Bill C-69

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First Reading

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	2nd Session, 35th Parliament, 45 Elizabeth II, 1996
	The House of Commons of Canada
	BILL C-
	An Act to amend the Income Tax Act, the Income Tax Application Rules, the Bankruptcy and Insolvency Act, the Canada Pension Plan, the Children's Special Allowances Act, the Cultural Property Export and Import Act, the Customs Act, the Employment Insurance Act, the Excise Tax Act, the Old Age Security Act, the Tax Court of Canada Act, the Tax Rebate Discounting Act, the Unemployment Insurance Act, the Western Grain Transition Payments Act and certain Acts related to the Income Tax Act
	Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
	SHORT TITLE
Short title	1. This Act may be cited as the Income Tax Amendments Act, 1996.
	PART I
R.S., c. 1 (5th Supp.); 1994, cc. 7, 8, 13, 21, 28, 29, 38, 41; 1995, cc. 1, 3, 11, 18, 21, 38, 46; 1996, cc. 11, 21, 23	INCOME TAX ACT
	*2. (1) Section 6 of the Income Tax Act* is amended by adding the following after subsection (16):**
Definitions	(17) The definitions in this subsection apply in this subsection and subsection (18).
``disability policy'' « police d'assurance- invalidité »	``disability policy'' means a group disability insurance policy that provides for periodic payments to individuals in respect of the loss of remuneration from an office or em ployment.
``employer'' « employeur »	``employer'' of an individual includes a for mer employer of the individual.
``top-up disability payment'' « paiement compensatoi- re pour invalidité »	``top-up disability payment'' in respect of an individual means a payment made by an employer of the individual as a conse quence of the insolvency of an insurer that was obligated to make payments to the indi vidual under a disability policy where
	(a) the payment is made to an insurer so that periodic payments made to the individual under the policy will not be reduced because of the insolvency, or will be reduced by a lesser amount, or
	(b) the following conditions are satisfied:
	(i) the payment is made to the individ ual to replace, in whole or in part, periodic payments that would have been made under the policy to the individual but for the insolvency, and
	(ii) the payment is made pursuant to an arrangement under which the individ ual is required to reimburse the pay ment to the extent that the individual subsequently receives an amount from an insurer in respect of the portion of the periodic payments that the pay ment was intended to replace.
	For the purposes of paragraphs (a) and (b), an insurance policy that replaces a disabil ity policy is deemed to be the same policy as, and a continuation of, the disability policy that was replaced.
Group disability benefits - insolvent insurer	(18) Where an employer of an individual makes a top-up disability payment in respect of the individual,
	(a) the payment is, for the purpose of paragraph (1)(a), deemed not to be a benefit received or enjoyed by the individual;
	(b) the payment is, for the purpose of paragraph (1)(f), deemed not to be a con tribution made by the employer to or under the disability insurance plan of which the disability policy in respect of which the payment is made is or was a part; and
	(c) where the payment is made to the individual, it is, for the purpose of para graph (1)(f), deemed to be an amount payable to the individual pursuant to the plan.
	(2) Subsection (1) applies to payments made after August 10, 1994.
	3. (1) The portion of paragraph 8(1)(n) of the Act before subparagraph (i) is replaced by the following:
Salary reimbursemen t	(n) an amount paid by or on behalf of the taxpayer in the year pursuant to an arrange ment (other than an arrangement described in subparagraph (b)(ii) of the definition ``top-up disability payment'' in subsection 6(17)) under which the taxpayer is required to reimburse any amount paid to the taxpayer for a period throughout which the taxpayer did not perform the duties of the office or employment, to the extent that
	(2) Subsection 8(1) of the Act is amended by adding the following after paragraph (n):
Reimburse- ment of disability payments	(n.1) where,
	(i) as a consequence of the receipt of a payment (in this paragraph referred to as the ``deferred payment'') from an insurer, a payment (in this paragraph referred to as the ``reimbursement payment'') is made by or on behalf of an individual to an employer or former employer of the individual pursuant to an arrangement described in subparagraph (b)(ii) of the definition ``top-up disability payment'' in subsection 6(17), and
	(ii) the reimbursement payment is made
	(A) in the year, other than within the first 60 days of the year if the deferred payment was received in the immedi ately preceding taxation year, or
	(B) within 60 days after the end of the year, if the deferred payment was received in the year,
	an amount equal to the lesser of
	(iii) the amount included under para graph 6(1)(f) in respect of the deferred payment in computing the individual's income for any taxation year, and
	(iv) the amount of the reimbursement payment;
	(3) Subsection (1) applies to arrange ments entered into after August 10, 1994.
	(4) Subsection (2) applies to reimburse ment payments made after August 10, 1994.
	4. (1) Subsections 10(1) and (1.1) of the Act are replaced by the following:
Valuation of inventory	10. (1) For the purpose of computing a taxpayer's income for a taxation year from a business that is not an adventure or concern in the nature of trade, property described in an inventory shall be valued at the end of the year at the cost at which the taxpayer acquired the property or its fair market value at the end of the year, whichever is lower, or in a prescribed manner .
Adventures in the nature of trade	(1.01) For the purpose of computing a taxpayer's income from a business that is an adventure or concern in the nature of trade, property described in an inventory shall be valued at the cost at which the taxpayer acquired the property.
Certain expenses included in cost	(1.1) For the purposes of subsections (1), (1.01) and (10), where land is described in an inventory of a business of a taxpayer, the cost at which the taxpayer acquired the land shall include each amount that is
	(a) described in paragraph 18(2)(a) or (b) in respect of the land and for which no deduction is permitted to the taxpayer or to another person or partnership that is
	(i) a person or partnership with whom the taxpayer does not deal at arm's length,
	(ii) where the taxpayer is a corporation, a person or partnership who is a specified shareholder of the taxpayer, or
	(iii) where the taxpayer is a partnership, a person or partnership whose share of any income or loss of the taxpayer is 10% or more; and
	(b) not included in or added to the cost to that other person or partnership of any property otherwise than because of para graph 53(1)(d.3) or subparagraph 53(1)(e)(xi).
	(2) Subsection 10(2.1) of the Act is re placed by the following:
Methods of valuation to be the same	(2.1) Where property described in an inven tory of a taxpayer's business that is not an adventure or concern in the nature of trade is valued at the end of a taxation year in accordance with a method permitted under this section, that method shall, subject to subsection (6), be used in the valuation of property described in the inventory at the end of the following taxation year for the purpose of computing the taxpayer's income from the business unless the taxpayer, with the concur rence of the Minister and on such terms and conditions as are specified by the Minister, adopts another method permitted under this section.
	(3) Section 10 of the Act is amended by adding the following after subsection (8):
Transition	(9) Where, at the end of a taxpayer's last taxation year at the end of which property described in an inventory of a business that is an adventure or concern in the nature of trade was valued under subsection (1), the property was valued at an amount that is less than the cost at which the taxpayer acquired the property, after that time the cost to the taxpayer at which the property was acquired is, subject to subsection (10), deemed to be that amount.
Acquisition of control	(10) Notwithstanding subsection (1.01), property described in an inventory of a corporation's business that is an adventure or concern in the nature of trade at the end of the corporation's taxation year that ends immedi ately before the time at which control of the corporation is acquired by a person or group of persons shall be valued at the cost at which the corporation acquired the property, or its fair market value at the end of the year, whichever is lower, and, after that time, the cost at which the corporation acquired the property is, subject to a subsequent application of this subsection, deemed to be that lower amount.
	(4) Subsections (1) to (3) apply
	(a) to taxation years that end after December 20, 1995;
	(b) in respect of a business that is an adventure or concern in the nature of trade, to taxation years of a taxpayer that end before December 21, 1995, except where
	(i) the taxpayer's filing-due date for the year is after December 20, 1995, or
	(ii) the taxpayer has valued the inven tory of the business for the purpose of computing income for the year from the business at an amount that is less than the cost at which the taxpayer acquired the property, which valuation is reflected in a return of income, notice of objection or notice of appeal filed or served under the Act before December 21, 1995; and
	(c) in respect of a business that is an adventure or concern in the nature of trade, to fiscal periods of a partnership that end before December 21, 1995, except where
	(i) the filing-due dates of all of the members of the partnership for their taxation years that include the end of the fiscal period are after December 20, 1995, or
	(ii) the partnership has valued the inventory of the business for the pur pose of computing income for the fiscal period from the business at an amount that is less than the cost at which the partnership acquired the property, which valuation is reflected in a return of income, notice of objection or notice of appeal filed or served under the Act before December 21, 1995 by any member of the partnership.
	5. (1) The portion of paragraph 12(1)(x) of the Act before subparagraph (vii) is replaced by the following:
Inducement, reimbursemen t, etc.	(x) any particular amount (other than a prescribed amount) received by the taxpay er in the year, in the course of earning income from a business or property, from
	(i) a person (in this paragraph referred to as the ``payer'') who pays the particular amount in the course of earning income from a business or property or in order to achieve a benefit or advantage for the payer or for persons with whom the payer does not deal at arm's length, or
	(ii) a government, municipality or other public authority,
	where the particular amount can reasonably be considered to have been received
	(iii) as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or
	(iv) as a refund, reimbursement, con tribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of
	(A) an amount included in, or deducted as, the cost of property, or
	(B) an outlay or expense,
	to the extent that the particular amount
	(v) was not otherwise included in com puting the taxpayer's income, or de ducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, for the year or a preceding taxation year,
	(vi) except as provided by subsection 127(11.1), (11.5) or (11.6), does not reduce, for the purpose of an assessment made or that may be made under this Act, the cost or capital cost of the property or the amount of the outlay or expense, as the case may be,
	(2) Subsection (1) applies to amounts received after 1990, except that, for taxa tion years that began before 1996, subpara graph 12(1)(x)(vi) of the Act, as enacted by subsection (1), shall be read without refer ence to ``(11.5) or (11.6),''.
	6. (1) Subsection 12.2(10) of the Act is replaced by the following:
Riders	(10) For the purposes of this Act, a rider added at any time after 1989 to a life insurance policy last acquired before 1990 that provides additional life insurance is deemed to be a separate life insurance policy issued at that time, unless
	(a) the policy is an exempt policy last acquired after December 1, 1982 or an annuity contract; or
	(b) the only additional life insurance pro vided by the rider is an accidental death benefit.
	(2) Subsection (1) applies to riders added after 1989.
	7. (1) The portion of subsection 13(4) of the Act after paragraph (b) and before paragraph (c) is replaced by the following:
	and the taxpayer so elects under this subsec tion in the taxpayer's return of income for the year in which the taxpayer acquires a depre ciable property of a prescribed class of the tax payer that is a replacement property for the taxpayer's former property ,
	(2) Paragraph 13(4.1)(a) of the Act is replaced by the following:
	(a) it is reasonable to conclude that the property was acquired by the taxpayer to replace the former property;
	(a.1) it was acquired by the taxpayer and used by the taxpayer or a person related to the taxpayer for the same or a similar use as the use to which the taxpayer or a person related to the taxpayer put the former property;
	(3) The portion of paragraph 13(7)(f) of the Act before subparagraph (i) is replaced by the following:
	(f) where a corporation is deemed under paragraph 111(4)(e) to have disposed of and reacquired depreciable property (other than a timber resource property), the capital cost to the corporation of the property at the time of the reacquisition is deemed to be the amount that is equal to the total of
	(4) Subsection 13(21.1) of the Act is replaced by the following;
Disposition of building	(21.1) Notwithstanding subsection (7) and the definition ``proceeds of disposition'' in section 54, where at any particular time in a taxation year a taxpayer disposes of a building of a prescribed class and the proceeds of disposition of the building determined without reference to this subsection and subsection (21.2) are less than the lesser of the cost amount and the capital cost to the taxpayer of the building immediately before the disposi tion, for the purposes of paragraph (a) of the description of F in the definition ``undepre ciated capital cost'' in subsection (21) and subdivision c,
	(a) where in the year the taxpayer or a person with whom the taxpayer does not deal at arm's length disposes of land subjacent to, or immediately contiguous to and necessary for the use of, the building, the proceeds of disposition of the building are deemed to be the lesser of
	(i) the amount, if any, by which
	(A) the total of the fair market value of the building at the particular time and the fair market value of the land immediately before its disposition

Bill C-69

BILL C-

SHORT TITLE

PART I

INCOME TAX ACT