OTHER AMENDMENTS TO THE INCOME TAX ACT AND RELATED LEGISLATIONR.S., c. 1 (5th Supp.)
Income Tax Act169. (1) Paragraph 4(3)(a) of the Income Tax Act is replaced by the following:(a) subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (z), apply either wholly or in part to a particular source or to sources in a particular place; and(2) Subsection (1) applies to the 2002 and subsequent taxation years, except that, for taxation years that end before 2007, paragraph 4(3)(a) of the Act, as enacted by subsection (1), is to be read as follows:(a) subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (x), apply either wholly or in part to a particular source or to sources in a particular place; and170. (1) Paragraph 6(1)(a) of the Act is replaced by the following:Value of benefits
(a) the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer’s office or employment, except any benefit(i) derived from the contributions of the taxpayer’s employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,(ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust,(iii) that was a benefit in respect of the use of an automobile,(iv) derived from counselling services in respect of(A) the mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or(B) the re-employment or retirement of the taxpayer,(v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11), or(vi) that is received or enjoyed by an individual other than the taxpayer under a program provided by the taxpayer’s employer that is designed to assist individuals to further their education, if the taxpayer deals with the employer at arm’s length and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer;(2) Paragraph 6(1)(l) of the Act is replaced by the following:Where standby charge does not apply
(l) the value of a benefit in respect of the operation of an automobile (other than a benefit to which paragraph (k) applies or would apply but for subparagraph (k)(iii)) received or enjoyed by the taxpayer, or by a person related to the taxpayer, in the year in respect of, in the course of or because of, the taxpayer’s office or employment.(3) Section 6 of the Act is amended by adding the following after subsection (1.1):Deeming rule — amount received
(1.2) For the purposes of paragraph (1)(g), an amount received by an individual out of or under an employee benefit plan is deemed to have been received by a taxpayer and not by the individual if(a) the individual does not deal at arm’s length with the taxpayer;(b) the amount is received in respect of an office or employment of the taxpayer; and(c) the taxpayer is living at the time the amount is received by the individual.(4) Section 6 of the Act is amended by adding the following after subsection (3):Amount receivable for covenant
(3.1) If an amount (other than an amount to which paragraph (1)(a) applies because of subsection (11)) is receivable at the end of a taxation year by a taxpayer in respect of a covenant, agreed to by the taxpayer more than 36 months before the end of that taxation year, with reference to what the taxpayer is, or is not, to do, and the amount would be included in the taxpayer’s income for the year under this subdivision if it were received by the taxpayer in the year, the amount(a) is deemed to be received by the taxpayer at the end of the taxation year for services rendered as an officer or during the period of employment; and(b) is deemed not to be received at any other time.(5) Subsection 6(15.1) of the French version of the Act is replaced by the following:Montant remis
(15.1) Pour l’application du paragraphe (15), le « montant remis » à un moment donné sur une dette émise par un débiteur s’entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :a) la dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;b) il n’était pas tenu compte d’un montant inclus dans le calcul du revenu en raison du règlement ou de l’extinction de la dette à ce moment;c) il n’était pas tenu compte des alinéas f) et h) de l’élément B de la formule figurant à la définition de « montant remis » au paragraphe 80(1);d) il n’était pas tenu compte des alinéas 80(2)b) et q).(6) Subsections (1) to (3) apply in respect of benefits received or enjoyed on or after October 31, 2011.(7) Subsection (4) applies to amounts receivable in respect of a covenant agreed to after October 7, 2003.(8) Subsection (5) applies to taxation years that end after February 21, 1994.171. (1) The portion of subsection 7(7) of the Act before the definition “qualifying person” is replaced by the following:Definitions
(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.1), (1.2), (1.5) to (1.8) and (2.1).(2) Subsection (1) is deemed to have come into force on January 1, 1999. However,(a) it does not apply to a right under an agreement to which subsection 7(7) of the Act, as enacted by subsection 3(7) of the Income Tax Amendments Act, 1998, does not (except for the purpose of applying paragraph 7(3)(b) of the Act) apply; and(b) before 2000, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition “qualifying person” is to be read as follows:(7) The definitions in this subsection apply in this section and in paragraph 110(1)(d) and subsections 110(1.5) to (1.8).(c) in respect of rights (other than rights referred to in paragraph (a)) exercised after 2000 but on or before 4:00 p.m. Eastern Standard Time, March 4, 2010, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition “qualifying person” is to be read as follows:(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.5) to (1.8) and (2.1).172. (1) Paragraph 8(1)(b) of the Act is replaced by the following:Legal expenses of employee
(b) amounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect, or to establish a right to, an amount owed to the taxpayer that, if received by the taxpayer, would be required by this subdivision to be included in computing the taxpayer’s income;(2) The portion of paragraph 8(1)(i) of the Act before subparagraph (i) is replaced by the following:Dues and other expenses of performing duties
(i) an amount paid by the taxpayer in the year, or on behalf of the taxpayer in the year if the amount paid on behalf of the taxpayer is required to be included in the taxpayer’s income for the year, as(3) Subsection 8(1) of the Act is amended by adding the following after paragraph (l.1):Quebec parental insurance plan
(l.2) an amount payable by the taxpayer in the year as an employer’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011 in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer’s office or employment if an amount is deductible by the taxpayer for the year under subparagraph (i)(ii) in respect of that individual;(4) Subsection (1) applies to amounts paid in the 2001 and subsequent taxation years.(5) Subsection (3) applies to the 2006 and subsequent taxation years.173. (1) Paragraph 12(1)(j) of the Act is replaced by the following:Dividends from resident corporations
(j) any amount of a dividend in respect of a share of the capital stock of a corporation resident in Canada that is required by subdivision h to be included in computing the taxpayer’s income for the year;(2) Paragraph 12(1)(s) of the Act is repealed.(3) Paragraph 12(1)(x) of the Act is amended by adding the following after subparagraph (v):(v.1) is not an amount received by the taxpayer in respect of a restrictive covenant, as defined by subsection 56.4(1), that was included, under subsection 56.4(2), in computing the income of a person related to the taxpayer,(4) Subparagraph 12(1)(x)(vii) of the French version of the Act is replaced by the following:(vii) ne réduit pas, en application du paragraphe (2.2) ou 13(7.4) ou de l’alinéa 53(2)s), le coût ou coût en capital du bien ou le montant de la dépense,(5) Section 12 of the Act is amended by adding the following after subsection (2):No deferral of section 9 income under paragraph (1)(g)
(2.01) Paragraph (1)(g) does not defer the inclusion in income of any amount that would, if this section were read without reference to that paragraph, be included in computing the taxpayer’s income in accordance with section 9.(6) Subsection (1) is deemed to have come into force on November 6, 2010.(7) Subsection (2) applies to reinsurance commissions paid after 1999.(8) Subsection (3) is deemed to have come into force on October 8, 2003.174. (1) Section 12.3 of the Act is repealed.(2) Subsection (1) applies to taxation years that begin after October 31, 2011.175. (1) Subsection 13(1) of the Act is replaced by the following:Recaptured depreciation
13. (1) If, at the end of a taxation year, the total of the amounts determined for E to K in the definition “undepreciated capital cost” in subsection (21) in respect of a taxpayer’s depreciable property of a particular prescribed class exceeds the total of the amounts determined for A to D.1 in that definition in respect of that property, the excess shall be included in computing the taxpayer’s income of the year.(2) Subparagraph 13(4)(c)(ii) of the Act is replaced by the following:(ii) the amount that has been used by the taxpayer to acquire(A) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, or(B) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,a replacement property of a prescribed class that has not been disposed of by the taxpayer before the time at which the taxpayer disposed of the former property, and(3) Section 13 of the Act is amended by adding the following after subsection (4.1):Election — limited period franchise, concession or license
(4.2) Subsection (4.3) applies if(a) a taxpayer (in this subsection and subsection (4.3) referred to as the “transferor”) has, pursuant to a written agreement with a person or partnership (in this subsection and subsection (4.3) referred to as the “transferee”), at any time disposed of or terminated a former property that is a franchise, concession or licence for a limited period that is wholly attributable to the carrying on of a business at a fixed place;(b) the transferee acquired the former property from the transferor or, on the termination, acquired a similar property in respect of the same fixed place from another person or partnership; and(c) the transferor and the transferee jointly elect in their returns of income for their taxation years that include that time to have subsection (4.3) apply in respect of the acquisition and the disposition or termination.Effect of election
(4.3) If this subsection applies in respect of an acquisition and a disposition or termination,(a) if the transferee acquired a similar property referred to in paragraph (4.2)(b), the transferee is deemed to have also acquired the former property at the time that the former property was terminated and to own the former property until the transferee no longer owns the similar property;(b) if the transferee acquired the former property referred to in paragraph (4.2)(b), the transferee is deemed to own the former property until such time as the transferee owns neither the former property nor a similar property in respect of the same fixed place to which the former property related;(c) for the purpose of calculating the amount deductible under paragraph 20(1)(a) in respect of the former property in computing the transferee’s income, the life of the former property remaining on its acquisition by the transferee is deemed to be equal to the period that was the life of the former property remaining on its acquisition by the transferor; and(d) any amount that would, if this Act were read without reference to this subsection, be an eligible capital amount to the transferor or an eligible capital expenditure to the transferee in respect of the disposition or termination of the former property by the transferor is deemed to be(i) neither an eligible capital amount nor an eligible capital expenditure,(ii) an amount required to be included in computing the capital cost to the transferee of the former property, and(iii) an amount required to be included in computing the proceeds of disposition to the transferor in respect of a disposition of the former property.(4) The description of E in the definition “undepreciated capital cost” in subsection 13(21) of the Act is replaced by the following:Eis the total depreciation allowed to the taxpayer for property of the class before that time, including, if the taxpayer is an insurer, depreciation deemed to have been allowed before that time under subsection (22) or (23) as they read in their application to the taxpayer’s last taxation year that began before November 2011,(5) Subsections 13(22) to (23.1) of the Act are repealed.(6) Subsection (1) applies to taxation years that end after February 23, 1998.(7) Subsection (2) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000, except that for those dispositions that occur in taxation years that end before December 20, 2001, clause 13(4)(c)(ii)(B) of the Act, as enacted by subsection (2), is to be read as follows:(B) in any other case, before the end of the first taxation year following the initial year,(8) Subsection (3) applies in respect of dispositions and terminations that occur after December 20, 2002.(9) Subsections (4) and (5) apply to taxation years that begin after October 31, 2011.176. (1) Paragraph 14(3)(a) of the Act is replaced by the following:(a) the amount determined for E in the definition “cumulative eligible capital” in subsection (5) in respect of the disposition of the property by the transferor or, if the property is the subject of an election under subsection (1.01) or (1.02) by the transferor, 3/4 of the actual proceeds referred to in that subsection,(2) The definition “adjustment time” in subsection 14(5) of the Act is replaced by the following:“adjustment time”
« moment du rajustement »
“adjustment time”, of a taxpayer in respect of a business, means(a) for a corporation, the time immediately after the commencement of its first taxation year commencing after June 1988, and(b) for any other taxpayer, the time immediately after the commencement of the taxpayer’s first fiscal period commencing after 1987 in respect of the business;(3) The description of A in the definition “cumulative eligible capital” in subsection 14(5) of the Act is replaced by the following:Ais the amount, if any, by which 3/4 of the total of all eligible capital expenditures in respect of the business made or incurred by the taxpayer after the taxpayer’s adjustment time and before that time exceeds the total of all amounts each of which is determined by the formula 1/2 × (A.1 – A.2) × (A.3/A.4)whereA.1is the amount required, because of paragraph (1)(b) or 38(a), to be included in the income of a person or partnership (in this definition referred to as the “transferor”) not dealing at arm’s length with the taxpayer in respect of the disposition after December 20, 2002 of a property that was an eligible capital property acquired by the taxpayer directly or indirectly, in any manner whatever, from the transferor and not disposed of by the taxpayer before that time,A.2is the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 by the transferor in respect of that disposition,A.3is the transferor’s proceeds from that disposition, andA.4is the transferor’s total proceeds of disposition of eligible capital property in the taxation year of the transferor in which the property described in A.1 was disposed of,(4) The description of R in the definition “cumulative eligible capital” in subsection 14(5) of the Act is replaced by the following:Ris the total of all amounts each of which is an amount included, in computing the taxpayer’s income from the business for a taxation year that ended before that time and after the taxpayer’s adjustment time(a) in the case of a taxation year that ends after February 27, 2000, under paragraph (1)(a), or(b) in the case of a taxation year that ended before February 28, 2000,(i) under subparagraph (1)(a)(iv), as that subparagraph applied in respect of that taxation year, or(ii) under paragraph (1)(b), as that paragraph applied in respect of that taxation year, to the extent that the amount so included is in respect of an amount included in the amount determined for P;(5) Section 14 of the Act is amended by adding the following after subsection (5):Restrictive covenant amount
(5.1) The description of E in the definition “cumulative eligible capital” in subsection (5) does not apply to an amount that is received or receivable by a taxpayer in a taxation year if that amount is required to be included in the taxpayer’s income because of subsection 56.4(2).(6) The portion of subsection 14(6) of the Act before paragraph (a) is replaced by the following:Exchange of property
(6) If in a taxation year (in this subsection referred to as the “initial year”) a taxpayer disposes of an eligible capital property (in this section referred to as the taxpayer’s “former property”) and the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquires an eligible capital property that is a replacement property for the taxpayer’s former property, the amount, not exceeding the amount that would otherwise be included in the amount determined for E in the definition “cumulative eligible capital” in subsection (5) (if the description of E in that definition were read without reference to “3/4 of”) in respect of a business, that has been used by the taxpayer to acquire the replacement property before the later of the end of the first taxation year after the initial year and 12 months after the end of the initial year(7) Subsections (1), (3) and (4) apply to taxation years that end after February 27, 2000, except that(a) the reference to “subsection (1.01) or (1.02)” in paragraph 14(3)(a) of the Act, as enacted by subsection (1), is to be read as a reference to “subsection (1.01)” for taxation years that end after February 27, 2000 and before December 20, 2002; and(b) the reference to “disposition after December 20, 2002 of a property that was an eligible capital property” in the description of A.1 in the definition “cumulative eligible capital” in subsection 14(5) of the Act, as enacted by subsection (3), is to be read as a reference to “disposition after 2003 of a property that was an eligible capital property” if(i) the taxpayer referred to in that description of A.1 acquired the property referred to in that description from the transferor referred to in that description,(ii) the property was so acquired under an agreement in writing made before December 21, 2002 between the transferor, or a particular person that controlled the transferor, and another person who dealt at arm’s length with the transferor and the particular person, and(iii) no clause in the agreement or any other arrangement allows an obligation of any party to the agreement to be changed, reduced or waived in the event of a change to, or an adverse assessment under, the Act.(8) Subsection (2) is deemed to have come into force on November 1, 2011.(9) Subsection (5) is deemed to have come into force on October 8, 2003.(10) Subsection (6) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.177. (1) Subsection 15(1) of the Act is replaced by the following:Benefit conferred on shareholder
15. (1) If, at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholder(a) where the corporation is resident in Canada at the time,(i) by the reduction of the paid-up capital of the corporation,(ii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock,(iii) on the winding-up, discontinuance or reorganization of the corporation’s business, or(iv) by way of a transaction to which subsection 88(1) or (2) applies;(a.1) where the corporation is not resident in Canada at the time,(i) by way of a distribution to which subsection 86.1(1) applies,(ii) by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies,(iii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, or(iv) on the winding-up, or liquidation and dissolution, of the corporation;(b) by the payment of a dividend or a stock dividend;(c) by conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph,(i) the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation if(A) the voting rights attached to the particular class differ from the voting rights attached to the other class, and(B) there are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, and(ii) rights are not considered identical if the cost of acquiring the rights differs; or(d) by an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies.(2) Subsection 15(1.21) of the French version of the Act is replaced by the following:Montant remis
(1.21) Pour l’application du paragraphe (1.2), le « montant remis » à un moment donné sur une dette émise par un débiteur s’entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :a) la dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;b) il n’était pas tenu compte d’un montant inclus dans le calcul du revenu (autrement que par l’effet de l’alinéa 6(1)a)) en raison du règlement ou de l’extinction de la dette;c) il n’était pas tenu compte des alinéas f) et h) de l’élément B de la formule figurant à la définition de « montant remis » au paragraphe 80(1);d) il n’était pas tenu compte des alinéas 80(2)b) et q).(3) Section 15 of the Act is amended by adding the following after subsection (1.3):Interpretation — subsection (1)
(1.4) For the purposes of this subsection and subsection (1),(a) a contemplated shareholder of a corporation is(i) a person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, or(ii) a member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation;(b) a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership;(c) a benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person — if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm’s length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be; and(d) for the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm’s length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested.(4) Subsection 15(1.4) of the Act, as enacted by subsection (3), is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):(e) if a non-resident corporation (in this paragraph referred to as the “original corporation”) governed by the laws of a foreign jurisdiction is divided under those laws into two or more non-resident corporations and, as a consequence of the division, a shareholder of the original corporation acquires at any time one or more shares of another corporation (in this paragraph referred to as the “new corporation”), the original corporation is deemed at that time to have conferred a benefit on the shareholder equal to the value at that time of the shares of the new corporation acquired by the shareholder except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies to the acquisition of the shares.(5) The portion of subsection 15(2.1) of the Act before paragraph (a) is replaced by the following:Meaning of connected
(2.1) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is(6) Subsections (1) and (3) apply in respect of benefits conferred on or after October 31, 2011.(7) Subsection (2) applies to taxation years that end after February 21, 1994.(8) Subsection (4) applies in respect of divisions of non-resident corporations that occur on or after October 24, 2012.(9) Subsection (5) applies in respect of loans made and indebtedness arising after October 31, 2011.178. (1) Subsection 18(1) of the Act is amended by striking out “and” at the end of paragraph (u), by adding “and” at the end of paragraph (v) and by adding the following after paragraph (v):Underlying payments on qualified securities
(w) except as expressly permitted, an amount that is deemed by subsection 260(5.1) to have been received by another person as an amount described in any of paragraphs 260(5.1)(a) to (c).(2) Paragraph 18(14)(c) of the Act is replaced by the following:(c) the disposition is not a disposition that is deemed to have occurred by section 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c) or subsection 138(11.3) or 149(10);(3) Subsection (1) is deemed to have come into force on January 1, 2002.(4) Subsection (2) applies to dispositions that occur after 1998.179. (1) Subsection 18.1(15) of the Act is replaced by the following:Non-application — risks ceded between insurers
(15) Subsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if(a) the expenditure is in respect of commissions, or other expenses, related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer; and(b) the taxpayer and the person to whom the expenditure is made, or is to be made, are both insurers who are subject to the supervision of(i) the Superintendent of Financial Institutions, if the taxpayer or that person, as the case may be, is an insurer who is required by law to report to the Superintendent of Financial Institutions, or(ii) the Superintendent of Insurance, or other similar officer or authority, of the province under whose laws the insurer is incorporated, in any other case.Non-application — no rights, tax benefits or shelters
(16) Subsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if(a) no portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer;(b) no portion of the matchable expenditure can reasonably be considered to relate to a tax shelter or a tax shelter investment (within the meaning assigned by subsection 143.2(1)); and(c) none of the main purposes for making the matchable expenditure can reasonably be considered to have been to obtain a tax benefit for the taxpayer, a person or partnership with whom the taxpayer does not deal at arm’s length, or a person or partnership that holds, directly or indirectly, an interest in the taxpayer.Revenue exception
(17) Paragraph (4)(a) does not apply in determining the amount for a taxation year that may be deducted in respect of a taxpayer’s matchable expenditure in respect of a right to receive production if(a) before the end of the taxation year in which the matchable expenditure is made, the total of all amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of any of those amounts that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production that relates to the matchable expenditure exceeds 80% of the matchable expenditure; and(b) no portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer.(2) Subject to subsection (3), subsection (1) applies in respect of expenditures made by a taxpayer on or after September 18, 2001 in respect of a right to receive production, except if(a) the expenditure was(i) required to be made under a written agreement made by the taxpayer before September 18, 2001,(ii) made under, or described in, the terms of a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or(iii) made under, or described in, the terms of an offering memorandum distributed as part of an offering of securities if(A) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,(B) the memorandum was distributed before September 18, 2001,(C) solicitations in respect of a sale of the securities contemplated in the offering were made before September 18, 2001, and(D) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum;(b) the expenditure was made before 2002;(c) the expenditure was made in consideration for services that were rendered in Canada before 2002 in respect of an activity, or a business, all or substantially all of which was carried on in Canada;(d) there is no agreement or other arrangement under which the obligation of any taxpayer in respect of the expenditure can, on or after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;(e) if the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001; and(f) if the expenditure was made under, or described in, the terms of a document that is a prospectus, a preliminary prospectus, a registration statement or an offering memorandum (and regardless of whether the expenditure was also made under a written agreement)(i) all of the funds raised pursuant to the document that may reasonably be used to make a matchable expenditure were received by the taxpayer before 2002,(ii) all or substantially all of the securities distributed pursuant to the document for the purpose of raising the funds described in subparagraph (i) were acquired before 2002 by a person who is not(A) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,(B) a vendor of the right to receive production,(C) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or(D) a person who does not deal at arm’s length with a person to whom clause (A) or (B) applies, and(iii) all or substantially all of the funds raised pursuant to the document before 2002 were used to make expenditures that were required to be made pursuant to agreements in writing made before September 18, 2001.(3) Subsection (1) does not apply to an expenditure made by a taxpayer in respect of a right to receive production in respect of a particular film or video production if(a) expenditures in respect of the particular film or video production(i) were made before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002), or(ii) were required to be made by the taxpayer under a written agreement made before September 18, 2001 by the taxpayer;(b) principal photography of the particular film or video production(i) began before 2002,(ii) was primarily completed before April 2002, and(iii) was conducted primarily in Canada;(c) the expenditure(i) was made before April 2002 in the course of the taxpayer’s business of providing film production services in respect of the particular film or video production (as determined for the purpose of this subparagraph without ref-erence to subsection 143.2(10) of the Act, except to the extent that a repaid amount for the purposes of that subsection is paid after 2002),(ii) was made under, or described in, the terms of(A) a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or(B) an offering memorandum distributed as part of an offering of securities if(I) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,(II) the memorandum was distributed before September 18, 2001,(III) solicitations in respect of a sale of the securities contemplated in the offering have been made before September 18, 2001, and(IV) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum, and(iii) was not an amount in respect of advertising, marketing, promotion or market research;(d) except where the particular film or video production is a designated production of the taxpayer, at least 75% of the total of all expenditures, each of which is an expenditure made by the taxpayer in the course of the business referred to in subparagraph (c)(i), is an expenditure described for the purpose of that subparagraph made in consideration for the supply of goods or services that are supplied or rendered in Canada before April 2002 by persons that are subject to tax on the expenditure under Part I or XIII of the Act;(e) there is no agreement or other arrangement under which the obligation of any taxpayer to acquire a security distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum can, after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;(f) if the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001;(g) all of the funds raised pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum that may reasonably be used to make a matchable expenditure before April 2002 in respect of the particular film or video production are received by the taxpayer before 2003;(h) all of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired before 2002;(i) all or substantially all of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired by a person who is not(i) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,(ii) a vendor of the right to receive production,(iii) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or(iv) a person who does not deal at arm’s length with a person referred to in subparagraph (i) or (ii); and(j) except where the particular film or video production is a designated production of the taxpayer, all or substantially all of the matchable expenditures made by the taxpayer that are wholly attributable to the principal photography of the particular film or video production are wholly attributable to principal photography conducted in Canada.(4) For the purpose of paragraphs (3)(d) and (j), a designated production of a taxpayer is(a) a film or video production in respect of which(i) all of the expenditures made by the taxpayer in respect of the particular film or video production were required to be made under a written agreement made by the taxpayer before September 18, 2001,(ii) if the taxpayer is a partnership,(A) the taxpayer’s expenditures in respect of the particular film or video production were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the taxpayer, pursuant to subscriptions in writing for the issue of units in the taxpayer,(B) all or substantially all of those written subscriptions were received by the taxpayer on or before September 18, 2001,(C) at least one member of the taxpayer referred to in subparagraph (i) is a partnership (in this subsection referred to as a “master partnership”),(D) the subscriptions in writing of all master partnerships for units in the taxpayer were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the master partnerships, pursuant to subscriptions in writing for the issue of units in the master partnerships, and(E) all or substantially all of the subscriptions in writing referred to in clause (D) were received by the master partnership on or before September 18, 2001,(iii) if a member of a particular master partnership is a partnership (in this subsection referred to as an “original master partnership”),(A) the subscriptions in writing of all original master partnerships for units in the particular master partnership were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the original master partnerships, pursuant to subscriptions in writing for the issue of units in the original master partnerships, and(B) all or substantially all of those written subscriptions were received by the original master partnership on or before September 18, 2001, and(iv) no member of an original master partnership is a partnership, an interest in which is a tax shelter; or(b) a film or video production in respect of which(i) principal photography was all or substantially all complete before September 18, 2001, and(ii) all or substantially all of the taxpayer’s expenditures were made on or before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002).180. (1) Paragraph 20(1)(bb) of the Act is replaced by the following:Fees paid to investment counsel
(bb) an amount, other than a commission, that(i) is paid by the taxpayer in the year to a person or partnership the principal business of which(A) is advising others as to the advisability of purchasing or selling specific shares or securities, or(B) includes the provision of services in respect of the administration or management of shares or securities, and(ii) is paid for(A) advice as to the advisability of purchasing or selling a specific share or security of the taxpayer, or(B) services in respect of the administration or management of shares or securities of the taxpayer;(2) Paragraph 20(1)(jj) of the Act is repealed.(3) Subsection 20(8) of the Act is amended by striking out “or” at the end of paragraph (a) and by adding the following after paragraph (b):(c) the purchaser of the property sold was a corporation that, immediately after the sale,(i) was controlled, directly or indirectly, in any manner whatever, by the taxpayer,(ii) was controlled, directly or indirectly, in any manner whatever, by a person or group of persons that controlled the taxpayer, directly or indirectly, in any manner whatever, or(iii) controlled the taxpayer, directly or indirectly, in any manner whatever; or(d) the purchaser of the property sold was a partnership in which the taxpayer was, immediately after the sale, a majority interest partner.(4) Subsection 20(12) of the Act is replaced by the following:Foreign non-business income tax
(12) In computing the income of a taxpayer who is resident in Canada at any time in a taxation year from a business or property for the year, there may be deducted any amount that the taxpayer claims that does not exceed the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada (within the meaning assigned by subsection 126(7) read without reference to paragraphs (c) and (e) of the definition “non-business income tax” in that subsection) in respect of that income, other than any of those taxes paid that can, in whole or in part, reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.(5) Paragraph 20(16)(a) of the Act is replaced by the following:(a) the total of all amounts used to determine A to D.1 in the definition “undepreciated capital cost” in subsection 13(21) in respect of a taxpayer’s depreciable property of a particular class exceeds the total of all amounts used to determine E to K in that definition in respect of that property, and(6) Subsection 20(16.1) of the Act is replaced by the following:Non-application of subsection (16)
(16.1) Subsection (16) does not apply(a) in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or any other amount that is prescribed; and(b) in respect of a taxation year in respect of a property that was a former property deemed by paragraph 13(4.3)(a) or (b) to be owned by the taxpayer, if(i) within 24 months after the taxpayer last owned the former property, the taxpayer or a person not dealing at arm’s length with the taxpayer acquires a similar property in respect of the same fixed place to which the former property applied, and(ii) at the end of the taxation year, the taxpayer or the person owns the similar property or another similar property in respect of the same fixed place to which the former property applied.(7) Subsections 20(17) and (18) of the Act are repealed.(8) Subsection 20(26) of the Act is repealed.(9) Subsection (1) applies to amounts paid after June 2005.(10) Subsection (2) applies to reinsurance commissions paid after 1999.(11) Subsection (3) applies in respect of property sold by a taxpayer after December 20, 2002. However, if a property so sold pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004(a) subsection 20(8) of the Act, as it read immediately before the enactment of subsection (3), applies in respect of the property; and(b) for the purpose of applying paragraph 20(1)(n) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of an amount not due in respect of the sale may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.(12) Subsection (4) applies after December 20, 2002 in respect of taxes paid at any time.(13) Subsection (5) applies to taxation years that end after February 23, 1998.(14) Subsection (6) applies in respect of taxation years that end after December 20, 2002.(15) Subsection (8) applies to taxation years that begin after October 31, 2011.181. (1) Subclause 37(8)(a)(ii)(B)(V) of the Act is replaced by the following:(V) the cost of materials consumed or transformed in the prosecution of scientific research and experimental development in Canada, or(2) Subsection (1) applies to costs incurred after February 23, 1998.182. (1) The Act is amended by adding the following before section 39:Allocation of gain re certain gifts
38.2 If a taxpayer is entitled to an amount of an advantage in respect of a gift of property described in paragraph 38(a.1) or (a.2),(a) those paragraphs apply only to that proportion of the taxpayer’s capital gain in respect of the gift that the eligible amount of the gift is of the taxpayer’s proceeds of disposition in respect of the gift; and(b) paragraph 38(a) applies to the extent that the taxpayer’s capital gain in respect of the gift exceeds the amount of the capital gain to which paragraph 38(a.1) or (a.2) applies.(2) Subsection (1) applies to gifts made after December 20, 2002.183. (1) Paragraph 40(1.01)(c) of the Act is replaced by the following:(c) the amount that the taxpayer claims in prescribed form filed with the taxpayer’s return of income for the particular year, not exceeding the eligible amount of the gift, where the taxpayer is not deemed by subsection 118.1(13) to have made a gift of property before the end of the particular year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of the particular year.(2) Paragraph 40(2)(a) of the Act is amended by striking out “or” at the end of subparagraph (i), by adding “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):(iii) the purchaser of the property sold is a partnership in which the taxpayer was, immediately after the sale, a majority interest partner;(3) The descriptions of A and B in subsection 40(3.11) of the Act are replaced by the following:Ais the total of(a) all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the member of the interest in the partnership at that time, and(b) if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(2)(c)(i) in respect of the taxpayer for that fiscal period; andBis the total of(a) the cost to the member of the interest determined for the purpose of computing the adjusted cost base to the member of the interest at that time,(b) all amounts required by subsection 53(1) to be added to the cost to the member of the interest in computing the adjusted cost base to the member of the interest at that time, and(c) if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(1)(e)(i) in respect of the taxpayer for that fiscal period.(4) Section 40 of the Act is amended by adding the following after subsection (3.11):Meaning of “professional partnership”
(3.111) In this section, “professional partnership” means a partnership through which one or more persons carry on the practice of a profession that is governed or regulated under a law of Canada or a province.(5) Paragraph 40(3.14)(a) of the English version of the Act is replaced by the following:(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);(6) Paragraph 40(3.5)(b) of the Act is replaced by the following:(b) a share of the capital stock of a corporation that is acquired in exchange for another share in a transaction is deemed to be a property that is identical to the other share if(i) section 51, 86 or 87 applies to the transaction, or(ii) the following conditions are met, namely,(A) section 85.1 applies to the transaction,(B) subsection (3.4) applied to a prior disposition of the other share, and(C) none of the times described in any of subparagraphs (3.4)(b)(i) to (v) has occurred in respect of the prior disposition;(7) Subsection (1) applies to gifts made after December 20, 2002.(8) Subsection (2) applies to sales that occur after December 20, 2002.(9) Subsections (3) and (4) apply to fiscal periods that end after November 2001.(10) Subsection (5) is deemed to have come into force on June 21, 2001.(11) Subsection (6) applies to dispositions of property that occur after April 26, 1995, except that it does not apply to any of those dispositions by a person or partnership that occurred before 1996 and that is described in subsection 247(1) of the Income Tax Amendments Act, 1997 unless the person or partnership, as the case may be, made an election under subsection 247(2) of that Act.184. (1) Section 42 of the Act is replaced by the following:Dispositions subject to warranty
42. (1) For the purposes of this subdivision,(a) an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,(i) if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and(ii) in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receiv-able; and(b) an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,(i) if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and(ii) in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.Meaning of “specified date”
(2) In subsection (1), “specified date” means,(a) if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and(b) in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.(2) Subsection (1) applies to taxation years and fiscal periods that end after February 27, 2004 except that, in its application to taxation years and fiscal periods that end before November 5, 2010, section 42 of the Act, as enacted by subsection (1), is to be read as follows:42. For the purposes of this subdivision,(a) an amount received or receivable by a taxpayer in a taxation year as consideration for a warranty, a covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of a property disposed of, at any time, by the taxpayer(i) is, if the amount is received or becomes receivable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be included in computing the taxpayer’s proceeds of disposition of the property, and(ii) is, if the amount is received or becomes receivable after that filing-due date, deemed to be a capital gain of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is received or becomes receivable; and(b) an outlay or expense paid or payable by the taxpayer in a taxation year under a warranty, covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of property disposed of, at any time, by the taxpayer(i) is, if the amount is paid or becomes payable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be deducted in computing the taxpayer’s proceeds of disposition of the property, and(ii) is, if the amount is paid or becomes payable after that filing-due date, deemed to be a capital loss of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is paid or becomes payable.185. (1) The portion of subsection 43(2) of the Act before the formula in paragraph (a) is replaced by the following:Ecological gifts
(2) For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,(a) the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or real servitude, as the case may be, is deemed to be equal to the amount determined by the formula(2) Subsection (1) applies to gifts made after December 20, 2002.186. (1) Paragraphs 44(1)(c) and (d) of the Act are replaced by the following:(c) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, and(d) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,(2) Subsection 44(7) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):(c) the former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority interest partner.(3) Paragraph 44(1)(c) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000.(4) Paragraph 44(1)(d) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.(5) Subsection (2) applies to dispositions of property by a taxpayer that occur after December 20, 2002. However, if a property so disposed of pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004(a) subsection 44(7) of the Act, as it read immediately before the enactment of subsection (2), applies in respect of the disposition of property; and(b) for the purpose of applying subparagraph 44(1)(e)(iii) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of the proceeds of disposition may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.187. (1) The portion of subsection 44.1(6) of the Act before paragraph (b) is replaced by the following:Special rule — re eligible small business corporation share exchanges
(6) For the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the “exchanged shares”), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual if(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; and(2) The portion of subsection 44.1(7) of the Act before paragraph (b) is replaced by the following:Special rule — re active business corporation share exchanges
(7) For the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the “exchanged shares”), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, if(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;(3) Paragraph 44.1(12)(b) of the Act is replaced by the following:(b) the new shares (or shares for which the new shares are substituted property) were(i) issued by the corporation that issued the old shares,(ii) issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm’s length with(A) the corporation that issued the old shares, or(B) the individual, or(iii) issued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; and(4) Section 44.1 of the Act is amended by adding the following after subsection (12):Order of disposition of shares
(13) For the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.(5) Subsections (1) and (2) apply to dispositions that occur after February 27, 2000.(6) Subsection (3) applies in respect of dispositions that occur after February 27, 2004.(7) Subsection (4) applies in respect of dispositions that occur after December 20, 2002. However, if an individual so elects in writing and files the election with the Minister of National Revenue on or before the individual’s filing-due date for the individual’s taxation year in which this Act receives royal assent, subsection (4) applies, in respect of the individual, to dispositions that occur after February 27, 2000.188. (1) Subsections 49(2) and (2.1) of the Act are replaced by the following:Expired option — shares
(2) If at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unless(a) the option is held, at that time, by a person who deals at arm’s length with the corporation and the option was granted by the corporation to a person who was dealing at arm’s length with the corporation at the time that the option was granted, or(b) the option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definition “Canadian exploration and development expenses” in subsection 66(15), paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) or paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.Expired option — trust units
(2.1) If, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm’s length with the trust or was granted to a person who did not deal at arm’s length with the trust at the time that the option was granted,(a) the trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; and(b) the adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.(2) Subsection (1) applies to options issued after October 24, 2012.189. (1) Subsection 52(1) of the Act is replaced by the following:Cost of certain property the value of which is included in income
52. (1) In applying this subdivision, an amount equal to the particular amount described by paragraph (d) shall be added in computing the cost at any time to a taxpayer of a property if(a) the taxpayer acquired the property after 1971;(b) the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;(c) the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; and(d) a particular amount in respect of the property’s value was(i) included, otherwise than under section 7, in computing(A) the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, or(B) the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, or(ii) for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.(2) Paragraph 52(3)(a) of the Act is replaced by the following:(a) where the stock dividend is a dividend, the amount, if any, by which(i) the amount of the stock dividendexceeds(ii) the amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received,(3) Subsection (1) applies to taxation years that begin after 2006.(4) Subsection (2) applies in respect of amounts received on or after November 9, 2006.190. (1) Paragraph 53(1)(b) of the Act is replaced by the following:(b) where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which(i) the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that timeexceeds(ii) the portion of the total determined under subparagraph (i) that relates to dividends in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received;(2) Clause 53(1)(e)(i)(A.1) of the Act is repealed.(3) Subparagraph 53(1)(e)(i) of the Act, as amended by subsection (2), is amended by adding the following after clause (A):(A.1) subparagraph 39(1)(a)(i.1) in respect of an object referred to in that subparagraph that is not the subject of a gifting arrangement, as defined in subsection 237.1(1), nor a property that is a tax shelter,(4) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (iv):(iv.1) each amount that is in respect of a specified amount described in subsection 80.2(1) and that is paid by the taxpayer to the partnership, to the extent that the amount paid is not deductible in computing the income of the taxpayer,(5) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (viii):(viii.1) an amount deemed, before that time, by subsection 59(1.1) to be proceeds of disposition receivable by the taxpayer in respect of the disposition of a foreign resource property,(6) Clause 53(2)(c)(i)(A.1) of the Act is repealed.(7) Subparagraph 53(2)(c)(iii) of the Act is replaced by the following:(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,(8) The portion of subsection 53(4) of the Act before paragraph (a) is replaced by the following:Recomputation of adjusted cost base on transfers and deemed dispositions
(4) If at any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property and the proceeds of disposition of the property are determined under paragraph 48.1(1)(c), section 70 or 73, subsection 85(1), paragraph 87(4)(a) or (c) or 88(1)(a), subsection 97(2) or 98(2), paragraph 98(3)(f) or (5)(f), subsection 104(4), paragraph 107(2)(a) or (2.1)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,(9) Subsection (1) applies in respect of a dividend received by a taxpayer on or after November 9, 2006. However, if the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, in respect of the dividend received by the taxpayer before July 16, 2010, paragraph 53(1)(b) of the Act, as enacted by subsection (1), is to be read as follows:(b) where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which(i) the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that timeexceeds(ii) the portion of the total determined under subparagraph (i) that relates to dividends(A) in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, and(B) that arose directly or indirectly as a result of a conversion of contributed surplus into paid-up capital;(10) Subsections (2) and (6) apply in respect of amounts that became payable after December 20, 2002.(11) Subsection (3) applies in respect of the disposition of an object made after 2003.(12) Subsection (4) applies to payments made in taxation years that end after 2002.(13) Subsection (5) applies for fiscal periods of a partnership that begin after 2000.(14) Subsection (7) applies in respect of gifts and contributions made after December 20, 2002, except that in its application before 2007, subparagraph 53(2)(c)(iii) of the Act, as enacted by subsection (7), is to be read as follows:(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made, or by subsection 127(4.2) to have been an amount contributed, by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,(15) Subsection (8) is deemed to have come into force on February 28, 2004.191. (1) Paragraph (c) of the definition “superficial loss” in section 54 of the Act is replaced by the following:(c) a disposition deemed to have been made by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),(2) Subsection (1) applies to dispositions that occur after 1998, except that, in its application to taxation years that begin before October 2006, paragraph (c) of the definition “superficial loss” in section 54 of the Act, as enacted by subsection (1), is to be read as follows:(c) a disposition deemed by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsection 144(4.1) or (4.2) or 149(10) to have been made,192. (1) The portion of subsection 54.1(1) of the English version of the Act before paragraph (a) is replaced by the following:Exception to principal residence rules
54.1 (1) A taxation year in which a taxpayer does not ordinarily inhabit the taxpayer’s property as a consequence of the relocation of the place of employment of the taxpayer or the taxpayer’s spouse or common-law partner while the taxpayer or the taxpayer’s spouse or common-law partner, as the case may be, is employed by an employer who is not a person to whom the taxpayer or the taxpayer’s spouse or common-law partner is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definition “principal residence” in section 54 if(2) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.193. (1) The definition “specified class” in subsection 55(1) of the Act is amended by striking out “and” at the end of paragraph (b) and by replacing paragraph (c) with the following:(c) no holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares, and(d) the shares are non-voting in respect of the election of the board of directors except in the event of a failure or default under the terms or conditions of the shares;(2) Subsection 55(1) of the Act is amended by adding the following in alphabetical order:“qualified person”
« personne admissible »
“qualified person”, in relation to a distribution, means a person or partnership with whom the distributing corporation deals at arm’s length at all times during the course of the series of transactions or events that includes the distribution if(a) at any time before the distribution,(i) all of the shares of each class of the capital stock of the distributing corporation that includes shares that cause that person or partnership to be a specified shareholder of the distributing corporation (in this definition all of those shares in all of those classes are referred to as the “exchanged shares”) are, in the circumstances described in paragraph (a) of the definition “permitted exchange”, exchanged for consideration that consists solely of shares of a specified class of the capital stock of the distributing corporation (in this definition referred to as the “new shares”), or(ii) the terms or conditions of all of the exchanged shares are amended (which shares are in this definition referred to after the amendment as the “amended shares”) and the amended shares are shares of a specified class of the capital stock of the distributing corporation,(b) immediately before the exchange or amendment, the exchanged shares are listed on a designated stock exchange,(c) immediately after the exchange or amendment, the new shares or the amended shares, as the case may be, are listed on a designated stock exchange,(d) the exchanged shares would be shares of a specified class if they were not convertible into, or exchangeable for, other shares,(e) the new shares or the amended shares, as the case may be, and the exchanged shares are non-voting in respect of the election of the board of directors of the distributing corporation except in the event of a failure or default under the terms or conditions of the shares, and(f) no holder of the new shares or the amended shares, as the case may be, is entitled to receive on the redemption, cancellation or acquisition of the new shares or the amended shares, as the case may be, by the distributing corporation or by any person with whom the distributing corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the exchanged shares were issued and the amount of any unpaid dividends on the new shares or on the amended shares, as the case may be;(3) Clause 55(3)(a)(iii)(B) of the Act is replaced by the following:(B) property (other than shares of the capital stock of the dividend recipient) more than 10% of the fair market value of which was, at any time during the course of the series, derived from shares of the capital stock of the dividend payer,(4) Paragraph 55(3.01)(d) of the Act is replaced by the following:(d) proceeds of disposition are to be determined without reference to(i) the expression “paragraph 55(2)(a) or” in paragraph (j) of the definition “proceeds of disposition” in section 54, and(ii) section 93; and(5) Clause 55(3.1)(b)(i)(B) of the Act is replaced by the following:(B) the vendor (other than a qualified person in relation to the distribution) was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, and(6) Paragraph 55(3.2)(h) of the Act is replaced by the following:(h) in relation to a distribution each corporation (other than a qualified person in relation to the distribution) that is a shareholder and a specified shareholder of the distributing corporation at any time during the course of a series of transactions or events, a part of which includes the distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.(7) Section 55 of the Act is amended by adding the following after subsection (3.3):Specified shareholder exclusion
(3.4) In determining whether a person is a specified shareholder of a corporation for the purposes of the definition “qualified person” in subsection (1), subparagraph (3.1)(b)(i) and paragraph (3.2)(h) as it applies for the purpose of subparagraph (3.1)(b)(iii), the reference to “not less than 10% of the issued shares of any class of the capital stock of the corporation” in the definition “specified shareholder” in subsection 248(1) is to be read as “not less than 10% of the issued shares of any class of the capital stock of the corporation, other than shares of a specified class (within the meaning of subsection 55(1))”.Amalgamation of related corporations
(3.5) For the purposes of paragraphs (3.1)(c) and (d), a corporation formed by an amalgamation of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) that were related to each other immediately before the amalgamation, is deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.(8) Section 55 of the Act is amended by adding the following after subsection (5):Unlisted shares deemed listed
(6) A share (in this subsection referred to as the “reorganization share”) is deemed, for the purposes of subsection 116(6) and the definition “taxable Canadian property” in subsection 248(1), to be listed on a designated stock exchange if(a) a dividend, to which subsection (2) does not apply because of paragraph (3)(b), is received in the course of a reorganization;(b) in contemplation of the reorganization(i) the reorganization share is issued to a taxpayer by a public corporation in exchange for another share of that corporation (in this subsection referred to as the “old share”) owned by the taxpayer, and(ii) the reorganization share is exchanged by the taxpayer for a share of another public corporation (in this subsection referred to as the “new share”) in an exchange that would be a permitted exchange if the definition “permitted exchange” were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition;(c) immediately before the exchange, the old share(i) is listed on a designated stock exchange, and(ii) is not taxable Canadian property of the taxpayer; and(d) the new share is listed on a designated stock exchange.(9) Subsection (1) applies in respect of shares issued after December 20, 2002.(10) Subsections (2), (5) and (6) and subsection 55(3.4) of the Act, as enacted by subsection (7), apply in respect of dividends received after 1999, except that for the period before December 14, 2007, the references to “designated stock exchange” in the definition “qualified person” in subsection 55(1) of the Act, as enacted by subsection (2), are to be read as references to “prescribed stock exchange”.(11) Subsections (3) and (4) apply to dividends received after February 21, 1994.(12) Subsection 55(3.5) of the Act, as enacted by subsection (7), applies in respect of dividends received after April 26, 1995.(13) Subsection (8) applies to shares that are issued after April 26, 1995, except that for the period before December 14, 2007, the references to “designated stock exchange” in subsection 55(6) of the Act, as enacted by subsection (8), are to be read as references to “prescribed stock exchange”.194. (1) Subparagraph 56(1)(a)(iv) of the Act is replaced by the following:(iv) a benefit under the Unemployment Insurance Act, other than a payment relating to a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act, or a benefit under Part I, VII.1, VIII or VIII.1 of the Employment Insurance Act,(2) Paragraph 56(1)(a) of the Act is amended by striking out “or” at the end of subparagraph (v), by adding “or” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):(vii) a benefit under the Act respecting parental insurance, R.S.Q., c. A-29.011;(3) Subsection 56(1) of the Act is amended by adding the following after paragraph (l.1):Bad debt recovered
(m) any amount received by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year on account of a debt in respect of which a deduction was made under paragraph 60(f) in computing the taxpayer’s income for a preceding taxation year;(4) Paragraph 56(1)(n.1) of the Act is replaced by the following:Apprenticeship grants
(n.1) the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program administered by the Department of Human Resources and Skills Development;(5) Section 56 of the Act is amended by adding the following after subsection (9):Meaning of “income”
(9.1) For the purposes of subsection (6), “income” of a person for a taxation year means the amount that would, in the absence of that subsection, paragraphs (1)(s) and (u) and 60(v.1), (w) and (y) and section 63, be the income of the person for the taxation year.(6) Section 56 of the Act is amended by adding the following after subsection (11):Foreign retirement arrangement
(12) If an amount in respect of a foreign retirement arrangement is, as a result of a transaction, an event or a circumstance, considered to be distributed to an individual under the income tax laws of the country in which the arrangement is established, the amount is, for the purpose of paragraph (1)(a), deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the transaction, event or circumstance.(7) Subsection (1) applies to the 2011 and subsequent taxation years.(8) Subsections (2) and (5) apply to the 2006 and subsequent taxation years.(9) Subsection (3) is deemed to have come into force on October 8, 2003.(10) Subsection (4) applies for the 2007 and subsequent taxation years except that, for the 2007 and 2008 taxation years, paragraph 56(1)(n.1) of the Act, as enacted by subsection (4), is to be read as follows:(n.1) the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Skills Development;(11) Subsection (6) applies to the 1998 and subsequent taxation years except that, for taxation years that end before 2002, subsection 56(12) of the Act, as enacted by subsection (6), is to be read as follows:(12) For the purpose of paragraph (1)(a),(a) if an amount in respect of a foreign retirement arrangement is considered, under section 408A(d)(3)(C) of the Internal Reve-nue Code of 1986 of the United States (in this subsection referred to as the “Code”), to be distributed to an individual as a result of a conversion of the arrangement after 1998 and before 2002, the amount is deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the conversion; and(b) if an individual received an amount as a payment out of or under a foreign retirement arrangement in 1998, or an amount is considered under section 408A(d)(3)(C) of the Code to be distributed to the individual as a result of a conversion of the arrangement in 1998, the individual was resident in Canada at the time of the receipt or conversion and the amount is an amount to which section 408A(d)(3)(A)(iii) of the Code applies,(i) the amount is deemed not to have been received by the individual, and(ii) an amount equal to the amount that is included under section 408A(d)(3)(A)(iii) or 408A(d)(3)(E) of the Code in the individual’s gross income for a particular taxable year is deemed to be an amount received by the individual, in the taxation year that includes the day on which the particular taxable year begins, as a payment out of the arrangement, where the expressions “gross income” and “taxable year” in this subparagraph have the meanings assigned to those expressions by the Code.195. (1) The Act is amended by adding the following after section 56.3: