| Deemed gains
and losses
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(3.1) Where an amount is deemed under
subsection (3) to be a capital gain or capital
loss of a policyholder or other beneficiary (in
this subsection referred to as the ``taxpayer'')
of a related segregated fund trust, in respect of
capital gains or losses realized in a taxation
year of the related segregated fund trust that
includes February 28, 2000 or October 17,
2000, and the related segregated fund trust so
elects under this subsection in its return of
income for the year,
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(a) the portion of the gains and losses that
are in respect of capital gains or losses from
dispositions of property that occurred
before February 28, 2000 is deemed to be
that proportion of the gains or losses that the
number of days that are in the year and
before February 28, 2000 is of the number
of days that are in the year;
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(b) the portion of the gains and losses that is
in respect of capital gains or losses from
dispositions of property that occurred in the
year and in the period that begins at the
beginning of February 28, 2000 and ends at
the end of October 17, 2000, is deemed to
be that proportion of the gains or losses that
the number of days that are in the year and
in that period is of the number of days that
are in the year; and
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(c) the portion of the gains and losses that is
in respect of capital gains or losses from
dispositions of property that occurred in the
year and in the period that begins at the
beginning of October 18, 2000 and ends at
the end of the year, is deemed to be that
proportion of the gains or losses that the
number of days that are in the year and in
that period is of the number of days that are
in the year.
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| Deemed gains
and losses -
taxpayer
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(3.2) Where a capital gain or a capital loss
is deemed by subsection (3) to be a capital gain
or a capital loss of a taxpayer and not that of
a related segregated fund trust,
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(a) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred before
February 28, 2000 and that taxation year of
the taxpayer includes February 27, 2000,
the capital gain or the capital loss is deemed
to be a capital gain or a capital loss, as the
case may be, of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year and
before February 28, 2000;
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(b) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred before
February 28, 2000 and the taxation year of
the taxpayer began after February 27, 2000
and ended before October 18, 2000, 9/8 of
the capital gain or the capital loss is deemed
to be a capital gain or a capital loss, as the
case may be, of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year;
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(c) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred before
February 28, 2000 and the taxation year of
the taxpayer began after February 27, 2000
and ended after October 17, 2000, 9/8 of the
capital gain or the capital loss is deemed to
be a capital gain or a capital loss, as the case
may be, of the taxpayer from the disposition
by the taxpayer of capital property in the
taxpayer's taxation year and before October
18, 2000;
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(d) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred before
February 28, 2000 and the taxation year of
the taxpayer began after October 17, 2000,
3/2 of the capital gain or the capital loss is
deemed to be a capital gain or a capital loss,
as the case may be, of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year;
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(e) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund that occurred after
February 27, 2000 and before October 18,
2000 and the taxation year of the taxpayer
began after October 17, 2000, 4/3 of the
capital gain or capital loss is deemed to be
a capital gain or a capital loss, as the case
may be, of the taxpayer from the disposition
by the taxpayer of capital property in the
taxpayer's taxation year;
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(f) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred after
February 27, 2000 and before October 18,
2000 and the taxation year of the taxpayer
includes February 28, 2000 and October 17,
2000, the capital gain or the capital loss is
deemed to be a capital gain or a capital loss,
as the case may be, of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year and
in the period that began after February 27,
2000 and ended before October 18, 2000;
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(g) if the capital gain or capital loss was in
respect of capital gains or capital losses
from dispositions of property by the related
segregated fund trust that occurred after
February 27, 2000 and before October 17,
2000 and the taxation year of the taxpayer
began after February 27, 2000 and ended
before October 17, 2000, the capital gain or
the capital loss is deemed to be a capital
gain or a capital loss, as the case may be, of
the taxpayer from the disposition by the
taxpayer of capital property in the
taxpayer's taxation year; and
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(h) in any other case, the capital gain or the
capital loss is deemed to be a capital gain or
a capital loss, as the case may be, of the
taxpayer from the disposition of capital
property by the taxpayer in the taxpayer's
taxation year and after October 17, 2000.
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(2) Subsection (1) applies to taxation
years that end after February 27, 2000.
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135. (1) The portion of subsection 141(5)
of the Act before paragraph (a) is replaced
by the following:
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| Exclusion
from taxable
Canadian
property
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(5) For the purpose of paragraph (d) of the
definition ``taxable Canadian property'' in
subsection 248(1), a share of the capital stock
of a corporation is deemed to be listed at any
time on a stock exchange prescribed for the
purpose of that definition where
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(2) Subsection (1) applies after December
15, 1998.
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136. (1) The portion of subsection
142.2(1) of the Act before the definition
``financial institution'' is replaced by the
following:
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| Definitions
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142.2 (1) In this section and sections 142.3
to 142.7,
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(2) Subsection (1) applies after June 27,
1999.
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137. (1) Subsection 142.6(2) of the Act is
replaced by the following:
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| Ceasing to use
property in
Canadian
business
|
(1.1) If at a particular time in a taxation year
a taxpayer that is a non-resident financial
institution (other than a life insurance
corporation) ceases to use, in connection with
a business or part of a business carried on by
the taxpayer in Canada immediately before
the particular time, a property that is a
mark-to-market property of the taxpayer for
the year or a specified debt obligation, but that
is not a property that was disposed of by the
taxpayer at the particular time,
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(a) the taxpayer is deemed
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(i) to have disposed of the property
immediately before the time that was
immediately before the particular time
for proceeds equal to its fair market value
at the time of disposition and to have
received those proceeds at the time of
disposition in the course of carrying on
the business or the part of the business, as
the case may be, and
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(ii) to have reacquired the property at the
particular time at a cost equal to those
proceeds; and
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(b) in determining the consequences of the
disposition in subparagraph (a)(i),
subsection 142.4(11) does not apply to any
payment received by the taxpayer after the
particular time.
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| Beginning to
use property
in a Canadian
business
|
(1.2) If at a particular time a taxpayer that
is a non-resident financial institution (other
than a life insurance corporation) begins to
use, in connection with a business or part of a
business carried on by the taxpayer in Canada,
a property that is a mark-to-market property of
the taxpayer for the year that includes the
particular time or a specified debt obligation,
but that is not a property that was acquired by
the taxpayer at the particular time, the
taxpayer is deemed
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(a) to have disposed of the property
immediately before the time that was
immediately before the particular time for
proceeds equal to its fair market value at the
time of disposition; and
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(b) to have reacquired the property at the
particular time at a cost equal to those
proceeds.
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| Specified debt
obligation
marked to
market
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(1.3) In applying subsection (1.1) to a
taxpayer in respect of a property in a taxation
year,
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(a) the definition ``mark-to-market
property'' in subsection 142.2(1) shall be
applied as if the year ended immediately
before the particular time referred to in
subsection (1.1); and
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(b) if the taxpayer does not have financial
statements for the period ending
immediately before the particular time
referred to in subsection (1.1), references in
the definition to financial statements for the
year shall be read as references to the
financial statements that it is reasonable to
expect would have been prepared if the year
had ended immediately before the
particular time.
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| Deemed
disposition
not applicable
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(2) For the purposes of this Act, the
determination of when a taxpayer acquired a
share shall be made without regard to a
disposition or acquisition that occurred
because of subsection 142.5(2) or subsection
(1), (1.1) or (1.2).
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(2) Subsection (1) applies after June 27,
1999 in respect of an authorized foreign
bank, and after August 8, 2000 in any other
case.
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138. (1) The Act is amended by adding the
following after section 142.6:
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| Definitions
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142.7 (1) The definitions in this subsection
apply in this section.
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``Canadian
affiliate''
« filiale
canadienne »
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``Canadian affiliate'' of an entrant bank at any
particular time means a Canadian
corporation that was, immediately before
the particular time, affiliated with the
entrant bank and that was, at all times
during the period that began on February
11, 1999 and ended immediately before the
particular time,
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(a) affiliated with either
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(ii) a foreign bank (within the meaning
assigned by section 2 of the Bank Act)
that is affiliated with the entrant bank
at the particular time; and
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(ii) a corporation authorized under the
Trust and Loan Companies Act to carry
on the business of offering to the public
its services as trustee, or
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(iii) a corporation of which the
principal activity in Canada consists of
any of the activities referred to in
subparagraphs 518(3)(a)(i) to (v) of
the Bank Act and in which the entrant
bank or a non-resident person
affiliated with the entrant bank holds
shares under the authority, directly or
indirectly, of an order issued by the
Minister of Finance or the Governor in
Council under subsection 521(1) of
that Act.
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``eligible
property''
« bien
admissible »
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``eligible property'' of a Canadian affiliate at
any time means a property described in any
of paragraphs 85(1.1)(a) to (g.1) that is,
immediately before that time, used or held
by it in carrying on its business in Canada.
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``entrant
bank''
« banque
entrante »
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``entrant bank'' means a non-resident
corporation that is, or has applied to the
Superintendent of Financial Institutions to
become, an authorized foreign bank.
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``qualifying
foreign
merger''
« fusion
étrangère
déterminée »
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``qualifying foreign merger'' means a merger
or combination of two or more corporations
that would be a ``foreign merger'' within
the meaning assigned by subsection 87(8.1)
if that subsection were read without
reference to the words ``and otherwise than
as a result of the distribution of property to
one corporation on the winding-up of
another corporation.
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| Qualifying
foreign
merger
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(2) Where an entrant bank was formed as
the result of a qualifying foreign merger, after
February 11, 1999, of two or more
corporations (referred to in this subsection as
``predecessors''), and at the time immediately
before the merger, there were one or more
Canadian corporations (referred to in this
subsection as ``predecessor affiliates''), each
of which at that time would have been a
Canadian affiliate of a predecessor if the
predecessor were an entrant bank at that time,
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(a) for the purpose of the definition
``Canadian affiliate'' in subsection (1),
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(i) each predecessor affiliate is deemed to
have been affiliated with the entrant bank
throughout the period that began on
February 11, 1999 and ended at the time
of the merger,
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(ii) the expression ``entrant bank'' in
subparagraph (b)(iii) of the definition is
deemed to include a predecessor, and
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(iii) if two or more of the predecessor
affiliates are amalgamated or merged at
any time after February 11, 1999 to form
a new corporation, the new corporation is
deemed to have been affiliated with the
entrant bank throughout the period that
began on February 11, 1999 and ended at
the time of the amalgamation or merger
of the predecessor affiliates; and
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(b) if at least one of the predecessors
complied with the terms of subsection
(11)(a), the entrant bank is deemed to have
complied with those terms.
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| Branch-establi
shment
rollover
|
(3) If a Canadian affiliate of an entrant bank
transfers an eligible property to the entrant
bank, the entrant bank begins immediately
after the transfer to use or hold the transferred
property in its Canadian banking business and
the Canadian affiliate and the entrant bank
jointly elect, in accordance with subsection
(11), to have this subsection apply in respect
of the transfer, subsections 85(1) (other than
paragraph (e.2)), (1.1), (1.4) and (5) apply,
with any modifications that the circumstances
require, in respect of the transfer, except that
the portion of subsection 85(1) before
paragraph (a) shall be read as follows:
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``85. (1) Where a taxpayer that is a
Canadian affiliate of an entrant bank (within
the meanings assigned by subsection
142.7(1)) has, in a taxation year, disposed of
any of the taxpayer's property to the entrant
bank (referred to in this subsection as the
``corporation''), if the taxpayer and the
corporation have jointly elected under
subsection 142.7(3), the following rules
apply:''.
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| Deemed fair
market value
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(4) If a Canadian affiliate of an entrant bank
and the entrant bank make an election under
subsection (3) in respect of a transfer of
property by the Canadian affiliate to the
entrant bank, for the purposes of subsections
15(1), 52(2), 69(1), (4) and (5), 246(1) and
247(2) in respect of the transfer, the fair
market value of the property is deemed to be
the amount agreed by the Canadian affiliate
and the entrant bank in their election.
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| Specified debt
obligations
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(5) If a Canadian affiliate of an entrant bank
transfers a specified debt obligation to the
entrant bank in a transaction in respect of
which an election is made under subsection
(3), the Canadian affiliate is a financial
institution in its taxation year in which the
transfer is made, and the amount that the
Canadian affiliate and the entrant bank agree
on in their election in respect of the obligation
is equal to the tax basis of the obligation within
the meaning assigned by subsection 142.4(1),
the entrant bank is deemed, in respect of the
obligation, for the purposes of sections 142.2
to 142.4 and 142.6, to be the same corporation
as, and a continuation of, the Canadian
affiliate.
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| Mark-to-mark
et property
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(6) If a Canadian affiliate of an entrant bank
described in paragraph (11)(a) transfers at any
time within the period described in paragraph
(11)(c) to the entrant bank a property that is,
for the Canadian affiliate's taxation year in
which the property is transferred, a
mark-to-market property of the Canadian
affiliate,
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(a) for the purposes of subsections 112(5) to
(5.21) and (5.4), the definition
``mark-to-market property'' in subsection
142.2(1) and subsection 142.5(9), the
entrant bank is deemed, in respect of the
property, to be the same corporation as and
a continuation of, the Canadian affiliate;
and
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(b) for the purpose of applying subsection
142.5(2) in respect of the property, the
Canadian affiliate's taxation year in which
the property is transferred is deemed to have
ended immediately before the time the
property was transferred.
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| Reserves
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(7) If
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(a), at a particular time,
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(i) a Canadian affiliate of an entrant bank
transfers to the entrant bank property that
is a loan or lending asset, or a right to
receive an unpaid amount in respect of a
disposition before the particular time of
property by the affiliate, or
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(ii) the entrant bank assumes an
obligation of the Canadian affiliate that is
an instrument or commitment described
in paragraph 20(1)(l.1) or an obligation
in respect of goods, services, lands or
chattels described in subparagraph
20(1)(m)(i), (ii) or (iii),
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(b) the property is transferred or the
obligation is assumed for an amount equal
to its fair market value at the particular
time,
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(c) the entrant bank begins immediately
after the particular time to use or hold the
property or owe the obligation in its
Canadian banking business, and
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(d) the Canadian affiliate and the entrant
bank jointly elect in accordance with
subsection (11) to have this subsection
apply in respect of the transfer or
assumption,
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then
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(e) in applying paragraphs 20(1)(l), (l.1),
(m), (n) and (p) in respect of the obligation
or property, the taxation year of the affiliate
that would, but for this paragraph, include
the particular time is deemed to end
immediately before the particular time, and
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(f) in computing the income of the Canadian
affiliate and the entrant bank for taxation
years that end on or after the particular time,
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(i) any amount deducted under paragraph
20(1)(l), (l.1), (m) or (n) by the Canadian
affiliate in respect of the property or
obligation in computing its income for its
taxation year that ended immediately
before the particular time, or under
paragraph 20(1)(p) in computing its
income for that year or for a preceding
taxation year (to the extent that the
amount has not been included in the
affiliate's income under paragraph
12(1)(i)), is deemed to have been so
deducted by the entrant bank in
computing its income for its last taxation
year that ended before the particular time
and not to have been deducted by the
Canadian affiliate,
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(ii) in applying paragraph 20(1)(m), an
amount in respect of the goods, services,
land or chattels that was included under
paragraph 12(1)(a) in computing the
Canadian affiliate's income from a
business is deemed to have been so
included in computing the entrant bank's
income from its Canadian banking
business for a preceding taxation year,
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(iii) in applying paragraph 20(1)(n) in
respect of a property described in
subparagraph (a)(i) and paragraphs (b),
(c) and (d) sold by the Canadian affiliate
in the course of a business, the property
is deemed to have been disposed of by the
entrant bank (and not by the Canadian
affiliate) at the time it was disposed of by
the Canadian affiliate, and the amount in
respect of the sale that was included in
computing the Canadian affiliate's
income from a business is deemed to
have been included in computing the
entrant bank's income from its Canadian
banking business for its taxation year that
includes the time at which the property
was so disposed of, and
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(iv) in applying paragraph 40(1)(a) or
44(1)(e) in respect of a property
described in subparagraph (a)(i) and
paragraphs (b), (c) and (d) disposed of by
the Canadian affiliate, the property is
deemed to have been disposed of by the
entrant bank (and not by the Canadian
affiliate) at the time it was disposed of by
the Canadian affiliate, the amount
determined under subparagraph
40(1)(a)(i) or 44(1)(e)(i) in respect of the
Canadian affiliate is deemed to be the
amount determined under that
subparagraph in respect of the entrant
bank, and any amount claimed by the
Canadian affiliate under subparagraph
40(1)(a)(iii) or 44(1)(e)(iii) in computing
its gain from the disposition of the
property for its last taxation year that
ended before the particular time is
deemed to have been so claimed by the
entrant bank for its last taxation year that
ended before the particular time.
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| Assumption
of debt
obligation
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(8) If a Canadian affiliate of an entrant bank
described in paragraph (11)(a) transfers at any
time within the period described in paragraph
(11)(c) property to the entrant bank, and any
part of the consideration for the transfer is the
assumption by the entrant bank in respect of its
Canadian banking business of a debt
obligation of the Canadian affiliate,
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