was made under paragraph 60(f) in computing the taxpayer's income for a preceding taxation year;

(4) Paragraph 56(1)(n.1) of the Act is replaced by the following:

Apprenticeship grants

(n.1the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program administered by the Department of Human Resources and Skills Development;

(5) Section 56 of the Act is amended by adding the following after subsection (9):

Meaning of "income"

(9.1) For the purposes of subsection (6), "income" of a person for a taxation year means the amount that would, in the absence of that subsection, paragraphs (1)(s) and (u), 60(v.1), (w) and (y) and section 63, be the income of the person for the taxation year.

(6) Section 56 of the Act is amended by adding the following after subsection (11):

Foreign retirement arrangement

(12) If an amount in respect of a foreign retirement arrangement is, as a result of a transaction, an event or a circumstance, considered to be distributed to an individual under the income tax laws of the country in which the arrangement is established, the amount is, for the purpose of paragraph (1)(a), deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the transaction, event or circumstance.

(7) Subsection (1) applies to the 2011 and subsequent taxation years.

(8) Subsections (2) and (5) apply to the 2006 and subsequent taxation years.

(9) Subsection (3) is deemed to have come into force on October 8, 2003.

(10) Subsection (4) applies for the 2007 and subsequent taxation years except that, for the 2007 and 2008 taxation years, paragraph 56(1)(n.1) of the Act, as enacted by subsection (4), is to be read as follows:

(n.1the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Skills Development;

(11) Subsection (6) applies to the 1998 and subsequent taxation years except that, for taxation years that end before 2002, subsection 56(12) of the Act, as enacted by subsection (6), is to be read as follows:

(12) For the purpose of paragraph (1)(a),

(aif an amount in respect of a foreign retirement arrangement is considered, under section 408A(d)(3)(C) of the Internal Revenue Code of 1986 of the United States (in this subsection referred to as the "Code"), to be distributed to an individual as a result of a conversion of the arrangement after 1998 and before 2002, the amount is deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the conversion; and

(bif an individual received an amount as a payment out of or under a foreign retirement arrangement in 1998, or an amount is considered under section 408A(d)(3)(C) of the Code to be distributed to the individual as a result of a conversion of the arrangement in 1998, the individual was resident in Canada at the time of the receipt or conversion and the amount is an amount to which section 408A(d)(3)(A)(iii) of the Code applies,

(i) the amount is deemed not to have been received by the individual, and

(ii) an amount equal to the amount that is included under section 408A(d)(3)(A)(iii) or 408A(d)(3)(E) of the Code in the individual's gross income for a particular taxable year is deemed to be an amount received by the individual, in the taxation year that includes the day on which the particular taxable year begins, as a payment out of the arrangement, where the expressions "gross income" and "taxable year" in this subparagraph have the meanings assigned to those expressions by the Code.

195. (1) The Act is amended by adding the following after section 56.3:

Restrictive Covenants

Definitions

56.4 (1) The following definitions apply in this section.

"eligible corporation"

« société admissible »

"eligible corporation" , of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock.

"eligible individual"

« particulier admissible »

"eligible individual" , in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time.

"eligible interest"

« participation admissible »

"eligible interest" , of a taxpayer, means capital property of the taxpayer that is

(aa partnership interest in a partnership that carries on a business;

(ba share of the capital stock of a corporation that carries on a business; or

(ca share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation.

"goodwill amount"

« montant pour achalandage »

"goodwill amount" , of a taxpayer, is an amount the taxpayer has or may become entitled to receive that is required by the description of E in the definition "cumulative eligible capital" in subsection 14(5) to be included in computing the cumulative eligible capital of a business carried on by the taxpayer through a permanent establishment located in Canada.

"permanent establishment"

« établissement stable »

"permanent establishment" means a permanent establishment as defined for the purpose of subsection 16.1(1).

"restrictive covenant"

« clause restrictive »

"restrictive covenant" , of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm's length with the taxpayer, other than an agreement or undertaking

(athat disposes of the taxpayer's property; or

(bthat is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value.

"taxpayer"

« contribuable »

"taxpayer" includes a partnership.

Income — restrictive covenants

(2) There is to be included in computing a taxpayer's income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm's length (other than an amount that has been included in computing the taxpayer's income because of this subsection for a preceding taxation year or in the taxpayer's eligible corporation's income because of this subsection for the taxation year or a preceding taxation year).

Non-application of subsection (2)

(3) Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the "purchaser") with whom the particular taxpayer deals at arm's length (determined without reference to paragraph 251(5)(b)), if

(asection 5 or 6 applied to include the amount in computing the particular taxpayer's income for the taxation year or would have so applied if the amount had been received in the taxation year;

(bthe amount would, if this Act were read without reference to this section, be required by the description of E in the definition "cumulative eligible capital" in subsection 14(5) to be included in computing the particular taxpayer's cumulative eligible capital in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or

(csubject to subsection (9), the amount directly relates to the particular taxpayer's disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition "eligible interest" where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and

(i) the disposition is to the purchaser (or to a person related to the purchaser),

(ii) the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),

(iii) the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;

(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,

(v) the amount is added to the particular taxpayer's proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer's eligible interest, and

(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.

Treatment of purchaser

(4) An amount paid or payable by a purchaser for a restrictive covenant is

(aif the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;

(bif an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of applying the definition "eligible capital expenditure" in subsection 14(5) and not to be an amount paid or payable for all other purposes of the Act; and

(cif an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser's acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.

Non-application of section 68

(5) If this subsection applies to a restrictive covenant granted by a taxpayer, section 68 does not apply to deem consideration to be received or receivable by the taxpayer for the restrictive covenant.

Application of subsection (5) — if employee provides covenant

(6) Subsection (5) applies to a restrictive covenant if

(athe restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm's length (referred to in this subsection as the "purchaser");

(bthe restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the "vendors") by the purchaser of an interest, or for civil law purposes a right, in the individual's employer, in a corporation related to that employer or in a business carried on by that employer;

(cthe individual deals at arm's length with the employer and with the vendors;

(dthe restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;

(eno proceeds are received or receivable by the individual for granting the restrictive covenant; and

(fthe amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.

Application of subsection (5) — realization of goodwill amount and disposition of property

(7) Subject to subsection (10), subsection (5) applies to a restrictive covenant granted by a taxpayer if

(athe restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the "vendor") to

(i) another taxpayer (in this subsection referred to as the "purchaser") with whom the vendor deals at arm's length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or

(ii) another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;

(bwhere subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, and

(i) the amount that can reasonably be regarded as being consideration for the restrictive covenant is

(A) included by the vendor in computing a goodwill amount of the vendor, or

(B) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or

(ii) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,

(A) under which the vendor or the vendor's eligible corporation disposes of property (other than property described in clause (B)) to the purchaser, or the purchaser's eligible corporation, for consideration that is received or receivable by the vendor, or the vendor's eligible corporation, as the case may be, or

(B) under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the "target corporation") are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm's length (determined without reference to paragraph 251(5)(b)),

(cwhere subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, and

(i) either

(A) the amount that can reasonably be regarded as being consideration for the restrictive covenant is

(I) included by the vendor in computing a goodwill amount of the vendor, or

(II) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or

(B) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing

(I) under which the vendor or the vendor's eligible corporation disposes of property (other than property described in subclause (II)) to the eligible individual, or eligible individual's eligible corporation, for consideration that is received or receivable by the vendor, or the vendor's eligible corporation, as the case may be, or

(II) under which shares of the capital stock of the vendor's eligible corporation (in this subsection and subsection (12) referred to as the "family corporation") are disposed of to the eligible individual or the eligible individual's eligible corporation,

(ii) the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and

(iii) the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;

(dno proceeds are received or receivable by the vendor for granting the restrictive covenant;

(esubsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;

(fthe restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of

(i) the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,

(ii) the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or

(iii) the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and

(ga joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by

(i) in the case of subparagraph (b)(i), the vendor, or the vendor's eligible corporation if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual's eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor's eligible corporation, as the case may be, or

(ii) in the case of clause (c)(i)(A), the vendor, or the vendor's eligible corporation if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual's eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor's eligible corporation, as the case may be.

Application of subsection (7) and section 69 — special rules

(8) For the purpose

(aof applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if

(i) the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor's eligible corporation, as the case may be, as consideration for the disposition of the property, and

(ii) if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and

(bof determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.

Anti-avoidance rule — non-application of paragraph (3)(c)

(9) Paragraph (3)(c) does not apply to an amount that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer's income from a source that is an office or employment or a business or property under paragraph 3(a).

Anti-avoidance — non-application of subsection (7)

(10) Subsection (7) does not apply in respect of a taxpayer's grant of a restrictive covenant if one of the results of not applying section 68 to the consideration received or receivable in respect of the taxpayer's grant of the restrictive covenant would be that paragraph 3(a) would not apply to consideration that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer's income from a source that is an office or employment or a business or property.

Clarification if subsection (2) applies — where another person receives the amount

(11) For greater certainty, if subsection (2) applies to include in computing a taxpayer's income an amount received or receivable by another taxpayer, that amount is not to be included in computing the income of that other taxpayer.

Clarification if subsection (5) applies

(12) For greater certainty, if subsection (5) applies in respect of a restrictive covenant,

(athe amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); and

(bthe amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.

Filing of prescribed form

(13) For the purpose of paragraphs (3)(b) and (c) and subsection (7), an election in prescribed form filed under any of those provisions is to include a copy of the restrictive covenant and be filed

(aif the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person's filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; and

(bin any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.

Non-application of section 42

(14) Section 42 does not apply to an amount received or receivable as consideration for a restrictive covenant.

(2) Subject to subsections (3) to (6), subsection (1) applies to

(aamounts received or receivable by a taxpayer after October 7, 2003 other than to amounts received by the taxpayer before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the taxpayer and a purchaser with whom the taxpayer deals at arm's length; and

(bamounts paid or payable by a purchaser after October 7, 2003 other than to amounts paid or payable by the purchaser before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the purchaser and a taxpayer with whom the purchaser deals at arm's length.

(3) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer before November 9, 2006,

(aparagraph (b) of the definition "restrictive covenant" in subsection 56.4(1) of the Act, as enacted by subsection (1), is to be read as follows:

(bthat is in satisfaction of an obligation described in section 49.1 that is not a disposition.

(bparagraph 56.4(3)(c) of the Act, as enacted by subsection (1), applies as enacted unless the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, that this paragraph apply, in which case paragraph 56.4(3)(c) of the Act, as enacted by subsection (1), is to be read in respect of the restrictive covenant as follows:

(cthe amount directly relates to the particular taxpayer's disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition "eligible interest" where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and

(i) the disposition is to the purchaser (or to a person related to the purchaser),

(ii) the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),

(iii) the amount does not exceed the amount determined by the formula

A – B
where
A

is the amount that would be the fair market value of the particular taxpayer's eligible interest that is disposed of if all restrictive covenants that may reasonably be considered to relate to a disposition of an interest, or for civil law purposes a right, in the business by any taxpayer were provided for no consideration, and

B

is the amount that would be the fair market value of the particular taxpayer's eligible interest that is disposed of if no covenant were granted by any taxpayer that held an interest, or for civil law purposes a right, in the business,

(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,

(v) the amount is added to the particular taxpayer's proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer's eligible interest, and

(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.

(csection 56.4 of the Act, as enacted by subsection (1), is to be read without reference to subsections (9) and (10).

(4) For the purpose of applying subsection (1) to a restrictive covenant, an election referred to in subsection 56.4(13) of the Act, as enacted by subsection (1), is deemed to be filed on a timely basis if it is filed on or before the later of the day that it is otherwise required to be filed and the day that is 180 days after the day on which this Act receives royal assent.

(5) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before July 16, 2010,

(aparagraph 56.4(7)(d) of the Act, as enacted by subsection (1), is to be read as follows:

(dfor the purpose of applying subparagraph (7)(b)(i) and paragraph (7)(c), no proceeds are received or receivable by the vendor for granting the restrictive covenant; and

(bparagraph 56.4(8)(a) of the Act, as enacted by subsection (1), is to be read as follows:

(aof applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) do not apply to a grant of a restrictive covenant unless the consideration, that can reasonably be regarded as being in part the consideration for the restrictive covenant, is received or receivable by the vendor or the vendor's eligible corporation, as the case may be, as consideration for the disposition of the property;

(6) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before ANNOUNCEMENT DATE,

(asubparagraph 56.4(7)(f)(i) of the Act, as enacted by subsection (1), is to be read as follows:

(i) the benefit of the expenditure made by the taxpayer derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A),

(bsubsection 56.4(7) of the Act, as enacted by subsection (1), is to be read without reference to paragraph (g).

196. (1) Section 60 of the Act is amended by adding the following after paragraph (e):

Restrictive covenant — bad debt

(fall debts owing to a taxpayer that are established by the taxpayer to have become bad debts in the taxation year and that are in respect of an amount included because of the operation of subsection 6(3.1) or 56.4(2) in computing the taxpayer's income in a preceding taxation year;

Quebec parental insurance plan — self-employed premiums

(gthe amount determined by the formula

A – B
where
A

is the total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the taxation year as a premium under the Act respecting parental insurance , R.S.Q., c. A-29.011, and

B

is the total of all amounts each of which is an amount that would be payable by the taxpayer as an employee's premium under the Act respecting parental insurance , R.S.Q., c. A-29.011, if those earnings were employment income of the taxpayer for the taxation year;

(2) Clause 60(l)(ii)(B) of the Act is replaced by the following:

(B) under which the taxpayer is the annuitant for a term not exceeding 18 years minus the age in whole years of the taxpayer at the time the annuity was acquired

(3) Paragraph 60(n) of the Act is amended by striking out "and" at the end of subparagraph (v) and by adding the following after subparagraph (v):

(v.1) a benefit described in subparagraph 56(1)(a)(vii), and

(4) Section 60 of the Act is amended by adding the following after paragraph (n):

Repayment of pension benefits

(n.1an amount paid by the taxpayer in the year to a registered pension plan if

(i) the taxpayer is an individual,

(ii) the amount is paid as

(A) a repayment of an amount received from the plan that was included in computing the taxpayer's income for the year or a preceding year, if

(I) it is reasonable to consider that the amount was paid under the plan as a consequence of an error and not as an entitlement to benefits, or

(II) it was subsequently determined that, as a consequence of a settlement of a dispute in respect of the taxpayer's employment, the taxpayer was not entitled to the amount, or

(B) interest in respect of a repayment described in clause (A), and

(iii) no portion of the amount is deductible under paragraph 8(1)(m) in computing the taxpayer's income for the year;

(5) Paragraph 60(p) of the Act is replaced by the following:

Repayment of apprenticeship grants

(pthe total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program of an amount that was included under paragraph 56(1)(n.1) in computing the taxpayer's income for the taxation year or a preceding taxation year;

(6) Paragraph 60(f) of the Act, as enacted by subsection (1), applies after October 7, 2003.

(7) Paragraph 60(g) of the Act, as enacted by subsection (1), and subsection (3) apply to the 2006 and subsequent taxation years.

(8) Subsection (2) is deemed to have come into force on January 1, 1989.

(9) Subsection (4) applies to the 2009 and subsequent taxation years.

(10) Subsection (5) applies to 2009 and subsequent years.

197. (1) The Act is amended by adding the following after section 60.01:

Meaning of "lifetime benefit trust"

60.011 (1) For the purpose of subsection (2), a trust is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual if

(aimmediately before the death of the deceased individual, the taxpayer

(i) was both a spouse or common-law partner of the deceased individual and mentally infirm, or

(ii) was both a child or grandchild of the deceased individual and dependent on the deceased individual for support because of mental infirmity; and

(bthe trust is, at the particular time, a personal trust under which

(i) no person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer's lifetime, any of the income or capital of the trust, and

(ii) the trustees

(A) are empowered to pay amounts from the trust to the taxpayer, and

(B) are required — in determining whether to pay, or not to pay, an amount to the taxpayer — to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer.

Meaning of "qualifying trust annuity"

(2) Each of the following is a qualifying trust annuity with respect to a taxpayer:

(aan annuity that meets the following conditions:

(i) it is acquired after 2005,

(ii) the annuitant under it is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the estate of a deceased individual,

(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv) if it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;

(ban annuity that meets the following conditions:

(i) it is acquired after 1988,

(ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,

(iii) it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, and

(iv) if it is acquired after 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; and

(can annuity that meets the following conditions:

(i) it is acquired

(A) after 2000 and before 2005 at a time at which the taxpayer was mentally or physically infirm, or

(B) in 2005 at a time at which the taxpayer was mentally infirm,

(ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity, and

(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.

Application of paragraph 60(l) to "qualifying trust annuity"

(3) For the purpose of paragraph 60(l),

(ain determining if a qualifying trust annuity with respect to a taxpayer is an annuity described in subparagraph 60(l)(ii), clauses 60(l)(ii)(A) and (B) are to be read without regard to their requirement that the taxpayer be the annuitant under the annuity; and

(bif an amount paid to acquire a qualifying trust annuity with respect to a taxpayer would, if this Act were read without reference to this subsection, not be considered to have been paid by or on behalf of the taxpayer, the amount is deemed to have been paid on behalf of the taxpayer where

(i) it is paid

(A) by the estate of a deceased individual who was, immediately before death,

(I) a spouse or common-law partner of the taxpayer, or

(II) a parent or grandparent of the taxpayer on whom the taxpayer was dependent for support, or

(B) by the trust that is the annuitant under the qualifying trust annuity, and

(ii) it would, if it had been paid by the taxpayer, be deductible under paragraph 60(l) in computing the taxpayer's income for a taxation year and the taxpayer elects, in the taxpayer's return of income under this Part for that taxation year, to have this paragraph apply to the amount.

(2) Subsection (1) is deemed to have come into force on January 1, 1989 and, for the purpose of applying subparagraph 60.011(3)(b)(ii) of the Act, as enacted by subsection (1), to a taxation year that ends before 2005, a taxpayer is deemed to have made the election referred to in that subparagraph in respect of an amount paid to acquire a qualifying trust annuity if the taxpayer claimed, in their return of income for that taxation year, an amount as a deduction under paragraph 60(l) of the Act in respect of the amount paid to acquire the qualifying trust annuity.

198. (1) The portion of clause (i)(B) of the description of C in paragraph 63(2)(b) of the Act before subclause (I) is replaced by the following:

(B) a person certified in writing by a medical doctor to be a person who

(2) Subsection (1) applies to certifications made after December 20, 2002.

199. (1) The portion of subsection 66(12.6) of the Act before paragraph (a) is replaced by the following:

Canadian exploration expenses to flow-through shareholder

(12.6) If a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation) , the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the "specified expenses") exceeds the total of

(2) The portion of subsection 66(12.63) of the Act before paragraph (a) is replaced by the following:

Effect of renunciation

(12.63) Subject to subsections (12.69) to (12.702), if under subsection (12.62) a corporation renounces an amount to a person,

(3) The portion of subsection 66(12.66) of the French version of the Act before paragraph (b) is replaced by the following:

Frais engagés dans l'année suivante

(12.66) Pour l'application du paragraphe (12.6) et pour l'application du paragraphe (12.601) et de l'alinéa (12.602)b), la société qui émet une action accréditive à une personne conformément à une convention est réputée avoir engagé des frais d'exploration au Canada ou des frais d'aménagement au Canada le dernier jour de l'année civile précédant une année civile donnée si les conditions ci-après sont réunies :

ala société engage les frais au cours de l'année donnée ;

a.1la convention a été conclue au cours de l'année précédente;

(4) Subparagraph 66(12.66)(b)(iii) of the French version of the Act is replaced by the following:

(iii) seraient des dépenses visées à l'alinéa f) de la définition de « frais d'aménagement au Canada » au paragraphe 66.2(5) si le passage « à l'un des alinéas a) à e) » était remplacé par « aux alinéas a) ou b) »;

(5) The portion of subsection 66(12.66) of the English version of the Act after paragraph (e) is replaced by the following:

the corporation is, for the purpose of subsection (12.6), or of subsection (12.601) and paragraph (12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of that preceding year.

(6) The definition "flow-through share" in subsection 66(15) of the Act is replaced by the following:

"flow-through share"

« action accréditive »

"flow-through share" means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agrees

(ato incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, and

(bto renounce, in prescribed form and before March of the first calendar year that begins after that period, to the person in respect of the share or right , an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right ;

(7) Subsection 66(18) of the Act is replaced by the following:

Members of partnerships

(18) For the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition "investment expense" in subsection 110.6(1), the definition "pre-production mining expenditure" in subsection 127(9) and the descriptions of C and D in subsection 211.91(1), where a person's share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition "foreign exploration and development expenses" in subsection (15), paragraph (h) of the definition "Canadian exploration expense" in subsection 66.1(6), paragraph (f) of the definition "Canadian development expense" in subsection 66.2(5), paragraph (e) of the definition "foreign resource expense" in subsection 66.21(1) or paragraph (b) of the definition "Canadian oil and gas property expense" in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions "foreign exploration and development expenses" , "Canadian exploration expense" , "Canadian development expense" , "foreign resource expense" and "Canadian oil and gas property expense" in respect of the person, to be made or incurred by the person at the end of that fiscal period.

(8) Subsections (1) and (2) apply to renunciations made after December 20, 2002.

(9) Subsection (3) applies to expenses incurred after 1996, except that

(asubsection (3) does not apply to expenses incurred in January or February 1997 in respect of an agreement that was made in 1995; and

(bfor the purpose of applying paragraph 66(12.66)(a.1) of the French version of the Act, as enacted by subsection (3), to expenses incurred in 1998, any agreement made in 1996 is deemed to have been made in 1997.

(10) Subsection (6) applies to agreements made after December 20, 2002.

(11) Subsection (7) applies to expenses incurred in fiscal periods that begin after 2001.

200. (1) The description of B in the definition "cumulative Canadian exploration expense" in subsection 66.1(6) of the Act is replaced by the following:

B

is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(b) for the taxpayer's taxation years ending before that time,

(2) Section 66.1 of the Act is amended by adding the following after subsection 66.1(6.1):

Deductible expense

(6.2) An expense of a taxpayer that is not included in paragraph (f) or (g) of the definition "Canadian exploration expense" in subsection (6) because the taxpayer earned revenue from a mine in a mineral resource is deemed, for the purposes of this Part, not to be an outlay or payment described in paragraph 18(1)(b).

(3) Subsection (1) applies to taxation years that end after November 5, 2010.

(4) Subsection (2) applies in respect of expenses incurred after November 5, 2010.

201. (1) Paragraph (e) of the definition "Canadian development expense" in subsection 66.2(5) of the Act is replaced by the following:

(ethe cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (b), (e) or (f) of the definition "Canadian resource property" in subsection 66(15), or any right to or interest in – or for civil law, any right in or to – the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),

(2) The description of B in the definition "cumulative Canadian development expense" in subsection 66.2(5) of the Act is replaced by the following:

B

is the total of all amounts that were, because of subsection (1) , included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,

(3) Subsection (1) applies to taxation years that begin after 2006, except that in its application to taxation years that begin in 2007, paragraph (e) of the definition "Canadian development expense" in subsection 66.2(5) of the Act, as enacted by subsection (1), is to be read as follows:

(enotwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (b), (e) or (f) of the definition "Canadian resource property" in subsection 66(15), or any right to or interest in – or for civil law, any right in or to – the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer's right in respect of a Canadian resource property, nor a payment to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),

(4) Subsection (2) applies to taxation years that end after November 5, 2010.

202. (1) The formula in the definition "cumulative foreign resource expense" in subsection 66.21(1) of the Act is replaced by the following:

(A + A.1 + B + C + D) – (E + F + G + H + I + J)

(2) The definition "cumulative foreign resource expense" in subsection 66.21(1) of the Act is amended by adding the following after the description of A:

A.1

is the total of all foreign resource expenses, in respect of that country, that is the cost to the taxpayer of any of the taxpayer's foreign resource property in respect of that country that is deemed to have been acquired by the taxpayer under paragraph 128.1(1)(c) at the last time (before the particular time) that the taxpayer became resident in Canada;

(3) The description of B in the definition "cumulative foreign resource expense" in subsection 66.21(1) of the Act is replaced by the following:

B

is the total of all amounts included in computing the amount referred to in paragraph 59(3.2)(c.1) in respect of that country, for taxation years that ended before the particular time and at a resident time;

(4) Subsections (1) and (2) are deemed to have come into force on January 1, 2005.

(5) Subsection (3) applies to taxation years that end after November 5, 2010.

203. (1) Paragraph (a) of the definition "Canadian oil and gas property expense" in subsection 66.4(5) of the Act is replaced by the following:

(athe cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (a), (c) or (d) of the definition "Canadian resource property" in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease,

(2) Subsection (1) applies to taxation years that begin after 2006, except that in its application to the taxation years that begin in 2007, paragraph (a) of the definition "Canadian oil and gas property expense" in subsection 66.4(5) of the Act, as enacted by subsection (1), is to be read as follows:

(anotwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (a), (c) or (d) of the definition "Canadian resource property" in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid or payable to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease, but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer's right in respect of a Canadian resource property, nor a payment (other than a net royalty payment referred to in this paragraph) to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),

204. (1) Section 66.7 of the Act is amended by adding the following after subsection (10):

Amalgamation — partnership property

(10.1) For the purposes of subsections (1) to (5) and the definition "original owner" in subsection 66(15), if at any particular time there has been an amalgamation within the meaning assigned by subsection 87(1), other than an amalgamation to which subsection 87(1.2) applies, of two or more corporations (each of which is referred to in this subsection as a "predecessor corporation") to form one corporate entity (referred to in this subsection as the "new corporation") and immediately before the particular time a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property,

(athe predecessor corporation is deemed

(i) to have owned, immediately before the particular time, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the particular time that is equal to the predecessor corporation's percentage share of the total of the amounts that would be paid to all members of the partnership if the partnership were wound up immediately before the particular time, and

(ii) to have disposed of those portions to the new corporation at the particular time;

(bthe new corporation is deemed to have, by way of the amalgamation, acquired those portions at the particular time; and

(cthe income of the new corporation for a taxation year that ends after the particular time that can reasonably be attributable to production from those properties is deemed to be the lesser of

(i) the new corporation's share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, and

(ii) the amount that would be determined under subparagraph (i) for the year if the new corporation's share of the income of the partnership for the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph (a).

(2) Subsection 66.7(16) of the Act is replaced by the following:

Non-successor acquisitions

(16) If at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsections (1) to (5), nor subsection 29(25) of the Income Tax Application Rules, apply, every person who was an original owner or predecessor owner of the property before that time is , for the purpose of applying those subsections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property before that time.

(3) Subsection (1) applies to amalgamations that occur after 1996.

(4) Subsection (2) applies to property acquired after November 5, 2010.

205. (1) Paragraph 66.8(3)(a) of the Act is replaced by the following:

(athe expression "limited partner" of a partnership has the meaning that would be assigned by subsection 96(2.4), if in subsection 96(2.5) each reference to

(i) "February 25, 1986" were a reference to "June 17, 1987",

(ii) "February 26, 1986" were a reference to "June 18, 1987",

(iii) "January 1, 1987" were a reference to "January 1, 1988",

(iv) "June 12, 1986" were a reference to "June 18, 1987", and

(v) "prospectus, preliminary prospectus or registration statement" were a reference to "prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence";

(a.1)  the expression "at-risk amount" of a taxpayer in respect of a partnership has the meaning that would be assigned by subsection 96(2.2) if paragraph 96(2.2)(c) read as follows :

(call amounts each of which is an amount owing at that time to the partnership, or to a person or partnership not dealing at arm's length with the partnership, by the taxpayer or by a person or partnership not dealing at arm's length with the taxpayer, other than any amount deducted under subparagraph 53(2)(c)(i.3) in computing the adjusted cost base, or under section 143.2 in computing the cost, to the taxpayer of the taxpayer's partnership interest at that time, or any amount owing by the taxpayer to a person in respect of which the taxpayer is a subsidiary wholly-owned corporation or where the taxpayer is a trust, to a person that is the sole beneficiary of the taxpayer, and;

(2) Subsection (1) applies to fiscal periods that end after 2003.

206. (1) The portion of subsection 67.1(1.1) of the Act before paragraph (a) is replaced by the following:

Meal expenses for long-haul truck drivers

(1.1) An amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during an eligible travel period of the driver is deemed to be the amount determined by multiplying the specified percentage in respect of the amount so paid or payable by the lesser of

(2) Subsection (1) applies to amounts that are paid, or become payable, after March 18, 2007.

207. (1) The portion of section 68 of the Act before paragraph (a) is replaced by the following:

Allocation of amounts in consideration for property, services or restrictive covenants

68. If an amount received or receivable from a person can reasonably be regarded as being in part the consideration for the disposition of a particular property of a taxpayer, for the provision of particular services by a taxpayer or for a restrictive covenant as defined by subsection 56.4(1) granted by a taxpayer ,

(2) Section 68 of the Act is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of paragraph (b) and by adding the following after paragraph (b):

(cthe part of the amount that can reasonably be regarded as being consideration for the restrictive covenant is deemed to be an amount received or receivable by the taxpayer in respect of the restrictive covenant irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the restrictive covenant was granted.

(3) Subsections (1) and (2) are deemed to have come into force on February 27, 2004, except that those subsections do not apply to a taxpayer's grant of a restrictive covenant made in writing by the taxpayer before February 27, 2004 between the taxpayer and a person with whom the taxpayer deals at arm's length.

208. (1) Paragraph 69(1)(b) of the English version of the Act is amended by striking out "and" at the end of subparagraph (iii).

(2) Subsection (1) applies to dispositions that occur after December 23, 1998.

209. (1) The portion of subsection 70(3) of the French version of the Act before paragraph (a) is replaced by the following:

Droits ou biens transférés aux bénéficiaires

(3) Si , avant l'expiration du délai accordé pour le choix prévu au paragraphe (2), un droit ou un bien auquel ce paragraphe s'appliquerait par ailleurs a été transféré ou distribué aux bénéficiaires ou à d'autres personnes ayant un droit de bénéficiaire sur la succession ou la fiducie, les règles ci-après s'appliquent :

(2) Subsection 70(5.2) of the Act is replaced by the following:

Resource property and land inventory

(5.2) If in a taxation year a taxpayer dies,

(athe taxpayer is deemed

(i)  to have disposed, at the time that is immediately before the taxpayer's death, of each

(A)  Canadian resource property of the taxpayer ,

(B)  foreign resource property of the taxpayer, and

(C) property that was land included in the inventory of a business of the taxpayer, and

(ii)  subject to paragraph (c), to have received at that time proceeds of disposition for each such property equal to its fair market value at that time ;

(bany person who, as a consequence of the taxpayer's death, acquires a property that is deemed by paragraph (a) to have been disposed of by the taxpayer is, subject to paragraph (c) , deemed to have acquired the property at the time of the death at a cost equal to its fair market value at the time that is immediately before the death; and

(cwhere the taxpayer was resident in Canada at the time that is immediately before the taxpayer's death, a particular property described in clause (a)(i)(A), (B) or (C) is, on or after the death and as a consequence of the death, transferred or distributed to a spouse or common-law partner of the taxpayer described in paragraph (6)(a) or a trust described in paragraph (6)(b), and it can be shown within the period that ends 36 months after the death (or, where written application has been made to the Minister by the taxpayer's legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances) that the particular property has, within that period, vested indefeasibly in the spouse, common-law partner or trust, as the case may be,

(i) the taxpayer is deemed to have received, at the time that is immediately before the taxpayer's death, proceeds of disposition of the particular property equal to

(A)  if the particular property is Canadian resource property of the taxpayer or foreign resource property of the taxpayer, the amount specified by the taxpayer's legal representative in the taxpayer's return of income filed under paragraph 150(1)(b), not exceeding its fair market value at that time , and

(B) if the particular property was land included in the inventory of a business of the taxpayer, its cost amount to the taxpayer at that time, and

(ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired at the time of the death the particular property at a cost equal to the amount determined under subparagraph (i) in respect of the disposition of it under paragraph (a) .

(3) The portion of subsection 70(6) of the French version of the Act before paragraph (a) is replaced by the following:

Transfert ou distribution de biens à l'époux ou au conjoint de fait ou à une fiducie à leur profit

(6) Lorsqu'un bien d'un contribuable qui résidait au Canada immédiatement avant son décès est un bien auquel le paragraphe (5) s'appliquerait par ailleurs et qu'il est, par suite du décès du contribuable, transféré ou distribué ?:

(4) The portion of subsection 70(6.1) of the French version of the Act before paragraph (a) is replaced by the following:

Transfert ou distribution du compte de stabilisation du revenu net à l'époux ou au conjoint de fait ou à une fiducie

(6.1) Lorsqu'un bien qui est un compte de stabilisation du revenu net d'un contribuable est transféré ou distribué à l'une des personnes ci-après au moment du décès du contribuable ou postérieurement et par suite de ce décès, les paragraphes (5.4) et 73(5) ne s'appliquent pas au second fonds du compte de stabilisation du revenu net du contribuable :

(5) The portion of paragraph 70(7)(b) of the French version of the Act before subparagraph (i) is replaced by the following:

ble représentant légal du contribuable peut, dans la déclaration de revenu du contribuable (sauf celle produite en vertu des paragraphes (2) ou 104(23), de l'alinéa 128(2)e) ou du paragraphe 150(4)) dans laquelle il énumère un ou plusieurs biens, sauf un compte de stabilisation du revenu net, qui ont été transférés ou distribués à la fiducie au moment du décès du contribuable ou postérieurement et par suite de ce décès et dont la juste valeur marchande globale immédiatement après ce décès est au moins égale au total des dettes non admissibles du contribuable, faire un choix pour que, à la fois :

(6) Subsection (2) applies to taxation years that begin after 2006.

210. The portion of subsection 72(2) of the French version of the Act before paragraph (a) is replaced by the following:

Choix par les représentants légaux et le bénéficiaire du transfert concernant les provisions

(2) Lorsqu'un bien d'un contribuable qui représente le droit de recevoir une somme a été, au moment du décès du contribuable ou postérieurement et par suite de ce décès, transféré ou distribué à son époux ou conjoint de fait visé à l'alinéa 70(6)a) ou à une fiducie visée à l'alinéa 70(6)b) (appelés « bénéficiaire du transfert » au présent paragraphe), que le contribuable résidait au Canada immédiatement avant son décès et que le représentant légal du contribuable et le bénéficiaire du transfert ont fait, à l'égard du bien, un choix conjoint selon le formulaire prescrit, les règles ci-après s'appliquent :

211. (1) Subsection 73(2) of the Act is replaced by the following:

Capital cost and amount deemed allowed to spouse, etc., or trust

(2) If a transferee is deemed by subsection (1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph (1)(b) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, in applying sections 13 and 20 and any regulations made under paragraph 20(1)(a)

(athe capital cost to the transferee of the particular property is deemed to be the amount that was the capital cost to the taxpayer of the particular property ; and

(bthe excess is deemed to have been allowed to the transferee in respect of the particular property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition of the particular property .

(2) Paragraph 73(3)(a) of the Act is replaced by the following:

(athe property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;

(3) Subsection (1) applies to transfers that occur after 1999.

(4) Subsection (2) applies to dispositions of property that occur after May 1, 2006, other than a disposition in respect of which a taxpayer has made an election under subsection 11(5) of the Budget Implementation Act, 2006, No. 2 .

212. (1) Paragraph 75(3)(b) of the Act is replaced by the following:

(bby an employee life and health trust, an employee trust, a private foundation that is a registered charity, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described by paragraph (a.1) of the definition "trust" in subsection 108(1), or a trust described by paragraph 149(1)(y);

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

213. (1) The Act is amended by adding the following after section 75.1:

Rules applicable with respect to "qualifying trust annuity"

75.2 If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer's income,

(aany amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; and

(bif the taxpayer dies after 2005

(i) an amount equal to the fair market value of the annuity at the time of the taxpayer's death is deemed to have been received, immediately before the taxpayer's death, by the taxpayer out of or under the annuity, and

(ii) for the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer's death) of the taxpayer's interest in the trust that is the annuitant under the annuity.

(2) Subsection (1) is deemed to have come into force on January 1, 2006.

214. (1) Subparagraph 80.04(6)(a)(ii) of the Act is replaced by the following:

(ii) on or before the later of

(A) the expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, and

(B) if the debtor is an individual (other than a trust) or a testamentary trust, the day that is one year after the taxpayer's filing-due date for the year;

(2) Subsection (1) applies for taxation years that end after February 21, 1994.

215. (1) The Act is amended by adding the following after section 80.1:

Application

80.2 (1) Subsections (2) to (13) apply if

(ain a taxation year, a taxpayer, under the terms of a contract, pays to a person (referred to in this section as the "recipient") an amount (referred to in this section as the "specified amount") that may reasonably be considered to be received by the recipient as a reimbursement of, or a contribution or an allowance in respect of, an amount (referred to in this section as the "original amount")

(i) that was described by paragraph 18(1)(m) and was paid or payable by the recipient, or

(ii) that was, in respect of the recipient, an amount described by paragraph 12(1)(o);

(bthe original amount is paid or became payable or receivable in a taxation year or fiscal period of the recipient that begins before 2007; and

(cthe taxpayer is resident in Canada or carries on business in Canada when the specified amount is paid.

Rules relating to time of payment

(2) If the specified amount is paid in a taxation year of the taxpayer that begins before 2008, the eligible portion of the specified amount, referred to in subsection (11), is deemed to be a payment described by paragraph 18(1)(m). If, however, the specified amount is paid in a taxation year of the taxpayer that begins after 2007, the specified amount is deemed, for the purpose of applying this section to the taxpayer, to be nil.

Applying paragraph 18(1)(m)

(3) For the purpose of applying paragraph 18(1)(m) for the taxpayer's taxation year in which the specified amount was paid, the amount to which that paragraph applies is to be determined for that taxation year

(aif the taxpayer was in existence at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), as if the specified amount were paid by the taxpayer at that time; and

(bin any other case, as if

(i) the taxpayer were in existence and had a calendar taxation year at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), and

(ii) the specified amount were paid by the taxpayer at that time.

Exception for certain partnership reimbursements

(4) Subsection (3) does not apply to a specified amount paid by a taxpayer if

(athe recipient is a partnership;

(bthe original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), in a particular fiscal period of the partnership;

(cthe taxpayer is a member of the partnership at the end of the particular fiscal period; and

(dthe taxpayer paid the specified amount before the end of the taxation year of the taxpayer in which that particular fiscal period ends.

Specified amount deemed to be paid at end of taxation year

(5) A specified amount paid by the taxpayer to a partnership is deemed to have been paid on the last day of a particular taxation year of the taxpayer, and not at the time it was paid, if

(athe taxpayer paid an amount to the partnership in the particular taxation year (referred to in this subsection as the "initial payment");

(bthe initial payment was paid before September 17, 2004;

(cthe initial payment is an amount to which subsection (3) did not apply because of subsection (4);

(dthe taxpayer's share of the original amount in respect of the initial payment is greater than the initial payment;

(ethe specified amount is equal to or less than the difference between the taxpayer's share of the original amount in respect of the initial payment and the initial payment;

(fthe taxpayer elects in the taxpayer's return of income for the taxpayer's taxation year that includes the time at which the specified amount would, if this Act were read without reference to this subsection, have been paid, to have this subsection apply to the specified amount; and

(gthe specified amount is paid before 2006.

Inclusion in recipient's income

(6) The recipient shall include in computing the recipient's income for the taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the eligible portion of the specified amount exceeds the portion of the original amount that was included in computing the income of the recipient for the taxation year or fiscal period because of paragraph 12(1)(o) or that was not deductible in computing the income of the recipient for the taxation year or fiscal period because of paragraph 18(1)(m).

Interpretation — portion of the original amount

(7) For the purpose of subsection (6), the portion of the original amount that was included in computing the income of the recipient or that was not deductible in computing the income of the recipient is the amount that would be included in computing the income of the recipient under paragraph 12(1)(o) or that would not be deductible in computing the income of the recipient under paragraph 18(1)(m), if the original amount were equal to the eligible portion of the specified amount.

Inclusion in recipient's income

(8) The recipient shall include, in computing the recipient's income for its taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.

Deduction by taxpayer

(9) Subject to paragraphs 18(1)(a) and (b), the taxpayer may deduct in computing the taxpayer's income for the taxpayer's taxation year in which the specified amount was paid, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.

Specified amount deemed not to be payable or receivable

(10) Except for the purposes of this section and subparagraph 53(1)(e)(iv.1),

(athe taxpayer is deemed not to have paid, and not to have been obligated to pay, the specified amount; and

(bthe recipient is deemed not to have received, and not to have been entitled to receive, the specified amount.

Eligible portion of a specified amount

(11) The eligible portion of a specified amount is

(aan amount equal to the specified amount if

(i) the specified amount was paid before September 17, 2004,

(ii) the original amount is a tax imposed under a provincial law on the production of

(A) petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada if the petroleum, natural gas or related hydrocarbons are not, before extraction, owned by the Crown in right of Canada or a province, or

(B) metals, minerals or coal from a mineral resource located in Canada if the metals, minerals or coal are not, before extraction, owned by the Crown in right of Canada or a province,

(iii) the specified amount does not exceed the taxpayer's share of the original amount, or

(iv) the original amount is a prescribed amount; and

(bthe taxpayer's share of the original amount, in any other case.

Taxpayer's share of original amount

(12) A taxpayer's share of an original amount in respect of a specified amount paid by the taxpayer to a recipient in respect of a property is the amount that may reasonably be considered to be the taxpayer's share of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property, which share may not exceed the total of

(athat proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property that the taxpayer's share of production from the property payable to the taxpayer as a royalty, which royalty is computed without reference to the costs of exploration or production, is of the total production from the property, and

(bthat proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property (other than those amounts which the recipient has received or is entitled to receive as a reimbursement, contribution or allowance in respect of a royalty described in paragraph (a)) that the taxpayer's share of the income from the property is of the total income from the property.

Reduction in original amount for Part XII of the regulations

(13) For the purpose of applying Part XII of the Income Tax Regulations , an original amount in respect of which a specified amount is received is deemed, for the taxation year in which the original amount was paid or became payable or receivable, not to include an amount equal to the eligible portion of the specified amount.

(2) Subsection (1) applies in respect of specified amounts paid after 2001.

(3) Where a person is liable to an amount of tax under Part I of the Act for a taxation year that exceeds the amount to which the person would be liable if section 80.2 of the Act applied as it read on December 31, 2001, the person is deemed, for the purpose of determining any interest or penalty payable by that person, to have paid the excess on that person's balance-due day, if

(athe person's balance-due day for the taxation year was before September 17, 2004; and

(bthe excess was paid to the Receiver General before March 2005.

(4) Notwithstanding subsections 152(4) to (5) of the Act, all assessments, determinations, and redeterminations may be made as necessary to give effect to subsections (1) to (3).

216. (1) The portion of subsection 80.4(8) of the Act before paragraph (a) is replaced by the following:

Meaning of connected

(8) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a corporation if that person or partnership does not deal at arm's length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is

(2) Subsection (1) applies in respect of loans made and indebtedness arising after October 31, 2011.

217. (1) Paragraph 81(1)(g.3) of the Act is replaced by the following:

Certain government funded trusts

(g.3the amount that, but for this paragraph, would be the income of the taxpayer for the year if

(i) the taxpayer is the trust established under

(A)  the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces,

(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, or

(C) the Indian Residential Schools Settlement Agreement entered into by Her Majesty in right of Canada on May 8, 2006, and

(ii) the only contributions made to the taxpayer before the end of the year are those provided for under the relevant Agreement described in subparagraph (i) ;

(2) Subsection 81(1) of the Act is amended by striking out "or" at the end of paragraph (q), by adding "or" at the end of paragraph (r) and by adding the following after paragraph (r):

Salary deferral leave plans

(san amount paid to the taxpayer in the year under an arrangement described in paragraph 6801(a) of the Income Tax Regulations to the extent that the amount may reasonably be considered to be attributable to amounts that

(i) were included in the taxpayer's income for a preceding taxation year and were income, interest or other additional amounts, described in subparagraph 6801(a)(iv) of the Income Tax Regulations , and

(ii) were re-contributed by the taxpayer under the arrangement in a preceding taxation year.

(3) Subsection (1) applies to the 2006 and subsequent taxation years, except that for the 2006 taxation year, subparagraph 81(1)(g.3)(i) of the Act, as enacted by subsection (1), is to be read as follows:

(i) the taxpayer is the trust established under

(A) the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces, or

(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, and

(4) Subsection (2) applies to the 2000 and subsequent taxation years.

218. (1) Clause 82(1)(a)(ii)(B) of the Act, as it read immediately before its repeal by S.C. 2007, c. 2, s. 44(1), is replaced by the following:

(B) where the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, an amount paid by the taxpayer in the year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend,

(2) The portion of subsection 82(1) of the Act before paragraph (c) is replaced by the following:

Taxable dividends received

82. (1) In computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:

(athe amount, if any, by which

(i) the total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,

exceeds

(ii) if the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend (other than an eligible dividend );

(a.1the amount, if any, by which

(i) the total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,

exceeds

(ii) if the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as an eligible dividend ;

(bif the taxpayer is an individual, other than a trust that is a registered charity, the total of

(i) 25% of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year, and

(ii) the product of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year multiplied by

(A) for taxation years that end after 2005 and before 2010 , 45%,

(B) for the 2010 taxation year, 44%,

(C) for the 2011 taxation year, 41%, and

(D) for taxation years that end after 2011, 38%;

(3) Subsection 82(1.1) of the Act is replaced by the following:

Limitation as to paragraph (1)(c)

(1.1) An amount shall be included in the amounts described in paragraph 82(1)(c) in respect of a taxable dividend received at any time as part of a dividend rental arrangement only if that dividend was received on a share acquired before that time and after April, 1989.

(4) Subsection (1) applies

(ato amounts paid in respect of arrangements made after 2001, except that, in its application to amounts paid in respect of an arrangement made before December 21, 2002, clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read without reference to the expression "or is deemed by paragraph 260(12)(b) to have been" unless an election referred to in paragraph 358 (34)(b) has been made in respect of the arrangement; and

(bto amounts paid in respect of arrangements made after November 2, 1998 and before 2002, if the parties to the arrangement have made the election referred to in paragraph 358 (34)(b), except that in its application to those arrangements, the reference to "subsection 260(5.1)" in clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read as a reference to "subsection 260(5)".

(5) Subsections (2) and (3) apply to amounts received or paid after 2005.

219. (1) Subsection 84(4.1) of the Act is replaced by the following:

Deemed dividend on reduction of paid-up capital

(4.1) Any amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unless

(athe amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred

(i) outside the ordinary course of the business of the corporation, or of the person or partnership that realized the proceeds, and

(ii) within the period that commenced 24 months before the payment; and

(bno amount that may reasonably be considered to be derived from those proceeds was paid by the public corporation on a previous reduction of the paid-up capital in respect of any class of shares of its capital stock.

(2) Subsection 84(7) of the Act is replaced by the following:

When dividend payable

(7) A dividend that is deemed by this section or section 84.1, 128.1 or 212.1 to have been paid at a particular time is deemed, for the purposes of this subdivision and sections 131 and 133, to have become payable at that time.

(3) Subsection (1) applies to amounts paid after 1996, except that in respect of those amounts paid before February 27, 2004, subsection 84(4.1) of the Act, as enacted by subsection (1), is to be read as follows:

(4.1) Any amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or in section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unless the amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred outside the ordinary course of the business of the public corporation, or of the person or partnership that realized the proceeds.

(4) Subsection (2) applies to dividends deemed to have been paid after February 23, 1998.

220. (1) Paragraph 85(1)(d.1) of the Act is replaced by the following:

(d.1for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(b) in computing the corporation's income, there shall be added to the amount otherwise determined for C in that paragraph the amount determined by the formula

1/2 × [(A × B/C) – 2(D – E)] + F + G
where
A

is the amount, if any, determined for Q in the definition "cumulative eligible capital" in subsection 14(5) in respect of the taxpayer's business immediately before the disposition time,

B

is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,

C

is the total of the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer's adjustment time ,

D

is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer's income as a result of the disposition if the values determined for C and D in paragraph 14(1)(b) were zero,

E

is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer's income as a result of the disposition if the value determined for D in paragraph 14(1)(b) were zero,

F

is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and

G

is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(ii) as it applied to the taxpayer in respect of a winding-up before the disposition time;

(2) Subsection 85(1) of the Act is amended by adding the following after paragraph (d.1):

(d.11for the purpose of determining after the time of the disposition (referred to in this paragraph and in paragraphs (d.1) and (d.12) as the "disposition time") the amount to be included under paragraph 14(1)(a) or (b) in computing the corporation's income, there shall be added to the amount otherwise determined for each of A and F in the definition "cumulative eligible capital" in subsection 14(5) the amount, if any, determined by the formula

(A × B/C) + D + E
where
A

is the amount, if any, that would be determined for F in that definition in respect of the taxpayer's business at the beginning of the taxpayer's following taxation year if the taxpayer's taxation year that includes the disposition time had ended immediately after the disposition time and if, in respect of the disposition, this Act were read without reference to paragraph (d.12),

B

is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,

C

is the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer's adjustment time,

D

is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and

E

is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(i) as it applied to the taxpayer in respect of a winding-up before the disposition time;

(d.12for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(a) or (b) in computing the taxpayer's income, the amount, if any, determined by the formula in paragraph (d.11) in respect of the disposition is to be deducted from each of the amounts otherwise determined

(i) by subparagraph 14(1)(a)(ii), and

(ii) for the description of B in paragraph 14(1)(b);

(3) Subsection (1) applies to taxation years of a corporation that end after December 20, 2002.

(4) Subsection (2) applies in respect of the disposition of an eligible capital property by a taxpayer to a corporation unless

(athe disposition by the taxpayer occurred before December 21, 2002; and

(bthe corporation disposed of the eligible capital property, before June 7, 2007 and in a taxation year of the corporation ending after February 27, 2000, to a person with whom the corporation was dealing at arm's length at the time of that disposition by the corporation.

221. (1) Section 85.1 of the Act is amended by adding the following after subsection (2.1):

Issuance deemed made to vendor

(2.2) For the purposes of subsection (1), if a purchaser issues shares of a class of its capital stock (in this subsection referred to as "purchaser shares" ) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged shares that trade on a designated stock exchange to the purchaser solely for purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.

(2) Section 85.1 of the Act is amended by adding the following after subsection (6):

Issuance deemed made to vendor

(6.1) For the purposes of subsection (5), if a foreign purchaser issues shares of a class of its capital stock (in this subsection referred to as "foreign purchaser shares" ) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged foreign shares that trade on a designated stock exchange to the purchaser solely for foreign purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.

(3) The portion of subsection 85.1(7) of the English version of the Act before paragraph (a) is replaced by the following:

Application of subsection (8)

(7) Subsection (8) applies in respect of the disposition before 2013 by a taxpayer of SIFT wind-up entity equity (referred to in subsection (8) as the "particular unit") to a taxable Canadian corporation if

(4) The portion of paragraph 85.1(8)(f) of the English version of the Act before the first formula is replaced by the following:

(fin computing the paid- up capital in respect of each class of shares of the capital stock of the corporation at any time after the disposition there shall be deducted the amount determined by the formula

(5) Subsections (1) and (2) apply to share exchanges made after June 2005 except that those subsections do not apply to a particular share exchange of a taxpayer that occurs before November 5, 2010 if, within six months of being advised by the Minister of National Revenue that subsection (1) or (2), as the case may be, applies to the exchange, the taxpayer elects in writing not to have that subsection apply to the exchange.

222. (1) Subparagraphs 86.1(2)(c)(ii) and (iii) of the Act are replaced by the following:

(ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and

(A)  are actively traded on a designated stock exchange in the United States, or

(B) are required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and

(iii) under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;

(2) Subparagraph 86.1(2)(e)(i) of the Act is replaced by the following:

(i) that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),

(3) Subparagraph 86.1(2)(e)(vi) of the Act is replaced by the following:

(vi) in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution,

(4) Subsections (1) to (3) apply to distributions made after 1999, except that

(awith respect to a distribution in respect of original shares described in clause 86.1(2)(c)(ii)(B) of the Act, as enacted by subsection (1),

(i) information referred to in paragraph 86.1(2)(e) of the Act is deemed to be provided to the Minister of National Revenue on a timely basis if it is provided to that Minister before the 90th day after the day on which this Act receives royal assent; and

(ii) an election referred to in paragraph 86.1(2)(f) of the Act is deemed to be filed on a timely basis if it is filed with the Minister of National Revenue before the 90th day after the day on which this Act receives royal assent; and

(bfor the period before December 14, 2007, the reference to "designated stock exchange" in clause 86.1(2)(c)(ii)(A), as amended by subsection (1), is to be read as a reference to "prescribed stock exchange".

223. (1) Paragraph 87(2)(g.2) of the Act is replaced by the following:

Financial institution rules

(g.2for the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2) Subsection 87(2) of the Act is amended by adding the following after paragraph (g.4):

Patronage dividends

(g.5for the purposes of section 135, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(3) Paragraphs 87(2)(j.9) and (j.91) of the Act are replaced by the following:

Part I.3 tax

(j.9for the purpose of determining the amount deductible by the new corporation for any taxation year under section 125.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

Part I.3 and Part VI tax

(j.91for the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any corporation for any taxation year that ends before the amalgamation ;

(4) Subsection 87(2) of the Act is amended by adding the following after paragraph (l.3):

Subsection 13(4.2) election

(l.4for the purposes of subsection 13(4.3) and paragraph 20(16.1)(b), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

Contingent amount — section 143.4

(l.5for the purposes of section 143.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(5) Subsection 87(2) of the Act is amended by adding the following after paragraph (m.1):

Gift of predecessor's property

(m.2for the purpose of computing the fair market value of property under subsection 248(35), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(6) Paragraph 87(2)(o) of the Act is replaced by the following:

Expiration of options previously granted

(ofor the purpose of subsection 49(2),

(i) any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,

(ii)  any person to whom the option was granted who was not dealing at arm's length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm's length at the time that the option was granted, and

(iii)  any person to whom the option was granted who was dealing at arm's length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm's length at the time that the option was granted;

(7) Subsection 87(2) of the Act is amended by adding the following after paragraph (q):

Employees profit sharing plan

(ran election made under subsection 144(10) by a predecessor corporation is deemed to be an election made by the new corporation;

(8) Subparagraph 87(2)(s)(ii) of the Act is replaced by the following:

(ii) if, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the "new share") that is described in all of paragraphs (b) to (d) of the definition "tax deferred cooperative share" in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the "old share") that was, at the end of the predecessor corporation's last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange ;

(9) Paragraph 87(2)(mm) of the Act is repealed.

(10) Section 87 of the Act is amended by adding the following after subsection (2.2):

Quebec credit unions

(2.3) For the purpose of applying this section to an amalgamation governed by section 689 of An Act respecting financial services cooperatives , R.S.Q., c. C-67.3, an investment deposit of a credit union is deemed to be a share of a separate class of the capital stock of a predecessor corporation in respect of the amalgamation the adjusted cost base and paid up capital of which to the credit union is equal to the adjusted cost base to the credit union of the investment deposit immediately before the amalgamation if

(aimmediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act , R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; and

(bon the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.

(11) Paragraphs 87(4.4)(c) and (d) of the Act are replaced by the following:

(cfor the consideration under the agreement

(i) a share (in this subsection referred to as the "old share") of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or

(ii) a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and

(dthe new corporation

(i) issues, on the amalgamation and in consideration for the disposition of the old share , a share (in this subsection referred to as a "new share") of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share , or

(ii) is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation's capital stock that would, if it were issued, be a flow-through share ,

(12) Subsection 87(9) of the Act is amended by adding the following after paragraph (a.2):

(a.21for the purpose of paragraph (4.4)(d)

(i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and

(ii) any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;

(13) Subsection (1) and paragraph 87(2)(j.9) of the Act, as enacted by subsection (3), apply to taxation years that begin after October 31, 2011.

(14) Subsection (2) applies to amalgamations that occur, and windings-up that begin, after 1997.

(15) Paragraph 87(2)(j.91) of the Act, as enacted by subsection (3), and paragraph 87(2)(l.4) of the Act, as enacted by subsection (4), apply to amalgamations that occur, and windings-up that begin, after December 20, 2002.

(16) Paragraph 87(2)(l.5) of the Act, as enacted by subsection (4), applies in respect of taxation years that end on or after March 16, 2011.

(17) Subsection (5) applies in respect of gifts of property made after 6:00 p.m. (Eastern Standard Time) on December 4, 2003.

(18) Subsection (6) applies to options issued after ANNOUNCEMENT DATE.

(19) Subsection (7) applies to amalgamations that occur, and windings-up that begin, after 1994.

(20) Subsection (8) is deemed to have come into force on September 29, 2009.

(21) Subsection (9) applies to amalgamations that occur after March 20, 2003.

(22) Subsection (10) applies to amalgamations that occur after June 2001.

(23) Subsections (11) and (12) apply to amalgamations that occur after 1997.

224. (1) Paragraph 88(1)(c.1) of the Act is replaced by the following:

(c.1for the purpose of determining after the winding-up the amount to be included under subsection 14(1) in computing the parent's income in respect of the business carried on by the subsidiary immediately before the winding-up

(i) there shall be added to the amount otherwise determined for each of the descriptions of A and F in the definition "cumulative eligible capital" in subsection 14(5), the total of all amounts, each of which is the amount, if any,

(A) determined for the description of F in that definition in respect of that business immediately before the winding up ,

(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or

(C) determined under paragraph 85(1)(d.11) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time, and

(ii) there shall be added to the amount determined for the description of C in the formula in paragraph 14(1)(b), the total of all amounts, each of which is an amount that is

(A)  one-half of the amount, if any, determined for the description of Q in that definition in respect of that business immediately before the winding up,

(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or

(C) determined under paragraph 85(1)(d.1) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time;

(2) Paragraph 88(1)(c.3) of the Act is amended by striking out "or" at the end of subparagraph (iv) and by adding the following after subparagraph (v):

(vi) a share of the capital stock of the subsidiary or a debt owing by it, if the share or debt, as the case may be, was owned by the parent immediately before the winding-up, or

(vii) a share of the capital stock of a corporation or a debt owing by a corporation, if the fair market value of the share or debt, as the case may be, was not, at any time after the beginning of the winding-up, wholly or partly attributable to property distributed to the parent on the winding-up;

(3) Subparagraph 88(1)(c.4)(i) of the Act is replaced by the following:

(i) a share of the capital stock of the parent that was

(A)  received as consideration for the acquisition of a share of the capital stock of the subsidiary by the parent or by a corporation that was a specified subsidiary corporation of the parent immediately before the acquisition, or

(B) issued for consideration that consists solely of money,

(4) Paragraph 88(1)(e.6) of the Act is replaced by the following:

(e.6if a subsidiary has made a gift in a taxation year (in this section referred to as the "gift year"), for the purposes of computing the amount deductible under section 110.1 by the parent for its taxation years that end after the subsidiary was wound up, the parent is deemed to have made a gift, in each of its taxation years in which a gift year of the subsidiary ended, equal to the amount, if any, by which the total of all amounts, each of which is the amount of a gift or, in the case of a gift made after December 20, 2002, the eligible amount of the gift, made by the subsidiary in the gift year exceeds the total of all amounts deducted under section 110.1 by the subsidiary in respect of those gifts ;

(5) The portion of paragraph 88(1.1)(e) of the Act before subparagraph (i) is replaced by the following:

(eif control of the parent has been acquired by a person or group of persons at any time after the commencement of the winding-up , or control of the subsidiary has been acquired by a person or group of persons at any time whatever , no amount in respect of the subsidiary's non-capital loss or farm loss for a taxation year ending before that time is deductible in computing the taxable income of the parent for a particular taxation year ending after that time, except that such portion of the subsidiary's non-capital loss or farm loss as may reasonably be regarded as its loss from carrying on a business and, where a business was carried on by the subsidiary in that year, such portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing its taxable income for the year is deductible only

(6) Subsection (1) applies in respect of the disposition of an eligible capital property by a subsidiary to a parent unless

(athe disposition by the subsidiary occurred before December 21, 2002; and

(bthe parent disposed of the eligible capital property, before November 9, 2006, and in a taxation year of the parent ending after February 27, 2000, to a person with whom the parent did not deal at arm's length at the time of that disposition by the parent.

(7) Subsections (2) and (3) apply to windings-up that begin, and amalgamations that occur, after 1997.

(8) Subsection (4) applies to windings-up that begin, and amalgamations that occur, after December 20, 2002.

(9) Subsection (5) applies to windings-up that begin after May 1996.

225. (1) Clause (a)(i)(A) of the definition "capital dividend account" in subsection 89(1) of the Act is replaced by the following:

(A) the amount of the corporation's capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as "the period")

(2) Clause (a)(i)(A) of the definition "capital dividend account" in subsection 89(1) of the Act, as enacted by subsection (1), is replaced by the following:

(A) the amount of the corporation's capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(12) or that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year (that began after the corporation last became a private corporation and that ended after 1971) and ending immediately before the particular time (in this definition referred to as "the period")

(3) Clause (a)(i)(A) of the definition "capital dividend account" in subsection 89(1) of the Act, as enacted by subsection (2), is replaced by the following:

(A) the amount of the corporation's capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as "the period")

(4) Clause (a)(ii)(A) of the definition "capital dividend account" in subsection 89(1) of the Act is replaced by the following:

(A) the amount of the corporation's capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period

(5) Clause (a)(ii)(A) of the definition "capital dividend account" in subsection 89(1) of the Act, as enacted by subsection (4), is replaced by the following:

(A) the amount of the corporation's capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(3.12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period

(6) The portion of paragraph (f) of the definition « compte de dividendes en capital » in subsection 89(1) of the French version of the Act before clause (i)(B) is replaced by the following:

fle total des montants représentant chacun un montant relatif à une distribution qu'une fiducie a effectuée sur ses gains en capital en faveur de la société au cours de la période et dont le montant est égal au moins élevé des montants suivants :

(i) l'excédent du montant visé à la division (A) sur le montant visé à la division (B) :

(A) le montant de la distribution ,

(7) Clause (f)(i)(B) of the definition "capital dividend account" in subsection 89(1) of the Act is replaced by the following:

(B) the amount designated under subsection 104(21) by the trust (other than a designation to which subsection 104(21.4), as it read in its application to the corporation's last taxation year that began before November 2011, applied) in respect of the net taxable capital gains of the trust attributable to those capital gains, and

(8) The portion of paragraph (g) of the definition « compte de dividendes en capital » in subsection 89(1) of the French version of the Act before subparagraph (ii) is replaced by the following:

gle total des montants représentant chacun un montant relatif à une distribution qu'une fiducie a effectuée en faveur de la société au cours de la période au titre d'un dividende (sauf un dividende imposable) qui a été versé à la fiducie au cours d'une année d'imposition de celle-ci tout au long de laquelle elle a résidé au Canada, sur une action du capital-actions d'une autre société résidant au Canada, et dont le montant est égal au moins élevé des montants suivants :

(i) le montant de la distribution ,

(9) Paragraph (b) of the definition "taxable Canadian corporation" in subsection 89(1) of the Act is replaced by the following:

(bwas not, by reason of a statutory provision other than paragraph 149(1)(t), exempt from tax under this Part;

(10) Subsections (1) and (4) apply in respect of dispositions that occur on or after November 9, 2006.

(11) Subsection (2) applies to dispositions that occur on or after March 22, 2011.

(12) Subsection (3) applies to dispositions under paragraph 40(3.1)(a) of the Act that occur after October 31, 2011.

(13) Subsection (5) applies to dispositions under subsection 40(3.12) of the Act that occur after October 31, 2011, other than dispositions that relate to amounts deemed under subsection 40(3.1) of the Act to have been a gain from a disposition that occurred before November 1, 2011.

(14) Subsections (6) and (8) apply to elections in respect of capital dividends that become payable after 1997.

(15) Subsection (7) applies to taxation years that begin after October 31, 2011.

(16) Subsection (9) applies in respect of taxation years that end after 1999.

226. (1) Subparagraph 91(4)(a)(ii) of the Act is replaced by the following:

(ii) the taxpayer's relevant tax factor for the year, and

(2) Section 91 of the Act is amended by adding the following after subsection (4):

Denial of foreign accrual tax

(4.1) For the purposes of the definition "foreign accrual tax" in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer's income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the "affiliate year") of the particular affiliate that ends in the taxation year of the taxpayer,

(aa specified owner in respect of the taxpayer is considered,

(i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the "relevant foreign tax law") of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or

(ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the "relevant foreign tax law") of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or

(bwhere the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the "relevant foreign tax law") of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member's direct or indirect share of that income for the purposes of this Act.

Specified owner

(4.2) For the purposes of subsections (4.1) and (4.5), a "specified owner" , at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,

(aa partnership of which the taxpayer is a member;

(ba foreign affiliate of the taxpayer;

(ca partnership a member of which is a foreign affiliate of the taxpayer; or

(da person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).

Pertinent person or partnership

(4.3) For the purposes of this subsection and subsection (4.1), a "pertinent person or partnership" , at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,

(aanother foreign affiliate of the taxpayer

(i) in which the particular affiliate has an equity percentage, or

(ii) that has an equity percentage in the particular affiliate;

(ba partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or

(ca person or partnership referred to in any of subparagraphs (4.4)(b)(i) to (iii).

Series of transactions

(4.4) For the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the "funding affiliate") of the taxpayer or of a person (referred to in this subsection as the "related person") resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the "funding partnership") of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm's length or by way of an acquisition of shares of the capital stock of any corporation, then

(aif the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:

(i) the related person,

(ii) each foreign affiliate of the related person, and

(iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and

(bthe following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:

(i) the funding affiliate or the funding partnership,

(ii) a non-resident corporation

(A) in which the funding affiliate has an equity percentage, or

(B) that has an equity percentage in the funding affiliate, and

(iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).

Exception — hybrid entities

(4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.

Exceptions — partnerships

(4.6) For the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(aa difference between the relevant foreign tax law and this Act in the manner of

(i) computing the income of the partnership, or

(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

(bthe treatment of the partnership as a corporation under the relevant foreign tax law; or

(cthe fact that the member is not treated as a corporation under the relevant foreign tax law.

Deemed ownership

(4.7) For the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.

(3) Subsection (1) applies to the 2002 and subsequent taxation years.

(4) Subsection (2) applies in respect of the computation of foreign accrual tax applicable to an amount included in computing a taxpayer's income under subsection 91(1) of the Act, for a taxation year of the taxpayer that ends after March 4, 2010, in respect of a foreign affiliate of the taxpayer. However, for taxation years of the taxpayer that end on or before ANNOUNCEMENT DATE,

(asubsection 91(4.1) of the Act, as enacted by subsection (2), is to be read as follows:

(4.1) For the purposes of the definition "foreign accrual tax" in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer's income under subsection (1) for a taxation year in respect of a particular foreign affiliate of the taxpayer shall not include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if the particular amount is earned during a period in which

(aif the taxpayer is a partnership, the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws (referred to in subsection (4.6) as the "relevant foreign tax law") of any country, other than Canada, under the laws of which the income of the partnership is subject to income taxation, less than its share of the income for the purposes of this Act; or

(bin any other case, the taxpayer is considered, under the income tax laws (referred to in subsection (4.5) as the "relevant foreign tax law") of any country, other than Canada, under the laws of which the income of the particular affiliate is subject to income taxation, to own less than all of the shares of the capital stock of the particular affiliate, of another foreign affiliate of the taxpayer in which the particular affiliate has an equity percentage, or of another foreign affiliate of the taxpayer that has an equity percentage in the particular affiliate, that are considered to be owned by the taxpayer for the purposes of this Act.

(bsubsection 91(4.5) of the Act, as enacted by subsection (2), is to be read as follows:

(4.5) For the purposes of paragraph (4.1)(b), a taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a foreign affiliate of the taxpayer that are considered to be owned by the taxpayer for the purposes of this Act solely because the taxpayer or the foreign affiliate is not treated as a corporation under the relevant foreign tax law.

(cthe portion of subsection 91(4.6) of the Act before paragraph (a), as enacted by subsection (2), is to be read as follows:

(4.6) For the purposes of paragraph (4.1)(a), a member of a partnership is not to be considered to have a lesser share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(dsection 91 of the Act is to be read without reference to its subsections (4.2) to (4.4) and (4.7), as enacted by subsection (2).

227. (1) The definition "relevant tax factor" in subsection 95(1) of the Act is replaced by the following:

"relevant tax factor"

« facteur fiscal approprié »

"relevant tax factor" , of a person or partnership for a taxation year, means

(ain the case of a corporation, or of a partnership all the members of which, other than non-resident persons, are corporations, the quotient obtained by the formula

1/(A – B)
where
A

is the percentage set out in paragraph 123(1)(a), and

B

is

(i) in the case of a corporation, the percentage that is the corporation's general rate reduction percentage (as defined by section 123.4) for the taxation year, and

(ii) in the case of a partnership, the percentage that would be determined under subparagraph (i) in respect of the partnership if the partnership were a corporation whose taxation year is the partnership's fiscal period, and

(bin any other case, 2.2;

(2) The portion of the definition "foreign accrual tax" in subsection 95(1) of the Act before paragraph (a) is replaced by the following:

"foreign accrual tax"

« impôt étranger accumulé »

"foreign accrual tax" applicable to any amount included in computing a taxpayer's income under subsection 91(1) for a taxation year in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1) ,

(3) Subsection (1) applies to the 2002 and subsequent taxation years.

(4) Subsection (2) applies to taxation years of a taxpayer that end after March 4, 2010.

228. (1) Section 96 of the Act is amended by adding the following after subsection (1):

Income allocation to former member

(1.01) If, at any time in a fiscal period of a partnership, a taxpayer ceases to be a member of the partnership

(afor the purposes of subsection (1) and sections 34.1, 34.2, 101, 103 and 249.1, and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and

(bfor the purposes of the application of paragraph (2.1)(b) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end

(i) immediately before the time at which the taxpayer is deemed by subsection 70(5) to have disposed of the interest in the partnership, where the taxpayer ceased to be a member of the partnership because of the taxpayer's death, and

(ii) immediately before the time that is immediately before the time that the taxpayer ceased to be a member of the partnership, in any other case.

(2) Paragraph 96(1.01)(a) of the Act, as enacted by subsection (1), is replaced with the following:

(afor the purposes of subsection (1), sections 34.1, 101 and 103 and paragraph 249.1(1)(b), and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and

(3) The portion of paragraph 96(1.01)(b) of the Act before subparagraph (i), as enacted by subsection (1), is replaced by the following:

(bfor the purposes of the application of paragraph (2.1)(b), subsection 40(3.12) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end

(4) Paragraph 96(2.4)(a) of the English version of the Act is replaced by the following:

(aby operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member's liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);

(5) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:

Agreement or election of partnership members

(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer's income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.2) and (16) and 14(1.01), (1.02) and (6), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04 and subsections 86.1(2), 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,

(6) Subsection 96(9) of the Act is replaced by the following:

Application of foreign partnership rule

(9) For the purposes of applying subsection (8) and this subsection ,

(a)  where it can reasonably be considered that one of the main reasons that a member of a partnership is resident in Canada is to avoid the application of subsection (8 ), the member is deemed not to be resident in Canada; and

(bwhere at any time a particular partnership is a member of another partnership,

(i) each person or partnership that is, at that time, a member of the particular partnership is deemed to be a member of the other partnership at that time,

(ii) each person or partnership that becomes a member of the particular partnership at that time is deemed to become a member of the other partnership at that time, and

(iii) each person or partnership that ceases to be a member of the particular partnership at that time is deemed to cease to be a member of the other partnership at that time.

(7) Subsection (1) applies in respect of a taxpayer

(ain the case where the taxpayer ceases to be a member of a partnership because of the taxpayer's death, to the 2003 and subsequent taxation years; and

(bin any other case, to the 1995 and subsequent taxation years.

(8) Subsection (2) applies in respect of a taxpayer to taxation years that end after March 22, 2011.

(9) Subsection (3) applies in respect of a taxpayer to taxation years that end after October 31, 2011.

(10) Subsection (4) is deemed to have come into force on June 21, 2001.

(11) If a taxpayer, who is a member of a partnership at the end of a particular fiscal period, of the partnership, that ends in the taxpayer's 2000 taxation year, so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer's filing-due date for the taxpayer's taxation year in which this Act receives royal assent,

(asubsection 96(1.7) of the Act does not apply to the taxpayer's 2000 taxation year;

(bthe taxpayer is deemed to have a capital gain, a capital loss or a business investment loss in respect of the partnership for the particular fiscal period equal to the amount of the taxable capital gain, the allowable capital loss or the allowable business investment loss in respect of the partnership for the particular fiscal period, as the case may be, multiplied by the reciprocal of the fraction in paragraph 38(a) of the Act that applies to the partnership for the particular fiscal period;

(cthe amount of a capital gain, a capital loss or a business investment loss determined under paragraph (b) is deemed to be a capital gain, a capital loss or a business investment loss, as the case may be, of the taxpayer from a disposition of a capital property on the day that the particular fiscal period ends; and

(dexcept as provided by this subsection, no amount shall be included in computing the taxpayer's taxable capital gains, allowable capital losses and allowable business investment losses in respect of the taxable capital gains, allowable capital losses and allowable business investment losses of the partnership for the particular fiscal period.

(12) Subsection (5) applies to taxation years that end after February 27, 2000. However, subsection 96(3) of the Act, as enacted by subsection (5), is before December 21, 2002 to be read without reference to ", (4.2)" and ", (1.02)".

(13) Subsection (6) applies to fiscal periods that begin after June 22, 2000.

229. Subsection 99(1) of the Act is replaced by the following:

Fiscal period of terminated partnership

99. (1) Subject to subsection (2), if , at any particular time in a fiscal period of a partnership, the partnership would, if this Act were read without reference to subsection 98(1), have ceased to exist, the fiscal period is deemed to have ended immediately before the time that is immediately before that particular time.

230. (1) Section 100 of the Act is amended by adding the following after subsection (4):

Replacement of partnership capital

(5) A taxpayer who pays an amount at any time in a taxation year is deemed to have a capital loss from a disposition of property for the year if

(athe taxpayer disposed of an interest in a partnership before that time or, because of subsection (3), acquired before that time a right to receive property of a partnership;

(bthat time is after the disposition or acquisition, as the case may be;

(cthe amount would have been described in subparagraph 53(1)(e)(iv) had the taxpayer been a member of the partnership at that time; and

(dthe amount is paid pursuant to a legal obligation of the taxpayer to pay the amount.

(2) Subsection (1) applies to the 1995 and subsequent taxation years.

231. (1) The portion of subsection 104(1.1) of the Act before paragraph (a) is replaced by the following:

Restricted meaning of "beneficiary"

(1.1) Notwithstanding subsection 248(25) , for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time if the person or partnership is beneficially interested in the trust at the particular time solely because of

(2) Subparagraph 104(4)(a)(i.1) of the Act is replaced by the following:

(i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(c) (or, in the case of a transfer that occurred in a taxation year before 2007, (b) or (d), as those paragraphs read in their application to that taxation year) or (6)(d) applied, and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,

(3) Paragraph 104(4)(i) of the French version of the Act is replaced by the following:

a.2lorsque la fiducie effectue une distribution à un bénéficiaire au titre de la participation de celui-ci à son capital, qu'il est raisonnable de conclure que la distribution a été financée par une dette de la fiducie et que l'une des raisons pour lesquelles la dette a été contractée était d'éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d'un particulier, le jour où la distribution est effectuée (déterminé comme si, pour la fiducie, la fin d'un jour correspondait au moment immédiatement après celui où elle distribue un bien à un bénéficiaire au titre de la participation de celui-ci à son capital);

(4) Subsections 104(5.3) to (5.7) of the Act are repealed.

(5) Subsections 104(10) and (11) of the Act are repealed.

(6) Paragraph 104(13.2)(a) of the Act is replaced by the following:

(afor the purposes of subsections (13) and 105(2) (except in the application of subsection (13) for the purposes of subsection (21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust; and

(7) Subsection 104(19) of the Act is replaced by the following:

Designation in respect of taxable dividends

(19) A portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation is, for the purposes of this Act other than Part XIII, deemed to be a taxable dividend on the share received by a taxpayer, in the taxpayer's taxation year in which the particular taxation year ends, and is, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, deemed not to have been received by the trust, if

(a)  an amount equal to that portion

(i) is designated by the trust, in respect of the taxpayer , in the trust's return of income under this Part for the particular taxation year, and

(ii)  may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;

(bthe taxpayer is in the particular taxation year a beneficiary under the trust;

(c)  the trust is , throughout the particular taxation year, resident in Canada; and

(dthe total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust's return of income under this Part for the particular taxation year is not greater than the total of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular taxation year, on a share of the capital stock of a taxable Canadian corporation.

(8) Subsection 104(21) of the Act is replaced by the following:

Designation in respect of taxable capital gains

(21) For the purposes of sections 3 and 111, except as they apply for the purposes of section 110.6, and subject to paragraph 132(5.1)(b), an amount in respect of a trust's net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular taxation year ends , from the disposition by the taxpayer of capital property if

(athe amount

(i) is designated by the trust, in respect of the taxpayer , in the trust's return of income under this Part for the particular taxation year, and

(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer ;

(bthe taxpayer is

(i) in the particular taxation year, a beneficiary under the trust, and

(ii) resident in Canada, unless the trust is, throughout the particular taxation year, a mutual fund trust;

(c)  the trust is , throughout the particular taxation year, resident in Canada; and

(dthe total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust's return of income under this Part for the particular taxation year is not greater than the trust's net taxable capital gains for the particular taxation year.

(9) Subsection 104(21.1) of the Act is repealed.

(10) Paragraph 104(21.3)(a) of the Act is replaced by the following:

(athe total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property , and

(11) Subsection 104(21.3) of the Act, as amended by subsection (10), is replaced by the following:

Net taxable capital gains of trust determined

(21.3) For the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, determined by the formula

A + B – C – D
where
A

is the total of all amounts each of which is a taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition,

B

is the total of all amounts each of which is deemed by subsection (21) to be a taxable capital gain of the trust for the year,

C

is the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and

D

is the amount, if any, deducted under paragraph 111(1)(b) in computing the trust's taxable income for the year.

(12) Subsections 104(21.4) and (21.5) of the Act are repealed.

(13) Paragraph 104(21.6)(g) of the Act is replaced by the following:

(f.1if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;

(gif the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18 , 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year; and

(14) Subsections 104(21.6), as amended by subsection (13), and (21.7) of the Act are repealed.

(15) Subsection 104(22) of the Act is replaced by the following:

Designation in respect of foreign source income

(22) For the purposes of this subsection, subsection (22.1) and section 126, an amount in respect of a trust's income for a particular taxation year of the trust from a source in a country other than Canada is deemed to be income of a taxpayer , for the taxation year of the taxpayer in which the particular taxation year ends , from that source if

(athe amount

(i)  is designated by the trust, in respect of the taxpayer , in the trust's return of income under this Part for the particular taxation year, and

(ii)  may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14), was included in computing the income for that taxation year of the taxpayer ;

(bthe taxpayer is in the particular taxation year a beneficiary under the trust;

(cthe trust is , throughout the particular taxation year, resident in Canada; and

(dthe total of all amounts each of which is an amount designated, under this subsection in respect of that source, by the trust in respect of a beneficiary under the trust in the trust's return of income under this Part for the particular taxation year is not greater than the trust's income for the particular taxation year from that source.

(16) Paragraphs 104(23)(a) and (b) of the Act are repealed.

(17) Subsection (1) applies to the 1998 and subsequent taxation years.

(18) Subsection (2) applies to trust taxation years that begin after 2006.

(19) Subsections (4), (9), (11), (12) and (14) apply to taxation years that begin after October 31, 2011.

(20) Subsection (5) applies to the 2005 and subsequent taxation years.

(21) Subsections (7), (8) and (15) apply to taxation years that end after February 27, 2004, except that, for taxation years that end on or before July 18, 2005, the reference to "paragraph (13)(a)" in subparagraph 104(19)(a)(ii) of the Act, as enacted by subsection (7), in subparagraph 104(21)(a)(ii) of the Act, as enacted by subsection (8), and in subparagraph 104(22)(a)(ii) of the Act, as enacted by subsection (15), is to be read as a reference to "subsection (13)".

(22) Subsection (10) applies to trust taxation years that begin after 2000.

(23) Paragraph 104(21.6)(f.1) of the Act, as enacted by subsection (13), applies to taxation years that end after February 27, 2000.

(24) Paragraph 104(21.6)(g) of the Act, as enacted by subsection (13), applies to trust taxation years that end after December 20, 2002.

(25) Subsection (16) is deemed to have come into force on December 21, 2002.

232. Subsection 106(3) of the French version of the Act is replaced by the following:

Produit de disposition d'une participation au revenu

(3) Il est entendu que la fiducie qui , à un moment donné, distribue un de ses biens à un contribuable qui était un de ses bénéficiaires, en règlement total ou partiel de la participation du contribuable au revenu de la fiducie, est réputée avoir disposé du bien pour un produit égal à la juste valeur marchande du bien à ce moment.

233. (1) Subsection 107(1) of the Act is amended by striking out "and" at the end of paragraph (c), by adding "and" at the end of paragraph (d) and by adding the following after paragraph (d):

(eif the capital interest is not a capital property of the taxpayer, notwithstanding the definition "cost amount" in subsection 108(1), its cost amount is deemed to be the amount, if any, by which

(i) the amount that would, if this Act were read without reference to this paragraph and the definition "cost amount" in subsection 108(1), be its cost amount

exceeds

(ii) the total of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I).

(2) Section 107 of the Act is amended by adding the following after subsection (1.1):

Deemed fair market value — non-capital property

(1.2) For the purpose of section 10, the fair market value at any time of a capital interest in a trust is deemed to be equal to the amount that is the total of

(athe amount that would, if this Act were read without reference to this subsection, be its fair market value at that time, and

(bthe total of all amounts, each of which is an amount that would be described, in respect of the capital interest, in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I), that has become payable to the taxpayer before that time.

(3) Subparagraph 107(2)(b.1)(iii) of the Act is replaced by following:

(iii) in any other case, 50% ;

(4) The portion of paragraph 107(2)(c) of the Act before subparagraph (i) is replaced by the following:

(cthe taxpayer's proceeds of disposition of the capital interest in the trust (or of the part of it) disposed of by the taxpayer on the distribution are deemed to be equal to the amount, if any, by which

(5) The portion of paragraph 107(2)(d) of the French version of the Act before subparagraph (i) is replaced by the following:

dlorsque les biens ainsi distribués étaient des biens amortissables de la fiducie, appartenant à une catégorie prescrite, et que le montant du coût en capital de ces biens, supporté par la fiducie, dépasse le coût que le contribuable est réputé, en vertu du présent article, avoir supporté pour les acquérir, pour l'application des articles 13 et 20 et des dispositions réglementaires prises en vertu de l'alinéa 20(1)a) :

(6) The portion of paragraph 107(2)(f) of the French version of the Act before subparagraph (i) is replaced by the following:

florsque les biens ainsi distribués étaient des immobilisations admissibles de la fiducie au titre de son entreprise :

(7) The portion of subparagraph 107(2)(f)(ii) of the French version of the Act after the formula is replaced by the following:

où :
A

représente le montant calculé selon cet élément Q au titre de l'entreprise de la fiducie immédiatement avant la distribution ;

B

la juste valeur marchande, immédiatement avant la distribution , des biens ainsi distribués ;

C

la juste valeur marchande, immédiatement avant la distribution , de l'ensemble des immobilisations admissibles de la fiducie au titre de l'entreprise.

(8) Subsection 107(2.001) of the French version of the Act is replaced by the following:

Roulement — choix d'une fiducie

(2.001) Lorsqu'une fiducie distribue un bien à l'un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, le paragraphe (2) ne s'applique pas à la distribution si la fiducie en fait le choix dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d'imposition où le bien est distribué et si l'un des faits ci-après se vérifie :

ala fiducie réside au Canada au moment de la distribution ;

ble bien est un bien canadien imposable;

cle bien est soit une immobilisation utilisée dans le cadre d'une entreprise que la fiducie exploite par l'entremise d'un établissement stable (au sens du règlement) au Canada immédiatement avant la distribution , soit une immobilisation admissible au titre d'une telle entreprise, soit un bien à porter à l'inventaire d'une telle entreprise.

(9) The portion of subsection 107(2.002) of the French version of the Act before paragraph (b) is replaced by the following:

Roulement — choix d'un bénéficiaire

(2.002) Lorsqu'une fiducie non-résidente distribue un bien (sauf celui visé aux alinéas (2.001)b) ou c)) à l'un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, les règles ci-après s'appliquent si le bénéficiaire en fait le choix en vertu du présent paragraphe dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d'imposition où le bien est distribué :

ale paragraphe (2) ne s'applique pas à la distribution ;

(10) The portion of subsection 107(2.01) of the French version of the Act before paragraph (a) is replaced by the following:

Distribution de résidence principale

(2.01) Lorsqu'une fiducie personnelle distribue à un moment donné, à un contribuable dans les circonstances visées au paragraphe (2), un bien qui serait sa résidence principale, au sens de l'article 54, pour une année d'imposition si elle l'avait désigné comme telle en application de l'alinéa c.1) de la définition de « résidence principale » à cet article , les règles ci-après s'appliquent si la fiducie en fait le choix dans sa déclaration de revenu pour l'année d'imposition qui comprend ce moment :

(11) The portion of paragraph 107(2.1)(c) of the French version of the Act before subparagraph (i) is replaced by the following:

csous réserve de l'alinéa e), le produit de disposition, pour le bénéficiaire, de la partie de l'ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l'excédent :

(12) The portion of subparagraph 107(2.1)(d)(iii) of the French version of the Act before clause (B) is replaced by the following:

(iii) le produit de disposition, pour le bénéficiaire, de la partie de l'ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l'excédent de la juste valeur marchande du bien sur le total des montants suivants :

(A) la partie du montant de la distribution qui est un paiement auquel s'applique l'alinéa h) ou i) de la définition de « disposition » au paragraphe 248(1),

(13) Paragraph 107(2.1)(e) of the French version of the Act is replaced by the following:

elorsque la fiducie est une fiducie de fonds commun de placement, que la distribution est effectuée au cours d'une de ses années d'imposition qui est antérieure à son année d'imposition 2003, qu'elle a fait, pour l'année, le choix prévu au paragraphe (2.11) et qu'elle en fait le choix relativement à la distribution dans le formulaire prescrit produit avec sa déclaration de revenu pour l'année :

(i) il n'est pas tenu compte de l'alinéa c),

(ii) le produit de disposition, pour le bénéficiaire, de la partie de l'ancienne participation dont il a disposé lors de la distribution est réputé être égal au montant déterminé selon l'alinéa a).

(14) Subsection 107(2.11) of the Act is replaced by the following:

Gains not distributed to beneficiaries

(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies and the trust elects in prescribed form filed with the trust's return for the year or a preceding taxation year to have one of the following paragraphs apply , the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard

(aif the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) to non-resident persons (including a partnership other than a Canadian partnership); and

(bif the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) .

(15) The portion of subsection 107(2.2) of the French version of the Act before paragraph (a) is replaced by the following:

Entité intermédiaire

(2.2) Lorsque, à un moment antérieur à 2005, une fiducie visée aux alinéas h), i) ou j) de la définition de « entité intermédiaire » au paragraphe 39.1(1) distribue des biens à l'un de ses bénéficiaires en règlement de tout ou partie des participations de celui-ci dans la fiducie et que le bénéficiaire présente au ministre, au plus tard à la date d'échéance de production qui lui est applicable pour son année d'imposition qui comprend ce moment, un choix concernant les biens sur le formulaire prescrit, le moins élevé des montants ci-après est à inclure dans le coût, pour le bénéficiaire, d'un bien (sauf de l'argent) qu'il a reçu dans le cadre de la distribution :

(16) The portion of subsection 107(4) of the French version of the Act before paragraph (a) is replaced by the following:

Fiducie en faveur de l'époux, du conjoint de fait ou de soi-même

(4) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s'applique au bien qu'une fiducie visée à l'alinéa 104(4)a) distribue à un bénéficiaire :

(17) Paragraph 107(4)(b) of the Act is replaced by the following:

(bthe distribution of the property occurs on or before the earlier of

(i) a reacquisition, in respect of any property of the trust, that occurs immediately after the day described by paragraph 104(4)(a), and

(ii) the cessation of the trust's existence.

(18) The portion of subsection 107(4.1) of the French version of the Act before paragraph (b) is replaced by the following:

Cas d'application du par. 75(2) à une fiducie

(4.1) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s'applique à la distribution d'un bien d'une fiducie personnelle donnée ou une fiducie donnée visée par règlement, effectuée par la fiducie donnée à un contribuable bénéficiaire de cette fiducie :

ala distribution a été effectuée en règlement de la totalité ou d'une partie de la participation du contribuable au capital de la fiducie donnée;

(19) The portion of paragraph 107(4.1)(b) of the Act before subparagraph (i), as enacted by subsection 11 (1), is replaced by the following:

(bsubsection 75(2) was applicable, or would have been applicable if it were read without reference to the phrase "while the person is resident in Canada" and subsection 75(3) were read without reference to paragraph (c.2), at a particular time in respect of any property of

(20) Subparagraph 107(4.1)(b)(ii) of the French version of the Act is replaced by the following:

(ii) soit d'une fiducie comptant parmi ses biens un bien qui, par suite d'une ou de plusieurs dispositions auxquelles le paragraphe 107.4(3) s'est appliqué, est devenu un bien de la fiducie donnée, lequel bien, après le moment donné et avant la distribution , n'a pas fait l'objet d'une disposition pour un produit de disposition égal à sa juste valeur marchande au moment de la disposition;

(21) Paragraph 107(4.1)(d) of the French version of the Act is replaced by the following:

dla personne visée au sous-alinéa c)(i) existait au moment de la distribution du bien.

(22) Subsection 107(5) of the Act is replaced by the following:

Distribution of property received on qualifying disposition

(4.2) Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), if

(aat a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; and

(bthe beneficiary is neither the particular partnership nor the particular corporation.

Distribution to non-resident

(5) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer's capital interest in the trust.

(23) The portion of subsection 107(5.1) of the Act before paragraph (b) is replaced by the following:

Instalment interest

(5.1) If , solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust's tax payable under this Part for the year is deemed to be the lesser of

(athe trust's tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and

(24) Paragraph 107(5.1)(b) of the French version of the Act is replaced by the following:

ble montant qui serait déterminé selon l'alinéa a) si le paragraphe (5) ne s'appliquait pas à chaque distribution , effectuée au cours de l'année, de biens canadiens imposables auxquels les règles énoncées au paragraphe (2) ne s'appliquent pas par le seul effet du paragraphe (5).

(25) Paragraphs 107(6)(a) and (b) of the Act are replaced by the following:

(athe property or property for which it was substituted was held by a trust; and

(beither

(i)  the trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, or

(iineither the vendor — nor a person that would, if section 251.1 were read without reference to the definition "controlled" in subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust.

(26) Subsections (1) and (2) apply to dispositions that occur, and valuations made,

(aafter 2001 in respect of qualified trust units, as defined in subsection 260(1) of the Act, as amended by subsection 365 (5), in respect of which an amount described in paragraph 260(5.1)(b) of the Act, as enacted by subsection 365 (7), or that would have been so described had no election been made under paragraph 365 (12)(b), is paid after 2001 and before February 28, 2004, except that subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before 2002, to be read without reference to the words "if that subparagraph were read without reference to its subclause (B)(I)"; and

(bin any other case, after February 27, 2004, except that, subject to paragraph (a),

(i) subsection (1) does not apply to a disposition by a taxpayer after February 27, 2004 and before 2005 pursuant to an agreement in writing made by the taxpayer on or before February 27, 2004, and

(ii) subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before February 27, 2004, to be read without reference to the words "if that subparagraph were read without reference to its subclause (B)(I)".

(27) Subsection (3) and subsection 107(4.2) of the Act, as enacted by subsection (22), apply to distributions made after December 20, 2002.

(28) Subsection (4) applies to distributions made after 1999.

(29) Subsection (14) applies to the 2002 and subsequent taxation years. It also applies to the 2000 and 2001 taxation years of a trust if the trust so elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act receives royal assent, in which case the portion of subsection 107(2.11) of the Act, as enacted by subsection (14), before paragraph (a), is to be read as follows for the 2000 and 2001 taxation years of the trust:

(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies (or, in the case of property distributed after October 1, 1996 and before 2000, in circumstances in which subsection (5) applied) and the trust elects in prescribed form filed with the trust's return for the year or a preceding taxation year, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard

(30) Subsections (17), (19) and (23) apply to distributions made after October 31, 2011.

(31) Subsection 107(5) of the Act, as enacted by subsection (22), applies to distributions made after February 27, 2004.

(32) Subsection (25) applies to dispositions made after October 31, 2011.

234. (1) The portion of section 107.2 of the French version of the Act before paragraph (a) is replaced by the following:

Montant provenant d'une fiducie de convention de retraite

107.2 Pour l'application de la présente partie et de la partie XI.3, dans le cas où, à un moment donné, une fiducie régie par une convention de retraite distribue un de ses biens à un contribuable bénéficiaire de la fiducie, en règlement de la totalité ou d'une partie de la participation de celui-ci dans la fiducie, les règles ci-après s'appliquent :

(2) Paragraph 107.2(b) of the French version of the Act is replaced by the following:

bla fiducie est réputée verser au contribuable, au titre d'une distribution, un montant égal à cette juste valeur marchande;

235. (1) The portion of subsection 107.4(1) of the Act before paragraph (a) is replaced by the following:

Qualifying disposition

107.4 (1) In this section, a "qualifying disposition" of a property means a disposition of the property before December 21, 2002 by a person or partnership, and a disposition of property after December 20, 2002 by an individual, (which person, partnership or individual is referred to in this subsection as the "contributor") as a result of a transfer of the property to a particular trust where

(2) Paragraph 107.4(1)(c) of the Act is replaced by the following:

(cthe particular trust is resident in Canada at the time of the transfer ;

(3) Paragraph 107.4(1)(d) of the Act is repealed.

(4) Subparagraphs 107.4(1)(g)(ii) and (iii) of the French version of the Act are replaced by the following:

(ii) celle commençant après le 17 décembre 1999 et comprenant la disposition de la totalité ou d'une partie d'une participation au capital ou d'une participation au revenu d'une fiducie personnelle, sauf une disposition effectuée uniquement par suite de la distribution d'un bien, d'une fiducie à une personne ou à une société de personnes, en règlement de la totalité ou d'une partie de cette participation,

(iii) celle commençant après le 5 juin 2000 et comprenant le transfert d'un bien à la fiducie donnée, effectué en contrepartie de l'acquisition d'une participation au capital de cette fiducie, s'il est raisonnable de considérer que celle-ci a reçu le bien en vue de financer une distribution (sauf celle qui correspond au produit de disposition d'une participation au capital de la fiducie);

(5) Subsections (1) and (3) are deemed to have come into force on December 20, 2002.

(6) Subsection (2) applies to dispositions that occur after February 27, 2004.

236. (1) Paragraph (a.1) of the definition "cost amount" in subsection 108(1) of the Act is replaced by the following:

(a.1where that time (in this paragraph referred to as the "particular time") is immediately before the time that is immediately before the time of the death of the taxpayer and subsection 104(4) or (5) deems the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under paragraph (b) if the taxpayer had died on a day that ended immediately before the time that is immediately before the particular time, and

(2) The portion of the definition "testamentary trust" in subsection 108(1) of the Act before paragraph (a) is replaced by the following:

"testamentary trust"

« fiducie testamentaire »

"testamentary trust" , in a taxation year, means a trust that arose on and as a consequence of the death of an individual (including a trust referred to in subsection 248(9.1)), other than

(3) The definition "testamentary trust" in subsection 108(1) of the Act is amended by striking out "and" at the end of paragraph (b), by adding "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(da trust that, at any time after December 20, 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership (which beneficiary, person or partnership is referred to in this paragraph as the "specified party") with whom any beneficiary of the trust does not deal at arm's length, other than a debt or other obligation

(i) incurred by the trust in satisfaction of the specified party's right as a beneficiary under the trust

(A) to enforce payment of an amount of the trust's income or capital gains payable at or before that time by the trust to the specified party, or

(B) to otherwise receive any part of the capital of the trust,

(ii) owed to the specified party, if the debt or other obligation arose because of a service (for greater certainty, not including any transfer or loan of property) rendered by the specified party to, for or on behalf of the trust,

(iii) owed to the specified party, if

(A) the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,

(B) in exchange for the payment (and in full settlement of the debt or other obligation), the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the specified party within 12 months after the payment was made (or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), and

(C) it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm's length with the trust, except where the trust is the individual's estate and that payment was made within the first 12 months after the individual's death (or, if written application has been made to the Minister by the estate within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), or

(iv) incurred by the trust before ANNOUNCEMENT DATE if, in full settlement of the debt or other obligation the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the person or partnership to whom the debt or other obligation is owed within 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent (or if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances);

(4) Paragraph (a.1) of the definition "trust" in subsection 108(1) of the Act is replaced by the following:

(a.1a trust (other than a trust described in paragraph (a) or (d), a trust to which subsection 7(2) or (6) applies or a trust prescribed for the purpose of subsection 107(2)) all or substantially all of the property of which is held for the purpose of providing benefits to individuals each of whom is provided with benefits in respect of, or because of, an office or employment or former office or employment of any individual,

(5) The portion of the definition "trust" in subsection 108(1) of the Act after paragraph (e.1) and before paragraph (f) is replaced by the following:

and, in applying subsections 104(4), (5), (5.2), (12), (14) and (15) at any time, does not include

(6) Subparagraph (g)(ii) of the definition "trust" in subsection 108(1) of the Act is repealed.

(7) Paragraph (a) of the definition "coût indiqué" in subsection 108(1) of the French version of the Act is replaced by the following:

adans le cas où de l'argent ou un autre bien de la fiducie a été distribué par celle-ci au contribuable en règlement de tout ou partie de sa participation au capital (lors de la liquidation de la fiducie ou autrement), du total des montants suivants :

(i) l'argent ainsi distribué ,

(ii) les sommes représentant chacune le coût indiqué pour la fiducie, immédiatement avant la distribution , de chacun de ces autres biens,

(8) Subparagraphs (g)(v) and (vi) of the definition "fiducie" in subsection 108(1) of the French version of the Act are replaced by the following:

(v) la fiducie dont les modalités prévoient, à ce moment, que la totalité ou une partie de la participation d'une personne dans la fiducie doit prendre fin par rapport à une période (y compris celle déterminée par rapport au décès de la personne), autrement que par l'effet des modalités de la fiducie selon lesquelles une participation dans la fiducie doit prendre fin par suite de la distribution à la personne (ou à sa succession) d'un bien de la fiducie, si la juste valeur marchande du bien à distribuer doit être proportionnelle à celle de cette participation immédiatement avant la distribution ,

(vi) la fiducie qui, avant ce moment et après le 17 décembre 1999, a effectué une distribution en faveur d'un bénéficiaire au titre de la participation de celui-ci à son capital, s'il est raisonnable de considérer que la distribution a été financée par une dette de la fiducie et si l'une des raisons pour lesquelles la dette a été contractée était d'éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d'un particulier.

(9) The definition "montant de réduction admissible" in subsection 108(1) of the French version of the Act is replaced by the following:

« montant de réduction admissible »

"eligible offset"

« montant de réduction admissible » En ce qui concerne un contribuable à un moment donné relativement à la totalité ou à une partie de sa participation au capital d'une fiducie, toute partie de dette ou d'obligation qui est prise en charge par le contribuable et qu'il est raisonnable de considérer comme étant imputable à un bien distribué à ce moment en règlement de la participation ou de la partie de participation, si la distribution est conditionnelle à la prise en charge par le contribuable de la partie de dette ou d'obligation.

(10) Clauses 108(2)(b)(iv)(A) and (B) of the Act are replaced by the following:

(A) not less than 95% of its income for the current year (computed without regard to subsections 39(2), 49(2.1) and 104(6)) was derived from, or from the disposition of, investments described in subparagraph (iii), or

(B) not less than 95% of its income for each of the relevant periods (computed without regard to subsections 39(2), 49(2.1) and 104(6) and as though each of those periods were a taxation year) was derived from, or from the disposition of, investments described in subparagraph (iii),

(11) Subsections (2) and (3) apply to taxation years that end after December 20, 2002, except that

(aa transfer that is required, by clause (d)(iii)(B) of the definition "testamentary trust" in subsection 108(1) of the Act, as enacted by subsection (3), to be made within 12 months after a payment was made is deemed to be made in a timely manner if it is made no later than 12 months after this Act receives royal assent; and

(bfor those taxation years that end before the day on which this Act receives royal assent, the reference to "within the first 12 months after the individual's death" in clause (d)(iii)(C) of the definition "testamentary trust" in subsection 108(1) of the Act, as enacted by subsection (3), is to be read as a reference to "after the individual's death and no later than 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent".

(12) Subsection (4) applies to trust taxation years that begin after 2006.

(13) Subsection (5) applies to the 1998 and subsequent taxation years.

(14) Subsection (6) applies to taxation years that begin after October 31, 2011.

(15) Subsection (10) applies to the 2003 and subsequent taxation years.

237. (1) Paragraph 110(1)(k) of the Act is replaced by the following:

Part VI.1 tax

(kthe amount determined by multiplying the taxpayer's tax payable under subsection 191.1(1) for the year by

(i) if the taxation year ends before 2010, 3,

(ii) if the taxation year ends after 2009 and before 2012, 3.2, and

(iii) if the taxation year ends after 2011, 3.5.

(2) Subsection 110(1.7) of the Act is replaced by the following:

Reduction in exercise price

(1.7) If the amount payable by a taxpayer to acquire securities under an agreement referred to in subsection 7(1) is reduced at any particular time and the conditions in subsection (1.8) are satisfied in respect of the reduction,

(athe rights (referred to in this subsection and subsection (1.8) as the "old rights") that the taxpayer had under the agreement immediately before the particular time are deemed to have been disposed of by the taxpayer immediately before the particular time;

(bthe rights (referred to in this subsection and subsection (1.8) as the "new rights") that the taxpayer has under the agreement at the particular time are deemed to be acquired by the taxpayer at the particular time; and

(cthe taxpayer is deemed to receive the new rights as consideration for the disposition of the old rights.

Conditions for subsection (1.7) to apply

(1.8) The following are the conditions in respect of the reduction:

(athat the taxpayer would not be entitled to a deduction under paragraph (1)(d) if the taxpayer acquired securities under the agreement immediately after the particular time and this section were read without reference to subsection (1.7); and

(bthat the taxpayer would be entitled to a deduction under paragraph (1)(d) if the taxpayer

(i) disposed of the old rights immediately before the particular time,

(ii) acquired the new rights at the particular time as consideration for the disposition, and

(iii) acquired securities under the agreement immediately after the particular time.

(3) Subsection (1) applies to the 2003 and subsequent taxation years.

(4) Subsection (2) applies to reductions that occur after 1998.

(5) An election by a taxpayer under subsection 7(10) of the Act, as it read immediately before its repeal by subsection 3(10) of the Sustaining Canada's Economic Recovery Act , to have subsection 7(8) of the Act, as it read immediately before its repeal by subsection 3(8) of the Sustaining Canada's Economic Recovery Act , apply is deemed to have been filed in a timely manner if

(ait is filed on or before the 60th day after the day on which this Act receives royal assent;

(bit is in respect of a security acquired by the taxpayer before the day on which this Act receives royal assent;

(cthe taxpayer is entitled to a deduction under paragraph 110(1)(d) of the Act in respect of the acquisition; and

(dthe taxpayer would not have been so entitled if subsection 110(1.7) of the Act, as enacted by subsection (2), did not apply.

238. (1) The portion of paragraph 110.1(1)(a) of the Act before the formula is replaced by the following:

Charitable gifts

(athe total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (b), (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to

(i) a registered charity,

(ii) a registered Canadian amateur athletic association,

(iii) a corporation resident in Canada and described in paragraph 149(1)(i),

(iv) a municipality in Canada,

(iv.1) a municipal or public body performing the function of government in Canada,

(v) the United Nations or an agency thereof,

(vi) a university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,

(vii) a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift in the year or in the 12-month period preceding the year, or

(viii) Her Majesty in right of Canada or a province,

not exceeding the lesser of the corporation's income for the year and the amount determined by the formula

(2) The portion of paragraph 110.1(1)(a) of the Act before the formula, as enacted by subsection (1), is replaced by the following:

Charitable gifts

(athe total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (b), (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to a qualified donee , not exceeding the lesser of the corporation's income for the year and the amount determined by the formula

(3) The description of B in paragraph 110.1(1)(a) of the Act is replaced by the following:

B

is the total of all amounts, each of which is that proportion of the corporation's taxable capital gain for the taxation year in respect of a gift made by the corporation in the taxation year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) that the eligible amount of the gift is of the corporation's proceeds of disposition in respect of the gift ,

(4) Clause (B) in the description of D in paragraph 110.1(1)(a) of the Act is replaced by the following:

(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class by the corporation in the year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) equal to the lesser of

(I) that proportion, of the amount by which the proceeds of disposition of the property exceeds any outlays and expenses, to the extent that they were made or incurred by the corporation for the purpose of making the disposition, that the eligible amount of the gift is of the corporation's proceeds of disposition in respect of the gift, and

(II) that proportion, of the capital cost to the corporation of the property, that the eligible amount of the gift is of the corporation's proceeds of disposition in respect of the gift ;

(5) Paragraph 110.1(1)(a.1) of the Act is replaced by the following:

Gifts of medicine

(a.1the total of all amounts each of which is an amount , in respect of property that is the subject of an eligible medical gift made by the corporation in the taxation year or in any of the five preceding taxation years, determined by the formula

A × B/C
where
A

is the lesser of

(a) the cost to the corporation of the property, and

(b) 50 per cent of the amount, if any, by which the corporation's proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property;

B

is the eligible amount of the gift; and

C

is the corporation's proceeds of disposition of the property in respect of the gift.

(6) The portion of paragraph 110.1(1)(b) of the Act before subparagraph (i) is replaced by the following:

Gifts to Her Majesty

(bthe total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (c) or (d)) made by the corporation to Her Majesty in right of Canada or of a province

(7) Paragraph 110.1(1)(c) of the Act is replaced by the following:

Gifts to institutions

(cthe total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (d)) of an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act , which gift was made by the corporation in the year or in any of the five preceding taxation years to an institution or a public authority in Canada that was, at the time the gift was made, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object; and

(8) Subparagraph 110.1(1)(d)(i) of the Act is replaced by the following:

(i) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada , or

(9) Paragraph 110.1(1)(d) of the Act, as amended by subsection (8), is replaced by the following:

Ecological gifts

(dthe total of all amounts each of which is the eligible amount of a gift of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if

(i) the fair market value of the gift is certified by the Minister of the Environment,

(ii) the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada's environmental heritage, and

(iii)  the gift was made by the corporation in the year or in any of the five preceding taxation years to

(A)  Her Majesty in right of Canada or of a province,

(B)  a municipality in Canada,

(C)  a municipal or public body performing a function of government in Canada, or

(D)  a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada's environmental heritage, and that is approved by that Minister or the designated person in respect of the gift.

(10) The portion of subsection 110.1(2) of the Act before paragraph (a) is replaced by the following:

Proof of gift

(2) An eligible amount of a gift shall not be included for the purpose of determining a deduction under subsection (1) unless the making of the gift is evidenced by filing with the Minister

(11) Subsection 110.1(3) of the Act is replaced by the following:

Where subsection (3) applies

(2.1)  Subsection (3) applies in circumstances where

(aa corporation makes a gift at any time of

(i) capital property to a donee described in paragraph (1)(a), (b) or (d) , or

(ii) in the case of a corporation not resident in Canada, real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and

(bthe fair market value of the property otherwise determined at that time exceeds

(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the corporation that includes that time (determined without reference to the proceeds of disposition designated in respect of the property under subsection (3)) and the adjusted cost base to the corporation of the property immediately before that time, and

(ii)  in any other case, the adjusted cost base to the corporation of the property immediately before that time .

Gifts of capital property

(3) If this subsection applies in respect of a gift by a corporation of property, and the corporation designates an amount in respect of the gift in its return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be its proceeds of disposition of the property and, for the purpose of subsection 248(31) , the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of

(ain the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and

(bthe amount determined under subparagraph (2.1)(b)(i) or (ii), as the case may be, in respect of the property.

(12) Subparagraph 110.1(2.1)(a)(i) of the Act, as enacted by subsection (11), is replaced by the following:

(i) capital property to a qualified donee, or

(13) Subsection 110.1(4) of the Act is replaced by the following:

Gifts made by partnership

(4) If at the end of a fiscal period of a partnership a corporation is a member of the partnership, its share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is, for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the corporation in its taxation year in which the fiscal period of the partnership ends.

(14) The portion of paragraph 110.1(5)(b) of the Act before subparagraph (i) is replaced by the following:

(bwhere the gift is a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, the greater of

(15) Subsections (1), (3), (4), (6), (7), (9), (10), (13) and (14) apply to gifts made after December 20, 2002.

(16) Subsections (2) and (12) are deemed to have come into force on January 1, 2012.

(17) Subsection (5) applies to gifts made after March 18, 2007.

(18) Subsection (8) applies to gifts made after May 8, 2000.

(19) Subsection (11) applies to gifts made after 1999, except that, for gifts made after 1999 and before December 21, 2002, the reference to "subsection 248(31)" in subsection 110.1(3) of the Act, as enacted by subsection (11), is to be read as a reference to "subsection (1)".

239. (1) Paragraph (c) of the definition "qualifying amount" in subsection 110.2(1) of the Act is replaced by the following:

(can amount described in paragraph 6(1)(f) or (f.1) , subparagraph 56(1)(a)(iv) or paragraph 56(1)(b), or

(2) Subsection (1) is deemed to have come into force on April 1, 2006.

240. (1) The portion of paragraph (a) of the definition "qualified farm property" in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:

(areal or immovable property that was used in the course of carrying on the business of farming in Canada by,

(2) The portion of paragraph (a) of the definition "qualified fishing property" in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:

(areal or immovable property or a fishing vessel that was used in the course of carrying on the business of fishing in Canada by,

(3) Paragraphs 110.6(1.3)(a) and (b) of the Act are replaced by the following:

(athe following apply in respect of the property or property for which the property was substituted (in this paragraph referred to as "the property" ),

(i) the property was owned throughout the period of at least 24 months immediately preceding that time by one or more of

(A)  the individual, or a spouse, common-law partner, child or parent of the individual,

(B)  a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual's spouse or common-law partner,

(C)  if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or

(D)  a personal trust from which the individual or a child or parent of the individual acquired the property, and

(ii) either

(A) in at least two years while the property was owned by one or more persons referred to in subparagraph (i) ,

(I)  the gross revenue of a person (in this subclause referred to as the "operator" ) referred to in subparagraph (i) from the farming business referred to in subclause (II) for the period during which the property was owned by a person described in subparagraph (i) exceeded the income of the operator from all other sources for that period, and

(II)  the property was used principally in a farming business carried on in Canada in which an individual referred to in subparagraph (i) , or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or

(B) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in subparagraph (i) , the property was used by a corporation referred to in subparagraph (a)(iv) of the definition "qualified farm property" in subsection (1) or by a partnership referred to in subparagraph (a)(v) of that definition in a farming business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis; or

(4) The portion of subsection 110.6(6) of the Act before paragraph (a) is replaced by the following:

Failure to report capital gain

(6) Notwithstanding subsections (2) to (2.3), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual's taxable income for the particular taxation year or any subsequent year , if

(5) Paragraph 110.6(6)(a) of the French version of the Act is replaced by the following:

ale particulier, sciemment ou dans des circonstances équivalant à faute lourde :

(i) soit ne produit pas de déclaration de revenu pour l'année donnée dans un délai de un an suivant la date d'échéance de production qui lui est applicable pour cette année,

(ii) soit ne déclare pas le gain en capital dans sa déclaration de revenu pour l'année donnée ;

(6) The portion of subsection 110.6(12) of the Act before paragraph (a) is replaced by the following:

Trust deduction — death of spouse or common-law partner

(12) Notwithstanding any other provision of this Act, a trust (other than an alter ego trust or a joint spousal or common-law partner trust) that is described in paragraph 104(4)(a) or (a.1) may, in computing its taxable income for its taxation year that includes the day determined under paragraph 104(4)(a) or (a.1), as the case may be, in respect of the trust, deduct under this section an amount equal to the least of

(7) Subsection 110.6(14) of the Act is amended by adding the following after paragraph (d):

(d.1a person who is a member of a partnership that is a member of another partnership is deemed to be a member of the other partnership;

(8) Subsections (1) and (2) apply to dispositions of property that occur after May 1, 2006.

(9) Subsection (3) applies to dispositions of property that occur after November 5, 2010.

(10) Subsections (4) and (5) apply to any taxation year for which a return of income has not been filed before October 31, 2011, except in respect of gains realized in another taxation year for which a return of income was filed before October 31, 2011.

(11) Subsection (6) applies to taxation years that begin after October 31, 2011.

(12) Subsection (7) applies

(ato dispositions that occur after December 20, 2002; and

(bto dispositions made by a taxpayer after 1999, if the taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer's filing-due date for the taxpayer's taxation year in which this Act receives royal assent.

241. (1) Subsection 111(1.1) of the Act is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of paragraph (b) and by adding the following after paragraph (b):

(cthe amount, if any, that the Minister determines to be reasonable in the circumstances, after considering the application of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) to the taxpayer for the particular year.

(2) Paragraph 111(1.1)(c) of the Act, as enacted by subsection (1), is replaced by the following:

(cthe amount, if any, that the Minister determines to be reasonable in the circumstances for the particular year and after considering the application to the taxpayer of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) as they read in their application to the taxpayer's last taxation year that began before November 2011 .

(3) Subsections 111(7.1) to (7.2) of the Act are repealed.

(4) The description of C in the definition "pre-1986 capital loss balance" in subsection 111(8) of the Act is replaced by the following:

C

is the total of all amounts deducted under section 110.6 in computing the individual's taxable income for taxation years that ended before 1988 or begin after October 17, 2000,

(5) Subsections (1) and (4) apply to the 2000 and subsequent taxation years.

(6) Subsections (2) and (3) apply to taxation years that begin after October 31, 2011.

242. (1) Subsection 112(2.1) of the Act is replaced by the following:

No deduction permitted

(2.1) No deduction may be made under subsection (1) or (2) in computing the taxable income of a specified financial institution in respect of a dividend received by it on a share that was, at the time the dividend was received , a term preferred share, other than a dividend on a share of the capital stock of a corporation that was not acquired in the ordinary course of the business carried on by the institution, and for the purposes of this subsection, if a restricted financial institution received the dividend on a share of the capital stock of a mutual fund corporation or an investment corporation at any time after the mutual fund or investment corporation has elected under subsection 131(10) not to be a restricted financial institution, the share is deemed to be a term preferred share acquired in the ordinary course of business.

(2) The portion of paragraph 112(2.2)(a) before subparagraph (i) is replaced by the following:

(aa person or partnership (in this subsection and subsection (2.21) referred to as the "guarantor" ) that is a specified financial institution or a specified person in relation to a specified financial institution, but that is not the issuer of the share or an individual other than a trust, is, at or immediately before the time the dividend was received , obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking (in this subsection and subsections (2.21) and (2.22) referred to as a "guarantee agreement" ), including any guarantee, covenant or agreement to purchase or repurchase the share and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the particular corporation or any specified person in relation to the particular corporation given to ensure that

(3) Subsections (1) and (2) apply to dividends received on or after November 5, 2010.

243. (1) Clause 113(1)(b)(i)(A) of the Act is replaced by the following:

(A) the corporation's relevant tax factor for the year

(2) Clause 113(1)(c)(i)(B) of the Act is replaced by the following:

(B) the corporation's relevant tax factor for the year , and

(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2001.

244. (1) The portion of subsection 115.2(2) of the Act before paragraph (a) is replaced by the following:

Not carrying on business in Canada

(2) For the purposes of subsections 115(1) and 150(1) and Part XIV, a non-resident person is not considered to be carrying on business in Canada at any particular time solely because of the provision to the person, or to a partnership of which the person is a member, at the particular time of designated investment services by a Canadian service provider if

(2) Paragraph 115.2(2)(c) of the Act is amended by striking out "or" at the end of subparagraph (i) and by replacing subparagraph (ii) with the following:

(ii) where the non-resident person is, or is affiliated with, a person or partnership described in clause (A) or (B), the total of the fair market value of all investments in the partnership at the particular time is not less than four times the total of the fair market value of each investment in the partnership beneficially owned at the particular time by

(A) a person or partnership (other than a designated entity in respect of the Canadian service provider), more than 25% of the total of the fair market value, at the particular time, of investments in which are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider, or

(B) a person or partnership (other than a designated entity in respect of the Canadian service provider) that is affiliated with the Canadian service provider, or

(iii) at the particular time, the non-resident person is not affiliated with the Canadian service provider and is not affiliated with any person or partnership (other than the partnership to which the services are provided) described in clause (ii)(A) or (B).

(3) The portion of subsection 115.2(3) of the Act before paragraph (a) is replaced by the following:

Interpretation

(3) For the purposes of this subsection and subparagraphs (2)(b)(iii) and (c)(ii),

(4) Section 115.2 of the Act is amended by adding the following after subsection (4):

Property of a partnership

(5) For the purpose of determining whether a non-resident person's interest in a partnership is, at any particular time before March 5, 2010, a taxable Canadian property, property of the partnership shall not be considered to be used or held by the partnership in a business carried on in Canada, if because of subsection (2) the non-resident person is not considered to be carrying on business in Canada at the particular time.

(5) Subsection 115.2(5) of the Act, as enacted by subsection (4), is repealed.

(6) Subsection (1) applies to the 1999 and subsequent taxation years.

(7) Subsections (2) and (3) apply to the 2002 and subsequent taxation years, except that for the period that begins at the beginning of the 2002 taxation year of a taxpayer and that ends on October 31, 2011, paragraph 115.2(2)(c) of the Act, as amended by subsection (2), does not apply to the taxpayer if the taxpayer so elects and files the election in writing with the Minister of National Revenue on or before the taxpayer's filing-due date for the taxpayer's taxation year that includes October 31, 2011.

(8) Subsection (4) applies to the 2008 and subsequent taxation years.

(9) Subsection (5) is deemed to have come into force on March 5, 2010.

245. (1) The portion of subsection 116(5.2) of the Act before paragraph (a) is replaced by the following:

Certificates for dispositions

(5.2) If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property, eligible capital property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),

(2) Paragraph 116(6)(f) of the Act is replaced by the following:

(fproperty of an authorized foreign bank that carries on a Canadian banking business;

(3) Subsection (1) is deemed to have come into force on December 24, 1998.

(4) Subsection (2) is deemed to have come into force on June 28, 1999.

246. (1) Paragraph (a) of the definition "pension income" in subsection 118(7) of the Act is amended by adding the following after subparagraph (iii):

(iii.1) a payment (other than a payment described in subparagraph (i)) payable on a periodic basis under a money purchase provision (within the meaning assigned by subsection 147.1(1)) of a registered pension plan,

(2) Subsection (1) applies to the 2004 and subsequent taxation years.

247. (1) The definition "qualified Canadian transit organization" in subsection 118.02(1) of the Act is replaced by the following:

"qualified Canadian transit organization"

« organisme de transport canadien admissible »

"qualified Canadian transit organization" means a person authorised, under a law of Canada or a province, to carry on in Canada a business that is the provision of public commuter transit services, which is carried on through a permanent establishment (as defined by regulation) in Canada.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

248. (1) The definition "total charitable gifts" in subsection 118.1(1) of the Act is replaced by the following:

"total charitable gifts"

« total des dons de bienfaisance »

"total charitable gifts" , of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition "total Crown gifts" , "total cultural gifts" or "total ecological gifts" ) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual's taxable income) to

(aa registered charity,

(ba registered Canadian amateur athletic association,

(ca housing corporation resident in Canada and exempt from tax under this Part because of paragrah 149(1)(i),

(da municipality in Canada,

(d.1a municipal or public body performing a function of government in Canada,

(ethe United Nations or an agency thereof,

(fa university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,

(ga charitable organization outside Canada to which her Majesty in right of Canada has made a gift during the individual's taxation year or the 12 months immediately preceding that taxation year, or

(g.1Her Majesty in right of Canada or a province,

to the extent that those amounts were

(hnot deducted in computing the individual's taxable income for a taxation year ending before 1988, and

(inot included in determining an amount that was deducted under this section in computing the individual's tax payable under this Part for a preceding taxation year;

(2) The definition "total charitable gifts" in subsection 118.1(1) of the Act, as enacted by subsection (1), is replaced by the following:

"total charitable gifts"

« total des dons de bienfaisance »

"total charitable gifts" , of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift the eligible amount of which is included in the total Crown gifts, the total cultural gifts or the total ecological gifts of the individual for the year) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual's taxable income) to a qualified donee , to the extent that the amount was not included in determining an amount that was deducted under this section in computing the individual's tax payable under this Part for a preceding taxation year;

(3) Paragraph (a) of the definition "total ecological gifts" in subsection 118.1(1) of the Act is replaced by the following:

(aHer Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada , or

(4) The definition "total ecological gifts" in subsection 118.1(1) of the Act, as amended by subsection (3), is replaced by the following:

"total ecological gifts"

« total des dons de biens écosensibles »

"total ecological gifts" , of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition "total cultural gifts" ) of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if

(a)  the fair market value of the gift is certified by the Minister of the Environment,

(b)  the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada's environmental heritage, and

(c)  the gift was made by the individual in the year or in any of the five preceding taxation years to

(i)  Her Majesty in right of Canada or of a province,

(ii)  a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv)  a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada's environmental heritage, and that is approved by that Minister or the designated person in respect of the gift,

to the extent that those amounts were not included in determining an amount that was deducted under this section in computing the individual's tax payable under this Part for a preceding taxation year;

(5) The portion of the definition "total Crown gifts" in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:

"total Crown gifts"

« total des dons à l'État »

"total Crown gifts" , of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition "total cultural gifts" or "total ecological gifts" ) made by the individual in the year or in any of the five preceding taxation years to Her Majesty in right of Canada or of a province, to the extent that those amounts were

(6) The portion of the definition "total cultural gifts" in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:

"total cultural gifts"

« total des dons de biens culturels »

"total cultural gifts" , of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift

(7) The description of B in subparagraph (a)(iii) of the definition "total gifts" in subsection 118.1(1) of the Act is replaced by the following:

B

is the total of all amounts, each of which is that proportion of the individual's taxable capital gain for the taxation year in respect of a gift made by the individual in the taxation year (in respect of which gift an eligible amount is included in the individual's total charitable gifts for the taxation year) that the eligible amount of the gift is of the individual's proceeds of disposition in respect of the gift ,

(8) Clause (B) in the description of D in subparagraph (a)(iii) of the definition "total gifts" in subsection 118.1(1) of the Act is replaced by the following:

(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class made by the individual in the year (in respect of which gift an eligible amount is included in the individual's total charitable gifts for the taxation year) equal to the lesser of

(I) that proportion, of the amount by which the proceeds of disposition of the property exceed any outlays and expenses, to the extent that they were made or incurred by the individual for the purpose of making the disposition, that the eligible amount of the gift is of the individual's proceeds of disposition in respect of the gift, and

(II) that proportion , of the capital cost to the individual of the property, that the eligible amount of the gift is of the individual's proceeds of disposition in respect of the gift, and

(9) The portion of subsection 118.1(2) of the Act before paragraph (a) is replaced by the following:

Proof of gift

(2) An eligible amount of a gift shall not be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is evidenced by filing with the Minister

(10) Subsection 118.1(6) of the Act is replaced by the following:

Where subsection (6) applies

(5.4)  Subsection (6) applies in circumstances where

(a)  an individual

(i)  makes a gift (by the individual's will or otherwise) at any time of capital property to a donee described in the definition "total charitable gifts" , "total Crown gifts" or "total ecological gifts" in subsection (1) , or

(ii)  who is non-resident, makes a gift (by the individual's will or otherwise) at any time of real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and

(bthe fair market value of the property otherwise determined at that time exceeds

(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the individual that includes that time (determined without reference to proceeds of disposition designated in respect of the property under subsection (6)) and the adjusted cost base to the individual of the property immediately before that time, and

(ii)  in any other case, the adjusted cost base to the individual of the property immediately before that time.

Gifts of capital property

(6) If this subsection applies in respect of a gift by an individual of property, and the individual or the individual's legal representative designates an amount in respect of the gift in the individual's return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be the individual's proceeds of disposition of the property and, for the purpose of subsection 248(31) , the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of

(ain the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and

(bthe amount determined under subparagraph (5.4)(b)(i) or (ii), as the case may be, in respect of the property.

(11) Subparagraph 118.1(5.4)(a)(i) of the Act, as enacted by subsection (10), is replaced by the following:

(i)  makes a gift (by the individual's will or otherwise) at any time of capital property to a qualified donee, or

(12) Paragraph 118.1(7)(b) of the French version of the Act is replaced by the following:

ble montant indiqué par le particulier ou par son représentant légal dans la déclaration de revenu du particulier produite conformément à l'article 150 pour l'année du don est réputé correspondre à la fois au produit de disposition de l'oeuvre d'art pour le particulier et, pour l'application du paragraphe 248(31), à la juste valeur marchande de l'oeuvre d'art ; toutefois, il ne peut ni excéder la juste valeur marchande de l'oeuvre d'art, déterminée par ailleurs, ni être inférieur au plus élevé des montants suivants :

(i) le montant de l'avantage au titre du don,

(ii)  le coût indiqué de l'oeuvre d'art pour le particulier.

(13) Paragraph 118.1(7)(d) of the English version of the Act is replaced by the following:

(dthe amount that the individual or the individual's legal representative designates in the individual's return of income under section 150 for the year in which the gift is made is deemed to be the individual's proceeds of disposition of the work of art and, for the purpose of subsection 248(31) , the fair market value of the work of art, but the amount so designated may not exceed the fair market value otherwise determined of the work of art and may not be less than the greater of

(i) the amount of the advantage, if any, in respect of the gift, and

(ii) the cost amount to the individual of the work of art.

(14) Paragraph 118.1(7.1)(b) of the French version of the Act is replaced by the following:

ble particulier est réputé avoir reçu, au moment donné pour l'oeuvre d'art , un produit de disposition égal au coût indiqué de l'oeuvre d'art pour lui à ce moment ou, s'il est plus élevé, au montant de l'avantage au titre du don .

(15) Paragraph 118.1(7.1)(d) of the English version of the Act is replaced by the following:

(dthe individual is deemed to have received at the particular time proceeds of disposition in respect of the work of art equal to the greater of its cost amount to the individual at that time and the amount of the advantage, if any, in respect of the gift .

(16) Subsection 118.1(8) of the Act is replaced by the following:

Gifts made by partnership

(8) If at the end of a fiscal period of a partnership an individual is a member of the partnership, the individual's share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is , for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the individual in the individual's taxation year in which the fiscal period of the partnership ends.

(17) Paragraphs 118.1(13)(b) and (c) of the Act are replaced by the following:

(bif the security ceases to be a non-qualifying security of the individual at a subsequent time that is within 60 months after the particular time and the donee has not disposed of the security at or before the subsequent time, the individual is deemed to have made a gift to the donee of property at the subsequent time and the fair market value of that property is deemed to be the lesser of the fair market value of the security at the subsequent time and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual's total charitable gifts or total Crown gifts for a taxation year ;

(cif the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of the individual or a property that would be a non-qualifying security of the individual if the individual were alive at that time ) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual's total charitable gifts or total Crown gifts for a taxation year; and

(18) Paragraph 118.1(13)(c) of the Act, as enacted by subsection (17), is replaced by the following:

(cif the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of any person ) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual's total charitable gifts or total Crown gifts for a taxation year; and

(19) Subsections (1), (4), (5) to (9) and (12) to (17) apply to gifts made after December 20, 2002.

(20) Subsections (2) and (11) are deemed to have come into force on January 1, 2012.

(21) Subsection (3) applies to gifts made after May 8, 2000.

(22) Subsection (10) applies to gifts made after 1999, except that, for gifts made before December 21, 2002, the reference to "subsection 248(31)" in subsection 118.1(6) of the Act, as enacted by subsection (10), is to be read as a reference to "subsection (1)".

(23) Subsection (18) is deemed to have come into force on March 22, 2011.

249. (1) The portion of the description of B in subsection 118.2(1) of the English version of the Act before paragraph (a) is replaced by the following:

B

is the total of the individual's medical expenses in respect of the individual, the individual's spouse or common-law partner or a child of the individual who has not attained the age of 18 years before the end of the taxation year

(2) Subparagraph 118.2(2)(c)(i) of the Act is replaced by the following:

(i) the patient is, and has been certified in writing by a medical practitioner to be, a person who, by reason of mental or physical infirmity, is and is likely to be for a long-continued period of indefinite duration dependent on others for the patient's personal needs and care and who, as a result, requires a full-time attendant,

(3) Paragraphs 118.2(2)(d) and (e) of the Act are replaced by the following:

(dfor the full-time care in a nursing home of the patient, who has been certified in writing by a medical practitioner to be a person who, by reason of lack of normal mental capacity, is and in the foreseeable future will continue to be dependent on others for the patient's personal needs and care;

(efor the care, or the care and training, at a school, an institution or another place of the patient, who has been certified in writing by an appropriately qualified person to be a person who, by reason of a physical or mental handicap, requires the equipment, facilities or personnel specially provided by that school, institution or other place for the care, or the care and training, of individuals suffering from the handicap suffered by the patient;

(4) Subparagraph 118.2(2)(g)(ii) of the Act is replaced by the following:

(ii) one individual who accompanied the patient, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant

(5) Paragraph 118.2(2)(h) of the Act is replaced by the following:

(hfor reasonable travel expenses (other than expenses described in paragraph (g)) incurred in respect of the patient and, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant, in respect of one individual who accompanied the patient, to obtain medical services in a place that is not less than 80 km from the locality where the patient dwells if the circumstances described in subparagraphs (g)(iii) to (v) apply;

(6) Paragraph 118.2(2)(i) of the Act is replaced by the following:

(ifor, or in respect of, an artificial limb, an iron lung, a rocking bed for poliomyelitis victims, a wheel chair, crutches, a spinal brace, a brace for a limb, an ileostomy or colostomy pad, a truss for hernia, an artificial eye, a laryngeal speaking aid, an aid to hearing, an artificial kidney machine, phototherapy equipment for the treatment of psoriasis or other skin disorders, or an oxygen concentrator, for the patient;

(7) The portion of paragraph 118.2(2)(l.1) of the French version of the Act before subparagraph (i) is replaced by the following:

l.1au nom du particulier, de son époux ou conjoint de fait ou d'une personne à charge visée à l'alinéa a), qui doit subir une transplantation de la moelle osseuse ou d'un organe :

(8) Subparagraph 118.2(2)(l.9)(iii) of the English version of the Act is replaced by the following:

(iii) at the time the remuneration is paid, the payee is neither the individual's spouse or common-law partner nor under 18 years of age, and

(9) Subsections (1) and (8) apply to taxation years that end after October 31, 2011.

(10) Subsections (2) to (5) apply to certifications made after December 20, 2002.

250. (1) Paragraph 118.3(2)(a) of the French version of the Act is replaced by the following:

ad'une part, le particulier demande pour l'année, pour cette personne, une déduction prévue au paragraphe 118(1), soit par application de l'alinéa 118(1)b), soit, si la personne est le père, la mère, le grand-père, la grand-mère, un enfant, un petit-enfant, le frère, la soeur, la tante, l'oncle, le neveu ou la nièce du particulier ou de son époux ou conjoint de fait, par application des alinéas 118(1)c.1) ou d), ou aurait pu demander une telle déduction pour l'année si cette personne n'avait eu aucun revenu pour l'année et avait atteint l'âge de 18 ans avant la fin de l'année et, dans le cas de la déduction prévue à l'alinéa 118(1)b), si le particulier n'avait pas été marié ou n'avait pas vécu en union de fait ;

(2) Paragraph 118.3(4)(b) of the Act is replaced by the following:

(bif the information referred to in paragraph (a) is provided by a person referred to in paragraph (1)(a.2) or (a.3) , the information so provided is deemed to be included in a certificate in prescribed form.

(3) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act , in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.

(4) Subsection (2) applies to the 2005 and subsequent taxation years.

251. Subparagraph 118.5(1)(a)(iii) of the Act is replaced by the following:

(iii) are paid on behalf of, or reimbursed to, the individual by the individual's employer and the amount paid or reimbursed is not included in the individual's income,

252. (1) Subparagraph (a)(i) of the definition "designated educational institution" in subsection 118.6(1) of the Act is replaced by the following:

(i) a university, college or other educational institution designated by the lieutenant governor in council of a province as a specified educational institution under the Canada Student Loans Act , designated by an appropriate authority under the Canada Student Financial Assistance Act , or designated, for the purposes of An Act respecting financial assistance for education expenses , R.S.Q, c. A-13.3 , by the Minister of the Province of Quebec responsible for the administration of that Act , or

(2) Subsection (1) applies to the 1998 and subsequent taxation years.

253. (1) Section 118.7 of the Act is replaced by the following:

Credit for EI and QPIP premiums and CPP contributions

118.7 For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula

A × B
where
A

is the appropriate percentage for the year; and

B

is the total of

(a) the total of all amounts each of which is an amount payable by the individual as an employee's premium or a self-employment premium for the year under the Employment Insurance Act , not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

(a.1) the total of all amounts each of which is an amount payable by the individual as an employee's premium for the year under the Act respecting parental insurance , R.S.Q., c. A-29.011, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

(a.2) the amount, if any, by which the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a premium under the Act respecting parental insurance , R.S.Q., c. A-29.011, (not exceeding the maximum amount of such premiums payable by the individual for the year under that Act) exceeds the amount deductible under paragraph 60(g) in computing the individual's income for the year,

(b) the total of all amounts each of which is an amount payable by the individual for the year as an employee's contribution under the Canada Pension Plan or under a provincial pension plan defined in section 3 of that Act, not exceeding the maximum amount of such contributions payable by the individual for the year under the plan, and

(c) the amount by which

(i) the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a contribution under the Canada Pension Plan or under a provincial pension plan within the meaning assigned by section 3 of that Act (not exceeding the maximum amount of such contributions payable by the individual for the year under the plan)

exceeds

(ii) the amount deductible under paragraph 60(e) in computing the individual's income for the year.

(2) Subsection (1) applies to the 2006 and subsequent taxation years, except that for taxation years ending after 2005 and before 2010, paragraph (a) of the description of B in section 118.7 of the Act, as amended by subsection (1), is to be read as follows:

(athe total of all amounts each of which is an amount payable by the individual as an employee's premium for the year under the Employment Insurance Act , not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,

254. (1) Paragraph 120.2(3)(b) of the Act is replaced by the following:

(bthe amount that, if this Act were read without reference to section 120, would be the individual's tax payable under this Part for the year if the individual were not entitled to any deduction under any of sections 126, 127 and 127.4, and

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

255. (1) The portion of paragraph 120.31(3)(b) of the Act before subparagraph (i) is replaced by the following:

(bif the eligible taxation year ended before the taxation year preceding the year of receipt, an amount equal to the amount that would be calculated as interest payable on the amount, if any, by which the amount determined under paragraph (a) in respect of the eligible taxation year exceeds the taxpayer's tax payable under this Part for that year, if the amount that would be calculated as interest payable on that excess were calculated

(2) Subsection (1) applies to the 1995 and subsequent taxation years.

256. (1) The portion of subparagraph (b)(ii) of the definition "split income" in subsection 120.4(1) of the English version of the Act before clause (A) is replaced by the following:

(ii) can reasonably be considered to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(2) The portion of clause (c)(ii)(C) of the definition "split income" in subsection 120.4(1) of the English version of the Act before subclause (I) is replaced by the following:

(C) to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(3) Subsections (1) and (2) apply in computing split income of a specified individual for taxation years that begin after December 20, 2002, other than in computing an amount included in that income that is from a trust or partnership for a taxation year or fiscal period of the trust or partnership that began before December 21, 2002.

257. (1) The portion of subsection 122(2) of the Act before paragraph (a) is replaced by the following:

Where subsection (1) does not apply

(2) Subsection (1) does not apply for a taxation year of an inter vivos trust that is not a mutual fund trust and that

(2) Subsection (1) applies to trust taxation years that begin after 2002.

258. (1) The portion of the definition "qualified REIT property" before paragraph (c) in subsection 122.1(1) of the Act is replaced by the following:

"qualified REIT property"

« bien admissible de FPI »

"qualified REIT property" , of a trust at any time, means a property that, at that time, is held by the trust and is

(aa real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers' acceptance, a property described by paragraph (a) or (b) of the definition "qualified investment" in section 204 or a deposit with a credit union;

(ba security of a subject entity all or substantially all of the gross REIT revenue of which, for its taxation year that ends in the trust's taxation year that includes that time, is from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of an entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;

(2) Paragraph (d) of the definition "qualified REIT property" in subsection 122.1(1) of the Act is replaced by the following:

(dancillary to the earning by the trust of amounts described in subparagraphs (b)(i) and (iii) of the definition "real estate investment trust" , other than

(i) an equity of an entity, or

(ii) a mortgage, hypothecary claim, mezzanine loan or similar obligation.

(3) Paragraph (a) of the definition "real estate investment trust" in subsection 122.1(1) of the Act is replaced by the following:

(aat each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the trust;

(4) The portion of paragraph (b) of the definition "real estate investment trust" in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:

(bnot less than 90% of the trust's gross REIT revenue for the taxation year is from one or more of the following:

(5) Subparagraph (b)(iii) of the definition "real estate investment trust" in subsection 122.1(1) of the Act is replaced by the following:

(iii) dispositions of real or immovable properties that are capital properties ,

(6) Paragraph (b) of the definition "real estate investment trust" in subsection 122.1(1) of the Act is amended by striking out "and" at the end of subparagraph (iv), by adding "and" at the end of subparagraph (v) and by adding the following after subparagraph (v):

(vi) dispositions of eligible resale properties;

(7) The portion of paragraph (c) of the definition "real estate investment trust" in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:

(cnot less than 75% of the trust's gross REIT revenue for the taxation year is from one or more of the following:

(8) Subparagraph (c)(iii) of the definition "real estate investment trust" in subsection 122.1(1) of the Act is replaced by the following:

(iii) dispositions of real or immovable properties that are capital properties ;

(9) The definition "real estate investment trust" in subsection 122.1(1) of the Act is amended by striking out "and" at the end of paragraph (c) and by replacing paragraph (d) with the following:

(dat each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is a real or immovable property that is capital property, an eligible resale property , an indebtedness of a Canadian corporation represented by a bankers' acceptance, a property described by paragraph (a) or (b) of the definition "qualified investment" in section 204 or a deposit with a credit union; and

(einvestments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or other public market.

(10) Paragraph (a) of the definition "rent from real or immovable properties" in subsection 122.1(1) of the Act is amended by adding "and" at the end of subparagraph (i), by replacing "and" at the end of subparagraph (ii) with "but" and by repealing subparagraph (iii).

(11) Subsection 122.1(1) of the Act is amended by adding the following in alphabetical order:

"eligible resale property"

« bien de revente admissible »

"eligible resale property" , of an entity, means real or immovable property (other than capital property) of the entity

(athat is contiguous to a particular real or immovable property that is capital property or eligible resale property, held by

(i) the entity, or

(ii) another entity affiliated with the entity; and

(bthe holding of which is ancillary to the holding of the particular property.

"gross REIT revenue"

« revenu brut de FPI »

"gross REIT revenue" , of an entity for a taxation year, means the amount, if any, by which the total of all amounts received or receivable in the year (depending on the method regularly followed by the entity in computing the entity's income) by the entity exceeds the total of all amounts each of which is the cost to the entity of a property disposed of in the year.

(12) Section 122.1 of the Act is amended by adding the following after subsection (1):

Application of subsection (1.2)

(1.1) Subsection (1.2) applies to an entity for a taxation year in respect of an amount and another entity (referred to in this subsection and subsection (1.2) as the "parent entity", "specified amount" and "source entity", respectively), if

(aat any time in the taxation year the parent entity

(i) is affiliated with the source entity, or

(ii) holds securities of the source entity that

(A) are described by any of paragraphs (a) to (c) of the definition "equity" in subsection (1), and

(B) have a total fair market value that is greater than 10% of the equity value of the source entity;

(bthe specified amount is included in computing the parent entity's gross REIT revenue for the taxation year in respect of a security of the source entity held by the parent entity; and

(cin the case of a source entity that is a subject entity described in paragraph (b) of the definition "qualified REIT property" in subsection (1) in respect of the parent entity at each time during the taxation year at which the parent entity holds securities of the source entity, the specified amount cannot reasonably be considered to be derived from the source entity's gross REIT revenue from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the parent entity or of an entity of which the parent entity holds a share or an interest, including real or immovable properties that the parent entity, or an entity of which the parent entity holds a share or an interest, holds together with one or more other persons or partnerships.

Character preservation rule

(1.2) If this subsection applies to a parent entity for a taxation year in respect of a specified amount and a source entity, then for the purposes of the definition "real estate investment trust" in subsection (1), to the extent that the specified amount can reasonably be considered to be derived from gross REIT revenue of the source entity having a particular character, the specified amount is deemed to be gross REIT revenue of the parent entity having the same character and not having any other character.

Character of revenue — hedging arrangements

(1.3) For the purposes of the definition "real estate investment trust" in subsection (1),

(aif an amount is included in gross REIT revenue of a trust for a taxation year and it results from an agreement that can reasonably be considered to have been made by the trust to reduce its risk from fluctuations in interest rates in respect of debt incurred by the trust to acquire or refinance real or immovable property, the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character; and

(bif a real or immovable property is situated in a country other than Canada and an amount included in gross REIT revenue of a trust for a taxation year

(i) is a gain from fluctuations in the value of the currency of that country relative to Canadian currency recognized on

(A) revenue in respect of the real or immovable property, or

(B) debt incurred by the trust for the purpose of earning revenue in respect of the real or immovable property, or

(ii) results from an agreement that

(A) provides for the purchase, sale or exchange of currency, and

(B) can reasonably be considered to have been made by the trust to reduce its risk from currency fluctuations described in subparagraph (i),

the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character.

(13) Subsections (1) to (12) apply to

(ataxation years of a trust that end after 2006 and before 2011 if

(i) investments in the trust are, in one or more of those taxation years, listed or traded on a stock exchange or other public market, and

(ii) the trust elects, by notifying the Minister of National Revenue in writing on or before its filing due-date for its taxation year that includes the day on which this Act receives royal assent, to have those subsections so apply; and

(bthe 2011 and subsequent taxation years, except that paragraph (d) of the definition "real estate investment trust" in subsection 122.1(1) of the Act, as enacted by subsection (9), is to be read as follows for taxation years that end before 2013:

(dat each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers' acceptance, property described by either paragraph (a) or (b) of the definition "qualified investment" in section 204, or a deposit with a credit union; and

259. (1) The portion of subsection 122.3(1) of the Act before paragraph (a) is replaced by the following:

Overseas employment tax credit

122.3 (1) If an individual is resident in Canada in a taxation year and, throughout any period of more than six consecutive months that began before the end of the year and included any part of the year (in this section referred to as the "qualifying period")

(2) Subsection 122.3(1.1) of the Act is replaced by the following:

Excluded income

(1.1) No amount may be included under paragraph (1)(d) in respect of an individual's income for a taxation year from the individual's employment by an employer

(aif

(i)  the employer carries on a business of providing services and does not employ in the business throughout the year more than five full-time employees,

(ii)  the individual

(A)  does not deal at arm's length with the employer, or is a specified shareholder of the employer, or

(B)  where the employer is a partnership, does not deal at arm's length with a member of the partnership, or is a specified shareholder of a member of the partnership, and

(iii)  but for the existence of the employer, the individual would reasonably be regarded as being an employee of a person or partnership that is not a specified employer; or

(bif at any time in that portion of the qualifying period that is in the taxation year

(i) the employer provides the services of the individual to a corporation, partnership or trust with which the employer does not deal at arm's length, and

(ii) the fair market value of all the issued shares of the capital stock of the corporation or of all interests in the partnership or trust, as the case may be, that are held, directly or indirectly, by persons who are resident in Canada is less than 10% of the fair market value of all those shares or interests.

(3) Subsections (1) and (2) apply to taxation years that begin after the day on which this Act receives royal assent.

260. Subsection 122.5(7) of the Act is replaced by the following:

Effect of bankruptcy

(7) For the purpose of this section, if in a taxation year an individual becomes bankrupt, the individual's income for the taxation year shall include the individual's income for the taxation year that begins on January 1 of the calendar year that includes the date of bankruptcy.

261. (1) Paragraph (a) of the definition "full rate taxable income" in subsection 123.4(1) of the Act is amended by striking out "and" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the corporation's income for the year from a personal services business; and

(2) The portion of paragraph (b) of the definition "full rate taxable income" in subsection 123.4(1) of the Act before subparagraph (i) is replaced by the following:

(bif the corporation is a Canadian-controlled private corporation throughout the year, the amount by which that portion of the corporation's taxable income for the year that is subject to tax under subsection 123(1) exceeds the total of

(3) Subparagraph (b)(iii) of the definition "full rate taxable income" in subsection 123.4(1) of the Act is replaced by the following:

(iii) except for a corporation that is, throughout the year, a cooperative corporation (within the meaning assigned by subsection 136(2)) or a credit union, the corporation's aggregate investment income for the year, within the meaning assigned by subsection 129(4), and

(4) Subsection (1) applies to taxation years that begin after October 31, 2011.

(5) Subsection (2) applies to taxation years that end after October 31, 2011.

(6) Subsection (3) applies to the 2001 and subsequent taxation years.

262. (1) Subparagraphs 125(1)(b)(i) and (ii) of the Act are replaced by the following:

(i) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4,

(ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and

(2) The description of B in subsection 125(5.1) of the Act is replaced by the following:

B

is the amount determined by the formula

0.225% × (D – $10 million)
where
D

is

(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the preceding taxation year,

(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the particular taxation year, or

(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year.

(3) Subparagraph 125(1)(b)(i) of the Act, as enacted by subsection (1), applies to taxation years that end after October 31, 2011, except that, for a taxation year that includes that day, that subparagraph, as enacted by subsection (1), is to be read as follows:

(i) the total of

(A) 10/3 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are on or before October 31, 2011 is of the total of days in the taxation year, and

(B) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are after October 31, 2011 is of the total of days in the taxation year,

(4) Subparagraph 125(1)(b)(ii) of the Act, as enacted by subsection (1), applies to the 2003 and subsequent taxation years.

(5) Subsection (2) applies to taxation years that begin after December 20, 2002, except that, in its application to a corporation described in subsection 181.1(3) of the Act for taxation years of the corporation that began before the day on which this Act receives royal assent, the description of B in subsection 125(5.1) of the Act, as enacted by subsection (2), is to be read as follows:

B

is

(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the amount that would, but for subsections 181.1(2) and (4), be the corporation's tax payable under Part I.3 for the preceding taxation year,

(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the amount that would, but for subsections 181.1(2) and (4), be the corporation's tax payable under Part I.3 for the particular taxation year, and

(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the amount determined by the formula

0.225% x (D – E)
where
D

is the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year, and

E

is $10 million.

263. (1) Subparagraph 125.1(1)(b)(ii) of the Act is replaced by the following:

(ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it , if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and

(2) The definition « bénéfices de fabrication et de transformation au Canada » in subsection 125.1(3) of the French version of the Act is replaced by the following:

« bénéfices de fabrication et de transformation au Canada »

"Canadian manufacturing and processing profits"

« bénéfices de fabrication et de transformation au Canada » En ce qui concerne une société pour une année d'imposition, la partie du total des montants représentant chacun le revenu que la société a tiré pour l'année d'une entreprise exploitée activement au Canada, déterminée en vertu des règles établies à cette fin par règlement pris sur recommandation du ministre des Finances, qui doit s'appliquer à la fabrication ou à la transformation au Canada de marchandises destinées à la vente ou à la location.

(3) Subparagraphs (l)(i) and (ii) of the definition « fabrication ou transformation » in subsection 125.1(3) of the French version of the Act are replaced by the following:

(i) de la vente ou de la location de marchandises qu'elle a fabriquées ou transformées au Canada,

(ii) de la fabrication ou de la transformation au Canada de marchandises destinées à la vente ou à la location, sauf des marchandises qu'elle devait vendre ou louer elle-même.

(4) Subsection (1) applies to the 2003 and subsequent taxation years.

264. (1) The definition "taxable resource income" in subsection 125.11(1) of the Act, as it read immediately before it was repealed by S.C. 2003, c. 28, s. 13(2), is replaced by the following:

"taxable resource income"

« revenu imposable provenant de ressources »

"taxable resource income" , of a taxpayer for a taxation year, is the lesser of

(a)  the amount, if any, by which the taxpayer's taxable income for the taxation year exceeds 100/16 of the amount deducted under subsection 125(1) from the taxpayer's tax otherwise payable under this Part for the year, and

(b)  the amount determined by the formula

3(A/B) + C – D – E
where
A

is the total of all amounts each of which is deducted by the taxpayer under paragraph 20(1)(v.1) in computing the taxpayer's income for the taxation year,

B

is the percentage that is the total of

(i) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,

(ii) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

(iii) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

(iv) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and

(v) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year,

C

is total of all amounts included in computing the taxpayer's income for the taxation year under paragraph 59(3.2)(b) or (c),

D

is the total of all amounts deducted by the taxpayer under any of sections 65 to 66.7, other than subsections 66(4), 66.21(4) and 66.7(2) and (2.3), of this Act, and subsections 17(2) and (6) and section 29 of the Income Tax Application Rules , in computing the taxpayer's income for the taxation year, and

E

is 100/16 of the amount deducted under subsection 125(1) from the taxpayer's tax otherwise payable under this Part for the year.

(2) The definition "taxable resource income" in subsection 125.11(1) of the Act, as enacted by subsection (1), is repealed.

(3) Subsection (1) applies to taxation years that begin after February 27, 2004.

(4) Subsection (2) applies to taxation years that begin after 2006.

265. (1) Section 125.2 of the Act is repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

266. (1) Paragraph 125.3(1.1)(b) of the Act is replaced by the following:

(bthe amount, if any, by which its tax payable under this Part (determined without reference to this section) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

267. (1) The portion of subsection 126(2.22) of the French version of the Act before paragraph (a) is replaced by the following:

Ancien résident — bénéficiaire de fiducie

(2.22) Lorsqu'un particulier non-résident dispose, au cours d'une année d'imposition donnée, d'un bien qu'il a acquis la dernière fois à un moment (appelé « moment de l'acquisition » au présent paragraphe) à l'occasion d'une distribution effectuée après le 1er octobre 1996 et à laquelle les alinéas 107(2)a) à c) ne s'appliquent pas par le seul effet du paragraphe 107(5), la fiducie peut déduire de son impôt payable par ailleurs en vertu de la présente partie pour l'année (appelée « année de la distribution » au présent paragraphe) qui comprend le moment de l'acquisition un montant ne dépassant pas le moins élevé des montants suivants :

(2) The portion of paragraph 126(2.22)(a) of the French version of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

s'il est raisonnable de considérer que le montant a été payé sur la partie de tout gain ou bénéfice tiré de la disposition du bien qui s'est accumulée avant la distribution et après le dernier en date des moments ci-après , antérieur à la distribution :

(3) Subparagraphs 126(2.22)(b)(i) and (ii) of the French version of the Act are replaced by the following:

(i) le montant d'impôt en vertu de la présente partie qui était payable par ailleurs par la fiducie pour l'année de la distribution , compte tenu de l'application du présent paragraphe aux dispositions effectuées avant le moment de la disposition,

(ii) le montant de cet impôt qui aurait été payable par la fiducie pour l'année de la distribution si le bien n'avait pas été distribué au particulier.

(4) Section 126 of the Act is amended by adding the following after subsection (4.1):

Denial of foreign tax credit

(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer's direct or indirect share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the "relevant foreign tax law") of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, is less than the taxpayer's direct or indirect share of the income for the purposes of this Act — is not included in computing the taxpayer's business-income tax or non-business-income tax for any taxation year.

Exceptions

(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser direct or indirect share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(aa difference between the relevant foreign tax law and this Act in the manner of

(i) computing the income of the partnership, or

(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

(bthe treatment of the partnership as a corporation under the relevant foreign tax law; or

(cthe fact that the taxpayer is not treated as a corporation under the relevant foreign tax law.

Tiered partnerships

(4.13) For the purposes of subsections (4.11) and (4.12), if a taxpayer is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership.

(5) The description of A in subsection 126(4.2) of the Act is replaced by the following:

A

is

(a)  if the foreign tax would otherwise be included in business-income tax, the total of

(i) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(ii) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year, and

(b)  if the foreign tax would otherwise be included in non-business-income tax, the total of

(i) if the taxpayer is a corporation that is a Canadian-controlled private corporation throughout the taxation year, that proportion of 28% that the number of days in the taxation year that are after 2010 is of the number of days in the taxation year, and

(ii) if the taxpayer is not a Canadian-controlled private corporation throughout the taxation year, the total of

(A) that proportion of 16.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(B) that proportion of 15% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year,

(6) Paragraph 126(4.4)(a) of the Act is replaced by the following:

(aa disposition or acquisition of property deemed to be made by subsection 10(12) or (13), 14(14) or (15) or 45(1), section 70, 128.1 or 132.2 , subsections 138(11.3) or 142.5(2), paragraph 142.6(1)(b), or subsections 142.6(1.1) or (1.2) or 149(10) is not a disposition or acquisition, as the case may be; and

(7) Subparagraph 126(5)(a)(i) of the Act is replaced by the following:

(i) the amount obtained by multiplying the taxpayer's income from the business in the taxing country for the year by the total of

(A) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

(B) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year

(8) Subsection 126(6) of the Act is amended by striking out "and" at the end of paragraph (b), by adding "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(dif, in computing a taxpayer's income for a taxation year from a business carried on by the taxpayer in Canada, an amount is included in respect of interest paid or payable to the taxpayer by a person resident in a country other than Canada, and the taxpayer has paid to the government of that other country a non-business income tax for the year with respect to the amount, the amount is, in applying the definition "qualifying incomes" in subsection (7) for the purpose of subsection (1), deemed to be income from a source in that other country.

(9) The portion of the definition "business-income tax" in subsection 126(7) of the Act before paragraph (a) is replaced by the following:

"business-income tax"

« impôt sur le revenu tiré d'une entreprise »

"business-income tax" paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a country other than Canada (referred to in this definition as the "business country") means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as tax in respect of the income of the taxpayer from a business carried on by the taxpayer in the business country, but does not include a tax, or the portion of a tax, that can reasonably be regarded as relating to an amount that

(10) The portion of the definition "non-business-income tax" in subsection 126(7) of the Act before paragraph (a) is replaced by the following:

"non-business-income tax"

« impôt sur le revenu ne provenant pas d'une entreprise »

"non-business-income tax" paid by a taxpayer for a taxation year to the government of a country other than Canada means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of that country that

(11) Subsections (4), (9) and (10) apply to income or profits tax paid for taxation years of a taxpayer that end after March 4, 2010, except that, for taxation years of the taxpayer that end on or before August 27, 2010,

(asubsection 126(4.11) of the Act, as enacted by subsection (4), is to be read as follows:

(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer's share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the "relevant foreign tax law") of any country other than Canada under the laws of which the income of the partnership is subject to income taxation, is less than the taxpayer's share of the income for the purposes of this Act — is not included in computing the taxpayer's business-income tax or non-business-income tax for any taxation year.

(bthe portion of subsection 126(4.12) of the Act before paragraph (a), as enacted by subsection (4), is to be read as follows:

(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

(csection 126 of the Act is to be read without reference to its subsection (4.13), as enacted by subsection (4).

(12) Subsections (5) and (7) apply to taxation years that begin after October 31, 2011.

(13) Subsection (6) applies to dispositions and acquisitions that occur after 1998, except that, in applying paragraph 126(4.4)(a) of the Act, as enacted by subsection (6), to dispositions and acquisitions that occur before June 28, 1999, that paragraph is to be read without reference to "10(12) or (13), 14(14) or (15), or".

(14) Subsection (8) applies to amounts received after February 27, 2004.

268. (1) Section 126.1 of the Act is repealed.

(2) Subsection (1) applies in respect of forms filed after March 20, 2003.

269. (1) Paragraphs 127(1)(a) and (b) of the French version of the Act are replaced by the following:

ales 2/3 de tout impôt sur les opérations forestières, payé par le contribuable au gouvernement d'une province sur le revenu pour l'année tiré d' opérations forestières dans cette province;

b6?2/3% du revenu du contribuable pour l'année, tiré d' opérations forestières dans la province, dont fait mention l'alinéa a).

(2) The definition « revenu pour l'année tiré des opérations forestières dans la province » in subsection 127(2) of the French version of the Act is repealed.

(3) The definition « impôt sur les opérations forestières » in subsection 127(2) of the French version of the Act is replaced by the following:

« impôt sur les opérations forestières »

"logging tax"

« impôt sur les opérations forestières » Impôt levé par la législature d'une province et qui est, par règlement, déclaré être un impôt d'application générale sur le revenu tiré d' opérations forestières.

(4) Subsection 127(2) of the French version of the Act is amended by adding the following in alphabetical order:

« revenu pour l'année tiré d'opérations forestières dans la province »

"income for the year from logging operations in the province"

« revenu pour l'année tiré d'opérations forestières dans la province » S'entend au sens du règlement.

(5) The portion of subsection 127(3) of the Act before paragraph (a) is replaced by the following:

Contributions to registered parties and candidates

(3) There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year in respect of the total of all amounts each of which is the eligible amount of a monetary contribution that is referred to in the Canada Elections Act and that is made by the taxpayer in the year to a registered party, a registered association or a candidate, as those terms are defined in that Act,

(6) Subsection 127(4.2) of the Act, as it read immediately before it was repealed by S.C. 2006, c. 9, s. 64(2), is replaced by the following:

Allocation of amount contributed among partners

(4.2) If at the end of a fiscal period of a partnership a taxpayer is a member of the partnership, the taxpayer's share of the total that would, if the partnership were a person and its fiscal period were its taxation year , be the total referred to in subsection (3) in respect of the partnership for that taxation year is deemed for the purpose of that subsection to be a monetary contribution made by the taxpayer in the taxpayer's taxation year in which the fiscal period of the partnership ends .

(7) Subsection 127(4.2) of the Act, as enacted by subsection (6), is repealed.

(8) The definition "eligible salary and wages" in subsection 127(9) of the Act is replaced by the following:

"eligible salary and wages"

« traitement et salaire admissibles »

"eligible salary and wages" payable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than a qualified expenditure incurred by the taxpayer in a taxation year , remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4));

(9) Paragraph (b) of the definition "pre-production mining expenditure" in subsection 127(9) of the Act is replaced by the following:

(bis not an expense that

(i) was renounced under subsection 66(12.6) to the taxable Canadian corporation except if the corporation is, on the effective date of the renunciation,

(A) a corporation that would be a "principal business corporation" , as defined in subsection 66(15), if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and

(B) the sole shareholder of the corporation that renounced the expenditure, or

(ii) is a member's share of an expense incurred by a partnership unless the expense was deemed by subsection 66(18) to have been made or incurred at the end of the fiscal period of the partnership by the member and throughout the fiscal period of the partnership in which the expense was incurred

(A) each member of the partnership would (otherwise than because of being a member of the partnership) be a "principal-business corporation" as defined in subsection 66(15) of the Act, if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and

(B) the corporation is a member of the partnership at the time the expenditure is incurred and would not be a specified member of the partnership if the definition "specified member" in subsection 248(1) were read without reference to its subparagraph (b)(ii),

(10) Paragraphs 127(27)(b) and (c) of the Act are replaced by the following:

(bthe cost, or a portion of the cost, of the particular property was a qualified expenditure, or would if this Act were read without reference to subsection (26) be a qualified expenditure, to the taxpayer,

(cthe cost, or the portion of the cost, of the particular property is included, or would if this Act were read without reference to subsection (26) be included, in an amount, a percentage of which can reasonably be considered to be included in computing the taxpayer's investment tax credit at the end of the taxation year, and

(11) The portion of subsection 127(27) of the Act after paragraph (d) is replaced by the following:

there shall be added to the taxpayer's tax otherwise payable under this Part for the year the lesser of

(e)  the amount that can reasonably be considered to be included in the taxpayer's investment tax credit at the end of any taxation year, or that would be so included if this Act were read without reference to subsection (26), in respect of the particular property, and

(f)  the amount that is the percentage — that is the sum of each percentage described in paragraph (c) that has been applied to compute the taxpayer's investment tax credit in respect of the particular property — of

(i)  in the case where the particular property or the other property is disposed of to a person who deals at arm's length with the taxpayer,

(A)  the proceeds of disposition of the property, if the property

(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or

(II) is the other property,

(B) 25% of the proceeds of disposition of the property, if the property is the particular property, is first term shared-use equipment and is not second term shared-use equipment, and

(C) 50% of the proceeds of disposition of the property, if the property is the particular property and is second term shared-use equipment, and

(ii) in the case where the particular property or the other property is converted to commercial use or is disposed of to a person who does not deal at arm's length with the taxpayer,

(A) the fair market value of the property, if the property

(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or

(II) is the other property,

(B) 25% of the fair market value of the property at the time of its conversion or disposition, if the particular property is first term shared-use equipment and is not second term shared-use equipment, and

(C) 50% of the fair market value of the property at the time of its conversion or disposition, if the particular property is second term shared-use equipment.

(12) Subsection (5) applies to monetary contributions made after December 20, 2002, except that, for monetary contributions made before 2004, the reference to "to a registered party, a registered association or a candidate" in subsection 127(3) of the Act, as amended by subsection (5), is to be read as a reference to "to a registered party or a candidate".

(13) Subsection (6) applies to monetary contributions made after December 20, 2002 and before 2007.

(14) Subsection (7) is deemed to have come into force on January 1, 2007, except that it does not apply in respect of monetary contributions made before that day.

(15) Subsection (8) applies to taxation years that end after November 5, 2010.

(16) Subsection (9) applies to the 2003 and subsequent taxation years.

(17) Subsections (10) and (11) apply to dispositions and conversions that occur after December 20, 2002.

270. (1) Paragraph (b) of the definition "approved share" in subsection 127.4(1) of the Act is replaced by the following:

(ba share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of the Income Tax Regulations ) of which the corporation is registered or established provides assistance in respect of the acquisition of the share;

(2) Subsection 127.4(6) of the Act is amended by striking out "and" at the end of paragraph (c), by adding "and'' at the end of paragraph (d) and by adding the following after paragraph (d):

(enil, if the share is issued in exchange for another share of the corporation.

(3) Subsection (1) applies to acquisitions of shares that occur after 2003.

(4) Subsection (2) applies to the 2004 and subsequent taxation years.

271. (1) The portion of subparagraph 127.52(1)(d)(ii) of the Act before the formula is replaced by the following:

(ii) each amount that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula

(2) Paragraph 127.52(1)(d) of the Act is amended by striking out "and" at the end of subparagraph (i), by adding "and" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) this Act were read without reference to subsection 104(21.6);

(3) Paragraph 127.52(1)(d) of the Act, as amended by subsections (1) and (2), is amended by adding "and" at the end of subparagraph (i), by striking out "and" at the end of subparagraph (ii) and by repealing subparagraph (iii).

(4) Paragraph 127.52(1)(e) of the Act is amended by striking out "and" at the end of subparagraph (i) and by adding the following after subparagraph (i):

(i.1) the individual's income for the year from property, or from the business of selling the product of property, described in Class 43.1 or 43.2 in Schedule II to the Income Tax Regulations , determined before deducting those amounts, and

(5) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:

(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (2.2) and (12) and 110.7(1),

(6) Subsections (1) and (3) apply to taxation years that begin after October 31, 2011.

(7) Subsection (2) applies to the 2000 and subsequent taxation years.

(8) Subsection (4) applies in respect of taxation years that end after 2008.

272. (1) Subparagraph 128(2)(g)(iii) of the Act is replaced by the following:

(iii) the individual's unused tuition, textbook and education tax credits (as determined under subsection 118.61(1) ) at the end of the last taxation year that ended before that time is deemed to be nil;

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

273. (1) The portion of subsection 128.1(5) of the Act before paragraph (b) is replaced by the following:

Instalment interest

(5) If an individual is deemed by subsection (4) to have disposed of a property in a taxation year, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the individual's total tax payable under this Part for the year is deemed to be the lesser of

(athe individual's total tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and

(2) Paragraph 128.1(7)(b) of the French version of the Act is replaced by the following:

best propriétaire, à ce moment, d'un bien qu'il a acquis, la dernière fois, à l'occasion d'une distribution à laquelle le paragraphe 107(2) se serait appliqué, n'eût été le paragraphe 107(5), effectuée par une fiducie à un moment (appelé « moment de la distribution » au présent paragraphe) postérieur au 1er octobre 1996 et antérieur au moment donné;

(3) Paragraph 128.1(7)(d) of the French version of the Act is replaced by the following:

dsous réserve des alinéas e) et f), si le particulier et la fiducie en font conjointement le choix dans un document présenté au ministre au plus tard à la première en date des dates d'échéance de production qui leur est applicable pour leur année d'imposition qui comprend le moment donné, le paragraphe 107(2.1) ne s'applique pas à la distribution pour ce qui est des biens que le particulier a acquis à l'occasion de la distribution et qui étaient des biens canadiens imposables lui appartenant tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné;

(4) Subparagraph 128.1(7)(e)(i) of the French version of the Act is replaced by the following:

(i) il résidait au Canada au moment de la distribution ,

(5) Subparagraphs 128.1(7)(f)(i) and (ii) of the French version of the Act are replaced by the following:

(i) malgré l'alinéa 107(2.1)a), la fiducie est réputée avoir disposé du bien au moment de la distribution pour un produit de disposition égal au total des montants suivants :

(A) le coût indiqué du bien pour elle immédiatement avant ce moment,

(B) l'excédent du montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l'alinéa e), sur le moins élevé des montants suivants :

(I) le coût indiqué du bien pour la fiducie immédiatement avant le moment de la distribution ,

(II) le montant que le particulier et la fiducie ont indiqué conjointement pour l'application du présent alinéa dans le document concernant le choix prévu à l'alinéa d) relativement au bien,

(ii) malgré l'alinéa 107(2.1)b), le particulier est réputé avoir acquis le bien au moment de la distribution à un coût égal à l'excédent du montant déterminé par ailleurs selon l'alinéa 107(2)b) sur le montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l'alinéa e), ou, s'il est moins élevé, le montant indiqué selon la subdivision (i)(B)(II);

(6) The portion of paragraph 128.1(7)(g) of the French version of the Act before subparagraph (i) is replaced by the following:

gsi le particulier et la fiducie en font conjointement le choix, dans un document présenté au ministre au plus tard à la dernière en date des dates d'échéance de production qui leur est applicable pour leur année d'imposition qui comprend le moment donné, relativement à chaque bien dont le particulier a été propriétaire tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné et dont il est réputé, par l'alinéa (1)b), avoir disposé du fait qu'il est devenu un résident du Canada, le produit de disposition pour la fiducie, selon l'alinéa 107(2.1)a), au moment de la distribution et le coût d'acquisition du bien pour le particulier au moment donné sont réputés, malgré les alinéas 107(2.1)a) et b), correspondre à ce produit et à ce coût, déterminés compte non tenu du présent alinéa, diminués du moins élevé des montants suivants :

(7) The portion of paragraph 128.1(7)(i) of the French version of the Act before subparagraph (i) is replaced by the following:

imalgré les paragraphes 152(4) à (5), le ministre établit, pour tenir compte des choix prévus au présent paragraphe, toute cotisation concernant l'impôt payable par la fiducie ou le particulier en vertu de la présente loi pour toute année qui est antérieure à l'année comprenant le moment donné sans être antérieure à l'année comprenant le moment de la distribution ; pareille cotisation est toutefois sans effet sur le calcul des montants suivants :

(8) Subsection (1) applies to taxation years that begin after October 31, 2011.

274. (1) Section 128.3 of the Act is replaced by the following:

Former resident — replaced shares

128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii), subsection 85.1(8) or section 86 or 87 applies, a person acquires a share (in this section referred to as the "new share") in exchange for another share or equity in a SIFT wind-up entity (in this section referred to as the "old share"), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.

(2) Subsection (1) applies to taxation years that begin after 2001, except that, before December 20, 2007, section 128.3 of the Act, as enacted by subsection (1), is to be read as follows:

128.3. If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii) or section 86 or 87 applies, a person acquires a share (in this section referred to as the "new share") in exchange for another share (in this section referred to as the "old share"), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.

275. (1) Clauses 129(3)(a)(ii)(B) and (C) of the Act are replaced by the following:

(B) 100/35 of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and

(C) the amount determined by multiplying the total of amounts deducted under subsection 126(2) from its tax for the year otherwise payable under this Part, by the relevant factor for the year, and

(2) Subparagraph 129(3)(a)(iii) of the Act is replaced by the following:

(iii) the corporation's tax for the year payable under this Part,

(3) Clause 129(3)(a)(ii)(B), as enacted by subsection (1), applies to taxation years that begin after October 31, 2011.

(4) Clause 129(3)(a)(ii)(C), as enacted by subsection (1), applies to the 2003 and subsequent taxation years.

(5) Subsection (2) applies to taxation years that begin after 2007.

276. (1) Paragraph 130.1(4)(b) of the Act is replaced by the following:

(bnotwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount

(i)  shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, and

(ii)  is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.

(2) Subsections 130.1(4.2) to (4.5) of the Act are repealed.

(3) Subparagraph 130.1(6)(f)(i) of the Act is replaced by the following:

(i) debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of the National Housing Act ) or on property included within a housing project (as defined in that section as it read on June 16, 1999 ), and

(4) Subsections (1) and (2) apply to taxation years that begin after October 31, 2011, except that if any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 130.1(4)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation's last taxation year that began before November 1, 2011.

(5) Subsection (3) applies to property acquired by a corporation after October 31, 2011, unless

(athe property is a particular debt

(i) that is owing to the corporation and secured on property (referred to in this paragraph as the "subject property"),

(ii) that replaces a debt (referred to in this paragraph as the "old debt") that was on October 31, 2011 owing to the corporation and secured on the subject property, and

(iii) that has a maximum term for repayment that does not exceed the maximum term for repayment, in effect on October 31, 2011, of the old debt; and

(bthe corporation would be a mortgage investment corporation for its taxation year that includes October 31, 2011 if that taxation year were determined as though it ended on October 31, 2011.

(6) If property that is held by a corporation on October 31, 2011 consists of debt, the term for repayment of the debt is extended by agreement entered into on a particular date that is after October 31, 2011, and the extended term exceeds the maximum term for repayment of the debt in effect on October 31, 2011, then the property is deemed, for the purposes of applying subsection (5), to have been acquired by the corporation on the particular date.

277. (1) Paragraph 131(1)(b) of the Act is replaced by the following:

(bnotwithstanding any other provision of this Act (other than paragraph (5.1)(b)), if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount

(i) shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, and

(ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.

(2) Subsections 131(1.5) to (1.9) of the Act are repealed.

(3) Subparagraph 131(5.1)(b)(i) of the Act is replaced by the following:

(i) subparagraph (1)(b)(ii) does not apply in respect of the dividend, to the extent of the TCP gains distribution, and

(4) Paragraph (a) of the definition "capital gains dividend account" in subsection 131(6) of the Act is replaced by the following:

(athe total of

(i)  its capital gains, for all taxation years that began more than 60 days before that time, from dispositions of property after 1971 and before that time while it was a mutual fund corporation, and

(ii) all amounts each of which is an amount in respect of a distribution made by a trust to the corporation, at a time that is after its 2004 taxation year and at which it is a mutual fund corporation, in respect of capital gains of the trust equal to twice the amount determined by the following formula:

A – B
where
A

is the amount of the distribution, and

B

is the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains

(5) Subparagraph (b)(iii) of the definition "capital gains dividend account" in subsection 131(6) of the Act is replaced by the following:

(iii) an amount equal to 100/14 of its capital gains refund for any taxation year throughout which it was a mutual fund corporation where the year ended more than 60 days before that time;

(6) Subsections (1) to (3) and (5) apply to taxation years that begin after October 31, 2011, except that

(aif any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 131(1)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation's last taxation year that began before November 1, 2011; and

(bif a corporation had a capital gains refund for a taxation year that began before November 2011, then in computing the capital gains dividend account of the corporation at any time in a taxation year of the corporation that begins after October 31, 2011, subparagraph (b)(iii) of the definition "capital gains dividend account" in subsection 131(6) of the Act, as enacted by subsection (5), is to be read, in its application to the corporation, as it read in its application to the corporation's last taxation year that began before November 1, 2011.

(7) Subsection (4) applies to the 2005 and subsequent taxation years.

278. (1) Paragraph 132(6)(c) of the Act is replaced by the following:

(cit complied with prescribed conditions.

(2) Subsection (1) applies to the 2000 and subsequent taxation years.

279. (1) Paragraph 132.11(1)(b) of the Act is replaced by the following:

(bif the trust's taxation year ends on December 15 because of paragraph (a), subject to subsection (1.1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 132.2(3)(b) or subsection 142.6(1); and

(2) Paragraph 132.11(1)(c) of the French version of the Act is replaced by the following:

cchacun de ses exercices qui soit commence dans une de ses années d'imposition se terminant le 15 décembre par l'effet de l'alinéa a), soit se termine dans une de ses années d'imposition ultérieures, doit prendre fin au plus tard à la fin de l'année où il a commencé .

(3) Subsection 132.11(4) of the Act is replaced by the following:

Amounts paid or payable to beneficiaries

(4) Notwithstanding subsection 104(24), for the purposes of subsections (5) and (6) and 104(6) and (13) and paragraph (i) of the definition "disposition" in subsection 248(1) each amount that is paid, or that becomes payable, by a trust to a beneficiary after the end of a particular taxation year of the trust that ends on December 15 of a calendar year because of subsection (1) and before the end of that calendar year, is deemed to have been paid or to have become payable, as the case may be, to the beneficiary at the end of the particular year and not at any other time.

(4) Subsection (1) is deemed to have come into force on January 1, 1999, except that, in applying paragraph 132.11(1)(b) of the Act, as enacted by subsection (1), to taxation years that end before 2000, that paragraph is to be read without reference to "subject to subsection (1.1)".

(5) Subsection (2) applies to the 1998 and subsequent taxation years.

(6) Subsection (3) applies to amounts that, after 1999, are paid or have become payable by a trust.

280. (1) Section 132.2 of the Act is replaced by the following:

Definitions re qualifying exchange of mutual funds

132.2 (1) The following definitions apply in this section.

"first post-exchange year"

« première année suivant l'échange »

"first post-exchange year" , of a fund in respect of a qualifying exchange, means the taxation year of the fund that begins immediately after the acquisition time.

"qualifying exchange"

« échange admissible »

"qualifying exchange" means a transfer at any time (in this section referred to as the "transfer time") of all or substantially all of the property of a mutual fund corporation (other than a SIFT wind-up corporation) or a mutual fund trust to a mutual fund trust (in this section referred to as the "transferor" and "transferee", respectively, and as the "funds") if

(aall or substantially all of the shares issued by the transferor and outstanding immediately before the transfer time are within 60 days after the transfer time disposed of to the transferor;

(bno person disposing of shares of the transferor to the transferor within that 60-day period (otherwise than pursuant to the exercise of a statutory right of dissent) receives any consideration for the shares other than units of the transferee; and

(cthe funds jointly so elect, by filing a prescribed form with the Minister on or before the election's due date.

"share"

« action »

"share" means a share of the capital stock of a mutual fund corporation and a unit of a mutual fund trust.

Timing

(2) In respect of a qualifying exchange, a time referred to in the following list immediately follows the time that precedes it in the list

(athe transfer time;

(bthe first intervening time;

(cthe acquisition time;

(dthe beginning of the funds' first post-exchange years;

(ethe depreciables disposition time;

(fthe second intervening time; and

(gthe depreciables acquisition time.

General

(3) In respect of a qualifying exchange,

(aeach property of a fund, other than property disposed of by the transferor to the transferee at the transfer time and depreciable property, is deemed to have been disposed of, and to have been reacquired by the fund, at the first intervening time, for an amount equal to the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greater of

(A) its cost amount, and

(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

(bsubject to paragraph (l), the last taxation years of the funds that began before the transfer time are deemed to have ended at the acquisition time, and their first post-exchange years are deemed to have begun immediately after those last taxation years ended;

(ceach depreciable property of a fund (other than property to which subsection (5) applies and property to which paragraph (d) would, if this Act were read without reference to this paragraph, apply) is deemed to have been disposed of, and to have been reacquired, by the fund at the second intervening time for an amount equal to the lesser of

(i) the fair market value of the property at the depreciables disposition time, and

(ii) the greater of

(A) the lesser of its capital cost and its cost amount to the disposing fund at the depreciables disposition time, and

(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

(dif at the second intervening time the undepreciated capital cost to a fund of depreciable property of a prescribed class exceeds the fair market value of all the property of that class, the excess is to be deducted in computing the fund's income for the taxation year that includes the transfer time and is deemed to have been allowed in respect of property of that class under regulations made for the purpose of paragraph 20(1)(a);

(eexcept as provided in paragraph (m), the transferor's cost of any particular property received by the transferor from the transferee as consideration for the disposition of the property is deemed to be

(i) nil, if the particular property is a unit of the transferee, and

(ii) the particular property's fair market value at the transfer time, in any other case;

(fthe transferor's proceeds of disposition of any units of the transferee that were disposed of by the transferor at any particular time that is within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be equal to the cost amount of the units to the transferor immediately before the particular time;

(gif, at any particular time that is within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee

(i) the taxpayer's proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the particular time,

(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,

(iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,

(iv) where all of the taxpayer's shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor,

(v) for the purpose of the definition "designated beneficiary" in section 210, the units are deemed not to have been held at any time by the transferor, and

(vi) where the taxpayer is at the particular time affiliated with one or both of the funds,

(A) those units are deemed not to be identical to any other units of the transferee,

(B) if the taxpayer is the transferee, and the units cease to exist when the taxpayer acquires them (or, for greater certainty, when the taxpayer would but for that cessation have acquired them), the taxpayer is deemed

(I) to have acquired those units at the particular time, and

(II) to have disposed of those units immediately after the particular time for proceeds of disposition equal to the cost amount to the taxpayer of those units at the particular time, and

(C) in any other case, for the purpose of computing any gain or loss of the taxpayer from the taxpayer's first disposition, after the particular time, of each of those units,

(I) if that disposition is a renunciation or surrender of the unit by the taxpayer for no consideration, and is not in favour of any person other than the transferee, the taxpayer's proceeds of disposition of that unit are deemed to be equal to that unit's cost amount to the taxpayer immediately before that disposition, and

(II) if subclause (I) does not apply, the taxpayer's proceeds of disposition of that unit are deemed to be equal to the greater of that unit's fair market value and its cost amount to the taxpayer immediately before that disposition;

(hwhere a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1) or 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);

(ithere shall be added to the amount determined under the description of A in the definition "refundable capital gains tax on hand" in subsection 132(4) in respect of the transferee for its taxation years that begin after the transfer time the amount, if any, by which

(i) the transferor's refundable capital gains tax on hand (within the meaning assigned by subsection 131(6) or 132(4), as the case may be) at the end of its taxation year that includes the transfer time

exceeds

(ii) the transferor's capital gains refund (within the meaning assigned by paragraph 131(2)(a) or 132(1)(a), as the case may be) for that year;

(jno amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of either of the funds for a taxation year that begins after the transfer time;

(kif the transferor is a mutual fund trust, for the purposes of subsections 132.1(1) and (3) to (5), the transferee is deemed after the transfer time to be the same mutual fund trust as, and a continuation of, the transferor;

(lif the transferor is a mutual fund corporation

(i) for the purpose of subsection 131(4) but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor is deemed in respect of any share disposed of in accordance with paragraph (g) to be a mutual fund corporation at the time of the disposition, and

(ii) for the purpose of Part I.3 but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor's taxation year that, if this Act were read without reference to this paragraph, would have included the transfer time is deemed to have ended immediately before the transfer time;

(mfor the purpose of determining the funds' capital gains redemptions (as defined in subsection 131(6) or 132(4), as the case may be), for their taxation years that include the transfer time,

(i) the total of the cost amounts to the transferor of all its properties at the end of the year is deemed to be the total of all amounts each of which is

(A) the transferor's proceeds of disposition of a property that was transferred to a transferee on the qualifying exchange, or

(B) the cost amount to the transferor at the end of the year of a property that was not transferred on the qualifying exchange, and

(ii) the transferee is deemed not to have acquired any property that was transferred to it on the qualifying exchange; and

(nexcept as provided in subparagraph (l)(i), the transferor is, notwithstanding subsections 131(8) and 132(6), deemed to be neither a mutual fund corporation nor a mutual fund trust for taxation years that begin after the transfer time.

Qualifying exchange — non-depreciable property

(4) If a transferor transfers a property, other than a depreciable property, to a transferee in a qualifying exchange,

(athe transferee is deemed to have acquired the property at the acquisition time and not to have acquired the property at the transfer time; and

(bthe transferor's proceeds of disposition of the property and the transferee's cost of the property are deemed to be the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greatest of

(A) the cost amount to the transferor of the property at the transfer time,

(B) the amount that the funds agree on in respect of the property in their election, and

(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property.

Depreciable property

(5) If a transferor transfers a depreciable property to a transferee in a qualifying exchange,

(athe transferor is deemed to have disposed of the property at the depreciables disposition time, and not to have disposed of the property at the transfer time;

(bthe transferee is deemed to have acquired the property at the depreciables acquisition time, and not to have acquired the property at the transfer time;

(cthe transferor's proceeds of disposition of the property and the transferee's cost of the property are deemed to be the lesser of

(i) the fair market value of the property at the transfer time, and

(ii) the greatest of

(A) the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,

(B) the amount that the funds agree on in respect of the property in their election, and

(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property;

(dwhere the capital cost of the property to the transferor exceeds the transferor's proceeds of disposition of the property under paragraph (c), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),

(i) the property's capital cost to the transferee is deemed to be the amount that was its capital cost to the transferor, and

(ii) the excess is deemed to have been allowed to the transferee in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years ending before the transfer time; and

(ewhere two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, paragraph (c) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor at the time of making the election in respect of the qualifying exchange or, if the transferor does not so designate any such order, in the order designated by the Minister.

Due date

(6) The due date of an election referred to in paragraph (c) of the definition "qualifying exchange" in subsection (1) is

(athe day that is six months after the day that includes the transfer time; and

(bon joint application by the funds, any later day that the Minister accepts.

Amendment or Revocation of Election

(7) The Minister may, on joint application by the funds on or before the due date of an election referred to in paragraph (c) of the definition "qualifying exchange" in subsection (1), grant permission to amend or revoke the election.

(2) The definitions "first post-exchange year" and "share" in subsection 132.2(1) and subsections 132.2(2) to (5) of the Act, as enacted by subsection (1), apply to qualifying exchanges that occur after 1998, except that,

(aif a qualifying exchange occurred before July 18, 2005 and the transferee has, before that day, filed a return of income, for any taxation year, that identified the realization of any loss that would not have been realized if paragraphs 132.2(3)(f) and (g) of the Act, as enacted by subsection (1), had applied in respect of the qualifying exchange, those paragraphs are to be read in their application to the qualifying exchange as follows:

(fthe transferor's proceeds of disposition of any units of the transferee that were received by the transferor as consideration for the disposition of the property, and that were disposed of by the transferor within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be nil;

(gif, within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee

(i) the taxpayer's proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the transfer time,

(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,

(iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,

(iv) where all of the taxpayer's shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor, and

(v) for the purpose of the definition "designated beneficiary" in section 210, the units are deemed not to have been held at any time by the transferor;

(bbefore the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:

(hwhere a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1) or section 204) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);

and

(cfor the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:

(hwhere a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);

(3) For qualifying exchanges that occurred after June 1994 and before 1999, paragraph 132.2(1)(j) of the Act is to be read as follows:

(jwhere shares of the transferor have been disposed of by a taxpayer to the transferor in exchange for units of the transferee within 60 days after the transfer time,

(i) the taxpayer's proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the transfer time,

(ii) if all of the taxpayer's shares of the transferor have been so disposed of, for the purposes of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor, and

(iii) for the purpose of the definition "designated beneficiary" in section 210, the units are deemed not to have been held at any time by the transferor;

(4) For qualifying exchanges that occurred after June 1994 and before 1999, subsection 132.2(1) of the Act is to be read as if it contained a paragraph (j.1) that read as follows:

(j.1if shares of the transferor have been disposed of by a taxpayer to the tranferor in exchange for units of the transferee within 60 days after the transfer time, for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer;

(5) The definition "qualifying exchange" in subsection 132.2(1), and subsections 132.2(6) and (7), of the Act, as enacted by subsection (1), apply to transfers that occur after June 1994, except that, before December 20, 2007, the portion of the definition "qualifying exchange" in subsection 132.2(1) before paragraph (a), as enacted by subsection (1), is to be read as follows:

"qualifying exchange" means a transfer at any time (in this section referred to as the "transfer time") of all or substantially all of the property of a mutual fund corporation or a mutual fund trust to a mutual fund trust (in this section referred to as the "transferor" and "transferee", respectively, and as the "funds") if

(6) If an election under paragraph (c) of the definition "qualifying exchange" in subsection 132.2(2) of the Act was made, the election continues to have the effect of having section 132.2 of the Act, as modified from time to time, apply to the transfer.

(7) If an election under subsection 159(4) of the Income Tax Amendments Act, 1997 , S.C. 1998, c. 19, was made in respect of a transfer to read subsection 132.2(1) of the Income Tax Act without reference to paragraph 132.2(1)(p) of that Act, the election is, on the application of subsection (1), deemed to have the effect of reading subsection 132.2(3) of that Act, as enacted by subsection (1), in respect of the transfer without reference to its paragraph (i).

281. (1) Subsection 134.1(2) of the Act is replaced by the following:

Application

(2) For the purposes of applying subsections 104(10) and (11) and 133(6) to (9) (other than the definition "non-resident-owned investment corporation" in subsection 133(8)), section 212 and any tax treaty, a corporation described in subsection (1) is deemed to be a non-resident-owned investment corporation in its first non-NRO year in respect of dividends paid in that year on shares of its capital stock to a non-resident person, to a trust for the benefit of non-resident persons or their unborn issue or to a non-resident-owned investment corporation.

(2) Subsection (1) applies to a corporation that ceases to be a non-resident-owned investment corporation because of a transaction or an event that occurs, or a circumstance that arises, in a taxation year of the corporation that ends after February 27, 2000.

282. (1) Subsection 135.1(7) of the Act is replaced by the following:

Withholding on redemption

(7) A person or partnership (in this subsection referred to as the "redeeming entity") that redeems, acquires or cancels a shareholder's share shall withhold and forthwith remit to the Receiver General, on account of the shareholder's tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation, if

(a)  the share was, at the time it was issued, a tax deferred cooperative share;

(b)  the redeeming entity is the corporation that issued the share , or a person or partnership with whom the corporation does not deal at arm's length; and

(cthe shareholder is not a trust whose taxable income is exempt from tax under this Part because of paragraph 149(1)(r) or (x).

(2) Section 135.1 of the Act is amended by adding the following after subsection (8):

Application of subsection (10)

(9) Subsection (10) applies in respect of the disposition, after September 28, 2009, by a taxpayer of a tax deferred cooperative share (in this subsection and subsection (10) referred to as the "old share") of an agricultural cooperative corporation if

(athe disposition results from the acquisition, cancellation or redemption of the old share in the course of a reorganization of the capital of the corporation;

(bin exchange for the old share the corporation issues to the taxpayer a share (in this subsection and subsection (10) referred to as the "new share") that is described in all of paragraphs (b) to (d) of the definition "tax deferred cooperative share" in subsection (1); and

(cthe amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share.

Shares issued on corporate reorganizations

(10) If this subsection applies in respect of an exchange of a taxpayer's old share for a new share, for the purposes of this section (other than subsection (9)),

(athe new share issued in exchange for the old share is deemed to have been issued, pursuant to an allocation in proportion to patronage, at the time the old share was issued; and

(bprovided that no person or partnership receives at any time any consideration (other than the new share) in exchange for the old share, for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.

(3) Subsection (1) applies to redemptions, acquisitions and cancellations that occur after 2007.

(4) Subsection (2) is deemed to have come into force on September 29, 2009, except that in its application to an exchange of shares described by subparagraph 87(2)(s)(ii) of the Act, as enacted by subsection 223 (8), that occurs before October 31, 2011,

(awith respect to a new share received on the exchange that has been disposed of before October 31, 2011, paragraph 135.1(10)(a) of the Act, as enacted by subsection (2), is to be read as follows:

(athe new share issued in exchange for the old share is deemed to have been issued at the time the old share was issued; and

and

(bparagraph 135.1(10)(b) of the Act, as enacted by subsection (2), is to be read as follows:

(bfor the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.

283. (1) Subsection 136(1) of the Act is replaced by the following:

Cooperative not private corporation

136. (1) Notwithstanding any other provision of this Act, a cooperative corporation that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 15.1, 123.4, 125, 125.1, 127, 127.1, 152 and 157, the definition "mark-to-market property" in subsection 142.2(1) and the definition "small business corporation" in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).

(2) Subsection 136(2) of the Act is amended by striking out "and" at the end of paragraph (b) and by replacing paragraph (c) with the following:

(cat least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming; and

(dat least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds, TFSAs or registered education savings plans, the annuitants, holders or subscribers under which are members described in that paragraph.

(3) Subsection (1) applies to the 2001 and subsequent taxation years.

(4) Subsection (2) applies to the 1998 and subsequent taxation years, except that, in its application to taxation years that end before 2009, paragraph 136(2)(d) of the Act, as enacted by subsection (2), is to be read as follows:

(dat least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds or registered education savings plans, the annuitants or subscribers under which are members described in that paragraph.

284. (1) Paragraph 137(4.3)(a) of the Act is replaced by the following:

(athe preferred-rate amount of a corporation at the end of a taxation year is an amount equal to the total of its preferred-rate amount at the end of its immediately preceding taxation year and 100/17 of the amount deductible under section 125 from the tax for the year otherwise payable by it under this Part;

(2) The definition "member" in subsection 137(6) of the Act is replaced by the following:

"member"

« membre »

"member" , of a credit union, means

(a)  a person who is recorded as a member on the records of the credit union and is entitled to participate in and use the services of the credit union, and

(ba registered retirement savings plan, a registered retirement income fund, a TFSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a).

(3) Subsection 137(7) of the Act is replaced by the following:

Credit union not private corporation

(7) Notwithstanding any other provision of this Act, a credit union that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 123.1, 123.4, 125, 127, 127.1, 152 and 157 and the definition "small business corporation" in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).

(4) Subsection (1) applies to the 2008 and subsequent taxation years, except that, in the application of paragraph 137(4.3) of the Act, as amended by subsection (1), to a particular taxation year of a credit union that began in 2007 and ended in 2008, the preferred-rate amount of the credit union at the end of the particular taxation year is equal to the total of

(athe preferred-rate amount of the credit union at the end of the taxation year that immediately preceded the particular taxation year; and

(bthe total of

(i) that proportion of the amount obtained by multiplying 25/4 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2007 is of the number of days in the particular taxation year, and

(ii) that proportion of the amount obtained by multiplying 100/17 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2008 is of the number of days in the particular taxation year.

(5) Subsection (2) applies to the 1996 and subsequent taxation years except that, in its application to taxation years that end before 2009, paragraph (b) of the definition "member" in subsection 137(6) of the Act, as enacted by subsection (2), is to be read as follows:

(ba registered retirement savings plan, a registered retirement income fund or a registered education savings plan, the annuitant or subscriber under which is a person described in paragraph (a).

(6) Subsection (3) applies to the 2001 and subsequent taxation years.

285. (1) Subsection 137.1(2) of the Act is replaced by the following:

Amounts not included in income

(2) The following amounts shall not be included in computing the income of a deposit insurance corporation for a taxation year:

(a)  any premium or assessment received, or receivable, by the corporation in the year from a member institution; and

(bany amount received by the corporation in the year from another deposit insurance corporation to the extent that that amount can reasonably be considered to have been paid out of amounts referred to in paragraph (a) received by that other deposit insurance corporation in any taxation year.

(2) Subsection 137.1(4) of the Act is amended by striking out "or" at the end of paragraph (c) and by adding the following after paragraph (c):

(dany amount paid by it to another deposit insurance corporation that is, because of paragraph (2)(b), not included in computing the income of that other deposit insurance corporation; or

(3) Subsections (1) and (2) apply to the 1998 and subsequent taxation years.

286. (1) Subsection 138(2) of the Act is replaced by the following:

Insurer's income or loss

(2) Notwithstanding any other provision of this Act,

(aif a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, its income or loss for the year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada;

(bif a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, for greater certainty,

(i) in computing the insurer's income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the insurer's gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the insurer, and

(ii) in computing the insurer's taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as "insurance business property") that, at the time of the disposition, was used or held by the insurer in the course of carrying on an insurance business,

(A) there is to be included each taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the insurer, and

(B) there is not to be included any taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the insurer;

(cif a non-resident insurer carries on an insurance business in Canada in a taxation year, its income or loss for the taxation year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada; and

(dif a non-resident insurer carries on an insurance business in Canada in a taxation year,

(i) in computing the non-resident insurer's income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the non-resident insurer's gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the non-resident insurer, and

(ii) in computing the non-resident insurer's taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as "insurance business property") that, at the time of the disposition, was used or held by the non-resident insurer in the course of carrying on an insurance business,

(A) there is to be included each taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the non-resident insurer, and

(B) there is not to be included any taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the non-resident insurer.

(2) Subparagraphs 138(3)(a)(iii) and (iv) of the Act are replaced by the following:

(iii) the amount determined by the following formula:

A – B
where
A

is the total of policy dividends (except the portion paid out of segregated funds) that became payable by the insurer after its 1968 taxation year and before the end of the year under its participating life insurance policies, and

B

is the total of amounts deductible under this subparagraph (including as determined under subsection (3.1) as it read in its application to the insurer's last taxation year that began before November 2011) in computing its incomes for taxation years before the year, and

(3) The portion of subsection 138(3) of the Act after paragraph (a) is replaced by the following:

(bthe total of amounts each of which is a policy loan made by the insurer in the year and after 1977; and

(cthe amount of tax under Part XII.3 payable by the insurer in respect of its taxable Canadian life investment income for the year.

(4) Subsection 138(3.1) of the Act is repealed.

(5) Paragraph 138(4)(a) of the Act is replaced by the following:

(aeach amount deducted under paragraph (3)(a), other than under subparagraph (3)(a)(ii.1), (iii) or (v), in computing the insurer's income for the preceding taxation year;

(6) Subsections 138(4.1) to (4.3) of the Act are repealed.

(7) Paragraph 138(11.5)(j) of the Act is replaced by the following:

(jfor the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph (h), amounts deducted by the transferor as reserves under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)) , paragraphs 20(1)(l) and (l.1) and 20(7)(c) of this Act and section 33 and paragraph 138(3)(c) of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, in its taxation year referred to in paragraph (h) in respect of the transferred property referred to in paragraph (b) or the obligations referred to in paragraph (c) are deemed to have been deducted by the transferee, and not the transferor, for its taxation year referred to in paragraph (h),

(8) Paragraph 138(11.5)(k) of the Act is replaced by the following:

(kfor the purposes of this section, sections 12, 12.4, 20, 138.1, 140 and 142, paragraphs 142.4(4)(c) and (d), section 148 and Part XII.3, the transferee is , in its taxation years following its taxation year referred to in paragraph (h), deemed to be the same person as, and a continuation of, the transferor in respect of the business referred to in paragraph (a), the transferred property referred to in paragraph (b) and the obligations referred to in paragraph (c),

(9) Paragraph 138(11.5)(l) of the Act is replaced by the following:

(lfor the purposes of this subsection and subsections (11.7) and (11.9), the fair market value of consideration received by the transferor from the transferee in respect of the assumption or reinsurance of a particular obligation referred to in paragraph (c) is deemed to be the total of the amounts deducted by the transferor as a reserve under paragraph (3)(a) (other than under subparagraph (ii.1), (iii) or (v)) and paragraph 20(7)(c) in its taxation year referred to in paragraph (h) in respect of the particular obligation, and

(10) Paragraph 138(11.91)(d) of the English version of the Act is replaced by the following:

(dfor the purposes of paragraph (4)(a), subsection (9) and the definition "designated insurance property" in subsection (12) and paragraphs 12(1)(d) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) for that year,

(11) Paragraph 138(11.91)(d) of the French version of the Act is repealed.

(12) Subsection 138(11.91) of the English version of the Act is amended by adding "and" at the end of paragraph (d.1), by striking out "and" at the end of paragraph (e) and by repealing paragraph (f).

(13) The portion of paragraph 138(11.94)(b) of the Act after subparagraph (ii) is replaced by the following:

to a corporation resident in Canada (in this subsection referred to as the "transferee") that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,

(14) The definitions "1975 branch accounting election deficiency" ,"1975-76 excess additional group term reserve" ,"1975-76 excess capital cost allowance" , "1975-76 excess investment reserve" , "1975-76 excess policy dividend deduction" , "1975-76 excess policy dividend reserve" and "1975-76 excess policy reserves" in subsection 138(12) of the Act are repealed.

(15) The formula "(A + B + C) – (D + E + F + G + H)" in the definition "surplus funds derived from operations" in subsection 138(12) of the Act is replaced by the following:

(A + B + C) – (D + E + F + G)

(16) The description of B in the definition "surplus funds derived from operations" in subsection 138(12) of the Act is replaced by the following:

B

is the total of all amounts each of which is a portion of a non-capital loss that was deemed by subsection 111(7.1) as it read in its application to the 1976 taxation year to have been deductible in computing the insurer's income for a taxation year that ended before 1977 ,

(17) The definition "surplus funds derived from operations" in subsection 138(12) of the Act is amended by adding "and" at the end of the description of F, by striking out "and" at the end of the description of G and by repealing the description of H.

(18) The definition "transition year" in subsection 138(12) of the Act is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of paragraph (b) and by adding the following after paragraph (b):

(cin respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer's 2012 taxation year, the life insurer's 2012 taxation year;

(19) Section 138 of the Act is amended by adding the following after subsection (25):

Policy reserve transition — application rules

(26) In applying subsections (16), (17), (18) and (19) to a life insurer for a taxation year of the life insurer,

(aif the application of one or more of those subsections is in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer's 2012 taxation year, the life insurer's reserve transition amount for its transition year in respect of that amendment is to be determined as though the description of A in the definition "reserve transition amount" in subsection (12) read as follows:

A

is the maximum amount that the life insurer would be permitted to claim under subparagraph (3)(a)(i) (and that would be prescribed by section 1404 of the Income Tax Regulations for the purposes of subparagraph (3)(a)(i)) as a policy reserve for its base year in respect of its life insurance policies in Canada if paragraph 1406(b) of the Income Tax Regulations were read as it applies to the life insurer's 2012 taxation year, and;

(bif one or more of those subsections applies in the same taxation year in respect of both the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer's 2012 taxation year, and the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011, then, for the purposes of applying those subsections in respect of a transition year described by paragraph (b) of the definition "transition year" in subsection (12), the reference to "as it reads in respect of its transition year" in paragraph (b) of the description of A in the definition "reserve transition amount" in subsection (12) is to be read as a reference to "as it reads in respect of its transition year (determined without reference to the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer's 2012 taxation year); and

(cif the life insurer has more than one transition year for the same taxation year of the life insurer

(i) for each transition year, the computation of the reserve transition amount for the transition year, and the requirements to include, or rights to deduct, under any of those subsections an amount in respect of that reserve transition amount, shall be determined as if that transition year were the only transition year of the life insurer for that taxation year, and

(ii) for greater certainty, the references in subsections (16), (17), (18) and (19) to a transition year include each of those transition years.

(20) Subsections (1), (11) and (12) apply to taxation years that end after 1999.

(21) Subsections (2) to (10) and (14) to (17) apply to taxation years that begin after October 31, 2011.

(22) Subsection (13) applies to transfers made after October 2004.

(23) Subsections (18) and (19) apply to the 2012 and subsequent taxation years.

287. (1) Subsections 138.1(3.1) and (3.2) of the Act are repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

288. (1) Subsections 142.5(4) to (7) of the Act are repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

289. (1) Paragraph 142.6(1)(b) of the Act is replaced by the following:

(bif the taxpayer becomes a financial institution, the taxpayer is deemed to have disposed, immediately before the end of its particular taxation year that ends immediately before the particular time, of each of the following properties held by the taxpayer for proceeds equal to the property's fair market value at the time of that disposition:

(i) a specified debt obligation, or

(ii) a mark-to-market property of the taxpayer for the particular taxation year or for the taxpayer's taxation year that includes the particular time ;

(2) Paragraph 142.6(1)(d) of the Act is replaced by the following:

(dthe taxpayer is deemed to have reacquired, at the end of its taxation year that ends immediately before the particular time , each property deemed by paragraph (b) or (c) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property.

(3) Subsections (1) and (2) apply to taxation years that end after 1998.

290. (1) Subsection 142.7(8) of the Act is amended by adding the following after paragraph (a):

(a.1for the purpose of applying subparagraph 212(1)(b)(vii) in respect of the debt obligation, the obligation is deemed to have been issued by the entrant bank at the time that the obligation was issued by the Canadian affiliate;

(2) Paragraph 142.7(8)(a.1) of the Act, as enacted by subsection (1), is repealed.

(3) Subsection (1) is deemed to have come into force on June 28, 1999.

(4) Subsection (2) is deemed to have come into force on January 1, 2008.

291. (1) The portion of subsection 143(3.1) of the Act before the description of B in paragraph (b) is replaced by the following:

Election in respect of gifts

(3.1) For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by an inter vivos trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,

(athe trust is deemed not to have made the gift; and

(beach participating member of the congregation is deemed to have made, in the year, such a gift the eligible amount of which is the amount determined by the formula

A × B/C
where
A

is the eligible amount of the gift made by the trust,

(2) Subsection (1) applies to gifts made after December 20, 2002.

292. (1) The heading before section 143.2 of the Act is replaced by the following:

Cost of Tax Shelter Investments and Limited-recourse Debt in Respect of Gifting Arrangements

(2) Subsection (1) is deemed to have come into force on February 19, 2003.

293. (1) Section 143.2 of the Act is amended by adding the following after subsection (6):

Limited-re­course debt in respect of a gift or monetary contribution

(6.1) The limited-recourse debt in respect of a gift or monetary contribution of a taxpayer, at the time the gift or monetary contribution is made, is the total of

(aeach limited-recourse amount at that time, of the taxpayer and of all other taxpayers not dealing at arm's length with the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution,

(beach limited-recourse amount at that time, determined under this section when this section is applied to each other taxpayer who deals at arm's length with and holds, directly or indirectly, an interest in the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution, and

(ceach amount that is the unpaid amount at that time of any other indebtedness, of any taxpayer referred to in paragraph (a) or (b), that can reasonably be considered to relate to the gift or monetary contribution if there is a guarantee, security or similar indemnity or covenant in respect of that or any other indebtedness.

(2) The portion of subsection 143.2(13) of the Act before paragraph (a) is replaced by the following:

Information located outside Canada

(13) For the purpose of this section, if it can reasonably be considered that information relating to indebtedness that relates to a taxpayer's expenditure, gift or monetary contribution is available outside Canada and the Minister is not satisfied that the unpaid principal of the indebtedness is not a limited-recourse amount, the unpaid principal of the indebtedness relating to the taxpayer's expenditure, gift or monetary contribution is deemed to be a limited-recourse amount relating to the expenditure, gift or monetary contribution unless

(3) Subsections (1) and (2) apply in respect of expenditures, gifts and monetary contributions made after February 18, 2003.

294. (1) The Act is amended by adding the following after section 143.2:

Expenditure — Limitations

Definitions

143.3 (1) The following definitions apply in this section.

"expenditure"

« dépense »

"expenditure" of a taxpayer means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer.

"option"

« option »

"option" means

(aa security that is issued or sold by a taxpayer under an agreement referred to in subsection 7(1); or

(ban option, warrant or similar right, issued or granted by a taxpayer, giving the holder the right to acquire an interest in the taxpayer or in another taxpayer with whom the taxpayer does not, at the time the option, warrant or similar right is issued or granted, deal at arm's length.

"taxpayer"

« contribuable »

"taxpayer" includes a partnership.

Options — limitation

(2) In computing a taxpayer's income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer's tax payable, an expenditure of the taxpayer is deemed not to include any portion of the expenditure that would — if this Act were read without reference to this subsection — be included in determining the expenditure because of the taxpayer having granted or issued an option on or after November 17, 2005.

Corporate shares — limitation

(3) In computing a corporation's income, taxable income or tax payable or an amount considered to have been paid on account of the corporation's tax payable, an expenditure of the corporation that would — if this Act were read without reference to this subsection — include an amount because of the corporation having issued a share of its capital stock at any particular time on or after November 17, 2005 is reduced by

(aif the issuance of the share is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds

(i) if the transaction under which the share is issued is a transaction to which section 85, 85.1 or 138 applies, the amount determined under that section to be the cost to the issuing corporation of the property acquired in consideration for issuing the share, or

(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the issuing corporation for issuing the share; and

(bif the issuance of the share is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the issuing taxpayer for issuing the share.

Non-corporate interests — limitation

(4) In computing a taxpayer's (other than a corporation's) income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer's tax payable, an expenditure of the taxpayer that would — if this Act were read without reference to this subsection — include an amount because of the taxpayer having issued an interest, or because of an interest being created, in itself at any particular time on or after November 17, 2005 is reduced by

(aif the issuance or creation of the interest is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds

(i) if the transaction under which the interest is issued is a transaction to which paragraph 70(6)(b) or 73(1.01)(c), subsection 97(2) or section 107.4 or 132.2 applies, the amount determined under that provision to be the cost to the taxpayer of the property acquired for the interest, or

(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the taxpayer for the interest; and

(bif the issuance or creation of the interest is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the taxpayer for the interest.

Clarification

(5) For greater certainty,

(asubsection (2) does not apply to reduce an expenditure that is a commission, fee or other amount for services rendered by a person as a salesperson, agent or dealer in securities in the course of the issuance of an option;

(bsubsections (3) and (4) do not apply to reduce an expenditure of a taxpayer to the extent that the expenditure does not include an amount determined to be an excess under those subsections;

(cthis section does not apply to determine the cost or capital cost of property determined under subsection 70(6), section 73, 85 or 85.1, subsection 97(2) or section 107.4, 132.2 or 138; and

(dthis section does not apply to determine the amount of a taxpayer's expenditure if the amount of the expenditure as determined under section 69 is less than the amount that would, if this subsection were read without reference to this paragraph, be the amount of the expenditure as determined under this section.

(2) Subsection (1) is deemed to have come into force on November 17, 2005, except that for securities issued or sold before ANNOUNCEMENT DATE, the definition "option" in subsection 143.3(1) of the Act, as enacted by subsection (1), is to be read without reference to its paragraph (a).

295. (1) The Act is amended by adding the following after section 143.3 of the Act, as enacted by subsection 294 (1):

Expenditure — Limit for Contingent Amount

Definitions

143.4 (1) The following definitions apply in this section.

"contingent amount"

« montant éventuel »

"contingent amount" , of a taxpayer at any time (other than a time at which the taxpayer is a bankrupt), includes an amount to the extent that the taxpayer, or another taxpayer that does not deal at arm's length with the taxpayer, has a right to reduce the amount at that time.

"expenditure"

« dépense »

"expenditure" , of a taxpayer, means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer.

"right to reduce"

« droit de réduire »

"right to reduce" means a right to reduce or eliminate an amount in respect of an expenditure at any time, including, for greater certainty, a right to reduce that is contingent upon the occurrence of an event, or in any other way contingent, if it is reasonable to conclude, having regard to all the circumstances, that the right will become exercisable.

"taxpayer"

« contribuable »

"taxpayer" includes a partnership.

Limitation of amount of expenditure

(2) For the purposes of this Act, if in a taxation year of a taxpayer an expenditure of the taxpayer occurs, the amount of the expenditure at any time is the lesser of

(athe amount of the expenditure at the time calculated under this Act without reference to this section, and

(bthe least amount of the expenditure calculated by reducing the amount of the expenditure determined under paragraph (a) by the amount that is the amount, if any, by which

(i) the total of all amounts each of which is a contingent amount of the taxpayer in the year in respect of the expenditure

exceeds

(ii) the total of all amounts each of which is

(A) an amount paid by the taxpayer to obtain a right to reduce an amount in respect of the expenditure, or

(B) a limited-recourse amount for the purposes of paragraph 143.2(6)(b) that reduces the expenditure under subsection 143.2(6) to the extent that the amount is also a contingent amount described in subparagraph (i) in respect of the expenditure.

Payment of contingent amount

(3) For the purposes of this Act, if in a particular taxation year, a taxpayer pays all or a portion of a contingent amount referred to in paragraph (2)(b) that reduces the amount of the taxpayer's expenditure referred to in paragraph (2)(a), the portion of the contingent amount paid by the taxpayer in the particular year for the purpose of earning income, and to that extent only, is deemed

(ato have been incurred by the taxpayer in the particular year;

(bto have been incurred for the same purpose and to have the same character as the expenditure so reduced; and

(cto have become payable by the taxpayer in respect of the particular year.

Subsequent years

(4) Subject to subsection (6), if at any time in a taxation year that is after a taxation year in which an expenditure of the taxpayer occurred, the taxpayer, or another taxpayer not dealing at arm's length with the taxpayer, has a right to reduce an amount in respect of the expenditure (in this subsection and subsection (5) referred to as the "prior expenditure") that would, if the taxpayer or the other taxpayer had had the right to reduce in a particular taxation year that ended before the time, have resulted in subsection (2) applying in the particular taxation year to reduce or eliminate the amount of the prior expenditure, the taxpayer's subsequent contingent amount in respect of the prior expenditure, as determined under subsection (5), is deemed, to the extent subsection (2) and this subsection have not previously applied in respect of the expenditure,

(ato be an amount received by the taxpayer at the time in the course of earning income from a business or property from a person described in subparagraph 12(1)(x)(i); and

(bto be an amount referred to in subparagraph 12(1)(x)(iv).

Subsequent contingent amount

(5) For the purposes of subsection (4), a taxpayer's subsequent contingent amount in respect of a prior expenditure of the taxpayer is the amount, if any, by which

(athe maximum amount by which the amount (in this subsection referred to as the "particular amount") in respect of the prior expenditure may be reduced pursuant to a right to reduce the particular amount

exceeds

(bthe amount, if any, paid to obtain the right to reduce the particular amount.

Anti-avoidance

(6) If a taxpayer, or another taxpayer that does not deal at arm's length with the taxpayer, has a right to reduce an amount in respect of an expenditure of the taxpayer in a taxation year that is after the taxation year in which the expenditure otherwise occurred, determined without reference to subsection (3), the taxpayer is deemed to have the right to reduce in the taxation year in which that expenditure otherwise occurred if it is reasonable to conclude having regard to all the circumstances that one of the purposes for having the right to reduce after the end of the year in which the expenditure otherwise occurred was to avoid the application of subsection (2) to the amount of the expenditure.

Assessments

(7) Notwithstanding subsections 152(4) to (5), such assessments, determinations and redeterminations may be made as are necessary to give effect to this section.

(2) Subsection (1) applies in respect of taxation years that end on or after March 16, 2011.

296. (1) Paragraph (d) of the definition « revenu gagné » in subsection 146(1) of the French version of the Act is replaced by the following:

dsoit, dans le cas d'un contribuable visé au paragraphe 115(2), le total qui serait calculé en application de l'alinéa 115(2)e) à son égard pour l'année compte non tenu du renvoi à l'alinéa 56(1)n) au sous-alinéa 115(2)e)(ii), ni du sous-alinéa 115(2)e)(iv), à l'exception de toute partie de ce total qui est incluse, en application de l'alinea c), dans le total calculé selon la présente définition ou qui est exonérée de l'impôt sur le revenu au Canada par l'effet d'une disposition d'un accord ou convention fiscal conclu avec un autre pays et ayant force de loi au Canada,

(2) Subparagraph (d)(i) of the definition "earned income" in subsection 146(1) of the English version of the Act is replaced by the following:

(i) that paragraph were read without reference to subparagraph 115(2)(e)(iv), and

(3) Paragraph (f) of the definition "earned income" in subsection 146(1) of the Act is replaced by the following:

(fan amount deductible under paragraph 60(b), or deducted under paragraph 60(c.2), in computing the taxpayer's income for the year,

(4) Paragraph (h) of the definition "earned income" in subsection 146(1) of the Act is replaced by the following:

(hthe portion of an amount included under subparagraph (a)(ii) or (c)(ii) in determining the taxpayer's earned income for the year because of paragraph 14(1)(b)

(5) Subsection 146(8.1) of the Act is replaced by the following:

Deemed receipt of refund of premiums

(8.1) If a payment out of or under a registered retirement savings plan of a deceased annuitant to the annuitant's legal representative would have been a refund of premiums if it had been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased's estate, the payment is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual (and not by the legal representative) at the time it was so paid as a benefit that is a refund of premiums.

(6) Subparagraph 146(10.1)(b)(ii) of the Act is replaced by the following:

(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word "all" .

(7) Subsections (1) and (2) apply to the 1993 and subsequent taxation years.

(8) Subsection (3) applies to the 1997 and subsequent taxation years.

(9) Subsection (4) applies to amounts included in computing income for taxation years in respect of business fiscal periods that end after February 27, 2000.

(10) Subsection (5) is deemed to have come into force on January 1, 1989, except that, before 1999, subsection 146(8.1) of the Act, as enacted by subsection (5), is to be read as follows:

(8.1) Such portion of an amount paid in a taxation year out of or under a registered retirement savings plan of a deceased annuitant to the annuitant's legal representative as, had that portion been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased's estate, would have been a refund of premiums is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual in the year as a benefit that is a refund of premiums.

297. (1) The definition "quarter" in subsection 146.01(1) of the Act is repealed.

(2) Subsection 146.01(8) of the Act is repealed.

(3) Subsections (1) and (2) apply in respect of the 2002 and subsequent taxation years.

298. (1) Subsection 146.1(2) of the Act is amended by adding the following after paragraph (g.2):

(g.3the plan provides that an individual is permitted to be designated as a beneficiary under the plan, and that a contribution to the plan in respect of an individual who is a beneficiary under the plan is permitted to be made, only if

(i) in the case of a designation, the individual's Social Insurance Number is provided to the promoter before the designation is made and either

(A) the individual is resident in Canada when the designation is made, or

(B) the designation is made in conjunction with a transfer of property into the plan from another registered education savings plan under which the individual was a beneficiary immediately before the transfer, and

(ii) in the case of a contribution, either

(A) the individual's Social Insurance Number is provided to the promoter before the contribution is made and the individual is resident in Canada when the contribution is made, or

(B) the contribution is made by way of transfer from another registered education savings plan under which the individual was a beneficiary immediately before the transfer;

(2) Section 146.1 of the Act is amended by adding the following after subsection (2.2):

Social Insurance Number not required

(2.3) Notwithstanding paragraph (2)(g.3), an education savings plan may provide that an individual's Social Insurance Number need not be provided in respect of

(aa contribution to the plan, if the plan was entered into before 1999; and

(ba designation of a non-resident individual as a beneficiary under the plan, if the individual was not assigned a Social Insurance Number before the designation is made.

(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2004.

299. (1) The definition "holder" in subsection 146.2(1) of the Act is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of paragraph (b) and by adding the following after paragraph (b):

(cat and after the death of a holder described in paragraph (b) or in this paragraph, the holder's survivor, if the survivor acquires

(i) all of the holder's rights as the holder of the arrangement, and

(ii) to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the holder under the arrangement or relating to property held in connection with the arrangement.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

300. (1) Paragraph (b) of the definition "annuitant" in subsection 146.3(1) of the Act is replaced by the following:

(bafter the death of the first individual, a spouse or common-law partner (in this definition referred to as the "survivor") of the first individual to whom the carrier has undertaken to make payments described in the definition "retirement income fund" out of or under the fund after the death of the first individual, if the survivor is alive at that time and the undertaking was made

(i)  pursuant to an election that is described in that definition and that was made by the first individual, or

(ii)  with the consent of the legal representative of the first individual, and

(2) The portion of paragraph 146.3(2)(c) of the English version of the Act before subparagraph (i) is replaced by the following:

(cif the carrier is a person referred to as a depositary in section 146, the fund provides that

(3) Paragraph 146.3(2)(f) of the Act is amended by adding the following after subparagraph (iv):

(iv.1) a deferred profit sharing plan in accordance with subsection 147(19);

(4) The portion of subsection 146.3(5.1) of the English version of the Act before paragraph (a) is replaced by the following:

Amount included in income

(5.1) If at any time in a taxation year a particular amount in respect of a registered retirement income fund that is a spousal or common-law partner plan (within the meaning assigned by subsection 146(1)) in relation to a taxpayer is required to be included in the income of the taxpayer's spouse or common-law partner and the taxpayer is not living separate and apart from the taxpayer's spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer's income for the year an amount equal to the least of

(5) The portion of subsection 146.3(9) of the Act before paragraph (a) is replaced by the following:

Tax payable on income from non-qualified investment

(9) If a trust that is governed by a registered retirement income fund holds, at any time in a taxation year, a property that is not a qualified investment,

(6) Subparagraph 146.3(9)(b)(ii) of the Act is replaced by the following:

(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word "all" .

(7) Subsections (1) and (4) apply to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act , in respect of the 1998, 1999 or 2000 taxation years, subsections (1) and (4) apply to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.

(8) Subsection (2) is deemed to have come into force on January 1, 2002.

(9) Subsection (3) is deemed to have come into force on March 21, 2003.

(10) Subsection (5) applies to the 2003 and subsequent taxation years.

301. (1) Paragraph 147(2)(e) of the Act is replaced by the following:

(ethe plan includes a provision stipulating that no right of a person under the plan is capable of any surrender or assignment other than

(i) an assignment under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between an individual and the individual's spouse or common-law partner, or former spouse or common-law partner, in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership,

(ii) an assignment by a deceased individual's legal representative on the distribution of the individual's estate, and

(iii) a surrender of benefits to avoid revocation of the plan's registration;

(2) Subsection 147(5.11) of the Act is repealed.

(3) Subparagraph 147(19)(b)(ii) of the Act is replaced by the following:

(ii) who is a spouse or common-law partner, or former spouse or common-law partner, of an employee or former employee referred to in subparagraph (i) and who is entitled to the amount

(A)  as a consequence of the death of the employee or former employee, or

(B) under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the employee or former employee and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership;

(4) The portion of paragraph 147(19)(d) of the French version of the Act before subparagraph (i) is replaced by the following:

dle montant est transféré directement à l'un des régimes ou fonds ci-après au profit du particulier :

(5) Paragraph 147(19)(d) of the Act is amended by striking out "or" at the end of subparagraph (ii), by adding "or" at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iv) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)).

(6) Subsection (1) is deemed to have come into force on March 21, 2003.

(7) Subsection (2) applies to cessations of employment that occur after 2002.

(8) Subsections (3) to (5) apply to transfers that occur after March 20, 2003.

302. (1) The portion of paragraph (a) of the definition "compensation" in subsection 147.1(1) of the Act that is after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

that is required (or that would be required but for paragraph 81(1)(a) as it applies with respect to the Indian Act or the Foreign Missions and International Organizations Act ) by section 5 or 6 to be included in computing the individual's income for the year, except such portion of the amount as

(2) Subsection (1) is deemed to have come into force on January 1, 1991.

303. (1) The portion of subsection 147.2(7) of the Act before paragraph (a) is replaced by the following:

Letter of credit

(7) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions , an amount paid to a registered pension plan by the issuer of a letter of credit issued in connection with an employer's funding obligations under a defined benefit provision of the plan is deemed to be an eligible contribution made to the plan in respect of the provision by the employer with respect to the employer's employees or former employees, if

(2) Section 147.2 of the Act is amended by adding the following after subsection (7):

Former employee of predecessor employer

(8) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions, a former employee of a predecessor employer (as defined by regulation) of a participating employer in relation to a pension plan is deemed to be a former employee of the participating employer in relation to the plan if

(athe former employee would not otherwise be an employee or former employee of the participating employer; and

(bbenefits are provided to the former employee under a defined benefit provision of the plan in respect of periods of employment with the predecessor employer.

(3) Subsection (1) is deemed to have come into force on November 6, 2010.

(4) Subsection (2) applies to contributions made after 1990.

304. (1) Paragraph 147.3(6)(b) of the Act is replaced by the following:

(bis transferred on behalf of a member who is entitled to the amount as a return of contributions made (or deemed by regulation to have been made) by the member under a defined benefit provision of the plan before 1991, or as interest (computed at a rate not exceeding a reasonable rate) in respect of those contributions; and

(2) Subsection (1) applies to transfers that occur after 1999.

305. (1) Paragraph 148(1)(e) of the Act is replaced by the following:

(ean annuity contract

(i) the payment for which was deductible in computing the policyholder's income by virtue of paragraph 60(l), or

(ii) that is a qualifying trust annuity with respect to a taxpayer, the payment for which was deductible under paragraph 60(l) in computing the taxpayer's income,

(2) Paragraph 148(1)(e) of the Act, as enacted by subsection (1), is replaced by the following:

(ean annuity contract if

(i) the payment for the annuity contract was deductible under paragraph 60(l) in computing the policyholder's income,

(i.1) the annuity contract is a qualifying trust annuity with respect to a taxpayer and the amount paid to acquire it was deductible under paragraph 60(l) in computing the taxpayer's income, or

(ii)  the policyholder acquired the annuity contract in circumstances to which subsection 146(21) applied,

(3) Subsection 148(8.2) of the French version of the Act is replaced by the following:

Transfert à l'époux ou au conjoint de fait au décès

(8.2) Malgré les autres dispositions du présent article, l'intérêt d'un titulaire de police dans une police d'assurance-vie (sauf une police qui est un régime ou un contrat visé à l'un des alinéas (1)a) à e) ou qui est établie aux termes d'un tel régime ou contrat) qui est transféré ou distribué à l'époux ou au conjoint de fait du titulaire par suite du décès de ce dernier est réputé, si le titulaire et son époux ou conjoint de fait résidaient au Canada immédiatement avant ce décès, avoir fait l'objet d'une disposition par le titulaire immédiatement avant son décès pour un produit égal au coût de base rajusté de l'intérêt pour lui immédiatement avant le transfert et avoir été acquis par l'époux ou le conjoint de fait à un coût égal à ce produit; toutefois, un choix peut être fait dans la déclaration de revenu du titulaire produite en vertu de la présente partie pour l'année d'imposition au cours de laquelle le titulaire est décédé pour que le présent paragraphe ne s'applique pas.

(4) Subsection (1) is deemed to have come into force on January 1, 1989.

(5) Subsection (2) is deemed to have come into force on September 1, 1992.

306. (1) The definition « versement admissible » in subsection 148.1(1) of the French version of the Act is replaced by the following:

« versement admissible »

"relevant contribution"

« versement admissible » Est un versement admissible effectué pour un particulier dans le cadre d'un arrangement donné :

ale versement effectué dans le cadre de l'arrangement donné en vue du financement de services de funérailles ou de cimetière relatifs au particulier, à l'exception d'un versement effectué au moyen d'un transfert d'un arrangement de services funéraires;

bla partie d'un versement effectué dans le cadre d'un arrangement de services funéraires (à l'exception d' un tel versement effectué au moyen d'un transfert d'un arrangement de services funéraires) qu'il est raisonnable de considérer comme ayant ultérieurement servi à effectuer un versement dans le cadre de l'arrangement donné au moyen d'un transfert d'un arrangement de services funéraires en vue du financement de services de funérailles ou de cimetière relatifs au particulier.

(2) The description of C in subsection 148.1(3) of the Act is replaced by the following:

C

is the amount determined by the formula

D – E
where
D

is the total of all relevant contributions made before the particular time in respect of the individual under the arrangement (other than contributions in respect of the individual that were in a cemetery care trust), and

E

is the total of all amounts each of which is the amount, if any, by which

(a) an amount relating to the balance in respect of the individual under the arrangement that is deemed by subsection (4) to have been distributed before the particular time from the arrangement

exceeds

(b) the portion of the amount referred to in paragraph (a) that is added, because of this subsection, in computing a taxpayer's income.

(3) Section 148.1 of the Act is amended by adding the following after subsection (3):

Deemed distribution on transfer

(4) If at a particular time an amount relating to the balance in respect of an individual (referred to in this subsection and in subsection (5) as the "transferor") under an eligible funeral arrangement (referred to in this subsection and in subsection (5) as the "transferor arrangement") is transferred, credited or added to the balance in respect of the same or another individual (referred to in this subsection and in subsection (5) as the "recipient") under the same or another eligible funeral arrangement (referred to in this subsection and in subsection (5) as the "recipient arrangement"),

(a) the amount is deemed to be distributed to the transferor (or, if the transferor is deceased at the particular time, to the recipient) at the particular time from the transferor arrangement and to be paid from the balance in respect of the transferor under the transferor arrangement; and

(b) the amount is deemed to be a contribution made (other than by way of a transfer from an eligible funeral arrangement) at the particular time under the recipient arrangement for the purpose of funding funeral or cemetery services with respect to the recipient.

Non-application of subsection (4)

(5) Subsection (4) does not apply if

(a) the transferor and the recipient are the same individual;

(b) the amount that is transferred, credited or added to the balance in respect of the individual under the recipient arrangement is equal to the balance in respect of the individual under the transferor arrangement immediately before the particular time; and

(c) the transferor arrangement is terminated immediately after the transfer.

(4) Subsections (2) and (3) apply to amounts that are transferred, credited or added after December 20, 2002.

307. (1) Paragraph 149(1)(d.5) of the Act is replaced by the following:

Income within boundaries of entities

(d.5) subject to subsections (1.2) and (1.3), a corporation, commission or association not less than 90% of the capital of which was owned by one or more entities each of which is a municipality in Canada, or a municipal or public body performing a function of government in Canada , if the income for the period of the corporation, commission or association from activities carried on outside the geographical boundaries of the entities does not exceed 10% of its income for the period;

(2) Subparagraphs 149(1)(d.6)(i) and (ii) of the Act are replaced by the following:

(i) if paragraph (d.5) applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in that paragraph in its application to that other corporation, commission or association, or

(ii) if this paragraph applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in subparagraph (i) in its application to that other corporation, commission or association,

(3) Paragraph 149(1)(d.6) of the Act, as amended by subsection (2), is replaced by the following:

Subsidiaries of municipal corporations

(d.6) subject to subsections (1.2) and (1.3), a particular corporation all of the shares (except directors' qualifying shares) or of the capital of which was owned by one or more entities (referred to in this paragraph as "qualifying owners") each of which is, for the period, a corporation, commission or association to which paragraph (d.5) applies, a corporation to which this paragraph applies, a municipality in Canada, or a municipal or public body performing a function of government in Canada, if no more than 10% of the particular corporation's income for the period is from activities carried on outside

(i) if a qualifying owner is a municipality in Canada, or a municipal or public body performing a function of government in Canada, the geographical boundaries of each such qualifying owner,

(ii ) if paragraph (d.5) applies to a qualifying owner , the geographical boundaries of the municipality, or municipal or public body, referred to in that paragraph in its application to each such qualifying owner, and

(iii ) if this paragraph applies to a qualifying owner , the geographical boundaries of the municipality, or municipal or public body, referred to in subparagraph (i) or paragraph (d.5), as the case may be, in their respective applications to each such qualifying owner;

(4) Clause 149(1)(o.2)(iii)(B) of the Act is replaced by the following:

(B) that had not accepted deposits or issued bonds, notes, debentures or similar obligations , and

(5) Section 149 of the Act is amended by adding the following after subsection (1.11):

Deemed election

(1.12) If at any time there is an amalgamation (within the meaning assigned by subsection 87(1)) of a corporation (in this subsection referred to as the "parent") and one or more other corporations (each of which in this subsection is referred to as the "subsidiary") each of which is a subsidiary wholly-owned corporation of the parent, and immediately before that time the parent is a person to which subsection (1) does not apply by reason of the application of subsection (1.11), the new corporation is deemed, for the purposes of subsection (1.11), to be the same corporation as, and a continuation of, the parent.

(6) The portion of subsection 149(1.2) of the Act before paragraph (b) is replaced by the following:

Income test

(1.2) For the purposes of paragraphs (1)(d.5) and (d.6), income of a corporation, a commission or an association from activities carried on outside the geographical boundaries of a municipality or of a municipal or public body does not include income from activities carried on

(a) under an agreement in writing between

(i) the corporation, commission or association, and

(ii) a person who is Her Majesty in right of Canada or of a province, a municipality, a municipal or public body or a corporation to which any of paragraphs (1)(d) to (d.6) applies and that is controlled by Her Majesty in right of Canada or of a province, by a municipality in Canada or by a municipal or public body in Canada

within the geographical boundaries of,

(iii) if the person is Her Majesty in right of Canada or a corporation controlled by Her Majesty in right of Canada, Canada,

(iv) if the person is Her Majesty in right of a province or a corporation controlled by Her Majesty in right of a province, the province,

(v) if the person is a municipality in Canada or a corporation controlled by a municipality in Canada, the municipality, and

(vi) if the person is a municipal or public body performing a function of government in Canada or a corporation controlled by such a body, the area described in subsection (11) in respect of the person; or

(7) Subsection 149(1.3) of the Act is replaced by the following:

Votes or de facto control

(1.3) Paragraphs (1)(d) to (d.6) do not apply in respect of a person's taxable income for a period in a taxation year if at any time during the period

(a) the person is a corporation shares of the capital stock of which are owned by one or more other persons that, in total, give them more than 10% of the votes that could be cast at a meeting of shareholders of the corporation, other than shares that are owned by one or more persons each of which is

(i) Her Majesty in right of Canada or of a province,

(ii) a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply; or

(b) the person is, or would be if the person were a corporation, controlled, directly or indirectly in any manner whatever, by a person, or by a group of persons that includes a person, who is not

(i) Her Majesty in right of Canada or of a province,

(ii) a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply.

(8) Paragraph 149(10)(c) of the Act is replaced by the following:

(c) for the purposes of applying sections 37, 65 to 66.4, 66.7, 111 and 126, subsections 127(5) to (36) and section 127.3 to the corporation, the corporation is deemed to be a new corporation the first taxation year of which began at that time; and

(9) Section 149 of the Act is amended by adding the following after subsection (10):

Geographical boundaries — body performing government functions

(11) For the purpose of this section, the geographical boundaries of a municipal or public body performing a function of government are

(a) the geographical boundaries that encompass the area in respect of which an Act of Parliament or an agreement given effect by an Act of Parliament recognizes or grants to the body a power to impose taxes; or

(b) if paragraph (a) does not apply, the geographical boundaries within which that body has been authorized by the laws of Canada or of a province to exercise that function.

(10) Subsections (1), (2), (6), (7) and (9) apply to taxation years that begin after May 8, 2000, except that, for those taxation years that began before December 21, 2002, subsection 149(1.3) of the Act, as enacted by subsection (7), is to be read as follows:

(1.3) For the purposes of paragraph (1)(d.5) and subsection (1.2), 90% of the capital of a corporation that has issued share capital is owned by one or more entities, each of which is a municipality or a municipal or public body, only if the entities own shares of the capital stock of the corporation that give the entities 90% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation.

(11) Subsection (3) applies in respect of taxation years that end after April 2004.

(12) Subsection (4) applies to taxation years that end after February 21, 1994.

(13) Subsection (5) applies to amalgamations that occur after October 4, 2004.

(14) Subsection (8) applies to each corporation that after 2006 becomes or ceases to be exempt from tax on its taxable income under Part I of the Act.

(15) Notwithstanding subsections 152(4) to (5) of the Act, any assessment of a taxpayer's tax payable under the Act for any taxation year that began before ANNOUNCEMENT DATE is to be made that is necessary to give effect to the provisions of the Act enacted by subsections (1), (2), (6), (7) and (9).

308. (1) The definition "public foundation" in subsection 149.1(1) of the Act is replaced by the following:

"public foundation"

« fondation publique »

"public foundation" , at a particular time, means a charitable foundation

(a) more than 50% of the directors, trustees, officers or like officials of which deal at arm's length with each other and with

(i)  each of the other directors, trustees, officers and like officials of the foundation,

(ii)  each person described by subparagraph (b)(i) or (ii), and

(iii)  each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm's length, if the group would, if it were a person, be a person described by subparagraph (b)(i), and

(b) that is not, at the particular time, and would not at the particular time be, if the foundation were a corporation, controlled directly or indirectly in any manner whatever

(i) by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),

(A) who immediately after the particular time, has contributed to the foundation amounts that are, in total, greater than 50% of the capital of the foundation immediately after the particular time, and

(B) who immediately after the person's last contribution at or before the particular time, had contributed to the foundation amounts that were, in total, greater than 50% of the capital of the foundation immediately after the making of that last contribution, or

(ii) by a person, or by a group of persons that do not deal at arm's length with each other, if the person or any member of the group does not deal at arm's length with a person described in subparagraph (i);

(2) The portion of the definition "charitable organization" in subsection 149.1(1) of the Act before paragraph (a) is replaced by the following:

"charitable organization"

« oeuvre de bienfaisance »

"charitable organization" , at any particular time, means an organization, whether or not incorporated,

(3) Paragraphs (c) and (d) of the definition "charitable organization" in subsection 149.1(1) of the Act are replaced by the following:

(c) more than 50% of the directors, trustees, officers or like officials of which deal at arm's length with each other and with

(i)  each of the other directors, trustees, officers and like officials of the organization,

(ii)  each person described by subparagraph (d)(i) or (ii), and

(iii) each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm's length, if the group would, if it were a person, be a person described by subparagraph (d)(i), and

(d)  that is not, at the particular time, and would not at the particular time be, if the organization were a corporation, controlled directly or indirectly in any manner whatever

(i)  by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),

(A) who immediately after the particular time, has contributed to the organization amounts that are, in total, greater than 50% of the capital of the organization immediately after the particular time, and

(B) who immediately after the person's last contribution at or before the particular time, had contributed to the organization amounts that were, in total, greater than 50% of the capital of the organization immediately after the making of that last contribution, or

(ii) by a person, or by a group of persons that do not deal at arm's length with each other, if the person or any member of the group does not deal at arm's length with a person described in subparagraph (i) ;

(4) Paragraph (d) of the definition "enduring property" in subsection 149.1(1) of the English version of the Act, as it read immediately before its repeal by subsection 37(1) of the Sustaining Canada's Economic Recovery Act , is replaced by the following:

(d) a gift received by the registered charity as a transferee from an original recipient charity or another transferee of a property that was, before that gift was so received, an enduring property of the original recipient charity or of the other transferee because of paragraph (a) or (c) or this paragraph, or property substituted for the gift, if, in the case of a property that was an enduring property of an original recipient charity because of paragraph (c) , the gift is subject to the same terms and conditions under the trust or direction as applied to the original recipient charity;

(5) Subsection 149.1(2) of the Act is amended by striking out "or" at the end of paragraph (a), by adding "or" at the end of paragraph (b) and by adding the following after paragraph (b):

(c) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift.

(6) Subsection 149.1(3) of the Act is amended by adding the following after paragraph (b):

(b.1) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift;

(7) Subsection 149.1(4) of the Act is amended by adding the following after paragraph (b):

(b.1) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift;

(8) The portion of subsection 149.1(9) of the Act after paragraph (b), as it read immediately before its repeal by subsection 37(8) of the Sustaining Canada's Economic Recovery Act , is replaced by the following:

is , notwithstanding subsection (8), deemed to be income of the charity for, and the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in, its taxation year in which the period referred to in paragraph (a) expires or the time referred to in paragraph (b) occurs, as the case may be.

(9) Subsection (1) is deemed to have come into force on January 1, 2000, except that, in respect of a foundation that has not been designated before 2000 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition "registered charity" in subsection 248(1) of the Act, subparagraph (a)(iii) and paragraph (b) of the definition "public foundation" in subsection 149.1(1) of the Act, as enacted by subsection (1), are, in their application before the earlier of the day, if any, on which the foundation is designated after 1999 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act and January 1, 2005, to be read

(a) without reference to "(other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l))"; and

(b) as if the references to "50%" in paragraph (b) of that definition were references to "75%".

(10) Subsections (2) and (3) are deemed to have come into force on January 1, 2000, except that, in respect of a charitable organization that has not been designated before 2000 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act , chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition "registered charity" in subsection 248(1) of the Act, subparagraphs (c)(ii) and (iii) of the definition "charitable organization" in subsection 149.1(1) of the Act, as enacted by subsection (3), apply after the earlier of the day, if any, on which the organization is designated after 1999 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act and December 31, 2004.

(11) Subsection (4) applies to taxation years that begin after March 22, 2004 but that end before March 4, 2010. For greater certainty, paragraph (d) of the definition "enduring property" in subsection 149.1(1) of the English version of the Act, as enacted by subsection (4), is deemed to have been repealed in respect of taxation years that end on or after March 4, 2010.

(12) Subsections (5) to (7) apply to gifts made after December 20, 2002.

(13) Subsection (8) is deemed to have come into force on December 21, 2002 but it applies only to taxation years that end before March 4, 2010. For greater certainty, subsection 149.1(9) of the Act, as enacted by subsection (8), is deemed to have been repealed in respect of taxation years that end on or after March 4, 2010.

(14) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A in the definition "disbursement quota" in subsection 149.1(1) of the Act before paragraph (a) is to be read as follows:

A

is 80% of the total of all amounts each of which is the eligible amount of a gift for which the foundation issued a receipt described in subsection 110.1(2) or 118.1(2) in its immediately preceding taxation year, other than

(15) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A.1 in the definition "disbursement quota" in subsection 149.1(1) of the Act before paragraph (a) is to be read as follows:

A.1

is 80% of the total of all amounts each of which is the eligible amount of a gift received in a preceding taxation year, to the extent that the eligible amount

(16) An application referred to in subsection 149.1(6.3) of the Act, in respect of one or more taxation years after 1999, may be made after 1999 and before the 90th day after the day on which this Act receives royal assent. If a designation referred to in that subsection for any of those taxation years is made in response to the application, the charity is deemed to be registered as a charitable organization, a public foundation or a private foundation, as the case may be, for the taxation years that the Minister of National Revenue specifies.

309. (1) Subsections 152(3.4) and (3.5) of the Act are repealed.

(2) Subsection 152(4.1) of the Act is replaced by the following:

If waiver revoked

(4.1) If the Minister would, but for this subsection, be entitled to reassess, make an additional assessment or assess tax, interest or penalties by virtue only of the filing of a waiver under subparagraph (4)(a)(ii) or paragraph (4)(c) , the Minister may not make such a reassessment, additional assessment or assessment after the day that is six months after the date on which a notice of revocation of the waiver in prescribed form is filed.

(3) Subsection 152(4.3) of the Act is replaced by the following:

Consequential assessment

(4.3) Notwithstanding subsections (4) , (4.1) and (5) , if the result of an assessment or a decision on an appeal is to change a particular balance of a taxpayer for a particular taxation year, the Minister may, or if the taxpayer so requests in writing, shall, before the later of the expiration of the normal reassessment period in respect of a subsequent taxation year and the end of the day that is one year after the day on which all rights of objection and appeal expire or are determined in respect of the particular year, reassess the tax, interest or penalties payable by the taxpayer , redetermine an amount deemed to have been paid or to have been an overpayment by the taxpayer or modify the amount of a refund or other amount payable to the taxpayer, under this Part in respect of the subsequent taxation year, but only to the extent that the reassessment, redetermination or modification can reasonably be considered to relate to the change in the particular balance of the taxpayer for the particular year.

(4) Paragraph 152(6)(c.1) of the Act is repealed.

(5) Paragraph 152(6)(e) of the Act is repealed.

(6) Section 152 of the Act is amended by adding the following after subsection (6.2):

Reassessment for section 119 credit

(6.3) If a taxpayer has filed for a particular taxation year the return of income required by section 150 and an amount is subsequently claimed by the taxpayer, or on the taxpayer's behalf, for the particular year as a deduction under section 119 in respect of a disposition in a subsequent taxation year, and the taxpayer files with the Minister a prescribed form amending the return on or before the filing-due date of the taxpayer for the subsequent taxation year, the Minister shall reassess the taxpayer's tax for any relevant taxation year (other than a taxation year preceding the particular taxation year) in order to take into account the deduction claimed.

(7) Subsection (1) applies in respect of forms filed after March 20, 2003.

(8) Subsection (3) applies to reassessments, redeterminations and modifications in respect of taxation years that relate to changes in balances for other taxation years as a result of assessments made, or decisions on appeal rendered, after November 5, 2010.

(9) Subsection (4) applies to taxation years that end after October 1, 1996.

(10) Subsection (5) applies to taxation years that begin after October 31, 2011.

(11) Subsection (6) applies in respect of particular taxation years that end after October 1, 1996. However, if a prescribed form referred to in subsection 152(6.3) of the Act, as enacted by subsection (6), is filed with the Minister on or before the filing-due date of the taxpayer for the taxation year that includes the day on which this Act receives royal assent, the form is deemed to have been filed with the Minister on a timely basis.

310. (1) Paragraph 153(1)(d.1) of the Act is replaced by the following:

(d.1) an amount described in subparagraph 56(1)(a)(iv) or (vii) ,

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

311. (1) Paragraphs 157(1.4)(a) and (b) of the Act are replaced by the following:

(a) if the corporation is not associated with another corporation in the particular taxation year, the amount that is the corporation's taxable capital employed in Canada (for the purpose of this subsection , within the meaning assigned by section 181.2 or 181.3, as the case may be ) for the particular taxation year; or

(b) if the corporation is associated with another corporation in the particular taxation year, the amount that is the total of all amounts each of which is the taxable capital employed in Canada of the corporation for the particular taxation year or the taxable capital employed in Canada of a corporation with which it is associated in the particular taxation year for a taxation year of that other corporation that ends in the particular taxation year.

(2) Paragraph 157(3)(c) of the Act is replaced by the following:

(c) if the corporation is a mutual fund corporation, 1/12 of the total of

(i) the corporation's capital gains refund (within the meaning assigned by section 131) for the year, and

(ii) the amount that, because of subsection 131(5) or (11) , is the corporation's dividend refund (within the meaning assigned by section 129) for the year,

(3) Subsection (1) applies to taxation years that begin after 2007.

(4) Subsection (2) applies to the 1999 and subsequent taxation years.

312. (1) Subsection 159(3) of the Act is replaced by the following:

Personal liability

(3) If a legal representative (other than a trustee in bankruptcy) of a taxpayer distributes to one or more persons property in the possession or control of the legal representative, acting in that capacity, without obtaining a certificate under subsection (2) in respect of the amounts referred to in that subsection,

(a)  the legal representative is personally liable for the payment of those amounts to the extent of the value of the property distributed;

(b)  the Minister may at any time assess the legal representative in respect of any amount payable because of this subsection; and

(c)  the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it had been made under section 152 in respect of taxes payable under this Part .

(2) Subsection (1) applies to assessments made after December 20, 2002.

313. (1) The portion of subsection 160(1) of the Act after subparagraph (e)(i) is replaced by the following:

(ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection .

(2) The portion of subsection 160(1.1) of the Act after the description of B is replaced by the following:

but nothing in this subsection limits the liability of the other taxpayer under any other provision of this Act or of any person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection .

(3) Paragraphs 160(1.2)(a) and (b) of the Act are replaced by the following:

(a) carried on a business that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual's split income for the year,

(b) was a specified shareholder of a corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual's split income for the year,

(4) Paragraph 160(1.2)(d) of the Act is replaced by the following:

(d) was a shareholder of a professional corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual's split income for the year, or

(5) Subsection 160(1.2) of the Act is amended by adding the following after paragraph (e):

but nothing in this subsection limits the liability of the specified individual under any other provision of this Act or of the parent for the interest that the parent is liable to pay under this Act on an assessment in respect of the amount that the parent is liable to pay because of this subsection.

(6) Subsection 160(2) of the Act is replaced by the following:

Assessment

(2) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part .

(7) Subsections (1), (2), (5) and (6) apply in respect of assessments made after December 20, 2002.

(8) Subsections (3) and (4) are deemed to have come into force on December 21, 2002.

314. (1) Subsection 160.1(3) of the Act is replaced by the following:

Assessment

(3) The Minister may at any time assess a taxpayer in respect of any amount payable by the taxpayer because of subsection (1) or (1.1) or for which the taxpayer is liable because of subsection (2.1) or (2.2), and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply , with any modifications that the circumstances require, in respect of an assessment made under this section, as though it were made under section 152 in respect of taxes payable under this Part, except that no interest is payable on an amount assessed in respect of an excess referred to in subsection (1) that can reasonably be considered to arise as a consequence of the operation of section 122.5 or 122.61 .

(2) Subsection (1) applies to assessments made after December 20, 2002.

315. (1) The portion of subsection 160.2(1) of the Act after paragraph (b) is replaced by the following:

the taxpayer and the last annuitant under the plan are jointly and severally, or solidarily, liable to pay a part of the annuitant's tax under this Part for the year of the annuitant's death equal to that proportion of the amount by which the annuitant's tax for the year is greater than it would have been if it were not for the operation of subsection 146(8.8) that the total of all amounts each of which is an amount determined under paragraph (b) in respect of the taxpayer is of the amount included in computing the annuitant's income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection .

(2) The portion of subsection 160.2(2) of the Act after paragraph (b) is replaced by the following:

the taxpayer and the annuitant are jointly and severally, or solidarily, liable to pay a part of the annuitant's tax under this Part for the year of the annuitant's death equal to that proportion of the amount by which the annuitant's tax for the year is greater than it would have been if it were not for the operation of subsection 146.3(6) that the amount determined under paragraph (b) is of the amount included in computing the annuitant's income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection .

(3) Section 160.2 of the Act is amended by adding the following after subsection (2):

Joint and several liability in respect of a qualifying trust annuity

(2.1) If a taxpayer is deemed by section 75.2 to have received at any time an amount out of or under an annuity that is a qualifying trust annuity with respect to the taxpayer, the taxpayer, the annuitant under the annuity and the policyholder are jointly and severally, or solidarily, liable to pay the part of the taxpayer's tax under this Part for the taxation year of the taxpayer that includes that time that is equal to the amount, if any, determined by the formula

A – B
where
A

is the amount of the taxpayer's tax under this Part for that taxation year; and

B

is the amount that would be the taxpayer's tax under this Part for that taxation year if no amount were deemed by section 75.2 to have been received by the taxpayer out of or under the annuity in that taxation year.

No limitation on liability

(2.2) Subsection (2.1) limits neither

(a) the liability of the taxpayer referred to in that subsection under any other provision of this Act; nor

(b) the liability of an annuitant or policyholder referred to in that subsection for the interest that the annuitant or policyholder is liable to pay under this Act on an assessment in respect of the amount that the annuitant or policyholder is liable to pay because of that subsection.

(4) Subsection 160.2(3) of the Act is replaced by the following:

Assessment

(3) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply , with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part .

(5) Section 160.2 of the Act is amended by adding the following after subsection (4):

Rules applicable — qualifying trust annuity

(5) If an annuitant or policyholder has, because of subsection (2.1), become jointly and severally, or solidarily, liable with a taxpayer in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:

(a) a payment by the annuitant on account of the annuitant's liability, or by the policyholder on account of the policyholder's liability, shall to the extent of the payment discharge their liability, but

(b) a payment by the taxpayer on account of the taxpayer's liability only discharges the annuitant's and the policyholder's liability to the extent that the payment operates to reduce the taxpayer's liability to an amount less than the amount in respect of which the annuitant and the policyholder were, by subsection (2.1), made liable.

(6) Subsections (1), (2) and (4) apply to assessments made after December 20, 2002.

(7) Subsections (3) and (5) apply to assessments made after 2005.

316. (1) Subsections 160.3(1) and (2) of the Act are replaced by the following:

Liability in respect of amounts received out of or under RCA trust

160.3 (1) If an amount required to be included in the income of a taxpayer because of paragraph 56(1)(x) is received by a person with whom the taxpayer is not dealing at arm's length, that person is jointly and severally, or solidarily, liable with the taxpayer to pay a part of the taxpayer's tax under this Part for the taxation year in which the amount is received equal to the amount by which the taxpayer's tax for the year exceeds the amount that would be the taxpayer's tax for the year if the amount had not been received, but nothing in this subsection limits the liability of the taxpayer under any other provision of this Act or of the person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection .

Assessment

(2) The Minister may at any time assess a person in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply , with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part .

(2) Subsection (1) applies to assessments made after December 20, 2002.

317. (1) Subsection 160.4(1) of the Act is replaced by the following:

Liability in respect of transfers by insolvent corporations

160.4 (1) If property is transferred at any time by a corporation to a taxpayer with whom the corporation does not deal at arm's length at that time and the corporation is not entitled because of subsection 61.3(3) to deduct an amount under section 61.3 in computing its income for a taxation year because of the transfer or because of the transfer and one or more other transactions, the taxpayer is jointly and severally, or solidarily, liable with the corporation to pay the lesser of the corporation's tax payable under this Part for the year and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the corporation under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection .

(2) The portion of subsection 160.4(2) of the Act after paragraph (c) is replaced by the following:

the transferee is jointly and severally, or solidarily, liable with the transferor and the debtor to pay an amount of the debtor's tax under this Part equal to the lesser of the amount of that tax that the transferor was liable to pay at that time and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the debtor or the transferor under any provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection .

(3) Subsection 160.4(3) of the Act is replaced by the following:

Assessment

(3) The Minister may at any time assess a person in respect of any amount payable by the person because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section, as though it had been made under section 152 in respect of taxes payable under this Part .

(4) Subsections (1) to (3) apply to assessments made after December 20, 2002.

318. (1) Subparagraph 161(7)(a)(vi) of the Act is repealed.

(2) Paragraph 161(11)(b.1) of the Act is replaced by the following:

(b.1) in the case of a penalty under subsection 237.1(7.4) or 237.3(8) , from the day on which the taxpayer became liable to the penalty to the day of payment; and

(3) Subsection (1) applies to taxation years that begin after October 31, 2011.

(4) Subsection (2) applies in respect of avoidance transactions that are entered into after 2010 or that are part of a series of transactions that began before 2011 and is completed after 2010.

319. (1) Subsection 162(6) of the French version of the Act is replaced by the following:

Défaut de fournir son numéro d'identification

(6) Toute personne ou société de personnes qui ne fournit pas son numéro d'assurance sociale ou son numéro d'entreprise à la personne — tenue par la présente loi ou par une disposition réglementaire de remplir une déclaration de renseignements devant comporter ce numéro — qui lui enjoint de le fournir est passible d'une pénalité de 100 $ pour chaque défaut à moins que, dans les 15 jours après avoir été enjoint de fournir ce numéro, elle ait demandé qu'un numéro d'assurance sociale ou un numéro d'entreprise lui soit attribué et qu'elle l'ait fourni à cette personne dans les 15 jours après qu'elle l'a reçu.

(2) Subsection (1) is deemed to have come into force on June 19, 1998.

320. (1) Paragraph 163(2)(c.1) of the Act is replaced by the following:

(c.1) the amount, if any, by which

(i) the total of all amounts each of which is an amount that would be deemed by section 122.5 to be paid by that person during a month specified for the year or, where that person is the qualified relation of an individual in relation to that specified month (within the meaning assigned by subsection 122.5(1)), by that individual, if that total were calculated by reference to the information provided in the person's return of income (within the meaning assigned by subsection 122.5(1)) for the year

exceeds

(ii) the total of all amounts each of which is an amount that is deemed by section 122.5 to be paid by that person or by an individual of whom the person is the qualified relation in relation to a month specified for the year (within the meaning assigned to subsection 122.5(1)) ,

(2) Subsection 163(2.9) of the Act is replaced by the following:

Partnership liable to penalty

(2.9) If a partnership is liable to a penalty under subsection (2.4) or section 163.2, 237.1 or 237.3 , sections 152, 158 to 160.1, 161 and 164 to 167 and Division J apply, with any changes that the circumstances require, in respect of the penalty as if the partnership were a corporation.

(3) Subsection (1) applies to amounts deemed to be paid during months specified for the 2001 and subsequent taxation years.

(4) Subsection (2) applies in respect of avoidance transactions that are entered into after 2010 or that are part of a series of transactions that began before 2011 and is completed after 2010.

321. (1) Section 164 of the Act is amended by adding the following after subsection (1.5):

When subsection (1.52) applies

(1.51) Subsection (1.52) applies to a taxpayer for a taxation year if, at any time after the beginning of the year

(a) the taxpayer has, in respect of the tax payable by the taxpayer under this Part (and, if the taxpayer is a corporation, Parts I.3, VI, VI.1 and XIII.1) for the year, paid under any of sections 155 to 157 one or more instalments of tax;

(b) it is reasonable to conclude that the total amount of those instalments exceeds the total amount of taxes that will be payable by the taxpayer under those Parts for the year; and

(c) the Minister is satisfied that the payment of the instalments has caused or will cause undue hardship to the taxpayer.

Instalment refund

(1.52) If this subsection applies to a taxpayer for a taxation year, the Minister may refund to the taxpayer all or any part of the excess referred to in paragraph (1.51)(b).

Penalties, interest not affected

(1.53) For the purpose of the calculation of any penalty or interest under this Act, an instalment is deemed not to have been paid to the extent that all or any part of the instalment can reasonably be considered to have been refunded under subsection (1.52).

(2) Subsection 164(1.6) of the Act is repealed.

(3) The portion of subsection 164(3) of the Act before paragraph (a) is replaced by the following:

Interest on refunds and repayments

(3) If , under this section, an amount in respect of a taxation year (other than an amount, or a portion of the amount , that can reasonably be considered to arise from the operation of section 122.5 or 122.61) is refunded or repaid to a taxpayer or applied to another liability of the taxpayer, the Minister shall pay or apply interest on it at the prescribed rate for the period that begins on the day that is the latest of the days referred to in the following paragraphs and that ends on the day on which the amount is refunded, repaid or applied:

(4) Paragraph 164(5)(g) of the Act is repealed.

(5) Subsection (2) is deemed to have come into force on March 21, 2003.

(6) Subsection (3) applies in respect of forms filed after March 20, 2003.

(7) Subsection (4) applies to taxation years that begin after October 31, 2011.

322. Subsection 170(2) of the Act is repealed.

323. Section 176 of the Act is repealed.

324. (1) Paragraph (g) of the definition "financial institution" in subsection 181(1) of Act is replaced by the following:

(g) a corporation

(i) listed in the schedule, or

(ii) all or substantially all of the assets of which are shares or indebtedness of financial institutions to which the corporation is related;

(2) Subsection (1) is deemed to have come into force on December 23, 1997, but in applying paragraph (g) of the definition "financial institution" in subsection 181(1) of the Act, as enacted by subsection (1), in respect of taxation years that end before December 20, 2002, that paragraph is to be read as follows:

(g) prescribed, or listed in the schedule;

325. (1) Subparagraph 181.2(3)(g)(i) of the Act is replaced by the following:

(i) the total of all amounts (other than amounts owing to the member or to other corporations that are members of the partnership) that would, if this paragraph and paragraphs (b) to (d) and (f) applied to partnerships in the same way that they apply to corporations, be determined under those paragraphs in respect of the partnership at the end of its last fiscal period that ends at or before the end of the year

(2) Paragraph 181.2(3)(g) of the Act, as amended by subsection (1), is replaced by the following:

(g) the total of all amounts, each of which is the amount, if any, in respect of a partnership in which the corporation held a membership interest at the end of the year, either directly or indirectly through another partnership, determined by the formula

(A – B) × C/D
where
A

is the total of all amounts that would be determined under paragraphs (b) to (d) and (f) in respect of the partnership for its last fiscal period that ends at or before the end of the year if

(a) those paragraphs applied to partnerships in the same manner that they apply to corporations, and

(b) those amounts were computed without reference to amounts owing by the partnership

(i) to any corporation that held a membership interest in the partnership either directly or indirectly through another partnership, or

(ii) to any partnership in which a corporation described in subparagraph (i) held a membership interest either directly or indirectly through another partnership,

B

is the partnership's deferred unrealized foreign exchange losses at the end of the period,

C

is the share of the partnership's income or loss for the period to which the corporation is entitled either directly or indirectly through another partnership, and

D

is the partnership's income or loss for the period

(3) Paragraph 181.2(3)(i) of the Act is replaced by the following:

(i) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,

(4) Paragraph 181.2(4)(d.1) of the Act is replaced by the following:

(d.1) a loan or advance to, or a bond, debenture, note, mortgage, hypothecary claim or similar obligation of, a partnership each member of which was, throughout the year,

(i)  another corporation (other than a financial institution) that was not exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)), or

(ii) another partnership described in this paragraph,

(5) Subsection 181.2(5) of the Act is replaced by the following:

Value of interest in partnership

(5) For the purposes of subsection (4) and this subsection , the carrying value at the end of a taxation year of an interest of a corporation or of a partnership (each of which is referred to in this subsection as the "member") in a particular partnership is deemed to be the member's specified proportion, for the particular partnership's last fiscal period that ends at or before the end of the taxation year, of the amount that would, if the particular partnership were a corporation, be the particular partnership's investment allowance at the end of that fiscal period .

(6) Subsections (1) and (5) apply to taxation years that begin after December 20, 2002.

(7) Subsection (2) applies to the 2012 and subsequent taxation years.

(8) Subsection (3) applies to taxation years that begin after 1995.

(9) Subsection (4) applies to the 2004 and subsequent taxation years.

(10) In applying paragraphs 181.2(4)(b), (c) and (d.1) of the Act to a particular corporation in respect of an asset that is a loan or an advance to, or an obligation of, another corporation or partnership that the particular corporation holds at the end of a taxation year of the particular corporation that began before December 20, 2002, those paragraphs are to be read without reference to "(other than a financial institution)" and to "(other than financial institutions)" if, at the end of the taxation year,

(a) the particular corporation deals at arm's length with the other corporation or the partnership, as the case may be; and

(b) the other corporation is a financial institution, or the partnership is not a partnership described in paragraph 181.2(4)(d.1) of the Act, as the case may be, solely because of section 324 and subsections 366 (1) and (3) of this Act.

326. (1) Subparagraph 181.3(3)(a)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year, and

(2) Subparagraph 181.3(3)(b)(iv) of the Act is replaced by the following:

(iv) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;

(3) Subparagraph 181.3(3)(c)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,

(4) Paragraph 181.3(3)(c) of the Act is amended by striking out "and" at the end of subparagraph (v), by adding "and" at the end of subparagraph (vi) and by adding the following after subparagraph (vi):

(vii) any amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under subparagraph (iii) in respect of a claims reserve;

(5) Subparagraph 181.3(3)(d)(iv) of the Act is amended by striking out "and" at the end of clause (D) and by adding the following after clause (E):

(F) the total of all amounts each of which is an amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under clause (A) in respect of a claims reserve; and

(6) Subsections (1) to (5) apply to taxation years that begin after 1995.

327. (1) Subsections 184(2) to (5) of the Act are replaced by the following:

Tax on excessive elections

(2) If a corporation has elected in accordance with subsection 83(2), 130.1(4) or 131(1) in respect of the full amount of any dividend payable by it on shares of any class of its capital stock (in this section referred to as the "original dividend") and the full amount of the original dividend exceeds the portion of the original dividend deemed by that subsection to be a capital dividend or capital gains dividend, as the case may be, the corporation shall, at the time of the election, pay a tax under this Part equal to 3/5 of the excess.

Election to treat excess as separate dividend

(3) If, in respect of an original dividend payable at a particular time, a corporation would, but for this subsection, be required to pay a tax under this Part in respect of an excess referred to in subsection (2), and the corporation elects in prescribed manner on or before the day that is 90 days after the day of sending of the notice of assessment in respect of the tax that would otherwise be payable under this Part, the following rules apply:

(a) the portion of the original dividend deemed by subsection 83(2), 130.1(4) or 131(1) to be a capital dividend or capital gains dividend, as the case may be, is deemed for the purposes of this Act to be the amount of a separate dividend that became payable at the particular time;

(b) if the corporation identifies in its election any part of the excess, that part is, for the purposes of any election under subsection 83(2), 130.1(4) or 131(1) in respect of that part , and, where the corporation has so elected, for all purposes of this Act, deemed to be the amount of a separate dividend that became payable immediately after the particular time;

(c) the amount by which the excess exceeds any portion deemed by paragraph (b) to be a separate dividend for all purposes of this Act is deemed to be a separate taxable dividend that became payable at the particular time; and

(d) each person who held any of the issued shares of the class of shares of the capital stock of the corporation in respect of which the original dividend was paid is deemed

(i) not to have received any portion of the original dividend, and

(ii) to have received, at the time that any separate dividend determined under any of paragraphs (a) to (c) became payable, the proportion of that dividend that the number of shares of that class held by the person at the particular time is of the number of shares of that class outstanding at the particular time except that, for the purpose of Part ?XIII, the separate dividend is deemed to be paid on the day that the election in respect of this subsection is made.

Concurrence with election

(4) An election under subsection (3) is valid only if

(a) it is made with the concurrence of the corporation and all its shareholders

(i) who received or were entitled to receive all or any portion of the original dividend, and

(ii) whose addresses were known to the corporation; and

(b) either

(i) it is made on or before the day that is 30 months after the day on which the original dividend became payable, or

(ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation's election into account.

Exception for non-taxable shareholders

(5) If each person who, in respect of an election made under subsection (3), is deemed by subsection (3) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,

(a) subsection (4) does not apply to the election; and

(b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend became payable.

(2) Subsection (1) applies to original dividends paid by a corporation after its 1999 taxation year, except that,

(a) the reference to "sending" in subsection 184(3) of the Act, as enacted by subsection (1), is to be read as a reference to "mailing" for notices of assessments sent before December 15, 2010; and

(b) for the purpose of subsection 184(5) of the Act, as enacted by subsection (1), an election made before the 90th day after the day on which this Act receives royal assent is deemed to have been made in a timely manner.

328. In applying the description of B in paragraph 188(1)(a) of the Act in respect of gifts made to a charity after December 20, 2002, to the extent that those gifts are relevant in respect of notices of intention to revoke the registration of the charity and certificates under subsection 5(1) of the Charities Registration (Security Information) Act that are issued by the Minister of National Revenue before June 13, 2005, that description is to be read as follows:

B

is the total of all amounts each of which is the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in the period (in this section referred to as the "winding-up period") that begins on the valuation day and ends immediately before the payment day, or an amount received by it in the winding-up period from a registered charity,

329. (1) Paragraph 190.1(3)(a) of the Act is replaced by the following:

(a) the corporation's tax payable under Part I for the year; and

(2) The definition "unused Part I tax credit" in subsection 190.1(5) of the Act is replaced by the following:

"unused Part I tax credit"

« crédit d'impôt de la partie I inutilisé »

"unused Part I tax credit" , of a corporation for a taxation year, means the amount, if any, by which

(a) the corporation's tax payable under Part I for the year

exceeds

(b) the amount that would, but for subsection (3), be its tax payable under this Part for the year;

(3) Subsections (1) and (2) apply to taxation years that begin after 2007.

330. (1) Subparagraph 190.13(a)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) ;

(2) Subparagraph 190.13(b)(iv) of the Act is replaced by the following:

(iv) the amount of any deficit deducted in computing its shareholders' equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) ;

(3) Subsections (1) and (2) apply to taxation years that begin after 1995.

331. (1) Section 190.16 of the Act and the heading before it are repealed.

(2) Subsection (1) applies to taxation years that begin after October 31, 2011.

332. (1) Section 191 of the Act is amended by adding the following after subsection (5):

Excluded dividend — partner

(6) If at any time a corporation pays a dividend to a partnership, the corporation is, for the purposes of this subsection and paragraph (a) of the definition "excluded dividend" in subsection (1), deemed to have paid at that time to each member of the partnership a dividend equal to the amount determined by the formula

A × B
where
A

is the amount of the dividend paid to the partnership; and

B

is the member's specified proportion for the last fiscal period of the partnership that ended before that time (or, if the partnership's first fiscal period includes that time, for that first fiscal period).

(2) Subsection (1) applies to dividends paid after December 20, 2002.

333. (1) Subparagraph 191.1(1)(a)(i) of the Act is replaced by the following:

(i) the amount determined by multiplying the amount by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on short-term preferred shares exceeds the corporation's dividend allowance for the year, by

(A) 50% for dividends paid in a taxation year that ends before 2010,

(B) 45% for dividends paid in a taxation year that ends after 2009 and before 2012,

(C) 40% for dividends paid in a taxation year that ends after 2011,

(2) Subsection (1) applies to the 2003 and subsequent taxation years.

334. Section 200 of the French version of the Act is replaced by the following:

Distribution assimilée à une disposition

200. Pour l'application de la présente partie, la distribution par une fiducie d'un placement non admissible à un bénéficiaire de la fiducie est réputée être une disposition du placement, et le produit de disposition du placement est réputé être sa juste valeur marchande au moment de la distribution .

335. (1) The definition "reserve" in subsection 204.8(1) of the Act is replaced by the following:

"reserve"

« réserve »

"reserve" means

(a)  property described in any of paragraphs (a), (b), (c), (f) and (g) of the definition "qualified investment" in section 204, and

(b)  deposits with a credit union that is a "member institution" in relation to a deposit insurance corporation (within the meaning assigned by subsection 137.1(5));

(2) Subsection 204.8(1) of the Act is amended by adding the following in alphabetical order:

"terminating corporation"

« société sortante »

"terminating corporation" in respect of a particular corporation means a predecessor corporation in circumstances where

(a) subsection 204.85(3) applies to a merger of the particular corporation and the predecessor corporation,

(b) Class A shares of the particular corporation have been issued to the predecessor corporation in exchange for property of the predecessor corporation, and

(c) within a reasonable period of time after the exchange, Class A shareholders of the predecessor corporation receive all of the Class A shares of the particular corporation issued to the predecessor corporation in the course of a wind-up of the predecessor corporation.

(3) Paragraph 204.8(2)(b) of the Act is replaced by the following:

(b) at the time it begins to wind-up, and for the purpose of this paragraph a corporation is not to be considered to have begun to wind up solely because it discontinues its venture capital business under prescribed wind-up rules;

(4) Subsection (1) applies to taxation years that end after 2006.

(5) Subsection (2) is deemed to have come into force on January 1, 2005.

(6) Subsection (3) is deemed to have come into force on ANNOUNCEMENT DATE.

336. (1) The portion of clause 204.81(1)(c)(ii)(A) of the Act before subclause (I) is replaced by the following:

(A) Class A shares that are issuable only to individuals (other than trusts), terminating corporations in respect of the corporation and trusts governed by registered retirement savings plans or by TFSAs and that entitle their holders

(2) Subparagraph 204.81(1)(c)(iv) of the Act is replaced by the following:

(iv) the corporation shall not reduce its paid-up capital in respect of a class of shares (other than Class B shares) otherwise than by way of

(A)  a redemption of shares of the corporation, or

(B) a reduction in its paid-up capital attributable to a class of shares for which no shares have been issued in the eight-year period ending at the time of the reduction,

(3) Clause 204.81(1)(c)(v)(E) of the Act is replaced by the following:

(E) the redemption occurs

(I)  more than eight years after the day on which the share was issued, or

(II) if the day that is eight years after that issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day, or

(4) Subparagraph 204.81(1)(c)(vii) of the Act is amended by adding the following after clause (A):

(B) the transfer occurs more than eight years after the day on which the share was issued,

(5) Section 204.81 of the Act is amended by adding the following after subsection (1):

Corporations incorporated before March 6, 1996

(1.1) In applying clause (1)(c)(v)(E) in relation to any time before 2004 in respect of a corporation incorporated before March 6, 1996, the references in that clause to "eight" are replaced with references to "five" if, at that time, the relevant statements in the corporation's articles refer to "five".

Deemed provisions in articles

(1.2) In applying subsection (1) in relation to any time before 2004, to a corporation incorporated before February 7, 2000, if the articles of the corporation comply with subclause (1)(c)(v)(E)(I) (as modified, where relevant, by subsection (1.1)), those articles are deemed to provide the statement required by subclause (1)(c)(v)(E)(II).

(6) Section 204.81 of the Act is amended by adding the following after subsection (8.2):

Discontinuance of provincial program

(8.3) If a corporation is a prescribed labour-sponsored venture capital corporation because of the laws of a province, which province has discontinued its labour-sponsored venture capital corporation credit program, notifies the Minister in writing of its intent to revoke its registration under this Part, and meets the requirements under prescribed wind-up rules, then the following rules apply:

(a) the corporation shall not, on or after the day the notice is provided to the Minister (referred to in this subsection and subsection (8.4) as the "notification date"), issue any tax credit certificates, other than duplicate certificates to replace certificates issued before that day;

(b) section 204.841 does not apply on the discontinuance of its venture capital business;

(c) subsections 204.82(1) to (4) do not apply to taxation years of the corporation that begin on or after the notification date; and

(d) subsection 204.83(1) does not apply in respect of a period, referred to in that subsection as the "second period", that ends after the notification date.

Discontinuance of provincial program

(8.4) Subsection (8.3) applies to a corporation only if,

(a) on the notification date, the percentage determined in respect of the corporation by the following formula is less than 20 per cent:

A/(B – C) × 100
where
A

is the amount of equity capital received by the corporation on the issue of Class A shares that were issued in the 24 months immediately preceding the notification date and are still outstanding on that date,

B

is the total amount of equity capital received by the corporation on the issue of Class A shares that are still outstanding on the notification date, and

C

is the amount of equity capital received by the corporation on the issue of Class A shares that, as of the notification date, have been outstanding for at least eight years.

(b) the corporation has revoked its registration before the third anniversary of the notification date.

(7) Subsection (1) is deemed to have come into force on January 1, 2005.

(8) Subsections (2) and (6) are deemed to have come into force on ANNOUNCEMENT DATE.

(9) Subsection (3) applies after February 6, 2000 to corporations incorporated at any time.

(10) Subsection (4) applies as of ANNOUNCEMENT DATE to corporations incorporated after March 5, 1996.

(11) Subsection (5) is deemed to have come into force on February 7, 2000.

337. (1) The portion of subsection 204.9(5) of the French version of the Act before paragraph (b) is replaced by the following:

Transferts entre régimes

(5) Pour l'application de la présente partie, dans le cas où un bien détenu par une fiducie régie par un régime enregistré d'épargne-études (appelé « régime cédant » au présent paragraphe) est distribué , à un moment donné, à une fiducie régie par un autre semblable régime (appelé « régime cessionnaire » au présent paragraphe), les règles ci-après s'appliquent :

a) sauf disposition contraire énoncée aux alinéas b) et c), le montant de la distribution est réputé ne pas avoir été versé au régime cessionnaire;

(2) The portion of paragraph 204.9(5)(c) of the French version of the Act before subparagraph (i) is replaced by the following:

c) sauf pour l'application du présent paragraphe à une distribution effectuée après le moment donné, du paragraphe (4) à un remplacement de bénéficiaire effectué après ce moment et du paragraphe 204.91(3) à des faits s'étant produits après ce moment, l'alinéa b) ne s'applique pas par suite de la distribution si, selon le cas :

(3) Paragraph 204.9(5)(d) of the French version of the Act is replaced by the following:

d) dans le cas où les sous-alinéas c)(i) ou (ii) s'appliquent à la distribution , le montant de la distribution est réputé ne pas avoir été retiré du régime cédant;

338. (1) The portion of subsection 204.94(2) of the Act before the formula is replaced by the following:

Charging provision

(2) Every person (other than a public primary caregiver that is exempt from tax under Part I) shall pay a tax under this Part for each taxation year equal to the amount determined by the formula

(2) Subsection (1) applies to the 2007 and subsequent taxation years.

339. (1) The definition "specified proportion" in subsection 206(1) of the Act, as it read before 2005, is repealed.

(2) In their application to months that end after December 20, 2002 and before 2005, subparagraphs (b)(i) to (iii) of the definition "cost amount" in subsection 206(1) of the Act are to be read as follows:

(i) after 2000 and at or before the end of the taxation year, by the trust in respect of the interest (otherwise than as proceeds of disposition of the interest), and

(ii) that has not been satisfied at or before that time by the issue of new units of the trust or by a payment of an amount by the trust;

(3) In its application to months that end after October 2003 and before 2005, paragraph (d.1) of the definition "foreign property" in subsection 206(1) of the Act, as it read immediately before it was repealed by S.C. 2005, c. 30, s. 14, is to be read as follows:

(d.1) any share (other than an excluded share) of the capital stock of, or any debt obligation (other than a debt obligation described in subparagraph (g)(iii)) issued by, a corporation (other than an investment corporation, a mutual fund corporation or a registered investment) that is a Canadian corporation, if shares of the corporation can reasonably be considered to derive their value, directly or indirectly, primarily from foreign property,

(4) In its application to months that end after October 2003 and before 2005, paragraph (g) of the definition "foreign property" in subsection 206(1) of the Act is to be read as follows:

(g) indebtedness of a non-resident person, other than

(i) indebtedness issued by an authorized foreign bank and payable at a branch in Canada of the bank,

(ii) indebtedness issued or guaranteed by

(A) the International Bank for Reconstruction and Development,

(B) the International Finance Corporation,

(C) the Inter-American Development Bank,

(D) the Asian Development Bank,

(E) the Caribbean Development Bank,

(F) the European Bank for Reconstruction and Development,

(G) the African Development Bank, or

(H) a prescribed person, or

(iii) a debt obligation that is fully secured by a mortgage, charge, hypothec or similar instrument in respect of real or immovable property situated in Canada or that would be fully secured were it not for a decline in the fair market value of the property after the debt obligation was issued,

(5) In its application to months that end after 1997 and before 2005, the portion of subsection 206(3.1) of the French version of the Act before paragraph (a) is to be read as follows:

(3.1) Pour ce qui est de l'application du sous-alinéa (2)a)(ii) à un moment donné ou postérieurement, lorsqu'un titre déterminé par rapport à un autre titre est acquis au moment donné par le contribuable mentionné au paragraphe (3.2) relativement au titre et que le titre est un bien étranger à ce moment, les règles ci-après s'appliquent :

(6) Subsection (1) is deemed to have come into force on December 21, 2002.

340. (1) Section 207.31 of the Act is replaced by the following:

Tax payable by recipient of an ecological gift

207.31 Any charity, municipality in Canada or municipal or public body performing a function of government in Canada (referred to in this section as the "recipient") that at any time in a taxation year, without the authorization of the Minister of the Environment or a person designated by that Minister, disposes of or changes the use of a property described in paragraph 110.1(1)(d) or in the definition "total ecological gifts" in subsection 118.1(1) and given to the recipient shall, in respect of the year, pay a tax under this Part equal to 50% of the amount that would be determined for the purposes of section 110.1 or 118.1, if this Act were read without reference to subsections 110.1(3) and 118.1(6), to be the fair market value of the property if the property were given to the recipient immediately before the disposition or change.

(2) Subsection (1) applies in respect of dispositions of or changes of use of property after July 18, 2005.

341. (1) Sections 210 and 210.1 of the Act are replaced by the following:

Definitions

210. (1) The following definitions apply in this Part.

"designated beneficiary"

« bénéficiaire étranger ou assimilé »

"designated beneficiary" , under a particular trust at any time, means a beneficiary, under the particular trust, who is at that time

(a) a non-resident person;

(b) a non-resident-owned investment corporation;

(c) a person who is, because of subsection 149(1), exempt from tax under Part I on all or part of their taxable income and who acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the particular trust except if

(i) the interest was, at all times after the later of October 1, 1987 and the day on which the interest was created, held by persons who were exempt from tax under Part I on all of their taxable income because of subsection 149(1), or

(ii) the person is a trust, governed by a registered retirement savings plan or a registered retirement income fund, who acquired the interest, directly or indirectly, from an individual or the spouse or common-law partner, or former spouse or common-law partner, of the individual who was, immediately after the interest was acquired, a beneficiary under the trust governed by the fund or plan;

(d) another trust (referred to in this paragraph as the "other trust") that is not a testamentary trust, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time

(i) a non-resident person,

(ii) a non-resident-owned investment corporation,

(iii) a trust that is not

(A) a testamentary trust,

(B) a mutual fund trust,

(C) a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, or

(D) a trust

(I) whose interest, at that time, in the other trust was held, at all times after the day on which the interest was created, either by it or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

(II) none of the beneficiaries under which is, at that time, a designated beneficiary under it, or

(iv) a person or partnership that

(A) is a designated beneficiary under the other trust because of paragraph (c) or (e), or

(B) would be a designated beneficiary under the particular trust because of paragraph (c) or (e) if, instead of being a beneficiary under the other trust, the person or partnership were at that time a beneficiary, under the particular trust, whose interest as a beneficiary under the particular trust were

(I) identical to its interest (referred to in this clause as the "particular interest") as a beneficiary under the other trust,

(II) acquired from each person or partnership from whom it acquired the particular interest, and

(III) held, at all times after the later of October 1, 1987 and the day on which the particular interest was created, by the same persons or partnerships that held the particular interest at those times; or

(e) a particular partnership any of the members of which is at that time

(i) another partnership, except if

(A) each such other partnership is a Canadian partnership,

(B) the interest of each such other partnership in the particular partnership is held, at all times after the day on which the interest was created, by the other partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

(C) the interest of each member, of each such other partnership, that is a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income was held, at all times after the day on which the interest was created, by that member or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

(D) the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

(ii) a non-resident person,

(iii) a non-resident-owned investment corporation,

(iv) another trust that is, under paragraph (d), a designated beneficiary of the particular trust or that would, under paragraph (d), be a designated beneficiary of the particular trust if the other trust were at that time a beneficiary under the particular trust whose interest as a beneficiary under the particular trust were

(A) acquired from each person or partnership from whom the particular partnership acquired its interest as a beneficiary under the particular trust, and

(B) held, at all times after the later of October 1, 1987 and the day on which the particular partnership's interest as a beneficiary under the particular trust was created, by the same persons or partnerships that held that interest of the particular partnership at those times, or

(v) a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income except if the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income.

"designated income"

« revenu de distribution »

"designated income" , of a trust for a taxation year, means the amount that would be the income of the trust for the year determined under section 3 if

(a) this Act were read without reference to subsections 104(6), (12) and (30);

(b) the trust had no income other than taxable capital gains from dispositions described in paragraph (c) and incomes from

(i) real or immovable properties in Canada (other than Canadian resource properties),

(ii) timber resource properties,

(iii) Canadian resource properties (other than properties acquired by the trust before 1972), and

(iv) businesses carried on in Canada;

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from

(i) dispositions of taxable Canadian property, and

(ii) dispositions of particular property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)), or property for which the particular property is substituted, that was transferred at any particular time to a particular trust in circumstances in which subsection 73(1) or 107.4(3) applied, if

(A) it is reasonable to conclude that the property was so transferred in anticipation that a person beneficially interested at the particular time in the particular trust would subsequently cease to reside in Canada, and a person beneficially interested at the particular time in the particular trust did subsequently cease to reside in Canada, or

(B) when the property was so transferred, the terms of the particular trust satisfied the conditions in subparagraph 73(1.01)(c)(i) or (iii), and it is reasonable to conclude that the transfer was made in connection with the cessation of residence, on or before the transfer, of a person who was, at the time of the transfer, beneficially interested in the particular trust and a spouse or common-law partner, as the case may be, of the transferor of the property to the particular trust; and

(d) the only losses referred to in paragraph 3(d) were losses from sources described in any of subparagraphs (b)(i) to (iv).

Tax not payable

(2)  No tax is payable under this Part for a taxation year by a trust that was throughout the year

(a) a testamentary trust;

(b) a mutual fund trust;

(c) exempt from tax under Part I because of subsection 149(1);

(d) a trust to which paragraph (a), (a.1) or (c) of the definition "trust" in subsection 108(1) applies; or

(e) non-resident.

(2) Subsection (1) applies to the 1996 and subsequent taxation years, except that paragraph (c) of the definition "designated income" in subsection 210(1) of the Act, as enacted by subsection (1), is to be read

(a) in respect of dispositions that occur after October 1, 1996 and before December 21, 2002, as follows:

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property; and

(b) in respect of dispositions that occur in a 1996 taxation year and before October 2, 1996, as follows:

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of property that would have been taxable Canadian property if, at no time in the year, the trust had been resident in Canada; and

342. (1) Subsections 210.2(1.1) and (2) of the Act are replaced by the following:

Amateur athlete trusts

(2) Notwithstanding subsection 210(2), a trust shall pay a tax under this Part in respect of a particular taxation year of the trust equal to 56.25% of the amount that is required by subsection 143.1(2) to be included in computing the income under Part I for a taxation year of a beneficiary under the trust, if

(a) the beneficiary is at any time in the particular taxation year a designated beneficiary under the trust; and

(b) the particular taxation year ends in that taxation year of the beneficiary.

(2) The portion of subsection 210.2(3) of the French version of the Act before the formula is replaced by the following:

Crédit d'impôt remboursable aux bénéficiaires résidant au Canada

(3) Dans le cas où une partie du revenu d'une fiducie pour une année d'imposition est incluse, en application du paragraphe 104(13) ou 105(2), dans le calcul du revenu en vertu de la partie I d'une personne qui n'a été bénéficiaire étranger ou assimilé de la fiducie à aucun moment de l'année ou dans la partie du revenu d'une personne non-résidente qui est soumise, par application du paragraphe 2(3), à l'impôt payable en vertu de la partie I et n'en est pas exonérée par un traité fiscal — sauf s'il s'agit d'une personne qui, à un moment de l'année, serait un bénéficiaire étranger ou assimilé de la fiducie si l'article 210 s'appliquait compte non tenu de l'alinéa a) de la définition de « bénéficiaire étranger ou assimilé » à cet article —, le montant, calculé selon la formule ci-après , attribué à la personne par la fiducie dans sa déclaration pour l'année en vertu de la présente partie est réputé payé le quatre-vingt-dixième jour suivant la fin de l'année d'imposition de la fiducie au titre de l'impôt payable en vertu de la partie I par cette personne pour l'année d'imposition de celle-ci au cours de laquelle l'année d'imposition de la fiducie se termine :

(3) Paragraph 210.2(3)(b) of the English version of the Act is replaced by the following:

(b) the income of a non-resident person (other than a person who, at any time in the year, would be a designated beneficiary under the trust if section 210 were read without reference to paragraph (a) of the definition "designated beneficiary" in that section ) that is subject to tax under Part I by reason of subsection 2(3) and is not exempt from tax under Part I by reason of a provision contained in a tax treaty ,

(4) Subsections (1) to (3) apply to the 1996 and subsequent taxation years, except that

(a) in applying the portion of subsection 210.2(3) of the French version of the Act before the formula, as enacted by subsection (2), for the 1996 and 1997 taxation years, the reference to "un traité fiscal" is to be read as a reference to "un accord ou une convention fiscale ayant force de loi au Canada et conclue entre le gouvernement du Canada et le gouvernement d'un pays étranger"; and

(b) in applying paragraph 210.2(3)(b) of the English version of the Act, as enacted by subsection (3), for the 1996 and 1997 taxation years the reference to "treaty" is to be read as a reference to "convention or agreement with another country that has the force of law in Canada".

343. (1) Subsection 211.7(1) of the Act is amended by adding the following in alphabetical order:

"qualifying exchange"

« échange admissible »

"qualifying exchange" means an exchange by a taxpayer of an approved share, that is part of a series of Class A shares of the capital stock of a corporation, for another approved share, that is part of another series of Class A shares of the capital stock of the corporation, if

(a) the only consideration received by the taxpayer on the exchange is the other share; and

(b) the rights in respect of the series are identical except for the portion of the reserve (within the meaning assigned by subsection 204.8(1)) of the corporation that is attributable to each series.

(2) Section 211.7 of the Act is amended by adding the following after subsection (2):

Exchangeable shares

(3) For the purposes of this Part and Part X.3, if an approved share of the capital stock of a corporation (referred to in this subsection as the "new share") has been issued in exchange for another approved share (referred to in this subsection as the "original share") in a qualifying exchange, the new share is deemed not to have been issued on the exchange and is deemed to have been issued at the time the corporation issued the original share.

(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2004.

344. (1) The portion of subsection 211.8(1) of the Act before paragraph (a) is replaced by the following:

Disposition of approved share

211.8 (1) If an approved share of the capital stock of a registered labour-sponsored venture capital corporation or a revoked corporation is, before the first discontinuation of its venture capital business, redeemed, acquired or cancelled by the corporation less than eight years after the day on which the share was issued (other than in circumstances described in subclause 204.81(1)(c)(v)(A)(I) or (III) or clause 204.81(1)(c)(v)(B) or (D) or other than if the share is a Class A share of the capital stock of the corporation that is exchanged for another Class A share of the capital stock of the corporation as part of a qualifying exchange ) or any other share that was issued by any other labour-sponsored venture capital corporation is disposed of, the person who was the shareholder immediately before the redemption, acquisition, cancellation or disposition shall pay a tax under this Part equal to the lesser of

(2) Subparagraph (i) of the description of B in paragraph 211.8(1)(a) of the Act is amended by striking out "or" at the end of clause (A) and by replacing clause (B) with the following:

(B) more than five years after its issuance, or

(C) if the day that is five years after its issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day,

(3) The description of B in paragraph 211.8(1)(a) of the Act is amended by adding the following after subparagraph (i):

(i.1) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was after March 5, 1996 and the redemption, acquisition or cancellation is in February or on March 1st of a calendar year but is not more than 31 days before the day that is eight years after the day on which the share was issued,

(4) Subsection (1) applies in respect of shares redeemed, acquired or cancelled after 2003.

(5) Subsections (2) and (3) apply to redemptions, acquisitions, cancellations and dispositions that occur after November 15, 1995.

345. (1) The Act is amended by adding the following after section 211.8:

Tax for failure to re-acquire certain shares

211.81 If a particular amount is payable under a prescribed provision of a provincial law for a taxation year of an individual as determined for the purposes of that provincial law (referred to in this section as the "relevant provincial year"), and an amount has been included in the computation of the labour-sponsored funds tax credit of the individual under subsection 127.4(6) in respect of an approved share that has been disposed of by a qualifying trust in respect of the individual, the individual shall pay a tax for the taxation year in which the relevant provincial year ends equal to the particular amount.

Return

211.82 (1) Every person that is liable to pay tax under this Part for a taxation year shall, not later than the day on or before which the person is required by section 150 to file a return of income for the year under Part I, file with the Minister a return for the year under this Part in prescribed form containing an estimate of the tax payable by the person for the year.

Provisions applicable to this Part

(2) Subsections 150(2) and (3), sections 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require.

(2) Section 211.81 of the Act, as enacted by subsection (1), is deemed to have come into force on ANNOUNCEMENT DATE.

(3) Section 211.82 of the Act, as enacted by subsection (1), applies to taxation years that end after ANNOUNCEMENT DATE.

346. (1) Section 211.9 of the Act is repealed.

(2) Subsection (1) applies to taxation years that end after ANNOUNCEMENT DATE.

347. (1) Subparagraph 212(1)(b)(iv) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), is replaced by the following:

(iv) interest payable to a person with whom the payer is dealing at arm's length and to whom a certificate of exemption that is in force on the day the amount is paid or credited was issued under subsection (14),

(2) The portion of subparagraph 212(1)(b)(xii) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), before clause (A) is replaced by the following:

(xii) interest payable by a lender under a securities lending arrangement, if the lender and the borrower deal with each other at arm's length and the lender is a financial institution prescribed for the purpose of clause (iii)(D), or a registered securities dealer resident in Canada, on money provided to the lender either as collateral or as consideration for the particular security lent or transferred under the arrangement where

(3) Paragraph 212(1)(b) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), is amended by striking out "and" at the end of subparagraph (xi), by adding "and" at the end of subparagraph (xii) and by adding the following after subparagraph (xii):

(xiii) an amount paid or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest if

(A) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and

(B) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition "qualified security" in subsection 260(1) and issued by a non-resident issuer;

(4) Paragraph 212(1)(b) of the Act, as amended by subsections (1) to (3), is replaced by the following:

Interest

(b) interest that

(i) is not fully exempt interest, and is paid or payable to a person with whom the payer is not dealing at arm's length, or

(ii) is participating debt interest;

(5) Subparagraph 212(1)(b)(i) of the Act, as enacted by subsection (4), is replaced by the following:

(i) is not fully exempt interest and is paid or payable

(A ) to a person with whom the payer is not dealing at arm's length, or

(B) in respect of a debt or other obligation to pay an amount to a person with whom the payer is not dealing at arm's length, or

(6) Subparagraph 212(1)(c)(ii) of the French version of the Act is replaced by the following:

(ii) peut raisonnablement être considérée, compte tenu des circonstances, y compris les modalités de la succession ou de l'acte de fiducie, comme la distribution d'un montant reçu par la succession ou la fiducie, ou comme une somme provenant d'un tel montant, au titre d'un dividende non imposable sur une action du capital-actions d'une société résidant au Canada;

(7) Subparagraph 212(1)(d)(iv) of the Act is replaced by the following:

(iv) unless paragraph (i) applies to the amount, made pursuant to an agreement between a person resident in Canada and a non-resident person under which the non-resident person agrees not to use or not to permit any other person to use any thing referred to in subparagraph (i) or any information referred to in subparagraph (ii), or

(8) Subparagraph 212(1)(d)(xi) of the Act is amended by striking out "or" at the end of clause (B) and by adding the following after clause (C):

(D) air navigation equipment utilized in the provision of services under the Civil Air Navigation Services Commercialization Act or computer software the use of which is necessary for the operation of that equipment that is used by the payer for no other purpose; or

(9) Paragraph 212(1)(d) of the Act is amended by striking out "or" at the end of subparagraph (x), by adding "or" at the end of subparagraph (xi) and by adding the following after subparagraph (xi):

(xii) an amount to which subsection (5) would apply if that subsection were read without reference to "to the extent that the amount relates to that use or reproduction";

(10) Subsection 212(1) of the Act is amended by adding the following after paragraph (h):

Restrictive covenant amount

(i) an amount that would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was received or receivable, be required by paragraph 56(1)(m) or subsection 56.4(2) to be included in computing the non-resident person's income for the taxation year;

(11) Section 212 of the Act is amended by adding the following after subsection (2):

Exempt dividends

(2.1) Subsection (2) does not apply to an amount paid or credited, by a borrower, under a securities lending arrangement if

(a) the amount is deemed by subparagraph 260(8)(c)(i) to be a dividend;

(b) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada; and

(c) the security that is transferred or lent to the borrower under the securities lending arrangement is a share of a class of the capital stock of a non-resident corporation.

(12) Subsection 212(3) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(3), is amended by adding "and" at the end of paragraph (a) and by repealing paragraph (b).

(13) Subsection 212(3) of the Act, as amended by subsection (12), is replaced by the following:

Interest — definitions

(3) The following definitions apply for the purpose of paragraph (1)(b).

"fully exempt interest"

« intérêts entièrement exonérés »

"fully exempt interest" means

(a) interest that is paid or payable on a bond, debenture, note, mortgage, hypothecary claim or similar debt obligation

(i) of, or guaranteed (otherwise than by being insured by the Canada Deposit Insurance Corporation) by, the Government of Canada,

(ii) of the government of a province,

(iii) of an agent of a province,

(iv) of a municipality in Canada or a municipal or public body performing a function of government in Canada,

(v) of a corporation, commission or association to which any of paragraphs 149(1)(d) to (d.6) applies, or

(vi) of an educational institution or a hospital if repayment of the principal amount of the obligation and payment of the interest is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province;

(b) interest that is paid or payable on a mortgage, hypothecary claim or similar debt obligation secured by, or on an agreement for sale or similar obligation with respect to, real property situated outside Canada or an interest in any such real property, or to immovables situated outside Canada or a real right in any such immovable, except to the extent that the interest payable on the obligation is deductible in computing the income of the payer under Part I from a business carried on by the payer in Canada or from property other than real or immovable property situated outside Canada;

(c) interest that is paid or payable to a prescribed international organization or agency; or

(d) an amount paid or payable or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest, if

(i) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and

(ii) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition "qualified security" in subsection 260(1) and issued by a non-resident issuer.

"participating debt interest"

« intérêts sur des créances participatives »

"participating debt interest" means interest (other than interest described in any of paragraphs (b) to (d) of the definition "fully exempt interest" ) that is paid or payable on an obligation, other than a prescribed obligation, all or any portion of which interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

(14) Subsection 212(5) of the French version of the Act is replaced by the following:

Films cinématographi­ques

(5) Toute personne non-résidente doit payer un impôt sur le revenu de 25 % sur toute somme qu'une personne résidant au Canada lui verse ou porte à son crédit, ou est réputée, en vertu de la partie I, lui verser ou porter à son crédit, au titre ou en paiement intégral ou partiel d'un droit sur les oeuvres ci-après qui ont été ou doivent être utilisées ou reproduites au Canada, ou d'un droit d'utilisation de telles oeuvres, dans la mesure où la somme se rapporte à cette utilisation ou reproduction :

a) un film cinématographique;

b) un film, une bande magnétoscopique ou d'autres procédés de reproduction à utiliser pour la télévision, sauf ceux utilisés uniquement pour une émission d'information produite au Canada.

(15) The portion of subsection 212(5) of the English version of the Act after paragraph (b) is replaced by the following:

that has been, or is to be, used or reproduced in Canada to the extent that the amount relates to that use or reproduction .

(16) Subsection 212(9) of the Act is amended by striking out "or" at the end of paragraph (b), by adding "or" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) a dividend or interest is received by a trust that is created under a reinsurance trust agreement

(i) to which a regulatory authority — being the Superintendent of Financial Institutions or a provincial regulatory authority having powers similar to those of the Superintendent — is a party, and

(ii) that accords with guidelines issued by the regulatory authority relating to reinsurance arrangements with unregistered insurers

(17) Subsection 212(13) of the Act is amended by striking out "or" at the end of paragraph (e), by adding "or" at the end of paragraph (f) and by adding the following after paragraph (f):

(g) an amount to which paragraph (1)(i) would apply if the amount paid or credited were paid or credited by a person resident in Canada, and that amount affects, or is intended to affect, in any way whatever,

(i) the acquisition or provision of property or services in Canada,

(ii) the acquisition or provision of property or services outside Canada by a person resident in Canada, or

(iii) the acquisition or provision outside Canada of a taxable Canadian property,

(18) Subsection 212(13.2) of the Act is replaced by the following:

Application of Part XIII tax — non-resident operates in Canada

(13.2) For the purposes of this Part, a particular non-resident person, who in a taxation year pays or credits to another non-resident person an amount other than an amount to which subsection (13) applies, is deemed to be a person resident in Canada in respect of the portion of the amount that is deductible in computing the particular non-resident person's taxable income earned in Canada for any taxation year from a source that is neither a treaty-protected business nor a treaty-protected property .

(19) Subparagraph (b)(i) of the description of B in subsection 212(19) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(6), is replaced by the following:

(i) 10 times the greatest amount determined, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be the capital employed by the taxpayer at the end of the day, and

(20) Subsection (1) applies to the 1998 and subsequent taxation years.

(21) Subsection (2) applies to arrangements made after 2002.

(22) Subsections (3) and (11) apply to securities lending arrangements entered into after May 1995, except that, in their application to arrangements made before 2002, each reference to "subparagraph 260(8)(c)(i)" in subparagraph 212(1)(b)(xiii) and paragraph 212(2.1)(a) of the Act, as respectively enacted by subsections (3) and (11), is to be read as a reference to "subparagraph 260(8)(a)(i)".

(23) Subsections (4) and (13) are deemed to have come into force on January 1, 2008.

(24) Subsection (5) applies to interest that is paid or payable by a person or partnership (referred to in this subsection as the "payer") to a person or partnership (referred to in this subsection as the "recipient") on or after March 16, 2011, unless

(a) the interest is paid in respect of a debt or obligation incurred by the payer before March 16, 2011; and

(b) the recipient acquired the entitlement to the interest as a consequence of an agreement or other arrangement entered into by the recipient, and evidenced in writing, before March 16, 2011.

(25) Subsection (7) applies to amounts paid or credited after October 7, 2003.

(26) Subsection (8) applies to payments made after July 2003.

(27) Subsections (9), (14) and (15) apply to the 2000 and subsequent taxation years.

(28) Subsections (10) and (17) apply to amounts paid or credited after October 7, 2003, except that the portion of paragraph 212(13)(g) of the Act before subparagraph (g)(i), as enacted by subsection (17), is to be read as follows before July 16, 2010:

(g) an amount to which paragraph (1)(i) applies if that amount affects, or is intended to affect, in any way whatever,

(29) Subsection (12) applies to replacement obligations issued after 2000.

(30) Subsection (16) applies to amounts paid or credited after 2000.

(31) A written application made under subsection 227(6) of the Act in respect of a particular amount that has been paid to the Receiver General is deemed to be filed on time if

(a) the application is filed with the Minister of National Revenue within 180 days after the day on which this Act receives royal assent; and

(b) the particular amount is an amount on which tax would not be payable because of the application of subsection 212(9) of the Act, as amended by subsection (16), if that subsection 212(9) were read without reference to its paragraphs (a) to (c).

(32) Subsection (18) applies to amounts paid or credited under obligations entered into after December 20, 2002.

(33) Subsection (19) applies to securities lending arrangements entered into after May 28, 1993.

348. Paragraph 214(3)(k) of the French version of the Act is replaced by the following:

k) le montant distribué par une fiducie au profit d'un athlète amateur à un moment donné, qui serait à inclure, en application du paragraphe 143.1(2), dans le calcul du revenu d'un particulier si la partie I s'appliquait est réputé avoir été payé au particulier à ce moment à titre de paiement relatif à une fiducie au profit d'un athlète amateur;

349. (1) The portion of subsection 216(1) of the Act before paragraph (a) is replaced by the following:

Alternatives re rents and timber royalties

216. (1) If an amount has been paid during a taxation year to a non-resident person or to a partnership of which that person was a member as, on account of, in lieu of payment of or in satisfaction of, rent on real or immovable property in Canada or a timber royalty, that person may, within two years (or, if that person has filed an undertaking described in subsection (4) in respect of the year, within six months) after the end of the year, file a return of income under Part I for that year in prescribed form. On so filing and without affecting the liability of the non-resident person for tax otherwise payable under Part I, the non-resident person is , in lieu of paying tax under this Part on that amount, liable to pay tax under Part I for the year as though

(2) The portion of subsection 216(5) of the Act before paragraph (a) is replaced with the following:

Disposition by non-resident

(5) If a person or a trust under which a person is a beneficiary has filed a return of income under Part I for a taxation year as permitted by this section or as required by section 150 and, in computing the amount of the person's income under Part I an amount has been deducted under paragraph 20(1)(a), or is deemed by subsection 107(2) to have been allowed under that paragraph, in respect of property that is real property in Canada — or an interest therein — or an immovable in Canada — or a real right therein —, a timber resource property or a timber limit in Canada, the person shall file a return of income under Part I in prescribed form on or before the person's filing-due date for any subsequent taxation year in which the person is non-resident and in which the person, or a partnership of which the person is a member, disposes of that property or any interest, or for civil law any right, in it. On so filing and without affecting the person's liability for tax otherwise payable under Part I, the person is , in lieu of paying tax under this Part on any amount paid, or deemed by this Part to have been paid, in that subsequent taxation year in respect of any interest in, or for civil law any right in, that property to the person or to a partnership of which the person is a member, liable to pay tax under Part I for that subsequent taxation year as though

(3) Subsection 216(7) of the Act is repealed.

(4) Subsections (1) and (2) apply to taxation years that end after December 20, 2002.

350. (1) Section 220 of the Act is amended by adding the following after subsection (2.1):

Exception

(2.2) Subsection (2.1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11) or paragraph (m) of the definition "investment tax credit" in subsection 127(9).

(2) Paragraph 220(4.6)(a) of the French version of the Act is replaced by the following:

a) par le seul effet du paragraphe 107(5), les alinéas 107(2)a) à c) ne s'appliquent pas à une distribution de biens canadiens imposables effectuée par une fiducie au cours d'une année d'imposition (appelée « année de la distribution » au présent article);

(3) Paragraph 220(4.6)(c) of the French version of the Act is replaced by the following:

c) le ministre accepte, jusqu'à la date d'exigibilité du solde applicable à la fiducie pour une année d'imposition ultérieure, une garantie suffisante fournie par la fiducie, ou en son nom, au plus tard à la date d'exigibilité du solde qui lui est applicable pour l'année de la distribution pour le moins élevé des montants suivants :

(i) le montant obtenu par la formule suivante :

A – B – [((A – B)/A) × C]
où :
A

représente le total des impôts prévus par les parties I et I.1 qui seraient payables par la fiducie pour l'année de la distribution s'il n'était pas tenu compte de l'exclusion ou de la déduction de chaque montant visé à l'alinéa 161(7)a),

B

le total des impôts prévus par ces parties qui auraient été ainsi payables si les règles énoncées au paragraphe 107(2) (sauf celle portant sur le choix prévu à ce paragraphe) s'étaient appliquées à chaque distribution , effectuée par la fiducie au cours de l'année de la distribution , de biens auxquels s'applique l'alinéa a) (sauf les biens dont il est disposé ultérieurement avant le début de l'année ultérieure),

C

le total des montants réputés par la présente loi ou une autre loi avoir été payés au titre de l'impôt de la fiducie en vertu de la présente partie pour l'année de la distribution ,

(ii) si l'année ultérieure suit immédiatement l'année de la distribution , le montant déterminé selon le sous-alinéa (i); sinon, le montant déterminé selon le présent alinéa relativement à la fiducie pour l'année d'imposition précédant l'année ultérieure;

(4) The portion of subsection 220(4.61) of the French version of the Act before paragraph (a) is replaced by the following:

Restriction

(4.61) Malgré le paragraphe (4.6), le ministre est réputé, à un moment donné, ne pas avoir accepté de garantie aux termes de ce paragraphe pour l'année de la distribution d'une fiducie pour un montant supérieur à l'excédent du total visé à l'alinéa a) sur le total visé à l'alinéa b) :

(5) Paragraph 220(4.61)(b) of the French version of the Act is replaced by the following:

b) le total des impôts qui seraient déterminés selon l'alinéa a) si les alinéas 107(2)a) à c) s'étaient appliqués à chaque distribution effectuée par la fiducie au cours de l'année de biens auxquels s'applique l'alinéa (1)a).

(6) Subsection (1) applies in respect of a prescribed form, receipt and document, and prescribed information, filed with the Minister of National Revenue on or after November 17, 2005 other than a prescribed form, receipt or document, or prescribed information, in respect of which the Minister of National Revenue has received, before November 17, 2005, a request made in writing with the Minister that the Minister waive the filing requirements in subsection 37(11) of the Act and paragraph (m) of the definition "investment tax credit" in subsection 127(9) of the Act that apply, but for any waiver, to the expenditures to which the prescribed form, receipt or document, or prescribed information, relates.

351. (1) The portion of subsection 227(8) of the Act before paragraph (a) is replaced by the following:

Penalty

(8) Subject to subsection (9.5 ), every person who in a calendar year has failed to deduct or withhold any amount as required by subsection 153(1) or section 215 is liable to a penalty of

(2) Paragraph 227(10)(b) of the Act is replaced by the following:

(b) subsection 237.1(7.4) or (7.5) or 237.3(8) by a person or partnership,

352. (1) Paragraph 230(2)(a) of the French version of the Act is replaced by the following:

a) des renseignements sous une forme qui permet au ministre de déterminer s'il existe des motifs de révocation de l'enregistrement de l'organisme ou de l'association en vertu de la présente loi;

(2) Subsection 230(3) of the French version of the Act is replaced by the following:

Ordre du ministre quant à la tenue de registres

(3) Le ministre peut exiger de la personne qui n'a pas tenue les registres et livres de compte voulus pour l'application de la présente loi qu'elle tienne ceux qu'il spécifie. Dès lors, la personne doit tenir les registres et livres de compte qui sont ainsi exigés d'elle.

353. The portion of subsection 231.2(1) of the Act before paragraph (a) is replaced by the following:

Requirement to provide documents or information

231.2 (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a listed international agreement or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,

354. Subparagraph 233.4(1)(c)(ii) of the Act is replaced by the following:

(ii) of which a non-resident corporation or trust is a foreign affiliate at any time in the fiscal period.

355. (1) Paragraph (b) of the definition "gifting arrangement" in subsection 237.1(1) of the Act is replaced by the following:

(b) incur a limited-recourse debt, determined under subsection 143.2(6.1), that can reasonably be considered to relate to a gift to a qualified donee or a monetary contribution referred to in subsection 127(4.1);

(2) Subsection (1) applies in respect of gifts and monetary contributions made after 6:00 p.m. (Eastern Standard Time) on December 5, 2003.

356. (1) The Act is amended by adding the following after section 237.2:

Definitions

237.3 (1) The following definitions apply in this section.

"advisor"

« conseiller »

"advisor" , in respect of a transaction or series of transactions, means each person who provides, directly or indirectly in any manner whatever, any contractual protection in respect of the transaction or series, or any assistance or advice with respect to creating, developing, planning, organizing or implementing the transaction or series, to another person (including any person who enters into the transaction for the benefit of another person).

"avoidance transaction"

« opération d'évitement »

"avoidance transaction" has the meaning assigned by subsection 245(3).

"confidential protection"

« droit à la confidentialité »

"confidential protection" , in respect of a transaction or series of transactions, means anything that prohibits the disclosure to any person or to the Minister of the details or structure of the transaction or series under which a tax benefit results, or would result but for section 245, but for greater certainty, the disclaiming or restricting of an advisor's liability shall not be considered confidential protection if it does not prohibit the disclosure of the details or structure of the transaction or series.

"contractual protection"

« protection contractuelle »

"contractual protection" , in respect of a transaction or series of transactions, means

(a) any form of insurance (other than standard professional liability insurance) or other protection, including, without limiting the generality of the foregoing, an indemnity, compensation or a guarantee that, either immediately or in the future and either absolutely or contingently,

(i) protects a person against a failure of the transaction or series to achieve any tax benefit from the transaction or series, or

(ii) pays for or reimburses any expense, fee, tax, interest, penalty or similar amount that may be incurred by a person in the course of a dispute in respect of a tax benefit from the transaction or series; and

(b) any form of undertaking provided by a promoter, or by any person who does not deal at arm's length with a promoter, that provides, either immediately or in the future and either absolutely or contingently, assistance, directly or indirectly in any manner whatever, to a person in the course of a dispute in respect of a tax benefit from the transaction or series.

"fee"

« honoraires »

"fee" , in respect of a transaction or series of transactions, means any consideration that is, or could be, received or receivable, directly or indirectly in any manner whatever, by an advisor or a promoter, or any person who does not deal at arm's length with an advisor or promoter, for

(a) providing advice or an opinion with respect to the transaction or series;

(b) creating, developing, planning, organizing or implementing the transaction or series;

(c) promoting or selling an arrangement, plan or scheme that includes, or relates to, the transaction or series;

(d) preparing documents supporting the transaction or series, including tax returns or any information returns to be filed under the Act; or

(e) providing contractual protection.

"person"

« personne »

"person" includes a partnership.

"promoter"

« promoteur »

"promoter" , in respect of a transaction or series of transactions, means each person who

(a) promotes or sells (whether as principal or agent and whether directly or indirectly) an arrangement, plan or scheme (referred to in this definition as an "arrangement"), if it may reasonably be considered that the arrangement includes or relates to the transaction or series;

(b) makes a statement or representation (whether as principal or agent and whether directly or indirectly) that a tax benefit could result from an arrangement, if it may reasonably be considered that

(i) the statement or representation was made in furtherance of the promoting or selling of the arrangement, and

(ii) the arrangement includes or relates to the transaction or series; or

(c) accepts (whether as principal or agent and whether directly or indirectly) consideration in respect of an arrangement referred to in paragraph (a) or (b).

"reportable transaction"

« opération à déclarer »

"reportable transaction" , at any time, means an avoidance transaction that is entered into by or for the benefit of a person, and each transaction that is part of a series of transactions that includes the avoidance transaction, if at the time any two of the following paragraphs apply in respect of the avoidance transaction or series:

(a) an advisor or a promoter, or any person who does not deal at arm's length with the advisor or promoter, has or had an entitlement, either immediately or in the future and either absolutely or contingently, to a fee that to any extent

(i) is based on the amount of a tax benefit that results, or would result but for section 245, from the avoidance transaction or series,

(ii) is contingent upon the obtaining of a tax benefit that results, or would result but for section 245, from the avoidance transaction or series, or may be refunded, recovered or reduced, in any manner whatever, based upon the failure of the person to obtain a tax benefit from the avoidance transaction or series, or

(iii) is attributable to the number of persons

(A) who participate in the avoidance transaction or series, or in a similar avoidance transaction or series, or

(B) who have been provided access to advice or an opinion given by the advisor or promoter regarding the tax consequences from the avoidance transaction or series, or from a similar avoidance transaction or series;

(b) an advisor or promoter in respect of the avoidance transaction or series, or any person who does not deal at arm's length with the advisor or promoter, obtains or obtained confidential protection in respect of the avoidance transaction or series,

(i) in the case of an advisor, from a person to whom the advisor has provided any assistance or advice with respect to the avoidance transaction or series under the terms of an engagement of the advisor by that person to provide such assistance or advice, or

(ii) in the case of a promoter, from a person

(A) to whom an arrangement, plan or scheme has been promoted or sold in the circumstances described in paragraph (a) of the definition "promoter" ,

(B) to whom a statement or representation described in paragraph (b) of the definition "promoter" has been made, or

(C) from whom consideration described in paragraph (c) of the definition "promoter" has been received; or

(c) either

(i) the person (in this subparagraph referred to as the "particular person"), another person who entered into the avoidance transaction for the benefit of the particular person or any other person who does not deal at arm's length with the particular person or with a person who entered into the avoidance transaction for the benefit of the particular person, has or had contractual protection in respect of the avoidance transaction or series, otherwise than as a result of a fee described in paragraph (a), or

(ii) an advisor or promoter in respect of the avoidance transaction or series, or any person who does not deal at arm's length with the advisor or promoter, has or had contractual protection in respect of the avoidance transaction or series, otherwise than as a result of a fee described in paragraph (a).

"solicitor-client privilege"

« privilège des communications entre client et avocat »

"solicitor-client privilege" has the meaning assigned by subsection 232(1).

"tax benefit"

« avantage fiscal »

"tax benefit" has the meaning assigned by subsection 245(1).

"transaction"

« opération »

"transaction" has the meaning assigned by subsection 245(1).

Application

(2) An information return in prescribed form and containing prescribed information in respect of a reportable transaction must be filed with the Minister by

(a) every person for whom a tax benefit results, or would result but for section 245, from the reportable transaction, from any other reportable transaction that is part of a series of transactions that includes the reportable transaction or from the series of transactions;

(b) every person who has entered into, for the benefit of a person described in paragraph (a), an avoidance transaction that is a reportable transaction;

(c) every advisor or promoter in respect of the reportable transaction, or in respect of any other transaction that is part of a series of transactions that includes the reportable transaction, who is or was entitled, either immediately or in the future and either absolutely or contingently, to a fee in respect of any of those transactions that is

(i) described in paragraph (a) of the definition "reportable transaction" in subsection (1), or

(ii) in respect of contractual protection provided in circumstances described in paragraph (c) of the definition "reportable transaction" in subsection (1); and

(d) every person who is not dealing at arm's length with an advisor or promoter in respect of the reportable transaction and who is or was entitled, either immediately or in the future and either absolutely or contingently, to a fee that is referred to in paragraph (c).

Clarification of reporting transactions in series

(3) For greater certainty, and subject to subsection (11), if subsection (2) applies to a person in respect of each reportable transaction that is part of a series of transactions that includes an avoidance transaction, the filing of a prescribed form by the person that reports each transaction in the series is deemed to satisfy the obligation of the person under subsection (2) in respect of each transaction so reported.

Application

(4) For the purpose of subsection (2), if any person is required to file an information return in respect of a reportable transaction under that subsection, the filing by any such person of an information return with full and accurate disclosure in prescribed form in respect of the transaction is deemed to have been made by each person to whom subsection (2) applies in respect of the transaction.

Time for filing return

(5) An information return required by subsection (2) to be filed by a person for a reportable transaction is to be filed with the Minister on or before June 30 of the calendar year following the calendar year in which the transaction first became a reportable transaction in respect of the person.

Tax benefits disallowed

(6) Notwithstanding subsection 245(4), subsection 245(2) is deemed to apply at any time to any reportable transaction in respect of a person described in paragraph (2)(a) in relation to the reportable transaction if, at that time,

(a) the obligation under subsection (2) of the person in respect of the reportable transaction, or any other reportable transaction that is part of a series of transactions that includes the reportable transaction, has not been satisfied;

(b) a person is liable to a penalty under subsection (8) in respect of the reportable transaction or any other reportable transaction that is part of a series of transactions that includes the reportable transaction; and

(c) the penalty under subsection (8) or interest on the penalty has not been paid, or has been paid but an amount on account of the penalty or interest has been repaid under subsection 164(1.1) or applied under subsection 164(2).

Assessments

(7) Notwithstanding subsections 152(4) to (5), the Minister may make any assessments, determinations and redeterminations that are necessary to give effect to subsection (8).

Penalty

(8) Every person who fails to file an information return in respect of a reportable transaction as required under subsection (2) on or before the day required under subsection (5) is liable to a penalty equal to the total of each amount that is a fee to which an advisor or a promoter (or any person who does not deal at arm's length with the advisor or the promoter) in respect of the reportable transaction is or was entitled, either immediately or in the future and either absolutely or contingently, to receive in respect of the reportable transaction, any transaction that is part of the series of transactions that includes the reportable transaction or the series of transactions that includes the reportable transaction, if the fee is

(a) described in paragraph (a) of the definition "reportable transaction" in subsection (1); or

(b) in respect of contractual protection provided in circumstances described in paragraph (c) of the definition "reportable transaction" in subsection (1).

Joint and several liability

(9) If more than one person is liable to a penalty under subsection (8) in respect of a reportable transaction, each of those persons are jointly and severally, or solidarily, liable to pay the penalty.

Joint and several liability — special cases

(10) Notwithstanding subsections (8) and (9), the liability of an advisor or a promoter, or a person with whom the advisor or promoter does not deal at arm's length, to a penalty under those subsections in respect of a reportable transaction shall not exceed the total of each amount that is a fee referred to in subsection (8) to which that advisor or promoter, or a person with whom the advisor or promoter does not deal at arm's length, is or was entitled, either immediately or in the future and either absolutely or contingently, to receive in respect of the reportable transaction.

Due diligence

(11) A person required to file an information return in respect of a reportable transaction is not liable for a penalty under subsection (8) if the person has exercised the degree of care, diligence and skill to prevent the failure to file that a reasonably prudent person would have exercised in comparable circumstances.

Reporting not an admission

(12) The filing of an information return under this section by a person in respect of a reportable transaction is not an admission by the person that

(a) section 245 applies in respect of any transaction; or

(b) any transaction is part of a series of transactions.

Application of sections 231 to 231.3

(13) Without restricting the generality of sections 231 to 231.3, even if a return of income has not been filed by a taxpayer under section 150 for the taxation year of the taxpayer in which a tax benefit results, or would result but for section 245, from a reportable transaction, sections 231 to 231.3 apply, with such modifications as the circumstances require, for the purpose of permitting the Minister to verify or ascertain any information in respect of that transaction.

Tax shelters and flow-through shares

(14) For the purpose of this section, a reportable transaction does not include a transaction that is, or is part of a series of transactions that includes,

(a) the acquisition of a tax shelter for which an information return has been filed with the Minister under subsection 237.1(7); or

(b) the issuance of a flow-through share for which an information return has been filed with the Minister under subsection 66(12.68).

Tax shelters and flow-through shares — penalty

(15) Notwithstanding subsection (8), the amount of the penalty, if any, that applies on a person under that subsection in respect of a reportable transaction shall not exceed the amount determined by the formula

A – B
where
A

is the amount of the penalty imposed on the person under subsection (8), determined without reference to this subsection; and

B

is

(a) if the reportable transaction is the acquisition of a tax shelter, the amount of the penalty, if any, that applies on the person under subsection 237.1(7.4) in respect of the tax shelter,

(b) if the reportable transaction is the issuance of a flow-through share, the amount of the penalty, if any, that applies on the person under subsection 66(12.74) in respect of the issuance of the flow-through shar