Notice of Ways and Means Motion to introduce an Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act: 4

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  169.  (1)  Subparagraph 191.1(1)(a)(i) of the Act is replaced by the following:

(i)  50% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year on short-term preferred shares exceeds the corporation's dividend allowance for the year,

  (2)  Subsection (1) applies to dividends paid by a corporation in its 2003 and subsequent taxation years.

  170.  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.

  171.  (1)  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

  (2)  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).

  (3)  Subsection (1) applies after February 6, 2000 to corporations incorporated at any time.

  (4)  Subsection (2) applies after February 6, 2000.

  172.  (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 suivantes 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;

  173.  (1)  The definition "specified proportion" in subsection 206(1) of the Act 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 shall 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 shall 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 shall 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) shall be read as follows:

Acquisition d'un titre déterminé

  (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 suivantes s'appliquent :

  (6)  Subsection (1) is deemed to have come into force on December 21, 2002.

  174.  (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 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.

  175.  (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 1 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

  176.  (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".

  177.  (1)  Subsection 211.6(1) of the Act is replaced by the following:

Charging provision

  211.6  (1)  Every trust that is a qualifying environmental trust at the end of a taxation year (other than a trust that is at that time described by paragraph 149(1)(z.1) or (z.2)) shall pay a tax under this Part for the year equal to 28% of its income under Part I for that taxation year.

  (2)  Subsection (1) applies to the 1997 and subsequent taxation years.

  178.  (1)  Subparagraph (i) of the description of B in paragraph 211.8(1)(a) of the Act is amended by striking out the word "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,

  (2)  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,

  (3)  Subsections (1) and (2) apply to redemptions, acquisitions, cancellations and dispositions that occur after November 15, 1995.

  179.  (1)  Subparagraph 212(1)(b)(iv) of the Act 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 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 is amended by striking out the word "and" at the end of subparagraph (xi), by adding the word "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)  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;

  (5)  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

  (6)  Subparagraph 212(1)(d)(xi) of the Act is amended by striking out the word "or" at the end of clause (B), by adding the word "or" at the end of clause (C) 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;

  (7)  Paragraph 212(1)(d) of the Act is amended by striking out the word "or" at the end of subparagraph (x), by adding the word "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";

  (8)  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;

  (9)  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.

  (10)  Subsection 212(3) of the Act is amended by adding the word "and" at the end of paragraph (a) and by repealing paragraph (b).

  (11)  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.

  (12)  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.

  (13)  Subsection 212(9) of the Act is amended by striking out the word "or" at the end of paragraph (b), by adding the word "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 created under a reinsurance trust agreement, to which the Superintendent of Financial Institutions is a party, established in accordance with guidelines issued by the Superintendent relating to reinsurance arrangements with unregistered insurers

  (14)  Subsection 212(13) of the Act is amended by striking out the word "or" at the end of paragraph (e), by adding the word "or" at the end of paragraph (f) and by adding the following after paragraph (f):

(g)  an amount to which paragraph (1)(i) applies if 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,

  (15)  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.

  (16)  Subparagraph (b)(i) of the description of B in subsection 212(19) of the Act 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

  (17)  Subsection (1) applies to the 1998 and subsequent taxation years.

  (18)  Subsection (2) applies to arrangements made after 2002.

  (19)  Subsections (3) and (9) 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 enacted by subsections (3) and (9), is to be read as a reference to "subparagraph 260(8)(a)(i)".

  (20)  Subsection (5) applies to amounts paid or credited after October 7, 2003.

  (21)  Subsection (6) applies to payments made after July 2003.

  (22)  Subsections (7), (11) and (12) apply to the 2000 and subsequent taxation years.

  (23)  Subsections (8) and (14) apply to amounts paid or credited after October 7, 2003.

  (24)  Subsection (10) applies to replacement obligations issued after 2000.

  (25)  Subsection (13) applies to amounts paid or credited after 2000 to non-resident persons.

  (26)  Subsection (15) applies to amounts paid or credited under obligations entered into after December 20, 2002.

  (27)  Subsection (16) applies to securities lending arrangements entered into after May 28, 1993.

  180.  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;

  181.  (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.

  182.  (1)  Section 220 of the Act is amended by adding the following after subsection 220(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 éventuel 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.

  183.  (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.

  184.  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,

  185.  (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.

  186.  (1)  Paragraph 241(3.2)(h) of the Act is replaced by the following:

(h)  an application by the charity, and information filed in support of the application, for a designation, determination or decision by the Minister under subsection 149.1(5), (6.3), (7), (8) or (13).

  (2)  Section 241 of the Act is amended by adding the following after subsection (3.2):

Information may be communicated

  (3.3)  The Minister of Canadian Heritage may communicate or otherwise make available to the public, in any manner that that Minister considers appropriate, the following taxpayer information in respect of a Canadian film or video production certificate (as defined under subsection 125.4(1)) that has been issued or revoked:

(a)  the title of the production for which the Canadian film or video production certificate was issued;

(b)  the name of the taxpayer to whom the Canadian film or video production certificate was issued;

(c)  the names of the producers of the production;

(d)  the names of the individuals in respect of whom and places in respect of which that Minister has allotted points in respect of the production in accordance with regulations made for the purpose of section 125.4;

(e)  the total number of points so allotted; and

(f)  any revocation of the Canadian film or video production certificate.

  (3)  Paragraph 241(4)(d) of the Act is amended by striking out the word "or" at the end of subparagraph (xiii) and by adding the following after subparagraph (xiv):

(xv)  to a person employed or engaged in the service of an office or agency, of the Government of Canada or of a province, whose mandate includes the provision of assistance (as defined in subsection 125.4(1) or 125.5(1)) in respect of film or video productions or film or video production services, solely for the purpose of the administration or enforcement of the program under which the assistance is offered, or

(xvi)  to an official of the Canadian Radio-television and Telecommunications Commission, solely for the purpose of the administration or enforcement of a regulatory function of that Commission;

  (4)  Subparagraph 241(4)(e)(xii) of the Act is replaced by the following:

(xii)  a provision contained in a tax treaty or in a listed international agreement;

  (5)  Subsection (1) applies to documents that are sent by the Minister of National Revenue, or that are filed or required to be filed with that Minister, after May 13, 2005.

  187.  (1)  The definition "common-law partner" in subsection 248(1) of the Act is replaced by the following:

"common-law partner"
« conjoint de fait »

"common-law partner", with respect to a taxpayer at any time, means a person who cohabits at that time in a conjugal relationship with the taxpayer and

(a)  has so cohabited throughout the 12-month period that ends at that time, or

(b)  would be the parent of a child of whom the taxpayer is a parent, if this Act were read without reference to paragraphs 252(1)(c) and (e) and subparagraph 252(2)(a)(iii),

and, for the purpose of this definition, where at any time the taxpayer and the person cohabit in a conjugal relationship, they are, at any particular time after that time, deemed to be cohabiting in a conjugal relationship unless they were living separate and apart at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship;

  (2)  The definition "dividend rental arrangement" in subsection 248(1) of the Act is replaced by the following:

"dividend rental arrangement"
« mécanisme de transfert de dividendes »

"dividend rental arrangement", of a person or a partnership (each of which is referred to in this definition as the "person"),

(a)  means any arrangement entered into by the person where it can reasonably be considered that

(i)  the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in paragraph (e) of the definition "term preferred share" in this subsection or an amount deemed by subsection 15(3) to be received as a dividend on a share of the capital stock of a corporation, and

(ii)  under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect, and

(b)  includes, for greater certainty, any arrangement under which

(i)  a corporation at any time receives on a particular share a taxable dividend that would, if this Act were read without reference to subsection 112(2.3), be deductible in computing its taxable income or taxable income earned in Canada for the taxation year that includes that time, and

(ii)  the corporation or a partnership of which the corporation is a member is obligated to pay to another person or partnership an amount

(A)  that is compensation for

(I)  the dividend described in subparagraph (i),

(II)  a dividend on a share that is identical to the particular share, or

(III)  a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate risk of loss or opportunity for gain as the particular share, and

(B)  that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person or partnership, as the case may be, as a taxable dividend;

  (3)  Subparagraph (b)(i) of the definition "disposition" in subsection 248(1) of the Act is replaced by the following:

(i)  where the property is a share, bond, debenture, note, certificate, mortgage, hypothecary claim, agreement of sale or similar property, or an interest, or for civil law a right, in it, the property is in whole or in part redeemed, acquired or cancelled,

  (4)  Subparagraphs (f)(i) and (ii) of the definition "disposition" in subsection 248(1) of the Act are replaced by the following:

(i)  the transferor and the transferee are trusts that are, at the time of the transfer, resident in Canada,

  (5)  The definition "disposition" in subsection 248(1) of the Act is amended by striking out the word "and" at the end of paragraph (l), by adding the word "and" at the end of paragraph (m) and by adding the following after paragraph (m):

(n)  a redemption, an acquisition or a cancellation of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this paragraph as the "security") of the capital stock of a corporation (referred to in this paragraph as the "issuing corporation") held by another corporation (referred to in this paragraph as the "disposing corporation") if

(i)  the redemption, acquisition or cancellation occurs as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this paragraph as the "new corporation"),

(ii)  the merger or combination

(A)  is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) does not apply,

(B)  is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) as the parent and the subsidiary, respectively, or

(C)  would be a foreign merger (within the meaning assigned by subsection 87(8.1)) were subparagraph 87(8.1)(c)(ii) read without reference to the words "that was resident in a country other than Canada", and

(iii)  either

(A)  the disposing corporation receives no consideration for the security, or

(B)  in the case where the merger or combination is described by clause (ii)(C), the disposing corporation receives no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, becomes property of the new corporation;

  (6)  Paragraphs (d) and (e) of the definition "foreign resource property" in subsection 248(1) of the Act are replaced by the following:

(d)  any right to a rental or royalty computed by reference to the amount or value of production from an oil or gas well in that country, or from a natural accumulation of petroleum or natural gas in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation,

(e)  any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource,

  (7)  The portion of the definition "former business property" in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

"former business property"
« ancien bien d'entreprise »

"former business property", in respect of a taxpayer, means a capital property of the taxpayer that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business, and that was real or immovable property of the taxpayer, an interest of the taxpayer in real property, a right of the taxpayer in an immovable or a property that is the subject of a valid election under subsection 13(4.2), but does not include

  (8)  Paragraph (d) of the definition "activités de recherche scientifique et de développement expérimental" in subsection 248(1) of the French version of the Act is replaced by the following:

d)  les travaux entrepris par le contribuable ou pour son compte relativement aux travaux de génie, à la conception, à la recherche opérationnelle, à l'analyse mathématique, à la programmation informatique, à la collecte de données, aux essais et à la recherche psychologique, lorsque ces travaux sont proportionnels aux besoins des travaux visés aux alinéas a), b) ou c) qui sont entrepris au Canada par le contribuable ou pour son compte et servent à les appuyer directement.

  (9)  Paragraph (g) of the definition "fiducie pour l'environnement admissible" in subsection 248(1) of the French version of the Act is replaced by the following:

g)  un montant a été distribué par elle avant le 23 février 1994;

  (10)  Subparagraph (h)(ii) of the definition "fiducie pour l'environnement admissible" in subsection 248(1) of the French version of the Act is replaced by the following:

(ii)  un montant a été distribué par elle avant le 19 février 1997,

  (11)  Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

"listed international agreement"
« accord international désigné »

"listed international agreement" means

(a)  the Convention on Mutual Administrative Assistance in Tax Matters, concluded at Strasbourg on January 25, 1988, and

(b)  the Convention between the Government of Canada and the Government of the United Mexican States for the Exchange of Information with Respect to Taxes, signed at Mexico City on March 16, 1990;

"qualifying trust annuity"
« rente admissible de fiducie »

"qualifying trust annuity" has the meaning assigned by subsection 60.011(2);

"specified proportion"
« proportion déterminée »

"specified proportion", of a member of a partnership for a fiscal period of the partnership, means the proportion that the member's share of the total income or loss of the partnership for the partnership's fiscal period is of the partnership's total income or loss for that period and, for the purpose of this definition, where that income or loss for a period is nil, that proportion shall be computed as if the partnership had income for that period in the amount of $1,000,000;

  (12)  Section 248 of the Act is amended by adding the following after subsection (1):

Non-disposition before December 24, 1998

  (1.1)  A redemption, an acquisition or a cancellation, at any particular time after 1971 and before December 24, 1998, of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this subsection as the "security") of the capital stock of a corporation (referred to in this subsection as the "issuing corporation") held by another corporation (referred to in this subsection as the "disposing corporation") is not a disposition (within the meaning of the definition "disposition" in section 54 as that section read in its application to transactions and events that occurred at the particular time) of the security if

(a)  the redemption, acquisition or cancellation occurred as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this subsection as the "new corporation");

(b)  the merger or combination

(i)  is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time did not apply,

(ii)  is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) (if in force, and as it read, at the particular time) as the parent and the subsidiary, respectively, or

(iii)  occurred before November 13, 1981 and is a merger of corporations that is described by subsection 87(8) (as it read in respect of the merger or combination),

(iv)  occurred after November 12, 1981 and

(A)  is a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination), or

(B)  all of the following conditions are met, namely

(I)  the merger or combination is not a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination),

(II)  subsection 87(8.1), as it read in respect of the merger or combination, contained a subparagraph (c)(ii), and

(III)  the merger or combination would be a foreign merger (within the meaning of subsection 87(8.1), as it read in respect of the merger or combination) if that subparagraph 87(8.1)(c)(ii) were read as follows:

"(ii)  if, immediately after the merger, the new foreign corporation was controlled by another foreign corporation (in this subsection referred to as the "parent corporation"), shares of the capital stock of the parent corporation,";

and

(c)  either

(i)  the disposing corporation received no consideration for the security, or

(ii)  in the case where the merger or combination is described by subparagraph (b)(iv), the disposing corporation received no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, became property of the new corporation.

  (13)  Section 248 of the Act is amended by adding the following after subsection (3):

Gift of bare ownership of immovables

  (3.1)  Subsection (3) does not apply in respect of a usufruct or a right of use of an immovable in circumstances where a taxpayer disposes of the bare ownership of the immovable by way of a gift to a donee described in the definition "total charitable gifts", "total Crown gifts" or "total ecological gifts" in subsection 118.1(1) and retains, for life, the usufruct or the right of use.

  (14)  Paragraphs 248(8)(a) and (b) of the French version of the Act are replaced by the following:

a)  un transfert, une distribution ou une acquisition de biens effectué en vertu du testament ou autre acte testamentaire d'un contribuable ou de son époux ou conjoint de fait, par suite d'un tel testament ou acte ou par l'effet de la loi en cas de succession ab intestat du contribuable ou de son époux ou conjoint de fait, est considéré comme un transfert, une distribution ou une acquisition de biens effectué par suite du décès du contribuable ou de son époux ou conjoint de fait, selon le cas;

b)  un transfert, une distribution ou une acquisition de biens effectué par suite d'une renonciation ou d'un abandon par une personne qui était bénéficiaire en vertu du testament ou autre acte testamentaire d'un contribuable ou de son époux ou conjoint de fait, ou qui était héritier ab intestat de l'un ou l'autre, est considéré comme un transfert, une distribution ou une acquisition de biens effectué par suite du décès du contribuable ou de son époux ou conjoint de fait, selon le cas;

  (15)  Subsection 248(16) of the Act is replaced by the following:

Goods and services tax - input tax credit and rebate

  (16)  For the purposes of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax credit or rebate with respect to the goods and services tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

(a)  where the amount was claimed by the taxpayer as an input tax credit in a return under Part IX of the Excise Tax Act for a reporting period under that Act,

(i)  at the particular time that is the earlier of the time that the goods and services tax in respect of the input tax credit was paid and the time that it became payable,

(A)  if the particular time is in the reporting period, or

(B)  if,

(I)  the taxpayer's threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is greater than $500,000 for the taxpayer's fiscal year (within the meaning assigned by that Act) that includes the particular time, and

(II)  the taxpayer claimed the input tax credit at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,

(ii)  at the end of the reporting period, if

(A)  subparagraph (i) does not apply, and

(B)  the taxpayer's threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and

(iii)  in any other case, on the last day of the taxpayer's earliest taxation year

(A)  that begins after the taxation year that includes the particular time, and

(B)  for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax credit was claimed; or

(b)  where the amount was claimed as a rebate with respect to the goods and services tax, at the time the amount was received or credited.  

  (16)  Section 248 of the Act is amended by adding the following after subsection (16):

Quebec input tax refund and rebate

  (16.1)  For the purpose of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax refund or a rebate with respect to the Quebec sales tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

(a)  where the amount was claimed by the taxpayer as an input tax refund in a return under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, for a reporting period under that Act,

(i)  at the particular time that is the earlier of the time that the Quebec sales tax in respect of the input tax refund was paid and the time that it became payable,

(A)  if the particular time is in the reporting period, or

(B)  if,

(I)  the taxpayer's threshold amount, determined in accordance with section 462 of that Act is greater than $500,000 for the taxpayer's fiscal year (within the meaning assigned by that Act) that includes the particular time, and

(II)  the taxpayer claimed the input tax refund at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,

(ii)  at the end of the reporting period, if

(A)  subparagraph (i) does not apply, and

(B)  the taxpayer's threshold amount, determined in accordance with section 462 of that Act is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and

(iii)  in any other case, on the last day of the taxpayer's earliest taxation year

(A)  that begins after the taxation year that includes the particular time, and

(B)  for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax refund was claimed; or

(b)  where the amount was claimed as a rebate with respect to the Quebec sales tax, at the time the amount was received or credited.

  (17)  The portion of subsection 248(17) of the Act before the portion enclosed by quotation marks is replaced by the following:

Application of subsection (16) to passenger vehicles and aircraft

  (17)  If the input tax credit of a taxpayer under Part IX of the Excise Tax Act in respect of a passenger vehicle or aircraft is determined with reference to subsection 202(4) of that Act, subparagraphs (16)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:

  (18)  Section 248 of the Act is amended by adding the following after subsection (17):

Application of subsection (16.1) to passenger vehicles and aircraft

  (17.1)  If the input tax refund of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of a passenger vehicle or aircraft is determined with reference to section 252 of that Act, subparagraphs (16.1)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:

"(i)  at the beginning of the first taxation year or fiscal period of the taxpayer that begins after the end of the taxation year or fiscal period, as the case may be, in which the Quebec sales tax in respect of such property was considered for the purposes of determining the input tax refund to be payable, if the tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, or

(ii)  if no such tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, at the end of the reporting period; or".

Input tax credit on assessment

  (17.2)  An amount in respect of an input tax credit that is deemed by subsection 296(5) of the Excise Tax Act to have been claimed in a return or application filed under Part IX of that Act is deemed to have been so claimed for the reporting period under that Act that includes the time when the Minister makes the assessment referred to in that subsection.

Quebec input tax refund on assessment

  (17.3)  An amount in respect of an input tax refund that is deemed by section 30.5 of An Act respecting the Ministère du Revenu, R.S.Q., c. M-31, to have been claimed is deemed to have been so claimed for the reporting period under An Act respecting the Québec sales tax, R.S.Q., c. T- 0.1, that includes the day on which an assessment is issued to the taxpayer indicating that the refund has been allocated under that section 30.5.

  (19)  Section 248 of the Act is amended by adding the following after subsection (18).

Repayment of Quebec input tax refund

  (18.1)  For the purposes of this Act, if an amount is added at a particular time in determining the net tax of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of an input tax refund relating to property or service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service under a legal obligation to repay all or part of that assistance.

  (20)  Paragraphs 248(23.1)(a) and (b) of the French version of the Act are replaced by the following:

a)  soit transféré ou distribué à la personne qui était l'époux ou le conjoint de fait du contribuable au moment du décès de celui-ci, ou acquis par cette personne, le bien est réputé avoir été ainsi transféré, distribué ou acquis, selon le cas, par suite de ce décès;

b)  soit transféré ou distribué à la succession du contribuable, ou acquis par celle-ci, le bien est réputé avoir été ainsi transféré, distribué ou acquis, selon le cas, immédiatement avant le moment immédiatement avant le décès.

  (21)  Subsection 248(25.1) of the Act is replaced by the following:

Trust-to-trust transfers

  (25.1)  Where at any time a particular trust transfers property to another trust (other than a trust governed by a registered retirement savings plan or by a registered retirement income fund) in circumstances to which paragraph (f) of the definition "disposition" in subsection (1) applies, without affecting the personal liabilities under this Act of the trustees of either trust or the application of subsection 104(5.8) and paragraph 122(2)(f), the other trust is deemed to be after that time the same trust as, and a continuation of, the particular trust, and, for greater certainty, if the property was deemed to be taxable Canadian property of the particular trust by paragraph 51(1)(f), 85(1)(i) or 85.1(1)(a), subsection 85.1(5) or 87(4) or (5) or paragraph 97(2)(c) or 107(2)(d.1), the property is deemed to be taxable Canadian property of the other trust.

  (22)  Subparagraph 248(25.3)(c)(i) of the Act is replaced by the following:

(i)  the particular unit is capital property and the amount is not proceeds of disposition of a capital interest in the trust, or

  (23)  Section 248 of the Act is amended by adding the following after subsection (29):

Intention to give

  (30)  The existence of an amount of an advantage in respect of a transfer of property does not in and by itself disqualify the transfer from being a gift to a qualified donee if

(a)  the amount of the advantage does not exceed 80% of the fair market value of the transferred property; or

(b)  the transferor of the property establishes to the satisfaction of the Minister that the transfer was made with the intention to make a gift.

Eligible amount of gift or monetary contribution

  (31)  The eligible amount of a gift or monetary contribution is the amount by which the fair market value of the property that is the subject of the gift or monetary contribution exceeds the amount of the advantage, if any, in respect of the gift or monetary contribution.

Amount of advantage

  (32)  The amount of the advantage in respect of a gift or monetary contribution by a taxpayer is the total of

(a)  the total of all amounts, other than an amount referred to in paragraph (b), each of which is the value, at the time the gift or monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm's length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy

(i)  that is consideration for the gift or monetary contribution,

(ii)  that is in gratitude for the gift or monetary contribution, or

(iii)  that is in any other way related to the gift or monetary contribution, and

(b)  the limited-recourse debt, determined under subsection 143.2(6.1), in respect of the gift or monetary contribution at the time the gift or monetary contribution is made.

Cost of property acquired by donor

  (33)  The cost to a taxpayer of a property, acquired by the taxpayer in circumstances where subsection (32) applies to include the value of the property in computing the amount of the advantage in respect of a gift or monetary contribution, is equal to the fair market value of the property at the time the gift or monetary contribution is made.

Repayment of limited-recourse debt

  (34)  If at any time in a taxation year a taxpayer has paid an amount (in this subsection referred to as the "repaid amount") on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse debt referred to in subsection 143.2(6.1) (in this subsection referred to as the "former limited-recourse debt") in respect of a gift or monetary contribution (in this subsection referred to as the "original gift" or "original monetary contribution", respectively, as the case may be) of the taxpayer (otherwise than by way of an assignment or transfer of a guarantee, security or similar indemnity or covenant, or by way of a payment in respect of which any taxpayer referred to in subsection 143.2(6.1) has incurred an indebtedness that would be a limited-recourse debt referred to in that subsection if that indebtedness were in respect of a gift or monetary contribution made at the time that that indebtedness was incurred), the following rules apply:

(a)  if the former limited-recourse debt is in respect of the original gift, for the purposes of sections 110.1 and 118.1, the taxpayer is deemed to have made in the taxation year a gift to a qualified donee, the eligible amount of which deemed gift is the amount, if any, by which

(i)  the amount that would have been the eligible amount of the original gift, if the total of all such repaid amounts paid at or before that time were paid immediately before the original gift was made,

exceeds

(ii)  the total of

(A)  the eligible amount of the original gift, and

(B)  the eligible amount of all other gifts deemed by this paragraph to have been made before that time in respect of the original gift; and

(b)  if the former limited-recourse debt is in respect of the original monetary contribution, for the purposes of subsection 127(3), the taxpayer is deemed to have made in the taxation year a monetary contribution referred to in that subsection, the eligible amount of which is the amount, if any, by which

(i)  the amount that would have been the eligible amount of the original monetary contribution, if the total of all such repaid amounts paid at or before that time were paid immediately before the original monetary contribution was made,

exceeds

(ii)  the total of

(A)  the eligible amount of the original monetary contribution, and

(B)  the eligible amount of all other monetary contributions deemed by this paragraph to have been made before that time in respect of the original monetary contribution.

Deemed fair market value

  (35)  For the purposes of subsection (31), paragraph 69(1)(b) and subsections 110.1(2.1) and (3) and 118.1(5.4) and (6), the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be the lesser of the fair market value of the property otherwise determined and the cost, or in the case of capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made if

(a)  the taxpayer acquired the property under a gifting arrangement that is a tax shelter as defined in subsection 237.1(1); or

(b)  except where the gift is made as a consequence of the taxpayer's death,

(i)  the taxpayer acquired the property less than 3 years before the day that the gift is made, or

(ii)  the taxpayer acquired the property less than 10 years before the day that the gift is made and it is reasonable to conclude that, at the time the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to a qualified donee.

Non-arm's length transaction

  (36)  If a taxpayer acquired a property that is the subject of a gift to which subsection (35) applies because of subparagraph (35)(b)(i) or (ii) and the property was, at any time within the 3-year or 10-year period, respectively, that ends when the gift was made, acquired by a person or partnership with whom the taxpayer does not deal at arm's length, for the purpose of applying subsection (35) to the taxpayer, the cost, or in the case of capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made is deemed to be equal to the lowest amount that is the cost, or in the case of capital property, the adjusted cost base, to the taxpayer or any of those persons or partnerships immediately before the property was disposed of by that person or partnership.

Non-application of subsection (35)

  (37)  Subsection (35) does not apply to a gift

(a)  of inventory;

(b)  of real property or an immovable situated in Canada;

(c)  of an object referred to in subparagraph 39(1)(a)(i.1);

(d)  of property to which paragraph 38(a.1) or (a.2) would apply, if those paragraphs were read without reference to "other than a private foundation";

(e)  of a share of the capital stock of a corporation if

(i)  the share was issued by the corporation to the donor,

(ii)  immediately before the gift, the corporation was controlled by the donor, a person related to the donor or a group of persons each of whom is related to the donor, and

(iii)  subsection (35) would not have applied in respect of the consideration for which the share was issued had that consideration been donated by the donor to the qualified donee when the share was so donated;

(f)  by a corporation of property if

(i)  the property was acquired by the corporation in circumstances to which subsection 85(1) or (2) applied,

(ii)  immediately before the gift, the shareholder from whom the corporation acquired the property controlled the corporation or was related to a person or each member of a group of persons that controlled the corporation, and

(iii)  subsection (35) would not have applied in respect of the property had the property not been transferred to the corporation and had the shareholder made the gift to the qualified donee when the corporation so made the gift; or

(g)  of a property that was acquired in circumstances where subsection 70(6) or (9) or 73(1), (3) or (4) applied, unless subsection (36) would have applied if this subsection were read without reference to this paragraph.

Artificial transactions

  (38)  The eligible amount of a particular gift of property by a taxpayer is nil if it can reasonably be concluded that the particular gift relates to a transaction or series of transactions

(a)  one of the purposes of which is to avoid the application of subsection (35) to a gift of any property; or

(b)  that would, if this Act were read without reference to this paragraph, result in a tax benefit to which subsection 245(2) applies.

Substantive gift

  (39)  If a taxpayer disposes of a property (in this subsection referred to as the "substantive gift") that is a capital property or an eligible capital property of the taxpayer, to a recipient that is a registered party, a provincial division of a registered party, a registered association or a candidate, as those terms are defined in the Canada Elections Act, or that is a qualified donee, subsection (35) would have applied in respect of the substantive gift if it had been the subject of a gift by the taxpayer to a qualified donee, and all or a part of the proceeds of disposition of the substantive gift are (or are substituted, directly or indirectly in any manner whatever, for) property that is the subject of a gift or monetary contribution by the taxpayer to the recipient or any person dealing not at arm's length with the recipient, the following rules apply:

(a)  for the purpose of subsection (31), the fair market value of the property that is the subject of the gift or monetary contribution made by the taxpayer is deemed to be that proportion of the lesser of the fair market value of the substantive gift and the cost, or if the substantive gift is capital property of the taxpayer, the adjusted cost base, of the substantive gift to the taxpayer immediately before the disposition to the recipient, that the fair market value otherwise determined of the property that is the subject of the gift or monetary contribution is of the proceeds of disposition of the substantive gift;

(b)  if the substantive gift is capital property of the taxpayer, for the purpose of the definitions "proceeds of disposition" of property in subsection 13(21) and section 54, the sale price of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a); and

(c)  if the substantive gift is eligible capital property of the taxpayer, the amount determined under paragraph (a) in the description of E in the definition "cumulative eligible capital" in subsection 14(5) in respect of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a).

Inter-charity gifts

  (40)  Subsection (30) does not apply in respect of a gift received by a qualified donee from a registered charity.

Information not provided

  (41)  Notwithstanding subsection (31), the eligible amount of a gift or monetary contribution made by a taxpayer is nil if the taxpayer does not - before a receipt referred to in subsection 110.1(2), 118.1(2) or 127(3), as the case may be, is issued in respect of the gift or monetary contribution - inform the qualified donee or the recipient, as the case may be, of any circumstances in respect of which subsection (31), (35), (36), (38) or (39) requires that the eligible amount of the gift or monetary contribution be less than the fair market value, determined without reference to subsection (35) and subsections 110.1(3) and 118.1(6), of the property that is the subject of the gift or monetary contribution.

  (24)  Subsection (1) applies in determining whether a person is, for the 2001 and subsequent taxation years, a common-law partner of a taxpayer, except that subsection does not apply to so determine whether a person is a common-law partner of a taxpayer for a taxation year to which a valid election, made under section 144 of the Modernization of Benefits and Obligations Act, applied before February 27, 2004. However, on and after February 27, 2004, no such election may be made to affect a current or subsequent taxation year.

  (25)  Subsection (2) applies

(a)  to arrangements made after December 20, 2002; and

(b)  to an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act is assented to, except that the reference to "subsection 260(5.1)" in clause (b)(ii)(B) of the definition "dividend rental arrangement" in subsection 248(1) of the Act, as enacted by subsection (2), is to be, in the application of that definition to any of those arrangements made before 2002, read as a reference to "subsection 260(5)".

  (26)  For arrangements made after 2001 and before December 21, 2002, other than an arrangement to which paragraph (25)(b) applies, the portion of paragraph (d) of the definition "dividend rental arrangement" in subsection 248(1) of the Act after subparagraph (iii) is to be read as follows:

that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person as a taxable dividend;

  (27)  Subsections (3) and (5) apply to redemptions, acquisitions and cancellations that occur after December 23, 1998 and, where a particular redemption, acquisition or cancellation occurs before December 21, 2002, any assessment of a taxpayer's tax, interest and penalties payable under the Act for a taxation year that includes the time at which the particular redemption, acquisition or cancellation occurred shall, notwithstanding subsections 152(4) to (5) of the Act, be made that is necessary to take into account the application of subsections (3) and (5).

  (28)  Subsection (4) applies to transfers that occur after February 27, 2004.

  (29)  Subsection (6) applies to property acquired after December 20, 2002.

  (30)  Subsection (7) applies in respect of dispositions and terminations that occur after December 20, 2002.

  (31)  The definition "qualifying trust annuity" in subsection 248(1) of the Act, as enacted by subsection (11), applies after 1988.

  (32)  The definition "specified proportion" in subsection 248(1) of the Act, as enacted by subsection (11), applies after December 20, 2002.

  (33)  In applying subsection 248(1.1) of the Act, as enacted by subsection (12), to a particular redemption, acquisition or cancellation, any assessment of a taxpayer's tax, interest and penalties payable under the Act for a taxation year that includes the time at which the particular redemption, acquisition or cancellation occurred shall, notwithstanding subsections 152(4) to (5) of the Act, be made that is necessary to take into account the application of subsection (12).

  (34)  Subsection (13) applies to dispositions that occur after July 18, 2005.

  (35)  Subsections (15) and (17), and subsection 248(17.2) of the Act, as enacted by subsection (18), apply in respect of input tax credits that become eligible to be claimed in taxation years that begin after December 20, 2002.

  (36)  Subsection (16) and subsections 248(17.1) and (17.3) of the Act, as enacted by subsection (18), apply in respect of input tax refunds and rebates that become eligible to be claimed in taxation years that begin after February 27, 2004.

  (37)  Subsection (19) applies after February 27, 2004.

  (38)  Subsection (21) applies in respect of transfers that occur after December 23, 1998.

  (39)  Subsection (22) applies to units issued after December 20, 2002.

  (40)  Subsection (23) applies in respect of gifts and monetary contributions made after December 20, 2002, except that

(a)  subsection 248(32) of the Act, as enacted by subsection (23), is to be read without reference to

(i)  its paragraph (b) in respect of gifts and monetary contributions made before February 19, 2003, and

(ii)  its subparagraph (a)(iii) in respect of gifts and monetary contributions made before 6:00 p.m. (Eastern Standard Time) on December 5, 2003;

(b)  subsection 248(34) of the Act, as enacted by subsection (23), does not apply in respect of gifts and monetary contributions made before February 19, 2003;

(c)  subsections 248(35), (37) and (38) of the Act, as enacted by subsection (23), do not apply in respect of gifts made before 6:00 p.m. (Eastern Standard Time) on December 5, 2003 and, in respect of gifts made after that time but before July 18, 2005, that subsection 248(38) of the Act is to be read as follows:

  (38)  If it can reasonably be concluded that one of the reasons for a series of transactions, that includes a disposition or acquisition of a property of a taxpayer that is the subject of a gift by the taxpayer, is to increase the amount that would be deemed by subsection (35) to be the fair market value of the property, the cost of the property for the purpose of that subsection is deemed to be the lowest cost to the taxpayer to acquire that property or an identical property at any time.

(d)  subsection 248(36) of the Act, as enacted by subsection (23), does not apply in respect of gifts or monetary contributions made before July 18, 2005;

(e)  subsection 248(39) of the Act, as enacted by subsection (23), does not apply in respect of gifts or monetary contributions made before February 27, 2004;

(f)  subsection 248(40) of the Act, as enacted by subsection (23), does not apply in respect of gifts made before ANNOUNCEMENT DATE; and

(g)  subsection 248(41) of the Act, as enacted by subsection (23), does not apply in respect of gifts and monetary contributions made before 2006.

  188.  (1)  Subsection 249(1) of the Act is replaced by the following:

Definition of "taxation year"

  249.  (1)  Except as expressly otherwise provided in this Act, a "taxation year" is

(a)  in the case of a corporation, a fiscal period;

(b)  in the case of an individual (other than a testamentary trust), a calendar year; and

(c)  in the case of a testamentary trust, the period for which the accounts of the trust are made up for purposes of assessment under this Act.

References to calendar year

  (1.1)  When a taxation year is referred to by reference to a calendar year, the reference is to the taxation year or taxation years that coincide with, or that end in, that calendar year.

  (2)  Section 249 of the Act is amended by adding the following after subsection (4):

Testamentary trusts

  (5)  The period for which the accounts of a testamentary trust are made up for the purposes of an assessment under this Act may not exceed 12 months, and no change in the time when such a period ends may be made for the purposes of this Act without the concurrence of the Minister.  

Loss of testamentary trust status

  (6)  If at a particular time after December 20, 2002 a transaction or event, described in any of paragraphs (b) to (d) of the definition "testamentary trust" in subsection 108(1), occurs and as a result of that occurrence a trust or estate is not a testamentary trust, the following rules apply:

(a)  the fiscal period for a business or property of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;

(b)  the taxation year of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;

(c)  a new taxation year of the trust or estate is deemed to have started at the particular time; and

(d)  in determining the fiscal period for a business or property of the trust or estate after the particular time, the trust or estate is deemed not to have established a fiscal period before that time.

  (3)  Subsection (1), and subsection 249(5) of the Act, as enacted by subsection (2), apply after December 20, 2002.

  (4)  Subsection 249(6) of the Act, as enacted by subsection (2), applies after July 18, 2005 and, if a trust or estate so elects in writing by filing the election with the Minister of National Revenue on or before its filing-due date for its taxation year in which this Act is assented to, it also applies to that trust or estate, as the case may be, after December 20, 2002.

  189.  (1)  Paragraph 251(1)(c) of the Act is replaced by the following:

(c)  in any other case, it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm's length.

  (2)  Subsection (1) applies after December 23, 1998.

  190.  (1)  Subsection 252(3) of the Act is amended by replacing the expression "subparagraph 210(c)(ii) and subsections 248(22) and (23)" with the expression "subsections 210(1) and 248(22) and (23)".

  (2)  Subsection (1) applies to the 1996 and subsequent taxation years.

  191.  (1)  Section 253.1 of the Act is replaced by the following:

Investments in limited partnerships

  253.1  For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b), 146.1(2.1)(c) and 149(1)(o.2), the definition "private holding corporation" in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

  (2)  Subsection (1) applies after 1997 except that, for taxation years that end after December 16, 1999 and before 2003, section 253.1 of the Act, as enacted by subsection (1), is to be read as follows:

  253.1  For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b), 146.1(2.1)(c) and 149(1)(o.2), the definition "private holding corporation" in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation is a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member is deemed

(a)  to undertake an investing of its funds because of its acquisition and holding of its interest as a member of the partnership; and

(b)  not to carry on any business or other activity of the partnership.

  192.  (1)  Subparagraph 256(6)(b)(ii) of the French version of the Act is replaced by the following:

(ii)  soit à des actions du capital-actions de la société contrôlée qui appartenaient à l'entité dominante au moment donné et qui, selon la convention ou l'arrangement, devaient être rachetées par la société contrôlée ou achetées par la personne ou le groupe de personnes visé au sous-alinéa a)(ii).

  (2)  Subparagraph 256(7)(a)(i) of the Act is amended by striking out the word "or" at the end of clause (C) and by adding the following after clause (D):

(E)  a corporation on a distribution (within the meaning assigned by subsection 55(1)) by a specified corporation (within the meaning assigned by that subsection) if a dividend, to which subsection 55(2) does not apply because of paragraph 55(3)(b), is received in the course of the reorganization in which the distribution occurs,

  (3)  Paragraph 256(7)(a) of the Act is amended by adding the word "or" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii)  the acquisition at any time of shares of the particular corporation if

(A)  the acquisition of those shares would otherwise result in the acquisition of control of the particular corporation at that time by a related group of persons, and

(B)  each member of each group of persons that controls the particular corporation at that time was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation immediately before that time;

  (4)  Paragraph 256(7)(e) of the Act is replaced by the following:

(e)  control of a particular corporation and of each corporation controlled by it immediately before a particular time is deemed not to have been acquired at the particular time by a corporation (in this paragraph referred to as the "acquiring corporation") if at the particular time, the acquiring corporation acquires shares of the particular corporation's capital stock for consideration that consists solely of shares of the acquiring corporation's capital stock, and if

(i)  immediately after the particular time

(A)  the acquiring corporation owns all the shares of each class of the particular corporation's capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),

(B)  the acquiring corporation is not controlled by any person or group of persons, and

(C)  the fair market value of the shares of the particular corporation's capital stock that are owned by the acquiring corporation is not less than 95% of the fair market value of all of the assets of the acquiring corporation, or

(ii)  any of clauses (i)(A) to (C) do not apply and the acquisition occurs as part of a plan of arrangement that, on completion, results in

(A)  the acquiring corporation (or a new corporation that is formed on an amalgamation of the acquiring corporation and a subsidiary wholly-owned corporation of the acquiring corporation) owning all the shares of each class of the particular corporation's capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),

(B)  the acquiring corporation (or the new corporation) not being controlled by any person or group of persons, and

(C)  the fair market value of the shares of the particular corporation's capital stock that are owned by the acquiring corporation (or the new corporation) being not less than 95% of the fair market value of all of the assets of the acquiring corporation (or the new corporation).

  (5)  Subsections (2) and (3) apply to acquisitions of shares that occur after 2000.

  (6)  Subsection (4) applies in respect of shares acquired after 1999.

  193.  (1)  The portion of subsection 259(1) of the Act before paragraph (a) is replaced by the following:

Proportional holdings in trust property

  259.  (1)  For the purposes of subsections 146(6), (10) and (10.1), 146.1(2.1) and 146.3(7), (8) and (9) and Parts X, X.2 and XI.1, if at any time a taxpayer that is a registered investment or that is described in paragraph 149(1)(r), (s), (u) or (x) acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

  (2)  Subsection (1) applies to the 2000 and subsequent taxation years, except that, in its application to taxation years that begin before 2005, the portion of subsection 259(1) of the Act before paragraph (a), as enacted by subsection (1), is to be read as follows:

  259.  (1)  For the purposes of subsections 146(6), (10) and (10.1), 146.1(2.1) and 146.3(7), (8) and (9) and Parts X, X.2, XI and XI.1, if at any time a taxpayer described in section 205 acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

  194.  (1)  The definition "qualified security" in subsection 260(1) of the Act is amended by striking out the word "or" at the end of paragraph (c), by adding the word "or" at the end of paragraph (d) and by adding the following after paragraph (d):

(e)  a qualified trust unit;

  (2)  Paragraph (a) of the definition "securities lending arrangement" in subsection 260(1) of the Act is replaced by the following:

(a)  a person (in this section referred to as the "lender") transfers or lends at any particular time a qualified security to another person (in this section referred to as the "borrower"),

  (3)  Paragraph (c) of the definition "securities lending arrangement" in subsection 260(1) of the Act is replaced by the following:

(c)  the borrower is obligated to pay to the lender amounts equal to and as compensation for all amounts, if any, paid on the security that would have been received by the borrower if the borrower had held the security throughout the period that begins after the particular time and that ends at the time an identical security is transferred or returned to the lender,

  (4)  The definition "securities lending arrangement" in subsection 260(1) of the Act is amended by adding the word "and" at the end of paragraph (d) and by adding the following after paragraph (d):

(e)  if the lender and the borrower do not deal with each other at arm's length, it is intended that neither the arrangement nor any series of securities lending arrangements, loans or other transactions of which the arrangement is a part be in effect for more than 270 days,

  (5)  Subsection 260(1) of the Act is amended by adding the following in alphabetical order:

"dealer compensation payment"
« paiement compensatoire (courtier) »

"dealer compensation payment" means an amount received by a taxpayer as compensation, for an underlying payment,

(a)  from a registered securities dealer resident in Canada who paid the amount in the ordinary course of a business of trading in securities, or

(b)  in the ordinary course of the taxpayer's business of trading in securities, where the taxpayer is a registered securities dealer resident in Canada;

"qualified trust unit"
« unité de fiducie déterminée »

"qualified trust unit" means a unit of a mutual fund trust that is listed on a prescribed stock exchange;

"security distribution"
« paiement de titre »

"security distribution" means an amount that is

(a)  an underlying payment, or

(b)  an SLA compensation payment, or a dealer compensation payment, that is deemed by subsection (5.1) to be an amount received as an amount described by any of paragraphs (5.1)(a) to (c);

"SLA compensation payment"
« paiement compensatoire (MPVM) »

"SLA compensation payment" means an amount paid pursuant to a securities lending arrangement as compensation for an underlying payment;

"underlying payment"
« paiement sous-jacent »

"underlying payment" means an amount paid on a qualified security by the issuer of the security.

  (6)  Subsections 260(5) and (6) of the Act are replaced by the following:

Where subsection (5.1) applies

  (5)  Subsection (5.1) applies to a taxpayer for a taxation year in respect of a particular amount (other than an amount received as proceeds of disposition or an amount received by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment or a dealer compensation payment that would be deductible in computing the taxable income, or not included in computing the income, for any taxation year of the person) received by the taxpayer in the taxation year

(a)  as an SLA compensation payment,

(i)  from a person resident in Canada, or

(ii)  from a non-resident person who paid the particular amount in the course of carrying on business in Canada through a permanent establishment as defined by regulation; or

(b)  as a dealer compensation payment.

Deemed character of compensation payments

  (5.1)  If this subsection applies in respect of a particular amount received by a taxpayer in a taxation year as an SLA compensation payment or as a dealer compensation payment, the particular amount is deemed, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the taxation year as,

(a)  where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which paragraph (b) applies), a taxable dividend on the share;

(b)  where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,

(i)  an amount of the trust's income that was, to the extent that subsection 104(13) applied to the underlying payment,

(A)  paid by the trust to the taxpayer as a beneficiary under the trust, and

(B)  designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust under this Act in respect of the recipient of the underlying payment, and

(ii)  to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or

(c)  in any other case, interest.

Deductibility

  (6)  In computing the income of a taxpayer under Part I from a business or property for a taxation year, there may be deducted a particular amount, paid by the taxpayer in the year as an SLA compensation payment or as a dealer compensation payment, that is equal to

(a)  if the taxpayer is a registered securities dealer and the particular amount is deemed by subsection (5.1) to have been received as a taxable dividend, no more than 2/3 of the particular amount; or

(b)  if the particular amount is in respect of an amount other than an amount that is, or is deemed by subsection (5.1) to have been, received as a taxable dividend,

(i)  where the taxpayer disposes of the borrowed security and includes the gain or loss, if any, from the disposition in computing its income from a business, the particular amount, or

(ii)  in any other case, the lesser of

(A)  the particular amount, and

(B)  the amount, if any, in respect of the security distribution to which the SLA compensation payment or dealer compensation payment relates that is included in computing the income, and not deducted in computing the taxable income, for any taxation year of the taxpayer or of any person to whom the taxpayer is related.

  (7)  Paragraph 260(6.1)(a) of the Act is replaced by the following:

(a)  the total of all amounts each of which is an amount that the corporation becomes obligated in the taxation year to pay to another person under an arrangement described in paragraph (b) of the definition "dividend rental arrangement" in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and

  (8)  Subsections 260(7) and (8) of the Act are replaced by the following:

Dividend refund

  (7)  For the purpose of section 129, if a corporation pays an amount for which no deduction in computing the corporation's income may be claimed under subsection (6.1) and subsection (5.1) deems the amount to have been received by another person as a taxable dividend,

(a)  the corporation is deemed to have paid the amount as a taxable dividend, where the corporation is not a registered securities dealer; and

(b)  the corporation is deemed to have paid 1/3 of the amount as a taxable dividend, where the corporation is a registered securities dealer.

Non-resident withholding tax

  (8)  For the purpose of Part XIII, any amount paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender

(a)  as an SLA compensation payment is, subject to paragraph (b) or (c), deemed to be a payment of interest made by the borrower to the lender;

(b)  as an SLA compensation payment in respect of a security that is a qualified trust unit, is deemed, to the extent of the amount of the underlying payment to which the SLA compensation payment relates, to be an amount paid by the trust and having the same character and composition as the underlying payment;

(c)  as an SLA compensation payment, if the security is not a qualified trust unit and throughout the term of the securities lending arrangement, the borrower has provided the lender under the arrangement with money in an amount of, or securities described in paragraph (c) of the definition "qualified security" in subsection (1) that have a fair market value of, not less than 95% of the fair market value of the security and the borrower is entitled to enjoy, directly or indirectly, the benefits of all or substantially all income derived from, and opportunity for gain with respect of, the money or securities,

(i)  is, to the extent of the amount of the interest or dividend paid in respect of the security, deemed to be a payment made by the borrower to the lender of interest or a dividend, as the case may be, payable on the security, and

(ii)  is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed

(A)  for the purpose of subparagraph 212(1)(b)(vii) to have been payable by the issuer of the security, and

(B)  to have been payable on a security that is a security described in subparagraph 212(1)(b)(ii) where the security is a security described in paragraph (c) of the definition "qualified security" in subsection (1); and

(d)  as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security is deemed to be a payment of interest made by the borrower to the lender.

Deemed fee for borrowed security

  (8.1)  For the purpose of paragraph (8)(d), if under a securities lending arrangement the borrower has at any time provided the lender with money, either as collateral or consideration for the security, and the borrower does not, under the arrangement, pay or credit a reasonable amount to the lender as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security, the borrower is deemed to have, at the time that an identical security is or can reasonably be expected to be transferred or returned to the lender, paid to the lender under the arrangement an amount as a fee for the use of the security equal to the amount, if any, by which

(a)  the interest on the money computed at the prescribed rates in effect during the term of the arrangement

exceeds

(b)  the amount, if any, by which any amount that the lender pays or credits to the borrower under the arrangement exceeds the amount of the money.

Effect for tax treaties

  (8.2)  In applying subsection (8), any amount, paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender, that is deemed by paragraph (8)(a), (b) or (d) to be a payment of interest, is deemed for the purposes of any tax treaty not to be payable on or in respect of the security.

  (9)  Section 260 of the Act is amended by adding the following after subsection (9):

Partnerships

  (10)  For the purpose of this section,

(a)  a person includes a partnership; and

(b)  a partnership is deemed to be a registered securities dealer if each member of the partnership is a registered securities dealer.

Corporate members of partnerships

  (11)  A corporation that is, in a taxation year, a member of a partnership is deemed

(a)  for the purpose of applying subsection (5) in respect of the taxation year,

(i)  to receive its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and

(ii)  in respect of the receipt of its specified proportion of that amount, to be the same person as the partnership;

(b)  for the purpose of applying paragraph (6.1)(a) in respect of the taxation year, to become obligated to pay its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of the amount the partnership becomes, in that fiscal period, obligated to pay to another person under the arrangement described in that paragraph; and

(c)  for the purpose of applying section 129 in respect of the taxation year, to have paid

(i)  if the partnership is not a registered securities dealer, the corporation's specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation), and

(ii)  if the partnership is a registered securities dealer, 1/3 of the corporation's specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation).

Individual members of partnerships

  (12)  An individual that is, in a taxation year, a member of a partnership is deemed

(a)  for the purpose of applying subsection (5) in respect of the taxation year,

(i)  to receive the individual's specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and

(ii)  in respect of the receipt of the individual's specified proportion of that amount, to be the same person as the partnership; and

(b)  for the purpose of subsection 82(1), to have paid the individual's specified proportion, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed by subsection (5.1) to have been received by another person as a taxable dividend.

  (10)  Subsections (1), (3), (5), (6) and (8) apply to arrangements made after 2001, except that, if the parties to an arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act is assented to, subsection 260(5.1) of the Act, as enacted by subsection (6), is to be read, in its application to SLA compensation payments or dealer compensation payments received under the arrangement before February 28, 2004, without reference to paragraph 260(5.1)(b) or (c), or to both of those paragraphs, as specified by the parties in the election.

  (11)  Subsections (2) and (4) apply to arrangements made after 2002.

  (12)  Subsection (7) applies to

(a)  arrangements made after December 20, 2002;

(b)  an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 187(25)(b) of this Act, except that, in its application to an arrangement made before 2002, the reference to "subsection (5.1)" in paragraph 260(6.1)(a) of the Act, as enacted by subsection (7), is to be read as a reference to "subsection (5)"; and

(c)  an arrangement, other than an arrangement to which paragraph (b) applies, made after 2001 and before December 21, 2002, except that, in its application before December 21, 2002, paragraph 260(6.1)(a) of the Act, as enacted by subsection (7), is to be read as follows:

(a)  the amount that the corporation is obligated to pay to another person under an arrangement described in paragraphs (c) and (d) of the definition "dividend rental arrangement" in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and

  (13)  Subsection (9) applies to

(a)  arrangements made after December 20, 2002; and

(b)  an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 187(25)(b) of this Act, except that, in its application to an arrangement made before 2002, the reference to "subsection (5.1)" in paragraph 260(12)(b) of the Act, as enacted by subsection (9), is to be read as a reference to "subsection (5)".

  195.  (1)  The Act is amended by adding, after section 260, the schedule set out in the schedule to this Act.

  (2)  Subject to subsection (3), subsection (1) is deemed to have come into force on December 20, 2002.

  (3)  Subsection (1) is deemed to have come into force to enact the schedule set out in that subsection so as to, as of the dates set out below, list each of the following corporations in the schedule:

(a)  2419726 Canada Inc., January 1, 1998, except that, in its application

(i)  after May 1999 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to "CitiFinancial Canada, Inc./CitiFinancière Canada, Inc.", and

(ii)  after 1997 and before June 1999, the reference in the schedule to that corporation is to be read as a reference to "Commercial Credit Corporation CCC Limited/Corporation De Credit Commerciale CCC Limitee";

(b)  AmeriCredit Financial Services of Canada Ltd., June 30, 2001;

(c)  Canaccord Capital Credit Corporation/Corporation de crédit Canaccord capital, September 25, 2000;

(d)  Citibank Canada Investment Funds Limited, December 31, 2001;

(e)  Citicapital Commercial Corporation/Citicapital Corporation Commerciale, January 1, 2000, except that, in its application after 1999 and before July 2001, the reference in the schedule to that corporation is to be read as a reference to "Associates Commercial Corporation of Canada Ltd./Les Associés, Corporation Commerciale du Canada Ltee";

(f)  Citi Cards Canada Inc./Cartes Citi Canada Inc., September 25, 2003;

(g)  Citi Commerce Solutions of Canada Ltd., January 1, 2003;

(h)  CitiFinancial Canada East Company/CitiFinancière, corporation du Canada Est, December 23, 1997, except that, in its application

(i)  after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to "CitiFinancial Services of Canada East Company/CitiFinancière, compagnie de services du Canada Est",

(ii)  after September 26, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to "Associates Financial Services of Canada East Company/Les Associés, Compagnie de Services Financiers du Canada Est",

(iii)  after February 12, 1998 and before September 27, 1999, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Canada East Company/Compagnie Services Financiers Avco Canada Est",

(iv)  after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Canada East Company/Services Financiers Avco Canada Est Compagnie", and

(v)  after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Canada East Company";

(i)  CitiFinancial Canada, Inc./CitiFinancière Canada, Inc., March 2, 1998, except that, in its application

(i)  after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to "CitiFinancial Services of Canada, Ltd./CitiFinancière, services du Canada, Ltée", and

(ii)  after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to "Associates Financial Services of Canada Ltd./Les Associés, Services Financières du Canada Ltée";

(j)  CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 2, 1998, except that, in its application after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to "Associates Mortgage Corporation/Les Associés, Corporation de Prêts Hypothécaires";

(k)  CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l'Est, December 23, 1997, except that, in its application

(i)  after November 2, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to "Associates Mortgage East Corporation/Les Associés, Corporation de Prêts Hypothécaires de l'Est",

(ii)  after September 27, 1999 and before November 3, 1999, the reference in the schedule to that corporation is to be read as a reference to "Associates Mortgage East Corporation/Les Associés, Corporation de Financiers du Prêts Hypothécaires de l'Est",

(iii)  after February 12, 1998 and before September 28, 1999, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Realty East Company/Compagnie Services Financiers Immobiliers Avco Est",

(iv)  after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Realty East Company/Services Financiers Immobiliers Avco Est Compagnie", and

(v)  after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to "Avco Financial Services Realty East Company";

(l)  Citigroup Finance Canada Inc., January 1, 1998, except that, in its application after 1997 and before June 11, 2003, the reference in the schedule to that corporation is to be read as a reference to "Associates Capital Corporation of Canada/Corporation de capital associés du Canada";

(m)  Ford Credit Canada Limited, December 23, 1997;

(n)  GE Card Services Canada Inc./GE Services de Cartes du Canada Inc., August 2, 2000;

(o)  GMAC Residential Funding of Canada, Limited, January 1, 2003;

(p)  John Deere Credit Inc./Crédit John Deere Inc., January 1, 1999;

(q)  PACCAR Financial Ltd./Compagnie Financière Paccar Ltée, January 1, 2003;

(r)  Paradigm Fund Inc./Le Fonds Paradigm Inc., January 1, 2002;

(s)  Prêts étudiants Atlantique Inc./Atlantic Student Loans Inc., January 1, 1998, except that, in its application after 1997 and before June 13, 2002, the reference in the schedule to that corporation is to be read as a reference to "Prêts étudiants Acadie Inc./Acadia Student Loans Inc.";

(t)  State Farm Finance Corporation of Canada/ Corporation de Crédit State Farm du Canada, January 1, 2002, except that, in its application after 2001 and before May 2002, the reference in the schedule to that corporation is to be read as a reference to "VNB Financial Services Inc./Services financiers VNB, Inc.";

(u)  Trans Canada Retail Services Company/Société de services de détails trans Canada, January 1, 1999, except that, in its application after 1998 and before January 15, 2002, the reference in the schedule to that corporation is to be read as a reference to "National Retail Credit Services Company/Société de services de crédit aux détaillants national"; and

(v)  Wells Fargo Financial Canada Corporation, January 1, 1999, except that, in its application after 1998 and before September 7, 2001, the reference in the schedule to that corporation is to be read as a reference to "Norwest Financial Canada Company".

  (4)  Ford Credit Canada Limited is deemed to have been, from July 1, 1989 to December 22, 1997, prescribed by a regulation made under paragraph 181(1)(g) of the Act.

  (5)  The schedule, as enacted by subsection (1), is amended by removing from the list, as of the dates set out below, the following corporations:

(a)  GE Card Services Canada Inc./ GE Services Cartes du Canada Inc., January 1, 2003;

(b)  2419726 Canada Inc., March 31, 2002;

(c)  CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 31, 2002; and

(d)  CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l'Est, April 1, 2002.

Consequential and Related Amendments

2003, c. 28

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

  196.  (1)  The portion of subsection 2(5) of An Act to Amend the Income Tax Act (Natural Resources) before paragraph (a) is replaced by the following:

  (5)  For each taxation year that ends after 2002 and begins before 2008, paragraph 18(1)(m) of the Act applies, notwithstanding paragraph 20(1)(v) of the Act, only to the percentage of each amount described by paragraph 18(1)(m) of the Act that is the total of:

  (2)  Subsection 2(7) of the Act is replaced by the following:

  (7)  Subsection (3) applies to taxation years that begin after 2007.

  197.  Section 9 of the Act is repealed.

1988, c. 28

Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act

  198.  (1)  Subsections 216(1) and (2) of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act are replaced by the following:

Imposition of corporate income tax and capital tax in offshore area

  216.  (1)  There shall be imposed, levied and collected under this Part in respect of the taxable income earned by, and the taxable capital of, a corporation in a taxation year in the offshore area, in accordance with subsection (3), the taxes, interest, penalties and other sums that would be imposed, levied and collected under the Nova Scotia Income Tax Act in respect of that taxable income and that taxable capital if the offshore area were in the land portion of the Province.

Exception

  (2)  Despite subsection (1), if taxes are imposed under the Nova Scotia Income Tax Act in respect of the taxable income earned by, or the taxable capital of, a corporation in a taxation year in the Province and taxes would, in the absence of this subsection, be imposed under subsection (1) in respect of that taxable income or that taxable capital, no taxes shall be imposed under subsection (1) in respect of that taxable income or that taxable capital.

  (2)  Subsection 216(4) of the Act is replaced by the following:

Determination of taxable income earned in the offshore area

  (4)  For the purpose of this section, the taxable income of a corporation earned in a taxation year in the offshore area or in the Province shall be determined in accordance with Part IV of the Income Tax Regulations as though the offshore area were a province and the Income Tax Act were read without reference to the definition "province" in subsection 124(4) of that Act, and "taxable capital" means taxable capital employed in Canada determined in accordance with Part I.3 of that Act.

  (3)  Subsections (1) and (2) are deemed to have come into force on April 1, 1997.

R.S., c. F-8; 1995, c. 17, s. 45(1)

Federal-Provincial Fiscal Arrangements Act

1990, c. 39, s. 56(1); 1999, c. 31, s. 237(F)

  199.  (1)  Paragraph 12.2(1)(b) of the Federal-Provincial Fiscal Arrangements Act is replaced by the following:

(b)  the Act of the legislature of the province imposing a tax on the income of corporations provides, in the opinion of the Minister, for a deduction in computing taxable income of a corporation for taxation years ending in the fiscal year of an amount that is not less than the amount deductible by the corporation for the year under paragraph 110(1)(k) of the Income Tax Act.

  (2)  Subsection (1) applies after 2003.

2001, c. 17

Income Tax Amendments Act, 2000

  200.  (1)  Subsection 59(2) of the Income Tax Amendments Act, 2000 is replaced by the following:

  (2)  Subsection (1) applies to taxation years that end after February 27, 2000, except that, for a taxation year of a debtor that includes either February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000, the reference to "½" in subsection 80.01(10) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act that applied to the debtor for the year in which the commercial debt obligation was deemed to have been settled.

  (2)  Subsection (1) is deemed to have come into force on June 14, 2001.

  201.  (1)  Subsection 70(11) of the Act is replaced by the following:

  (11)  Subsections (4), (5) and (7) apply to taxation years that end after February 27, 2000, except that, for a taxation year of a taxpayer that includes February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000, the references to "twice" in subsection 93(1.2) of the Act, as enacted by subsection (4), in subsection 93(2) of the Act, as enacted by subsection (5), and in subsection 93(2.2) of the Act, as enacted by subsection (7), are to be read as references to "the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 22(1) of the Income Tax Amendments Act, 2000, that applies to the taxpayer for the year, multiplied by".

  (2)  Subsection (1) is deemed to have come into force on June 14, 2001.

PART 3

AMENDMENTS RELATED TO BIJURALISM

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

Income Tax Act

  202.  (1)  Subclauses 12(1)(o)(ii)(B)(I) to (V) of the Income Tax Act are replaced by the following:

(I)  of 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, in respect of which the taxpayer had an interest, or for civil law a right,

(II)  of sulphur from a natural accumulation of petroleum or natural gas located in Canada, from an oil or gas well located in Canada or from a mineral resource located in Canada, in respect of which the taxpayer had an interest, or for civil law a right,

(III)  to any stage that is not beyond the prime metal stage or its equivalent, of metal, minerals (other than iron or petroleum or related hydrocarbons) or coal from a mineral resource located in Canada in respect of which the taxpayer had an interest, or for civil law a right,

(IV)  to any stage that is not beyond the pellet stage or its equivalent, of iron from a mineral resource located in Canada in respect of which the taxpayer had an interest, or for civil law a right, or

(V)  to any stage that is not beyond the crude oil stage or its equivalent, of petroleum or related hydrocarbons from a deposit located in Canada of bituminous sands or oil shales in respect of which the taxpayer had an interest, or for civil law a right;

  (2)  Subparagraph 12(1)(x)(viii) of the Act is replaced by the following:

(viii)  may not reasonably be considered to be a payment made in respect of the acquisition by the payer or the public authority of an interest in the taxpayer, an interest in, or for civil law a right in, the taxpayer's business or an interest in, or for civil law a real right in, the taxpayer's property;

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

Interest from investment contract

  (4)  Subject to subsection (4.1), where in a taxation year a taxpayer (other than a taxpayer to whom subsection (3) applies) holds an interest in, or for civil law a right in, an investment contract on any anniversary day of the contract, there shall be included in computing the taxpayer's income for the year the interest that accrued to the taxpayer to the end of that day with respect to the investment contract, to the extent that the interest was not otherwise included in computing the taxpayer's income for the year or any preceding taxation year.

  (4)  Subsections 12(9) and (9.1) of the Act are replaced by the following:

Deemed accrual

  (9)  For the purposes of subsections (3), (4) and (11) and 20(14) and (21), where a taxpayer acquires an interest in, or for civil law a right in, a prescribed debt obligation, an amount determined in prescribed manner shall be deemed to accrue to the taxpayer as interest on the obligation in each taxation year during which the taxpayer holds the interest or the right in the obligation.

Exclusion of proceeds of disposition

  (9.1)  Where a taxpayer disposes of an interest in, or for civil law a right in, a debt obligation that is a debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which the taxpayer is entitled, such portion of the proceeds of disposition received by the taxpayer as can reasonably be considered to represent a recovery of the cost to the taxpayer of the interest or the right in the debt obligation shall, notwithstanding any other provision of this Act, not be included in computing the income of the taxpayer, and for the purpose of this subsection, a debt obligation includes, for greater certainty, all of the issuer's obligations to pay principal and interest under that obligation.

  (5)  Paragraph (i) of the definition "investment contract" in subsection 12(11) of the Act is replaced by the following:

(i)  an obligation in respect of which the taxpayer has (otherwise than because of subsection (4)) at periodic intervals of not more than one year, included, in computing the taxpayer's income throughout the period in which the taxpayer held an interest in, or for civil law a right in, the obligation, the income accrued thereon for such intervals,

  203.  (1)  The portion of subsection 13(5.2) of the Act before paragraph (a) is replaced by the following:

Deemed cost and depreciation

  (5.2)  Where, at any time, a taxpayer has acquired a capital property that is depreciable property or real or immovable property in respect of which, before that time, the taxpayer or any person with whom the taxpayer was not dealing at arm's length was entitled to a deduction in computing income in respect of any amount paid or payable for the use of, or the right to use, the property and the cost or the capital cost (determined without reference to this subsection) at that time of the property to the taxpayer is less than the fair market value thereof at that time determined without reference to any option with respect to that property, for the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), the following rules apply:

  (2)  Subsection 13(5.3) of the Act is replaced by the following:

Deemed recapture

  (5.3)  Where, at any time in a taxation year, a taxpayer has disposed of a capital property that is an option with respect to depreciable property or real or immovable property in respect of which the taxpayer or any person with whom the taxpayer was not dealing at arm's length was entitled to a deduction in computing income in respect of any amount paid for the use of, or the right to use, the property, for the purposes of this section, the amount, if any, by which the proceeds of disposition to the taxpayer of the option exceed the taxpayer's cost in respect thereof shall be deemed to be an excess referred to in subsection (1) in respect of the taxpayer for the year.

  (3)  Paragraph 13(7.5)(c) of the Act is replaced by the following:

Reserve for unpaid amounts

(c)  where a taxpayer acquires an intangible property, or for civil law an incorporeal property, as a consequence of making a payment to which paragraph (a) applies or incurring a cost to which paragraph (b) applies,

(i)  the property referred to in paragraph (a) or (b) is deemed to include the intangible or incorporeal property, and

(ii)  the portion of the capital cost referred to in paragraph (a) or (b) that applies to the intangible or incorporeal property is deemed to be the amount determined by the formula

A x B/C

where

A is the lesser of the amount of the payment made or cost incurred and the amount determined for C,

B is the fair market value of the intangible or incorporeal property at the time the payment was made or the cost was incurred, and

C is the fair market value at the time the payment was made or the cost was incurred of all intangible or incorporeal properties acquired as a consequence of making the payment or incurring the cost; and

  204.  (1)  Paragraph (c) of the definition "eligible capital expenditure" in subsection 14(5) of the Act is replaced by the following:

(c)  that is the cost of, or any part of the cost of,

(i)  tangible property, or for civil law corporeal property, of the taxpayer,

(ii)  intangible property, or for civil law incorporeal property, that is depreciable property of the taxpayer,

(iii)  property in respect of which any deduction (otherwise than under paragraph 20(1)(b)) is permitted in computing the taxpayer's income from the business or would be so permitted if the taxpayer's income from the business were sufficient for the purpose, or

(iv)  an interest in, or for civil law a right in, or a right to acquire any property described in any of subparagraphs (i) to (iii)

  (2)  Subparagraph (f)(iv) of the definition "eligible capital expenditure" in subsection 14(5) of the Act is replaced by the following:

(iv)  an interest in, or for civil law a right in, or a right to acquire any property described in any of subparagraphs (i) to (iii).

  205.  The portion of subsection 16.1(1) of the Act before paragraph (a) is replaced by the following:

Leasing properties

  16.1  (1)  Where a taxpayer (in this section referred to as the "lessee") leases tangible property, or for civil law corporeal property, that is not prescribed property and that would, if the lessee acquired the property, be depreciable property of the lessee, from a person resident in Canada other than a person whose taxable income is exempt from tax under this Part, or from a non-resident person who holds the lease in the course of carrying on a business through a permanent establishment in Canada, as defined by regulation, any income from which is subject to tax under this Part, who owns the property and with whom the lessee was dealing at arm's length (in this section referred to as the "lessor") for a term of more than one year, if the lessee and the lessor jointly elect in prescribed form filed with their returns of income for their respective taxation years that include the particular time when the lease began, the following rules apply for the purpose of computing the income of the lessee for the taxation year that includes the particular time and for all subsequent taxation years:

  206.  (1)  Paragraph 18(2)(f) of the Act is replaced by the following:

(f)  in the case of a corporation whose principal business is the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm's length, the corporation's base level deduction for the particular year.

 (2)  Paragraphs 18(3.4)(a) and (b) of the Act are replaced by the following:

(a)  a corporation whose principal business is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm's length, or

(b)  a partnership

(i)  each member of which is a corporation described in paragraph (a), and

(ii)  the principal business of which is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property held by it, to or for a person with whom each member of the partnership is dealing at arm's length,

  207.  (1)  Paragraph 18.1(9)(b) of the French version of the Act is replaced by the following:

b)  au cours de la période commençant au moment de la disposition ou de l'extinction et se terminant 30 jours après ce moment, un contribuable - qui avait une part directe ou indirecte dans le droit - a une autre semblable part dans un autre droit aux produits, laquelle autre part est un abri fiscal ou un abri fiscal déterminé au sens de l'article 143.2.

  (2)  Subparagraph 18.1(10)(b)(v) of the French version of the Act is replaced by the following:

(v)  en cas d'application du paragraphe (9), le début d'une période de 30 jours tout au long de laquelle aucun contribuable ayant eu une part directe ou indirecte dans le droit n'a une autre semblable part dans un autre droit aux produits, laquelle autre part est un abri fiscal ou un abri fiscal déterminé au sens de l'article 143.2.

  208.  (1)  Subparagraph 20(1)(m)(iii) of the Act is replaced by the following:

(iii)  periods for which rent or other amounts for the possession or use of land or of chattels or movables have been paid in advance, or

  (2)  Paragraph 20(1)(n) of the Act is replaced by the following:

Reserve for unpaid amounts

(n)  where an amount included in computing the taxpayer's income from the business for the year or for a preceding taxation year in respect of property sold in the course of the business is payable to the taxpayer after the end of the year and, except where the property is real or immovable property, all or part of the amount was, at the time of the sale, not due until at least 2 years after that time, a reasonable amount as a reserve in respect of such part of the amount as can reasonably be regarded as a portion of the profit from the sale;

  (3)  The portion of subsection 20(11) of the Act before paragraph (a) is replaced by the following:

Foreign taxes on income from property exceeding 15%

  (11)  In computing the income of an individual from a property other than real or immovable property for a taxation year after 1975 that is income from a source outside Canada, there may be deducted the amount, if any, by which,

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

  (5)  The portion of subsection 20(21) of the Act before paragraph (a) is replaced by the following:

Debt obligation

  (21)  Where a taxpayer has in a particular taxation year disposed of a property that is an interest in, or for civil law a right in, a debt obligation for consideration equal to its fair market value at the time of disposition, there may be deducted in computing the taxpayer's income for the particular year the amount, if any, by which

  209.  (1)  The portion of subsection 20.1(1) of the French version of the Act before paragraph (a) is replaced by the following:

Argent emprunté pour tirer un revenu d'un bien

  20.1  (1)  Le contribuable qui, à un moment donné, cesse d'utiliser de l'argent emprunté en vue de tirer un revenu d'une immobilisation (sauf un bien immeuble ou réel ou un bien amortissable) est réputé continuer à ainsi utiliser la fraction de l'argent emprunté qui correspond à l'excédent visé à l'alinéa b), dans la mesure où cette fraction reste à rembourser après ce moment, si les conditions suivantes sont réunies :

 (2)  Paragraph 20.1(1)(a) of the English version of the Act is replaced by the following:

(a)  at any time after 1993 borrowed money ceases to be used by a taxpayer for the purpose of earning income from a capital property (other than real or immovable property or depreciable property), and

  210.  (1)  Paragraph 35(1)(a) of the Act is replaced by the following:

(a)  is received in a taxation year by an individual as consideration for the disposition by the individual to the corporation of a mining property or an interest, or for civil law a right, therein acquired by the individual as a result of the individual's efforts as a prospector, either alone or with others, or

  (2)  Subparagraph 35(1)(b)(ii) of the Act is replaced by the following:

(ii)  as consideration for the disposition by the person referred to in subparagraph (i) to the corporation of a mining property or an interest, or for civil law a right, therein acquired under the arrangement under which that person made the advance or paid the expenses, or if the prospector's employee, acquired by the person through the employee's efforts,

  (3)  Paragraphs 35(1)(e) and (f) of the Act are replaced by the following:

(e)  notwithstanding subdivision c, in computing the cost to the individual, person or partnership, as the case may be, of the share, no amount shall be included in respect of the disposition of the mining property or the interest, or for civil law the right, therein, as the case may be,

(f)  notwithstanding sections 66 and 66.2, in computing the cost to the corporation of the mining property or the interest, or for civil law the right, therein, as the case may be, no amount shall be included in respect of the share, and

  (4)  Paragraph (b) of the definition "mining property" in subsection 35(2) of the Act is replaced by the following:

(b)  real property or an immovable in Canada (other than depreciable property) the principal value of which depends on its mineral resource content;

  211.  (1)  Clause 37(8)(d)(iii)(B) of the French version of the Act is replaced by the following:

(B)  une université, un collège ou une organisation agréés, dans la mesure où il est raisonnable de considérer le paiement fait pour permettre à cette entité d'acquérir un bâtiment - ou un droit de tenure à bail dans un bâtiment - sur lequel le contribuable a un intérêt ou, pour l'application du droit civil, un droit ou sur lequel il est raisonnable de s'attendre à ce qu'il en ait un.

  (2)  Clause 37(8)(d)(iii)(E) of the English version of the Act is replaced by the following:

(E)  in the case of a payment to a person described in clause (C), to the extent that the amount of the payment may reasonably be considered to have been made to enable the recipient to acquire a building, or a leasehold interest in a building, in which the taxpayer has, or may reasonably be expected to acquire, an interest or, for civil law, a right.

  212.  Paragraph (h) of the definition "flow-through entity" in subsection 39.1(1) of the Act is replaced by the following:

(h)  a trust maintained primarily for the benefit of employees of a corporation or 2 or more corporations that do not deal at arm's length with each other, where one of the main purposes of the trust is to hold interests in, or for civil law rights in, shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm's length therewith,

  213.  Subparagraph (i) of the description of D in paragraph 40(2)(b) of the Act is replaced by the following:

(i)  where the acquisition date is before February 23, 1994 and the taxpayer or a spouse or common-law partner of the taxpayer elected under subsection 110.6(19) in respect of the property or an interest, or for civil law a right, therein that was owned, immediately before the disposition, by the taxpayer, 4/3 of the lesser of

(A)  the total of all amounts each of which is the taxable capital gain of the taxpayer or of a spouse or common-law partner of the taxpayer that would have resulted from an election by the taxpayer or spouse or common-law partner under subsection 110.6(19) in respect of the property or the interest or right if

(I)  this Act were read without reference to subsection 110.6(20), and

(II)  the amount designated in the election were equal to the amount, if any, by which the fair market value of the property or the interest or right at the end of February 22, 1994 exceeds the amount determined by the formula

E - 1.1F

where

E is the amount designated in the election that was made in respect of the property or the interest or right, and

F is the fair market value of the property or the interest or right at the end of February 22, 1994, and

(B)  the total of all amounts each of which is the taxable capital gain of the taxpayer or of a spouse or common-law partner of the taxpayer that would have resulted from an election that was made under subsection 110.6(19) in respect of the property or the interest or right if the property were the principal residence of neither the taxpayer nor the spouse or common-law partner for each particular taxation year unless the property was designated, in a return of income for the taxation year that includes February 22, 1994 or for a preceding taxation year, to be the principal residence of either of them for the particular taxation year, and

  214.  The portion of paragraph 43.1(2)(b) of the French version of the Act before subparagraph (i) is replaced by the following:

b)  lorsque la personne qui détient un domaine résiduel sur le bien réel immédiatement avant le décès du particulier a un lien de dépendance avec le détenteur du domaine viager, le moins élevé des montants suivants est ajouté, après ce décès, au calcul du prix de base rajusté du bien pour cette personne :

  215.  The portion of subsection 44(6) of the Act before paragraph (a) is replaced by the following:

Deemed proceeds of disposition

  (6)  Where a taxpayer has disposed of property that was a former business property and was in part a building and in part the land (or an interest, or for civil law a right, therein) subjacent to, or immediately contiguous to and necessary for the use of, the building, for the purposes of this subdivision, the amount if any, by which

  216.  Paragraphs 44.1(10)(c) and (d) of the Act are replaced by the following:

(c)  a corporation the principal business of which is the leasing, rental, development or sale, or any combination of those activities, of real or immovable property owned by it; or

(d)  a corporation more than 50 per cent of the fair market value of the property of which (net of debts incurred to acquire the property) is attributable to real or immovable property.

  217.  (1)  Paragraph 53(1)(o) of the French version of the Act is replaced by the following:

o)  lorsque le bien est un bien réel du contribuable, tout montant à ajouter, en application de l'alinéa 43.1(2)b), dans le calcul du prix de base rajusté du bien pour le contribuable;

  (2)  The portion of paragraph 53(2)(e) of the Act before subparagraph (i) is replaced by the following:

(e)  where the property is a share, or an interest in or a right to - or, for civil law, a right in or to - a share, of the capital stock of a corporation acquired before August, 1976, an amount equal to any expense incurred by the taxpayer in consideration therefor, to the extent that the expense was, by virtue of

  218.  The portion of the definition "listed personal property" in section 54 of the Act before paragraph (a) is replaced by the following:

"listed personal property"
« biens meubles déterminés »

"listed personal property" of a taxpayer means the taxpayer's personal-use property that is all or any portion of, or any interest in or right to - or, for civil law, any right in or to - any

  219.  The portion of the description of A in subsection 56.1(2) of the Act before paragraph (a) is replaced by the following:

A is the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a person in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the person resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the taxpayer described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a taxpayer, children in the taxpayer's custody or both the taxpayer and those children, where the taxpayer is

  220.  The portion of the description of A in subsection 60.1(2) of the Act before paragraph (a) is replaced by the following:

A is the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a taxpayer in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the taxpayer resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the person described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a person, children in the person's custody or both the person and those children, where the person is

  221.  Subparagraph 65(2)(a)(i) of the Act is replaced by the following:

(i)  natural accumulations of petroleum or natural gas, oil or gas wells or mineral resources in which the taxpayer has any interest or, for civil law, right, or

  222.  (1)  Paragraphs 66(12.1)(a) and (b) of the Act are replaced by the following:

(a)  where as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to - or, for civil law, a right in or to - the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarding as having been primarily Canadian exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and before May 7, 1974) or a Canadian exploration expense, there shall at that time be included in the amount determined for G in the definition "cumulative Canadian exploration expense" in subsection 66.1(6) in respect of the taxpayer the amount that became receivable by the taxpayer at that time; and

(b)  where as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to - or, for civil law, a right in or to - the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily a Canadian development expense, there shall at that time be included in the amount determined for G in the definition "cumulative Canadian development expense" in subsection 66.2(5) in respect of the taxpayer the amount that became receivable by the taxpayer at that time.

  (2)  Paragraph (c) of the definition "Canadian resource property" in subsection 66(15) of the Act is replaced by the following:

(c)  any oil or gas well in Canada or any real property or immovable in Canada the principal value of which depends on its petroleum or natural gas content (but not including any depreciable property),

  (3)  Paragraphs (f) and (g) of the definition "Canadian resource property" in subsection 66(15) of the Act are replaced by the following:

(f)  any real property or immovable in Canada the principal value of which depends on its mineral resource content (but not including any depreciable property),

(g)  any right to or interest in - or, for civil law, any right to or in - any property described in any of paragraphs (a) to (e), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, or

(h)  an interest in real property described in paragraph (f) or a real right in an immovable described in that paragraph, other than an interest or a right that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership;

  223.  (1)  Paragraph (i) of the definition "Canadian exploration expense" in subsection 66.1(6) of the Act is replaced by the following:

(i)  any expense referred to in any of paragraphs (a) to (g) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to - or, for civil law, any right in or to - such shares,

  (2)  Paragraph (j) of the definition "Canadian exploration expense" in subsection 66.1(6) of the Act is replaced by the following:

(j)  any consideration given by the taxpayer for any share or any interest in or right to - or, for civil law, any right in or to - a share, except as provided by paragraph (i),

  224.  (1)  Clause 66.2(2)(b)(ii)(A) of the Act is replaced by the following:

(A)  an amount included in the taxpayer's income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to - or, for civil law, any right in or to - a share, acquired by the taxpayer under circumstances described in paragraph (g) of the definition "Canadian development expense" in subsection (5) or paragraph (i) of the definition "Canadian exploration expense" in subsection 66.1(6), or

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

(e)  notwithstanding 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 - such property (other than such a right or 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 rights 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),

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

(e)  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 - such 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),

  (4)  Paragraph (g) of the definition "Canadian development expense" in subsection 66.2(5) of the Act is replaced by the following:

(g)  any cost or expense referred to in any of paragraphs (a) to (e) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to - or, for civil law, any right in or to - such shares,

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

(h)  any consideration given by the taxpayer for any share or any interest in or right to - or, for civil law, any right in or to - a share, except as provided by paragraph (g),

  (6)  The portion of the description of F in the definition "cumulative Canadian development expense" in subsection 66.2(5) of the Act before paragraph (a) is replaced by the following:

F is the total of all amounts each of which is an amount in respect of 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 - such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as "the particular property") disposed of by the taxpayer before that time equal to the amount, if any, by which

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

  225.  The portion of subsection 66.3(2) of the Act before paragraph (a) is replaced by the following:

Deductions from paid-up capital

  (2)  Where, at any time after May 23, 1985, a corporation has issued a share of its capital stock under circumstances described in 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) or has issued a share of its capital stock on the exercise of an interest in or right to - or, for civil law, a right in or to - such a share granted under circumstances described in any of those paragraphs, in computing, at any particular time after that time, the paid-up capital in respect of the class of shares of the capital stock of the corporation that included that share

  226.  (1)  Clause 66.4(2)(a)(ii)(A) of the Act is replaced by the following:

(A)  an amount included in the taxpayer's income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to - or, for civil law, any right in or to - a share acquired by the taxpayer under circumstances described in paragraph (c) of the definition "Canadian oil and gas property expense" in subsection (5), or

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

(a)  notwithstanding 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 - such property (other than such 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 rights 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),

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

(a)  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 - such 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,

  (4)  Paragraph (c) of the definition "Canadian oil and gas property expense" in subsection 66.4(5) of the Act is replaced by the following:

(c)  any cost or expense referred to in paragraph (a) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to - or, for civil law, any right in or to - such shares,

  (5)  The portion of the description of F in the definition "cumulative Canadian oil and gas property expense" in subsection 66.4(5) of the Act before paragraph (a) is replaced by the following:

F is the total of all amounts each of which is an amount in respect of 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 - such a property, other than such a right or interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as "the particular property") disposed of by the taxpayer before that time equal to the amount, if any, by which

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

  227.  (1)  Clause 66.7(1)(b)(i)(A) of the Act is replaced by the following:

(A)  the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to - or, for civil law, any right in or to - the particular property to the extent that the proceeds of the disposition have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (3)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,

  (2)  Clause 66.7(2)(b)(i)(A) of the Act is replaced by the following:

(A)  the amount included under subsection 59(1) in computing its income for the year that can reasonably be regarded as attributable to the disposition by it of any interest in or right to - or, for civil law, any right in or to - the particular property, or

  (3)  Clause 66.7(3)(b)(i)(A) of the Act is replaced by the following:

(A)  the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as being attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to - or, for civil law, any right in or to - the particular property to the extent that the proceeds have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (1)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,

  228.  The portion of paragraph 79.1(6)(b) of the Act before subparagraph (i) is replaced by the following:

(b)  all amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor's interest, or for civil law the creditor's right, in the particular property, except to the extent the outlay or expense

   229.  Paragraph 80(2)(o) of the Act is replaced by the following:

(o)  notwithstanding paragraph (n), where a commercial debt obligation, for which a particular person is liable with one or more other persons, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the obligation that can reasonably be considered to be the particular person's share of the obligation shall be considered to have been issued by the particular person and settled at that time and not at any subsequent time;

  230.  Subsection 80.04(11) of the English version of the Act is replaced by the following:

Joint and several, or solidary, liability

  (11)  Where taxes, interest and penalties are payable under this Act by a person for a taxation year and those taxes, interest and penalties are payable by a debtor because of subsection (10), the debtor and the person are jointly and severally, or solidarily, liable to pay those amounts.

  231.  (1)  Paragraphs 85(1.1)(a) and (b) of the Act are replaced by the following:

(a)  a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person);

(b)  a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident insurer where that property and the property received as consideration for that property are designated insurance property for the year;

  (2)  Paragraph 85(1.1)(f) of the Act is replaced by the following:

(f)  an inventory (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable);

  (3)  Paragraph 85(1.1)(h) of the Act is replaced by the following:

(h)  a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person (other than a non-resident insurer) and used in the year in a business carried on in Canada by that person; or

  (4)  Subparagraph 85(2)(a)(i) of the Act is replaced by the following:

(i)  a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, where the partnership was not a Canadian partnership at the time of the disposition),

  232.  (1)  Subparagraph (a)(ii) of the definition "investment business" in subsection 95(1) of the Act is replaced by the following:

(ii)  the development of real property or immovables for sale, the lending of money, the leasing or licensing of property or the insurance or reinsurance of risks, and

  (2)  Paragraph (g) of the definition "investment property" in subsection 95(1) of the Act is replaced by the following:

(g)  real property or immovables,

  (3)  Paragraph (j) of the definition "investment property" in subsection 95(1) of the Act is replaced by the following:

(j)  interests in, or for civil law rights in, or options in respect of, property that is included in any of paragraphs (a) to (i);

  233.  (1)  The portion of subsection 98(3) of the Act before paragraph (a) is replaced by the following:

Rules applicable where partnership ceases to exist

  (3)  Where at any particular time after 1971 a Canadian partnership has ceased to exist and all the partnership property has been distributed to persons who were members of the partnership immediately before that time so that immediately after that time each such person has, in each such property, an undivided interest, or for civil law an undivided right (which undivided interest or undivided right is referred to in this subsection as an "undivided interest or right", as the case may be) that, when expressed as a percentage (referred to in this subsection as that person's "percentage") of all undivided interests or rights in the property, is equal to the person's undivided interest or right, when so expressed, in each other such property, if each such person has jointly so elected in respect of the property in prescribed form and within the time referred to in subsection 96(4), the following rules apply:

  (2)  The portion of paragraph 98(3)(b) before subparagraph (i) of the Act is replaced by the following:

(b)  the cost to each such person of that person's undivided interest or right in each such property shall be deemed to be an amount equal to the total of

  (3)  Subparagraph 98(3)(b)(ii) of the Act is replaced by the following:

(ii)  where the amount determined under subparagraph (a)(i) exceeds the amount determined under subparagraph (a)(ii), the amount determined under paragraph (c) in respect of the person's undivided interest or right in the property;

  (4)  Paragraph 98(3)(c) of the Act is replaced by the following:

(c)  the amount determined under this paragraph in respect of each such person's undivided interest or right in each such property that was a capital property (other than depreciable property) of the partnership is such portion of the excess, if any, described in subparagraph (b)(ii) as is designated by the person in respect of the property, except that

(i)  in no case shall the amount so designated in respect of the person's undivided interest or right in any such property exceed the amount, if any, by which the person's percentage of the fair market value of the property immediately after its distribution exceeds the person's percentage of the cost amount to the partnership of the property immediately before its distribution, and

(ii)  in no case shall the total of amounts so designated in respect of the person's undivided interest or right in all such capital properties (other than depreciable property) exceed the excess, if any, described in subparagraph (b)(ii);

  (5)  Paragraph 98(3)(e) of the Act is replaced by the following:

(e)  where the property so distributed by the partnership was depreciable property of the partnership of a prescribed class and any such person's percentage of the amount that was the capital cost to the partnership of that property exceeds the amount determined under paragraph (b) to be the cost to the person of the person's undivided interest or right in the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)

(i)  the capital cost to the person of the person's undivided interest or right in the property shall be deemed to be the person's percentage of the amount that was the capital cost to the partnership of the property, and

(ii)  the excess shall be deemed to have been allowed to the person in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the person of the undivided interest or right;

  (6)  Subparagraph 98(3)(g)(i) of the Act is replaced by the following:

(i)  for the purposes of determining under this Act any amount relating to cumulative eligible capital, an eligible capital amount, an eligible capital expenditure or eligible capital property, each such person shall be deemed to have continued to carry on the business, in respect of which the property was eligible capital property and that was previously carried on by the partnership, until the time that the person disposes of the person's undivided interest or right in the property,

  234.  (1)  Clauses 108(2)(b)(ii)(A) and (B) of the Act are replaced by the following:

(A)  the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),

(B)  the acquiring, holding, maintaining, improving, leasing or managing of any real property or an interest in real property, or of any immovable or a real right in immovables, that is capital property of the trust, or

  (2)  Clauses 108(2)(b)(iii)(F) and (G) of the Act are replaced by the following:

(F)  real property situated in Canada, and interests in such real property, or immovables situated in Canada and real rights in such immovables, and

(G)  rights to and interests in - or, for civil law, rights in or to - any rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, from an oil or gas well in Canada or from a mineral resource in Canada,

  (3)  Paragraph 108(2)(c) of the Act is replaced by the following:

(c)  the fair market value of the property of the trust at the end of 1993 was primarily attributable to real property or an interest in real property - or to immovables or a real right in immovables - and the trust was a unit trust throughout any calendar year that ended before 1994 and the fair market value of the property of the trust at the particular time is primarily attributable to property described in paragraph (a) or (b) of the definition "qualified investment" in section 204, real property or an interest in real property - or immovables or a real right in immovables - or any combination of those properties.

  235.  Clause (a)(ii)(A) of the definition "qualified investment" in subsection 115.2(1) of the Act is replaced by the following:

(A)  real or immovable property situated in Canada,

  236.  (1)  Paragraph 116(6)(a.1) of the Act is replaced by the following:

(a.1)  a property (other than real or immovable property situated in Canada, a Canadian resource property or a timber resource property) that is described in an inventory of a business carried on in Canada by the person;

  (2)  Paragraph 116(6)(h) of the Act is replaced by the following:

(h)  an interest, or for civil law a right, in property referred to in any of paragraphs (a) to (g).

  237.  The portion of the definition "specified investment business" in subsection 125(7) of the Act before paragraph (a) is replaced by the following:

"specified investment business"
« entreprise de placement déterminée »

"specified investment business", carried on by a corporation in a taxation year, means a business (other than a business carried on by a credit union or a business of leasing property other than real or immovable property) the principal purpose of which is to derive income (including interest, dividends, rents and royalties) from property but, except where the corporation was a prescribed labour-sponsored venture capital corporation at any time in the year, does not include a business carried on by the corporation in the year where

  238.  (1)  The portion of subparagraph 126(2.21)(a)(i) of the Act before clause (A) is replaced by the following:

(i)  where the property is real or immovable property situated in a country other than Canada,

  (2)  Subparagraph 126(2.21)(a)(ii) of the Act is replaced by the following:

(ii)  where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,

  (3)  The portion of subparagraph 126(2.22)(a)(i) of the Act before clause (A) is replaced by the following:

(i)  where the property is real or immovable property situated in a country other than Canada,

  (4)  Subparagraph 126(2.22)(a)(ii) of the Act is replaced by the following:

(ii)  where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,

  239.  Paragraph (d) of the description of A in the definition "scientific research and experimental development tax credit" in subsection 127.3(2) of the English version of the Act is replaced by the following:

(d)  a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (in this section referred to as a "debt obligation") acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of that debt obligation, or

  240.  (1)  The portion of paragraph 128(1)(e) of the English version of the Act before subparagraph (i) is replaced by the following:

(e)  where, in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation fails to pay any tax payable by the corporation under this Act for any such year, the corporation and the trustee in bankruptcy are jointly and severally, or solidarily, liable to pay the tax, except that

  (2)  Subparagraph 128(1)(e)(ii) of the Act is replaced by the following:

(ii)  payment by either of them discharges the liability to the extent of the amount paid;

  241.  (1)  Subparagraph 128.1(4)(b)(i) of the Act is replaced by the following:

(i)  real or immovable property situated in Canada, a Canadian resource property or a timber resource property,

  (2)  Subparagraph 128.1(7)(h)(ii) of the English version of the Act is replaced by the following:

(ii)  if the individual alone makes such an election or specification, the individual and the trust are jointly and severally, or solidarily, liable for any amount payable under this Act by the trust as a result of the election or specification, and

  242.  (1)  Paragraphs 130.1(6)(b) and (c) of the Act are replaced by the following:

(b)  its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property;

(c)  none of the property of the corporation consisted of

(i)  debts owing to the corporation that were secured on real or immovable property situated outside Canada,

(ii)  debts owing to the corporation by non-resident persons, except any such debts that were secured on real or immovable property situated in Canada,

(iii)  shares of the capital stock of corporations not resident in Canada, or

(iv)  real or immovable property situated outside Canada, or any leasehold interest in such property;

  (2)  Paragraph 130.1(6)(g) of the Act is replaced by the following:

(g)  the cost amount to the corporation of all real or immovable property of the corporation, including leasehold interests in such property (except real or immovable property acquired by the corporation by foreclosure or otherwise after default made on a mortgage, hypothec or agreement of sale of real or immovable property) did not exceed 25% of the cost amount to it of all its property;

  243.  Subparagraphs 131(8)(b)(i) and (ii) of the Act are replaced by the following:

(i)  the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),

(ii)  the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the corporation, or

  244.  Subparagraphs 132(6)(b)(i) and (ii) of the Act are replaced by the following:

(i)  the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),

(ii)  the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the trust, or

  245.  (1)  Subparagraph (b)(i) of the definition "non-resident-owned investment corporation" in subsection 133(8) of the Act is replaced by the following:

(i)  ownership of, or trading or dealing in, bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest, or for civil law any right, therein,

  (2)  Subparagraph (b)(iii) of the definition "société de placement appartenant à des non-résidents" in subsection 133(8) of the French version of the Act is replaced by the following:

(iii)  soit de loyers, de la location de chatels, de frais ou rémunérations sur chartes-parties, de rentes, de redevances, d'intérêts ou de dividendes,

  (3)  Paragraph (c) of the definition "société de placement appartenant à des non-résidents" in subsection 133(8) of the French version of the Act is replaced by the following:

c)  au plus 10 % de son revenu brut de chaque année d'imposition se terminant au cours de la période ont été tirés de loyers, de la location de chatels, de frais ou rémunérations sur chartes-parties;

  246.  (1)  Subsection 138(4.4) of the Act is replaced by the following:

Income inclusion

  (4.4)  Where, for a period of time in a taxation year, a life insurer

(a)  owned land (other than land referred to in paragraph (c) or (d)) or an interest, or for civil law a right, therein that was not held primarily for the purpose of gaining or producing income from the land for the period,

(b)  had an interest, or for civil law a right, in a building that was being constructed, renovated or altered,

(c)  owned land subjacent to the building referred to in paragraph (b) or an interest, or for civil law a right, therein, or

(d)  owned land immediately contiguous to the land referred to in paragraph (c) or an interest, or for civil law a right, therein that was used or was intended to be used for a parking area, driveway, yard, garden or other use necessary for the use or intended use of the building referred to in paragraph (b),

there shall be included in computing the insurer's income for the year, where the land, building, or interest or right, was designated insurance property of the insurer for the year, or property used or held by it in the year in the course of carrying on an insurance business in Canada, the total of all amounts each of which is the amount prescribed in respect of the insurer's cost or capital cost, as the case may be, of the land, building, or interest or right, for the period, and the amount prescribed shall, at the end of the period, be included in computing

(e)  where the land, or interest or right therein, is property described in paragraph (a), the cost to the insurer of the land, or of the interest or right therein, and

(f)  where the land, building, or interest or right therein, is property described in paragraphs (b) to (d), the capital cost to the insurer of the interest or right in the building described in paragraph (b).

  (2)  Clauses 138(4.5)(b)(ii)(A) and (B) of the French version of the Act are replaced by the following:

(A)  si le bien est un fonds de terre, ou un intérêt ou, pour l'application du droit civil, un droit sur un fonds de terre du cessionnaire, visé à l'alinéa (4.4)a), dans le calcul du coût de ce bien pour le cessionnaire,

(B)  si le bien est un fonds de terre, un bâtiment, ou un intérêt ou, pour l'application du droit civil, un droit sur un fonds de terre ou un bâtiment, visé aux alinéas (4.4)b) à d), dans le calcul du coût en capital, pour le cessionnaire, de l'intérêt ou, pour l'application du droit civil, du droit sur le bâtiment visé à l'alinéa (4.4)b).

  (3)  Clauses 138(4.5)(e)(ii)(A) and (B) of the English version of the Act are replaced by the following:

(A)  where the property is land or an interest, or for civil law a right, therein of the transferee described in paragraph (4.4)(a), the cost to the transferee of the land, or of the interest or right therein, and

(B)  where the property is land or a building, or an interest therein or for civil law a right therein, described in paragraphs (4.4)(b) to (d), the capital cost to the transferee of the interest or of the right in the building described in paragraph (4.4)(b).

  247.  (1)  Subparagraph 142.7(7)(a)(ii) of the Act is replaced by the following:

(ii)  the entrant bank assumes an obligation of the Canadian affiliate that is an instrument or commitment described in paragraph 20(1)(l.1) or an obligation in respect of goods, services, land, or chattels or movable property, described in subparagraph 20(1)(m)(i), (ii) or (iii),

  (2)  Subparagraph 142.7(7)(f)(ii) of the Act is replaced by the following:

(ii)  in applying paragraph 20(1)(m), an amount in respect of the goods, services, land, chattels or movable property, that was included under paragraph 12(1)(a) in computing the Canadian affiliate's income from a business is deemed to have been so included in computing the entrant bank's income from its Canadian banking business for a preceding taxation year,

  248.  (1)  Subparagraph (a)(iii) of the definition "earned income" in subsection 146(1) of the Act is replaced by the following:

(iii)  property, where the income is derived from the rental of real or immovable property or from royalties in respect of a work or invention of which the taxpayer was the author or inventor,

  (2)  Subparagraph (e)(ii) of the definition "earned income" in subsection 146(1) of the Act is replaced by the following:

(ii)  property, where the loss is sustained from the rental of real or immovable property,

  249.  Clauses 149(1)(o.2)(ii)(A) to (C) of the Act are replaced by the following:

(A)  limited its activities to

(I)  acquiring, holding, maintaining, improving, leasing or managing capital property that is real property or an interest in real property - or immovables or a real right in immovables - owned by the corporation, another corporation described by this subparagraph and subparagraph (iv) or a registered pension plan, and

(II)  investing its funds in a partnership that limits its activities to acquiring, holding, maintaining, improving, leasing or managing capital property that is real property or an interest in real property - or immovables or a real right in immovables - owned by the partnership,

(B)  made no investments other than in real property or an interest in real property - or immovables or a real right in immovables - or investments that a pension plan is permitted to make under the Pension Benefits Standards Act, 1985 or a similar law of a province, and

(C)  borrowed money solely for the purpose of earning income from real property or an interest in real property or from immovables or a real right in immovables,

  250.  Paragraph 153(6)(c) of the Act is replaced by the following:

(c)  is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables.

  251.  The portion of paragraph 159(1)(a) of the English version of the Act before subparagraph (i) is replaced by the following:

(a)  the legal representative is jointly and severally, or solidarily, liable with the taxpayer

  252.  (1)  Paragraph 160(1)(d) of the English version of the Act is replaced by the following:

(d)  the transferee and transferor are jointly and severally, or solidarily, liable to pay a part of the transferor's tax under this Part for each taxation year equal to the amount by which the tax for the year is greater than it would have been if it were not for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of any income from, or gain from the disposition of, the property so transferred or property substituted therefor, and

  (2)  The portion of paragraph 160(1)(e) of the English version of the Act before subparagraph (i) is replaced by the following:

(e)  the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of

  (3)  The portion of subsection 160(1.1) of the English version of the Act before the formula is replaced by the following:

Joint and several, or solidary, liability - subsection 69(11)

  (1.1)  Where a particular person or partnership is deemed by subsection 69(11) to have disposed of a property at any time, the person referred to in that subsection to whom a benefit described in that subsection was available in respect of a subsequent disposition of the property or property substituted for the property is jointly and severally, or solidarily, liable with each other taxpayer to pay a part of the other taxpayer's liabilities under this Act in respect of each taxation year equal to the amount determined by the formula

  (4)  The portion of subsection 160(1.2) of the English version of the Act before paragraph (a) is replaced by the following:

Joint and several, or solidary, liability - tax on split income

  (1.2)  A parent of a specified individual is jointly and severally, or solidarily, liable with the individual for the amount required to be added because of subsection 120.4(2) in computing the specified individual's tax payable under this Part for a taxation year if, during the year, the parent

  (5)  Paragraph 160(3)(a) of the Act is replaced by the following:

(a)  a payment by the particular taxpayer on account of that taxpayer's liability shall to the extent of the payment discharge their liability; but

  (6)  Paragraph 160(3)(b) of the English version of the Act is replaced by the following:

(b)  a payment by the other taxpayer on account of that taxpayer's liability discharges the particular taxpayer's liability only to the extent that the payment operates to reduce that other taxpayer's liability to an amount less than the amount in respect of which the particular taxpayer is, by this section, made jointly and severally, or solidarily, liable.

  (7)  Subsection 160(3.1) of the Act is replaced by the following:

Fair market value of undivided interest or right

  (3.1)  For the purposes of this section and section 160.4, the fair market value at any time of an undivided interest, or for civil law an undivided right, in a property, expressed as a proportionate interest or right in that property, is, subject to subsection (4), deemed to be equal to the same proportion of the fair market value of that property at that time.

  253.  Subsections 160.1(2.1) and (2.2) of the English version of the Act are replaced by the following:

Liability for refunds by reason of section 122.61

  (2.1)  Where a person was a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6) of an individual at the end of a taxation year, the person and the individual are jointly and severally, or solidarily, liable to pay any excess described in subsection (1) that was refunded in respect of the year to, or applied to a liability of, the individual as a consequence of the operation of section 122.61 if the person was the individual's cohabiting spouse or common-law partner at the time the excess was refunded, but nothing in this subsection shall be deemed to limit the liability of any person under any other provision of this Act.

Liability for excess refunds under section 126.1 to partners

  (2.2)  Every taxpayer who, on the day on which an amount has been refunded to, or applied to the liability of, a member of a partnership as a consequence of the operation of subsection 126.1(7) or (13) in excess of the amount to which the member was so entitled, is a member of that partnership is jointly and severally, or solidarily, liable with each other taxpayer who on that day is a member of the partnership to pay the excess and to pay interest on the excess, but nothing in this subsection shall be deemed to limit the liability of any person under any other provision of this Act.

  254.  (1)  The portion of subsection 160.2(4) of the English version of the Act before paragraph (a) is replaced by the following:

Rules applicable

  (4)  Where a taxpayer and an annuitant have, by virtue of subsection (1) or (2), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the annuitant under this Act, the following rules apply:

  (2)  Paragraph 160.2(4)(a) of the Act is replaced by the following:

(a)  a payment by the taxpayer on account of the taxpayer's liability shall to the extent thereof discharge their liability; but

  (3)  Paragraph 160.2(4)(b) of the English version of the Act is replaced by the following:

(b)  a payment by the annuitant on account of the annuitant's liability discharges the taxpayer's liability only to the extent that the payment operates to reduce the annuitant's liability to an amount less than the amount in respect of which the taxpayer was, by subsection (1) or (2), as the case may be, made jointly and severally, or solidarily, liable.

  255.  (1)  The portion of subsection 160.3(3) of the English version of the Act before paragraph (a) is replaced by the following:

Rules applicable

  (3)  Where a taxpayer and another person have, by virtue of subsection (1), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:

  (2)  Paragraph 160.3(3)(a) of the Act is replaced by the following:

(a)  a payment by the other person on account of the other person's liability shall to the extent thereof discharge their liability; but

  (3)  Paragraph 160.3(3)(b) of the English version of the Act is replaced by the following:

(b)  a payment by the taxpayer on account of the taxpayer's liability discharges the other person's liability only 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 other person was, by subsection (1), made jointly and severally, or solidarily, liable.

  256.  (1)  The portion of subsection 160.4(4) of the English version of the Act before paragraph (a) is replaced by the following:

Rules applicable

  (4)  Where a corporation and another person have, because of subsection (1) or (2), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the corporation under this Act

  (2)  Paragraph 160.4(4)(a) of the Act is replaced by the following:

(a)  a payment by the other person on account of that person's liability shall to the extent thereof discharge their liability; and

  (3)  Paragraph 160.4(4)(b) of the English version of the Act is replaced by the following:

(b)  a payment by the corporation on account of the corporation's liability discharges the other person's liability only to the extent that the payment operates to reduce the corporation's liability to an amount less than the amount in respect of which the other person was, by subsection (1) or (2), as the case may be, made jointly and severally, or solidarily, liable.

  257.  Subparagraph 163.2(8)(b)(i) of the French version of the Act is replaced by the following:

(i)  une part a ou doit avoir un numéro d'inscription attribué en vertu de l'article 237.1 qui est le même numéro que celui qui s'applique à chacune des autres parts dans le bien,

  258.  Paragraph (d) of the definition "financial institution" in subsection 181(1) of the Act is replaced by the following:

(d)  authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,

  259.  (1)  Paragraph 181.3(1)(a) of the Act is replaced by the following:

(a)  the total of all amounts each of which is the carrying value at the end of the year of an asset of the financial institution (other than property held by the institution primarily for the purpose of resale that was acquired by the financial institution, in the year or the preceding taxation year, as a consequence of another person's default, or anticipated default, in respect of a debt owed to the institution) that is tangible, or for civil law corporeal, property used in Canada and, in the case of a financial institution that is an insurance corporation, that is non-segregated property, within the meaning assigned by subsection 138(12),

  (2)  Subparagraph 181.3(1)(b)(i) of the Act is replaced by the following:

(i)  the total of all amounts each of which is the carrying value of an asset of the partnership, at the end of its last fiscal period ending at or before the end of the year, that is tangible, or for civil law corporeal, property used in Canada

  260.  Subparagraph 181.4(d)(i) of the Act is replaced by the following:

(i)  is a ship or aircraft operated by the corporation in international traffic or is personal or movable property used in its business of transporting passengers or goods by ship or aircraft in international traffic, and

  261.  (1)  The portion of subsection 185(4) of the English version of the Act before paragraph (a) is replaced by the following:

Joint and several, or solidary, liability from excessive elections

  (4)  Each person who has received a dividend from a corporation in respect of which the corporation elected under subsection 83(2), 130.1(4) or 131(1) is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation's tax payable under this Part because of the election that

  (2)  The portion of subsection 185(6) of the English version of the Act before paragraph (a) is replaced by the following:

Rules applicable

  (6)  Where under subsection (4) a corporation and another person have become jointly and severally, or solidarily, liable to pay part or all of the corporation's tax payable under this Part in respect of a dividend described in subsection (4),

  (3)  Paragraph 185(6)(a) of the Act is replaced by the following:

(a)  a payment at any time by the other person on account of the liability shall, to the extent of the payment, discharge their liability after that time; and

  262.  Subsection 188(4) of the English version of the Act is replaced by the following:

Joint and several, or solidary, liability - tax transfer

  (4)  Where property has been transferred to a charitable organization in circumstances described in subsection (3) and it may reasonably be considered that the organization acted in concert with a charitable foundation for the purpose of reducing the disbursement quota of the foundation, the organization is jointly and severally, or solidarily, liable with the foundation for the tax imposed on the foundation by that subsection in an amount not exceeding the net value of the property.

  263.  Paragraph (c) of the definition "financial institution" in subsection 190(1) of the Act is replaced by the following:

(c)  is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,

  264.  (1)  Paragraph 191.3(1)(e) of the English version of the Act is replaced by the following:

(e)  the transferor corporation and the transferee corporation are jointly and severally, or solidarily, liable to pay the amount of tax specified in the agreement and any interest or penalty in respect thereof.

  (2)  Subsection 191.3(5) of the English version of the Act is replaced by the following:

Assessment of transferor corporation

  (5)  The Minister may at any time assess a transferor corporation in respect of any amount for which it is jointly and severally, or solidarily, liable by reason of paragraph (1)(e) and the provisions of Division I of Part I are applicable in respect of the assessment as though it had been made under section 152.

  (3)  The portion of subsection 191.3(6) of the English version of the Act before paragraph (a) is replaced by the following:

Payment by transferor corporation

  (6)  Where a transferor corporation and a transferee corporation are by reason of paragraph (1)(e) jointly and severally, or solidarily, liable in respect of tax payable by the transferee corporation under subparagraph 191.1(1)(a)(iv) and any interest or penalty in respect thereof, the following rules apply:

  (4)  Paragraph 191.3(6)(a) of the Act is replaced by the following:

(a)  a payment by the transferor corporation on account of the liability shall, to the extent thereof, discharge their liability; and

  (5)  Paragraph 191.3(6)(b) of the English version of the Act is replaced by the following:

(b)  a payment by the transferee corporation on account of its liability discharges the transferor corporation's liability only to the extent that the payment operates to reduce the transferee corporation's liability under this Act to an amount less than the amount in respect of which the transferor corporation was, by paragraph (1)(e), made jointly and severally, or solidarily, liable.

  265.  (1)  The portion of subparagraph 204.4(2)(a)(ii) of the Act after clause (A) is replaced by the following:

(B)  the amount by which the fair market value at the time of acquisition of its real or immovable property that may reasonably be regarded as being held for the purpose of producing income from property exceeds the total of all amounts each of which is owing by it on account of its acquisition of the real or immovable property

is not less than 80% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is owing by it on account of its acquisition of real or immovable property,

  (2)  Subparagraphs 204.4(2)(a)(iii) and (iv) of the Act are replaced by the following:

(iii)  the fair market value at the time of acquisition of its shares, bonds, mortgages, hypothecary claims and other securities of any one corporation or debtor (other than bonds, mortgages, hypothecary claims and other securities of or guaranteed by Her Majesty in right of Canada or a province or Canadian municipality) is not more than 10% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is an amount owing by it on account of its acquisition of real or immovable property,

(iv)  the amount by which

(A)  the fair market value at the time of acquisition of any one of its real or immovable properties

exceeds

(B)  the total of all amounts each of which is owing by it on account of its acquisition of the real or immovable property

is not more than 10% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is owing by it on account of its acquisition of real or immovable property,

  (3)  Clause 204.4(2)(a)(viii)(A) of the Act is replaced by the following:

(A)  a mortgage or hypothecary claim (other than a mortgage or hypothecary claim insured under the National Housing Act or by a corporation that offers its services to the public in Canada as an insurer of mortgages or hypothecary claims and that is approved as a private insurer of mortgages or hypothecary claims by the Superintendent of Financial Institutions pursuant to the powers assigned to the Superintendent under subsection 6(1) of the Office of the Superintendent of Financial Institutions Act), or an interest therein, or for civil law a right therein, in respect of which the mortgagor or hypothecary debtor is the annuitant under a registered retirement savings plan or registered retirement income fund, or a person with whom the annuitant is not dealing at arm's length, if any of the funds of a trust governed by such a plan or fund have been used to acquire an interest in the applicant, or

  266.  (1)  Subparagraph 204.6(2)(b)(ii) of the Act is replaced by the following:

(ii)  the total of all amounts each of which is an amount owing by the trust at the end of the month in respect of the acquisition of real property or immovables.

  (2)  Subsection 204.6(3) of the Act is replaced by the following:

Tax payable - real property or immovables

  (3)  Where at the end of any month a taxpayer that is a registered investment described in paragraph 204.4(2)(a) holds real or immovable property, it shall, in respect of that month, pay a tax under this Part equal to 1% of the total of all amounts each of which is the amount by which the excess of

(a)  the fair market value at the time of its acquisition of any one real or immovable property of the taxpayer

over

(b)  the total of all amounts each of which was an amount owing by it at the end of the month on account of its acquisition of the real or immovable property

was greater than 10% of the amount by which the total of all amounts each of which is the fair market value at the time of its acquisition of a property held by it at the end of the month exceeds the total of all amounts each of which was an amount owing by it at the end of the month on account of its acquisition of real or immovable property.

  267.  Paragraphs (c) and (c.1) of the definition "carved-out property" in subsection 209(1) of the Act are replaced by the following:

(c)  an interest, or for civil law a right, in respect of a property that was acquired by the person solely in consideration of the person's undertaking under an agreement to incur Canadian exploration expense or Canadian development expense in respect of the property and, where the agreement so provides, to acquire gas or oil well equipment (as defined in subsection 1104(2) of the Income Tax Regulations) in respect of the property,

(c.1)  an interest, or for civil law a right, in respect of a property that was retained by the person under an agreement under which another person obtained an absolute or conditional right to acquire another interest, or for civil law another right, in respect of the property, if the other interest or right is not carved-out property of the other person because of paragraph (c),

  268.  (1)  Subparagraph 212(1)(b)(viii) of the Act is replaced by the following:

(viii)  interest payable on a mortgage, hypothecary claim or similar 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,

  (2)  Subparagraphs 212(1)(d)(viii) and (ix) of the Act are replaced by the following:

(viii)  a payment made under a bona fide cost-sharing arrangement under which the person making the payment shares on a reasonable basis with one or more non-resident persons research and development expenses in exchange for an interest, or for civil law a right, in any or all property or other things of value that may result therefrom,

(ix)  a rental payment for the use of or the right to use outside Canada any tangible, or for civil law corporeal, property,

  (3)  Paragraph 212(13)(f) of the Act is replaced by the following:

(f)  interest on any mortgage, hypothecary claim or other indebtedness entered into or issued or modified after March 31, 1977 and secured by real property situated in Canada or an interest therein, or by immovables situated in Canada or real rights therein, to the extent that the amount so paid or credited is deductible in computing the non-resident person's taxable income earned in Canada or the amount on which the non-resident person is liable to pay tax under Part I,

  269.  (1)  Paragraph 216(1)(b) of the Act is replaced by the following:

(b)  the non-resident person's income from the non-resident person's interest in real property, or real right in immovables, in Canada and interest in, or for civil law right in, timber resource properties and timber limits in Canada, and the non-resident person's share of the income of a partnership of which the non-resident person was a member from its interest in real property, or real right in immovables, in Canada and interest in, or for civil law right in, timber resource properties and timber limits in Canada, were the non-resident person's only income;

  (2)  Paragraphs 216(2)(a) and (b) of the Act are replaced by the following:

(a)  rent on real or immovable property or from timber royalties paid to the person, and

(b)  the person's share of the rent on real or immovable property or from timber royalties paid to a partnership of which the person is a member

  (3)  The portion of subsection 216(4) of the Act before paragraph (a) is replaced by the following:

Optional method of payment

  (4)  Where a non-resident person or, in the case of a partnership, each non-resident person who is a member of the partnership files with the Minister an undertaking in prescribed form to file within 6 months after the end of a taxation year a return of income under Part I for the year as permitted by this section, a person who is otherwise required by subsection 215(3) to remit in the year, in respect of the non-resident person or the partnership, an amount to the Receiver General in payment of tax on rent on real or immovable property or on a timber royalty may elect under this section not to remit under that subsection, and if that election is made, the elector shall,

  (4)  Paragraph 216(5)(b) of the Act is replaced by the following:

(b)  the person's income from the person's interest in real property, or real right in immovables, in Canada or interest in, or for civil law right in, timber resource properties and timber limits in Canada, and the person's share of the income of a partnership of which the person was a member from its interest in real property, or real right in immovables, in Canada or interest in, or for civil law right in, timber resource properties and timber limits in Canada, were the person's only income;

   270.  Subsection 219(1.1) of the Act is replaced by the following:

Excluded gains

  (1.1)  For the purpose of subsection (1), the definition "taxable Canadian property" in subsection 248(1) shall be read without reference to paragraphs (a) and (c) to (k) of that definition and as if the only options, interests or rights referred to in paragraph (l) of that definition were those in respect of property described in paragraph (b) of that definition.

  271.  (1)  The portion of subsection 223(5) of the Act before paragraph (a) is replaced by the following:

Charge on property

  (5)  A document issued by the Federal Court evidencing a certificate in respect of a debtor registered under subsection (3), a writ of that Court issued pursuant to the certificate or any notification of the document or writ (such document, writ or notification in this section referred to as a "memorial") may be filed, registered or otherwise recorded for the purpose of creating a charge, lien or priority on, or a binding interest in, property in a province, or any interest in, or for civil law any right in, such property, held by the debtor in the same manner as a document evidencing

  (2)  Subsection 223(6) of the Act is replaced by the following:

Creation of charge

  (6)  If a memorial has been filed, registered or otherwise recorded under subsection (5),

(a)  a charge, lien or priority is created on, or a binding interest is created in, property in the province, or any interest in, or for civil law any right in, such property, held by the debtor, or

(b)  such property, or interest or right in the property, is otherwise bound,

in the same manner and to the same extent as if the memorial were a document evidencing a judgment referred to in paragraph (5)(a) or an amount referred to in paragraph (5)(b), and the charge, lien, priority or binding interest created shall be subordinate to any charge, lien, priority or binding interest in respect of which all steps necessary to make it effective against other creditors were taken before the time the memorial was filed, registered or otherwise recorded.

  (3)  Paragraphs 223(7)(c) and (d) of the Act are replaced by the following:

(c)  to cancel or withdraw the memorial wholly or in respect of any of the property, or interests or rights, affected by the memorial, or

(d)  to postpone the effectiveness of the filing, registration or other recording of the memorial in favour of any right, charge, lien or priority that has been or is intended to be filed, registered or otherwise recorded in respect of any property, or interest or right, affected by the memorial,

  (4)  Paragraph 223(8)(a) of the English version of the Act is replaced by the following:

(a)  a memorial is presented for filing, registration or other recording under subsection (5) or a document relating to the memorial is presented for filing, registration or other recording for the purpose of any proceeding described in subsection (7) to any official in the land registry system, personal property or movable property registry system, or other registry system, of a province, it shall be accepted for filing, registration or other recording, or

  (5)  Subsection 223(8) of the French version of the Act is replaced by the following:

Présentation des documents

  (8)  L'extrait qui est présenté pour production, enregistrement ou autre inscription en application du paragraphe (5), ou un document concernant l'extrait qui est présenté pour production, enregistrement ou autre inscription dans le cadre des procédures visées au paragraphe (7), à un agent d'un régime d'enregistrement foncier ou des droits sur des biens meubles ou personnels ou autres droits d'une province est accepté pour production, enregistrement ou autre inscription de la même manière et dans la même mesure que s'il s'agissait d'un document faisant preuve du contenu d'un jugement visé à l'alinéa (5)a) ou d'un montant visé à l'alinéa (5)b) dans le cadre de procédures semblables. Aux fins de la production, de l'enregistrement ou autre inscription de cet extrait ou ce document, l'accès à une personne, à un endroit ou à une chose situé dans une province est donné de la même manière et dans la même mesure que si l'extrait ou le document était un document semblable ainsi délivré ou établi. Lorsque l'extrait ou le document est délivré par la Cour fédérale ou porte la signature ou fait l'objet d'un certificat d'un juge ou d'un fonctionnaire de cette cour, tout affidavit, toute déclaration ou tout autre élément de preuve qui doit, selon la loi provinciale, être fourni avec l'extrait ou le document ou l'accompagner dans le cadre des procédures est réputé avoir été ainsi fourni ou accompagner ainsi l'extrait ou le document.

  272.  The definition "security interest" in subsection 224(1.3) of the Act is replaced by the following:

"security interest"
« garantie »

"security interest" means any interest in, or for civil law any right in, property that secures payment or performance of an obligation and includes an interest, or for civil law a right, created by or arising out of a debenture, mortgage, hypothec, lien, pledge, charge, deemed or actual trust, assignment or encumbrance of any kind whatever, however or whenever arising, created, deemed to arise or otherwise provided for;

  273.  Section 224.2 of the Act is replaced by the following:

Acquisition of debtor's property

  224.2  For the purpose of collecting debts owed by a person to Her Majesty under this Act or under an Act of a province with which the Minister of Finance has entered into an agreement for the collection of taxes payable to the province under that Act, the Minister may purchase or otherwise acquire any interest in, or for civil law any right in, the person's property that the Minister is given a right to acquire in legal proceedings or under a court order or that is offered for sale or redemption and may dispose of any interest or right so acquired in such manner as the Minister considers reasonable.

  274.  (1)  Subsection 225(1) of the Act is replaced by the following:

Seizure of goods, chattels or movable property

  225.  (1)  Where a person has failed to pay an amount as required by this Act, the Minister may give 30 days notice to the person by registered mail addressed to the person's latest known address of the Minister's intention to direct that the person's goods and chattels, or movable property, be seized and sold, and, if the person fails to make the payment before the expiration of the 30 days, the Minister may issue a certificate of the failure and direct that the person's goods and chattels, or movable property, be seized.

  (2)  Subsection 225(5) of the Act is replaced by the following:

Exemptions from seizure

  (5)  Such goods and chattels, or movable property, of any person in default as would be exempt from seizure under a writ of execution issued out of a superior court of the province in which the seizure is made are exempt from seizure under this section.

  275.  Subsection 226(2) of the Act is replaced by the following:

Seizure in case of default of payment

  (2)  Where a taxpayer fails to pay, as required, any tax, interest or penalties demanded under this section, the Minister may direct that the goods and chattels, or movable property, of the taxpayer be seized and subsections 225(2) to (5) apply, with respect to the seizure, with such modifications as the circumstances require.

  276.  (1)  The portion of paragraph 227(5)(b) of the English version of the Act before subparagraph (i) is replaced by the following:

(b)  is jointly and severally, or solidarily, liable with the payer to pay to the Receiver General

  (2)  Subsection 227(8.1) of the English version of the Act is replaced by the following:

Joint and several, or solidary, liability

  (8.1)  Where a particular person has failed to deduct or withhold an amount as required under subsection 153(1) or section 215 in respect of an amount that has been paid to a non-resident person, the non-resident person is jointly and severally, or solidarily, liable with the particular person to pay any interest payable by the particular person pursuant to subsection (8.3) in respect thereof.

  (3)  Subsection 227(10.2) of the English version of the Act is replaced by the following:

Joint and several, or solidary, liability re contributions to RCA

  (10.2)  Where a non-resident person fails to deduct, withhold or remit an amount as required by subsection 153(1) in respect of a contribution under a retirement compensation arrangement that is paid on behalf of the employees or former employees of an employer with whom the non-resident person does not deal at arm's length, the employer is jointly and severally, or solidarily, liable with the non-resident person to pay any amount payable under subsection (8), (8.2), (8.3), (9), (9.2) or (9.4) by the non-resident person in respect of the contribution.

  277.  (1)  Paragraphs (a) and (b) of the definition "specified foreign property" in subsection 233.3(1) of the English version of the Act are replaced by the following:

(a)  funds or intangible property, or for civil law incorporeal property, situated, deposited or held outside Canada,

(b)  tangible property, or for civil law corporeal property, situated outside Canada,

  (2)  Paragraph (h) of the definition "specified foreign property" in subsection 233.3(1) of the English version of the Act is replaced by the following:

(h)  an interest in, or for civil law a right in, or a right - under a contract in equity or otherwise either immediately or in the future and either absolutely or contingently - to, any property (other than any property owned by a corporation or trust that is not the person) that is specified foreign property, and

  (3)  Paragraph (q) of the definition "specified foreign property" in subsection 233.3(1) of the English version of the Act is replaced by the following:

(q)  an interest in, or for civil law a right in, or a right to acquire, a property that is described in any of paragraphs (j) to (p).

  (4)  Subparagraphs (a)(i) and (ii) of the definition "bien étranger déterminé" in subsection 233.3(1) of the French version of the Act are replaced by the following:

(i)  les fonds ou le bien intangible ou, pour l'application du droit civil, le bien incorporel situés, déposés ou détenus à l'étranger,

(ii)  le bien tangible ou, pour l'application du droit civil, le bien corporel situé à l'étranger,

  (5)  Subparagraph (a)(viii) of the definition "bien étranger déterminé" in subsection 233.3(1) of the French version of the Act is replaced by the following:

(viii)  l'intérêt ou, pour l'application du droit civil, le droit sur un bien (sauf celui appartenant à une société ou une fiducie autre que la personne) qui est un bien étranger déterminé ou le droit à un tel bien, immédiat ou futur, absolu ou conditionnel et prévu par un contrat, en equity ou autrement,

  (6)  Subparagraph (b)(viii) of the definition "bien étranger déterminé" in subsection 233.3(1) of the French version of the Act is replaced by the following:

(viii)  l'intérêt ou, pour l'application du droit civil, le droit sur un bien visé à l'un des sous-alinéas (i) à (vii) ou le droit d'acquérir un tel bien.

  278.  (1)  Paragraph (c) of the definition "foreign resource property" in subsection 248(1) of the Act is replaced by the following:

(c)  an oil or gas well in that country or real or immovable property in that country the principal value of which depends on its petroleum or natural gas content (but not including depreciable property),

  (2)  Paragraphs (f) and (g) of the definition "foreign resource property" in subsection 248(1) of the Act are replaced by the following:

(f)  a real or immovable property in that country the principal value of which depends upon its mineral resource content (but not including depreciable property),

(g)  a right to or an interest in - or for civil law a right to or in - any property described in any of paragraphs (a) to (e), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, or

(h)  an interest in real property described in paragraph (f) or a real right in an immovable described in that paragraph, other than an interest or a right that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership;

  (3)  The portion of the definition "former business property" in subsection 248(1) of the Act after paragraph (d) is replaced by the following:

and for the purpose of this definition, "rental property" of a taxpayer means real or immovable property owned by the taxpayer, whether jointly with another person or otherwise, and used by the taxpayer in the taxation year in respect of which the expression is being applied principally for the purpose of gaining or producing gross revenue that is rent (other than property leased by the taxpayer to a person related to the taxpayer and used by that related person principally for any other purpose), but, for greater certainty, does not include a property leased by the taxpayer or the related person to a lessee, in the ordinary course of a business of the taxpayer or the related person of selling goods or rendering services, under an agreement by which the lessee undertakes to use the property to carry on the business of selling or promoting the sale of the goods or services of the taxpayer or the related person;

  (4)  The portion of the definition "property" in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

"property"
« biens »

"property" means property of any kind whatever whether real or personal, immovable or movable, tangible or intangible, or corporeal or incorporeal and, without restricting the generality of the foregoing, includes

  (5)  Paragraph (a) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(a)  real or immovable property situated in Canada,

  (6)  Subparagraph (b)(ii) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(ii)  where the taxpayer is non-resident, ships and aircraft used principally in international traffic and personal or movable property pertaining to their operation if the country in which the taxpayer is resident does not impose tax on gains of persons resident in Canada from dispositions of such property,

  (7)  Clause (e)(i)(E) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(E)  an option in respect of, or an interest in, or for civil law a right in, a property described in any of clauses (B) to (D), whether or not the property exists,

  (8)  Clause (e)(ii)(A) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(A)  real or immovable property situated in Canada,

  (9)  Subparagraph (g)(v) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(v)  an option in respect of, or an interest in, or for civil law a right in, a property described in any of subparagraphs (ii) to (iv), whether or not that property exists,

  (10)  Clause (k)(i)(E) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(E)  an option in respect of, or an interest in, or for civil law a right in, a property described in any of clauses (B) to (D), whether or not that property exists

  (11)  Clause (k)(ii)(A) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(A)  real or immovable property situated in Canada,

  (12)  Paragraph (l) of the definition "taxable Canadian property" in subsection 248(1) of the Act is replaced by the following:

(l)  an option in respect of, or an interest in, or for civil law a right in, a property described in any of paragraphs (a) to (k), whether or not that property exists,

  (13)  Subsection 248(4) of the Act is replaced by the following:

Interest in real property

  (4)  In this Act, an interest in real property includes a leasehold interest in real property but does not include an interest as security only derived by virtue of a mortgage, agreement for sale or similar obligation.

Real right in immovables

  (4.1)  In this Act, a real right in an immovable includes a lease but does not include a security right derived by virtue of a hypothec, agreement for sale or similar obligation.

  (14)  Subsections 248(20) and (21) of the Act are replaced by the following:

Partition of property

  (20)  Subject to subsections (21) to (23), for the purposes of this Act, where at any time a property owned by two or more persons is the subject of a partition, the following rules apply, notwithstanding any retroactive or declaratory effect of the partition:

(a)  each such person who had, immediately before that time, an interest in, or for civil law a right in, the property (which interest or right in the property is referred to in this subsection and subsection (21) as an "interest" or a "right", as the case may be) shall be deemed not to have disposed at that time of that proportion, not exceeding 100%, of the interest or right that the fair market value of that person's interest or right in the property immediately after that time is of the fair market value of that person's interest or right in the property immediately before that time,

(b)  each such person who has an interest or right in the property immediately after that time shall be deemed not to have acquired at that time that proportion of the interest or right that the fair market value of that person's interest or right in the property immediately before that time is of the fair market value of that person's interest or right in the property immediately after that time,

(c)  each such person who had an interest or a right in the property immediately before that time shall be deemed to have had until that time, and to have disposed at that time of, that proportion of the person's interest or right to which paragraph (a) does not apply,

(d)  each such person who has an interest or a right in the property immediately after that time shall be deemed not to have had before that time, and to have acquired at that time, that proportion of the person's interest or right to which paragraph (b) does not apply, and

(e)  paragraphs (a) to (d) do not apply where the interest or right of the person is an interest or a right in fungible tangible property, or for civil law fungible corporeal property described in that person's inventory,

and, for the purposes of this subsection, where an interest or a right in the property is an undivided interest or right, the fair market value of the interest or right at any time shall be deemed to be equal to that proportion of the fair market value of the property at that time that the interest or right is of all the undivided interests or rights in the property.

Subdivision of property

  (21)  Where a property that was owned by two or more persons is the subject of a partition among those persons and, as a consequence thereof, each such person has, in the property, a new interest or right the fair market value of which immediately after the partition, expressed as a percentage of the fair market value of all the new interests or rights in the property immediately after the partition, is equal to the fair market value of that person's undivided interest or right immediately before the partition, expressed as a percentage of the fair market value of all the undivided interests or rights in the property immediately before the partition,

(a)  subsection (20) does not apply to the property, and

(b)  the new interest or right of each such person shall be deemed to be a continuation of that person's undivided interest or right in the property immediately before the partition,

and, for the purposes of this subsection,

(c)  subdivisions of a building or of a parcel of land that are established in the course of, or in contemplation of, a partition and that are co-owned by the same persons who co-owned the building or the parcel of land, or by their assignee, shall be regarded as one property, and

(d)  where an interest or a right in the property is or includes an undivided interest or right, the fair market value of the interest or right shall be determined without regard to any discount or premium that applies to a minority or majority interest or right in the property.

  (15)  The portion of subsection 248(23.1) of the Act before paragraph (a) is replaced by the following:

Transfers after death

  (23.1)  Where, as a consequence of the laws of a province relating to spouses' or common-law partners' interests or rights in respect of property as a result of marriage or common-law partnership, property is, after the death of a taxpayer:

  279.  Subparagraphs 253(c)(ii) and (iii) of the Act are replaced by the following:

(ii)  property (other than depreciable property) that is a timber resource property, an option in respect of a timber resource property or an interest in, or for civil law a right in, a timber resource property, or

(iii)  property (other than capital property) that is real or immovable property situated in Canada, including an option in respect of such property or an interest in, or for civil law a real right in, such property, whether or not the property is in existence,

PART 4

COORDINATING AMENDMENTS

Bill C-2

Bill C-2

  280.  (1)  Subsections (2) and (3) apply if Bill C-2, introduced in the 1st session of the 39th Parliament and entitled the Federal Accountability Act (the "other Act"), receives royal assent.

  (2)  On the coming into force of subsection 64(2) of the other Act, subparagraph 53(2)(c)(iii) of the Income Tax Act, as enacted by subsection 66(3) of this 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,

  (3)  If subsection 64(2) of the other Act comes into force before this Act is assented to, subsections 123(6) and (9) of this Act are deemed to have come into force before subsection 64(2) of the other Act.

Bill C-28

Bill C-28

   281.  (1)  Subsections (2) to (12) apply if Bill C-28, introduced in the 1st session of the 39th Parliament and entitled the Budget Implementation Act, 2006, No. 2 (the "other Act"), receives royal assent.

  (2)  If subsection 3(3) of the other Act comes into force, paragraph 14(3)(a) of the Income Tax Act, as amended by subsection 53(1) of this Act, is amended by replacing the expression "subsection (1.01)" with the expression "subsection (1.01) or (1.02)".

  (3)  Subsection 82(1) of the Income Tax Act, as enacted by subsection 44(1) of the other Act, 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:

(a)  the 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.1)  the 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;

(b)  if 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)  45% of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year;

(c)  all taxable dividends received by the taxpayer in the taxation year, from corporations resident in Canada, under dividend rental arrangements of the taxpayer;

(d)  all taxable dividends (other than taxable dividends described in paragraph (c)) received by the taxpayer in the taxation year from corporations resident in Canada that are not taxable Canadian corporations; and

(e)  if the taxpayer is a trust, all amounts each of which is all or part of a taxable dividend (other than a taxable dividend described in paragraph (c) or (d)) that was received by the trust in the taxation year on a share of the capital stock of a taxable Canadian corporation and that can reasonably be considered to have been included in computing the income of a beneficiary under the trust who was non-resident at the end of the taxation year.

  (4)  If subsection 3(3) of the other Act comes into force, subsection 96(3) of the Income Tax Act, as amended by subsection 20(3) of this Act, is amended by replacing the expression "14(1.01) and (6)" with the expression "14(1.01), (1.02) and (6)".

  (5)  Section 54 of the other Act is, or is deemed to have been, repealed.

  (6)  Section 260 of the Income Tax Act is amended by adding the following after subsection (1):

Eligible dividend

  (1.1)  This subsection applies to an amount if the amount is received by a person who is resident in Canada, is deemed under subsection (5.1) to be a taxable dividend, and is either

(a)  received as compensation for an eligible dividend, within the meaning assigned by subsection 89(1); or

(b)  received as compensation for a taxable dividend (other than an eligible dividend) paid by a corporation to a non-resident shareholder in circumstances where it is reasonable to consider that the corporation would, if that shareholder were resident in Canada, have designated the dividend to be an eligible dividend under subsection 89(14).

  (7)  Subsection 260(5.1) of the Income Tax Act, as enacted by subsection 194(6) of this Act, is replaced by the following:

Deemed character of compensation payments

  (5.1)  If this subsection applies in respect of a particular amount received by a taxpayer in a taxation year as an SLA compensation payment or as a dealer compensation payment, the particular amount is deemed for the purpose of this Act, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the taxation year as,

(a)  where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which paragraph (b) applies), a taxable dividend and, if subsection (1.1) applies to the particular amount, an eligible dividend on the share;

(b)  where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,

(i)  an amount of the trust's income that was, to the extent that subsection 104(13) applied to the underlying payment,

(A)  paid by the trust to the taxpayer as a beneficiary under the trust, and

(B)  designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust under this Act in respect of the recipient of the underlying payment, and

(ii)  to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or

(c)  in any other case, interest.

  (8)  Paragraph 260(12)(b) of the Income Tax Act, as enacted by subsection 194(9) of this Act, is replaced by the following:

(b)  for the purpose of subsection 82(1), to have paid the individual's specified proportion, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed by subsection (5.1) to have been received by another person as a taxable dividend or an eligible dividend.

  (9)  Subsection (2) applies to taxation years that end after December 20, 2002, except that the expression "disposition after December 20, 2002 of a property that was an eligible capital property" in the description of A.1 in the description of A in the definition "cumulative eligible capital" in subsection 14(5) of the Income Tax Act, as enacted by subsection 53(2) of this Act, is to be read as the expression "disposition after 2003 of a property that was an eligible capital property" if

(a)  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;

(b)  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 an arm's length with the transferor and the particular person; and

(c)  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 Income Tax Act.

  (10)  Subsection (3) is deemed to have come into force on January 1, 2006.

  (11)  Subsection (4) applies to taxation years that end after December 20, 2002. However, subsection 96(3) of the Income Tax Act, as amended by subsection 20(3) of this Act, is, before 2007, to be read without reference to "sections 94.1 to 94.3, paragraph 95(2)(g.3)".

  (12)  Subsections (6) to (8) apply to SLA compensation payments or dealer compensation payments received in respect of eligible dividends paid after 2005.

Income Tax Amendments, 2006 - Schedule

SCHEDULE  

(Section 195)

SCHEDULE  

(Subsection 181(1))

LISTED CORPORATIONS

2419726 Canada Inc.

AmeriCredit Financial Services of Canada Ltd.

AVCO Financial Services Quebec Limited

Bombardier Capital Ltd.

Canaccord Capital Credit Corporation/Corporation de crédit Canaccord capital

Canadian Cooperative Agricultural Financial Services

Canadian Home Income Plan Corporation

Citibank Canada Investment Funds Limited

Citicapital Commercial Corporation/Citicapital Corporation Commerciale

Citi Cards Canada Inc./Cartes Citi Canada Inc.

Citi Commerce Solutions of Canada Ltd.

CitiFinancial Canada East Corporation/CitiFinancière, corporation du Canada Est

CitiFinancial Canada, Inc./CitiFinancière Canada, Inc.

CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires

CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l'Est

Citigroup Finance Canada Inc.

Crédit Industriel Desjardins

CU Credit Inc.

Ford Credit Canada Limited

GE Card Services Canada Inc./GE Services de Cartes du Canada Inc.

General Motors Acceptance Corporation of Canada Limited

GMAC Residential Funding of Canada, Limited

Household Commercial Canada Inc.

Household Finance Corporation of Canada

Household Finance Corporation Limited

Household Realty Corporation Limited

Hudson's Bay Company Acceptance Limited

John Deere Credit Inc./Crédit John Deere Inc.

Merchant Retail Services Limited

PACCAR Financial Ltd./Compagnie Financière Paccar Ltée

Paradigm Fund Inc./Le Fonds Paradigm Inc.

Prêts étudiants Atlantique Inc./Atlantic Student Loans Inc.

Principal Fund Incorporated

RT Mortgage-Backed Securities Limited

RT Mortgage-Backed Securities II Limited

State Farm Finance Corporation of Canada/Corporation de Crédit State Farm du Canada

Trans Canada Credit Corporation

Trans Canada Retail Services Company/Société de services de détails trans Canada

Wells Fargo Financial Canada Corporation

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