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Bill C-22

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Application to control in fact

(6.2) In its application to subsection (5.1), subsection (6.1) shall be read as if the references in subsection (6.1) to ``controlled'' were references to ``controlled, directly or indirectly in any manner whatever,''.

(2) Subsection (1) applies after November 1999.

195. (1) Subparagraph 258(3)(b)(ii) of the Act is replaced by the following:

      (ii) was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and is not deemed by subsection 112(2.22) to have been issued after that time

(2) Subsection (1) applies in respect of dividends received after 1998.

PART 2

HARMONIZATION WITH THE CIVIL CODE OF QUEBEC

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

Income Tax Act

196. (1) Subsection 13(7.3) of the Income Tax Act is replaced by the following:

Control of corporations by one trustee

(7.3) For the purposes of paragraph (7)(e), where at a particular time one corporation would, but for this subsection, be related to another corporation by reason of both corporations being controlled by the same executor, liquidator of a succession or trustee and it is established that

      (a) the executor, liquidator or trustee did not acquire control of the corporations as a result of one or more estates or trusts created by the same individual or by two or more individuals not dealing with each other at arm's length, and

      (b) the estate or trust under which the executor, liquidator or trustee acquired control of each of the corporations arose only on the death of the individual creating the estate or trust,

the two corporations are deemed not to be related to each other at the particular time.

(2) Paragraph (g) of the definition ``proceeds of disposition'' in subsection 13(21) of the English version of the Act is replaced by the following:

        (g) an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec , plus any amount received by the taxpayer out of the proceeds of the sale, and

(3) Paragraph 13(21.2)(c) of the English version of the Act is replaced by the following:

      (c) on the 30th day after the particular time, a person or partnership (in this subsection referred to as the ``subsequent owner'') who is the transferor or a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation),

(4) Clause 13(21.2)(e)(iii)(A) of the English version of the Act is replaced by the following:

          (A) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation),

197. (1) Subparagraph (f)(iii) of the definition ``eligible capital expenditure'' in subsection 14(5) of the Act is replaced by the following:

          (iii) a share, bond, debenture, mortgage, hypothecary claim , note, bill or other similar property, or

(2) Paragraph 14(13)(a) of the English version of the Act is replaced by the following:

      (a) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation) is deemed to be a property that is identical to the property; and

198. The portion of the definition ``qualifying debt obligation'' in subsection 15.1(3) of the Act before paragraph (a) is replaced by the following:

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of a corporation at a particular time means an obligation that is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,

199. The portion of the definition ``qualifying debt obligation'' in subsection 15.2(3) of the Act before paragraph (a) is replaced by the following:

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of an issuer at a particular time means an obligation that is a bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,

200. The portion of subsection 16(3) of the Act before paragraph (a) is replaced by the following:

Obligation issued at discount

(3) Where, in the case of a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (other than an obligation that is a prescribed debt obligation for the purpose of subsection 12(9)) issued after June 18, 1971 by a person exempt, because of section 149, from Part I tax on part or on all of the person's income, a non-resident person not carrying on business in Canada or a government, municipality or municipal or other public body performing a function of government,

201. (1) Paragraph 18(13)(e) of the Act is replaced by the following:

      (e) the particular property is a share, or a loan, bond, debenture, mortgage, hypothecary claim , note, agreement for sale or any other indebtedness;

(2) Subsection 18(16) of the English version of the Act is replaced by the following:

Deemed identical property

(16) For the purposes of subsections (13), (14) and (15), a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation) is deemed to be a property that is identical to the property.

202. Subsection 18.1(12) of the English version of the Act is replaced by the following:

Identical property

(12) For the purposes of subsections (8) and (10), a right to acquire a particular right to receive production (other than a right, as security only, derived from a mortgage, hypothec , agreement of sale or similar obligation) is deemed to be a right to receive production that is identical to the particular right.

203. (1) The portion of paragraph 20(1)(f) of the Act before subparagraph (i) is replaced by the following:

      (f) an amount paid in the year in satisfaction of the principal amount of any bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by the taxpayer after June 18, 1971 on which interest was stipulated to be payable, to the extent that the amount so paid does not exceed,

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

Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition

(5) Where depreciable property, other than a timber resource property, of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm's length, and the proceeds of disposition include an agreement for the sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm's length, there may be deducted in computing the income of the taxpayer for the subsequent year an amount equal to the lesser of

      (a) the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim , and

(3) Subsection 20(5.1) of the Act is replaced by the following:

Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition

(5.1) Where a timber resource property of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm's length, and the proceeds of disposition include an agreement for sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm's length, there may be deducted in computing the income of the taxpayer for the subsequent year the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim .

204. Subsection 39(6) of the Act is replaced by the following:

Definition of ``Canadian security''

(6) For the purposes of this section, ``Canadian security'' means a security (other than a prescribed security) that is a share of the capital stock of a corporation resident in Canada, a unit of a mutual fund trust or a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by a person resident in Canada.

205. Paragraph 40(3.5)(a) of the English version of the Act is replaced by the following:

      (a) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation) is deemed to be a property that is identical to the property;

206. Paragraph 53(1)(g) of the Act is replaced by the following:

      (g) where the property is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation, the amount, if any, by which the principal amount of the obligation exceeds the amount for which the obligation was issued, if the excess was required by subsection 16(2) or (3) to be included in computing the income of the taxpayer for a taxation year commencing before that time;

207. (1) Paragraph (g) of the definition ``proceeds of disposition'' in section 54 of the English version of the Act is replaced by the following:

      (g) an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec , plus any amount received by the taxpayer out of the proceeds of the sale,

(2) The portion of the definition ``superficial loss'' in section 54 of the English version of the Act after paragraph (h) is replaced by the following:

      and, for the purpose of this definition, a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec , agreement for sale or similar obligation) is deemed to be a property that is identical to the property.

208. (1) Paragraph 70(8)(a) of the English version of the Act is replaced by the following:

      (a) the ``fair market value'' at any time of any property subject to a mortgage or hypothec is the amount, if any, by which the fair market value at that time of the property otherwise determined exceeds the amount outstanding at that time of the debt secured by the mortgage or hypothec , as the case may be;

(2) Subparagraph 70(8)(b)(ii) of the English version of the Act is replaced by the following:

      (ii) any debt secured by a mortgage or hypothec on property owned by the taxpayer immediately before the taxpayer's death; and

209. The definitions ``creditor'' and ``debt'' in subsection 79(1) of the Act are replaced by the following:

``creditor''
« créancier »

``creditor'' of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property;

``debt''
« dette »

``debt'' includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement;

210. The portion of subsection 80.1(1) of the Act before paragraph (a) is replaced by the following:

Expropria-
tion assets acquired as compensation for, or as consideration for sale of, foreign property taken by or sold to foreign issuer

80.1 (1) Where in a taxation year ending coincidentally with or after December 31, 1971 a taxpayer resident in Canada has acquired any bonds, debentures, mortgages, hypothecary claims , notes or similar obligations (in this section referred to as ``expropriation assets'') issued by the government of a country other than Canada or issued by a person resident in a country other than Canada and guaranteed by the government of that country,

211. The portion of subsection 87(6) of the Act before paragraph (a) is replaced by the following:

Obligations of predecessor corporation

(6) Notwithstanding subsection (7), where there has been an amalgamation of two or more corporations after May 6, 1974, each taxpayer (except any predecessor corporation) who, immediately before the amalgamation, owned a capital property that was a bond, debenture, mortgage, hypothecary claim , note or other similar obligation of a predecessor corporation (in this subsection referred to as the ``old property'') and who received no consideration for the disposition of the old property on the amalgamation other than a bond, debenture, mortgage, hypothecary claim , note or other similar obligation respectively, of the new corporation (in this subsection referred to as the ``new property'') is , if the amount payable to the holder of the new property on its maturity is the same as the amount that would have been payable to the holder of the old property on its maturity, deemed

212. Paragraph 116(6)(d) of the Act is replaced by the following:

      (d) a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation; or

213. Subparagraph (d)(i) of the definition ``qualified property'' in subsection 127(9) of the Act is replaced by the following:

        (i) the property is leased in the ordinary course of carrying on a business in Canada by a corporation whose principal business is leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables , bills of exchange or other obligations representing all or part of the sale price of merchandise or services, or any combination thereof,

214. (1) Subparagraph 130.1(6)(f)(i) of the English version of the Act is replaced by the following:

      (i) debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of the National Housing Act) or on property included within a housing project (as defined in that section), and

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

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

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

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

(2) Subparagraph (d)(ii) of the definition ``non-resident-owned investment corporation'' in subsection 133(8) of the Act is replaced by the following:

          (ii) trading or dealing in bonds, shares, debentures, mortgages, hypothecary claims , bills, notes or other similar property or any interest therein,

216. (1) Subparagraphs 137.1(1)(b)(i) and (ii) of the Act are replaced by the following:

      (i) the total of profits or gains made in the year by the corporation in respect of bonds, debentures, mortgages, hypothecary claims , notes or other similar obligations owned by it that were disposed of by it in the year, and

      (ii) the total of each such portion of each amount, if any, by which the principal amount, at the time it was acquired by the corporation, of a bond, debenture, mortgage, hypothecary claim , note or other similar obligation owned by the corporation at the end of the year exceeds the cost to the corporation of acquiring it as was included by the corporation in computing its profit for the year.

(2) Paragraphs 137.1(3)(a) and (b) of the Act are replaced by the following:

      (a) the total of losses sustained in the year by the corporation in respect of bonds, debentures, mortgages, hypothecary claims , notes or other similar obligations owned by it and issued by a person other than a member institution that were disposed of by it in the year;

      (b) the total of each such portion of each amount, if any, by which the cost to the corporation of acquiring a bond, debenture, mortgage, hypothecary claim , note or other similar obligation owned by the corporation at the end of the year exceeds the principal amount of the bond, debenture, mortgage, hypothecary claim , note or other similar obligation, as the case may be, at the time it was so acquired as was deducted by the corporation in computing its profit for the year;

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