Whether carrying on business before February 22, 1994	(3.17) For the purpose of subsection (3.15), a partnership in respect of which paragraph (3.16)(a), (b) or (c) applies shall be considered to have actively carried on the business, or earned income from the property, contemplated in the document referred to in that paragraph throughout the period beginning February 22, 1994 and ending on the earlier of the closing date, if any, stipulated in the document and January 1, 1995.
Deemed partner	(3.18) For the purpose of subsection (3.1), a member of a partnership who acquired an interest in the partnership after February 22, 1994 shall be deemed to have held the interest on February 22, 1994 where the member acquired the interest
	(a) in circumstances in which
	(i) paragraph 70(6)(d.1) applied,
	(ii) where the member is an individual, the member's spouse held the partnership interest on February 22, 1994,
	(iii) where the member is a trust, the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
	(iv) the partnership interest was, immediately before the death of the spouse or the taxpayer, as the case may be, an excluded interest;
	(b) in circumstances in which
	(i) paragraph 70(9.2)(c) applied,
	(ii) the member's parent held the partnership interest on February 22, 1994, and
	(iii) the partnership interest was, immediately before the parent's death, an excluded interest;
	(c) in circumstances in which
	(i) paragraph 70(9.3)(e) applied,
	(ii) the trust referred to in subsection 70(9.3) or the taxpayer by whose will the trust was created held the partnership interest on February 22, 1994, and
	(iii) the partnership interest was, immediately before the death of the spouse referred to in subsection 70(9.3), an excluded interest; or
	(d) before 1995 pursuant to a document referred to in subparagraph (3.16)(a)(i) or paragraph (3.16)(b) or (c).
Non-applicati on of subsection (3 )	(3.19) Subsection (3) does not apply in any case where subsection (3.1) applies.
Non-applicati on of subsection (3. 1)	(3.2) Subsection (3.1) does not apply in any case where paragraph 98(1)(c) or 98.1(1)(c) applies.
	(3) Subparagraph 40(6)(b)(ii) of the Act is replaced by the following:
	(ii) the description of B in paragraph (2)(b) is read without reference to ``one plus''
	(4) Section 40 of the Act is amended by adding the following after subsection (7):
Effect of election under subsection 110.6(19)	(7.1) Where an election was made under subsection 110.6(19) in respect of a property of a taxpayer that was the taxpayer's principal residence for the 1994 taxation year or that, in the taxpayer's return of income for the taxation year in which the taxpayer disposes of the property or grants an option to acquire the property, is designated as the taxpayer's principal residence, in determining, for the purposes of paragraph (2)(b) and subsections (4) to (7), the day on which the property was last acquired or reacquired by the taxpayer and the period throughout which the property was owned by the taxpayer this Act shall be read without reference to subsection 110.6(19).
	(5) Subsections (1), (3) and (4) apply to dispositions that occur after February 22, 1994.
	(6) Subsection (2) applies after February 21, 1994, except that subsection 40(3.1) of the Act, as enacted by subsection (2), does not apply to a member of a partnership before the end of the partnership's fifth fiscal period ending after 1994 where the following conditions are met:
	(a) the member acquires the partnership interest before 1995;
	(b) all or substantially all of the property (other than money) of the partnership is a film production or an interest in one or more partnerships all or substantially all of the property of which is a film production;
	(c) the principal photography of the production (or, in the case of a television series, an episode of the series) commences before 1995;
	(d) the funds used to produce the film production are raised before 1995 and the principal photography of the production is completed, and the funds are expended, before 1995 (or, in the case of a film production prescribed for the purpose of subparagraph 96(2.2)(d)(ii) of the Act, the principal photography of the production is completed, and the funds are expended, before March 2, 1995); and
	(e) one of the following conditions is met:
	(i) the producer of the production has, before February 22, 1994, entered into a written agreement for the pre-production, distribution, broadcasting, financing or acquisition of the production or the acquisition of the screenplay for the production (or has entered into a written contract before February 22, 1994 with a screenwriter to write the screenplay for the production),
	(ii) the producer of the production receives before 1995 a commitment for funding or government assistance (or an advance ruling or active status letter in respect of eligibility for such funding or other government assistance) for the production from a federal or provincial government agency the mandate of which is related to the provision of assistance to film productions in Canada, or
	(iii) the production is a continuation of a television series an episode of which satisfies the requirements of paragraph (e).
	13. (1) Section 49 of the Act is amended by adding the following after subsection (3.1):
Option granted before February 23, 1994	(3.2) Where an individual (other than a trust) who disposes of property pursuant to the exercise of an option that was granted by the individual before February 23, 1994 so elects in the individual's return of income for the taxation year in which the disposition occurs, subsection (3) does not apply in respect of the disposition in computing the income of the individual.
	(2) Subsection (1) applies to dispositions that occur after February 22, 1994.
	14. (1) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (v):
	(vi) any amount deemed by subsection 40(3.1) to be a gain of the taxpayer for a taxation year from a disposition before that time of the property,
	(2) Paragraph 53(1)(e) of the Act is amended by striking out the word ``and'' at the end of subparagraph (x), by adding the word ``and'' at the end of subparagraph (xi) and by adding the following after subparagraph (xi):
	(xii) any amount required by paragraph 110.6(23)(a) to be added at that time in computing the adjusted cost base to the taxpayer of the interest;
	(3) Subsection 53(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (n), by adding the word ``and'' at the end of paragraph (o) and by adding the following after paragraph (o):
	(p) where the time is after 2004 and the property is an interest in or a share of the capital stock of a flow-through entity (within the meaning assigned by subsection 39.1(1)), the amount determined by the formula
	A x B/C
	where
	A is the amount, if any, that would, if the definition ``exempt capital gains balance'' in subsection 39.1(1) were read without reference to ``that ends before 2005'', be the taxpayer's exempt capital gains balance in respect of the entity for the taxpayer's 2005 taxation year,
	B is the fair market value at that time of the property, and
	C is the fair market value at that time of all the taxpayer's interests in or shares of the capital stock of the entity.
	(4) Paragraph 53(2)(c) of the Act is amended by adding the following after subparagraph (i.1):
	(i.2) any amount deemed by subsection 40(3.12) to be a loss of the taxpayer for a taxation year from a disposition before that time of the property,
	(i.3) where at that time the taxpayer would be a member described in subsection 40(3.1) of the partnership, if the fiscal period of the partnership that includes that time ended at that time, the unpaid principal amount of any debt of the taxpayer at that time in respect of which recourse against the taxpayer is limited, either immediately or in the future and either absolutely or contingently, and that can reasonably be considered to have been used to acquire the property,
	(5) Paragraph 53(2)(c) of the Act is amended by striking out the word ``and'' at the end of subparagraph (ix), by adding the word ``and'' at the end of subparagraph (x) and by adding the following after subparagraph (x):
	(xi) any amount required by paragraph 110.6(23)(b) to be deducted at that time in computing the adjusted cost base to the taxpayer of the interest;
	(6) Subsection 53(2) of the Act is amended by striking out the word ``and'' at the end of paragraph (s) and by adding the following after paragraph (t):
	(u) where the property was at the end of February 22, 1994 a non-qualifying real property (within the meaning assigned by subsection 110.6(1) as that subsection applies to the 1994 taxation year) of a taxpayer, any amount required by paragraph 110.6(21)(b) to be deducted in computing the adjusted cost base to the taxpayer of the property; and
	(v) where the taxpayer elected under subsection 110.6(19) in respect of the property, any amount required by subsection 110.6(22) to be deducted in computing the adjusted cost base to the taxpayer of the property at that time.
	(7) Subsections (1) and (4) apply after February 21, 1994, except that subparagraph 53(2)(c)(i.3) of the Act, as enacted by subsection (4), applies to debts entered into by a taxpayer after September 26, 1994 other than such a debt entered into pursuant to an agreement in writing entered into by the taxpayer before September 27, 1994.
	(8) Subsections (2), (3), (5) and (6) apply to the 1994 and subsequent taxation years.
	15. (1) Paragraphs (c) and (d) of the definition ``adjusted cost base'' in section 54 of the Act are replaced by the following:
	(c) for greater certainty, where any property (other than an interest in or a share of the capital stock of a flow-through entity within the meaning assigned by subsection 39.1(1) that was last reacquired by the taxpayer as a result of an election under subsection 110.6(19)) of the taxpayer is property that was reacquired by the taxpayer after having been previously disposed of by the taxpayer, no adjustment to the cost to the taxpayer of the property that was required to be made under section 53 before its reacquisition by the taxpayer shall be made under that section to the cost to the taxpayer of the property as reacquired property of the taxpayer, and
	(d) in no case shall the adjusted cost base to a taxpayer of any property at any time be less than nil;
	(2) Subsection (1) applies to the 1994 and subsequent taxation years.
	16. (1) Section 55 of the Act is amended by adding the following before subsection (2):
Definitions	55. (1) In this section,
``distribution'' « attribution »	``distribution'' means a direct or indirect transfer of property of a corporation (referred to in this section as the ``distributing corporation'') to one or more corporations (each of which is referred to in this section as a ``transferee corporation'') where, in respect of each type of property owned by the distributing corporation immediately before the transfer, each transferee corporation receives property of that type the fair market value of which is equal to or approximates the amount determined by the formula
	A x B/C
	where
	A is the fair market value, immediately before the transfer, of all property of that type owned at that time by the distributing corporation,
	B is the fair market value, immediately before the transfer, of all the shares of the capital stock of the distributing corporation owned at that time by the transferee corporation, and
	C is the fair market value, immediately before the transfer, of all the issued shares of the capital stock of the distributing corporation;
``permitted acquisition'' « acquisition autorisée »	``permitted acquisition'', in relation to a distribution by a distributing corporation, means an acquisition of property by a person or partnership on, or as part of,
	(a) a distribution, or
	(b) a permitted exchange or permitted redemption in relation to a distribution by another distributing corporation;
``permitted exchange'' « échange autorisé »	``permitted exchange'', in relation to a distribution by a distributing corporation, means
	(a) an exchange of shares for shares of the capital stock of the distributing corporation to which subsection 51(1) or 86(1) applies or would, if the shares were capital property to the holder thereof, apply, other than an exchange that resulted in an acquisition of control of the distributing corporation by any person or group of persons, and
	(b) an exchange of shares of the capital stock of the distributing corporation by one or more shareholders of the distributing corporation (each of whom is referred to in this paragraph as a ``participant'') for shares of the capital stock of another corporation (referred to in this paragraph as the ``acquiror'') in contemplation of the distribution where
	(i) no share of the capital stock of the acquiror outstanding immediately after the exchange (other than directors' qualifying shares) is owned at that time by any person or partnership other than a participant,
	and either
	(ii) the acquiror owns, immediately before the distribution, all the shares each of which is a share of the capital stock of the distributing corporation that was owned immediately before the exchange by a participant, or
	(iii) the fair market value, immediately before the distribution, of each participant's shares of the capital stock of the acquiror is equal to or approximates the amount determined by the formula
	(A x B/C) + D
	where
	A is the fair market value, immediately before the distribution, of all the shares of the capital stock of the acquiror then outstanding (other than shares issued to participants in consideration for shares of a specified class all the shares of which were acquired by the acquiror on the exchange),
	B is the fair market value, immediately before the exchange, of all the shares of the capital stock of the distributing corporation (other than shares of a specified class none or all of the shares of which were acquired by the acquiror on the exchange) owned at that time by the participant,